Clarification on Inaccurate Media Reports

HONG KONG, CHINA – Media OutReach – 26 November 2019 – Hebei Construction Group Corporation
Limited (“Hebei
Construction Group” and its subsidiaries, together, the “Group”, stock
code: 1727) announced today that, the Company
noticed that on 25 November and 26 November 2019, certain media published news
reports headed “With Unfinished Projects and Temperamental Decisions, PPP
Business of Hebei Construction is Paradoxical ( ????????? ????PPP ????????)” and “Is Zhongming Zhiye the Profit Modifier of
Hebei Construction? ( ????????????????)”, respectively (the “Reports”). The Company has
carefully verified the contents of the Reports in a timely manner and found
that the contents of the Reports are not based on rigorous investigation and
demonstration and are inconsistent with the actual situation. The relevant
information is hereby clarified as follows:

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1. Regarding the Company’s change
of use of the net proceeds from the Global Offering, referred to the Company’s
announcement dated 8 January 2019 and the circular dated 14 January 2019. The
change in the use of the net proceeds from the Global Offering was made based
on the Company’s research and judgment of the then actual situation of PPP
projects and the actual needs in the Company’s ordinary course of business and
operation at that time, and was for the purpose of improving the efficiency and
flexibility of the use of the proceeds. The change was in accordance with the
provisions of the Listing Rules, relevant laws and regulations and the Articles
of Association, and the Company has fulfilled necessary approval procedures and
satisfied relevant disclosure requirements.

 

2. The investment projects to be
funded by proceeds from the proposed A share offering of the Company is
determined based on the changes in the current business environment and the
actual needs of the Company for newly added PPP project pipelines. The
Feasibility Research Report on Investment Projects to be Funded by Proceeds
from the A Share Offering prepared by the Company and the feasibility study
reports issued by third-party engineering consulting agencies have fully
demonstrated the necessity and reasonableness of PPP and BOT investment
projects.

 

3. The Company hereby clarifies that at present,
the PPP projects of the Company are running steadily in general with smooth
construction progress and positive development trend. As for the three PPP
projects mentioned in the Reports, (i) the Company has won the biddings of
Anhui Dangshan Airport Facilities PPP Project (???????????PPP??), Guangdong Jieyang Sino-German Metal Eco City to
Jieyang Chaoshan International Airport PPP Project ( ????????????????????????PPP ??). Such projects are currently pending for
environment assessment and land issues; and (ii) the Company has won the
bidding of Auxiliary Infrastructure Construction PPP Project for Shangdong
Yantai Haiyang Automobile Industrial Innovation Park (????????????????????????PPP??). However, the project failed to progress smoothly
due to force majeure reasons including changes in national policies and laws.
Both parties have reached agreement to termination such project after
negotiation at arm’s length, and have established a special coordination group
for negotiation over the project termination.

 

4. References are made to the Company’s
announcement dated 17 May 2019 and the circular dated 31 May 2019 in relation
to, among others, the entering into of the Equity Swap and Transfer Agreement.
The Company disposed of certain real estate-related businesses in order to
reasonably control the management and control risks of the Chinese government
and China’s securities regulatory authorities and to streamline the principal
business, thereby focusing on the development of the Company’s advantages and
capabilities in the construction business. The Company’s acquisition of HCG
Garden Engineering is based on its synergy with the Company’s construction
business in terms of business scope. It is expected that the Company’s business
scope and the construction industry chain will be further improved, which will
be conducive to the Company’s diversified project portfolio in future bidding
and ensure the Company’s long-term sustainable development. The Equity Swap and
Transfer Agreement entered into between the Company and Zhongming Zhiye
conformed to the provisions of the Listing Rules, relevant laws and regulations
and the Articles of Association, and the Company has fulfilled necessary
approval procedures and satisfied relevant disclosure requirements.

 

5. Regarding the business relationship between HCG Installment
Engineering Co., Ltd. (“HCG Installment Engineering“), a subsidiary of
the Company, and Sanhe Baolan Heat Co., Ltd. (“Baolan Heat“), the
Company hereby clarifies that the heat supply facilities construction services
provided by HCG Installment Engineering to Baolan Heat fulfilled the bidding
procedures required by relevant laws and regulations, and there are no illegal
contract awarding or other acts. In addition, the Company disclosed the
related-party transactions between HCG Installment Engineering and Baolan Heat
in its interim report of 2019 to satisfy the latest requirements of the
modified accounting standards for business enterprises. The Company has
strictly complied with the Listing Rules, relevant laws and regulations and the
Articles of Association to continuously manage connected transactions and
related-party transactions to ensure that the terms and conditions of
transactions are fair and reasonable, necessary approval procedures have been performed
and relevant disclosure requirements have been satisfied.

 

6. Regarding a series of equity transfers of the Company prior to the
initial public offering and listing (the “Listing“),
the Company hereby clarifies that the purpose of such equity transfers and
reorganization is to focus on and stress the principal business, improve the
corporate structure and improve the use of resources in core business. The
pricing of relevant equity transfers is based on the reasonable book value and
is determined by third-party evaluation agencies. The transfers complied with
the provisions of relevant laws and regulations in force at the time and the
Articles of Association, and the necessary approval procedures have been
fulfilled. For further details of the Company’s pre-Listing reorganization,
please refer to the Company’s Listing prospectus dated 5 December 2017. The
Company’s past and current transactions with Zhongming Zhiye Co., Ltd. (????????), a controlling shareholder of the Company from time to time have been
subject to the necessary approval procedures and satisfied the relevant
disclosure requirements, are fair and reasonable and the interests of the
Company and shareholders as a whole are not prejudiced.