CLP : Discloseable Transaction (2 April 2014)

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中 電 控 股 有 限 公 司 CL P Ho ld ing s Li mi t ed (incorporated in Hong Kong with limited liability)

(Stock Code: 00002)

On 2 April 2014 (after Hong Kong trading hours), CLP China (an indirect wholly-owned subsidiary of CLP Holdings) entered into the Share Transfer Agreement with the Purchaser, whereby CLP China agreed to sell and the Purchaser agreed to purchase the entire issued share capital and all related shareholder's loans of CLP China Tianjin and CLP China Shenmu for a cash consideration of the US$ equivalent of RMB2,250 million (HK$2,808 million).
It is a condition under the Share Transfer Agreement that CLP China Tianjin will undergo an internal restructuring before completion of the Disposal so that it will own 30% of the registered capital of CSEC Guohua upon completion of the Internal Restructuring and the Disposal. CSEC Guohua holds a 100% ownership interest in Beijing Yire Power Station in Beijing City and partial ownership interests in Panshan Power Station in Tianjin City, Sanhe Power Station in Hebei Province, Zhungeer Power Station in Inner Mongolia Autonomous Region and Suizhong Power Station in Liaoning Province. These five coal-fired power stations in the Chinese mainland have a combined installed capacity of 7,650 MW.
CLP China Shenmu owns 49% of the registered capital of Shenmu Power. Shenmu Power owns and operates a coal-fired power station, Shenmu Power Station in Shaanxi Province, with an installed capacity of 220 MW.

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As disclosed in the CEO's Strategic Review in our 2013 Annual Report, CLP Group's strategy in the Chinese mainland is to continue its selective investments in nuclear power, coal-fired generation and renewable energy, accompanied by the divestment of minority stakes in joint ventures with limited growth prospects. The power plant portfolio in which CSEC Guohua and Shenmu Power have invested fall under the category of minority investments in the Chinese mainland, which CLP Group wishes to divest at appropriate prices and terms. We consider that the divestment of CLP Group's interest in CSEC Guohua and Shenmu Power, through the disposal of CLP China Tianjin and CLP China Shenmu, represents an appropriate opportunity for us to exit our investments in the relevant power plants.
As one of the applicable percentage ratios (as calculated in accordance with Rule 14.07 of the Listing Rules) for the Disposal is more than 5% but less than 25%, the Disposal constitutes a discloseable transaction for CLP Holdings under Chapter 14 of the Listing Rules.

2 April 2014 (after Hong Kong trading hours)

Vendor: CLP Power China Limited (CLP China) Purchaser: CA Holdings Limited (the Purchaser)
CLP China is a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of CLP Holdings. CLP China is an investment holding company which holds interests in various power projects in the Chinese mainland.
Based on the information available to the Company, the Purchaser is a company incorporated in Hong Kong with limited liability and is an investment holding company whose major subsidiaries are principally engaged in industrial investment, property renting, property management and commercial shopping mall operation in the Chinese mainland. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons (as defined in the Listing Rules).

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Under the Share Transfer Agreement, CLP China agreed to sell and the Purchaser agreed to purchase the entire issued share capital and all related shareholder's loans of CLP China Tianjin and CLP China Shenmu.
CLP China Tianjin is a company incorporated in the British Virgin Islands with limited liability and a direct wholly-owned subsidiary of CLP China. CLP China Tianjin is an investment holding company whose principal asset as of the date of this announcement is its direct interest in holding one share of the registered capital of CSEC Guohua. It is a condition under the Share Transfer Agreement that CLP China Tianjin will undergo an internal restructuring before completion of the Disposal (the "Internal Restructuring") so that it will acquire the registered capital of CSEC Guohua currently held by CLP China Beijing (a direct wholly-owned subsidiary of CLP China) and thereby own 30% of the registered capital of CSEC Guohua upon completion of the Internal Restructuring and the Disposal. For more details on the corporate structure before and after the Internal Restructuring and upon Completion, please see the section headed "Corporate Structure of the Target Companies before and after the Internal Restructuring and upon Completion" in this announcement.
CSEC Guohua is a sino-foreign joint stock company with limited liability established in China, with 70% of its registered capital owned by CSEC and 30% owned by CLP Group (through CLP China Beijing and CLP China Tianjin). CSEC Guohua holds ownership interests in five coal-fired power stations in the Chinese mainland, namely (a) 100% ownership interest in Beijing Yire Power Station in Beijing City (with an installed capacity of
400 MW), (b) 65% ownership interest in Panshan Power Station in Tianjin City (with an installed capacity of 1,030 MW), (c) 55% ownership interest in Sanhe Power Station in Hebei Province (including Phase I and Phase II, with an installed capacity of 1,300 MW), (d) 65% ownership interest in Zhungeer Power Station in Inner Mongolia Autonomous Region (including Phase II and Phase III, with an installed capacity of 1,320 MW) and (e) 50% ownership interest in Suizhong Power Station in Liaoning Province (including Phase I and Phase II, with an installed capacity of 3,600 MW). These five power stations have a combined installed capacity of 7,650 MW.
CLP China Shenmu is a company incorporated in the British Virgin Islands with limited liability and a direct wholly-owned subsidiary of CLP China. CLP China Shenmu is an investment holding company whose principal asset is its direct interest in 49% of the registered capital of Shenmu Power.
Shenmu Power is a sino-foreign cooperative joint venture established in China, with 51% of its registered capital owned by CSEC and 49% owned by CLP China Shenmu. Shenmu Power owns and operates a coal-fired power station, Shenmu Power Station in Shaanxi Province, with an installed capacity of 220 MW.
After completion of the Disposal, CLP China Tianjin and CLP China Shenmu will cease to be wholly-owned subsidiaries of CLP Group, and CSEC Guohua and Shenmu Power will cease to be joint ventures of CLP Group.

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The total consideration for the Disposal is the US$ equivalent of RMB2,250 million (HK$2,808 million), of which RMB2,090 million (HK$2,608 million) is attributed to the disposal of CLP China Tianjin and RMB160 million (HK$200 million) is attributed to the disposal of CLP China Shenmu. CLP Group intends to use the net proceeds arising from the Disposal for investment purposes as well as for general working capital requirements.
The consideration for the Disposal shall be payable in cash by the Purchaser to CLP China: (a) as to 10% of the total consideration within 20 working days after the signing of the Share Transfer Agreement (the "Deposit"); and (b) as to the remaining 90% of the total consideration on completion of the Disposal.
The consideration for the Disposal was agreed by CLP Group and the Purchaser on normal commercial terms after arm's length negotiation, by reference to, amongst other things, the net book value and the profitability of the Target Companies and their related investments in CSEC Guohua and Shenmu Power, and the industry outlook relating to the coal-fired power market in the locality in which the relevant power stations operate.
Subject to completion, the Purchaser shall be entitled to the dividends (if any) derived from the earnings of the Target Companies for the financial year ended 31 December 2013 and beyond.
As of 31 December 2013, the aggregate carrying value of CSEC Guohua and Shenmu Power in CLP Group was reduced from HK$3,553 million to HK$3,256 million as a result of an impairment provision of HK$297 million being made. This impairment provision was measured on the basis of "fair value less costs to sell" in accordance with Hong Kong Accounting Standard 36 "Impairment of Assets", which is calculated by (a) the aggregate carrying value of CSEC Guohua and Shenmu Power of HK$3,553 million; less (b) the net consideration for the Disposal (i.e. the total consideration for the Disposal less the estimated transaction costs arising from the Disposal); less (c) the accumulated exchange gain arising from the appreciation of RMB against HK$ from the date of investment up to 31 December
2013. Since the expected loss on Disposal has already been substantially reflected in the impairment provision of HK$297 million as described above, we currently do not expect any further gain or loss to be recorded upon completion of the Disposal, save and except for any further exchange gain or loss arising from the fluctuation of RMB against HK$ between 1
January 2014 and the date of completion of the Disposal.

Completion of the Disposal is subject to, inter alia, completion of the Internal Restructuring which is in turn subject to the obtaining of corporate and regulatory approvals regarding the Internal Restructuring.
Under the Share Transfer Agreement, it is CLP China's responsibility to (a) obtain/complete the approvals and/or registrations (if appropriate) necessary for the transfer of the shareholding in the Target Companies to the Purchaser; and (b) deliver relevant documents and information that CLP China has in its possession to the Purchaser to facilitate the

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completion of the Disposal.
CLP China shall complete the Internal Restructuring within six months after the receipt of the Deposit. If the Internal Restructuring is not completed within the six-month period, CLP China is required to continue the Internal Restructuring unless both parties mutually agree then to terminate the Share Transfer Agreement. In any event, the Internal Restructuring shall be completed to enable completion of the Disposal to take place not later than 31
December 2014, unless both parties agree otherwise. If the Disposal is not completed due to (i) the Internal Restructuring not being completed by CLP China (on a reasonable endeavour basis) within the aforementioned period, or (ii) no default of CLP China and the Purchaser, CLP China shall refund the Deposit to the Purchaser without interest and without any additional liability. In the case of a default by the Purchaser, CLP China shall be entitled to keep the Deposit, including any interest accrued.
CLP China shall deliver a notice to the Purchaser within seven working days after the successful completion of the Internal Restructuring. Completion of the Disposal shall take place (a) within sixty working days after the delivery of the notice of successful completion of the Internal Restructuring, and (b) in any event not later than 31 December 2014 unless both parties agree otherwise.
Subject to the satisfaction of the conditions to completion, the Disposal is anticipated to be completed by the third quarter of 2014.

The Purchaser shall ensure that the Target Companies no longer use the registered marks of "CLP" (and the Chinese equivalent) after completion of the Disposal. In addition, the Purchaser shall amend the company names of the Target Companies within two months after completion of the Disposal, and cause to amend the company name of Shenmu Power on a best endeavour basis immediately after completion of the Disposal, so that they no longer contain references to "CLP" (and the Chinese equivalent).

Our joint venture partner in CSEC Guohua and Shenmu Power, namely CSEC, was founded and majority controlled by Shenhua Group. Shenhua Group is a state-owned enterprise and the largest coal producer in China. H shares and A shares of CSEC are listed respectively on the Stock Exchange and the Shanghai Stock Exchange.

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(a) The corporate structure relating to the Target Companies prior to the Internal

Restructuring is summarised below:
CLP Holdings
100% (indirect)
CLP China
100%
CLP China
Beijing
100%
CLP China
Tianjin
100%
CLP China
Shenmu
30% less 1 share
1 share
49%
Other CLP Group investment
CSEC Guohua
Shenmu
Power

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(b) The corporate structure relating to the Target Companies following the Internal
Restructuring but prior to completion of the Disposal is summarised below:
CLP Holdings
100% (indirect)
CLP China
100%
100% 100%
CLP China
Beijing
CLP China
Tianjin
CLP China
Shenmu
Other CLP Group investment
30%
CSEC Guohua
49%
Shenmu
Power

(c) The corporate structure relating to the Target Companies following completion of the

Disposal is summarised below:
The Purchaser
rect)
100% CLP China
Tianjin
30% CSEC
Guohua
100% CLP China
Shenmu
49% Shenmu
Power

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For the financial year ended 31 December 2012, the audited consolidated net profits (before and after taxation) of CSEC Guohua were RMB483 million (HK$594 million) and RMB356 million (HK$438 million) respectively. For the financial year ended 31 December 2011, the audited consolidated net profits (before and after taxation) of CSEC Guohua were RMB463 million (HK$559 million) and RMB308 million (HK$372 million) respectively. As at 31
December 2012, CSEC Guohua had audited consolidated total assets, net assets and net assets excluding non-controlling interests of RMB23,832 million (HK$29,649 million), RMB9,900 million (HK$12,316 million) and RMB5,752 million (HK$7,155 million) respectively.
For the financial year ended 31 December 2012, the audited net profits (before and after taxation) of Shenmu Power were RMB6 million (HK$7 million) and RMB6 million (HK$7 million) respectively. For the financial year ended 31 December 2011, the audited net losses (before and after taxation) of Shenmu Power were RMB48 million (HK$58 million) and RMB48 million (HK$58 million) respectively. As at 31 December 2012, Shenmu Power had audited total assets and net assets of RMB762 million (HK$949 million) and RMB279 million (HK$347 million) respectively; Shenmu Power did not have any non-controlling interest.
The figures above are extracted from the audited financial statements of CSEC Guohua and Shenmu Power, which were prepared in accordance with generally accepted accounting principles in China.
In this section, financial figures in RMB are translated to HK$ at the applicable exchange rates at the relevant time for illustration purposes only. An annual average exchange rate is used for profit or loss figures during a financial year, while the exchange rate as of the year end date is used for total assets or net assets values as of that date.

As disclosed in the CEO's Strategic Review in our 2013 Annual Report, CLP Group's strategy in the Chinese mainland is to continue its selective investments in nuclear power, coal-fired generation and renewable energy, accompanied by the divestment of minority stakes in joint ventures with limited growth prospects. The power plant portfolio in which CSEC Guohua and Shenmu Power have invested fall under the category of minority investments in the Chinese mainland, which CLP Group wishes to divest at appropriate prices and terms.
We consider that the divestment of CLP Group's interest in CSEC Guohua and Shenmu Power, through the disposal of CLP China Tianjin and CLP China Shenmu, represents an appropriate opportunity for us to exit our investments in the relevant power plants. In addition to the alignment with our strategy mentioned above, we have also considered our goal to reduce carbon emissions and our capital reallocation plan in arriving at our divestment decision.

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The Directors consider that the terms of the Disposal (including the consideration for the Disposal) are fair and reasonable and in the interests of CLP Holdings and its shareholders as a whole.

As one of the applicable percentage ratios (as calculated in accordance with Rule 14.07 of the Listing Rules) for the Disposal is more than 5% but less than 25%, the Disposal constitutes a discloseable transaction for CLP Holdings under Chapter 14 of the Listing Rules.

CLP Holdings is the holding company of the CLP Group. The CLP Group owns and operates a vertically integrated electricity generation, transmission and distribution business in Hong Kong, and invests in the power sector in Australia, the Chinese mainland, India, Southeast Asia and Taiwan.

Unless the context otherwise requires, terms used in this announcement shall have the following meanings:

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Non-Hong Kong Company, and a direct wholly-owned subsidiary of CLP China

Exchange

Kong with limited liability

the share transfer agreement entered into between CLP China and the Purchaser on 2 April 2014, whereby CLP

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China agrees to sell and the Purchaser agrees to purchase the entire issued share capital and all related shareholder's loans of CLP China Tianjin and CLP China Shenmu for the US$ equivalent of RMB2,250 million (HK$2,808 million)

49% owned by CLP China Shenmu

In this announcement, save as otherwise stated, figures in US$ and RMB are translated to HK$ at the exchange rate of US$1.00 = HK$7.80 and RMB1.00 = HK$1.2479 respectively, for illustration purposes only.
By Order of the Board

Company Secretary
Hong Kong, 2 April 2014

中 電 控 股 有 限 公 司 CL P Ho ld ing s Li mi t ed (incorporated in Hong Kong with limited liability) (Stock Code: 00002)

The Directors of CLP Holdings as at the date of this announcement are:

Dr. Y. B. Lee, Mr. Andrew Brandler and Mr. Paul A. Theys

(Mr. David Moore as Mr. Theys' alternate)

Mrs. Fanny Law, Ms. Irene Lee and Dr. Rajiv Lall

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