RNS Number:0480N
Zhejiang Southeast Elec Power Co Ld
02 July 2003

               Zhejiang Southeast Electric Power Company Limited

           Announcement of Foreign Investment (Connected Transaction)

The Company and all the members of the Board of Directors assure the
authenticity, accuracy and integrity of this announcement and they jointly and
severally accept full responsibility for the false representations, misleading
statements or material omissions in this announcement.

Important matters:

1.     Content of the foreign investment i.e. connected transaction: Zhejiang
Southeast Electric Power Company Limited ("the Company") is planning to invest
with its own fund, together with Zhejiang Provincial Energy Group Limited
Company ("the Energy Group") and Lishui Municipal State-Owned Asset Operation
Limited Company to construct mutually the project of Zhejiang Tankeng
Hydroelectric Power Plant. The Company intends to hold 25% shares of Tankeng
project.

2.     Avoidance of connected parties: In view that the largest shareholder of
the Company - Zhejiang Provincial Electric Power Development Company is a
wholly-owned subsidiary of the Energy Group, so the fact that the Energy Group
and the Company mutually invest in the construction of Tankeng Hydroelectric
Power Plant forms part of connected transactions, directors from connected
parties should avoid voting on this connected transaction during review and
discussion of the Board of Directors.

3.     Affect of this transaction on the listed company: this transaction will
benefit the Company from increase of installed capacity optimizing the
structure of the electric power assets and promoting the long-term durable
development of the Company.

I. Foreign investment i.e. connected transaction

In order to promote the long-term development of the Company, the Company is
planning to invest with its own fund, together with Zhejiang Provincial Energy
Group Limited Company ("the Energy Group") and Lishui Municipal State-Owned
Asset Operation Limited Company to construct mutually the project of Zhejiang
Tankeng Hydroelectric Power Plant. Under the approval of the first meeting of
the 3rd Board of Directors of the Company, the Company is planning to
participate in the investment of Tankeng Hydroelectric Power Plant by holding
25% shares of the project. Besides the Company, the Energy Group and Lishui
Municipal State-Owned Asset Operation Limited Company are planning to invest the
power plant by holding 65% and 10% of shares of the project respectively.

In view that the largest shareholder of the Company - Zhejiang Provincial
Electric Power Development Company is a wholly-owned subsidiary of the Energy
Group, in accordance with the stipulations of Stock Listing Rules of Shanghai
Stock Exchange, the fact that the Energy Group and the Company mutually invest
in the construction of Tankeng Hydroelectric Power Plant forms part of connected
transactions, directors from connected parties have avoided voting on this
connected transaction during the review and discussion at the meeting. The
independent directors of the Company mutually agree this connected transaction
and issued independent opinions.

This transaction still needs to be approved by Shareholders' General Meeting,
and the connected parties in relation to this connected transaction will give up
their voting rights on this proposal during the Shareholders' General Meeting.
Matters of the convening of the Extraordinary Shareholders' General Meeting will
be announced separately.

II. Introduction of investment parties

A. Connected investment parties

1.     The Energy Group

The Energy Group is a provincial energy state-owned asset operation organization
with a registered capital of 3.5 billion RMB established on 21st March 2001
based on the assets of Zhejiang Provincial Electric Power Development Company
and Zhejiang Provincial Coal Group Corporation in accordance with document Zhe
Zheng Fa (2001) No.6 Notice of Establishing Zhejiang Provincial Energy Group
Limited Company issued by Zhejiang Provincial People's Government. The operation
scope is within the operation of state-owned asset and state-owned equity of
group corporations and their subsidiary enterprises authorized by the state,
investment and development of industry and commerce, technology consultation
service. The legal representative is Mr. Shun Yongsen.

By the end of 2002, the total asset of the Energy Group amounted to RMB 32.8
billion yuan, the net asset (minority shareholders' equity not inclusive) was
RMB 15.4 billion yuan, the income from principal operating activities for 2002
reached RMB 10.8 billion yuan, the total profit was RMB 2.1 billion yuan and the
net profit amounted to RMB 0.8 billion yuan.

2.     The relation between the Energy Group and the Company

The largest shareholder of the Company is Zhejiang Provincial Electric Power
Development Company holding 39.80% shares of the Company. Zhejiang Provincial
Electric Power Development Company is a wholly owned subsidiary of the Energy
Group. Therefore, the Energy Group holds indirectly 39.80% shares of the Company
and is the real controller of the Company.

B. Other investment parties

Lishui Municipal State-Owned Asset Operation Limited Company is a state owned
limited liability company exclusively with its own investment, its registered
capital amounts to 0.1 billion yuan, and its operation scope is within the
operation of asset, capital operation and stock asset inventory authorized by
the municipal government. The legal representative is Mr. He Chifeng.

III.             Brief introduction of the tender of the investment

Zhejiang Tankeng Hydroelectric Power Plant is located at the middle reaches of
stream on Oujiang River branch, Qingtian County, Zhejiang Province, as a very
important backbone power plant in plan within the Oujiang River Valley, it is at
present the only conventional hydroelectric power source remaining to be
developed within Zhejiang Province who possesses adjusting performance and
assuming load peak adjusting task for many years. The installed capacity of the
power plant is 3x200MW, the total capacity of the reservoir is 4.19 billion
cubic meters.

In accordance with the Feasibility Study of Tankeng Hydroelectric Power Plant
Project, the total budgetary estimate investment amount will be RMB 4.642
billion yuan, the fund will mainly comes from the capital of the project
contributed by all the investment parties and bank loan for the project.
According to the relevant stipulations of the State and the requirements of the
term of loan, all the investment parties will contribute by way of capital 30%
of the total investment amount of the project according to their respective
proportion of the contributions, the remaining 70% of the fund will be resolved
by the bank loan.

In accordance with the Feasibility Study of Tankeng Hydroelectric Power Plant
Project, the total period of the construction will be 5 years. After the power
plant was completely put into operation, the predicted annual normal electricity
output will be 1.023 billion KWh.

After State Development and Reform Commission submitted the Project Proposal on
Tankeng Hydroelectric Power Plant for approval, the project was set up under the
approval of the 8th Standing Meeting of the State Council convened on 13th May
2003.

IV.            Main content of this investment

Under the approval of the 1st meeting of the 3rd Board of Directors of the
Company, the Company is planning to invest with its own fund to construct the
project of Zhejiang Tankeng Hydroelectric Power Plant by holding 25% shares of
the project.

Tankeng Hydroelectric Power Plant is a newly constructed project, all the
investment parties should contribute their capital by cash. The real
contribution amount of the investment parties should be decided by the total
investment amount of Tankeng Hydroelectric Power Plant, relative proportion of
capital of the project and proportion of equity of the investment parties. The
calculation shows that the Company may probably contribute a capital of RMB 325
million yuan. The final total investment amount of the project, capital amount
of the project and the contribution amount of the Company will be decided by the
approval of Feasibility Study.

V.               Aim of this investment and affect on the Company by this
connected transaction

a)       From a long-term view, on the one hand, the long operation period and
the low operation cost of the hydroelectric power plant shows more and more
evident advantages on competitive on grid bidding, on the other hand, with the
improvement of the requirement of environment protection control of the State,
the required fund for the desulphurization, denitration, ESP etc by the
environment protection narrowed the gap between the cost of the construction of
hydroelectric power and that of the thermal power plant, and relatively raise
the feasibility on economy of the investment of hydroelectric power plant.

b)      The Company is mainly engaged in electricity generation, the increase of
installed capacity is the main factor of the increase of income from principal
operating activities of the electricity generation company. Due to that the
development of hydroelectric power is affected by the spread of hydroelectric
resource region, with regard of the monopoly and rareness of the resource, to
occupy these hydroelectric resources creates the indispensable resource
advantage for the durable development of the Company.

c)       The electricity demand increases quickly in Zhejiang Province.
According to the prediction of the planning of development of Zhejiang
provincial electric power, the highest load of the whole province in 2010 will
be 24,900MW, generation demand of 152 billion KWh, the biggest peak valley
difference of 10,200MW, taking into account of the projects in construction and
newly constructed projects will be completely constructed by 2010 as predicted
and the input of East China Power Grid and the Three Gorge, by that time the
installed capacity still remain shortage of 1244 to 2379MW, generation output
shortage of 7.9 billion KWh, the contradiction between the power supply and
demand and the shortage of capacity for peak adjustment will be prominent, thus
it is urgent to have some hydroelectric power plants which have adjustment
performance to be put into operation.

d)      The participation in investment of Tankeng Hydroelectric Power Plant of
the Company will to some extent ameliorate the current situation of the Company
focusing all the generation assets on thermal electric power plants, and it will
be beneficial to the optimization of the generation resource of the Company.

e)       The strong support of the government and relevant authorities is
beneficial to the construction and development of Tankeng Hydroelectric Power
Plant.

In view of the above mentioned advantages, under the circumstances of the
avoiding vote of connected directors, the Board of Directors is of the view that
although Tankeng Hydroelectric Power Plant has some disadvantages such as big
investment, long construction period and slow return of fund, the long term
benefit is still evident. In consideration of the long-term development of the
Company, the Board of Directors agreed to participate in the investment.

VI.            Opinion of independent directors

The independent directors are of the view that as a large-scale hydroelectric
power project, Tankeng Hydroelectric Power Plant although possesses the
characteristics of big investment, long construction period and slow return of
fund etc, it will have a very good long-term benefit. The long-term operation
period and the low operation cost of the hydroelectric power project will show
evident advantages in the competition on the electricity market. At the same
time, the contradiction between the supply and the demand, the shortage of
installed capacity during the peak hours of Zhejiang Province is very prominent,
it is urgent to have some hydroelectric power plants to be put into operation.
Tankeng Hydroelectric Power Plant as the adjusting power resource with good
operation characteristic has a very prosperous future in the market.

The Company is mainly engaged in electricity generation, possessing generation
recourses, enlarging installed capacity is the major methods for the Company to
increase its income from principal operating activities. Hydroelectric resource
possesses the characteristic of scarce and monopoly, occupying these resources
will create necessary material basis for the long-term development of the
Company.

In view of the above-mentioned factors, the independent directors of the Company
is of the view that the participation of the Company in the investment of
Tankeng Hydroelectric Power Plant meets the requirements of the long-term
benefit of the Company, so they agree to this proposal.

VII.         Documents for inspection

a)       Resolutions of the Board of Directors and the minutes of the meeting
signed by the directors.

b)      Independent director opinion confirmed and signed by independent
directors.

c)       The proposal of Tankeng Hydroelectric Power Plant Project

d)      Feasibility Study Report of Tankeng Hydroelectric Power Plant Project.



                               Board of Directors

               Zhejiang Southeast Electric Power Company Limited

                                 2nd July 2003





         Opinion of Independent Directors on the Connected Transaction

In accordance with the stipulations of Directive Opinion of Establishing
Independent Directors System in Listed Companies, we now address our independent
opinion on the participation in investment of Zhejiang Tankeng Hydroelectric
Power Plant by holding 25% shares with its own fund of Zhejiang Southeast
Electric Power Company Limited:

Tankeng Hydroelectric Power Plant as a large-scale hydroelectric power project
although possesses the characteristics of big investment and long construction
period, it will have a very good long-term benefit. The long-term operation
period and the low operation cost of the hydroelectric power project will show
evident advantages in the competition on the electricity market. At the same
time, the contradiction between the supply and the demand, the shortage of
installed capacity during the peak hours of Zhejiang Province is very prominent,
it is urgent to have some hydroelectric power plants to be put into operation.
Tankeng Hydroelectric Power Plant as the adjusting power resource with good
operation characteristic has a very prosperous future in the market.

The Company is mainly engaged in electricity generation, possessing generation
recourses, enlarging installed capacity is the major methods of the Company to
increase income from principal operating activities. Hydroelectric resource
possesses the characteristic of scarce and monopoly, occupying these resources
will create necessary material basis for the long-term development of the
Company.

In view of the above-mentioned factors, we are of the view that the
participation of the Company in the investment of Tankeng Hydroelectric Power
Plant meets the requirements of the long-term benefit of the Company, so we
agree to this proposal.

We also suggest the Company to follow the principle of less input, more output
to invest Tankeng Hydroelectric Power Plant, to control strictly the
construction cost, to take full advantage of its excellent peak adjusting
performance and to make every effort to generate more electricity at high price
biding period and promote the benefit of the project.



Independent directors: Wu Xianquan, Qian Zhongwei, Huang Dongliang, Mao Fugen




                      This information is provided by RNS
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