Continuing Connected Transact

RNS Number : 9636B

Datang Intl Power Generation Co Ld

26 August 2008

 



The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

                                DATANG INTERNATIONAL POWER GENERATION CO., LTD.

(a sino-foreign joint stock limited company incorporated in the People's Republic of China)(Stock Code: 991)

ANNOUNCEMENT

CONTINUING CONNECTED TRANSACTION

Reference is made to the announcement made by the Company dated 23 December 2005, pursuant to which it was announced that, among others, the Company and CDC entered into the Supplemental Agreement to the Ash Disposal Agreement on 20 December 2005 to amend certain terms of the Ash Disposal Agreement to render the Ash Disposal Agreement in compliance with the provisions governing continuing connected transactions under the then-revised Listing Rules which became effective on 31 March 2004. The Company announces that the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) will expire on 19 December 2008, and the Company is pleased to announce that the Company and CDC entered into the Further Supplemental Agreement on 22 August 2008. As at the date of the Further Supplemental Agreement, CDC owned approximately 33.70% of the issued share capital of the Company and is therefore a substantial shareholder of the Company under the Listing Rules. As such, CDC is a connected person of the Company under Rule 14A.11 of the Listing Rules, and the entering into of the Further Supplemental Agreement constitutes a continuing connected transaction of the Company. Given that each of the relevant percentage ratios of the maximum annual value of the services agreed to be provided by CDC to the Company under the Further Supplemental Agreement is less than 2.5%, the Further Supplemental Agreement is thereby only subject to the reporting, annual review and announcement requirements under Rules 14A.37 to 14A.40 and Rules 14A.45 to 14A.47 of the Listing Rules.

  BACKGROUND

Reference is made to the announcement made by the Company dated 23 December 2005, pursuant to which it was announced that, among others, the Company and CDC entered into the Supplemental Agreement to the Ash Disposal Agreement on 20 December 2005 to amend certain terms of the Ash Disposal Agreement to render the Ash Disposal Agreement in compliance with the provisions governing continuing connected transactions under the then-revised Listing Rules which became effective on 31 March 2004. The Company announces that the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) will expire on 19 December 2008, and the Company is pleased to announce that the Company and CDC entered into the Further Supplemental Agreement on 22 August 2008.

THE FURTHER SUPPLEMENTAL AGREEMENT

Date

22 August 2008

Parties

(i)    the Company; and

(ii)    CDC.

Term

The Further Supplemental Agreement provides that the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) is renewed for a term of 3 years commencing from the date of the Further Supplemental Agreement to 21 August 2011. The Company will ensure its compliance with the Listing Rules in the event that the Ash Disposal Agreement is renewed pursuant to the terms of the Further Supplemental Agreement.

The Services

The scope of the services to be provided by CDC pursuant to the Further Supplemental Agreement, remains the same as those under the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) . Pursuant to the terms of the Further Supplemental Agreement, CDC will continue to be responsible for disposing of all ashes generated by the Company's power plants in accordance with the PRC national and local environmental protection requirements and industrial policies. The Further Supplemental Agreement will also continue to apply to all future generating units or power plants that are wholly-owned, operated and managed by the Company.

Pricing

The mechanism for determining ash disposal fees under the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) is not affected by the Further Supplemental Agreement. The Company and CDC will continue to agree annually on the unit ash disposal fee, which shall reflect CDC's estimated operating costs, depreciation of its ash yards, amortisation charges for the construction of the ash yards and a profit margin (to be agreed annually by the Company and CDC based on arm's length negotiations between the Company and CDC) ranging between 5% to 10% of CDC's costs. The ash disposal fees will continue to be confirmed between the Company and CDC based on the actual volume of ashes disposed of by CDC every month at the agreed unit ash disposal fee and paid by the Company in cash to CDC on an annual basis. The Company's expenditures in this regard will continue to be funded by its internal resources. The ash disposal fees levied by CDC under the Further Supplemental Agreement are no less favourable to the Group than terms available from independent third parties.

Maximum Aggregate Annual Caps

The annual cap pursuant to the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) for each of the financial years ended 31 December 2005, 2006 and 2007 was RMB60,000,000 (equivalent to approximately HK$68,415,051.31). Pursuant to the provisions of the Further Supplemental Agreement, the services as contemplated by the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) are subject to the following maximum aggregate annual caps (the 'Annual Caps') for each of the financial years ending 31 December 2008, 2009 and 2010:

For the year ending 31 December 2008	RMB57,890,000
	(equivalent to approximately HK$66,009,122)
For the year ending 31 December 2009	RMB57,890,000
	(equivalent to approximately HK$66,009,122)
For the year ending 31 December 2010	RMB57,890,000
	(equivalent to approximately HK$66,009,122)

The Annual Caps for the services to be provided by CDC as stipulated under the Further Supplemental Agreement have been determined with reference to the previous ash disposal transactions between the Company and CDC, which amounted to approximately RMB57,890,000 (equivalent to approximately HK$66,009,122), for each of the years ended 31 December 2005, 2006, and 2007, respectively. The ash disposal charges which have been accounted for by the Company under the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) from 1 January 2008 to the date of entering into the Further Supplemental Agreement is RMB28,946,000 (equivalent to approximately HK$33,005,701.25), and such amount has not been paid by the Company as at the date of this announcement.

INFORMATION RELATING TO THE PARTIES TO THE FURTHER SUPPLEMENTAL AGREEMENT

The Group is principally engaged in the development and operation of power plants, the sale of electricity and thermal power, and the repair, testing and maintenance of power equipment and power related technical services. The Group's main service areas are in the PRC.

CDC is a state-owned enterprise. Its scope of operations includes the development, investment, construction, operation and management of power energy; organisation of power (thermal) production and sales; as well as power technology development and consultation.

REASONS FOR AND BENEFITS OF THE FURTHER SUPPLEMENTAL AGREEMENT

The Ash Disposal Agreement was entered into before certain amendments to the Listing Rules which became effective on 31 March 2004. The Ash Disposal Agreement has an indefinite term and provides that it will be terminated only by agreement between the Company and NCPGC (or as required by the law) or automatically upon termination of the Power Purchase and Sales Agreement. The Ash Disposal Agreement also contains specific provisions as to how the unit ash disposal fee shall be calculated. Details of the Ash Disposal Agreement were set out in the Prospectus.

Pursuant to the amendments to the Listing Rules which became effective on 31 March 2004, continuing connected transactions became subject to new requirements, including (i) the period for the agreement in relation to a continuing connected transaction must be fixed and not exceed 3 years, and (ii) a maximum aggregate annual value in respect of each continuing connected transaction must be determined and the basis of which must also be disclosed.

The Further Supplemental Agreement was entered into between the Company and CDC in order to render the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) to comply with the above amendments to the Listing Rules. The Further Supplemental Agreement stipulates that, inter alia, the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement) is renewed for a term of 3 years commencing from the date of the Further Supplemental Agreement, and that the Annual Caps for each of the years ending 31 December 2008, 2009 and 2010 is RMB57,890,000 (equivalent to approximately HK$66,009,122).

Since the ash yards owned by CDC are situated in the neighbourhood of the power plants owned or managed by the Company, it would be practical and cost-efficient for the Company to continue to use CDC's ash yards and to engage CDC's ash-disposing services for the Company's power plants. As such, the Directors (including the independent non-executive directors of the Company) are of the view that the terms of the Further Supplemental Agreement (including the Annual Caps) are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and that the terms of the Further Supplemental Agreement are normal commercial terms.

CONTINUING CONNECTED TRANSACTION

As at the date of the Further Supplemental Agreement, CDC owned approximately 33.70% of the issued share capital of the Company and is therefore a substantial shareholder of the Company under the Listing Rules. As such, CDC is a connected person of the Company under Rule 14A.11 of the Listing Rules, and the entering into of the Further Supplemental Agreement constitutes a continuing connected transaction of the Company. Given that each of the relevant percentage ratios of the maximum annual value of the services agreed to be provided by CDC to the Company under the Further Supplemental Agreement is less than 2.5%, the Further Supplemental Agreement is thereby only subject to the reporting, annual review and announcement requirements under Rules 14A.37 to 14A.40 and Rules 14A.45 to 14A.47 of the Listing Rules.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context otherwise requires:

'A Shares'			the domestic ordinary shares of the Company with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange
'Ash Disposal Agreement'			the agreement entered into between the Company and NCPGC on 5 August 1996, as amended by the Variation Agreement, in relation to the disposal by CDC of all ashes generated by the Company's power plants in accordance with the PRC national and local environmental protection requirements and industrial policies
'Board'			the board of Directors
'CDC'				China Datang Corporation, a state-owned enterprise established under the laws of the PRC and is a controlling Shareholder of the Company which owned approximately 33.70% of the issued share capital of the Company as at the date of this announcement
'Company'				Datang International Power Generation Co., Ltd., a sino-foreign joint stock limited company incorporated in the PRC on 13 December 1994, whose H Shares are listed on the Stock Exchange and the London Stock Exchange and whose A Shares are listed on the Shanghai Stock Exchange
Continuing connected transaction'				has the meaning ascribed to it in the Listing Rules
'Director(s)'				the director(s) of the Company
'Domestic Shares'				ordinary shares issued by the Company, with a nominal value of RMB1.00 each, which are subscribed for or credited as paid up in Renminbi
'Further Supplemental Agreement'				the further supplemental agreement entered into between the Company and CDC on 22 August 2008 in relation to the Ash Disposal Agreement (as amended by the Supplemental Agreement to the Ash Disposal Agreement)
'Group'				the Company and its Subsidiaries
'H Shares'				the overseas listed foreign shares of the Company with a nominal value of RMB1.00 each, which are listed on the Stock Exchange and the London Stock Exchange
'HK$'				Hong Kong dollar(s), the lawful currency of Hong Kong
'Hong Kong'				the Hong Kong Special Administrative Region of the PRC
'Listing Rules'				The Rules Governing the Listing of Securities on the Stock Exchange
'London Stock Exchange'				The London Stock Exchange Limited
'NCPGC'				North China Grid Company Limited (formerly known as North China Power Group Company), is a State-owned enterprise established in 1993 and currently managed by the State Grid Corporation, which is in turn managed by the central government of the PRC
'Power Purchase and Sales Agreement'				the agreement entered into between the Company and NCPGC on 5 August 1996 in relation to the purchase and sales of power
'PRC'				the People's Republic of China
'Prospectus'				the prospectus in relation to the new issue and placing of 1,244,060,000 H Shares of the Company dated 10 March 1997
'RMB'				Renminbi, the lawful currency of the PRC
'Shares'				the ordinary shares of the Company with a nominal value of RMB1.00 each, comprising Domestic Shares and H Shares
'Shareholder(s)'				the holder(s) of the Share(s)
'Stock Exchange'				The Stock Exchange of Hong Kong Limited
'Subsidiary'				has the meaning ascribed to it under the Listing Rules
'Supplemental Agreement to the Ash Disposal Agreement'				the agreement entered into between the Company and CDC on 20 December 2005 in relation to the Ash Disposal Agreement
'Variation Agreement'				the 'Variation Agreement in relation to the Ash Disposal Agreement and the Building Lease Agreement' entered into among NCPGC, CDC and the Company on 16 March 2004. Pursuant to this agreement, NCPGC transferred all of its rights and obligations under the Ash Disposal Agreement to CDC.
'%'				per cent.

Note: Unless otherwise specified and for reference only, the conversion of Hong Kong dollars into

Renminbi is based on the exchange rate of HK$1= RMB0.877 in this announcement.

By Order of the Board  

   Zhou Gang   

Secretary to the Board 

Beijing, the PRC, 25 August 2008

As at the date of this announcement, the directors of the Company are:

Zhai Ruoyu, Hu Shengmu, Cao Jingshan, Fang Qinghai, Zhou Gang, Liu Haixia, 

Guan Tiangang, Su Tiegang, Ye Yonghui, Li Gengsheng, Xie Songlin*, Liu Chaoan*, 
Yu Changchun*, Xia Qing* and Li Hengyuan*

* Independent non-executive directors

 

END

 

 

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