Announcement of 2010 Interim Results
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibility for the contents of this announcement, make no
representation as to its accuracy or completeness and expressly disclaim any
liability whatsoever for any loss howsoever arising from or in reliance upon
the whole or any part of the contents of this announcement.
(a sino-foreign joint stock limited company incorporated in the People's
Republic of China)
(Stock Code: 991)
ANNOUNCEMENT OF 2010 INTERIM RESULTS
OPERATING AND FINANCIAL HIGHLIGHTS:
-- Operating revenue amounted to approximately RMB28,946 million,
representing an increase of 39.66% over the first half of 2009.
-- Net profit attributable to equity holders of the Company amounted to
approximately RMB912 million, representing an increase of 27.91% over
the first half of 2009.
-- Basic earnings per share attributable to equity holders of the Company
amounted to approximately RMB0.0757, representing an increase of
approximately RMB0.0151 per share over the first half of 2009.
I. COMPANY RESULTS
The board of directors (the "Board") of Datang International Power
Generation Co., Ltd. (the "Company") hereby announces the unaudited
consolidated operating results of the Company and its subsidiaries
(the "Group") prepared in conformity with the International Financial
Reporting Standards ("IFRS") for the six months ended 30 June 2010
(the "Period"), together with the unaudited consolidated operating
results of the first half of 2009 (the "Corresponding Period Last
Year") for comparison. Such operating results have been reviewed and
confirmed by the Company's audit committee (the "Audit Committee").
Operating revenue of the Group for the Period was approximately
RMB28,946 million, representing an increase of approximately 39.66% as
compared to the Corresponding Period Last Year.
Net profit attributable to equity holders of the Company was
approximately RMB912 million, representing an increase of
approximately 27.91% as compared to the Corresponding Period Last Year.
Basic earnings per share attributable to equity holders of the Company
amounted to approximately RMB0.0757, representing an increase of
approximately RMB0.0151 per share as compared to the Corresponding
Period Last Year.
The Board does not recommend any payment of interim dividend for 2010.
Please refer to the unaudited financial information for details of the
consolidated operating results of the Group.
II. MANAGEMENT DISCUSSION AND ANALYSIS
The Group is one of the largest independent power generation companies
in the People's Republic of China (the "PRC"), which is primarily
engaged in power generation businesses with its main focus on coal-
fired power generation. As at 30 June 2010, the Group managed a total
installed capacity of 34,252.8MW. The power generation businesses of
the Group are primarily distributed in the North China Power Grid, the
Gansu Power Grid, the Zhejiang Power Grid, the Yunnan Power Grid, the
Fujian Power Grid, the Guangdong Power Grid, the Chongqing Power Grid,
the Jiangxi Power Grid, the Liaoning Power Grid, the Ningxia Power
Grid, the Jiangsu Power Grid and the Qinghai Power Grid.
During the Period, the PRC's economy maintained steady rapid growth,
with a year-on-year 11.1% Gross Domestic Product (GDP) growth reported.
Both power generation and power consumption nationwide showed
accelerated growth. Newly installed generating units continued to be
of relatively large scale and their structure continued to improve;
nationwide capability to supply power was sufficient; and the
cumulative average utilisation hours of power generating facilities
was 190 hours higher as compared to the Corresponding Period Last Year.
Overally speaking, power supply and demand in the PRC was balanced in
general. According to relevant information, during the Period,
nationwide installed capacity of power plants with generation capacity
of 6,000 kW or above grew by approximately 11.6% year-on-year; social
power consumption increased by 21.57% over the previous year, while
nationwide power generation increased by approximately 19.3% over the
previous year.
During the Period, the Group seized the opportunities of the upward
economic trend and the recovery of the power market, while continuing
steadfastly the implementation of the development strategy of
"pursuing the power generation business as its core development whilst
complementing with synergistic diversifications", and pushed forward
power-related upstream and downstream projects such as coal mining,
coal chemical, railway construction and shipping at a steady pace in
accordance with plans. The Group, with reference to changes in the
State policies and the market environment, took initiatives in
tackling the changes and making prompt responses, while ensuring
steady, safe and orderly production and operation management. As a
result, the Group achieved a significant growth in profit over the
Corresponding Period Last Year.
A. Management's review on the operating results of various businesses
1. Power Generation Businesses
(1) Business Review
(i) Maintained stable power production
During the Period, the operational generating units of the Group
maintained safe and stable operation. No casualties or incidents
regarding the production facilities occurred to the Group during
the course of power production. The equivalent availability factor
of operational generating units amounted to 94.17%, maintaining at
relatively high levels.
During the Period, primarily due to the impact of the positive
macro-economy of the PRC, the utilisation hours of the Group's
power generation facilities increased considerably as compared to
the Corresponding Period Last Year. Total power generation of the
Group amounted to approximately 80.768 billion kWh, representing a
significant increase of approximately 31.75% as compared to the
Corresponding Period Last Year. Total on-grid power generation of
the Group amounted to approximately 76.013 billion kWh,
representing an increase of approximately 31.65% over the
Corresponding Period Last Year. Both total power generation and on-
grid power generation saw significant year-on-year increases, which
were mainly attributable to the buoyant macro-economy of the
country, the continuously strong demand of social power consumption,
a growth in capacity of the operational generating units and an
increase in average utilisation hours of the coal-fired generating
units of the Company and its subsidiaries.
Details of the power generation of the Group during the Period
(Unit: billion kWh):
Power Power
generation generation
for the for the
first half first half Growth
Power plant/Company of 2010 of 2009 (%)
Gao Jing Thermal Power Plant 1.6835 1.3539 24.34%
Dou He Power Plant 4.2014 3.5957 16.85%
Xia Hua Yuan Power Plant 0.5145 0.6924 -25.69%
Zhang Jia Kou Power Plant 6.6552 6.2422 6.62%
Tianjin Datang International Panshan
Power Generation Company Limited
("Panshan Power Company") 3.4132 3.1573 8.11%
Inner Mongolia Datang International
Tuoketuo Power Generation Company
Limited ("Tuoketuo Power Company") 10.1039 8.8999 13.53%
Shanxi Datang International Yungang
Thermal Power Company Limited
("Yungang Thermal Power Company") 3.1472 2.1242 48.16%
Hebei Datang International Tangshan
Thermal Power Company Limited
("Tangshan Thermal Power Company") 1.6580 1.9276 -13.99%
Shanxi Datang International Shentou
Power Generation Company Limited
("Shentou Power Company") 2.4540 2.3104 6.22%
Gansu Datang International Liancheng
Power Generation Company Limited
("Liancheng Power Company") 1.5835 1.4367 10.22%
Hebei Datang International Wangtan
Power Generation Company Limited
("Wangtan Power Company") 3.4390 3.2426 6.06%
Zhejiang Datang International
Wushashan Power Generation Company
Limited ("Wushashan Power Company") 6.5222 5.9703 9.24%
Guangdong Datang International
Chaozhou Power Generation Company
Limited ("Chaozhou Power Company") 3.1931 3.3272 -4.03%
Fujian Datang International Ningde
Power Generation Company Limited
("Ningde Power Company") 4.0524 3.4914 16.07%
Yunnan Datang International Honghe
Power Generation Company Limited
("Honghe Power Company") 2.2281 1.5756 41.41%
Jiangxi Datang International Xinyu
Power Generation Company Limited
("Xinyu Power Company") 0.8051 0.8181 -1.59%
Shanxi Datang International Yuncheng
Power Generation Company Limited
("Yuncheng Power Company") 3.0133 2.9647 1.64%
Inner Mongolia Datang International
Hohhot Thermal Power Generation
Company Limited ("Hohhot Thermal
Power Company") 1.3820 0.4586 201.35%
Chongqing Datang International
Pengshui Hydropower Development
Company Limited ("Pengshui Hydropower
Company") 2.0980 2.6167 -19.82%
Yunnan Datang International Nalan
Hydropower Development Company
Limited ("Nalan Hydropower Company") 0.1321 0.2045 -35.40%
Yunnan Datang International
Lixianjiang Hydropower Development
Company Limited ("Lixianjiang
Hydropower Company") 0.9230 1.2857 -28.21%
Inner Mongolia Datang International
Duolun Hydropower Multiple
Development Company Limited ("Duolun
Hydropower Company") 0.0026 0.0041 -36.59%
Qinghai Datang International
Zhiganglaka Hydropower Generation
Development Company Limited
("Zhiganglaka Hydropower Company") 0.3457 0.3570 -3.17%
Hebei Datang International Huaze
Hydropower Development Company
Limited ("Huaze Hydropower Company") 0.0097 0.0090 7.78%
Inner Mongolia Datang International
Windpower Development Company
Limited ("Inner Mongolia Windpower
Company") 0.1014 0.0549 84.70%
Inner Mongolia Datang International
Tuoketuo No. 2 Power Generation
Company Limited ("Tuoketuo No. 2
Power Company") 3.3591 2.9386 14.31%
Liaoning Datang International Jinzhou
Thermal Power Generation Company
Limited ("Jinzhou Thermal Power
Company") 1.6656 0.1967 746.77%
Shanxi Datang International Zuoyun
Windpower Company Limited ("Zuoyun
Windpower Company") 0.0843 0.0480 75.63%
Hebei Datang International Fengrun
Thermal Power Company Limited Not Not
("Fengrun Thermal Power Company") 1.7015 Applicable Applicable
Ningxia Datang International Daba
Power Generation Company Limited Not Not
("Daba Power Company") 3.9021 Applicable Applicable
Hebei Datang International
Zhangjiakou Thermal Power Company
Limited ("Zhangjiakou Thermal Power Not Not
Company") 1.3965 Applicable Applicable
Qian'an Datang Thermal Power Company
Limited ("Qian'an Datang Thermal Power Not Not
Company") 0.5593 Applicable Applicable
Liaoning Datang International
Windpower Development Company Not Not
Limited ("Liaoning Windpower Company") 0.1143 Applicable Applicable
Fujian Datang International Windpower
Development Company Limited ("Fujian Not Not
Windpower Company") 0.0880 Applicable Applicable
Jiangsu Datang International Lvsigang
Power Generation Company Limited Not Not
("Lvsigang Power Company") 3.6375 Applicable Applicable
Yunnan Datang International Wenshan
Hydropower Development Company
Limited ("Wenshan Hydropower Not Not
Development Company") 0.2019 Applicable Applicable
Yuneng (Group) Company Limited Not Not
("Yuneng Group Company") 0.3960 Applicable Applicable
------- -------
Total 80.768 61.304 31.75%
======= =======
(ii) Advanced steadily on energy savings and emissions reduction
During the Period, coal consumption of the Group amounted to
approximately 324.92g/kWh, representing a decrease of approximately
1.88g/kWh over the Corresponding Period Last Year, while the
consolidated electricity consumption rate of power plants amounted
to approximately 5.95%. The coal-fired generating units of the
Company and its subsidiaries continued to achieve a
desulphurisation facilities installation rate of 100%. Emission
rates of sulphur dioxide, nitrogen oxides, smoke ash and waste
water amounted to approximately 0.459g/kWh, 1.41g/kWh, 0.131g/kWh
and 86g/kWh, respectively. Emission rates of various pollutants
were lower than the national average levels.
(iii) Achieved prominent results in project construction
During the Period, the Group achieved prominent results in
construction and preliminary works through delegating management
responsibilities level-by-level according to specific production
targets for power projects, thereby enabling new generating units
with a total capacity of approximately 3,511MW to commence
production successfully for power generation. Among the new
capacity added:
-- 2,940MW of coal-fired power units, mainly including: four 660MW
generating units at Lvsigang Power Company; and one 300MW
generating unit at Zhangjiakou Thermal Power Company.
-- 473.5MW of hydropower units, including: 200MW hydropower
generating units at Wenshan Hydropower Development Company; and
273.5MW hydropower generating units at Yuneng Group Company
(obtained through acquisition).
-- 97.5MW of windpower units, including: 48MW windpower generating
units at Inner Mongolia Windpower Company; and 49.5MW windpower
generating units at Zuoyun Windpower Company.
(2) Major Financial Indicators and Analysis
(i) Operating revenue
Revenues from power and heat sales of the Group accounted for
approximately 84.01% of the total operating revenue of the Group.
Sales revenue from the principal power generation business
accounted for 82.92% of the total operating revenue.
During the Period, revenues from power and heat sales of the Group
amounted to approximately RMB24,002 million and RMB316 million,
respectively, representing increases of approximately 30.93% and
79.89% over the Corresponding Period Last Year. The increase in
revenue from power sales was mainly attributable to the significant
year-on-year increases in power generation and on-grid power
generation during the Period; the increase in revenue from heat
sales was mainly attributable to an increase in co-generation units
and the impact of climate change during the Period, resulting in a
substantial year-on-year increase in heat sales.
(ii) Operating costs
During the Period, the operating costs of power and heat generation
of the Group are approximately RMB19,608 million and RMB516 million,
respectively, representing respective increases of approximately
RMB5,078 million and RMB255 million as compared to the
Corresponding Period Last Year, representing increases of
approximately 34.94% and 97.66%, respectively.
(iii) Operating profit
During the Period, operating profit from power generation amounted
to approximately RMB4,394 million, representing an increase of
approximately 15.60% over the Corresponding Period Last Year while
gross profit margin was approximately 18.31%.
2. Coal Chemical Business
During the Period, the Group controlled and constructed the Duolun
Coal Chemical Project with a production scale of 460,000 tonnes of
polypropylene per annum, the Keqi Coal-based Gas Project with a
production scale of 4 billion cubic meters of natural gas per annum,
and the Fuxin Coal-based Gas Project with a production scale of 4
billion cubic meters of natural gas per annum. Of these projects:
(1) The Duolun Coal Chemical Project is located in Duolun County,
Xilinguole Pledge, Inner Mongolia. It uses lignite coal from East
Unit 2 of Shengli Coal Mine in Inner Mongolia (which is controlled
and constructed by the Company) as raw materials; and it applies
advanced technologies including the technology of vaporising coal
ash, the syngas purification technology, the large-scale methanol
synthesis technology, the technology to convert methanol to
propylene, and the propylene polymerization technology to produce
coal chemical products. The final products of the project are
460,000 tonnes/year of polypropylene and other by-products. The
project is still under construction at present. It is expected that
the successful development and construction of this project will be
a new point of profit growth for the Group.
(2) Keqi Coal-based Gas Project is located in Kesheketeng Qi, Chifeng
City, Inner Mongolia. The project will use brown coal from East Unit
2 of Shengli Coal Mine in Inner Mongolia (which is controlled and
constructed by the Company) as raw materials and fuels, It will be a
coal conversion project making clean, efficient and high value-added
use of coal through the adoption of internationally advanced
technologies such as pressurized fixed bed gasification, synthesis
gas purification and synthesis gas methanation. Natural gas, the
principal product, will be transmitted by a long-distance pipeline
covering 359 km in total which runs from the project site
(Kesheketeng Qi destination) to the final destination in Miyun,
Beijing, the PRC. The Keqi Coal-based Gas Project will be
constructed in three stages. The Phase I project is expected to
commence operation by 2012 and the project is expected to produce 4
billion cubic meters of natural gas per annum upon completion of the
entire project and commencement of production.
(3) The Fuxin Coal-based Gas Project is located in the Changyingzi Town,
Xinqiu District, Fuxin City, Liaoning Province and is a new coal
conversion project using brown coal from East Unit 2 of Shengli Coal
Mine in Inner Mongolia (which is controlled and constructed by the
Company) as its raw materials. It will be a coal conversion project
making clean, efficient and high value-added use of coal through the
adoption of internationally advanced technologies such as
pressurized fixed bed gasification, synthesised gas purification and
synthesised gas methanation. The natural gas produced is supplied
via long-distance pipelines to cities such as Shenyang, Tieling,
Fushun, Benxi and Fuxin. Its pipeline covers 334 km in total. The
Fuxin Coal-based Gas Project will be constructed in three stages.
The Phase I project is expected to commence operation by 2013 and
the project is expected to produce 4 billion cubic meters of natural
gas per annum upon completion of the entire project and commencement
of production.
3. Coal Business
(1) Business Review
The East Unit 2 coal mine of Shengli Coal Mine was developed and
constructed by the Group and located in the central area of Shengli
Coal Mine in Inner Mongolia. The coal produced will be mainly used
as raw materials for coal chemical projects and coal-based natural
gas projects including the Duolun Coal Chemical Project, the Keqi
Coal-based Natural Gas Project and the Fuxin Coal-based Natural Gas
Project. Among these, the Phase 1 project reaches a production scale
of 10 million tonnes.
During the Period, the Group has completed the acquisition of 70%
interest in Inner Mongolia Baoli Coal Company Limited ("Baoli
Company"). The open-cut coal mine owned by Baoli Company is located
in E'erduosi City, Inner Mongolia. Its designed production scale is
1.2 million tonnes per annum.
The successful developments and acquisitions of the above-said coal
mine projects will enhance the coal consumption self-sufficiency
ratio of the Company's power plants. Meanwhile, the Group is also
proceeding with the preliminary development works on the Phase 2
project of the East Unit 2 coal mine of Shengli Coal Mine in Inner
Mongolia, Wujianfang Coal Mine and Kongduigou Coal Mine. The
successful development of the above-mentioned coal mine projects
will increase the coal self-sufficiency ratio of the Group's power
plants.
To further secure coal supply and lower fuel cost, Beijing Datang
Fuel Company Limited ("Fuel Company"), a wholly-owned subsidiary of
the Company, actively expanded its coal sales business and increased
its coal sales during the Period.
(2) Major Financial Indicators and Analysis
(i) Operating revenue
Operating revenue from the coal business amounted to
approximately RMB2,930 million, accounting for approximately
10.12% of the total operating revenue of the Group, representing
an increase of approximately RMB813 million over the
Corresponding Period Last Year.
(ii) Operating costs
During the Period, operating costs of the coal business amounted
to approximately RMB2,435 million, representing an increase of
approximately RMB391 million over the Corresponding Period Last
Year.
(iii) Operating profit
During the Period, operating profit from the coal business
amounted to approximately RMB495 million, representing an
increase of approximately 582.00% over the Corresponding Period
Last Year while gross profit margin was approximately 16.88%.
Other Businesses
Jiangsu Datang Shipping Company Limited ("Datang Shipping Company"),
in which the Group holds 97.54% interest, was registered and
established on 6 September 2007 by the Group. Currently, Datang
Shipping Company has two 70,000-ton bulk cargo vessels, namely "Datang
Power #1" and "Datang Power #2", which are engaged in thermal coal
transportation from Qinhuangdao (or other ports in North China) to
Chaozhou, Guangdong (or Ningde, Fujian). Shipping companies, which the
Group controls or has interest in, achieved 2.22 million tonnes of
coal transportation in the first half of 2010.
Datang Shipping Company actively commenced shipbuilding works and has
entered into relevant agreements on planned construction of four
45,000-ton bulk cargo vessels and two 76,000-ton bulk cargo vessels,
thereby further expanding the fleet scale of the Group.
The development and strengthening of Datang Shipping Company will help
to ease the tense situation being faced by the Group's coastal power
plants in regard to transportation of thermal coal, stabilise
transportation costs for thermal coal, and enhance its transportation
self-sufficiency.
B. Management's Review on the Consolidated Operating Results
Improved Effectiveness in operational management
During the Period, the Company was still under the impact of
unfavourable factors such as persistently high fuel coal prices. Faced
with such tough operating environment, the Company kept abreast of the
trends of the market while taking initiatives in planning budgets,
strengthening internal management and at the same time creating a
favourable external environment, thereby rigorously enhancing
production and operation:
(1) Through timely adjustments of the power generation evaluation system,
management accountability was implemented level-by-level, and the
target of power generation was achieved. Consolidated utilisation
hours accumulated to 2,304 hours, representing a year-on-year increase
of 66 hours;
(2) The Company executed its development strategies through strengthening
its capital operation. The non-public issuance of A shares to specific
parties was completed by 23 March 2010. After completion of the
issuance, the total share capital of the Company increased from
11,780,037,578 shares to 12,310,037,578 shares and the net funds
raised amounted to RMB3,248,246,600. The Group successfully acquired
Baoli Company, which pertains to a designed production capacity of 1.2
million tonnes per year, thereby increasing the self-sufficiency ratio
for coal consumption for the Company's power plants;
(3) In order to effectively utilise the functions of resources allocation
in the capital market, satisfy the capital needs arising from the
rapid development of the Company and foster a successful
implementation of the investment projects of the Company so as to
enhance the Company's profitability, the Company planned to issue not
more than 1 billion non-public A-shares within the current year, with
an issue price not lower than RMB6.74 per share (As the Company has
distributed the 2009 final dividend of RMB0.07 per share in July 2010,
the issue price was adjusted from RMB6.81 per share to RMB6.74 per
share). To date, such proposal has been considered and approved by the
Board and the general meeting of the Company as well as the State-
Owned Asset Supervisory and Administration Commission of the PRC (the
"SASAC"), and the China Securities Regulatory Commission has accepted
the application of the current non-public issue of A shares and is
undergoing its approval procedures at present.
1. Operating Revenue
During the Period, the Group realised an operating revenue of
approximately RMB28,946 million, representing an increase of
approximately 39.66% over the Corresponding Period Last Year. Of the
operating revenue, revenue from power sales increased by approximately
RMB5,671 million.
2. Operating Costs
During the Period, total operating costs of the Group amounted to
approximately RMB25,033 million, representing an increase of
approximately RMB7,335 million or approximately 41.42% over the
Corresponding Period Last Year. Of the total operating costs, fuel
costs accounted for approximately 67.38%.
3. Net Finance Costs
During the Period, finance costs of the Group amounted to
approximately RMB2,563 million, representing an increase of
approximately RMB532 million or approximately 26.22% over the
Corresponding Period Last Year. The significant increase was mainly
due to an increase of remaining borrowing balance, an increase in
expensed interests and the construction-in-progress being successively
converted into fixed assets.
4. Profit Before Tax and Net Profit
During the Period, the Group reported a total profit before income tax
of approximately RMB1,742 million, representing an increase of
approximately 30.24% over the Corresponding Period Last Year. Net
profit attributable to equity holders of the Company amounted to
approximately RMB912 million, representing an increase of
approximately 27.91% over the Corresponding Period Last Year.
5. Financial Position
As at 30 June 2010, total assets of the Group amounted to
approximately RMB202,819 million, representing an increase of
approximately RMB18,596 million over the end of 2009. The increase in
total assets mainly resulted from the implementation of the Group's
expansion strategy which led to a corresponding increase in
investments in construction-in-progress, property and equipment.
Total liabilities of the Group amounted to approximately RMB166,815
million, representing an increase of approximately RMB15,439 million
over the end of 2009. Of the total liabilities, long-term liabilities
increased by approximately RMB10,163 million over the end of 2009. The
increase in total liabilities was mainly due to an increase in the
Group's borrowing level so as to meet the needs of daily operations
and infrastructure construction.
Equity attributable to owners of the Company amounted to approximately
RMB29,241 million, representing an increase of approximately RMB3,042
million over the end of 2009. Net asset value per share attributable
to equity holders of the Company amounted to approximately RMB2.38,
representing an increase of approximately RMB0.16 per share over the
end of 2009.
6. Liquidity
As at 30 June 2010, the asset-to-liability ratio of the Group was
approximately 82.25%. The net debt-to-equity ratio (i.e. (loans +
medium-term notes + short-term bonds - cash and cash equivalents -
bank deposits with a maturity of over 3 months)/total equity) was
approximately 375.75%.
As at 30 June 2010, cash and cash equivalents and bank deposits with a
maturity of over 3 months of the Group amounted to approximately
RMB7,452 million, of which deposits equivalent to approximately RMB199
million were foreign currency deposits. The Group had no entrusted
deposits and overdue fixed deposits during the Period.
As at 30 June 2010, short-term loans of the Group amounted to
approximately RMB19,967 million, bearing annual interest rates ranging
from 2.10% to 7.47%. Long-term loans (excluding those repayable within
one year) amounted to approximately RMB110,108 million and long-term
loans repayable within one year amounted to approximately RMB6,719
million. All long-term loans (including those repayable within 1 year)
were at annual interest rates ranging from 1.13% to 7.83%.
Loans of approximately RMB1,011 million were denominated in US dollar.
The Group paid close attention to foreign exchange market fluctuations
constantly and cautiously assessed foreign currency risks. Part of the
borrowings of the Group was pledged against assets including accounts
receivable, property, plant and equipment, etc, totalling
approximately RMB32,850 million.
7. Welfare Policy
As at 30 June 2010, the staff of the Group totalled 17,120. The Group
adopts the basic salary system on the basis of position-points salary
distribution. The Group carries out evaluation of its subordinated
enterprises based on a profit accountability system, and adopts an
incentive system for the senior management of its subordinated
enterprises based on assessments of capital operations, safe
production and improved CPS's anti-corruption work. The Group is
concerned about personal growth and occupational training. It
implements a reward mechanism of "unification of training, usage and
remuneration". Based on the basic principles of "identifying targets
scientifically and providing training depending on actual needs", and
led by the strategy of developing a strong corporation with strong
talents, the Group relies on a three-tier management organisational
structure and implements an all-staff training scheme for various
levels.
C. Outlook for the Second Half of 2010
In the second half of 2010, the aftermath of the global financial
crisis will still linger. Although the domestic economy has been
developing along the expected direction of the State's macro-economic
controls, it still faces the risk of a relapse. The Group, therefore,
has a daunting task on maintaining stable and healthy development and
is faced with both opportunities and challenges.
In the first half of the year, as the macro-economy of the PRC was
gradually recovering, power demand has shown a rapid growth after
recovery. Growth rate for the whole year is expected to maintain at a
high level. In view of the current tough energy-saving environment,
continued implementation of strict energy-saving and consumption
lowering policies, and the State's adjustment of the energy structure,
the growth rate of power demand by high-energy consumption industries
such as the iron and steel and cement industries may slow. However,
there is still hope that the growth rate for the whole year will
maintain at a relatively high level. Although social power consumption
will experience a first-high-then-low growth trend, thermal coal supply
is expected to remain basically stable. However, there remains
uncertain factors such as coal supply shortage and a surge in thermal
coal prices.
Faced with a difficult operating environment, the Group will continue
to implement an overall strategy that focuses on "pursuing the power
generation business as its core development whilst complementing with
synergistic diversifications". The Company will do its utmost to
achieve the production and operation targets for 2010 with a persistent
focus on profitability and safe production. It will actively expand its
room for development and strengthen its marketing and sales efforts by
fully leveraging its advantages in resources, scale, geographical
distribution and costs. While pursuing success in its core power
business, it will also pursue excellence in non-power businesses. It
will exercise stringent cost controls and strive to contain unit fuel
cost increase, with a view to enhancing the profitability of the
Company.
In the second half of 2010, the Group will focus on the following tasks:
(1) To strengthen production safety as the foundation of the Company
and endeavour to be a company with safety as its character.
(2) To expand income while reducing expenditures so as to enhance the
profitability of the Company.
(3) To actively pursue structural adjustments so as to raise quality
and profitability throughout the Company.
(4) To step up efforts in improving management and focus on the
construction of excellent infrastructures.
(5) To further push forward the development of capital operations and
fully leverage the financing capacity of the Company.
(6) To implement a lean management, thus further improving the
Company's management performance.
(7) To push forward the work on energy conservation and emissions
reduction in order to maintain a leadership position of the Company
in the industry.
III. SHARE CAPITAL AND DIVIDENDS
1. Share Capital
As at 30 June 2010, the total share capital of the Company amounted to
12,310,037,578 shares, divided into 12,310,037,578 shares carrying a
nominal value of RMB1.00 each.
2. Shareholding of Substantial Shareholders
So far as the directors of the Company are aware, as at 30 June 2010,
the persons below held the interests or short positions in the shares
or underlying shares of the Company which were required to be disclosed
to the Company under section 336 of the Securities and Futures
Ordinance (the "SFO") (Chapter 571 of the Laws of Hong Kong):
Approximate
percentage Approximate Approximate
to total percentage percentage
issued to total to total
share issued A issued H
capital of Shares of Shares of
Name of Class of Number of the Company the Company the Company
shareholder shares shares held (%) (%) (%)
China Datang
Corporation A shares 3,959,241,160 32.16 44.02 --
H shares 480,680,000(L) 3.90(L) -- 14.50(L)
Hebei
Construction
Investment
(Group)
Company
Limited A shares 1,299,872,927 10.56 14.45 --
Beijing
Energy
Investment
(Group)
Company
Limited A shares 1,278,988,672 10.39 14.22 --
Tianjin
Jinneng
Investment
Company A shares 1,212,012,600 9.85 13.48 --
Blackrock,
Inc. H shares 265,591,753(L) 2.16(L) -- 8.0(L)
20,663,351(S) 0.17(S) -- 0.62(S)
(L) means Long Position (S) means Short Position (P) means Lending Pool
3. Dividends
The distribution proposal on the payment of cash dividends for the year
of 2009 was considered and approved at the 2009 annual general meeting
of the Company held on 11 June 2010. The above distribution proposal
was completed before the date of this announcement.
The Board does not recommend the payment of any interim dividend for
2010.
4. Shareholding of the Directors and Supervisors
As at 30 June 2010, Mr. Fang Qinghai, a director of the Company, was
interested in 24,000 A shares of the Company. Save as disclosed above,
none of the directors, supervisors and chief executives of the Company
nor their associates had any interests or short positions in the shares,
underlying shares and debentures of the Company or any of its
associated corporation (within the meaning of the SFO) that were
required to be notified to the Company and The Stock Exchange of Hong
Kong Limited (the "Hong Kong Stock Exchange") under the provisions of
Divisions 7 and 8 of Part XV of the SFO, or required to be recorded in
the register mentioned in the SFO pursuant to section 352 or otherwise
required to be notified to the Company and the Hong Kong Stock Exchange
pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers (the "Model Code") in Appendix 10 of the Rules Governing
the Listing of Securities on the Hong Kong Stock Exchange (the "Listing
Rules").
IV. SIGNIFICANT EVENTS
Pursuant to the resolutions passed at the thirty-seventh meeting of the
sixth session of the Board held on 29 June 2010, the Board agreed to
nominate Liu Shunda, Cao Jingshan, Hu Shengmu, Fang Qinghai, Zhou Gang,
Liu Haixia, Guan Tiangang, Su Tiegang, Ye Yonghui and Li Gengsheng as
candidates for non-independent directors of the seventh session of the
Board of the Company; and to nominate Li Yanmeng, Zhao Zunlian, Li
Hengyuan, Zhao Jie and Jiang Guohua as candidates for independent
directors of the seventh session of the Board of the Company. The afore-
mentioned election matters relating to the change of the session of the
Board have been submitted to the Second Extraordinary General Meeting of
2010 of the Company for consideration and approval on 19 August 2010. The
term of office of the seventh session of the Board will commence from 20
August 2010 and end on 30 June 2013.
Pursuant to the resolutions passed at the seventeenth meeting of the sixth
session of the Supervisory Committee held on 29 June 2010, the Supervisors
agreed to nominate Zhang Xiaoxu and Fu Guoqiang as candidates representing
the shareholders for supervisors of the seventh session of the Supervisory
Committee of the Company. Mr. Qiao Xinyi and Mr. Guan Zhenquan were
elected at the Staff Representatives Congress as the supervisors
representing the staff for the seventh session of the Supervisory
Committee. The afore-mentioned election matters relating to the change of
the session of the Supervisory Committee have been submitted to the Second
Extraordinary General Meeting of 2010 of the Company for consideration and
approval on 19 August 2010. The term of office of the seventh session of
the Supervisory Committee will commence from 20 August 2010 and end on 30
June 2013.
V. PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the Period, the Group has not purchased, sold or redeemed any of
the listed securities of the Company.
VI. COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES
To the knowledge of the Board, the Company has complied with all the code
provisions under the Code on Corporate Governance Practices as set out in
Appendix 14 of the Listing Rules during the Period.
VII. COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
OF LISTED ISSUERS
Upon specific enquiries made to all the directors of the Company and in
accordance with the information provided, the Board confirmed that all
directors of the Company have complied with the provisions under the Model
Code for Securities Transactions by Directors of Listed Issuers as set out
in Appendix 10 to the Listing Rules during the Period.
VIII. AUDIT COMMITTEE
The Audit Committee has reviewed the accounting principles and methods
adopted by the Group with the management of the Company. They have also
discussed matters regarding internal controls and the annual financial
statements, including the review of the financial information for the
Period.
The Audit Committee considers that the 2010 interim financial report of
the Group has complied with the applicable accounting standards, and that
the Group has made appropriate disclosures thereof.
By Order of the Board
Zhai Ruoyu
Chairman
Beijing, the PRC, 19 August 2010
As at the date of this announcement, the directors of the Company are:
Zhai Ruoyu, Hu Shengmu, Cao Jingshan, Fang Qinghai, Zhou Gang, Liu Haixia,
Guan Tiangang, Su Tiegang, Ye Yonghui, Li Gengsheng, Xie Songlin*, Liu
Chaoan*, Yu Changchun*, Xia Qing* and Li Hengyuan*
* Independent non-executive directors
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2010
(Amounts expressed in thousands of Renminbi, except earnings per share)
Six months ended 30 June
Note 2010 2009
(unaudited) (unaudited
and
restated)
Operating revenue 4 28,946,006 20,726,435
Operating costs
Fuel for power generation (14,027,483) (9,349,287)
Fuel for coal sales (2,840,373) (1,978,614)
Depreciation (3,571,794) (3,587,262)
Repairs and maintenance (539,261) (762,237)
Salaries and staff welfares (902,658) (902,705)
Local government surcharges (149,909) (186,361)
Others (3,001,467) (934,123)
------- -------
(25,032,945) (17,700,589)
------- -------
Operating profit 3,913,061 3,025,846
Share of profits/(losses) of jointly
controlled entities 6,806 (7,495)
Share of profits of associates 352,712 185,747
Other gains 8,212 144,633
Interest income 24,437 19,550
Finance costs 6 (2,563,386) (2,030,894)
------- -------
Profit before tax 1,741,842 1,337,387
Income tax expense 7 (312,707) (225,109)
------- -------
Profit for the period 8 1,429,135 1,112,278
------- -------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2010
(Amounts expressed in thousands of Renminbi, except earnings per share)
Six months ended 30 June
Note 2010 2009
(unaudited) (unaudited
and
restated)
Other comprehensive income after tax:
Disposal of available-for-sale investments,
net of tax (10,954) --
Share of other comprehensive income of
associates, net of tax (7,745) 50,110
Currency translation differences 1,303 (148)
------- -------
Other comprehensive income for the period,
net of tax (17,396) 49,962
------- -------
Total comprehensive income for the period 1,411,739 1,162,240
========= =========
Profit for the period attributable to:
Owners of the Company 911,878 713,407
Non-controlling interests 517,257 398,871
------- -------
1,429,135 1,112,278
========== =========
Total comprehensive income for the period
attributable to:
Owners of the Company 896,673 763,369
Non-controlling interests 515,066 398,871
------- -------
1,411,739 1,162,240
========== ==========
Earnings per share 10
Basic (RMB) 0.0757 0.0606
========= ========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2010
(Amounts expressed in thousands of Renminbi)
Note At 30 June At 31 December
2010 2009
(unaudited) (audited
and
restated)
ASSETS
Non-current assets
Property, plant and equipment 11 165,963,171 157,524,940
Investment properties 210,652 --
Investments in jointly controlled
entities 2,354,049 1,636,674
Investments in associates 4,260,782 3,772,537
Available-for-sale investments 2,022,983 1,339,829
Deferred housing benefits 148,233 163,384
Intangible assets 2,331,513 2,122,836
Long-term entrusted loans to associates 100,135 130,194
Deferred income tax assets 834,425 744,114
Other long-term assets 57,801 109,422
------- -------
178,283,744 167,543,930
------- -------
Current assets
Inventories 3,480,244 1,855,177
Short-term entrusted loans to ultimate
parent company -- 17,000
Prepayments and other receivables 6,501,684 6,574,901
Accounts and notes receivable 12 7,037,067 6,634,917
Income tax recoverables 64,342 91,216
Cash and cash equivalents 7,452,246 1,506,435
------- -------
24,535,583 16,679,646
------- -------
TOTAL ASSETS 202,819,327 184,223,576
=========== ===========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2010
(Amounts expressed in thousands of Renminbi)
Note At 30 June At 31 December
2010 2009
(unaudited) (audited)
EQUITY AND LIABILITIES
Capital and reserves
Share capital 13 12,310,038 11,780,038
Reserves 15,189,173 12,700,049
Retained earnings
- Proposed dividend -- 861,703
- Others 1,741,427 856,695
------- -------
Equity attributable to owners of the
Company 29,240,638 26,198,485
Non-controlling interests 6,763,713 6,649,510
------- -------
Total equity 36,004,351 32,847,995
------- -------
Non-current liabilities
Long-term loans 110,107,701 99,506,545
Long-term bonds 5,943,689 5,938,544
Deferred income 479,769 475,788
Deferred income tax liabilities 397,948 323,789
Provision 41,554 36,008
Other long-term liabilities 3,173,937 3,701,165
------- -------
120,144,598 109,981,839
------- -------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2010
(Amounts expressed in thousands of Renminbi)
Note At 30 June At 31 December
2010 2009
(unaudited) (audited)
Current liabilities
Accounts payable and accrued liabilities 14 18,243,709 14,040,020
Taxes payable 448,991 380,778
Dividends payable 986,346 36,909
Short-term loans 19,966,552 19,569,023
Current portion of long-term liabilities 7,024,780 7,367,012
------- -------
46,670,378 41,393,742
------- -------
Total liabilities 166,814,976 151,375,581
------- -------
TOTAL EQUITY AND LIABILITIES 202,819,327 184,223,576
=========== ===========
Net current liabilities 22,134,795 24,714,096
=========== ===========
Total assets less current liabilities 156,148,949 142,829,834
=========== ===========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2010
(Amounts expressed in thousands of Renminbi)
Attributable to owners of the Company
Statutory Discretionary
Share Capital surplus surplus
capital reserve reserve reserve
(Unaudited)
At 1 January 2009 11,780,038 1,878,578 2,886,134 6,800,692
Total comprehensive income
for the period -- -- -- --
Capital injection into
subsidiaries from non-
controlling shareholders -- -- -- --
Disposal of a subsidiary -- -- -- --
Others -- -- -- --
Transfer to restricted
reserve -- -- -- --
Transfer to surplus reserve -- -- -- 1,065,496
Dividends paid -- -- -- --
---------- --------- --------- ---------
At 30 June 2009 11,780,038 1,878,578 2,886,134 7,866,188
========== ========= ========= =========
(Unaudited)
At 1 January 2010 11,780,038 1,521,516 3,079,440 7,866,188
Total comprehensive income
for the period -- -- -- --
Issue of shares 530,000 2,718,246 -- --
Capital injection into
subsidiaries from non-
controlling shareholders -- -- -- --
Non-controlling interests
arising from business
combinations -- -- -- --
Acquisition of non-
controlling interests of
subsidiaries -- -- -- --
Others -- 125 -- --
Transfer to restricted
reserve -- -- -- --
Dividends paid -- -- -- --
---------- --------- --------- ---------
At 30 June 2010 12,310,038 4,239,887 3,079,440 7,866,188
========== ========= ========= =========
Attributable to owners of the Company
Available-
for-sale
Currency investment
Restricted translation revaluation Other
reserve differences reserve reserves
(Unaudited)
At 1 January 2009 115,656 17,036 126,435 (55,168)
Total comprehensive income
for the period -- (148) 50,110 --
Capital injection into
subsidiaries from non-
controlling shareholders -- -- -- --
Disposal of a subsidiary -- -- -- --
Others -- -- -- 9,196
Transfer to restricted
reserve 11,975 -- -- --
Transfer to surplus reserve -- -- -- --
Dividends paid -- -- -- --
---------- --------- --------- ---------
At 30 June 2009 127,631 16,888 176,545 (45,972)
========== ========= ========= =========
(Unaudited)
At 1 January 2010 153,864 17,691 105,705 (44,355)
Total comprehensive income
for the period -- 1,303 (16,508) --
Issue of shares -- -- -- --
Capital injection into
subsidiaries from non-
controlling shareholders -- -- -- --
Non-controlling interests
arising from business
combinations -- -- -- --
Acquisition of non-
controlling interests of
subsidiaries -- -- -- (240,412)
Others -- -- -- (4,543)
Transfer to restricted
reserve 30,913 -- -- --
Dividends paid -- -- -- --
---------- --------- --------- ---------
At 30 June 2010 184,777 18,994 89,197 (289,310)
========== ========= ========= =========
Non-
Retained controlling Total
earnings Total interests Equity
(Unaudited)
At 1 January 2009 2,702,110 26,251,511 4,654,462 30,905,973
Total comprehensive income
for the period 713,407 763,369 398,871 1,162,240
Capital injection into
subsidiaries from non-
controlling shareholders -- -- 234,826 234,826
Disposal of a subsidiary -- -- (443,198) (443,198)
Others -- 9,196 3,033 12,229
Transfer to restricted
reserve (11,975) -- -- --
Transfer to surplus reserve (1,065,496) -- -- --
Dividends paid (1,295,804) (1,295,804) (175,802) (1,471,606)
--------- ---------- --------- ----------
At 30 June 2009 1,042,242 25,728,272 4,672,192 30,400,464
========= ========== ========= ==========
(Unaudited)
At 1 January 2010 1,718,398 26,198,485 6,649,510 32,847,995
Total comprehensive income
for the period 911,878 896,673 515,066 1,411,739
Issue of shares -- 3,248,246 -- 3,248,246
Capital injection into
subsidiaries from non-
controlling shareholders -- -- 528,417 528,417
Non-controlling interests
arising from business
combinations -- -- 217,773 217,773
Acquisition of non-
controlling interests of
subsidiaries -- (240,412) (310,003) (550,415)
Others 3,767 (651) (13,292) (13,943)
Transfer to restricted
reserve (30,913) -- -- --
Dividends paid (861,703) (861,703) (823,758) (1,685,461)
--------- ---------- --------- ----------
At 30 June 2010 1,741,427 29,240,638 6,763,713 36,004,351
========= ========== ========= ==========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2010
(Amounts expressed in thousands of Renminbi)
Six months ended 30 June
2010 2009
(unaudited) (unaudited
and
restated)
NET CASH GENERATED FROM OPERATING ACTIVITIES 7,996,035 5,962,346
NET CASH USED IN INVESTING ACTIVITIES (7,682,868) (12,743,373)
NET CASH GENERATED FROM FINANCING ACTIVITIES 5,633,184 3,661,088
------- -------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 5,946,351 (3,119,939)
CASH AND CASH EQUIVALENTS AT 1 JANUARY 1,506,435 4,979,535
EFFECT OF FOREIGN EXCHANGE RATE CHANGES (540) 3,487
------- -------
CASH AND CASH EQUIVALENTS AT 30 JUNE 7,452,246 1,863,083
=========== ===========
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2010
(Amounts expressed in thousands of Renminbi unless otherwise stated)
1. BASIS OF PREPARATION
These condensed financial statements have been prepared in accordance
with International Accounting Standard 34 "Interim Financial Reporting"
issued by the International Accounting Standards Board and the
applicable disclosures required by the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited.
At 30 June 2010, a significant portion of the funding requirements of
the Company and its subsidiaries (collectively referred to as the
"Group") for capital expenditures was satisfied by short-term
borrowings. Consequently, at 30 June 2010, the Group had a net current
liabilities of approximately RMB22,135 million (At 31 December 2009:
RMB24,714 million). The Group had significant undrawn borrowing
facilities, subject to certain conditions, amounting to approximately
RMB192.12 billion (At 31 December 2009: RMB169.00 billion) and may
refinance and/or restructure certain short-term borrowings into long-
term borrowings and will also consider alternative sources of financing,
where applicable. The directors of the Company are of the opinion that
the Group will be able to meet its liabilities as and when they fall
due within the next twelve months and have prepared these financial
statements on a going concern basis.
These condensed financial statements should be read in conjunction with
the 2009 annual financial statements. The accounting policies and
methods of computation used in the preparation of these condensed
financial statements are consistent with those used in the annual
financial statements for the year ended 31 December 2009 except as
stated below.
2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
In the current period, the Group has adopted all the new and revised
International Financial Reporting Standards ("IFRSs") issued by the
International Accounting Standards Board that are relevant to its
operations and effective for its accounting year beginning on 1 January
2010. IFRSs comprise International Financial Reporting Standards
("IFRS"); International Accounting Standards ("IAS"); and
Interpretations. The adoption of these new and revised IFRSs did not
result in significant changes to the Group's accounting policies,
presentation of the Group's financial statements and amounts reported
for the current period and prior years except as stated below.
a. Business Combinations
IFRS 3 (Revised) "Business Combinations" continues to require
acquisition method to be applied to business combinations with some
significant changes:
-- Contingent consideration is recognised at its acquisition-date
fair value and forms part of the cost of acquisition. The
previous IFRS 3 requires that a contingent consideration be
recognised if it is probable and can be measured reliably.
-- In a business combination achieved in stages, the previously held
equity interest in the subsidiary is remeasured at its
acquisition-date fair value and the resulting gain or loss is
recognised in consolidated profit or loss. The fair value is
added to the cost of acquisition to calculate goodwill. The
previous IFRS 3 does not have a requirement for such fair value
measurement.
-- There is a choice to measure initially the non-controlling
interests in a subsidiary either at their acquisition-date fair
value or the non-controlling shareholders' proportionate share of
the net fair value of the subsidiary's identifiable assets and
liabilities at the acquisition date. The previous IFRS 3 only
allows the latter choice.
-- If a business combination is accounted for using provisional
amounts, the measurement period that the provisional amounts can
be adjusted retrospectively is limited to one year from the
acquisition date to reflect new information obtained about facts
and circumstances that existed as of the acquisition date and, if
known, would have affected the measurement of the amounts
recognised as of that date. The previous IFRS 3 does not have a
time limit for adjustments in relation to contingent
considerations and deferred tax assets. Subsequent adjustments to
contingent considerations and deferred tax assets will adjust
goodwill.
-- Acquisition-related costs are recognised as expenses in the
periods in which the costs are incurred and the services are
received. The previous IFRS 3 requires that acquisition-related
costs form part of the cost of a business combination.
IFRS 3 (Revised) has been applied prospectively to business
combinations for which the acquisition date is on or after 1 January
2010 and resulted in changes in the consolidated amounts reported in
the financial statements as follows:
At 30 June 2010 At 31 December 2009
Decrease in goodwill (3,090) --
============= =============
Six months ended 30 June
2010 2009
Increase in operating costs
- others 3,090 --
Decrease in earnings per
share (RMB) 0.0003 --
============= =============
b. Classification of Land Leases
Amendments to IAS 17 "Leases" deleted the guidance in IAS 17 that
when the land has an indefinite economic life, the land element is
normally classified as an operating lease unless title is expected
to pass to the lessee by the end of the lease term.
The adoption of the amendments to IAS 17 has resulted in a change in
accounting policy for the classification of leasehold land of the
Group. Previously, leasehold land was classified as an operating
lease and stated at cost less accumulated amortisation. In
accordance with the amendments, leasehold land is classified as a
finance lease and stated at cost less accumulated depreciation if
substantially all risks and rewards of the leasehold land have been
transferred to the Group. As the present value of the minimum lease
payments (i.e. the transaction price) of the land held by the Group
amounted to substantially all of the fair value of the land as if it
were freehold, the leasehold land of the Group has been classified
as a finance lease. The amendments have been applied retrospectively
to unexpired leases at the date of adoption of the amendments on the
basis of information existing at the inception of the leases.
Amendments to IAS 17 have been applied retrospectively and resulted
in changes in the consolidated amounts reported in the financial
statements as follows:
At 30 June 2010 At 31 December 2009
Increase in property, plant
and equipment 1,923,750 1,523,508
Decrease in land use rights (1,923,750) (1,523,508)
============= =============
The Group has not applied the other new IFRSs that have been issued but
are not yet effective. The Group has already commenced an assessment of
the impact of these new IFRSs but is not yet in a position to state
whether these new IFRSs would have a material impact on its results of
operations and financial position.
3. COMMON CONTROL BUSINESS COMBINATIONS
On 30 November 2009, the Company acquired 100% equity interests of
Datang Liaoning New Energy Co., Ltd. ("Liaoning New Energy") and its
subsidiary and Datang Zhangzhou Wind Power Co., Ltd. ("Zhangzhou Wind
Power") from China Datang Corporation ("China Datang") for a cash
consideration of RMB264.75 million while Datang Energy and Chemical
Company Limited ("Energy and Chemical Company"), one of the Company's
wholly-owned subsidiaries acquired 100% equity interest of Datang
Hulunbei'er Fertilizer Company Limited ("Hulunbei'er Fertilizer") from
China Datang for a cash consideration of RMB51.22 million (collectively
referred to as "common control entities acquired in 2009"). Such
acquisitions became effective on 30 November 2009. Thereafter, the
Group controlled 100% equity interests in the common control entities
acquired in 2009 and became their controlling shareholders.
As the Company, Energy and Chemical Company and the common control
entities acquired in 2009 above are under the common control of China
Datang before and after the acquisitions, these transactions were
accounted for as common control business combinations, using merger
accounting for all periods presented herein. The condensed consolidated
statement of comprehensive income and condensed consolidated statement
of cash flows include the results and cash flows of the combining
entities from the earliest date presented or since the date when the
combining entities first came under the common control, where this is a
shorter period, regardless of the date of the common control
combination.
Name of acquiree Principal activities Equity interest acquired
Liaoning New Energy
and its subsidiary Wind power generation 100%
Zhangzhou Wind Power Wind power generation 100%
Hulunbei'er Fertilizer Production and sales
of chemical materials 100%
As a result of business combinations of common control entities
acquired in 2009, profit for the period for the six months ended 30
June 2009 decreased by RMB8,553 thousand and the cash and cash
equivalents as at 30 June 2009 increased by RMB16,746 thousand.
4. OPERATING REVENUE
Six months ended 30 June
2010 2009
(unaudited) (unaudited and restated)
Sales of electricity 24,001,833 18,331,293
Heat supply 316,192 175,767
Sales of coal 2,930,001 2,117,230
Transportation service fees 125,437 24,751
Sales of chemical products 1,311,817 1,540
Others 260,726 75,854
-------- --------
28,946,006 20,726,435
============= =============
5. SEGMENT INFORMATION
Executive directors and certain senior management of the Company
perform the function as chief operating decision makers (collectively
referred to as the "senior management"). The senior management reviews
the internal reporting of the Group in order to assess performance and
allocate resources. Senior management has determined the operating
segments based on these reports.
Senior management considers the business from a product perspective.
Senior management primarily assesses the performance of power
generation, coal and chemical separately. Other operating activities
include investments in transportation services, financial services,
etc., and are included in "other segments".
Senior management assesses the performance of the operating segments
based on a measure of profit before tax prepared under the People's
Republic of China ("PRC") accounting standards.
Segment assets exclude deferred income tax assets and available-for-
sale investments. Segment liabilities exclude the current income tax
liabilities and deferred income tax liabilities. Sales between
operating segments are marked to market or contracted close to market
price and have been eliminated at consolidation level. Unless otherwise
noted below, all such financial information in the segment tables below
is prepared under China Accounting Standards for Business Enterprises
("PRC GAAP").
Power
generation Coal Chemical Other
segment segment segment segments
(unaudited) (unaudited) (unaudited) (unaudited)
Six months ended 30
June 2010
Revenue from external
customers 24,143,576 3,118,444 1,322,492 361,494
Intersegment revenue 36,731 8,446,414 -- 157,110
Segment profit/(loss) 1,626,658 122,767 35,987 (4,428)
At 30 June 2010
Segment assets 186,225,012 12,002,513 31,874,594 6,719,048
=========== ========== ========== =========
(unaudited
and
restated) (unaudited) (unaudited) (unaudited)
Six months ended 30
June 2009
Revenue from external
customers 18,538,156 2,186,739 1,540 --
Intersegment revenue 2,648 168,633 -- --
Segment profit/(loss) 1,110,385 63,245 (31,599) 86,396
(audited) (audited) (audited) (audited)
At 31 December 2009
Segment assets 148,329,678 13,517,801 25,056,663 1,923,390
=========== ========== ========== =========
Total
discontinued
Total operations
continuing (coal
operations segment Total
(unaudited) (unaudited) (unaudited)
Six months ended 30
June 2010
Revenue from external
customers 28,946,006 -- 28,946,006
Intersegment revenue 8,640,255 -- 8,640,255
Segment profit/(loss) 1,780,984 -- 1,780,984
At 30 June 2010
Segment assets 236,821,167 -- 236,821,167
=========== ========= ===========
(unaudited (unaudited
and and
restated) (unaudited) restated)
Six months ended 30
June 2009
Revenue from external
customers 20,726,435 -- 20,726,435
Intersegment revenue 171,281 -- 171,281
Segment profit/(loss) 1,228,427 40,000 1,268,427
(audited) (audited) (audited)
At 31 December 2009
Segment assets 188,827,532 -- 188,827,532
=========== ======= ===========
Six months ended 30 June
2010 2009
(unaudited) (unaudited
and restated)
Reconciliations of segment profit or loss:
Total profit or loss of reportable segments 1,780,984 1,268,427
Elimination of intersegment profits (125,186) (2,525)
IFRS adjustment on reversal of general
provision on mining funds 101,195 86,491
IFRS adjustment on amortisation of deferred
housing benefits (15,151) (15,006)
--------- ---------
Profit before tax 1,741,842 1,337,387
========= =========
6. FINANCE COSTS
Six months ended 30 June
2010 2009
(unaudited) (unaudited
and restated)
Interest expense 3,625,688 3,359,480
Less: amount capitalised in property,
plant and equipment (1,072,552) (1,369,441)
-------- --------
2,553,136 1,990,039
Exchange gain, net (4,415) (222)
Others 14,665 41,077
-------- --------
2,563,386 2,030,894
========= =========
7. INCOME TAX EXPENSE
Six months ended 30 June
2010 2009
(unaudited) (unaudited)
Current tax 429,866 128,421
Deferred tax (117,159) 96,688
-------- --------
312,707 225,109
======= =======
Income tax is provided on the basis of the statutory profit for
financial reporting purposes, adjusted for income and expense items,
which are not assessable or deductible for income tax purposes.
The applicable PRC income tax rate of the Company is 25% (six months
ended 30 June 2009: 25%). Those entities located in western region in
the PRC enjoy income tax rate of 15% before 2011 when such income tax
rate will change to 25% thereafter.
In addition, certain subsidiaries, being located in specially
designated regions in the PRC, are subject to preferential income tax
rates. Moreover, certain subsidiaries are exempted from the PRC income
tax for two years starting from the first year of commercial operation
followed by a 50% exemption of the applicable tax rate for the next
three years.
The subsidiary of the Company registered in Hong Kong applies Hong Kong
Profits Tax rate of 16.5% (six months ended 30 June 2009: 16.5%).
8. PROFIT FOR THE PERIOD
The Group's profit for the period is arrived at after
charging/(crediting):
Six months ended 30 June
2010 2009
(unaudited) (unaudited
and
restated)
Interest income (24,437) (19,550)
Amortisation of intangible assets 5,996 4,125
Amortisation of deferred housing benefits 15,151 15,006
Depreciation 3,571,794 3,587,262
Gain on disposal of available-for-sale
investments (8,212) (30,173)
Gain on disposal of assets and liabilities
held for sale -- (40,000)
Gain on disposal of an associate -- (74,460)
Reversal of allowance for trade receivables (1,134) --
Reversal of allowance for inventories (757) --
======== =======
Since certain aged inventories were sold during the period, the
allowance made in prior years against the inventories of RMB757
thousand (six months ended 30 June 2009: RMBNil) was reversed during
the period.
9. DIVIDENDS
Six months ended 30 June
2010 2009
(unaudited) (unaudited)
Final dividend for the year ended 31
December 2009 (six months ended 30
June 2009: 2008) approved and paid
- RMB0.07 (six months ended 30 June
2009: RMB0.11) per share 861,703 1,295,804
======= =========
10. EARNINGS PER SHARE
(a) Basic earnings per share
The calculation of basic earnings per share is based on the profit for
the period attributable to owners of the Company of RMB911,878
thousand (six months ended 30 June 2009, as restated: RMB713,407
thousand) and the weighted average number of ordinary shares of
12,045,038 thousand (six months ended 30 June 2009: 11,780,038
thousand) in issue during the period.
(b) Diluted earnings per share
No diluted earnings per share are presented as the Company did not
have any dilutive potential ordinary shares during the six months
ended 30 June 2010 and 2009.
11. PROPERTY, PLANT AND EQUIPMENT
During the six months ended 30 June 2010, the Group acquired property,
plant and equipment of RMB12,424,566 thousand (six months ended 30
June 2009, as restated: RMB11,563,023 thousand).
In order to reflect the Group's financial position and operating
results in a fairer and more appropriate manner so that the
depreciation periods for property, plant and equipment is brought
closer to their real useful lives, the Group has made changes to the
estimated useful lives and estimated net salvage values of the
property, plant and equipment pursuant to the accounting standards and
other related accounting and tax regulations in combination with the
actual situation of the Group. The changes to the estimated useful
lives and estimated net salvage values of the property, plant and
equipment were considered and approved at the thirty-fifth meeting of
the sixth session of the Board of the Directors held on 29 April 2010.
These changes in accounting estimates reduced the Group's depreciation
charges by approximately RMB900 million for the six months ended 30
June 2010.
12. ACCOUNTS AND NOTES RECEIVABLE
The Group usually grants about one month's credit period to local
power grid customers and coal purchase customers from the end of the
month in which the sales are made. Ageing analysis of accounts and
notes receivable is as follows:
At 30 June 2010 At 31 December 2009
(unaudited) (audited)
Within 1 year 6,894,768 6,447,885
Between 1 to 2 years 48,046 186,396
Between 2 to 3 years 94,253 636
------ ------
7,037,067 6,634,917
========= =========
13. SHARE CAPITAL
At 30 June At 31 December
2010 2009
(unaudited) (audited)
Registered, issued and fully paid:
8,994,360,000 (At 31 December 2009:
8,464,360,000) A shares of RMB1 each 8,994,360 8,464,360
3,315,677,578 (At 31 December 2009:
3,315,677,578) H shares of RMB1 each 3,315,678 3,315,678
--------- ---------
12,310,038 11,780,038
========== ==========
A summary of the movements in the issued share capital of the Company
is as follows:
Nominal
Note Number of value of
shares issued shares issued
'000 RMB'000
At 1 January 2009, 31 December
2009 and 1 January 2010 11,780,038 11,780,038
Shares issued (i) 530,000 530,000
-------- --------
At 30 June 2010 12,310,038 12,310,038
========== ==========
Note:
(i) On 23 March 2010, the Company issued 530,000,000 A shares at a
subscription price of RMB6.23 per share for a total cash
consideration of approximately RMB3,301,900 thousand.
14. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At 30 June At 31 December
2010 2009
(unaudited) (audited)
Accounts and notes payable 7,791,458 6,015,519
Other payables and accrued liabilities 10,452,251 8,024,501
---------- --------
18,243,709 14,040,020
========== ==========
Ageing analysis of accounts and notes payable is as follows:
At 30 June 2010 At 31 December 2009
(unaudited) (audited)
Within 1 year 7,406,537 5,716,659
Between 1 to 2 years 196,566 127,756
Between 2 to 3 years 54,377 43,857
Over 3 years 133,978 127,247
------- -------
7,791,458 6,015,519
========= =========
15. ACQUISITION OF SUBSIDIARIES
On 1 January 2010, the Group acquired 100% of the issued capital of
Yuneng (Group) Company Limited for a cash consideration of RMB1,345
million, of which approximately RMB550.4 million was paid for
acquisition of non-controlling interests of two subsidiaries of the
Company held by Yuneng (Group) Company Limited. Yuneng (Group) Company
Limited and its subsidiaries (collectively referred to as "Yuneng
Group") were engaged in power generation, mining and metallurgy as
well as property development during the period.
The carrying amount and the fair value of the identifiable assets and
liabilities of Yuneng Group acquired as at its date of acquisition are
as follows:
Carrying Fair value Fair
amount adjustments value
Net assets acquired:
Property, plant and equipment 2,149,858 (97,699) 2,052,159
Other non-current assets 914,916 (158,253) 756,663
Cash and cash equivalents 1,418,922 -- 1,418,922
Other current assets 1,169,255 148,470 1,317,725
Long-term loans (1,892,750) -- (1,892,750)
Other non-current liabilities (62,213) (26,823) (89,036)
Current liabilities (2,676,661) (14,996) (2,691,657)
--------- -------- --------
1,021,327 (149,301) 872,026
Non-controlling interests (179,015) (38,145) (217,160)
--------- --------
Goodwill 139,719
-------
Satisfied by:
Cash 794,585
=======
Net cash inflow arising on acquisition:
Cash consideration paid (794,585)
Cash and cash equivalents acquired 1,418,922
---------
624,337
========
At 1 January 2010, Yunnan Datang International Deqin Hydropower
Development Company Limited ("Datang Deqin") was a 40% owned
subsidiary of the Company. On 4 March 2010, the Group further acquired
30% of the issued share capital of Datang Deqin for a cash
consideration of approximately RMB0.7 million. Datang Deqin is engaged
in hydropower generation construction during the period.
The fair value of the identifiable assets and liabilities of Datang
Deqin acquired as at its date of acquisition, which has no significant
difference from its carrying amount, is as follows:
Net assets acquired:
Property, plant and equipment 43,765
Cash and cash equivalents 8,156
Other current assets 197
Long-term loans (30,000)
Current liabilities (11,974)
-------
10,144
Net assets attributable to the owners of
the Company before acquisition of
additional interest (8,918)
Non-controlling interests (613)
Goodwill 70
------
Satisfied by:
Cash 683
======
Net cash inflow arising on acquisition:
Cash consideration paid (683)
Cash and cash equivalents acquired 8,156
------
7,473
======
On 23 March 2010, the Group acquired 100% of the issued share capital
of Liaoning Datang International Fuxin Wind Power Company Limited
("Datang Fuxin") for a cash consideration of approximately RMB33.2
million. Datang Fuxin is engaged in wind power generation construction
during the period.
The carrying amount and the fair value of the identifiable assets and
liabilities of Datang Fuxin acquired as at its date of acquisition are
as follows:
Carrying Fair value Fair
amount adjustments value
Net assets acquired:
Property, plant and equipment 9,859 14,963 24,822
Cash and cash equivalents 20,654 -- 20,654
Other current assets 20 -- 20
Other non-current liabilities -- (3,741) (3,741)
Current liabilities (8,533) -- (8,533)
------- ------ ------
22,000 11,222
========= ========
Satisfied by:
Cash 33,222
=======
Net cash outflow arising on acquisition:
Cash consideration paid (33,222)
Cash and cash equivalents acquired 20,654
------
(12,568)
=======
The goodwill arising on the acquisition of Yuneng Group and Datang
Deqin is attributable to the anticipated profitability of their power
generation operations and the anticipated future operating synergies
from the combination.
Yuneng Group, Datang Deqin and Datang Fuxin reduced the Group's profit
for the period for the six months ended 30 June 2010 by approximately
RMB31.5 million, RMBNil and RMBNil respectively between the respective
dates of acquisition and the end of the reporting period.
If all the above acquisitions had been completed on 1 January 2010,
such acquisitions will have no effect on total Group turnover for the
period and profit for the period. The proforma information is for
illustrative purposes only and is not necessarily an indication of the
turnover and results of operations of the Group that actually would
have been achieved had the acquisition been completed on 1 January
2010, nor is intended to be a projection of future results.
16. RELATED PARTY TRANSACTIONS
(a) Significant transactions with China Datang and its subsidiaries
Six months ended 30 June
2010 2009
(unaudited)(unaudited)
Agency commission paid to a fellow
subsidiary for equipment purchases 4,851 4,027
Ash disposal fee to ultimate parent
company 28,946 28,946
Fuel management fee to ultimate parent
company 8,210 --
Fuel management fee to a fellow
subsidiary -- 1,260
Interest expense to an associate 87,596 53,315
Interest income from associates 13,517 5,568
Purchases of coal from a fellow
subsidiary 9,896 --
Purchases of coal from a jointly
controlled entity 124,045 153,904
Purchases of coal from associates 297,511 177,478
Purchases of materials and fuel from
a fellow subsidiary -- 429
Purchases of equipment from fellow
subsidiaries 243,037 3,789
Rental expense for buildings to ultimate
parent company 3,614 3,614
Rental expense for public facility to a
fellow subsidiary 1,250 7,500
Repairs expense to a fellow subsidiary 1,800 --
Sales of pre-project assets to a fellow
subsidiary 80,726 --
Sales of heat to an associate 39,223 94,260
Sales of equipment to a fellow subsidiary -- 6,649
Sales of power to an associate 2,822 1,208
Technical support, assistance and testing
service fee to an associate 20,599 26,864
======= =======
At 30 June 2010, the ultimate parent company provided guarantees
for loans of the Group amounting to RMB3,234 million (At 31
December 2009: RMB1,537 million).
At 30 June 2010, a wholly owned subsidiary of the ultimate parent
company's provided guarantees for loans of the Group amounting to
RMB611 million (At 31 December 2009: RMB616 million) which were
counter-guaranteed by the Company.
At 30 June 2010, the Company provided guarantees for the loans
borrowed by two associates, proportionate to its shareholding
percentage, amounting approximately RMB456 million (At 31 December
2009: RMB456 million).
At 30 June 2010, the Company provided guarantees for the loans
borrowed by a jointly controlled entity, proportionate to its
shareholding percentage, totalling approximately RMB617 million (At
31 December 2009: RMB577 million).
At 30 June 2010, an associate of the Company provided borrowing
facilities of RMB4.5 billion (At 31 December 2009: RMB4.5 billion)
to the Group.
(b) Significant transactions with other state-owned enterprises
State-owned enterprises and their subsidiaries, other than entities
under China Datang (also a state-owned enterprise), directly or
indirectly controlled by the PRC government are also defined as
related parties of the Group in accordance with IAS 24 "Related
Party Disclosures".
Given that the PRC government still owns a significant portion of
the productive assets in the PRC despite the continuous reform of
the government structures, the majority of the business activities
of the Group are conducted with enterprises directly or indirectly
owned or controlled by the PRC government ("other state-owned
enterprises"), including China Datang and its subsidiaries, jointly
controlled entities and associates in the normal course of business.
For the purpose of the related party transactions disclosure, the
Group has established procedures to determine, to the extent
possible, the identification of the ownership structure of their
customers and suppliers as to whether they are state-owned
enterprises. However, many state-owned enterprises have multi-
layered corporate structures and the ownership structures change
over time as a result of transfers and privatisation programs.
Nevertheless, management believes that all material related party
transactions have been adequately disclosed.
Six months ended 30 June
2010 2009
(unaudited) (unaudited)
Sales of electricity 19,839,888 18,414,462
Sales of heat 167,335 81,507
Interest income from state-controlled
banks/non-bank financial institutions 14,926 19,882
Interest expense on loans borrowed from
state-controlled banks/non-bank
financial institutions 2,136,884 2,940,644
Purchases of property, plant and equipment
(including construction-in-progress) 2,603,205 6,418,170
Purchases of fuel 10,975,711 6,758,379
Purchases of spare parts and consumable
supplies 41,626 96,068
Drawdown of short-term loans from
state-controlled banks/non-bank financial
institutions 20,394,129 12,960,448
Drawdown of long-term loans borrowed from
state-controlled banks/non-bank financial
institutions 16,212,417 24,901,821
========== ==========
At 30 June 2010, loans of RMB430 million (At 31 December 2009:
RMB4,328 million) were guaranteed by other state-controlled
enterprises.
At 30 June 2010, the Company provided guarantees for the loans
borrowed by an other state-controlled enterprise of RMB132 million
(At 31 December 2009: RMB326 million).
(c) Key management personnel compensation
Six months ended 30 June
2010 2009
(unaudited) (unaudited)
Basic salaries and allowances 795 554
Bonus 1,682 1,776
Retirement benefits 99 19
Other benefits 434 666
-------- --------
3,010 3,015
======== ========
17. CONTINGENT LIABILITIES
At the end of the reporting period, the Group has provided financial
guarantees for loan facilities granted to the following parties:
At 30 June 2010 At 31 December 2009
(unaudited) (audited)
Associates 455,880 455,880
A jointly controlled entity 616,500 576,500
Other investees 132,000 132,000
Other state-controlled enterprises -- 193,550
-------- -------
1,204,380 1,357,930
=========== ==========
Based on historical experience, no claims have been made against the
Group since the dates of granting the financial guarantees described
above.
18. COMMITMENTS
(a) Capital commitments
At 30 June 2010, the Company has capital commitments related to
investments in subsidiaries, jointly controlled entities,
associates and other investees amounted to approximately RMB94
million (At 31 December 2009: RMB2,030 million). In addition,
capital commitments of the Group in relation to the construction
and renovation of the electric utility plants and acquisition of
intangible assets not provided for in the condensed consolidated
statement of financial position are as follows:
At 30 June 2010 At 31 December 2009
(unaudited) (audited)
Contracted but not provided
for 17,918,627 18,337,718
=========== ===========
(b) Lease commitments
At 30 June 2010 the total future minimum lease payments under non-
cancellable operating leases in relation to buildings are payable
as follows:
At 30 June 2010 At 31 December 2009
(unaudited) (audited)
Within one year 40,732 20,578
In the second to fifth years
inclusive 60,195 68,427
After five years 24,300 46,813
-------- --------
125,227 135,818
======== ========
19. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved and authorised for issue by the
Board of Directors on 19 August 2010.
Equity and net profit reconciliations between PRC GAAP and IFRS
For the six months ended 30 June 2010
(Amount expressed in thousands of Renminbi, unless otherwise stated)
The unaudited condensed financial statements, which are prepared by
the Group in conformity with IFRS, differ in certain respects from PRC
GAAP. Major differences between PRC GAAP and IFRS ("GAAP differences"),
which affect the equity and net profit of the Group, are summarised as
follows:
Equity
At 30 At 31
June December
2010 2009
(unaudited) (audited
and
restated)
Equity attributable to owners of the
Company under IFRS 29,240,638 26,198,485
Impact of PRC GAAP adjustments:
Difference in the commencement of
depreciation of property, plant
and equipment (a) 106,466 106,466
Difference in accounting treatment on
monetary housing benefits (b) (148,233) (163,384)
Difference in accounting treatment on
mining funds (c) (120,741) (83,291)
Applicable deferred income tax impact of
the above GAAP differences (d) 16,481 9,158
Non-controlling interests' impact of the
above GAAP differences after tax 2,600 6,011
-------- --------
Equity attributable to owners of the
Company under PRC GAAP 29,097,211 26,073,445
=========== ===========
Equity and net profit reconciliations between PRC GAAP and IFRS
For the six months ended 30 June 2010
(Amount expressed in thousands of Renminbi, unless otherwise stated)
Net profit for the six
months ended 30 June
2010 2009
(unaudited
and
(unaudited) restated)
Profit for the period attributable to
owners of the Company under IFRS 911,878 713,407
Impact of PRC GAAP adjustments:
Difference in accounting treatment on
monetary housing benefits (b) 15,151 15,006
Difference in accounting treatment on
mining funds (c) (101,195) (86,491)
Applicable deferred income tax impact of
the above GAAP differences (d) 7,323 6,857
Non-controlling interests' impact of the
above GAAP differences after tax (3,411) (4,961)
------ -------
Net profit attributable to owners of the
Company under PRC GAAP 829,746 643,818
======= =======
(a) Difference in the commencement of depreciation of property, plant
and equipment
This represents the depreciation difference arose from the
different timing of the start of depreciation charge in previous
years.
(b) Difference in accounting treatment on monetary housing benefits
Under PRC GAAP, the monetary housing benefits provided to
employees who started work before 31 December 1998 were directly
deducted from the retained earnings and statutory public welfare
fund after approval by the general meeting of the Company and its
subsidiaries.
Under IFRS, these benefits are recorded as deferred assets and
amortised on a straight-line basis over the estimated service
lives of relevant employees.
(c) Difference in accounting treatment on mining funds
Under PRC GAAP, accrual of future development and work safety
expenses are included in respective product cost or current period
profit or loss and recorded in a specific reserve accordingly.
When such future development and work safety expenses are applied
and related to revenue expenditures, specific reserve is directly
offset when expenses incurred. When capital expenditures are
incurred, they are included in construction-in-progress and
transferred to fixed assets when the related assets reach the
expected use condition. They are then offset against specific
reserve based on the amount included in fixed assets while
corresponding amount is recognised in accumulated depreciation.
Such fixed assets are not depreciated in subsequent periods.
Under IFRS, coal mining companies are required to set aside an
amount to a fund for future development and work safety through
transferring from retained earnings to restricted reserve. When
qualifying revenue expenditures are incurred, such expenses are
recorded in statement of comprehensive income as incurred. When
capital expenditures are incurred, an amount is transferred to
property, plant and equipment and is depreciated in accordance
with the depreciation policy of the Group. Internal equity items
transfers take place based on the actual application amount of
future development and work safety expenses whereas restricted
reserve is offset against retained earnings to the extent of zero.
(d) Applicable deferred income tax impact on the above GAAP
differences
This represents the deferred income tax effect on the above GAAP
differences where applicable.
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