Luzhou Xinglu Water : BUSINESS UPDATE - ENTERING INTO THE PPP PROJECT AGREEMENT IN RESPECT OF THE EUROPEAN INDUSTRIAL TOWN* SEWAGE PURIFICATION PLANT PHASE I PROJECT

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Luzhou Xinglu Water (Group) Co . , Ltd . *

瀘 州 市 興 瀘 水 務（集 團）股 份 有 限 公 司

(a joint stock company incorporated in the People's Republic of China with limited liability)

(Stock code: 2281)

BUSINESS UPDATE

ENTERING INTO THE PPP PROJECT AGREEMENT

IN RESPECT OF

THE EUROPEAN INDUSTRIAL TOWN*

SEWAGE PURIFICATION PLANT PHASE I PROJECT

The Board is pleased to announce that on 6 December 2019 (after trading hours),

Bureau of Economy, Science and Technology and Information Technology of Qingbaijiang District, Chengdu City* (成都市青白江區經濟科技和信息化局)

(the "Economy, Science and Technology Bureau"), Zhongrong Investment and Construction Company Limited* (中蓉投建實業有限公司) ("Zhongrong

Investment") and the Company, after the completion of a public tender process, entered into the PPP Project Agreement in respect of the PPP Project in Qingbaijiang District, Chengdu City, Sichuan Province, the PRC.

This announcement is made by the Company to keep the shareholders and potential investors of the Company informed of the latest business development of the Group.

INTRODUCTION

The Board is pleased to announce that on 6 December 2019 (after trading hours), the Company, Zhongrong Investment and the Economy, Science and Technology Bureau, after the completion of a public tender process, entered into the PPP Project Agreement in respect of the PPP Project in Qingbaijiang District, Chengdu City, Sichuan Province, the PRC.

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The PPP Project will be carried out through the public-private-partnership (commonly known as "PPP") model, which is an emerging cooperation model, supported by national policies, for the public and private sectors to work together under the leadership of the relevant PRC local government. While the PPP model typically involves the use of private sector capital in public sector works, there is no fixed cooperation model, as the extent and nature of the private sector's involvements are driven by the requirements of the local government concerned.

THE PPP PROJECT AGREEMENT

The principal terms of the PPP Project Agreement are set out below:

Date:

6 December 2019 (after trading hours)

Parties:

1. the Economy, Science and Technology Bureau;
2. the Company; and
3. Zhongrong Investment (the Company and Zhongrong Investment together referred to as the "Private Parties").

Principal terms:

Pursuant to the PPP Project Agreement, the Private Parties shall establish the Project Company in Qingbaijiang District, Chengdu City, Sichuan Province, the PRC, within 30 business days after the execution of the PPP Project Agreement. The registered capital of the Project Company, which amounts to RMB34,711,400, shall be paid up in one lump sum by the Private Parties according to their respective shareholding percentage in the Project Company within 30 business days after the execution of the PPP Project Agreement. The Project Company shall enter into a supplemental agreement with the Economy, Science and Technology Bureau within 5 business days after its establishment to succeed the relevant rights and obligations of the Private Parties under the PPP Project Agreement.

During the cooperation period as set out in the PPP Project Agreement, the Project Company shall be exclusively responsible for, among other things, the investment, financing, construction, operation and maintenance in respect of the sewage treatment plant of the PPP Project, and will be entitled to the sewage treatment service fees annually from the Economy, Science and Technology Bureau according to the payment mechanism under the PPP Project Agreement.

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The cooperation period consists of (1) construction period of the European Industrial Town* ( 歐 洲 產 業 城) sewage purification plant (phase I) (the "Sewage Treatment Plant"), being 1 year commencing from construction commencement date of the PPP project; and (2) operation period, being 25 years commencing from the date when the Sewage Treatment Plant is put into commercial operation.

After the cooperation period, the Private Parties shall transfer all the ownerships and interests in respect of the Sewage Treatment Plant and relevant facilities and equipment under the PPP Project entirely to the Economy, Science and Technology Bureau or other government-designated entity at nil consideration.

INFORMATION ABOUT THE PPP PROJECT

The PPP Project comprises of the construction and operation of the Sewage Treatment Plant and relevant facilities and equipment located within the red line of the PPP Project with the planned daily treatment capacity of 20,000 cubic meters, which is the phase I project of the entire European Industrial Town* ( 歐 洲 產 業 城) sewage purification plant project with a total planned daily treatment capacity of 60,000 cubic meters. The estimated total investment for the PPP Project will be approximately RMB173,557,100 which, excluding the registered capital of the Project Company of RMB34,711,400, will be financed by the Project Company mainly by obtaining bank loans by pledging the concession rights of the Sewage Treatment Plant as authorized by the Economy, Science and Technology Bureau under the PPP Project Agreement.

INFORMATION ABOUT THE ECONOMY, SCIENCE AND TECHNOLOGY BUREAU, ZHONGRONG INVESTMENT AND THE GROUP

The Economy, Science and Technology Bureau is a local government authority authorized by the People's Government of Qingbaijiang District* ( 青 白 江 區 人 民 政

府) and is responsible for the authorization and implementation of the PPP Project.

Zhongrong Investment is a PRC limited liability company incorporated on 12 November 2019 with the scope of business varying from port and waterway engineering, power engineering, mining to water pollution control, technology research and sales of water treatment equipment, etc.

To the best of the Directors' knowledge, information and belief and having made all reasonable enquiries, each of the Economy, Science and Technology Bureau and Zhongrong Investment and their ultimate beneficial owner is a third party independent of the Company and its connected person(s) (as defined under the Listing Rules).

The Group is mainly engaged in the provision of tap water supply and related installation and maintenance services and wastewater treatment and related infrastructure construction services.

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BENEFITS OF AND REASONS FOR ENTERING INTO THE PPP PROJECT AGREEMENT

The European Industrial Town* ( 歐 洲 產 業 城) targeting to be an industrial function zone that promotes the deep cooperation of international industry of the "Belt and Road" as well as an important part of the strategic development of the whole region of Qingbaijiang District, Chengdu City, Sichuan Province, the PRC, has gathered significant attention and investment of the local government. As a result, entering into the PPP Project Agreement is a great opportunity for the Company to enhance the reputation and develop the customer base of the Company and secure more PPP projects in the future around the region, and is also in line with the business strategy of the Company to enlarge the Group's business scale and realize a continuous and stable growth in revenue of the Company.

The Directors (including the independent non-executive Directors) are of the view that the terms of the PPP Project Agreement are fair and reasonable, on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and its shareholders as a whole.

DEFINITIONS

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

"Board"	the board of Directors of the Company
"Company"	Luzhou Xinglu Water (Group) Co., Ltd.* ( 瀘 州 市
	興 瀘 水 務（ 集 團 ）股 份 有 限 公 司), a joint stock
	company with limited liability incorporated in the PRC,
	whose H Shares are listed on the Main Board of the
	Stock Exchange
"Director(s)"	the director(s) of the Company
"Group"	the Company and its subsidiaries
"H Share(s)"	overseas listed foreign invested ordinary share(s) in
	the capital of the Company with a nominal value of
	RMB1.00 each, which are subscribed for and traded in
	Hong Kong dollars and listed on the Stock Exchange
"Hong Kong"	the Hong Kong Special Administrative Region of the
	PRC

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"Listing Rules"	the Rules Governing the Listing of Securities on
	the Stock Exchange, as amended, supplemented or
	otherwise modified from time to time
"PPP Project"	the phase I PPP project under the European Industrial
	Town* ( 歐 洲 產 業 城) sewage purification plant
	project in Qingbaijiang District, Chengdu City, Sichuan
	Province, the PRC
"PPP Project Agreement"	the public-private-partnership project agreement
	entered into among the Bureau of Economy, Science
	and Technology and Information Technology of
	Qingbaijiang District, Chengdu City* ( 成 都 市 青 白 江
	區 經 濟 科 技 和 信 息 化 局), Zhongrong Investment
	and Construction Company Limited* ( 中 蓉 投 建 實 業
	有 限 公 司) and the Company on 6 December 2019
"PRC"	the People's Republic of China, for the purposes of
	this announcement, excluding Hong Kong, the Macau
	Special Administrative Region of the PRC and Taiwan
"Project Company"	a project company to be established by the Company
	and Zhongrong Investment within 30 business days
	after the execution of the PPP Project Agreement, of
	which the Company and Zhongrong Investment shall
	respectively hold as to 99.9% and 0.1% equity interest
"RMB"	Renminbi, the lawful currency of the PRC
"Share(s)"	share(s) of the Company
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
	By order of the Board
	Luzhou Xinglu Water (Group) Co., Ltd.*
	Zhang Qi
	Chairman

Luzhou City, Sichuan Province, the PRC

6 December 2019

As at the date of this announcement, the Board comprises of (i) three executive Directors, namely Mr. Zhang Qi, Mr. Liao Xingyue and Mr. Wang Junhua; (ii) three non-executive Directors, namely Mr. Chen Bing, Ms. Xu Yan and Mr. Xie Xin; and (iii) three independent non-executive Directors, namely Mr. Gu Ming'an, Mr. Lin Bing and Mr. Cheng Hok Kai, Frederick.

• For identification purposes only

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