With reference to the Company’s earlier announcements dated 22 November 2010 and 28 February 2011, the Board of Directors of Salcon wishes to announce that the consideration for the Disposal of RMB238 million (or equivalent to approximately RM112.26 million based on the exchange rate of RM1.00 : RMB2.12 as at 6 January 2011) had been adjusted to RMB202.62 million (or equivalent of RM95.58 million based on an exchange rate of RM1.00: RMB2.12 as at 6 January 2011) pursuant to Clause 3 and Schedule 5 of the Sale and Purchase Agreement dated 22 November 2010 relating to the Disposal (“SPA”).
Accordingly, Salcon had on 29 April 2011 refunded RMB35.38 million (or equivalent of RM16.69 million based on an exchange rate of RM1.00: RMB2.12 as at 6 January 2011) in cash to EMIF.
With regard to the foregoing, for ease of reference, set out hereunder is a relevant extract from page 9, item 2.2.8 of the Circular to Shareholders dated 6 January 2011 on the Disposal (“Circular”):
“Adjustments to the purchase price
Of the Concessions held by the HK Subsidiaries, Changle Salcon Raw Water and Nan An Water are still in the process of laying raw water pipelines, whilst Haining Water has only recently commenced operations of its Phase II with 150 MLD plant and has yet to agree the water tariff rates with the Haining Water Group (which is a unit owned by the Haining Municipal).
This being the case and as the Proposed Disposal consideration was arrived at after taking into consideration the valuations of all the Concessions held by the HK Subsidiairies based on a discounted cash-flow method of valuation, the SPA provides for adjustments to be made to the respective disposal considerations for Shandong (which owns Changle Salcon Raw Water), Fujian (which owns Nan An Water) and Zhejiang (which owns Haining Water).
Such adjustment (if necessary) shall be made and appropriate cash amounts paid by EMIF to Salcon or Salcon to EMIF, as the case may be, in the event of amongst others, variations to subject matters such as construction costs, amount of additional third party debt required, shareholders’ loans required to fund any increase in total construction costs, water tariff rates, water sales volume bands and minimum guaranteed volumes, at various points in time, including the targeted dates of completion - as elaborated in Clause 3 and Schedule 5 of the SPA. Accordingly, any adjustment required will be made via a revised valuation for the said companies.”
In view of the above, based on the water tariff rates agreed with the Haining Water Group and minimum guaranteed volumes pertaining to Phase II of 150 MLD plant, calculated based on SPA adjustment of the agreed model, the Disposal consideration of RMB238 million had therefore been adjusted to RMB202.62 million.
Both Salcon and EMIF have mutually agreed to the value of the said adjusted Disposal consideration.
For consistency, the abbreviations used above are the same as those previously defined in the Company’s announcement dated 22 November 2010 and 28 February 2011.
