Tianneng Power International : UPDATES ON THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF THE BATTERIES BUSINESS BY WAY OF PROPOSED A SHARES LISTING OF THE SPIN-OFF COMPANY ON THE SHANGHAI STOCK EXCHANGE

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TIANNENG POWER INTERNATIONAL LIMITED

天 能 動 力 國 際 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00819)

UPDATES ON THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF

THE BATTERIES BUSINESS

BY WAY OF PROPOSED A SHARES LISTING OF THE SPIN-OFF COMPANY

ON THE SHANGHAI STOCK EXCHANGE

This announcement is made by the board (the "Board") of directors (the "Directors") of Tianneng Power International Limited (the "Company"), pursuant to Rule 13.09(2)(a) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the "Listing Rules") and the Insider Information Provision (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

References are made to the announcements of the Company dated 9 November 2018, 23 April 2019 and the circular of the Company dated 24 June 2019 (the "Circular"), in relation to the Proposed Spin-off. Unless otherwise specified, capitalized terms used herein shall have the same meaning as ascribed to them in the Circular.

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1. SUBMISSION OF FORMAL APPLICATION FOR LISTING ON THE SHANGHAI STOCK EXCHANGE

The Board would like to report the latest progress to the Shareholders and potential investors that on 27 December 2019, the Spin-off Company submitted a formal application to the Shanghai Stock Exchange in respect of its proposed initial public offering and listing of shares on the Science and Technology Innovation Board pursuant to the approval by the Shareholders at the EGM held on 12 July 2019, and received a notice of acceptance of the application from the Shanghai Stock Exchange on 30 December 2019. The application is currently being reviewed and processed by the Shanghai Stock Exchange. In accordance with the relevant laws and regulations of the PRC, the application version of the prospectus of the Spin-off Company has been submitted to the Shanghai Stock Exchange and has been posted on the website of the Shanghai Stock Exchange (http://kcb.sse.com.cn/).

1. THE PLAN FOR THE SPIN-OFF OFFERING AND INTENDED USE OF PROCEEDS
   As of today, the latest number of shares of the Spin-off Company is 855,500,000, and not more than 116,600,000 shares (but no less than 10% of the total share capital of the Spin-off Company upon completion of the Proposed A Share Listing) are intended to be issued in this proposed initial public offering. The final offering price will be determined in accordance with the price consultation results, and the total proceeds to be raised are expected to be approximately RMB3.6 billion.
   The Spin-off Company intends to apply the raised proceeds from the proposed offering on the following investment projects:

	Proposed investment of
Name of projects		raised proceeds
		(RMB'000)
Green intelligent manufacturing and technology reform project	839,378
High-energy power lithium battery and PACK project	852,616
High-capacity-and-reliabilitystart-stop batteries projects	433,705
Comprehensive digital support platform construction project	313,040
National standard technology centre innovative capability
upgrade project	155,816
Supplement working capital	1,000,000
Total	3,594,555

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In these fund-raising investment projects, the Spin-off Company actively responded to the national call for energy conservation and emission reduction. It intends to further upgrade and continuously improve the lead-acid battery production line through the "Green Intelligent Manufacturing and Technology Reform Project", which can reduce energy consumption and manpower while at the same time increase production efficiency and production quality. The high energy power lithium battery business not only is one of the major businesses of the Spin-off Company but also belongs to the energy conservation and environmental industry specified in the "Guiding Catalogue of Key Products and Services in Strategic Emerging Industries". Through the implementation of the "High-energy Power Lithium Battery and PACK Project", the Spin-off Company will further enhance its technical strength and industrial scale in the field of lithium-ion batteries. The "National Standard Technology Centre Innovative Capability Upgrade Project" will position itself as a national standard new technology centre for research and development of advanced materials and high performance materials, research and development of high performance components and innovative products, material testing and product performance testing, research and development of system integration technology and PACK, as well as system performance testing. Through this project, the Spin-off Company will enhance its overall competitiveness in technological innovations such as fuel cells and next generation batteries. The remaining raised funds will be used to optimize the product structure of the Spin-off Company, strengthen its industrial scale and improve its large data handling capability.

The implementation of the projects will help the Spin-off Company enhance the cleanliness and intelligence of its manufacturing system, enrich and optimize its product structure, further expand its business scale, enhance its multi-dimensional profitability, research and development capabilities and large data processing capabilities; ultimately improving the core competitiveness and market position of the Spin-off Company.

1. THE SEPARATE LISTING OF THE SPIN-OFF COMPANY ON THE SCIENCE AND TECHNOLOGY INNOVATION BOARD OF THE SHANGHAI STOCK EXCHANGE
   The Spin-off Company applied for listing on the Science and Technology Innovation Board of the Shanghai Stock Exchange mainly due to a number of reasons including the PRC's
   Yangtze River Delta regional integrated development strategy, the review and offering mechanism of the Science and Technology Innovation Board, combined with various considerations, such as the Spin-off Company's leading market position, profitability, research and development investment, number of patents and green development.

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The overall review cycle for listing on the Science and Technology Innovation Board is relatively short, and the offering pricing mechanism is more flexible. The Company believes that the Spin-off Company's separate listing on the Science and Technology Innovation Board will further enhance the capital operation efficiency of the Spin-off Company, thus enabling it to make full use of the capital market to promote its own strategic development, consolidate its industry position, increase its competitiveness and market share, and further enhance its brand influence. On the whole, it is beneficial to the interests of the Shareholders as well as the shareholders of the Spin-off Company.

IV. THE MAIN OPERATING RESULTS AND FINANCIAL POSITION OF THE SPINOFF COMPANY AS DISCLOSED IN THE PROSPECTUS

In the process of the present spin-off and listing, Zhonghui Certified Public Accountants LLP ( 中匯會計師事務所( 特殊普通合夥)) ("Zhonghui CPA") audited the financial data of the Spin-off Company for the years 2016, 2017, 2018 and the six months from January to June 2019 (the "Reporting Periods") in accordance with the relevant rules of the Shanghai Stock Exchange and issued the corresponding audit report. Both the application version of the prospectus for the listing of the Spin-off Company, which refers to the relevant financial information in the audit report of the Spin-off Company (the "IPO Submission Statement"), and the aforementioned audit report have been disclosed on the website of the Shanghai Stock Exchange. According to the audit report issued by Zhonghui CPA, the major operating results and financial position of the Spin-off Company for the years 2016, 2017,

2018 and January to June 2019 are as follows:

	As at/for the	As at/for the	As at/for the	As at/for the
	six months ended	year ended	year ended	year ended
Items	30 June 2019	31 December 2018	31 December 2017	31 December 2016
Total assets (RMB'000)	17,908,381	15,514,629	14,422,325	12,466,059
Attributable to owners' equity
of the parent company (RMB'000)	3,776,531	3,847,398	4,142,144	3,261,473
Operating income (RMB'000)	20,756,323	35,862,842	28,052,245	22,384,858
Net profit (RMB'000)	474,578	1,264,967	1,156,185	792,406
Net profit attributable to owners' equity
of the parent company (RMB'000)	467,821	1,217,259	1,122,671	774,511

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The Spin-off Company issued two tranches of corporate bonds in 2014, which were traded on the Shanghai Stock Exchange and the interbank market. In accordance with the disclosure requirements of the relevant bond trading markets, the Spin-off Company has disclosed its financial statements for the years 2016, 2017, 2018 and the six months from January to June 2019 (the "Bond Statements") at the aforementioned trading venues.

There are certain differences between the IPO Submission Statement and the Bond Statements of the Spin-off Company, which are mainly attributable to two factors.

1. The financial statements of the Company have been prepared in accordance with the Hong Kong Financial Reporting Standards. As the major subsidiary of the Company, part of the accounting treatments of the Bond Statements of the Spin-off Company still adopt the practice of Hong Kong Financial Reporting Standards. In the process of the A Share IPO application, the Spin-off Company has made adjustments to part of its accounting treatments for the purpose of implementing the China Accounting Standards for Business Enterprises and references have been made to the practices of A-share listed companies in the same industry. These mainly include: (1) other operating income and costs were reinstated according to the nature of business and recognized as income and cost on a gross revenue basis; (2) asset-related government grants that previously offset the cost of long-term assets were recognized as deferred income; (3) after-sale expenses as cost of sales were reclassified as selling expenses;
   (4) calculation of sales rebates were aligned by adjusting certain sales rebates from sales expenses to operating income; (5) provision for safety production fees was made; and (6) presentation of other subjects were reclassified and adjusted according to the domestic accounting practices.
2. For the purpose of implementing the China Accounting Standards for Business Enterprises and making references to the practices of A-share listed companies in the same industry, the Spin-off Company has adjusted some of the items in the previous years. These mainly include: (1) the method of provision for estimated liabilities in relation to product quality warranties was optimized, with the amount of estimated liabilities provision arising from after-sale obligations at the end of the each of the Reporting Periods redefined and the current period warranty expenses adjusted accordingly; (2) during the Reporting Periods, there were situations where some of the incomes were spread across two periods and the Spin-off Company made adjustments to such incomes and the corresponding operating costs in the financial statements accordingly; (3) during the Reporting Periods, there were situations where some of the remunerations were spread across two periods, the relevant amount represented a lower proportion of the aggregate amounts of remuneration for those years and the

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Spin-off Company made adjustments to such remunerations and the corresponding employee remuneration payables in the financial statements accordingly; (4) part of the capitalized interests in the Reporting Periods were expensed as incurred by the Spinoff Company, and the depreciation expenses of part of the fixed assets with deferred recognition were recalculated and the provision for the corresponding depreciation expenses were adjusted by the Spin-off Company; and (5) the Spin-off Company has straightened up the relevant subsidy documentations for the government grants received, redefined the nature of government grants during the Reporting Periods according to the subsidy documentations and recalculated the asset-related government grants and the amortized amounts thereof.

The monetary impact of the abovementioned adjustments on the Spin-off Company's Bond Statements are as follows:

					Net profit (RMB'000)					Shareholders'equity (RMB'000)
									For the
									six months
			For the year ended 31 December	ended	31 December	31 December	31 December	31 December
Adjusted items	2016		2017		2018	30 June 2019	2016		2017		2018		2019
Bond Statement	915,487		1,204,263	1,321,609	447,572		3,891,945		4,818,821		4,433,189	4,344,985
1.	Redefine warranty expenses (A)	(91,325)	(57,429)	120,776	78,710	(229,276)	(286,704)	(165,928)	(87,219)
2.	Recognition of intertemporal
	adjustment for income (B)	(13,105)	16,524	(156,605)	(27,591)	(48,855)	(32,332)	(188,936)	(216,527)
3.	Intertemporal adjustment of
		employees'remuneration (C)	(3,889)	(27,728)	(18,684)	37,038	1,711	(25,818)	(44,503)	(7,464)
4.	Interest capitalization,
		intertemporal adjustment
		for depreciation (D)	(19,888)	(10,273)	12,208	(557)	(50,891)	(71,080)	(58,872)	(59,429)
5.	Redefinition of asset-related
		government grants (E)	(14,395)	(13,950)	9,856	191	(24,029)	(37,979)	(28,123)	(27,932)
6.	Other differences and
		tax implications (F)	19,521	44,778	(24,193)	(60,785)	30,207	87,923	92,401	38,554
Total impact
	(G =A+B+C+D+E+F)	(123,081)	(48,078)	(56,642)	27,006	(321,133)	(365,990)	(393,961)	(360,017)
IPO Submission Statement	792,406		1,156,185	1,264,967	474,578		3,570,812		4,452,831		4,039,228	3,984,968

The accumulative difference in net profit between the IPO Submission Statement and the Bond Statements of the Spin-off Company for the years 2016, 2017, 2018 and from January to June 2019 was approximately RMB-200,795,000, representing approximately -5.16% of the accumulated net profit in the Bond Statements for the Reporting Periods.

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The Spin-off Company is an important subsidiary of the Company and its business constitutes a substantial part of the business of the Company. The Spin-off Company is required to continue to disclose its financial information in accordance with the requirements of the accounting standards for PRC domestic enterprises, during the process and after the completion of A Share IPO. Accordingly, the Company will consult with the auditors of the Company as to how to improve the comparability and consistency of the financial statements of the Company and the Spin-off Company in the future, both inside and outside of the PRC. The specific impact of the above- mentioned adjustments on the financial statements of the Company will be based on the audited results of the Company as disclosed in the future.

The approval of the relevant regulatory authorities, including the Shanghai Stock Exchange and the China Securities Regulatory Commission, is still required for the initial public offering and listing of shares of the Spin-off Company on the Science and Technology Innovation Board. Further announcements will be made in respect of the Proposed Spin-off and listing in due course as required by the Listing Rules.

Shareholders and prospective investors of the Company should note that the Proposed Spin-off and the Proposed A Share Listing shall be subject to the approval of the relevant regulatory authorities (including the Shanghai Stock Exchange and the CSRC) in accordance with all applicable regulatory requirements. Even if the relevant regulatory authorities have approved the initial public offering of shares of the Spin-off Company and its listing on the Science and Technology Innovation Board, there is still a risk that the issue will fail as a result of insufficient subscription or failure to meet the expected market value of the Science and Technology Innovation Board as prescribed by the Shanghai Stock Exchange at the time of the issue. Therefore, Shareholders and prospective investors are advised to exercise caution when dealing in the shares of the Company.

By Order of the Board

Tianneng Power International Limited

Zhang Tianren

Chairman

Hong Kong, 30 December 2019

As at the date of this announcement, the executive directors of the Company are Dr. ZHANG Tianren, Mr. ZHANG Aogen, Mr. ZHANG Kaihong, Mr. SHI Borong, and Mr. ZHOU Jianzhong; the independent non-executive directors of the Company are Mr. WU Feng, Mr. HUANG Dongliang and Mr. ZHANG Yong.

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