Sustainable Forest ties up with CITIC Merchant

The two companies enter into non-binding term sheet for a proposed acquisition of 90% interest of a biomass power plant.

Sustainable Forest Holdings Limited (“SFH”), together with its subsidiaries, (“the Group”) is pleased to announce that it has entered into a non-binding term sheet with CITIC Merchant Co., Limited (“CITIC Merchant”), the merchant banking arm of the CITIC Group, in which the Group intends to acquire from CITIC Merchant 90% equity interest of a company incorporated in the PRC which holds 100% beneficial interests in a 2x15 megawatt wood based biomass power plant in Inner Mongolia, the PRC (“Target Company”).

The total consideration of the proposed acquisition is estimated to be approximately RMB 90,000,000 to RMB135,000,000, with adjustments based on performance of the Target Company, which will be satisfied by cash and SFH’s issue of non-listing bonds convertible into ordinary shares. The final consideration shall be agreed upon by both parties taking into consideration the fair value of the Target Company as evaluated by an independent valuer. It is expected that net profit after tax of the Target Company shall not be less than RMB 20,000,000 for each of the three financial years after completion of the proposed transaction. CITIC Merchant has granted SFH exclusive right to proceed with the proposed acquisition within four months from the date of signing the term sheet, according to an SFH report.

Ms Sandy Fletcher, Chief Financial Officer of Sustainable Forest Holdings Limited, said, “We are very pleased to have entered into a non-binding term sheet with CITIC Merchant for the proposed acquisition of the biomass power plant in Inner Mongolia, the PRC. The proposed transaction will not only help the Group to diversify its product lines, but also gain a strategic partnership with CITIC Merchant, which focus on the energy, resources and renewable energy sector. During the discussion of the proposed acquisition, we are excited to know that CITIC Merchant endorses our business strategy of providing sustainable source of energy and materials. It is our intention to further cooperate or co-invest in other timber resources or other biomass power plant projects in the future.

Looking ahead, the Group will continue its commitment to become a truly integrated one-stop timber products group carrying out sustainable forest management and fully integrate its harvesting, processing, manufacturing and distribution operations in order to enhance the Group’s financial performance, it will also continue to explore any related investment opportunity which can create additional value for shareholders.”