SFSY ENERGY plans to acquire 100% equity of Guizhou Xingye Green Energy Technology

According to the announcement from SFSY ENERGY (00750), on October 21, 2025, the company, the seller, and the target company (Guizhou Xingye Green Energy Technology Co., Ltd.) entered into a share transfer agreement, under which the company agrees to acquire and the seller agrees to sell a total of 100% equity of the target company for a cash consideration of RMB 216 million; and the company agrees to assume and repay in cash the debts owed by the target company to the seller, totaling RMB 384 million. Therefore, the total consideration for the acquisition is RMB 600 million.

The target company is a limited company established in China, mainly engaged in the maintenance management of photovoltaic power stations and electricity sales business.

The share transfer agreement is a proposal to resolve litigation. Seller A (Beijing Jingyuntong Technology Co., Ltd.) and the target company (as the plaintiff) have filed a lawsuit against SFSY GREEN ENERGY (as the defendant) in 2023 for alleged violations of the EPC documents.

According to the EPC documents, the parties have agreed (including) that the group must provide EPC services to the target company, with a contract price of approximately RMB 705 million; and seller A must provide the target company with a entrusted loan of approximately RMB 343 million. According to the EPC documents, SFSY GREEN ENERGY has (including) committed to completing all government approval procedures and grid connection procedures for power generation; and agrees to compensate seller A for all losses arising from land occupation issues. Relevant departments issued notices to the target company in 2020 and 2022, indicating that the target company occupied a total area of 800 acres of farmland without approval. In 2021 and 2022, the facilities of the 100MW photovoltaic power station in Wangjiazai, Liupanshui City, involved in the aforementioned farmland were dismantled successively, and thereafter the project only operated with a capacity of 65MW. Seller A and the target company claimed approximately RMB 361 million in damages in the lawsuit, including: (i) losses from dismantling the power station of approximately RMB 253 million; (ii) losses from electricity sales of approximately RMB 57 million; (iii) liquidated damages for delays in grid connection of approximately RMB 34 million; (iv) interest; (v) costs.

According to the legal opinion of the group's legal advisor in China, considering the evidence and the case, the group is likely to bear substantial compensation liabilities in the lawsuit (especially the losses of approximately RMB 253 million arising from the dismantling of the power station). The company believes that the acquisition essentially represents the cancellation of the transaction under the EPC documents, and the company only needs to acquire the target equity and repay the debts at fair value (i.e., the net debt of RMB 133 million after deducting the waived debts owed to the seller). The company believes that resolving the issue through acquisition will significantly reduce the damages the group would have to pay in the event that the lawsuit cannot be resolved and save costs. In addition, resolving the lawsuit and proceeding with the acquisition will release the funds and equity of the company's subsidiaries that are under asset preservation, thereby improving the group's credit rating and alleviating the group's operational pressure.

Furthermore, the group is a professional provider of renewable energy and green building solutions. The board believes that the acquisition will complement the group's existing business and expand the group's revenue sources by enhancing productivity and business scale. Taking into account the discount of the consideration relative to the assessed value of the target equity, as well as the waiver of the target company's debt of approximately RMB 133 million owed to the seller, the group expects to achieve a pre-tax profit of approximately RMB 163 million upon completion As the acquisition represents a resolution to the litigation and is a favorable acquisition for the company, the directors believe that the acquisition is beneficial to the group