09:45     CHINA EB INT'L<00257> - Announcement (2)                            

    thereby. Accordingly, the Company has applied to the                      
    Stock Exchange for a waiver from the requirement to                       
    convene a shareholders' meeting to approve the                            
    Contracts and the connected transactions                                  
    contemplated thereby.                                                     
                                                                              
    A circular containing, inter alia, further details                        
    of the Contracts as well as a letter of advice from                       
    Yu Ming, the independent financial adviser to the                         
    Independent Board Committee of the Company, will be                       
    despatched to the Shareholders for information as                         
    soon as practicable.                                                      
                                                                              
    BACKGROUND INFORMATION                                                    
    As previously disclosed by the Company, EB-VW                             
    (currently an indirect non-wholly owned subsidiary                        
    of the Company) entered into with Qingdao Drainage                        
    the Project Company JV Contract on 1 November 2003                        
    for establishing the Project Company. Pursuant to the                     
    Project Company JV Contract, the Project Company was                      
    established on 13 August 2004 and is currently owned                      
    as to 60% by EB-VW and 40% by Qingdao Drainage. The                       
    Project Company is established to own the main parts                      
    of the Facilities, operate and maintain such                              
    Facilities and provide waste water treatment services                     
    in Qingdao Municipality for approximately 26 years                        
    after its establishment.                                                  
                                                                              
    Reference is also made to the Previous Circular in                        
    relation to the continuing connected transactions                         
    contemplated respectively by the Waste Water                              
    Treatment Agreement and the Operation and Maintenance                     
    Agreement, which were entered into for implementation                     
    of the Project.                                                           
                                                                              
    One of the conditions precedent of the Waste Water                        
    Treatment Agreement and the Operation and Maintenance                     
    Agreement is that Veolia Water Systems shall be                           
    appointed to be in charge of the design, equipment                        
    procurement and construction management for the                           
    extension to the Facilities and has entered into a                        
    turnkey engineering, procurement and construction                         
    contract with the Project Company. The conditions                         
    precedent of the Waste Water Treatment Agreement and                      
    the Operation and Maintenance Agreement have not all                      
    been fulfilled yet. However, Qingdao Drainage has                         
    agreed to pay the Project Company the waste water                         
    treatment service charges commencing on 1 January                         
    2005.                                                                     
                                                                              
    Accordingly, on 3 March 2005 the Project Company                          
    entered into with the subsidiaries of Veolia Water                        
    Systems the Contracts, which comprise the following                       
    contracts entered into with the parties mentioned                         
    below:-                                                                   
                                                                              
    1.      the EPC Contract with a consortium comprising OTV                 
    Shenzhen, Veolia Water Systems Shanghai and Tianjin                       
    Engineering Design Institute, pursuant to which the                       
    consortium led by OTV Shenzhen will design and                            
    construct the Maidao Extension Facilities;                                
                                                                              
    2.      the ES Contract with OTV SA, pursuant to which OTV                
    SA will supply foreign equipment to be used in the                        
    construction of the Maidao Extension Facilities; and                      
                                                                              
    3.      the Service Contract with OTV SA, pursuant to which               
    OTV SA will provide offshore basic design, offshore                       
    project management, other technical services,                             
    process guarantee, patent and proprietary provision                       
    to be used in the construction of the Maidao Extension                    
    Facilities.                                                               
                                                                              
    OTV Shenzhen, Veolia Water Systems Shanghai and OTV