On October 20, 2021, ENN Natural Gas (600803.SH) issued a suspension announcement, announcing plans for a major asset restructuring. After nearly a week of trade suspension, ENN officially released a restructuring plan on the evening of the 26th. The company plans to purchase 90% of ENN Zhoushan held by ENN Technology, ENN Group and ENN Holdings via cash, and share issue. After the completion of this transaction, the listed company will hold 90% of the equity of ENN Zhoushan indirectly. ENN Natural Gas has resumed trading on October 27, 2021.



This is the second large-scale asset acquisition of ENN in recent years. In 2020, by acquiring the control of ENN Energy Holdings (02688.HK), a listed Hong Kong stocks.? ENN has achieved the integration of clean energy upstream and downstream, forming a pattern featuring "global distribution + flexible storage & transportation + resource coordination + digital interconnection". The acquisition further expands the scale of ENN’s assets, also increase the company’s business layout in the field of natural gas. With Zhoushan receiving terminal being the fulcrum, the acquisition will create in-depth collaboration and build an intelligent ecology of the natural gas industry to enhance competitiveness on the market.

The plan shows that the acquisition of assets will be carried out by cash payment and share issuing. However, because the audit and evaluation involved in this transaction has not yet been completed, the specific transaction consideration and the proportion of shares issued and cash paid will be included in the “Restructuring Report" to be disclosed.

The plan announced the pricing of the shares to be issued. According to the "Restructuring Management Measures", the market reference price shall be the average price among the 20 trading days, 60 trading days and 120 trading days prior to the pricing ex-date. Available three options are 16.82 CNY, 17.22 CNY, and 17.32 CNY per share. After consultation among parties, the issuance price of the assets purchased via share issue is set at 17.22 CNY per share in the middle.

The issuer of this transaction, ENN Technology, ENN Group, and ENN Holdings, have issued a 36-month lock-up period commitment. Meanwhile, if the closing price of the listed company is lower than the issuing price for twenty consecutive trading days within six months after completion of the restructuring, or the closing price at the end of six months is lower than the issuing price, the lock-up period shall be automatically extended to 42 months.

The plan announced the financial data of ENN Zhoushan for the past two and half years for the first time. Although the audit and evaluation of this transaction has not yet been completed, as of the date of signing of the plan, ENN Zhoushan Pipeline and ENN Zhoushan Pipeline Technology Co., Ltd. have become wholly-owned subsidiaries of ENN Zhoushan through share transfer and are part of the acquisition.?

Since Zhoushan receiving terminal started operations at the end of 2018, its performance has grown rapidly. In 2019, ENN Zhoushan has total assets of 5.089 billion CNY, revenue of 260 million CNY and net profit of 29.6 million CNY. In 2020, ENN had total assets of 6 billion CNY, revenue of 906 million CNY, an increase of 248% on a year-on-year basis, and net profit of 361 million CNY, an increase of 1119% on a year-on-year basis. In the first half of 2021, its revenue has exceeded 552 million CNY, equivalent to 61% of the full year of 2020, and its net profit is 272 million CNY, equivalent to 75% of 2020.?

The plan shows that as natural gas has become the "ballast stone" and "stabilizer" under the goal of peak carbon emissions & carbon neutrality, the global oil price remains high since 2021, also because of the high dependence on natural gas import, LNG import volume increases, LNG receiving terminal plays an increasingly important role in stabilizing natural gas supply. Under such a circumstance, the transaction is expected to achieve the following objectives:

1. Through the transaction, ENN Zhoushan has become an indirect subsidiary of ENN. Zhoushan receiving terminal can play its role as a fulcrum more flexibly.
? Achieve better coordination and cooperation
? Enhance the ability to meet the seasonal peak demand
? Contribute to the security of clean energy supply
? Optimize the company’s integrated industrial chain layout to build a new clean energy ecology
2. Zhoushan receiving terminal will be an important platform for global LNG resource allocation through varieties of ecological cooperation method such as terminal window swapping, to realize the dynamic adjustment of overseas LNG resource procurement long-term/short-term contracts, to form a more stable and market-competitive resource pool. ENN may also develop new business method in the receiving terminal such as window swapping, terminal tank leasing, LNG ship filing, offshore bonded warehouse, LNG tank container intermodal transportation, to create flexible and diversified international trade of natural gas.
3. Through the integration of highly synergistic LNG receiving terminal assets, ENN will further enhance the operation capacity and profitability. Meanwhile, inclusion of Zhoushan receiving terminal into ENN will reduce the number of related party transactions, which is conductive to the regulated operation of listed companies, thereby protecting the rights and interests of listed companies and their minority shareholders. In the first half of 2021, the volume of related transactions between the two parties is 510 million CNY.