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DATANG INTERNATIONAL POWER GENERATION COMPANY LD: Connected Transaction Regarding Entrusted Loan Agreement


DATANG INTERNATIONAL POWER GENERATION COMPANY LD: Connected Transaction Regarding Entrusted Loan Agreement ------------------------------------------------------------------------

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION ------------------------------------------------------------------------

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in DATANG INTERNATIONAL POWER GENERATION CO., LTD., you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make 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 circular.

------------------------------------------------------------------------


            DATANG INTERNATIONAL POWER GENERATION CO., LTD.
    (a sino-foreign joint stock limited company incorporated in the 
                       People's Republic of China)
                          (Stock Code: 00991)
                         CONNECTED TRANSACTION
                             IN RELATION TO
                        ENTRUSTED LOAN AGREEMENT
    Independent Financial Adviser to the Independent Board Committee 
                    and the Independent Shareholders
                     Mizuho Securities Asia Limited

------------------------------------------------------------------------

A letter from the Board is set out on pages 4 to 9 of this circular. A 
letter from the Independent Board Committee is set out on pages 10 to 11 
of this circular. A letter from Mizuho Securities containing its advice 
to the Independent Board Committee and the Independent Shareholders is 
set out on pages 12 to 18 of this circular.


The Company will convene the EGM at the meeting room no. 1608, head 
office of the Company, No. 9 Guangningbo Street, Xicheng District, 
Beijing, PRC on 18 December 2012 (Tuesday) at 9:00 a.m.. The notice 
convening the EGM has been despatched to the Shareholders on 1 November 
2012.

Completion and return of the proxy form shall not preclude you from 
attending and voting in person at the EGM or at any adjourned meetings 
should you so wish.
                                                        20 November 2012


------------------------------------------------------------------------

CONTENTS ------------------------------------------------------------------------

DEFINITIONS LETTER FROM THE BOARD LETTER FROM THE INDEPENDENT BOARD COMMITTEE LETTER FROM MIZUHO SECURITIES APPENDIX �C GENERAL INFORMATION

------------------------------------------------------------------------

DEFINITIONS ------------------------------------------------------------------------

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

"A Share(s)" the domestic ordinary share(s) of the


                                 Company with a nominal value of RMB1.00
                                 each and are listed on the Shanghai 
                                 Stock Exchange

"Board"                          the board of Directors of the Company

"CDC"                            China Datang Corporation, a State-owned
                                 enterprise established under the laws 
                                 of the PRC and is the controlling 
                                 Shareholder of the Company pursuant to 
                                 the Listing Rules which, together with
                                 its subsidiaries, own approximately 
                                 34.71% of the issued share capital of 
                                 the Company as at the Latest 
                                 Practicable Date

"Company"                        Datang International Power Generation 
                                 Co., Ltd., a sino-foreign joint stock 
                                 limited company incorporated in the 
                                 PRC on 13 December 1994, whose H Shares
                                 are listed on the Stock Exchange and 
                                 the London Stock Exchange and whose A 
                                 Shares are listed on the Shanghai Stock
                                 Exchange

"connected person"               has the meaning ascribed to it under 
                                 the Listing Rules

"connected transaction"          has the meaning ascribed to it under
                                 the Listing Rules

"Datang Finance Company"         Datang Corporation Finance Limited 
                                 Company, a subsidiary of CDC

"Directors"                      the director(s) of the Company

"Duolun Coal Chemical Company"   Datang Inner Mongolia Duolun Coal 
                                 Chemical Company Limited, which 
                                 constructs and operates the Duolun Coal
                                 Chemical Project

"Duolun Coal Chemical Project"   the project located in Duolun County in
                                 the Inner Mongolia Autonomous Region 
                                 which uses the brown coal from the East
                                 Unit 2 coal mine of Shengli Coal Mine 
                                 as raw materials for the production of 
                                 polypropylene chemical products by 
                                 employing the pulverised coal 
                                 gasification technology, the synthetic
                                 gas purification technology, 
                                 large-scale methanol synthesis 
                                 technology, the methanol-to-propylene
                                 technology and the propylene 
                                 polymerisation technology

"EGM"                            the 2012 third extraordinary general 
                                 meeting of the Company to be held at 
                                 the PRC on 18 December 2012 (Tuesday) 

at 9:00 a.m.

"Entrusted Loan" the entrusted loan of a total principal


                                 amount of not exceeding RMB3 billion

"Entrusted Loan Agreement"       the entrusted loan agreement entered 
                                 into on 31 October 2012 between the
                                 Company, Datang Finance Company and 
                                 Duolun Coal Chemical Company in respect
                                 of the Entrusted Loan Arrangement

"Entrusted Loan Arrangement"     the arrangement where Datang Finance 
                                 Company is entrusted by the Company to 
                                 act as a lending agent to, inter alia,
                                 release the Entrusted Loan to Duolun 
                                 Coal Chemical Company pursuant to the 
                                 Entrusted Loan Agreement

"Financial Services Agreement"   the financial services agreement dated 
                                 26 October 2010 entered into between
                                 the Company and Datang Finance Company,
                                 details of which please refer to the 
                                 circular of the Company dated 16
                                 November 2010

"Group"                          the Company and its subsidiaries

"H Share(s)"                     the overseas listed foreign shares of
                                 the Company with a nominal value of 
                                 RMB1.00 each, which are listed on the 
                                 Stock Exchange and the London Stock 
                                 Exchange

"Hong Kong"                      the Hong Kong Special Administrative
                                 Region of the PRC

"Independent Board Committee"    the independent board committee of the 
                                 Company, comprising five independent
                                 non-executive Directors, and each of
                                 them does not have any material 
                                 interest in the Entrusted Loan 
                                 Agreement

"Independent Shareholders"       has the meaning ascribed to it under
                                 the Listing Rules

"Latest Practicable Date"        16 November 2012, being the latest
                                 practicable date prior to the printing 
                                 of this circular for ascertaining
                                 certain information in this circular

"Listing Rules"                  the Rules Governing the Listing of 
                                 Securities on the Stock Exchange

"Mizuho Securities"              Mizuho Securities Asia Limited, the
                                 independent financial adviser to the 
                                 Independent Board Committee and the 
                                 Independent Shareholders in respect of
                                 the terms of the Entrusted Loan
                                 Agreement, and a licensed corporation
                                 for types 1 (dealing in securities), 2
                                 (dealing in futures contracts), 4 
                                 (advising on securities), 5 (advising 
                                 on futures contracts), 6 (advising on
                                 corporate finance) and 9 (asset 
                                 management) regulated activities under 

the SFO

"PRC" the People's Republic of China

"RMB" Renminbi, the lawful currency of the

PRC

"SFO" the Securities and Futures Ordinance


                                 (Chapter 571 of the Laws of Hong Kong)

"Shareholder(s)"                 the holder(s) of the Share(s)

"Shares"                         the ordinary shares of the Company with
                                 a nominal value of RMB1.00 each, 
                                 comprising domestic Shares and H Shares

"Stock Exchange"                 The Stock Exchange of Hong Kong Limited

"%"                              percent

"2010 Revolving Entrusted        the revolving entrusted loan agreement 
  Loan Agreement"                dated 12 January 2010 entered into 
                                 between the Company, Datang Finance 
                                 Company and Duolun Coal Chemical 
                                 Company in respect of an entrusted loan

arrangement

------------------------------------------------------------------------

LETTER FROM THE BOARD ------------------------------------------------------------------------


            DATANG INTERNATIONAL POWER GENERATION CO., LTD.
    (a sino-foreign joint stock limited company incorporated in the 
                       People's Republic of China)
                          (Stock Code: 00991)


Executive Directors:                    Office address:

Mr. Cao Jingshan                        No.9 Guangningbo Street
Mr. Zhou Gang                           Xicheng District

Beijing, 100033 Non-executive Directors: the PRC

Mr. Liu Shunda (Chairman) Principal place of business Mr. Hu Shengmu in Hong Kong: Mr. Fang Qinghai c/o Eversheds Mr. Liu Haixia 21/F, Gloucester Tower Ms. Guan Tiangang The Landmark Mr. Mi Dabin 15 Queen's Road Central Mr. Ye Yonghui Hong Kong Mr. Li Gengsheng

Independent non-executive Directors:

Mr. Li Yanmeng Mr. Zhao Zunlian Mr. Li Hengyuan Ms. Zhao Jie Mr. Jiang Guohua


                                                       20 November 2012

To the Shareholders

Dear Sir or Madam,
                         CONNECTED TRANSACTION
                             IN RELATION TO
                        ENTRUSTED LOAN AGREEMENT


BACKGROUND

On 25 October 2012, the 30th meeting of the seventh session of the Board considered and approved the provision of the Entrusted Loan of not exceeding RMB3 billion to Duolun Coal Chemical Company. On 31 October 2012, the Company entered into the Entrusted Loan Agreement with Datang Finance Company and Duolun Coal Chemical Company in relation to the provision of the Entrusted Loan by the Company to Duolun Coal Chemical Company through the Entrusted Loan Arrangement, in which Datang Finance Company acts as the lending agent.


      The purpose of this circular is:
    (1)   to provide you with further details of the Entrusted Loan 
          Agreement; 
    (2)   to set out the recommendation of the Independent Board 
          Committee in respect of the Entrusted Loan Agreement; and 
    (3)   to set out the letter of advice from Mizuho Securities to the 
          Independent Board Committee and the Independent Shareholders 
          in respect of the Entrusted Loan Agreement. 


ENTRUSTED LOAN AGREEMENT


Date and Subject Matter

On 31 October 2012, the Company entered into the Entrusted Loan Agreement with Datang Finance Company and Duolun Coal Chemical Company in relation to the provision of the Entrusted Loan by the Company to Duolun Coal Chemical Company pursuant to the Entrusted Loan Arrangement, in which Datang Finance Company acts as a lending agent.

Parties to the Agreement

1. The Company, as the lender; 2. Datang Finance Company, as the lending agent; and 3. Duolun Coal Chemical Company, as the borrower.

Major Terms of the Entrusted Loan Agreement

1. Entrusted Loan Arrangement

Pursuant to the Entrusted Loan Agreement, Datang Finance Company is entrusted by the Company to act as a lending agent to, inter alia, release the Entrusted Loan to Duolun Coal Chemical Company, and supervise Duolun Coal Chemical Company to use and repay the Entrusted Loan.

2. Principal amount of the Entrusted Loan

Not exceeding RMB3 billion.

3. Term

The term for the Entrusted Loan Agreement is 36 months commencing from 31 October 2012 and ending on 30 October 2015.

4. Interest rate

At a floating interest rate, being the benchmark interest rate to be charged for the same level of loans in RMB by the People's Bank of China for the same period as announced by the People's Bank of China on the date when the Entrusted Loan is withdrawn and such interest rate is to be adjusted annually. The adjustment date is 21st December of each year. The adjusted interest rate will be the benchmark interest rate for the same level of loans in RMB for the same period announced by the People's Bank of China on the adjustment date.

As at the Latest Practicable Date, the current benchmark interest rate of the People's Bank of China for the same level of loans in RMB for the same period is 6.15% per year.

Such interest rate is arrived at after arm's length negotiation between the Company and Duolun Coal Chemical Company in consideration of the overall reduction in capital costs to the Group after the accounts of Duolun Coal Chemical Company (being the subsidiary of the Company) are consolidated into the accounts of the Company.

5. Repayment schedule of the principal of the Entrusted Loan

One-off repayment of principal by Duolun Coal Chemical Company upon maturity under the Entrusted Loan Agreement.

6. Payment schedule of interests of the Entrusted Loan

Interests shall be settled by Duolun Coal Chemical Company on a quarterly basis. The settlement date falls on the twentieth (20th) day of the last month of each quarter.

7. Handling Fee

The handling fee shall be charged by Datang Finance Company on the date of grant of the Entrusted Loan and on the day corresponding to the date of grant of the Entrusted Loan in each following year. The rate of the handling fee per annum shall be 0.025% of the outstanding amount of the Entrusted Loan.

8. Effective date

The Entrusted Loan Agreement shall become effective when it is duly signed by the parties and upon the approval of the internal authority of each of the parties (or the internal approval procedures of each of the parties have been implemented) including obtaining approval of the Entrusted Loan Agreement by the Independent Shareholders at the EGM.

REASONS FOR AND BENEFITS OF ENTERING INTO THE ENTRUSTED LOAN AGREEMENT

In view of the cooperation history between Datang Finance Company and the Company and given that the provision of entrusted loan services by Datang Finance Company is covered under the Financial Services Agreement, Datang Finance Company has better understanding of the operations of the Company which will allow more expedient and efficient services than those rendered by other PRC commercial banks. Further, the handling fees charged by Datang Finance Company will not be higher than those charged by other PRC commercial banks. In view of the above considerations, the Company appointed Datang Finance Company, rather than other PRC commercial banks, as the lending agent.

Further, considering the capital risks control measures under the Financial Services Agreement as set out in the circular of the Company dated 16 November 2010 and the terms under the Entrusted Loan Agreement are normal commercial terms which confer no additional obligations nor risks on the Company when comparing with other entrusted loan agreement in the market, the Company considers that no additional risks will be involved by appointing Datang Finance Company as the lending agent under the Entrusted Loan Agreement.

In order to ensure the day-to-day cash flow of Duolun Coal Chemical Company, the Company intends to provide the Entrusted Loan of not exceeding RMB3 billion to Duolun Coal Chemical Company. The Company is of the view that the Entrusted Loan is beneficial for the smooth progress of the Duolun Coal Chemical Project. The Entrusted Loan will be primarily utilized by Duolun Coal Chemical Company to repay its existing bank and other borrowings since the borrowings of the Company under the 2010 Revolving Entrusted Loan Agreement and a small portion of bank borrowings in the aggregate sum of approximately RMB3 billion will be due for repayment in January 2013.

Considering the possible higher financial costs for Duolun Coal Chemical Company to obtain the current loan from other commercial banks when comparing with the financial costs incurred by the Company to obtain the funding of the Entrusted Loan, the Company considers that the overall capital costs to the Group will be reduced after the accounts of Duolun Coal Chemical Company (being the subsidiary of the Company) are consolidated into the accounts of the Company.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Entrusted Loan Agreement are fair and reasonable, have been entered into after arm's length negotiation between all parties thereto and determined on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE PARTIES

1. Information relating to the Company

The Company is principally engaged in the development and operation of power plants, the sale of electricity and thermal power, and the repair, testing and maintenance of power equipment as well as the provision of power-related technical services. The main service areas of the Company are in the PRC.

2. Information relating to Duolun Coal Chemical Company

Duolun Coal Chemical Company was duly incorporated on 19 August 2009 with a registered capital of RMB4,050 million. Duolun Coal Chemical Company is principally responsible for the construction and operation of the coal-based olefin project with an annual output of 460,000 tonnes. The equity structure of Duolun Coal Chemical Company is as follows: Energy and Chemical Company, the Company's wholly-owned subsidiary, holds 60% equity interests, and CDC, the controlling Shareholder of the Company, holds 40% equity interests. As at the Latest Practicable Date, the aforementioned project is under trial-run production.

3. Information relating to Datang Finance Company

Datang Finance Company is a non-banking financial institution duly incorporated in the PRC on 10 May 2005 with a registered capital of RMB3 billion. Its principal business includes, among others, the provision of deposit services, loan services, entrusted loan services and entrusted investment services.

4. Information relating to CDC

CDC was established on 9 March 2003 with registered capital of RMB15.394 billion. It is principally engaged in the development, investment, construction, operation and management of power energy, organization of power (thermal) production and sales; manufacturing, repair and maintenance of power equipment; power technology development and consultation; power engineering, contracting and consultation of environmental power engineering; development of new energy as well as development and production of power related coal resources.

CONNECTED TRANSACTION

As at the Latest Practicable Date, Duolun Coal Chemical Company is owned as to 60% and 40% by Energy and Chemical Company, a wholly-owned subsidiary of the Company, and CDC, respectively. Datang Finance Company is a subsidiary of CDC which is the controlling Shareholder. CDC and its subsidiaries hold approximately 34.71% of the issued share capital of the Company as at the Latest Practicable Date. Both Duolun Coal Chemical Company and Datang Finance Company are therefore connected persons of the Company and the transaction under the Entrusted Loan Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As one of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) for the principal amount of the Entrusted Loan under the Entrusted Loan Agreement is more than 5%, the Entrusted Loan Arrangement and the Entrusted Loan Agreement are subject to the requirements of reporting, announcement and approval by the independent Shareholders of the Company under Chapter 14A of the Listing Rules.

The Company will disclose the relevant details in the next annual report and accounts of the Company in accordance with the relevant requirements as set out in Chapter 14A of the Listing Rules.

BOARD'S APPROVAL

None of the Director has material interest in the Entrusted Loan Agreement. Those connected Directors, including Liu Shunda, Hu Shengmu and Fang Qinghai, who are the principal management staff of CDC, have abstained from voting at the Board meeting for approval of the relevant transaction in accordance with the requirements of the listing rules of the Shanghai Stock Exchange.

EGM

The Company will convene the EGM to, among other things, consider and approve the Entrusted Loan Agreement. The notice convening the EGM and the relevant notice of attendance were despatched to the Shareholders on 1 November 2012.

Any Shareholder with a material interest in the transaction and its associates will abstain from voting at the EGM for approving the Entrusted Loan Agreement. Therefore, CDC and its associates, which hold approximately 34.71% of the issued share capital of the Company as the Latest Practicable Date, shall abstain from voting at the EGM to approve the Entrusted Loan Agreement.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee as set out on pages 10 to 11 of this circular which contains its recommendation to the Independent Shareholders on the terms of the Entrusted Loan Agreement. Your attention is also drawn to the letter of advice received from Mizuho Securities, the independent financial adviser to the Independent Board Committee and the Independent Shareholders as set out on pages 12 to 18 of this circular which contains, among others, its advice to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Entrusted Loan Agreement, the casting of votes for or against the resolution approving the Entrusted Loan Agreement by poll at the EGM as well as the principal factors and reasons considered by it in concluding its advice.

The Directors consider that the terms of the Entrusted Loan Agreement are fair and reasonable and in the interest of the Shareholders and the Company as a whole and they recommend the Shareholders to vote in favour of the resolution at the EGM.


                                       Yours faithfully,
                                   By Order of the Board of
                        Datang International Power Generation Co., Ltd.
                                           Zhou Gang

Secretary to the Board

------------------------------------------------------------------------

LETTER FROM THE INDEPENDENT BOARD COMMITTEE ------------------------------------------------------------------------


            DATANG INTERNATIONAL POWER GENERATION CO., LTD.
    (a sino-foreign joint stock limited company incorporated in the 
                       People's Republic of China)
                          (Stock Code: 00991)
                                        Office address
                                        No.9 Guangningbo Street
                                        Xicheng District
                                        Beijing, 100033
                                        The PRC
                                        20 November 2012

To the Independent Shareholders

Dear Sir or Madam,
                         CONNECTED TRANSACTION
                             IN RELATION TO
                        ENTRUSTED LOAN AGREEMENT

We refer to the circular issued by the Company to the shareholders dated 20 November 2012 (the "Circular") of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

Under the Listing Rules, the Entrusted Loan Agreement constitutes a connected transaction for the Company, and is subject to the approval of the Independent Shareholders at the EGM.

We have been appointed as the Independent Board Committee to consider the terms of the Entrusted Loan Agreement and to advise the Independent Shareholders in connection with the Entrusted Loan Agreement as to whether, in our opinion, its terms are fair and reasonable and whether the Entrusted Loan Agreement is in the interests of the Company and the shareholders as a whole. Mizuho Securities has been appointed as the independent financial adviser to advise us in this respect.

We wish to draw your attention to the letter from the Board and the letter from Mizuho Securities as set out in the Circular. Having considered the principal factors and reasons considered by, and the advice of, Mizuho Securities as set out in its letter of advice, we consider that the Entrusted Loan Agreement is on normal commercial terms, and that the Entrusted Loan Agreement is in the best interests of the Company and the Shareholders as a whole.

We also consider that the terms of the Entrusted Loan Agreement are fair and reasonable. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to approve the Entrusted Loan Agreement at the EGM.


                                 Yours faithfully,
               For and on behalf of the Independent Board Committee
          Li Yanmeng, Zhao Zunlian, Li Hengyuan, Zhao Jie, Jiang Guohua
                         Independent non-executive Directors

Datang International Power Generation Co., Ltd.

------------------------------------------------------------------------

LETTER FROM MIZUHO SECURITIES ASIA LIMITED ------------------------------------------------------------------------

The following is the text of the letter of advice from Mizuho Securities Asia Limited, the independent financial adviser to the Independent Board Committee and Independent Shareholders, in respect of the Entrusted Loan Agreement, which has been prepared for the purpose of inclusion in this circular.


                                     Mizuho Securities Asia Limited
                                     12th Floor, Chater House,
                                     8 Connaught Road Central, Hong Kong
                                     Tel: 2685-2000   Fax: 2685-2410
                                                       20 November 2012

To the Independent Board Committee
 and the Independent Shareholders

Datang International Power Generation Co., Ltd.

Dear Sirs,
                         CONNECTED TRANSACTION


INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee and Independent Shareholders in respect of the Entrusted Loan Agreement. Further details of the Entrusted Loan Agreement are set out in the letter from the Board (the "Letter from the Board") in the circular of the Company to its Shareholders dated 20 November 2012 (the "Circular"), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

On 31 October 2012, the Company entered into the Entrusted Loan Agreement with Datang Finance Company and Duolun Coal Chemical Company in relation to the provision of the Entrusted Loan by the Company to Duolun Coal Chemical Company pursuant to the Entrusted Loan Agreement, in which Datang Finance Company acts as a lending agent.

As at the Latest Practicable Date, Duolun Coal Chemical Company is owned as to 60% and 40% by Energy and Chemical Company, a wholly-owned subsidiary of the Company, and CDC, respectively. Datang Finance Company is a subsidiary of CDC which is a controlling Shareholder. CDC together with its subsidiaries, hold approximately 34.71% of the issued share capital of the Company as at the Latest Practicable Date. Both Duolun Coal Chemical Company and Datang Finance Company are therefore connected persons of the Company and the transaction contemplated under the Entrusted Loan Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As one of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) for the total principal amount of the Entrusted Loan under the Entrusted Loan Agreement is more than 5%, the Entrusted Loan Arrangement and the Entrusted Loan Agreement are subject to the requirements of reporting, announcement and approval by the Independent Shareholders of the Company under Chapter 14A of the Listing Rules.

Our scope of work under this engagement is to assess whether the terms of the Entrusted Loan Agreement are fair and reasonable so far as the Shareholders are concerned, and, from that perspective, whether the Entrusted Loan Agreement is in the interests of the Company and the Shareholders as a whole. It is not within our scope of work to opine on any other aspects of the Entrusted Loan Agreement. In addition, it is not within our terms of reference to comment on the commercial merits of the Entrusted Loan Agreement which is the responsibility of the Directors.

BASIS OF OUR OPINION

In arriving at our opinion, we have relied on the information, opinions and facts supplied, and representations made to us, by the Directors, advisers and representatives of the Company (including those contained or referred to in the Circular). We have also assumed that the information and representations contained or referred to in the Circular were true and accurate in all respects at the time they were made and continue to be so at the date of dispatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and senior management of the Company. We have also relied on certain information available to the public and have assumed such information to be accurate and reliable, and we have not independently verified the accuracy of such information. We have been advised by the Directors and believe that no material facts have been omitted from the Circular.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs or other prospects of the Company, Duolun Coal Chemical Company, Datang Finance Company, CDC and any of their respective subsidiaries or associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In forming our opinion, we have considered the following principal factors and reasons:

1. BACKGROUND


    Information relating to the Group 
        The Group is principally engaged in the development and 
    operation of power plants, the sale of electricity and thermal 
    power, and the repair, testing and maintenance of power equipment as 
    well as the provision of power-related technical services. The main
    service areas of the Group are in the PRC.
       Information relating to Duolun Coal Chemical Company
        Duolun Coal Chemical Company was duly incorporated on 19 August 
    2009 with a registered capital of RMB4,050 million. Duolun Coal 
    Chemical Company is principally responsible for the construction and
    operation of the coal-based olefin project with an annual output of
    460,000 tonnes in Inner Monglia, the PRC. The equity interest of 
    Duolun Coal Chemical Company is held as to 60% by Energy and 
    Chemical Company, the Company's wholly-owned subsidiary, and as to
    40% by CDC, the controlling Shareholder of the Company. As advised 
    by the Company, the coal-based olefin project is currently under 
    trial-run production.
      Information relating to Datang Finance Company
        Datang Finance Company is a non-banking financial institution
    incorporated in the PRC on 10 May 2005. It is a subsidiary of CDC
    which is a controlling Shareholder. The registered capital of Datang
    Finance Company is RMB3 billion. The principal business of Datang 
    Finance Company includes, among others, the provision of deposit 
    services, loan services, entrusted loan services and entrusted 
    investment services.
    Previous entrusted loans provided by the Company to Duolun Coal 
    Chemical Company
    (i)   Revolving entrusted loan agreement in January 2010 
          On 12 January 2010, the Company entered into a revolving 
    entrusted loan agreement ("2010 Revolving Entrusted Loan Agreement")
    with Datang Finance Company and Duolun Coal Chemical Company in 
    respect of an entrusted loan arrangement. Pursuant to the 2010 
    Revolving Entrusted Loan Agreement, Datang Finance Company is
    designated by the Company to act as a lending agent to, inter alia,
    release the revolving entrusted loan of a principal amount of RMB3 
    billion, which is funded by the Company, to Duolun Coal Chemical 
    Company. The maximum term of the revolving entrusted loan is 36 
    months for each loan term from the date of the entering into the
    2010 Revolving Entrusted Loan Agreement. The handling charge for the
    entrusted loan under the 2010 Revolving Entrusted Loan Agreement is
    calculated at 0.025% of the principal amount of the entrusted loan. 
    The Company shall pay such handling charge in a one-off basis to 
    Datang Finance Company when each of the loan under the 2010 
    Revolving Entrusted Loan Agreement is made. As advised by the 
    Company, Duolun Coal Chemical Company has fully utilized the 
    principal amount of RMB3 billion of such resolving entrusted loan
    under the 2010 Revolving Entrusted Loan Agreement as at the Latest
    Practicable Date.
    (ii)  Framework entrusted loan agreement in October 2011 
          On 24 October 2011, the Company entered into a framework 
    entrusted loan agreement ("2011 Framework Entrusted Loan Agreement")
    with Datang Energy and Chemical Company Limited ("Energy and 
    Chemical Company"), a wholly-owned subsidiary of the Company, the 
    Diao Yu Tai Branch of China Construction Bank Corporation ("CCB Diao
    Yu Tai Branch") and Duolun Coal Chemical Company. Pursuant to the 
    2011 Framework Entrusted Loan Agreement, CCB Diao Yu Tai Branch is 
    designated to act as the lending agent to release the entrusted loan
    of a principal amount of RMB2 billion in various tranches to Duolun
    Coal Chemical Company. The term of the 2011 Framework Entrusted Loan
    Agreement is 36 months commencing from 12 October 2011 to 11 October 
    2014. The handling charge for the entrusted loan under the 2011 
    Framework Entrusted Loan Agreement is calculated at 0.025% of the
    principal amount of the entrusted loan. The Company shall pay such 
    handling charge to CCB Diao Yu Tai Branch when the entrusted loan is 
    released and on every year's corresponding date for the release of 
    the loan. As advised by the Company, Duolun Coal Chemical Company 
    has borrowed a total of approximately RMB2 billion pursuant to the
    2011 Framework Entrusted Loan Agreement as at the Latest Practicable
    Date.
    (iii) Entrusted Loan Framework Agreement in July 2012 
          On 5 July 2012, the Company entered into an entrusted loan 
    framework agreement ("2012 Entrusted Loan Framework Agreement") with
    Energy and Chemical Company, Datang Finance Company and Duolun Coal
    Chemical Company in respect of an entrusted loan arrangement. 
    Pursuant to the 2012 Entrusted Loan Framework Agreement, Datang 
    Finance Company is designated by the Company and Energy and Chemical
    Company to act as a lending agent to, inter alia, release the 
    entrusted loan of a principal amount of RMB2 billion to Duolun Coal
    Chemical Company. The term of the 2012 Entrusted Loan Framework
    Agreement is 36 months commencing from 5 July 2012. The handling 
    charge for the entrusted loan under the 2012 Entrusted Loan 
    Framework Agreement is calculated at 0.025% of the outstanding 
    amount of the entrusted loan each year. As advised by the Company,
    Duolun Coal Chemical Company has drawn down approximately RMB850 
    million of entrusted loans under the 2012 Entrusted Loan Framework 
    Agreement as at the Latest Practicable Date. The Company advised 
    that since Duolun Coal Chemical Project is under trial-run 
    production, it is expected that additional testing and other work
    would need to be conducted and completed before the commencement of
    actual production. Furthermore, certain existing loans of Duolun 
    Coal Chemical Company are about to fall due. The Company expected 
    that Duolun Coal Chemical Company will further draw down the 
    remaining amount of the entrusted loan amount under the 2012 
    Entrusted Loan Framework Agreement before the end of 2012.


2.  REASONS FOR AND BENEFITS OF ENTERING INTO THE ENTRUSTED LOAN 
    AGREEMENT 
        We note that the aggregate amount of the entrusted loans 
    pursuant to the 2010 Revolving Entrusted Loan Agreement, 2011 
    Framework Entrusted Loan Agreement and 2012 Entrusted Loan Framework
    Agreement made to Duolun Coal Chemical Company as at the Latest 
    Practicable Date was approximately RMB6 billion. As advised by the
    Company, the Duolun Coal Chemical Project is currently still in 
    trial-run production phase and requires additional working capital 
    for funding the further fine-tuning construction and testing work. 
    In addition, the borrowings of the Company under the 2010 Revolving 
    Entrusted Loan Agreement and a small portion of bank borrowings in 
    the aggregate sum of approximately RMB3 billion will be due for
    repayment in January 2013. Accordingly, the Company entered into the 
    Entrusted Loan Agreement to provide funding to Duolun Coal Chemical
    Company primarily for repayment of such loans, so as to ensure 
    smooth progress of production operation of the Duolun Coal Chemical
    Project.
        The Company advised that, considering the possible higher 
    financial costs for Duolun Coal Chemical Company to obtain the 
    required loan from other commercial banks as compared to the 
    financial costs to be incurred by the Company to obtain the funding
    of the Entrusted Loan, the Company considers that the overall 
    capital costs to the Group will be reduced given that Duolun Coal 
    Chemical Company is a 60% subsidiary of the Company. The Company 
    further advised that it had not obtained any loans from financial
    institutions specifically for the purpose of the provision of the
    Entrusted Loans, and the Company intends to fund the Entrusted Loans
    from its own financial resources.
        In view of the funding requirement of Duolun Coal Chemical 
    Company as discussed above and the expected saving in the overall
    capital costs for the Group on a consolidated financial statements
    perspective as advised by the Company, we concur with the view of 
    the Directors that the Entrusted Loan Agreement (including the 
    amount of the Entrusted Loan considering the funding need of Duolun
    Coal Chemical Company) is in the ordinary and usual course of 
    business of the Company, in the interest of the Company, and is fair
    and reasonable as far as the interests of the Shareholders as a 
    whole are concerned.


3.  MAJOR TERMS OF THE ENTRUSTED LOAN AGREEMENT 
    Entrusted Loan 
        Pursuant to the Entrusted Loan Agreement, Datang Finance Company 
    is entrusted by the Company to act as a lending agent to, inter 
    alia, release the Entrusted Loan to Duolun Coal Chemical Company,
    and supervise Duolun Coal Chemical Company to use and repay the 
    Entrusted Loan.
    Principal amount
        The principal amount of the Entrusted Loan will not exceed RMB3
    billion.
    Term
        The term for the Entrusted Loan Agreement is 36 months 
    commencing from 31 October 2012 and ending on 30 October 2015.
    Interest rate
        At a floating interest rate, being the benchmark interest rate 
    to be charged for the same level of loans in RMB by the People's 
    Bank of China for the same period as announced by the People's Bank 
    of China on the date when the Entrusted Loan is withdrawn and such 
    interest rate is to be adjusted annually. The adjustment date is 
    21st December of each year. The adjusted interest rate will be the
    benchmark interest rate for the same level of loans in RMB for the
    same period announced by the People's Bank of China on the 
    adjustment date.
        As at the Latest Practicable Date, the prevailing benchmark 
    interest rate of the People's Bank of China for the same level of
    loans in RMB for the same period is 6.15% per annum.
        As advised by the Company, the average interest rate for Duolun
    Coal Chemical Company's existing borrowings (other than the loans 
    provided by the Group) is approximately 6.35%. We have discussed
    with the Company and understand from the Company that since the 
    Duolun Coal Chemical Project is still in trial-run production phase,
    it is uncertain as to whether Duolun Coal Chemical Company could 
    obtain financing from other PRC commercial banks at the benchmark
    interest rate as announced by the People's Bank of China. As 
    mentioned in the Letter from the Board, the interest rate under the
    Entrusted Loan Agreement is arrived at after arm's length 
    negotiation between the Company and Duolun Coal Chemical Company in
    consideration of the overall reduction in borrowing costs to the 
    Group (on a consolidated basis) after the accounts of Duolun Coal 
    Chemical Company (being the controlled subsidiary of the Company) 
    are consolidated into the accounts of the Company.
        We note that in April 2012, the Company has issued a bond with a
    principal amount of RMB5 billion and with a maturity of
    approximately 3.042 years at a coupon rate of 5.08%, which was lower
    than the then benchmark lending rate of 6.22% for the same period as
    announced by the People's Bank of China. Having considered that (i)
    the Company has the ability to obtain funds at borrowing cost lower 
    than the benchmark lending rate for the same period as announced by
    the People's Bank of China as compared to what Duolun Coal Chemical 
    Company might be able to do so from other PRC commercial banks, and
    (ii) Duolun Coal Chemical Company is a subsidiary of the Company and
    the accounts of Duolun Coal Chemical Company are consolidated into 
    the accounts of the Company, we consider that the interest rate of 
    the Entrusted Loan, which is set at the benchmark interest rate for
    loans of the same period as announced by the People's Bank of China,
    is on normal commercial terms, and fair and reasonable.
    Handling fees
        The handling fees shall be charged by Datang Finance Company on
    the date of grant of the Entrusted Loan and on the date 
    corresponding to the date of grant of the Entrusted Loan in each 
    following year. The rate of the handling fee per annum shall be
    0.025% of the outstanding amount of the Entrusted Loan.
        We note that the Group has engaged other banks as lending agents
    in relation to the provision of entrusted loans to some of the Group
    companies and the rate of the handling fees for those entrusted 
    loans were set at 0.025% of the principal amount of the entrusted 
    loans. In addition, the handling fee charged by CCB Diao Yu Tai 
    Branch under the 2011 Framework Entrusted Loan Agreement in October
    2011 was set at 0.025%. Based on this, we consider that the rate of
    the handling fees for the Entrusted Loan under the Entrusted Loan 
    Agreement is on normal commercial terms.
        As mentioned in the Letter from the Board, the Directors 
    consider that in view of the cooperation history between Datang 
    Finance Company and the Company and given that the provision of
    entrusted loan services by Datang Finance Company is covered under
    the Financial Services Agreement, Datang Finance Company has better
    understanding of the operations of the Company which will allow more
    expedient and efficient services than those rendered by other PRC 
    commercial banks. Furthermore, the handling fees charged by Datang 
    Finance Company will not be higher than those charged by other PRC 
    commercial banks to the Group companies in previous entrusted loan 
    cases. In view of the above considerations, the Company appointed 
    Datang Finance Company, rather than other PRC commercial banks, as 
    the lending agent. We understand that it may take more time and 
    administrative efforts to obtain approval from other commercial 
    banks to act as the lending agents.
          Furthermore, considering the capital risks control measures 
    under the Financial Services Agreement as set out in the 
    shareholders' circular of the Company dated 16 November 2010, the 
    Company advised that the terms under the Entrusted Loan Agreement 
    are normal commercial terms which confer no additional obligations
    nor risks on the Company when compared to other typical entrusted 
    loan arrangements in the market based on the understanding of the 
    Directors.
        In this connection, we consider that it is fair and reasonable
    and in the interest of the Company and the Shareholders as a whole
    for the Company to provide entrusted loans to Duolun Coal Chemical
    Company with Datang Finance Company as the lending agent.
    OPINION
        Having considered the principal factors and reasons described 
    above, we are of the opinion that the terms of the Entrusted Loan 
    Agreement are on normal commercial terms and are fair and reasonable
    as far as the interests of the Independent Shareholders are 
    concerned, and, from this perspective, the Entrusted Loan Agreement
    is in the interests of the Company and its Shareholders as a whole.
    Accordingly, we recommend the Independent Shareholders to vote in 
    favour of the ordinary resolution to approve the Entrusted Loan 
    Agreement at the EGM.
                                            Yours faithfully,
                                          For and on behalf of
                                    MIZUHO SECURITIES ASIA LIMITED
                                           Kelvin S. K. Lau
                                           Managing Director

Equity Capital Markets & Corporate Finance

------------------------------------------------------------------------ APPENDIX GENERAL INFORMATION ------------------------------------------------------------------------

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF


    EXECUTIVE OF THE COMPANY 
    (i)   As at the Latest Practicable Date, save and except Mr. Fang 
          Qinghai, being a Director, who held 24,000 A shares of the 
          Company, none of the Directors, supervisors and chief 
          executive of the Company have any interests and short 
          positions in the shares, underlying shares and/ or debentures
          (as the case may be) of the Company or any of its associated
          corporations (within the meaning of the SFO) which was 
          required to be notified to the Company and the Stock Exchange
          pursuant to Divisions 7 and 8 of Part XV of the SFO (including
          interests and short positions which any such Director, chief
          executive or supervisor is taken or deemed to have under such 
          provisions of the SFO) or which was required to be entered 
          into the register required to be kept by the Company under 
          section 352 of the SFO or which was otherwise required to be 
          notified to the Company and the Stock Exchange pursuant to the
          Model Code for Securities Transactions by Directors of Listed
          Issuers in the Listing Rules. 
    (ii)  As at the Latest Practicable Date, none of the Directors, 
          proposed Directors, supervisors or proposed supervisors of the
          Company has any direct or indirect interest in any assets 
          which have since 31 December 2011 (being the date to which the
          latest published audited financial statements of the Company 
          were made up) been acquired or disposed of by or leased to any
          member of the Group, or are proposed to be acquired or 
          disposed of by or leased to any member of the Group. 


3.  SERVICE AGREEMENTS 

As at the Latest Practicable Date, none of the Directors, proposed directors, supervisors or proposed supervisors of the Company had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation (other than statutory compensation)).

4. INTEREST IN CONTRACT

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement entered into by any member of the Group, and which was significant in relation to the business of the Group.

5. MATERIAL CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2011, being the date to which the latest published audited financial statements of the Group were made up.

6. COMPETING INTEREST

As at the Latest Practicable Date, none of the directors of the Company and its subsidiaries, or their respective Associates has interests in the businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Company and its subsidiaries.

7. EXPERT


    (a)   The following sets out the qualifications of the expert which 
          has given its opinion or advice as contained in this circular: 
          Name                   Qualifications
          Mizuho Securities      A licensed corporation to engage in 
                                 types 1 (dealing in securities), 2 
                                 (dealing in futures contracts), 4 
                                 (advising on securities), 5 (advising 
                                 on futures contracts), 6 (advising on 
                                 corporate finance) and 9 (asset 
                                 management) regulated activities under
                                 the SFO
    (b)   Mizuho Securities did not have any shareholding, direct or 
          indirect, in any members of the Group or any rights (whether 
          legally enforceable or not) to subscribe for or to nominate
          persons to subscribe for securities in any members of the 
          Group as at the Latest Practicable Date. 
    (c)   Mizuho Securities does not have any interest, direct or 
          indirect, in any assets which have been acquired or disposed 
          of by or leased to any members of the Group, or which are 
          proposed to be acquired or disposed of by or leased to any 
          members of the Group since 31 December 2011, the date to which
          the latest published audited financial statements of the 
          Company were made up. 
    (d)   Mizuho Securities has given and has not withdrawn its written
          consent to the issue of this circular with the inclusion of 
          its letter and references to its name in the form and context 

in which they are included.

8. LITIGATION

No member of the Company and its Subsidiaries is at present engaged in any litigation or arbitration of material importance to the Company and its subsidiaries and no litigation or claim of material importance to the Company and its subsidiaries is known to the Directors or the Company to be pending or threatened by or against any member of the Company and its subsidiaries.

9. MISCELLANEOUS


    (a)   The registered office of the Company is No. 482, Guanganmennei
          Avenue, Xuanwu District, Beijing, the PRC and the office 
          address of the Company is No. 9 Guangningbo Street, Xicheng 
          District, Beijing, the PRC. 
    (b)   The place of business of the Company in Hong Kong is at c/o
          Eversheds, 21/F, Gloucester Tower, The Landmark, 15 Queen's 
          Road Central, Hong Kong. 
    (c)   The Hong Kong share registrar and transfer office of the 
          Company is Computershare Hong Kong Investor Services Limited 
          at 46/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong
          Kong. 
    (d)   The secretary to the Board of the Company is Mr. Zhou Gang. 
          Mr. Zhou graduated from East China Institute of Water 
          Conservancy (currently known as Hehai University), and is a 
          senior engineer. 


10. DOCUMENTS AVAILABLE FOR INSPECTION 

Copies of the Entrusted Loan Agreement, the consent letter and the letter of advice from Mizuho Securities are available for inspection at the principal place of business in Hong Kong of the Company at 21/F, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong during normal business hours from the date of this circular up to and including 5 December 2012.

END

-0- Nov/21/2012 07:00 GMT

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