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China Petroleum & Chemical Corporation Acquisition and Disposal of Assets

China Petroleum & Chemical Corporation Acquisition and Disposal of Assets. 2 November 2004. Disclaimer.

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China Petroleum & Chemical Corporation Acquisition and Disposal of Assets

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  1. China Petroleum & Chemical CorporationAcquisition and Disposal of Assets 2 November 2004

  2. Disclaimer This presentation and the presentation materials distributed herewith include forward-looking statements. All statements, other than statements of historical facts, that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to price fluctuations, actual demand, exchange rate fluctuations, exploration and development outcomes, estimates of proved reserves, market shares, competition, environmental risks, changes in legal, financial and regulatory frameworks, international economic and financial market conditions, political risks, project delay, project approval, cost estimates and other risks and factors beyond our control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.Financial data in this presentation is prepared in accordance with PRC Accounting Rules and Regulations, which has no material difference with that prepared under IFRS.

  3. Transaction Overview Chemicals, catalysts and gas station related assets Assets to be acquired Downhole operation services of E & P Assets to be disposed of RMB 17.154 billion of valuated total assets, RMB 4.215 billion of valuated net assets and 4.578 billion of consideration for net assets Acquisition consideration RMB 2.147 billion of valuated total assets, RMB 1.748 billion of valuated net assets and 1.748 billion of consideration for net assets Disposal consideration Payment terms RMB 2.830 billion in cash Contracts and terms 3 acquisition and 1 disposal contracts, which are mutually independent China International Capital Corporation (Hong Kong) Limited Financial adviser Independent financial advisers Offshore: N M Rothschild & Sons (Hong Kong) Limited Onshore: Guotai Junan Securities Co., Limited

  4. Strategic Rationale • Deliver promises made at time of listing • Rapid expansion of core business scale which is in line with corporate strategies • Improve product value chains and optimize operational management

  5. Overview of Assets to be Acquired • Main assets to be acquired: chemicals, catalysts and gas stations Financial highlights Transaction consideration RMB million RMB million 2002 2003 2004H1 Sales 13,596 16,804 10,099 Enterprise value 15,287 1,794 2,944 2,061 Net debt 10,709 EBITDA 478 1,630 1,423 EBIT 4,578 Consideration for net assets Net profit -149 779 802 End of the period per valuation report Total assets 17,154 Minority Interest 205 Total liabilities 12,734 Net assets 4,215

  6. Overview of Assets to be Disposed of • Downhole operation assets Financial highlights Transaction consideration RMB million RMB million 2002 2003 2004H1 Enterprise value 5,358 5,724 2,830 Sales 1,871 EBITDA Net debt 123 295 303 105 35 29 -89 EBIT 1,748 Consideration for net assets Net profit 12 11 -105 End of the period per valuation report Total assets 2,147 Minority Interest - Total liabilities 399 Net assets 1,748

  7. Chemical Related Assets – Operations Description • Ethylene complexes in Tianjin and Zhongyuan started up in mid 90s. Synthetic fiber monomer and polymer complexes in Tianjin and Luoyang started up in 2001. The refining facilities in Maoming is AVD/FCC units, etc. • In 2000, the above assets were not included in the listco because of relative smaller scale or under construction • Through de-bottleneck, upgrading scale of the facilities, such as ethylene, were improved and major economic indicators are similar to those under Sinopec Corp. • The acquisition will significantly increase the company’s major chemical product capacity and give full play of location advantages Major Chemical Product Capacity ‘000 tonnes/year 6000 12% 580 5000 4000 12% 380 3000 36% 24% 4,730 31% 630 450 2000 3,240 410 1,740 1,840 1000 1,330 0 Ethylene Synthetic Resin PX PTA Polyester Sinopec Corp. Assets to be Acquired Data source：Sinopec Corp.

  8. Chemical Related Assets – Financials Highlights Financial highlights Transaction consideration RMB million RMB million 2002 2003 2004H1 12,325 12,855 10,381 7,725 Sales Enterprise value 1,353 2,359 1,708 EBITDA 10,348 Net debt 132 1,157 1,121 EBIT Consideration for net assets 1,977 Net profit -398 439 584 End of the period per valuation report Total assets 13,904 Minority Interest 42 Total liabilities 11,699 Net assets 2,163

  9. Others 40% Acquisitions 60% Catalyst related Assets – Operations Description • Catalyst assets mainly produce refining and chemical catalysts, and primarily serve Sinopec’s refining and chemical units • The company was the primary sole developer of the relevant technology. Costs of major catalysts were lower than those of imports • Following the acquisition, the Company will have an integrated model of R&D, production,sales and application, and the company’s catalyst capacity will increase from 2,800 tonnes to 80,730 tonnes per year Share of the Company’s Catalysts Capacity in China Post-Acquisition Data source：Sinopec Corp.

  10. Catalysts related Assets – Financials Highlights Financial highlights Transaction consideration RMB million RMB million 2002 2003 2004H1 Sales 1,373 1,615 893 Enterprise value 1,082 EBITDA 212 259 152 Net debt 362 EBIT 140 171 113 Consideration for net assets 720 Net profit 89 108 73 End of the period per valuation report Total assets 1,885 Minority interest 163 Total liabilities 1,024 Net assets 698

  11. Gas Stations – Operations Description 2003 • The gas station assets, as part of Sinopec’s integrated oil products marketing network, includes 1,023 gas stations and 54 oil depots • In 2000, since the scale of the assets was small, they were not included as part of the Company • After optimizations made over the recent years and under the supervision and management of the listco, profitability and quality of the assets have been improved significantly • The acquisition will complement the Company’s oil product marketing network 2004 (annualized) 2,172 1,870 Retail volume of gas stations to be acquired (‘000 tonnes/year) 2,123 1,825 Annual throughput per station to be acquired (tonnes/site) Data source：Sinopec

  12. Gas Stations – Financials Highlights Transaction consideration Financial highlights RMB million RMB million 2002 2003 2004H1 Enterprise value 1,880 1,842 2,335 1,481 Sales -1 229 326 201 EBITDA Net debt 205 302 189 EBIT 1,881 Consideration for net assets Net profit 160 233 144 End of the period per valuation report Total assets 1,364 Minority Interest - Total liabilities 11 Net assets 1,353

  13. Downhole Operation Services – Operations Description • Downhole operation services is the company’s professional maintenance assets. Main operations include: downhole procedures in oil & gas fields, enhancement measures to increase oil & gas output and well repairs • The downhole operation have capabilities of developments, maintenances and engineering for complicated oil & gas fields • The disposal will improve the operating structure of Sinopec’s upstream assets, and will gradually move the Company towards the business structure that is similar to that of international oil companies.

  14. Comparison of Main Financial Indicators Pre and Post Transactions Financial highlights 2004H1 (Pre) 2004H1 (Post pro forma) Changes (RMB, million) Sales 265,709 272,978 +2.7% EBITDA 42,112 44,067 +4.6% EBIT 27,339 28,851 +5.5% Net profit 16,151 17,031 +5.5% EPS (RMB/Share) 0.19 0.20 +5.5% ROCE (Annualized) 12.3% 12.5% +20 bps Debt/Capital Ratio 26.6% 28.7% +210 bps EBITDA/Interest 21.2x 19.9x -1.3x End of the period End of the period Total assets 434,937 449,585 +3.4% Net assets 178,409 180,409 +1.1% Notes： (1) Estimated according to IFRS (2) Pro forma post transaction data are of combination

  15. Conclusion • Expand scope of core business • Capacity of ethylene, synthetic resins, synthetic fiber monomers and polymers will increase rapidly • Oil products marketing network will be improved • The integration of R&D, production, sales and application of catalysts with refining and chemical processes • Increase the profitability of the Company • On a pro forma combination basis, 1H2004’s net profit may increase by approximately RMB 880 million • After capacity expansion and cost cutting, profitability of acquired assets will be further enhanced • Achieve synergy of investment, management and resources allocation amongst Sinopec Corp.’s different business units to improve operational efficiency • Reduction of connected transactions and competition with the Group • Estimated to reduce RMB 2.4 billion of connected transactions • Reduce competition with the Group

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