China HK Power (00931.HK) announced on August 6th that its wholly-owned subsidiary, AoTu Energy, has entered into an investment service agreement with Dongguan Huiheng in August 6, 2024. According to the agreement, (i) AoTu Energy agrees to invest RMB 0.107 billion (approximately HKD 0.117 billion) in the project and is responsible for building a comprehensive energy system that includes integrated cooling systems, vapor systems, solar photovoltaics, energy storage, and charging stations. Upon completion of construction, it will obtain a 20-year franchise; AoTu Energy can sign energy use contracts with companies within Songshan Lake Science Smart City and make money based on usage. (ii) Dongguan Huiheng agrees to provide land for construction and help AoTu Energy obtain necessary administrative approval and record procedures, such as real estate ownership certificates, construction land planning permits, construction project planning permits, construction engineering construction permits, and investment project filing certificates, and can share part of the project's operating income according to the contract, accounting for 5%-20% of various different service incomes, (iii)After the 20-year franchise expires, the ownership and management rights of the comprehensive energy system will be unconditionally transferred to Dongguan Huiheng.

Songshan Lake Science Smart City is a high-standard, high-quality, and high-level biomedical industrial park built with an investment of RMB 4.5 billion by Dongguan Songshan Lake Science City Development Group Co., Ltd. (a wholly-owned subsidiary of the Dongguan Songshan Lake High-tech Industrial Development Zone Management Committee). The park has a total planned area of 360 acres and a total construction area of 1 million square meters of factory buildings, including 0.2 million square meters in Phase I and 0.8 million square meters in Phase II. Phase I has already been leased, and relevant companies have moved in. According to the overall plan of the park, biomedical enterprises that settle in the park will be supplied with energy by the park's comprehensive energy system. The first phase of the comprehensive energy system has an installed capacity of 85MW, with an investment of approximately RMB 0.107 billion and an expected annual operating income of over RMB 0.045 billion. The second phase of the project has an installed capacity of approximately 300MW, with an investment of approximately RMB 0.4 billion and an expected annual operating income of approximately RMB 0.2 billion.

Based on the data of the highly efficient energy storage center project of the Yunfu Headquarters Base of 51MW, which can save 30% of fuel operating costs annually during the operation process, and the data of the successful implementation of the AI ​​heating system for several heating projects in Xi'an during the winter season from October 2023 to the present, which can save 20% to 60% of fuel operating costs annually during the operation process, the group has received extensive recognition and admiration from government and corporate users in many regions of China for its independently innovative equipment and AI technology application in energy saving and emission reduction.

The board of directors believes that the successful construction and operation of the first phase of the comprehensive energy system will also serve as a good demonstration. With this opportunity, the company will further expand the comprehensive energy supply business of surrounding park enterprises, covering factory building areas of more than 2 million square meters in the short term, accelerating the company's market layout and strategic implementation in the new energy field, thus expanding the company's income and profit sources. This move is in line with the overall interests of the company and shareholders.