Major Transaction and Continuing Connected Transactions

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited takeno responsibility for the contents of this announcement, make no representation as to itsaccuracy or completeness and expressly disclaim any liability whatsoever for any losshowsoever arising from or in reliance upon the whole or any part of the contents of thisannouncement. DATANG INTERNATIONAL POWER GENERATION CO., LTD. (a sino-foreign joint stock limited company incorporated in the People's Republic of China) (Stock Code: 00991) Announcement Major Transaction and Continuing Connected Transactions FINANCIAL SERVICES AGREEMENT The Board announces that on 15 October 2013, the Company and Datang Finance entered into theFinancial Services Agreement with a term of three years commencing from 1 January 2014 andending on 31 December 2016, pursuant to which Datang Finance agreed to provide the Groupwith deposit services, loan services and other financial services subject to the terms andconditions provided therein. LISTING RULES IMPLICATIONS As at the date of this announcement, CDC is a controlling Shareholder of the Company whichtogether with its subsidiaries, hold a total of approximately 34.71% of the issued sharecapital of the Company. CDC is the controlling shareholder of Datang Finance which holds a52.5% interest in Datang Finance. Accordingly, Datang Finance is a connected person of theCompany and the Financial Services Agreement constitutes continuing connected transactionsof the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios for the provision of deposit servicesunder the Financial Services Agreement is more than 5%, the provision of deposit servicesunder the Financial Services Agreement is subject to the reporting, announcement andIndependent Shareholders' approval requirements under Chapter 14A of the Listing Rules.The Company will also disclose the relevant details in its next published annual reportin accordance with the relevant requirements as set out in Rule 14A.45 of the Listing Rules. As one of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules)in relation to the provision of deposit services under the Financial Services Agreement ismore than 25% but less than 75%, such transaction constitutes a major transaction of theCompany and is subject to the reporting, announcement and the shareholders' approvalrequirements under Chapter 14 of the Listing Rules. The loan services to be provided by Datang Finance to the Group will constitute financialassistance to be provided by a connected person for the benefit of the Group. As such loanservices are on normal commercial terms which are similar to or even more favourable thanthose offered by other commercial banks for comparable services in the PRC, and no securityover the assets of the Group will be granted in respect of the loan services, the loanservices are exempt under Rule 14A.65(4) of the Listing Rules from all reporting,announcement and Independent Shareholders' approval requirements. The Company expects that each of the applicable percentage ratios (as defined in Rule 14.07of the Listing Rules) of the total fees payable by the Company to Datang Finance in respectof the provision of other financial services under the Financial Services Agreement willfall within the de minimis threshold as stipulated under Rule 14A.33(3) of the ListingRules. The Company will comply with the reporting, announcement and independentShareholders' approval requirements of the Listing Rules if the transaction amount ofother financial services to be provided by Datang Finance to the Group under the FinancialServices Agreement exceed the relevant threshold. A circular containing details of the Financial Services Agreement, a letter from theIndependent Board Committee of the Company and a letter from the independent financialadvisor, both advising the terms of the Financial Services Agreement, will be dispatched tothe shareholders on or before 5 November 2013. BACKGROUND On 28 August 2008, the Company and Datang Finance entered into a financial servicesagreement with a term commencing from 1 January 2008 to 31 December 2010. On 26 October2010, the Company and Datang Finance entered into a financial services agreement, with aterm of three years commencing from 1 January 2011 and ending on 31 December 2013. In orderto further enhance the economies of scale of the capital, accelerate capital turnover, savefinancing costs and ensure funds security while maintaining stability of the partnershipbetween both parties, the relevant financial services agreement is renewed. On 15 October2013, the Company and Datang Finance entered into the Financial Services Agreement, witha term commencing from 1 January 2014 and ending on 31 December 2016. FINANCIAL SERVICES AGREEMENT Date 15 October 2013 Parties 1. the Company; and2. Datang Finance Major Terms 1. Datang Finance shall provide the Group with the following major services subject to the terms and conditions provided therein: i. basic services, such as deposit, loans, financial leasing, entrusted loans, bill acceptance and discount, payment and settlement, financial guarantees, financial and financing consultation, and bonds underwriting; ii. conducting unified settlement services for funds according to the instructions of the Group, and the relevant settlement expenses shall be borne by Datang Finance Company; iii. conducting comprehensive credit services, including but not limited to loans, discount, guarantees and other forms of financing, with a comprehensive credit limit of RMB24 billion at an interest rate not higher than those charged by other domestic financial institutions; iv. consultation and training services in relation to monetary policies, financial market conditions, financing products and cash management; v. the handling fee of the entrusted loans services shall not exceed 0.0006% of the actual principal amount; vi. the savings interest rate of the deposit services are settled according to the interest rates of the PBOC (as at the date of this announcement, the prevailing negotiated deposit interest rate is 1.15% per annum, while the prevailing savings interest rate is 0.35% per annum), with a daily maximum balance of deposits of not more than RMB12 billion; vii. provision of other financial services at the request and according to the instructions of the Company subject to obtaining the relevant approvals from the CBRC. 2. Deposit cap: the daily maximum balance of the Group's deposits with Datang Finance for each of the three years ending 31 December 2014, 31 December 2015 and 31 December 2016 is RMB12 billion. 3. Datang Finance has undertaken to adhere to the principles below in providing the aforementioned financial services to the Group: i. the interest rates for the Group's deposits in and for loans to be granted from Datang Finance shall be within the permitted bands around the interest rates for deposits and loans as announced by the PBOC, and with reference to the benchmark interest rates as announced by the PBOC, Datang Finance shall accept deposits at interests rates which are not lower than those offered by other domestic financial institutions, and offer loans and other services at lending interest rates which are not higher than those charged by other domestic financial institutions for the same type of services. ii. Datang Finance should ensure the stable operation of its funds management system to safeguard the funds, and to monitor the credit risk so as to satisfy the payment needs of the Group. 4. The Group, with information of market rates and in view of its own interests, has the unilateral right to determine whether or not to maintain the business relationship with Datang Finance, and may obtain relevant financial services from other financial institutions in addition to those services provided under the Financial Services Agreement in accordance with the actual situations. 5. The effective date and the term of the Financial Services Agreement: the Financial Services Agreement shall become effective when it is duly signed by the respective representatives of the parties and sealed with their respective company chops and upon the approval of the internal authority of each of the parties (including obtaining the approval by the Independent Shareholders at the general meeting of the Company). The term of the Financial Services Agreement shall be from 1 January 2014 to 31 December 2016. Capital Risk Control Measures 1. Datang Finance will ensure the safe and stable operation of the funds management information system, which has undergone the security test in respect of connection to the interface of online commercial banking and has reached the national security standards for commercial banks. The system is equipped with the mode awarded with CA safety certificate to ensure the security of the funds of the Group. 2. Datang Finance will ensure that it is in strict compliance with the risk monitoring indicators for financial institutions issued by the CBRC and that its major regulatory indicators such as gearing ratio, interbank borrowing ratio and liquidity ratio will also comply with the requirements of the CBRC. 3. Any balance in the Group's deposits (after deducting the amount used for making entrusted loans and the loans made to the Group by Datang Finance) will be redeposited into one or more commercial banks in the PRC as interbank deposits. 4. A report on the status of the Group's deposits with Datang Finance will be delivered by Datang Finance to the chief financial officer of the Company before 10 a.m. of each business day to enable the chief financial officer of the Company to monitor and ensure that the daily maximum deposit balance of the Group with Datang Finance does not exceed the cap of RMB12 billion. 5. A copy of every regulatory report submitted by Datang Finance to the CBRC will be provided to and reviewed by the senior management of the Company, including the relevant executive Director(s). 6. The financial statements of Datang Finance for each month will be provided to and reviewed by the senior management of the Company, including the relevant executive director(s), on the fifth working day of the following month. PROPOSED CAPS Deposit Services Pursuant to the financial services agreement entered into between Datang Finance and theCompany on 26 October 2010, the maximum daily balance of the Group's deposits with DatangFinance amounted to RMB6,630 million, RMB6,300 million and RMB5,480 million for the twoyears ended 31 December 2010 and 31 December 2011 and for the nine months ended 30 September2013, respectively. In view of the Company's business growth and increase in demand for financial services,the Company estimates that the proposed caps in respect of the daily maximum depositbalance with Datang Finance is RMB12 billion for each of the three years ending 31 December2014, 31 December 2015 and 31 December 2016 after taking into account of the following: 1. As the assets of the Group continue to grow, the amount of deposits will also increase. 2. In order to strengthen the centralised management of funds and monitor the use of funds, the Group will roll out a "funding pool" platform through Datang Finance. Such platform amasses the funds of the Group and enables loans to be granted within the Group by capitalising on the leeway arising from the difference in the time for receipt and payment of funds of the members of the Group, with an aim to support the development of the Group. 3. In respect of the Group's funds settlement business at Datang Finance, settlement expenses will be undertaken by Datang Finance. 4. During the term of the agreement, the issuance of short-term debentures, super short-term debentures and non-public debt financing instruments will also enhance the Company's daily maximum deposit balance with Datang Finance. 5. CDC undertakes the following to the CBRC: in the event that Datang Finance is in urgent difficulty in making payment, CDC will raise Datang Finance's capital accordingly based on the actual need. The Directors (excluding the independent non-executive Directors, whose views will becontained in the circular after considering the advice from the independent financialadvisor) consider that the above proposed caps in respect of the deposit services are fairand reasonable. Loan Services In view of the fact that the loan services to be provided by Datang Finance to the Groupare on normal commercial terms which are similar to or even more favourable than thoseoffered by other commercial banks in the PRC, and that no collateral against the assets ofthe Group will be required in respect of the loan services, the loan services are exemptunder Rule 14A.65(4) of the Listing Rules from all reporting, announcement and IndependentShareholders' approval requirements. As such, no cap has been set for such services. TheDirectors (including the independent non-executive Directors) consider that the loanservices to be provided under the Financial Services Agreements are fair and reasonable andin the interests of the Shareholders as a whole. Other Services Apart from the deposit services and the loan services, other financial services which maybe provided by Datang Finance to the Company mainly include entrusted loans services,finance leasing services, bill acceptance and discount services, and so forth. The other services to be provided under the Financial Services Agreement will be on normalcommercial terms and on terms similar to or even more favourable than those offered byother commercial banks in the PRC. The Directors (including the independent non-executiveDirectors) consider that the other services provided under the Financial Services Agreementare fair and reasonable and in the interests of the Shareholders as a whole. The Company expects that each of the applicable percentage ratios (as defined in Rule14.07 of the Listing Rules) of the total fees payable by the Company to Datang Financewill fall within the de minimis threshold as stipulated under Rule 14A.33(3) of theListing Rules. The Company will comply with the reporting, announcement and IndependentShareholders' approval requirements of the Listing Rules if the transaction amounts ofthe other services to be provided by Datang Finance to the Group under the FinancialServices Agreement exceed the relevant threshold. BENEFITS AND REASONS OF ENTERING INTO THE FINANCIAL SERVICES AGREEMENT By entering into the Financial Services Agreement with Datang Finance, the Company isable to secure loans and other financing services at interest rates lower than those inthe market, which assists in improving the overall standard of fund operation of theCompany and enhancing the Group's bargaining power of external financing. The entering intoof the Financial Services Agreement can also enable the Company to secure higher interestrates for deposits than those in the market and enjoy payment and settlement services at zerorate, thereby increasing interest income on deposits and saving e settlement costs. Meanwhile,pursuant to the Financial Services Agreement, the Group can strengthen its funds controland accounts management through the funds management platform of Datang Finance, therebyfurther improving the efficiency of fund applications, and mitigating and avoidingfinancial risks. In view of the above, the Directors (excluding the independent non-executive Directorswhose views will be contained in the circular after considering the advice from theindependent financial advisor) believe that the credit risk control measures under theFinancial Services Agreement are adequate enough to cover the risks involved in depositingfunds of the Group with Datang Finance and the provision of financial services under theFinancial Services Agreement are fair and reasonable and in the best interests of theCompany and the Shareholders as a whole. INFORMATION RELATING TO THE PARTIES OF THE FINANCIAL SERVICES AGREEMENT Information of the Group The Group is principally engaged in the development and operation of power plants, the saleof electricity and thermal power, and the repair, testing and maintenance of power equipmentand power-related technical services, with its main service areas being in the PRC. Information of Datang Finance Datang Finance is duly established in the PRC as a non-banking financial institution. As atthe date of this announcement, its registered capital is RMB3 billion. The principalbusiness of Datang Finance includes the provision of, among others, deposit services, loanservices, entrusted loan services and entrusted investment services. Information of CDC CDC was established on 9 March 2003 with a registered capital of RMB15.394 billion. It isprincipally engaged in the development, investment, construction, operation and managementof power energy, organization of power (thermal) production and sales; manufacturing, repairand maintenance of power equipment; power technology development and consultation; powerengineering, contracting and consultation of environmental power engineering; developmentof new energy as well as development and production of power related coal resources. LISTING RULES IMPLICATIONS As at the date of this announcement, CDC is a controlling Shareholder of the Company whichtogether with its subsidiaries, hold a total of approximately 34.71% of the issued sharecapital of the Company. CDC is the controlling shareholder of Datang Finance which holds a52.5% interest in Datang Finance. Accordingly, Datang Finance is a connected person of theCompany and the Financial Services Agreement constitutes continuing connected transactionsof the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios for the provision of deposit servicesunder the Financial Services Agreement is more than 5%, the provision of deposit servicesunder the Financial Services Agreement is subject to the reporting, announcement andIndependent Shareholders' approval requirements under Chapter 14A of the Listing Rules.The Company will also disclose the relevant details in its next published annual reportin accordance with the relevant requirements as set out in Rule 14A.45 of the Listing Rules. As one of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules)in relation to the provision of deposit services under the Financial Services Agreement ismore than 25% but less than 75%, the transaction constitutes a major transaction of theCompany and is subject to the reporting, announcement and the Company's IndependentShareholders' approval requirements under Chapter 14 of the Listing Rules. The loan services to be provided by Datang Finance to the Group will constitute financialassistance to be provided by a connected person for the benefit of the Group. As such loanservices are on normal commercial terms which are similar to or even more favourable thanthose offered by other commercial banks for comparable services in the PRC, and no securityover the assets of the Group will be granted in respect of the loan services, the loanservices are exempt under Rule 14A.65(4) of the Listing Rules from all reporting,announcement and independent Shareholders' approval requirements. The Company expects that each of the applicable percentage ratios (as defined in Rule14.07 of the Listing Rules) of the total fees payable by the Company to Datang Financein respect of the provision of other financial services under the Financial ServicesAgreement will fall within the de minimis threshold as stipulated under Rule 14A.33(3) ofthe Listing Rules. The Company will comply with the reporting, announcement and independentShareholders' approval requirements of the Listing Rules if the transaction amount of otherfinancial services to be provided by Datang Finance to the Group under the FinancialServices Agreement exceeds the relevant threshold. None of the Directors has material interests in the Financial Services Agreement.Connected Directors, including Chen Jinhang, Hu Shengmu and Fang Qinghai, who are principalmanagement staff of CDC, and such Directors have abstained from voting at the relevant Boardmeeting for the approval of the Financial Services Agreement in accordance with therequirements of the Listing Rules of the Shanghai Stock Exchange. The Company will hold an EGM to consider and approve the provision of deposit servicesunder the Financial Services Agreement. CDC and its associates shall abstain from votingat the EGM in approving the provision of deposit services under the Financial ServicesAgreement. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISOR An independent board committee comprising all the independent Directors will be formed toadvise the Independent Shareholders on the terms of the Financial Services Agreement. The Company will appoint an independent financial advisor to advise the Independent BoardCommittee of the Company and the Independent Shareholders on the terms of the FinancialServices Agreement. DESPATCH OF CIRCULAR A circular containing details of the Financial Services Agreement, a letter from theindependent board committee of the Company and a letter from the independent financialadvisor, both advising the terms of the Financial Services Agreement, will be despatchedto the Shareholders in accordance with the Listing Rules on or before 5 November 2013. DEFINITIONS In this announcement, the following expressions have the meanings set out below unlessthe context otherwise requires: "Board" the board of Directors "CBRC" China Banking Regulatory Commission "CDC" China Datang Corporation, a State-owned enterprise established under the laws of the PRC and is a controlling Shareholder of the Company. CDC, together with its subsidiaries, hold a total of approximately 34.71% of the issued share capital of the Company as at the date of this announcement. For details, please refer to "Information relating to the parties" "Company" Datang International Power Generation Co., Ltd., a sino-foreign joint stock limited company incorporated in the PRC on 13 December 1994, whose H Shares are listed on the Stock Exchange and the London Stock Exchange and whose A Shares are listed on the Shanghai Stock Exchange. For details, please refer to "Information relating to the parties" "connected person" has the meaning ascribed to it under the Listing Rules "connected transaction" has the meaning ascribed to it under the Listing Rules "Datang Finance" China Datang Finance Co., Ltd., a subsidiary of CDC "Director(s)" the director(s) of the Company "EGM" the extraordinary general meeting of the Company to be held to consider and approve, among others, the deposit service under the Financial Services Agreement "Financial Services the financial services agreement entered into between the CompanyAgreement" and Datang Finance on 15 October 2013, particulars of which are set out in this announcement "Group" the Company and its subsidiaries "Independent Shareholders" has the meaning ascribed to it under the Listing Rules "Listing Rules" The Rules Governing the Listing of Securities on the Stock Exchange "PBOC" the People's Bank of China "PRC" the People's Republic of China "RMB" Renminbi, the lawful currency of the PRC "Stock Exchange" The Stock Exchange of Hong Kong Limited "%" percent By Order of the Board Zhou Gang Secretary to the Board Beijing, the PRC, 15 October 2013 As at the date of this announcement, the Directors of the Company are:Chen Jinhang, Hu Shengmu, Cao Jingshan, Fang Qinghai, Zhou Gang, Li Gengsheng, Cao Xin,Cai Shuwen, Liu Haixia, Guan Tiangang, Dong Heyi*, Ye Yansheng*, Li Hengyuan*, Zhao Jie*,Jiang Guohua* * Independent non-executive Directors