Zhejiang Expressway Co Ld - Asphalt Pavement On-site Thermal Regeneration

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ZHEJIANG EXPRESSWAY CO., LTD.
(A joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock code: 0576)

CONTINUING CONNECTED TRANSACTION
ASPHALT PAVEMENT ON-SITE THERMAL REGENERATION
ENGINEERING AGREEMENT FOR THE YEAR OF 2018

ASPHALT PAVEMENT ON-SITE THERMAL REGENERATION ENGINEERING AGREEMENT FOR THE YEAR OF 2018

On August 7, 2018, the Company entered into Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 with Zhejiang Shunchang, pursuant to which Zhejiang Shunchang, a non wholly-owned subsidiary of Communications Group, agreed to provide the Engineering Services to the Target Expressways from the date of execution of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 to November 20, 2018.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Communications Group is a controlling shareholder of the Company. Zhejiang Shunchang is a non wholly-owned subsidiary of Communications Group. Therefore, Zhejiang Shunchang is a connected person of the Company and as a result, the transactions under Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

Pursuant to Rules 14A.81 and 14A.82 of the Listing Rules, as the transactions contemplated under Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 and the Previous Transactions were entered into with parties who are connected with one another and within a 12-month period, Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 and the Previous Transactions are required to be aggregated for the calculation of the relevant percentage ratios to determine the classification of the transactions.

As the applicable percentage ratios in respect of the transactions contemplated under Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 after aggregating the Previous Transactions, are more than 0.1% but less than 5%, Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 will be subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

BACKGROUND

On May 30, 2018, the Company organised a public tender in respect of the provision of Engineering Services to the Target Expressways, namely, the Shanghai-Hangzhou-Ningbo Expressway, Jinhua section of the Ningbo-Jinhua Expressway and the Huihang Expressway (the "Public Tender"). A tender notice in respect of the Public Tender was published on the website of www.chinabidding.com.cn on May 30, 2018.

Evaluation of the Public Tender was conducted by a committee consisting of industry experts. The management of the Company decided to accept the committee's recommendation and awarded a contract to Zhejiang Shunchang to provide the Engineering Services. Zhejiang Shunchang was amongst three entities (two of which being independent suppliers) who submitted tenders to the Company and obtained the highest score.

ASPHALT PAVEMENT ON-SITE THERMAL REGENERATION ENGINEERING AGREEMENT FOR THE YEAR OF 2018

On August 7, 2018, the Company entered into Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 with Zhejiang Shunchang, a non wholly-owned subsidiary of Communications Group, pursuant to which Zhejiang Shunchang agreed to provide the Engineering Services to the Target Expressways from the date of execution of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 to November 20, 2018.

Principal terms of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 are set out below:

Date:	August 7, 2018
Parties:	(1)    the Company, as the contract letting party; and
	(2)     Zhejiang Shunchang, as the contractor
Term:	From the date of execution of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 to November 20, 2018
Scope of services:	Zhejiang Shunchang agreed to provide certain Engineering Services in respect of the Target Expressways, namely the Shanghai-Hangzhou-Ningbo Expressway, Jinhua section of the Ningbo-Jinhua Expressway and the Huihang Expressway, including asphalt pavement on-site thermal regeneration work, roadbed work, bridge work, toll station expansion work and road safety related work.
Consideration:	RMB76,564,938
Basis of consideration:	The consideration was determined as a result of the Public Tender of the Engineering Services for the Target Expressways. Zhejiang Shunchang was successfully awarded the bid in accordance with terms of the Public Tender.
	The factors for assessment include, but not limited to: (i) price; (ii) the working plan proposed by the tenderers, the technical capability and dedicated equipment of the tenderers; (iii) the standard of safety management of the tenderers and their capability of handling emergency events; (iv) the quality of work and the ability to deliver work on a timely manner; (v) the experience of the tenderers in similar projects; and (vi) the past performance and achievements of tenderers. According to the evaluation of the assessment committee, Zhejiang Shunchang successfully obtained the highest overall score among all the bidders.
Payment:	The consideration shall be payable by the Company to the Zhejiang Shunchang as follows: (i) 97% to be payable upon completion of the Engineering Services; and (ii) 3% to be payable within 15 days after the completion acceptance and the finalisation of the completion and settlement report.
Governing law:	PRC law

Cap for Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018

For the purpose of complying with Chapter 14A of the Listing Rules, the Company has set a cap in respect of the aggregate fees payable by the Company to Zhejiang Shunchang for the Engineering Services during the term of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018, which shall not exceed RMB76,564,938.

The above cap was determined after taking into account total service fees payable to Zhejiang Shunchang in respect of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018.

REASONS FOR AND BENEFITS OF THE TRANSACTION

Engineering Services, including asphalt pavement on-site thermal regeneration service, are necessary for the operation of the Target Expressways. Zhejiang Shunchang has the relevant qualifications and expertise to provide such services to the Company. In addition, the Company has also gone through the Public Tender in accordance with which Zhejiang Shunchang was selected as the qualified service provider for the Engineering Services.

Given the above, the Directors (including the independent non-executive Directors) are of the view that the terms of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 are on normal commercial terms, in the ordinary and usual course of business of the Company and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Communications Group is a controlling shareholder of the Company. Zhejiang Shunchang is a non wholly-owned subsidiary of Communications Group. Therefore, Zhejiang Shunchang is a connected person of the Company and as a result, the transactions under Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

Pursuant to Rules 14A.81 and 14A.82 of the Listing Rules, as the transactions contemplated under Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 and the Previous Transactions were entered into with parties who are connected with one another and within a 12-month period, Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 and the Previous Transactions are required to be aggregated for the calculation of the relevant percentage ratios to determine the classification of the transactions.

As the applicable percentage ratios in respect of the transactions contemplated under Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 after aggregating with the Previous Transactions, are more than 0.1% but less than 5%, Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 will be subject to the reporting, announcement and annual review requirements but exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

INFORMATION ON THE PARTIES

The Company is a joint stock company established under the laws of the PRC with limited liability on March 1, 1997, the H Shares of which are listed on the Main Board of the Stock Exchange. It is principally engaged in investing in, developing and operating high-grade roads in the PRC. The Group also carries on certain other businesses such as securities brokerage, investment banking, asset management, margin financing and securities lending through Zhejiang Zheshang Securities Co., Ltd..

Zhejiang Shunchang is a non wholly-owned subsidiary of Communications Group which is incorporated under the laws of the PRC on November 11, 2003. Zhejiang Shunchang is principally engaged in the construction and maintenance of expressway and toll road projects.

DEFINITIONS

In this announcement, unless the context specifies otherwise, the following defined expressions have the following meanings:

"Asphalt Pavement On-Site Thermal Regeneration Engineering Agreement for the year of 2018"	asphalt pavement on-site thermal regeneration engineering agreement dated August 7, 2018 entered into between the Company and Zhejiang Shunchang, pursuant to which Zhejiang Shunchang agreed to provide the Engineering Services to the Target Expressways
"associate"	has the meaning ascribed to it under the Listing Rules
"Board"	the board of Directors
"Communications Group"	Zhejiang Communications Investment Group Co., Ltd.*, a wholly state-owned enterprise established in the PRC, and the controlling shareholder of the Company
"Company"	Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in the PRC with limited liability
"connected person"	has the meaning ascribed to it under the Listing Rules
"controlling shareholder"	has the meaning ascribed to it under the Listing Rules
"Director(s)"	the directors of the Company
"Engineering Services"	engineering services of the following works, including (i) asphalt pavement on-site thermal regeneration work; (ii) roadbed work such as slope treatment; (iii) bridge work such as bridge fault maintenance and reinforcement; (iv) toll road station expansion work and (v) road safety work
"Group"	the Company and its subsidiaries
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Listing Rules"	Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"percentage ratios"	has the meaning ascribed to it under Rule 14.04(9) of the Listing Rules
"PRC"	the People's Republic of China (for the purpose of this announcement, excludes Hong Kong, Macau and Taiwan)
"Previous Transactions"	the agreements entered into within a 12-month period prior to the date of Asphalt Pavement On-site Thermal Regeneration Engineering Agreement for the year of 2018 between or among the Group and Communications Group's associates in relation to highway operations and maintenance services. For details, please refer to the announcements issued by the Company dated April 8, 2016, June 23 and 26, 2017 and May 28, 2018 respectively.
"RMB"	Renminbi, the lawful currency of the PRC
"Shareholder(s)"	holder(s) of the share(s) of the Company
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"subsidiary(ies)"	has the meaning ascribed to it under the Listing Rules
"Target Expressways"	the Shanghai-Hangzhou-Ningbo Expressway, Jinhua section of the Ningbo-Jinhua Expressway and the Huihang Expressway
"Zhejiang Shunchang"	Zhejiang Shunchang High-grade Expressway Maintenance Co.,  Ltd.*, a non wholly-owned subsidiary of Communications Group
"%"	per cent.
* English names for reference only

On behalf of the Board           
ZHEJIANG EXPRESSWAY CO., LTD.
 YU Zhihong                    
Chairman                     

Hangzhou, the PRC, August 7, 2018

As at the date of this announcement, the Chairman of the Company is Mr. YU Zhihong; the executive Directors of the Company are: Mr. CHENG Tao and Ms. LUO Jianhu; the other non-executive Directors of the Company are: Mr. DAI Benmeng, Mr. YU Qunli and Mr. YU Ji; and the independent non-executive Directors of the Company are: Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa and Mr. CHEN Bin.

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