Inner Mongolia Yuanxing Energy Co., Ltd.
Announcement on the termination of the ethylene glycol project of Xilingol Sunit Alkali Co., Ltd.
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete, and contains no false records, misleading statements or major omissions.
1. Overview of terminated projects
Xilingol Sunit Alkali Co., Ltd. (hereinafter referred to as “Sunit Alkali”), a wholly-owned subsidiary of Henan Zhongyuan Chemical Co., Ltd., a holding subsidiary of Inner Mongolia Yuanxing Energy Co., Ltd. (hereinafter referred to as the “Company”) Due to the impact of raw material and ethylene glycol market factors, the construction of the alcohol project has been suspended for many years. In addition, under the current background of relevant policies such as “carbon peaking” and “carbon neutrality”, the feasibility of the project has undergone significant changes. After research by the company, the company plans to terminate the project.
The company held the 18th meeting of the 8th Board of Directors and the 17th meeting of the 8th Board of Supervisors on November 29, 2021, and reviewed and approved the “Proposal on Terminating the Ethylene Glycol Project of Xilingol Sunit Alkali Co., Ltd.”. The company’s independent directors expressed their opinions on the above The company issued independent opinions and agreed to the proposal, which still needs to be reviewed and approved by the company’s shareholders’ meeting.
According to the “Shenzhen Stock Exchange Stock Listing Rules” and the “Articles of Association” and other relevant regulations, the termination of the Sunit Alkali Industry Ethylene Glycol Project does not involve related transactions, nor does it constitute the provisions of the “Administrative Measures for Major Asset Reorganization of Listed Companies” In the case of major asset reorganization, approval from relevant departments is not required.
2. Basic situation of the project to be terminated
In 2008, in order to extend the mining time of alkali mines through technological transformation and solve the employment problems of company employees and local people, Sunit Alkali Industry made full use of existing public works and local abundant coal resources to build coal chemical projects to realize the goal of producing natural gas. The alkali industry has been transformed into the coal chemical industry to achieve sustainable development of the enterprise. After technological transformation, Sunit Alkali’s ethylene glycol project can produce 200,000 tons/year of ethylene glycol using clean coal gasification technology.
The total planned investment in Sunit Alkali Industry’s ethylene glycol project is RMB 1,888,847,800. The filing procedures have been completed, and the approval documents such as energy assessment, environmental assessment, safety assessment, and water resource demonstration have been completed. As of August 31, 2021, the asset book value of Sunit Alkali Industry’s ethylene glycol project was 353.8725 million yuan, including 116.865 million yuan in prepaid accounts and 237.0075 million yuan in construction in progress, mainly for equipment ordering, technical services, civil engineering, and water sources. Necessary investment in projects such as underground pipelines.
3. Reasons for terminating the project
In view of the great changes in the relevant policies, regulations, environment, and conditions supporting the construction of the Sunit Alkali Ethylene Glycol Project, national and Inner Mongolia local industrial policies, energy consumption indicators and other constraints make it difficult to obtain legal compliance for the continued construction of the project. Procedures; factors such as overcapacity in the ethylene glycol market, rising production costs, low market prices, and remote target markets have increased project investment risks. The company hired China Wuhuan Engineering Co., Ltd. to conduct a feasibility assessment of the project and issued a special assessment report. It believed that the Sunit Alkali Ethylene Glycol Project was no longer feasible for continued implementation and recommended that the project be terminated. The special report believes:
1. The policy environment is tightening, and project continuation is subject to many restrictions.
According to the “Several Guarantee Measures to Ensure the Completion of the “14th Five-Year Plan” Energy Consumption Dual Control Target Tasks” (Neifagaihuanzi [2021] No. 209) issued by the Inner Mongolia Autonomous Region Development and Reform Commission, Department of Industry and Information Technology, and Energy Bureau It is stipulated that starting from 2021, new production capacity projects such as ethylene glycol will no longer be approved. If construction is indeed necessary, production capacity and energy consumption reduction replacement must be implemented in the zone. Sunit Alkali’s ethylene glycol project is a “two high” project. In accordance with the dual energy consumption control policy of the Inner Mongolia Autonomous Region, energy consumption indicator approval has become the biggest bottleneck for the continued construction of Sunit Alkali’s ethylene glycol project.
2. Significant changes in raw coal supply conditions
In recent years, Xilingol League, where Sunit Alkali’s ethylene glycol project is located, has adhered to the policy of “development while protecting and protecting during development”, fully implemented the overall requirements for mine geological environmental protection in the league, strengthened supervision, strictly protected, and More than 60% of the area has been included in the ecological protection red line. No new mining development projects will be launched in the grassland, and indiscriminate mining and excavation in the grassland will be resolutely curbed. Policy changes have led to dramatic changes in the coal supply and demand situation in the Xilingol League. Under the requirements of total quantity control, the demand gap continues to expand, causing the overall coal price to continue to rise, significantly increasing the production cost of ethylene glycol.
3. There are many unfavorable factors in the development of the industry
After more than ten years of rapid development in the domestic coal-to-ethylene glycol project, product supply is steadily increasing, downstream industry demand growth is sluggish, product prices have fluctuated downwards, and industry competition has become increasingly fierce.
4. Forecast costs will increase significantly and profitability will be low.
Compared with the current new projects, the ethylene glycol production technology has made significant progress. The single-series production capacity of Sunit Alkali’s ethylene glycol project is relatively small, and the raw material consumption and energy consumption are relatively high. In the long term, Sunit Alkali’s There is no obvious competitive advantage in the cost of industrial ethylene glycol projects.
According to the special assessment report issued by China Wuhuan Engineering Co., Ltd. and the company’s careful internal demonstration, it is believed that the country will “peak carbon emissions”.In the context of incorporating “carbon neutrality” into the overall layout of ecological civilization construction, the control of energy consumption indicators will become increasingly strict. Especially recently, the People’s Government of the Inner Mongolia Autonomous Region has issued “The General Office of the People’s Government of the Inner Mongolia Autonomous Region.” The Fifth “Notice on Climate Change Planning” (Ministry of Internal Affairs [2021] No. 60) stipulates that new production capacity in the “two high” industries shall be strictly controlled, and the approval of energy consumption indicators has become a continuation of Sunit Alkali Industry’s ethylene glycol project. The biggest constraint on construction is that in recent years, competition in the ethylene glycol industry has become increasingly fierce, and product profitability has tended to be unstable. Taking into account the changing external environment of Sunit Alkali’s ethylene glycol project and the uncertainty of investment and construction yields, the company decided to terminate the Sunit Alkali’s ethylene glycol project.
4. Impact of project termination on the company
1. The termination of Sunit Alkali Industry’s ethylene glycol project is in line with the company’s business development strategy, will help the company improve management efficiency, integrate existing resources, and optimize the industrial structure, and will not harm the legitimate interests of the company and all shareholders.
2. Ethylene glycol belongs to the “two high” industry. The termination of the ethylene glycol project will help the company integrate into the “carbon reduction” and “low-carbon” changes, and will help the company continue to build a leader in the high-quality development of the green industry in the soda ash industry.
3. According to the pre-assessment results of Beijing Huaya Zhengxin Asset Appraisal Co., Ltd. with August 31, 2021 as the base date, the termination of the above ethylene glycol project is expected to affect the company’s total profit in 2021 by approximately -175.5564 million yuan (finally based on annual audit data shall prevail) and will not affect the company’s normal production and operation activities.
4. The company will subsequently dispose and revitalize the assets available for the Sunit Alkali Industry Ethylene Glycol Project through various methods such as supporting utilization by enterprises within the system and external sales.
5. Opinions of independent directors
The company’s termination of the ethylene glycol project of Xilingol Sunit Alkali Co., Ltd. is in line with the company’s future development plan and will help the company promote strategic adjustments, optimize the industrial structure, focus on the main business of trona, and further enhance core competitiveness. It will not have any impact on the company’s current situation. Some businesses, production operations and financial conditions have a significant impact, and there is no harm to the interests of the company and all shareholders, especially small and medium-sized shareholders.
We agree that the company will terminate the ethylene glycol project of Xilingol Sunit Alkali Co., Ltd. and agree to submit the matter to the company’s shareholders’ meeting for review.
6. Documents available for inspection
1. Resolution of the 18th meeting of the 8th Board of Directors;
2. Resolution of the 17th meeting of the 8th Supervisory Board;
3. Opinions of independent directors at the 18th meeting of the 8th Board of Directors;
4. “Henan Zhongyuan Chemical Co., Ltd. intends to understand the relevant asset market after the construction of the under-construction technological transformation and co-production ethylene glycol project held by Xilingol Sunit Alkali Industry Co., Ltd. issued by Beijing Huaya Zhengxin Asset Appraisal Co., Ltd. Explanation of value pre-assessment results”;
5. China Wuhuan Engineering Co., Ltd. “Inner Mongolia Boyuan Chemical Co., Ltd./Xilingol Sunit Alkali Co., Ltd. Ethylene Glycol Project Evaluation Report” (File No.: 21291-FP08-01).
Special announcement.
Board of Directors of Inner Mongolia Yuanxing Energy Co., Ltd.
November 30, 2021
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