China Huarong Energy : Announcements and Notices - Proposed Issue of Up to HK$751,000,000 7.0% Convertible Bonds Due 2019 under Specific Mandate

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

CHINA HUARONG ENERGY COMPANY LIMITED

中 國 華 榮 能 源 股 份 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 01101)

PROPOSED ISSUE OF UP TO HK$751,000,000 7.0% CONVERTIBLE BONDS DUE 2019 UNDER SPECIFIC MANDATE

On 16 January 2017 (after trading hours), the Company as issuer, Mr. Zhang as guarantor and the Subscriber as subscriber entered into the Subscription Agreements, pursuant to which the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe for, or procure its nominee(s) to subscribe for, the Convertible Bonds in an aggregate principal amount of HK$751,000,000. Mr. Zhang has agreed to guarantee the payment obligations of the Company under the Convertible Bonds.

The initial Conversion Price is HK$0.50 per Conversion Share, which represents: (i) a premium of approximately 16.28% over the closing price of HK$0.43 per Share as quoted on the Stock Exchange on 16 January 2017 (being the date of the Subscription Agreements); and (ii) a premium of approximately 13.90% to the average closing price of approximately HK$0.439 as quoted on the Stock Exchange for the five consecutive trading days up to and including 13 January 2017 (being the last trading day before the date of the Subscription Agreements).

Assuming full conversion of the Convertible Bonds at the initial Conversion Price of HK$0.50 per Conversion Share (assuming no conversion of the 2018 Convertible Bonds), the Convertible Bonds will be convertible into up to 1,502,000,000 Shares, representing approximately 69.17% of the issued share capital of the Company as at the date of this announcement and approximately 40.89% of the enlarged issued share capital of the Company. The Conversion Shares shall rank pari passu in all respects with all other existing Shares outstanding at the conversion date.

The Company, the Guarantor and the Subscriber agree and acknowledge that the Convertible Bonds will be issued in exchange for the Existing Indebtedness, subject to and in accordance with the terms and conditions of the Subscription Agreements.

The Convertible Bonds and the Conversion Shares shall be allotted and issued by the Company pursuant to the specific mandate sought to be granted to the Directors by the Shareholders at the EGM. The subscription of the Convertible Bonds and the issue of the Conversion Shares by the Company are subject to Shareholders' approval.

Pursuant to the terms and conditions of the 2018 Convertible Bonds, the conversion price of the 2018 Convertible Bonds is expected to be adjusted to the 2018 CB New Conversion Price of HK$0.50 per Share upon completion of the Subscription Agreements. Based on the 2018 CB New Conversion Price of HK$0.50 per Share, the maximum number of Shares to be issued by the Company upon full conversion of the 2018 Convertible Bonds shall be

207,000,000 Shares. The Company proposes to convene the EGM to consider, and if thought fit, approve, among other things, the grant of the specific mandate to issue the 2018 CB Conversion Shares upon full conversion of the 2018 Convertible Bonds based on the 2018 CB New Conversion Price.

Completion of the Subscription Agreements is subject to the satisfaction and/or waiver of the conditions precedent therein. Please refer to the section headed "THE SUBSCRIPTION AGREEMENTS" below for further information. As the Subscription Agreements may or may not be completed, the Convertible Bonds may or may not be issued and/or the Conversion Shares and the 2018 CB New Conversion Shares may or may not be issued or listed, Shareholders and potential investors are advised to exercise caution when dealing in the securities of the Company. THE SUBSCRIPTION AGREEMENTS

The First Subscription Agreement

Date: 16 January 2017

Parties:	1.	the Company as issuer;
2.	Mr. Zhang as guarantor; and
3.	the Subscriber as subscriber

Subscription:

Subject to the fulfillment of the conditions set out in the subsection headed "Conditions precedent" below, the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe for, or procure its nominee(s) to subscribe for, the First Convertible Bonds in an aggregate principal amount of HK$610,000,000. Mr. Zhang has agreed to guarantee the payment obligations of the Company under the First Convertible Bonds.

The Company, the Guarantor and the Subscriber agree and acknowledge that the First Convertible Bonds will be issued in exchange for the First Existing Indebtedness, subject to and in accordance with the terms and conditions of the First Subscription Agreement.

Conditions precedent:

The obligations of the Company to issue the First Convertible Bonds and the Subscriber to subscribe for, or procure its nominee(s) to subscribe for, the First Convertible Bonds under the First Subscription Agreement are conditional upon:

1. the passing by the requisite Shareholders at the EGM of all resolutions required under the Listing Rules (if any) to approve the transactions contemplated under the First Subscription Agreement, including without limitation the grant of the mandate to be sought from the Shareholders at the EGM for the allotment and issue of the Conversion Shares with respect to the First Convertible Bonds;

2. the Stock Exchange having granted the listing of, and permission to deal in, the Conversion Shares with respect to the First Convertible Bonds;

3. the First Warranties and the First Guarantor Warranties not having been breached and remaining true and accurate in all respects (or, with respect to certain First Warranties, in all material respects) and not misleading in any respect (or, with respect to certain First Warranties, in any material respect) as at the Closing Date;

4. the Guarantor and the Company having complied with all agreements and satisfied all conditions on their parts to be performed or satisfied under the First Subscription Agreement at or prior to the Closing Date;

5. the Subscriber having received legal opinions from the Cayman Islands counsel for the Subscriber, in form and substance satisfactory to the Subscriber;

6. the Subscriber having received a certificate of the Guarantor in which the Guarantor shall state that the First Guarantor Warranties are true and correct and that the Guarantor has complied with all agreements and satisfied all conditions on his part to be performed or satisfied under the First Subscription Agreement at or prior to the Closing Date;

7. the Subscriber having received a certificate from an executive Director duly authorised by the Board in which such Director shall state that the First Warranties are true and correct in all respects (or, with respect to certain First Warranties, in all material respects), and that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied under the First Subscription Agreement at or prior to the Closing Date;

8. subsequent to the execution and delivery of the First Subscription Agreement, there shall not have occurred (i) any change in the condition (financial or otherwise), results of operations, business, properties or prospects of the Group taken as a whole which, in the judgment of the Subscriber, is material and adverse;

   (ii) any material adverse change (as determined by the Subscriber) in Hong Kong, PRC, United Kingdom, the United States or international financial or economic conditions; or (iii) any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; and

9. the Subscriber having received from the Guarantor and the Company such other documents as the Subscriber may reasonably request in connection with the issuance of the First Convertible Bonds.

   The Subscriber may, in its absolute discretion and upon such terms as it thinks fit, waive all or any of the conditions precedent above. Completion of the First Subscription Agreement shall take place on the second business day after the fulfilment of the conditions precedent or such other date as the Company and the Subscriber may agree in writing. In the event that the conditions precedent have not been fulfilled or waived (as the case may be) prior to 30 June 2017 or such later date as the Company and the Subscriber may agree in writing, the First Subscription Agreement shall terminate and cease to be of any effect (save for any surviving provision which shall remain in full force and effect under the First Subscription Agreement).

   The Second Subscription Agreement

   Date: 16 January 2017

   Parties:	1.	the Company as issuer;
   2.	Mr. Zhang as guarantor; and
   3.	the Subscriber as subscriber

   Subscription:

   Subject to the fulfillment of the conditions set out in the subsection headed "Conditions precedent" below, the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe for, or procure its nominee(s) to subscribe for, the Second Convertible Bonds in an aggregate principal amount of up to HK$141,000,000. Mr. Zhang has agreed to guarantee the payment obligations of the Company under the Second Convertible Bonds.

   The Company, the Guarantor and the Subscriber agree and acknowledge that the Second Convertible Bonds will be issued in exchange for the Second Existing Indebtedness, subject to and in accordance with the terms and conditions of the Second Subscription Agreement.

   Conditions precedent:

   The obligations of the Company to issue the Second Convertible Bonds and the Subscriber to subscribe for, or procure its nominee(s) to subscribe for, the Second Convertible Bonds under the Second Subscription Agreement are conditional upon:

10. the passing by the requisite Shareholders at the EGM of all resolutions required under the Listing Rules (if any) to approve the transactions contemplated under the Second Subscription Agreement, including without limitation the grant of the mandate to be sought from the Shareholders at the EGM for the allotment and issue of the Conversion Shares with respect to the Second Convertible Bonds;

11. the Stock Exchange having granted the listing of, and permission to deal in, the Conversion Shares with respect to the Second Convertible Bonds;

12. the Second Warranties and the Second Guarantor Warranties not having been breached and remaining true and accurate in all respects (or, with respect to certain Second Warranties, in all material respects) and not misleading in any respect (or, with respect to certain Second Warranties, in any material respect) as at the Closing Date;

13. the Guarantor and the Company having complied with all agreements and satisfied all conditions on their parts to be performed or satisfied under the Second Subscription Agreement at or prior to the Closing Date;

14. the Subscriber having received legal opinions from the Cayman Islands counsel for the Subscriber, in form and substance satisfactory to the Subscriber;

15. the Subscriber having received a certificate of the Guarantor in which the Guarantor shall state that the Second Guarantor Warranties are true and correct and that the Guarantor has complied with all agreements and satisfied all conditions on his part to be performed or satisfied under the Second Subscription Agreement at or prior to the Closing Date;