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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.
FDG Kinetic Limited 五龍動力有限公司 (Incorporated in Bermuda with limited liability)
(Stock Code: 378) DISCLOSEABLE TRANSACTION IN RELATION TO FINANCE LEASE AGREEMENT
On 9 September 2016 after trading hours, the Lessee, as an indirect wholly-owned subsidiary of the Company, and the Lessor entered into the Finance Lease Agreement, pursuant to which the Lessee agreed to sell the Leased Assets to the Lessor at a total consideration of RMB146,000,000 (equivalent to approximately HK$170,820,000) and the Lessor agreed to leaseback the Leased Assets to the Lessee during the Lease Period. Upon expiry of the Lease Period and subject to full payment of the final installment of the rent under the Finance Lease Agreement, the Lessor shall transfer the ownership of the Leased Assets back to the Lessee at nil consideration. As the applicable percentage ratios are more than 5% but less than 25%, the transaction contemplated under the Finance Lease Agreement constitutes a discloseable transaction of the Company and is subject to the reporting and announcement requirements only but exempt from the Shareholders’ approval requirement under Chapter 14 of the Listing Rules.
INTRODUCTION The Board is pleased to announce that on 9 September 2016 after trading hours, the Lessee, as an indirect wholly-owned subsidiary of the Company, and the Lessor entered into the Finance Lease Agreement, pursuant to which the Lessee agreed to sell the Leased Assets to the Lessor at a total consideration of RMB146,000,000 (equivalent to approximately HK$170,820,000) and the Lessor agreed to leaseback the Leased Assets to the Lessee during –1–
the Lease Period. Upon expiry of the Lease Period and subject to full payment of the final installment of the rent under the Finance Lease Agreement, the Lessor shall transfer the ownership of the Leased Assets back to the Lessee at nil consideration. THE FINANCE LEASE AGREEMENT The principal terms of the Finance Lease Agreement are summarised as follows: Date 9 September 2016 Parties (i)
重慶新能源汽車融資租賃有限公司 (Chongqing New Energy Vehicles Financial Leasing Co., Limited*), being the Lessor; and
(ii) 五龍動力（重慶）鋰電材料有限公司 (FDG Kinetic (Chongqing) Lithium Ion Battery Materials Co. Ltd.*), being the Lessee. Subject Matters Sale of the Leased Assets to the Lessor Pursuant to the Finance Lease Agreement, the Lessee agreed to sell and the Lessor agreed to purchase the Leased Assets originally owned by the Lessee at a total consideration of RMB146,000,000 (equivalent to approximately HK$170,820,000), which was determined after arm’s length negotiation between the parties with reference to the net asset value of the Leased Assets as at 31 May 2016, being approximately RMB146,724,000 (equivalent to approximately HK$171,667,000), and shall be paid by the Lessor in the following manners: (1)
Upon satisfaction of the conditions precedent described below, within 3 Business Days following the Lessee’s application, the Lessor shall make the payment of the first tranche of consideration in the sum of RMB78,000,000 to the Lessee: a) the Lessor and the Lessee having executed the Finance Lease Agreement and the Acknowledgement of Receipt of the Leased Assets with value of RMB78,000,000 (the “First Acknowledgement”), and these two documents having become effective;
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b) the Guarantor having executed the Letter of Guarantee and the Letter of Guarantee having become effective; c) the Lessee having changed the beneficiary of the insurance of the Leased Assets under the First Acknowledgement for the year 2016 to the Lessor; and d) the Lessee having paid to the Lessor approximately 53.42% of the total management fee and deposit (details of which shall be further described under the paragraph headed “Deposit and Management Fee” below). Upon execution of the First Acknowledgement, the title of the Leased Assets with value of RMB78,000,000 as prescribed thereunder will be transferred to the Lessor, and such Leased Assets shall be leased back to the Lessee at the same time. (2)
Upon satisfaction of the conditions precedent described below, within 3 Business Days following the Lessee’s application, the Lessor shall make the payment of the second tranche of the consideration in the sum of RMB68,000,000 to the Lessee: a) the Lessee having paid to the Lessor approximately 46.58% of the total management fee and deposit (details of which shall be further described under the paragraph headed “Deposit and Management Fee” below); b) the Lessor and the Lessee having executed the Acknowledgement of Receipt of the Leased Assets with value of RMB68,000,000 (the “Second Acknowledgement”), and the Second Acknowledgment having become effective; and c) the relevant registration in respect of the title of the Leased Assets under the Second Acknowledgement having been completed and the Lessee having mortgaged such Leased Assets to the Lessor. Upon execution of the Second Acknowledgement, the title of the Leased Assets with value of RMB68,000,000 as prescribed thereunder will be transferred to the Lessor, and such Leased Assets shall be leased back to the Lessee at the same time.
Leaseback of the Leased Assets to the Lessee Pursuant to the Finance Lease Agreement, the Leased Assets shall be leased back to the Lessee during the Lease Period at the total rent of approximately RMB160,623,000 (equivalent to approximately HK$187,929,000), which comprises of (i) the amount of the –3–
lease
principal
in
the
sum
of
RMB146,000,000
(equivalent
to
approximately
HK$170,820,000); and (ii) the lease interest of approximately RMB14,623,000 (equivalent to approximately HK$17,109,000) under the lease interest rate of 6% per annum. The aforesaid rent shall be paid by the Lessee to the Lessor during the Lease Period in twelve (12) equal installments of approximately RMB13,385,000 (equivalent to approximately HK$15,661,000) each (which includes approximately RMB7,151,000 for repayment of the first tranche of consideration mentioned above and approximately RMB6,234,000 for repayment of the second tranche of consideration mentioned above). Ownership of the Leased Assets during and after the Lease Period The Leased Assets comprise certain buildings, trial lines and equipment for production, research and development and quality control of cathode materials for lithium-ion battery of the Lessee, the net assets value of which as at 31 May 2016 was approximately RMB146,724,000 (equivalent to approximately HK$171,667,000). During the Lease Period, the ownership of the Leased Assets will vest in the Lessor and the Lessee will be entitled to occupy and use the Leased Assets. During the Lease Period, the Group will recognize the Leased Assets as “assets held under finance lease” under property, plant and equipment in its consolidated financial statements. Upon expiry of the Lease Period and subject to full payment of the final installment of the rent under the Finance Lease Agreement, the Lessor shall transfer the ownership of the Leased Assets back to the Lessee at nil consideration. Other Arrangements Deposit and Management Fee Under the Finance Lease Agreement, (1) a deposit in the sum of RMB7,300,000 (equivalent to approximately HK$8,541,000), which shall either be refunded to the Lessee after the end of the Lease Period, or be used to set-off part of the last installment of the rent and other payables under the Finance Lease Agreement; and (2) a non-refundable 3-year management fee calculated at the rate of 0.5% of the lease principal per annum in the total sum of RMB2,190,000 (equivalent to approximately HK$2,562,000), shall be payable by the Lessee to the Lessor according to the payment schedule thereunder. Mortgage and Guarantee Pursuant to the Finance Lease Agreement, the Lessee agreed to mortgage the Leased Assets to the Lessor to guarantee its liabilities thereunder. –4–
According to the Letter of Guarantee, the Guarantor agreed to provide joint liability guarantee to the Lessor for the Lessee’s liabilities under the Finance Lease Agreement. The guarantee period shall be from the date of commencement of the Lease Period to the date of fulfillment of all its obligations by the Lessee under the Finance Lease Agreement. The scope of guarantee includes all of the rental, default interest, liquidated damages, consideration for transfer of the Leased Assets under the Finance Lease Agreement, and the costs incurred from realization of claims by the Lessor (including but not limited to litigation fee, legal fee, maintenance cost, travel expenses, evaluation fee and auction fee, etc.). REASONS FOR AND BENEFIT OF ENTERING INTO THE FINANCE LEASE AGREEMENT The entering into of the Finance Lease Agreement is for the purposes of increasing the financing channels of the Company, replenishing capital required for the production and operations of the cathode material business, liquidising the Company’s assets, and optimising the Company’s liability structure. In view of the above, the Board (including the independent non-executive Directors) considers that the terms of the Finance Lease Agreement and the transaction contemplated thereunder are arrived at after arm’s length negotiations between the parties thereto, and are fair and reasonable and in the interests of the Company and its Shareholders as a whole. INFORMATION OF THE LESSEE AND THE GROUP The Group is principally engaged in cathode material production and direct investments, including financing, securities trading and asset management. It primarily invests in the energy conservation, environmental protection and clean energy sectors. It is an indirect non wholly-owned subsidiary of FDG. As at the date of this announcement, the Company has (i) a 25% equity interest in Synergy Dragon Limited, whose subsidiary is an integrated high-tech enterprise which specializes in production, sales and research and development of high capacity lithium-ion battery and its related products; (ii) a 100% equity interest in Premier Property Management Limited, whose subsidiary is principally engaged in the manufacturing of the cathode materials for nickel cobalt-manganese (“NCM”) lithium-ion battery; and (iii) a 45% equity interest in 華能壽光風力發電有限公司 (Huaneng Shouguang Wind Power Co., Ltd.*), a wind power electricity developer and operator in the PRC. The Group acquired cathode material production business through the acquisition of Premier Property Management Limited and its subsidiary (i.e. the Lessee) pursuant to a sale and purchase agreement dated 5 September 2015. Details of the transaction above are set out in –5–
the joint announcements of the Company and FDG dated 5 September 2015, 8 September 2015 and 29 October 2015. The Lessee, is a company incorporated in the PRC with limited liability, an indirect wholly-owned subsidiary of the Company and a manufacturer of cathode materials for NCM lithium-ion batteries with an annual designed production capacity of 2,400 tonnes. INFORMATION OF THE GUARANTOR AND THE LESSOR The Guarantor is a company incorporated in the PRC with limited liability and is an indirect non wholly-owned subsidiary of FDG, the indirect controlling shareholder of the Company. The Guarantor is principally engaged in research and development, manufacturing and sales of battery products. The Lessor is a company incorporated in the PRC with limited liability and is principally engaged in financial leasing business. To the best of the knowledge, information and belief of the Directors and having made all reasonable enquiries, as at the date of this announcement, the Lessor and its ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons. LISTING RULES IMPLICATIONS As the applicable percentage ratios are more than 5% but less than 25%, the transaction contemplated under the Finance Lease Agreement constitutes a discloseable transaction of the Company and is subject to the reporting and announcement requirements only but exempt from the Shareholders’ approval requirement under Chapter 14 of the Listing Rules. Since FDG is an indirect controlling shareholder of the Company, the Guarantor (being a non wholly-owned subsidiary of FDG) is regarded as a connected person of the Company under the Listing Rules. The provision of guarantee by the Guarantor in favour of the Lessee under the Letter of Guarantee will constitute financial assistance to be provided by a connected person for the benefit of the Group. As such provision of guarantee will be conducted on normal commercial terms or better and no security over the assets of the Group will be required, the provision of guarantee under the Letter of Guarantee is exempt under Rule 14A.90 of the Listing Rules from the reporting, announcement and independent Shareholders’ approval requirements.
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DEFINITIONS In this announcement, the following terms shall have the meanings set out below unless the context requires otherwise: “Board”
the board of directors of the Company;
“Business Day”
a day (other than Saturday, Sunday and public holidays) on which licensed banks in the PRC are open for general banking business;
“Company”
FDG Kinetic Limited, an indirect non wholly-owned subsidiary of FDG and a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 378);
“connected person(s)”
has the same meaning as ascribed to it under the Listing Rules;
“Director(s)”
the director(s) of the Company;
“FDG”
FDG Electric Vehicles Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 729);
“Finance Lease Agreement”
the finance lease agreement dated 9 September 2016 entered into between the Lessor and the Lessee, pursuant to which the Lessee agreed to sell the Leased Assets to the Lessor at a total consideration of RMB146,000,000 and the Lessor agreed to leaseback the Leased Assets to the Lessee during the Lease Period;
“Group”
the Company and its subsidiaries;
“Guarantor”
天津中聚新能源科技有限公司 (Tianjin Sinopoly New Energy Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and an indirect non wholly-owned subsidiary of FDG;
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong;
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“Hong Kong”
the Hong Kong Special Administrative Region of the People’s Republic of China;
“Lease Period”
a period of 3 years commencing from the date of payment by the Lessor of the first tranche of the consideration in the sum of RMB78,000,000;
“Leased Assets”
certain buildings, trial lines and equipment for production, research and development and quality control of cathode materials for lithium-ion battery, which shall be transferred by the Lessee to the Lessor and shall be leased back by the Lessor to the Lessee according to the Finance Lease Agreement;
“Lessee”
五龍動力（重慶）鋰電材料有限公司 (FDG Kinetic (Chongqing) Lithium Ion Battery Materials Co. Ltd.*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company;
“Lessor”
重 慶 新 能 源 汽 車 融 資 租 賃 有 限 公 司 (Chongqing New Energy Vehicles Financial Leasing Co., Limited*), a company incorporated in the PRC with limited liability;
“Letter of Guarantee”
the letter of guarantee dated 9 September 2016 executed by the Guarantor, pursuant to which the Guarantor shall provide joint liability guarantee for the Lessee’s liabilities to the Lessor under the Finance Lease Agreement;
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange;
“percentage ratios” has the same meaning as ascribed to it under the Listing Rules, as applicable to a transaction; “PRC”
The People’s Republic of China, for the purpose of this announcement, excludes Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan;
“RMB”
Renminbi, the lawful currency of the PRC;
“Shareholders”
the shareholders of the Company; –8–
“Stock Exchange”
The Stock Exchange of Hong Kong Limited; and
“%”
per cent.
For the purpose of this announcement, the following exchange rate is used: RMB1.00 = HK$1.17 By Order of the Board of FDG Kinetic Limited Jaime Che Executive Director Hong Kong, 9 September 2016 As at the date of this announcement, the Board comprises Mr. Cao Zhong (Chairman), Mr. Sun Ziqiang (Vice Chairman), Mr. Miao Zhenguo (Chief Executive Officer) and Mr. Jaime Che as executive directors; Dr. Chen Yanping and Professor Chen Guohua as non-executive directors; Mr. Hung Chi Yuen Andrew, Mr. Sit Fung Shuen Victor and Mr. Toh Hock Ghim as independent non-executive directors. Website: http://www.fdgkinetic.com * For identification purposes only
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