SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of October, 2006
CHINA PETROLEUM & CHEMICAL CORPORATION
A6, Huixindong Street,
Chaoyang District Beijing, 100029
People's Republic of China
Tel: (8610) 6499-0060
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
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(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. )
Yes No X
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(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-__________. )
N/A
This Form 6-K consists of:
The announcement of connected transactions of China Petroleum & Chemical
Corporation (the "Registrant"), made by the Registrant in English on October
11, 2006.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
China Petroleum & Chemical Corporation
By: /s/ Chen Ge
-----------
Name: Chen Ge
Title: Secretary to the Board of Directors
Date: October 12, 2006
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
[GRAPHIC OMITTED]
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 0386)
ANNOUNCEMENT
CONNECTED TRANSACTION
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The Board announces that on 11 October 2006, the Company entered into a Joint
Venture Contract with Shengjun International, a subsidiary of Sinopec Group,
pursuant to which, the Company and Shengjun International agreed to increase
the registered capital of Hainan Petrochemical Co Ltd from USD 0.355 billion
(approximately RMB 2.8 billion) to RMB 3.986 billion by way of capital
injection of RMB 2.9895 billion by the Company and RMB 0.9965 billion by
Shengjun International. As at the date hereof, the entire equity interests in
Hainan Petrochemical Co Ltd is held by Shengjun International and upon the
completion of the capital increase, the Company and Shengjun International will
respectively hold 75% of and 25% of the equity interests in Hainan
Petrochemical Co Ltd.
Implications of Listing Rules for the Company
Sinopec Group is the controlling shareholder of the Company. As at the date
hereof, Sinopec Group is the holder of approximately 75.84% of the total issued
share capital of the Company. As Shengjun International is a subsidiary wholly
owned by Sinopec Group, pursuant to the Listing Rules, Shengjun International
is the connected person of the Company, therefore, the entering into the Joint
Venture Contract between the Company and Shengjun International constituted a
connected transaction for the Company under the Listing Rules. Pursuant to Rule
14A.32 of the Listing Rules, this transaction is subject only to the reporting
and announcement requirements as set out thereunder and no independent
shareholders' approval will be required.
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I THE JOINT VENTURE CONTRACT
Date
11 October 2006
Parties
(1) the Company
(2) Shengjun International, a subsidiary of Sinopec Group
Total Investment
The original total investment for Hainan Petrochemical Co Ltd stated in the
application report is RMB 10.62 billion. However, considering the effects of
the rising prices of the special-purpose equipment and materials including but
not limited to pumps, compressors, blowing machinery and rolled steel, the
actual total investment of Hainan Petrochemical Co Ltd has been adjusted to RMB
11.956 billion. The adjusted total investment of RMB 11.956 billion was
approved by the National Development and Reform Commission in its approval (Fa
Gai Gong Ye [2006] No.764) relating to the construction and development of the
Hainan Project issued on 29 April 2006.
Amount of Capital Increase
The registered capital of Hainan Petrochemical Co Ltd will amount to RMB 3.986
billion after the capital increase, which will be contributed by the Company
and Shengjun International within one month from the date of the execution of
the Joint Venture Contract in the following manner:
1
(1) RMB 2.9895 billion in cash by the Company; and
(2) RMB 0.9965 billion in cash by Shengjun International.
Hainan Petrochemical Co Ltd (previously known as Hainan Shihua Oil Refinery)
was established by Shengjun International in October 2003. At the time of
establishment of Hainan Shihua Oil Refinery, its total investment and
registered capital were USD 1.065 billion (approximately RMB 8.41 billion) and
USD 0.355 billion (approximately RMB 2.8 billion) respectively. As at the date
hereof, the paid-up capital of Hainan Shihua Oil Refinery was USD 12.8 million
(approximately RMB 101.12 million) and was contributed by Shengjun
International.
Pursuant to the Joint Venture Contract, the Company and Shengjun International
agreed to increase the registered capital of Hainan Petrochemical Co Ltd by way
of capital injection of RMB 2.9895 billion by the Company and RMB 0.9965
billion by Shengjun International. As at the date hereof, the entire equity
interests in Hainan Petrochemical Co Ltd is held by Shengjun International and
upon the completion of the capital increase, the registered capital of Hainan
Petrochemical Co Ltd will increase from USD 0.355 billion (approximately RMB
2.8 billion) to RMB 3.986 billion and the Company and Shengjun International
will respectively hold 75% of and 25% of the equity interests in Hainan
Petrochemical Co Ltd. The difference between the total investment of RMB 11.956
billion and the increased registered capital of RMB 3.968 billion will be
raised by way of bank loans through the application by Hainan Petrochemical Co
Ltd.
Term
The term of Hainan Petrochemical Co Ltd is 50 years from the date of issue of
its business licence.
Board
The Board of Hainan Petrochemical Co Ltd will consist of 6 directors. The
Company will nominate 4 directors and Shengjun International will nominate 2
directors. The chairman of the Board will be nominated by the Company.
Condition
The capital increase of Hainan Petrochemical Co Ltd is subject to the obtaining
of all the necessary approvals for the entering into the Joint Venture Contract
and for the increase of registered capital from all the relevant regulatory and
supervisory authorities (including but not limited to the approvals from the
State Environmental Protection Administration, the State Administration for
Industry and Commerce and the National Development and Reform Commission).
The shareholding structure after the capital increase of Hainan Petrochemical
Co Ltd is as follows:
----------------- -----------------
| Sinopec Corp | | Shengiun |
| | | International |
----------------- -----------------
\ /
\ 75% 25% /
\ /
-----------------------
| Hainan Petrochemical |
| Co Ltd |
-----------------------
Upon the completion of the capital increase, the Company will hold 75% of the
equity interests in Hainan Petrochemical Co Ltd and Hainan Petrochemical Co Ltd
will therefore become a subsidiary of the Company and the consolidated accounts
of the Company will include the results of Hainan Petrochemical Co Ltd.
The terms of the Joint Venture Contract have been arrived at after arm's length
negotiations between the Company and Shengjun International. Pursuant to the
Joint Venture Contract, the profit-sharing arrangement will be in proportion of
the respective shareholdings of the Company and Shengjun International in
Hainan Petrochemical Co Ltd after the capital increase.
II INFORMATION ON HAINAN PROJECT
The 4th meeting of the third session of the meeting of the Board was convened
on 10 October 2006, at which the investment in Hainan Petrochemical Co Ltd by
the Company and Shengjun International and the construction of
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Hainan Project was considered and reviewed. Mr. Chen Tonghai and Mr. Zhouyan
are non-executive Directors and are also the general manager and vice general
manger of Sinopec Group respectively, Mr. Chen Tonghai and Mr. Zhou Yuan, who
are deemed to be interested in the Hainan Project, abstained from the review
and the voting in respect of the Hainan Project.
1 Background Information of Hainan Project
For the purposes of increasing the overall oil-refining productivity and
promoting the economic development of Hainan Province, Shengjun International
and Hebang Oil-refinery, a wholly foreign-invested enterprise and a third party
independent of the Company and connected persons of the Company, together with
the support from the provincial government of Hainan Province entered into an
"Acquisition & Transfer Agreement" in October 2003 for the transfer of the
Hainan Project and its related assets owned by Hebang Oil-refinery and Hainan
Shihua Oil Refinery was therefore established by Shengjun International for the
construction and development of Hainan Project. Hainan Shihua Oil Refinery was
wholly owned by Shengjun International, its total investment and registered
capital at the time of establishment in October 2003 were USD1.065 billion
(approximately RMB 8.414 billion) and USD 0.355 billion (approximately RMB 2.8
billion) respectively. The paid-up capital of Hainan Shihua Oil Refinery was
USD12.8 million (approximately RMB 101.12 million). The business scope of
Hainan Shihua Oil Refinery covered the following: the importation and
processing of crude oil, production and sale of petroleum products and
petrochemical products; construction and operation of self-used dock and oil
storage depots; operation and storage of oil products; provision of product
transportation and ancillary services. Since Hainan Shihua Oil Refinery was
registered with the Hainan local bureau of industry and commerce on 31 October
2003, Hainan Project was owned and undertaken by Hainan Shihua Oil Refinery.
In April 2005, the Company and the government of Hainan Province jointly
submitted an application report in relation to development of the Hainan
Project to the central government for approval. The Environmental Impact
Appraisal Report was approved by the State Environmental Protection
Administration of China in June 2004 and upon the obtaining of the approval
from the State Administration for Industry and Commerce which was obtained in
November 2005, the name of Hainan Shihua Oil Refinery was changed to Hainan
Petrochemical Co Ltd. The National Development and Reform Commission also
issued its approval (Fa Gai Gong Ye [2006] No.764) in respect of the
construction and development of the Hainan Project on 29 April 2006.
In order to continuously enjoy the benefits from the preferential policies
which include (but without limitation) the preferential tax treatment
specifically granted by the state to the foreign investment enterprises in the
PRC, Hainan Petrochemical Co Ltd retained, and will continue to maintain, the
organizational structure as a Sino-foreign joint venture, in which the
Directors (including the independent non-executive Directors) believe that it
is in the interests of the Company and its shareholders as a whole to do so.
2 Selected Financial Information of Hainan Shihua Oil Refinery (the former
entity of Hainan Petrochemical Co Ltd)
The construction of the Hainan Project was completed around the end of August
2006 and the Hainan Project was put into operation on a trial basis at the end
of September 2006. Therefore, as of the date hereof, no revenue has been
derived by Hainan Petrochemical Co Ltd.
The selective financial information (audited figures prepared in accordance
with the PRC Accounting Rules and Regulations) of Hainan Shihua Oil Refinery
are as follows:
As at As at
31 December 31 December
2004 2005
(RMB) (RMB)
Total assets 3,919,410,277.58 8,203,717,878.27
Current Liabilities 2,013,612,032.87 2,797,619,633.56
Net Assets 105,786,714.71 105,786,714.71
3
3 Production Quantity and Quality
After the Hainan Project is put into full operation, it is expected that the
annual potential production capacity will be as follows: 483,000 tons of
liquefied gas and 2,368,000 tons of gasoline (including 1,368,000 tons of No.93
gasoline, 800,000 tons of No.95 gasoline and 200,000 tons of No.97 gasoline);
3,860,000 tons of diesel, all of which can meet the Europe III Quality
Standard; 200,000 tons of 3# jet fuel; 215,000 tons of polypropylene; 58,000
tons of benzene and 66,000 tons of sulphur.
4 Assessment on Environmental Impact
The principal hydro-technological process route is selected for and adopted by
the Hainan Project in accordance with the principle of clean production, the
products include liquefied gas, gasoline, jet fuel, diesel, polypropylene,
etc., among which, the gasoline and diesel products can all meet the Europe III
Quality Standard. Clean production technology will be used for the Hainan
Project and all the pollutants such as waste water, waste residue and waste gas
will be discharged to comply with the required standards after disposal. The
total amount of discharged pollutants will be in compliance with the
requirements for the control of the total amount of discharge approved by the
local environmental protection authority. The environmental protection
indicators of the Hainan Project are the most environmental friendly indicators
amongst domestic refinery plants, thus making it possible to protect the
natural environment of Hainan Province to the utmost extent. The State
Environmental Protection Administration of China has approved the
"Environmental Impact Report relating to Hainan Oil-refinery Hainan Project of
Hainan Shihua Oil Refinery Co., Ltd.".
5 Competitiveness of the Hainan Project
The Hainan Project will fully take advantage of its favourable geographical
location, the preferential policies available in Hainan Province and the sound
external fundamental infrastructures, especially the advantages of being able
to construct a port with a 300,000-ton oil tanker capacity along the coastline,
as a result, the costs for transfer of the transportation of crude oil will be
significantly reduced. In terms of the processing cost, the operational costs
for the oil refinery is RMB 84.6 yuan/ton and the total cost is RMB169
yuan/ton, both of which are lower than the current average level of the
Company. Furthermore, a modern and information-based mode of management is
adopted by Hainan Petrochemical Co Ltd and the labour costs will be greatly
reduced. For the reasons stated above, the Directors believe that the Hainan
Project will have a competitive advantage over others.
III REASONS FOR AND BENEFITS OF ENTERING ITNO THE JOINT VENTURE CONTRACT AND
THE IMPLICATIONS FOR THE COMPANY
With the PRC's economy maintaining a steady growth, higher levels of demands
and requirements are expected of the petroleum and petrochemical products in
terms of production quantity, quality, categories, etc. With a view to
satisfying the increasing domestic demands, taking full advantage of the
preferential geographical location of Hainan Province and the favourable
investment environment of Hainan Yangpu Economic Development Zone and improving
the overall competitiveness of the Company, the Directors (including the
non-executive Directors) believe that it is beneficial to the Company and its
shareholders as a whole to construct the Hainan Project in Hainan Yangpu
Economic Development Zone.
The construction of the Hainan Project was completed around the end of August
2006 and the Hainan Project was put into operation on a trial basis at the end
of September 2006. After the Hainan Project is formally put into operation, the
oil-refining operations of the Company in the Pan-Zhujiang Delta District will
be further concentrated. New and advanced technologies will be adopted for the
Hainan Project with fewer staff and lower costs, the economical and
technological indicators of the Hainan Project will meet advanced standards in
the world. Therefore, the Hainan Project is beneficial to the enhancement of
the overall competitiveness of the oil-refining section of the Company. In
addition, Hainan Province possesses the geographical advantage as the vital
transportation centre from Mainland China to various countries surrounding the
Pacific Ocean and there are many coastlines suitable for the construction of
large-scale deep-water ports. Compared with other ports in China, the ports of
Hainan Province are closer to the Middle East, thus the construction of the
Hainan Project in Hainan Province will reduce the costs of transportation of
crude oil and thus be beneficial for the reduction of transportation costs.
4
IV IMPLICATIONS OF LISTING RULES FOR THE COMPANY
Sinopec Group is the controlling shareholder of the Company. As at the date
hereof, Sinopec Group is the holder of 75.84% of the total issued shares of the
Company. As Shengjun International is a subsidiary wholly owned by Sinopec
Group, pursuant to the Listing Rules, Shengjun International is a connected
person of the Company, therefore, the entering into the Joint Venture Contract
between the Company and Shengjun International constituted a connected
transaction for the Company under the Listing Rules. Pursuant to Rule 14A.32 of
the Listing Rules, the transaction is subject only to the reporting and
announcement requirements set out in Rules 14A.45 and 14A.47 of the Listing
Rules but not the independent shareholder's approval requirement under 14A.48
of the Listing Rules.
All the Directors (including the independent non-executive Directors) are of
the view that the investment in the Hainan Project by the Company was entered
into on normal commercial terms in the ordinary and usual course of business of
the Company, the terms of the Joint Venture Contract are fair and reasonable
and in the interest of the Company and its shareholders as a whole.
V INTRODUCTION OF THE PARTIES to THE CONNECTED TRANSACTION
1 Information on Sinopec Group
(1) Basic Information of Sinopec Group
Enterprise Name: China Petroleum Corporation ([GRAPHIC
OMITTED][GRAPHIC OMITTED])
Legal Address: No.6 Huixin East Street Jia Chaoyang District, Beijing
Enterprise Type: State-owned enterprise
Legal Representative: Chen Tonghai ([GRAPHIC OMITTED][GRAPHIC OMITTED])
Registered Capital (as at 31 December 2005): RMB 104.9 billion (approximately HK$102.691billion)
(2) History and Development of Sinopec Group
Sinopec Group is a state-owned enterprise established under the laws of the
PRC. Pursuant to the "Reform Scheme of the Organizations of the State Council"
and the "Approval of the State Council on the Relevant Issues relating to the
incorporation of China Petrochemical Corporation", Sinopec Group, as a mega
petroleum and petrochemical enterprise group, was established in July 1998
based on China Petrochemical Company. Sinopec Group is the controlling
shareholder of the Company and is a state authorised investment vehicle in oil
and petrochemical business that integrates the upstream and downstream assets.
(3) Business Scope of Sinopec Group
The scope of the principal business of Sinopec Group is as follows: industrial
investments and investment management; exploration, development, storage and
transportation (including pipeline transportation) of petroleum and natural
gas; sale and integrated application of petroleum and natural gas; petroleum
refining; wholesale of gasoline, kerosene and diesel; production, storage, sale
of and transportation of petrochemicals and other chemical products; design,
construction of petroleum and petrochemical installations; repair and
maintenance of petroleum and petrochemical installations; manufacturing of
mechanical and electronic equipments; research, development, application and
related consulting service of technology, IT and alternative energy products;
and import and export of self-produced products and third parties' products and
technologies (other than those operated by companies designated by the state
and prohibited to be imported and exported).
(4) Financial Status of Sinopec Group
As at 31 December 2005, the audited net profits and net assets of Sinopec Group
were RMB 21.863 billion (approximately HK$21.402 billion) and RMB249.176
billion (approximately HK$ 243.924 billion) respectively, calculated in
accordance with the PRC Accounting Rules and Regulations.
5
2 Information on Shengjun International
(1) Basic Information on Shengjun International
Enterprise Name: Shengjun International Investment Co., Ltd.
([GRAPHIC OMITTED]
Legal Address: 12/F, Office Tower, Convention Plaza, 1 Harbour Road,
Wanchai, Hong Kong
Enterprise Type: Limited liability company
Legal Representative: Mr. Wang Xinhua
Registered Capital (as at 31 December 2005): HK$75 million
(2) Business Scope of Shengjun International
Investment and financing, provision of financial adviser services
(3) Financial Status of Shengjun International
As at 31 December 2005, the audited loss and net assets of Shengjun
International were RMB 142.59 million and RMB 2,218 million respectively,
calculated in accordance with the PRC Accounting Rules and Regulations.
3 Information on Sinopec Corp
Sinopec Corp. is an integrated energy and chemical company with upstream,
midstream and downstream operations and is publicly listed on the stock
exchange of Hong Kong, Shanghai, New York and London. The principal operations
of Sinopec Corp. and its subsidiaries include:
(i) exploring for and developing, producing and trading of crude oil and
natural gas;
(ii) processing crude oil into refined oil products, producing refined oil
products and trading, transporting, distributing and marketing of refined
oil products; and
(iii) producing, distributing and trading of chemical products.
VI OPINION OF THE INDEPENDENT NON-EXECUTIVE DIRECTORS
Messrs. Liu Zhongli, Shi Wanpeng and Li Deshui, being independent non-executive
directors of the Company are of the view that the investment in the Hainan
Project was entered into on normal commercial terms, the contribution of the
capital of the Hainan Project is fair and reasonable and in the interest of the
Company and its shareholders as a whole.
VIII DEFINITIONS
Names Definitions
"Board" the board of Directors of Sinopec Corp
"China Petrochemical Company" [GRAPHIC OMITTED]
"Company" or "Sinopec Corp" China Petroleum & Chemical Corporation
([GRAPHIC OMITTED]), a joint-stock
limited company incorporated in the PRC,
the shares of which are listed on the
stock exchanges of Hong Kong, Shanghai,
New York and London
"Directors" the directors of Sinopec Corp
"Hainan Petrochemical Co Ltd " SINOPEC Hainan Petrochemical Co Ltd
([GRAPHIC OMITTED]), its legal address
is: Office Building of SINOPEC Hainan
Petrochemical Co Ltd, Yangpu Economic
Development Zone, Hainan Province
"Hainan Project" Hainan Oil-refining Project (Hainan
Petrochemical Co Ltd is established for
the construction of Hainan Project)
"Hebang Oil-refinery" Hainan Hebang International Oil-refinery
Co., Ltd ([GRAPHIC OMITTED])
"HK$" The lawful currency of the Hong Kong
Special Administrative Region of the
People's Republic China at the exchange
rate of HK$1.00 equivalent to
approximately RMB1.02
"Hong Kong Stock Exchange" The Stock Exchange of Hong Kong Limited
6
"Listing Rules " The Rules Governing the Listing of
Securities on The of Hong Kong Stock
Exchange
"RMB" the lawful currency of the People's
Republic of China
"Shengjun International" Shengjun International Investment Co.,
Ltd ([GRAPHIC OMITTED])
"Sinopec Group" China Petrochemical Corporation ([GRAPHIC
OMITTED]), being the controlling
shareholder of Sinopec Corp
"USD" US Dollars, the lawful currency of the
United States of America
For and on behalf of the Board of Directors
China Petroleum & Chemical Corporation
Chen Ge
Secretary to the Board of Directors
Beijing, PRC, 11 October 2006
As at the date of this announcement, the executive directors of The Company
Corp. are Messrs. Wang Tianpu, Zhang Jianhua, Wang Zhigang, Dai Houliang; the
non-executive directors are Messrs. Chen Tonghai, Zhou Yuan, Fan Yifei and Yao
Zhongmin; the independent non-executive directors are Messrs. Shi Wanpeng, Liu
Zhongli and Li Deshui.
7