Latest progress on Inner Mongolia Baofeng’s 4 million tons per year coal-to-olefins project

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Latest progress on Inner Mongolia Baofeng’s 4 million-ton coal-to-olefins project. Investor’s question: Dear Secretary of the Board, hello. The 4 million-ton coal-to-olefins project in Inner Mongolia has yet to receive approval for environmental impact assessment from the Ministry of Ecology and Environment. According to the 2021 work report of Wushen Banner in Inner Mongolia, this project is the only one that has not started operations yet. According to available information, when your company launched this project, there were no dual-carbon policies in place. Although efforts to reduce carbon emissions are increasing nowadays, has this factor caused the project to lose its original cost advantage? Will there still be a market competitive advantage after the project is completed? Furthermore, considering the establishment of your parent company’s new full-industry-chain energy storage project, could it serve as a substitute for the Inner Mongolia project? Secretary to the Board’s reply (Baofeng Energy SH600989): Dear investors, 1. This project falls within the planned scope and requires approval from the Ministry of Ecology and Environment. Since 2021, no similar projects have been approved nationwide; it’s not just the company’s projects that haven’t started. 2. The company’s Inner Mongolia project has added a section on carbon reduction, yet it has not lost its original cost advantages; firstly, the project is located in a coal-rich area, which reduces production costs and transportation costs from the outset ； Secondly, replacing some of the raw coal with green hydrogen aligns with the **dual-carbon policy**, as it promotes the use of renewable energy to produce high-end chemical products in place of fossil fuels ； Secondly, with the advancement of future technologies, the cost of green hydrogen is expected to drop significantly. According to Guosen Securities’ analysis, \"at the current carbon trading price of 50 yuan per ton, carbon emission rights trading can help reduce costs by 350 yuan per ton.\" Once the total amount for reaching carbon peak is determined, carbon, as a scarce resource, is likely to see rising prices in the medium to long term rather than falling, which will also gradually narrow the gap between the additional costs associated with carbon neutrality and the existing costs of hydrogen produced from coal. When the price of carbon trading rises above 150 yuan per ton, the cost of producing hydrogen through photovoltaic electrolysis will be on par with existing costs. In summary: The company will still possess a strong competitive advantage in the market once its project in Inner Mongolia is completed. Furthermore, the group’s energy storage projects and the company’s projects in Inner Mongolia are two separate entities, and there is no substitution between them. Thank you for following. Announcement on Revised Annual Performance Forecast for 2021: Ningxia Baofeng Energy Group Co., Ltd. (hereinafter referred to as the “Company”) expects to achieve a net profit attributable to the shareholders of the listed company in 2021 in the range of 680,000.00 million yuan to 720,000.00 million yuan, representing an increase of 217,723.20 million yuan to 257,723.20 million yuan compared with the previous year, or a growth rate of 47.10% to 55.75%. The company expects that for the year 2021, the net profit attributable to the shareholders of the listed company, after deducting non-recurring gains and losses, will be between 707,450.00 million yuan and 747,450.00 million yuan. This represents an increase of 222,718.52 million yuan to 262,718.52 million yuan compared to the previous year, corresponding to a growth rate of 45.95% to 54.20%. The increase in projected earnings this time is mainly due to the continuous improvement of the company’s industrial chain, with more pronounced advantages resulting from integration within this chain, which has helped to mitigate the impact of sharp rises in raw material prices ； At the same time, in 2021, the prices of the company’s main products increased significantly compared to the previous year. As the company continued to work on improving efficiency, optimizing its production processes, and strengthening production management, its operational efficiency improved markedly, resulting in a substantial increase in overall profitability.