Yunnan Energy International Signs Major Master Purchase Agreement for Silicon Materials with Yunnan Energy New Materials

Key Highlights for Investors

• Significant Continuing Connected Transactions: On 14 January 2026, Yunnan Energy International Co. Limited (“the Company”) entered into a Master Purchase Agreement with Yunnan Energy New Materials, a wholly-owned subsidiary of Yunnan Provincial Energy Investment Group Co., Ltd. The agreement covers the supply of silicon materials, specifically organic silicon and industrial silicon, for the period from the Commencement Date until 31 December 2027.
• Shareholder Approval Required: As the transactions constitute continuing connected transactions under Chapter 14A of the Hong Kong Listing Rules (due to Yunnan Provincial Energy and its associates controlling approximately 73.05% of the Company), the proposed transactions and annual caps must be approved by independent shareholders at a Special General Meeting (SGM).
• Proposed Annual Caps: The Company has set significant annual caps for silicon materials purchases from Yunnan Energy New Materials Group at HK\$172 million for each of the financial years ending 31 December 2026 and 2027.
• Stringent Internal Controls and Pricing Policy: The Company has established detailed internal control procedures to ensure arm’s length pricing and that terms are no less favourable than those offered by independent third parties. This includes comparing at least two independent quotations for identical or similar products whenever possible.
• Strategic Rationale: The agreement secures a stable, reliable supply of silicon materials and offers more flexible payment terms from Yunnan Energy New Materials Group than from independent third parties, potentially improving the Company’s liquidity, operational flexibility, and competitiveness.

Details of the Master Purchase Agreement

• Parties Involved: The Company (on behalf of itself and its subsidiaries) and Yunnan Energy New Materials (on behalf of its group).
• Term: From the Commencement Date (conditioned on compliance with Listing Rules and shareholder approval) until 31 December 2027.
• Subject Matter: The purchase of required silicon materials (organic and industrial silicon) by the Company from Yunnan Energy New Materials Group. Each purchase will be subject to individual agreements negotiated on terms consistent with the Master Purchase Agreement.
• Condition Precedent: The agreement is conditional upon compliance with the Listing Rules, including obtaining independent shareholder approval at the SGM.
• Pricing Terms: All terms, including price, payment, and credit, must be no less favourable than those offered by independent third parties and must reflect normal commercial terms or better.
• Internal Controls: The business department must compare terms from Yunnan Energy New Materials with at least two independent third parties, including aspects such as quality, payment terms, and price, to ensure fairness and competitiveness.
• Annual Review: Independent non-executive directors and auditors will conduct annual reviews of the transactions and pricing terms.

Historical and Projected Transactions

• Historical Purchases: For the year ended 31 December 2025, the Company purchased approximately HK\$413,000 in silicon materials from Yunnan Energy New Materials Group and HK\$45.14 million from independent third parties.
• Future Demand: The projected demand for silicon materials is estimated at HK\$172 million for each of the years 2026 and 2027, based on historical data, customer quotations, and market trends.
• Market Opportunity: The Group expects robust growth in demand for silicon materials, particularly due to increasing global demand for green and low-carbon energy solutions in the new energy and photovoltaic industries. As of the announcement, customer quotations received totaled approximately HK\$77.5 million for the period ending 30 June 2026, with further positive purchase intentions from global industry players.

Strategic and Competitive Benefits

• Reputation and Efficiency: Yunnan Energy New Materials Group is recognized for its quality and efficiency, holding multiple national-level awards, certifications (including ISO 9001 and ISO 50001), and 78 technological patents, supporting lower production costs and price competitiveness.
• Favourable Payment Terms: The supplier offers more flexible payment terms, including full payment after receipt from the Company’s customers, improving liquidity and operational flexibility.
• Risk Mitigation: The agreement provides security against market volatility and supply disruptions by expanding sourcing channels and leveraging the supplier’s reliability.
• Enhanced Negotiating Power: Retaining payment in the event of delivery or performance issues strengthens the Company’s negotiating position.

Governance and Compliance

• Board Approval: No Director was required to abstain from voting on the Board resolution approving the Master Purchase Agreement.
• SGM and Shareholder Voting: Yunnan Provincial Energy and its associate, together holding 73.05% of the Company’s shares, will abstain from voting at the SGM. Independent shareholders will vote on the agreement and proposed annual caps.
• Independent Oversight: An Independent Board Committee and an Independent Financial Adviser (WRise Capital Limited) have been appointed to evaluate and advise on the fairness of the transactions.
• Next Steps: A circular containing further details and the SGM notice will be dispatched to shareholders on or before 27 February 2026.

Implications for Shareholders and Share Price

• Price Sensitive Information: The size and structure of the agreement, as well as the reliance on a major connected party, are significant and could impact the share price depending on investor perception of the risks and benefits.
• Potential Positive Impact: The stable supply, enhanced terms, and improved liquidity position may be viewed positively by the market, supporting the Company’s growth in the expanding new energy sector.
• Potential Risks: As the agreement is with a connected party, there is heightened regulatory scrutiny and potential concerns regarding independence, which may impact investor sentiment.
• Shareholder Action Required: Independent shareholders should review the forthcoming circular and participate in the SGM vote, as the transaction’s approval may influence the Company’s future direction and share value.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should review the full circular and consult their professional advisers before making any investment decisions related to Yunnan Energy International Co. Limited.

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