SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2004
China Petroleum & Chemical Corporation
A6, Huixindong Street,
Chaoyang District Beijing, 100029
People's Republic of China
Tel: (8610) 6499-0060
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
----- -----
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. )
Yes No X
----- -----
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b):82-__________. )
N/A
This Form 6-K consists of:
Announcement of connected transactions and continuing connected
transactions pursuant to the Resolutions approved on October 31, 2004, made on
November 1, 2004 in English by China Petroleum & Chemical Corporation (the
"Registrant").
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
China Petroleum & Chemical Corporation
By: /s/ Chen Tonghai
----------------
Name:Chen Tonghai
Title: Chairman of the Board of Directors
Date: November 1, 2004
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company incorporated in the People's Republic
of China with limited liability)
(Stock code: 386)
Connected transactions
and continuing connected transactions
Summary
Background
The Board considered and approved the Resolutions at the 12th meeting of the
second session of the Board held on 31st October 2004. Pursuant to the
Resolutions, Sinopec Corp. will (i) acquire the Acquiring Assets from, inter
alia, Sinopec Group Company and (ii) dispose the Disposal Assets to Sinopec
Group Company.
The Board also approved the entering into of the Acquisition Agreements, the
Disposal Agreement and the New Continuing Connected Transactions Adjustment
Agreement between Sinopec Corp. and Sinopec Group Company.
According to the valuation reports prepared by the independent valuers in
respect of the Acquiring Assets, the aggregate asset value amounts to
RMB17,154 million (which is equivalent to approximately HK$16,183 million),
the liabilities amount to RMB12,734 million (which is equivalent to
approximately HK$12,013 million) and net asset value amounts to RMB4,215
million (which is equivalent to approximately HK$3,976 million) after the
deduction of minority interests which amount to RMB205 million (which is
equivalent to approximately HK$193 million).
According to the valuation report prepared by the independent valuer in
respect of the Disposal Assets, as at the Valuation Date, the aggregate asset
value amounts to RMB2,147 million (which is equivalent to approximately
HK$2,025 million), the liabilities amount to RMB399 million (which is
equivalent to approximately HK$376 million) and net asset value amounts to
RMB1,748 million (which is equivalent to approximately HK$1,649 million).
The consideration for the Acquisition is RMB4,578 million (which is equivalent
to approximately HK$4,319 million) while the consideration for the Disposal is
RMB1,748 million (which is equivalent to approximately HK$1,649 million). If
the transactions are approved by the Independent Shareholders, the balance of
the consideration after offsetting being in the sum of RMB2,830 million (which
is equivalent to approximately HK$2,670 million) will be payable by Sinopec
Corp. to Sinopec Group Company.
Impacts on Sinopec Corp.
From the strategic perspective, the transactions contemplated under the
Acquisition Agreements and Disposal Agreement effectively broaden Sinopec
Corp.'s core businesses through significant expansion of the scale of its
petrochemical facilities, improvement to the operation and retail network of
oil products, consolidation of the catalyst business and adoption of
international management structure and practice for the upstream business.
Upon completion of the transactions, Sinopec Corp.'s management structure will
further systematise, resulting in more efficient management of operations,
investments and resource allocation.
There will be further reduction in both continuing connected transactions and
industry competition between Sinopec Corp. and Sinopec Group Company upon the
completion of the Acquisition and Disposal.
Connected Transactions and Continuing Connected Transactions
The Acquiring Assets are owned by Sinopec Group and Sinopec Group Company, on
behalf of itself and other members of the Sinopec Group, entered into the
Acquisition Agreements with Sinopec Corp. The Disposal Assets are owned by the
Company and Sinopec Corp., on behalf and other members of the Company, entered
into the Disposal Agreement with Sinopec Group Company.
Sinopec Group Company owns 47,742,561,000 shares in Sinopec Corp.,
representing 55.06% of its total issued share capital. Recently, Sinopec Group
Company had entered into share transfer agreements with Sinopec Corp.'s
shareholders, the China Development Bank and China Cinda Asset Management
Corporation pursuant to which the China Development Bank agreed to transfer
its 6,143,000,000 state-owned shares (representing 7.085% of the total issued
share capital), and China Cinda Asset Management Corporation agreed to
transfer its 5,000,000,000 state-owned shares (representing 5.767% of the
total issued share capital), to Sinopec Group Company. The SASAC and MOF have
approved the transfers. Sinopec Group Company is still required to apply for a
waiver from making a general offer with CSRC. If the transfer is completed,
Sinopec Group Company will in total hold 58,885,561,000 shares of Sinopec
Corp., representing approximately 67.917% of the issued share capital of
Sinopec Corp. Sinopec Group Company, being a substantial shareholder of
Sinopec Corp., is a connected person under Rule 14A.11(1) of the Listing
Rules. Consequently, the Acquisition and Disposal will constitute connected
transactions under Rule 14A.13 of the Listing Rules and the applicable
provisions of the Shanghai Listing Rules.
A number of continuing connected transactions will be entered into between the
Sinopec Group and the Company as a result of the Acquisition and Disposal.
Further details of such transactions are set out in section 6 of this
announcement.
Notes to the Investors
(1) Pursuant to the Listing Rules and Shanghai Listing Rules, the
transactions contemplated under the Acquisition Agreements and Disposal
Agreement constitute connected transactions for Sinopec Corp. The
Acquisition and Disposal are subject to the approval of Independent
Shareholders at the EGM. Sinopec Group Company, a connected person of
Sinopec Corp. under the Listing Rules, will abstain from voting in
respect of the Resolutions at the EGM.
(2) The financial data were prepared and provided for in accordance with the
PRC Accounting Rules and Regulations. In respect of the Acquiring Assets
and Disposal Assets, there is no material difference between the related
financial data prepared under the PRC Accounting Rules and Regulation
and those prepared in accordance with International Financial Reporting
Standard.
(3) Each of the transactions contemplated under the Acquisition Agreements
and Disposal Agreement is independent from each other. If any of the
said transactions is not completed, the remaining transactions shall not
be affected.
(4) The Acquisition and Disposal are subject to the approval of SASAC and
the asset valuation reports are to be filed with SASAC. Furthermore, the
effectiveness of such transactions are also subject to the satisfaction
of all conditions precedent under the Acquisition Agreements and
Disposal Agreement.
Independent Financial Adviser
Rothschild has been retained as the Independent Financial Adviser to the
Independent Non-Executive Directors and the Independent Shareholders.
The Acquisition and the Disposal require the approval of the Independent
Shareholders at the EGM at which Sinopec Group Company and its associates will
abstain from voting. Any vote of the Independent Shareholders at the EGM shall
be taken by poll.
Financial Adviser
CICC is the financial advisers to Sinopec Corp. in respect of the Acquisition,
the Disposal and the Continuing Connected Transactions.
Views of the Directors and the Independent Non-Executive Directors
The Directors including the Independent Non-Executive Directors are of the
view that the terms of the Acquisition and Disposal are fair and reasonable so
far as the shareholders of Sinopec Corp. are concerned and the Acquisition
Agreements and Disposal Agreement were negotiated on an arm's length basis and
were arrived at on normal commercial terms. The Directors, Mr. Chen Tonghai
(being the General Manager of Sinopec Group Company) and Mr. Liu Genyuan
(being the Deputy General Manager of Sinopec Group Company) abstained from
voting in such meeting of the Board by reason of conflict of interests.
Dispatch of Shareholders' Circular
A circular containing, amongst other things, details of the terms of the
Acquisition, the Disposal and the Continuing Connected Transactions, letters
from the Independent Non-Executive Directors and from Rothschild, further
information in respect of the Target Assets and a notice to shareholders of
Sinopec Corp. convening an EGM to approve, amongst other things, the terms of
the Acquisition and the Disposal will be dispatched to the shareholders of
Sinopec Corp. as soon as practicable and within 21 days from this
announcement.
Suspension and resumption of trading
At the request of Sinopec Corp., trading of shares of Sinopec Corp. on the
Hong Kong Stock Exchange and Shanghai Stock Exchange were suspended on 1
November 2004 pending release of this announcement. Application has been made
with both exchanges for the resumption of trading of Sinopec Corp.'s shares
with effect from 9.30 am on 2 November 2004.
1. Introduction
The Board considered the "Proposal in respect of the acquisition of
petrochemical assets from Sinopec Group Company", "Proposal in respect
of the acquisition of catalyst production assets from Sinopec Group
Company, "Proposal in respect of the acquisition of gas station assets",
"Proposal in respect of the disposal of downhole operation assets to
Sinopec Group Company" and "Proposal in respect of the New Continuing
Connected Transactions Adjustment Agreement" (together the
"Resolutions") at the 12th meeting of the second session of the Board
held on 31st October 2004. Pursuant to the Proposed Resolutions, Sinopec
Corp. will (i) acquire certain assets including petrochemical assets,
catalyst production assets and gas station assets (together the
"Acquiring Assets") from Sinopec Group Company and its subsidiaries, and
(ii) dispose the downhole operation assets (the "Disposal Assets") to
Sinopec Group Company.
According to the valuation reports prepared by the independent valuers
in respect of the Acquiring Assets, as of the Valuation Date, the
aggregate asset value amounted to RMB17,154 million (approximately
HK$16,183 million), total liabilities amounted to RMB12,734 million
(approximately HK$12,013 million) and after the deduction of minority
interests which amounted to RMB205 million (approximately HK$193
million), the net asset value amounted to RMB4,215 million
(approximately HK$3,976 million).
According to the valuation report prepared by the independent valuer in
respect of the Disposal Assets, as of the Valuation Date, the aggregate
asset value amounted to RMB2,147 million (approximately HK$2,025
million), total liabilities amounted to RMB399 million (approximately
HK$376 million) and net asset value amounted to RMB1,748 million
(approximately HK$1,649 million).
The consideration for the Acquisition is RMB4,578 million (approximately
HK$4,319 million) while the consideration for the Disposal is RMB1,748
million (approximately HK$1,649 million). The balance of consideration
after offsetting in the sum of RMB2,830 million (approximately HK$2,670
million) will be payable by Sinopec Corp. to Sinopec Group Company. The
Board also approved the execution of the Acquisition Agreements, the
Disposal Agreement and the New Continuing Connected Transactions
Adjustment Agreement between Sinopec Corp. and Sinopec Group Company.
2. The Acquisition and the Disposal
2.1 The Acquisition
(1) The Petrochemical Assets
Date: 31 October 2004
Parties: Vendors: Sinopec Group Company (on its own
behalf and on behalf of the
Authorising Entities)
Purchaser: Sinopec Corp.
Assets to be (i) The principal ethylene and synthetic fiber
monomers and polymers production purchased:
facilities of Tianjin Petrochemical and
related liabilities
(ii) The principal synthetic fiber monomers and
polymers products production facilities of
Luoyang Petrochemical and related
liabilities
(iii) 93.51% equity interest in Zhongyuan
Petrochemical held by Sinopec Group Company
(iv) The 5,000,000 tonnes per year AVD unit, the
1,400,000 tonne per year catalytic
cracking unit of Maoming Petrochemical
(v) Certain power generation facilities of
Guangzhou Petrochemical and related
liabilities
According to the valuation reports prepared by independent
valuers, as of the Valuation Date, the results of the valuation of
the Petrochemical Assets are as follows: total assets were
RMB13,904 million (approximately HK$13,116 million); the
liabilities were RMB11,699 million (approximately HK$11,037
million); after the deduction of minority interest of RMB42
million (approximately HK$40 million), net assets were RMB2,163
million (approximately HK$2,040 million). Consideration is
RMB1,977 million (approximately HK$1,865 million).
(2) The Catalyst Assets
Date: 31 October 2004
Parties: Vendors: Sinopec Group Company (on its own
behalf and on behalf of the
Authorising Entities)
Purchaser: Sinopec Corp.
Assets to be (i) Primary assets owned by the Changling Plant
purchased: (ii) The 81% equity interest in Jianchang
Petrochemical
(iii) Primary assets of Qilu Catalyst
(iv) Primary assets owned by the Technologies
Development Company
(v) The 50% equity interest in Aoda Technology
(vi) The 60% equity interest in Lide Catalyst
(vii) Primary assets of the Shanghai Research
Institute
(viii) All the assets owned by Nanlian Catalyst
and related liabilities
According to the valuation reports prepared by independent
valuers, as at the Valuation Date, the results of the valuation of
the Catalyst Assets are as follows: total assets were RMB1,885
million (approximately HK$1,778 million); the liabilities were
RMB1,024 million (approximately HK$966 million); after the
deduction of minority interest of RMB163 million (approximately
HK$154 million), net assets were RMB698 million (approximately
HK$659 million). Consideration is RMB720 million (approximately
HK$679 million).
(3) The Gas Station Assets
Date: 31 October 2004
Parties: Vendors: Sinopec Group Company (on its own
behalf and on behalf of the
Authorising Entities)
Purchaser: Sinopec Corp.
Assets to be the assets, interests and certain related
liabilities of 1,023 gas stations and 54 oil
purchased: depots owned by Sinopec Group Company and the
Authorising Entities
According to the valuation reports prepared by independent
valuers, as at the Valuation Date, the results of the valuation of
the Gas Station Assets are as follows: total assets were RMB1,364
million (approximately HK$1,287 million); the liabilities were
RMB11 million (approximately HK$10 million); net assets were
RMB1,353 million (approximately HK$1,276 million). Consideration
is RMB1,881 million (approximately HK$1,775 million).
2.2 The Disposal
Date: 31st October 2004
Parties: Vendor: Sinopec Corp. (on its own behalf and
on behalf of the Authorising Entities)
Purchaser: Sinopec Group Company
Assets to be Downhole Operation Assets, including downhole
operation assets owned by Shengli Oilfield
disposed: Company Limited, Zhongyuan Oilfield Branch
Company, Henan Oilfield Branch Company, Jianghan
Oilfield Branch Company, Jiangsu Oilfield Branch
Company, Huabei Branch Company, Huadong Branch
Company and Xinan Branch Company
According to the valuation reports prepared by independent valuers, as
at the Valuation Date, the results of the valuation of the Downhole
Operation Assets are as follows: total assets were RMB2,147 million
(approximately HK$2,025 million); total liabilities were RMB399 million
(approximately HK$376 million); net assets were RMB1,748 million
(approximately HK$1,649 million). Consideration is RMB1,748 million
(approximately HK$1,649 million).
2.3 Terms of the Acquisition and the Disposal
(1) Pricing Policy and Consideration
(i) The considerations for the Acquisition and the Disposal were
determined with reference to the valued figures prepared by
independent valuers and by taking into account a number of factors
which include the valued figures in other similar transactions of
comparable companies, ability of generating cash flows, quality of
assets, business' development potential and the position in the
industry cycle of the Target Assets. The agreed considerations for
the Acquisition and the Disposal were reached after arms-length
negotiations between the parties.
Pursuant to the Acquisition Agreements and the Disposal Agreement,
the respective considerations were agreed as follows:
Unit: RMB thousand
Total Total Miniority Surplus/
Assets Liabilities Interests Net Assets (Deficit)
valued valued valued valued Price
Item amount amount amount amount Consideration (%)
Acquiring Assets
Petrochemical Assets 13,904,128 11,698,592 42,359 2,163,177 1,977,000 -8.61
Gas Station Assets 1,364,357 10,964 - 1,353,393 1,881,217 39.00
Catalyst Assets 1,885,282 1,024,383 162,751 698,148 720,000 3.13
Total 17,153,767 12,733,939 205,110 4,214,718 4,578,217 8.62
Disposal Assets
Downhole Operation Assets 2,146,863 399,096 - 1,747,767 1,747,767 (note 1)
Net Effect 15,006,904 12,334,843 205,110 2,466,951 2,830,450 14.73
Note
(1): The sale price of the Downhole Operation Assets is equal to the valued amount.
(ii) The parties also agreed that, after the signing of the Acquisition
Agreements and the Disposal Agreement, if the Target Assets' asset
value decreases or liabilities to increase or the Vendor breaches
any of its obligation under the said agreements, including
declarations, representations and warranties, the parties shall
agree to adjust the considerations of the transaction accordingly.
(2) Settlement of consideration
The total consideration in respect of the Acquisition will be set-off
against the consideration for the Disposal by way of an asset swap. The
balance shall be settled in cash within 20 Business Days from
completion.
2.4 Completion and Completion Date
(1) Completion
The Vendor will deliver to the Purchaser relevant documents of title,
government approvals, personnel data and other agreements and related
legal documents that reflect the status of the Target Assets to the
Purchaser at the Completion Date. The Vendor will also comply with the
necessary legal procedures to ensure that the Purchaser will take
ownership and control over the Target Assets. The Purchaser will be
responsible for the debts arising from the Target Assets from the
Completion Date.
(2) Completion Date
The Completion Date will be 31 December 2004 or such later date as the
parties may otherwise agree in writing.
(3) Risks before completion
Subject to the terms of the Acquisition Agreements and the Disposal
Agreement, all the risks and benefits arising from the Target Assets
between the respective Valuation Dates and completion shall be borne and
in the account of the Vendor. The consideration will be adjusted
accordingly. Please refer to section 2.3(1)(ii) of this announcement.
2.5 Conditions precedent to the Acquisition Agreements and the Disposal
Agreement becoming effective:
The effectiveness of each of the Acquisition Agreements and the Disposal
Agreement is conditional upon:
1. the agreements having been signed by the authorized representative
of the parties;
2. the parties having complied with their respective internal
approval procedures and obtained such respective internal
approvals.
2.6 Conditions to completion of the Acquisition Agreements and the Disposal
Agreement:
Completion of each of the Acquisition Agreements and the Disposal
Agreement is conditional upon the satisfaction or the waiver of:
1. the agreements becoming effective;
2. there has not been any breach, or evidence evidencing any breach,
of the agreements;
3. the obtaining of all necessary governmental approvals for the
Acquisition and the Disposal;
4. there has not been any material adverse change to the assets,
financial condition, business operation and future prospects of
the companies comprised in the Target Assets and Downhole
Operation Assets;
5. the land and property comprised in the Target Assets having
obtained legal title documents;
6. the obtaining of all necessary third parties' approvals and
consents in respect of the Acquisition and the Disposal;
7. the independent financial advisers appointed by Sinopec Corp.
opining that the terms of the Acquisition and Disposal are fair.
2.7 Necessary approvals:
The Acquisition and Disposal are subject to the approval by the
Independent Shareholders at the EGM. Sinopec Group Company will apply
with the SASAC for approval of the sale of the Target Assets and the
filing of the valuation reports on the state-owned assets involved.
2.8 Warranties and undertakings
(1) Sinopec Group Company has agreed that, at any time before
completion, it will, and will procure that the subsidiaries on
behalf of which it represents, operate in accordance with its
ordinary course of business and in a manner consistent with the
past.
(2) In relation to the land and building involved in the acquisition,
Sinopec Group Company undertakes that:
(i) in relation to the land use rights included in the Target
Assets and the land which will be leased by Sinopec Corp.
after completion, in relation to those which have been
issued with the relevant title certificates or assigned
land, Sinopec Group Company warrants the completeness and
legality of the land use rights of such land. In relation to
the land which has not been issued with the relevant title
certificate, Sinopec Group Company undertakes to use its
best endeavours to obtain the relevant title certificates
and related title documents and warrants the validity and
legality of the leasing by Sinopec Corp. of such land;
(ii) in relation to the buildings included in the Target Assets
and the buildings which will be leased by Sinopec Corp.
after completion, Sinopec Group Company warrants the
completeness and legality of the transfer of such buildings.
In relation to the buildings which have not been issued with
the relevant title certificate at the date of the agreement,
Sinopec Group Company undertakes to use its best endeavours
to obtain the relevant title certificates and related title
documents;
(iii) any tax or costs involved in issuing the above-mentioned
land and building title documents and to protect the
legality and validity of the leasing of the land and
buildings will be borne by Sinopec Group Company;
(iv) the parties agree that Sinopec Group Company will indemnify
Sinopec Corp. against all actual and foreseeable losses
arising from the above-mentioned irregularity or
incompleteness of land and building title and tile
documents; and
(v) the above warranties and undertakings will survive after
completion and will not be affected by completion.
Sinopec Corp. does not believe there would be any material adverse
effect on its operations arising from the above.
2.9 Personnel Arrangements
As agreed between the parties, the employment relationships, pension
insurance and medical insurance of all registered personnel (including
management staff and common staff) relating to the Acquisition and
Disposal shall be retained by the Purchaser. The employment
relationships in respect of the Gas Station Assets shall remain
unchanged after the Acquisition. Sinopec Group Company and the
Authorizing Entities shall maintain such employment relationships and
provide alternative arrangements to those affected personnel. If Sinopec
Corp. decides to keep certain personnel associated with the Gas Station
Assets, the arrangements in respect of employment relationships shall be
made in accordance with the terms of relevant connected transaction
agreements between Sinopec Corp. and Sinopec Group Company. Sinopec
Corp. will comply with the connected transaction requirements under
Chapter 14A of the Listing Rules in relation to these arrangements.
2.10 Information on Sinopec Corp.
The principal operations of Sinopec Corp. and its subsidiaries include:
exploring for and developing, producing and trading crude oil and
natural gas; processing crude oil, producing petroleum products and
trading, transporting, distributing and marketing petroleum products,
producing, distributing and trading petrochemical products.
2.11 Information on the other party
(1) Information on Sinopec Group Company
(i) Basic information
Name of enterprise: China Petrochemical Corporation
Registered address: A6 Huixindong Street, Chaoyang
District, Beijing, PRC
Type of industrial and State-owned enterprise
commercial registration:
Legal representative: Mr. Chen Tonghai
Registered capital: RMB104.912 billion (approximately
HK$98.962 billion)
(ii) History
Sinopec Group Company is a large-scale petroleum and chemical
enterprise conglomerate established on the basis of the original
China Petrochemical Corporation in July 1998 according to the
"Reform Proposal for Organisations under the State Council" and
"Reply to Certain Questions relating to the Establishment of
Sinopec Group Company by the State Council", both approved at the
first meeting of the 9th session of the National People's
Congress. Sinopec Group Company is a state-owned and authorized
investment enterprise. Pursuant to its corporate restructuring in
2000, Sinopec Group Company injected its petroleum and
petrochemical business into Sinopec Corp.
(iii) Principal business of Sinopec Group Company
Sinopec Group Company is principally engaged in the business of
industrial investments and investment management; exploration and
development, production and construction, storage and
transportation and sale of petroleum and natural gas resources;
the wholesale of gasoline, kerosene and diesel; production,
storage and transportation and sale of petrochemical and related
products; the design, implementation and construction of petroleum
and petrochemical installations; maintenance and repair of
petroleum and petrochemical installations; the research,
development, implementation and related consulting services of
technology, IT and energy substitute products; and the import and
export of self-produced products and third parties' products and
technologies (other than those prohibited by the state).
(iv) Financial information of Sinopec Group Company
Below is a summary of the consolidated assets and liabilities, and
the income statement of Sinopec Group Company. The information is
extracted from its consolidated financial statements prepared in
accordance with PRC Accounting Rules and Regulations provided by
Sinopec Group Company.
Summary of Assets and Liabilities
Unit: RMB thousands
30 June 2004 31 December 2003
Items (unaudited) (audited)
Total assets 587,423,434 559,237,248
Liabilities 311,095,007 291,168,261
Minority interests 110,487,337 103,939,309
Net assets 165,841,090 164,129,678
Summary of Income Statement
Unit: RMB thousands
6-month period
ended 30 June 2004 31 December 2003
(unaudited) (audited)
Turnover 290,395,699 466,673,109
Cost of Sales 224,159,551 359,773,798
Profit before taxation 21,426,286 28,968,816
Net profit 5,526,014 8,675,552
2.12 Information on the Authorising Entities
Certain assets comprised in the assets proposed to be acquired by
Sinopec Corp. are owned by certain subsidiaries of Sinopec Group
Company. These subsidiaries have authorised Sinopec Group Company to
sell these assets to Sinopec Corp. In addition, certain assets comprised
in the assets proposed to be sold by Sinopec Corp. are owned by certain
subsidiaries of Sinopec Corp. These subsidiaries have authorised Sinopec
Corp. to sell these assets to Sinopec Group Company. The Authorising
Entities include the respective entities authorising the sale by Sinopec
Group Company of the Petrochemical Assets, the Catalyst Assets and the
Gas Station Assets and the entities authorising the sale by Sinopec
Corp. of the Downhole Operation Assets. These include:
(1) Tianjin Petrochemical, Luoyang Petrochemical, Maoming
Petrochemical and Guangzhou Petrochemical which authorised the
sale of the Petrochemical Assets.
(2) Changlin Plant, Sinopec Group Petroleum and Chemical Science
Research Centre, Yueyang Xingchang Petrochemcial Corporation,
Luoyang Petrochemical Plant Jinda Industry Limited, Qilu Plant,
Technologies Development Company, Shanghai Research Institute,
Nanjing Nanlian and Maoming Petrochemical which authorised the
sale of the Catalyst Assets.
(3) Sinopec Group Beijing Petroleum Company Limited, Sinopec Group
Tianjin Petroleum Company Limited, Sinopec Group Hebei Petroleum
Company Limited, Sinopec Group Shanxi Petroleum Company Limited,
Sinopec Group Shanghai Petroleum (Group) Company Limited, Sinopec
Group Jiangsu Petroleum Company Limited, Sinopec Group Zhejiang
Province Petroleum Company Limited, Sinopec Group Anhui Petroleum
Company Limited, Sinopec Group Fujian Petroleum Company Limited,
Sinopec Group Jiangxi Petroleum Company Limited, Sinopec Group
Shandong Province Petroleum Company Limited, Sinopec Group Henan
Petroleum Company Limited, Sinopec Group Hubei Petroleum Company
Limited, Sinopec Group Hunan Province Petroleum Company Limited,
Sinopec Group Guangdong Province Petroleum Company Limited,
Sinopec Group Guangxi Petroleum Company Limited, Sinopec Group
Hainan Petroleum Company Limited, Sinopec Group Yunnan Petroleum
Company Limited and Sinopec Group Shenzhen Petroleum Company
Limited which authorised the sale of the Gas Station Assets.
(4) Shengli Oilfield Company Limited which authorised the sale of the
Downhole Operation Assets.
3. Reasons and Benefits of the Acquisition and the Disposal
(1) Strengthening and Developing Core Businesses
(i) Petrochemical Business
Through acquisitions during the prosperous period of the
petrochemical industry cycle, the Company realises rapid expansion
and development of its petrochemical business.
Upon completion of the Acquisition, the Company is expected to
increase its production capacity of ethylene by 380,000 tonnes,
representing an increase of 12 #% based on the production capacity
of the year 2003. The production capacity of synthetic resin is
expected to increase 580,000 tonnes, representing an increase of
12%. The production capacity of ethylene glycol is expected to
increase 63,000 tonnes, representing an increase of 11%. The
production capacity of PX is expected to increase 414,100 tonnes,
representing an increase of 31%. The production capacity of PTA is
expected to increase 625,000 tonnes, representing an increase of
36%. The production capacity of synthetic fiber monomers and
polymers is expected to increase by 448,000 tonnes, representing
an increase of 24%. Accordingly, the Company's production scale in
the ethylene and synthetic fiber monomers and polymers industry
will be further enlarged.
(ii) Catalyst Business
The acquisition of the catalyst business by Sinopec Corp. will
effectively improve the Company's research and development, and
production capacities of catalyst because there is a close
relationship crude refining and chemical production. Such
acquisition also allows the Company to maintain core technologies
and strengthen its research and development of catalysis
technology. The competitiveness of the Company's oil refining and
chemical businesses will be improved accordingly.
Through the Acquisition, the Company will have control over the
production of major refining petrochemical catalysts in the
process units of catalytic cracking, hydroforming, basic organic
process and polyolefins. Consequently, the production capacities
of different types of oil refinery and petrochemical catalysts are
expected to increase from 2,800 tonnes to 80,730 tonnes,
representing over 60% of the total production capacity of
catalysts in the PRC.
(iii) Oil Products Retail Business
A number of 1,023 gas stations to be acquired by Sinopec Corp. are
located in 18 different provinces, cities and autonomous regions
in the eastern, central and southern parts of the PRC and are
logistically supported by 54 respective depots. Consequent to
certain improvements and restructuring made and undertaken in
recent years, the operation ability of the gas stations have
improved.
Pursuant to the World Trade Organisation Agreement entered into by
the PRC, the doors to the oil products retail industry in the PRC
will be officially opened to foreign investors on 11 December
2004. The Acquisition allows the Company to further strengthen its
retail capability of refined oil products in economic developed
regions, take advantage of its retail network's economies of
scale, improve the business' overall competitiveness and reinforce
the Company's leading status in the retail sector.
(iv) Downhole Operation Assets
The Downhole Operation Assets belong to the oilfield services
business and are currently providing services and support to the
Company internally. By disposing the Downhole Operation Assets to
Sinopec Group Company, the Company can focus on the developments
of its core upstream operations, aiming at becoming one of the
international oil companies. The Disposal will also allow the
Company's core businesses to stand out and production efficiency
to improve.
(2) Consolidating Management Structure, Improving Quality of Assets and
Achieving Harmonization Effect
Sinopec Corp. aims to further consolidate the management structure,
strengthen its corporate governance, promote profitability and improve
the quality of assets through the Acquisition. At the same time, through
the rationalization of the investment management structure and the
optimisation of the allocation of resources, the operations and
coordination amongst different arms of business will further harmonise.
(3) Reducing Continuing Connected Transactions and Industry Competition
Upon completion of the Acquisition and the Disposal, the continuing
connected transactions between Sinopec Corp. and Sinopec Group Company
will decrease, in monetary terms, by approximately RMB2,358 million
(approximately HK$2,225 million). In order to fulfil its promise given
at the time of the listing of the shares of Sinopec Corp. on the Stock
Exchange, the Acquisition which is conducted by virtue of the exercising
of pre-emptive rights granted to Sinopec Corp. further reduces existing
industry competition between Sinopec Corp. and Sinopec Group Company in
respect of the chemical, catalyst and retail operations.
(4) Financial Impact on Sinopec Corp.
According to the valuation reports prepared by the independent valuers,
as at the Valuation Date, the total assets and the net assets involved
in the Acquisition amounted to RMB17,154 million (approximately
HK$16,183 million) and RMB4,215 million (approximately HK$3,976)
respectively, while the total assets and net assets involved in the
Disposal amounted to RMB2,147 million (approximately HK$2,025 million)
and RMB1,748 million (approximately HK$1,648 million) respectively.
Based on the performance in the first six-month period of the year 2004,
sales revenue generated by the Acquiring Assets was RMB10,099 million
(approximately HK$9,527 million), with a net profit of RMB775 million
(approximately HK$731 million) while sales revenue generated by the
Disposal Assets was RMB2,830 million (approximately HK$2,670 million),
with a net loss of RMB105 million (approximately HK$99 million).
4. Non-competition with Sinopec Group Company
Prior to the restructuring of Sinopec Corp. for the purpose of its
listing of the Stock Exchange and for the protection of Sinopec Corp.'s
interest, Sinopec Group Company and Sinopec Corp. entered into the
Non-competition Agreement, pursuant to which Sinopec Group Company
undertook to Sinopec Corp., unless Sinopec Corp. agrees in writing or
under certain circumstances as permitted under the Non-Competition
Agreement, that it shall:
(1) not be involved in any business which competes or may compete with
Sinopec Corp.'s business;
(2) provide Sinopec Corp. with an option to purchase any business of
Sinopec Group Company which competes or may compete with Sinopec
Corp.'s business and right of first refusal over any business
which competes or may competes with Sinopec Corp.;
(3) adopt Sinopec Corp.'s mode of operation in respect of sales and
services to its own retail business and gas stations; and
(4) appoint Sinopec Corp. to become sales agent for its own products
which compete or may compete with Sinopec Corp.'s products.
The Directors and Independent Non-Executive Directors are of the view
that the terms of the Acquisition and Disposal are fair and reasonable
so far as the shareholders of Sinopec Corp. are concerned and in the
interest of them taken as a whole. The Acquisition Agreements and
Disposal Agreement were negotiated on an arm's length basis and were
arrived at on normal commercial terms. The Directors, Mr. Chen Tonghai
(being the Chief manager of Sinopec Group Company) and Mr. Liu Genyuan
(being the Deputy Manager of Sinopec Group Company) abstained from
voting in such meeting of the Board by reason of conflict of interests.
5. Details of the Target Assets
5.1 General
Based on the functions in the Sinopec Group and Sinopec Corp. production
and operation systems, and the types of products, the Target Assets
proposed to be acquired / disposed can be categorized into 4 sectors:
the Petrochemical Assets, the Catalyst Assets, the Gas Station Assets
and the Downhole Operation Assets.
The Petrochemical Assets proposed to be acquired are mainly relating to
the production of ethylene and its down-stream products, synthetic fiber
monomers and polymers products, and refined oil. Among the Petrochemical
Assets, the assets of Tianjin Petrochemical are mainly relating to the
production of ethylene, synthetic resin, and synthetic fiber monomers
and polymers products; the assets of Luoyang Petrochemical are mainly
relating to the production of synthetic fiber monomers and polymers
products; the assets of Maoming Petrochemical principally comprises 2
oil refinery catalyst installations; the assets of Guangzhou
Petrochemical mainly represent the power assets held by Guangzhou
Petrochemical Power generating department and Zhongyuan Petrochemical
principally engages in the production of ethylene and synthetic resin
products.
The Catalyst Assets proposed to be acquired are from Changling Plant,
Jianchang Petrochemical, Qilu Plant, Technologies Development Company,
Aoda Technology, Shanghai Lide, Shanghai Research Institute and Nanjing
Nanlian, and all these 8 entities take catalyst business as their
primary or sole business, which is closely connected with oil refinery
and chemical business.
The Gas Station Assets proposed to be acquired are the 1,023 gas
stations and 54 oil depots owned by Sinopec Group Company and
Authorising Entities.
The Downhole Operation Assets proposed to be disposed are the oilfield
downhole operation assets, business and associated liabilities of
Zhongyuan Oilfield Branch Company, Henan Oilfield Branch Company,
Jianghan Oilfield Branch Company, Jiangsu Oilfield Branch Company,
Huabei Branch Company, Huadong Branch Company, Xinan Branch Company and
Shengli Oilfield Compoany. Downhole operations involve the testing of
oilfield and gas, the maintenance of oil wells, pressurisation,
acidification and action operations, maintenance operations and field
operations. These are engineering services for the testing of gas and
oil data and improvement of well productivity which are required in the
course of exploration and oilfield production.
Independent valuers which are authorized to engage in the domestic
securities business of PRC were engaged by Sinopec Corp, to carry out
valuation of the above assets and issued valuation reports. Such
valuation reports are to be filed with SASAC. According to the valuation
reports prepared by such independent valuers, as at the Valuation Date,
the results of the valuation of the Petrochemical Assets are as follows:
total assets were RMB13,904 million (approximately HK$13,116 million);
total liabilities were RMB11,699 million (approximately HK$11,037
million); after the deduction of minority interest of RMB42 million
(approximately HK$40 million), net assets is RMB2,163 million
(approximately HK$2,041 million); the results of the valuation of the
Catalyst Assets as at the Valuation Date are as follows: total assets
were RMB1,885 million (approximately HK$1,778 million); total
liabilities were RMB1,024 million (approximately HK$966 million); after
the deduction of minority interest of RMB163 million (approximately
HK$154 million), net assets were RMB698 million (approximately HK$659
million); the results of the valuation of the Gas Station Assets as at
the Valuation Date are as follows: total assets were RMB1,364 million
(approximately HK$1,287 million); total liabilities were RMB11 million
(approximately HK$10 million); net assets were RMB1,353 million
(approximately HK$1,276 million); the results of the valuation of the
Downhole Operation Assets as at the Valuation Date are as follows: total
assets were RMB2,147 million (approximately HK$2,025 million); total
liabilities were RMB399 million (approximately HK$376 million); net
assets were RMB1,748 million (approximately HK$1,649 million).
5.2 Details of the Acquiring Assets
Details of the Petrochemical Assets
According to the consolidated balance sheets at 30 June 2004 of Tianjin
Petrochemical and Luoyang Petrochemical, the balance sheets at 31
December 2003 and 30 June 2004 and the income statements for 2003 and
the six-month period ended 30 June 2004 of Zhongyuan Petrochemical as
audited by KPMG Huazhen, the balance sheets and income statements for
2003 and the first six-month period of 2004 of Maoming Petrochemical and
Guangzhou Petrochemical as audited by Huazheng Accounting Firm Co., Ltd,
and the unaudited consolidated balance sheet at 31 December 2003 and the
unaudited consolidated income statements for 2003 and the six-month
period ended 30 June 2004 of Tianjin Petrochemical and Luoyang
Petrochemical, and the unaudited balance sheets and income statements of
all the above entities for 2002. The accumulative summary of balance
sheet and income statement of the above assets are as follows:
Summary of the Assets and Liabilities of the Petrochemical Assets
Unit: RMB thousand
Item 30 June 2004 31 December 2003 31 December 2002
(audited) (unaudited) (unaudited)
Cash and bank deposits 157,993 230,303 246,501
Total Assets 13,849,433 14,256,952 15,045,579
Short term Loans 4,775,619 4,899,127 4,312,414
Long term Loans 5,613,403 6,549,100 8,242,810
Total liabilities 11,865,079 12,912,412 14,173,598
Minority interest 78,259 74,827 61,540
Net assets 1,906,095 1,269,713 810,441
Summary of Income Statement of the Petrochemical Assets
Unit: RMB thousand
Item 1st half of 2004 2003 2002
(unaudited) (unaudited) (unaudited)
Turnover 7,725,107 12,854,530 10,380,935
Depreciation and amortisation 587,169 1,202,258 1,220,401
Net finance costs 232,325 576,293 705,977
Income tax 296,502 127,833 (184,303)
Minority interests 7,796 14,161 8,797
Net profits 584,083 438,599 (398,360)
Net profits after taxation
andextraordinary items (note 1) 584,083 438,599 (398,360)
Note 1: Net profit after tax and extraordinary items is disclosed
according to the requirements of Chapter 14 of the Listing
Rules.
Note 2: Prior to the hypothetical reorganization base date of 30
June 2004, the assets of Tianjin Petrochemical and Luoyang
Petrochemical included some non-operational assets, all
financial data is unaudited and does not include
non-operational assets, except for the assets and liabilities
date of 30 June 2004 which has been audited.
According to the Asset Valuation Report In Respect Of Five Entities
including the Ethylene Factory Under Tianjin Petrochemical (Zhongzheng
Pin Bao Zi [2004] No. 056) prepared by Beijing Zhongzheng Appraisal Co.,
Ltd with PRC securities qualification and the Asset Valuation Report In
Respect Of the To-be Disposed Assets of Sinopec Group Tianjin
Petrochemical Co., Ltd (Zhongfeng Pin Bao Zi (2004) No. 092) prepared by
Zhongfeng Asset Appraisal Co., Ltd with PRC securities qualification,
the Asset Valuation Report In Respect of the To-be Disposed Luoyang
Polyester Assets of Sinopec Group Company (Zhongshen Pin Bao Zi[2004]
No. 4018) prepared by Zhongshen Accounting Firm Co., Ltd with PRC
securities qualification, the Asset Valuation Report Regarding China
Petroleum & Chemical Corporation's Acquisitoin of Zhongyuan Ethylene
Project (Tianxin Pin Bao Zi (2004) No. 87 prepared by Beijing Tianjian
Xinye Asset Appraisal Co., Ltd with PRC securities qualification, the
Asset Valuation Report In Relation To China Petroleum & Chemical
Corporation's Proposed Acquisition of the AVD and catalytic
assets(Zhongqihua Pin Bao Zi (2004) No. 200) prepared by Beijing
Zhongqihua Asset Apraisal Co., Ltd with PRC securities qualification and
the Asset Apraisal Report In Relation to the To-be Disposed Assets of
Sinopec Group Guangzhou Petrochemical Main Factory (Zhonglei Pin Bao Zi
(2004) No. 6005) prepared by Zhonglei Accounting Firm Co., Ltd with PRC
securities qualification, based on the replacement cost method, the
accumulative summary of valuation results of the Petrochemical Assets as
at the Valuation Date which is 30 June 2004 are as follows:
Unit: RMB thousand
Amount
Adjusted Valuated increased/ Rate of
Item Book value book value value decreased increase%
Fixed assets 11,796,965 11,863,532 12,140,723 277,191 2.34
Total assets 13,604,845 13,604,848 13,904,128 299,279 2.20
Total liabilities 11,698,750 11,698,697 11,698,592 -105 0.00
Net asset 1,906,095 1,906,151 2,205,536 299,384 15.71
Minority interests 38,000 38,803 42,359 3,554 9.16
Net valuation after the deduction of 1,867,295 1,867,348 2,163,177 295,829 15.84
minority interest (Note 1)
Note 1: Zhongyuan Petrochemical comprises a 6.49% minority interest.
Note 2: The increase rate after the valuation of the Petrochemical
Assets was 2.20%, generally equal to the book value. However,
because of the large figures of the associated liabilities, the
net assets figure is relatively small. Thus, although the
increase of the total assets is not significant, the resulting
increase of the net assets figure is notable.
Note 3: This table is a summary, and the long-term investments of
the asset valuation summary table are indicated according to
the equity method, resulting in a difference between the total
assets and total liabilities figures of this table and the
summary of assets and liabilities.
(1) The ethylene, synthetic fiber monomers and polymers assets of
Tianjin Petrochemical
Overview
Tianjin Petrochemical was established in 1983 as a wholly-owned
subsidiary of Sinopec Group Company with a registered capital of
RMB2,941,481,000. Its domicile is Shanggulin West, Dagang District,
Tianjin, and the enterprise legal person business licence registration
number is 1200001000750. It is an integrated chemical and industrial
enterprise with ethylene, synthetic fiber monomers and polymers
production installations and ancillary power generation facilities.
Assets proposed to be acquired
The assets of Tianjin Petrochemical proposed to be acquired include a
200,000 tonnes per year ethylene unit, a 60,000 tonnes per year glycol
unit, a 120,000 tonnes per year polythene unit, a 60,000 tonnes per year
polypropylene unit, a 250,000 tonnes per year PX unit, a 300,000 tonnes
per year PTA unit, a 210,000 tonnes per year polyester unit and
ancillary synthetic fibre units and other construction facilities, as
well as current assets such as accounts receivable, prepayments and
associated liabilities.
According to the valuation report, as of the Valuation Date, the
Zhongyuan Petrochemical of such assets amounted to approximately
RMB7,689 million (approximately HK$7,254 million), the total liabilities
amounted to approximately RMB7,126 million (approximately HK$6,723
million) and the net assets amounted to approximately RMB563 million
(approximately HK$531 million).
Such assets include buildings with a total area of approximately 488,652
m2 of which building occupying a total area of 35,238 m2 have obtained
relevant title certificates and approximately 453,414 m2 have not
obtained relevant title certificates in respect of which the application
for such certificates are in process. After the completion of the
Acquisition, Sinopec Corp. will need to lease land from Sinopec Group
Company and Tianjin Petrochemical for the operation of such assets. The
leasing arrangement will be covered under the Land Use Rights Leasing
Agreement.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
(2) The ethylene, synthetic fiber monomers and polymers assets of
Luoyang Petrochemical
Overview
Luoyang Petrochemical is a wholly-owned subsidiary of Sinopec Group
Company with a registered capital of RMB1,524,898,000. Its domicile is
Jili District, Luoyang City, Henan Province, and the enterprise legal
person business licence registration number is 4103001001290. It is a
petrochemical enterprise engaged in the production and sales of
synthetic fiber monomers and polymers chips and polypropylene products.
Assets proposed to be acquired
The assets proposed to be acquired comprises synthetic fiber monomers
and polymers related assets, current assets such as accounts receivables
and prepayments, and associated liabilities, also the 55% equity
interest of Luoyang Petrochemical Polypropylene Co., Ltd. Upon
completion, Luoyang Petrochemical Polypropylene Co., Ltd. will become a
subsidiary of Sinopec Corp.
The Assets proposed to be acquired include a PX installation unit with
an annual designed capacity of 260,000 tonnes, a PTA installation unit
with an annual designed capacity of 325,000 tonnes, a polyester and
synthetic fibre installation unit with an annual designed capacity of
240,000 tonnes. The principal business of Luoyang Petrochemical
Polypropylene Co., Ltd comprises the production and sale of
polypropylene products.
According to the valuation report as of the Valuation Date, the total
assets of such assets amount to approximately RMB2,907 million
(approximately HK$2,742 million), the total liabilities amount to
approximately RMB2,799 million (approximately HK$2,641 million) and the
net assets amount to approximately RMB108 million (approximately HK$101
million).
Such assets include approximately 206,139 m2 of building, of which
building occupying a total area of approximately 195,869 m2 have
obtained relevant title certificates and approximately 10,270 m2 have
not obtained relevant title certificates in respect of which the
application for such certificates are in process. Such assets also
include approximately 174,070 m2 of land use right, of which a total
area of approximately 94,636 m2 have obtained relevant title
certificates and approximately 79,434 m2 have not obtained relevant
title certificates in respect of which the application for such
certificates are in process. After the completion of the Acquisition,
Sinopec Corp. will need to lease land from Sinopec Group Company and
Luoyang Petrochemical for the operation of such assets. The lease
arrangement will be covered under the Land Use Rights Leasing Agreement.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
(3) The 93.51% equity interest in Zhongyuan Petrochemical
Overview
Zhongyuan Petrochemical, formerly Zhongyuan Petrochemical Joint Company
established by Henan Provincial Government and China Petroleum and
Natural Gas Company, is now a majority-owned subsidiary of Sinopec Group
Company. In 1995, it was reorganized into Zhongyuan Petrochemical under
the Company Law of PRC. In 1998, it was transferred to Sinopec Group
Company pursuant to the Reply on Relevant Issues Regarding the
Establishment of China Petrochemical Corporation [Guo Han (1998) 58]. In
2003, agreed by the shareholders, Henan Economy and Technology
Development Company and Puyang City Economy and Technology Development
Company were added as shareholders. Its domicile is Shenglixi Road
South, Puyang City, Henan Province, and the enterprise legal person
business licence registration number is 4109001000068.
Zhongyuan Petrochemical has a registered capital of RMB2,400 million, of
which Sinopec Group Company holds 93.51% of the equity interest and the
remaining equity interest is held by Henan Province Construction
Investment Company (2.49%), Henan Province Economy and Technology
Development Company (2.06%) and Puyang City Economy and Technology
Development Company (1.94%). Upon completion, Zhongyuan Petrochemical
will become a subsidiary of Sinopec Corp.
The present scope of business of Zhongyuan Petrochemical principally
includes the production of polypropylene and polythene products, the
exportation of petroleum resins and high foaming products and the import
of raw and ancillary materials, machinery, apparatus, meters and
component parts, etc. needed for its production and research.
According to the valuation report, as of the Valuation Date, the total
assets of Zhongyuan Petrochemical amounted to approximately RMB2,336
million (approximately HK$2,204 million), the total liabilities amounted
to approximately RMB1,683 million (approximately HK$1,588 million).
After the deduction of minority interest of approximately RMB42 million
(approximately HK$40 million), the net assets amounted to approximately
RMB613 million (approximately HK$576 million).
The principal production facilities of Zhongyuan Petrochemical include
an ethylene production unit with an installed capacity of 180,000 tonnes
per year, a polythene production unit with an installed capacity of
200,000 tonnes per year and a polypropylene production unit with an
installed capacity of 60,000 tonnes per year.
The assets of Zhongyuan Petrochemical proposed to be acquired include
approximately 142,374 m2 of building, of which building occupying a
total area of approximately 31,326 m2 have obtained relevant title
certificates and approximately 111,047 m2 have not obtained relevant
title certificates in respect of which the application for such
certificates are in process. Land with an aggregate area of 58,036 m2 is
also included, of which a total area of approximately 5,308 m2 have not
obtained relevant title certificates in respect of which the application
for such certificates are in process.
Save as disclosed above, the above 93.51% equity interest in Zhongyuan
Petrochemical that Sinopec Corp. proposes to acquire is free from any
guarantees, restrictions on transfers, litigation, arbitration, judicial
enforcements or other major disputes.
Financial Information
According to the financial statements for 2003 and the six-month period
ended 30 June 2004 (The Audit Report KPMG-AH [2004] AR NO. 0035) audited
by KPMG Huazhen with PRC securities qualification and the unaudited
financial statements for 2001 and 2002 of Zhongyuan Petrochemical, the
main assets and liabilities, income statement and cash flow statement of
Zhongyuan Petrochemical are as follows:
Summary of Assets and Liabilities
Unit: RMB thousand
31 December 31 December
Item 30 June 2004 2003 31 December 2002 2001
(audited) (audited) (unaudited) (unaudited)
Total Assets 2,281,403 2,327,062 2,599,383 3,036,063
Liabilities and shareholders' funds
Total current liabilities 1,097,544 1,202,258 1,419,844 1,407,881
Total non-current liabilities 586,014 697,634 923,412 1,106,927
Total liabilities 1,683,558 1,899,892 2,343,256 2,514,808
Minority interest 597,845 427,170 256,127 521,255
Total liabilities and shareholders' fund 2,281,403 2,327,062 2,599,383 3,036,063
Summary of Income Statement
Unit: RMB thousand
1st half of
Item 2004 2003 2002 2001
(audited) (audited) (unaudited) (unaudited)
Turnover of principal business 1,376,518 2,110,683 1,743,401 1,767,267
Profit before tax 253,590 199,921 -258,021 -206,697
Net profit 169,822 181,796 -234,650 -146,214
Summary of Cashflow
Unit: RMB thousand
1st half of
2004 2003 2002 2001
(audited) (audited) (unaudited) (unaudited)
Net cashflow from operating activities 396,327 503,413 170,255 393,685
Net cashflow from investing activities -159,541 -26,139 -15,198 -73,173
Net cashflow from financing activities -275,109 -519,813 -161,262 -212,561
Effect of foreign exchange rate change -103 77 - -
Net decrease in cash and cash equivalents -38,426 -42,462 -6,205 107,951
Save as disclosed above, the above equity interest are free from any
guarantees, litigation or other major disputes that could result in
material adverse effect.
(4) The AVD and Catalytic Cracking assets of Maoming Petrochemical
Overview
Maoming Petrochemical is a wholly-owned subsidiary of Sinopec Group
Company with a registered capital of RMB2,286,510,000. Its domicile is
Maoming City, Guangdong Province, and the enterprise legal person
business licence registration number is 4409001001128. Its principal
business is the leasing of oil refinery installations and petrochemical
installations, and owns railways, ports and power generation facilities.
Assets proposed to be acquired
The Maoming Business comprises a 5 million tonnes/year AVD Unit and a
1.4 million tonnes/year catalysis installation unit and ancillary
assets. According to the valuation report, as of the Valuation Date, the
assessed value of such assets were approximately RMB385 millioin
(approximately HK$363 million).
The Maoming Business owns approximately 6,063 m2 of building, of which
building occupying a total area of approximately 1,830 m2 have not
obtained relevant title certificates in respect of which the application
for such certificates are in process.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
(5) The Co-generation assets of Guangzhou Petrochemical
Overview
Guangzhou Petrochemical was established on 18 June 1973 as a
wholly-owned subsidiary of Sinopec Group Company with a registered
capital of RMB599,890,000. Its domicile is Guangzhou City, Guangdong
Province, and the enterprise legal person business licence registration
number is 4401011300183. Its principal business includes infrastructure
projects, storage and transportation, maintenance projects.
Assets proposed to be acquired
It is proposed to acquire all assets of Guangzhou Petrochemical power
generating department and associated liabilities. The main facilities
include 4 sets of power generation units with a total capacity of
99,000KW/h, a water processing system with an installed capacity of over
3 million tonnes/year de-salted water, and air separation and air
pressure facilities.
According to the valuation report, as of the Valuation Date, the total
assets of such assets amounted to approximately RMB586 million
(approximately HK$553 million), the total liabilities amounted to
approximately RMB89 million (approximately HK$84 million) and the net
assets amounted to approximately RMB497 million (approximately HK$469
million).
The assets to be acquired comprise approximately 105,629 m2 of building,
in respect of which the application for the relevant title certificates
are in process. After the completion of the Acquisition, Sinopec Corp.
will need to lease the land needed for the operation of such assets from
Sinopec Group Company and Guangzhou Petrochemical. The lease arrangement
will be covered under the Land Use Rights Leasing Agreement.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
Details of the Catalyst Assets
According to the financial statements for 2003 and the six-month period
ended 30 June 2004 (Auditor's Reports, Zhongxi Shen zi (2004) No. 02269
and 02270) audited by Zhongxi Accounting Firm Co., Ltd with PRC
securities qualification, the financial statements for 2003 and the
six-month period ended 30 June 2004 (Auditor's Reports, Zhonghe Zhengxin
Zhuan Zi (2004) No. 1-051, 1-052 and 1-053) audited by Zhonghe Zhengxin
Accounting Firm Co., Ltd with PRC securities qualification, the
financial statements for 2003 and the six-month period ended 30 June
2004 (Auditor's Reports, Yuezong Shen Zi (2004) No. B287, No. B288 and
No. B289) prepared by Yuehua Accounting Firm Co., Ltd with PRC
securities qualification and the unaudited financial statements for
2002, the main assets and liabilities and the loss and profit statements
of the to-be acquired Catalyst Assets are as follows:
Summary of Assets and Liabilities of the Catalyst Assets
Unit: RMB thousand
Item 30 June 2004 31 December 2003 31 December 2002
(audited) (audited) (unaudited)
Cash and bank deposits 191,923 190,414 185,810
Total Assets 1,925,860 1,744,262 1,717,630
Short term loans 356,588 195,122 1,550,000
Long term loans 2,000 2,000 82,000
Total liabilities 1,087,468 929,958 950,664
Minority interests 18,363 15,383 11,943
Net assets 820,029 798,921 755,023
Summary of Profit and Loss of the Catalyst Assets
Unit: RMB thousand
Item 1st half of 2004 2003 2002
(audited) (audited) (unaudited)
Turnover 893,142 1,615,093 1,373,494
Depreciation and amortisation 38,508 87,125 71,914
Net financial costs 6,506 17,340 20,248
Taxation 30,585 41,838 27,965
Minority interests 2,980 4,357 3,199
Net profit 73,302 107,904 88,732
Net profits after taxation extraordinary items 73,302 107,904 88,732
According to the Asset Valuation Report In Relation to the Proposed
Transfer of Assets of China Petroleum and Chemical Scientific Technology
Development Company by Sinopec Group Company ( Zhonglian Pin Bao Zi
[2004] No. 83), the Asset Valuation Report In Relation to the Proposed
Transfer of Equities of Beijing Municipal Aoda Petrochemical New
Technology Development Centre by Sinopec Group Company ( Zhonglian Pin
Bao Zi [2004] No.84), the Asset Valuation Report In Relation to the
Proposed Transfer of Assets of Shanghai Petroleum and Chemical Research
Institute by Sinopec Group Company (Zhonglian Pin Bao Zi [2004] No.85),
the Asset Valuation Report In Relation to the Proposed Transfer of
Equities of Shanghai Lide Catelyst Company Limited by Sinopec Group
Company (Zhonglian Pin Bao Zi [2004] No.86), the Asset Valuation Report
In Relation to the Proposed Transfer of Part of Assets of Changling
Refinery Company by Sinopec Group Company (Zhonglian Pin Bao Zi [2004]
No. 87), the Asset Valuation Report In Relation to the Proposed Transfer
of Equities of Hunan Jianzhang Petrochemical Company Limited by Sinopec
Group Company (Zhonglian Pin Bao Zi [2004] No. 88), the Asset Valuation
Report In Relation to the Proposed Transfer of Assets of Qilu Petroleum
and Chemical Company Catalyst Plant by Sinopec Group Company (Zhonglian
Pin Bao Zi [2004] No.89) and the Asset Valuation Report In Relation to
the Proposed Transfer of Equities of Nanjing Nanlian Catalyst Limited
Liability Company by Sinopec Group Company (Zhonglian Pin Bao Zi [2004]
No.90) prepared by Zhonglian Asset Appraisal Co., Ltd with PRC
securities qualification, based on the replacement cost method, as at
the Valuation Date, the accumulative summary of the valuation results of
the Catalyst Assets are as follows:
Unit: RMB thousand
Amount
Adjusted Valuated increased/ Rate of
Item Book value book value value decreased increase%
Fixed assets 611,778 611,778 645,250 33,472 5.47
Total assets 1,853,207 1,853,484 1,885,282 31,798 1.72
Total liabilities 1,033,178 1,033,389 1,024,383 -9,006 (-0.87)
Net assets 820,029 820,095 860,899 40,804 4.89
Minority interests 148,247 148,260 162,751 14,491 9.77
Net valuation after the deduction of minority 671,782 671,835 698,148 26,313 3.92
interest (Note)
Note: the assets of Technologies Development Company proposed to be
acquired include the 50% equity interest in Aoda Technology and the 40%
equity interest in Shanghai Lide. Only 81% of the total equity interest
in Jianchang Petrochemical is included in the Acquisition, and the
minority interests were deducted during calculation.
(1) The principal assets of Changling Plant
Overview
Changling Plant, a branch company of Changling Refinery, was established
in 1992. Its place of business is Yunxi District, Yueyang City, and the
business licence number is 4306001501875. Its principal business
includes the production of catalytic cracking catalyst, catalytic
hydrogenation catalyst and catalytic reforming catalyst.
Changling Refinery is a state-owned company wholly-owned by Sinopec
Group Company with a registered capital of RMB1,200 million. Its
domicile is Changling, Yueyang City, and the enterprise legal person
business licence registration number is 4306001500391. Its principal
business involves the production of oil products and catalyst.
Assets proposed to be acquired
The assets proposed to be acquired are all the assets of Changling Plant
and all its liabilities shall be assumed. According to the valuation
report carried out by Zhonglian Assets Appraisal Co., Ltd., as at the
Valuation Date, the total assets of such assets amount to approximately
RMB592 million (approximately HK$558 million), the total liabilities
amount to approximately RMB465 million and the net assets amount to
approximately RMB127 million (approximately HK$120 million) Such assets
mainly include catalytic cracking catalyst facilities with a production
capacity of 32,800 tonnes / year, catalytic hydrogenation catalyst
facilities, catalytic reforming catalyst production facilities,
ancillary facilities, intellectual property rights, relevant inventories
and current assets such as accounts receivable and prepayments.
The above assets include 62,405 m2 of building, in respect of which the
application for relevant title certificates are in process. After the
completion of the Acquisition, Sinopec Corp. will need to lease the land
needed for the operation of such assets from Changling Refinery. The
lease arrangement will be covered under the Land Use Rights Leasing
Agreement.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
(2) The 81% equity interest in Jianchang Petrochemical
Overview
Jianchang Petrochemical is a joint-stock limited company registered in
November 1992 with a registered capital of RMB30,000,000. Its registered
address is Yunxi District, Yueyang City, Hunan Province and its
enterprise legal person business licence number is 4300001002774.
Currently, it has five shareholders and their shareholdings are Sinopec
Group Chongling Oil Refinery Chemical Limited Liability Company (50%),
China Petroleum and Chemical Scientific Research Institute (20%),
Yueyang Xingchang Petrochemical Company Limited (10%), Luoyang
Petrochemical Plant Jinda Industrial Company (1%) and Yueyang Boyuan
Trading Company Limited (19%).
The first four shareholders are subsidiaries of Sinopec Group Company,
and Sinopec Corp. proposes to acquire all of the 81% equity interest
held by them. Upon completion, Jianchang Petrochemical will become a
subsidiary of Sinopec Corp.
Save as disclosed above, the above equity interest are free from any
guarantees, litigation or other major disputes that could result in
material adverse effect.
Principal business and assets to be acquired
Jianchang Petrochemical mainly produces continuous reforming catalyst.
According to the valuation carried out by Zhonglian Assets Appraisal
Co., Ltd., as at the Valuation Date, the total assets of such assets
amounted to approximately RMB150 million (approximately HK$142 million),
the liabilities amounted to approximately RMB98 million (approximately
HK$92 million) and the net assets amount to approximately RMB52 million
(approximately HK$49 million) (the net assets in proportion with the 81%
equity interest was approximately RMB42 million (approximately HK$40
million)).
Such assets mainly include continuous reforming catalyst production
facilities with a production capacity of 985 tonnes / year, catalytic
hydrogenation catalyst facilities, catalytic reforming catalyst
production facilities, ancillary facilities, intellectual property
rights, relevant inventories and current assets such as accounts
receivable and prepayments.
Jianchang Petrochemical's assets also include properties with an
aggregate area of 8,597 m2 of which properties with an aggregate area of
110 m2 have not received the relevant title certificates. The remaining
properties have all been issued with legal title documentations.
Jianchang Petrochemical will need to continue to lease land from
Changling Refinery. The lease arrangement will be covered under the Land
Use Rights Leasing Agreement.
Financial Information
According to the financial statements for 2003 and the first six-month
period ended at 30 June 2004 (Auditor's Report, Zhongxi Shen Zi (2004)
No. 02270 ) prepared by Zhongxi Accounting Firm Co., Ltd with PRC
securities qualification and unaudited financial statements for 2001 and
2002 of Jianchang Petrochemical, the main assets and liabilities, income
statement and cashflow position of Jianchang Petrochemical are as
follows:
Summary of the Assets and Liabilities
Unit: RMB thousand
31 December 31 December 31 December
Item 30 June 2004 2003 2002 2001
(audited) (audited) (unaudited) (unaudited)
Total Assets 171,797 166,749 138,019 111,573
Liabilities and shareholders' funds
Total current liabilities 102,567 101,940 72,149 58,942
Total non-current liabilities - - 4,000 4,000
Total liabilities 102,567 101,940 76,149 62,942
Minority interest 18,363 15,383 11,943 8,745
Equity interest 50,867 49,426 49,927 39,886
Total liabilities and shareholders' funds 171,797 166,749 138,019 111,573
Summary of Income Statement
Unit: RMB thousand
1st half of
Item 2004 2003 2002 2001
(audited) (audited) (unaudited) (unaudited)
Turnover 38,070 155,912 89,295 134,652
Profit before tax 5,596 17,303 16,890 15,023
Net profit 1,440 9,589 10,042 9,766
Summary of Cashflow
Unit: RMB thousand
1st half of
Item 2004 2003 2002 2001
(audited) (audited) (unaudited) (unaudited)
Net cashflow from operating activities -8,902 29,991 2,249 14,038
Net cashflow from investing activities -5,716 -6,050 -12,637 -656
Net cashflow from financing activities -9,514 2,307 11,394 -10,559
Net decrease in cash and equivalents -24,132 26,248 1,006 2,823
(3) Primary assets of the Qilu Plant
Overview
Qilu Plant, being a state-owned enterprise established in October 1990,
is a wholly-owned subsidiary of Qilu Petrochemical Co., Ltd. with a
registered capital of RMB159,300,000. Its domicile is 1 Tiyuchang Road,
Zhoucun District, Zibo City, and the enterprise legal person business
licence registration number is 3703051870225. Its principal business is
the production of catalytic cracking catalyst.
Assets proposed to be acquired
The assets proposed to be acquired are all the assets of Qilu Plant
(excluding land use rights) and all its liabilities shall be assumed.
According to the valuation carried out by Zhonglian Assets Valuation
Co., Ltd., as of the Valuation Date, the total assets of Qilu Plant
amounted to approximately RMB447 million (approximately HK$422 million),
the total liabilities amounted to approximately RMB293 million
(approximately HK$276 million ) and the net assets amount to
approximately RMB148 million (approximately HK$140 million). Such assets
mainly include catalytic cracking catalyst installation with a
production capacity of 25,000 tonnes/year, molecular sieve installations
with an aggregate production capacity of 18,000 tonnes/year, ancillary
facilities, relevant intellectual property rights and current assets
including related inventories, accounts receivable and prepayments.
The above assets include 63,271 m2 of building, of which building
occupying a total area of 26,724 m2 have not obtained relevant title
certificates in respect of which the application for such certificates
are in process. After the completion of the Acquisition, Sinopec Corp.
will need to lease the land needed for the operation of such assets from
Qilu Plant. The lease arrangement will be covered under the Land Use
Rights Leasing Agreement.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
(4) Primary assets owned by the Technologies Development Company
Overview
Technology Development Company, being a state-owned enterprise, is a
wholly-owned subsidiary of Sinopec Group Company with a registered
capital of RMB67,000,000. It was established in November 1990. Its
registered address is 1203 Jingmin Building, 10 Huayanli, Chaoyang
District, Beijing, and the enterprise legal person business licence
registration number is 1000001001082. Its principal business includes
the exportation of technologies developed, and related products
produced, of itself and subsidiaries, the organization for the
industrial implementation of technical innovations, technology
transfers, technical consulting and services.
Assets proposed to be acquired
The assets proposed to be acquired are principal assets of the
Technology Development Company and all its liabilities shall be assumed.
According to the valuation carried out by Zhonglian Assets Valuation
Co., Ltd., as of the Valuation Date, the total assets of the Technology
Development Centre amounted to approximately RMB228 million
(approximately HK$215 million), the liabilities amounted to
approximately RMB26 million (approximately HK$25 million) and the net
assets amounted to approximately RMB202 million (approximately HK$191
million). Such assets mainly include long-term equity investments,
current assets such as cash, accounts receivable and prepayments, and
related intellectual property rights and authorizations.
The assets of Technology Development Company proposed to be acquired
include a 50% equity interest in the Aoda Technology and a 40% equity
interest in Shanghai Lide, both involved in catalyst business.
(i) The 50% equity interest in Aoda Technology
Overview
Aoda Technology was established in 1993 and is a collectively-owned
joint venture with a registered capital of RMB49,600,000. Its domicile
is Taihu Town, Tongzhou District, Beijing and enterprise legal person
business licence number is 1102231662894. The shareholders of Aoda
Technology are Sinopec Corp. Beijing Chemical and Industrial Research
Institute and Technology Development Company, each holding a 50% equity
interest.
At present, Sinopec Corp. indirectly owns 50% interest in Aoda
Technology through Beijing Chemical and Industrial Research Institute.
As part of the Acquisition, Sinopec Corp. proposes to indirectly acquire
a further 50% interest in Aoda Technology through the acquisition of all
the assets of Technology Development Centre. After completion of the
Acquisition, Sinopec Corp. will own 100% interests in Aoda Technology
and Aoda Technology will become a subsidiary of Sinopec Corp.
Principal business and assets
The primary businesses of the Aoda Technology are the production of
polypropylene catalyst, benzene anhydride and anhydride catalyst.
According to the valuation carried out by Zhonglian Assets Valuation
Co., Ltd., as of the Valuation Date, the total assets of the Aoda
Technology amounted to approximately RMB191 million (approximately
HK$180 million), the liabilities amounted to approximately RMB66 million
(approximately HK$62 million) and the net assets amounted to
approximately RMB125 million (approximately HK$118 million) (the net
assets in proportion with the 50% equity interest were approximately
RMB62 million (approximately HK$58 million)).
Its main production installations include polypropylene catalyst
production installations with a production capacity of 140 tonnes/year,
anhydride and benzene anhydride catalyst production installations with a
production capacity of 120 - 130 tonnes/year, ancillary facilities,
related intellectual rights and current assets such as related
inventories, accounts receivable and prepayments.
The above assets include 2,993 m2 of building, in respect of which the
application for relevant title certificates are in process. After the
completion of the Acquisition, Aoda Technology will need to lease the
land needed for the operation of such assets from Sinopec Group Beijing
Chemical and Industrial Research Institute.
(ii) The 60% equity interest in Shanghai Lide
Overview
Shanghai Lide is a limited liability company established in 2001 with a
registered capital of RMB20,000,000. Its domicile is Qianxu Town,
Jinshan District, Shanghai, and enterprise legal person business licence
number is 3102281012263.
The shareholders of Shanghai Lide are Shanghai Chemical and Industrial
Research Institute (40%), Technology Development Company (40%) and
Maoming Petrochemical (20%). Among them, both Technology Development
Company and Maoming Petrochemical are subsidiaries of Sinopec Group
Company. In the Acquisition, Sinopec Corp. will acquire the 40% equity
interest in Shanghai Lide through the acquisition of Technology
Development Company. In addition, Sinopec Corp. will also acquire the
20% equity interest held by Maoming Petrochemical. After the completion
of the Acquisition, Sinopec Corp. will hold 60% equity interest in
Shanghai Lide. Upon completion, Shanghai Lide will become a subsidiary
of Sinopec Corp.
Principal business and assets
Shanghai Lide mainly produces gas phase polyethylene catalyst.
According to the valuation carried out by Zhonglian Assets Valuation
Co., Ltd., as of the Valuation Date, the total assets of the Shanghai
Lide amount to approximately RMB72 million (approximately HK$68
million), the liabilities amount to approximately RMB37 million
(approximately HK$35 million) and the net assets amount to approximately
RMB35 million (approximately HK$33 million) (the net assets in
proportion with the 60% equity interest is approximately RMB21 million
(approximately HK$20 million)).
Its main production installation is one set of gas phase polyethylene
catalyst production installation with a production capacity of 120
tonnes/year, related intellectual property rights and current assets
such as related inventories, accounts receivables and prepayments.
The above assets include 1,039 m2 of building and 8,789 m2 of land use
right, in respect of which the application for relevant title
certificates are in process.
Save as disclosed above, the above assets of the Technology Development
Company and the equity interest in Aoda Technology and Shanghai Lide are
free from any guarantees, litigation or other major disputes that could
result in material adverse effect.
(5) Primary assets of the Shanghai Research Institute
Overview
Shanghai Research Institute was established in 1961 as a state-owned
enterprise wholly-owned by Sinopec Group Company, with a registered
capital of RMB113,420,000. Its domicile is 1658 Pudongbei Road,
Shanghai, and enterprise legal person business licence number is
3101151016076. Its principal products are acrylonitrile catalyst,
methylbenzene isomerization catalyst and styrene catalyst.
Assets proposed to be acquired
The assets proposed to be acquired are all the assets owned by Shanghai
Research Institute (excluding the equity interest in Shanghai Shibida
Petrochemical Hi-tech Company and land use rights) and all its
liabilities shall be assumed.
According to the valuation carried out by Zhonglian Assets Valuation
Co., Ltd., as of the Valuation Date, the total assets of the Shanghai
Research Centre amounted to approximately RMB180 million (approximately
HK$170 million), the liabilities amounted to approximately RMB24 million
(approximately HK$23 million) and the net assets amounted to
approximately RMB156 million (approximately HK$147 million).
Such assets mainly include the acrylonitrile catalyst, methylbenzene
isomerization catalyst and styrene catalyst production installations
with an aggregate production capacity of 1,750 tonnes/year, the related
intellectual property rights and current assets such as related
inventories, accounts receivables and prepayments.
The above assets include 32,011 m2 of building, of which building
occupying a total area of 11,727 m2 have not obtained relevant title
certificates in respect of which the application for such certificates
are in process. After the completion of the Acquisition, Sinopec Corp.
will need to lease the land needed for the operation of such assets from
Shanghai ResearchInstitute. The leasing arrangement will be covered
under the Land Use Rights Leasing Agreement.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
(6) All assets of Nanjing Nanlian
Overview
Nanjing Nanlian was established in 1995 as a limited liability company,
with a registered capital of RMB5,000,000. Its domicile is Hengyi Road,
Economic and Technology Development Zong, Nanjing, and enterprise legal
person business licence number is 3201921000914. Its principal products
is isomerization catalyst.
Assets proposed to be acquired
The main buildings and equipments used by Nanjing Nanlian Catalyst
Limited Liability Company for production and operation are leased from
China Petroleum and Chemical Corporation Jinling Branch. The assets
proposed to be acquired are all the assets of Nanjing Nanlian Catalyst
Limited Liability Company and all its liabilities shall be assumed.
According to the valuation carried out by Zhonglian Assets Valuation
Co., Ltd., as of the Valuation Date, the total assets of the Nanjing
Nanlian amounted to approximately RMB29 million (approximately HK$27
million), the liabilities amounted to approximately RMB14 million
(approximately HK$13 million) and the net assets amounted to RMB15
million (approximately HK$14 million).
Such assets mainly comprise current assets including related
inventories, accounts receivables, cash, and related intellectual
property rights.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
Details of Gas Station Assets
According to the balance sheet at 31 May 2004 as audited by Huazheng
Accounting Firm Co., Ltd with PRC securities qualification, and the
unaudited balance sheets at 31 December 2003 and 31 December 2002
(Huazheng Te Shen Zi [2004] No. 120), the main assets and liabilities
information of the Gas Station Assets are as follows:
Summary of the Assets and Liabilities
Unit: RMB thousands
Item 31 May 2004 31 December 2003 31 December 2002
(audited) (unaudited) (unaudited)
Cash and bank deposits 1,455 2,711 2,524
Total Assets 1,139,517 1,115,514 1,072,543
Short term loans - - -
Long term loans - - -
Total liability 10,963 6,981 8,383
Minority Interests - - -
Net Assets 1,128,554 1,108,533 1,064,160
Prior to the Acquisition, most of the gas stations which are subject to
the acquisition were operated by Sinopec Corp. through the leasing of
their operating rights. In order to accurately reflect their operating
performance, it has been assumed for the purpose of the below
information that they were independently operated and, based on their
gasoline throughput volume for 2002, 2003 and the first five-month
period of 2004, prepared the following unaudited calculation of their
operating results:
Summary of Income Statement
Unit: RMB thousands
For the 5 months
Item ended 31 May 2004 2003 2002
(unaudited) (unaudited) (unaudited)
Turnover 1,233,763 2,334,626 1,841,720
Depreciation and amortisation 10,221 23,854 23,843
Finance costs - - -
Income tax 36,810 69,490 45,004
Minority interest - - -
Net profit 120,390 232,541 160,470
Net profit after tax and extraordinary items 120,390 232,541 160,470
According to the valuation report Zhongzheng PingBao [2004] No. 48
prepared by Beijing Zhongzheng Appraisal Company Limited, with PRC
securities qualification, based on replacement cost method, the
valuation results of the Gas Station Assets as at 31 May 2004 are:
Unit: RMB thousands
Rate of
increase/
Total Net Asset Total Valuated decrease(%)
Item Book Value Value (overall)
Total 1,128,554 1,353,393 19.92%
Summary of Sinopec Group Company and Authorising Entities
Please refer to section 2.11 of this announcement.
Overview
The Gas Station Assets comprise the assets, interests and related
liabilities of 1,023 gas stations and 54 oil depots owned by Sinopec
Group Company and the Authorising Entities. These comprise 620
wholly-owned gas stations (including 25 oil transportation vessels and
oil trucks), 82 majority-owned gas stations, 269 minority owned gas
stations and 52 gas stations leased from third parties. The gas stations
and depots are located in 18 different provinces, cities and autonomous
regions of the PRC, namely, Beijing, Tianjin, Hebei, Shanxi, Shanghai,
Jiangzu, Zhejiang, Anhui, Fujian, Jiangxi, Shandong, Henan, Hubei,
Hunan, Guangdong, Guangxi, Hainan and Yunnan.
Out of the oil depots, 48 are wholly-owned, one is majority-owned and 5
are minority-owned.
Out of the gas stations and oil depots which are wholly-owned (not
including the 25 oil transportation vessels and oil trucks), Sinopec
Corp. will mainly lease the land use right from the Vendors or third
parties. The leasing arrangement will be covered under the Land Use
Rights Leasing Agreement. For the land occupied by majority-owned gas
stations and oil depots with an approximate aggregate area of
approximately 122,232 m2 is included in the Acquisition by virtue of the
acquisition by Sinopec Corp. of the equity interest in such gas stations
and oil depots. Out of such land, approximately 49,473 m2 have not
received the appropriate land use rights certificates. The balance of
the land will be either leased or jointly operated with the Vendor or
the relevant land owner. The wholly and majority owned gas stations and
depots occupy a total of approximately 339,673 m2 buildings, of which
approximately 197,672 m2 are yet to receive appropriate title
certificates.
Unless otherwise disclosed above, the above assets are free from any
material guarantee, litigation or other major dispute.
Price and Details of the Gas Station Assets
After negotiations between Sinopec Corp. and Sinopec Group Company, and
taken into account various factors including the asset valuation
results, comparable historical transactions, cash flow generating
ability and growth potential, it was agreed that the consideration for
the net assets should be RMB1,881 million (approximately HK$1,775
million), and Sinopec Corp. should at the same time bear the associated
liabilities of RMB11 million (approximately HK$10 million).
The increase of the price of the Gas Station Assets on the book value is
mainly due to 3 factors:
o the increasing costs of properties and constructions in recent
years have caused the replacement costs of the gas stations and
oil depots to rise.
o years of marketing and cost-reduction have led to significant
improvements in the throughput and performance. For single gas
station throughput, the average figure has risen from 1,362 tonnes
in 2001 to 1,825 tonnes in 2003, representing an annual increase
of 15.8% and is expected to continue to show good potentials.
o the establishment of new gas stations requires the approval of
certain governmental departments which may create certain
difficulties. This factor cannot be reflected in the book value of
the gas stations to be acquired.
Before the Acquisition, the gas stations proposed to be acquired were
operated by Sinopec Corp. through leasing from Sinopec Group Company of
their operating rights. The fees negotiated at that time had taken into
account reasonable costs and profit level. Since Sinopec Group Company
had not obtained all title certificates of the properties and had not
paid relevant fees, and also the profitability was low due to a low
single gas station throughput, the rent payable had been historically
low. Following the increasing of costs of gas station properties, the
rising of single gas station profitability and the future difficulty of
acquiring or establishing gas stations, the future lease fees are
expected to rise significantly to reflect the potential rise of profit
based on the fair market trade principle. For Sinopec Corp., it will
face of the risk of an increase of the costs of rental if it continues
to operate these gas stations by way of lease.
If Sinopec Corp. is able to acquire these gas stations, this will help
to eliminate the risks in their future operation, and to achieve
coordinated effect in various aspects such as investments, allocation of
resources and network through consolidated operation. It is expected
that it will result in a greater income potentials for Sinopec Corp.
from its investments.
Despite the premium in the consideration for the Gas Station Assets
against the book value, such consideration is fair and reasonable when
compared with single gas station acquisition prices of comparable
historical transactions and analysed by P/E ratio level of the
acquisition:
(1) comparison with single gas station acquisition prices of comparable
historical transactions
After the deduction of valuation results of oil depots, the
purchase price of the gas stations are lower than or similar to
the prices of domestic acquisition of other single gas stations
which are of the similar size.
(2) P/E ratio comparing with comparable companies
The unaudited figure of the net profit of the Gas Station Assets
in 2003 is RMB233 million (approximately HK$220 million), based on
which the P/E ratio in 2003 corresponding to the net asset
acquisition price of RMB1,881 (approximately 1,775 million) is
approximately 8.1, which is lower than that of comparable
companies.
5.3 Details of the Disposal Assets
Details of the Downhole Operation Assets
According to the financial statements for 2002, 2003 and the first seven
months ended 31 July 2004, Auditor's Reports (Yuezong Shen Zi [2004] No.
B293, No. B296) prepared by Yuehua Accounting Firm Co., Ltd with PRC
securities qualification, the accumulative summary of the financial
position of the Downhole Operation Assets are as follows:
Summary of the Assets and Liabilities
Unit: RMB thousand
31 July 2004 31 December 2003 31 December 2002
Item (audited) (audited) (unaudited)
Cash and bank deposits 32,792 38,376 33,432
Total Assets 2,266,550 2,566,454 2,272,244
Short term loans - - -
Long term loans - - -
Total liabilities 411,597 442,691 261,991
Minority interest - - -
Net assets 1,854,953 2,123,763 2,010,253
Summary of Income Statement
Unit: RMB thousand
For the seven
months ended
31 July 2004 2003 2002
Item (audited) (audited) (unaudited)
Turnover 3,301,939 5,723,870 5,353,048
Depreciation and amortisation 226,833 274,280 259,611
Finance cost (note) 10,497 11,625 10,678
Income tax 8,183 6,664 12,548
Minority interest - - -
Net profit (122,744) 10,640 12,141
Net profit after tax and extraordinary (122,744) 10,640 12,141
items
Note: the net financial cost is hypothetical appropriation cost of the
occupied working capital. The average balance of interest bearing
working capital for the past 2 years and the period ended 30 July
2004 is RMB156 million
According to the Asset Valuation Report (Zhongzheng Pin Bao Zi [2004]
No. 062 and No.063) prepared by Beijing Zhongzheng Valuation Co., Ltd
with PRC securities qualification as at the Valuation Date being 31 July
2004, based on the replacement costs, the accumulative summary of the
asset valuation results of the Downhole Operation Assets are as follows:
Unit: RMB thousand
Amount
Adjusted Valuated increased/ Rate of
Item Book value book value value decreased increase%
Current asset 414,005 417,484 420,851 3,367 0.81
Long-term investment - - - - -
Fixed asset 1,805,629 1,805,629 1,679,708 -125,921 -6.97
Intangible asset - - - - -
Total asset 2,266,550 2,270,028 2,146,863 -123,166 -5.43
Total liabilities 411,597 415,076 399,096 -15,980 -3.85
Net assets 1,854,953 1,854,953 1,747,767 -107.186 -5.78
Net assets acquired 1,854,953 1,854,953 1,747,767 -107.186 -5.78
Note: in this case the downhole operation assets valuation shows a 5.78%
decrease. The main reason is that a notable part of the assets are
in bad shape, which in turn is caused by the corruption of
alkalescence materials and bad working environment.
The assets proposed to be disposed under the Disposal are the oilfield
downhole operation assets, business and associated liabilities of
Zhongyuan Oilfield Branch Company, Henan Oilfield Branch Company,
Jianghan Oilfield Branch Company, Jiangsu Oilfield Branch Company,
Huabei Branch Company, Huadong Branch Company, Xinan Branch Company and
Shengli Oilfield Company Limited.
(1) Downhole Operation Assets proposed to be sold by Shengli Oilfield
Company Limited
Overview
Shengli Oilfield Company Limited was established on 18 May 2000 with a
registered capital of RMB30,028 million. Its domicile is 258 Jinan Road,
Dongying District, Dongying City, Shandong Province, and the enterprise
legal person business licence registration number is 3705001804320. Its
principal business includes the exploration, extraction, utilization,
processing and sale of, and the downhole operations in relation to,
ocean/land petroleum, natural gas and other natural resources, petroleum
refining and chemical industry.
Assets proposed to be disposed
It is proposed to sell the assets of 4 downhole operation companies
under Shengli Oilfield, including the "Operation Branch", "Preparation
Branch", "Engineering Vehicles Branch" and pipelines, oil pumping rods
and oil pumping equipment repair and other ancillary assets related to
the oilfield downhole operation. The above assets include 4,225 vehicles
and machines.
Such assets include buildings and structures with a total area of
449,063 m2, of which the relevant title certificates for an aggregate
area of 81,481 m2 are being applied for.
(2) Downhole Operation Assets of Zhongyuan Oilfield Branch Company
proposed to be sold
It is proposed to sell the downhole operation, special vehicles,
preparation, oil pipeline plant, oil rod plant, "rods, pipelines, pumps"
and downhole tools repair and maintenance and special vehicles
maintenance of the Special Operation Office, Oil Extraction Plant One,
Plant Two, Plant Three, Plant Five, Plant Six and Trial Extraction
Second Office under Zhongyuan Oilfield Branch Company, and the electric
pump unit, electric cables manufacturing, repair and technical services
of the Oil Extraction Technology Research Institute and other related
ancillary assets. The above assets include 3,065 vehicles and machines.
Such assets include buildings and structures with a total area of
158,790 m2, of which the relevant title certificates for an aggregate
area of 46,737 m2 are being applied for.
(3) Downhole Operation Assets of Jiangsu Oilfield Branch Company proposed
to be sold
It is proposed to sell the related ancillary assets of 3 oil extraction
plants under Jiangsu Oilfield Branch Company, including the internal
downhole operation, testing (including measuring), special vehicles, oil
pipeline works and rods, pipelines and pumps repair of the 3 oil
production fields. The above assets include 422 vehicles and machines.
Such assets include buildings and structures with a total area of 25,081
m2, of which the relevant title certificates for an aggregate area of
6,167 m2 are being applied for.
(4) Downhole Operation Assets of Henan Oilfield Branch Company proposed
to be sold
It is proposed to sell the assets related to 7 mine brigade units under
Henan Oilfield Branch Company (2 special operation works departments, 2
downhole operation works department, 2 production preparation brigades,
one testing project management department) and related supporting
facilities. The above assets include 824 vehicles and machines.
Such assets include buildings and structures with a total area of 33,329
m2, of which the relevant title certificates for an aggregate area of
13,630 m2 are being applied for.
(5) Downhole Operation Assets of Jianghan Oilfield Branch Company
proposed to be sold
It is proposed to dispose the following assets and associated
liabilities of Jianghan Oilfield Branch Company: 8 operation brigades
and the processing works, tools works and derrick teams of the
preparation branches of Jianghan Oil Extraction Plant; 8 operation
branches, 2 testing brigades, one overhaul brigade and special vehicles
branches. The above assets include 965 vehicles and machines, and
structures with a total area of approximately 72,045 m2, of which the
relevant title certificates for an aggregate area of approximately 3,225
m2 are being applied for.
(6) Downhole Operation Assets of Huadong Branch Company proposed to be
sold
It is proposed to dispose the assets of the oil production division
under Huadong Branch Company including the testing branch, operation
branch, measuring branch, water transport branch, vehicle transportation
branch, equipment maintenance branch, oil construction and associated
liabilities including all vehicles and machines, and 2
buildings/structures with a total area of approximately 894 m2.
(7) Downhole Operation Assets of Huabei Branch Company proposed to be sold
It is proposed to sell the assets related to 5 testing branch and one
measuring branch of the downhole n department of Huabei Branch Company,
including all machines and vehicles.
(8) Downhole Operation Assets of Xinan Branch Company proposed to be sold
It is proposed to sell the downhole operation department and the assets
related to well repair, gas testing and midway measuring brigades and
associated liabilities of Xinan Branch Company including all
transportation facilities and machinery.
The Downhole Operation Assets include properties with an area of 300 m2,
the relevant title certificate of which is being applied for. The land
relating to the Downhole Operation Assets are leased from Sinopec Group
Company.
Save as disclosed above, the above assets are free from any guarantees,
litigation or other major disputes that could result in material adverse
effect.
6. Prospective Continuing Connected Transactions
In preparation for its listing on the Stock Exchange, Sinopec Corp. and
Sinopec Group Company entered into a number of agreements in the year
2000 governing the continuing connected transactions between them. These
continuing connected transactions include the transactions comtemplated
under the Land Use Rights Lease Agreement and the Property Leasing
Agreement. On 11 June 2001, the Ongoing Connected Transaction Adjustment
Agreement was entered into between Sinopec Corp. and Sinopec Group
Company whereby, amongst other connected transaction agreements, various
terms of the above agreements were amended.
Details of the Land Use Rights Lease Agreement and the Property Leasing
Agreement are summarised below:
(1) Land Use Rights Lease Agreement
According to the Land Use Rights Lease Agreement as amended by the
Ongoing Connected Transaction Adjustment Agreement, Sinopec Group
Company agreed to lease to the Company certain parcels of land, with an
aggregate area of approximately 370,074,262 m2 at an annual rent of
approximately RMB1,977 million (approximately HK$1,865 million), which
is lower than the prevailing market rent. The rent may be reviewed every
3 years and any such revised rent shall not be higher than the
prevailing market rent as confirmed by an independent valuer.
In respect of the authorised lands for operation owned by members of the
Sinopec Group, lands for industrial use were leased to the Company for a
term of 50 years while lands for commercial use were leased to the
Company for a term of 40 years. Lands over which members of the Sinopec
Group have been granted land use rights with consideration, were leased
for a term up to the date of expiry of the respective land use rights
certificates. The term of the lease in each case commenced from 1
January 2000. The Company may request for renewal of the term of the
lease by giving notice to relevant member(s) of the Sinopec Group twelve
months before the expiry of the lease.
(2) Properties Lease Agreement
Sinopec Group Company and Sinopec Corp. entered into the Properties
Leasing Agreement dated 3 June 2000, which took effect from 1 January
2000, and as amended by the Ongoing Connected Transaction Adjustment
Agreement, members of the Sinopec Group agreed to lease to the Company
certain properties with a gross floor area of approximately 2,593,490 m2
at an annual rent of RMB567 million (approximately HK$535 million),
which is lower than the prevailing market rent. The rent may be reviewed
annually and any such revised rent shall not be higher than the
prevailing market rent. Property taxes and land use fees in relation to
such properties shall be borne by Sinopec Group.
The properties were leased by Sinopec Group to the Company for a term of
20 years commencing from 1 January 2000.
If Sinopec Group Company negotiates to sell a leased property to a third
party, Sinopec Corp. shall have a pre-emptive right to purchase such
property under the same terms.
At the extraordinary general meeting of Sinopec Corp. held on 18
December 2003, the Independent Shareholders approved the following caps
in respect of the Land Use Rights Lease Agreement and the Properties
Lease Agreement. The caps shall be valid until 31 December 2006:
Transactions Caps
Land Use Rights Lease Agreement RMB2,150 million (approximately
annual rents payable by the Company HK$2,028 million)
Properties Lease Agreement annual rents RMB730 million(approximately
payable by the Company HK$689 million)
Following the completion of the Acquisition, the Acquiring Assets
(either by itself or through Sinopec Corp.) will lease various parcels
of land and certain properties from members of the Sinopec Group. Such
transactions will constitute continuing connected transactions for
Sinopec Corp. under the Listing Rules. Accordingly, on 31 October 2004,
Sinopec Corp. and Sinopec Group Company entered into the New Continuing
Connected Transaction Adjustment Agreement which supplements the Land
Use Rights Lease Agreement and Property Leasing Agreement and provides,
inter alia, that the terms of these 2 agreements will apply to the
additional leasing of land and properties between the Company and the
Sinopec Group arising from the Acquisition.
1. Land Use Rights Lease Agreement (as supplemented)
Following the completion of the Acquisition, the Acquiring Assets
(either by itself or through the Company) will lease from Sinopec Group
land with a total area of approximately 8,888,498 m2. for an annual
rental of approximately RMB110 million (approximately HK$104 million).
Accordingly, the Land Use Rights Lease Agreement will be supplemented
under which land with an aggregate area of 370,962,760 m2 will be leased
by the Company from Sinopec Group. As a result, the annual rentals
payable by the Company under the Land Use Rights Lease Agreement will
exceed the annual limit of RMB2,150 (approximately HK$2,028 million) as
approved by the shareholders of Sinopec Corp. on 18th December 2003.
Taking into account the amount of the historical rent paid under the
Land Use Rights Agreement for the 2 years ended 31 December 2003 and the
expected amount for the year ending 31 December 2004, being
approximately RMB2,018 million (approximately HK$1,903 million),
RMB2,060 million (approximately HK$1,943 million) and RMB2,147 million
(approximately HK$2,025 million), respectively, the provisions under
that the Land Use Rights Lease Agreement which provide that Sinopec
Group Company may review the rent payable every 3 years and that rent
and land value generally in the PRC are rising and the additional amount
of rent of approximately RMB110 million, it is proposed that the new cap
for each financial year for the 3-year period ending 31 December 2007
will be RMB2,450 million (approximately HK$2,311 million).
The rent payable for the additional land leased is determined based on
(i) the level of rent payable at present under the Land Use Rights Lease
Agreement, (ii) the market rent for such land taking into account their
location and size and (iii) the actual area of land subject to the
lease. The duration of the lease will be the same as that provided for
in the Land Use Rights Lease Agreement.
Under the Land Use Rights Lease Agreement as supplemented, in respect of
the authorised lands for operation owned by members of the Sinopec
Group, lands for industrial use were leased to the Company for a term of
50 years while lands for commercial use were leased to the Company for a
term of 40 years. Lands over which members of the Sinopec Group have
been granted land use rights with consideration, were leased for a term
up to the date of expiry of the respective land use rights certificates.
The term of the lease in respect of the newly leased land will commence
from the Completion Date. The Company may request for renewal of the
term of the lease by giving notice to relevant member(s) of the Sinopec
Group twelve months before the expiry of the lease.
2. Properties Lease Agreement
Following the completion of the Acquisition, the Acquiring Assets
(either itself or through the Company) will lease from Sinopec Group
more buildings with an aggregate area of 15,114 m2. The amount of the
annual rental for the newly leased properties will be approximately RMB1
million (approximately HK$0.94 million). Accordingly, the Properties
Lease Agreement will be supplemented under which properties with an
aggregate area of 2,608,604 m2 will be leased by the Company from
Sinopec Group.
Taking into account the amount of the historical rent paid under the
Properties Lease Agreement for the 2 years ended 31 December 2003, being
in the sum of approximately RMB619 million (approximately HK$584
million) and RMB700 million (approximately HK$660 million), the
Directors (including the Independent Non-executive Directors) expect
that the increase of leasing of the properties arising from the
Acquisition together with properties which are already subject of the
lease will not exceed the annual limits approved by the shareholders of
Sinopec Corp. on 18 December 2003, being RMB730 million (approximately
HK$687 million) per year. Accordingly, the cap previously approved by
the Independent Shareholders and granted by the Stock Exchange in its
waiver in respect of the Properties Lease Agreement will continue to
apply for each financial year for the 3-year period ending 31 December
2007.
The rent payable for the additional building leased is determined based
on (i) the level of rent payable at present under the Properties Lease
Agreement, (ii) the market rent for such building taking into account
the location and size and (iii) the actual area of building subject to
the lease. The duration of the lease will be the same as that provided
for in the Properties Lease Agreement, being 20 years. The commencement
date for the newly leased properties will be the Completion Date.
The Listing Rules
As the duration of the Land Use Rights Lease Agreement and the Properties
Lease Agreement is in excess of three years, the Independent Financial
Advisers will set out the special reasons as to why their duration is required
and their confirmation that it is normal business practice for contracts of
these types to be of such duration in their recommendation to the Independent
Non-Executive Directors and Independent Shareholders which will be included in
the circular to be despatched to shareholders of Sinopec Corp.
As the annual amount of the transactions under the Land Use Rights Lease
Agreement and the Properties Lease Agreement are, in aggregate, less than 2.5%
of the relevant percentage ratio (as defined in the Listing Rules), these
transactions are exempted from the independent shareholders approval
requirement and are only subject to reporting and announcement requirements
under rule 14A.34 of the Listing Rules.
Sinopec Corp. will comply with the relevant provisions of Chapter 14A of the
Listing Rules in relation to the reporting requirements in respect of the
Continuing Connected Transactions.
7. The Views of the Independent Non-executive Directors
On the basis of reviewing the opinions of the independent financial advisor,
Mr. Cheng Qintai, Mr. He Zhuguo, Mr. Shi Wanpeng and Mr. Zhang Youcai issued
independent views regarding the Acquisition and the Disposal and the New
Continuing Connected Transactions Adjustment Agreement, respectively. The
independent Non-executive Directors unanimously agree that each of the
Acquisition and Disposal complies with the provisions of the relevant PRC laws
and regulations and the articles of associations of Sinopec Corp. The
connected Directors have abstained from voting for the relevant matters in the
board meeting, and the voting procedures comply with the provisions of the
relevant domestic and overseas laws and regulations and the articles of
associations of Sinopec Corp; the considerations for the Acquisitions and
Disposal are fair and reasonable; the Acquisition and Disposal are reached on
normal business terms, and the provisions of the relevant agreements are fair
and reasonable to Sinpec Corp. and all its shareholders without prejudice to
the interests of Sinpec Corp. and the Independent Shareholders; the
competition and the overall continuing connected transactions between the
Company and Sinopec Group will be reduced upon the completion of the
transaction, therefore the competitiveness of the Company will be enhanced,
which will contribute to the consistent, stable and healthy development of
Sinopec Corp. and the interests of all the shareholders; approving Sinopec
Corp. to sign the relevant agreements and fulfil the transactions thereunder;
suggesting that the Independent Shareholders vote to approve the relevant
agreements and the transactions thereunder..
8. Definitions
In this announcement, unless otherwise indicated in the context, the following
expressions have the meaning set out below:
"Acquisition" the proposed acquisition by Sinopec Corp.
of the relevant Target Assets (including
the Petrochemical Assets, the Catalyst
Assets and the Gas Station Assets) under
the Acquisition Agreements
"Acquisition Agreements" 1. the sale and purchase agreement in
respect of the Petrochemical Assets,
collectively: which was entered into
between Sinopec Corp. and Sinopec
Group Company
2. the sale and purchase agreement in
respect of the Catalyst Assets, which
was entered into between Sinopec
Corp. and Sinopec Group Company
3. the sale and purchase agreement in
respect of the Gas Station Assets,
which was entered into between
Sinopec Corp. and Sinopec Group
Company
"associates" has the meaning ascribed to it in the
Listing Rules
"Authorising Entities" the subsidiaries of Sinopec Group
Company which authorised Sinopec Group
Company to enter into the Acquisition
Agreements on their behalf, and the
subsidiaries of Sinopec Corp. which
authorised Sinopec Corp. to enter into the
Disposal Agreement on their behalf.
"Aoda Technology" Beijing Aoda Petrochemical New Technologies
Development Centre
"Board" the board of directors of Sinopec Corp.
"Changling Plant" The catalyst plant of Changling Refinery
"Changling Refinery" Sinopec Group Changling Refinery and
Chemical Co., Ltd.
"CICC" China International Capital Corporation
Limited, which was previously registered
with the Securities and Futures Commission
as an investment adviser and is deemed to
be currently licensed to carry out Types 1,
4 and 6 regulated activities under the SFO,
being the financial advisers to Sinopec
Corp. in respect of the Acquisition, the
Disposal and the Continuing Connected
Transactions
"Company" Sinopec Corp. and its subsidiaries
"Completion Date" 31st December 2004, or a later date agreed
upon by both parties in writing
"Continuing Connected means the continuing transactions
Transactions" between the Company and Sinopec Group
arising as a result of the Acquisition and
the Disposal
"CSRC" China Securities Regulatory Commission
"Directors" the directors of Sinopec Corp.
"Disposal" the proposed disposal by Sinopec Corp. of
the relevant Target Assets, namely the
Downhole Operation Assets, under the
Disposal Agreement
"Disposal Agreement" the sale and purchase agreement in respect
of the Downhole Operation Assets, which was
entered into between Sinopec Corp. and
Sinopec Group Company
"EGM" the extraordinary general meeting of
Sinopec Corp. to be held for Independent
Shareholders to consider and to approve the
Acquisition (including the Acquisition
Agreements) and the Disposal (including the
Disposal Agreement)
"Guangzhou Petrochemical" Sinopec Group Guangzhou Petrochemical
General Plant
"Henan Oilfield Branch Company" China Petroleum & Chemical Corporation
Henan Oilfield Branch Company
"HK$" Hong Kong Dollar, the lawful currency of
Hong Kong
"Hong Kong" The Hong Kong Special Administrative Region
of the People's Republic of China
"Huabei Branch Company" China Petroleum & Chemical Corporation
Huabei Branch Company
"Huadong Branch Company" China Petroleum & Chemical Corporation
Huadong Branch Company
"Independent Non-Executive the independent non-executive directors of
Directors" Sinopec Corp., who are invited to advise the
Independent Shareholdersin connection with
the Acquisition (including the Acquisition
Agreements), the Disposal (including the
Disposal Agreement) and the Continuing
Connected Transactions (including the New
Continuing Connected Transactions
Adjustment Agreement)
"Independent Shareholders" the shareholders of Sinopec Corp. other
than Sinopec Group Company and its
associates
"Jianchang Petrochemical Hunan" Jianchang Petrochemical Joint-stock Limited
Company
"Jianghan Oilfield Branch Company" China Petroleum & Chemical Corporation
Jianghan Oilfield Branch Company
"Jiangsu Oilfield Branch Company" China Petroleum & Chemical Corporation
Jiangsu Oilfield Branch Company
"Land Use Rights Lease Agreement" The land use rights lease agreement dated
3rd June 2000 (as amended);
"Listing Rules" The Rules Governing the Listing of
Securities on The Stock Exchange of Hong
Kong Limited;
"Luoyang Petrochemical" Sinopec Group Luoyang Petrochemical General
Plant
"Maoming Petrochemical" Sinopec Group Maoming Petrochemical Company
"MOF" Ministry of Finance of the PRC
"Nanjing Nanlian" Nanjing Nanlian Catalyst Co., Ltd.
"New Continuing Connected means the continuing connected transactions
Transactions Adjustment adjustment agreement dated 31st October
Agreement" 2004 entered into between Sinopec Corp. and
Sinopec Group Company in respect of the
Continuing Connected Transactions
"Ongoing Connected Transaction the agreement dated 11th June 2001 providing
Adjustment Agreement" for certain amendments to the terms of the
terms of the ongoing connected transactions
between Sinopec Corp. and Sinopec Group
Company
"Payment Date" within 20 days after the Completion Date
"PRC" the People's Republic of China
"Properties Lease Agreement" The Property Lease Agreement, which was
dated 3 June 2000 and entered into between
Sinopec Corp. and Sinopec Group Company
"Prospectus" the prospectus of Sinopec Corp. dated 9th
October, 2000 relating to the offer and
sale of Sinopec Corp.'s H shares in Hong
Kong
"PTA" Pure Terephthalic Acid
"Purchaser" in relation to the Acquisition, Sinopec
Corp. in relation to the Disposal, Sinopec
Group Company
"PX" Pare-xylene
"Qilu Plant" The catalyst plant of Qilu Petrochemical
Company
"RMB" renminbi, the lawful currency of the
People's Republic of China
"Rothschild" N M Rothschild & Sons (Hong Kong) Limited,
which was previously registered with the
Securities and Futures Commission as an
investment adviser and is deemed to be
currently licensed to carry out Types 1, 4,
6 and 9 regulated activities under the SFO,
being the independent financial adviser
appointed by the Company to advise the
Independent Non-Executive Directors and
Independent Shareholders as to whether the
terms of the Acquisition and the Disposal
are fair and reasonable and whether the
Acquisition and the Disposal are in the
interest of the Company and the
shareholders as a whole and to advise the
Company's shareholders on how to vote in
respect of the Acquisition and the
Disposal.
"SASAC" The State-owned Assets Supervision and
Administration Commission under the State
Council of PRC
"Shanghai Research Institute" Sinopec Group Shanghai Petroleum & Chemical
Research Institute
"Shanghai Lide" Shanghai Lide Catalyst Co., Ltd.
"Shengli Oilfield Company Limited" China Petroleum & Chemical Corporation
Shengli Oilfield Company Limited
"Sinopec Corp." China Petroleum & Chemical Corporation, a
joint stock limited company incorporated in
the PRC with limited liability
"Sinopec Group" Sinopec Group Company and its subsidiaries
(other than the Company)
"Sinopec Group Company" China Petrochemical Corporation, the
controlling shareholder of Sinopec Corp.
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Supervisors" The members of the supervisory committee of
Sinopec Corp.
"Target Assets" 1. the Tianjin Business, Luoyang
Business, Maoming Business, Guangzhou
Assets and the 93.51% equity interest
of Zhongyuan Petrochemical (the
"Petrochemical Assets")
2. the 81% equity interest in Jianchang
Petrochemical, the 50% equity
interest of Aoda Technology, the 60%
equity interest in Shanghai Lide,
Changling Plant, Qilu Plant,
Technologies Development Company,
Shanghai Research Institute and
Nanjing Nanlian (the "Catalyst
Assets")
3. the 1,023 gas stations and 54 oil
depots owned by Sinopec Group (the
"Gas Station Assets")
4. the downhole operation assets and
associated liabilities of Shengli
Oilfield Company, Zhongyuan Oilfield
Branch, Henan Oilfield Branch,
Jianghan Oilfield Branch, Jiangsu
Oilfield Branch, Huabei Branch,
Huadong Branch and Xinan Branch (the
"Downhole Operation Assets")
"Technologies Development China Petroleum & Chemical Technologies
Company" Development Co., Ltd.
"Tianjin Petrochemical" Sinopec Group Tianjin Petrochemical Company
"Valuation Date" 30th June 2004 for the Petrochemical Assets
and Catalyst Assets; 31st May 2004 for the
Gas Station Assets; and 31st July 2004 for
the Downhole Operation Assets
"Vendor" in relation to the Acquisition, Sinopec
Group Company and the Authorising Entities
in relation to the Disposal, Sinopec Corp.
and the Authorising Entities
"Xinan Branch Company" China Petroleum & Chemical Corporation
Xinan Branch Company
"Zhongyuan Oilfield Branch China Petroleum & Chemical Corporation
Company" Zhongyuan Oilfield Branch Company
"Zhongyuan Petrochemical" Zhongyuan Petrochemical Co., Ltd.
By Order of the Board
Chen Tonghai
Chairman of the board of directors
Beijing, the PRC, 1 November 2004
As at the date of this announcement, the directors of Sinopec Corp. are
Messrs. Chen Tonghai, Wang Jiming, Mou Shuling, Zhang Jiaren, Cao Xianghong,
Liu Genyuan, Gao Jian and Fan Yifei; the independent non-executive directors
of Sinopec Corp. are Messrs. Chen Qingtai, Ho Tsu Kwok Charles, Shi Wanpeng
and Zhang Youcai; and the employee representative director of Sinopec Corp. is
Mr. Cao Yaofeng.