Announcement Details :
2. Information of the Joint Venture Parties
2.1Information on Nan An City Co.
Nan An City Co. is a company established in the PRC with the registered address at No. 14, Hu Xin Road, Nan An City. Nan An City Co. is a company owned by Nan An Municipal Government.
2.2 Information on SFHK
SFHK is a company incorporated in Hong Kong with the registered address at 31/F, Gloucester Tower, The Landmark 11, Pedder Street, Central Hong Kong. SFHK is a wholly-owned subsidiary of Salcon.
3. Rationale
To incorporate Nan An Salcon to develop and construct the Coastal 3-Town Water Intake Engineering Project ("Project").
4. Information on the Total Capital and Investment Outlay
The initial registered capital of Nan An Salcon will be CNY100 million (approximately RM44.78 million) and will be subscribed by SFHK and Nan An City Co. in 65:35 respectively. The investment for the Phase I of the Project is estimated at CNY267 million (approximately RM120 million).
5. Salient Features of the JVA
5.1 Nan An Salcon shall be responsible for developing and constructing the Project, which involves the construction of water intake and transmission of pipelines.
5.2 The Project will be implemented in 2 phases that is, 170 MLD in the Phase I and 175 MLD in the Phase II bringing a total of 345 MLD of raw water to the water plants in GuanQiao, ShuiTou and ShiJing towns ("Coastal 3-Town") of Nan An City, upon completion.
5.3Phase I of the Project had commenced on 30 November 2007 and shall be completed by 30 September 2009 for testing and commissioning. The investment for the Phase I is estimated at CNY267 million. Once the consumption of water reaches 90% of the Phase I capacity, the construction of Phase II shall commence.
5.4 Nan An Salcon is expected to procure CNY167 million (approximately RM75 million) by way of bank borrowing to finance the Phase I of the Project.
5.5 Nan An Municipal Government has agreed to grant a 30-year raw water supply concession right for the Coastal 3-Town to Nan An Salcon.
6. Sources of Funds
Salcon will fund the Investment through the proceeds from private placement to be implemented and/or internally generated funds.
7. Prospect for the Joint Venture
The Incorporation and investment in Nan An Salcon ("Investment") is in line with the expansion plan of the core business activities of Salcon Group. The Investment is expected to contribute to the medium and long term profitability and growth of Salcon Group.
8. Financial Effects
The Incorporation and Investment will not have any significant effect on the earnings or net assets of Salcon Group for the financial year ending 31 December 2008, and the share capital of the Company. However, it is expected to contribute positively to the future earnings of Salcon Group.
9. Risk Factors
The risk factors for the Investment include but not limited to those associated with changes in the economic, political and regulatory conditions in the PRC such as changes to government policies and administration, interest rates, taxes and exchange control regulations.
10. Approvals Required
The JVA is not subject to the shareholders approval. The Incorporation and Investment are subject to the approval of the relevant authorities in the PRC.
11. Departure From Guidelines
To the best of its knowledge and belief, the Board of Directors of the Company confirms that there is no departure from the Policies and Guidelines on Issue/Offer of Securities issued by the Securities Commission in undertaking the investment.
12. Directors and Substantial Shareholders Interest
None of the Directors and/or major shareholders of the Company, or persons connected with them have any interest, direct or indirect, in the Incorporation and/or Investment.
13. Statement By Directors
The Board of Directors of the Company, having taken into consideration the rationale and all relevant aspects of the Investment, is of the opinion that the Investment is in the best interest of the Company and its shareholders.
14. Documents for Inspection
The JVA may be inspected at the Company's registered office at 15thFloor, Menara Summit, Persiaran Kewajipan, USJ 1, 47600 UEP, Subang Jaya, Selangor during normal office hours from Monday to Friday (except public holidays) for a duration of 2 weeks from the date of this announcement.
This announcement is dated 15 January 2008.