Zhejiang Expressway Continuing Connected Transaction

 
TIDMZHEH 
 
Hong Kong Stock 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. 
 
                         ZHEJIANG EXPRESSWAY CO., LTD. 
 (A joint stock limited company incorporated in the People's Republic of China 
                           with limited liability) 
                               (Stockcode:0576) 
 
                       CONTINUING CONNECTED TRANSACTION 
                     DEDICATED ROAD MAINTENANCE AGREEMENT 
 
THE DEDICATED ROAD MAINTENANCE AGREEMENT 
On May 28, 2018, the Company entered into the Dedicated Road Maintenance 
Agreement with Maintenance Co, pursuant to which Maintenance Co agreed to 
provide the Dedicated Maintenance Services to the Group's four expressways from 
May 28, 2018 to November 30, 2018. 
 
LISTING RULES IMPLICATIONS 
 
As at the date of this announcement, Communications Group is a controlling 
shareholder of the Company. Maintenance Co is a non-wholly-owned subsidiary of 
Communications Group. Therefore, Maintenance Co is a connected person of the 
Company and as a result, the transactions under the Dedicated Road Maintenance 
Agreement 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 the Dedicated Road Maintenance Agreement and the Previous 
Transactions were entered into with parties who are connected with one another 
and within a 12-month period, the Dedicated Road Maintenance Agreement 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 the Dedicated Road Maintenance Agreement after aggregating the Previous 
Transactions, are more than 0.1% but less than 5%, the Dedicated Road 
Maintenance Agreement 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 March 1, 2018, the Company organised a public tender in respect of the 
provision of Dedicated Maintenance Services to the Target Expressways, namely, 
the Shanghai-Hangzhou-Ningbo Expressway, the Shangsan Expressway, Jinhua 
section of the Ningbo-Jinhua Expressway and the Hanghui Expressway (the "Public 
Tender"). A tender notice in respect of the Public Tender was published on the 
website of the Company and www.chinabidding.com.cn on March 1, 2018. 
 
Evaluation of the Public Tender was conducted by a committee consisting of 
industry experts. The committee considered the following factors when 
evaluating candidates to the Public Tender: (1) working plan proposed by the 
tenderers and their technical capability; (2) standard of safety management of 
the tenderers and their capability of handling emergency events; (3) quality of 
work and ability to deliver work on a timely manner; (4) experience of the 
tenderers in similar projects and (5) reputation of tenderers. 
 
After taking into account the above evaluation criteria, the management of the 
Company decided to accept the committee's recommendation and awarded a contract 
to Maintenance Co to provide the Dedicated Maintenance Services. Maintenance Co 
was amongst four entities (three of which being independent suppliers) who 
submitted tenders to the Company. 
 
THE DEDICATED ROAD MAINTENANCE AGREEMENT 
 
On May 28, 2018, the Company entered into the Dedicated Road Maintenance 
Agreement with Maintenance Co, pursuant to which Maintenance Co agreed to 
provide the Dedicated Maintenance Services to the Group's four expressways from 
May 28, 2018 to November 30, 2018. 
 
Principal terms of the Dedicated Road Maintenance Agreement are set out below: 
 
Date:          May 28,2018 
 
Parties:       (1)       the Company,as the contract letting party; and 
 
               (2)       Maintenance Co,as the contractor 
 
Term:          The term of the Dedicated Road Maintenance Agreement is from May 
               28,2018 to November 30, 2018. 
 
Subject        Maintenance Co agreed to provide certain dedicated 
matter:        maintenance services in respect of the Target Expressways, 
               namely Shanghai-Hangzhou-Ningbo Expressway, the Shangsan 
               Expressway, Jinhua section of the Ningbo-Jinhua Expressway and 
               the Hanghui Expressway, including road work, roadbed work, 
               bridge work, road safety related work and certain specific 
               maintenance services. 
 
Consideration: RMB199,877,381 
 
Basis of       The consideration was determined as a result of the 
consideration: Public Tender of the Dedicated Maintenance Services for the 
               Target Expressways. Maintenance Co was successfully awarded the 
               bid in accordance with terms of the Public Tender. 
 
               To ensure that the terms offered by Maintenance Co are fair, 
               reasonable and no less favourable than those provided by 
               independent third parties to the Group, the Company compared 
               prices offered by each of the tenderers for the Dedicated 
               Maintenance Services. In addition, prices offered by independent 
               suppliers are also higher than that offered by Maintenance Co. 
 
Payment:       The consideration is paid in two installments: (i) 97% to be 
               paid upon completion of the Dedicated Maintenance Services; and 
               (ii) 3% to be paid within 15 days after acceptance of completion 
               and finalisation of the completion and settlement report. 
 
Governing law: PRC law 
 
 
Cap for the Dedicated Road Maintenance Agreement 
 
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 
Maintenance Co for the Dedicated Maintenance Services during the term of the 
Dedicated Road Maintenance Agreement, which shall not exceed RMB199,877,381. 
 
The above cap was determined after taking into account (i) total service fees 
payable to the Maintenance Co in respect of the Dedicated Road Maintenance 
Agreement, and (ii) service fees charged by independent third parties offering 
comparable services. 
 
REASONS FOR AND BENEFITS OF THE TRANSACTION 
 
Specific maintenance services including the Dedicated Maintenance Services are 
necessary for the operation of the Target Expressways. Maintenance Co has the 
relevant qualifications and expertise to provide such services to the Company. 
In addition, the Company has also gone through the Public Tender to select 
Maintenance Co as the qualified service provider for the Dedicated Maintenance 
Services. Maintenance Co offered the lowest price amongst all the tenderers, 
and the terms offered by Maintenance Co are also no less favourable than those 
provided by independent third parties of the Group. 
 
Given the above, the Directors (including the independent non-executive 
Directors) are of the view that the terms of the Dedicated Road Maintenance 
Agreement 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. Maintenance Co is a non-wholly-owned subsidiary of 
Communications Group. Therefore, Maintenance Co is a connected person of the 
Company and as a result, the transactions under the Dedicated Road Maintenance 
Agreement 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 the Dedicated Road Maintenance Agreement and the Previous 
Transactions were entered into with parties who are connected with one another 
and within a 12-month period, the Dedicated Road Maintenance Agreement 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 the Dedicated Road Maintenance Agreement after aggregating the Previous 
Transactions, are more than 0.1% but less than 5%, the Dedicated Road 
Maintenance Agreement 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 1 March 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.. 
 
Maintenance Co is a non wholly-owned subsidiary of Communications Group which 
was incorporated under the laws of the PRC with limited liability on January 
28, 2014. Maintenance Co is principally engaged in the construction of 
transportation projects and maintenance of toll road. 
 
DEFINITIONS 
 
In this announcement, unless the context specifies otherwise, the following 
defined expressions have the following meanings: 
 
"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 
 
"Dedicated Maintenance    dedicated maintenance services including (i) road 
Services"                 work such as pavement diseases treatment, bridge deck 
                          overlay, pavement overlay; (ii) roadbed work such as 
                          slope treatment; (iii) bridge work such as bridge 
                          fault maintenance and reinforcement and deck system 
                          maintenance; (iv) road safety work such as signs, 
                          road markings and fence maintenance and (v) specific 
                          maintenance services such as tunneling and greening 
 
"Dedicated Road           the dedicated road maintenance agreement dated May 
Maintenance Agreement"    28, 2018 entered into between the Company and 
                          Maintenance Co, pursuant to which Maintenance Co 
                          agreed to provide the Dedicated Maintenance Services 
                          to the Target Expressways 
 
"Director(s)"             the directors of the Company 
 
"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 
 
"Maintenance Co"          Zhejiang Expressway Maintenance Co., Ltd.*,  a  non 
                           wholly-owned subsidiary of Communications Group 
 
"percentage ratio"        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 between or among the 
                          Group and Communications Group's associates within a 
                          12-month period prior to the date of the Dedicated 
                          Road Maintenance Agreement 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 and June 23, 2017 
                          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, the Shangsan 
                          Expressway, Jinhua section of the Ningbo-Jinhua 
                          Expressway and the Hanghui Expressway 
 
"%"                       per cent. 
 
*   English names for 
reference only 
 
                                          On behalf of the Board 
                                                  ZHEJIANG EXPRESSWAY CO., LTD. 
                                              YU Zhihong 
                                               Chairman 
 
Hangzhou, the PRC, May 28, 2018 
 
As at the date of this announcement, the Chairman of the Company is Mr. YU Zhihong; 
 the executive directors of the Company include: 
 Mr. CHENG Tao and Ms. LUO Jianhu; 
 the other non-executive directors of the Company include: 
 Mr. DAI Benmeng, Mr. YU Qunli and Mr. YU Ji; 
 and the independent non-executive directors of the Company include: 
 Mr. PEI Ker-Wei, Ms. LEE Wai Tsang, Rosa and Mr. CHEN Bin. 
 
 
 
END 
 

(END) Dow Jones Newswires

May 29, 2018 02:26 ET (06:26 GMT)