Guangsha Construction Group Co., Ltd Lu Chunliang And China Hydroelectric Corporation In Matter of Qingtian Wulitin Hydropower Development Co., Ltd Enter Equity Interest Transfer Contract December 13, 2007

Exhibit 10.11

Guangsha Construction Group Co., Ltd

Lu Chunliang

And

China Hydroelectric Corporation

In Matter of

Qingtian Wulitin 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			15
Chapter Six Assumption of Credits and Debts			17
Chapter Seven Rights and Obligations			19
Chapter Eight: Fulfillment and Unilateral Termination			24
Chapter Nine Representations And Warranties By The Parties			25
Chapter Ten Employees			36
Chapter Eleven Confidentiality			37
Chapter Twelve Breach Of Contract			38
Chapter Thirteen Force Majeure			41
Chapter Fourteen Resolution of Disputes			41
Chapter Fifteen Applicable Law			43
Chapter Sixteen Miscellaneous			43

Equity Interest Transfer Contract

This equity interest transfer contract (hereinafter referred to as “Contract”) is made and entered into on December 13, 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 ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, authorized representative ▇▇▇▇ ▇. ▇▇▇▇▇, 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 ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, legal representative and chairman of the board of directors ▇▇▇ ▇▇▇▇.

Party C: Lu Chunliang

ID Number: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇

Residence Address: Zhenxinglu ▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ Province

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

WHEREAS:

Qingtian Wuliting Hydropower Development Co., Ltd (hereinafter referred to as “Object Company”), was established on December 21, 2001. Its business period is 20 years, and the registered capital is RMB 80,000,000. The company owns a hydropower project , i.e. Wuliting hydropower project, (“Hydropower Project”), whose total installation is three power units of 14,000 KW and total installed capacity is 42,000 KW. The Hydropower Project is still under construction, however, two units have been in operation, one is expected to be in operation in March 2008.

The Object Company has legal ownership and operational right of the Hydropower Project.

Party B contributed RMB 16,000,000 to the registered capital of the Object Company, accounting for 20% of its total equity interest; Party C contributed RMB 64,000,000 to the registered capital of the Object Company, accounting for 80% of its total 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: 20%, Party C’s interest: 80%, 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.

Zhejiang Guangsha Stock Co., Ltd, Zhejiang Guangsha Hydropower Investment Co., Ltd, Party C and the Transferee executed the Framework Agreement on October 27, 2007.

For the above purpose, after friendly consultations on the principles of equality and mutual benefit, the parties to 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.

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 Beijing Jingdu CPA Limited, a copy of which is attached hereto as Appendix 2.

“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 147,759,809 upon the Transferee’s acceptance of the Object Equity Interest.

“Claims” shall mean claims (arbitration or litigation), actions, demands, proceedings, judgment liabilities, damages, 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 damages caused by direct losses and liabilities, losses caused by obligations, shared expenses, or judgments, awards and fines (including, without limitation, those arising out of any pending or threatened action, suit, proceeding or judgment, as well as any settlement fees), 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, shall be excluded to the extent permitted by applicable laws.

“Disclosed Information” shall mean the related materials explanation statement and other information disclosed and made by the Transferors to the Transferee and its 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 caused by other circumstances.

“Equity Interest Transfer” shall mean the transfer of all of the Object Equity Interest of the Object Company 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 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 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 executed by Zhejiang Guangsha Stock Co., Ltd, Zhejiang Guangsha Hydropower Investment Co., Ltd and Party C, and the Transferee on October 27, 2007 concerning 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.

“Hydropower Project” shall mean the hydropower project located in Qingtian Wuliting, 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) agreement on 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 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 of the People’s Republic of China, any local government authority of commerce entity which is similarly competent to examine and approve such matter under the laws and regulations of the PRC.

“NDRC” means the National Development and Reform Commission, and any local governmental development and reform commissions.

“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 Qingtian Wuliting Hydropower Development Co., Ltd.

“Object Company Financial Statements” shall bear the meaning ascribed thereto in Article 32.16.

“Object Equity Interest” shall mean (i) the 20% equity interest of the Object Company held by Party B, fully paid, and (ii) the 80% 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 4.

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

“Party C” Lu Chunliang

ID card No.: 332526194904180030

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

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

“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.

“SAFE” means the PRC State Administration of Foreign Exchange, and any local governmental foreign exchange authorities.

“SCRS” means the China Securities Regulatory Commission and any of its designated agencies.

“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 corresponding interest, expense, fine, penalty or other charge payable, claimed, estimated or assessed in respect of any such Taxes and imposed by any governmental authority.

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

(a) before the Delivery Date and 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 such date; or

(b) by reference to any income, profits or gains earned, accrued or received by the Object Company on or before the Delivery Date, 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.

Chapter Two Transfer Object

Article 2.		Subject of the Equity Interest Transfer

The 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.

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 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 206,880,191 (the “Purchase Price”). The respective amount of payment made to each Transferor shall be as follows:

Party B: RMB 41,376,038

Party C: RMB 165,504,153

Article 6		The Purchase Price hereunder shall be paid by the Transferee in 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 median rate of RMB and US Dollars published by People’s Bank of China one on the date of payment specified in this Contract.

Article 7		The Remittance and Payment the Purchase Price

7.1		Promptly upon 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”).
7.2		Within five (5) days of opening the Provisional Account, and on the condition that the provisions under Article 7.2.1 are completed and satisfied by the Transferee, the Transferee shall remit the Purchase Price in a lump-sum to the Provisional Account.

7.2.1		The Parties to this Contract agree that all obligations of the Transferee under this Contract including but not restricted to, remitting of the Purchase Price amount to the Provisional Account, are subject to the fulfillment of the following conditions:
7.2.1.1		The assumption and succession of the previous bank loans of The Object Company has been consented and acknowledged by the lending bank in accordance with Article 20.8.3 of this Contract.
7.2.1.2		The obligations of the Object Company and the Transferors under the Contract shall have been duly performed and the representations and warranties of 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 problems requiring resolutions identified by any Transferee shall have been resolved 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 5, has been signed by on terms and conditions satisfactory to the Transferee.
7.2.1.5		The Transferors and the Transferee has determined the final amount as specified in Article 52.2.

Article 8		The Payment of the Purchase Price

8.1		First Installment
		On the date the Purchase Price reaches the Provisional Account in accordance with legal procedures and upon satisfaction of the following conditions, the Transferee shall pay 80% of the Purchase Price (“First Installment”) to the Transferors:

8.1.1

The Transferors has obtained written documents of Lishui municipal government’s consent to the Equity Stakes Transfer specified in Article 22.13 of the Contract

8.1.2		The Object Company shall have legally obtained the Social Insurance Registration Certificate and Water Procurement Certificate.
8.1.3		The Transferors and the Transferee agree that 80% yield from power generation of the Hydropower Project belongs to the Object Company from the date of the First Installment to the date of the second installment, and the Transferors shall not dispose of or reduce the aforesaid yield in whatever manner, for which the Transferee is entitled to pursue compensation directly from the Transferors.
8.2		Second Installment
		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 16% of the Purchase (“Second Installment”) to the Transferors.
		The Transferors and the Transferee agree that the entire yield from power generation of the Hydropower Project belongs to the Object Company upon payment of the Second Installment, and the Transferors shall not dispose of or reduce the aforesaid yield in whatever manner, for which the Transferee is entitled to pursue compensation directly from the Transferors.
8.3		Performance Deposit
		2% of the Purchase Price shall be reserved as a performance deposit for the Transferors. The performance deposit guarantees: on the date of examination and acceptance, the Object Company and its Hydropower Project are 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 , and shall have obtained the State-owned Land Use Right Certificate for the construction land. The Transferee is entitled to directly deduct the appropriate amount from the aforesaid performance deposit in the event of any damage or loss incurred due to such trouble or defect. Upon completion of examination and acceptance and issuance of the power business permit, the Transferee will return such performance deposit to the Transferors with no interest thereupon.

8.4		2% of the Purchase Price shall be reserved and paid as quality deposit in accordance with Article 53 hereunder.
8.5		If any Taxes, fees or other charges are levied on the Purchase Price in the PRC, the same shall be borne by the Transferee and the Transferors, however, the Stamp Tax, to be paid by the Transferee through the Transferors lawfully withholding it, shall be paid to the Transferors within three (3) days upon effectiveness of this Contract.

Article 9		The Transferors shall issue official and valid receipts to the Transferee promptly after each receipt of the Transferee’s payment of the Purchase Price. Within five (5) 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 obtained such certificate of registration, and provided it to the Transferee.

Article 10		On the date of the First Installment stipulated in Article 8.1 hereunder, the Transferors shall repay RMB 2,500,000 of the entire deposit of RMB8,000,000 made by the Transferee pursuant to the Framework Agreement, to the Third Party company within China designated by Transferee.

Chapter Four Capital Increase

Article 11		Capital Increase

Simultaneously with the Equity Interest Transfer, the sum of RMB 147,759,809 (the “Capital Increase”) will be injected into the Object Company to increase the registered capital to RMB 227,759,809.

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 Account for the Object Company(“Foreign Exchange Capital Account”) jointly maintained by them. The Object Company’s official seal (kept by the Transferors) and the personal seal of Transferee’s authorized representative (kept by the Transferee) will be reserved at the Foreign Exchange Capital Account.

Article 13		Use of the Capital Increase

13.1		The Capital Increase will be used to discharge those outstanding debts of the Object Company incurred after the restructuring of credits and debts as listed in Appendix 7, and to satisfy the requirements for running the Object Company and expanding business.
13.2		The Transferors shall, within three (3) days of the Transferee remitting the Capital Increase to the Foreign Exchange Capital Account, complete the restructuring of its credits and debts listed in Appendix 7 of this Contract and sign official debt restructuring agreements (“Restructuring Agreements”) with creditors and debtors of the Object Company, the Object Company itself and the designated third party of the Transferors 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 set forth in Appendix 7, as evidenced by a signed the restructuring agreement between the creditors and debtors, the Object Company and

the third party designated by the Transferee in form and content approved 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 227,759,809.

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 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 he submitted to the competent departments of such organizations for such examination and approval.

Article 16		Upon payment of the First Installment, 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 payment of the First Installment, 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 the result of Appendix 7 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 aforesaid result 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;
	(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 shall be completed within seven (7) days upon the First Installment. 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 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 of Appendix 6. 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 credits and the debts of the Object Company listed in Appendix 6

to this Contract (hereinafter referred to as the “Credits and Debts”) shall be assumed by the Object Company after the Equity Interest Transfer is completed:

Article 19		In accordance with Article 13.3, the following credits and debts of the Object Company shall be assumed by the Transferors:

19.1		Except the Original Bank Loans disclosed by the Transferors, the monetary fund, the accounts receivables and the accounts payable listed in Appendix 7 and arising prior to the Base Date shall be enjoyed or borne by the Transferors as may be applicable. In this regards, the 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 7.
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 formed part of assets, for example 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		Except as otherwise provided for in Article 8, 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 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 Co., Ltd.

20.3

Within the Period, the interest on the loans 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 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 and save harmless the Object Company or the Transferee from all such claims and demands (if the Transferee assumed such credits and debts). 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.

22.3		Upon execution of this Contract, the Transferors shall not exercise any rights over the Object Equity Interest, such as 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, lights 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 assessment on the Base Date.
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 to the Provisional Foreign Capital Account 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 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 8.
22.10		If the original guarantor of the Bank Loans of the Object Company or the Transferors comply with this Contract and provide the guarantees of the Bank Loans of the Object Company upon completion of the Equity Transfer, the Transferee shall pay the guarantee cost pursuant to the following terms to the original guarantor or the Transferors: seventy-five percent (75%) of the prevailing guarantee fee rate of the market (i.e., 3% of the guarantee amount per year), that is, 2.25% of the guarantee amount per year prior to the payment to the Transferors of the performance deposit as specified in Article 8.3; if such payment has been made to the Transferors, the Transferee shall pay the guarantee cost at 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. Other items may be negotiated and specified by both parties separately.
22.13		The Transferors shall have obtained the written approval of the government of Zhejiang Province Lishui City for the Equity Interest Transfer.
22.14		The Transferors shall ensure Zhejiang Guangsha Hydropower Investment Co., Ltd has obtained the Construction Land Planning Permit, Construction Land Permit, and Construction Land Approval as they are required for the construction of the hydropower project.
22.15		The Transferors shall ensure that Zhejiang Guangsha Hydropower Investment Co., Ltd will complete the legal “completion and acceptance” process for the hydropower project and bear relevant fees for such acceptance and renovation.
22.16		The Transferors shall ensure and be responsible that the Object Company has obtained the Social Insurance Registration Certificate, and the Transferors will bear any consequence where the Object Company is imposed on administrative punishment due to lack of such certificate.
22.17		The Transferors shall ensure that Zhejiang Guangsha Hydropower Investment Co., Ltd has obtained the power business permit for the Object Company as require by operating the Hydropower Project.
22.18		The Transferors shall be responsible for and ensure that Zhejiang

		Guangsha Hydropower Investment Co., Ltd has obtained for the Object Company approval of the water procurement license.
22.19		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.
22.20		The Transferors shall be entitled to receive and accept the Purchase Price pursuant to the provisions of this Contract.
22.21		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 33.1 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.
23.4		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.

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:

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.
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 three (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 Transferor and the Transferees are entitled 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 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 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.

32.2		The Contract has been duly executed and delivered by the Transferors and, assuming the due execution and delivery hereof by the Transferee, the Contract constitutes a legal, valid and binding obligation of each 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 which is RMB 80,000,000 has been fully paid in compliance with PRC law, and the Object Equity Interest is owned by the Transferors.

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 Object Company and the Transferors, and the consummation by the Object Company and 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 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 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 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 as requested by the Transferee that a Transferor has provided to Transferee 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”) 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 need of maintenance or repairs except for ordinary routine maintenance and repairs.

32.10		The Hydropower Project has been approved by all competent governmental authorities in China and is in full compliance of all relevant laws, regulations, regulatory documents, rules and approval documents in China including holding all required rights to use the Land upon which is located the Hydropower Project. The Object Company has also obtained all the licenses, registrations, permits and approvals to operate the same, a list of which is attached hereto as Appendix 10, all of which are valid and subsisting and in good standing with no violations thereof.

32.11		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.

32.12		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.

32.13		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.

32.14		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 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.

32.15		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.

32.16		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.

32.17		Attached hereto as Appendix 2 is a true and complete copy the audited financial statements of the Object Company for the financial years ended 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 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.

32.18		Appendix 11 sets forth 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.

32.19		Other than the leases and subleases of the Object Company expressly disclosed 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.

32.20		All leases or subleases entered into by the Object Company (which leases and subleases are referred to in Appendix 10) 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.

32.21		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.

32.22		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.

32.23		All of the information set forth in Appendix 3 to the Contract is true and correct.

32.24		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 is set out in Appendix 6 are owned free and clear of all Encumbrances.

32.25		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.

32.26		The Transferors hereby jointly confirm and assure to the Transferee that the land for the Hydropower Project of the Object Company is obtained legally.

32.27		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.

32.28		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.

32.29		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.

32.30		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.

32.31		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.

33.4		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 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 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 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.

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 already knows 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.

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 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 44		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.

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. 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 claimant(s) and respondent(s) 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.

48.3		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 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 total cost for the project under construction is RMB 12,500,000; 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 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 52.1 of the Contract; Zhengjiang Guangsha Hydropoer Investment Co., Ltd is to complete such project within the cost range specified in Article 52.2, 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 52.1 is to pass the examination and acceptance of Wuliting Hydropower Project and for the Object Company to obtain the power business permit. Consequences from failure to meet up the standard and obtain the permit will be borne by the Transferors jointly and severally and the Object Company or the Transferee may directly pursue the Transferors for compensation.

52.4		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 Wuliting Hydropower Project ahead of the time agreed, the Transferee shall give an appropriate award to such company; if the construction is behind schedule due to reasons of Zhejiang Guangsha Hydropower Investment Co., Ltd, then such company shall pay the Transferee an appropriate penalty. The Transferors shall bear a joint and several liability for the payment of such penalty by Zhejiang Guangsha Hydropower Investment Co., Ltd.

52.5		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.

52.6		The Transferee agrees that Zhejiang Guangsha Hydropower Investment Co., Ltd and the Transferee are to sign a contract for the project under 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 punishment of such project are to be specified in this contract.

52.7		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		The parties agree that the quality deposit for the temperature increase of unit 2 power generators staying within the range of the national standards when in operation for 72 hours consecutively is 2% of the Equity Interest Transfer Price, which shall be paid to the Transferors upon satisfaction of the said condition next day.

Article 54		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 55		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 56		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 57		Severability

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

Article 58		Language

This Agreement is written in Chinese.

Article 59		Validity of the Contract and Appendix

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

59.2		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.

59.3		This Contract has ( ) original copies executed in Mandarin and ( ) original copies executed in English with each party keeping one (1) copy or each version.

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

Article 60		Notification

60.1		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.

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

		Transferors’ Address:		▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇
		Telephone Number:		▇▇▇▇-▇▇▇▇▇▇▇▇
		Facsimile Number:		0571-87963818
		Addressee:		CHENG Gang

		Transferee’s Address:		1201, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
		Telephone Number:		010—64928483
		Facsimile Number:		010—64961540
		Addressee:		▇▇ ▇▇▇-wei

Article 61		Appendix

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

61.2		Appendix 2 The Information Disclosed by the Transferors

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

61.4		Appendix 4 Letter of Security

61.5		Appendix 5 Assets Assessment Report by September 30, 2007 confirmed by an assets assessment agency

61.6		Appendix 6 Credits and Debtors Restructuring Agreements of the Object Company

61.7		Appendix 7 Letter of Undertaking

[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 Hydro electric Corporation
Representative’s Signature
Party B: Guangsha Constrution Group Co., Ltd
Representative’s Signature:
Party C: LU Chunliang
Representative’s Signature:

The End

Appendix 1 — Audit Report

Qingtian Wuliting Hydroelectric

Development Co., Ltd.

Audit Report

Sep. 30^th, 2007

Contents

The audit report
The balance sheet		1-2
The profit and statement of profit distribution		3
Notes of financial statement		4-16

		Dehao International Beijing Jingdu Certified Public		Dehao International Beijing Jingdu Certified Public Accountants Co., Ltd. Scitech Place 5th floor, Jianguomenwai
		Accountants Co., Ltd.		▇▇▇▇▇▇ ▇▇.▇▇, ▇▇▇▇▇▇▇
				Zip Code: 100004
				Tel: ▇▇-▇▇-▇▇▇▇▇▇▇▇
				Fax: ▇▇-▇▇-▇▇▇▇▇▇▇▇

Audit Report

(English Translation)Beijing JINGDUSHENZI (2007) No.1315

China Hydroelectric Corporation:

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

I. Management Personnel’s responsibilities for financial statements

The management Personnel of Wuliting 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 task 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		Dehao International Beijing Jingdu Certified Public Accountants Co., Ltd. Scitech Place 5th floor, Jianguomenwai
		Accountants Co., Ltd.		▇▇▇▇▇▇ ▇▇.▇▇, ▇▇▇▇▇▇▇
				Zip Code: 100004
				Tel: ▇▇-▇▇-▇▇▇▇▇▇▇▇
				Fax: ▇▇-▇▇-▇▇▇▇▇▇▇▇

III. Audit opinions

We believe that the financial statements of Wuliting Hydroelectric Company has given a fair and true view of the financial situation of Dec. 31^st, 2006 and Sep. 30^th, 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		The Chinese Certified Public
Public Accountants Co.,		Accountant(CICPA)
Ltd.
		The Chinese Certified Public
		Accountant(CICPA)

Beijing China		Nov. 15th, 2007

BALANCE SHEET
AS AT 30 SEPTEMBER 2007
[English Translation ]

Prepared by: Qingtian Wuliting Hydroelectric Development Co., Ltd.

In RMB Yuan

ASSETS

NOTES

2007.09.30

2007.01.01

CURRENT ASSETS

Cash

4—1

537,312.59

364,813.60

Short-term investments

Notes receivable

Dividends receivable

Interest receivable

Accounts receivable

4—2

3,739,709.76

Other receivables

4—3

297,592.50

73,213.00

Advances to suppliers

Subsidy receivable

Inventories

Prepaid expenses

Long-term investments maturing within one year

Other current assets

Total current assets

4,574,614.85

438,026.60

LONG-TERM INVESTMENTS

Long-term equity investments

Long-term debt investments

Total long-term investments

FIXED ASSETS

Fixed assets — cost

Less: accumulated depreciation

Fixed assets — net amount

Less: Fixed assets impairment provision

Fixed assets — net book value

Construction supplies

Construction in progress

4—4

442,259,808.79

388,545,389.64

Fixed assets disposal

Total fixed assets

442,259,808.79

388,545,389.64

INTANGIBLE AND OTHER ASSETS

Intangible assets

Long-term prepaid expenses

Other long-term assets

Including: Foreign exchange loss to be deferred

Total intangible and other assets

DEFERRED TAXES

Deferred tax debits

—

—

TOTAL ASSETS

446,834,423.64

388,983,416.24

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

BALANCE SHEET (CONTINUED)
AS AT 30 SEPTEMBER 2007
[English Translation ]

Prepared by: Qingtian Wuliting Hydroelectric Development Co., Ltd.										In RMB Yuan
LIABILITIES AND SHAREHOLDERS' EQUITY		NOTES				2007.09.30				2007.01.01
CURRENT LIABILITIES
Short-term loans
Notes payable
Accounts payable
Advances from customers
Accrued payroll							552,300.00				552,300.00
Welfare benefits payable							302,257.43				167,209.15
Dividends payable
Taxes payable			4£5				6,636,568.94				605.00
Other levies payable			4—6				31,983.52
Other payables			4—7				131,431,849.75				78,263,302.09
Accrued expenses			4—8				879,464.00
Accrued liabilities
Deferred revenue
Long-term liabilities due within one year			4—9				24,000,000.00				6,000,000.00
Other current liabilities
Total current liabilities							163,834,423.64				84,983,416.24
LONG-TERM LIABILITIES
Long-term loans			4—10				203,000,000.00				224,000,000.00
Debentures payable
Payables due after one year
Government grants payable
Other long-term payables
Total long-term liabilities							203,000,000.00				224,000,000.00
DEFERRED TAXES
Deferred tax credits
Total liabilities							366,834,423.64				308,983,416.24
SHAREHOLDERS’ EQUITY
Paid-in capital			4—11				80,000,000.00				80,000,000.00
Capital surplus
Surplus reserve
including: welfare fund
Undistributed profits
Total shareholders’ equity							80,000,000.00				80,000,000.00
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY							446,834,423.64				388,983,416.24

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

THE PROFIT AND STATEMENT OF PROFIT DISTRIBUTION

FOR THE PERIOD FROM JANUARY TO SEPTEMBER 2007

[English Translation ]

Prepared by: Qingtian Wuliting 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:

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

Notes of Financial Statements

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

I. The company’s basic information

Qingtian Wuliting Hydroelectric Development Co., Ltd. (hereinafter referred to as “the company”) was invested and established by Zhejiang Guangsha Hydroelectric Development LLC., and Zhejiang Guangning Hydroelectric Development Co., Ltd. It registered in Qingtian County Administration for Industry and Commerce on Dec. 21, 2001 and obtained the business license of enterprise legal person. The registration No. is 3325221001187.

At the beginning of the establishment, the company’s registered capital was 2 million yuan. The shareholders and the investment amount were as follows:

		investment				Holding
shareholders		amount				proportion
Zhejiang Guangsha Hydroelectric Development LLC.			1,600,000.00				80	%
Zhejiang Guangning Hydroelectric Development Co., Ltd.			400,000.00				20	%
Total			2,000,000.00				100	%

On Nov. 18, 2003, the company’s shareholders pari passu performed the capital increase of 28 million. After that, the amounts of investment were as follows:

		investment				Holding
shareholders		amount				proportion
Zhejiang Guangsha Hydroelectric Development LLC.			24,000,000.00				80	%
Zhejiang Guangning Hydroelectric Development Co., Ltd.			6,000,000.00				20	%
Total			30,000,000.00				100	%

On April 22, 2004, the company’s shareholders pari passu performed capital increase. After that, the registered capital was 80 million yuan. The shareholders and the investment amount were as follows:

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

		investment				Holding
shareholders		amount				proportion
Zhejiang Guangsha Hydroelectric Development LLC.			64,000,000.00				80	%
Zhejiang Guangning Hydroelectric Development Co., Ltd.			16,000,000.00				20	%
Total			80,000,000.00				100	%

According to the decision of board of shareholders on Dec. ▇▇^▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ Guangning Hydroelectric Development Co., Ltd. transferred its 20% interests to Lu Chunliang. Up to Sep. 30, 2007, the registered capital was 80 million yuan, the details were as follows:

		investment				Holding
shareholders		amount				proportion
Zhejiang Guangsha Hydroelectric Development LLC.			64,000,000.00				80	%
Lu Chunliang			16,000,000.00				20	%
Total			80,000,000.00				100	%

Registered address: Lingxia Village, Zhenbu Town, ▇▇▇▇ ▇▇▇▇ County

Legal representative: Lu Chunliang;

Business Scope:		water resource development, generation and distribution of electrical energy; purchase and sale of hardware and electromechanical products, chemical products and building materials;

The company is in test operation phase. The income of test operation of this period offsets the costs of projects under construction. The related costs occurred are included in the costs of the project.

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 Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

		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
		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 funds of the related parties as well as the Electric Utility Bureau.

		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 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 Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

The salvage value rate, depreciation life and annual depreciation rate of all kinds of fixed assets:

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

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

			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.
	(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 directly be classified under conforming to capitalization condition assets, it should be capitalization and be counted into 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 revenues 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 likely flow in the company;
	(4)		The amount of revenue can be measured reliably;

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

III. Major taxes

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

The company’s applicable taxes and tax rates are as follows:

1.		Corporate income tax
		The company’s applicable tax rate of income tax is 33%.
2.		The value added tax
		Pay at 6% of the business income
3.		Urban construction tax
		Pay at 1% of the turnover tax payable
4.		Education surtax
		The education surtax should be paid at 3% of the turnover tax payable, 2% of the turnover tax payable for the local education surtax.

IV. Notes on the financial statement’s main items

1. Monetary Resources

Items		Closing amount				Opening amount of the year
Cash			830.89				317.80
Bank deposits			536,481.70				364,495.80
Total			537,312.59				364,813.60

2.

Account receivable

(1)

Duration of account receivables is as follows:

Opening amount of the year

Closing amount

Balance at the

Closing

Provision for

beginning of

Provision for

Duration

balance

Bad Debts

the year

Bad Debts

Within 1 year

3,739,709.76

0.00

0.00

0.00

Total

3,739,709.76

0.00

0.00

0.00

	(2)		Receivables are all funds of Electricity Generating Board. As the company is in operation test phase, the bad debt reserve has not been set up.
	(3)		No receivables of related parties

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

3.

Other receivables

(1)

Duration of other receivables is as follows:

										Opening amount of the year
		Closing amount								Balance at the
		Closing				Provision for				beginning of				Provision for
Duration		balance				Bad Debts				the year				Bad Debts
Within 1 year			286,592.50				0.00				62,213.00				0.00
1-2 years							0.00				10,000.00				0.00
2-3 years			10,000.00				0.00								0.00
More than 3 years			1,000.00				0.00				1,000.00				0.00
Total			297,592.50				0.00				73,213.00				0.00

As the company is in test operation phase, the bad debt reserve has not been set up.

The details of the ending balance are as follows:

Items		Amounts				Contents
Zhejiang Guangsha Beichuan Hydroelectric Development Co., Ltd			283,592.50			Incomings and outgoings
Wu Feihua			10,000.00			Office building deposit
Dong Shilin			1,000.00			Building site house deposit
▇▇▇▇ ▇▇▇▇▇▇▇▇			2,000.00			Fund of disbursement
▇▇ ▇▇▇▇▇▇▇			1,000.00			Fund of disbursement
Total			297,592.50

4.

Projects under construction

																										Inputs to
		Budge tamount																								the work
		(10 thousand				Opening amount of				Increase of				decrease of								funds				account
project Name		yuan)				the year				current period				current period				Closing amount				Source				in budget
Wuliting Hydroelectric project			43117																			Self-financing					90	%
investment of construction project							127,553,091.94				30,264,132.13				0.00				157,817,224.07
Investment of installation project							35,593,617.64				8,191,256.79				0.00				43,784,874.43
Investment of equipment							66,857,675.23				10,987,500.63				0.00				77,845,175.86

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

																										Inputs to
		Budge tamount																								the work
		(10 thousand				Opening amount of				Increase of				decrease of								funds				account
project Name		yuan)				the year				current period				current period				Closing amount				Source				in budget
other Investment							7,927,867.88				433,975.00				0.00				8,361,842.88
Investment of deferred expenses							150,613,136.95				3,837,554.60				0.00				154,450,691.55
Total							388,545,389.64				53,714,419.15				0.00				442,259,808.79
Thereinto: capitalized interest							31,936,034.88				23,183,037.22				0.00				55,119,072.10

		The company is in test operation phase. The income of test operation of this period offset the cost of projects under construction. The related costs occurred are included in the costs of the project.
5.		Taxes payable

Taxes		Closing amount				Opening amount of the year
Value added tax			479,752.92				0.00
corporate income tax			6,099,803.21				0.00
urban construction tax			4,797.53				0.00
Individual income tax			51,143.00				605.00
Stamp tax			1,072.28				0.00
Total			6,636,568.94				605.00

6.

Other taxes payable

Taxes		Closing amount				Opening amount of the year
The extra charges of education funds			23,987.64				0.00
Special funds for water conservancy construction			7,995.88				0.00
Total			31,983.52				0.00

7.

Other accounts payable

Items		Closing balance				Fund discription
Zhejiang Guangsha Hydroelectric Investment Co., Ltd.			78,858,600.94			Current loan
Guangsha Construction Group Co., Ltd.			4,154,862.00			Current loan
Workers raised funds of Guangsha Imbarking Investment Holding Co., Ltd.			14,125,000.00			raised funds
Zhejiang Guangning Hydroelectric Development Co. Ltd.			159,550.00			Interest payble

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

Items		Closing balance				Fund discription
Jinhua Shuntai Hydroelectric Development Co. Ltd.			28,697,316.31			deposits Construction costs
Shanghai Power Transmission & Distribution Co., Ltd.			238,880.00			deposits
Nanjing Nari Automatization Control Co., Ltd.			236,800.00			deposits
Shanghai Fuji Electric Switch Co., Ltd.			194,240.00			deposits
Shanghai Zhaoyin Electric Power Equipment Co., Ltd.			163,200.00			deposits
Hangzhou Hosting Machinery Company			108,000.00			deposits
Hangzhou Guorui Electric Power Co., Ltd.			88,560.00			deposits
Hangzhou E-lord Electric Technology Co., Ltd			64,000.00			deposits
labour security cost			110,825.50			account payable
Labour union outlay			60,750.20			account payable
Wei Xiaofei			1,255.80			Dismissal wages payable
forestation subsidy funds			330,000.00			Subsidy of Qingtian County Forestry Bureau
industrial project growth funds			1,835,000.00			Appropriate of Ministry of Finance of Qingtian County
forestation subsidy funds			400,000.00			Subsidy of Qingtian County Forestry Bureau
farmland reclamation funds			744,944.00			finance special funds of Qingtian County
tax on land occupation			827,565.00			finance special funds of Qingtian County
Hydrologic Station of Liandu District, Lishui City			12,500.00			service fee
bounty			20,000.00			bounty payable
Total			131,431,849.75

8.

Accrued Expenses

Item		Closing amount				Opening amount of the year
Loan interests			627,464.00				0.00
operation training cost of power station			252,000.00				0.00
Total			879,464.00				0.00

9.

Current maturity of long-term debt

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

Item		Closing amount				Opening amount of the year
Guaranteed loans			24,000,000.00				6,000,000.00
Total			24,000,000.00				6,000,000.00

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

10.

Long-term loans

Loan categories		Closing balance				Balance at the beginning of the year
Guaranteed loans			203,000,000.00				224,000,000.00
Total			203,000,000.00				224,000,000.00

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

11.

Paid-up capital

		Opening amount of the year								Increase of				Decrease of				Closing amount of the year
Investors		amounts				Proportion				the year				the year				amounts				Proportion
Zhejiang Guangsha Hydroelectric Investment Co., Ltd.			64,000,000.00				80	%			0.00				0.00				64,000,000.00				80	%
Lu Chunliang			16,000,000.00				20	%			0.00				0.00				16,000,000.00				20	%
Total			80,000,000.00				100	%			0.00				0.00				80,000,000.00				100	%

V. Related parties relationships and their transactions

(I) Related parties relationships

1.

Related parties which have controlling relationships

		Registered				Relationships with		Economic		Legal
Enterprise		addresses		Major businesses		the company		character		representative
Zhejiang Guangsha Hydroelectric Investment Co., Ltd.		▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇-▇#, ▇▇▇▇▇▇ ▇▇▇▇		▇▇▇▇▇ resource development, etc.		Majority shareholders		Limited liability		Lu Chunliang

2.

The registered capital and its changes by related parties which have controling relationships

The Notes of Financial Statement of Qingtian Wuliting Hydroelectric Development Co., Ltd. on Sep, 30^th, 2007

Opening amount of

Increase of

Decrease of

Related parties’ name

the year

current period

current period

Closing amount

Zhejiang Guangning Hydroelectric Development Co., Ltd.

180,000,000.00

—

—

180,000,000.00

3.

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

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.

64,000,000.00

64,000,000.00

80

%

80

%

4.

Related parties which have other relationships with the company

Related parties’ name		relationship
Lu Chunliang		Shareholder of the company
Guangsha Building Group Co., Ltd.		The same ultimate controller
Zhejiang Guangsha Beichuan Hydroelectric Development Co. Ltd.		The same ultimate controller