Another Coal-to-ethylene Glycol Project Was Suspended!

Inner Mongolia Yuanxing Energy Co., Ltd.

Announcement on Termination of Ethylene Glycol Project of Xilingol Sunite Alkali Industry Co., Ltd.

The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete, and that there are no false records, misleading statements or major omissions.

An overview of the termination project

Inner Mongolia Yuanxing Energy Co., Ltd. (hereinafter referred to as the "Company"), a wholly-owned subsidiary of Henan Zhongyuan Chemical Co., Ltd., a wholly-owned subsidiary of Xilin Gol Sunite Alkali Co., Ltd. (hereinafter referred to as "Sunit Alkali") B2 The alcohol project has been suspended for many years due to the influence of raw materials and ethylene glycol market factors, and under the background of the current "carbon peak" and "carbon neutral" and other relevant policies, the feasibility of the project has undergone major changes. After the company's research, the company intends to terminate the project.

On November 29, 2021, the company held the 18th meeting of the 8th Board of Directors and the 17th meeting of the 8th Board of Supervisors, and reviewed and approved the "Proposal on Terminating the Ethylene Glycol Project of Xilin Gol Sunite Alkali Industry Co., Ltd.". The proposal expressed independent opinions and agreed with the proposal, which still needs to be reviewed and approved by the company's general meeting of shareholders.

According to the "Shenzhen Stock Exchange Listing Rules" and the "Articles of Association" and other relevant regulations, the termination of the ethylene glycol project of Sunite Alkali Industry does not involve related transactions, nor does it constitute the provisions of the "Administrative Measures for Major Asset Restructuring of Listed Companies" It is not necessary to obtain the approval of the relevant departments for the major asset reorganization.

2. Basic information of the project to be terminated

In 2008, Sunite Alkali Industry made full use of the existing public works and local abundant coal resources to build coal chemical projects in order to prolong the mining time of alkali ore and solve the employment problem of enterprise employees and local people through technological transformation, so as to realize natural The alkali industry is transformed into the coal chemical industry, so as to realize the sustainable development of the enterprise. After the technical transformation, the Sunite Alkali Ethylene Glycol Project can produce 200,000 tons/year of ethylene glycol using clean coal gasification technology.

The total planned investment of Sunite Alkali Ethylene Glycol Project is RMB 1,888,847,800. The filing procedures, energy assessment, environmental assessment, safety assessment, water resources demonstration and other approval documents have been completed. As of August 31, 2021, the book value of the assets of Sunite Alkali Ethylene Glycol Project was 353.8725 million yuan, of which 116.865 million yuan was prepaid and 237.0075 million yuan was under construction, mainly for equipment ordering, technical services, civil works, water sources necessary investment for projects such as underground pipelines.

3. Reasons for Termination of the Project

In view of the great changes in the relevant policies, regulations, environment and conditions supporting the construction of the Sunite Alkali Ethylene Glycol Project, the national and Inner Mongolia local industrial policies, energy consumption indicators and other constraints make it difficult for the continued construction of the project to obtain legal compliance Procedures; factors such as overcapacity in the ethylene glycol market, rising production costs, low market prices and far target markets lead to 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 Sunite Alkali Ethylene Glycol Project was no longer feasible for continued implementation, and suggested to terminate the project. The special report argues that:

1. The policy environment is tightening, and the continuation of the project is restricted in many ways

According to the "Several Guarantee Measures for Ensuring the Completion of the "14th Five-Year Plan" Energy Consumption Dual Control Objectives" (Nei Fa Gai Huan Zi [2021] No. 209) issued by the Development and Reform Commission of Inner Mongolia Autonomous Region, the Department of Industry and Information Technology, and the Energy Bureau It is stipulated that from 2021, new production capacity projects such as ethylene glycol will no longer be approved, and if it is really necessary to build, the production capacity and energy consumption reduction replacement must be implemented in the area. Sunite Alkali Ethylene Glycol Project is a "two high" project. According to the double control policy of energy consumption in Inner Mongolia Autonomous Region, the approval of energy consumption indicators has become the biggest bottleneck for the continued construction of Sunite Alkali Ethylene Glycol Project.

2. Significant changes in raw coal supply conditions

In recent years, Xilin Gol League, where Sunite Alkali Ethylene Glycol Project is located, adheres to the policy of "development in protection and protection in development", fully implements the overall requirements of the mine geological environmental protection of the whole league, strengthens supervision and strict protection, and will More than 60% of the area is classified as an ecological protection red line, no new mine development projects will be launched on the grassland, and the indiscriminate mining of the grassland will be resolutely curbed. Policy changes have led to dramatic changes in the coal supply and demand situation in the Xilin Gol League area. Under the requirement of total volume control, the continuous expansion of the demand gap has led to a continuous increase in the overall coal price, which has greatly increased 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 of domestic coal-to-ethylene glycol projects, at present, the product supply is steadily increasing, the downstream industry demand growth is sluggish, the product price fluctuates downward, and the industry competition is becoming increasingly fierce.

4. Predicted cost increases significantly and profitability is low

Compared with the new projects at this stage, the ethylene glycol production technology has greatly improved. The single-series production capacity of the ethylene glycol project of Sunite Alkali Industry is relatively small, and the consumption of raw materials and energy consumption is relatively high. There is no obvious competitive advantage in the cost of industrial ethylene glycol projects.

According to the special evaluation report issued by China Wuhuan Engineering Co., Ltd., after careful internal demonstration by the company, it is believed that under the background that the country incorporates "carbon peaking" and "carbon neutrality" into the overall layout of ecological civilization construction, the energy consumption index The control will become more and more strict, especially the recent Inner Mongolia Autonomous Region People's Government issued the "Notice of the General Office of the Inner Mongolia Autonomous Region People's Government on Printing and Distributing the Autonomous Region's "14th Five-Year Plan" for Climate Change Planning (Neizhengbanfa [2021] No. 60), which stipulates that, Clearly and strictly control the new production capacity of the "two high" industries, and the approval of energy consumption indicators has become the biggest constraint for the continued construction of Sunite's ethylene glycol project. In recent years, the competition in the ethylene glycol industry has become increasingly fierce, and product profitability has increased. in an unstable state. Considering the constant changes in the external environment of Sunite Alkali Ethylene Glycol Project and the uncertainty of investment and construction yield, the company decided to terminate Sunite Alkali Ethylene Glycol Project.

Fourth, the impact of the termination of the project on the company

1. The termination of the Sunite Alkali Ethylene Glycol Project is in line with the company's business development strategy, which is conducive to the company's improvement of management efficiency, integration of existing resources, and optimization of industrial structure. There is no situation that damages the legitimate interests of the company and all shareholders.

2. Ethylene glycol belongs to the "two high" industries. Terminating the ethylene glycol project is conducive to the company's benign integration into the "carbon reduction" and "low carbon" reforms, and it is conducive to the company to 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 Assets Appraisal Co., Ltd. taking August 31, 2021 as the base date, the termination of the above-mentioned ethylene glycol project is expected to affect the company's total profit in 2021 of about -175,556,400 (finally based on the annual audit The data shall prevail) and will not affect the normal production and operation activities of the company.

4. In the future, the company will dispose and revitalize the assets available for the ethylene glycol project of Sunite Alkali Industry through various methods such as supporting utilization by enterprises in the system and external sales.

V. Opinions of Independent Directors

The company's termination of the ethylene glycol project of Xilin Gol Sunite Alkali Industry Co., Ltd. is in line with the company's future development plan, which is conducive to the company's promotion of strategic adjustment, optimization of industrial structure, focus on the main business of trona, and further enhancement of core competitiveness. Some businesses, production operations and financial conditions have a significant impact, and there is no situation that damages the interests of the company and all shareholders, especially the interests of small and medium shareholders.

We agree that the company will terminate the ethylene glycol project of Xilin Gol Sunite Alkali Industry Co., Ltd., and agree to submit the matter to the company's general meeting of shareholders for deliberation.