Discloseable Transaction and Connected Transaction
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
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If you are in any doubt as to any aspect of this circular or as to the action to be taken,
you should consult a licensed securities dealer, bank manager, solicitor, professional
accountant or other professional adviser.
If you have sold or transferred all your shares in DATANG INTERNATIONAL POWER GENERATION CO.,
LTD., you should at once hand this circular to the purchaser or transferee or to the bank,
licensed securities dealer or other agent through whom the sale or transfer was effected for
transmission to the purchaser or transferee.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no
responsibility for the contents of this circular, make 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 circular.
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DATANG INTERNATIONAL POWER GENERATION CO., LTD.
(a sino-foreign joint stock limited company incorporated in the People's Republic of China)
(Stock Code: 00991)
DISCLOSEABLE TRANSACTION
AND
CONNECTED TRANSACTION
Independent Financial Adviser to the Independent Board Committee
and the Independent Shareholders
Mizuho Securities Asia Limited
A letter from the Board, a letter from the Independent Board Committee and a letter from Mizuho
Securities containing its advice to the Independent Board Committee and the Independent
Shareholders are set out in this circular.
The Company will convene the AGM at 5/F, InterContinental Hotel, No. 11 Financial Street,
Xicheng District, Beijing, the PRC on 3 June 2011 (Friday) at 9:00 a.m. The notice convening
the AGM has been despatched to the Shareholders on 15 April 2011.
Completion and return of the proxy form shall not preclude you from attending and voting in
person at the AGM or at any adjourned meetings should you so wish.
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CONTENTS
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DEFINITIONS
LETTER FROM THE BOARD
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
LETTER FROM MIZUHO SECURITIES
APPENDIX - GENERAL INFORMATION
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DEFINITIONS
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In this circular, unless the context otherwise requires, the following expressions have the
following meanings:
"AGM" the 2010 annual general meeting of the Company to be held on
5/F, InterContinental Hotel, No. 11 Financial Street, Xicheng
District, Beijing, the PRC on 3 June 2011 (Friday) at 9:00 a.m.
to consider and approve, among others, the Entrusted Loan
Agreement
"A Share(s)" the domestic ordinary share(s) of the Company with a nominal
value of RMB1.00 each and are listed on the Shanghai Stock
Exchange
"Articles of Association" the articles of association of the Company
"BIEC" Beijing Jingneng International Energy Company Limited. As at
the Latest Practicable Date, BEIG and its subsidiaries hold the
entire equity interests of BIEC
"BEIG" Beijing Energy Investment (Group) Company Limited. As at
the Latest Practicable Date, BEIG holds approximately 10.39%
of the issued capital of the Company
"Board" the board of Directors of the Company
"CDC" China Datang Corporation, a State-owned enterprise
established under the laws of the PRC and is a controlling
Shareholder of the Company pursuant to the Listing Rules
which together with its subsidiaries own approximately
36.07% of the issued share capital of the Company as at the
Latest Practicable Date
"Company" Datang International Power Generation Co., Ltd., a sinoforeign
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
"Connected Transaction" has the meaning ascribed to it in the Listing Rules
"Connected Person" has the meaning ascribed to it in the Listing Rules
"Datang Finance Company" China Datang Finance Company Limited
"Directors" the director(s) of the Company
"Entrusted Loan" the entrusted loan of a principal amount of RMB3,000 million
"Entrusted Loan Agreement" the entrusted loan agreement entered into on 13 April 2011 by
the Company, Datang Finance Company and TPGC in respect
of the Entrusted Loan Arrangement
"Entrusted Loan Arrangement" the arrangement where Datang Finance Company is designated
by the Company to act as a lending agent to release the
Entrusted Loan, which is funded by the Company, to TPGC
and to monitor the use and repayment of the Entrusted Loan by
TPGC pursuant to the Entrusted Loan Agreement
"Group" the Company and its subsidiaries from time to time
"H Share(s)" 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
"Hong Kong" the Hong Kong Special Administrative Region of the PRC
"Independent Board Committee" the independent board committee of the Company, comprising
five independent non-executive Directors, and each of them
does not have any material interest in the Entrusted Loan
Agreement
"Independent Shareholders" has the meaning ascribed to it under the Listing Rules
"Latest Practicable Date" 4 May 2011, being the latest practicable date prior to the
printing of this circular for ascertaining certain information
in this circular
"Listing Rules" the Rules Governing the Listing of Securities on the Stock
Exchange
"London Stock Exchange" The London Stock Exchange Limited
"Mengdian Group" Inner Mongolia Mengdian Huaneng Thermal Power
Corporation Limited
"Mizuho Securities" Mizuho Securities Asia Limited, the independent financial
adviser to the Independent Board Committee and the
Independent Shareholders in respect of the terms of the
Entrusted Loan Agreement, and a licensed corporation for
types 1 (dealing in securities), 2 (dealing in futures
contracts), 4 (advising on securities), 5 (advising on futures
contracts), 6 (advising on corporate finance) and 9 (asset
management) regulated activities under the SFO
"PRC" the People's Republic of China
"RMB" Renminbi, the lawful currency of the PRC
"SFO" the Securities and Futures Ordinance (Chapter 571 of the Laws
of Hong Kong)
"Shareholder(s)" the holder(s) of the Share(s)
"Shares" the ordinary shares of the Company with a nominal value of
RMB1.00 each, comprising domestic Shares and H Shares
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"TPGC" Inner Mongolia Datang International Tuoketuo Power
Generation Company Limited
"%" percent
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LETTER FROM THE BOARD
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DATANG INTERNATIONAL POWER GENERATION CO., LTD.
(a sino-foreign joint stock limited company incorporated in the People's Republic of China)
(Stock Code: 00991)
Executive Directors: Office address:
Mr. Cao Jingshan No.9 Guangningbo Street
Mr. Zhou Gang Xicheng District
Beijing, 100033
Non-executive Directors: the PRC
Mr. Liu Shunda (Chairman)
Mr. Hu Shengmu Principal place of business
Mr. Fang Qinghai in Hong Kong:
Mr. Liu Haixia c/o Stephen Mok & Co.
Ms. Guan Tiangang 21/F, Gloucester Tower
Mr. Su Tiegang The Landmark
Mr. Ye Yonghui 15 Queen's Road Central
Mr. Li Gengsheng Hong Kong
Independent non-executive Directors:
Mr. Li Yanmeng
Mr. Zhao Zunlian
Mr. Li Hengyuan
Ms. Zhao Jie
Mr. Jiang Guohua
9 May 2011
To the Shareholders
Dear Sir or Madam,
DISCLOSEABLE TRANSACTION
AND
CONNECTED TRANSACTION
BACKGROUND
On 13 April 2011, the Company entered into the Entrusted Loan Agreement with Datang Finance
Company and TPGC in relation to the provision of the Entrusted Loan by the Company to TPGC
through the Entrusted Loan Arrangement, in which Datang Finance Company acts as the lending
agent to ensure TPGC's repayment of due borrowings and the normal turnaround of working capital
as well as to reduce its financing costs.
The purpose of this circular is:
(1) to provide you with further details of the Entrusted Loan Agreement;
(2) to set out the recommendation of the Independent Board Committee in respect of the
Entrusted Loan Agreement; and
(3) to set out the letter of advice from Mizuho Securities to the Independent Board
Committee and the Independent Shareholders in respect of the Entrusted Loan Agreement.
ENTRUSTED LOAN AGREEMENT
Date and Subject Matter
On 13 April 2011, the Company entered into the Entrusted Loan Agreement with Datang Finance
Company and TPGC in relation to the provision of the Entrusted Loan by the Company to TPGC
through the Entrusted Loan Arrangement, in which Datang Finance Company acts as lending agent.
Parties
(1) the Company, as the lender;
(2) Datang Finance Company, as the lending agent; and
(3) TPGC, as the borrower.
Major terms of the Entrusted Loan Agreement
Entrusted Loan Arrangement
Pursuant to the Entrusted Loan Agreement, Datang Finance Company is designated by the
Company to act as a lending agent to release the Entrusted Loan, which is funded by the
Company, to TPGC and to monitor the use and repayment of the Entrusted Loans by TPGC.
Principal amount of the Entrusted Loan
RMB3,000 million
Term
The term of borrowing stipulated in the Entrusted Loan Agreement is one year.
Interest rate
At a floating interest rate, being 10% floating downward as compared to the benchmark
interest rate announced by the People's Bank of China on the actual date of granting the loan.
During the term of the Entrusted Loan Agreement, the lending rate will be adjusted on the
twenty-first day of the last month of the following quarter since the actual date of granting
the loan. Such interest rate is arrived at after arm's length negotiation between the Company
and TPGC after considering the overall reduction of capital costs to the Group as the accounts
of TPGC (being the controlled subsidiary of the Company) are consolidated into the accounts of
the Company.
Repayment schedule for the principal of the Entrusted Loan
One-off repayment of principal by TPGC upon maturity of the Entrusted Loan Agreement.
Payment schedule for the interests of the Entrusted Loan
Interests for the Entrusted Loan shall be settled by TPGC on a quarterly basis. The
settlement date falls on the twentieth (20th) day of the last month of each quarter.
Handling charge
The handling charge for the Entrusted Loan under the Entrusted Loan Agreement is calculated
at 0.025% of the principal amount of the Entrusted Loan. TPGC shall pay such handling charge on
an oneoff basis to Datang Finance Company within five working days when the Entrusted Loan
Agreement becomes effective.
Effective Date
After being duly signed by the parties, the Entrusted Loan Agreement is also subject to the
approval by the Independent Shareholders pursuant to the Articles of Association and the
Listing Rules.
REASONS FOR AND BENEFITS OF ENTERING INTO THE ENTRUSTED LOAN AGREEMENT
In order to ensure the turnover of capital at TPGC and to reduce financing costs, the
Company intends to provide the Entrusted Loan to TPGC. Furthermore, according to the Entrusted
Loan Agreement, Datang Finance Company shall collect a handling charge of 0.025% based on the
amount of the Entrusted Loan for acting as the lending agent for the Company's Entrusted Loan.
The Company is of the view that the provision of the Entrusted Loan to TPGC through Datang
Finance Company is beneficial for ensuring TPGC's repayment of due borrowings and the normal
turnaround of working capital, as well as reducing the overall capital costs of the Company.
The terms of the Entrusted Loan Agreement were negotiated on an arm's length basis between
all parties thereto and were determined on normal commercial terms. The Directors believe that
the terms of the Entrusted Loan Agreement are fair and reasonable and in the best interests of
the Company and the Shareholders as a whole.
DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION
As the consideration ratio (as defined in Rule 14.07 of the Listing Rules) for the
principal amount of the Entrusted Loan is more than 5% but less than 25%, the Entrusted Loan
Agreement constitutes a discloseable transaction of the Company and is subject to the reporting
and announcement requirements under Chapter 14 of the Listing Rules.
As at the Latest Practicable Date, CDC is the controlling shareholder of Datang Finance
Company which holds a 55.31% interest in Datang Finance Company. CDC, together with its
subsidiaries, also hold a total of approximately 36.07% of the issued share capital of the
Company as at the Latest Practicable Date. Accordingly, Datang Finance Company is a Connected
Person of the Company.
As at the Latest Practicable Date, TPGC is owned as to 60% and 25% by the Company and BIEC,
respectively. BEIG and its subsidiaries hold the entire equity interest of BIEC. BEIG holds
approximately 10.39% of the issued share capital of the Company. TPGC is therefore a Connected
Person of the Company and the Entrusted Loan Arrangement constitutes a Connected Transaction of
the Company under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing
Rules) for the principal amount of the Entrusted Loan is more than 5%, the Entrusted Loan
Agreement is subject to the reporting, announcement and Independent Shareholders' approval
requirements under Chapter 14A of the Listing Rules.
Any Shareholder with a material interest in the transaction and its associates, will
abstain from voting at approving the Entrusted Loan Agreement at the AGM to be held by the
Company, to, among others, consider and approve the Entrusted Loan Agreement. BEIG and its
associates, which hold approximately 10.39% of the issued share capital as at the Latest
Practicable Date, shall abstain from voting at the AGM to approve the Entrusted Loan Agreement.
The Company considers that since CDC and its associates do not have any material interest in
the Entrusted Loan Agreement and the applicable percentage ratio (as defined in Rule 14.07 of
the Listing Rules) in respect of the handling fee receivable by Datang Finance Company under
the Entrusted Loan Agreement is less than 0.1% and de minimis, CDC and its associates are not
required to abstain from voting at approving the Entrusted Loan Agreement at the AGM.
None of the Directors have any material interest in the Entrusted Loan Agreement. Those
connected Directors, including Liu Shunda, Hu Shengmu, Fang Qinghai, Liu Haixia, and Guan
Tiangang, who are the principal management staff of CDC and BEIG, respectively, have abstained
from voting at the Board meeting for approval of the relevant transaction in accordance with
the requirements of the listing rules of the Shanghai Stock Exchange.
The Company will disclose the relevant details in the next published annual report and
accounts of the Company in accordance with the relevant requirements as set out in Rule 14A.45
of the Listing Rules.
INFORMATION RELATING TO THE COMPANY
The Company 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 powerrelated technical services, with its main service areas being in the PRC.
INFORMATION RELATING TO TPGC
TPGC is duly incorporated in the PRC on 17 November 1995 with the registered capital of
RMB1,714.02 million. TPGC is mainly responsible for the construction and operation of the
6×600MW power plant projects in Inner Mongolia region. The Company holds 60% of the equity
interests of TPGC, while BIEC and Mengdian Company hold the balance of 25% and 15%,
respectively. As at 31 December 2010, TPGC's audited total assets amounted to RMB9,442.85
million; audited total liabilities amounted to RMB5,434.61 million; and the asset-to-liability
ratio was 57.55%. In 2010, its audited sales revenue amounted to RMB5,607.03 million in
aggregate, and audited net profit amounted to RMB1,441.21 million in aggregate.
INFORMATION RELATING TO DATANG FINANCE COMPANY
Datang Finance Company is duly established in the PRC as a non-banking financial
institution on 10 May 2005. The registered capital of Datang Finance Company is RMB1,600
million. The principal business of Datang Finance Company includes the provision of, among
others, deposit services, loan services, entrusted loan services and entrusted investment
services.
AGM
The Company will convene the AGM to, among other things, consider and approve the Entrusted
Loan Agreement. The notice convening the AGM and the relevant notice of attendance were
despatched to the Shareholders on 15 April 2011.
RECOMMENDATION
Your attention is drawn to the letter from the Independent Board Committee as set out in
this circular which contains its recommendation to the Independent Shareholders on the terms
of the Entrusted Loan Agreement. Your attention is also drawn to the letter of advice
received from Mizuho Securities, the independent financial adviser to the Independent Board
Committee and the Independent Shareholders as set out in this circular which contains,
among others, its advice to the Independent Board Committee and the Independent
Shareholders in relation to the terms of the Entrusted Loan Agreement, the casting of votes
for or against the resolution approving the Entrusted Loan Agreement by poll at the AGM as
well as the principal factors and reasons considered by it in concluding its advice.
The Directors consider that the terms of the Entrusted Loan Agreement are fair and
reasonable and in the interest of the Shareholders and the Company as a whole and they
recommend the Shareholders to vote in favour of the resolution at the AGM.
Yours faithfully,
By Order of the Board of
Datang International Power Generation Co., Ltd.
Zhou Gang
Secretary to the Board
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LETTER FROM THE INDEPENDENT BOARD COMMITTEE
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DATANG INTERNATIONAL POWER GENERATION CO., LTD.
(a sino-foreign joint stock limited company incorporated in the People's Republic of China)
(Stock Code: 00991)
office address
No.9 Guangningbo Street
Xicheng District
Beijing, 100033
The PRC
9 May 2011
To the Independent Shareholders
Dear Sir or Madam,
DISCLOSEABLE TRANSACTION
AND
CONNECTED TRANSACTION
We refer to the circular issued by the Company to the shareholders dated 9 May 2011 (the
"Circular") of which this letter forms part. Terms defined in the Circular shall have the same
meanings in this letter unless the context otherwise requires.
Under the Listing Rules, the Entrusted Loan Agreement and the entering into of the
Entrusted Loan Agreement constitutes a discloseable transaction and connected transaction for
the Company, and is subject to the approval of the Independent Shareholders at the AGM.
We have been appointed as the Independent Board Committee to consider the terms of the
Entrusted Loan Agreement and to advise the Independent Shareholders in connection with the
Entrusted Loan Agreement as to whether, in our opinion, its terms are fair and reasonable and
whether the relevant transactions under the Entrusted Loan Agreement is in the interests of the
Company and the shareholders as a whole. Mizuho Securities has been appointed as the independent
financial adviser to advise us in this respect.
We wish to draw your attention to the letter from the Board and the letter from Mizuho
Securities as set out in the Circular. Having considered the principal factors and reasons
considered by, and the advice of, Mizuho Securities as set out in its letter of advice, we
consider that the Entrusted Loan Agreement is on normal commercial terms, and that the Entrusted
Loan Agreement is in the best interests of the Company and the Shareholders as a whole.
We also consider that the terms of the Entrusted Loan Agreement are fair and reasonable.
Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary
resolution to approve the Entrusted Loan Agreement at the AGM.
Yours faithfully,
For and on behalf of the Independent Board Committee
Li Yanmeng, Zhao Zunlian, Li Hengyuan, Zhao Jie, Jiang Guohua
Independent non-executive Directors
Datang International Power Generation Co., Ltd.
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LETTER FROM MIZUHO SECURITIES
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The following is the text of the letter of advice from Mizuho Securities, the independent
financial adviser to the Independent Board Committee and Independent Shareholders, in respect
of the terms of the Entrusted Loan Agreement, which has been prepared for the purpose of
inclusion in this circular.
Mizuho Securities Asia Limited
12th Floor, Chater House,
8 Connaught Road Central, Hong Kong
Tel: 2685-2000 Fax: 2685-2410
9 May 2011
To the Independent Board Committee
and the Independent Shareholders
Datang International Power Generation Co., Ltd.
Dear Sirs,
DISCLOSEABLE TRANSACTION
AND CONNECTED TRANSACTION
INTRODUCTION
We refer to our engagement as the independent financial adviser to the Independent Board
Committee and Independent Shareholders in respect of the Entrusted Loan Agreement. Further
details of the Entrusted Loan Agreement are set out in the letter from the Board (the "Letter
from the Board") in the circular of the Company to its Shareholders dated 9 May 2011 (the
"Circular"), of which this letter forms part. Capitalised terms used in this letter shall have
the same meanings as those defined in the Circular unless the context otherwise requires.
On 13 April 2011, the Company entered into the Entrusted Loan Agreement with Datang Finance
Company and TPGC in relation to the provision of the entrusted loan of a principal amount of
RMB3,000 million by the Company to TPGC through the Entrusted Loan Arrangement, in which Datang
Finance Company acts as the lending agent to ensure TPGC's repayment of due borrowings and the
normal turnaround of working capital as well as to reduce its financing costs.
As at the Latest Practicable Date, CDC is the controlling shareholder of Datang Finance
Company holding 55.31% of its equity interest. CDC, together with its subsidiaries, also hold a
total of approximately 36.07% of the issued share capital of the Company as at the Latest
Practicable Date. Accordingly, Datang Finance Company is a Connected Person of the Company.
As at the Latest Practicable Date, TPGC is owned as to 60% and 25% by the Company and BIEC,
respectively. BEIG and its subsidiaries hold the entire equity interest of BIEC. BEIG holds
approximately 10.39% of the issued share capital of the Company. TPGC is therefore a Connected
Person of the Company and the Entrusted Loan Arrangement constitutes a Connected Transaction of
the Company under Chapter 14A of the Listing Rules.
As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing
Rules) for the principal amount of the Entrusted Loan is more than 5%, the Entrusted Loan
Agreement is subject to the reporting, announcement and Independent Shareholders' approval
requirements under Chapter 14A of the Listing Rules.
Any Shareholder with a material interest in the transaction and its associates, will
abstain from voting at approving the Entrusted Loan Agreement at the AGM to be held by the
Company, to, among others, consider and approve the Entrusted Loan Agreement. BEIG and its
associates, which hold approximately 10.39% of the issued share capital as at the Latest
Practicable Date, shall abstain from voting at the AGM to approve the Entrusted Loan Agreement.
Our scope of work under this engagement is to assess whether the terms of the Entrusted
Loan Agreement are fair and reasonable so far as the Shareholders are concerned, and, from that
perspective, whether the Entrusted Loan Agreement is in the interests of the Company and the
Shareholders as a whole. It is not within our scope of work to opine on any other aspects of
the Entrusted Loan Agreement. In addition, it is not within our terms of reference to comment
on the commercial merits of the Entrusted Loan Agreement which is the responsibility of the
Directors.
BASIS OF OUR OPINION
In arriving at our opinion, we have relied on the information, opinions and facts supplied,
and representations made to us, by the Directors, advisers and representatives of the Company
(including those contained or referred to in the Circular). We have also assumed that the
information and representations contained or referred to in the Circular were true and accurate
in all respects at the time they were made and continue to be so at the date of dispatch of the
Circular. We have no reason to doubt the truth, accuracy and completeness of the information
and representations provided to us by the Directors and senior management of the Company. We
have also relied on certain information available to the public and have assumed such
information to be accurate and reliable, and we have not independently verified the accuracy of
such information. We have been advised by the Directors and believe that no material facts have
been omitted from the Circular.
We consider that we have reviewed sufficient information to reach an informed view, to
justify reliance on the accuracy of the information contained in the Circular and to provide a
reasonable basis for our opinion. We have not, however, conducted an independent verification
of the information nor have we conducted any form of in-depth investigation into the businesses
and affairs or other prospects of the Company, Datang Finance Company and TPGC, and any of
their respective subsidiaries or associates.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In forming our opinion, we have considered the following principal factors and reasons:
1. Background
Information relating to the Company
The Company 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 powerrelated technical services, with its main service areas being in the PRC.
Information relating to TPGC
TPGC is duly incorporated in the PRC on 17 November 1995 with the registered capital of
RMB1,714.02 million. TPGC is mainly responsible for the construction and operation of the
6×600MW power plant projects in Inner Mongolia region. The Company holds 60% of the equity
interests of TPGC while BIEC and Mengdian Company hold the balance of 25% and 15% respectively.
As at 31 December 2010, TPGC's audited total assets amounted to RMB9,442.85 million and audited
total liabilities amounted to RMB5,434.61 million. For the year ended 31 December 2010, its
audited sales revenue amounted to RMB5,607.03 million, and audited net profit amounted to
RMB1,441.21 million.
Information relating to Datang Finance Company
Datang Finance Company is duly established in the PRC as a non-banking financial
institution on 10 May 2005. The registered capital of Datang Finance Company is RMB1,600
million. The principal business of Datang Finance Company includes the provision of, among
others, deposit services, loan services, entrusted loan services and entrusted investment
services.
2. Reasons for and Benefits of Entering into the Entrusted Loan Agreement
As mentioned in the Letter from the Board, in order to improve the turnover of capital at
TPGC and to reduce financing costs, the Company intends to provide the Entrusted Loan to TPGC.
Furthermore, according to the Entrusted Loan Agreement, Datang Finance Company shall collect a
handling charge of 0.025% based on the principal amount of the Entrusted Loan for acting as the
lending agent for the Company's Entrusted Loan. The Company is of the view that the provision of
the Entrusted Loan to TPGC through Datang Finance Company is beneficial for ensuring TPGC's
repayment of due borrowings and the normal turnaround of working capital, as well as reducing
the overall capital costs of the Company.
In view of such background and the fact that TPGC is a subsidiary of the Company, we
consider that the Entrusted Loan Arrangement is in the ordinary and usual course of business of
the Company and is in the interest of the Company and its Shareholders as a whole.
3. Major Terms of the Entrusted Loan Agreement
Entrusted Loan Arrangement
Pursuant to the Entrusted Loan Agreement, Datang Finance Company is designated by the
Company to act as a lending agent to release the Entrusted Loan, which is funded by the Company,
to TPGC and to monitor the use and repayment of the Entrusted Loans by TPGC.
Principal amount of the Entrusted Loan and its usage
The principal amount of the Entrusted Loan is RMB3,000 million.
As mentioned in the Letter from the Board, as at 31 December 2010, the total liabilities of
TPGC amounted to RMB5,434.61 million. We understand from the Company that the Entrusted Loan
may be used as working capital of TPGC and TPGC may repay part of its short-term loans from
third parties after obtaining the Entrusted Loan.
Term
The term of borrowing stipulated in the Entrusted Loan Agreement is one year.
Interest rate
Interest rate of the Entrusted Loan is at a floating interest rate, being 10% floating
downward as compared to the benchmark interest rate announced by the People's Bank of China on
the actual date of granting the loan. During the term of the Entrusted Loan Agreement, the
lending rate will be adjusted on the twenty-first day of the last month of the following
quarter since the actual date of granting the loan.
As mentioned in the Letter from the Board, such interest rate is arrived at after arm's
length negotiation between the Company and TPGC after considering the overall reduction of
capital costs to the Group as the accounts of TPGC (being a subsidiary of the Company) are
consolidated into the accounts of the Company.
In order to assess the reasonableness of the interest rate of the Entrusted Loan, we have
reviewed the interest rates of the short-term loans (which fall due within one year) of the
Group as at 31 December 2010 as references. According to the annual report of the Company for
the year ended 31 December 2010, the interest rates of the short-term bank loans of the Group
as at 31 December 2010 ranged from approximately 1.31% to 5.56%, and the interest rates of
other short-term loans of the Group as at 31 December 2010 ranged from approximately 3.89% to
5.23%. Based on the one-year benchmark lending rate announced by the People's Bank of China on
31 December 2010 of 5.81%, the floating interest rate of the Entrusted Loan on that date would
have been 5.229%. Considering the tenor of the Entrusted Loan being one year, and that the
accounts of TPGC are consolidated into the accounts of the Company, we consider that the
interest rate under the Entrusted Loan Agreement is reasonably determined.
Handling charge
The handling charge for the Entrusted Loan under the Entrusted Loan Agreement is calculated
at 0.025% of the principal amount of the Entrusted Loan. TPGC shall pay such handling charge on
a one-off basis to Datang Finance Company within five working days when the Entrusted Loan
Agreement becomes effective.
Datang Finance Company shall collect a handling charge of 0.025% based on the principal
amount of the Entrusted Loan for acting as the lending agent for the Company's Entrusted Loan.
We have discussed with the management of the Company about the scale of handling charge for
entrusted loans quoted by other commercial banks, including one of the largest commercial banks
in China. We note that the rate of 0.025% is on the low side, but is not out of line of the
handling charge imposed by other commercial banks for providing similar services generally.
Based on this, we consider that the handling charge for the Entrusted Loan under the Entrusted
Loan Agreement is reasonable.
OPINION
Having considered the principal factors and reasons described above, we are of the opinion
that the terms of the Entrusted Loan Agreement are on normal commercial terms and are fair and
reasonable as far as the interests of the Independent Shareholders are concerned, and, from
this perspective, the Entrusted Loan Agreement is in the interests of the Company and its
shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in
favour of the ordinary resolution to approve the Entrusted Loan Agreement at the AGM.
Yours faithfully,
For and on behalf of
MIZUHO SECURITIES ASIA LIMITED
Kelvin S. K. Lau
Managing Director
Equity Capital Markets & Corporate Finance
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APPENDIX GENERAL INFORMATION
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1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full
responsibility, includes particulars given in compliance with the Listing Rules for the purpose
of giving information with regard to the Company. The Directors having made all reasonable
enquiries, confirm that to the best of their knowledge and belief the information contained in
this circular is accurate and complete in all material respects and not misleading or deceptive,
and there are no other matters the omission of which would make any statement herein or this
circular misleading.
2. DISCLOSURE OF INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE OF THE COMPANY
(i) As at the Latest Practicable Date, save and except Mr. Fang Qinghai, being a Director,
who held 24,000 A shares of the Company, none of the Directors, supervisors and chief
executive of the Company have any interests and short positions in the shares,
underlying shares and/or debentures (as the case may be) of the Company or any of its
associated corporations (within the meaning of the SFO) which was required to be
notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part
XV of the SFO (including interests and short positions which any such Director, chief
executive or supervisor is taken or deemed to have under such provisions of the SFO)
or which was required to be entered into the register required to be kept by the
Company under section 352 of the SFO or which was otherwise required to be notified to
the Company and the Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers in the Listing Rules.
(ii) As at the Latest Practicable Date, none of the Directors, proposed Directors,
supervisors or proposed supervisors of the Company has any direct or indirect interest
in any assets which have since 31 December 2010 (being the date to which the latest
published audited financial statements of the Company were made up) been acquired or
disposed of by or leased to any member of the Group, or are proposed to be acquired or
disposed of by or leased to any member of the Group.
3. SERVICE AGREEMENTS
As at the Latest Practicable Date, none of the Directors, proposed directors, supervisors
or proposed supervisors of the Company had any existing or proposed service contract with any
member of the Group (excluding contracts expiring or determinable by the Company within one year
without payment of compensation (other than statutory compensation).
4. INTEREST IN CONTRACT
As at the Latest Practicable Date, none of the Directors or supervisors of the Company was
materially interested in any contract or arrangement entered into by any member of the Group,
and which was significant in relation to the business of the Group.
5. MATERIAL CHANGES
The Directors are not aware of any material adverse change in the financial or trading
position of the Group since 31 December 2010, being the date to which the latest published
audited financial statements of the Group were made up.
6. COMPETING INTEREST
As at the Latest Practicable Date, none of the directors of the Company and its
Subsidiaries, or their respective Associates has interests in the businesses which compete or
are likely to compete, either directly or indirectly, with the businesses of the Company and
its Subsidiaries.
7. EXPERT
(a) The following sets out the qualifications of the expert which has given its opinion or
advice as contained in this circular:
Name Qualifications
Mizuho Securities A licensed corporation to engage in types 1 (dealing in
securities), 2 (dealing in futures contracts) 4
(advising on securities), 5 (advising on futures
contracts), 6 (advising on corporate finance) and 9
(asset management) regulated activities under the SFO
(b) Mizuho Securities did not have any shareholding, direct or indirect, in any members of
the Group or any rights (whether legally enforceable or not) to subscribe for or to
nominate persons to subscribe for securities in any members of the Group as at the
Latest Practicable Date.
(c) Mizuho Securities does not have any interest, direct or indirect, in any assets which
have been acquired or disposed of by or leased to any members of the Group, or which
are proposed to be acquired or disposed of by or leased to any members of the Group
since 31 December 2010, the date to which the latest published audited financial
statements of the Company were made up.
(d) Mizuho Securities has given and has not withdrawn its written consent to the issue of
this circular with the inclusion of its letter and references to its name in the form
and context in which they are included.
8. LITIGATION
No member of the Company and its Subsidiaries is at present engaged in any litigation or
arbitration of material importance to the Company and its subsidiaries and no litigation or
claim of material importance to the Company and its subsidiaries is known to the Directors or
the Company to be pending or threatened by or against any member of the Company and its
subsidiaries.
9. MISCELLANEOUS
(a) The registered office of the Company is No. 482, Guanganmennei Avenue, Xuanwu
District, Beijing, the PRC and the office address of the Company is No. 9 Guangningbo
Street, Xicheng District, Beijing, the PRC.
(b) The place of business of the Company in Hong Kong is at c/o Stephen Mok & Co., 21/F,
Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong.
(c) The Hong Kong share registrar and transfer office of the Company is Computershare
Hong Kong Investor Services Limited at 46/F, Hopewell Centre, 183 Queen's Road East,
Wanchai, Hong Kong.
(d) The secretary to the Board of the Company is Mr. Zhou Gang. Mr. Zhou graduated from
East China Institute of Water Conservancy (currently known as Hehai University), and
is a senior engineer.
10. DOCUMENTS AVAILABLE FOR INSPECTION
A copy of the Entrusted Loan Agreement, the consent letter and the letter of advice from
Mizuho Securities are available for inspection at the principal place of business in Hong Kong
of the Company at 21/F, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong
during normal business hours from the date of this circular up to and including 23 May 2011.
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