Boer Power : Announcements and Notices - DISCLOSEABLE TRANSACTION IN RELATION TO DISPOSAL OF THE TARGET COMPANY

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BOER POWER HOLDINGS LIMITED

博耳 電力 控 股 有 限公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1685)

DISCLOSEABLE TRANSACTION

IN RELATION TO DISPOSAL OF THE TARGET COMPANY

The Board is pleased to announce that on 21 October 2019, the Seller (a 60% indirectly- owned subsidiary of the Company), the Buyer and the Guarantor (a 60% indirectly-owned subsidiary of the Company and the sole shareholder of the Seller) entered into the Equity Transfer Agreement, pursuant to which the Seller has conditionally agreed to sell, and the Buyer has conditionally agreed to purchase, the Transferred Equity, representing the entire issued share capital of the Target Company in issue as at the date of this announcement, for a Transfer Price of RMB25,709,000 (equivalent to approximately HK$28,566,000) which shall be settled by way of cash.

LISTING RULES IMPLICATIONS

As the highest of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Equity Transfer is more than 5% and less than 25%, the Equity Transfer constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules, and is subject only to the reporting and announcement requirements but is exempted from approval by the Shareholders under Chapter 14 of the Listing Rules.

The Board is pleased to announce that on 21 October 2019, the Seller (a 60% indirectly-owned subsidiary of the Company), the Buyer and the Guarantor (a 60% indirectly-owned subsidiary of the Company and the sole shareholder of the Seller) entered into the Equity Transfer Agreement, pursuant to which, among other things, the Buyer has conditionally agreed to purchase from the Seller, and the Seller has conditionally agreed to sell, the Transferred Equity, which represents the entire issued share capital of the Target Company as at the date of this announcement, at the Transfer Price of RMB25,709,000 (equivalent to approximately HK$28,566,000), which shall be settled by way of cash.

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THE EQUITY TRANSFER AGREEMENT

Details of the major terms and conditions of the Equity Transfer Agreement are set out below:

Date:	21 October 2019
Parties:	(i)	the Seller as vendor
	(ii)	the Buyer as purchaser
	(iii)	the Guarantor as guarantor

The Seller is a 60% indirectly-owned subsidiary of the Group and is principally engaged in investment holding. To the best of the Directors' knowledge, information and belief after having made all reasonable enquiries, the Buyer and its ultimate beneficial owners are Independent Third Parties. The Buyer is principally engaged in consultation services, development and technical services in new energy industry, investments in photovoltaic power plants and environmental protection industry and research in photovoltaic power generation. The Guarantor, has agreed to guarantee the obligations of the Seller.

Assets to be disposed of

Subject to and in accordance with the terms and conditions of the Equity Transfer Agreement, the Seller has conditionally agreed to sell and the Buyer has conditionally agreed to purchase the Transferred Equity, representing the entire equity interest in the Target Company as at the date of this announcement.

Transfer Price

Pursuant to the Equity Transfer Agreement, the Transfer Price for the sale and purchase of the Transferred Equity shall be in the sum of RMB25,709,000 (equivalent to approximately HK$28,566,000), which shall be payable by the Buyer within 7 Business Days of Completion by way of cash.

In the event that the net assets of the Target Company are less than RMB24,081,433 (equivalent to approximately HK$26,757,000) as of the Completion Date upon supplemental audit, the Seller shall compensate the Buyer for the deficit. If the Seller fails to compensate the Buyer for the deficit, the Buyer has the right to deduct such deficit from the Transfer Price.

Basis of the Transfer Price

The Transfer Price was agreed after arm's length negotiation between the Buyer and the Seller with reference to the value of the entire shareholders' equity of the Target Company as at 30 June 2019 (the "Reference Date") according to the valuation report (the "Valuation Report") prepared by an independent valuer in the PRC. The aforesaid value of the entire shareholders' equity means the aggregate of enterprise discounted free cash flow, value of surplus assets and non-operating assets, minus the non-operating liabilities of the Target Company. Please refer to the section headed "Information on the Valuer and the Valuation Report" in this Announcement for further details on the Valuer and the Valuation Report.

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Conditions precedent

Pursuant to the Equity Transfer Agreement, the obligations of the Seller and the Buyer to complete the transfer of the Transferred Equity are conditional upon fulfilment or waiver (if applicable) of the following conditions:

1. there is no actual or potential legal impediment, liens, pledges, guarantees, third- party pre-emptive rights, options or any other encumbrances against the Transferred Equity and the Target Company. If there exists any encumbrances referred to above, such encumbrances shall be terminated or waived in writing, and the Seller having assumed all responsibility and duly settled all the late payment fee due to China Kangfu International Leasing Co., Ltd.* (中國康富國際租賃股份有限公司);
2. the Equity Transfer Agreement and all other agreements referred to in the Equity Transfer Agreement having been duly signed by all relevant parties; all relevant parties have obtained all necessary approvals, consents and authorisations for the signing and performance of all such agreements; and the signing of all such agreements does not violate any relevant laws and regulations, company constitutional documents, contracts, or agreements entered into with any third party or government agencies;
3. the Target Company having obtained all approvals, qualifications and licences to commence operation; the Project having achieved an on-grid price of RMB0.88/kWh and the relevant conditions for such on-grid price being fulfilled; and having entered into agreement(s) with the grid operating company regarding electricity supply and purchase and grid integration;
4. the Target Company being in a normal operating state, and from the Reference Date to the Completion Date, the Target Company has not experienced any adverse changes in relation to, among others, its business operations, financial conditions and assets business prospects; there is no change in laws and regulations which may have adverse effects on the transactions contemplated under the Equity Transfer Agreement, the legality of such transactions and the operations of the Target Company; there are no litigations, judicial procedures, administrative procedures or other dispute procedures which may affect the transactions contemplated under the Equity Transfer Agreement;
5. the Seller having dismissed and resettled all employees of the Target Company and all compensation fees have been paid in full and there being no dispute in connection with the dismissal of the employees;
6. the Target Company having signed the supplemental agreement(s)/termination agreement(s) as set out in the Equity Transfer Agreement with the relevant contracting parties and such agreement(s) being effective, and the Target Company providing documentary proof to the satisfactory of the Buyer that such agreement(s) have been signed and are effective;
7. the Seller having provided the Buyer with documentary proof of the right of Heilongjiang Province Anda Livestock Farm* (黑龍江省安達畜牧場) to use the state- owned land where the Project is located (such as land use right certificate);

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1. the Target Company having obtained documents issued by the local land resources bureau stating the land for the Project does not cover valuable minerals and does not involve in any mining rights;
2. the Target Company having obtained written consent from the relevant pipeline enterprise of Daqing Oilfield in the vicinity of the Project, agreeing to the construction of the Project, or approval documents issued by the local energy bureau approving the construction of the Project;
3. the representations and warranties given by the Seller as set out in the Equity Transfer Agreement remain true, accurate and complete up to the Date of Completion; the Seller having complied with all obligations and covenants which by their nature shall be complied before or at Completion under the Equity Transfer Agreement and all warranties specified in the Equity Transfer Agreement are true, accurate and not misleading in all respects.

The conditions set out above shall be fulfilled on or before 31 December 2020.

Guarantee

In consideration of the entry by the Seller into the Equity Transfer Agreement, the Guarantor, has agreed to undertake unconditionally and irrevocably as primary obligor the punctual performance by the Seller of its obligation to pay any agricultural land occupation tax and the corresponding late payment fee in respect of the agricultural land occupation tax (if any).

Completion

Subject to the fulfilment or waiver (where applicable) of conditions precedent, the Completion shall take place on the Completion Date.

INFORMATION ABOUT THE TARGET COMPANY

The Target Company is a limited liability company incorporated in the PRC principally engaged in the construction and operation of photovoltaic power plant and owns a 10MWp photovoltaic power plant in Heilongjiang province. The Target Company is wholly owned by the Seller.

Based on the valuation report prepared by the independent valuer in the PRC, the value of the entire shareholders' equity of the Target Company as at 30 June 2019 was approximately RMB25,800,000 (equivalent to approximately HK$28,667,000). Set out below are the unaudited financial information of the Target Company for the 8 months ended 31 August 2019 and the audited financial information of the Target Company for the two financial years ended 31 December 2018 and 31 December 2017 prepared in accordance with the Business Enterprises Accounting Standard (企業會計準則) issued by the PRC Ministry of Finance:

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	For the
	8 months
	ended		For the year ended
	31 August		31 December
	2019	2018		2017
	RMB'000		RMB'000	RMB'000
Revenue	7,947	12,287		4,030
Net profit/(loss) before and after taxation	3,267	6,711	(2,237)

Upon completion of the Equity Transfer, the Target Company will be wholly-owned by the Buyer, and accordingly, the Target Company will cease to be a subsidiary of the Company and will cease to be consolidated in the audited consolidated accounts of the Company.

FINANCIAL EFFECTS OF THE EQUITY TRANSFER AND USE OF PROCEEDS

Based on the preliminary assessment on the unaudited financial information as at 31 August 2019, it is estimated that the Group will record a gain of approximately RMB2,456,000 (equivalent to approximately HK$2,729,000) as a result of the Equity Transfer, being the sale proceeds less the carrying amount of the net assets of the Target Company. The actual gain or loss as a result of the Equity Transfer to be recorded by the Group is subject to final audit to be performed by the auditors of the Company. The net proceeds from the transaction are intended to be used for the Group's business development and general working capital.

REASONS FOR AND BENEFITS OF THE EQUITY TRANSFER

The Group principally engages in the design, manufacture, and distribution of high-end integrated electrical distribution systems and solutions, and provides related value-added services.

The Target Company is a project based company set up for the purpose of constructing and holding a 10MWp photovoltaic power plant in Anda county, Heilongjiang province in the PRC. Photovoltaic power generation is a new source of energy which the PRC government encourages enterprises to invest in.

Investment in the development and construction of photovoltaic power plants require a high level of capital injection. As the implementation of photovoltaic power plants mainly involve obtaining approvals and carrying out construction work, private enterprises, such as our Group, are having an edge in such developments due to their flexibility. It is common that once construction of photovoltaic power plants is completed, central government-owned and state-owned enterprises would desire to acquire the same.

The Directors are of the view that, as compared with retaining the Target Company and operating the 10MWp photovoltaic power plant held by the Target Company, disposing the Target Company will enable the Group to quickly recover the capital injected into the Project and realise profits, improve the liquidity of the Group and allow the Group to promptly capture new opportunities by investing in other new projects in which the Group has an edge to develop as mentioned above.

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