COSCO SHIPPING Ports : Announcement |Discloseable Transaction – Concession Agreement in relation to Khalifa Port Container Terminal 2

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(Incorporated in Bermuda with limited liability)

The Board is pleased to announce that on 28 September 2016, CSPL SPV, a wholly-owned subsidiary of the Company, entered into the Concession Agreement in connection with the construction, management and operation of KPCT2.

It is expected that a Joint Venture Company will be established by CSPL SPV and AD Ports and that all of the rights and obligations of CSPL SPV under the Concession Agreement will be transferred to the Joint Venture Company on the Effective Date. It is currently envisaged that CSPL SPV will, through itself and a nominee, be entitled to 90% of the voting rights attached to the shares of the Joint Venture Company and AD Ports will be entitled to the remaining 10% of the voting rights attached to the shares of the Joint Venture Company.

The total consideration payable (including expected capital expenditure to be incurred), assuming CSPL SPV exercises its right to extend the term of the Concession Agreement, is estimated to have a present value of approximately US$738 million. The Concession Agreement will expire on the 35th anniversary of the date upon which the Expanded Concession Area has been handed over by AD Ports to CSPL SPV, subject to an option for CSPL SPV to extend the term for a further period of 5 years.

The highest of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Concession Agreement exceeds 5% and is lower than 25%. Accordingly, the entering into of the Concession Agreement constitutes a discloseable transaction of the Company and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

The Board is pleased to announce that on 28 September 2016, CSPL SPV, a wholly-owned subsidiary of the Company, entered into the Concession Agreement in connection with the construction, management and operation of KPCT2.

1. AD Ports, as the grantor of the Concession; and

2. CSPL SPV, as the concessionaire of the Concession.

It is the intention of the parties that AD Ports and CSPL SPV will jointly establish the Joint Venture Company and all of the rights and obligations of CSPL SPV under the Concession Agreement will be transferred to the Joint Venture Company on the Effective Date pursuant to the terms of a novation agreement expected to be entered into between AD Ports, CSPL SPV and the Joint Venture Company. Further, AD Ports and CSPL SPV shall use all reasonable endeavours to execute a shareholders' agreement in relation to the Joint Venture Company prior to the Effective Date. As at the date of this announcement, the negotiation of the shareholders' agreement is significantly progressed, although the detailed terms concerning the rights and obligations of AD Ports and CSPL SPV have not been finalised. It is currently envisaged that CSPL SPV will, through itself and a nominee, be entitled to 90% of the voting rights attached to the shares of the Joint Venture Company and AD Ports will be entitled to the remaining 10% of the voting rights attached to the shares of the Joint Venture Company.

Pursuant to the Concession Agreement, AD Ports granted to CSPL SPV, inter alia, the exclusive right to construct, manage and operate (including the right to establish and collect tariff) KPCT2 within the Concession Area. CSPL SPV will be responsible for the design, development and procurement of the relevant superstructure and the commissioning of the relevant equipment at the Concession Area.

The term of the Concession Agreement shall commence on the Effective Date and expire at 23:59 on the 35th anniversary of the date upon which the Expanded Concession Area has been handed over by AD Ports. CSPL SPV shall have the right to unilaterally extend the term for a further period of 5 years by giving prior notice to AD Ports, provided that CSPL SPV is not, at the time of giving notice, in material breach of any of its material obligations under the Concession Agreement.

The total consideration payable (including expected capital expenditure to be incurred) during the entire term of the Concession Agreement (assuming CSPL SPV exercises its right to extend the term of the Concession Agreement as described above) is estimated to have a present value of approximately US$738 million, comprising:

1. an annual fixed concession fee calculated at US$7 million equivalents provided that 1,200 metres of quay length has been handed over to CSPL SPV (which shall be pro rated proportionately for the initial 800 metres of quay length to be handed over to CSPL SPV and, if the Concession Area is expanded to include the Option Concession Area, for the 1,800 metres of quay length) and which shall be adjusted upwards by 2.5% annually, representing a total fixed concession fee of approximately US$107 million in present value terms;

2. a variable concession fee calculated on the basis of actual revenue at a rate ranging from 10% (in years one to three following the Commercial Operations Date) to 30% (from year 13 onwards) of actual revenue. Based on the forecasted aggregate revenue of KPCT2 over the entire term of the Concession Agreement as projected by the Company by reference to, inter alia, the expected volume and tariff of KPCT2, it is estimated that the present value of the total variable concession fee payable will amount to approximately US$309 million; and

3. estimated capital expenditure of approximately US$322 million in present value terms.

Items (i) and (ii) of the consideration set out above in relation to the Concession Agreement was determined after arms-length negotiations with AD Ports and was arrived at by reference to the concession terms of other similar ports in the region.

The Company will finance the capital requirements of KPCT2 by a combination of its internal resources and external bank borrowings.

During the Option Period, in the event that the throughput of KPCT2 (comprising throughput of origin or destination in UAE and throughput relating to transshipment cargoes) reaches or exceeds 70% of an annual handling capacity of 2,400,000 TEU, CSPL SPV shall require AD Ports to expand the Concession Area to include the Option Concession Area. Notwithstanding the above, CSPL SPV may by written notice require AD Ports to expand the Concession Area to include the Option Concession Area at any time during the Option Period provided that such notice cannot be served earlier than 18 months after the Effective Date. If and when the Option Concession Area is handed over to CSPL SPV and becomes operational, the nominal annual handling capacity of KPCT2 will increase to 3,500,000 TEU.

A party may terminate the Concession Agreement if the other party commits certain events of default (such as a continuing material breach of the Concession Agreement or insolvency) or if the other party is affected by certain force majeure events.

KPCT2 offers a draft depth of 18 metres (with a channel depth of 16.5 metres) and a quay length of up to 1,200 metres will be made available to the Company under the Concession Agreement (before any expansion of the Concession Area to include the Option Concession Area (as described above)). The first 800 metres of the quay length (and the corresponding Concession Area) is expected to commence operation in 2018 and the latter 400 metres (and the corresponding Expanded Concession Area) is expected to commence operation in 2020. As expanded by the Expanded Concession Area, the Concession Area will span an area of approximately 70 hectares with 3 berths and an annual handling capacity of 2,400,000 TEU. If and when the Option Concession Area is handed over to CSPL SPV and becomes operational, the nominal annual handling capacity of KPCT2 will increase to 3,500,000 TEU.

KPCT2 is located along the "Silk Road Economic Belt and the 21st Century Maritime Silk Road" and the shipping hub of West Asia region. Khalifa Port, where KPCT2 is located, is one of the major gateway ports of Abu Dhabi. It is also strategically situated between Abu Dhabi and Dubai with minimal deviation from the Straits of Hormuz and with excellent hinterland connections and geographic location.

KPCT2 will be the second overseas terminal in which the Company holds a controlling interest. This investment is expected to strengthen the Company's sustainable growth and create value for Shareholders. With the strong support from the large container shipping fleet of COSCO SHIPPING Group, the Company will dedicate its efforts to develop KPCT2 to be called by international container shipping liners as a hub of the upper Persian Gulf region in the Middle East. The Company is confident at the future development of KPCT2.

The Company adopts "The Ports For ALL" as the guiding vision for future development and places an emphasis on the strategy of globalisation. This strategy focuses on expanding the Company's global terminal network with increasing controlling stakes so as to provide comprehensive and quality services to customers and to create value for all of its stakeholders as a socio-economic contributor to local communities.

Taking into account the above factors, the Board believes that the Transaction is a valuable investment opportunity for the Company to create value for Shareholders and the terms of the Transaction are fair and reasonable and in the interests of the Shareholders as a whole.

CSPL SPV is a wholly-owned subsidiary of the Company and is a special purpose vehicle established to hold the Company's interest in KPCT2. The Group is principally engaged in the businesses of managing and operating terminals, and related businesses.

AD Ports is a public joint stock company incorporated in the Emirate of Abu Dhabi, UAE that was established by the Government of Abu Dhabi. It is mainly engaged in the businesses of holding, developing and operating all commercial ports and industrial and logistic zones of the Emirate of Abu Dhabi, UAE.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiry, AD Ports and its ultimate beneficial owners are third parties independent of the Company and its connected persons under the Listing Rules.