Tianjin Jinran Public Utilities : CONTINUING CONNECTED TRANSACTION IN RELATION TO TAIHUA GAS PROVISION

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天津津燃公用事業股份有限公司

TIANJIN JINRAN PUBLIC UTILITIES COMPANY LIMITED

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 01265)

CONTINUING CONNECTED TRANSACTION

IN RELATION TO TAIHUA GAS PROVISION

The Company and Taihua Gas entered into the Taihua Gas Provision Contract on 15 April 2021 for the Taihua Gas Provision.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Taihua Gas is indirectly owned as to 70% by Tianjin Gas, which is the controlling shareholder, holding approximately 70.55% of the total issued shares of the Company. Taihua Gas is hence a connected person of the Company, and the entering into of the Taihua Gas Provision Contract between Taihua Gas and the Company constitutes continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the highest the applicable percentage ratio (as defined under Rule 14.07 of the Listing Rules) for the annual caps for the Taihua Gas Provision Contract for the years ending 31 December 2021, 31 December 2022 and 31 December 2023 exceed 5%, the Taihua Gas Provision Contract is subject to, inter alia, the Independent Shareholders' approval, reporting, annual review and announcement requirements under Chapter 14A of the Listing Rules.

The Company has appointed Gram Capital Limited as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the Taihua Gas Provision (together with the relevant annual caps) contemplated under the Taihua Gas Provision Contract.

A circular containing, inter alia, (i) further details of the Taihua Gas Provision and the Taihua Gas Provision Contract, (ii) the advice from the Independent Board Committee to the Independent Shareholders; (iii) the advice from Gram Capital Limited to the Independent Board Committee and Independent Shareholders in relation to the Taihua Gas Provision and the Taihua Gas Provision Contract; and (iv) the notice convening the EGM, is expected to be despatched to the shareholders of the Company on or before 6 May 2021. Tianjin Gas and its associates will abstain from voting in connection with the Taihua Gas Provision Contract at the aforesaid EGM.

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The Board is pleased to announce that the Company and Taihua Gas entered into the Taihua Gas Provision Contract on 15 April 2021 for the Taihua Gas Provision.

TAIHUA GAS PROVISION AND TAIHUA GAS PROVISION CONTRACT

Date of entering into the Taihua Gas Provision Contract

15 April 2021
Contracting parties
Supplier	:	The Company
Purchaser	:	Taihua Gas

As at the date of this announcement, Taihua Gas is owned as to 70% by Tianjin Gas, which is the controlling shareholder, holding approximately 70.55% of the total issued shares of the Company.

Background of the Taihua Gas Provision and the Taihua Gas Provision Contract

To prescribe the commercial terms for the supply of natural gas by the Company to Taihua Gas under 中華 人民共和國民法典 (Civil Code of the People's Republic of China*), 城鎮燃氣管理條例 (Regulation on the Administration of Urban Natural Gas *), and 天津市燃氣管理條例 (Regulation on the Administration of Natural Gas of Tianjin City *) for the period from 1 January 2021 to 31 December 2021, the Company

and Taihua Gas entered into the Taihua Gas Provision Contract, the effect of which is conditional upon the Independent Shareholders' approval in the EGM.

Major terms of the Taihua Gas Provision Contract

Conditions Precedent

The Taihua Gas Provision Contract and the Taihua Gas Provision shall be effective upon the Independent Shareholders' approval for the same in the EGM.

Pricing Policy and Annual Caps

Pursuant to the Taihua Gas Provision Contract, the Company has agreed to sell to Taihua Gas and Taihua Gas has agreed to purchase from the Company natural gas at the Gas Selling Price which shall be calculated in the following manner (the "Pricing Policy"):

1. subject to the potential adjustments under the paragraphs (ii) and (iii) and the annual cap under paragraph (iv) below, the Gas Selling Price shall be RMB0.2 (tax inclusive) plus the Gas Sourcing Price of the Company from time to time;
2. should there be any adjustment in the Gas Sourcing Price of the Company, the Gas Selling Price shall be adjusted in accordance with the principle under paragraph (i);
3. the Gas Selling Price shall be adjusted in accordance with the natural gas price directives to be announced by the governmental administrative department from time to time, if any;

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1. in any event, the total transaction amount (tax inclusive) under the Taihua Gas Provision Contract each year shall not exceed the following annual caps:
   for the year ended 31 December 2021: RMB383,000,000;
   for the year ended 31 December 2022: RMB445,000,000;
   for the year ended 31 December 2023: RMB538,000,000.

In arriving at the aforesaid annual caps of natural gas provision, the Company has considered, among others, the following factors:

1. the historical (tax exclusive) transaction amount with Taihua Gas for the year ended 31 December 2019, being approximately, RMB190,925,000 (the Company does not consider the transaction amount for the year ended 31 December 2020 to be a good reference point because it is impacted by COVID-19);
2. an average annual growth of 2.5% in the amount of natural gas supplied for the years 2016-2019;
3. an average annual growth of 1.32% in the Gas Selling Price for the years 2016-2019;
4. a value-added tax of 10% applicable to the Taihua Gas Provision;
5. an additional annual buffer of approximately 5% in anticipation of the spike in consumption during peak seasons; and
6. the non-binding estimates of increase in demand as communicated to the Company by Taihua Gas in light of new significant end users of Taihua Gas for the years 2021 to 2023 and the increase in the transaction amounts concerned are estimated to be approximately RMB154,235,000, RMB205,175,000 and RMB285,830,000 respectively.

Having considered the above factors, the proposed annual cap for the year ended 31 December 2021 of RMB383,000,000 is calculated as follow:

1. The actual transaction amount for the year ended 31 December 2019

x (1 + (ii) average growth in gas consumption by Taihua Gas) x (1 + (iii) average growth in Gas Selling Price)

x (1 + (iv) value-added tax applicable to the Taihua Gas Provision) x (1 + (v) additional buffer)

• (vi) estimated demand of new significant end users of Taihua Gas in year 2021
  =
  RMB190,925,000 x (1+2.5%) x (1+1.32%) x (1+10%) x (1 + 5%) + RMB154,235,000
  ~
  RMB383,000,000

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The proposed annual caps for the years ended 31 December 2022 and 2023 are calculated similarly by considering the abovementioned (i) to (v), an additional buffer of 5% for each year, plus the transaction amount of the estimated demand of new significant end users of Taihua Gas for the respective year.

In arriving at the Pricing Policy, the Company has considered:

1. the Company's natural gas sourcing cost and related overheads;
2. the unit price and profit margin of other natural gas suppliers capable of supplying gas to Taihua Gas in the market; and
3. the Company's strategy to maintain its market share and previous transactions with Taihua Gas.

The Directors (excluding the independent non-executive Directors who will form their view after considering the advice of Gram Capital Limited) consider that the above-mentioned annual caps and the Pricing Policy are fair and reasonable.

Payment Arrangement

Under the Taihua Gas Provision Contract, Taihua Gas is required to settle the gas fee incurred for each month on or before the 30th day of each month, based on the actual consumption of natural gas by Taihua Gas during the month.

INTERNAL CONTROL

To facilitate the Pricing Policy and the Taihua Gas Provision in accordance with the Taihua Gas Provision Contract and the application laws and regulations as a whole, the Company will adopt the following internal control procedures:

1. The sales department of the Company pays close attention to the laws and regulations promulgated by the Tianjin Municipal Government from time to time that is applicable to Gas Sourcing Price and Gas Selling Price in order to ensure that the Taihua Gas Provision is conducted in accordance with mandated prices;
2. The sales department of the Company reviews the Gas Sourcing Price every month. Should any adjustment is to be made to the Gas Sourcing Price, the sales department of the Company shall notify the head of the department and be prepared to adjust the Gas Selling Price (including but not limited to notifying the Company's customers) and issues to Taihua Gas invoice using the adjusted Gas Selling Price.
3. The finance department of the Company monthly monitors the aggregated invoiced amount arose from the transactions with Taihua Gas in the financial year in order to ensure that such aggregated amount will not exceed the applicable annual cap set for the connected transaction concerned. Should such aggregated amount exceed 75% of the applicable annual cap, starting from the month concerned, the finance department will estimate, by the end of each month, the volume of natural gas to be supplied to Taihua Gas in the next month based on the volume of natural gas actually supplied to Taihua Gas monthly throughout the year. The finance department will then calculate the expected transaction amount of the next month at the latest Gas Selling Price and notify the general manager of the Company of such expected transaction amount and the aggregated transaction amount. The Board shall eventually determine if the annual cap should be revised upward in accordance with the Listing Rules.

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REASONS FOR AND BENEFITS OF ENTERING THE TAIHUA GAS PROVISION CONTRACT

The sale of natural gas is the ordinary course of business of the Group. Besides, the Directors believe that the sale of natural gas to Taihua Gas will form a steady, reliable and relatively large income to the Group.

The Directors (excluding the independent non-executive Directors who will form their view after considering the advice of Gram Capital Limited) consider that the Taihua Gas Provision Contract is entered into in the ordinary and usual course of business of the Group after arm's length negotiations between the Company and Taihua Gas and the terms of each of the Taihua Gas Provision Contract and the proposed annual caps are normal commercial terms or better which are fair and reasonable and in the interests of the Company and its shareholders as a whole.

INFORMATION ABOUT THE GROUP

The Group's principal activities are the operation and management of gas pipeline infrastructure and the sale and distribution of piped gas in the PRC.

INFORMATION ABOUT TAIHUA GAS

Taihua Gas is indirectly owned as to 70% by Tianjin Gas (a controlling shareholder of the Company

holding 1,297,547,800 Domestic Shares, representing approximately 70.55% of the total issued shares of the Company) and 30% by 天津泰達投資控股有限公司 (Tianjin Taida Investment Holdings Limited*), respectively, which, to the best of the knowledge, information and belief of the Directors, having made

all reasonable enquiries, is a party independent of and not connected with the Company and its connected persons. Its principal business is the sales of natural gas, construction of city gas pipeline network and infrastructure, wholesale and retail of gas appliances. Accordingly, Taihua Gas is a connected person of the Company, and the entering into of the Taihua Gas Provision Contract between Taihua Gas and the Company constitutes continuing connected transaction of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio as defined under Rule 14.07 of the Listing Rules for the annual caps for the Taihua Gas Provision Contract for the years ending 31 December 2021, 31 December 2022 and 31 December 2023 exceed 5%, the Taihua Gas Provision Contract will be subject to, inter alia, the Independent Shareholders' approval, reporting, annual review and announcement requirements under Chapter 14A of the Listing Rules.

A circular containing, inter alia, (i) further details of the Taihua Gas Provision and the Taihua Gas Provision Contract, (ii) the advice from the Independent Board Committee to the Independent Shareholders; (iii) the advice from Gram Capital Limited to the Independent Board Committee and Independent Shareholders in relation to the Taihua Gas Provision and the Taihua Gas Provision Contract; and (iv) the notice convening the EGM, is expected to be despatched to the shareholders of the Company on or before 5 May 2021. Tianjin Gas and its associates will abstain from voting in connection with the Taihua Gas Provision Contract at the aforesaid EGM.

As: (i) Mr. Hou Shuang Jiang, a non-executive Director, is a director of 天津能源集團財務有限公司 (Tianjin Energy Group Finance Co., Ltd.*), an indirect non wholly-owned subsidiary of 天津能源投資集團 有限公司 (Tianjin Energy Investment Company Limited*), which owns the entire equity interest in Tianjin Gas and is a connected person of the Company; and (ii) Mr. Zhao Heng Hai, a non-executive Director, is a director of 津燃華潤燃氣有限公司 (Jinran China Resources Gas Co., Ltd*), which is held as to 51% by Tianjin Gas and is a connected person of the Company, both of them have abstained from voting on the

resolutions in relation to the approval of the Taihua Gas Provision Contract proposed to the Board. Save as disclosed above, none of the Directors attending the Board meeting has a material interest in the Taihua Gas Provision Contract.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms have the following meanings:

"associate(s)"

"Board"

"Company"

has the meaning ascribed to it under the Listing Rules

the board of Directors

天津津燃公用事業股份有限公司 (Tianjin Jinran Public Utilities Company Limited), a joint stock limited company incorporated in the PRC, whose H shares are listed on the Stock Exchange

"connected person(s) "

"controlling shareholder(s)"

"Director(s)"

"Domestic Share(s)"

"EGM"

has the meaning ascribed to it under the Listing Rules

has the meaning ascribed to it under the Listing Rules

the director(s) of the Company

ordinary domestic share(s) of nominal value of RMB0.10 each in the registered capital of the Company which are subscribed for in RMB

the extraordinary general meeting to be convened for the purpose of considering, and if thought fit, passing ordinary resolutions regarding, among others, the Taihua Gas Provision and the Taihua Gas Provision Contract

"Gas Selling Price"	the price per cubic meter at which the Company sells its natural gas to
	Taihua Gas
"Gas Sourcing Price"	the price per cubic meter at which the Company sources its natural gas
"Group"	the Company and its subsidiaries
"Independent Board	the independent board committee of the Company comprising of Mr.
Committee"	Zhang Ying Hua, Mr. Yu Jian Jun and Mr. Guo Jia Li, the independent
	non-executive Directors
"Independent Shareholders"	Shareholders other than those who are required by the Listing Rules
	to abstain from voting on the resolution(s) approving the Taihua Gas
	Provision Contract

"Listing Rules"

"Taihua Gas Provision"

the Rules Governing the Listing of Securities on the Stock Exchange

the supply of natural gas by the Company to Taihua Gas for the three years ending 31 December 2023, in accordance with the Taihua Gas Provision Contract, details of which are set out in this announcement

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"Taihua Gas Provision	the conditional gas provision contract dated 15 April 2021 and entered
Contract"	into between the Company and Taihua Gas in respect of the Taihua Gas
	Provision
"PRC"	The People's Republic of China and for the purpose of this announcement,
	does not include the Hong Kong Special Administrative Region of the
	People's Republic of China, the Macau Special Administrative Region of
	the People's Republic of China and Taiwan

"RMB"

"Stock Exchange"

"Taihua Gas"

"Tianjin Gas"

• For identification purpose only

Renminbi, the lawful currency of the PRC

The Stock Exchange of Hong Kong Limited

天津泰華燃氣有限公司 (Tianjin Taihua Gas Co., Ltd.*), a company established in the PRC with limited liability and is indirectly owned as to 70% by Tianjin Gas

天津市燃氣集團有限公司 (Tianjin Gas Group Company Limited*), a state-owned enterprise established in the PRC with limited liability

By Order of the Board

Tianjin Jinran Public Utilities Company Limited

Zhao Wei

Chairman

Tianjin, the People's Republic of China, 15 April 2021

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Zhao Wei (Chairman), Ms. Tang Jie and Mr. Sun Liangchuan, three non-executive Directors, namely Mr. Hou Shuang Jiang, Mr. Zhao Heng Hai and Mr. Zhang Jinlin, and three independent non-executive Directors, namely Mr. Zhang Ying Hua, Mr. Yu Jian Jun and Mr. Guo Jia Li.

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