13 Jun 2016 16:16
ZHEJIANG EXPRESSWAY CO LD - Specific Road Maintenance ServicesZHEJIANG EXPRESSWAY CO LD - Specific Road Maintenance Services
PR Newswire
London, June 13
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
Zhejiang Expressway Co., Ltd.(A joint stock limited company incorporated in the People's Republic of China with limited liability)(Stock code: 0576)
CONTINUING CONNECTED TRANSACTIONIN RELATION TO SPECIFIC ROAD MAINTENANCE SERVICES
ROAD MAINTENANCE AGREEMENT
On 25 March 2016, the Company organised a public tender in respect of the provision of Maintenance Services to the Group's four expressways, namely: the Shanghai- Hangzhou-Ningbo Expressway, the Shangsan Expressway, Jinhua section of Ningbo- Jinhua Expressway and the Hanghui Expressway for a term of seven months from 1 May 2016 to 30 November 2016. Maintenance Co succeeded in the tender and was awarded a contract to provide the Maintenance Services.
On 13 June 2016, the Company entered into the Road Maintenance Agreement with Maintenance Co, pursuant to which Maintenance Co agreed to provide the Maintenance Services to the Group's four expressways for a term of seven months from 1 May 2016 to 30 November 2016.
LISTING RULES IMPLICATIONS
As at the date of this announcement, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a controlling shareholder of the Company. Therefore, Maintenance Co, as a wholly-owned subsidiary of Communications Group, is a connected person of the Company and as a result, the transactions under the Road Maintenance Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.
As the Road Maintenance Agreement and the Previous Agreements are entered into by the Group with the same party within a 12-month period and are similar in nature, the continuing connected transactions contemplated under the Road Maintenance Agreement and the Previous Agreements should be aggregated in accordance with Rule 14A.81 of the Listing Rules.
As the applicable percentage ratios in respect of the transactions contemplated under the Road Maintenance Agreement and the Previous Agreements, on an aggregated basis, are more than 0.1% but less than 5%, the Road Maintenance Agreement is subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.
ROAD MAINTENANCE AGREEMENT
Principal terms of the Road Maintenance Agreement are set out below:
| Date: | 13 June 2016 |
| Parties: | (1) the Company; and |
| (2) Maintenance Co | |
| Term: | The term of the Road Maintenance Agreement is for a period of seven months from 1 May 2016 to 30 November 2016. |
| Subject matter: | Maintenance Co agreed to provide the certain specific maintenance services including road work, roadbed work, bridge work and road safety related work, in respect of the Target Expressways, namely Shanghai-Hangzhou- Ningbo Expressway, the Shangsan Expressway Jinhua section, Ningbo-Jinhua Expressway and the Hanghui Expressway. The specific maintenance services to be provided by Maintenance Co under the Road Maintenance Agreement are different from the day-to-day maintenance services covered by the Previous Agreements, namely road patrol, inspection of the maintenance status of pavements, roadbeds, greening and sloping. |
| Service fee and basis of the fee: | The total service fees payable by the Company to Maintenance Co under the Road Maintenance Agreement shall be RMB250,375,079, which was determined as a result of a public tender (the "Public Tender") of the Maintenance Services for the Target Expressways, where Maintenance Co has succeeded in its bid in accordance with the terms of the Public Tender.On 25 March 2016, a tender notice in respect of the Public Tender was published on the website of Communications Group and www.chinabidding.com.cn. Ten entities expressed their interest and each of them made the relevant payment to the Company to obtain the tender documents for the Public Tender. After their internal consideration, four entities (three of which being independent suppliers) eventually submitted their tender to the Company.Tender evaluation was conducted by a committee consisting of five experts in this industry. The committee evaluated the following factors before deciding to recommend to accept the tender submitted by Maintenance Co: (1) the technical capability and financial position of the tenderers; (2) the tenderers' past experience in providing maintenance services to expressways similar to that of the Maintenance Services in the Zhejiang province; and (3) the tenderers' tender price in respect of the Maintenance Services for the Target Expressways.To ensure that the terms offered by Maintenance Co are fair, reasonable and no less favourable than those provided by the independent third parties to the Group, the Company has compared the price offered by each of the tenderers for the Maintenance Services and the price offered by each of the independent suppliers is higher than that offered by Maintenance Co.After taking into account the above evaluation criteria, the management of the Company has decided to accept the committee's recommendation and award a contract for the Maintenance Services to Maintenance Co. |
| Terms of payment: | Payment will be made by the Company upon confirmation of the invoice issued by Maintenance Co setting out details of the Maintenance Services delivered on a monthly basis. |
Cap for the Road Maintenance Agreement
For the purpose of complying with Chapter 14A of the Listing Rules, the Company has set a cap in respect of the aggregate fees payable by the Company to Maintenance Co for the Maintenance Services during the term of the Road Maintenance Agreement, which shall not exceed RMB275,420,000.
The above cap was determined after taking into account (i) the total service fees payable to Maintenance Co in respect of the Maintenance Services under the Road Maintenance Agreement; and (ii) additional service fees, being approximately 10% of the service fees agreed under the Road Maintenance Agreement, that may be payable to Maintenance Co in the event that additional maintenance services not contemplated under the Road Maintenance Agreement are required by the Company.
REASONS FOR AND BENEFITS OF THE TRANSACTION
Specific maintenance services including the Maintenance Services are necessary for the operation of the Target Expressways. Maintenance Co has the relevant qualifications and expertise to provide such services to the Company. In addition, the Company has gone through the Public Tender in accordance with which Maintenance Co was selected as the qualified service provider for the Maintenance Services. On the basis that the price offered by Maintenance Co being the lowest amongst the tenderers, the terms offered by Maintenance Co are no less favourable than those provided by the independent third parties to the Group.
Given the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Road Maintenance Agreement are on normal commercial terms, in the ordinary and usual course of business of the Company and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
LISTING RULES IMPLICATIONS
As at the date of this announcement, Communications Group holds approximately 67% of the issued share capital of the Company. By virtue of this shareholding interest, Communications Group is a controlling shareholder of the Company. Therefore, Maintenance Co, as a wholly-owned subsidiary of Communications Group, is a connected person of the Company and as a result, the transactions under the Road Maintenance Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.
As the Road Maintenance Agreement and the Previous Agreements are entered into by the Group with the same party within a 12-month period and are similar in nature, the continuing connected transactions contemplated under the Road Maintenance Agreement and the Previous Agreements should be aggregated in accordance with Rule 14A.81 of the Listing Rules.
As the applicable percentage ratios in respect of the transactions contemplated under the Road Maintenance Agreement and the Previous Agreements, on an aggregated basis, are more than 0.1% but less than 5%, the Road Maintenance Agreement is subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.
As each of Mr. Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping holds certain senior position in Communications Group, they have abstained from voting on the board resolution with respect to the approval of the Road Maintenance Agreement. Save for Mr. Zhan Xiaozhang, Mr. Wang Dongjie, Mr. Dai Benmeng and Mr. Zhou Jianping, none of the Directors has any material interest in the Road Maintenance Agreement or is required to abstain from voting on the relevant Board resolutions to approve the same.
INFORMATION ON THE PARTIES
The Company is a joint stock company established under the laws of the PRC with limited liability on 1 March 1997, the H Shares of which are listed on the Main Board of the Stock Exchange. It is principally engaged in investing in, developing and operating high-grade roads in the PRC. The Group also carries on certain other businesses such as operation of gas stations, restaurants and shops in service areas, advertising at expressway interchanges and external road maintenance, as well as securities related business.
Maintenance Co is an indirect wholly-owned subsidiary of Communication Group which is incorporated under the laws of the PRC on 28 January 2014. Maintenance Co is principally engaged in construction of transportation projects and maintenance of toll road.
DEFINITIONS
In this announcement, unless the context specifies otherwise, the following defined expressions have the following meanings:
| "Board" | the board of Directors |
| "Communications Group" | (Zhejiang Communications Investment Group Co., Ltd.*), a wholly State-owned enterprise established in the PRC, and the controlling shareholder of the Company |
| "Company" | Zhejiang Expressway Co., Ltd. , a joint stock limited company incorporated in the PRC with limited liability |
| "connected person" | has the meaning ascribed to it under the Listing Rules |
| "controlling shareholder" | has the meaning ascribed to it under the Listing Rules |
| "Director(s)" | the directors of the Company |
| "Group" | the Company and its subsidiaries |
| "H Shares" | overseas listed foreign shares in the share capital of the Company with a nominal value of RMB1 per share, which are listed on the Main Board of the Stock Exchange |
| "Hong Kong" | the Hong Kong Special Administrative Region of the PRC |
| "Listing Rules" | Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
| "Maintenance Co" | (Zhejiang Expressway Maintenance Co., Ltd.*), a company incorporated in the PRC and an indirect wholly-owned subsidiary of Communications Group |
| "Maintenance Services" | special maintenance services including (i) road work such as pavement diseases treatment, bridge deck overlay, pavement overlay and thermal regeneration; (ii) roadbed work such as ditch retaining wall maintenance and slope treatment; (iii) bridge work such as bridge fault maintenance and reinforcement and deck system maintenance; and (iv) road safety work such assigns, road markings and fence maintenance |
| "percentage ratio(s)" | has the meaning ascribed to it under Rule 14.04(9) of the Listing Rules |
| "PRC" | the People's Republic of China (for the purpose of this announcement, excludes Hong Kong, Macau and Taiwan) |
| "Previous Agreements" | the road maintenance agreements dated 8 April 2016 entered into between the Group and Maintenance Co in respect of the provision of day-to-day road maintenance services to the Target Highways, details of which are set out in the announcement of the Company dated 8 April 2016 |
| "RMB" | Renminbi, the lawful currency of the PRC |
| "Road Maintenance Agreement" | the road maintenance agreement dated 13 June 2016 entered into between the Company and Maintenance Co, pursuant to which Maintenance Co agreed to provide the Maintenance Services to the Target Expressways |
| "Shareholder(s)" | holder(s) of the share(s) of the Company |
| "Stock Exchange" | The Stock Exchange of Hong Kong Limited |
| "subsidiary(ies)" | has the meaning ascribed to it under the Listing Rules |
| "Target Expressways" | Jinhua section of Ningbo-Jinhua Expressway, the Hanghui Expressway, Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway |
* English names for reference only
On behalf of the BoardZHEJIANG EXPRESSWAY CO., LTD.ZHAN XiaozhangChairman
Hangzhou, PRC, 13 June 2016
As of the date of this announcement, the executive directors of the Company are: Mr. ZHAN Xiaozhang, Mr. CHENG Tao and Ms. LUO Jianhu; the non-executive directors of the Company are: Mr. WANG Dongjie, Mr. DAI Benmeng and Mr. ZHOU Jianping; and the independent non-executive directors of the Company are: Mr. ZHOU Jun, Mr. PEI Ker-Wei and Ms. LEE Wai Tsang Rosa.