CHINA SHENHUA ENERGY COMPANY LIMITED 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: 01088)
DISCLOSEABLE TRANSACTION CONTINUING CONNECTED TRANSACTION
RESCISSION OF THE ORIGINAL FINANCIAL
SERVICES AGREEMENT AND
ENTERING INTO FINANCIAL SERVICES AGREEMENT
As disclosed in the announcement dated 29 December 2020, the Company entered into the Original Financial Services Agreement with the Finance Company on 29 December 2020. Pursuant to the Original Financial Services Agreement, the Finance Company agreed to provide financial services to the Members of the Group. The Original Financial Services Agreement will expire on 31 December 2021.
The Company has entered into the Financial Services Agreement with the Finance Company on 26 March 2021, pursuant to which the Finance Company agreed to provide financial services to Members of the Group. The Financial Services Agreement will be effective from the date of the approval at the 2020 annual general meeting and will expire on 31 December 2023. The Original Financial Services Agreement shall terminate from the date on which the Financial Services Agreement becomes effective, and all rights and obligations under the Original Financial Services Agreement of both parties shall be terminated. The Company and the Finance Company will agree on their respective rights and obligations in accordance with the Financial Services Agreement.
As at the date of this announcement, the Finance Company is held as to 60% of equity interest by China Energy, and China Energy holds 69.52% of equity interest of the Company and is the controlling shareholder of the Company. As such, the Finance Company is a connected person of the Company under the Hong Kong Listing Rules. In accordance with Chapter 14A of the Hong Kong Listing Rules, the Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company.
In respect of the annual caps under the Financial Services Agreement, as one or more of the applicable percentage ratios exceed 5% but all such percentage ratios are less than 25% as calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules, the Financial Services Agreement and the transactions contemplated thereunder are subject to reporting, announcement, the approval of independent shareholders and annual review requirements under Chapter 14A of the Hong Kong Listing Rules. This transaction also constitutes a discloseable transaction under Chapter 14 of the Hong Kong Listing Rules.
The Company will seek approval from the Independent Shareholders for the Financial Services Agreement and the proposed annual caps thereto at 2020 annual general meeting to be convened. According to the Hong Kong Listing Rules, China Energy and their respective associates shall abstain from voting in respect of the resolutions for the Financial Services Agreement and the proposed annual caps thereto.
The Company and the Independent Board Committee have reviewed the Financial Services Agreement and the proposed annual caps thereto. The Company will appoint an independent financial adviser to make recommendations to the Independent Board Committee and the Independent Shareholders as to whether the terms of the Financial Services Agreement, proposed annual caps and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms or better and in the ordinary and usual course of business of the Group, and are in the interests of the Company and its Shareholders as a whole and to advise the Independent Shareholders on how to vote.
A circular containing, among other things, further details of the Financial Services Agreement, a letter from the Independent Board Committee and an opinion of the independent financial adviser will be dispatched to the Shareholders within 15 business days.
BACKGROUND
The Company is a world-leading coal-based integrated energy company. The main business of the Group includes production and sales of coal and power, railway, port and ship transportation, and coal-to-olefins and other coal related chemical processing business.
China Energy and its subsidiaries operate eight business segments including coal, thermal power, new energy, hydropower, transportation, chemical industry, environmental technology and finance, principally engaging in coal liquefaction, coal-related chemical processing, coal production, power generation business and investment and financing activities. China Energy is the controlling shareholder of the Company. As at the date of this announcement, China Energy holds 69.52% of equity interest in the Company.
Finance Company is principally engaged in domestic and foreign currency services: the provision of financial consultation services, credit appraisal and other related consultation and agency services to members; assistance to members in the collection and payment of transaction amount; authorised insurance agency services; provision of guarantee between members; provision of entrusted loans and entrusted investments between members; provision of bill acceptance and discount services to members; provision of internal fund transfer and settlement services and corresponding settlement planning to members; accepting deposits from members; provision of loans and finance leasing to members; provision of inter-bank lending; authorised issuance of finance company bonds; underwriting of corporate bonds of members; equity investments in financial institutions; investments in negotiable securities; provision of consumption credit, buyers' credit and finance leasing for products of members. As at the date of this announcement, China Energy holds 60% of the equity interests of the Finance Company, and the Company and its controlled subsidiaries hold 40% of equity interest in Finance Company in total (among which, the Company directly holds 32.57% of the equity interest of the Finance Company; Guoneng Shuohuang Railway Development Co., Ltd. ( ঐࣤර᚛༩೯࢝Ϟࠢபʮ̡ ), Shenhua Zhunge'er Energy Co., Ltd. ( ग़ശࣸဧঐ๕Ϟࠢபʮ̡ ), Shenhua Baoshen Railway Co., Ltd. ( ग़ശ̍ग़᚛༩Ϟࠢபʮ̡ ), which are the controlled subsidiaries of the Company, hold 2.86%, 2.86% and 1.71% of equity interest in Finance Company, respectively.)
As disclosed in the announcement dated 29 December 2020, the Company entered into the Original Financial Services Agreement with the Finance Company on 29 December 2020. Pursuant to the Original Financial Services Agreement, the Finance Company agreed to provide financial services to the Members of the Group. The Original Financial Services Agreement will expire on 31 December 2021.
The Company has entered into the Financial Services Agreement with the Finance Company on 26 March 2021, pursuant to which the Finance Company agreed to provide financial services to Members of the Group. The Financial Services Agreement will be effective from the date of the approval at the 2020 annual general meeting and will expire on 31 December 2023. The Original Financial Services Agreement shall terminate from the date on which the Financial Services Agreement becomes effective, and all rights and obligations under the Original Financial Services Agreement of both parties shall be terminated. The Company and the Finance Company will agree on their respective rights and obligations in accordance with the Financial Services Agreement.
ENTERING INTO FINANCIAL SERVICES AGREEMENT
Date
26 March 2021
Parties
The Company and Finance Company
Transaction
Pursuant to the Financial Services Agreement, the Finance Company will provide the following financial services to Members of the Group:
(1) provision of financial service of guarantee (including guarantee business within the business scope of financial enterprises, such as performance guarantee and quotation sharing) to Members of the Group;
(2) bill acceptance and discount services to Members of the Group;
(3) taking deposits from Members of the Group;
(4) granting loans, consumption credit and buyer's credit to Members of the Group;
(5) financial consultation, credit appraisal and other relevant advice and agency services to Members of the Group;
(6) provision of assistance to Members of the Group to receive and pay transaction proceeds;
(7) entrustment investments between Members of the Group;
(8) internal settlement and settlement planning services between Members of the Group;
(9) underwriting or distribution of financial instruments such as debt financing instruments, corporate bonds and enterprise bonds of Members of the Group;
(10) provision of comprehensive credit limits to Members of the Group, including loans, bill acceptance and discount services;
(11) provision of financial training and consultation services;
(12) provision of other financial services (letter of credit, online banking and entrusted loans) to Members of the Group and charge agency fee, handling fee, consulting fee or other service fee.
Both parties agree that, on the premise that Finance Company would obtain the approval of relevant regulatory authorities in the future, Finance Company may provide related services such as foreign exchange deposits, loans, settlement and foreign exchange settlement services to Members of the Group.
Term and termination
The Financial Services Agreement will be effective from the date of approval at the 2020 annual general meeting and will expire on 31 December 2023, after the legal representative or authorized representative of the parties affix their signatures and common seals or contract seals of their companies. The Original Financial Services Agreement shall terminate from the date on which the Financial Services Agreement becomes effective, and all rights and obligations under the Existing Financial Services Agreement of both parties shall be terminated. The Company and the Finance Company will agree on their respective rights and obligations in accordance with the Financial Services Agreement.
Price determination
(1) In terms of deposits and loans or similar services provided by Finance Company to Members of the Group, subject to compliance with the relevant rules and regulations of PBOC, CBIRC and other relevant regulatory authorities and relevant requirements:
(i) The interest rates for deposits placed by Members of the Group with Finance
Company shall be no less than the interest rate paid by major commercial banks in the PRC for comparable deposits services provided to Members of the Group and shall be negotiated in normal commercial terms;
(ii) The interest rates for loans granted by Finance Company to Members of the Group shall be no more than the benchmark loan interest rate for the corresponding period stipulated by the PBOC and no more than the interest rate charged by major commercial banks in the PRC for comparable loans services provided to Members of the Group and shall be negotiated in normal commercial terms.
With respect to the deposit interest rate offered by Finance Company for deposits placed by Members of the Group, Finance Company will pay close attention to the benchmark interest rate stipulated by the PBOC on monthly basis and, by way of inquiry, ascertain the deposit interest rates of major commercial banks in the PRC (i.e. Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications), to ensure the interest rates for deposits placed by Members of the Group with Finance Company shall be no less than the interest rate paid by major commercial banks in the PRC for comparable deposits services provided to Members of the Group. Furthermore, price determination of deposits interest rate offered by Finance Company will be under strict supervision and the Company will enforce relevant internal approval procedures. For further details, please refer to "The Group's internal approval procedures for the price determination process".
(2) In terms of paid services provided by Finance Company to Members of the Group:
(i) Finance Company can provide paid consultation, agency, settlement, transfer, investment, letter of credit, online banking, entrusted loan, guarantee, bill acceptance and other related services to Members of the Group.
(ii) Subject to compliance with the relevant rules and regulations of PBOC, CBIRC and other relevant regulatory authorities, the service fees charged by Finance Company for the provision of the above financial services to Members of the Group shall be no more than the service fees charged by major commercial banks in the PRC for comparable financial services provided to Members of the Group and shall be negotiated in normal commercial terms.
With respect to the service fees charged by Finance Company for provision of financial services to Members of the Group, Finance Company will, by way of inquiry, ascertain the service fees rate charged by major commercial banks on monthly basis and ensure the service fees charged by Finance Company for provision of financial services to Members of the Group shall be no more than the service fees charged by major commercial banks in the PRC for comparable financial services provided to Members of the Group. In addition, price determination of service fees charged by Finance Company will be under strict supervision and the Company will enforce relevant internal approval procedures. For further details, please refer to "The Group's internal approval procedures for the price determination process".
The Group's internal approval procedures for the price determination process
With a view to strengthening holistic control of deposits and loans and ensuring implementation of pricing policies in conformity with laws and regulations, measures pertaining to centralized fund management, centralized financing approval and centralized business decision-making are adopted by the Company during the ordinary course of business, which is principally reflected in the following aspects:
(1) Reinforcing centralized financing control. Finance department of the Company is accountable for the centralized review of the annual financing needs of Members of the Group. Members of the Group shall, while submitting a loan application to Finance Company, provide relevant information such as the purpose, amount, term and interest rate of the loan. Upon review of the aforementioned matters, finance department of the Company shall report to the management of the Company to reach a decision.
(2) Real-time monitoring on market price level. In light of the funding requirements, finance department of the Company will monitor the deposit rates of PBOC on a monthly basis, and conduct business inquiries periodically and publicly with major commercial banks in the PRC and Finance Company, primarily focusing on factors relating to interest rates for deposits, scale, term, service fee and preconditions. In view of ensuring prices are determined in conformity with the relevant rates, consolidated inquiry results shall be reported to the management of the Company.
(3) Establishing monthly review mechanism. A fund balance meeting of the Company, chaired by the chief accountant of the Company with the attendance of audit, legal, finance and other related departments, will be convened on a monthly basis by the Company, to review the deposits placed with Finance Company by Members of the Group, to keep abreast of the loans granted by Finance Company in a timely manner and to reasonably formulate recommendations on deposit and financing arrangements of the Company for the next month, which shall also be reported to the management of the Company.
(4) Persisting in legal and compliance implementation. Following the approval of the abovementioned deposit and financing arrangements, the implementation by the person in charge shall be strictly in compliance with relevant procedures and finance approval authority level-by-level of the Company. Upon completion, sustained supervision and post-evaluation shall be conducted by relevant review departments of the Company.
Capital Risk Control Measures
(1) China Energy undertakes in the Finance Company Capital Increase Agreement that in case of an emergency where Finance Company has difficulties making payments, China Energy shall, in accordance with the actual needs to address payment difficulties, satisfy the payment needs of Finance Company through various channels including, among others, the increase of capital and the provision of liquidity support to Finance Company in conformity with laws, regulations and internal regulations such as the articles of association.
(2) Finance Company is a major domestic non-banking financial institution under the supervision of the CBIRC. Competent authority delegated by CBIRC conducts daily supervision on Finance Company and conducts on-site and off-site inspections. Finance Company ensures that it is in strict compliance with the risk control indicators and risk monitoring indicators issued by the CBIRC.
(3) Finance Company shall establish a sound internal control system on the basis of business operation, a risk management system covering the entire process and contingency plans devised for diverse risks to ensure security of the deposits placed by the Members of the Group and effectively guard against the risks.
(4) The personnel assigned by Finance Company to undertake the duty of financial services shall possess experiences in financial services and a sense of responsibility and diligently perform their duties. To ensure the security of the payment and settlement of Members of the Group, Finance Company shall establish a mature and efficient online banking system, and strictly execute the operation procedure and control the risk arising out of the information technology.
(5) Finance Company shall establish a model of fund pooling and usage suitable for Members of the Group, in order to ascertain the transaction caps for connected parties, fulfill the relevant regulatory requirements and prevent the compliance risk of the Company.
(6) Finance Company shall not accept Members of the Group to provide entrusted loans and entrusted wealth management to other related members through Finance Company, and shall not accept deposit of proceeds (if any) in Finance Company.
(7) The Company will divide the deposit limit to Members of the Group. Finance Company shall monitor the deposit placed by Members of the Group with Finance Company to ensure the designated deposit limit will not be exceeded. In the event of the deposits placed by any Member of the Group with Finance Company exceeding the limit, Finance Company shall promptly notify the Company and cooperate with the Company to transfer the over-limit deposits to the designated bank account of the Company. Approval of finance department of the Company shall be obtained in the event of the deposit to be placed exceeding the designated deposit limit. Under this circumstance, the deposit limit of other Members of the Group shall be deducted accordingly so as to ensure the overall deposit limit is not exceeded.
(8) Prior to the commencement of connected transaction with Finance Company, Members of the Group are entitled to review whether valid financial license and business license have been obtained by Finance Company. Members of the Group shall not engage in relevant business with Finance Company in the event that the foregoing licenses concerned are absent or expired. In addition, within four months after the end of the year before the Financial Services Agreement takes effect, Finance Company shall provide its annual report for the most recent fiscal year audited by an accounting firm qualified for the securities and futures business, and the finance department of the Company will be in charge of careful assessment of the annual report and relevant documents. The Company may conduct business with Finance Company on condition that the risk is confirmed to be controllable.
(9) The Group examines the operation status and financial position of Finance Company on a regular basis, and pay close attention to whether Finance Company is in violation of any relevant regulations including the Administrative Measures on Financial Companies of Group Enterprises issued by CBIRC. Finance Company will provide various regulatory indicators to the finance department of the Company within 20 business days after the end of each quarter. In the event that major regulatory indicators of Finance Company are found to be inconsistent with relevant regulatory requirements and may lead to material risks, Members of the Group shall discontinue depositing at Finance Company.
(10) Members of the Group will be able to withdraw cash to satisfy the flexible requirements of treasury timely at any time without limitation, and may, from time to time, transfer its deposit placed with Finance Company in full or in part to test and ensure the security and liquidity of the relevant deposits.
(11) Finance Company shall assist in monitoring the maximum daily balance (including interests accrued thereon) of deposits placed by Members of the Group with Finance Company to ensure the relevant balance does not exceed the applicable annual caps of connected transactions. If the service fees charged by Finance Company reach the annual cap for the year, Members of the Group shall discontinue the relevant service with Finance Company for the rest of the year unless otherwise approved by the Board and the general meeting (if applicable) of the Company.
(12) Finance Company guarantees that the Company will be informed in a timely manner upon occurrence of any event that may imperil or bring potential risk to the deposit safety of Members of the Group. On occurrence of the following circumstances, including but not limited to:
(i) The major regulatory indicators of Finance Company fail to comply with the relevant regulations including the Administrative Measures on Financial Companies of Group Enterprises which may lead to material risks;
(ii) Finance Company encounters the run of depositors, unpaid due debts, substantial overdue loans or guarantee advances, serious computer system failures, being robbed or scammed, directors or senior management involved in serious violations of disciplines, criminal cases and other material issues;
(iii) Finance Company's securities investment business suffered massive losses, reaching 50% of Finance Company's registered capital;
(iv) Major institutional adjustments, equity transactions or business risks that may affect the normal operation of Finance Company;
(v) Finance Company is subject to administrative penalties by the CBIRC or other regulatory authorities for violations of laws and regulations;
(vi) Other matters that, in the view of the Board, may raise safety concern to the deposits of Members of the Group,
Officers of the Company in charge of financial work shall urge the relevant departments of the Company and Members of the Group to take risk response measures in due course, such as withdrawing full or partial deposits placed with Finance Company, suspending any deposits placement with Finance Company and requesting Finance Company to carry out rectification within a prescribed time limit, so as to ensure the safety of deposits of Members of the Group placed with Finance Company. In the event of default where the deposits become unable to be withdrawn, Members of the Group are entitled to set off the amount of unrecovered deposits with the loan provided by Finance Company.
(13) During the annual audit period of the Company, the external auditor will review and issue opinions on the connected transactions between the Company and Finance Company. The Company shall be subject to the information disclosure obligation under the requirements of Shanghai Listing Rules and Hong Kong Listing Rules in a timely manner. Finance Company shall provide necessary cooperation.
(14) The Company and the Finance Company agree to, under the requests and recommendations of securities regulatory authorities where the shares of the Company are listed, independent non-executive directors of the Company, and independent financial adviser (if any), adjust risk control measures mentioned above, including, but not limited to adding and modifying relevant risk control measure, which shall be agreed.
PROPOSED ANNUAL CAPS AND PAST TRANSACTIONS
For the purpose of regulating the financial service cooperation between the Group and Finance Company and satisfying the needs of continuous development of the Group, the annual caps of the Financial Services Agreement for the year ending 31 December 2023 are set as follows. Meanwhile, the Company also sets out below the historical transaction amounts of each annual cap categories for the three years ended 31 December 2018, 31 December 2019 and 31 December 2020.
The historical transaction amount of financial services between the Group and the Finance Company is within the existing annual caps stipulated in the 2019 Financial Services Agreement and the 2020 Financial Services Agreement and the Original Financial Services Agreement.
Daily balance (including interests accrued thereon) of deposits placed by Members of the Group with Finance Company
(1) Historical transaction amounts
Year ended | Year ended | Year ended |
31 December | 31 December | 31 December |
2018 | 2019 | 2020 |
Aggregated | Aggregated | Aggregated |
transaction amount | transaction amount | transaction amount |
(RMB million) | (RMB million) | (RMB million) |
81,875.1 | 104,902.7 | 113,767.5note |
Note: The maximum amount of the daily balance (including interests accrued thereon) under the 2019 Financial Services Agreement from 1 January 2020 to 31 August 2020 was RMB113,767.5 million; The maximum amount of the daily balance (including interests accrued thereon) under the 2020 Financial Services Agreement from 1 September 2020 to 31 December 2020 was RMB20,364.3 million.
(2) Annual cap under the Original Financial Services Agreement
Year ending 31 December 2021
Annual cap (RMB million)
10,800
(3) Proposed Annual cap under the Financial Services Agreement
Year ending | Year ending | Year ending |
31 December 2021 | 31 December 2022 | 31 December 2023 |
Annual cap | Annual cap | Annual cap |
(RMB million) | (RMB million) | (RMB million) |
27,900 | 27,900 | 27,900 |
The agency fee, handling fee, consultation fee and other services fee charged by Finance Company for providing Members of the Group with financial services including but not limited to consultation, agency, settlement, transfer, investment, letter of credit, online banking, entrusted loan, guarantee, bill acceptance and other services
(1) Historical transaction amounts
Year ended | Year ended | Year ended |
31 December | 31 December | 31 December |
2018 | 2019 | 2020 |
Aggregated | Aggregated | Aggregated |
transaction amount | transaction amount | transaction amount |
(RMB million) | (RMB million) | (RMB million) |
2.3 | 1.3 | 0.9note |
Note: The total amount of agency fee, handling fee, consultation fee and other services fee charged by Finance Company for providing Members of the Group with financial services under the 2019 Financial Services Agreement from 1 January 2020 to 31 August 2020 was RMB0.42 million; the total amount of agency fee, handling fee, consultation fee and other services fee charged by Finance Company for providing Members of the Group with financial services under the 2020 Financial Services Agreement from 1 September 2020 to 31 December 2020 was RMB0.51 million.
(2) Annual cap under the Original Financial Services Agreement
Year ending 31 December 2021
Annual cap (RMB million)
200
(3) Proposed annual cap under the Financial Services Agreement
Year ending | Year ending | Year ending |
31 December 2021 | 31 December 2022 | 31 December 2023 |
Annual cap | Annual cap | Annual cap |
(RMB million) | (RMB million) | (RMB million) |
200 | 300 | 400 |
The terms of the Financial Services Agreement have been reached after arm's length negotiation between the Company and Finance Company.
The proposed annual caps of the Financial Services Agreement have been set taking into account the following factors:
(a) The Members of the Group have formed a long-term and stable business cooperation relationship with Finance Company in deposits, loans, bills, settlement, agency and other businesses. Finance Company would have a comparable advantage in continuing to provide relevant services to the Company and Members of the Group.
(b) Looking into the future, China's economy will continue to retain its upward trend in the long run, and industries such as coal, electricity and new energy will remain as the important fundamental industries in a relatively long period. The efforts made at the state level to improve orderly competition and reduce excessive production capacity will provide favourable conditions for industries such as coal, electricity and new energy to achieve sustainable and robust development and improve operation environment of enterprises. Finance Company's continuing provision of relevant services to the Members of the Group is conducive to improving the convenience of the Members of the Group in using funds, increasing the efficiency of the use of funds, reducing the cost of capital, and helping the Members of the Group to develop their business in line with economic and policy trends.
(c) Pursuant to the comprehensive credit service under the Financial Services Agreement, Finance Company will grant credits to the Group, and the Group therefore, may have needs seeking to place deposits with Finance Company in the future.
(d) The average balance of the Company's monthly deposits were approximately RMB80 billion in 2019 and 2020, therefore, the Members of the Group will continue to maintain reasonable demands for deposit service provided by depository financial institutions such as Finance Company. To facilitate sound risk control and standardized management and to reduce potential risks, the Company proposes that the annual cap of daily balance (including accrued interest thereon) of deposits placed by Members of the Group with Finance Company from 2021 to 2023 be set as RMB27.9 billion.
(e) The Finance Company will continue to provide financial services for Members of the Group. In the future, the Finance Company will fully utilize the functions of the financial platform to carry out entrusted loans, syndicated loans and bills business on a large scale. It is expected that the handling fees and consultation fees will be significantly increased. It is proposed that the annual cap for service fees charged by Finance Company for provision of financial services to Members of the Group for the year of 2021, 2022 and 2023 be set as RMB0.2 billion, RMB0.3 billion and RMB0.4 billion, respectively. The proposed annual caps are not substantial to the Group as the highest applicable percentage ratio is around 0.1% as calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules.
(f) The Company is committed to gradually reducing connected transactions while setting the proposed annual caps of continuing connected transactions. The Company is of the view that when proposing annual caps of continuing connected transactions, flexibility shall be taken into account to accommodate the maximum limits under various possibilities. Even if the Company sets the annual caps for continuing connected transactions, it does not mean that Members of the Group and Finance Company will transact such amounts, and the proposed annual caps are not indications for the actual transaction amounts. Members of the Group and Finance Company will conduct continuing connected transactions in strict accordance with the actual demand for transaction volume and the actual transaction price. The Company will disclose the actual transaction amounts in each year's annual report, and the independent non-executive Directors and auditors will opine on the continuing connected transaction to receive supervision of the independent shareholders.
In respect of the Finance Company providing financial service of guarantee (including guarantee business within the business scope of financial enterprises, such as performance guarantee and quotation sharing) to Members of the Group, bill acceptance and discount services to Members of the Group; granting loans, consumption credit and buyer's credit to Members of the Group on normal commercial terms or better, it would amount to a provision of financial assistance by a connected person for the benefit of the Group and would therefore be exempt under Rule 14A.90 of the Hong Kong Listing Rules from all reporting, announcement and independent shareholders' approval requirements since no security over the assets of the Group has been or will be granted in respect of such financial assistance from the Group. Nevertheless, the Company is required to propose and set maximum daily balance in respect of the comprehensive credit (including loans, credit loan, bill acceptance and discount, guarantee, letter of indemnity, overdraft, letter of credit) (including interests accrued thereon) provided by Finance Company to Members of the Group pursuant to the Shanghai Listing Rules. The proposed annual caps of the Company for the years ending 31 December 2021, 31 December 2022 and 31 December 2023 are set out as below, respectively. The historical transaction amounts of the Company for the three years ended 31 December 2018, 31 December 2019 and 31 December 2020 are listed here.
Historical maximum daily balance of loans (including interests accrued thereon) granted by Finance Company to Members of the Group
Year ended | Year ended | Year ended |
31 December 2018 | 31 December 2019 | 31 December 2020 |
Aggregated | Aggregated | Aggregated |
transaction amount | transaction amount | transaction amount |
(RMB million) | (RMB million) | (RMB million) |
19,984.0 | 25,177.7 | 24,221.5(note) |
Note: The daily maximum remaining amount of loans granted by Finance Company to Members of the Group under the 2019 Financial Services Agreement from 1 January 2020 to 31
August 2020 was RMB23,281.9 million; the daily maximum remaining amount of loans granted by Finance Company to Members of the Group under the 2020 Financial Services Agreement from 1 September 2020 to 31 December 2020 was RMB24,221.5 million.
Maximum daily balance of comprehensive credit provided by Finance Company to Members of the Group (including loans, credit loan, bill acceptance and discount, guarantee, letter of indemnity, overdraft, letter of credit) (including relevant interest accrued thereon)
(1) Annual cap under the Original Financial Services Agreement
Year ending
31 December 2021
Annual cap (RMB million)
100,000
(2) Proposed annual cap under the Financial Services Agreement
Year ending | Year ending | Year ending |
31 December 2021 | 31 December 2022 | 31 December 2023 |
Annual cap | Annual cap | Annual cap |
(RMB million) | (RMB million) | (RMB million) |
100,000 | 100,000 | 100,000 |
IMPLEMENTATION AGREEMENTS |
Members of the Group may, from time to time and as necessary, enter into separate implementation agreements for each specific transaction contemplated under the Financial Services Agreement with Finance Company. Each implementation agreement will set out the specifications for the transaction. The implementation agreements provide for the financial services as contemplated by the Financial Services Agreement, as such, they do not constitute new categories of connected transactions. Any such implementation agreement will be within the bounds of the Financial Services and the annual caps.
All payment made pursuant to the Financial Services Agreement and its implementation agreements will be in cash.
BACKGROUND AND REASONS FOR ENTERING INTO THE NEW FINANCIAL SERVICES AGREEMENT AND THE BENEFITS TO THE COMPANY
The Members of the Group have established long-term and stable cooperation with Finance Company, as well as relatively stable business relations in terms of deposits, loans, bills, settlements and agents. The Company has entered into the Financial Services Agreement with Finance Company. Provision of financial services by Finance Company to Members of the Group is conducive to maintaining the continuity of financial services received by Members of the Group, thereby lowering the financing cost. Further details are as follows:
(1) Improving treasury management efficiency, realising centralised treasury management: Finance Company provides deposits and other financial services to Members of the Group to facilitate settlement within Members of the Group and between Members of the Group and Members of China Energy Group and shorten the time required for transfer and turnover of funds. Compared with opening bank accounts by Members of China Energy Group and Members of the Group separately in independent commercial banks, direct clearing and settlement between both sides would be more efficient. Finance Company will enable the Company to lower the cost by improving the efficiency of the internal settlement and help to realise optimisation of cost and operational efficiency. In addition, deposits placed by Members of the Group with Finance Company would be conducive to realising centralised treasury management as Members of the Group will be able to withdraw cash to satisfy their flexible requirements of treasury timely at any time without limitation. Meanwhile, Members of the Group will also be entitled to withdraw its deposit placed with Finance Company in full or in part. Members of the Group may, at its sole discretion, deposit its funds into Finance Company or other independent commercial banks without any restrictions.
(2) Familiar with the Company's business, providing more flexible and convenient services: Since Finance Company mainly provides financial services to China Energy and its subsidiaries, it has accumulated in-depth knowledge over the years in respect of the industry in which Members of the Group operate. Finance Company is familiar with the capital structure, business operation, capital requirements and cash flow pattern of Members of the Group, enabling it to better forecast the capital requirements of Members of the Group. Therefore, Finance Company can provide flexible, convenient and low-cost service to Members of the Group at any time, while it will be difficult for independent commercial banks to provide equivalent services.
(3) Offering better commercial terms: As a professional centralised treasury management platform, Finance Company generally can offer Members of the Group with more favourable terms and interest rates as compared to other financial institutions. Pursuant to the Financial Services Agreement, the deposit interest rate offered by Finance Company will be no less than that offered by major commercial banks for the deposits of the same nature and the same maturity. And the loan interest rate will be no higher than that offered by major commercial banks for the loans of the same nature and the same maturity.
HONG KONG LISTING RULES IMPLICATIONS
As of the date of this announcement, Finance Company is held as to 60% of equity interest by China Energy, and China Energy holds 69.52% of equity interest of the Company and is the controlling shareholder of the Company. As such, Finance Company is a connected person of the Company under the Hong Kong Listing Rules, and the Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company pursuant to Chapter 14A of the Hong Kong Listing Rules.
In respect of the annual caps under the Financial Services Agreement, as one or more of the applicable percentage ratios exceed 5% but all such percentage ratios are less than 25% as calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules, the Financial Services Agreement and the transactions contemplated thereunder are subject to reporting, announcement, the approval of independent shareholders and annual review requirements under Chapter 14A of the Hong Kong Listing Rules. This transaction also constitutes a discloseable transaction under Chapter 14 of the Hong Kong Listing Rules.
GENERAL INFORMATION
The Board has resolved and approved the Financial Services Agreement and the proposed annual caps thereto on 26 March 2021. Of the Directors attending the board meeting, connected Directors Mr. Wang Xiangxi and Mr. Jia Jinzhong were considered to have material interests by virtue of being employed by China Energy and had thus abstained from voting on the relevant resolution(s). The Directors (including independent non-executive Directors) consider that the Financial Services Agreement and the proposed annual caps thereto are on normal commercial terms or better and in the ordinary and usual course of business of the Group, the pricing principle is fair and reasonable, and are in the interests of the Company and its Shareholders as a whole.
An Independent Board Committee has been formed to advise the Independent Shareholders on the Financial Services Agreement and the proposed annual caps thereto.
An independent financial adviser will be appointed by the Company to advise the Independent Board Committee and Independent Shareholders on the terms of the Financial Services Agreement, the proposed annual caps thereto and the transactions contemplated thereunder in accordance with the Hong Kong Listing Rules.
To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, no member of the Independent Board Committee has any material interest in the Financial Services Agreement and the transactions contemplated thereunder.
A general meeting of the Company will be convened and held to, inter alia, consider and, if thought fit, to approve the Financial Services Agreement and the proposed annual caps thereto. According to the Hong Kong Listing Rules, China Energy and its respective associates shall abstain from voting in respect of relevant resolutions.
A circular containing, among other things, further details of the Financial Services Agreement, a letter from the Independent Board Committee and an opinion of the independent financial adviser will be dispatched to the Shareholders within 15 business days.
DEFINITIONS
The following expressions have the following meaning unless the context requires otherwise:
"2019 Financial | the Financial Services Agreement entered into on 22 March |
Services Agreement" | 2019 between the Company and Finance Company; |
"2020 Financial | the Financial Services Agreement entered into on 27 March |
Services Agreement" | 2020 between the Company and Finance Company; |
"Board" | the board of Directors; |
"CBIRC" | China Banking and Insurance Regulatory Commission; |
"China Energy" | China Energy Investment Corporation Limited ( ঐ๕ |
ҳ༟ණྠϞࠢபʮ̡ ), the controlling shareholder of | |
the Company as defined under the Hong Kong Listing Rules; | |
"China Energy Group" | collectively, China Energy and its subsidiaries (excluding the |
Group); | |
"Company" | China Shenhua Energy Company Limited ( ʕग़ശঐ๕ |
ٰ΅Ϟࠢʮ̡ ), a joint stock limited company incorporated | |
in the PRC, the H shares of which are listed on the Hong | |
Kong Stock Exchange and the A shares of which are listed on | |
the Shanghai Stock Exchange; | |
"Director(s)" | the director(s) of the Company; |
"Original Financial | The financial services agreement dated 29 December 2020 |
Services Agreement" | entered into between the Company and Finance Company; |
"Finance Company" | China Energy Finance Co., Ltd. ( ঐ๕ණྠৌਕϞࠢ |
ʮ̡ ), a limited company incorporated in the PRC, formerly | |
known as Shenhua Finance Co., Ltd. ( ग़ശৌਕϞࠢʮ̡ ); | |
"Financial Services | the financial services agreement dated 26 March 2021 entered |
Agreement" | into between the Company and Finance Company; |
"Group" | the Company and its subsidiaries; |
"Hong Kong" | the Hong Kong Special Administrative Region of the PRC; |
"Hong Kong Listing | the Rules Governing the Listing of Securities on The Stock |
Rules" | Exchange of Hong Kong Limited; |
"Members of China | including China Energy, its subsidiaries in which China |
Energy Group" | Energy holds over 51% of equity interest (the "China |
Energy Subsidiaries"), companies in which China Energy | |
and the China Energy Subsidiaries individually or jointly | |
hold(s) over 30% of equity interest, public institution(s) or | |
social organisation(s) with legal person(s) status under China | |
Energy and its subsidiaries, but excluding the Group; | |
"Members of | including the Company, its subsidiaries in which the |
the Group" | Company holds over 51% equity interests (the "Company |
Subsidiaries"), companies in which the Company and | |
the Company Subsidiaries individually or jointly hold(s) | |
over 30% equity interests, public institution(s) or social | |
organisation(s) with legal person(s) status under the Company | |
and its subsidiaries; | |
"PBOC" | the People's Bank of China; |
"PRC" | the People's Republic of China; |
"RMB" | Renminbi, the lawful currency of the PRC; |
"Shanghai Listing | Rules Governing the Listing of Stocks on the Shanghai Stock |
Rules" | Exchange; |
"Shareholder(s)" | the shareholder(s) of the Company. |
China Shenhua Energy Company Limited | |
Secretary to the Board | |
Beijing, 28 March 2021 |
By order of the Board
Huang Qing
As at the date of this announcement, the Board comprises the following: Mr. Wang Xiangxi, Mr. Yang Jiping and Mr. Xu Mingjun as executive directors, Mr. Jia Jinzhong as non-executive director, Dr. Yuen Kwok Keung, Dr. Bai Chong-En and Dr. Chen Hanwen as independent non-executive directors, and Mr. Wang Xingzhong as employee director.
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CSEC - China Shenhua Energy Company Ltd. published this content on 28 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 March 2021 10:37:01 UTC.
