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Privatization of zrcc by sinopec corp

Privatization of ZRCC by Sinopec Corp.

China Petroleum & Chemical Corporation

14 November 2005


This presentation and the presentation materials distributed herewith include forward-looking statements. All statements, other than statements of historical facts, that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to price fluctuations, actual demand, exchange rate fluctuations, market shares, competition, environmental risks, changes in legal, financial and regulatory frameworks, international economic and financial market conditions, political risks, project delay, project approval, cost estimates and other risks and factors beyond our control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements. Financial figures in this presentation are based on International Financial Reporting Standards.

Transaction overview
Transaction Overview

Proposed Transaction

Privatization of ZRCC by Sinopec Corp. through Ningbo Yonglian

Cancellation Price and Form of Payment

Cash payment of HK$10.60 per H share of ZRCC, total consideration for the H shares approximatelyHK$7,672 million

Include but not limited to:

  • Approval by shareholders and independent shareholders of ZRCC

  • Approval by relevant regulatory authorities

Conditions Precedent

Financial Adviser to Sinopec Corp.

China International Capital Corporation (Hong Kong) Limited

Financial Adviser to ZRCC

Lehman Brothers Asia Investment Limited

Independent Financial Adviser to ZRCC

N M Rothschild China Holding AG

Privatization of zrcc by sinopec corp

BusinessOverview of ZRCC

‘000 Tonnes



Source:Annual/Interim Report of ZRCC

Privatization of zrcc by sinopec corp

Financial Highlights of ZRCC










Note:2004 interim results and 2005 interim results are unaudited

Privatization of zrcc by sinopec corp

Strategic Rationale for Transaction

  • Integration of ZRCC’s oil refining business into Sinopec Corp’s value chain

  • Synergy effects in capital allocation, investment, branding, resources, marketing, distribution channels, etc.

  • Elimination of related party transactions and of intra-group competition

  • Consolidation and simplification of management structure and efficiency improvement

Privatization of zrcc by sinopec corp

Transaction Procedures

  • Key Events:

  • 12 November 2005, boards of Sinopec Corp. and ZRCC approved the transaction

  • Mid January 2006, shareholders and independent shareholders meetings will be held to seek approval for the transaction

  • After approval by relevant regulatory authorities, ZRCC will apply for delisting and deregistration, and pay the consideration to its H share shareholders

Sinopec Corp.

Issue New Registered Capital



H Shareholders






Cash Cancellation Price


Merged into


Ningbo Yonglian

Cash/new registered capital flow

Privatization of zrcc by sinopec corp

Pricing Principle and Methodology

Based on principle of fairness for a win-win transaction


Applied various commonly adopted valuation methods in capital markets


Based on opinions from financial advisors, pricing principle, methodology and cancellation price were substantially discussed and negotiated at arm’s length between both parties before final agreement was reached


Privatization of zrcc by sinopec corp

Cancellation Price

Cancellation Price to H share shareholders of ZRCC at HKD10.60 per Share

  • Implied Multiples

  • Premium of proposed Cancellation Price over historical trading prices of ZRCC H shares

  • This transaction meets Sinopec’s investment criteria and is proposed to be included in the 2006 investment arrangement

Source:ZRCC 2004 Annual Report; All periods stated above refer to the period up to and including 2 November 2005

Privatization of zrcc by sinopec corp


  • This transaction is consistent with the corporate strategy of Sinopec Corp.

  • Cancellation Price is fair to shareholders of both parties

  • Upon completion of the Merger, Sinopec Corp. will further realize synergies in investment, management and resources allocation, and enhance overall operating efficiency

For further information
For Further Information

Investor Relations

Beijing: Tel: (8610) 64990067Fax: (8610) 64990489


Hong Kong: Tel: (852) 28242638Fax: (852) 28243669


New York: Tel: (212) 759 5085 Fax: (212) 759 6882


Media Relations

Tel: (8610) 64990092

Fax: (8610) 64990093