Yuexiu Transport Proposes to Acquire 100% of Equity Interests in Lanwei Expressway Company

HONG KONG SAR - Media OutReach - 18 October 2022 - Yuexiu Transport Infrastructure Limited ("Yuexiu Transport" or the "Company"; stock code: 01052) announced that a wholly-owned subsidiary of the Company has entered into an agreement to acquire 100% of equity interests in the target company which operates Lanwei Expressway in Henan Province ("Target Company") from Guangzhou Yuexiu Holdings Limited at a total consideration of RMB1.098 billion. The Target Company operates the expressway and is entitled to its toll collection right. The Company intends to finance approximately 60% of the total consideration by bank loan for acquisition and approximately 40% by internal resources. The acquisition is subject to approval by independent shareholders. Meanwhile, the Company's GNSR Expressway is making further progress with its R&E Project. As a preliminary step of the R&E Project, an agreement on land expropriation has been entered into today. Upon the completion of the R&E Project, the Company may be able to extend its operating rights of GNSR Expressway for a period of up to 25 years.

Expanding business presence in Central China and directly enhancing toll revenue and profit contribution

Lanwei Expressway has been in operation for nearly 17 years since it opened to traffic in 2005. It has a total mileage of 61.03 km while the expressway networks connecting to Lanwei Expressway and the nearby expressway networks are all very mature and stable. Moreover, Lanwei Expressway has a significant geographical advantage, and is an important part of the expressway network planned by Henan. It is an important component of Lannan Expressway, one of the 16 expressways running from north to south vertically under the expressway network of Henan. It connects the section from Wanglou to Lankao of the Rilan Expressway in the north. It connects Zhengmin Expressway, Daguang Expressway and Shangdeng Expressway. It also connects Weixu Expressway, which is wholly owned by the Company, in the south, and serves as a highway from the hinterland of the Central Chinese Plains to the coastal areas of Shandong Province.

The Company is optimistic about the economic development in Central China in the long run. The acquisition of Lanwei Expressway aligns with the Company's strategy of developing in the Central China region and the Company believes that Lanwei Expressway, located in the core development areas of the Central Chinese Plain city clusters, will continue to benefit from the regional strategic developments such as the "Rise of Central China" as well as the construction of the Central Chinese Plain city clusters and the Zhengzhou Metropolitan Area. At the same time, the connection between Lanwei Expressway and Weixu Expressway fosters a more united and consistent approach of operation management and facilitates the Company to set up a district-based management and control model, which can provide economies of scale and enhance management efficiency.

Lanwei Expressway is a project with considerable benefits. The Target Company recorded an audited revenue of approximately RMB309 million and a profit before tax of approximately RMB36.011 million for the full year of 2021. The acquisition will expand the Company's revenue stream. For the seven months ended 31 July 2022, the Target Company achieved an unaudited revenue of approximately RMB198 million, while its profit before tax for the same period rose to approximately RMB34.31 million, representing a year-on-year increase of 10.5% and 44.4% respectively.

Upon the completion of the acquisition, the toll mileage of the Company's controlled expressways will increase from 495.2 km to 556.23 km, representing an increment of approximately 12.32%. In conclusion, the acquisition not only will help the Company increase its revenue, profitability and mileage, it will also help the Company optimize the regional presence of its expressway assets and raise revenue contribution from provinces in Central China, while scaling up its operation and enhancing its capability of sustainable development. The Company will continue to invest in its main business of toll expressways, with an aim to capitalize on opportunities arising from favorable policies, continuously optimize its asset portfolio, and improve its business model integrating "investment, financing, management and exit" on an ongoing basis, to create greater value and better returns for shareholders.

Making further progress in R&E Project, enhancing asset value for the long run

In order to relieve the traffic pressure and enhance the capacity of GNSR Expressway with an aim to support the government's economic and infrastructure development plans in the Greater Bay Area, GNSR Company, an indirect subsidiary owned as to 60% by the Company, is going to undertake the GNSR Expressway R&E Project. As a preliminary step of the GNSR Expressway R&E Project, on 17 October 2022, GNSR Company has entered into the Baiyun District Land Expropriation Works Agreement with Baiyun Land Acquisition Office, for the land expropriation arrangement to be undertaken by Baiyun Land Acquisition Office in Baiyun District in connection with preliminary works for the GNSR Expressway. The total compensation amount for the expropriation of the relevant land is RMB50 million, and shall be paid by GNSR Company.

As a core component of the national expressway network and a key part of Guangzhou's expressway network planning, GNSR Expressway is crucial to the expressway network of the Greater Bay Area. The traffic volume of GNSR Expressway has become substantially saturated, resulting in frequent traffic congestion. With the continuous growth of traffic volume in Guangzhou, actual traffic volume has exceeded the existing capacity of GNSR Expressway, and there is an apparent urgency for the reconstruction and expansion of GNSR Expressway. The preliminary works of the GNSR Expressway R&E Project will commence by the end of November 2022, while the subsequent major works are expected to commence in June 2023, with the construction works to be completed in June 2028. The total investment amount of the GNSR Expressway R&E Project is estimated to be approximately RMB17 billion. The total capital contribution of the Company in respect of the Project is expected to be approximately RMB3.06 billion, which will be contributed to GNSR Company based on the construction progress during the construction period between 2022 and 2028.

The GNSR Expressway R&E Project will significantly improve traffic conditions, enhance service standards, reduce traffic accidents, and ensure safe travel. Through the GNSR Expressway R&E Project, the Company believes it can effectively improve the asset quality of GNSR Expressway, extend the remaining comprehensive concession period, expand the scale of the Company's expressway assets, enhance the future development capacity of its main toll road business, and further strengthen its core advantages in investment, construction and operation of toll roads.

The Board expects that upon the completion of the GNSR Expressway R&E Project, the Company should be able to obtain an approval for the extension of the operating rights of GNSR Expressway for a period of up to 25 years until 2053. The final toll period extension is subject to the approval of the Guangdong Provincial People's Government.

The Board considers that the GNSR Expressway R&E Project is of strategic significance to the future growth and development of the Company and is in line its development plan. As a preliminary step of the GNSR Expressway R&E Project, the Baiyun District Land Expropriation Works Agreement and its implementation are fair and reasonable and on normal commercial terms. They are in the interests of the Company and its shareholders in general.