Interim Report 2024

CONTENTS

1. Corporate Information
2. Management Discussion and Analysis

10 Disclosure of Interests and Other Information

1. Report on Review of Interim Condensed Consolidated Financial Statements
2. Interim Financial Report

Interim Condensed Consolidated Statement of Profit or Loss

Interim Condensed Consolidated Statement of Comprehensive Income Interim Condensed Consolidated Statement of Financial Position Interim Condensed Consolidated Statement of Changes in Equity Interim Condensed Consolidated Statement of Cash Flows

Notes to Interim Condensed Consolidated Financial Information

MANAGEMENT DISCUSSION AND ANALYSIS

In the first half of 2024, China's gross domestic product (GDP) grew by 5% year-on-year, maintaining its overall upward trend. Specifically, in the first quarter, the economy achieved a brilliant start beyond expectations, with

1. year-on-yearincrease of 5.3%, and the growth rate declined to 4.7% year-on-year in the second quarter. As indicated by the above data, the current trend of economic performance is consistent with the typical pattern of "a brilliant start in the first quarter and increased downward pressure in the second quarter" in the past few years. Looking ahead, the possible development might be "introducing measures aiming at stabilizing growth in the third quarter to boost the economy, and the growth continues in the fourth quarter at a slightly lower rate". This development trend is mainly attributable to the fact that in the first quarter, despite the early actions and efforts taken by various local organizations and governments, the problems of insufficient overall demand and sluggish expectations persisted, resulting in a less solid foundation for economic recovery, which led to the subsequent decline. From the perspective of economic momentum, the economic performance in the first half of the year was mainly driven by the higher-than-expected growth of exports, the high growth of manufacturing investment, and the soaring growth of corresponding infrastructure investment led by central fiscal expenditure. However, the unstable real estate market and tightened budgets of local finances resulted in restrictions on local infrastructure. From the perspective of microeconomic entities, the vitality of microeconomic entities such as local governments, residents and entrepreneurs remains to be further stimulated. In the first half of the year, the nominal GDP growth rate was 4.1% year-on-year, lower than the actual growth rate of 5%. The low prices directly affected fiscal revenue, residents' income and corporate income.

In the first half of the year, driven by multiple policies and technological innovations, China's environmental protection industry showed a positive development trend, but the market performance of different sectors significantly differentiated. In terms of waste incineration business, the new capacity and new investment dropped to 5,800 tons/day and RMB4.2 billion, respectively, representing a year-on-year decrease of 75% and 71%, respectively, both new record lows in the past three years. For the operation stage, cost reduction and efficiency enhancement have become the core competitive elements in the industry. Looking ahead, company mergers and acquisitions as well as project quality and efficiency improvement will become the main trends of industry development. In the environmental sanitation market, projects with an investment of over RMB10 million contributed an aggregate contract value of RMB93.9 billion, up by 14% year-on-year. As for the service term, the contract value of long term projects (franchised or purchase of services for more than 8 years) was RMB26.6 billion, accounting for 28%, while the contract value of short term projects (3 years and below) was RMB65 billion, accounting for as high as 69%. Due to the impact of the new public-private partnerships policy, the number of franchised projects dropped sharply. In addition, the site restoration business also gained positive growth momentum, with a contract value of RMB46.6 billion, representing a year-on-year increase of 15%. Its growth was mainly driven by land consolidation projects, such as the conversion of dry land into paddy field and land leveling to increase cultivated land.

Since entering the field of solid waste treatment in 2011, Capital Environment Holdings Limited (the "Company"), together with its subsidiaries (collectively, the "Group"), has aligned itself with the development guidance of national policies to promptly grasp policy benefits and market opportunities, and fully implemented the "14th Five-Year Plan" strategy and the overall deployment of "Eco+2025" strategic iteration of Beijing Capital Eco- Environment Protection Group Co., Ltd. (collectively, the "Capital Eco Group"), a controlling shareholder of the Company. The Group has continuously made in-depth adjustment to its business structure to gradually enhance profitability. Simultaneously, it has pursued development driven by technological innovation, optimised the environment for technological innovation, enhanced its technological innovation capabilities and accelerated the establishment of its technological innovation strengths, to promote the high-quality development of the Group. During the first half of 2024, the Group focused on its environmental protection business, continuously consolidated the core position of its waste-to-energy incineration business, and actively promoted the development of asset-light business such as the urban-rural environmental sanitation, site restoration and energy conservation

• dual carbon business. All business segments on the business chain have achieved greater synergies - a vertical synergy with waste incineration as the core, and a horizontal synergy among various types of waste, forming

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

a comprehensive structure for solid waste treatment business. The Group proactively established three major asset-light business platforms, namely the site restoration department (based on Beijing Capital Environment Technology Company Limited), the environmental industry department (based on Beijing Capital Environmental Sanitation Company Limited) and the carbon asset management department (based on Beijing Municipal Beijie Energy Design and Research Institute Co., Ltd.), clarifying the positioning of the platforms and strengthening business development. Each platform actively explores new customers and new markets and continuously expands its business scope as well as scale. The Group pursued the strategic initiatives on transformation and upgrading, in-depth urban presence and value diversification and, with a focus on capacity building and technological innovation, created a diversified value-driven model of "investment + operation + service" to develop both asset- light and asset-heavy operations, supporting Capital Eco Group to achieve a multi-business portfolio covering "water, solid waste, air and energy" environmental services.

In the first half of 2024, adhering to the operating focus of "tackling challenges, improving quality, making innovation and increasing quantity", the Group strived to expand its business increments, and based on key performance indicators such as return on equity improvement, continued to explore the potential for improvement in various aspects of existing asset operation and management, thereby delivering remarkable results. In particular, the Group's turnover amounted to RMB1,787 million, of which waste-to-energy incineration, urban-rural environmental sanitation, site restoration and organic solid waste treatment contributed turnover of RMB1,698 million, accounting for 95.04% of the total revenue for the six months ended 30 June 2024. Seven city-oriented companies in Zhumadian, Nanchang, Nanyang, Huizhou, Xinxiang, Pingdingshan, and Duyun in aggregate recorded revenue of RMB678 million, of which four recorded revenue of more than RMB100 million. Compared to the corresponding period last year, five city-oriented companies recorded revenue growth, with Nanyang and Duyun companies in particular, experiencing a growth of over 35%. The Group's net profit attributable to parent company amounted to RMB171 million, while the seven city-oriented companies in aggregate achieved

1. net profit attributable to parent company of RMB231 million, up by 3.63% year-on-year. Compared to the corresponding period last year, five city-oriented companies recorded profit growth, with Pingdingshan, Nanyang and Duyun companies recording more significant increases.

In the first half of 2024, in respect of results of operations, the Group's total assets reached RMB20,591 million, representing an increase of 1.5% as compared to RMB20,287 million as at 31 December 2023; the turnover amounted to RMB1,787 million, representing a year-on-year decrease of 6.38%; profit for the period amounted to RMB195 million, representing a year-on-year increase of 43.78%; and net profit attributable to parent company amounted to RMB171 million, representing a year-on-year increase of 13.48%.

In terms of project reserves, the Group secured a total of 67 projects (including 29 waste-to-energy projects, 5 waste landfill projects, 6 organic waste treatment projects, 18 cleaning, collection and transportation and management projects, 6 hazardous waste treatment projects, 1 waste electrical appliances dismantling project and 2 biomass power generation projects) in the PRC, with a total investment of approximately RMB19,783 million, of which RMB17,127 million had been invested before 30 June 2024. The facilities are designed with an aggregate annual waste treatment capacity of approximately 14,980,800 tons and annual electrical and electronic equipment dismantling volume of approximately 1.2 million units.

During the six months ended 30 June 2024, the Group's projects in operation or trial operation reached 57, including 26 waste-to-energy and biomass power generation projects, 4 waste landfill projects, 17 cleaning, collection and transportation and management projects, 1 dismantling project, 6 organic waste treatment projects, and 3 hazardous waste treatment projects. Key tasks were carried out in an orderly manner according to the Group's scientific management plan. In the first half of the year, the Group completed domestic waste disposal of 5,041,600 tons, hazardous waste disposal of 23,100 tons, and a dismantling volume of 23,400 units, providing a total of 1,287 million kWh of on-grid electricity.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Significant achievements in comprehensive quality improvement

In terms of franchise agreement maintenance, the Group coordinated and facilitated core matters in the field of franchise agreement maintenance and strengthened the control over key points. At present, the incineration project in Qianjiang, the kitchen waste treatment project in Fuzhou and the waste collection and transportation project in Gaoan have been successfully put into commercial operation. Price adjustments have been implemented for the incineration project in Puer and the waste collection and transportation project in Gaoan. In terms of technological renovation and efficiency improvement, the Group actively expanded the utilization of out-of-region garbage and general industrial solid waste, and promoted the implementation of technological renovation and efficiency improvement. The capacity utilization rate of projects increased from 77% to 87%. In particular, eight waste incineration power generation projects in Duyun, Gaoan, Nanyang, Xinxiang, Yutian, Tanghe, Yongji and Nanle, respectively recorded significant increase in capacity utilization rate compared with the beginning of the year. In addition, the average on-grid power generation per tonne of waste incineration power generation projects increased by 5.7% as compared with last year, with particularly significant increases observed in projects in Nanle, Zhengyang, Nong'an and Zhumadian. The Group also focused on proceeding with technological renovation in ten projects including the incineration for charging piles project in Suixian and the incineration for heat supply project in Tanghe. At present, the incineration for charging piles project in Suixian, renovation of #1 boiler furnace of the incineration project in Shenzhou and the renovation of screw conveyors of No.2 and 3 channels of #1 furnace of the incineration project in Nanle have been completed, and other technological renovations are also in progress in an orderly manner. In terms of cost reduction and efficiency improvement, the Group vigorously promoted centralized procurement for cost reduction, loan replacement, and energy conservation and consumption reduction. By broadening the categories and coverage of centralized procurement, the Group effectively controlled its procurement costs and saved the procurement amount by RMB14 million. At the same time, through measures to promote the reduction in loan interest rates, the incineration projects in Yutian, Xinxiang, Zhengyang and Nong'an have been granted lower interest rates, with the highest reduction reaching 80 basis points.

Fruitful results in innovative increment

In terms of "open competition mechanism" for technological innovation, there are six projects in progress according to project plans. Among them, the flue gas deacidification process renovation project has made rapid progress and entered the test and commissioning stage. For the project of ash hopper with high-efficiencywater-cooled heat exchange, the ash hopper has been manufactured and the furnace will be shut down for further construction when appropriate. For the steam turbine cold end comprehensive treatment project, the contract and technical agreement have been finalized. In terms of market expansion, the waste incineration derivative business was granted another 10 projects and signed a total of 47 contracts with a contract value of approximately RMB24 million; 6 urban and rural sanitation projects were implemented with an annual contract value of RMB69 million. In terms of technological innovation, the Group completed the final acceptance of four existing projects, added two project establishment applications, and accepted four invention patents and 10 utility model patents. Meanwhile, the Group also authorized four invention patents and 14 utility model patents. Based on the appraisal of scientific and technological achievements completed in December 2023, the Group applied for the Shanghai Science and Technology Award jointly with Donghua University in February 2024. The "key technologies and application achievements of the refined reconstruction of food waste resources and the application results of the step-by-step directional transformation" won the second prize of Shanghai Scientific and Technology Progress Award, which is a major breakthrough of the Group in the field of kitchen waste treatment.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Evident effect of systematic upgrade

In terms of the operation system, the Group has actively advanced the establishment of an operational excellence system, organised the symposium on production technology, and continued to promote the implementation of three major regulations in the water treatment process. Through these measures, the Group has successfully elevated its power generation capacity, lowered the consumption of purchased electricity in its plants, and enhanced unit efficiency and other key indicators. In terms of management system for the environmental sanitation business, the Group has proactively promoted its improvement, with a focus on enhancing safety management, operational planning, human resources management and organisational capacity building for the environmental sanitation platform. In terms of blazing new trails, the Group has conducted in-depth research and feasibility studies centered on three directions, namely chemical recycling of waste plastics, new energy heating, and the application of heat pumps in large-scalewaste-to-heat projects.

Comprehensive safety system

In respect of the letter of responsibility for safety objectives, the Group has required all departments, subordinate entities and employees at all levels to sign the letter of responsibility for safety objectives, achieving a 100% signing rate. In terms of internal control system construction, the Group has formulated the "Key Points of the 2024 Safety Production Work" and the "2024 Work Plan for Safety Production". The Group has also maintained the "Registration Form for Identification and Assessment of Hazard Source" for each project, and compiled the "High- and Medium-Risk Management and Control List" and the "Implementation Plan for Safety Inspectors in Safety Production Standardization". In addition, the Group successfully held two monthly Safety Committee Office meetings and two quarterly Safety Committee meetings, and organized activities in response to the 23rd National "Safety Production Month". For safety inspections, the Group carried out a total of 10 safety inspections, during which 265 safety hazards were identified and rectified. In the meantime, the Group organized 17 symposia on traffic safety. The coverage rate of safety inspections for high- and medium-risk types reached 100%, and all identified safety hazards were rectified on schedule, also achieving a 100% rectification rate. In terms of accident management, the "Management Measures for the Reporting, Investigation and Handling of Production Safety Accidents" and the "Management Measures for Related Parties" have been revised and issued simultaneously.

Diversified financing methods

On the basis of maintaining good cooperative relationships with a number of mainstream financial institutions in the market, including Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Postal Savings Bank of China, the Group achieved the notable results in persistently reducing the existing medium- and long-term borrowings and finance costs through in-depth and constructive communication with various cooperative banks, thanks to the supportive policies of the People's Bank of China to create a more favorable monetary and financial environment by reducing finance costs for the real economy through ongoing guidance. In the first half of 2024, the Group secured RMB10,143 million of outstanding banking facilities in total, of which RMB500 million was granted to the Group's headquarters and RMB9,643 million was granted to various project companies.

Business outlook

The second half of 2024 will pose even greater challenges. The Group will continue to solidly advance its annual operational targets and forge ahead with determination. With the primary goal of promoting the implementation of projects, we will spare no effort and take the initiative to concentrate our resources on securing premium projects. In addition, we will steadfastly advance our efforts to reduce and end losses, while reducing accounts receivable, through solid and targeted actions. Supported by the improvement in return on equity, we will devote meticulous and thorough efforts to our business operations, relentlessly driving a comprehensive upgrade of the Group's management. Centering on the "five key objectives", we shall adopt "four major initiatives" and focus on ten priorities for management improvement, thereby enabling the overall elevation in the management level from the Group's headquarters down to each project. All business lines shall adhere to the predetermined arrangements and push forward key tasks. With a strong sense of responsibility, accountability and commitment,

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

we will adopt targeted strategies and measures to accelerate the pace of development and embark on a new journey, so as to strive to excel in our work, accomplish tasks to the fullest, and aim to achieve the annual operational targets, thereby continuously driving the high-quality development of our Group.

FINANCIAL REVIEW

Financial Performance

For the period under review, the Group's revenue from its waste treatment and waste-to-energy business was approximately RMB1,786,721,000, representing a decrease of approximately 6.38% as compared to approximately RMB1,908,540,000 for the corresponding period in 2023. The decrease was mainly due to projects under construction were put into commercial operation, resulting in a corresponding decrease in construction revenue; and a sharp reduction in revenue as a result of the closure of dismantling project.

For the period under review, the Group's gross profit margin was approximately 36.41%, representing an increase from approximately 34.16% for the corresponding period in 2023. The increase was mainly attributable to the increase in waste disposal and the continuous improvement in power generation efficiency of some project companies for the period under review, which led to an increase in operating income and a decrease in the amortisation of fixed costs. The Group's selling and administrative expenses decreased by approximately 2.07% to approximately RMB198,473,000. The decrease was mainly due to a decrease in sales commissions as a result of a reduction in business volume of hazardous waste projects.

For the period under review, net profit attributable to owners of the Company was approximately RMB170,656,000, representing an increase of approximately 13.48% as compared to approximately RMB150,386,000 for the corresponding period in 2023. The increase was mainly due to a decrease in the provision for impairment of long-term assets for the period under review.

Financial Position

As at 30 June 2024, the Group had total assets of approximately RMB20,590,873,000 and net assets attributable to owners of the Company were approximately RMB6,598,697,000. The gearing ratio (calculated as total liabilities divided by total assets) was 66.37%, representing a slight decrease of less than 1 percentage point as compared to 66.99% as at 31 December 2023. The current ratio (calculated as current assets divided by current liabilities) increased from approximately 1.79 as at 31 December 2023 to approximately 2.02, mainly due to the continuous increase in accounts receivable as most of the projects were put into commercial operation, and a decrease in accounts payable as a result of the successive payments of project balances.

Financial Resources

The Group finances its operations primarily with internally generated cash flows, debt financing and bank loan facilities. As at 30 June 2024, the Group's cash and bank balances and pledged bank deposits amounted to approximately RMB545,752,000, representing a decrease of approximately RMB156,536,000 as compared to approximately RMB702,288,000 as at 31 December 2023. The decrease was mainly due to (i) slower collection of receivables due from the government, which was affected by factors such as financial approval processes and economic downturn; and (ii) the successive payments of project balances during the current period. Currently, most of the Group's cash is denominated in RMB, HK$ and US$.

Borrowings

As at 30 June 2024, the Group had outstanding borrowings of approximately RMB10,592,065,000, representing an increase of approximately RMB120,021,000 as compared to approximately RMB10,472,044,000 as at 31 December 2023. The borrowings comprised secured loans of approximately RMB6,571,965,000 and unsecured loans of approximately RMB4,020,100,000. The borrowings are denominated in US$ and RMB. Approximately 32% and 68% of the borrowings bear interest at fixed rate and variable rate, respectively.

As at 30 June 2024, the Group's undrawn loan facilities amounted to approximately RMB1,610,433,000.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

Finance costs decreased by 4.59% from RMB223,134,000 for the corresponding period in 2023 to approximately RMB212,903,000. The decrease was mainly due to a decrease in interest expenses for the current period as a result of the repayment of RMB1 billion of bonds in May 2023.

Foreign Exchange Exposure

The majority of the Group's sales, purchases and operating expenses were denominated in US$, HK$ and RMB. Although the Group has been and will continue to be exposed to foreign currency exchange risks, the Board does not expect future currency fluctuations to materially impact the Group's operations. The management will continue to monitor the foreign exchange exposure flexibly and engage in prompt and appropriate hedging activities when needed.

Pledge of Assets

As at 30 June 2024, certain banking facilities of the Group were secured by, inter alia, certain proceeds under the Group's service concession arrangements, bank balances of RMB3,045,000, and leasehold land and buildings of RMB35,544,000.

As at 30 June 2024, bank deposits of RMB35,964,000 were mainly bank balances pledged to secure service concession arrangements as required by the local governments.

Capital Commitment Arrangements

As at 30 June 2024, the Group had capital commitments of approximately RMB102,542,000 in respect of construction works under service concession arrangements, which were contracted but not provided for in the unaudited consolidated financial statements.

Contingent Liabilities

As at 30 June 2024, the Group provided performance guarantees of approximately RMB217,993,000 to the government authorities of the PRC in respect of the construction progress and continuous operation of the projects in the PRC.

The Group had a dispute with Fujian Huifeng Construction Engineering Co., Ltd.（福建惠豐建築工程有限公 司）, concerning a construction project contract, amounting to RMB73,477,000. Fujian Huifeng Construction Engineering Co., Ltd. claimed to the court for the unpaid contract amount of RMB67,735,000 and overdue interest payable for project payment of RMB5,742,000. As at 30 June 2024, the lawsuit is still in progress.

Employee Information

As at 30 June 2024, the Group had a total of approximately 3,647 employees, with a male to female ratio of 3.44:1, mainly based in the PRC. Total staff costs amounted to RMB249 million, which included basic pension insurance, basic medical insurance, unemployment insurance, work-related injury insurance, maternity insurance, and housing provident fund or regular contributions to the MPF Scheme on behalf of employees. The Group regularly reviews its remuneration policy, which is linked to the performance of individual employees and based on the salary trends prevailing in the aforesaid regions. In addition, the Group continues to provide trainings (including professional skills training, production safety training, etc.) and development plans.

MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities (including sale of treasury shares) during the six months ended 30 June 2024. As at 30 June 2024, there is no treasury shares held by the Company.

INTERIM DIVIDEND

The Board has resolved not to declare an interim dividend for the six months ended 30 June 2024 (six months ended 30 June 2023: nil).

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

On 11 March 2024, Shenzhen Qianhai Capital Environmental Investment Company Limited（深圳前海首創環 境投資有限公司）("Shenzhen Qianhai"), a direct wholly-owned subsidiary of the Company, entered into the capital increase agreement with Beijing Capital Eco-Environment Protection Group Co., Ltd.（北京首創生態環保 集團股份有限公司）("Capital Eco Group"), a controlling shareholder and a connected person of the Company, and Beijing Capital Environmental Sanitation Company Limited（北京首創環衛有限公司）("Capital Environmental Sanitation"), an indirect wholly-owned subsidiary of the Company immediately before the Capital Increase (as defined below), pursuant to which Capital Eco Group shall subscribe for the corresponding equity interest of RMB33,640,700 (representing approximately 49% of its enlarged registered capital) in the newly increased registered capital of Capital Environmental Sanitation ("Capital Increase"). The consideration for the Capital Increase of RMB33,640,700 shall be settled by Capital Eco Group in cash and shall be paid into the account of Capital Environmental Sanitation on or before 30 June 2024. Upon completion of the Capital Increase, the equity interest of Shenzhen Qianhai in Capital Environmental Sanitation will be diluted to 51%. Since Capital Environmental Sanitation remained as a subsidiary of the Company upon completion of the Capital Increase, the financial results of Capital Environmental Sanitation continued to be consolidated into the financial statements of the Group. It is expected that the Group will not record any gain or loss from the Capital Increase. Please refer to the announcement of the Company dated 11 March 2024 for details.

Save as disclosed in this interim report, the Group had no material acquisitions or disposals of subsidiaries, associates and joint ventures during the six months ended 30 June 2024.

SIGNIFICANT INVESTMENTS HELD BY THE GROUP

During the six months ended 30 June 2024, there were no significant investments held by the Group.

FUTURE PLAN FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

Save as disclosed in this interim report, the Group had no future plan for material investments or purchase of capital assets during the six months ended 30 June 2024.

EVENTS AFTER THE REPORTING PERIOD

Save as disclosed in this interim report, there were no material events which would have an impact on the Company since 30 June 2024 and up to the date of this interim report.