Zhongshenzhonghuan Certified Public Accountants LLP
17-18/F, Yangtze River Industry Building,
No. 166 Zhongbei Road, Wuhan, 430077
Postal Code: 430077
Tel: 027-86791215
Fax: 027-85424329
To: Shenzhen Stock Exchange
Subject: Reply to Shenwu Energy Co., Ltd. 2025 Annual Report Inquiry Letter
Zhonghuan Letter of Special Audit (2026) No. 0101669
Zhongshenzhonghuan Certified Public Accountants LLP (hereinafter referred to as "the Firm" or "we"), as the auditor of Shenwu Energy Co., Ltd. (hereinafter referred to as "Shenwu Energy" or "the Company") for the 2025 financial year, issued an unqualified audit report (Zhonghuan Audit Letter (2026) No. 0102420) on April 28, 2026.
On July 6, 2026, the Listed Company Supervision Department of the Shenzhen Stock Exchange issued the "Inquiry Letter Regarding the 2025 Annual Report of Shenwu Energy Co., Ltd. (Company Department Annual Report Inquiry Letter [2026] No. 818)" (hereinafter referred to as the "Inquiry Letter"). Based on the audit work performed on the financial statements of Shenwu Energy, we have performed verification procedures on the relevant issues that require the Firm's response in the Inquiry Letter, and the verification results are hereby described as follows:
Question One:
The annual report shows that the Company's contract assets had a closing balance of RMB 4,703,500 at the end of the period, with no opening balance. An impairment provision of RMB 235,200 was made during the period. Please provide:
(I) A breakdown of the construction-in-progress and unsettled projects under contract assets, including project name, customer name, contract amount, completion progress, recognized revenue and cost, unsettled amount, reasons for non-settlement, and expected settlement time.
(II) Explain whether there are long-term unsettled projects and related collection risks, and the adequacy of the bad debt provision.
Please have the annual audit accountant explain the audit procedures performed and audit evidence obtained for the above issue (II), and whether the relevant audit procedures and evidence are appropriate and the audit conclusions are appropriate.
Company's Reply:
The Company's contract assets at the end of 2025 had a closing balance of RMB 4,703,500, with details as shown in the table below:
| Entity | Project Name | Customer Name | Contract Amount (incl. tax) | Completion Progress | Recognized Revenue | Recognized Cost | Unsettled Amount | Reason for Non-settlement | Expected Settlement Time |
|---|---|---|---|---|---|---|---|---|---|
| Huangshi Great King Town 82MW Solar-Wind Complementary Project | Fuyuan Electric Engineering (Shanghai) Co., Ltd. | Fuyuan Electric Engineering (Shanghai) Co., Ltd. | 17,471.97 | 46.3% | 4,162.53 | 3,467.28 | 222.55 | See Note 1 | December 2026 |
| Xiaozhuang Mine Underground Expansion Project | Shaanxi Coal and Chemical Industry Group Co., Ltd. Binlong Branch | Shaanxi Coal and Chemical Industry Group Co., Ltd. Binlong Branch | 1,780.00 | 100% | 1,415.31 | 996.12 | 178.00 | Contract amount retained 10% as project warranty, warranty period not yet expired, warranty amount not yet collected. | December 2026 |
| Xuchang Iron Mine Underground Mining Refrigeration Equipment Project | Xuji Group Co., Ltd. | Xuji Group Co., Ltd. | 698.00 | 100% | 617.70 | 461.64 | 69.80 | Contract amount retained 10% as project warranty, warranty period not yet expired, warranty amount not yet collected. | October 2026 |
| Total | 19,949.97 | 6,195.54 | 4,925.04 | 470.35 |
Note 1: As of December 31, 2025, the amount settled with the owner was RMB 6,498.40 million. The Company recognized RMB 6,749.88 million as receivables using the cost recovery method. The difference of RMB 251.48 million (RMB 222.55 million excluding tax) was recognized as contract assets, which will be transferred to receivables after the owner confirms the completion of the project.