Connected Transactions

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT CONNECTED TRANSACTIONS

CONNECTED PERSONS

1. Wenling Water Supply

Wenling Water Supply principally engages in the business of centralised water production and supply services in Wenling City. On 30 May 2011, Wenling Water Supply acquired 18% of the equity interest of Taizhou City Water. As of the Latest Practicable Date, Wenling Water Supply was a substantial shareholder of our subsidiary, Taizhou City Water, holding 18% of the equity interest of Taizhou City Water. In light of the foregoing, Wenling Water Supply is a connected person of our Company pursuant to Rule 14A.07 of the Listing Rules.

2. Yuhuan Water Supply

Yuhuan Water Supply principally engages in the business of tap water supply services in Yuhuan City. As of the Latest Practicable Date, Yuhuan Water Supply was a wholly-owned subsidiary of Yuhuan Water Group which in turn held 40% of the equity interest of Taizhou South Bay Water Supply since March 2018. In light of the foregoing, Yuhuan Water Supply is a connected person of our Company pursuant to Rule 14A.07 of the Listing Rules.

3. Zhejiang Huangyan Water Supply

Zhejiang Huangyan Water Supply principally engages in the business of centralised water supply services in Huangyan District of Taizhou. As of the Latest Practicable Date, Zhejiang Huangyan Water Supply was an indirect wholly-owned subsidiary of Huangyan SAOG which in turn held 17.79% shareholding interest in our Company. In light of the foregoing, Zhejiang Huangyan Water Supply is a connected person of our Company pursuant to Rule 14A.07 of the Listing Rules.

4. Taizhou Luqiao Water Supply

Taizhou Luqiao Water Supply principally engages in the business of centralised water supply services in Luqiao District of Taizhou. As of the Latest Practicable Date, Taizhou Luqiao Water Supply was an indirect wholly-owned subsidiary of Taizhou Luqiao Public Assets, a substantial shareholder of our Company. In light of the foregoing, Taizhou Luqiao Water Supply is a connected person of our Company pursuant to Rule 14A.07 of the Listing Rules.

5. Taizhou Urban Construction

Taizhou Urban Construction principally engages in the business of investment and management of infrastructure construction projects and operation of state-owned assets. As of the Latest Practicable Date, Taizhou Urban Construction held 28.83% shareholding interest in our Company and was a substantial shareholder of our Company. In light of the foregoing, Taizhou Urban Construction is a connected person of our Company pursuant to Rule 14A.07 of the Listing Rules.

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EXEMPT CONTINUING CONNECTED TRANSACTIONS

Continuing connected transaction which is exempt from the reporting, annual review, announcement, circular and independent shareholders’ approval requirements

Taizhou Urban Construction, our substantial shareholder, has provided guarantee for the CDB Loan. Please refer to the section headed “Relationship with Controlling Shareholders — Independence from our Controlling Shareholders — Financial independence” in this document for further details.

Taizhou Urban Construction is a connected person of our Company for the purpose of the Listing Rules. Accordingly, the guarantee provided by Taizhou Urban Construction in relation to the CDB Loan will constitute continuing connected transaction for our Company under Chapter 14A of the Listing Rules.

As our Directors (including the independent non-executive Directors) are of the view that the guarantee provided by Taizhou Urban Construction in relation to the CDB Loan is on normal commercial terms or better from our Company’s perspective and the guarantee is not secured by assets of our Company, the provision of guarantee is exempted from the reporting, annual review, announcement and independent shareholders’ approval requirements pursuant to Rule 14A.90 of the Listing Rules.

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Upon [REDACTED], the transactions set forth below will constitute non-exempt continuing connected transactions (the “Non-exempt Continuing Connected Transactions”) of our Company for the purpose of Chapter 14A of the Listing Rules:

Continuing connected transactions subject to reporting, annual review and announcement requirements but exempt from circular and independent shareholders’ approval requirements

Provision of municipal water supply services to our connected persons

Background of and reasons for the transactions

During the Track Record Period, our Group subsidiary, namely, Taizhou City Water, has been providing municipal water supply services in or incidental to our ordinary and usual course of business to our connected persons (i.e. Wenling Water Supply and Yuhuan Water Supply), which will then provide tap water for use by the residents and enterprises in Wenling City and Yuhuan City.

We expect that our Group subsidiary, namely, Taizhou City Water, will continue to provide municipal water supply services to our connected persons (i.e. Wenling Water Supply and Yuhuan Water Supply) upon [REDACTED], which will constitute continuing connected transactions for us under Chapter 14A of the Listing Rules.

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Details of the Wenling Water Supply Framework Agreement and Yuhuan Water Supply Framework Agreement to be entered into between the connected persons and our Group subsidiary (namely, Taizhou City Water) are further set forth below: a. Wenling Water Supply Framework Agreement

Nature of transaction

On [●], Taizhou City Water and Wenling Water Supply entered into a water supply framework agreement (the “Wenling Water Supply Framework Agreement”) for a renewable term commencing from the [REDACTED] and ending on 31 December 2021. Pursuant to the said agreement, Taizhou City Water shall continue to provide Wenling Water Supply with municipal water supply services. Payment has been, and will continue after [REDACTED] to be, made every month based on the volume of municipal water supplied.

Historical transaction value Year ended 31 December 2016 2017 2018 (RMB’000) (RMB’000) (RMB’000)

Amount of municipal water supply 92,969 111,088 123,417 services provided by Taizhou City Water to Wenling Water Supply

Proposed annual caps

As a continuation of the municipal water supply contract between Taizhou City Water and Wenling Water Supply, the proposed annual caps for the sales of municipal water to be paid by Wenling Water Supply for the municipal water supply services under the Wenling Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are as follows: Year ended 31 December 2019 2020 2021 (RMB’000) (RMB’000) (RMB’000)

Amount of municipal water supply 111,833 121,015 122,919 services provided by Taizhou City Water to Wenling Water Supply

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Basis of annual caps

The prices of the sales of municipal water supply services provided by Taizhou City Water to Wenling Water Supply will continue to be determined in accordance with the standing arrangements between Taizhou City Water and Wenling Water Supply on the basis of (i) the water prices as approved by Taizhou DRC; and (ii) the price adjustment as fixed and promulgated by Taizhou DRC.

Implications under the Listing Rules

As Wenling Water Supply is a connected person at the subsidiary level and our Board (including all the independent non-executive Directors) has approved the Wenling Water Supply Framework Agreement and the transactions contemplated thereunder and all the independent non-executive Directors have confirmed that the terms of the Wenling Water Supply Framework Agreement are fair and reasonable, on normal commercial terms or better and in the interests of our Company and our Shareholders as a whole, pursuant to Rule 14A.101 of the Listing Rules, the transactions contemplated under the Wenling Water Supply Framework Agreement are exempt from the circular, independent shareholders’ approval requirements but are subject to the reporting, annual review and announcement requirements under Chapter 14A of the Listing Rules. b. Yuhuan Water Supply Framework Agreement

Nature of transaction

On [●], Taizhou City Water and Yuhuan Water Supply entered into a water supply framework agreement (the “Yuhuan Water Supply Framework Agreement”) for a renewable term commencing from the [REDACTED] and ending on 31 December 2021. Pursuant to the said agreement, Taizhou City Water shall continue to provide Yuhuan Water Supply with municipal water supply services. Payment has been, and will continue after [REDACTED] to be, made every month on the basis of the volume of municipal water supplied.

Historical transaction value Year ended 31 December 2016 2017 2018 (RMB’000) (RMB’000) (RMB’000)

Amount of municipal water supply 36,161 51,082 56,125 services provided by Taizhou City Water to Yuhuan Water Supply

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Proposed annual caps

As a continuation of the municipal water supply contract between Taizhou City Water and Yuhuan Water Supply, the proposed annual caps for the sales of municipal water to be paid by Yuhuan Water Supply for the municipal water supply services under the Yuhuan Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are as follows: Year ended 31 December 2019 2020 2021 (RMB’000) (RMB’000) (RMB’000)

Amount of municipal water supply 47,794 54,777 55,124 services provided by Taizhou City Water to Yuhuan Water Supply

Basis of annual caps

The prices of the sales of municipal water supply services provided by Taizhou City Water to Yuhuan Water Supply will continue to be determined in accordance with the standing arrangements between Taizhou City Water and Yuhuan Water Supply on the basis of (i) the water prices as approved by Taizhou DRC; and (ii) the price adjustment as fixed and promulgated by Taizhou DRC.

Implications under the Listing Rules

As Yuhuan Water Supply is a connected person at the subsidiary level and our Board (including all the independent non-executive Directors) has approved the Yuhuan Water Supply Framework Agreement and the transactions contemplated thereunder and all the independent non-executive Directors have confirmed that the terms of the Yuhuan Water Supply Framework Agreement are fair and reasonable, on normal commercial terms or better and in the interests of our Company and our Shareholders as a whole, pursuant to Rule 14A.101 of the Listing Rules, the transactions contemplated under the Yuhuan Water Supply Framework Agreement are exempt from the circular, independent shareholders’ approval requirements but are subject to the reporting, annual review and announcement requirements under Chapter 14A of the Listing Rules.

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Continuing connected transactions subject to reporting, annual review, announcement, circular and independent shareholders’ approval requirements

Provision of raw water and/or municipal water supply services to our connected persons

Background of and reasons for the transactions

During the Track Record Period, our Company and our Group subsidiary, namely, Taizhou City Water, have been providing raw water and/or municipal water supply services in or incidental to our ordinary and usual course of business to our connected persons (namely, Zhejiang Huangyan Water Supply and Taizhou Luqiao Water Supply), which will then provide tap water (after purification of raw water, if necessary) for use by the residents and enterprises in Huangyan District and Luqiao District.

We expect that our Company and our Group subsidiary, namely, Taizhou City Water, will continue to provide raw water and/or municipal water supply services to our connected persons (namely, Zhejiang Huangyan Water Supply and Taizhou Luqiao Water Supply) upon [REDACTED], which will constitute continuing connected transactions for us under Chapter 14A of the Listing Rules.

Details of the Zhejiang Huangyan Water Supply Framework Agreement, Taizhou Luqiao Raw Water Supply Framework Agreement and Taizhou Luqiao Municipal Water Supply Framework Agreement to be entered into between the connected persons on one hand and our Company and our Group subsidiary, namely, Taizhou City Water, on the other hand are further set forth below: a. Zhejiang Huangyan Water Supply Framework Agreement

Nature of transaction

On [●], our Company and Zhejiang Huangyan Water Supply entered into a water supply framework agreement (the “Zhejiang Huangyan Water Supply Framework Agreement”) for a renewable term commencing from the [REDACTED] and ending on 31 December 2021. Pursuant to the said agreement, our Company shall continue to provide Zhejiang Huangyan Water Supply with raw water supply services. Payment has been, and will continue after [REDACTED] to be, made every month on the basis of the volume of raw water supplied.

Historical transaction value Year ended 31 December 2016 2017 2018 (RMB’000) (RMB’000) (RMB’000)

Amount of raw water supply 31,814 34,562 40,480 services provided by our Company to Zhejiang Huangyan Water Supply

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Proposed annual caps

As a continuation of the raw water supply contract between our Company and Zhejiang Huangyan Water Supply, the proposed annual caps for the sales of raw water to be paid by Zhejiang Huangyan Water Supply for the raw water supply services under the Zhejiang Huangyan Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are as follows: Year ended 31 December 2019 2020 2021 (RMB’000) (RMB’000) (RMB’000)

Amount of raw water supply 38,941 41,270 41,829 services provided by our Company to Zhejiang Huangyan Water Supply

Basis of annual caps

The prices of the sales of raw water supply services provided by our Company to Zhejiang Huangyan Water Supply will continue to be determined in accordance with the standing arrangements between our Company and Zhejiang Huangyan Water Supply on the basis of (i) the water prices as approved by Taizhou DRC; and (ii) the price adjustment as fixed and promulgated by Taizhou DRC.

Implications under the Listing Rules

The proposed annual cap amounts of the transactions under the Zhejiang Huangyan Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are RMB38,940,797, RMB41,270,133 and RMB41,828,556, respectively, and each of the percentage ratios (other than the profits ratio) under Chapter 14 of the Listing Rules, where applicable, in respect of the Zhejiang Huangyan Water Supply Framework Agreement is, on an annual basis, more than 5%. Accordingly, the transactions will be subject to reporting, annual review, announcement, circular and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. b. Taizhou Luqiao Raw Water Supply Framework Agreement

Nature of transaction

On [●], our Company and Taizhou Luqiao Water Supply entered into a raw water supply framework agreement (the “Taizhou Luqiao Raw Water Supply Framework Agreement”) for a renewable term commencing from the [REDACTED] and ending on 31 December 2021. Pursuant to the said agreement, our Company shall continue to provide Taizhou Luqiao Water Supply with raw water supply services. Payment has been, and will continue after [REDACTED] to be, made every month on the basis of the volume of raw water supplied.

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Historical transaction value Year ended 31 December 2016 2017 2018 (RMB’000) (RMB’000) (RMB’000)

Amount of raw water supply 23,808 26,073 30,707 services provided by our Company to Taizhou Luqiao Water Supply

Proposed annual caps

As a continuation of the raw water supply contract between our Company and Taizhou Luqiao Water Supply, the proposed annual caps for the sales of raw water to be paid by Taizhou Luqiao Water Supply for the raw water supply services under the Taizhou Luqiao Raw Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are as follows: Year ended 31 December 2019 2020 2021 (RMB’000) (RMB’000) (RMB’000)

Amount of raw water supply 31,184 32,089 32,424 services provided by our Company to Taizhou Luqiao Water Supply

Basis of annual caps

The prices of the sales of raw water supply services provided by our Company to Taizhou Luqiao Water Supply will continue to be determined in accordance with the standing arrangements between our Company and Taizhou Luqiao Water Supply on the basis of (i) the water prices as approved by Taizhou DRC; and (ii) the price adjustment as fixed and promulgated by Taizhou DRC. c. Taizhou Luqiao Municipal Water Supply Framework Agreement

Nature of transaction

On [●], Taizhou City Water and Taizhou Luqiao Water Supply entered into a municipal water supply framework agreement (the “Taizhou Luqiao Municipal Water Supply Framework Agreement”) for a renewable term commencing from the [REDACTED] and ending on 31 December 2021. Pursuant to the said agreement, Taizhou City Water shall continue to provide Taizhou Luqiao Water Supply with municipal water supply services. Payment has been, and will continue after [REDACTED] to be, made every month on the basis of the volume of municipal water supplied.

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Historical transaction value Year ended 31 December 2016 2017 2018 (RMB’000) (RMB’000) (RMB’000)

Amount of municipal water supply 55,785 61,922 66,411 services provided by Taizhou City Water to Taizhou Luqiao Water Supply

Proposed annual caps

As a continuation of the municipal water supply contract between Taizhou City Water and Taizhou Luqiao Water Supply, the proposed annual caps of the sales of municipal water to be paid by Taizhou Luqiao Water Supply for the municipal water supply services under the Taizhou Luqiao Municipal Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are as follows: Year ended 31 December 2019 2020 2021 (RMB’000) (RMB’000) (RMB’000)

Amount of municipal water supply 64,707 67,705 68,581 services provided by Taizhou City Water to Taizhou Luqiao Water Supply

Basis of annual caps

The prices of the sales of municipal water supply services provided by Taizhou City Water to Taizhou Luqiao Water Supply will continue to be determined in accordance with the standing arrangements between Taizhou City Water and Taizhou Luqiao Water Supply on the basis of (i) the water prices as approved by Taizhou DRC; and (ii) the price adjustment as fixed and promulgated by Taizhou DRC.

Implications under the Listing Rules

The proposed annual caps of the transactions under the Taizhou Luqiao Raw Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are RMB31,184,040, RMB32,088,561 and RMB32,423,715, respectively. The proposed annual caps of the transactions under the Taizhou Luqiao Municipal Water Supply Framework Agreement for the three years ending 31 December 2019, 2020 and 2021 are RMB64,707,146, RMB67,705,448 and RMB68,580,538, respectively.

Pursuant to Rules 14A.82 and 14A.83 of the Listing Rules, the transactions under the Taizhou Luqiao Raw Water Supply Framework Agreement and Taizhou Luqiao Municipal Water Supply Framework Agreement (collectively, the “Taizhou Luqiao Water Supply Framework Agreements”) have been aggregated. Each of the percentage ratios (other than the profits ratio) under Chapter 14 of the Listing Rules, where applicable, in respect of the Taizhou Luqiao Water Supply Framework Agreements is, on

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an annual and aggregated basis, more than 5%. Accordingly, the aforesaid transactions will be subject to reporting, annual review, announcement, circular and the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

APPLICATION FOR WAIVERS

As the Non-exempt Continuing Connected Transactions (i) will continue after [REDACTED] on a recurring basis; (ii) the details of the Non-exempt Continuing Connected Transactions have been fully disclosed in this document for the information of potential investors; (iii) our Directors confirmed that the Non-exempt Continuing Connected Transactions have been and will be entered into in or incidental to the ordinary and usual course of our Group’s business, on normal commercial terms or better and are fair and reasonable and in the interests of our Company and our Shareholders as a whole; and (iv) the proposed annual caps for the transactions under each of the Non-exempt Continuing Connected Transactions as stated above in this section are fair and reasonable and are in the interests of our Company and our Shareholders as a whole, our Directors consider that strict compliance with the announcement, circular and independent shareholders’ approval requirements under the Listing Rules would be burdensome and would add unnecessary administrative costs to our Company each time when such transactions arise. The transactions under respective agreements are subject to announcement and/or circular and the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules, and our Company has applied for waivers under Rule 14A.105 of the Listing Rules to exempt the Non-exempt Continuing Connected Transactions from strict compliance with the applicable requirements and the Stock Exchange has [agreed] to grant such waivers subject to the aggregate value of each of the Non-exempt Continuing Connected Transactions for each financial year not exceeding the corresponding annual caps as stated above in this section as well as other relevant conditions imposed by the Stock Exchange (if any) being observed.

CONFIRMATION FROM DIRECTORS/SOLE SPONSOR

Confirmation from Directors

The Directors (including the independent non-executive Directors) confirm that the above Non-exempt Continuing Connected Transactions have been and will be entered into in or incidental to the ordinary and usual course of the business of our Group, are based on normal commercial terms or better and are fair and reasonable and in the interests of our Company and the Shareholders as a whole, and that the proposed annual caps for the transactions under each of the Non-exempt Continuing Connected Transactions are fair and reasonable and in the interests of our Company and our Shareholders as a whole.

Confirmation from the Sole Sponsor

Having taken into account the information above, the Sole Sponsor concurs with the Directors’ view that the above Non-exempt Continuing Connected Transactions have been and will be entered into in or incidental to the ordinary and usual course of the business of our Group, are based on normal commercial terms or better and are fair and reasonable and in the interests of our Company and our Shareholders as a whole, and that the proposed annual caps for the transactions under each of the Non-exempt Continuing Connected Transactions are fair and reasonable and in the interests of our Company and our Shareholders as a whole.

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