ZHEJIANG EXPRESSWAY CO., LTD. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
(A joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock code: 0576)Reference is made to the Company's announcement dated 12 October 2015. The Board is pleased to announce that all of the conditions precedent set out in the Share Purchase Agreement have been fulfilled and Completion took place on 4 January 2016. Upon Completion, the Company has ceased to hold any interest in Petroleum Co and Petroleum Co has ceased to be an associate of the Company.
The Board also announces that, on 28 January 2016, Development Co and Petroleum Co entered into (i) the Petroleum Supply Agreement in relation to the supply of petroleum to the Service Stations; and (ii) the Service Stations Management Agreement in relation to the day-to-day management of the Service Stations.
After Completion, 50% of the equity interest in Petroleum Co is held by Zhejiang Communications Investment, which is a wholly-owned subsidiary of Communications Group, the controlling shareholder of the Company. Therefore, Petroleum Co is an associate of Zhejiang Communications Investment and a connected person of the Company, and the entering into of the Petroleum Supply Agreement and the Service Stations Management Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules.
As the relevant percentage ratios in respect of the Cap is over 0.1% but less than 5%, the entering into of the Petroleum Supply Agreement and the Service Stations Management Agreement is subject to the reporting and announcement requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.
Reference is made to the announcement of Zhejiang Expressway Co., Ltd. (the "Company") dated 12 October 2015 in relation to the disposal of 50% equity interest in Petroleum Co (the "Announcement"). Unless otherwise stated, terms used in this announcement have the same meanings as defined in the Announcement.
The Board is pleased to announce that all of the conditions precedent set out in the Share Purchase Agreement have been fulfilled and Completion took place on 4 January 2016. Upon Completion, the Company has ceased to hold any interest in Petroleum Co and Petroleum Co has ceased to be an associate of the Company.
As stated in the Announcement, Petroleum Co has been supplying petroleum to Development Co (a wholly-owned subsidiary of the Company), and has been providing management services to the Service Stations. After Completion, Petroleum Co has become a connected person of the Company by virtue of it being an associate of Zhejiang Communications Investment, which is a wholly-owned subsidiary of Communications Group, the controlling shareholder of the Company. Therefore, transactions between Petroleum Co and Development Co would become connected transactions for the Company under Chapter 14A of the Listing Rules.
It is the intention of the Company that the operation of the Service Stations will be contracted out to Petroleum Co, pursuant to which Petroleum Co will operate the Service Stations, be entitled to the revenue generated and bear the costs and expenses arising from its operation of the Service Stations. On the other hand, Development Co, being the owner of the Service Stations, will receive a fee on an annual basis to be determined based on the sales volume of the Service Stations.
As the proposed contracting out of the Service Stations to Petroleum Co requires the change of the business licence for the Service Stations in the PRC which is expected to take approximately two to three months after the date of Completion, on 28 January 2016, Development Co and Petroleum Co entered into the Petroleum Supply Agreement pursuant to which Petroleum Co agreed to supply petroleum to Development Co. In consideration of the purchase of petroleum by Development Co pursuant to the Petroleum Supply Agreement, on 28 January 2016, Development Co and Petroleum Co entered into the Service Stations Management Agreement pursuant to which Petroleum Co agreed to provide management services to the Service Stations.
It is anticipated that the Petroleum Supply Agreement and the Service Stations Management Agreement will be terminated and a new agreement will be entered into between Petroleum Co and Development Co in respect of the contracting out of the Service Stations to Petroleum Co. Further announcement will be made by the Company in accordance with the Listing Rules as and when appropriate.
Details of the Petroleum Supply Agreement and the Service Stations Management Agreement are set out below.
(2) Petroleum Co
Service Stations
charged at the prevailing market price with a discount of no less than RMB260 per ton. Payment for the petroleum supplied will be settled by Development Co within three Business Days of the supply of the petroleum.
The cap is determined based on (i) the historical annual supply of petroleum by Petroleum Co to Development Co in the amounts of RMB1,781,179,000 and RMB1,931,466,000 for the year ended 31 December 2013 and 31 December 2014, respectively;
(ii) the expected consumption of petroleum during the Term; and (iii) the expected price of petroleum during the Term.
(2) Petroleum Co
management services to the Service Stations, including the preparation of monthly management report in respect of the Service Stations, management and maintenance of the Service Stations
management services to be provided by Petroleum Co under the Service Stations Management Agreement in consideration of Development Co agreeing to purchase petroleum from Petroleum Co pursuant to the Petroleum Supply Agreement
under the Service Stations Management Agreement as no fees are payable by Development Co for the management services to be provided by Petroleum Co
The Directors consider that, as Petroleum Co has been supplying petroleum to Development Co and providing management services to Development Co prior to Petroleum Co became a connected person of the Company, the entering into of the Petroleum Supply Agreement and the Service Stations Management Agreement will enable Development Co to continue purchasing petroleum and obtaining management services from Petroleum Co pending the change of the business licence for the Service Stations and the entering into of an agreement for the contracting out of the operation of the Service Stations to Petroleum Co.. The Directors also consider that the entering into of the Service Stations Management Agreement will enable the Company to outsource the management of the Service Stations to Petroleum Co, which reduces the operating costs of the Company.
Given the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Petroleum Supply Agreement and the Service Stations Management Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
Zhejiang Expressway Co. Ltd. issued this content on 28 January 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 28 January 2016 10:49:19 UTC
Original Document: http://www.zjec.com.cn/en/upload/2016012806393981210.PDF
