Binhai Investment : MAJOR TRANSACTION IN RELATION TO HEAT SUPPLY CONSTRUCTION PROJECT IN TIANJIN FUTURE SCIENCE AND TECHNOLOGY CITY BEIJING-TIANJIN COOPERATION DEMONSTRATION ZONE

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Binhai Investment Company Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

(Incorporated in Bermuda with limited liability)

(Stock code: 2886)

MAJOR TRANSACTION

IN RELATION TO HEAT SUPPLY CONSTRUCTION PROJECT IN

TIANJIN FUTURE SCIENCE AND TECHNOLOGY CITY

BEIJING-TIANJIN COOPERATION DEMONSTRATION ZONE

Unless the context otherwise requires, all capitalised terms used in this circular shall have the meanings as set out in the section headed "Definitions" of this circular.

A letter from the Board is set out on pages 4 to 13 of this circular.

The Heat Supply Construction Agreement and the transaction contemplated thereunder have been approved by written shareholder's approval obtained from TEDA HK, a controlling Shareholder of the Company, pursuant to Rule 14.44 of the Listing Rules in lieu of a general meeting of the Company. This circular is being despatched to the Shareholders for information only.

20 December 2019

	CONTENTS
		Page
Definitions.............................................................................................................	1
Letter from the Board
1.	Introduction..................................................................................................	4
2.	The Heat Supply Construction Agreement ....................................................	5

3. Financial Effects of Entering into the Heat Supply

Construction Agreement ...............................................................................

11

4. Reasons for and Benefits of Entering into the Heat

	Supply Construction Agreement....................................................................	12
5.	Listing Rules Implications............................................................................	12
6.	General	.........................................................................................................	13
7.	Additional Information.................................................................................	13
Appendix I	- Financial Information of the Group .........................................	I-1
Appendix II	- General Information ..............................................................	II-1

- i -

DEFINITIONS

In this circular, the following expressions shall have the following meanings unless the context requires otherwise:

"Board"	the board of Directors
"Capital Urbanization"	首創經中（天津）投資有限公司 (Capital Jingzhong (Tianjin)
	Investment Co., Ltd.*), a company established in the PRC
	with limited liability and a wholly-owned subsidiary of 北
	京首都創業集團有限公司 (Beijing Capital Group Company
	Limited*) which is a state-owned enterprise established in
	the PRC with limited liability directly under the supervision
	of the State-owned Assets Supervision and Administration
	Commission of the People's Government of Beijing
	Municipality（北京市人民政府國有資產監督管理委員會）
"close associate(s)"	has the meaning ascribed to it under the Listing Rules
"connected person(s)"	has the meaning ascribed to it under the Listing Rules
"Consideration"	the aggregate consideration payable by Capital Urbanization
	to the Project Company for the Transaction under the Heat
	Supply Construction Agreement in the aggregate amount
	of RMB843,440,000, subject to the adjustment mechanism
	as mentioned in the paragraph headed "Adjustment to the
	Consideration" in the letter from the Board in this circular
"Company"	B i n h a i I n v e s t m e n t C o m p a n y L i m i t e d , a c o m p a n y
	incorporated in Bermuda with limited liability, the ordinary
	shares of which are listed on the main board of the Stock
	Exchange (Stock Code: 2886)
"Demonstration Zone"	天津未來科技城京津合作示範區 (Tianjin Future Science and
	Technology City Beijing-Tianjin Cooperation Demonstration
	Zone*)
"Director(s)"	directors of the Company
"Group"	the Company and its subsidiaries

- 1 -

	DEFINITIONS
"Heat Supply Construction	the agreement dated 30 October 2019 entered into between
Agreement"	the Project Company and Capital Urbanization in relation to
	the investment, construction and operation of the supporting
	facilities related to heat supply in the Demonstration Zone,
	as more particularly described under the section headed "The
	Heat Supply Construction Agreement" in the letter from the
	Board in this circular
"Heat Supply Construction"	the investment, construction and operation of the heat supply
	supporting facilities such as boiler room, main heating
	pipelines and heat stations in the Demonstration Zone by the
	Project Company pursuant to the Heat Supply Construction
	Agreement
"HK$"	Hong Kong Dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Latest Practicable Date"	16 December 2019, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information contained herein
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"Model Code"	Model Code for Securities Transactions by Directors of
	Listed Issuers set out in Appendix 10 to the Listing Rules
"PRC"	the People's Republic of China (for the purpose of
	this circular, excluding Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan)
"Project Company"	天津泰合熱力有限公司 (Tianjin Tehe Thermal Co., Ltd.),
	an indirect non wholly-owned subsidiary of the Company,
	established in the PRC with limited liability
"RMB"	Renminbi, the lawful currency of the PRC

- 2 -

	DEFINITIONS
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
"Share(s)"	ordinary share(s) of HK$0.10 each in the share capital of the
	Company
"Shareholder(s)"	holder(s) of Share(s)
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"TEDA HK"	TEDA HK Property Company Limited（泰達香港置業有限
	公司）, a company incorporated in Hong Kong and directly
	holding approximately 60.19% of the total Shares in issue as
	at the Latest Practicable Date
"Tianjin Clean Energy"	天津泰達濱海清潔能源集團有限公司 (Tianjin TEDA Binhai
	Clean Energy Group Co., Ltd.*), a company established
	in the PRC with limited liability and a wholly-owned
	subsidiary of the Company as at the Latest Practicable Date
"Transaction"	the transaction contemplated under the Heat Supply
	Construction Agreement
"%"	per cent
*  For identification purpose only

- 3 -

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability)

(Stock code: 2886)

Executive Directors:	Registered Office:
Mr. Zhang Bing Jun (Chairman)	Clarendon House
Mr. Gao Liang (General Manager)	2 Church Street
	Hamilton HM11
Non-Executive Directors:	Bermuda
Mr. Wang Gang
Ms. Cao Hong Mei	Principal place of business in
Ms. Peng Bo	Hong Kong:
Mr. Yu Ke Xiang	Suites 3205-07, 32/F
	Tower Two
Independent Non-executive Directors:	Times Square
Mr. Ip Shing Hing, J.P.	1 Matheson Street
Mr. Lau Siu Ki, Kevin	Causeway Bay
Professor Japhet Sebastian Law	Hong Kong

20 December 2019

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

IN RELATION TO HEAT SUPPLY CONSTRUCTION PROJECT IN

TIANJIN FUTURE SCIENCE AND TECHNOLOGY CITY

BEIJING-TIANJIN COOPERATION DEMONSTRATION ZONE

1. INTRODUCTION

Reference is made to the announcement of the Company dated 30 October 2019 in relation to the Heat Supply Construction Agreement, pursuant to which Capital Urbanization has engaged the Project Company (a non-wholly owned subsidiary

- 4 -

LETTER FROM THE BOARD

of the Company) to carry out the overall investment, construction, operation and maintenance of the supporting facilities related to heat supply in the Demonstration Zone to meet the needs of customers for safe, stable and comfortable heat supply in the Demonstration Zone at the Consideration of RMB843,440,000.

The Demonstration Zone is a project for the synergistic development of Beijing and Tianjin in the PRC, which will serve as an important hub for the transferring of industrial functions of the Beijing capital city and a pilot demonstration area for the cooperation and joint development of Beijing and Tianjin. Capital Urbanization is responsible for the organization of the development and construction of the Demonstration Zone.

The Demonstration Zone, with a total planned area of approximately 38.07 square kilometres and planned population size of three hundred thousand, comprises three islands all with their respective development positioning, namely as a main area for urban life, a key development area for the transfer of industrial functions of the Beijing capital city and a space for the expansion of urban residential life. Pursuant to the Heat Supply Construction Agreement, the Project Company, which is equipped with heat supply qualification, shall carry out the overall investment, construction, operation, maintenance and the dispatching and transportation of heat sources, etc. in the Demonstration Zone in order to meet the needs of customers for heat supply in the Demonstration Zone upon completion of its development. Over the course of the Heat Supply Construction, which is intended to be carried out in 3 phases spanning over 10 to 15 years, the heat supply service area in the Demonstration Zone is expected to reach up to 16 million square metres each year.

The Transaction constitutes a major transaction for the Company under the Listing Rules.

The purpose of this circular is to provide you with, among other things, further details of the Transaction and the general information of the Group.

2. THE HEAT SUPPLY CONSTRUCTION AGREEMENT

On 30 October 2019, the Project Company (a non wholly-owned subsidiary of the Company) and Capital Urbanization entered into the Heat Supply Construction Agreement, pursuant to which the Project Company agreed to carry out the overall investment, construction, operation and maintenance of the supporting facilities related to heat supply in the Demonstration Zone in order to meet the needs of customers for safe, stable and comfortable heat supply in the Demonstration Zone at the Consideration of RMB843,440,000.

- 5 -

LETTER FROM THE BOARD

Date

30 October 2019

Parties

1. Project Company (a non wholly-owned subsidiary of the Company)
2. Capital Urbanization (a wholly-ownedsubsidiary of 北 京 首 都 創 業 集 團 有 限 公 司 (Beijing Capital Group Company Limited*), which is a state- owned enterprise established in the PRC with limited liability directly under the supervision of the State-ownedAssets Supervision and Administration Commission of the People's Government of Beijing Municipality（北京市人民 政府國有資產監督管理委員會）)

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

Heat Supply Construction

Pursuant to the Heat Supply Construction Agreement, the Project Company shall be responsible for the Heat Supply Construction in the Demonstration Zone according to the overall planning, specific heat supply planning, heat supply detailed planning and urban pipelines network comprehensive planning of the Demonstration Zone. The details of the Heat Supply Construction are set out below:

1. the scope of the Heat Supply Construction includes 31 boilers, 93 boiling facilities, 140 heat stations, main heating pipeline network (including secondary heating pipelines extending 1 metre from the heat stations), heat dispatching centre, intellectual control system, etc.;
2. the construction of heat sources in the boilers includes all works in relation to the construction work of boilers, the supply and installation of facilities, the main heating pipeline network connecting the boilers and the heat stations, the construction works of municipal roads, greening and municipal pipe network facilities within the area of the boilers and the connection with the main urban pipeline beyond such boundary, etc.; and
3. the supply and installation of heat station facilities, power distribution and control system, and the installation of secondary heating pipelines in the 1-metre area surrounding the heat stations.
4. • 6 -

LETTER FROM THE BOARD

Capital Urbanization shall be responsible for collecting the construction fees of the Heat Supply Construction from the development and construction units in the Demonstration Zone, and will transfer and pay the fees to the Project Company on a stage by stage basis according to the construction planning. The ownership of the equipment and facilities constructed under the Heat Supply Construction shall belong to the Project Company.

Consideration and basis

The Consideration for the Transaction under the Heat Supply Construction Agreement is RMB843,440,000, subject to the adjustment mechanism as set out in the paragraph headed "Adjustment to the Consideration" below. On the basis of the Heat Supply Construction Agreement, Capital Urbanization and the Project Company shall enter into specific implementation contracts according to specific circumstances of the Heat Supply Construction, and the Consideration shall be paid by Capital Urbanization to the Project Company in installments according to the progress of the specific implementation contracts in the following manner:

1. within 60 days after the completion and acceptance inspection of each of the boiler room, supporting heat station, heat dispatching centre, boiler room fire pumping station etc., Capital Urbanization shall, according to the principle of "build one, pay for one", pay the corresponding construction fees according to the actual amount of construction in different development cycles; and
2. the heating pipeline shall be constructed in phases in conjunction with the road works, and after completion and acceptance inspection, Capital Urbanization shall pay the corresponding construction fees within 60 days according to the completed project quantity confirmed by both parties.

The Consideration was determined based on assessment of the construction fees, other construction costs, reserve fees, as well as the policies and market risks to be borne by the Project Company in relation to the Transaction.

Adjustment to the Consideration

The Heat Supply Construction is intended to be carried out in three phases spanning over 10 to 15 years. Due to the long construction period of the Heat Supply Construction and fluctuation risk of the market price, the Project Company and Capital Urbanization agreed to the following adjustment mechanism for the Consideration:

- 7 -

LETTER FROM THE BOARD

1. the Consideration is set with reference to the cost index of the "Tianjin Construction Project Budget Base Price"《天津市建築工程預算基價》(the "Index") promulgated by the Tianjin Construction Project Cost Management Station（天津市建設工程造價管理總站）in 2016 and such index is updated every four years;
2. the Consideration is subject to adjustment arising from changes to the updated Index as compared to that promulgated in 2016;
3. the Index is adjusted with reference to the installation cost index and information on the changes of heating construction projects under the Tianjin Construction Cost Information（天津工程造價信息）issued by the Tianjin Construction Project Cost Management Station; thus the "cost index of the month" of heating construction projects at the signing of the Heat Supply Construction Agreement is used as the base index for the calculation of the Consideration. Subsequently, the fluctuation range of the Index depends on the difference between the annual average of the monthly index of heating construction projects as compared to the base index;
4. no adjustment to the Consideration will be made if changes to the Index amounts to an increase of not more than 10% or a decrease of not more than 5%;
5. adjustment to the Consideration will be made if changes to the Index amounts to an increase of more than 10% or a decrease of more than 5% and the portion beyond such threshold will be adjusted accordingly.

According to the construction timeline of the Heat Supply Construction, phases 1 and 2 of the Heat Supply Construction will be completed by 2025 and phase 3 of the Heat Supply Construction will be carried out after 2025.

The Project Company and Capital Urbanization have estimated that:-

1. for phases 1 and 2 of the Heat Supply Construction which will be completed by 2025, Capital Urbanization will pay the corresponding construction fees on the basis under the Heat Supply Construction Agreement and no adjustment will be made;
2. for phase 3 of the Heat Supply Construction which will be carried out after 2025, the maximum amount of increase adjustment to the Consideration will be approximately RMB32,660,000.

- 8 -

LETTER FROM THE BOARD

On the basis of steady and reasonable inflation and economic growth in the PRC, the Project Company and Capital Urbanization expect the construction fees, other construction costs and reserve fees etc. to be incurred in relation to the Transaction to be on an upward trend over the course of the Transaction. As it is anticipated that the aforesaid costs and fees will rise rather than fall in the long run, no maximum amount of decrease adjustment to the Consideration has been estimated by the Project Company and Capital Urbanization.

The Index, which is adjusted with reference to the installation cost index and information on the changes of heating construction projects under the Tianjin Construction Cost Information（天 津 工 程 造 價 信 息 ）, is a comprehensive and appropriate basis on which to measure adjustments for the Consideration. Further, despite the long construction period of the Heat Supply Construction spanning over 10 to 15 years, the Index which is updated on regular intervals will be able to reflect changes in the installation cost index and information on the changes of heating construction projects and appropriately effect necessary adjustments to the Consideration. In view of the aforesaid basis of the adjustment mechanism for the Consideration, the Directors consider that such adjustment mechanism is fair and reasonable.

Condition precedent

The Transaction shall be carried out subject to the Company having complied with the relevant requirements under the Listing Rules, including announcement, circular and shareholders' approval (as applicable).

Rights and obligations of the parties

1. Capital Urbanization shall have the following rights and obligations:
2. 1. to provide the Project Company with planning approval documents and relevant materials of the Demonstration Zone, and assist the Project Company to be listed on the enterprise list of heat supply supporting facilities in Tianjin such that it can benefit from the government subsidy on gas heating;
   2. prior to the commencement of the Heat Supply Construction, to assist the Project Company in resolving and handling any relevant government procedures in relation to planning, territory, transport, etc. to ensure that the construction site has the necessary conditions for commencement of construction;

- 9 -

LETTER FROM THE BOARD

1. 1. i) to provide the Project Company with the underground pipeline network graph, buildings conditions on the ground in the Demonstration Zone, etc. and ii) to coordinate the planning and construction progress of all the works under and on the ground in the Demonstration Zone to ensure the smooth commencement of all works in an orderly manner; and
   2. during the development and construction of the Demonstration Zone, if there is a major adjustment on the specific heat supply planning in the Demonstration Zone due to factors such as the promulgation and adjustment of relevant policies of the PRC or Tianjin, new technology or implementation of new standards and new regulations, the Project Company and Capital Urbanization may negotiate for the continuation of cooperation on the same conditions. If the negotiation fails, Capital Urbanization has the right to terminate the Heat Supply Construction Agreement and choose another partner to be responsible for the investment, development and operation of the heat supply facilities in the incomplete areas. Capital Urbanization and the Project Company shall settle payment pursuant to the jointly confirmed amount of construction works actually completed by the Project Company, and the Project Company shall continue to enjoy the rights to operate and maintain the heat supply facilities in the completed area, to ensure the quality of heat supply is not affected.
2. The Project Company shall have the following rights and obligations:
3. 1. i) to commence operation pursuant to the relevant provisions and implementation rules of the "Tianjin Heat Management Regulations"（天 津市供熱管理條例）and strictly implement relevant national technical standards and norms in the design, construction and operation of heating facilities and ii) actively adopt domestic and foreign advanced technologies to improve the quality of heat supply and service;
   2. i) commence the design of the Heat Supply Construction pursuant to the planning of the Demonstration Zone and the development construction plan of Capital Urbanization; ii) coordinate with the relevant government authorities to timely organize construction works to be done at the site and conduct acceptance inspection of the Heat Supply Construction;
   3. 1. be responsible for the quality of construction; and iv) monitor the progress and implementation of the plan and be accountable to Capital Urbanization;

- 10 -

LETTER FROM THE BOARD

1. be responsible for all the works such as the collection of payment and for maintenance of the daily heat supply, and also the maintenance, operation and emergency repair work of the heat supply facilities relevant to the municipal roads in the Demonstration Zone;
2. during the construction, the Project Company shall cooperate with Capital Urbanization and the municipal general contractor in the unified management of on-site coordination, construction progress and safety, etc.; and
3. be responsible for the relevant design, development and subsequent operation, daily maintenance, collection of payment etc. of heat supply to all the industrial, residential and commercial projects in the Demonstration Zone.

3. FINANCIAL EFFECTS OF ENTERING INTO THE HEAT SUPPLY CONSTRUCTION AGREEMENT

As construction of the supporting facilities related to heat supply in the Demonstration Zone pursuant to the Heat Supply Construction Agreement has not yet commenced and such construction will take a long time to be carried out, the transactions contemplated under the Heat Supply Construction Agreement are not expected to have any immediate material impact on the consolidated earnings of the Group as well as the net asset value attributable to equity shareholders of the Company for the year ending 31 December 2019. However, the Transaction in the long run would lead to increase in the Group's fixed assets upon completion of construction of the heat supply facilities and enhancement of the Group's income stream upon the commencement of the operation of heat supply facilities in the Demonstration Zone.

During the process of the Heat Supply Construction and assuming the investment into the Heat Supply Construction will be financed by the Group's existing internal resources, there will be an increase in construction-in-progress of the Group and a decrease in the Group's cash and bank deposit balance. Such construction-in-progress will be recognized as fixed assets upon completion of the Heat Supply Construction.

As the project of the Transaction progresses, the revenue of the Group derived from the heat supply supporting facilities shall increase when the constructed facilities come into operation and start generating income from the heat supply operations. The profit base of the Group will be diversified, including not only the income

- 11 -

LETTER FROM THE BOARD

relating to the heat supply facilities, but also the long-term income derived from the operation of heat supply facilities based on the size of the heat supply area. It is expected that the earnings and cash flow of the Company will thus be substantially improved.

1. REASONS FOR AND BENEFITS OF ENTERING INTO THE HEAT SUPPLY CONSTRUCTION AGREEMENT
   The Demonstration Zone is positioned as an important hub for the transferring of industrial functions of the Beijing capital city, a pilot demonstration area for the cooperation and joint development of Beijing and Tianjin and a model zone for the industry-city integration of smart ecology and liveability, which bears great historic responsibility and mission. The entering into of the Heat Supply Construction Agreement is beneficial to the Company in several aspects, namely, (i) it favours the Group's active involvement and participation in the national grand strategy of the integrated development of Beijing and Tianjin and enables the Group to benefit from such strategic planning concept; (ii) it will facilitate the Group's active expansion to industries in the downstream applications of gas, particularly the industry of city central heat supply; (iii) it will enable the Group to expand its scope of business and nurture new profit growth drivers; (iv) the Group will become the exclusive operator of heat supply in the Demonstration Zone, and manifest synergy with its gas supply business; and (v) it will enable the Company to build a good image in the gas and heat supply industries, thereby conducive to the Group becoming a significant gas and heat supplier in the Tianjin Future Science and Technology City area.
2. LISTING RULES IMPLICATIONS
   As one of the applicable percentage ratios calculated in accordance with Rule 14.07 of the Listing Rules in respect of the Transaction exceed(s) 25% but less than 75%, the Transaction constitutes a major transaction of the Company and is therefore subject to reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

- 12 -

LETTER FROM THE BOARD

No Shareholder would be required to abstain from voting if the Company were to convene a general meeting for approval of the Heat Supply Construction Agreement and the Transaction. TEDA HK, being the controlling Shareholder holding 706,818,659 Shares (representing approximately 60.19% of the total number of issued Shares as at the Latest Practicable Date), has given its written approval for the Heat Supply Construction Agreement and the Transaction. Accordingly, such written approval is accepted in lieu of holding a general meeting pursuant to Rule 14.44 of the Listing Rules.

The Directors (including the independent non-executive Directors) are of the view that the Transaction is on normal commercial terms, fair and reasonable and in the interests of the Company and its Shareholders as a whole. Had a physical extraordinary general meeting been convened for the approval of the Transaction, the Directors would have recommended the Shareholders to vote in favour of the Transaction.

1. GENERAL
   The Project Company is a non wholly-owned subsidiary of the Company, established in the PRC with limited liability and owned as to 51% by Tianjin Clean Energy and as to 49% by Tianjin Pipeline Engineering Group Co., Ltd.*（天津市管道工 程集團有限公司）, and is equipped with heat supply qualification to carry out the overall investment, construction, operation, maintenance and the dispatching and transportation of heat sources, etc. in order to meet the needs of customers in the Demonstration Zone.
   Capital Urbanization is principally engaged in the development of new industrial city, urban renewal and housing development.
2. ADDITIONAL INFORMATION
   Your attention is also drawn to the additional information set out in the appendices to this circular.

Yours faithfully,

By Order of the Board

Binhai Investment Company Limited

Gao Liang

Executive Director

- 13 -

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. THREE-YEARFINANCIAL INFORMATION OF THE GROUP
   The audited consolidated financial statements of the Group for the years ended 31 December 2016, 2017 and 2018 together with the relevant notes to the financial statements of the Group can be found on pages 66 to 165 of the annual report of the Company for the year ended 31 December 2016, pages 76 to 171 of the annual report of the Company for the year ended 31 December 2017, and pages 83 to 197 of the annual report of the Company for the year ended 31 December 2018. Please also see below the hyperlinks to the said annual reports.
   2016: https://www1.hkexnews.hk/listedco/listconews/sehk/2017/0411/ltn20170411709.pdf
   2017: https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0328/ltn20180328530.pdf
   2018: https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0328/ltn20190328567.pdf
2. STATEMENT OF INDEBTEDNESS
   As at 31 October 2019, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group has outstanding indebtedness as summarized below:
   US bond
   The Group issued bonds in the aggregate principal amount of US$300,000,000, which will mature on 30 November 2020. As at 31 October 2019, the carrying value of these bonds was US$300,000,000.
   Bank borrowings and finance leases
   As at 31 October 2019, the Group had total outstanding bank borrowings of RMB177,000,000 and an aggregate amount of RMB120,273,041.70 due under finance leases arrangement. The aforesaid amount due under finance leases were secured by the Group's transportation pipeline, second pipeline network and ancillary facilities with an aggregate carrying value of RMB439,212,269.80 as at 31 October 2019.

- I-1 -

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Save as aforesaid or as otherwise mentioned herein and apart from intra-group liabilities and normal accounts payable in the ordinary course of business, the Group did not have any debt securities issued and outstanding, authorized or otherwise created but unissued, term loans, indebtedness in the nature of borrowing including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, finance leases or hire purchase commitments, mortgages, charges, debentures, loan capital or other similar indebtedness, which are either guaranteed, unguaranteed, secured or unsecured, or any guarantees or other material contingent liabilities outstanding as at the close of business on 31 October 2019.

1. SUFFICIENCY OF WORKING CAPITAL
   The Directors, after due and careful consideration, are of the opinion that, taking into account the financial resources available to the Group, including internally generated funds, bank and other loan facilities currently available to the Group, and its ability to refinance certain banking facilities and bonds falling due, the Group will have sufficient working capital for its present requirements for at least the next 12 months following the date of this circular in the absence of unforeseen circumstances.
2. MATERIAL ADVERSE CHANGE
   So far as the Directors are aware, as at the Latest Practicable Date, there has been no material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest published audited consolidated financial statements of the Group were made up.
3. FINANCIAL AND TRADING PROSPECTS OF THE GROUP
   The Group is principally engaged in the construction of gas pipeline networks, gas construction and installation service, sales of piped natural gas, pipeline transportation and bottled natural gas sales.
   As disclosed in the interim report of the Company for the six months ended 30 June 2019, the Group's total gas pipeline network was approximately 2,782 kilometers, representing an increase of 138 kilometers of the pipeline network from 2,644 kilometers as at 31 December 2018. During the six months ended 30 June 2019, the gas construction and installation service income amounted to approximately HK$227,445,000, representing an increase of HK$27,182,000 or 14% as compared to HK$200,263,000 for the corresponding period last year.

- I-2 -

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

During the six months ended 30 June 2019, consumption of piped gas by residential and industrial customers amounted to approximately 4,954*106 and 12,636*106 mega-joules respectively, as compared to 4,006*106 and 12,068*106 mega-joules respectively for the corresponding period last year. During the said period, the piped gas sales income of the Group amounted to HK$1,493,924,000, representing an increase of HK$121,508,000 or 9% as compared to HK$1,372,416,000 for the corresponding period last year. The increase in piped gas sales income is mainly due to the increase in natural gas sales volume.

During the six months ended 30 June 2019, the volume of gases transported by the Group for its clients amounted to 538,077,550 cubic meters and pipeline transportation income amounted to HK$45,296,000, representing an increase of HK$9,564,000 or 27% as compared to HK$35,732,000 for the corresponding period last year.

Following the energy transformation and the further promotion of the plan of "Winning the Battle for a Blue Sky", there is an enormous potential for domestic demand for clean energy. During the six months ended 30 June 2019, the national demand for natural gas demonstrated a steady growth. The national apparent consumption volume of natural gas reached 149.3 billion cubic metres, representing

1. year-on-yeargrowth of 10.8%. In respect of reform of the natural gas system, the PRC government has decided to establish a national pipeline network company as a key step in the marketization reform of natural gas. This will allow state-owned oil and gas enterprises to concentrate on exploration and enhancement of production volume in order to improve the supply capacity of natural gas. Also, the increase in number and further diversification in the nature of suppliers, users and intermediary service agents will benefit the progress of marketisation reform of natural gas prices. The promulgation of the latest "Special Administrative Measures for Access of Foreign Investment (Negative List) (2019 Edition)*"（《外商投資准入特別管理 措施（負面清單）（2019 年版）》）has completely opened up the market access of city gas for foreign investment which encourages the development of city gas and is beneficial to the downstream utilisation of natural gas, bringing new development opportunities to large-scale Hong Kong-listed and overseas-registered domestic urban gas companies including the Group. The Group will continue to capitalise on its geographical advantages in the existing operating regions in order to proactively expand its scale of operation and promote the steady growth of its operating results.

- I-3 -

APPENDIX II	GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT
2. 
   This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.
3. DISCLOSURE OF INTERESTS Directors' interests
4. 1. 
      As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors and chief executive of the Company were taken or deemed to have pursuant to Divisions 7 and 8 of Part XV of the SFO), or (ii) entered in the register required to be kept under Section 352 of the SFO, or
   2. notified to the Company and the Stock Exchange pursuant to the Model Code adopted by the Company were as follows:

						Interests in	Total	Approximate
						underlying	interests in	percentage
						ordinary	ordinary	of the
						Shares	Shares and	Company's
			Interests in ordinary Shares		pursuant	underlying	total issued
		Personal	Corporate	Family	Total	to share	ordinary	ordinary
Name of Director	Capacity	interests	interests	interests	interests	options	Shares	Shares
Mr. GAO Liang	Beneficial owner	-	-	-	-	1,000,000	1,000,000	0.09%
Mr. WANG Gang	Beneficial owner	-	-	-	-	700,000	700,000	0.06%
Mr. IP Shing Jing, J.P.	Beneficial owner	-	-	-	-	200,000	200,000	0.02%
Mr. LAU Siu Ki, Kevin	Beneficial owner	-	-	-	-	200,000	200,000	0.02%
Professor Japhet Sebastian	Beneficial owner	100,000	-	-	100,000	200,000	200,000	0.03%
LAW

- II-1 -

APPENDIX II	GENERAL INFORMATION

Save as disclosed above and so far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in any Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors and chief executive of the Company were taken or deemed to have pursuant to Divisions 7 and 8 of Part XV of the SFO), or (ii) entered in the register required to be kept under Section 352 of the SFO, or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code adopted by the Company.

As at the Latest Practicable Date, so far as was known to the Directors, the following Directors were also directors or employees of a company which has an interest or short position in the Shares or underlying shares of the Company which could fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Name of Director	Name of Company	Position
Zhang Bing Jun	TEDA	Party Secretary and Chairman
Wang Gang	TEDA	Assistant General Manager
Cao Hong Mei	TEDA	Manager in the environmental
		department
Peng Bo	TEDA	Manager in the asset management
		department

3. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter, into any service contract with any member of the Group which is not expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation).

- II-2 -

APPENDIX IIGENERAL INFORMATION

4. D I R E C T O R S ' I N T E R E S T S I N A S S E T S O R C O N T R A C T S O R ARRANGEMENTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been acquired or disposed of by, or leased to, any member of the Group, or are proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 December 2018, the date to which the latest published audited consolidated financial statements of the Company were made up.

As at the Latest Practicable Date, none of the Directors were materially interested in any contract or arrangement which is subsisting at the date of this circular and which is significant in relation to the business of the Group.

1. COMPETING INTERESTS
   As at the Latest Practicable Date, none of the Directors or his or her respective close associates had any business or interest which competes or may compete, either directly or indirectly, with the businesses of the Group, or any other conflicts of interest with the Group.
2. LITIGATION
   As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims of material importance and no litigation or claims of material importance was pending or threatened against any member of the Group.
3. MATERIAL CONTRACTS
   The following contract (not being a contract entered into in the ordinary course of business of the Group) had been entered into by a member of the Group within the two years immediately preceding the date of this circular and is or may be material:
   - the Heat Supply Construction Agreement.

- II-3 -

APPENDIX II	GENERAL INFORMATION

1. DOCUMENTS AVAILABLE FOR INSPECTION
   Copies of the following documents will be available for inspection during normal business hours from the date of this circular up to and including 3 January 2020 at the head office and principal place of business of the Company in Hong Kong:
2. 1. the memorandum and articles of association of the Company;
   2. the annual reports of the Company for the two years ended 31 December 2017 and 2018;
   3. the Heat Supply Construction Agreement;
   4. the continuing connected transaction circular of the Company dated 8 October 2019 on revision of annual caps of the Master Gas Supply Connection Agreement; and
   5. this circular.
3. MISCELLANEOUS
4. 1. The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
   2. The head office and principal place of business of the Company is situated at Suites 3205-07, 32/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.
   3. The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong.
   4. The company secretary of the Company is Mr. Yip Wai Yin who is a solicitor of the High Court of the Hong Kong Special Administrative Region and a member of the Law Society of Hong Kong.
   5. This circular is made in English and Chinese. In case of any inconsistency, the English version shall prevail.

- II-4 -