Stock Code: 200771 Stock ID: Hangqilun B Announcement No.: 2023-02
Hangzhou Steam Turbine Power Group Co., Ltd.
Announcement on Capital Increase and Investment of Zhejiang Ranchuang in
Western Power
The members of the Board and the Company acknowledge being responsible for the truthfulness, accuracy, and
completeness of the announcement. Not any false record, misleading statement or significant omission carried
in this announcement.
I. Overview of Outbound Investment
In order to improve the comprehensive competitiveness of gas turbine industry, extend the industrial chain of
gas turbine, Hangzhou Steam Turbine Power Group Co., Ltd. (referred to as "the Company") will invest in
Pengzhou Western Power Blue Technology Co., Ltd. (referred to as "Western Power" or "the Target Company")
through the equity transfer and capital increase of Zhejiang Ranchuang Turbine Machinery Co., Ltd. (a
wholly-owned subsidiary of the company, referred to as "Zhejiang Ranchuang"). The specific matters are as
follows:
(1) Transaction mode
1. The Company's capital increase in Zhejiang Ranchuang:
According to the capital demand of Zhejiang Ranchuang to invest in Western Power and the need of its
continuous operation and development, the Company increased the capital in Zhejiang Ranchuang by RMB 130
million, and increased the registered capital of Zhejiang Ranchuang from RMB 25 million to RMB 155 million.
2. Zhejiang Ranchuang's investment in the Western Power:
(1) Zhejiang Ranchuang plans to acquire 20 million shares of Western Power held by Chengdu Mengjiang
Investment Group Co., Ltd. ("Chengdu Mengjiang") through public delisting;
(2) Zhejiang Ranchuang plans to acquire 15 million shares of Western Power held by Liaoning Passion
Energy Technology Service Co., Ltd. (hereinafter referred to as "Liaoning Passion") and 3 million shares of
Western Power held by Liu Yuhuan by non-public agreement;
（3）Zhejiang Ranchuang increased its capital by 43 million shares to Western Power.
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After the above-mentioned transaction is completed, the changes of the ownership structure of Western
Power are as follows:
Shares held by each party before Shares held by each party after the
the transaction transaction
No Name of shareholder
Number of shares Shareholding Number of shares Shareholding
(10,000shares) ratio (10,000shares) ratio
1 Liaoning Passion Energy Technology Service Co., Ltd. 5,000 50% 3,500 24.48%
2 Chengdu Mengjiang Investment Group Co., Ltd. 3,000 30% 1,000 6.99%
3 Liu Yuhuan 2,000 20% 1,700 11.89%
4 Zhejiang Ranchuang Turbine Machinery Co., Ltd. 0 0 8,100 56.64%
Total 10,000 100% 14,300 100%
(II) Transaction price
1. Pricing of stock rights acquired by public delisting:
According to the listing announcement of Chengdu Mengjiang's equity transfer in Southwest United Equity
Exchange, the listing price of 20% equity (20 million shares) of Western Power held by Chengdu Mengjiang is
RMB 25.2 million, Zhejiang Ranchuang will quote according to the listed price, and the final transaction price
will be subject to the actual transaction price confirmed by Southwest United Equity Exchange.
2. Pricing of acquiring part of equity and increasing capital by agreement
Main contents of the assessment report: On May 31, 2022 as the base date, the book net assets of Western
Power were RMB 61.2525 million on the base date, according to the special audit by Pan-China Certified Public
Accountants (special general partnership) and assessment by Beijing North Asia Asset Assessment Firm (special
general partnership). The income method was adopted as the final shareholder's total equity value, and the net
assets of Western Power was RMB 96.88 million on the base date.
On the basis of the assessed value of 100% equity of Western Power, the transaction price of the underlying
assets held by each counterparty is confirmed according to the following principles, and the capital increase price
is determined accordingly:
The assessed price for the acquisition of shares of Western Power held by some shareholders = (assessed
value of all the rights and interests of 100% shareholders of Western Power + unpaid capital contribution of
shareholders of Western Power) ×proportion of subscribed capital contribution corresponding to the equity to be
acquired - unpaid capital contribution corresponding to the shareholder in the acquired equity.
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In principle, the transaction price of this investment in Western Power is based on the assessment value, and
it is not higher than the price after the audit assessment and filing confirmation. According to the above formula,
the transaction assessed value of 15 million shares (15% equity) of Western Power held by Liaoning Passion and
3 million shares (3% equity) of Western Power held by Liu Yuhuan are RMB 19.233 million and RMB 3,846,600
respectively, and the capital increase of 43 million shares requires RMB 55,134,600. Based on the assessed value
of the above transaction, the agreed purchase price and capital increase price are determined at RMB 1.27/share
through negotiation by all parties, that is, 15 million shares of Western Power held by Liaoning Passion are
acquired at RMB 19.05 million, 3 million shares of Western Power held by Liu Yuhuan are acquired at RMB 3.81
million, and 43 million shares of Western Power are increased at a price of RMB 54.61 million.
(III) Calculation of total investment
If Zhejiang Ranchuang finally clinches a deal at Chengdu Mengjiang's listing price of RMB 25.2 million,
and Zhejiang Ranchuang receives the shares of Liaoning Passion and Liu Yuhuan at the above-mentioned
negotiated transaction price and increases its capital to Western Power, the above-mentioned total investment is
estimated to be RMB 102.67 million. Considering the uncertainty of public delisting, the final investment amount
shall be subject to the actual transaction amount.
(IV) Other relevant explanations.
On January 13, 2023, the Company held the 31st Meeting of the Eighth Board of Directors, which reviewed
and approved the Proposal on Capital Increase and Investment in Western Power of Zhejiang Ranchuang, which
need not be submitted to the General Meeting of Shareholders for consideration.
This outbound investment still needs the approval of Hangzhou State-owned Assets Supervision and
Administration Department or relevant competent authorities.
The source of funds for this outbound investment is its own funds. This investment does not involve related
party transactions, and does not constitute a major asset restructuring as stipulated in the Administrative Measures
for Major Asset Restructuring of Listed Companies.
II. Basic situation of Zhejiang Ranchuang
1. Company name: Zhejiang Ranchuang Turbine Machinery Co., Ltd.
2. Address: Room 506, South Building, No.2 Chaofeng East Road, Linping Economic Development Zone,
Hangzhou City, Zhejiang Province
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3.Legal representative: Sui Yongfeng
4.Registered capital: RMB 25 million
5.Date of establishment: February 28,2019
6. Business Term: February 28, 2019 to long term
7. Business scope: technical development, product development, production & manufacturing, testing,
technical service, technology transfer, technical consultation and sales in the fields of spare parts, equipment,
systems and spare parts related to rotating machinery such as gas turbines; patent agency. (For projects that are
subject to approval according to law, business activities can only be carried out after being approved by relevant
departments)
8. Equity structure
Hangzhou Steam Turbine Power Group Co., Ltd. holds 100% equity of Zhejiang Ranchuang.
9. Financial situation
In RMB
Operation
Period Total assets Total liabilities Net assets Net profit
revenue
2020 48000366.07 23627267.89 24373098.18 0 460604.47
2021 39661022.19 14699385.17 24961637.02 0 588538.84
January -October 2022
38204245.07 11636403.49 26567841.58 0 856204.56
（Unaudited）
III. Introduction of Counterparty
1. Chengdu Mengjiang Investment Group Co., Ltd.
Company name Chengdu Mengjiang Investment Group Co., Ltd.
Room 301, 3/F, Building 2, No.999, Section 3, East Third Ring Road, Pengzhou City, Sichuan
Address
Province
Legal representative Hu Chongyang
Registered capital RMB 147.04488 million
Company type Other Limited liability Company
Unified social credit code 91510182660488523H
Date of establishment May 23,2007
Business Term May 23, 2007 to no fixed term
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Licensed projects: construction projects (projects that need to be approved according to law can
only be operated after being approved by relevant departments, and specific business projects are
subject to the approval documents or permits of relevant departments). General projects:
investment activities with self-owned funds; enterprise management consulting; municipal
facility management; urban greening management; urban park management; urban and rural city
Business scope appearance management; engineering management services; landscape and greening
engineering construction; property management; housing lease; non-residential real estate lease;
commercial complex management services; sales of building materials; sales of metal materials;
park management services; supply chain management services (except for the projects that must
be approved according to law, for which business activities shall be carried out independently
according to law as per the business license).
Registration authority Pengzhou Market Supervision and Administration
The shareholding structure of Chengdu Mengjiang is as follows:
Amount of subscribed capital
No Name of shareholder Shareholding ratio (%)
contribution (RMB '0,000)
Chengdu Jianjiang Investment Group Co.,
1 13,234.0392 90
Ltd.
2 Sichuan Provincial Finance Department 1,470.4488 10
Total 14,704.488 100
Chengdu Jianjiang Investment Group Co., Ltd. is a 100% owned subsidiary of Pengzhou Finance
Bureau(Pengzhou State-owned Assets Supervision and Administration and Financial Work Bureau).
2. Liaoning Passion Energy Technology Service Co., Ltd.
Company name Liaoning Passion Energy Technology Service Co., Ltd.
No.6 Workshop of Rainbow Incubation Park, Guantai Park, Tieling Economic Development
Address
Zone, Liaoning Province
Legal representative Liu Qing
Registered capital RMB 5 million
Company type Limited liability company (wholly owned by natural person)
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Unified social credit code 91211200353576611F
Date of establishment August 14,2015
Business Term August 14,2015 to August 13, 2045
Production equipment, processing, maintenance, installation, commissioning and technical
services of power generation equipment, gas turbine, steam turbine and generator parts and
accessories; machinery and equipment processing, manufacturing, maintenance and technical
Business scope
services; import and export of goods and technologies (for projects that are subject to approval
according to law, business activities can only be carried out after they are approved by relevant
departments.) .
Registration authority Tieling Market Supervision and Administration
The shareholding structure of Liaoning Passion Energy Technology Service Co., Ltd. is as follows:
Amount of capital Paid-in capital contribution
No Name of shareholder Shareholding ratio (%)
contribution (RMB '0,000) (RMB '0,000)
1 Liu Qing 500 500 100
Total 500 500 100
3. Liu Yuhuan
Liu Yuhuan, female, ID number: 510182199501******, address ********, holds 20% equity of Western
Power.
IV. Basic Information of the Target Company
(1) Basic information
Company name Pengzhou Western Power Blue Technology Co., Ltd.
Address Group IV, Baihe Village, Lichun Town, Pengzhou City, Chengdu City, Sichuan Province
Legal representative Liu Qing
Registered capital RMB 100 million
Company type Other Limited liability Company
Unified social credit code 91510182MA61W5XJ2C
Date of establishment June 12,2016
Business Term June 12, 2016 to no fixed term
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General projects: technical service, technical development, technical consultation, technical
exchange, technology transfer and technology promotion; manufacturing of steam turbines and
auxiliary engines; manufacturing of generators and generator sets; electrical equipment repair;
manufacture of motor; general equipment repair; repair of metal products; manufacturing of
general equipment (excluding manufacturing of special equipment); leasing of mechanical
equipment; installation service of general mechanical equipment; sales of generators and
generator sets; special equipment rental; maintenance of electronic and mechanical equipment
Business scope
(excluding special equipment); sales of steam turbines and auxiliary engines; non-ferrous metal
casting; manufacturing of forgings and powder metallurgy products; sales of forgings and
powder metallurgy products; manufacturing of special equipment (excluding licensed
professional equipment manufacturing); sales of non-ferrous metal alloy; manufacturing of
non-ferrous metal alloy; import and export of goods; import and export of technology (except for
the items subject to approval according to law, for which business activities shall be carried out
independently according to law as per business license).
Registration authority Pengzhou Market Supervision and Administration
(2) Basic financial situation
In RMB 10,000
Items November 30,2022 December 31,2021 December 31,2020
Total assets 8,575.24 8,977.37 7,505.97
Total liabilities 156.05 2,811.36 1,187.69
Net assets 7,006.19 6,166.01 6,318.28
Operation revenue 781.09 5,593.38 1,774.50
Net profit 179.27 578.36 71.79
Note: The financial data of 2020 is selected from the Audit Report [CJXKS Zi (2021)No. B110] issued by
Sichuan Jiexin Certified Public Accountants, the financial data of 2021 is selected from the Audit Report [TJS
(2022) No.9433] issued by Pan-China Certified Public Accountants, and the financial data of November 2022 is
selected from Chengdu Mengjiang's listing announcement on Southwest United Equity Exchange.
(3) Other explanations
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1. According to the legal opinion issued by Shanghai Allbright (Hangzhou) Law Firm, there are no other
rights restrictions such as pledge on the equity held by the existing shareholders of Western Power. Through
inquiries on websites such as "Credit China", "National Enterprise Credit Information Publicity System" and
"China Judgment Document Network", no major records of dishonesty, major administrative punishment or
major litigation of Western Power have not found.
2. According to the Articles of Association of Western Power dated November 30, 2022, except for the
increase or decrease of registered capital of Western Power, merger, division, dissolution, liquidation or change of
company form, the approval of the general meeting of shareholders in the Articles of Association of Western
Power requires the approval of shareholders representing more than three-quarters of the voting rights. In addition
to the normal business activities of Western Power, the shareholder Chengdu Mengjiang has one veto on other
major issues affecting the rights and interests of shareholders in Chengdu Mengjiang, such as other investments
and liabilities. In addition to the above clauses, there are no other special clauses that restrict shareholders' rights
except laws and regulations in the Articles of Association of Western Power. After the investment is completed,
Zhejiang Ranchuang, as the controlling shareholder, will revise the Articles of Association of Western Power.
V. Main Contents of Outbound Investment Contract
The contracts or agreements signed by Zhejiang Ranchuang and related parties are as follows:
1. The equity transaction contract to be signed by Zhejiang Ranchuang and Chengdu Mengjiang
According to the announcement of Chengdu Mengjiang's listing on Southwest United Equity Exchange, the
listing price of 20% shares (20 million shares) of Western Power sold by Chengdu Mengjiang this time is RMB
25.2 million. The start and end date of listing is from December 19, 2022 to January 16, 2023. The deposit
required for this transaction is RMB 12.6 million. This transaction is settled through the special account of
Southwest United Equity Exchange.
If Zhejiang Ranchuang is finally delisted, Zhejiang Ranchuang will sign the Equity Transaction Contract
with Chengdu Mengjiang. For other related matters, please refer to the listing announcement of Chengdu
Mengjiang in Southwest United Equity Exchange.
2. Main contents of the Framework Agreement on Equity Transaction of Pengzhou Western Power Blue
Technology Co., Ltd.:
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Transaction subject Party A: Zhejiang Ranchuang Turbine Machinery Co., Ltd.
Party B: Pengzhou Western Power Blue Technology Co., Ltd.
Party C 1: Liaoning Passion Energy Technology Service Co., Ltd.
Party C 2: Liu Yuhuan
Party D 1: Liu * (General manager and director of the Target Company)
Party D 2: Jiang * (Chairman of the Target Company)
Transaction price, pricing The first transaction shall be publicly listed on the equity exchange, and Zhejiang Ranchuang has
basis and payment method the obligation to participate in the auction (delisting) and submit a valid quotation within the period
specified by the equity exchange. After delisting, it shall sign and perform the final equity transaction
contract according to the relevant procedures of the entry transaction. The transaction price and payment
method are determined according to the listing transaction results of the equity transaction center.
The second transaction price is based on the assessed value of 100% equity of Western Power as
determined in the Asset Assessment Report issued by Beijing North Asia Asset Assessment Firm (special
general partnership) with the document number of BFYSPB Zi [2022] No. 01-739, considering the fact
that some shareholders' contributions have not been paid in full, and the price of this transaction is
determined to be RMB 1.27/contribution amount through negotiation between all parties.
For the above transactions, the transaction consideration shall be paid to the counterparty in cash.
Special provisions After the completion of this transaction, Liaoning Passion will hold a capital contribution of RMB
35 million from Western Power, and all parties agree that Liaoning Passion will actually pay in RMB 13
million, and the remaining capital contribution will be paid according to the provisions of the Target
Company's articles of association.
All parties agree that, if the capital contribution fails to be paid in place on time, Zhejiang
Ranchuang will decide the disposal plan of such unpaid capital contribution. If Zhejiang Ranchuang
intends to undertake it, the transaction consideration will be determined according to the initial RMB
1/capital contribution or the assessed value (whichever is lower).
Taxes and expenses Unless otherwise agreed in this agreement, the statutory taxes, government fees and expenses that
should be paid due to the implementation of the transactions described in this agreement shall be borne
by each party according to law.
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Liability for breach of The second transaction mentioned in Article 2 of this Agreement shall be based on the fulfillment
contract of the first transaction. After the fulfillment of the first transaction, other parties shall actively promote
the second transaction with Party A. If any of the parties (the "defaulting party") fails to promote the
second transaction according to the requirements of this agreement, such behavior shall be regarded as a
breach of contract, and the observant party has the right to require the defaulting party to pay RMB 5
million as liquidated damages in one lump sum in addition to the liability for breach of this agreement.
Establishment and This agreement shall come into force as of the date when the legal representatives or authorized
effectiveness of the representatives of all parties hereto sign and affix their official seals.
agreement This agreement will come into effect after Hangzhou Steam Turbine Power Group Co., Ltd. has the
right to implement legal procedures at the decision-making meeting to consider and approve the relevant
proposals of this transaction.
3. Supplementary Agreement to Framework Agreement on Equity Transaction
Transaction subject Party A: Zhejiang Ranchuang Turbine Machinery Co., Ltd.
Party B: Liaoning Passion Energy Technology Service Co., Ltd.
Party C: Liu *
Party D: Jiang *
Special provisions 1. Solving horizontal competition
Party B, Party C and Party D promise to properly solve the problem of horizontal competition among
affiliated enterprises, and properly handle the same or similar situations between affiliated enterprises and the
Target Company by changing the business scope, transferring equity or other means.
2. Stabilization and control of core personnel
Party B, Party C and Party D promise to actively cooperate with Party A's work after the control right of the
Target Company is handed over to Party A, so as to ensure the smooth transition of the Target Company and
maintain the stability of the technical and business backbone.
3. Intellectual property provisions
The Target Company has complete, legal and effective ownership and disposition rights of trademarks,
patents, proprietary technology, domain names, software and other intellectual property rights (hereinafter
collectively referred to as "intellectual property rights") used in the business process, and has not set any other
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encumbrances such as mortgage, pledge and guarantee, and there are no compulsory measures such as freezing,
seizure and sealing up, nor any litigation, arbitration and administrative investigation procedures involved;
Except disclosed to investors at the time of signing the agreement, the Company has not entered into any
agreement, arrangement or understanding or otherwise that allows others to use any intellectual property rights it
owns.
The Target Company, existing shareholders, Party C and Party D have fully disclosed the Company's
intellectual property rights to investors, and there are no infringing debts or other forms of creditor's rights, debts
and external guarantees due to intellectual property rights, or the circumstances of possibly being subject to
recourse by a third party and any other circumstances that may cause property losses of the company or
investors, otherwise the existing shareholders shall bear all losses and legal responsibilities caused to the Target
Company and investors. Party C and Party D shall be jointly and severally liable for the Company's intellectual
property related contingent liabilities (including but not limited to potential liabilities and risks) before the
delivery date.
4. Organizational structure arrangement
Party A has the right to change the articles of association of the Target Company and appoint the Company's
directors, senior managers, supervisors, etc. according to the provisions of the articles of association. Party B,
Party C and Party D promise to cooperate in handling the work handover of directors, senior managers and
supervisors.
Liability for breach If any party (the "defaulting party") fails to fully, properly and timely perform any commitments or
of contract provisions under this agreement, such behavior shall be deemed as a breach of contract, and the observant party
has the right to require the defaulting party to make full compensation for all losses, liabilities, expenses
(including investigation fees, attorney's fees, etc. paid for investigating the responsibility of the defaulting party)
incurred by the observant party due to this breach.
Establishment and This agreement shall be established as of the date of signature and seal of all parties, and shall come into
effectiveness of the effect at the same time as the Framework Agreement on Equity Transaction comes into effect. If the Framework
agreement Agreement on Equity Transaction is dissolved or terminated, this Agreement will be dissolved or terminated
automatically.
4. Main contents of Equity Transfer Agreement to be signed by Zhejiang Ranchuang and Liaoning Passion
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Transaction subject Party A (Transferor): Liaoning Passion Energy Technology Service Co., Ltd.
Party B (Transferee): Zhejiang Ranchuang Turbine Machinery Co., Ltd.
Transaction price, pricing The Transferor will transfer its 15% equity of the Target Company (corresponding to the capital
basis and payment method contribution of RMB 15 million) to Party B.
Through negotiation between the Parties, it is determined that the transaction price is RMB
1.27/contribution amount, and the transfer price of the underlying equity is RMB 19.05 million.
The equity transfer price shall be paid by the Transferee to the Transferor in one lump sum within 5
working days after this agreement comes into effect.
Equity delivery The date when the industrial and commercial change registration of this equity transfer is
completed is the equity delivery date. After the equity delivery date, the Transferee shall be entitled to
the shareholders' rights and undertake the shareholders' obligations in accordance with the laws and
regulations and the articles of association of the Target Company.
Transition period This agreement comes into effect until the date of equity delivery, which is the transition period of
arrangement this equity transfer. During the transition period, the Transferor shall exercise the rights of shareholders
of the Target Company in good faith, and shall not dispose of the equity of the Target Company in any
form, including but not limited to equity pledge, entrusted management, etc.
Liability for breach of 1. If the Transferee fails to issue the equity transfer payment on time as agreed in this agreement, it
contract shall pay 0.5‰ of the overdue price as liquidated damages for each overdue day.
2. If the Transferor fails to assist the Transferee to complete the industrial and commercial change
procedures of all equity transfer under this agreement within the time agreed herein, the Transferor shall
pay the liquidated damages of 0.5‰ of the amount paid by the Transferee for each overdue day; If it is
overdue for more than 30 days, the Transferee has the right to unilaterally terminate this agreement, and
the Transferor shall not only return all the equity transfer payment issued by the Transferee, but also pay
the Transferee 20% of the target amount of this agreement as liquidated damages.
3. If the Transferor violates this agreement and makes false statements, guarantees or fails to fulfill
its commitments, it shall pay the Transferee 20% of the target amount of this agreement as liquidated
damages, and compensate the actual losses of the Transferee. At the same time, the Transferee has the
right to unilaterally terminate this contract.
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4. If the Transferor fails to provide timely, accurate and complete information or the Target
Company has false assets and/or undisclosed debts after the equity delivery due to the Transferee's
reason, the Transferor shall multiply the amount of inflated assets and/or undisclosed debts by the
proportion of this equity transfer, supplement the target amount to the Transferee in cash, and pay the
Transferee 20% of the amount of this agreement as liquidated damages.
5. If either party of this agreement violates other obligations stipulated in this agreement, the
defaulting party shall pay 20% of the target amount of this agreement as liquidated damages to the
observant party.
Establishment and This agreement is established after being signed by Party A and Party B, and comes into effect after the
effectiveness of the Transferee has completed the necessary review and approval procedures for this equity transfer.
agreement
5. Main contents of Equity Transfer Agreement to be signed by Zhejiang Ranchuang and Liu Yuhuan
Transaction subject Party A (Transferor): Liu Yuhuan
Party B (Transferee): Zhejiang Ranchuang Turbine Machinery Co., Ltd.
Transaction price, pricing The Transferor will transfer its 3% equity of the Target Company (corresponding to the capital
basis and payment method contribution of RMB 3 million) to Party B.
Both parties agree that the transfer price of the target equity is based on the assessed value of 100%
equity of Western Power determined in the Asset Assessment Report issued by Beijing North Asia Asset
Assessment Firm (special general partnership) with the document number of BFYSPB Zi [2022]
No.01-739, considering the fact that some shareholders' contributions have not been paid in full, and the
transaction price is determined to be RMB 1.27/contribution amount through negotiation between both
parties, and the transfer price of the target equity is RMB 3.81.
The equity transfer price shall be paid by the Transferee to the Transferor in one lump sum within 5
working days after this agreement comes into effect and the Transferor has paid all the capital
contribution of RMB 20 million.
Terms on equity delivery, transition period arrangement, liability for breach of contract, establishment and
effectiveness of the agreement are consistent with the aforementioned Equity Transfer Agreement signed by
Zhejiang Ranchuang and Liaoning Passion.
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VI. Purpose, Existing Risks and Impact on the Company of Outbound Investment
1. Purpose of investment
(1) Double carbon strategy provides an opportunity for the development of gas turbine
The "14th Five-Year Plan" is the key period and window period for peak carbon dioxide emissions. Under
the current situation that China is making overall plans to well ensure peak carbon dioxide emissions and carbon
neutrality, natural gas power generation and its driving core equipment-gas turbine will usher in new development
opportunities and a window period. With the increase of gas turbines in China and the popularization of
distributed energy application scenarios, the market demand of gas turbines continues to heat up, and the market
prospect is promising.
(2) The need of the Company's strategy implementation
The Company's "14th Five-Year Plan" strategic plan will speed up business transformation and upgrading,
and realize the transformation to "service-oriented manufacturing". It will promote gas turbine business
cooperation, master the system integration capability of distributed energy, master the technology and service
capability of gas turbine, and expand the market influence of gas turbine.
2. Existing risks
(1) Market competition risk
Although the technical threshold of gas turbine business is high, there is still some market competition. The
gas turbine market is large in volume and high in profit, which may attract more competitive market players, and
there is a certain market competition risk.
(2) Industrial policy risk
The development of the industry of Zhejiang Ranchuang is highly dependent on the national industrial policy.
In the future, there will be the risk that the income will not reach the expected level due to the policy influence
such as the change of environmental protection policy, the reduction of tax incentives and the decline of subsidies.
The Company will pay close attention to the changing trends of national policies, industrial policies and tax
policies, and adjust its business strategy in time to adapt to market changes.
(3) Risk of control rights
After Zhejiang Ranchuang invests in Western Power, it will strengthen the management and business
development of Western Power, and will change the Target Company's articles of association and appoint the
company's directors, senior managers, supervisors, etc. according to the provisions of the articles of association
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when the equity transfer goes through the formalities of industrial and commercial change registration. However,
according to the Articles of Association of Western Power, Zhejiang Ranchuang's Target Company still needs the
cooperation of other shareholders to amend the Articles of Association and appoint directors, supervisors and
senior managers.
3. Impact of project investment
(1) This capital increase and investment will help Zhejiang Ranchuang to expand its gas turbine business,
conform to the Company's strategic planning and business development direction, expand the scale of its gas
turbine business, increase the source of business income, enhance the Company's market competitiveness and
profit growth point, and conform to the overall interests of the Company, with no harm on the interests of small
and medium investors.
(2) The funding source of this capital increase and investment comes from the Company's own funds. The
Company's stable operation and its capital situation can meet this capital increase arrangement. This capital
increase and investment will not have any significant adverse impact on the Company's financial and operating
conditions.
(3) The field of Zhejiang Ranchuang's business is greatly affected by macro policies and market risks, and
the expected income from business development is uncertain. The Company will fulfill its information disclosure
obligations in accordance with the regulations based on the development of Zhejiang Ranchuang's Business, so
investors are requested to invest rationally and pay attention to investment risks.
(4) According to the relevant provisions of the Accounting Standards for Business Enterprises, after
Zhejiang Ranchuang completes the above transaction, Zhejiang Ranchuang will hold 56.64% equity of Western
Power (estimated), and the Company will incorporate Western Power into the scope of financial statements
consolidation.
VII. Documents for Reference
1. The audit report on the assets and capital verification of Western Power issued by Pan-China Certified
Public Accountants (TJS [2022] No.9433);
2. The asset assessment report on Western Power issued by Beijing North Asia Asset Assessment Firm
(BFYSPB Zi [2022] No.01-739);
3. The legal opinion on Zhejiang Ranchuang's investment in Western Power issued by Shanghai Allbright
(Hangzhou) Law Firm ([2022] NSJHFS Zi No.40908);
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4. The feasibility analysis report on investment in Western Power issued by Zhejiang Ranchuang;
5. The Articles of Association of Western Power (revised by the General Meeting of Shareholders on
November 30, 2022);
6. The announcement on the listing of Chengdu Mengjiang's equity transfer in Southwest United Equity
Exchange(https://www.swuee.com/#/projectDetail/f6e27eabbbad4f15bb70c38610ad4286.html)
The Board of Directors of Hangzhou Steam Turbine Power Group Co., Ltd.
January 17, 2023
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