Cheung Kong Infrastructure : Formation Of Joint Venture - Connected Transaction (PDF)

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(Incorporated in Bermuda with limited liability)

(Stock code: 1038) FORMATION OF JOINT VENTURE CONNECTED TRANSACTION

(Incorporated in Hong Kong with limited liability)

(Stock code: 0006) FORMATION OF JOINT VENTURE CONNECTED TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

The respective boards of directors of CKI and PAH jointly announce that, on 25 April 2016 (Calgary time), being 26 April 2016 (Hong Kong time) (before the opening of trading hours in Hong Kong), CKI, PAH and Husky entered into the Investment Agreement in relation to, among other things, the formation of HMLP and the initial contribution by each partner of HMLP at Closing.

Pursuant to the Investment Agreement:

1. CKI has agreed to, among other things, at Closing (i) cause CKI Canco2 to contribute approximately CAD288.46 million (equivalent to approximately HK$1,764.58 million) in cash to HMLP, in exchange for 1,623,375 Class A LP Units in HMLP (representing 16.25% of the total number of limited partnership units in HMLP in issue upon Closing); and (ii) cause CKI Canco1 to subscribe for 1,625 Class A Non-voting Shares in GPCo (representing 16.25% of the total number of non-voting shares in GPCo in issue upon Closing) for a consideration of approximately CAD0.29 million (equivalent to approximately HK$1.77 million) in cash and 250 Class C Voting Shares in GPCo (representing 25% of the total number of voting shares in GPCo in issue upon Closing) for a consideration of CAD25 (equivalent to approximately HK$153) in cash;

2. PAH has agreed to, among other things, at Closing (i) cause PAH Canco2 to contribute approximately CAD865.38 million (equivalent to approximately HK$5,293.75 million) in cash to HMLP, in exchange for 4,870,125 Class A LP Units in HMLP (representing 48.75% of the total number of limited partnership units in HMLP in issue upon Closing); and (ii) cause PAH Canco1 to subscribe for 4,875 Class A Non-voting Shares in GPCo (representing 48.75% of the total number of non-voting shares in GPCo in issue upon Closing) for a consideration of approximately CAD0.87 million (equivalent to approximately HK$5.32 million) in cash and 250 Class C Voting Shares in GPCo (representing 25% of the total number of voting shares in GPCo in issue upon Closing) for a consideration of CAD25 (equivalent to approximately HK$153) in cash;

3. Husky has agreed to, among other things, at Closing (i) cause HOOL to contribute its 99% interests in HMGP to HMLP in exchange for 3,496,500 Class B LP Units in HMLP (representing 35% of the total number of limited partnership units in HMLP in issue upon Closing) and approximately CAD1,667.40 million (equivalent to approximately HK$10,199.90 million) in cash; (ii) cause HOIRL to convey all the shares in HoldCo and the HoldCo Note to HMLP in exchange for approximately CAD33.97 million (equivalent to approximately HK$207.80 million) in cash; and (iii) cause HOOL (or an affiliate of HOOL) to subscribe for 3,500 Class B Non-voting Shares in GPCo (representing 35% of the total number of non-voting shares in GPCo in issue upon Closing) for a consideration of approximately CAD0.62 million (equivalent to approximately HK$3.79 million) in cash and 500 Class C Voting Shares in GPCo (representing 50% of the total number of voting shares in GPCo in issue upon Closing) for a consideration of CAD50 (equivalent to approximately HK$306) in cash; and

4. GPCo will contribute, as part of the transactions steps at Closing, approximately CAD1.78 million (equivalent to approximately HK$10.89 million) in cash to HMLP in exchange for 0.1% partnership interest in HMLP.

Closing will be conditional upon the fulfillment of certain conditions under the Investment Agreement (further details of which are set out in the section headed "The Investment Agreement

- Conditions to the Joint Venture Transaction" below).

Each of CKI and PAH estimates their respective group's maximum capital commitment under the Joint Venture Transaction to be approximately CAD373 million and CAD1,119 million (equivalent to approximately HK$2,281.73 million and HK$6,845.20 million) respectively.

Immediately after Closing, CKI, PAH and Husky will, through their wholly-owned subsidiaries and through their respective holdings in GPCo, be interested in 16.25%, 48.75% and 35% of HMLP, and HMLP will be accounted for as a joint venture by each of CKI and PAH in their respective consolidated financial statements.

Pursuant to the Investment Agreement, CKI, PAH and Husky also agreed that, upon Closing, other transaction documents including but not limited to the Limited Partnership Agreement, the Unanimous Shareholder Agreement, the Management and Operating Services Agreement, the Construction Services Agreement, the Blending Services Agreement, the Husky TSA, the Trust Agreement and the Storage Agreement will be entered into by the relevant entities. Please refer to some further details set out in the section headed "Other Transaction Documents" below. It is also agreed that, upon Closing, (i) each of CKI and PAH will execute a guarantee in favour of GPCo and HMLP in respect of CKI Canco2's and PAH Canco2's respective contribution obligations for the Growth Projects up to the amounts of 16.25% and 48.75% of approximately CAD518 million (equivalent to approximately HK$3,168.74 million) respectively; and

(ii) Husky will execute a guarantee in favour of GPCo and HMLP in respect of HOOL's contribution obligations for the Growth Projects up to the amount of 35% of approximately CAD518 million (equivalent to approximately HK$3,168.74 million), and a guarantee in favour of HMGP in respect of HEMP's obligations under the Husky TSA and the Storage Agreement and Blender GP's obligations under the Blending Services Agreement.

CKH Holdings, the controlling shareholder of CKI currently holding approximately 71.93% of the issued shares of CKI, also indirectly holds approximately 40.18% of the issued shares of Husky. As an associate of CKH Holdings, Husky is a connected person of CKI under the Listing Rules. Accordingly, the Joint Venture Transaction constitutes a connected transaction for CKI under the Listing Rules. As one or more of the relevant percentage ratios represented by the maximum financial commitment of CKI under the Joint Venture Transaction exceed 0.1% but all of the relevant percentage ratios are less than 5%, the Joint Venture Transaction is subject to the reporting and announcement requirements of Chapter 14A of the Listing Rules but exempt from the requirement for approval by independent shareholders of CKI.

CKI currently holds approximately 38.87% of the issued shares of PAH. As a substantial shareholder of PAH, CKI is a connected person of PAH under the Listing Rules. CKH Holdings, the controlling shareholder of CKI, currently holds approximately 40.18% of the issued shares of Husky. As an associate of CKI, Husky is a connected person of PAH under the Listing Rules. Accordingly, the Joint Venture Transaction constitutes a connected transaction for PAH under the Listing Rules. As one or more of the relevant percentage ratios represented by the maximum financial commitment of PAH under the Joint Venture Transaction exceed 0.1% but all of the relevant percentage ratios are less than 5%, the Joint Venture Transaction is subject to the reporting and announcement requirements of Chapter 14A of the Listing Rules but exempt from the requirement for approval by independent shareholders of PAH.

HMLP will, upon Closing, be a Material JV of PAH, and will be subject to a number of continuing obligations governing subsidiaries of PAH under the Listing Rules, including Chapters 14 and 14A of the Listing Rules, subject to certain modifications to the effect that, among other things, the percentage ratio tests for the de minimis exemption for connected transactions will be adjusted to take into account only the proportional interest of PAH (through PAH Canco2 and through PAH's shareholding in GPCo) in HMLP. Accordingly, upon Closing, each of the Services Agreements to be entered into between (among other parties) (i) HMGP (a wholly-owned subsidiary of HMLP) and (ii) HOOL, HEMP or Blender GP (each a wholly-owned subsidiary of Husky) will be considered continuing connected transactions for PAH. As one or more of the relevant percentage ratios in respect of the annual caps for (i) the income-nature continuing connected transactions (on an aggregated basis); and (ii) the expense-nature continuing connected transactions (on an aggregated basis) contemplated under the Services Agreements exceed 0.1% but all of the relevant percentage ratios are less than 5%, the continuing connected transactions contemplated under the Services Agreements are subject to the reporting, announcement and annual review requirements under Chapter 14A of the Listing Rules but exempt from the requirement for approval by independent shareholders of PAH.

INTRODUCTION

The respective boards of directors of CKI and PAH jointly announce that, on 25 April 2016 (Calgary time), being 26 April 2016 (Hong Kong time) (before the opening of trading hours in Hong Kong), CKI, PAH and Husky entered into the Investment Agreement in relation to, among other things, the formation of HMLP, and the initial contribution by each partner of HMLP at Closing.

The major terms of the Investment Agreement and other information relating thereto are set out below.

THE INVESTMENT AGREEMENT Subscription and Contribution

1. CKI has agreed to, among other things, at Closing (i) cause CKI Canco2 to contribute approximately CAD288.46 million (equivalent to approximately HK$1,764.58 million) in cash to HMLP, in exchange for 1,623,375 Class A LP Units in HMLP (representing 16.25% of the total number of limited partnership units in HMLP in issue upon Closing); and (ii) cause CKI Canco1 to subscribe for 1,625 Class A Non-voting Shares in GPCo (representing 16.25% of the total number of non-voting shares in GPCo in issue upon Closing) for a consideration of approximately CAD0.29 million (equivalent to approximately HK$1.77 million) in cash and 250 Class C Voting Shares in GPCo (representing 25% of the total number of voting shares in GPCo in issue upon Closing) for a consideration of CAD25 (equivalent to approximately HK$153) in cash;

2. PAH has agreed to, among other things, at Closing (i) cause PAH Canco2 to contribute approximately CAD865.38 million (equivalent to approximately HK$5,293.75 million) in cash to HMLP, in exchange for 4,870,125 Class A LP Units in HMLP (representing 48.75% of the total number of limited partnership units in HMLP in issue upon Closing); and (ii) cause PAH Canco1 to subscribe for 4,875 Class A Non-voting Shares in GPCo (representing 48.75% of the total number of non-voting shares in GPCo in issue upon Closing) for a consideration of approximately CAD0.87 million (equivalent to approximately HK$5.32 million) in cash and 250 Class C Voting Shares in GPCo (representing 25% of the total number of voting shares in GPCo in issue upon Closing) for a consideration of CAD25 (equivalent to approximately HK$153) in cash;