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Shenzhen Expressway Makes Foray Into New Energy Business, Through Acquisition of 51% Equity Interest of Nanjing Wind Power

release time:2019-03-15 source:Shenzhen Expressway

(Hong Kong, 15 March 2019) Shenzhen Expressway Company Limited (hereinafter referred to as “Shenzhen Expressway", “the Company” or “the Group”; Stock Code: 600548.SH, 00548.HK) announced that its wholly owned subsidiary Shenzhen Expressway Environmental Company Limited (hereinafter referred to as “Environmental Company”) entered into an agreement with Nanjing Wind Power Technology Co., Ltd. (hereinafter referred to as “Nanjing Wind Power”) in relation to the acquisition of 51% equity interest of Nanjing Wind Power by way of equity transfer and capital contribution at a consideration of RMB510 million (hereinafter referred to as the “M&A Project”).

Take company’s strategy forward and optimise business structure with participation in wind power business

As a company engaged in transport infrastructure and environmental protection businesses, Shenzhen Expressway has made foray into many sub-sectors of the environmental protection industry, including water environment governance and solid waste treatment, by acquiring shares of two leading enterprises in the environmental protection industry in 2017 and into the wind power business after consideration and analysis. Wind power, as a clean energy source, is a sub-sector under the big sector of environmental protection business of the Group which is supported by national policies and has broad market prospects. Wind power industry covers such sub-sectors as wind power equipment, wind power farm operation and wind power farm maintenance. In particular, the wind power farm operation business and the toll road business share a very similar operation model as they are both franchise businesses with stable cash flows. Besides, the wind power farm operation business has simpler management procedures than the toll road business and boasts an investment yield rate that can better meet the return requirement of the Company. The wind power farm operation business is in line with the Company’s development strategy.

After the explosive growth and the fall into a trough, China's wind power industry is gradually moving toward stable development. In recent years, the state has continuously introduced relevant policies to promote the development of the wind power industry and facilitate the rapid growth of the wind power industry. According to the “13th Five-Year Plan for the Development of Wind Power Sector” of the Nation Energy Administration, it is specified that the grid-connected installed capacity of wind power projects shall reach 210 GW by the end of 2020 and there is still a shortage of nearly 50 GW. Besides, the proportion of wind power in energy composition is less than 5%. But as more demanding regulations will be imposed on atmospheric control by the Chinese government, new energy will gain greater shares in the future. Therefore, China’s wind power market will have larger room for growth. A high-tech company engaged in renewable energy and wind power and an overall solutions provider of wind power generation system for wind power farm, Nanjing Wind Power owns independent intellectual property rights over its core technology and has experience and capability in the development, construction, operation and management of wind power farms. Its business has good prospects in the market. Through the M&A Project, the Group will acquire advantages in equipment, technology, operation and maintenance and wind power farm resources, which can lay a foundation for the Group to rapidly enter the wind power industry and to seek further growth.

The management of Shenzhen Expressway said that the M&A Project will comprise the Group’s acquisition of 30% equity interest of Nanjing Wind Power at a consideration of RMB210 million and a one-way capital contribution of RMB300 million into Nanjing Wind Power after the acquisition. Upon the completion of the transaction, Environmental Company will hold 51% equity interest of Nanjing Wind Power, which, in turn, will become the non-wholly owned subsidiary of the Group and its financial results will be consolidated into the Group’s financial statements as well. The Group’s acquisition of the equity interests of Nanjing Wind Power is made at a reasonable consideration, which, can not only expand the revenue source and profit base of Shenzhen Expressway but also allow Shenzhen Expressway to establish a complementary relationship with Nanjing Wind Power, accelerate the expansion into the field of new energy and optimise the business structure of the Group. The investment in Nanjing Wind Power will effectively develop the Group's major environmental protection business, which is in line with the Group's development strategy and overall interests.

Shenzhen Expressway’s healthy and sustainable development underpinned by two major businesses

The acquisition and capital contribution represent another milestone of Shenzhen Expressway in the execution of the dual main businesses strategy and will enable the Group to expand the environmental protection business and further determine the sub-sectors under the environmental business, providing strong support for the Group’s stable, healthy growth in the long term. In addition, the acquisition and capital contribution will further consolidate Shenzhen Expressway’s core advantages in investment, management and operation and therefore are in line with the development strategy and interest of Shenzhen Expressway. The Group will finalise the equity transfer as soon as practicable and will work closely with other shareholders and the management to achieve better production, operation and management and a larger business scale so as to create more lucrative returns and greater values for shareholders and the society.