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. CONNECTED TRANSACTIONS On 31st August 2012, (a) the Company and CKI entered into the JV Transaction; and (b) PNS and TOA entered into the Construction Agreement pursuant to which PNS agreed to undertake the Project for TOA. CKI currently holds approximately 38.87% of the issued share capital of the Company. PNS is considered an indirect non-wholly owned subsidiary of the Company under the Listing Rules. CKI, and TOA, an associate (as defined in the Listing Rules) of CKI, are deemed connected persons of the Company under the Listing Rules. The JV Transaction and the Construction Agreement therefore constitute connected transactions for the Company under the Listing Rules. The JV Transaction and the Construction Agreement are subject to the reporting and announcement requirements but are exempt from the independent shareholders approval requirement under the Listing Rules. THE JV TRANSACTION Parties: the Company and CKI Subject of the transaction: On 31st August 2012, TOA, a company held as to 50% each by the Company and CKI, entered into the Connection Services Agreement and the Network Services Agreement. Pursuant to the Connection Services Agreement, TOA agrees to provide connection service to MMW enabling the transmission of the electricity generated from Mt Mercer Wind Farm to the Network for a term of 25 years from the commencement date of the connection service which may be extended for a further term of up to 25 years at the option of MMW. The agreement sets out the design, supply, construction, operation and maintenance of the transmission facilities (including a transmission line) required in order for TOA to provide the service. Pursuant to the Network Services Agreement, TOA agrees to design, supply, construct, operate and maintain a terminal station which will provide connection service between the above-mentioned transmission line and the Network for a term of 25 years from the commencement date of the connection service which may be extended for a further term similar to that extended by MMW under the Connection Services Agreement. The charges receivable by TOA under the above-mentioned two agreements are subject to increases linked to certain annual inflation indices. It is estimated that the annual - 1 -
revenue of TOA arising from the services provided under the above-mentioned two agreements will be in the region of between A$5.0 million (HK$39.9 million) and A$6.0 million (HK$47.9 million). For the purpose of the Connection Services Agreement and the Network Services Agreement, TOA will build, own and operate the Transmission Assets. The major terms of the JV Transaction comprise the following:- Funding by way of share subscription and shareholders loans Each of the Company and CKI, through their respective subsidiaries and companies jointly held by them on a 50:50 basis, will subscribe for shares in the capital of TOA and advance shareholders loans to TOA, on a 50:50 basis in proportion to their respective equity interests in TOA, in several stages during the period from September 2012 to the end of 2013. Based on the estimated costs and expenses associated with the JV Transaction and the working capital requirements of TOA, the aggregate subscription price to be paid and the amount of the shareholder s loan to be advanced by the Company, will be approximately A$5.0 million (approximately HK$39.9 million) and approximately A$11.8 million (approximately HK$94.2 million) respectively. The aggregate funding of the Company and CKI will hence be approximately A$33.6 million (approximately HK$268.1 million). It is contemplated that the cash to be funded by the Company will be financed by internal resources. TOA is accounted for as an associate company of the Company. Board composition and decisions Each of the Company and CKI is entitled to appoint an equal number of directors to the board of TOA. All resolutions made by the board of TOA at a board meeting must be passed by at least one director representing each of the Company and CKI and those made by way of written resolutions must be assented to by all directors. Shareholders decisions TOA has only one shareholder which is held indirectly by a holding company, which is in turn held indirectly as to 50% each by the Company and CKI. Questions arising at a general meeting of the said holding company are to be decided by a majority of votes cast by the shareholders present at the meeting. A resolution may also be passed without a general meeting being held if it is signed by all shareholders. Profits of the said holding company available for distribution will be distributed to, and return of capital on the passing of a resolution for the winding-up of the said holding company will be made, between the Company and CKI on a 50:50 basis. THE CONSTRUCTION AGREEMENT Parties: PNS and TOA Subject of the agreement: Pursuant to the Construction Agreement, PNS will undertake the Project for TOA at a consideration of A$26.1 million (HK$208.3 million). The consideration is payable by TOA to PNS in cash by progress payments for materials and equipment delivered and works completed. The consideration was determined having regard to the costs of sub-contracts, materials, manpower and overheads required for undertaking and completing the works under the agreement. The Project is expected to be completed in November 2013. - 2 -
Under the agreement, PNS will provide an unconditional bank guarantee of A$1.5 million (HK$12.0 million) to TOA as security against failure to perform the obligations under the agreement on the part of PNS. INFORMATION ON THE PARTIES INVOLVED IN THE TRANSACTIONS The principal activities of the Company and its subsidiaries are investment in power-related facilities outside Hong Kong and generation and supply of electricity to Hong Kong Island and Lamma Island. The principal activities of CKI and its subsidiaries are development, investment and operation of infrastructure businesses in Hong Kong, Mainland China, the United Kingdom, Australia, New Zealand and Canada. The principal business of PNS is the design, supply, construction and maintenance of transmission facilities. The principal business of TOA is the construction and ownership of transmission assets in Australia. MMW is the developer of Mt Mercer Wind Farm. To the best of the knowledge, information and belief of the Company s directors having made all reasonable enquiry, MMW and its ultimate beneficial owner are third parties independent of the Company and connected persons of the Company. Australian Energy Market Operator Limited operates the energy markets and provides planning advice in gas and electricity systems in Eastern and South-eastern Australia. REASONS FOR THE TRANSACTIONS The Company together with CKI proposed to enter into the business of providing transmission augmentations in Australia. The Company and CKI have made joint investments in power generation, transmission or distribution facilities in the past and their previous experience of working together successfully makes each other a suitable partner for the JV Transaction. The JV Transaction reflects the Group s strategy of expanding its business outside Hong Kong. PNS has extensive experience in the construction of electrical distribution and transmission facilities in Australia and the entering into of the Construction Agreement is in the ordinary course of business of PNS. The terms of each of the JV Transaction and the Construction Agreement had been reached between the respective parties on an arm s length basis. The directors (including the independent non-executive directors) of the Company consider that the terms of the JV Transaction and the Construction Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and its shareholders as a whole. - 3 -
LISTING RULES IMPLICATIONS CKI currently holds approximately 38.87% of the issued share capital of the Company and by virtue of this shareholding, CKI is a connected person of the Company under the Listing Rules. PNS is considered an indirect non-wholly owned subsidiary of the Company under the Listing Rules. TOA is held as to 50% by CKI and is therefore an associate of CKI and deemed a connected person of the Company under the Listing Rules. As such, the JV Transaction and the Construction Agreement constitute connected transactions for the Company under the Listing Rules. As the respective applicable ratios in respect of the JV Transaction and the Construction Agreement, calculated pursuant to Rule 14.07 of the Listing Rules, are more than 0.1% but less than 5%, the JV Transaction and the Construction Agreement are subject to the reporting and announcement requirements but are exempt from the independent shareholders approval requirement under the Listing Rules. None of the directors of the Company has a material interest in the JV Transaction and the Construction Agreement. DEFINITIONS Unless the context otherwise requires, the following expressions shall have the meaning set out below: A$ associate CKI Company Connection Services Agreement Construction Agreement Group HK$ Australian dollars, the lawful currency of Australia has the meaning ascribed to such term in the Listing Rules Cheung Kong Infrastructure Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of The Stock Exchange of Hong Kong Limited (Stock Code: 1038) Power Assets Holdings Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Main Board of The Stock Exchange of Hong Kong Limited (Stock Code: 6) the agreement dated 31st August 2012 entered into between TOA and MMW the agreement dated 31st August 2012 entered into between PNS and TOA, as described under the heading The Construction Agreement above the Company and its subsidiaries Hong Kong dollars, the lawful currency of Hong Kong - 4 -
JV Transaction Listing Rules MMW Mt Mercer Wind Farm Network Network Services Agreement PNS Project the construction, ownership, operation and maintenance by TOA of the Transmission Assets in Victoria, Australia the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited Mt Mercer Windfarm Pty Ltd, a company incorporated in Australia with limited liability a wind farm to be built by MMW in Victoria, Australia an existing 220kV transmission network in Victoria, Australia the agreement dated 31st August 2012 entered into between TOA and Australian Energy Market Operator Limited Powercor Network Services Pty Ltd, a company incorporated in Australia with limited liability, which notwithstanding it is indirectly held as to 51% by a company which is in turn indirectly held as to 54.76% by the Company (hence technically considered as a non-wholly owned subsidiary of the Company within the definition of subsidiary under the Listing Rules), since the Company has no effective control over its board composition and decision making on significant matters, is accounted for as an associate in the Company s group financial statements the construction (including design, supply, delivery, installation, testing and commissioning) of the Transmission Assets, together with the associated civil, electrical and mechanical works TOA Transmission Assets Transmission Operations (Australia) Pty Ltd, a company incorporated in Australia with limited liability, and indirectly held as to 50% each by the Company and CKI a 21km 132kV overhead power line, an electricity terminal station and all associated equipment for enabling the transmission of electricity generated by Mt Mercer Wind Farm to the Network Note: The figures in A$ are converted into HK$ at the rate of A$1.00 : HK$7.98 as at 31st August 2012 throughout this announcement for indicative purpose only. Hong Kong, 3rd September 2012 By Order of the Board Lillian Wong Company Secretary - 5 -
As at the date of this announcement, the directors of the Company are: Executive directors Non-executive directors Independent non-executive directors : Mr. FOK Kin Ning, Canning (Chairman), Mr. TSO Kai Sum (Group Managing Director), Mr. CHAN Loi Shun (also Alternate Director to Mr. KAM Hing Lam), Mrs. CHOW WOO Mo Fong, Susan (also Alternate Director to Mr. FOK Kin Ning, Canning and Mr. Frank John SIXT), Mr. Andrew John HUNTER, Mr. KAM Hing Lam, Mr. LI Tzar Kuoi, Victor, Mr. Frank John SIXT, Mr. WAN Chi Tin and Mr. YUEN Sui See : Mr. Ronald Joseph ARCULLI, Mr. George Colin MAGNUS and Mr. Neil Douglas MCGEE : Mr. Holger KLUGE, Mr. LEE Lan Yee, Francis, Mr. Ralph Raymond SHEA and Mr. WONG Chung Hin - 6 -