EX-10.13






Exhibit
10.13

Guangsha Construction Group Co., Ltd




Lu Chunliang




And




China Hydroelectric Corporation




In Matter of




Suichang County Jiulongshan Hydropower Development Co., Ltd




Enter




Equity Interest Transfer Contract




December 13, 2007




 









 





Contents




	 	 	 	 	 
	Chapter One Definitions of the Contract
	 	 	3	 
	 	 
	Chapter Two Transfer Object
	 	 	9	 
	 	 
	Chapter Three Purchase Price
	 	 	10	 
	 	 
	Chapter Four Capital Increase
	 	 	13	 
	 	 
	Chapter Five Authorization Approval and Handover
	 	 	14	 
	 	 
	Chapter Six Assumption of Credits and Debts 
	 	 	17	 
	 	 
	Chapter Seven Rights and Obligations
	 	 	19	 
	 	 
	Chapter Eight
	 	 	24	 
	 	 
	Fulfillment and Unilateral Termination
	 	 	24	 
	 	 
	Chapter Nine
	 	 	26	 
	 	 
	Representations And Warranties By The Parties
	 	 	26	 
	 	 
	Chapter Ten
	 	 	36	 
	 	 
	Employees
	 	 	36	 
	 	 
	Chapter Eleven
	 	 	38	 
	 	 
	Confidentiality
	 	 	38	 
	 	 
	Chapter Twelve Breach Of Contract
	 	 	39	 
	 	 
	Chapter Thirteen Force Majeure
	 	 	41	 
	 	 
	Chapter Fourteen Resolution of Disputes
	 	 	41	 
	 	 
	Chapter Fifteen
	 	 	43	 
	 	 
	Applicable Law
	 	 	43	 
	 	 
	Chapter Sixteen
	 	 	43	 
	 	 
	Miscellaneous
	 	 	43	 






 









 





Equity Interest Transfer Contract



This
equity interest transfer contract (hereinafter referred to as “Contract”) is made and entered
into on the [date of November], 2007 at Hangzhou City, Zhejiang Province of P. R. China by and
among:



Party A: China Hydroelectric Corporation {hereinafter referred to as “Transferee”), a company
registered and established under the laws of Cayman Islands, registered address at 558 Lime Rock
Road, Lime Rock, Connecticut 06039, authorized representative John D. Kuhns, and president of the
company;



Party B: Guangsha Construction Group Co., Ltd, a company registered and established under the laws
of People’s Republic of China, registered address at 166 Yugulu, Hangzhou City, Zhejiang Province,
legal representative Lou Ming, and chairman of the board.




Party C: Lu Chunliang




ID Number: 332526194904180030



Address: 1 Zhenxinglu, Wuning Street, Dongyang City, Zhejiang Province



Party B and Party C are hereinafter collectively referred to as “Transferors”, The single form of
them is referred to as “Each Transferor”.




WHEREAS:



Suichang County Jiulongshan Hydropower Development Co., Ltd (hereinafter referred to as “Object
Company”), was established on November 22, 2001. The
Object Company owns the Jiulongshan
Hydropower Project with three (3) levels: level one with the installed capacity of 2 x 12,500 kw,
level two with the installed capacity of 2 x 6,300 kw and level three with the installed capacity
of 2 x 8,000 kw, amounting up to a total installed capacity of 53,600 kw. It is still under
construction and it is expected to be completed by the end of 2009.



The Object Company has full legal ownership and operational right of the





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Hydropower Project.



The
registered capital of the Object Company is RMB 90,000,000, 75% of which is held by Party B as
equity interest and 25% of which is held by Party C as equity interest.



Each Transferor will transfer to the Transferee, and the Transferee will purchase the Transferors’
total equity interest in the Object Company (Party B’s interest:
75%, Party C’s interest: 25%,
Party B’s and Party C’s interest will be collectively referred to as “Object Equity Interest”).
Upon the Transferee’s acquisition of such equity interest, the Object Company shall become a
wholly foreign-owned enterprise.



The Transferee, Zhejiang Guangsha Stock Co., Ltd, Zhejiang Guangsha Hydropower Investment Co., Ltd
and Party C executed the Framework Agreement of Zhejiang Jingning Yingchuan Hydropower Development
Co., Ltd, Qingtian Wuliting Hydropower Development Co., Ltd, Suichang County Jiulongshan
Hydropower Development Co., Ltd and Zhejiang Guangsha Beichuan Hydropower Development Co., Ltd on
October 27, 2007.



For the above purpose, after friendly consultations on the principles of equality and mutual
benefit, the parties in this Contract have reached the following terms and conditions in
accordance with the Corporate Law of the People’s Republic of
China, (the Contract Law of the
People’s Republic of China, the Law of the People’s Republic of China on Wholly Foreign-owned
Enterprises, and other applicable Chinese laws and regulations. The parties will abide by and
fulfill the Contract in good faith.




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Chapter One Definitions of the Contract





			
	Article 1.	 	Definition






The terms hereinafter used in this Contract shall have the meanings set forth as
follows:




“AIC” means the Administration for Industry and Commerce of the PRC or, with
respect to the issuance of any business licenses, filings or registrations effected
by or with the State Administration of Industry and Commerce or any government
entity which is similarly competent to issue such business licenses or accept such
filings or registrations under the laws of the PRC.




“Audited Balance Sheet” shall mean the balance sheet audited by [ ], a copy of which
is attached hereto as Appendix 1.




“Base
Date” shall mean September 30, 2007.




“Capital Increase” shall mean the newly registered capital increase and investment in
the Object Company by the Transferee in the amount of RMB 250,000,000 upon the
Transferee’s acceptance of the Object Equity Interest.




“Claims” shall mean claims (arbitration or litigation), actions, demands,
proceedings, judgment liabilities, damage sums, costs and expenses (including legal
costs and disbursements) howsoever arising.




“Delivery Date” shall mean the date on which the Object Equity Interest Transfer has
undergone the formality of registering the amendments with the Administration of
Industry and the Commerce (the “AIC”) which has issued the New Business License to
the Object Company upon examination and approval.




“Damages” shall mean any and all direct losses, liabilities, damages,




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obligations,
liens, assessments, judgments, awards and fines (including, without limitation, those
arising out of any pending or threatened action, suit, proceeding or judgment, including any
settlement or compromise thereof), any related reasonable ‘out-of-pocket costs and expenses
(including, without limitation, reasonable attorneys’, consultants’ and experts’ fees and
expenses), and consequential damages that include, but are not limited to loss of profit or any
value reductions due to lost earnings, provided that those damages not permitted by applicable law
shall be excluded.




“Disclosed Information” shall mean the related materials explanation statement and other
information disclosed and made by the Transferors to the Transferee and the Transferee retained
intermediaries in accordance with the Framework Agreement and in the course of the due diligence
investigation of the Object Company, the Hydropower Project and the Object Equity Interest,
attached hereto as Appendix 2.




“Employees” shall mean all personnel who have either a labor or an actual or deemed employment
relationship with the Object Company or who were appointed by the Transferors to work in the Object
Company or who work in the Object Company based on some other form of employment relationship as of
the Base Date.




“Encumbrance” shall mean any mortgage, assignment, lien, charge, pledge, title retention, right to
acquire, security interest, option, trust interest, pre-emptive right, and any other restrictions
or conditions.




“Equity Interest Transfer” shall mean the transfer of the Object Equity Interest by the
Transferors to the Transferees as contemplated in the Contract.




“Examination and Approval Authority” shall mean the relevant Chinese governmental departments
having authority defined by relevant Chinese regulations on examining and approving foreign
investment



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projects to examine and approve this Contract and to grant approval for the transfer of the
Object Equity Interest and the Capital Increase contemplated in this Contract, including without
limitation, the MOC, NDRC, SAFE, AIC and (CSRC, if applicable).




“Execution Date” shall mean the date that this Contract is signed by the Parties.




“Force Majeure” shall bear the meaning ascribed thereto in Article 47.1.




“Foreign Exchange Capital Account” shall bear the meaning as ascribed thereto in Article 12.1.




“Framework
Agreement” shall mean the Framework Agreement of Zhejiang
Jingning Yingchuan Hydropower
Development Co., Ltd, Qingtian Wuliting Hydropower Development Co., Ltd, Suichang County
Jiulongshan Hydropower Development Co., Ltd and Zhejiang Guangsha Beichuan Hydropower Development
Co., Ltd executed by Transferee, Zhejiang Guangsha Stock Co., Ltd, Zhejiang Guangsha Hydropower
Investment Co., Ltd and Party C on October 27, 2007.




“Hydropower Project” shall mean the hydropower station project located in Jiulongshan, legally
owned and operated by the Object Company.




“Material Agreements” includes any oral or written agreement, arrangement, or understanding outside
the ordinary course of business, including any (a) consulting agreement not terminable on notice
within thirty (30) days, (b) agreement with respect to any employee of the Object Company providing
any term of employment or compensation guarantee, (c) change in control or any other agreement with
any executive officer or other key employee of the Object Company of which the benefits are
contingent, or the terms of which are materially altered, upon the occurrence of a transaction
involving the Object Company of



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the nature contemplated by the Contract, (d) agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan, of which any of the
benefits will be increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by the Contract or the value of any of the
benefits of which will be calculated on the basis of any of the transactions contemplated by the
Contract, (e) agreement containing covenants that limit the ability of the Object Company to
compete in any line of business or with any person, or that involve any restriction on the
geographic area in which, or method by which, the Object Company may carry on its business (other
than as may be required by law) or exclusive dealings of contracts that limit the ability of the
Object Company to contract certain persons or to engage, whether directly or indirectly, in
certain activities.




“MOC” means the Ministry of Commerce or, with respect to any matter submitted for examination and
approval by the Ministry of Commerce, any government entity which is similarly competent to
examine and approve such matter under the laws of the PRC.




“NDRC” means the National Development and Reform Commission, and any governmental body that is a
successor thereto.




“New Business License” shall mean the new business license of the Object Company issued by the
industrial and commercial administration after completion of the Capital Increase and Equity
Interest Transfer.




“Object Company” shall mean Suichang County Jiulongshan Hydropower Development Co., Ltd.




“Object
Company Financial Statements” shall bear the meaning ascribed thereto in Article 32.17.



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“Object Equity Interest” shall mean (i) the 75% equity interest of the Object Company held by
Party B, fully paid, and (ii) the 25% equity interest of the Object Company held by Party C,
fully paid.




“Original Bank Loans” shall mean all outstanding loans of the Object Company as of the Base Date,
a list of which is attached hereto as Appendix 3.




“Party B” shall mean Guangsha Construction Group Co., Ltd, a company registered and established
under the laws of People’s Republic of China, registered address at 166 Yugulu, Hangzhou City,
Zhejiang Province.




“Party C” Lu Chunliang




ID Number: 332526194904180030




Address:
1 Zhengxinglu, Wuning Street, Dongyang City,
Zhejiang Province




“Provisional Account” shall bear the .meaning as ascribed thereto in Article 7.1.




“Purchase Price” shall mean the price paid by Transferee for the purchase of the Object Equity
Interest as set out in Article 5 pursuant to the Contract.




“PRC” or “China” shall mean the People’s Republic of China, and insofar as this Contract is
concerned, shall exclude Hong Kong, Taiwan and Macao.




“Renminbi” or “RMB” shall mean the legal currency of the PRC.



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“SAFE” means the PRC State Administration of Foreign Exchange, and any governmental body that is
a successor thereto.




“CSRC” means the China Securities Regulatory Commission and any governmental body that is a
successor thereto.




“State-owned Property Right”, pursuant to Property Law of the People’s Republic China and other
related regulations, shall mean all property rights owned by the PRC government or state-owned
enterprises which are not allowed or allowed under certain terms and conditions to be transferred
or allotted to natural persons, private companies, or institutions.




“Taxes” means all national and local internal revenue taxes under PRC laws including without
limitation all income, capital gains, withholding (including expanded, final and compensation
withholding), value added, documentary stamp, percentage, payroll, excise and any other taxes,
levies, charges, deductions or duties of any nature and includes any interest, expense, fine,
penalty or other charge payable, claimed, estimated or assessed in respect of any such Taxes and
imposed by any governmental authority; and “Tax” shall be construed accordingly.




“Taxation Claims” means any claims for taxation which have been made or may hereafter be made
against the Object Company:




(a) in respect of or arising from any transaction effected or deemed to have been effected by the
Object Company, whether reported or filed in respect of, prior to, on or after [      ]; or




(b) by reference to any income, profits or gains earned, accrued or received by the Object Company
on or before [      ], whether reported or filed in respect of, prior to, on or after [      ];




“Third Party” shall mean any natural person, legal entity, or any other organization or entity,
other than the parties to this Contract.



8









 





Chapter Two Transfer Object





			
	Article 2.	 	Object of the Equity Interest Transfer






The transfer object or subject of this Contract is the Object Equity Interest.
Subject to the terms and conditions herein, the Transferors hereby sell and transfer
to the Transferee, and the Transferee buys and acquires from the Transferors the
Object Equity Interest together with all rights, interests and entitlements attached
thereto and free of any Encumbrance in consideration of the Transferee paying the
Purchase Price to the Transferors in accordance with the terms and conditions of
this Contract.




			
	Article 3.	 	Pre-emptive purchase right






Each Transferor hereby waives its respective pre-emptive purchase rights to the
equity interest of the Object Company to be transferred by the Transferors to the
Transferee pursuant to the terms of this Contract.




			
	Article 4.	 	The Transferors agree to comply with the terms and conditions of this Contract and to
transfer to the Transferee the Object Equity Interest held by them and all the rights,
interests and entitlements attached thereto. The Transferee agrees to comply with the terms
of the Contract and accepts the Object Equity Interest. After the transfer of the Equity
Interest is completed in accordance with the provisions of this Contract, the Transferee will
hold 100 percent (100%) of the equity interest in the Object
Company and the Transferor will
no longer hold any equity interest in the Object Company.






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Chapter Three Purchase Price





			
	Article 5	 	The Transferors and the Transferee agree that the Purchase Price shall be determined by
consideration of and reference to the assessed value of the assets of the Object Company as
set out in an evaluation report issued by Jingdu Assets Evaluation Co., Ltd (an assets
evaluation agency with competent qualifications). Upon mutual consultation, the Transferors
and the Transferee confirm and agree that the final Purchase Price shall be RMB 157,330,000
(the “Purchase Price”). The respective amount of payment made to each Transferor shall be as
follows:






Party B: RMB 117,997,500 



Party C:
 RMB 39,332,500




			
	Article 6	 	The Purchase Price shall be paid by the Transferee in US Dollars equal to the Purchase
Price unless the Contract provides otherwise. The Transferors and the Transferee agree that in
the event any amounts expressed in RMB are to be paid in US Dollars, the parties will apply
the RMB/US Dollars exchange rate equivalent to the intermediary price of RMB and US Dollars
published by People’s Bank of China one day prior to the date of payment specified in this
Contract.






			
	Article 7	 	The Transferee shall pay the Purchase Price as follows:






	7.1	 	Promptly upon the approval of this Contract by the Examination and Approval Authority,
thereby converting the Object Company into a wholly foreign invested enterprise (hereinafter
referred to as a “WFOE”), and the approval by SAFE for the opening of a domestic provisional
foreign exchange account for the Equity Interest Transfer, the Transferee shall open
a provisional foreign exchange capital account (the “Provisional Account”). The Object Company
shall also open an foreign exchange account as soon as practicable after obtaining its New
Business License (“Foreign Exchange Capital Account”),
	 
	7.2	 	Within five (5) days of opening the Provisional Account, and on the





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\




	 	 	condition that the provisions under Article 7.2.1 are completed and satisfied by
the Transferee, the Transferee shall remit the remaining Purchase Price in a
lump-sum to the Provisional Account (the exchange rate of US Dollar payment shall
be the intermediary price published by People’s Bank of China on the prior day).
	 
	7.2.1	 	The Parties to this Contract agree that all obligations of
the Transferee under this Contract including but not restricted to, payment of the Purchase Price
and payment of the Capital Increase amount, are subject to the fulfillment at or
before Closing of the following conditions:
	 
	7.2.1.1	 	The Object Company has obtained consent and confirmation from the lending bank in
accordance with Article 22.8.3 of this Contract, in the form approved by the Transferee.
	 
	7.2.1.2	 	The covenants and agreements of the Object Company and the Transferors under the
Contract to be performed on or before the date of remitting the remaining Purchase Price in
accordance with this Contract shall have been duly performed and the representations and
warranties of the Object Company and the Transferors contained in this Contract shall be true
and correct.
	 
	7.2.1.3	 	The Transferee shall have completed all business, legal, project and financial due
diligence, and any items requiring correction identified by any Transferee shall have been
corrected to the Transferee’s satisfaction.
	 
	7.2.1.4	 	As of the exact day of execution of this Contract, the Letter of Guarantee, attached hereto
as Appendix 4, has been signed by China Hydropower Corporation on terms and conditions
satisfactory to the Transferee.
	 
	7.2.1.5	 	Both the Transferors and the Transferee has determined the final amount of project under
construction in accordance with Article 52.2.






			
	Article 8	 	Payment of the Purchase Price






	8.1	 	On the date the Purchase Price is remitted the Provisional Account and





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	 	 	subject to satisfaction of the following conditions, the Transferee shall pay 80%
of the Purchase Price (“First Installment”) to the Transferors;
	 
	 	 	The Transferors shall be responsible for helping the Object Company to have
obtained the water procurement certificate.
	 
	8.2	 	While the transfer stipulated under Article 17 hereunder is completed and confirmed in
writing by both of the Transferors and the Transferee, the Transferee shall pay 17% of the
Purchase (“Second Installment”) to the Transferors;
	 
	8.3	 	The remaining 3% of the Purchase Price shall be reserved as a performance deposit for the
Transferors. The performance deposit guarantees: the Object Company’s Hydropower Project will
pass the overall examination and acceptance upon its completion in accordance
with Article 16 free of any material potential engineering trouble and any defect in contracts
with respect to environment, land, relocation and settlement, uploading to and connecting to
power grid. The Hydropower Project shall have obtained approval of Luhanyuan water
introduction involving Jiulongshan national natural protection zone, state-owned land use
right certificate, power business permit, economic agreement on power grid connection and
documents for examination and acceptance. If the above items causes any losses to the
Transferee, the Transferee is entitled to directly deduct the appropriate amount from the
aforesaid performance deposit. If no such trouble or defect exists and the above items are
completed, the Transferee shall pay such performance deposit to the Transferors upon
examination and acceptance of the Hydropower Project and completion all legal procedures for
the abovementioned approval, certificate and documents.
	 
	8.4	 	If any Taxes, fees or other charges are levied on the Purchase Price in the PRC, the
Transferors shall be jointly responsible for bearing such Taxes, fees or charges.






			
	Article 9	 	The Transferors shall issue official and valid receipts to the Transferee promptly after
receipt of the Transferee’s payment of the Purchase Price or any part thereof. Within 5
(five) days after receipt of the Transferee’s payment of the Purchase Price, the Transferors
shall have completed the foreign exchange registration of the Equity Interest Transfer with
SAFE where each of the Transferors is located, by obtaining such certificate the





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	 	 	registration, and provided it to the Transferee.






			
	Article 10	 	On the date of the First Installment as specified in Article 8.1 hereunder, Transferors
shall repay the partial deposit of RMB 3,000,000 made by the Transferee pursuant to the
Framework Agreement executed on October 27, 2007, to the Third Party company within China
designated by Transferee.





Chapter Four Capital Increase





			
	Article 11	 	Capital Increase






	 	 	The Transferee agrees that simultaneously with the Equity Interest Transfer it
shall pay to increase the capital (the “Capital Increase”) to the Object Company in
the amount of RMB 250,000,000..






			
	Article 12	 	Payment of the Capital Increase






	12.1	 	Promptly upon the approval of this Contract by the Examination and Approval Authority, the
Transferors and the Transferee shall work jointly on opening a Foreign Exchange Capital for
the Object Company to be jointly kept by them. The Object Company’s official seal (to be kept
by the Transferors) and the personal seal of Transferee’s authorized representative (to be
kept by the Transferee) will be reserved at the Foreign Exchange Capital Account.
	 
	12.2	 	Transferee shall remit the Capital Increase to the Foreign Exchange Capital Account
simultaneously with the remittance of the Purchase Price to the Provisional Account as
provided in Article 7.2 of this Contract.






			
	Article 13	 	Use of the Increased Capital






	13.1	 	The Transferee agrees that the Capital Increase will be used to





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	 	 	discharge those outstanding debts of the Object Company after credits and debts
restructuring as listed in Appendix 6 hereto , maintain normal construction of the
projects after the Delivery Date and keep normal operation and business expansion.
	 
	13.2	 	The Transferors shall, within 3 days of the Transferee
remitting the Capital Increase to the Object company, complete the restructuring of its credits
and debts listed in Appendix 6 of this Contract and sign with a third party
designated by the Transferee official debt restructuring agreements with creditors
and debtors of the Object Company in form and content approved by the Transferee.
	 
	13.3	 	The Capital Increase amount shall not be disbursed by the Object Company until the
following conditions have been satisfied (including but not limited to the difference from
credits and debts restructuring, see Appendix 6 for the specific amount):
	 
	13.3.1	 	The Transferors shall have completed the restructuring of its credits and debts listed in
Appendix 6, as evidenced by a signed restructuring agreement in form and content approved
by the Transferee between creditors and debtors, the Object Company and the third party
designated by the Transferee






			
	Article 14	 	After the Equity Interest Transfer and the Capital Increase has been completed, the
registered capital of the Object Company shall be changed to RMB 340,000,000.






	 	 	Chapter Five Authorization Approval and Handover






			
	Article 15	 	Within three (3) days of execution of this Contract, the Transferors and the Transferee
shall make joint application to the Examination and





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	 	 	Approval Authority to perform the examination and approval procedures for this
Contract. If examination and approval of this Contract is required
from CSRC, the
Development and Reform Commission, the Water Conservancy Department and the Power
Department, this Contract shall be submitted to the competent departments of such
organizations for such examination and approval.






			
	Article 16	 	After the First Installment is paid, the Transferors and the Transferee shall co-operate
and jointly undertake the registration of the transfer of the Object Equity Interest and apply
for the New Business License with the relevant governmental authorities.






			
	Article 17	 	Handover






	17.1	 	Upon the date on which this Contract is approved by the Examination and Approval Authority,
the Transferors and the Transferee shall organize a team responsible for the Hydropower
Project handover and take joint and active actions to conduct the handover of the Object
Company, the Hydropower Project and the Object Equity Interest, including but is not limited
to handing over the production, operation and management, accounting and finance, assets
checking and accounting, file documents, certificates and licenses, seals and project
construction to the Transferee.
	 
	17.2	 	The Transferor shall assure that the assets of the Object Company and all rights and
interests handed over to the Transferee shall not have any loss or damage compared with
Appendix 6 and the audit by the Transferee listed in Appendix 2. The Transferors shall make a
comprehensive and complete handover to the Transferees pursuant to the audit and completion of
such handover is confirmed by the Transferees.
	 
	17.3	 	The handover shall include but is not limited to:






	 	(1)	 	The business seals, special financial seals and special
contract seals, [to list all] of the Object Company shall be handed over to
the Transferee;





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	 	(2)	 	The Transferors and the Transferee shall check and count the assets of
Object Company, compile the assets inventory and perform the handover with
confirmation via signatures of the jobsite representatives of the
Transferors and Transferee. The assets loss ascertained through the assets
check and count procedure shall be compensated by the Transferors at the
replacement value for such missing assets;
	 
	 	(3)	 	All original engineering drawings, contracts,
agreements (including but not limited to project contracts, equipment
contracts, installation contracts and material contracts) and any other file
documents of the Hydropower Project shall be handed over to the Transferee;
	 
	 	(4)	 	The financial books and the accounting files shall be handed
over to the Transferee;
	 
	 	(5)	 	The Transferors shall make technical disclosure to the
Transferee about the companies responsible for the construction of the
Hydropower Projects, equipment supply (manufacturer), design, supervision,
quality inspection, output line and otherwise; and
	 
	 	(6)	 	Handover of all materials and files of the Object Company;
	 
	 	(7)	 	Other handover procedures as may be reasonably required by
the Transferee.






	17.4	 	The handover specified in Article 17.3 (1) of this Contract shall be completed on the Delivery
Date. All other handovers shall be completed within seven (7) days of the Delivery Date.
The completion of the handover shall be certified and confirmed by the representatives of the
parties in writing.
	 
	17.5	 	The Transferors shall assure in the course of the handover, the





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	 	 	construction and production of the power station is continuous, steady and
secure.
	 
	17.6	 	The Transferors shall give their full cooperation and complete the handover relating to the
Equity Interest Transfer. If the Transferors do not give cooperation and incur Damages to the
Transferee or to the Object Company after the Equity Interest Transfer is completed, the
Transferors shall bear the liability of compensation pursuant to the relevant laws.
	 
	17.7	 	The Transferors agree that the Hydropower Projects and related equipment and facilities of
the Object Company have no quantitative and qualitative problems inconsistent with the
evaluation report. If any quantitative and qualitative problems with the hydropower projects
and equipment incur any losses to the Transferee, the Transferee is entitled to deduct
corresponding sum from the fund payable or seek compensation from the Transferors.





Chapter Six Assumption of Credits and Debts





			
	Article 18	 	The Original Bank Loans of the Object Company as of the Base Date which have been
disclosed by the Transferors to the Transferee, shall be assumed by the Object Company after
the Equity Interest Transfer is completed.






			
	Article 19	 	The following financial items of the Object Company shall be assumed by the
Transferors in accordance with Article 13.1:






	19.1	 	Except the Original Bank Loans disclosed by the Transferors, the
monetary fund, the accounts receivables and the accounts payable listed in
Appendix 6 and arising prior to the Base Date shall be enjoyed or borne by the
Transferors as may be applicable. In this regards, the





17









 






	 	 	Transferors shall Indemnify and save harmless the Transferee from any Claims,
demands and losses arising out of such monetary fund, accounts receivable and
accounts payable noted in Appendix 6.
	 
	19.2	 	Except for the Disclosed Information set forth in Appendix 3, the debts (including
contingent debts) of the Object Company as of the Base Date which the Transferors
have not disclosed in Appendix 3 of this Contract, when executing this Contract.
	 
	19.3	 	All the debts (including contingent debts and debts that have not been part of assets, e.g.
litigation) of the Object Company incurred during the period from the Base Date of the Equity
Interest Transfer to the Delivery Date.






			
	Article 20	 	Financial affairs from the Base Date to the Delivery Date (“Period”)






	20.1	 	The credits and yield of the Object Company within the Period shall belong to the
Transferors, allocated and disposed of in accordance with the previous Articles of
Association.
	 
	20.2	 	Taxes (if any return) incurred prior to the Delivery Date in the normal business course of
the Object Company shall belong to the Transferors. The said taxes received by the Object
Company after the Delivery Date shall be paid to Zhejiang Guangsha Hydropower Investment
Corporation Limited within three (3) days upon receipt of the same.
	 
	20.3	 	Within the Period, the interest of the Object Company shall be borne by the Object Company.
	 
	20.4	 	On the immediate date following the Delivery Date, the
Transferors and the Transferee shall
jointly confirm the aforesaid amounts.






			
	Article 21	 	For the Credits and Debts which shall be assumed by the Transferors in





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	 	 	accordance with Article 19 of this Contract, if the right holder makes claim
against the Object Company and the Object Company assumes the credits and debts in
advance in favor of the right holder, the Object Company or the
Transferee will be
entitled to seek compensation from the Transferors separately pursuant to this
Contract and the Transferors shall indemnify the Object Company or the Transferee
(if the Transferee assumed such Credits and Debts) and save harmless the same from
all such claims and demands. The scope of compensations shall include the debts
themselves, all costs and expenses incurred by the Object Company and the
Transferee in handling and settling the debts, including but not limited to
litigation cost, arbitration cost, enforcement cost, attorney’s cost, and travel
cost.





Chapter Seven Rights and Obligations





			
	Article 22	 	Rights and Obligations of the Transferors






	22.1	 	When this Contract is signed, the Transferors shall present to the Transferee the valid legal
documents and the internal approval and authorization documents specified in Article 32.1 of
this Contract that evidence the establishment of the Object Company and that the Transferors
legally hold the Object Equity Interest.
	 
	22.2	 	Upon execution of the Contract, the Transferors shall not draw or receive dividends of the
Object Company or any other rights and interests of the Object Company Equity Interest and
shall not commit any act which damages and deceases or may damage and decrease the Object
Company’s assets, rights and interests and the shareholders’ rights and interests.




19









 












	22.3	 	Upon execution of this Contract, the Transferors shall not exercise any rights
over the Object Equity Interest, for example, any actions to establish a mortgage,
pledge, transfer and trusteeship over the Object Equity Interest which may
influence the actual fulfillment of the Contract and the Transferee’s procurement
of the Object Equity Interest as provided in this Contract.
	 
	22.4	 	Upon execution of the Contract, the Transferors agree that they and the Object Company shall
manage the Object Company normally with due care of a good faith managing party, which shall
include but not limited to (i) no change to the constitutional documents of the Object
Company; (ii) no change to the accounting policies of the Object Company after the execution
of the Contract; and when they dispose of the assets, credits and debts and all other rights
and obligations of the Object Company in the normal course of business, they shall give
advance notice to the Transferee and procure approval from the Transferee, otherwise all
consequences arising from such disposal actions shall be borne solely by the Transferors
themselves.
	 
	22.5	 	The Transferors shall actively assist the Transferee to handle all approval procedures of the
Equity Interest Transfer and provide all necessary cooperation.
	 
	22.6	 	The Transferors shall actively assist the Transferee to handle the registration procedures
related to the Equity Interest Transfer and agree that they and the Object Company shall
provide all necessary cooperation.
	 
	22.7	 	The Transferors shall pursuant to the provisions under this Contract conduct the handover of
the Object Company and the Object Equity Interest and the Transferors agree that the assets,
rights and interests of the Object Company handed over to the Transferee shall not have any
loss or damage compared with the assets, rights and interests confirmed by audit and due
diligence on the Base Date.





20









 






	22.8	 	The Transferors shall procure continuity of the original bank loans of
the Object Company listed in the Appendix 4 to this Contract as follows:
	 
	22.8.1	 	Prior to the date of the Equity Interest Transfer, for matters concerning the validity of
the Original Bank Loan contracts of the Object Company, the amount of the loans, the terms of
the loans, the deadline of repayment and the terms of extension of the loans, the Transferors
shall not commit any act adverse to the interest of the Object Company after the Equity
Interest Transfer is completed.
	 
	22.8.2	 	The Transferors agree that, the finance amount, loan terms, repayment time period,
extension terms and all other conditions promised to the Object Company by the lending banks
of the Original Bank Loans prior to the Base Date of the Equity Interest Transfer, shall not
have any change adverse to the Object Company prior to the date of the Equity Interest
Transfer and Delivery Date.
	 
	22.8.3	 	The Transferors and the Transferee shall make joint efforts to coordinate with the related
lending banks on succession of the Original Bank Loans of the Object Company. Procurement of
the said consent and confirmation from the lending banks is a precondition for the Transferee
to remit the Purchase Price pursuant to Article 7.2 of this Contract.
	 
	22.8.4	 	In accordance with the provisions of Articles 22.8.2 and 22.8.3 of this Contract, the
Transferors shall provide-relevant guarantees on the Original Bank Loans to the satisfaction
of the lending banks after the Equity Interest Transfer, and the Transferors shall procure
consent and confirmation from the lending banks that the relevant loans and loan rights shall
remain available to the Object Company after the-Equity Interest Transfer is completed.
	 
	22.9	 	The Transferors shall procure that the guarantees of the Original Bank
Loans of the Object Company shall continue to be fulfilled by the original
guarantor after the Equity Interest Transfer is completed. Upon





21









 






	 	 	execution of this Contract, the Transferors shall provide the letter of commitment
issued by the original guarantor of the Original Bank Loans of the Object Company
that the said guarantor will continue to fulfill the guarantees pursuant to the
original terms and conditions. Such letter of commitment is attached to this
Contract as Appendix 7.
	 
	22.10	 	If the original guarantor of the Original Bank Loans or the Transferors comply with Articles
21.8.4 and 21.9 of this Contract and provide the guarantees of the Original Bank Loans of the
Object Company, the Transferee shall pay the guarantee cost pursuant
to the following terms
to the original guarantor or the Transferors: prior to the payment of performance deposit
specified in Article 8.3, the Transferee shall pay 75% of the market guarantee cost (3% of the
performance deposit per year); subsequent to the payment of performance deposit specified in
Article 8.3, the Transferee shall pay fifty percent (50%) of the prevailing guarantee fee rate
of the market (i.e., 3% of the guarantee amount per year), that is, 1.5% of the guarantee
amount per year as a guarantee; and the Transferee should provide a proportional counter
guarantee with equity or assets acknowledged by the Transferee. Other items may be negotiated
and specified by both parties separately.
	 
	22.11	 	The Transferors shall be responsible for the execution of a Principal Agreement on Power
Grid Connection between the Object Company and the power company
	 
	22.12	 	The Transferors shall be responsible for the Object Company obtaining approval on
Luohanyuan Water Introduction project involving Jiulongshan National Natural
Protection Zone
	 
	22.13	 	The Transferors shall be responsible for the Object Company obtaining the water procurement
permit, examination and approval documents for the anti-flood planning in water construction
projects
	 
	22.14	 	The Transferors shall guarantee that Zhengjiang Guangsha Hydropower Investment Corporation
Limited will obtain the Construction Land Planning Permit, the Construction Land Permit for
the Object Company’s hydropower station as well as the State-owned Land Use Right





22









 






	 	 	Certificate for the 7.2874 acres land (as finally approved) for phase one of the
hydropower project.
	 
	22.15	 	The Transferors shall guarantee that Zhengjiang Guangsha Hydropower Investment Corporation
Limited will obtain the State-owned Land Use Right Certificate for 122.2318 acres of land for
phase two of the hydropower station (as finally approved)..
	 
	22.16	 	The Transferors shall give timely written notice to Transferee when they come into knowledge
of any acts, events or conditions which may make the Contract impossible to be partly or
completely fulfilled.
	 
	22.17	 	The Transferors shall be entitled to receive and accept the Purchase Price pursuant to the
provisions of this Contract.
	 
	22.18	 	The Transferors shall be jointly and severally liable for the
obligations, representations,
statements and warranties of each Transferor under this Contract.






			
	Article 23	 	Rights and Obligations of the Transferee






	23.1	 	Simultaneous with the Execution of this Contract, the Transferee shall present to the
Transferors the internal approval and authorization documents specified in Article 32.2 of
this Contract
	 
	23.2	 	The Transferee will assist the Transferors handle all approval procedures of the
Equity Interest Transfer and provide all necessary cooperation.
	 
	23.3	 	The Transferee will assist the Transferors to handle the registration procedures with AIC of
the Equity Interest Transfer and agree that they and the Object Company shall provide all
necessary cooperation.






23











 






	23.4	 	The Transferee shall pay the Purchase Price to the Transferors and shall
pay the Increased Capital to the Object Company in accordance with
the provisions of this Contract.
	 
	23.5	 	The Transferee shall give timely written notice to Transferors when it
comes into knowledge of any acts, events or conditions which may
make the Contract impossible to be partly or completely fulfilled.






			
	Article 24	 	The Transferors and the Transferees shall make joint efforts and shall cooperate
preparing/completing all necessary application documentation and to complete all procedures
to facilitate the Equity Interest Transfer contemplated by this Contract, including but not
limited to, the examination and approval process and the registration and record filing
process. All costs incurred therein shall be borne by each party respectively.





Chapter Eight Fulfillment and Unilateral Termination





			
	Article 25	 	The parties shall fulfill their Contractual obligations fully and completely
pursuant to the provisions of this Contract,






			
	Article 26	 	The Transferee shall have the right to terminate this Contract if any of the
following events occurs:






	26.1	 	Within five (5) days of opening the Foreign Exchange Capital Account
specified in this Contract, the Transferee and the Object Company fail to obtain
the consent and confirmation of the lending bank specified in
Article 22.8.3 of
this Contract;
	 
	26.2	 	The Transferors have not disclosed relevant facts and events
prior to the Base Date, and such facts that will impact the continued legal and normal operations
of the Object Company after the Equity Interest Transfer.




24









 






	26.3	 	The Transferors have not disclosed facts and events prior to the Base
Date, that will subject the Object Company to administrative penalty, and
the administrative penalty arising from such undisclosed facts and/or
events will impact the continued legal and normal operation of the Object
Company after the Equity Interest Transfer.
	 
	26.4	 	If the Transferee elects to terminate this Contract as hereinbefore
provided, it shall do so by written notice to the Transferors, Within two
(2) days of receipt of the termination notice from the Transferee, the
Transferors shall repay to the Transferee all payments made by the
Transferee pursuant to the Framework Agreement and this Agreement.
	 
	26.5	 	If the Transferee elects to terminate this Contract pursuant to Article 26.1
of this Contract, the Transferors and the Transferee shall be mutually
released from the provisions of this Contract and bear no further liability.

	 
	 	 	If the Transferee elects to terminates this Contract pursuant
to Articles 26.2 or 26.3 of this Contract, the Transferors shall bear liability for breaching this
Contract under relevant provisions of this Contract.






			
	Article 27	 	If this Contract and the Equity Interest Transfer fail to be approved by the
Examination and Approval Authority, and such failure is not caused by either the Transferors
or the Transferee, this Contract shall be deemed to be terminated. The Transferors shall,
within 3 days of the termination of this Contract, repay to the Transferee all payments paid
by the Transferee pursuant to the Framework Agreement and this
Contract. Thereafter, the
parties will be mutually released from this Contract without further liability.






			
	Article 28	 	If any Party fails to complete the transfer of the object company equity interest of any
of the other object companies under the Framework Agreement, both the Transferors and the
Transferee shall have the right to terminate this Contract.






			
	Article 29	 	Unless this Contract expressly specifies otherwise or the parties agree in writing,
neither party to this Contract shall terminate or dismiss this







25









 









			
		 	Contract without the consent of the other Party.






			
	Article 30	 	Any Taxes or fees arising out of execution and fulfillment of this Contract shall be
borne by each of the Transferors and Transferee according to their respective tax liabilities
under PRC law.






			
	Article 31	 	Delivery Date






On Delivery Date, valid title to the Object Equity Interest will pass to the
Transferee free and clear of any Encumbrance.



     Chapter Nine Representations And Warranties By The Parties




			
	Article 32.	 	Disclosures, Representations and Warranties by Transferors






As a material inducement to the Transferee to enter into this Contract and acquire
the Object Equity Interest hereunder, each of the Object Company and the
Transferors, jointly and severally, hereby represent and warrant to the Transferee
as follows:




	32.1	 	Each of the Transferors has full corporate power to execute and deliver
the Contract, to perform its respective obligations hereunder, and to
consummate the transactions contemplated hereby. All corporate acts
required to be taken by the Object Company and the Transferors to
authorize the execution, delivery and performance of the Contract and
the consummation of the transactions contemplated hereby have been
duly and properly taken. All the internal approval and authorization
documents that are necessary for the execution, delivery and
performance of the Contract hereby have been obtained by the Object
Company.
	 
	32.2	 	The Contract has been duly executed and delivered by the Transferors
and, assuming the due execution and delivery hereof by the other parties
to the Contract, the Contract constitutes a legal, valid and binding




26









 






		 	obligation of the Transferors, enforceable against each of the Transferors in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights and
remedies of creditors generally.
	 
	32.3	 	As of the date hereof, the registered capital of the Object Company is
RMB 90,000,000 and has been fully paid in compliance with PRO law.
	 
	32.4	 	Each of the Transferors has full right and authority to transfer their
portion of the Object Equity Interest to the Transferee in accordance with
the Contract and the Object Equity Interest is not classified as a State-owned Property Right that is not allowed to be transferred or allotted or
encumbered to any natural persons, private companies, or institutions
unless in accordance with the law of PRC.
	 
	32.5	 	The execution, delivery and performance of this Contract by the
Transferors, and the consummation by the Transferors of the transactions
contemplated hereby will not (i) violate any provision of the charter, by
laws or any other organizational document of the Object Company, (ii)
violate any provision of, or constitute a default (with or without notice or
lapse of time) under, or give rise to a right of termination, cancellation or
acceleration of (or entitle any parry to accelerate whether after the giving
of notice or lapse of time or both) any obligation under any agreement,
indenture, undertaking or other instrument to which either the Object
Company or the Transferors is a party or by which it or any of its
properties may be bound or affected, (iii) violate any law, administrative
regulations, regulatory documents, rules, approval documents or any
judgment, injunction, order or decree, the violation of which could have
a material adverse effect on the business, operations, assets or financial
condition of the Object Company, or (iv) result in the creation or
imposition of (or the obligation to create or impose) any Encumbrance or
restriction of any kind on any of the properties of the Object Company or
the Shares. Each Transferor has obtained the consents, approvals or
authorization to enter into the Contract required from its board of
directors and/or department in charge pursuant to its Articles of
Association or by law. Conclusion of the Contract does not constitute a




27









 






	 	 	breach of any agreement or law, administrative regulations, regulatory documents,
rules and approval documents by which Transferor is bound.
	 
	32.6	 	All information and documents in relation to the Object Company and
the Object Equity Interest provided to the Transferee by the Transferors
prior to the execution of the Contract are true and complete.
	 
	32.7	 	All Object Company related materials and facts known or held by the
Transferors, have been disclosed to the Transferee, including materials
and facts which have or may have an adverse material effect on any
Transferors’ ability of full fulfillment of their obligations under the
Contract, or if disclosed to the Transferee, have or may have an adverse
material effect on the Transferee’s willingness to execute and fulfill the
Contract. Such materials and facts provided by the Transferors to the
Transferee do not contain any false or misleading statements. Except for
the Disclosed Information, no such conditions exist as affecting the
legitimacy and validity of the Equity Interest Transfer, or affecting the
legal rights and interests of the Object Company. All the copies of the
materials supplied by the Transferors during the due diligence to
Transferee or any professional agencies delegated by the Transferee shall
be the authentic duplicates of the originals and shall be true and reliable.
All debts (including contingent debts) undisclosed by the Transferors in
writing shall be jointly assumed by the Transferors.
	 
	32.8	 	Subject to the matters set out in the Disclosed Information, the Object
Company is a validly established legal person, validly existing and in
good standing under Chinese law.
	 
	32.9	 	The Object Company has a good and marketable title for all its
properties and assets, real and personal, as reflected in the Audited
Balance Sheet(the “Assets”) as attached hereto as Attachment 2. Except
as set out in the Disclosed Information, the Assets have been fully paid
for and free of any Encumbrance, pledge, mortgage or retention of title.
	 
	 	 	All Assets are structurally sound with no material defects, in good operating
condition and fit for their purposes. None of the assets is in




28









 






	 	 	need of maintenance or repairs except for ordinary routine maintenance and repairs
and those fully disclosed to the Transferee by the Transferors.
	 
	32.10	 	The Object Company and any of its officers, agents or Employees, have
not committed or omitted to do any act or thing, the commission or
omission of which is in contravention of any law or legislation and
which may have a material adverse effect on the Object Company or any
of its activities.
	 
	32.11	 	Neither the Object Company, the Assets, the Hydropower Project, the
interests of the Transferors in the Object Equity Interest, nor any person
for whom it may be liable, is or has been in the period from its
establishment, engaged in any prosecution, litigation, arbitration
proceedings or administrative or governmental investigation or challenge
as plaintiff, defendant, Third Party or in any other capacity. There are no
such matters (including customer claims) pending or threatened in
respect of which verbal or written communication has been given or
received by or against the Object Company. There are no facts or
disputes which may or might give rise to any such matters.
	 
	32.12	 	The Object Company has been in compliance with all requirements
under Chinese law in respect of environmental protection, health and
safety and hereby states that it has a clean accident history. No notices,
complaints, demands or proceedings have been received by either the
Object Company or any Transferor in relation to environmental issues.
There is no condition of the real property or the land and building which
would require any person of the Object Company to decontaminate or
take other remedial action in or around that real property or building or
to contribute to the costs of doing so.
	 
	32.13	 	The Object Company has duly carried out all tax registrations required,
filed in the prescribed manner and within the prescribed time all tax
returns required to be filed by it, it has filed tax returns that are true,
correct and complete, has made complete and accurate disclosure in such
tax returns and in all schedules, documents and other materials




29









 






	 	 	accompanying such tax returns, has paid all taxes shown on such tax returns as
being due and payable and has paid all taxes payable under any assessment or
reassessment which a relevant taxing authority is entitled to collect from the
Object Company. No Taxation Claims or any deficiencies for Taxes of the Object
Company have been made, claimed, proposed, or assessed in writing or otherwise by
any governmental authority with respect to the Object Company, and there are no
pending or Taxation Claims or such other threatened audits or investigations for or
relating to any liability or potential liability in the respect of Taxes of the
Object Company.
	 
	32.14	 	The Object Company has provided the Transferee with a list of all
policies (including scope, duration and amount of coverage) of fire,
liability, product liability, worker’s compensation and other forms of
liability and casualty insurance currently in effect with respect to the
Object Company. It has no liability (whether contingent or otherwise) for
any unpaid salary, wages, unused entitlements, long service leave, social
contributions, housing fund, (medical) insurance, taxation or other matter
in relation to the employment of any person.
	 
	32.15	 	No claims have been asserted by any person to the use of intellectual
property rights including patents, trademarks, trade names, copyrights,
technology, know-how or processes or challenging or questioning the
validity or effectiveness of any such license or agreement, and there is no
valid basis for any such claim. The use of any intellectual property
rights by the Object Company does not infringe on the rights of any
Third Party.
	 
	32.16	 	Attached hereto as Appendix 2 is a true and complete copy the audited
financial statements of the Object Company for the financial years
ending on September 30, 2007 (the “Object Company Financial
Statements”).
	 
	 	 	The Object Company Financial Statements: (a) are true, correct and complete, (b) are
in accordance with the books and records of the Object Company, (c) present the
consolidated financial condition, assets and




30









 






	 	 	liabilities of the Object Company as of their respective dates and the results of
operation and changes in cash flows of the Object Company for the periods covered
thereby, and (d) have been prepared in accordance with generally accepted
accounting principles, consistently applied.
	 
	32.17	 	The Transferors provide a true and complete list of all equipment, other
personal property and fixtures in the possession or custody of the Object
Company which is leased or held under licence or similar arrangement
and of the leases, licenses, agreements, or other documentation relating
thereto.
	 
	32.18	 	Other than the leases and subleases listed by the Transferors, the Object
Company is not a party to or bound by any lease, sublease, license or
other instrument relating to real property and the Object Company has
not entered into any other instrument relating to real property. All
interests held by the Object Company under such leases or subleases are
free and clear of any and all liens, charges and Encumbrances of any
nature and kind whatsoever.
	 
	32.19	 	All leases or subleases entered into by the Object Company are in good
standing and in full force and effect without amendment and the Object
Company is entitled to the benefit of all such leases or subleases to
which the Object Company is a party.
	 
	32.20	 	All amounts of rent and other amounts presently owing under the leases
or subleases to which the Object Company is a party, have been paid.
	 
	32.21	 	The Object Company has complied with all of its obligations under the
leases or subleases to which it is a party, and the Object Company is not
in default or breach or has received a notice of default or breach of its
obligations under such leases or subleases.
	 
	32.22	 	All of the information listed by the Transferors is true and correct.




31









 






	32.23	 	All of the tangible assets, including but not limited to machinery,
equipment, vehicles, furniture, office equipment, computer hardware and
software wherever situated and owned by Object Company listed by the
Transferors are owned tree and clear of all Encumbrances.
	 
	32.24	 	All material tangible assets of the Object Company used in or in
connection with the business of the Object Company (as is currently
being carried out) or any part thereof are in good condition, repair and
(where applicable) proper working order, having regard to the use and
age thereof, except only for reasonable wear and tear.
	 
	32.25	 	The Transferors hereby jointly confirm and assure to the Transferee that
the land for the Hydropower Project of the Object Company is obtained
legally.
	 
	32.26	 	The Object Company has provided the Transferee with a list of all
governmental licenses, permits, franchises, approvals and other
authorizations of any governmental authority necessary for the Object
Company to own, lease and operate its properties and enable it to carry
on the business as presently conducted.
	 
	32.27	 	True and complete copies of all written Material Agreements have been
made available to the Transferee prior to the date hereof in the course of
the due diligence process.
	 
	32.28	 	No material adverse change has occurred in any of the assets, business,
financial condition, results of operation or prospects of the Object
Company or the Hydropower Project has any other event, condition or
state of facts occurred or arisen that might materially and adversely
affect, or threaten to materially and adversely affect, the Object Company,
or the business, operations or prospects of the Object Company or
Hydropower Project.




32









 






	32.29	 	From the execution of this Contract till the Delivery Date of the Equity
Interest Transfer, the Transferors will operate and manage the Object
Company and the Hydropower Project in the ordinary course, provided
that the operation, business and conditions of the Object Company and
the Hydropower Project will not have any materially adverse change
compared with the status on Base Date; and that after the execution of
this Contract, Transferors shall not take any acts that might adversely
affect the Object Equity Interest, the Object Company or its Hydropower
Project.
	 
	32.30	 	Term of the above representations and warranties: one (1) year from the
date of examination and acceptance or the effective date of this Contract,
whichever comes later.






			
	Article 33	 	Disclosures, Representations and Warranties by Transferee






	33.1	 	The Transferee is a limited liability company duly established that
validly exists and normally operates under the laws of Cayman Islands.
	 
	33.2	 	The Transferee has full corporate power to execute and deliver the
Contract, to perform its respective obligations hereunder, and to
consummate the transactions contemplated hereby. All corporate acts
required to be taken by the Transferee to authorize the execution,
delivery and performance of the Contract and the consummation of the
transactions contemplated hereby have been duly and properly taken.
	 
	33.3	 	The Contract has been duly executed and delivered by the Transferee and,
assuming the due execution and delivery hereof by the other parties
hereto, the Contract constitutes the legal, valid and binding obligation of
the Transferee, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity.




33









 






	33.4	 	The execution, delivery and performance of this Contract by the
Transferee, and the consummation by the Transferee of the transactions
contemplated hereby will not (a) violate any provision of the charter, by
laws or any other organizational document of the Transferee, (b) violate
any provision of, or constitute a default (with or without notice or lapse
of time) under, or give rise to a right of termination, cancellation or
acceleration of (or entitle any party to accelerate whether after the giving
of notice or lapse of time or both) any obligation under any agreement,
indenture, undertaking or other instrument to which the Transferee is a
party or by which it or any of its properties may be bound or affected, or
(c) violate any law, statute, ordinance, rule or regulation or any judgment,
injunction, order or decree, the violation of which could have a
materially adverse effect on the business, operations, assets or financial
condition of the Transferee.
	 
	33.5	 	The Transferee undertakes that, the new income, credits and debts of the
Object Company generated outside the result of the audit and evaluation during
the period from the base date to the transfer and Delivery Date of the Equity
Interest, shall be enjoyed and borne by the Transferors.





Article 34     Undertakings





	34.1	 	The Transferors hereby agrees with and undertakes to the Transferee
that, subject to existing confidentiality arrangements and such further
confidentiality arrangements reasonably acceptable to the Transferors, after the
date hereof and prior to the Delivery Date, the Object Company shall, and the
Transferors shall procure the Object Company to, provide to the Transferee and
such representatives of the Transferee who are directly involved in and, at the
reasonable request of the Transferee, to potential financing sources in
connection with the transactions contemplated hereby (the “Transferee’s
Representatives”), reasonable access to the Object Company’s offices, properties,
books and records, officers, counsel, accountants and contracts during normal
business hours, in order for the Transferee and the Transferee’s Representatives
to have an opportunity to make such investigations of the affairs of the Object
Company and its business; provided, however, that any on-site investigation shall
be upon reasonable prior notice and shall not unreasonably disrupt the




34









 






	 	 	personnel and operations of the Object Company.
	 
	34.2	 	Subject to the terms and conditions herein provided and after the
Delivery Date, each of the Transferors and the Transferee agrees to, from time to
time, whether before, at or after the Delivery Date, use all commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated hereby and to
cooperate with the other parties in connection with the foregoing, including,
without limitation, using all commercially reasonable efforts (a) to obtain all
necessary consents and approvals from other parties to material loan agreements,
leases and other contracts, (b) to obtain the consents,
approvals, licenses,
permits and authorizations that are required to be obtained from any governmental
authority, (c) to prevent the entry of, or to lift or rescind, any judgments or
outstanding orders, injunctions, decrees, stipulations or awards of any nature
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby, (d) to effect all necessary registrations and filings and
submissions of information requested by governmental authorities, and (e) to
fulfill all conditions to the Contract.
	 
	34.3	 	 Subject to the terms and conditions of the Contract and until the
Delivery Date, the Object Company and the Transferors shall use all reasonable
efforts to preserve the Object Company’s business intact, to maintain the assets
business, unusual condition, results of operation or prospects of the Object
Company (including the Hydropower Project) in the same condition as on the date
hereof (and with respect to tangible assets, ordinary wear and excepted tear), to
keep available to the Object Company the services of persons employed by the
Object Company and to preserve the goodwill of customers and others having
business relations with the Object Company.
	 
	34.4	 	From the date hereof up to and including [       ], the Transferors and the
Object Company shall not, directly or indirectly, (a) solicit, initiate or
encourage the submission of any inquiries, discussions or proposals or offers from
any person relating to a possible disposition, of any registered capital or any
material portion of the assets of the Object Company, (b) continue, propose,
solicit, initiate, encourage or enter into negotiations or discussions relating to
a possible disposition of any registered capital or any material portion of the
assets of the Object Company, (c) enter into or consummate any agreement or
understanding providing for the disposition of any capital stock or any




35









 






	 	 	material portion of the assets of the Object Company, or (d) assist, participate
in or encourage any effort or attempt by any other person to do or seek any of
the foregoing. The Transferors and the Object Company shall promptly notify the
Transferee of, and communicate to the Transferee the terms of, any such inquiry,
proposal or request for information received by, or negotiations or discussions
sought with, the Object Company.





Article 35     Indemnification





The Transferors (the “Indemnifying Party”) hereby agrees to jointly and severally
indemnify, reimburse and hold the Transferee (including its successors and
permitted assignees) and including, after the Delivery Date, the Object Company
harmless from and against, any one or more of the following (without duplication):
(a) any and all Damages arising out of or resulting from a misrepresentation or
breach of warranty of any of the Object Company or the Transferors contained in
the Contract or in any exhibit or annex hereto, and (b) any and all Damages
arising out of or resulting from any breach of any covenant or obligation of any
of the Object Company or the Transferors contained in this Contract.



Chapter Ten Employees




Article 36       Dismissal of Employees and Employees’ s leaving office





	36.1	 	All the Employees of the Object Company shall be resettled by the
Transferors and the labor contracts, employment contracts and other
legal relations shall be terminated.
	 
	36.2	 	All expenses arising from resettling the Employees of the Object
Company by the Transferors shall be borne by the Transferors. If
the resettlement dispute between the transferors and the Employees
results in Claims against the Object Company by the Employees
after the Equity Interest Transfer is completed and the Object
Company suffers losses therefrom, the Object Company and the
Transferee are entitled be fully compensated for its loss and




36









 






	 	 	Damages from the Transferors.
	 
	36.3	 	The Transferors agree that when they resettle the original
Employees of the Object Company, they shall not cause any
adverse influence on the Object Company, the Object Equity
Interest, the management, handover and ongoing work of the
Hydropower Project.
	 
	36.4	 	When the original Employees of the Object Company terminate their
labor relations, employment relations or terminate their other work
relations with the Object Company and leave the Object Company, the
Transferee shall appoint a representative to participate in the outgoing
employees’ job handover with the Object Company or the Transferors.
The Transferors agree that all outgoing employees will only leave their
position after they complete all job handover procedures and such
handover obligations have been confirmed by the Transferee.
	 
	36.5	 	If as a result of the non-cooperation and non-coordination of the
original Employees of the Object Company in the leave-office
handovers, the Object Company or the Transferee suffers Damages
therefrom, the Transferors shall fully compensate the Transferee for its
loss and Damages.






			
	Article 37	 	Recruitment of employees






After the Equity Interest Transfer is completed, the Transferee shall employ
operational and managerial personnel for the Object Company through social
recruitment and the original Employees of the Object Company shall be given
employment priority with the Object Company upon the same conditions and terms as
such original. Employees enjoyed as employees with the Object Company prior to the
Delivery Date. If the construction, production and business management requires
and the Transferee is willing to retain the original Employees of the Object
Company, the Object Company shall sign new employment contracts with the retained
employees.




37









 








Chapter Eleven Confidentiality





			
	Article 38	 	Confidentiality






	38.1	 	Upon receipt of the Disclosed Information pursuant to the provision of
this Contract the receiving party shall:
	 
	38.1.1	 	Keep the above materials and information confidential for five (5)
years from the date hereof;
	 
	38.1.2	 	Except in cases when a Party needs to provide Disclosed
Information to it’s employees or advisors for the purpose of this
Contract, neither Party shall disclose the above materials and
information to any Third Party.
	 
	38.2	 	Article 38.1 shall not apply to the following cases:
	 
	38.2.1	 	Before the disclosing party discloses the information to the receiving
party, the receiving party has already known the information or the
receiving party can prove the materials and information may be known
through other legal channels.
	 
	38.2.2	 	The materials and information have become public material and
information not as a result of any breach of the Contract by the
receiving Party;
	 
	38.2.3	 	The receiving party obtains the materials and information from the
Third Party who is not subject to any confidentiality obligations.
	 
	38.2.4 	 	The materials and information must be disclosed pursuant to applicable
laws and regulations.




38









 











Chapter Twelve Breach Of Contract





			
	Article 39	 	If, either the Transferors or the Transferee fail to obtain internal approval and
authorization or due to a reason attributable to one party, or this Contract is made invalid
or impossible to be fulfilled, it shall be deemed a breach of this Contract by such party.
The breaching party shall pay the non-breaching party 1% of the Equity Interest Transfer
Price as liquidated Damages. If the non-breaching party’s economic losses suffered in
executing and fulfilling this Contract is not fully covered and remedied by the liquidated
Damages, then the breaching party shall compensate the non-breaching party for the rest of
such economic losses as stated under this Article.






			
	Article 40	 	If the Transferors, prior to the date this Contract is executed, have not disclosed all
the matters that may impact the legal existence of the Object Company and the Hydropower
Project whereby, the legal existence of the Object Company and the Hydropower Project is
impacted after the Equity Interest Transfer is completed, the Transferee is entitled to
terminate this Contract and to require the Transferors to pay one percentage ( 1 %) of the
Equity Interest Transfer Price to the Transferee as liquidated Damages.






			
	Article 41	 	If either the Transferors or the Transferee has a delay in fulfilling the contract
obligations, it shall be deemed a breach of this Contract. However, the following cases shall
not be deemed a breach of this Contract: The other party shall be the first to fulfill its
obligations yet it has a delay fulfilling its obligations, or the other party does not
fulfill its obligations, or the other party has an obligation to give cooperation and
assistance yet does not do it, consequently the party is unable to make timely fulfillment of
the Contract obligations.






The delaying party as hereinbefore set out, shall pay the non-defaulting party
liquidated Damages based on the Purchase Price and at the rate for annual bank
loan announced by the People’s Bank of China.




			
	Article 42	 	During the period from the date of execution of the Contract to the





39









 









			
		 	Delivery Date, if the Transferors commit any act that damages the assets, rights
and interests of the Object Company and the Object Equity Interest, it shall be
deemed a breach of the Contract by the Transferors. The Transferors shall be
liable to compensate the Transferee or the Object Company for any Damages arising
from its breach of the Contract. The Transferee is entitled to use its own name or
use the name of the Object Company after the Equity Interest transfer is completed
to seek compensation from the Transferors. If the Transferee discovers a breach of
the Transferors before making any payment under the Contract, the Transferee is
entitled to deduct due amount from the payment due.






			
	Article 43	 	If any party terminates or dismisses this Contract without justified reasons, or due to
reasons attributable to one party, the Contract is made invalid fully or partially, it shall
be deemed a breach of the Contract. The breaching party shall pay the non-defaulting party
one percentage (1 %) of the Purchase Price as liquidated Damages. If the non-breaching
party’s economic losses suffered in executing and fulfilling this Contract is not fully
covered and remedied by the liquidated Damages, then the breaching party shall compensate the
non-breaching party for the remainder of such economic losses.






			
	Article 44	 	If any party violates this Contract obligations, representations and warranties, it
shall be deemed a breach of this Contract and the breaching party shall compensate the other
party the losses incurred by the breach.






			
	Article 45	 	If any of the Transferors breaches this Contract, it shall be deemed that all the
Transferors collectively have breached this Contract and all the Transferors shall bear joint
liability for the breach of any single breaching party.






			
	Article 46	 	If the assets, rights and interests of the Object Company handed over by the
Transferors to the Transferee have any damage or loss compared with that confirmed by the
audit and due diligence as of the Base Date, the Transferors shall be liable to the
Transferee for such loss and damage and the Transferee is entitled to deduct such amount from
any payment payable to the Transferors.





40









 









Chapter Thirteen Force Majeure





			
	Article 47	 	Force Majeure






	47.1	 	“Force Majeure” refers to the special incidents or events, including
earthquake, typhoon, flood, fire, war, political unrest, etc., or events that
are deemed to be Force Majeure pursuant to relevant laws and regulations of
China.
	 
	47.2	 	In the event of a Force Majeure event, the obligations of the party
affected by such event and any time period binding on such affected
party shall pause and be extended automatically during the period of
the Force Majeure event. The affected party shall not bear any liability
of breach of the Contract as provided therein in such situations.
	 
	47.3	 	The Party claiming the occurrence of a Force Majeure event shall
promptly inform the other Party in writing within seven (7) days of the
occurrence, and shall provide sufficient evidence (notarized) of the
occurrence and the continuation of the Force Majeure event. The party
shall do its best to eliminate the adverse effect of the Force Majeure
event on the fulfillment of this Contract;





Chapter Fourteen Resolution of Disputes





			
	Article 48	 	Arbitration






	48.1	 	If the Parties have disputes relating to the Contract, it shall first be
resolved through friendly consultation. If the dispute cannot be
resolved through friendly consultation, any Party may submit the
dispute to Shanghai branch of China International Economic and Trade
Arbitration Commission (hereinafter referred to as “CIETAC”) for
arbitration pursuant to the prevailing CIETAC arbitration rules.
	 
	48.2	 	The arbitration tribunal shall be constituted by three (3) arbitrators.




41









 






	 	 	The claimant shall select and appoint or, the claimants shall jointly select and
appoint, as the case may be, one (1) arbitrator. Failing to perform such
selection and appointment within twenty (20) days after service of the notice for
arbitration, the Chairman of CIETAC shall select and appoint such arbitrator; and
	 
	 	 	The respondent shall select and appoint, or the respondents shall jointly select
and appoint, as the case may be, one (1) arbitrator. Failing to perform such
selection and appointment within twenty (20) days after service of the notice
for arbitration, the Chairman of CIETAC shall select and appoint such
arbitrator.
	 
	 	 	Both arbitrators shall be selected and appointed, as specified above, within
thirty (30) days after receiving the notice for arbitration.
	 
	 	 	The third arbitrator shall be jointly selected and appointed by the claimants)
and respondents) and failing an agreement in respect thereof selected and
appointed by the Chairman of CIETAC upon the joint authorization of the
claimant(s) and respondent(s). In case the claimant(s) and respondent(s) fail to
jointly select and appoint the third arbitrator or fail to jointly entrust the
Chairman of CIETAC to appoint the third arbitrator within twenty (20) days from
the date on which the respondent(s) receives (or receive) the notice for
arbitration, the third arbitrator will be appointed by the Chairman of CIETAC.
The third arbitrator will act as the presiding arbitrator.
	 
	 	 	The arbitration proceedings shall be conducted in Mandarin.






			
	Article 49	 	Validity of the Arbitration Award






The arbitration award issued by CIETAC shall be final and shall be binding on each
party. Each party to this Contract agrees to be bound by said award, and to act
pursuant to the terms of the said award.




			
	Article 50	 	Continuation of Rights and Obligations






After a dispute has occurred and during its arbitration process, other than the
disputed matter, each party to this Contract shall continue to exercise



42









 






its other respective rights under this Contract, and shall continue to implement
its other respective obligations under this Contract.



Chapter Fifteen Applicable Law





			
	Article 51	 	Applicable Law






The establishment, validity, interpretation and implementation of the Contract
shall be governed and bound by the laws and regulations of the PRC. All disputes
arising out of the Contract shall be determined pursuant to the laws of PRC. In the
event the laws of the PRC do not have provision on a certain issue relating to this
Contract, a reference shall be made to the general international business practice.



Chapter Sixteen Miscellaneous





			
	Article 52	 	Special agreement on the project under construction






	52.1	 	Both the Transferors and the Transferee affirm that the project under
construction refers to the part of the Wuliting hydropower project that
should be constructed but has not been completed from the date hereof
to the date of examination and acceptance.
	 
	52.2	 	Both the Transferors and the Transferee affirm that the provisional total
cost for the project under construction is RMB 250,000,000; upon
execution of this Contract, both the Transferors and the Transferee shall
appoint professional persons to verify the final cost for the project
under construction; if the final cost is lower than provisional cost, the
difference will be paid to the Transferors by the Transferee along with






43











 





	 	 	 
	 

	 	the difference in credits and debts restructuring; if the final cost is more than the
provisional cost, the difference will be deducted upon payment of credits and debts and
paid as the amount for the project under construction. The final cost has no impact on
the total cost under this Contract.
	 
	 	 
	52.3

	 	The Transferee agrees that Zhejiang Guangsha Hydropower Investment
Co., Ltd is to complete the project under construction specified in
Article 53.1 of the Contract; Zhengjiang Guangsha Hydropower
Investment Co., Ltd is to complete such project within the cost range
specified in Article 53.2, however if the ultimate cost surpasses the
above cost range, any additional cost will be borne by the Transferors;
if the ultimate cost is less than the cost range, any balance will belong
to the Transferors. The quality standard for the project under
construction specified in Article 53.1 is to pass the examination and
acceptance of Wuliting Hydropower Project.
	 
	 	 
	52.4

	 	Zhejiang Guangsha Hydropower Co., Ltd is responsible for carrying
out procedures for examination and acceptance of the Hydropower
Project and obtaining all legal approvals for the construction land as
well as the power business permit.
	 
	 	 
	52.5

	 	The Transferors agree that Zhejiang Guangsha Hydropower Investment
Co., Ltd is to complete construction within the time limit approved by
the State. If it completes construction of the Hydropower Project ahead
of the time agreed, the Transferee shall give an appropriate award to
such company;
	 
	 	 
	 

	 	The Transferors represent: if the construction of the Hydropower Project is behind
schedule due to reasons of Zhejiang Guangsha Hydropower Investment Co., Ltd, then such
company shall pay a penalty to the Transferee, and the Transferors shall bear a joint
and several liability for such company paying the aforesaid penalty.
	 
	 	 
	52.6

	 	The Transferee agrees that Guangsha Enterprise Investment Holding
Co., Ltd is to provide a guarantee for Zhejiang Guangsha Hydropower
Co. Ltd’s completion of the project under construction specified in
Article 52.1 of the Contract.
	 
	 	 
	52.7

	 	The Transferee agrees that Zhejiang Guangsha Hydropower Investment
Co., Ltd and the Transferee are to sign a contract for the project under






44









 






	 	 	 
	 

	 	construction specified in Article 52.1 of the Contract in accordance with Article 52.1
to 52.5; such matters as the progress, quality standard, management, payment of cost
and measures for award and penalty of such project are to be specified in this
contract.
	 
	 	 
	52.8

	 	The Transferors and the Transferee agree that if extra approval or various land cost is
imposed on the construction land for the Hydropower Project of the Object Company with no
change of nature of such land, relevant fee will be borne by Guangsha Hydropower Investment
Co., Ltd; the Transferors bear a joint and several liability to the Transferee for the
fulfillment of the aforesaid obligation; the Transferee will bear the extra fee if it is
required by change in land acquiring method from allocation method to commercial use,
enabling the conversion of the Object Company to a foreign-invested enterprise.
	 
	 	 
	Article
53

	 	Guarantee
	 
	 	 
	 

	 	Guangsha Enterprise Investment Holding Co., Ltd shall guarantee the obligations of
the Transferors under this Contract in the form attached to this Contract as
Appendix 5.
	 
	 	 
	Article
54

	 	Waiver
	 
	 	 
	 

	 	The non-exercise or delay in exercise of any right under this Contract shall not be
deemed a waiver of the said right.
	 
	 	 
	Article
55

	 	Amendment
	 
	 	 
	 

	 	An Amendment of this Contract is only effective if in writing signed by all Parties
to this Contract. Provided that, if any approval by relevant administrative
departments is required pursuant to the law of China, it shall be approved by such
competent administrative departments before such amendment becomes effective.
	 
	 	 
	Article
56

	 	Severability
	 
	 	 
	 

	 	The invalidity of any article in the Contract shall not affect the validity of the
other articles in this Contract.






45









 






	 	 	 
	Article
57

	 	Langnage
	 
	 	 
	 

	 	This Agreement is written in Mandarin.
	 
	 	 
	Article
58

	 	Validity of the Contract and Appendix
	 
	 	 
	58.1

	 	The Contract shall be effective upon the seals affixed by the parties
and approval by the Examination and Approval Authority.
	 
	 	 
	58.2

	 	All preceding contracts or documents executed by the parties in
relation to the Object Equity Interest Transfer shall be subject to this
Contract if they are inconsistent with this Contract.
	 
	 	 
	58.3

	 	This Contract has ten (10) original copies with each party keeping
two (2) copies and the remaining copies for record filing.
	 
	 	 
	58.4

	 	The appendix of the Contract is inseparable and integral part of the
Contract and shall have equal validity as the Contract.
	 
	 	 
	Article
59

	 	Notification
	 
	 	 
	59.1

	 	Unless otherwise provided in the Contract, any notice or written
communication sent by one party to the other party as per the Contract,
shall be written in Chinese and English and shall be sent by a courier
service. All notices shall be deemed to be received on the fifth day
after posting day (subject to the postal seal) as per the correspondence
addresses specified by the Contract. If the date of actual receipt is
earlier than the said time, the date of actual receipt shall be the date of
receipt.
	 
	 	 
	59.2

	 	All notices and correspondences shall be sent to the following
addresses unless the other party gives written notice to update such addresses.






46









 






	 	 	 	 	 
	 

	 	Transferors’ Address:
	 	166 Yugu Road, Hangzhou City
	 
	 

	 	Telephone Number:
	 	0571—87969988
	 
	 

	 	Facsimile Number:
	 	0571—87963818
	 
	 

	 	Addressee:
	 	CHENG Gang
	 
	 	 	 	 
	 

	 	Transferee’s Address:
	 	1201, Tower C2, Sunshine Plaza, 68
	 

	 	 	 	     Anlilu, Chaoyang District, Beijing
	 
	 

	 	Telephone Number:
	 	010—64928483
	 
	 

	 	Facsimile Number:
	 	010—64961540
	 
	 

	 	Addressee:
	 	LI Wei-wei






	 	 	 
	Article 60

	 	Appendix
	 
	 	 
	60.1

	 	Appendix 1 Audit Report by September 30, 2007 by Beijing Jingdu CPA
Limited
	 
	 	 
	60.2

	 	Appendix 2 The Information Disclosed by the Transferors
	 
	 	 
	60.3

	 	Appendix 3 List of Original Bank Loans by September 30, 2007 audited
by Beijing Jingdu CPA Limited
	 
	 	 
	60.4

	 	Appendix 4 Letter of Security of Guangsha Stock Investment Co., Ltd
	 
	 	 
	60.5

	 	Appendix 5 Assets List by September 30, 2007 affirmed by the assets
assessment agency






47









 






	 	 	 
	60.6

	 	Appendix 6 Restructuring Details and Measures for credits and debts of
the Object Company in its Equity Interest Transfer
	 
	 	 
	60.7

	 	Appendix 7 Letter of Undertaking of Guangsha Construction Group Co.,
Ltd






[Signature Page]




48









 











(No more text hereinafter ]





IN WITNESS WHEREOF, the duly authorized representatives of Party A, Party B and Party C
have signed this Contract on the date borne on the first
page,





Party A: China




Representative’s Signature:





Party B: Guangsha





Representative’s




Party C: LU Chunliang





Representative’s Signature:



The End














 





Appendix 1 — Audit Report

















 







Suichang Jiulongshan Hydroelectric




Development Co., Ltd.




Audit Report




Sep. 30th, 2007




 









 





Contents




	 	 	 
	The audit report
	 	 
	 
	 	 
	The balance sheet
	 	1-2
	 
	 	 
	The profit and statement of profit distribution
	 	3
	 
	 	 
	Notes of financial statement
	 	4-15






 









 






	 	 	 	 	 
	

	 	
Dehao International


Beijing Jingdu Certified Public

Accountants Co., Ltd.
	 	
Dehao International

Beijing Jingdu Certified Public

Accountants Co., Ltd.

Scitech Place 5th floor , Jianguomenwai

Avenue No.22, Beijing

Zip Code: 100004

Tel: 86-10-65264838

Fax: 86-10-65227521






Audit Report




(English Translation)Beijing JINGDUSHENZI (2007) No.1316




China Hydroelectric Corporation:



We have audited the enclosed financial statements of Suichang Jiulongshan Hydroelectric Development
Co., Ltd. (hereinafter referred to as “Jiulongshan Hydroelectric Company”), including the balance
sheet on Dec. 31, 2006 and Sep. 30, 2007, the profit and financial statement of profit distribution
and the notes of financial statements of 2006 and Jan — Sep., 2007.




I. Management Personnel’s responsibilities for financial statements



The management Personnel of Jiulongshan Hydroelectric Company is responsible for the preparation
and fair presentation of these financial statements in accordance with the Accounting Standards for
Business Enterprises and China Accounting System for Business Enterprises. The responsibilities
includes: (i) designing, implementing and maintaining internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due
to fraud or error;(ii) selecting and applying appropriate accounting policies; (iii) making
reasonable accounting estimates.




II. Auditor’s responsibility



Our responsibility is to express an opinion on the financial statements based on the auditing task.
We have performed the auditing task under the provision of CICPA auditing guideline. CICPA auditing
guideline requires us to comply with the professional ethics, to plan and perform audit tasks to
obtain reasonable assurance on whether the financial statements are free from material
misstatement.



An audit involves performing procedures to obtain audit evidence regarding the amounts and
disclosures in the financial statements. The procedures selection is depended on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements



We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.




 









 








	 	 	 	 	 
	

	 	
Dehao International


Beijing Jingdu Certified Public

Accountants Co., Ltd.
	 	
Dehao International

Beijing Jingdu Certified Public

Accountants Co., Ltd.

Scitech Place 5th floor , Jianguomenwai

Avenue No.22, Beijing

Zip Code: 100004

Tel: 86-10-65264838

Fax: 86-10-65227521






III. Audit opinions



We believe that the financial statements of Jiulongshan Hydroelectric Company have given a fair and
true view of the financial situation of Dec. 31, 2006 and Sep. 30, 2007, as well as operating
results of 2006 and Jan. to Sep., 2007 in accordance with the Accounting Standards for Business
Enterprises and China Accounting System for Business Enterprises.




	 	 	 
	Beijing Jingdu Certified

Public Accountants Co.,

Ltd.

	 	The Chinese Certified Public

Accountant(CICPA)
	 
	 	 
	 

	 	The Chinese Certified Public

Accountant(CICPA)






			
	Beijing ·China
	 	Nov. 15th , 2007






 









 






THE PROFIT AND STATEMENT OF PROFIT DISTRIBUTION




FOR THE PERIOD FROM JANUARY TO SEPTEMBER 2007




[English Translation ]




			
	 	 	 
	Prepared by: Suichang County Jiulongshan Hydroelectric Development Co., Ltd.
	 	In RMB Yuan






	 	 	 	 	 	 	 	 	 	 	 	 	 
	Items	 	NOTES	 	2007.01 — 2007.09	 	2006.01 — 2006.12
	Revenues from main operations
	 	 	 	 	 	 	—	 	 	 	—	 
	Less: Cost of main operations
	 	 	 	 	 	 	—	 	 	 	—	 
	Tax and levies on main operations
	 	 	 	 	 	 	—	 	 	 	—	 
	Profit from main operations(loss is expressed in
 “—”)
	 	 	 	 	 	 	—	 	 	 	—	 
	Add: Profit from other operations(loss is expressed in
 “—”)
	 	 	 	 	 	 	—	 	 	 	—	 
	Less: Selling expenses
	 	 	 	 	 	 	—	 	 	 	—	 
	General and administrative expenses
	 	 	 	 	 	 	—	 	 	 	—	 
	Financial expenses
	 	 	 	 	 	 	—	 	 	 	—	 
	Operating profit (loss is expressed in
 “—”)
	 	 	 	 	 	 	—	 	 	 	—	 
	Add: Income from investment(loss is expressed in
 “—”)
	 	 	 	 	 	 	—	 	 	 	—	 
	Subsidy income
	 	 	 	 	 	 	—	 	 	 	—	 
	Non-operating income
	 	 	 	 	 	 	—	 	 	 	—	 
	Less: Non-operating expenses
	 	 	 	 	 	 	—	 	 	 	—	 
	Total Profit (loss is expressed in “—”)
	 	 	 	 	 	 	—	 	 	 	—	 
	Less: Income tax
	 	 	 	 	 	 	—	 	 	 	—	 
	 
	 	 	 	 	 	 	—	 	 	 	—	 
	Net profit (loss is expressed in “—”)
	 	 	 	 	 	 	—	 	 	 	—	 
	Add: Undistributed profit at beginning of the year
	 	 	 	 	 	 	—	 	 	 	—	 
	Other transferred-in fund
	 	 	 	 	 	 	—	 	 	 	—	 
	Distributed profit
	 	 	 	 	 	 	—	 	 	 	—	 
	Less: withdraw statutory surplus reserve
	 	 	 	 	 	 	—	 	 	 	—	 
	withdraw statutory public welfare fund
	 	 	 	 	 	 	—	 	 	 	—	 
	Undistributed profit
	 	 	 	 	 	 	—	 	 	 	—	 







					
	 	 	 	 	 
	Legal representative:
	 	Person in charge of accounting :
	 	Person in charge of financial function:







3











 





The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




Notes of Financial Statements

(If there is no special explanation, the notes use yuan as monetary unit)




I.     The company’s basic information



Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (hereinafter refered to as “the
company”) was invested and established by Zhejiang Guangsha Hydroelectric Development LLC.,
Zhejiang Guangning Hydroelectric Development Co., Ltd. and Lishui Nanfang Hydroelectric Development
Co., Ltd.. It registered in Suichang Administration for Industry and Commerce on Nov.
22nd, 2001 and obtained the business license of enterprise legal person. The
registration No. is 3325271001120.




At the beginning of the establishment, the company’s registered capital was 1.5 million yuan. The
shareholders and the investment amount were as follows:



	 	 	 	 	 	 	 	 	 
	 	 	investment	 	Holding
	shareholders	 	amount	 	proportion
	Zhejiang Guangsha Hydroelectric Development
LLC.
	 	 	975,000.00	 	 	 	65	%
	Zhejiang Guangning Hydroelectric Development
Co., Ltd.
	 	 	300,000.00	 	 	 	20	%
	Lishui Nanfang Hydroelectric Development Co.,
Ltd.
	 	 	225,000.00	 	 	 	15	%
	Total
	 	 	1,500,000.00	 	 	 	100	%






On Nov. 10th, 2003, the company’s shareholders performed capital increase. After that,
the registered capital was 25 million yuan. The shareholders and the investment amount were as
follows:



	 	 	 	 	 	 	 	 	 
	 	 	investment	 	Holding
	shareholders	 	amount	 	proportion
	Zhejiang Guangsha Hydroelectric Development
LLC.
	 	 	16,250,000.00	 	 	 	65	%
	Zhejiang Guangning Hydroelectric Development
Co., Ltd.
	 	 	5,000,000.00	 	 	 	20	%
	Lishui Nanfang Hydroelectric Development
Co., Ltd.
	 	 	3,750,000.00	 	 	 	15	%
	Total
	 	 	25,000,000.00	 	 	 	100	%






4









 






The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




On April 16th, 2004, the company’s shareholders performed capital increase. After that,
the registered capital was 50 million yuan. The shareholders and the investment amount were as
follows:



	 	 	 	 	 	 	 	 	 
	 	 	investment	 	Holding
	shareholders	 	amount	 	proportion
	Zhejiang Guangsha Hydroelectric Development
LLC.
	 	 	32,500,000.00	 	 	 	65	%
	Zhejiang Guangning Hydroelectric Development
Co., Ltd.
	 	 	10,000,000.00	 	 	 	20	%
	Lishui Nanfang Hydroelectric Development
Co., Ltd.
	 	 	7,500,000.00	 	 	 	15	%
	Total
	 	 	50,000,000.00	 	 	 	100	%






On June 3rd, 2005, the company’s shareholders performed capital increase. After that,
the registered capital was 70 million yuan. The shareholders and the investment amount were as
follows:



	 	 	 	 	 	 	 	 	 
	 	 	investment	 	Holding
	shareholders	 	amount	 	proportion
	Zhejiang Guangsha Hydroelectric Development
LLC.
	 	 	45,500,000.00	 	 	 	65	%
	Zhejiang Guangning Hydroelectric Development
Co., Ltd.
	 	 	14,000,000.00	 	 	 	20	%
	Lishui Nanfang Hydroelectric Development
Co., Ltd.
	 	 	10,500,000.00	 	 	 	15	%
	Total
	 	 	70,000,000.00	 	 	 	100	%






According to the decision of board of shareholders and the share transfer agreement on July
18th, 2005, the shareholder, Lishui Nanfang Hydroelectric Development Co., Ltd.,
transferred its 10% equity to Zhejiang Guangsha Hydroelectric Development LLC., and 5% to Zhejiang
Guangning Hydroelectric Development Co., Ltd.. Thus the capital increased to 90 million yuan. The
shareholders and the investment amount were as follows:



	 	 	 	 	 	 	 	 	 
	 	 	investment	 	Holding
	shareholders	 	amount	 	proportion
	Zhejiang Guangsha Hydroelectric Development
LLC.
	 	 	67,500,000.00	 	 	 	75	%
	Zhejiang Guangning Hydroelectric Development
Co., Ltd.
	 	 	22,500,000.00	 	 	 	25	%
	Total
	 	 	90,000,000.00	 	 	 	100	%






5









 





The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




According to the decision of board of shareholders and the share transfer agreement on March
12th, 2007, the shareholder, Zhejiang Guangsha Hydroelectric Development LLC, changed
its name into Zhejiang Guangsha Hydroelectric Investment Co., Ltd., and Zhejiang Guangning
Hydroelectric Development Co., Ltd. transferred all its 25% equity to Mr. Lu Chunliang. Up to Sep.
30th, 2007, the registered capital was 90 million yuan. The shareholders and the
investment amount were as follows:



	 	 	 	 	 	 	 	 	 
	 	 	investment	 	Holding
	shareholders	 	amount	 	proportion
	Zhejiang Guangsha Hydroelectric Investment
Co., Ltd.
	 	 	67,500,000.00	 	 	 	75	%
	Lu Chunliang
	 	 	22,500,000.00	 	 	 	25	%
	Total
	 	 	90,000,000.00	 	 	 	100	%





Registered address: Nanmen Road 30#, Miaogao Town;



Legal representative: Lu Chunliang;



Business Scope: water resource development, generation and distribution of electrical energy; water
supply, hardware, electromechanical products(not including cars); purchase and sale of
chemicals(except for dangerous goods), building materials, farm and sideline products(except for
cotton, pod and tobacco leaf).



The company is still under construction, and have not been put into formal operation.




II. Major accounting policy and accounting estimates





	1.	 	Accounting standards and accounting systems
	 
	 	 	The company implements the Accounting Standards for Business Enterprises and Accounting Systems
of Enterprises issued by the Ministry of Finance.
	 
	2.	 	Financial year
	 
	 	 	The financial year means a calendar year starting on January 1 and ending on December 31.
	 
	3.	 	Standard money
	 
	 	 	The standard money is Renminbi (RMB).
	 
	4.	 	Accounting base and pricing principles




6









 











The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007





	 	 	The company adopts the accrual basis as accounting base, and the pricing principle is based on
the historical cost.
	 
	5.	 	Validation criteria for cash equivalent
	 
	 	 	Cash equivalent means those investments featuring short term (generally due within 3 months from
purchase date), high mobility, easy to change into cash, and low value disturbance.
	 
	6.	 	Entry method of bad debt loss for the account receivable






	 	(1)	 	Bad debt validation criteria: a. the debtor goes into liquidation or death, and his
liquidated property and heritage cannot cover the all the debts; b. the debtor fails to
perform its repayment obligations overdue and it’s obvious that the debt is unable to be
repaid.
	 
	 	(2)	 	The entry method of bad debt loss: allowance method is used for reckoning the bad debt
loss. By the end of each year, the company will draw 5% of the balance for bad debts to the
receivables (including account receivable and other receivables) after deducting the
incoming and outgoing of the related parties and funds of disbursement.






	 	 	For those accounts receivable featuring conclusive evidence of the obvious difference of
repayment, individual recognizing method is used to draw bad debt provision.
	 
	7.	 	Fixed assets pricing and depreciation method






	 	(1)	 	Validation criteria for fixed assets: the fixed assets concurrently feature the following
characteristics: 1. tangible assets; 2. high unit value; 3. service life is more than one
year; 4. purchased for the purposes of production, offering labour services, lease or
operation management.
	 
	 	(2)	 	The fixed assets pricing and depreciation method: the fixed asset is booked at the actual
cost of procurement, and depreciated according to straight-line method from the next month
after reaching the serviceable conditions.
	 
	 	 	 	The salvage value rate, depreciation life and annual depreciation rate of all kinds of fixed
assets:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	salvage	 	Depreciation	 	Annual
	Fixed assets group	 	value rate	 	life	 	depreciation rate (%)
	Buildings and structures
	 	 	3	%	 	 	20-30	 	 	 	3.23%—4.85	%






7









 





The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	salvage	 	Depreciation	 	Annual
	Fixed assets group	 	value rate	 	life	 	depreciation rate (%)
	General-purpose equipment
	 	 	3	%	 	 	8	 	 	 	12.13	%
	Special-purpose equipment
	 	 	3	%	 	 	20-25	 	 	 	3.88%-4.85	%
	Vehicles
	 	 	3	%	 	 	10	 	 	 	9.70	%







	 	(3)	 	The validation criteria and provision method for the depreciation provision of fixed
assets: by the end of each year, the company will inspect all the fixed assets. If the
following factors are found, including continual downslide of market price, technical
obsolescence, damage or long-term idling, then the recoverable amount is evaluated for the
fixed assets so as to check whether the fixed asset is devaluated or not. If the recoverable
amount is lower than the book value of the fixed assets, then the depreciation provision is
drawn as the difference between the recoverable amount and the book value.






	8.	 	The accounting method for project under construction






	 	(1)	 	The project under construction adopts actual cost accounting. The Company project under
construction is divided into construction project investment, installation work investment,
equipment investment, miscellaneous investment and prepaid and deferred expenses investment.
	 
	 	 	 	For exterior product sales formed in the trial run process before reaching prearranged
serviceable condition of project under construction, its generated cost is counted into the
cost of project under construction, when it is sold or turned into commodity stocks; the
engineering cost is subtracted according to effective sales income or according to predicted
sales price.
	 
	 	 	 	From the date of the built project reaching prearranged serviceable condition, according to
project budget, cost or project actual cost, appraisal value is turned into fixed assets. The
fixed assets depreciation is provided according to prescription of depreciation of fixed
assets provision.




8









 











The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007





	 	(2)	 	The depreciation preparation for project under construction: the Company inspected the
project under construction in terminal and estimated receivable sum of various project under
construction. If there is any evidence indicating that the project under construction induced
depreciation, the provision of project under construction depreciation preparation is made
according to depreciation sum.






	9.	 	Accounting process for borrowing cost
	 
	 	 	If the company’s generant borrowing cost can be directly categorized under conforming to
capitalization condition assets, it should be capitalization and be counted in the related assets
cost. For miscellaneous borrowing cost, it should be confirmed as expense according to its sum
and be counted in the profit and loss in the current period.
	 
	10.	 	Validation criteria for revenue
	 
	 	The operating revenues of the company are mainly power generation revenue. The validation
criteria for revenue are as follows:






	 	(1)	 	The major risk and remuneration of the ownership are transferred to the buyers;
	 
	 	(2)	 	The company neither keeps the ownership-related management right, nor implements
effective control on the sold goods;
	 
	 	(3)	 	The correlative economic benefits are likely to flow in the company;
	 
	 	(4)	 	The amount of revenue can be measured reliably;






The accounting treatment method of the corporate income tax is taxes payable method.



III. Major taxes




As the company is still under construction, it does not have authentication for various taxes.



IV. Notes on the financial statement’s main items





	1.	 	Monetary Resources




9









 











The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Opening amount of the
	Items	 	Closing amount	 	year
	Cash
	 	 	1,764.89	 	 	 	1,315.32	 
	Bank deposits
	 	 	219,353.24	 	 	 	295,158.84	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	 	221,118.13	 	 	 	296,474.16	 
	 
	 	 	 	 	 	 	 	 






2. Other receivables





	(1)	 	Duration of other receivables is as follows:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Closing amount	 	Opening amount of the year
	 	 	 	 	 	 	 	 	 	 	Balance at the	 	 
	 	 	 	 	 	 	Provision for	 	beginning of the	 	Provision for
	Duration	 	Closing balance	 	Bad Debts	 	year	 	Bad Debts
	Within 1 year
	 	 	23,509,440.71	 	 	 	0.00	 	 	 	39,653,050.96	 	 	 	0.00	 
	1-2 years
	 	 	20,500.00	 	 	 	0.00	 	 	 	5,500.00	 	 	 	0.00	 
	2-3 years
	 	 	3,000.00	 	 	 	0.00	 	 	 	50,000.00	 	 	 	0.00	 
	More than 3 years
	 	 	50,000.00	 	 	 	0.00	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	23,582,940.71	 	 	 	0.00	 	 	 	39,708,550.96	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







	(2)	 	Other receivables’ details:





	 	 	 	 	 	 	 	 	 
	Name	 	Business description	 	Amounts	 	Remarks
	Guangsha Hydroelectric
Investment Co., Ltd.

	 	Incomings and
outgoings
	 	 	22,982,747.71	 	 	Majority

shareholders
	Water Resources Bureau of
Suichang County

	 	Deposit
	 	 	50,000.00	 	 	 
	Suichang Shuangyuan 

Hydroelectric Company

	 	Construction costs
	 	 	500,000.00	 	 	 
	Lishui Bowei Vehicle Repair

	 	repair charge
	 	 	693.00	 	 	 
	Liu Jianxiang

	 	Fund of disbursement
	 	 	2,000.00	 	 	 
	Chen Xiangliang

	 	Fund of disbursement
	 	 	3,000.00	 	 	 
	Chen Shijin

	 	Fund of disbursement
	 	 	3,000.00	 	 	 
	Yin Lichang

	 	Fund of disbursement
	 	 	500.00	 	 	 
	Li Qingshan

	 	Fund of disbursement
	 	 	500.00	 	 	 
	Zhou Yueming

	 	Fund of disbursement
	 	 	20,000.00	 	 	 
	Zheng Wuxiong

	 	Fund of disbursement
	 	 	5,000.00	 	 	 
	Li Weiming

	 	Fund of disbursement
	 	 	15,000.00	 	 	 
	Wang Jianchun

	 	Fund of disbursement
	 	 	500.00	 	 	 
	Total

	 	 	 	 	23,582,940.71	 	 	 






10









 






The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




(3) As the company is under construction, the bad debt reserve has not been set up on the current
fund.



3. Projects under construction




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Amount of	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Budge	 	 	 	 	 	 	 	 	 	fixed assets	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	tamount	 	 	 	 	 	 	 	 	 	transfered in	 	Amount of	 	 	 	 	 	 	 	 	 	Inputs to the
	 	 	(10 thousand	 	Opening amount of	 	Increase of	 	at current	 	other	 	 	 	 	 	funds	 	work account in
	project Name	 	yuan)	 	the year	 	current period	 	period	 	decrease	 	Closing amount	 	Source	 	budget
	Jiulongshan
Hydroelectric
project
	 	 	46,100	 	 	 	206,965,082.07	 	 	 	74,127,619.04	 	 	 	0.00	 	 	 	0.00	 	 	 	281,092,701.11	 	 	Self-financing	 	 	60	%
	Thereinto: investment
of construction
project
	 	 	 	 	 	 	98,168,326.14	 	 	 	36,562,122.21	 	 	 	0.00	 	 	 	0.00	 	 	 	134,730,448.35	 	 	 	 	 	 	 	 	 
	Investment of
equipment
	 	 	 	 	 	 	2,696,520.00	 	 	 	7,915,850.00	 	 	 	0.00	 	 	 	0.00	 	 	 	10,612,370.00	 	 	 	 	 	 	 	 	 
	Investment of
installation
project
	 	 	 	 	 	 	60,000.00	 	 	 	590,000.00	 	 	 	0.00	 	 	 	0.00	 	 	 	650,000.00	 	 	 	 	 	 	 	 	 
	Investment of
deferred expenses
	 	 	 	 	 	 	105,744,226.93	 	 	 	29,050,446.83	 	 	 	0.00	 	 	 	0.00	 	 	 	134.794.673.76	 	 	 	 	 	 	 	 	 
	Investment of other
project
	 	 	 	 	 	 	296,009.00	 	 	 	9,200.00	 	 	 	0.00	 	 	 	0.00	 	 	 	305,209.00	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	206,965,082.07	 	 	 	74,127,619.04	 	 	 	0.00	 	 	 	0.00	 	 	 	281,092,701.11	 	 	 	 	 	 	 	 	 
	Thereinto: capitalized
interest
	 	 	 	 	 	 	10,841,650.89	 	 	 	12,204,540.26	 	 	 	0.00	 	 	 	0.00	 	 	 	23,046,191.15	 	 	 	 	 	 	 	 	 






(1) Prepaid compensation of Suichang County Jiulongshan Hydroelectric Co., Ltd. policy office
inundated or field requisition in investment of deferred expenses are 34,456,719.58 yuan, thereinto
incomings and outgoings are 29,975,000.00 yuan.



(2) The company did not estimate the steels and cements purchased but unliquidated.



4. Taxes payable




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Opening amount of the
	Taxes	 	Closing amount	 	year
	Individual income tax
	 	 	113,237.00	 	 	 	1,080.00	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	 	113,237.00	 	 	 	1,080.00	 
	 
	 	 	 	 	 	 	 	 






5. Other accounts payable




	 	 	 	 	 	 	 	 	 
	Items	 	Closing balance	 	Fund description
	Shanghai Zhaoyin
	 	 	30,000.00	 	 	Project margins
	Chongqing Xinshiji
	 	 	100,000.00	 	 	Project margins
	Shanghai Zhaoyin Electric
Power Equipment Company
	 	 	100,000.00	 	 	Project margins
	Workers raised funds
	 	 	1,520,000.00	 	 	Workers raised funds






11









 





The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007





	 	 	 	 	 	 	 	 	 
	Items	 	Closing balance	 	Fund description
	Final payment of retaining
wall (Zheng Yingyi)
	 	 	0.60	 	 	Construction costs
	Zheng Yingyi
	 	 	11,473.15	 	 	Construction costs
	Li Yirong
	 	 	26,915.20	 	 	Construction costs of retaining wall
	Policy Office
	 	 	5,000.00	 	 	Policy outlays
	Wu Linxiang
	 	 	2,905.92	 	 	Construction costs of retaining wall
	Wu Lingsheng
	 	 	0.03	 	 	Construction costs of retaining wall
	Shanghai Zhengji Device
Company
	 	 	100,000.00	 	 	Project margins
	Hangzhou Guorui Electric
Power Company
	 	 	30,000.00	 	 	Project margins
	Huzhou Zhengdao Hosting
Machinery Company
	 	 	60,450.00	 	 	Project margins
	Hydroelectric Building
Machinery Co., Ltd. Of
Zhengjiang Province
	 	 	135,000.00	 	 	Project margins
	Nanjing Nari Automatization
Control Co., Ltd.
	 	 	188,000.00	 	 	Project margins
	Jiangshan Transformer Factory
	 	 	150,000.00	 	 	Project margins
	Field requisition cost
	 	 	2,435,100.00	 	 	Field requisition costs
	Tunnel Engineering Company
of the Province
	 	 	800,000.00	 	 	deposits
	The 3rd Geology
and Mineral Engineer Company
of the Province
	 	 	1,200,000.00	 	 	deposits
	Jinhua Shuntai Hydroelectric
Engineer Company
	 	 	1,200,000.00	 	 	deposits
	Fujian Nanping Nandian
Hydroelectric Equipment
Manufacture Co., Ltd.
	 	 	1,123,000.00	 	 	deposits
	Endowment insurance
	 	 	169,566.60	 	 	 	 	 
	Industrial injury insurance
	 	 	13,792.00	 	 	 	 	 
	Labour union outlay
	 	 	48,694.00	 	 	 	 	 
	Education outlay
	 	 	12,127.45	 	 	 	 	 
	Mess hall
	 	 	40.00	 	 	Mess subsidies of  power station staffs
	 	 	 	 	 	 	 	 	 
	Total
	 	 	9,462,064.95	 	 	 	 	 
	 	 	 	 	 	 	 	 	 






2,435,100.00 yuan land requisition costs were returned by Suichang County Finance Bureau in
March, 2007.



6. Long-term loans




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Balance at the beginning
	Loan category	 	Closing balance	 	of the year
	Guaranteed loans
	 	 	205,000,000.00	 	 	 	150,000,000.00	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	 	205,000,000.00	 	 	 	150,000,000.00	 
	 
	 	 	 	 	 	 	 	 






12









 





The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




The guarantor of the guaranteed loans is Guangsha Building Group Co., Ltd..



7. Paid-up capital




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Opening amount of the year	 	 	 	 	 	 	 	 	 	Closing amount of the year
	 	 	 	 	 	 	Propor-	 	Increase of	 	Decrease of	 	 	 	 	 	Propor-
	Investors	 	amounts	 	tion	 	the year	 	the year	 	amounts	 	tion
	Zhejiang Guangsha
Hydroelectric
Investment Co.,
Ltd.
	 	 	67,500,000.00	 	 	 	75	%	 	 	0.00	 	 	 	0.00	 	 	 	67,500,000.00	 	 	 	75	%
	Zhejiang Guangning
Hydroelectric
Development Co.,
Ltd.
	 	 	22,500,000.00	 	 	 	25	%	 	 	0.00	 	 	 	22,500,000.00	 	 	 	0.00	 	 	 	0	%
	Lu Chunliang
	 	 	0.00	 	 	 	0	%	 	 	22,500,000.00	 	 	 	0.00	 	 	 	22,500,000.00	 	 	 	25	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	90,000,000.00	 	 	 	100	%	 	 	22,500,000.00	 	 	 	22,500,000.00	 	 	 	90,000,000.00	 	 	 	100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






According to the decision of board of shareholders and the share transfer agreement on March
12th, 2007, Zhejiang Guangning Hydroelectric Development Co., Ltd. transferred all its
25% equity to Mr. Lu Chunliang.



V. Related parties relationships and their transactions




(I) Related parties relationships




1. Related parties which have controlling relationships




	 	 	 	 	 	 	 	 	 	 	 
	 	 	Registered	 	 	 	Relationships with	 	 	 	 
	Enterprise	 	addresses	 	Major businesses	 	the company	 	Economic character	 	Legal representative
	Zhejiang Guangsha
Hydroelectric
Investment Co.,
Ltd.

	 	Liqing Road 157-1#,

Lishui City
	 	Water resource
development, etc.
	 	Majority

shareholders
	 	Limited liability
	 	Lu Chunliang






2. The registered capital and its changes by related parties which have controlling relationships




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Opening amount of	 	Increase of current	 	Decrease of current	 	 
	Related parties’ name	 	the year	 	period	 	period	 	Closing amount
	Zhejiang Guangsha
Hydroelectric
Investment Co., Ltd.
	 	 	180,000,000.00	 	 	 	—	 	 	 	—	 	 	 	180,000,000.00	 






3. The stocks held by related parties which have controlling relationships and the changes




13









 








The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	The amount of shareholding	 	Holding proportion
	 	 	Opening amount of	 	 	 	 	 	Opening amount of	 	 
	Related parties’ name	 	the year	 	Closing amount	 	the year	 	Closing amount
	Zhejiang Guangsha
Hydroelectric
Investment Co., Ltd.
	 	 	67,500,000.00	 	 	 	67,500,000.00	 	 	 	75	%	 	 	75	%






4. Related parties which have other relationships with the company




	 	 	 
	Related parties’ name	 	relationship
	Guangsha Building Group Co., Ltd.

	 	The same ultimate controller
	Lu Chunliang
	 	Shareholder of the company






(II) Related transaction




1. Paid 196,579.73 yuan management fee to Zhejiang Guangsha Hydroelectric Investment Co., Ltd. from
Jan., 2007 to Sep., 2007



2. Acceptance of guarantee



The guarantor is Guangsha Building Group Co., Ltd.. Up to Sep. 30th, 2007, the guarantee
amount accepted is 205 million yuan.



(3) Balance of related parties




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Opening amount
	Related parties’ name	 	Categories	 	Closing amount	 	of the year
	Zhejiang Guangsha
Hydroelectric
Investment Co., Ltd.
	 	Other receivables	 	 	22,982,747.71	 	 	 	38,917,550.96	 






VI. Commitment matters




Up to the deadline of the report, we do not have commitment matters which should be disclosed.



VII. Contingencies




Up to the deadline of the report, we do not have contingencies which should be disclosed such as
pending action, external guarantee, etc..



VIII. Other important matters




14









 






The Notes of Financial Statement of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on Sep, 30th, 2007




Up to the deadline of the report, China Hydroelectric Fund Beijing Management Company plans to
purchase all the equity of the company. The correlative work is ongoing. Other than this, we do not
need to explain other important matters.



IX. The subsequent events of the balance sheet



On Nov. 17th, 2007, Zhejiang Guangsha Hydroelectric Investment Co., Ltd. and Guangsha
Building Group Co., Ltd. signed the share transfer agreement. Zhejiang Guangsha Hydroelectric
Investment Co., Ltd. transferred its 75% equity to Guangsha Building Group Co., Ltd.. After that,
the shareholders and the investment amount are as follows:




	 	 	 	 	 	 	 	 	 
	 	 	investment	 	Holding
	shareholder	 	amount	 	proportion
	Guangsha Building Group Co., Ltd.
	 	 	67,500,000.00	 	 	 	75	%
	Lu Chunliang
	 	 	22,500,000.00	 	 	 	25	%
	Total
	 	 	90,000,000.00	 	 	 	100	%





Suichang County Jiulongshan Hydroelectric Development Co., Ltd.



Nov. 15th, 2007





15











 





Appendix 2 Index to information disclosed by the Transferors




Including but not limited to:




Enterprise Legal Person Business License




Enterprise Legal Person Business License (copy)




Amendments




Articles of Association




Amendments to Articles of Association




Amendments to Articles of Association




Amendments to Articles of Association




Amendments to Articles of Association




Sui Hui Suo Yan Zi (2001) No. 74 Capital Verification Report




Zhong Hui Suo Yan [2005] No.13 Capital Verification Report




Zhong Hui Suo Yan [2004] No.12 Capital Verification Report




Zhong Hui Suo Yan [2003] No. 18 Capital Verification Report




Minute of
the company establishment and the first Shareholders’ Meeting Documents of the first Shareholders’ Meeting




Resolution of the first meeting of the first Board’s Meeting.



Documents of the first meeting of the first Board’s Meeting.



Documents of the second meeting of the Shareholders’ Meeting.




Documents of the second meeting of the first Board




Documents
of the third Shareholders’ Meeting (Documents of the third meeting by the first Board)




Resolution of the Shareholders’ Meeting Capital Increase Agreement




Resolution of the Shareholders’ Meeting Capital Increase Agreement




Resolution of the Shareholders’ Meeting Capital Increase Agreement




Resolution of the Shareholders’ Meeting Equity Interest Transfer Agreement




Resolution of the Board of Directors




Resolution of the Supervisory Board




Resolution of the Shareholders’ Meeting Equity Interest Transfer Agreement




Resolution of the Shareholders’ Meeting Equity Interest Transfer Agreement




Tax Registration Certificate




Organization Code Certificate




Social Insurance Registration Certificate




Organization Code Certificate (Integrated Circuit Card)




Bank Accounts Sheet




Permit for Opening a Bank Account 3310-01810212




Enterprise Credit Grading Certificate




Enterprise Legal Person Business License with registration number: 3325001002885




Enterprise Legal Person Business License with registration number: 3325001002885




Resolution of the Shareholders’ Meeting of Zhejiang Guangsha Hydropower
 Investment Co., Ltd




1









 





Amendments to Articles of Association of Zhejiang Guangsha
Hydropower Investment Co., Ltd




Zhejiang Development and Planning Commission, Notice of
Project Initiation, [2002] No. 170




Zhejiang Development and Planning Commission,
 Approval on the Feasibility Study
Report of Suichang County Zhougongyuan cascaded hydropower stations, Zhe Ji Ji Chu [2003] No. 824




Suichang
County government, Approval on the Cascading Development Plan for
Zhougongyuan Hydropower, Sui Zheng Fa [2001] No. 39



Zhejiang Water Resources Bureau, Approval on the Water and Soil Conservancy
Plan for Zhougongyuan Cascaded Hydropower Stations, Zhe Shui Zheng [2003] No. 64



Zhejiang Water Resources Bureau,
 Reply to the Review Opinion on Suichang County
Zhougongyuan cascaded hydropower stations Environmental Impact Report, Zhe Shi
Ji [2003] No. 52




Suichang County Water Resources Bureau,
 Request for Reviewing Suichang County
Zhougongyuan cascaded hydropower stations Environmental Impact Report, Sui Shui
Li [2003] No. 59




Zhejiang Environmental Protection Bureau,
 Reply to the Review Opinion on
Suichang County Zhougongyuan cascaded hydropower stations Environmental Impact
Report, Zhe Huan Jian [2003] No. 157




Zhejiang Lishui Environmental Protection Bureau,
Preliminary Opinion on Suichang County Zhougongyuan cascaded hydropower stations Environmental Impact
Report, Li Huan Jian [2003] No. 120




Suichang County Environmental Protection
 Bureau, Preliminary Opinion on Suichang County Zhougongyuan cascaded hydropower stations
 Environmental Impact Report, Sui Huan Bao [2003] No. 28




Zhejiang Water Resources Bureau, Approval on Water
Resources Argumentation Report of Zhougongyuan Cascaded Hydropower Stations, Zhe Shui Zheng
 [2003] No. 85




Application for Assessing Dangers in Geological Disasters of Construction Land



Zhejiang Development and Reform Commission, Approval on the Preliminary Design
of Suichang County Zhougongyuan cascaded hydropower stations, Zhe Fa Gai She Ji
[2004] No. 36



Zhejiang Forestry Survey and Design Institute,
Feasibility Report on the Use of Forestry Land for Suichang County Zhougongyuan cascaded hydropower stations





Zhejiang Land and Resources Bureau, Preliminary Opinion on the Land Use in
Suichang County Zhougongyuan cascaded hydropower stations, Zhe Tu Zi Yu [2003]
No. 01



Sale Contract for State-owned Land Use Right GF-2000-2601




Construction Land Permit, Suichang County (2005)
 Sui Tu Zi No. 002




Approval on the Use of Forestry Land, Lin Zi
 Lin Di Shen Zi (2004) No. 101




Application for Construction Land (Phase Two) for
 Suichang County Zhougongyuan cascaded hydropower stations, Sui Jiu Dian (2006) No. 14




2









 





Zhejiang Water Resources Bureau, Approval on the Construction
 of Water Introducing Tunnel for Suichang County Zhougongyuan cascaded hydropower
stations, Zhe Shui Jian [2005] No. 32




Zhejiang Water Resources Bureau, Approval
on the Construction of Suichang County Zhougongyuan cascaded hydropower stations, Zhe Shui Xu [2006] No. 16




Zhong Hui
Suo Shen (2007) No. 18 Audit Report




Zhong Hui
Suo Shen (2006) No. 11 Audit Report




Zhong Hui
Suo Shen (2005) No. 2 Audit Report




Sep.30, 2007 Balance Sheet




Sep.30, 2007 Breakdown of other receivables




Sep.30, 2007 Breakdown of other amounts payable




Agreement for Investing in and Developing Suichang
 County Zhougongyuan cascaded
hydropower stations




Songyang County Agricultural Bank of China Loan Contract
 (Lishui Songyang),
Nong Yin Jie Zi [2005] No. 33101200500047542




Songyang County Agricultural Bank of China Loan
 Contract (2005) No.
33101200500047551




Guangsha Construction Co., Ltd provides guarantee for the
 above two loans, Guarantee Contract (Lishui Songyang) Nong Yin Bao Zi [2005] No.
33901200800000387




Lishui Mingzhu Sub-branch of Agricultural
Bank of China, Loan Contract



Contract Number: 33101200600005626



Guarantee
Contract 
Contract Number: 33901201400000003



Lishui Branch of Agricultural Bank of China Loan Contract




Contract Number: 33101200600032812




Lishui
Branch of Agricultural Bank of China Loan Contract



Contract Number: 33101200600032814



Guarantee Contract



Contract Number: 3390120100000005



Lishui Branch of Agricultural Bank of China Loan Contract



Contract Number: 33101200600035767




Guarantee Contract Contract Number: 33901201500000002,
 for the performance of
the Loan Contract numbered 33101200600035767




Lishui Branch of Agricultural Bank of China Loan Contract



Contract Number: 33101200700005053



Lishui Branch of Agricultural Bank of China Loan Contract




Contract Number: 33101200700005057



Lishui Branch of Agricultural Bank of China Loan Contract




Contract Number: 33101200700005059



Guarantee Contract



Contract Number: 33901201200000006



Lishui Branch of Agricultural Bank of China Loan Contract




3









 





Contract Number: 33101200700033780




Guarantee Contract

Contract Number: 33901201300000010




Lishui Branch of Agricultural Bank of China Loan Contract

Contract Number: 33101200700034929




Guarantee Contract

Contract Number: 33901201500000005




Loan proof: 2 copies




Sale Contract for State-owned Land Use Right GF-2000-2601



Insurance List for construction projects No. 0206331102000901000003



Bank deposit receipt, invoices of China United Property
 Insurance Corporation Limited




Bid-inviting Contract for the Construction of Suichang
 County Zhougongyuan
cascaded hydropower stations




Contract Account (one copy)





4












 






Appendix 3




Breakdown of Jiulongshan Bank Loans




	 	 	 	 	 
	 
	 	By Sep.30,2007
	 	Unit : RMB






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	No.	 	Lending Bank or Agency	 	Beginning Date	 	Expiry Date	 	Annual Rate	 	Currency	 	Amount	 	Guarantor	 	Note
	1

	 	Agricultural Bank of China, Lishui Mingzhu Sub-branch
	 	 	2006.2.23	 	 	 	2011.8.20	 	 	 	7.344	 	 	RMB
	 	 	4,000,000.00	 	 	Guangsha Construction Group Co., Ltd
	 	Transfer from
Mingzhu Sub-branch
to the City ABC
Business Department
	1

	 	Agricultural Bank of China, Lishui Mingzhu Sub-branch
	 	 	2006.2.23	 	 	 	2012.8.20	 	 	 	7.344	 	 	RMB
	 	 	15,000,000.00	 	 	Guangsha Construction Group Co., Ltd
	 	Transfer from
Mingzhu Sub-branch
to the City ABC
Business Department
	1

	 	Agricultural Bank of China, Lishui Mingzhu Sub-branch
	 	 	2006.2.23	 	 	 	2013.8.20	 	 	 	7.344	 	 	RMB
	 	 	15,000,000.00	 	 	Guangsha Construction Group Co., Ltd
	 	Transfer from
Mingzhu Sub-branch
to the City ABC
Business Department
	1

	 	Agricultural Bank of China, Lishui Mingzhu Sub-branch
	 	 	2006.2.23	 	 	 	2014.8.20	 	 	 	7.344	 	 	RMB
	 	 	16,000,000.00	 	 	Guangsha Construction Group Co., Ltd
	 	Transfer from
Mingzhu Sub-branch
to the City ABC
Business Department
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2008.11.20	 	 	 	7.02	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2009.05.20	 	 	 	7.02	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2009.11.20	 	 	 	7.02	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2010.05.20	 	 	 	7.02	 	 	RMB
	 	 	6,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2011.05.20	 	 	 	7.344	 	 	RMB
	 	 	6,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2012.05.20	 	 	 	7.344	 	 	RMB
	 	 	6,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2013.05.20	 	 	 	7.344	 	 	RMB
	 	 	6,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2014.05.20	 	 	 	7.344	 	 	RMB
	 	 	7,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	2

	 	Songyang Branch of Agricultural Bank of China
	 	 	2005.10.19	 	 	 	2015.05.20	 	 	 	7.344	 	 	RMB
	 	 	10,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	3

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2006.8.16	 	 	 	2010.8.15	 	 	 	7.344	 	 	RMB
	 	 	15,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	3

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2006.8.16	 	 	 	2009.2.15	 	 	 	7.236	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	3

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2006.8.16	 	 	 	2010.5.15	 	 	 	7.344	 	 	RMB
	 	 	2,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	3

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2006.8.16	 	 	 	2010.2.15	 	 	 	7.344	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	3

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2006.8.16	 	 	 	2010.11.15	 	 	 	7.344	 	 	RMB
	 	 	7,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	4

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2006.9.8	 	 	 	2015.2.15	 	 	 	8.208	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	4

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2006.9.8	 	 	 	2015.8.15	 	 	 	8.208	 	 	RMB
	 	 	17,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	5

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.2.5	 	 	 	2012.2.15	 	 	 	8.208	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	5

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.2.5	 	 	 	2009.8.15	 	 	 	7.560	 	 	RMB
	 	 	8,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	5

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.2.5	 	 	 	2011.11.15	 	 	 	7.760	 	 	RMB
	 	 	7,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	5

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.2.5	 	 	 	2011.8.15	 	 	 	7.760	 	 	RMB
	 	 	11,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	5

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.2.5	 	 	 	2011.2.15	 	 	 	7.760	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	5

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.2.5	 	 	 	2011.5.15	 	 	 	7.760	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	6

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.8.20	 	 	 	2013.11.15	 	 	 	8.856	 	 	RMB
	 	 	7,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	6

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.8.20	 	 	 	2013.2.15	 	 	 	8.856	 	 	RMB
	 	 	3,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	7

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.8.29	 	 	 	2015.11.15	 	 	 	9.072	 	 	RMB
	 	 	8,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	7

	 	Lishui Agricultural Bank of China Operation Center
	 	 	2007.8.29	 	 	 	2015.2.15	 	 	 	9.072	 	 	RMB
	 	 	2,000,000.00	 	 	Guangsha Construction Group Co., Ltd	 	 
	 

	 	Total

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	205,000,000.00	 	 	 	 	 






 









 






Appendix 4




Letter Of Guarantee




China Hydroelectric Corporation:



We hereby issue this Letter to you to provide a joint liability guarantee for all contractual
obligations and maters under the “Formal Equity Interest Transfer Contract of Suichang County
Jiulongshan Hydropower Development Co., Ltd” signed by CHC, Zhejiang Guangsha Construction Group
Co., Ltd, and Lu Chunliang (hereinafter collectively referred to as “the Transferee”) on                     , 2007.




1. Guarantee Scope



The Guarantee’s scope is all contractual obligations and matters under the “Formal Equity Interest
Transfer Contract of Suichang County Jiulongshan Hydropower Development Co., Ltd,” all payment
obligations, liabilities for breach of contracts and compensation caused by the Transferee’s
failure to perform any contractual obligations thereof, and the obligations and liabilities
specified in Article 52 of Formal Equity Interest Transfer Contract of Suichang County Jiulongshan
Hydropower Development Co., Ltd that should be assumed by Zhejiang Guangsha Hydropower Investment
Co., Ltd.




2. Guarantee Term



It shall be two years from the expiration date of the performance of the contractual obligations
and matters under the “Formal Equity Interest Transfer Contract of Suichang County Jiulongshan
Hydropower Development Co., Ltd.”




3. Guarantee manner: Joint liability guarantee




4. Performance of the Guarantee obligations



If the Transferee fails to perform its contractual obligations and matters in accordance with the
provisions of the Contract, CHC is entitled to request us to bear liability under the guarantee. We
shall fulfill our obligations set out in this letter, within two (2) work days of receipt of your
written notice affixed with your company seal, setting out our relevant contractual obligations, we
will honor our payment obligations, our liability for breach of contractual provisions and remit
the appropriate compensation.




5. Effective Date



This letter shall come into effect on the date when the legal representative or authorized
representative signs and affixes our official business seal.




 









 








Guarantor: Guangsha Holding Venture Capital Co. Ltd

 



Signature of legal representative or authorized

representative (signed and Sealed)




                              , 2007





 











 





Suichang Jiulongshan Hydropower Development Co., Ltd.

Share Transfer Project

Assets Appraisal Report




JINGDUPINGBAOZI (2007) No.***

One volume only




Beijing Jingdu Assets Valuation Co., Ltd.

November 15, 2007




 









 





			
	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report






Contents




	 	 	 	 	 
	I. Entrusting Party and Other Appraisal Report Users

	 	 	5	 
	 
	 	 	 	 
	II. Basic Information and Financial Status of the Appraised Enterprise

	 	 	6	 
	 
	 	 	 	 
	III. Appraisal Objectives

	 	 	15	 
	 
	 	 	 	 
	IV. Appraisal Subject

	 	 	16	 
	 
	 	 	 	 
	V. Value Type and Definition

	 	 	17	 
	 
	 	 	 	 
	VI. Appraisal Base Day

	 	 	17	 
	 
	 	 	 	 
	VII. Appraisal Assumptions and Restrictive Conditions

	 	 	18	 
	 
	 	 	 	 
	VIII. Appraisal Principle

	 	 	19	 
	 
	 	 	 	 
	IX. Appraisal Basis

	 	 	19	 
	 
	 	 	 	 
	X. Appraisal Method

	 	 	21	 
	 
	 	 	 	 
	XI. Implementation Process and Conditions of Appraisal Procedures

	 	 	32	 
	 
	 	 	 	 
	XII. Appraisal Conclusions

	 	 	33	 
	 
	 	 	 	 
	XIII. Explanations to Particular Issues

	 	 	35	 
	 
	 	 	 	 
	XIV. Major Issues after Appraisal Base Day

	 	 	36	 
	 
	 	 	 	 
	XV. Legal Effect of the Appraisal Report

	 	 	36	 
	 
	 	 	 	 
	XVI. Appraisal Reporting Day

	 	 	37	 
	 
	 	 	 	 
	Document for Future Reference

	 	 	39	 
	 
	 	 	 	 
	Statement on the Application Scope of Document for Future Reference of the
Assets Appraisal Report

	 	 	40	 






Beijing Jingdu Assets Valuation Co., Ltd.     3F, Scitech Plaza     Fax: 0086-10-65227608      1




 









 






			
	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report








Share Transfer Project by Suichang Jiulongshan

Hydropower Development Co., Ltd.

Abstract




JINGDUPINGBAOZI (2007) No.***




Beijing Jingdu Assets Valuation Co., Ltd. (hereinafter referred to as Jingdu Company) has been
entrusted by China Hydroelectric Corporation and developed appraisal work for all shareholders’
equity value of Suichang Jiulongshan Hydropower Development Co., Ltd. (hereinafter referred to as
“Jiulongshan Hydroelectric Development Company) on the appraisal base day.



Appraisal objectives: Because China Hydroelectric Corporation planed to purchase all stock rights
of Jiulongshan Hydropower Development Company, the Jingdu Company accepted its entrustment and
developed value appraisal for all shareholders’ equity of Jiulongshan Hydropower Development
Company on the appraisal base day and supplied references for the aforementioned economic behavior.



The appraisal base day is September 30, 2007.



Appraisal Subject is all shareholders’ equity of Jiulongshan Hydropower Development Company. The
net assets nominal value of the Jiulongshan Company on appraisal base day is RMB 90 Million.



Appraisal method: Income approach.



Value type: the value type of the appraisal is investment value. The investment value is the assets
possessed value for special investors with investment objective or certain of investors.



Beijing Jingdu Assets Valuation Co., Ltd.     3F, Scitech Plaza     Fax: 0086-10-65227608      2




 









 








			
	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report






Referring to relevant data provided by the appraised enterprise, the appraisers
have carried out necessary appraisal procedures including the verification, inquiry and data
collection for property right, obligation and operation status, the investigation, analyses and
judgment for the market environment and state of operation, financial status, and future
development status for appraised enterprise according to national provisions concerning assets
appraisal, at the same time complying with principles of independence, objectivity and impartial.
Also, according to the effective price data on the appraisal base day, the fair value of the
entrusted assets on the appraisal base day has been reflected objectively.



Till September 30, 2007, the appraisal base day expiration, through adopting income approach
appraisal, the entity value appraisal value of the Jiulongshan Hydropower Development Company is
RMB 428.7616 Million. And all shareholders’ equity appraisal value is RMB 222.2416 Million.



Appraisal conclusions are drawn on some assumptions and restrictive conditions, so it is hereby
noted that the report user shall pay attention to the legal ownership explanation of the entrusted
assets as well as influences on appraisal conclusions and trade pricing generated by these
assumptions and restrictions.



This appraisal report will be valid for one year, namely, from September 30, 2007 to September 29,
2008.



The aforesaid content is picked from the asset appraisal report. To learn the comprehensive
information of the appraisal report, please earnestly read the full text of this asset appraisal
report. If any questions, take the Chinese version as criterion.



The use right of the appraisal report belongs to entrusting party. Without the permission of the
entrusting party, the organization can’t supply or publicize the report. For any miscellaneous
purposes, or somebody else presented and mastered the report, the appraisal organization will
neither admit nor take on any responsibility, without the written approval of Jingdu.



Beijing Jingdu Assets Valuation Co., Ltd.     3F, Scitech Plaza     Fax: 0086-10-65227608      3




 









 








			
	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report






(No text in this passage)



Assets Appraisal Institution: Beijing Jing Du Assets Valuation Company Ltd.



Legal Representative of Assets Appraisal Institution: Jiang Jianying



China Certified Public Valuer: Wang Ri



China Certified Public Valuer: Sun Chaohui



November 15, 2007




Beijing Jingdu Assets Valuation Co., Ltd.     3F, Scitech Plaza     Fax: 0086-10-65227608      4




 









 








			
	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report






Suichang Jiulongshan Hydropower Development Co., Ltd.

Share Transfer Project

Assets Appraisal Report




JINGDUPINGBAOZI (2007) No.***




Beijing Jingdu Assets Valuation Co., Ltd. (hereinafter referred to as Jingdu Company) has been
entrusted by China Hydroelectric Corporation and developed appraisal work for all shareholders’
equity value of Suichang Jiulongshan Hydropower Development Co., Ltd. (hereinafter referred to as
“Jiulongshan Hydroelectric Development Company) on the appraisal base day, according to relevant
provisions on assets appraisal and guided by the principle of independence, impersonality, fairness
and scientificness. The appraisers of Jingdu Company verified, inquired and collected data of the
property right, obligation and operation status for entrusted assets according to necessary
appraisal procedures. The market environment of the appraised enterprise is investigated. The
investigation, analyses and judgments are carried out for the state of operation, financial status
and forthcoming development of the appraised enterprise. The fair value of the entrusted assets on
September 30, 2007 has been reflected objectively. The assets appraisal conditions and results are
reported as follows:



I. Entrusting Party and Other Appraisal Report Users




The entrusting party of the appraisal project is China Hydroelectric Corporation. China
Hydroelectric Corporation planed to purchase all stock rights of Jiulongshan Hydropower Development
Company. Except the entrusting party, the proceeding involved related parties will use the report.



Beijing Jingdu Assets Valuation Co., Ltd.     3F, Scitech Plaza     Fax: 0086-10-65227608      5




 









 








			
	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report






II. Basic Information and Financial Status of the Appraised Enterprise




The appraised enterprise of the project is Jiulongshan Hydropower Development Company.




	 	1.	 	Company name: Suichang Jiulongshan Hydropower Development Co., Ltd. (hereinafter referred
to as “Jiulongshan Hydroelectric Development Company)






	 	 	 	Address: Nanmen Road No. 30, Miaogao Town
	 
	 	 	 	Registered Capital: RMB 90 million
	 
	 	 	 	Paid-up Capital: RMB 90 million
	 
	 	 	 	Company Type: Company with Limited Liability
	 
	 	 	 	Legal Representative: Lu Chunliang
	 
	 	 	 	Operation Period: from November 22, 2001 to November 21, 2031






	 	 	 	Business Scope: water resource development, generation and distribution of
electrical energy, the purchase and sale of water supply, hardware,
electro mechanic (exclusive of cars), chemicals(except for dangerous
goods), building materials, purchasing and salving of subsidiary
agricultural products(except tea, pod and cotton)






	 	2.	 	History evolution
	 
	 	 	 	Jiulongshan Hydroelectric Development Co., Ltd. was established on November 21, 2001 by
Zhejiang Guangsha Hydroelectric Development Co., Ltd., Zhejiang Guangning Hydroelectric
Development Co., Ltd. and Lishui Nanfang Hydroelectric Development Co., Ltd. They
respectively invested 975,000.00 yuan (account for 65% of the registered capital),
300,000.00 yuan (account for 20% of the registered capital) and 225,000.00 yuan (account
for 15% of the registered capital). The total registered capital was 1.5 million yuan. On
November 10, 2003, the company increased its registered capital to 25 million yuan.





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	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report







	 	 	 	There among, Zhejiang Guangsha Hydroelectric Development Co., Ltd. invested 4.275 million
yuan in currencies and 11 million yuan in form of debt-for-equity swap; Zhejiang Guangning
Hydroelectric Development Co., Ltd. invested 4.7 million yuan in currencies; Lishui Nanfang
Hydroelectric Development Co., Ltd. invested 3.525 million yuan in currencies. After the
capital increase, the company’s total registered capital was 25 million yuan, of which the
totally contributed capital of Zhejiang Guangsha Hydroelectric Development Co., Ltd. was
16.25 million yuan (account for 65% of the registered capital), the totally contributed
capital of Zhejiang Guangning Hydroelectric Development Co., Ltd. was 5 million yuan
(account for 20% of the registered capital) and the totally contributed capital of Lishui
Nanfang Hydroelectric Development Co., Ltd. was 3.75 million yuan (account for 15% of the
registered capital).
	 
	 	 	 	On April 16, 2004, Jiulongshan Hydroelectric Development Co., Ltd. increased its registered
capital to 50 million yuan. All of the three shareholders invested in currencies. After the
capital increase, the totally contributed capital of Zhejiang Guangsha Hydroelectric
Development Co., Ltd. was 32.5 million yuan (account for 65% of the registered capital);
the totally contributed capital of Zhejiang Guangning Hydroelectric Development Co., Ltd.
was 10 million yuan (account for 20% of the registered capital); and the totally
contributed capital of Lishui Nanfang Hydroelectric Development Co., Ltd. was 7.5 million
yuan. The company’s total amount of the registered capital was 50 million yuan.
	 
	 	 	 	On May 20, 2005, the company increased its registered capital to 70 million yuan. There
among, Zhejiang Guangsha Hydroelectric Development Co., Ltd. invested 13 million yuan in
currencies; Zhejiang Guangning Hydroelectric Development Co., Ltd. invested 4 million yuan
in currencies; and Lishui Nanfang Hydroelectric Development Co., Ltd. invested 3 million
yuan in currencies. After the capital increase, the totally contributed capital of Zhejiang
Guangsha Hydroelectric Development Co., Ltd was 45.5 million yuan (account for 65% of the
registered capital); the totally contributed





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	Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project
	 
	 	Assets Appraisal Report







	 	 	 	capital of Zhejiang Guangning Hydroelectric Development Co., Ltd. was 14
million yuan (account for 20% of the registered capital); and the totally contributed
capital of Lishui Nanfang Hydroelectric Development Co., Ltd. was 10.5 million yuan
(account for 15% of the registered capital). The total amount of the registered capital was
70 million yuan.
	 
	 	 	 	On July 26, 2005, the company increased its registered capital by 20 million yuan. The
registered capital was increased from 70 million yuan to 90 million yuan. There among,
Zhejiang Guangsha Hydroelectric Development Co., Ltd. increased investment by 15 million
yuan and Zhejiang Guangning Hydroelectric Development Co., Ltd. increased investment by 5
million yuan both in currencies. Meanwhile, Lishui Nanfang Hydroelectric Development Co.,
Ltd. transferred 2/3 of its interests of Jiulongshan Hydroelectric Development Co., Ltd. to
Zhejiang Guangsha Hydroelectric Development Co., Ltd., which amount to 7 million yuan
(account for 10% of the registered capital), and transferred 1/3 of the interests to
Zhejiang Guangning Hydroelectric Development Co., Ltd., which amount to 3.5 million yuan
(account for 5% of the registered capital). After the transformation, the totally
contributed capital of Zhejiang Guangsha Hydroelectric Development Co., Ltd. was 67.5
million yuan (account for 75% of the registered capital); the totally contributed capital
of Zhejiang Guangning Hydroelectric Development Co., Ltd. was 22.5 million yuan (account
for 25% of the registered capital); while Lishui Nanfang Hydroelectric Development Co.,
Ltd. was no longer a shareholder of Jiulongshan Hydroelectric Development Co., Ltd..
	 
	 	 	 	On March 12, 2007, the company adopted the resolution of the board of directors that
Zhejiang Guangning Hydroelectric Development Co., Ltd. transferred its 25% of its interests
of Jiulongshan Hydroelectric Development Co., Ltd. to Mr. Lu Chunliang, which amount to
22.5 million yuan. After the interests transfer, Zhejiang Guangning Hydroelectric
Development Co., Ltd. was no longer a shareholder of Jiulongshan Hydroelectric Development
Co., Ltd.; Zhejiang Guangsha Hydroelectric Investment Co., Ltd. owned 75% interests of
Jiulongshan Hydroelectric





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	 	 	 	Development Co., Ltd. which amount to 67.5 million yuan; Mr. Lu Chunliang
owned 25% interests of Jiulongshan Hydroelectric Development Co., Ltd. which amount to 22.5
million yuan. On September 10, 2007, the company adopted the resolution of board of
shareholders to agree the internal transfer of the contributed capital. Shareholder Mr. Lu
Chunliang transferred the 25% interests to Zhejiang Guangsha Hydroelectric Investment LLC.,
which amount to 22.5 million yuan. After the interests transfer, Mr. Lu Chunliang was no
longer a shareholder of Jiulongshan Hydroelectric Development Co., Ltd.; Zhejiang
Hydroelectric Investment Co., Ltd. owned 100% interests of Jiulongshan Hydroelectric
Development Co., Ltd., which amount to 90 million yuan.
	 
	 	 	 	Zhougongyuan Hydropower Station is the main assets.
	 
	 	 	 	Zhougongyuan hydroelectric station is located in Suichang County, Zhejiang Province, on the
branch of Wuxi River, Zhougongyuan. It has 3 cascade hydroelectric stations.
	 
	 	 	 	This station is a cascade hydroelectric station. The first hydroelectric station’s dam is
about 92 kilometers from Suichang County, located in Zhedaikou Country. The drainage area
controlled above this dam is 162km2 with a maximum reservoir capacity of 21.47
million m3 and the installed capacity of electric system is 25 MW. Besides
these, there are five trans basin diversion headrace systems, of which the pilot area of
11.5km2 is directly piloted into the mountain stone pit of the reservoir; the
pilot area of 6.8km2 is piloted into the broken stone pit; while pilot area of
Yangmuyuan headrace system is 23.7km2, Luohanyuan headrace system
17km2, Xiaoyang pit headrace system 3.85km2. The dam is a concrete
parabolic double curvature arch dam; the normal pool level is 472 meters with the maximum
height of dam of 54 meters. The power generation intake is on the right bank from the dam’s
upper reaches 1.5km. There is a pipe bridge across the broken stone pit and Luohanyuan
branch. The tunnel’s horizontal projection is totally 8.8km long. The factory is located on
the upper reaches of the Hebei Village, 2.0km from Huangshayao Town. The





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	 	 	 	designing tail water level is 340.0m. At present, the project of the first
hydroelectric station’s barrage has not jet completed; pilot tunnel project has almost
completed; the power house is under construction and in the stage of main body concrete
placement and basic facility placement; most of the tail water project has completed.
	 
	 	 	 	The second hydroelectric station’s dam is about 78 kilometers from Suichang County, located
in Shangding Country. The drainage area controlled above this dam is 269km2 with
a maximum reservoir capacity of 1.58 million m3 and the installed capacity of
electric system is 12.6 MW. The dam is a concrete checkgate; the normal pool level is
340.0m with the maximum height of dam of 17.8m. The tunnel’s horizontal projection is
totally 4.0km long. The factory is located on the lower reaches of the Dingyutan Village;
designing tail water level is 290.0m. At present, the second hydroelectric station’s
barrage has not jet completed; pilot tunnel project has almost completed; the power house
is under construction and in the stage of main body concrete placement and basic facility
placement; most of the tail water project has completed.
	 
	 	 	 	The third hydroelectric station’s dam is about 7 kilometers from the second dam, located in
Changqiu Village. The drainage area controlled above this dam is 336.4km2 with a
maximun reservoir capacity of 0.55 million m3 and the installed capacity of
electric system is 16 MW. The dam is a concrete weir shutter dam, the normal pool level is
290.0 meters with the maximum height of dam of 17.7 meters. The power generation intake is
on the right bank from the dam’s upper reaches 20 meters. The tunnel’s horizontal
projection is totally 7.2km long. The factory is located in Shijiao. The designing tail
water level is 226.0m. At present, the project of the third hydroelectric station’s barrage
has not jet completed; pilot tunnel project has not jet completed; the power house is under
construction and in the stage of groundwork; the tail water project has not jet completed.
	 
	 	 	 	In July, 2001, “Zhougongyuan Hydropower Cascade Development Planning Report”, which
prepared by Zhejiang Design Institute of Water Conservancy





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	 	 	 	and Hydroelectric Power (ZDWP), passed the censor of Lishui Water
Resources & Hydropower Engineering Bureau. In September of the same year, People’s
Government of Suichang County issued (2001) No.39 File and agreed “Zhougongyuan Hydropower
Cascade Development Planning Report”. On November 29, 2001, the company signed “Invest and
Develop Project Agreement of Suichang County Zhougongyuan Cascade Hydroelectric Station”
with People’s Government of Suichang County, Zhejiang Province. On October 17, 2003, the
company got the “Response of Feasibility Study Report of Suichang County Zhougongyuan
Cascade Hydroelectric Station” and on February 16, 2004, the company got the “Response of
Preliminary Planning of the Project of Suichang County Zhougongyuan Cascade Hydroelectric
Station”. The project started in April, 2005. The total time limit for a project is 3.5
years and now is a construction in process. Zhougongyuan Cascade Hydroelectric Station is
three levels and the total installed capacity of electric system is 53.6MW, the first
hydroelectric station is 2×12.5MW, the second hydroelectric station is 2×6.3MW and the
third hydroelectric station is 2×8MW. The guarantee power is total 4530KW (P=90%). The
average of electricity power is 130.1 million KW.h






	 	3.	 	Enterprise’s financial position
	 
	 	 	 	The assets and liabilities of Jiulongshan Hydropower Development Co. Ltd. in recent three years
are as follows:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	unit: RMB 10 thousand
	 
	Item	 	2004	 	2005	 	2006	 	Sep. 30, 2007
	Total assets
	 	 	5,339.34	 	 	 	14,725.10	 	 	 	24,697.01	 	 	 	30,489.68	 
	Liabilities
	 	 	339.34	 	 	 	5,725.10	 	 	 	15,697.01	 	 	 	21,489.68	 
	Net assets
	 	 	5,000.00	 	 	 	9,000.00	 	 	 	9,000.00	 	 	 	9,000.00	 







	 	 	 	Jiulongshan Hydroelectric Development Co., Ltd. was in the construction stage for Zhougongyuan
Cascade Hydroelectric Station from 2004 — 2006 and do not have





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	 	 	 	any business activities. The annual audit of Jiulongshan Hydroelectric Development Co., Ltd. in
2004, 2005 and 2006 was done by Zhejiang Suichang
Public League CPAs Firm, and respectively issued audit report with clean audit opinion,
ZHONGHUISUOSHEN [2005] No. 2, ZHONGHUISUOSHEN [2006] No. 11, ZHONGHUISUOSHEN [2007] No. 18. The
audit report considered that the company finacial statements conformed to the prescription of
Accounting Standard for Business Enterprises and Accounting System of the Small enterprises. It
reflected the financial status, operation achievement and the fund variation in the important
aspects. The accounting process selection complies with principle of consistency. Beijing Jing Du
CPAs Firm carried out special audit for balance sheet of the Jiulongshan Hydropower Development
Company on Sep. 30, 2007 and presented the audit report BEIJINGJINGDUSHENZI ( 2007) No. 1314 .






	 	4.	 	Major accounting policies
	 
	 	4.1	 	Financial system
	 
	 	 	 	Accounting Standards for Business Enterprises and Accounting Systems of Enterprises issued by
the Ministry of Finance of Jiulongshan Hydropower Development Company.
	 
	 	4.2	 	Financial year
	 
	 	 	 	The financial year means a calendar year starting on January 1 and ending on December 31.
	 
	 	4.3	 	Standard money
	 
	 	 	 	The standard money is Renminbi (RMB).
	 
	 	4.4.	 	Accounting base and pricing principles
	 
	 	 	 	The company adopts the accrual basis as accounting base, and its pricing principle is based on
the historical cost.
	 
	 	4.5	 	Validation criteria for cash equivalent
	 
	 	 	 	Cash equivalent means those investments featuring short term (generally due within 3 months
from purchase date), high mobility, easy to change into cash,





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	 	 	 	and low value disturbance.
	 
	 	4.6	 	Entry method of bad debt loss for the account receivable






	 	(1)	 	Bad debt validation criteria: a. the debtor goes into liquidation or is death, and
his liquidated property and heritage cannot cover the all the debts; b. the debtor fails
to perform its repayment obligations overdue and it’s obvious to indicate that the debt
is unable to be repaid.
	 
	 	(2)	 	The entry method of bad debt loss: allowance method is used for reckoning the bad
debt loss. By the end of each year, the company will draw 5% of the balance for bad debts
to the receivables (including account receivable and other receivables) after deducting
the incoming and outgoing and funds of disbursement of the related parties.
	 
	 	 	 	For those accounts receivable featuring conclusive evidence of the obvious difference of
repayment, individual recognizing method is used to draw bad debt provision.










	 	4.7.	 	Fixed assets pricing and depreciation method










	 	(1)	 	Validation criteria for fixed assets: the fixed assets concurrently feature the
following characteristics: 1. tangible assets; 2. high unit value; 3. service life is
more than one year; 4. purchased for the purposes of production, offering labor services,
lease or operation management.
	 
	 	(2)	 	The fixed assets pricing and depreciation method: the fixed asset is booked at the
actual cost of procurement, and depreciated according to straight-line method from the
next month after reaching the serviceable conditions.
	 
	 	 	 	The salvage value rate, depreciation life and annual depreciation rate of all kinds of
fixed assets:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Annual depreciation
	Fixed assets group	 	Salvage value rate	 	Depreciation life	 	rate (%)
	Buildings and structures
	 	 	3	%	 	 	20-30	 	 	 	3.23%-4.85	%






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	 	 	 	 	 	 	 	 	 	 	Annual depreciation
	Fixed assets group	 	Salvage value rate	 	Depreciation life	 	rate (%)
	General-purpose equipment
	 	 	3	%	 	 	8	 	 	 	12.13	%
	Special-purpose equipment
	 	 	3	%	 	 	20-25	 	 	 	3.88% - 4.85	%
	Vehicles
	 	 	3	%	 	 	10	 	 	 	9.70	%







	 	(3)	 	The validation criteria and provision method for the depreciation provision of
fixed assets: by the end of each year, the company will inspect all the fixed assets. If
the following factors are found, including continual downslide of market price, technical
obsolescence, damage or long-term idling, then the recoverable amount is evaluated for
the fixed assets so as to check whether the fixed asset is devaluated or not. If the
recoverable amount is lower than the book value of the fixed assets, then the
depreciation provision is drawn as the difference between the recoverable amount and the
book value. Upon being determined, the depreciation provision of fixed assets cannot be
inverted in the following accounting periods.






	 	4.8	 	The accounting method for project under construction






	 	(1)	 	The project under construction adopts actual cost for accounting. The project under
construction is divided into construction project investment, installation engineering
investment, equipment investment, miscellaneous investment and deferred expense
investment.
	 
	 	 	 	For the sale products formed in the trial running process before reaching preset service
condition of project under construction, its cost is counted in the cost of project
under construction; when it is sold or turned into commodity inventory; the engineering
cost is subtracted according to actual sales income or according to predicted sales
price.
	 
	 	 	 	From the date when the project reaches predicted service conditions, according to
project budget, cost or project actual cost, the appraisal value is turned into the
fixed assets. The fixed assets depreciation





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	 	 	 	provision is provided according to the relevant depreciation methods.






	 	(2)	 	The depreciation provision for project under construction: the Company will inspect
the project under construction by the end of the construction
and estimate the receivable sum of various items. If there is any evidence indicates that
the project under construction is devalued, the depreciation provision of project under
construction is made according to the depreciation amount.






	 	4.9	 	Accounting treatment method for borrowing cost
	 
	 	 	 	For the borrowing cost occurred, if it compliant to the capitalization conditions of fixed
assets construction or procurement, it can be added into the corresponding assets costs; the
other borrowing costs shall be determined as expenses and listed in the income statement
according to the amount occurred.
	 
	 	4.10	 	Validation criteria for revenue
	 
	 	 	 	The operating revenues of the company mainly cover power generation revenue. The validation
criteria for revenue as follows:






	 	(1)	 	The major risk and remuneration of the ownership are transferred to the buyers;
	 
	 	(2)	 	The company neither keeps the ownership-related management right, nor implements
effective control to the sold goods;
	 
	 	(3)	 	The correlative economic benefits likely flow in the company;
	 
	 	(4)	 	The related cost occurred or to be occurred can be measured reliably.






	 	4.11	 	Accounting treatment method for income tax
	 
	 	 	 	Tax payable method is adopted to check the corporate income tax.





III Appraisal Objectives




The project appraisal objective is that China Hydroelectric Corporation planed to purchase all
interests of Jiulongshan Hydropower Development Company. Jingdu Company has been entrusted by China
Hydroelectric Corporation to develop



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appraisal work for all shareholders’ equity value of Jiulongshan Hydropower Development Company on
the appraisal base day and supplied value references for the forementioned economic behavior.



IV Appraisal Subject




The appraisal covers all the shareholders’ equity of Jiulongshan Hydropower Development Company.

The audited balance sheet of the Jiulongshan Hydropower Development Company on the appraisal base
day is as follows: the assets are RMB 304.8968 Million. The liabilities are RMB 214.8968 Million.
The net assets are RMB 90 Million. Including:




	1.	 	Assets
	 
	 	 	The current assets book value is RMB 23.8041 Million, including monetary fund, receivable
account and other receivables.
	 
	 	 	The fixed assets book value is RMB 281.0927 Million; it is the assets of Jiulongshan hydropower
station under construction. Zhougongyuan hydroelectric station is located in Suichang County,
Zhejiang Province, on the branch of Wuxi River, Zhougongyuan. It has 3 cascade hydroelectric
station.
	 
	 	 	The first hydroelectric station’s dam is located in Zhedaikou Country, about 92 kilometers from
Suichang County. The drainage area controlled above this dam is 162km2 with a
maximum reservoir capacity of 21.47 million m3 and the installed capacity of
electric system is 25 MW. Besides these, there are five transbasin diversion headrace systems,
of which the pilot area of 11.5km2 is directly piloted into the mountain stone pit
of the reservoir; the polit area of 6.8km2 is piloted into the broken stone pit;
while pilot area of Yangmuyuan headrace system is 23.7km2, Luohanyuan headrace
system 17km2, Xiaoyang pit headrace system 3.85km2.
	 
	 	 	The second hydroelectric station’s dam is located in Shangding Country, about 78 kilometers
from Suichang County. The drainage area controlled above this





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	 	 	dam is 269km2 with a maximum reservoir capacity of 1.58 million m3
and the installed capacity of electric system is 12.6 MW.
	 
	 	 	The third hydroelectric station’s dam is located in Changqiu Village, about 7 kilometers from
the second dam. The drainage area controlled above this dam is 336.4km2 with a
maximum reservoir capacity of 0.55 million m3 and the
installed capacity of electric system is 16 MW.
	 
	2.	 	Liabilities
	 
	 	 	The current liabilities book value is RMB 9.8968 Million, including other payables, the payable
staff salary, taxes payable and accrued interest payable.
	 
	 	 	The long-term liability book value is RMB 205 Million, it is funded debt.





V Value Type and Definition




The value type of the appraisal project is the investment value. The investment value means the
value of assets for the specific investors who have investment target or the investors of a certain
kind.



The connotation of the appraisal project investment value is the all equity value of the
shareholders of Jiulongshan Hydropower Development Company. It corresponds to net assets value of
the Jiulongshan Hydropower Development Company.



In the report the appraisal value stated means the value of all the stockholders’ equity on the
base date, including cash flow and appreciates depreciation and cash convention, provided that the
enterprise is running continually. Appraisal values in this report are drawn by Jing Du according
to the agreed appraisal assumptions and restrictive conditions on the appraisal subject and by
means of procedures and method stated in this report. They only serve in providing appraisal
opinions to these appraisal objectives.



VI Appraisal Base Day




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The asset appraisal base day of this project is September 30, 2007.



In favor of guaranteeing appraisal result and effectively in the service of appraisal objectives,
the appraisal base day has little effect on the appraisal result and is capable of correctly
reflecting the up-to-date status of related assets. The day is decided by the entrustee after the
joint negotiation and approaches the realization day of relevant economic activities as possible.



The pricing standard adopted in this appraisal is the effective pricing standard on the appraisal
base day.



VII Appraisal Assumptions and Restrictive Conditions





	1.	 	Zhougongyuan Hydropower Station power generation amount is able to reach preliminary designed
generating capacity, and will continue its operations. Its scope of business, method and
decision-making process will have few changed in the future.
	 
	2.	 	The future macroeconomic environment of Jiulongshan Hydropower Development Company will have
no significant changes and the enterprise will completely observe national laws and
regulations. Laws, regulations and relevant industrial policies and supervising measures under
which the profit is forecast will also have no or few changes in the future.
	 
	3.	 	Inflation rate, national current back credit interest rate, tax base and tax rate, service
and product price fluctuations can be kept in a normal range and will have no significant
changes.
	 
	4.	 	Zhougongyuan hydropower station, under construction, can be completed on schedule and passed
through the construction quality acceptance. The generator units can supply power to the grid
normally. Its future practical generation capacity can reach the generation capacity stated in
the preliminary design.
	 
	5.	 	In the forecast year, the entrustee can improve the power generation peak-valley ratio via
coordination and reach the expected goal through Lishui Electricity Generating Board
(85%:15%).
	 
	6.	 	In the forecast year, no force majeure or unpredictable factors that would cause





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	 	 	major detrimental effects to the main operations of the enterprise or result in great losses of
the enterprise properties would happen.
	 
	7.	 	The operator of the enterprise is responsible and top management of the enterprise is
competent for their duties.
	 
	8.	 	No legal disputes or obstacles of assets and business of Jiulongshan Hydropower Development
Company exist. The property right of assets is clear.
	 
	9.	 	The Jiulongshan Hydropower Development Company is able to be in sustained operation. The
continued operation qualification can be obtained when the business license recorded operation expiry date reached.





During the appraisal, appraisers have observed requirements of assets appraisal and adopted current
terms and conditions of policies, industrial conventions, statistical parameters or preconditions
concerning the universal industrial parameters and on the appraisal base day, no deviation factors
existed. In case that great change has taken place to further economic environment, appraisers will
assume no responsibility for different results deduced from the changed preconditions.



VIII Appraisal Principle





	1.	 	Acceptable principles stated in national and industrial regulations;
	 
	2.	 	Principles of independence, objectivity and specialty;
	 
	3.	 	Principle of continuous operation of assets, substitutability and open market;
	 
	4.	 	Principle of variation of main beneficiaries of the property right.





IX Appraisal Basis



This appraisal is made by observing related national laws, regulations and other fair appraisal
basis, pricing standard, appraisal references concerning assets appraisal.




	 
	1.	 	Behavior Basis






Assets Appraisal Business Agreement concluded between Jing Du and China Hydroelectric Corporation.




	 
	2.	 	Legal Basis
	 
	(1)	 	Management Measures for State-owned Assets (No.91) issued by the State





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	 	 	Department in 1991;
	 
	(2)	 	Evaluation Management Detailed Rules on State-owned Assets (GUOZIBANFA [1992] No.36) issued
by the original State State-owned Assets Administration Bureau;
	 
	(3)	 	Opinions on Assets Appraisal Operation Norms (try out) issued by China Appraisal Society;
	 
	(4)	 	Temporary Provisions for Assets Appraisal Report Basic Content and Format (CAIPINGZI No.91)
issued by the Ministry of Finance;
	 
	(5)	 	Opinion on Certified Public Valuer Focusing on the Legal Right of Appraisal Subject (HUIXIE
[2003] No.18) issued by the China Institute of Certified Public Accountants(CICPA );
	 
	(6)	 	Instruction Opinion on Business Valuation ([2004] No.134) issued by China Appraisal Society;
	 
	(7)	 	Assets appraisal criteria;
	 
	(8)	 	Policies and regulations concerning enterprise finance, accounting, revenue and assets
management established by the Ministry of Finance, Headquarters of People’s Bank of China,
National Taxation Bureau and the original State State-owned Assets Administration Bureau.
	 
	3.	 	Property Right Basis
	 
	(1)	 	Business license of the enterprise as a legal person;
	 
	(2)	 	Zhejiang Commission of Development and Project file “Endorsement on Suichang County
Zhougongyuan Cascade Hydroelectric Station Project feasibility study report” ZHEJIJICHU No.
824 [2003];
	 
	(3)	 	Zhejiang Commission of Development and Reform file “Endorsement on Suichang County
Zhougongyuan Cascade Hydroelectric Station Project preliminary design” ZHEFAGAISHEJI No.
36[2004];
	 
	(4)	 	Financial materials like accounting statements;
	 
	(5)	 	Application materials for assets appraisal.
	 
	4.	 	Pricing Basis
	 
	(1)	 	Current deposit and loan rates of financial institutions issued by the People’s Bank of
China;
	 
	(2)	 	Loan Contract, Mortgage Contract, Contract of Guarantee, Invest and Develop





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	 	 	Project Agreement of Suichang County Zhougongyuan Cascade Hydroelectric Station and Preliminary
Planning Report of the Project of Suichang County Zhougongyuan Cascade Hydroelectric Station
of Jiulongshan hydropower station.
	 
	(3)	 	The annual interest of the registered national debt (seven-year term) face value in 2007 (the
fourteenth term)
	 
	(4)	 	The Income Tax Law of the People’s Republic of China;
	 
	(5)	 	Preliminary Design Report for Zhougongyuan Hydropowe Station offered by
Jiulongshan Hydropower Development Company;
	 
	(6)	 	The analysis of the efficiency increasing statement of Zhougongyuan Hydroelectric Station
provided by entrustee;
	 
	(7)	 	Relevant information of the listed power generation companies.
	 
	5.	 	Other References
	 
	(1)	 	Audit reports
	 
	(2)	 	Price information and other materials collected from news, journals, webs, manufacturers and
other channels;
	 
	(3)	 	Relevant contracts and agreements provided by the appraised enterprise;
	 
	(4)	 	Relevant information mastered by appraisers and materials from field investigation.





X Appraisal Method




The income approach is adopted in this appraisal assuming the continuous operation of the
enterprise.




	1.	 	Preconditions for Application of the Income Approach
	 
	 	 	The income approach refers to such an assets appraisal approach that the value of the appraised
assets is decided by means of estimating the expected return of the appraised assets and
converting them into present value. Preconditions for application of the income approach as
follows:






	 	(1)	 	The clear property right of the enterprise assets appraised;
	 
	 	(2)	 	The future income of enterprises able to be monetarily quantified;
	 
	 	(3)	 	The future operating risk of the enterprise able to be monetarily quantified.





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	2.	 	Profit Forecast Basis






	 	(1)	 	The basis of this appraisal is established on the precondition of the normal
operation of the enterprise and all earnings are from the normal operation of the
enterprise, taking no account of accidental factors and non-comparable factors.
	 
	 	(2)	 	The profit forecast takes the actual stock assets of the enterprise and has taken the
influence on the normal earnings of the enterprise from the reasonable improvement of
stock assets and the additional investment into consideration.
	 
	 	(3)	 	The profit forecast is established on the findings of audit from Jiulongshan
Hydropower Development Company, in accordance with the profit forecast submitted by the
enterprise and entrustee’s working plan and according to relevant information collection
from inquiry carried out by appraisers. It has necessarily analyzed, estimated and
confirmed the reasonableness of the profit forecast by the enterprise and some adjustments
have been made.
	 
	 	(4)	 	Operation materials of the past years and the preliminary design report provided by
Jiulongshan Hydropower Development Company;
	 
	 	(5)	 	The analysis of the efficiency increasing statement of Zhougongyuan Hydroelectric
Station provided by entrustee;
	 
	 	(6)	 	The unification of accounting process adopted.






	3.	 	Profit Method valuation model




The discounted cash flow model adopts entity cash flow. Its computing formula is:
The basic format of entity cash flow model is:




     Entity value=entity cash flow t/ (1+ weighted average cost of capital)
t



     Shareholders equity value=entity value- liability value



     Liability value =payable liability cash flow/ (1+equal risk liability cost) t



     The entity cash flow= after-tax profit before interest+ depreciation and
amortization — operation capital increment- capital expenditure



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	4.	 	Establishment of the Forecast Period




So as to be able to reflect cash flow of the power station operation in a long time, we confirmed
the predicted period is ten years (including the fourth-quarter of the year 2007). It is from the
year 2007 (the first year) to the year 2016.





	5.	 	Establishment of Benefit Period




The operation period of the Jiulongshan Hydropower Development Company is thirty years as stated in
the company regulations, counting from the issuance of the operation license. The operation period
stated in the business license of the enterprise as a legal person is from Nov. 22, 2001 to Nov.
21, 2031. On the base of the economic development prospect of generating power by water conservancy
and supposing the enterprise to be operate continuately, the appraisal benefit period is permanent,
namely from Sep. 30, 2007 to the permanency.





	6.	 	Establishment of the Discounting Rate




According to the principle of unifying the earning capacity and the discounting rate, the earning
capacity is entity cash flow, so the discounting rate” r” will choose the weighted average cost of
capital (WACC), i.e., the return on investment capital, also called investment capital cost, a
comprehensive return rate decided by the structure and return rate of the shareholders’ equity
capitals and interest-payment debenture capitals.




     The computing formula is:


WACC = Ke*We+Kd*(1-T)*Wd

Ke: Shareholders’ equity capital cost;

Kd: debenture capital cost;

We: the ratio of shareholders’ equity capital in the capital structure;

Wd: the ratio of debenture capital in the capital structure;

T: valid income tax rate of the company;





	(1)	 	Definition of Ke




According to the capital asset pricing model (CAPM) and on this base, considering



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the individual
risk earning of Jiulongshan Hydropower Development Company, the computing formula is:





Ke= Rf+β×Rpm+A




Rf: risk-free return rate;




RPm: market risk premium;




	 	 	A: individual risk adjustment.
	 
	•	 	Risk-free Return Rate Rf
	 
	 	 	The annual interest of the registered national debt (seven-year term) face value in 2007 (the
fourteenth term) is 3.9% and if converted into the compound interest, the interest is 3.51%, so
the risk-free return rate is 3.51%.
	 
	•	 	Enterprise risk coefficient β
	 
	 	 	It is confirmed according to inquiry the enterprise analogous Hu Shen A shares stock listed
company Beta value, the specific confirmation process as follows:
	 
	 	 	Firstly, on the base of Beta without the finance lever from the listed companies of the same
kind, the average Beta without the finance lever can be worked out. According to the
interest-bearing debt status as well as the future financing plan of the enterprise, the Beta
of the enterprise can be worked out.
	 
	 	 	Through calculation, the Beta without finance level in the listed companies of the same kind is
0.2939.
	 
	 	 	According to the operation capacity, financing capacity and the future capital structure of the
enterprise, the debt/equity ratio (D/E) from October 2007 to 2015 can be determined. Through
the formula βL= (1+(1-T)×D/E)×βU, we can work out the Beta coefficient of the enterprise, see
the following table.





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Oct.-Dec	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	.,2007	 	2008	 	2009	 	2010	 	2011	 	2012	 	2013	 	2014	 	2015	 	2016
	Payment of interest
liability D/ equity
E
	 	 	 	 	 	 	0.38	 	 	 	2.18	 	 	 	1.93	 	 	 	1.56	 	 	 	1.21	 	 	 	0.93	 	 	 	0.61	 	 	 	0.28	 	 	 	0.02	 
	corporate income tax
	 	 	 	 	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%
	BETA
	 	 	 	 	 	 	0.38	 	 	 	0.77	 	 	 	0.72	 	 	 	0.64	 	 	 	0.56	 	 	 	0.50	 	 	 	0.43	 	 	 	0.36	 	 	 	0.30	 






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	•	 	Market Risk Premium Rpm
	 
	 	 	Domestic securities market is an emerging but bundle one. On one hand, the domestic market has
a relatively shorter history data and in the first several years of its establishment, the
speculation atmosphere was pregnant, so the market fluctuation is large; on the other hand,
presently, the control over the exchange flow under the capital account is strict, plus the
particularity of the stock equity separation, so the stock equity risk premium deduced directly
from the history data has a low reliability, while in the mature market, owing the long history
data, the overall stock equity risk premium on the market could be got from analyzing the
history data, so the risk premium of international emerging markets commonly could be decided
by the risk premium of the mature market. In this appraisal, the market risk premium Rpm is
7.5%.
	 
	•	 	The risk adjustment coefficient
	 
	 	 	According to preliminary design report, the hydropower station installed capacity should reach
53,600.0KW, in consideration of the hydropower station is under construction, it has too much
operation risk. The income of the power station is relatively stabile and the operating risk is
not high. At present, the assets/liabilities ratio of the enterprise is not high and its business
finance risk is not high. Whereas the above content, the specific risk adjustment “A” is
confirmed to be 2%.
	 
	•	 	Equity Capital Return Rate r
	 
	 	 	Ke = Rf+β×Rpm+A





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Oct.-Dec., 2007	 	2008	 	2009	 	2010	 	2011	 	2012	 	2013	 	2014	 	2015	 	2016
	Rf
	 	 	 	 	 	 	3.51	%	 	 	3.51	%	 	 	3.51	%	 	 	3.51	%	 	 	3.51	%	 	 	3.51	%	 	 	3.51	%	 	 	3.51	%	 	 	3.51	%
	Rm
	 	 	 	 	 	 	7.50	%	 	 	7.50	%	 	 	7.50	%	 	 	7.50	%	 	 	7.50	%	 	 	7.50	%	 	 	7.50	%	 	 	7.50	%	 	 	7.50	%
	BETA
	 	 	 	 	 	 	0.38	 	 	 	0.77	 	 	 	0.72	 	 	 	0.64	 	 	 	0.56	 	 	 	0.50	 	 	 	0.43	 	 	 	0.36	 	 	 	0.30	 
	A
	 	 	 	 	 	 	2	%	 	 	2	%	 	 	2	%	 	 	2	%	 	 	2	%	 	 	2	%	 	 	2	%	 	 	2	%	 	 	2	%
	Ke
	 	 	 	 	 	 	8.36	%	 	 	11.29	%	 	 	10.91	%	 	 	10.31	%	 	 	9.71	%	 	 	9.26	%	 	 	8.74	%	 	 	8.21	%	 	 	7.76	%







	(2).	 	Kd, the ratio of calculated finance expenses (according to the actually
performed interest-paid accounting contract) / the actual interest-paid accounts (in the same
period). Kd value shall be determined year by year.





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	(3).	 	Definition of We and Wd
	 
	 	 	In combination with the future operation condition, financing capability and capital structure
planning of the company, the proportion of the capitals in the total capital;
	 
	(4).	 	Definition of WACC
	 
	 	 	The WACC is estimated according to corporate income tax rate and forementioned indices.





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Oct.-Dec.,	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2007	 	2008	 	2009	 	2010	 	2011	 	2012	 	2013	 	2014	 	2015	 	2016
	Liability proportion ( Wd))
	 	 	 	 	 	 	0.69	 	 	 	0.66	 	 	 	0.61	 	 	 	0.55	 	 	 	0.48	 	 	 	0.38	 	 	 	0.22	 	 	 	0.02	 	 	 	0.28	 
	Equity proportion (We)
	 	 	 	 	 	 	0.31	 	 	 	0.34	 	 	 	0.39	 	 	 	0.45	 	 	 	0.52	 	 	 	0.62	 	 	 	0.78	 	 	 	0.98	 	 	 	0.72	 
	Corporate income tax rate (T)
	 	 	 	 	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%
	WACC
	 	 	 	 	 	 	7.47	%	 	 	7.54	%	 	 	7.60	%	 	 	7.61	%	 	 	7.68	%	 	 	7.73	%	 	 	7.82	%	 	 	7.78	%	 	 	7.63	%







	7.	 	Shareholders Equity Value Calculation




The entire shareholders’ equity is decided according to the present actual operation status of the
appraised enterprise, by means of subsection forecast of the future income of Jiulongshan
Hydropower Development Company and converting the income into cash to realize its entity value,
which then shall be deducted by the interest-payment liabilities. Firstly, the annual cash flow of
the Jiulongshan Hydropower Development Company from 2007 to 2016 is forecast; secondly, it is
presumed that the enterprise will run permanently and the entity cash flow remains the same as that
of 2016 after the year 2016; Thirdly, according to the selected discounting rate, the aforesaid
two-stage entity cash flows are converted into cash; Fourthly, they shall be summed up and the
entity value of Jiulongshan Hydropower Development Company is figured out; Finally, The
shareholders equity value is obtained by liability value subtracted from entity value. Entity value
computing formula is:










	 	 	 	In which, P: the entity value of the enterprise
	 
	 	 	 	               
  Rt: the entity cash flow in the Tth year





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	 	R: 	 	 weighted average cost of capital; l.
	 
	 	T: 	 	 the forecast year;
	 
	 	n and n+1: 	 	 are the last year of the forecast period
and the first year after the forecast period respectively;
	 
	 	Rn+1:	 	 the entity cash flow of the (n+1)th year,
namely the first-year pre-interest cash flow after taxes after the forecast
period.






	7.	 	Selection of Data Estimations




The financial data forecast of Jiulongshan Hydropower Development Company has been adjusted based
on the manufacturing and operation capacity in the preliminary design, in accordance with national
current related laws, codes and macro-policies, the status and foreground of the China power
industry, and trend of Zhejiang power and according to the analysis the predominance and risk of
the enterprise, especially the market environment and development prospect and potentials of the
enterprises, the appraisers carried out necessary analyses and judgment for the profit forecast
from the year 2007 to the year 2016. And the rationality of forecast is affirmed, specific
adjustment are based on this.





	(1)	 	Prime Operating Revenue
	 
	 	 	The prime operating revenue Jiulongshan Hydropower Development Company, as a hydroelectric
enterprise, is the income from power sales.
	 
	 	 	In the forecast, various operational indicators influence on the income should be taken into
consideration.






	 	1	 	Installed generation capacity: refer to preliminary design, it is confirmed according
to practical installed generation capacity.
	 
	 	2	 	Utilization hours in a year: it is confirmed according to preliminary design
capability.
	 
	 	3	 	The station service power consumption rate, transformer loss rate and the line loss rate
for the exclusive power supply and transformation:
	 
	 	 	 	according to the preliminary design report, the station service power consumption rate is
calculated by 0.5%, transformer loss rate is calculated by 1%, and the line loss rate for
the exclusive power supply and
transformation is calculated by adopting 2%.





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	 	4	 	The estimation of the grid power: it is estimated based on the aforesaid indicators.
	 
	 	•	 	Establishment of the power price: it is established according to Parallel in Economic
Agreement which signed by Yingchuan Hydroelectric Station, Wuliting Hydroelectric Station
Enterprise and Lishui Electric Utility Bureau.
	 
	 	•	 	The estimation of the prime operating revenue: it is estimated based on the aforesaid
indicators.






	(2)	 	Prime Operating Cost
	 
	 	 	The prime operating cost includes salary, depreciation and amortization, water resources fee,
repair charge, mini hydro management fee, running cost. It is estimated according to cost real
data of Jiulongshan Hydropower Development Company during its main business trial running and
the break-even cost data during preliminary design. The future increase is also considered.






	 	1	 	Based on the 2009 level, wages of workers will raise 5% per annum to 2014 the wage
level in the year 2015 and the year after will held the line. The number of employee is
confirmed according to personnel arrangement in preliminary design report and practical
situation.
	 
	 	2	 	Depreciation and amortization, the building structures and hydraulic structures are
depreciated according to 50 years. The facility is depreciated according to 25 years.
	 
	 	3	 	The cost of water resources shall exercise the current standard: RMB 0.01 yuan for
1kW. (it enjoys three exemption and two reduction by one half policies from the year 2008
to 2013).
	 
	 	4	 	Maintenance expenses: because the hydropower station is nearly established, the
maintenance expenses are increasingly growing year by year from the year 2008. It will
reach 0.5% of the predicted original value of fixed assets in the year 2014. Subsequently,
the annual maintenance expenses retain constant.
	 
	 	5	 	The cost of small hydropower station management shall exercise the current standard:
it is taken according to 35% of the cost of water resources.




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	(3)	 	Tax and Associate Charge of Main Operations
	 
	 	 	Taxes and associate charges of main operations include urban construction tax and education
surtax, which shall be estimated according to current tax standards, namely the urban
construction tax is 1% of the actual paid value added tax and the education surtax is 3% of the
actual paid value added tax. The local education surtax is 2% of the actual paid value added
tax, The water conservancy construction fund is 0.1% of the actual paid value added tax
	 
	(4)	 	Management cost
	 
	 	 	The management cost includes salary, employee welfare cost, labor union expenditure, staff
education expenditure, staff endowment insurance, bonus and other management cost.






	 	1	 	Based on the 2008 level, wages of workers will rise 5% per annum to 2014. The wage
level in the year 2015 and the year after will hold the line. The number of employee is
confirmed according to personnel arrangement in preliminary design report and practical
situation.
	 
	 	2	 	Staff welfare cost is estimated according to the current standard.
	 
	 	3	 	Labor union expenditure is estimated according to the current standard.
	 
	 	4	 	Staff education expenditure is estimated according to the current standard.
	 
	 	5	 	Staff endowment insurance is referred to the current standard.
	 
	 	6	 	Bonus is estimated according to the current bonus standard.
	 
	 	7	 	Other management expenses are estimated on the base of preliminary design report.






	(5)	 	Financial expenses
	 
	 	 	Financial expenses: it is estimated according to enterprise implementary loan agreement and in
combination with the future operation condition, financing capability and future capital
structure planning of the enterprise.
	 
	(6)	 	Non-operating Income and Non-operating Expenses
	 
	 	 	Non-operating revenues and expenses are not recur renting items, so they
haven’t been taken into consideration in this profit forecast.





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	(7)	 	Corporate income tax
	 
	 	 	The corporate income tax is determined according to the Company’s implemented tax rate: in
2007, it is estimated according to the current income tax rate (33%). After the year 2008, it
will carry out the new income tax rate stated by the newly-published “Enterprise Income Tax Law
of the People’s Republic of China”, i.e. 25%.






	(8)	 	After-tax Profit
	 
	 	 	Based on the said profit and loss items like income and cost, the after-tax profit is decided.
	 
	(9)	 	Net Investment





          Net investment = capital expenditure + increase of operation funds — depreciation
and amortization





	 	1	 	Capital Expenditure
	 
	 	 	 	The capital expenditure is decided by the new power station plan. At the same time, on the
condition of the permanent operation of the enterprise, the funds of depreciation and
amortization are equivalent to the capital expenditure. Because the appraisal takes no
account of additional investment, provided that the enterprise kept simple reproduction and
the facility requires resetting, the annual capital expenditure sum is equal to the
provision of depreciation of equipment.
	 
	 	2	 	Increase of Operation Funds
	 
	 	 	 	The demand for the operation funds in the company is slim and the cash flow brought by the
daily power sales is able to support the daily operation turnover, so the increase of
operation funds is taken no account of.
	 
	 	•	 	Depreciation and Amortization
	 
	 	 	 	The forecast value of the depreciation and amortization is decided on the basis of forecast
depreciation of fixed assets of main business cost.






	(10)	 	Forecast of Annual Stockholders’ Cash Flow
	 
	 	 	According to the said forecasts, the forecast of annual shareholders’ cash flow





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	 	 	is as follows:





Unit: RMB, 10 thousand     




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Item	 	2008	 	2009	 	2010	 	2011	 	2012	 	2013	 	2014	 	2015	 	2016
	I. Prime Operating Revenue
	 	 	907.67	 	 	 	5,446.03	 	 	 	5,568.83	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 
	Minus: discount distribution
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	 	 	 	 	 	 	 	 
	Prime Operating net sale
	 	 	907.67	 	 	 	5,446.03	 	 	 	5,568.83	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 	 	 	5,691.63	 
	Minus: Cost of Main Operations
	 	 	220.87	 	 	 	1,338.85	 	 	 	1,358.83	 	 	 	1,380.73	 	 	 	1,404.76	 	 	 	1,431.13	 	 	 	1,542.32	 	 	 	1,542.32	 	 	 	1,542.32	 
	Tax and Associate Charge of Main
Operations
	 	 	4.18	 	 	 	25.05	 	 	 	25.62	 	 	 	26.18	 	 	 	26.18	 	 	 	26.18	 	 	 	26.18	 	 	 	26.18	 	 	 	26.18	 
	II. Profits from Main Operations
	 	 	682.62	 	 	 	4,082.13	 	 	 	4,184.38	 	 	 	4,284.72	 	 	 	4,260.69	 	 	 	4,234.32	 	 	 	4,123.13	 	 	 	4,123.13	 	 	 	4,123.13	 
	Add: other business profit
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Minus: the operation expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	General and Administrative Expense
	 	 	46.53	 	 	 	279.21	 	 	 	289.96	 	 	 	301.23	 	 	 	313.07	 	 	 	313.07	 	 	 	313.07	 	 	 	313.07	 	 	 	313.07	 
	Financial Expenses
	 	 	263.17	 	 	 	1,509.21	 	 	 	1,344.67	 	 	 	1,095.31	 	 	 	854.15	 	 	 	668.53	 	 	 	446.32	 	 	 	215.51	 	 	 	18.24	 
	III. Operating Income
	 	 	372.92	 	 	 	2,293.71	 	 	 	2,549.75	 	 	 	2,888.18	 	 	 	3,093.47	 	 	 	3,252.72	 	 	 	3,363.74	 	 	 	3,594.55	 	 	 	3,791.82	 
	Add: investment income
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Subsidiary earnings
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Non-operating Income
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Minus: Non-operating Expense
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Iv. Income Before Tax
	 	 	372.92	 	 	 	2,293.71	 	 	 	2,549.75	 	 	 	2,888.18	 	 	 	3,093.47	 	 	 	3,252.72	 	 	 	3,363.74	 	 	 	3,594.55	 	 	 	3,791.82	 
	Minus: Income Tax
	 	 	93.23	 	 	 	573.43	 	 	 	637.44	 	 	 	722.05	 	 	 	773.37	 	 	 	813.18	 	 	 	840.94	 	 	 	898.64	 	 	 	947.96	 
	V. Net Income
	 	 	279.69	 	 	 	1,720.28	 	 	 	1,912.31	 	 	 	2,166.13	 	 	 	2,320.10	 	 	 	2,439.54	 	 	 	2,522.80	 	 	 	2,695.91	 	 	 	2,843.86	 
	VI. Pre-interest Profit After Taxes
	 	 	477.07	 	 	 	2,852.19	 	 	 	2,920.82	 	 	 	2,987.62	 	 	 	2,960.72	 	 	 	2,940.94	 	 	 	2,857.55	 	 	 	2,857.55	 	 	 	2,857.55	 
	Add: depreciation and amortization
	 	 	170.55	 	 	 	1,023.31	 	 	 	1,023.31	 	 	 	1,023.31	 	 	 	1,023.31	 	 	 	1,023.31	 	 	 	1,023.31	 	 	 	1,023.31	 	 	 	1,023.31	 
	Minus: the capital expenditure
	 	 	49.15	 	 	 	294.88	 	 	 	294.88	 	 	 	294.88	 	 	 	294.88	 	 	 	294.88	 	 	 	294.88	 	 	 	294.88	 	 	 	294.88	 
	Minus: business current assets
increment
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	VIII. Entity cash flow
	 	 	598.47	 	 	 	3,580.62	 	 	 	3,626.33	 	 	 	3,601.45	 	 	 	3,574.55	 	 	 	3,554.77	 	 	 	3,471.38	 	 	 	3,471.38	 	 	 	3,471.38	 







	(11)	 	The estimation for entity cash flow present value
	 
	 	 	Through above indictor’s estimation, it is calculated by adopting the above-mentioned entity
cash flow calculation of present value . The entity value of enterprise forever operation
state is RMB 428.7616 Million.
	 
	(12)	 	Shareholders equity value calculation
	 
	 	 	Shareholders equity value = entity value —  liability value






	 	•	 	Liability value
	 
	 	 	 	The enterprise has RMB 206.52 Million for various loans on appraisal base day. The
liability value is RMB 206.52 Million.
	 
	 	•	 	Interests Value
	 
	 	 	 	Shareholders equity value=entity value - liability value=428,761,600-206,520,000=
222,241,600





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Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project




Assets Appraisal Report







XI Implementation Process and Conditions of Appraisal Procedures




                              The appraisal process can be divided into five stages:




	(I)	 	Acceptance of Commission




Main jobs of this stage include: defining appraisal objectives, scope and the appraisal base day,
establishing work scheme of assets appraisal and signing agreement on assets appraisal.





	(II)	 	Preparations
	 
	1.	 	As required by the assets appraisal, arranging the application form of assets appraisal for
the entrustee and the appraised enterprise and assisting the appraised enterprise for assets
declaration;
	 
	2.	 	Collecting and preparing materials required by assets appraisal.
	 
	(III)	 	Assets Check and Verification
	 
	1.	 	Listening to introductions on the enterprise status, the history and status of the appraised
assets by persons concerned in the assets-holding enterprise;
	 
	2.	 	Consulting and discriminating the application form of assets appraisal provided by the
enterprise, checking and verifying the physical assets with the financial records of the
enterprise, proving the authenticity and integrality of declaration materials submitted by the
enterprise;
	 
	3.	 	Verifying the real objects on the scene according to the application form of assets
appraisal, looking into and recording the assets conditions, talking with asset management
personnel to learn the operation and management status of assets, investigating whether there
are overage assets influencing appraisal;
	 
	4.	 	Examining certificates of the property right of the appraised assets, equipment purchase
contract, accounting materials like account current and invoices, and making clear of the
enterprise assets property right;




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	5.	 	Consulting the project approximate budget and audit materials, spot-examining assets
discharge statement, equipment operation records, maintenance and accident records and looking
into the remaining status of assets to confirm the continuous development of assets operation;
	 
	6.	 	Investigating the operation, financial and future development status of the enterprise,
making proper adjustments after analyzing related indices;
	 
	7.	 	Investigating and confirming the market environment where the appraised enterprise is
located.
	 
	(IV)	 	Estimations and Gathering






	1.	 	Analyzing obtained materials and selecting proper appraisal approaches according to the
status and features of the appraised assets;
	 
	2.	 	Acquiring pricing basis and price materials;
	 
	3.	 	Calculating the appraisal value;
	 
	4.	 	Analyzing the appraisal conclusion and adjusting, amend and perfecting the assets appraisal
result;
	 
	5.	 	Writing appraisal explanations and appraisal report;
	 
	6.	 	Carrying out three-level double checks, supplementing and amending the appraisal report and
appraisal explanations.
	 
	(V)	 	Submittal of the Report
	 
	 	 	According to the appraisal condition, submitting Assets Appraisal report discussion
draft to the entrustee; according to opinions from the entrustee and the assets-holding
enterprise, making necessary amendments; submitting a formal Assets Appraisal report to the
entrustee after it has been confirmed all right by the entrustee and the appraised
enterprise.





XII Appraisal Conclusions





	(I)	 	The Legal Property Right of the Appraisal Subject
The work of certified public valuers aims to estimate and professionally comment the value of
the appraisal subject, but the confirmation of the legal property right of the appraisal
subject or comment on them is beyond their work 




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Assets Appraisal Report


	 	 	scope. The entrustee and the related disputing
party shall offer materials on the legal property right of the appraisal subject and shall assume all responsibilities on the
authenticity, legitimacy and integrality of such materials. Certified public valuers are not
entitled to confirm or comment the legal property right of the appraisal subject, so we hereby
provide no guarantee to the legal property of the appraisal subject. The entrustee and related
disputing parties shall pay attention to this.
	 
	 	 	According to Opinion on Certified Public Valuer Focusing on the Legal Right of Appraisal
Subject, on the appraisal scene, appraisers have properly paid attention to the property right
to the appraisal subject, collected and checked certificates of the legal property right of the
appraisal subject and investigated issues concerning the property right.
	 
	 	 	The prime assets of Jiulongshan Hydropower Development Company are the Jiulongshan hydropower
station under construction. The project has not been completed. The acceptance of works has
not been transacted yet. The state-owned land use certificate and building ownership
certificate have not been transacted yet.
	 
	(II)	 	Appraisal conclusion
	 
	 	 	Up to the appraisal base day September 30, 2007, by means of income approach, the entity value
appraisal value of Jiulongshan Hydropower Development Company is RMB 428.7616 Million and all
shareholders equity appraisal value is RMB 222.2416 Million.






	(III)	 	Explanations to Appraisal Conclusions
	 
	1.	 	The selling price of power in Jiulongshan Hydropower Development Company is in accordance
with the current standard, taking no consideration of prospective adjustment.
	 
	2.	 	As the enterprise has been operated for more than 5 years, it enjoys the preferential
policies of corporate income tax relief no longer.
	 
	3.	 	This assessment of power generation peak-valley ratio is based on “Preliminary Planning
Report of the Project of Suichang County Zhougongyuan 





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Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project




Assets Appraisal Report



	 	 	Cascade Hydroelectric Station” and the
analysis of the efficiency increasing
statement of Zhougongyuan Hydroelectric Station provided by entrustee and in combination with
the entrustee’s improving of the power generation peak-valley ratio via coordination and reach
the expected goal through Lishui Electricity Generating Board in the forecast year.






	4.	 	Jiulongshan Hydropower Development Company estimated the predicted grid power on the basis of
long term average annual power output of the preliminary design. In the actual operation, the
grid power quantity may be higher or lower than the aforesaid level due to the impacts of the
natural factors.
	 
	5.	 	The appraisal conclusion is the working results after carrying out all the aforesaid
appraisal procedure. The appraisal conclusion is not a guarantee for the operation status and
operation achievements of the enterprise in the future.





XIII Explanations to Particular Issues





Issues that may influence the appraisal conclusions but are beyond the capabilities of
appraisers for estimation are including but not limited to:




	 	1.	 	Assets and liabilities of Jiulongshan Hydropower Development Company to be appraised
have already been audited by the China certified account and acquired the audited
accounting statement on the appraisal base day.
	 
	 	2.	 	Materials provided by the top management of Jiulongshan Hydropower Development
Company and other personnel are the basis of this report, so Jiulongshan Hydropower
Development Company shall be responsible for the authenticity, legitimacy and allsidedness
of such materials. For defect issues that exist in Jiulongshan Hydropower Development
Company and may influence the appraisal conclusions, if not particularly stated or
expressed clearly in the appraisal field investigation or unable to be obtained according
to the professional experience, the appraisal institution and appraisers shall be exempt
from any responsibilities thereof.
	 
	 	3.	 	The Jiulongshan Hydropower Development Company submitted Preliminary Planning Report
of Suichang County Zhougongyuan Cascade Hydroelectric 




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Assets Appraisal Report



	 	 	 	Station and the analysis of the
efficiency increasing statement of Zhougongyuan Hydroelectric Station provided by
entrustee provided by the
entrustee, which are one of the main basis for the appraisal report.






	 	4.	 	Zhougongyuan Hydropower Station has not been completed yet, this appraisal supposes
the appraisal result that the hydropower station can be completed and can be operated
normally. It takes no account of the payable associated costs for completing the
hydropower station project and putting into normal operation conditions.
	 
	 	5.	 	This appraisal supposes that the hydropower station can be completed on schedule and
passed through construction quality acceptance. The power generation can reach multi-year
average annual power output stated in the preliminary design report.
	 
	 	6.	 	In the forecast year, as the consummating of the locat electrical network structure and
the fortified management the entrustee would improve the power generation peak-valley ratio
via coordination and reach the expected goal through Lishui Electricity Generating Board
(85%:15%).






It is hereby notified that the report users shall pay attention to the influence on the appraisal
conclusions from the said issues.



XIV Major Issues after Appraisal Base Day





	1.	 	They refer to key issues that happen between the appraisal base day and the submittal day of
the appraisal report.
	 
	2.	 	On November 7, 2007, Zhejiang Guangsha Hydropower Investment Co., Ltd. signed stock rights
transfer agreement with Guangsha Construction Group Co., Ltd.. Zhejiang Guangsha Hydropower
Investment Co., Ltd. transferred 75% stock rights of Jiulongshan Hydropower Development Co.,
Ltd. to Guangsha Construction Group Co., Ltd.. After stock rights transfer, the shareholder
and amount of investment, Guangsha Construction Group Co., Ltd. RMB 67.5 Million, occupies 75%
stock rights; Lu Chunliang RMB 22.5 Million, occupies 25% stock rights.
	 
	3.	 	Other key issues that haven’t been provided by the appraised enterprise or discovered by
appraisers after the appraisal base day;





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Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project




Assets Appraisal Report




	4.	 	After the appraisal base day and within the valid period of the appraisal report, if the
amount of assets varies, it shall be priced according to the original appraisal approach of
such assets and corresponding adjustments of assets
shall be made. Due to specific causes, if the price standard of assets has been changed, which
has obviously influenced the appraisal assets. the entrustee shall request the appraisal
institution to reassess the appraisal value according to the practical situations.





XV Legal Effect of the Appraisal Report





	1.	 	Appraisal conclusions stated in the report are merely a reflection of the current fair market
price that was decided according to the principle of open market, of the appraised assets
under the appraisal objectives, taking no consideration of influences from losses caused by
activities like pledge and guarantee, or significant changes of the national macroeconomic
policies, or natural forces and other force majeure. The precondition of this report is the
continuous operation of the assets, so if the precondition is changed, the appraisal
conclusions will be null. The report is exclusive for the appraisal objectives, so the signing
certified public valuers and the appraisal institution shall be exempt from any
responsibilities from results caused by misapplications.
	 
	2.	 	The valid date of this report is one year, namely from September 30, 2007 to September 29,
2008. During this period, if the appraisal objectives are to be realized, the report shall
work as the pricing basis and shall be adjusted, in the form of self-regulating or entrusting
the appraisal company, according to issues concerned after the appraisal base day, the
appraisal conclusions in this will be invalid after one year.
	 
	3.	 	Appraisal conclusions in this report are exclusive for the entrustee to realize the appraisal
objectives.





XVI Appraisal Reporting Day



The formal presentation data of the Assets Appraisal report is November 15, 2007.



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Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project




Assets Appraisal Report






     Assets Appraisal Institution: Beijing Jing Du Assets Valuation Company Ltd.



     Legal Representative of Assets Appraisal Institution: Jiang Jianying



     China Certified Public Valuer: Wang Ri



     China Certified Public Valuer: Sun Chaohui



     November 15, 2007




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Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project




Assets Appraisal Report



Zhejiang Jingning Jiulongshan Hydropower




Development Co., Ltd.




Share Transfer Project




Document for Future Reference




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Suichang Jiulongshan Hydropower Development Co., Ltd. Share Transfer Project




Assets Appraisal Report


Statement
on the Application Scope of Document
for Future Reference of the Assets Appraisal Report




This document is exclusive for the economic activities to fulfill appraisal objectives and
delivered to the administrative competent departments for assets appraisal for review. The use
right of the appraisal report belongs to the entrustee, so without the permission of the entrustee,
no offer or disclosure of this report shall be made by the appraisal institution. At the same time,
without the approval of us, the whole or partial report shall not be published on the open media by
the entrustee. Jingdu is exempt from any legal responsibilities for any other results of economic
activities by due to the inappropriate quotation by the entrustee of the appraisal result.




Beijing Jingdu Assets Valuation Co., Ltd.




Nov. 15, 2007




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Ltd.      3F, Scitech Plaza       Fax: 0086-10-65227608       40



                                                 









 





Appendix 6




Breakdown of Restructuring Credits and Debts of the Object Company and Measures therefore of

Jiulongshan Hydropower Investment Co., Ltd




     By September 30, 2007, the Audit Report of Beijing Jingdu CPA Limited affirms that the capital
balance in the finance account of Jiulongshan Hydropower Project (“Object Company”, same as below)
is RMB 221,118.13, the balance of other receivables is RMB 23,582,940.71and the balance of
liabilities other than those from banks is RMB 9,896,759.95.



     Upon consultation between the Transferors and the Transferee, they have agreed as follows
regarding the aforesaid credits and debts (including currency capital):



     1. In accordance with the Equity Interest Transfer Contract, the Transferors shall
restructure the credits (including currency capital and other receivables, same as below) and debts
(including other payables, payable benefits to staff, tax payableeexcluding bank loans, same as
below) of the Object Company, in other words, the Object Company will pass the credits and debts to
Zhejiang Guangsha Hydropower Investment Co., Ltd by signing credits and debts agreements with
creditors and debtors.



     2. Upon restructuring, the Object Company shall receive from or pay Zhejiang Guangsha
Hydropower Investment Co., Ltd the credits and debts; in accordance with the Equity Interest
Transfer Agreement and Framework Agreement, such credits and debts shall be enjoyed and borne by
Guangsha Hydropower Investment Co., Ltd.



     3. Changes in the credits and debts from the Base Date to Delivery Date shall be settled by
the Transferors and Transferee through settling the credits and debts as of the Delivery Date in
accordance with the Equity Interest Transfer Contract and these measures.



     4. Breakdown of the credits and debts as of the assessment date is as follows (attached
hereto):



Date: _________ 2007




1









 





Breakdown of Jiulongshan Credits and Debts




	 	 	 	 	 	 	 	 	 
	 	 	 	 	By Sep.30, 2007	 	Unit: RMB









	 	 	 	 	 	 	 	 	 
	 	 	 	 	Post-audit	 	 
	Item	 	Unit or detail	 	adjustment	 	Note
	Currency Capital

	 	 	 	 	221,118.13	 	 	 
	Other Payables

	 	 	 	 	23,582,940.71	 	 	 
	 

	 	Guangsha Hydropower Investment Co., Ltd
	 	 	22,982,747.71	 	 	Borrowing and lending
	 

	 	Suichang Water Resources Bureau
	 	 	50,000.00	 	 	deposit
	 

	 	Suichang Shuangyuan Hydropwer Co., Ltd
	 	 	500,000.00	 	 	work expense
	 

	 	Lishui Bowei Auto Care
	 	 	693	 	 	Repair cost
	 

	 	Liu Jianxiang
	 	 	2,000.00	 	 	Reserve fund
	 

	 	Chen Xiangliang
	 	 	3,000.00	 	 	Reserve fund
	 

	 	Chen Shijin
	 	 	3,000.00	 	 	Reserve fund
	 

	 	Yin Lichang
	 	 	500	 	 	Reserve fund
	 

	 	Li Qingshan
	 	 	500	 	 	Reserve fund
	 

	 	Zhou Yueming
	 	 	20,000.00	 	 	Reserve fund
	 

	 	Zheng Wuxiong
	 	 	5,000.00	 	 	Reserve fund
	 

	 	Li Weiming
	 	 	15,000.00	 	 	Reserve fund
	 

	 	Wang Jianchun
	 	 	500	 	 	Reserve fund
	 	 	Total Credits
	 	 	23,804,058.84	 	 	 
	Benefits payable

	 	Provision for staff welfare
	 	 	321,458.00	 	 	 
	Taxes payable

	 	Income tax
	 	 	113,237.00	 	 	 
	Other payables

	 	 	 	 	9,462,064.95	 	 	 
	 

	 	Shanghai Zhaoyin
	 	 	30,000.00	 	 	Work bond
	 

	 	Chongqing New Century
	 	 	100,000.00	 	 	Work bond
	 

	 	Shanghai Zhaoyin Power Equipment Co., Ltd
	 	 	100,000.00	 	 	Work bond
	 

	 	Staff financing
	 	 	1,520,000.00	 	 	 
	 

	 	Last payment for the retaining wall
	 	 	0.6	 	 	work expense
	 

	 	Zheng Yinyi
	 	 	11,473.15	 	 	work expense
	 

	 	Li Yirong
	 	 	26,915.20	 	 	work expense for retaining wall






2









 







	 	 	 	 	 	 	 	 	 
	 	 	 	 	Post-audit	 	 
	Item	 	Unit or detail	 	adjustment	 	Note
	 

	 	Research office
	 	 	5,000.00	 	 	 
	 

	 	Wu Linxiang
	 	 	2,905.92	 	 	work expense for retaining wall
	 

	 	Wu Lingsheng
	 	 	0.03	 	 	work expense for retaining wall
	 

	 	Shanghai Zhengji Eectronic Co., ltd
	 	 	100,000.00	 	 	Work bond
	 

	 	Hangzhou Guorui Power Supply ompany
	 	 	30,000.00	 	 	Work bond
	 

	 	Huzhou Zhengdao Lifting Equipment Co., Ltd
	 	 	60,450.00	 	 	Work bond
	 

	 	Zhengjiang Hydropower Construction
Equipment Co., Ltd
	 	 	135,000.00	 	 	Work bond
	 

	 	Nanjing Nanrui Automation Control Co., Ltd
	 	 	188,000.00	 	 	Work bond
	 

	 	Jiangshan Transformer Factory
	 	 	150,000.00	 	 	Work bond
	 

	 	Land Requisition Fund
	 	 	2,435,100.00	 	 	 
	 

	 	Provincial Tunnel Project Company
	 	 	800,000.00	 	 	Bond
	 

	 	Provincial Third Geological Mine Company
	 	 	1,200,000.00	 	 	Bond
	 

	 	Jinhua Shuitai Hydropower Project Company
	 	 	1,200,000.00	 	 	Bond
	 

	 	Fujian Nanping Nandian Hydropower
Equipment Manufacturing Company
	 	 	1,123,000.00	 	 	Bond
	 

	 	Pension Insurance
	 	 	169,566.60	 	 	 
	 

	 	Work-related injury insurance
	 	 	13,792.00	 	 	 
	 

	 	Union fee
	 	 	48,694.00	 	 	 
	 

	 	Education Charge
	 	 	12,127.45	 	 	 
	 

	 	Dinning hall
	 	 	40.00	 	 	 
	 	 	Total Debts
	 	 	9,896,759.95	 	 	 






3









 






Appendix 7




Letter of Undertaking




China
Hydroelectric Corporation:





We had provided guarantee for the following bank loans of Suichang County Jiulongshan
Hydropower Development Co., Ltd as set forth in Appendix 4:




Whereas CHC is willing to purchase one hundred percent of the equity interest of Suichang
County Jiulongshan Hydropower Development Co., Ltd, we hereby undertake that:




	1.	 	We will continually fulfill our guarantee obligations under above-mentioned guarantee
contracts until the fulfillment of the guarantee contracts are legally completed.
	 
	2.	 	If the creditor, the lending bank, requests us to provide the guarantee and perform the
procedure separately, we hereby undertake that, prior to the remitting date specified in
Article 7.2.1 of “Formal Equity Interest Transfer Contract of Suichang County Jiulongshan
Hydropower Development Co., Ltd” signed by CHC, Guangsha Construction Co., Ltd and Lu
Chunliang, we will provide the relevant guarantee and perform the procedure unconditionally in
accordance with the creditor’s requirements upon the Transferee’s provision of counter
guarantee and assumption of the guarantee cost and provide an ongoing guarantee for the undue
loans of Suichang County Jiulongshan Hydropower Development Co., Ltd.





Guangsha
Construction Group Co., Ltd.


December 13 , 2007