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.
DISCLOSEABLE TRANSACTION DISPOSAL OF ENVIRONMENTAL PROTECTION ASSETS Reference is made to the announcement of the Company dated 30 May 2016 in relation to the disposal of the Company’s Environmental Protection Assets at the China Beijing Equity Exchange by way of public listing. The Board of the Company hereby announces that Aluminum SPC participated in the bidding of the disposal of the Environmental Protection Assets at the China Beijing Equity Exchange. On 29 June 2016, each of the Lanzhou Branch and three subsidiaries of the Company entered into an Assets Transfer Agreement with Aluminum SPC, respectively, i.e. four Assets Transfer Agreements in total, pursuant to which Lanzhou Branch and three subsidiaries of the Company agreed to sell and Aluminum SPC agreed to acquire the Environmental Protection Assets. Such Proposed Disposal constitutes a transaction under Chapter 14 of the Listing Rules. As the highest applicable percentage ratio (as defined in the Listing Rules) for the Proposed Disposal exceeds 5% but is less than 25%, the Proposed Disposal constitutes a disclosable transaction which is subject to the announcement requirement under Chapter 14 of the Listing Rules but exempted from the shareholders’ approval requirement.
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INTRODUCTION Reference is made to the announcement of the Company dated 30 May 2016 in relation to the disposal of the Environmental Protection Assets of the Company and its subsidiaries at the China Beijing Equity Exchange by way of public listing. The Board hereby announces that Aluminum SPC participated in the bidding of the disposal of the Environmental Protection Assets at the China Beijing Equity Exchange. On 29 June 2016, each of the Lanzhou Branch and three subsidiaries (i.e. Baotou Aluminum, Shandong Huayu and Chalco Ningxia Energy) of the Company (collectively the “Sellers” and each a “Seller”) entered into an Assets Transfer Agreement with Aluminum SPC, respectively, i.e. four Assets Transfer Agreements in total, pursuant to which the Sellers agreed to sell and Aluminum SPC agreed to acquire the Environmental Protection Assets. Assets Transfer Agreements Date 29 June 2016 Parties (1) Lanzhou Branch, Baotou Aluminum, Shandong Huayu and Chalco Ningxia Energy (each as the Seller of an Assets Transfer Agreement, respectively); and (2) Aluminum SPC (as the purchaser of four Assets Transfer Agreements). To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, Aluminum SPC and its beneficial owners are third parties independent from the Company and its connected persons. Environmental Protection Assets to be Disposed The Environmental Protection Assets include the environmental protection assets in relation to the desulfurization, denitration and dedusting of the coal-fired generating units of five enterprises, namely Lanzhou Branch (a branch of the Company), Baotou Aluminum, Shandong Huayu, Maliantai Power Station and Liupanshan Power Station of Chalco Ningxia Energy (subsidiaries of the Company).
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Deposit As a guarantee of its intention to acquire and to show its credit status and performance ability, a trading deposit amounting to RMB80 million has been paid to China Beijing Equity Exchange for the transactions under the four Assets Transfer Agreements by Aluminum SPC in total. Consideration and the Payment The aggregate consideration for the Proposed Disposal under the four Assets Transfer Agreements is RMB1,754,364,500, being the starting price for the bidding of the Environmental Protection Assets, which was determined based on the valuation of the Environmental Protection Assets on the Valuation Base Date as set out on the valuation reports issued by Orient Appraisal and according to the rules of China Beijing Equity Exchange. The consideration will be paid in two instalments. The first instalment, which is 30% of the consideration, shall be paid (after deducting the deposit) by Aluminum SPC on the date of entering into the Assets Transfer Agreements to the designated account of China Beijing Equity Exchange, and China Beijing Equity Exchange shall transfer the first instalment (deposit inclusive) to the designated accounts of the Sellers before 30 June 2016. The second instalment, which is the remaining 70% of the consideration, shall be paid by Aluminum SPC before 31 December 2016. Conditions Precedent The conditions precedent of the Proposed Disposal include that the Sellers have went through the relevant procedures of internal decision and assets evaluation and etc. in relation to the Environmental Protection Assets in accordance with the laws; the Sellers have completed the procedures of public disclosure and/or bidding at China Beijing Equity Exchange in accordance with the relevant laws, regulations and policies for the Proposed Disposal under the Assets Transfer Agreements; and other reasonable and usual conditions. Delivery of the Environmental Protection Assets The Sellers shall undertake the transfer of the Environmental Protection Assets with Aluminum SPC within one business day after Aluminum SPC paid up the consideration in full.
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INFORMATION ON THE ENVIRONMENTAL PROTECTION ASSETS According to the valuation report prepared by Orient Appraisal using income approach, the aggregate net book value and the appraised value of the Environmental Protection Assets under the four Asset Transfer Agreements on the Valuation Base Date are RMB1,188,632,900 and RMB1,754,364,500 (including certain liabilities), respectively. The Environmental Protection Assets are free from mortgages, pledges and any other transfer restrictions, and not subject to litigation, arbitration or judicial measures such as distrain and freezing of assets as well as other conditions obstructing the transfer of ownership. Set out below are the net profits attributable to such Environmental Protection Assets (before and after taxes and extraordinary items) for the financial years ended 31 December 2014 and 2015 pursuant to the financial reports prepared according to generally accepted accounting principles in the PRC by Lanzhou Branch, Baotou Aluminum, Shandong Huayu and Chalco Ningxia Energy. The year ended 31 December 2014 (audited) (RMB)
The year ended 31 December 2015 (audited) (RMB)
0
0
0
0
Net profit before taxes and extraordinary items Net profit after taxes and extraordinary items
PROFIT FORECAST RELATED TO THE VALUATION METHOD Since Orient Appraisal used the income approach to prepare the aforesaid valuation report, the calculation of the valuation of the Environmental Protection Assets under the valuation report is deemed as a profit forecast under Rule 14.61 of Hong Kong Listing Rules. Accordingly, the Company discloses the following details on the valuation in accordance with Rule 14.62 of Hong Kong Listing Rules.
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Details of the principal appraisal assumptions, including the commercial assumptions as the basis of the profit forecast of the Environmental Protection Assets, are set out below: Basic assumptions on the Environmental Protection Assets provided by the valuer are as follows: 1.
unless specified otherwise, the valuation report does not take into account the impact on the valuation conclusion from any abnormal factors including any existing or potential pledge, guaranty or special transaction modes. The valuation report also excludes the impacts of the changes in national macroeconomic policies or natural force or force majeure;
2.
the valuation is based on the assumption that no significant changes will occur in national macroeconomic policies and the economic environment of the region; no significant changes will occur in the industry policy, management system and relevant regulations; and no significant changes will occur in the taxation policy, credit rates and exchange rates related to the operations;
3.
the valuation is based on the assumption that the assets entrusted for valuation will be further used for the purpose of its original design and manufacturing in the future production and operation;
4.
the equipment included in the scope of valuation will be utilised locally and continuously; and
5.
the valuation is based on the assumption that the Environmental Protection Assets will adopt the mode of independent operation in the coming year and that the income will be determined according to the feed-in tariff for desulfurization and denitration published by the National Development and Reform Commission of the PRC.
The Company’s reporting accountant Ernst & Young has reviewed the arithmetical accuracy of the calculations of the income forecasts, which do not involve the adoption of accounting policies, for the valuation. The Board has confirmed that the profit forecast of the Environmental Protection Assets as set out in the valuation report has been made after due and careful enquiry by the Board. The letters issued by Ernst & Young and the Board are set out in Appendix I and Appendix II to this announcement respectively. The followings are the qualifications of the experts who have provided their opinions or advices which are contained in this announcement:
Name
Qualification
Ernst & Young Orient Appraisal
Certified Public Accountant Qualified PRC valuer –5–
Date of conclusion or opinions 14 June 2016 26 May 2016
As at the date of this announcement, as far as the Directors are aware, each of the experts was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any shares, convertible securities, warrants, options or derivatives which carry voting rights in any member of the Group. Each of the experts has given and has not withdrawn its written consent to the issue of this announcement with the inclusion herein of its letter and/or references to its name. REASONS FOR AND BENEFITS OF THE TRANSACTION The transaction will contribute to optimizing and deploying the existing stock assets of the Company; reducing operation cost and improving operation efficiency by taking full advantage of external capital and national policies; and enhancing assets liquidity, so as to realize the hedging and appreciation of state-owned assets and increase Shareholder’s value of the Company. Upon the Proposed Disposal, the Company is expected to record a gain before taxes of approximately RMB566 million based on the differences between the book value of the Environmental Protection Assets and the consideration of the Proposed Disposal. The Company intends to use the proceeds from the Proposed Disposal to supplement working capital, repay loans, and use for capital expenditures. The Directors (including the independent non-executive Directors) are of the view that the transactions contemplated under the Assets Transfer Agreements are carried out on normal commercial terms, and the terms of such agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole. IMPLICATIONS UNDER THE HONG KONG LISTING RULES Such Proposed Disposal constitutes a transaction under Chapter 14 of the Listing Rules. As the highest applicable percentage ratio (as defined in the Listing Rules) for the Proposed Disposal exceeds 5% but is less than 25%, the Proposed Disposal constitutes a disclosable transaction which is subject to the announcement requirement under Chapter 14 of the Listing Rules but exempted from the Shareholders’ approval requirement.
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INFORMATION OF THE PARTIES The Company is a joint stock limited company established in the PRC, whose H Shares and A Shares are listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange respectively, while its ADSs are listed on the New York Stock Exchange. The Group is principally engaged in the mining of bauxite; the production and sales of alumina, primary aluminum and aluminum alloy products; operating of coal and electricity businesses as well as trading and logistics of non-ferrous metal products. Lanzhou Branch mainly produces primary aluminum products; Baotou Aluminum is principally engaged in the production and sales of aluminum, aluminum alloy and its fabrication products, thermal energy and carbon products and etc.; Shandong Huayu is principally engaged in the production and sales of alloy products; and Chalco Ningxia Energy is principally engaged in the construction and operational management of coal power, aluminum, wind power and solar power generation and other relevant industries as well as the investment in coal, railway, mechanical manufacturing and others. Established on 8 June 2016, Aluminum SPC is a controlled subsidiary of Beijing SPC Environment Protection Tech Co., Ltd.* (北京清新環境技術股份有限公司, a company listed on the Shenzhen Stock Exchange under the stock code of 002573) and is principally engaged in technology development, technology promotion, technology consulting and technology services; treatment of air pollution; treatment of water pollution; treatment of solid waste pollution; operation of environmental pollution treatment facilities; sale of environmental pollution treatment equipment and chemical products (excluding hazardous chemicals and class A precursor chemicals). DEFINITIONS In this announcement, unless the context otherwise requires, the following expressions have the following meanings: “A Share(s)”
domestic share(s) in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange;
“ADS(s)”
the American depository share(s) issued by the Bank of New York Mellon as the depository bank and listed on the New York Stock Exchange, each of which represents the entitlement of 25 H Shares;
“Aluminum SPC”
Beijing Aluminum SPC Environment Protection Tech Co., Ltd.* (北京鋁能清新環境技術有限公司);
“Assets Transfer Agreements”
four assets transfer agreements entered into between each Seller and Aluminum SPC on 29 June 2016, pursuant to which the Sellers proposed to sell and Aluminum SPC agreed to acquire the Environmental Protection Assets; –7–
“Baotou Aluminum”
Baotou Aluminum Co., Ltd.* (包頭鋁業有限公司), a limited liability company incorporated in the PRC and a subsidiary of the Company as at the date of this announcement;
“Board”
the board of directors of the Company;
“Chalco Ningxia Energy”
Chalco Ningxia Energy Group Co., Ltd.* (中鋁寧夏能源 集團有限公司), a limited liability company incorporated in the PRC and a subsidiary of the Company as at the date of this announcement;
“Company”
Aluminum Corporation of China Limited* (中國鋁業股 份有限公司), a joint stock limited company established in the PRC, the A Shares, H Shares and ADSs of which are listed on the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the New York Stock Exchange, respectively;
“Director(s)”
the director(s) of the Company;
“Environmental Protection Assets”
the environmental protection assets that the Sellers proposed to dispose of under four Assets Transfer Agreements, details of which are set out in the section headed “Environmental Protection Assets to be Disposed” in this announcement;
“Group”
the Company and its subsidiaries;
“H Shares”
overseas listed foreign shares with a nominal value of RMB1.00 each in the share capital of the Company, which are listed on the Hong Kong Stock Exchange and subscribed for in Hong Kong dollars;
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC;
“Hong Kong Listing Rules”
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;
“Hong Kong Stock Exchange”
The Stock Exchange of Hong Kong Limited;
“Lanzhou Branch”
Lanzhou Branch of Aluminum Corporation of China Limited* (中國鋁業股份有限公司蘭州分公司);
“Orient Appraisal”
Shanghai Orient Appraisal Co., Ltd.* (上海東洲資產評 估公司), a qualified valuer in the PRC;
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“PRC”
the People’s Republic of China which, for the purposes of this announcement, excludes Hong Kong, the Macau Special Administrative Region and the Taiwan;
“Proposed Disposal”
the disposals contemplated under the Assets Transfer Agreements entered into between each of the Lanzhou Branch and three subsidiaries of the Company (namely Baotou Aluminum, Shandong Huayu and Chalco Ningxia Energy), and Aluminum SPC, respectively, on 29 June 2016, i.e. four Assets Transfer Agreements in total, pursuant to which Lanzhou Branch and the three subsidiaries of the Company agreed to sell the Environmental Protection Assets;
“RMB”
Renminbi, the lawful currency of the PRC;
“Shandong Huayu”
Shandong Huayu Alloy Materials Co., Ltd.* (山東華 宇合金材料有限公司), a limited liability company incorporated in the PRC and a subsidiary of the Company as at the date of this announcement;
“Shareholder(s)”
the shareholder(s) of the Company;
“subsidiary(ies)”
has the same meaning ascribed thereto under the Hong Kong Listing Rules;
“Valuation Base Date”
31 March 2016; and
“%”
percentage. By order of the Board Aluminum Corporation of China Limited* Zhang Zhankui Company Secretary
Beijing, the PRC 29 June 2016 As at the date of this announcement, the members of the Board comprise Mr. Ao Hong, Mr. Lu Dongliang and Mr. Jiang Yinggang (Executive Directors); Mr. Yu Dehui, Mr. Liu Caiming and Mr. Wang Jun (Non-executive Directors); Ms. Chen Lijie, Mr. Hu Shihai and Mr. Lie-A-Cheong Tai Chong, David (Independent Non-executive Directors).
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APPENDIX I – LETTER FROM ERNST & YOUNG The following is the text of the letter dated 14 June 2016 from Ernst & Young, Certified Public Accountants, which was prepared for inclusion in this announcement. 14 June 2016 The Board of Directors Aluminum Corporation of China Limited* No. 62 North Xizhimen Street, Haidian District, Beijing, The People’s Republic of China Dear Sirs, We have performed the work described below, in respect of the arithmetical accuracy of the calculations of the discounted cash flow forecast (hereinafter referred to as the “Underlying Forecast”) underlying the valuation dated 26 May 2016 prepared by Orient Appraisal Co., Ltd. in respect of the environmental protection assets in relation to the desulfurization, denitration and dedusting of the coal-fired generating units of five subsidiaries of Aluminum Corporation of China Limited (“Chalco Environmental Protection Assets”) as at 31 March 2016. The Underlying Forecast is regarded by The Stock Exchange of Hong Kong Limited as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). RESPECTIVE RESPONSIBILITIES OF DIRECTORS OF THE COMPANY AND REPORTING ACCOUNTANTS It is the responsibility solely of the directors (the “Directors”) of Aluminum Corporation of China Limited* (the “Company”) to prepare the Underlying Forecast. The Underlying Forecast has been prepared using a set of assumptions (the “Assumptions”), the completeness, reasonableness and validity of which are the sole responsibility of the Directors.
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It is our responsibility to draw a conclusion, based on our work on the arithmetical accuracy of the calculations of the Underlying Forecast and to present our conclusion solely to you, as a body, for the purpose of reporting under paragraph 14.62(2) of the Listing Rules and for no other purpose. We are not reporting on the appropriateness and validity of the bases and Assumptions on which the Underlying Forecast are based and our work does not constitute any valuation of Chalco Environmental Protection Assets. The Underlying Forecast does not involve the adoption of accounting policies. The Assumptions used in the preparation of the Underlying Forecast include hypothetical assumptions about future events and management actions that may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Underlying Forecast and the variation may be material. We have not reviewed, considered or conducted any work on the completeness, reasonableness and the validity of the Assumptions and thus express no opinion whatsoever thereon. Our work is more limited than that for a reasonable assurance engagement, and therefore less assurance is obtained than in a reasonable assurance engagement. We also accept no responsibility to any other person in respect of, arising out of, or in connection with our work. BASIS OF CONCLUSION We conducted our work in accordance with Hong Kong Standards on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of checking the arithmetical accuracy of the calculations, of the Underlying Forecast prepared based on the Assumptions made by the Directors of the Company. Our work has been undertaken solely to assist the Directors in evaluating whether the Underlying Forecast, so far as the arithmetical accuracy of the calculations is concerned, has been properly compiled in accordance with the Assumptions made by the Directors of the Company. Our work does not constitute any valuation of Chalco Environmental Protection Assets as at 31 March 2016. CONCLUSION Based on our work described above, nothing has come to our attention that causes us to believe that the Underlying Forecast, so far as the arithmetical accuracy of the calculations of the Underlying Forecast is concerned, has not been properly compiled on the basis of the Assumptions made by the Directors of the Company. Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong
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APPENDIX II – LETTER FROM THE BOARD The following is the text of the letter dated 28 June 2016 from the Board which was prepared for inclusion in this announcement. To: Listing Division of The Stock Exchange of Hong Kong Limited 11th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong Dear Sir/Madam, Company: Aluminum Corporation of China Limited *(the “Company”). Re: Profit forecast – confirmation letter under the requirements of Rule 14.62(3) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) Reference is made to the announcements of the Company dated 30 May 2016 and 29 June 2016 in relation to the valuation report regarding the Environmental Protection Assets and the relevant liabilities of five enterprises, namely Lanzhou Branch of Aluminum Corporation of China Limited*, Baotou Aluminum Co., Ltd.*, Shandong Huayu Alloy Materials Co., Ltd.*, Maliantai Power Station and Liupanshan Power Station of Chalco Ningxia Energy Group Co., Ltd.*, dated 26 May 2016 (the “Valuation Report”). The Valuation Report was prepared by Shanghai Orient Appraisal Co., Ltd. (the “Valuer”) based on the income approach. The board of directors of the Company has reviewed and discussed with the Valuer on the basis and assumptions of the valuation. The board of directors of the Company has also considered the confirmation letter issued by Ernst & Young, the reporting accountant of the Company, on 14 June 2016 in relation to the arithmetical accuracy of the calculations of the profit forecast in the Valuation Report. Pursuant to the requirements of Rule 14.62(3) of the Listing Rules, the board of directors of the Company confirmed that the profit forecast used in the aforesaid Valuation Report has been made after due and careful enquiry. The board of directors of Aluminum Corporation of China Limited* 28 June 2016 * For identification purpose only
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