Huadian Heavy Industries Co.Ltd(601226) : Huadian Heavy Industries Co.Ltd(601226) : Announcement on signing the financial service agreement and related party transactions with China Huadian Group Finance Co., Ltd

Securities code: Huadian Heavy Industries Co.Ltd(601226) securities abbreviation: Huadian Heavy Industries Co.Ltd(601226) Announcement No.: pro 2022017 Huadian Heavy Industries Co.Ltd(601226)

Announcement on signing financial service agreement and related party transactions with China Huadian Group Finance Co., Ltd

The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.

Important content tips:

Huadian Heavy Industries Co.Ltd(601226) (hereinafter referred to as "the company") intends to sign the financial service agreement with China Huadian Group Finance Co., Ltd. (hereinafter referred to as "Huadian finance company") in 2022, which is valid for three years from the date of entry into force of the agreement.

In the past 12 months, the company and its holding subsidiaries lent 80 million yuan to Huadian finance company. As of December 31, 2021, the balance of loans from the company and its holding subsidiaries to Huadian finance company was 30 million yuan; The balance of deposits in Huadian finance company was 2091766700 yuan. In 2021, the average daily deposit balance of the company and its holding subsidiaries in Huadian finance company was 1233 million yuan.

On April 21, 2022, the sixth meeting of the Fourth Board of directors of the company deliberated and approved the proposal on signing the financial service agreement with China Huadian Group Finance Co., Ltd., and the related directors avoided the vote on the proposal. The independent directors of the company believe that this connected transaction will not damage the interests of the company and other shareholders, especially the interests of minority shareholders, and will not affect the independence of the company. This proposal still needs to be submitted to the 2021 annual general meeting of the company for deliberation.

1、 Overview of related party transactions

The company signed the financial service agreement with Huadian finance company in 2021. In order to improve the use level and efficiency of funds, save financial expenses and consider the needs of business development, the company plans to increase some financial service lines and sign a new financial service agreement with Huadian finance company. Since Huadian Finance Co., Ltd. and the company are companies directly or indirectly controlled by China Huadian Group Co., Ltd. (hereinafter referred to as "Huadian Group"), Huadian Finance Co., Ltd. is an affiliated legal person of the company, and this transaction constitutes a connected transaction in accordance with the relevant provisions of the stock listing rules of Shanghai Stock Exchange, the self regulatory guidelines for listed companies of Shanghai Stock Exchange No. 5 - transactions and connected transactions. This connected transaction does not constitute a major asset reorganization as stipulated in the administrative measures for major asset reorganization of listed companies.

In the past 12 months, the company and its holding subsidiaries lent 80 million yuan to Huadian finance company. As of December 31, 2021, the balance of loans from the company and its holding subsidiaries to Huadian finance company was 30 million yuan; The balance of deposits in Huadian finance company was 2091766700 yuan. In 2021, the average daily deposit balance of the company and its holding subsidiaries in Huadian finance company was 1233 million yuan.

2、 Introduction to related parties

(I) introduction to related party relationship

Huadian finance company is the holding subsidiary of Huadian Group, which meets the related relationship stipulated in article 6.3.3 of the stock listing rules of Shanghai Stock Exchange.

(II) basic information of related parties

Name: China Huadian Group Finance Co., Ltd

Registered address: 10th floor, West building, building 2, Xuanwumen inner street, Xicheng District, Beijing

Legal representative: Li Wenfeng

Registered capital: 500 million yuan

Nature of enterprise: limited liability company (foreign-invested enterprise and domestic joint venture)

Date of establishment: May 10, 1988

The actual controlling shareholder of Huadian Group is the largest shareholder or 41.09% of the actual controlling shareholder of Huadian Group.

Business scope: handle financial and financing consulting, letter of credit and related consulting and agency business for member units; Assist member units to realize the receipt and payment of transaction funds; Approved insurance agency business; Provide guarantee to member units; Handle entrusted loans and entrusted investment between member units; Handle bill acceptance and discount for member companies; Handle the internal transfer settlement between member units and the corresponding settlement and clearing scheme design; Absorbing deposits from member units; Handle loans and financial leases for member units; Engage in interbank lending; Issue financial corporate bonds upon approval; Underwriting corporate bonds of member units; Equity investment in financial institutions; Securities investment; Consumer credit, buyer's credit and financial leasing of products of member units Bank Of China Limited(601988) other businesses approved by the Industry Regulatory Commission.

In recent three years, the total assets, operating income and net profit of Huadian finance company have shown a steady growth trend. As of December 31, 2021, Huadian finance company has total assets of 65.519 billion yuan and net assets of 9.988 billion yuan. In 2021, Huadian finance company realized a main business income of 1.53 billion yuan and a net profit of 949 million yuan. In addition to the business scope involved in the financial services agreement, there is no relationship between Huadian finance company and the company in terms of property rights, assets, personnel and other aspects.

3、 Basic information of related party transactions

In principle, the total maximum daily deposit balance of the company and its subsidiaries in Huadian finance company shall not be higher than 25% (including) of the total audited assets in the consolidated statements of the company in the latest fiscal year, and the average daily deposit balance shall not exceed RMB 1.5 billion, The deposit interest rate shall not be lower than the average of the same deposit interest rate provided by the four major industrial and agricultural China Construction Bank, and shall not be lower than the interest rate determined by Huadian finance company to absorb the demand deposits of other member units of China Huadian Group. The settlement services provided by Huadian finance company for the company and its subsidiaries are free of charge except the settlement handling fee charged by the people's Bank of China.

The company plans to obtain a comprehensive credit balance of no more than 1.7 billion yuan from Huadian finance company. In the comprehensive credit service, the loan interest rate is not higher than the loan interest rate of the same grade of China's major commercial banks in the same period.

For other financial services provided by Huadian finance company to the company and its subsidiaries, it is expected that the amount of related party transactions will not exceed 50 million yuan within the validity period of the agreement, the charging standard will not be higher than the market fair price, and the same level of business expenses of other financial institutions in China.

4、 Main contents of financial services agreement

The financial service agreement to be signed between the company and Huadian finance company stipulates that Huadian finance company will provide financial services for the company (including its wholly-owned and holding subsidiaries). The main contents of the agreement are as follows:

(I) agreement subject

Party A: Huadian Heavy Industries Co.Ltd(601226)

Party B: China Huadian Group Finance Co., Ltd

(II) main service contents

1. Financial services business

Huadian finance company provides deposit service business for the company; Settlement service business; Comprehensive credit service business; Other financial service businesses approved by the CIRC.

2. Deposit service business

The company or its subsidiaries open a deposit account in Huadian finance company with free access. The form of deposit can be current deposit, time deposit, call deposit, agreement deposit, etc. The deposit interest rate provided by Huadian finance company to the company shall not be lower than the average of the same deposit interest rate provided by the four major industrial and agricultural China Construction Bank, and shall not be lower than the interest rate determined by Huadian finance company to absorb the demand deposits of other member units of China Huadian Group. During the validity of the agreement, the total maximum daily deposit balance of the company and its subsidiaries in Huadian finance company shall not be higher than 25% (including) of the total audited assets in the consolidated statements of the company in the latest fiscal year, and the average daily deposit balance shall not exceed RMB 1.5 billion.

3. Settlement service business

Huadian finance company provides payment services, collection services and other auxiliary services related to settlement business according to the instructions of the company and member enterprises. Huadian finance company shall ensure the safe operation of capital settlement network, ensure capital security, control asset liability risk and meet the payment needs of the company and its subsidiaries. The settlement business provided by Huadian finance company for the company includes but is not limited to the centralized settlement business management of the company's funds. In addition to the settlement fees charged by the people's Bank of China, Huadian finance company provides various settlement services for the company free of charge.

4. Comprehensive credit business

Huadian finance company can provide the company with comprehensive credit business on a regular basis, which shall not exceed 1.7 billion yuan. The loan interest rate of the company or its subsidiary in Huadian finance company shall be negotiated by both parties according to the loan market quotation interest rate (LPR) applicable in the current period when signing each loan contract, and the execution interest rate of the loan can be adjusted appropriately. At the same time, it shall not be higher than the loan interest rate of the same grade of major commercial banks in China in the same period. All other financial services except deposits and loans shall follow the principle of fairness and reasonableness, and the charging standard shall not be higher than the market fair price, and shall not be higher than the same level of business expenses of other financial institutions in China.

On the premise of complying with relevant national laws and regulations, Huadian finance company provides comprehensive credit services for the company and its subsidiaries according to the needs of the company's operation and development. The company and its subsidiaries can use the comprehensive credit line provided by Huadian finance company to handle loans, bill acceptance, bill discount, guarantee and other forms of capital financing, Huadian finance company will give priority to meeting the needs of the company and its member enterprises within its own capital capacity.

5. Other financial services

Huadian finance company will provide other financial services within its business scope approved by the CBRC in accordance with the instructions and requirements of the company and its subsidiaries. Before Huadian finance company provides other financial services to the company and its subsidiaries, both parties need to negotiate and enter into an independent agreement. The fees charged by Huadian finance company for providing other financial services are no higher than those charged by major financial institutions in China for similar services. It is estimated that the amount of connected transactions of other financial services will not exceed 50 million yuan during the validity of the agreement.

(III) transaction price and pricing basis

While providing the above financial services for the company, Huadian finance company shall abide by: the deposit interest rate shall not be lower than the average of the same deposit interest rate provided by the four major industrial and agricultural China Construction Bank, and shall not be lower than the interest rate determined by Huadian finance company to absorb the demand deposits of other member units of China Huadian Group; The settlement service is free of charge except for the settlement handling fee charged by the people's Bank of China; The loan interest rate shall not be higher than the loan interest rate of the same grade of China's major commercial banks in the same period; The charging standard of other financial services shall not be higher than the fair market price, and shall not be higher than the same level of business expenses of other financial institutions in China.

(IV) effective conditions of the contract

1. Huadian finance company meets relevant compliance requirements.

2. Approved by the general meeting of shareholders of the company.

3. The legal representatives or authorized representatives of both parties sign and affix the official seal of the unit.

(V) term of validity

The agreement is valid for three years from the effective date.

(VI) risk control measures

1. The settlement services provided by Huadian finance company to the company must be carried out under the condition of ensuring that the company's ownership, use right and beneficial right of funds will not be affected in any way; In case of payment difficulties of Huadian finance company, according to the measures for the administration of enterprise group finance companies, the parent company of Huadian finance company has the obligation to increase the corresponding capital and other necessary actions, including organizing liquidation, so as to ensure the interests of the company.

2. When providing various business services for the company, Huadian finance company has the obligation to ensure the safety and use of the company's funds in Huadian finance company. In case of capital loss, the company has the right to unilaterally terminate this agreement.

3. Huadian finance company shall cooperate with the company to provide the company with relevant documents and materials such as financial status and internal control according to the regulatory rules of listed companies, information disclosure of connected transactions of listed companies, risk control and other relevant requirements.

5、 Risk assessment and risk prevention

Huadian finance company continues to operate in accordance with the law. It has strong ability to repay debts, abundant funds and less affected by the adverse economic environment.

China Huadian Group Co., Ltd. promises to increase its capital accordingly according to the actual needs of solving the difficulties in case of an emergency of payment difficulties in Huadian finance company.

In addition, in order to effectively prevent, timely control and resolve the capital risks of the company's deposit business in Huadian finance company and maintain capital safety, the company has formulated the risk control system for related party transactions between Huadian Heavy Industries Co.Ltd(601226) and China Huadian Group Finance Co., Ltd.

6、 Impact of this transaction on the company

As a non bank financial institution established with the approval of Bank Of China Limited(601988) industry supervision and Administration Commission, Huadian finance company is subject to the supervision of Bank Of China Limited(601988) insurance supervision and Administration Commission, has various qualifications to provide financial services for enterprise group member units, and all indicators comply with the provisions of the measures for the administration of enterprise group financial companies; When Huadian finance company handles deposit, credit, settlement and other financial services for the company, both parties shall follow the principles of equality and voluntariness, complementary advantages, mutual benefit and win-win cooperation, which will not affect the operation and allocation of the company's funds; The company can make full use of the financial service platform provided by Huadian finance company to broaden financing channels, reduce financing costs, ensure the demand for operating funds, enhance the ability of capital allocation and maximize capital benefits.

This connected transaction will not damage the interests of the company and shareholders, especially minority shareholders, and will not affect the independence of the company.

7、 Review procedures for the performance of this connected transaction

On April 21, 2022, the sixth meeting of the Fourth Board of directors of the company deliberated and adopted the proposal on signing the financial service agreement with China Huadian Group Finance Co., Ltd. the related directors Wen Duanchao, Peng Gangping and Li Guoming avoided voting, and all three independent directors agreed to the proposal. The voting results were: 6 in favor, 0 against, 0 abstention and 3 avoidance. The proposal was adopted. On the same day, the sixth meeting of the Fourth Board of supervisors also considered and adopted the proposal. The proposal needs to be submitted to the 2021 annual general meeting of shareholders of the company for deliberation, and the related parties interested in the related party transaction shall waive the right to vote on the proposal at the general meeting of shareholders. The audit committee of the board of directors and independent directors of the company have reviewed and agreed on the related party transactions in advance. The details are as follows:

Opinion of the Audit Committee: "we have reviewed the signing of the financial service agreement between the company and China Huadian Group Finance Co., Ltd. (hereinafter referred to as" Huadian finance company "), carefully read the relevant materials provided by the company, and believe that the company signed the financial service agreement with Huadian finance company and obtained a comprehensive credit balance of no more than 170 million yuan from Huadian finance company, It is beneficial for the company to make full use of the financial service platform provided by Huadian finance company, broaden financing channels, reduce financing costs, ensure the demand for operating funds, enhance the ability of capital allocation and maximize capital benefits. This connected transaction follows

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