2007 Annual Report

RNS Number : 7507U

Datang Intl Power Generation Co Ld

19 May 2008

 



Diversifying to Enhance Power

Datang Power is committed to its diversification development strategy. Its generation structure has evolved from a single-mode thermal generation into a strategically balanced deployment of thermal power, hydropower, wind power and nuclear power. Its business structure has also extended from a pure power generation operation to a chain of upstream and downstream businesses related to power generation, forming a structure of integrated 'coal-power-railway' operation.

Datang Power firmly believes that diversification on the one hand leverages the complementary advantages of various resources, thereby facilitating a sustainable development of the Company; and on the other hand allows the Company to take full advantage of the opportunities presented by the State's promotion of renewable energy development. As such, Datang Power has gained all the competitive advantages and has much enhanced its power among its peers.

Contents

2    Company Profile

4    Major Events for 2007

6    Distribution of Datang Power's Business Projects

8    Financial and Operating Highlights

12    Chairman's Statement

16    Management Discussion and Analysis

28    Corporate Governance Report

36    Human Resources Overview

46    Questions Frequently Asked by Investors

52    Report of the Directors

58    Report of the Supervisory Committee

60    Taxation in the United Kingdom

61    Independent Auditor's Report

63    Consolidated Income Statement

64    Balance Sheets

66    Consolidated Statement of Changes in Equity

68    Consolidated Cash Flow Statement

69    Notes To The Financial Statements

159    Net Assets and Net Profit Reconciliation between PRC GAAP and IFRS

162    Corporate Information

164    Glossary of Terms

Company Profile

Corporate Values

Essence of Corporate Value

Team Spirit, Results Oriented and Pursuit Of Excellence

Datang International Power Generation Company Limited ('Datang Power' or the 'Company', formerly Beijing Datang Power Generation Company Limited) was incorporated as a joint stock limited company and registered with the State Administration for Industry and Commerce of the People's Republic of China (the 'PRC') on 13 December 1994 and converted into a sino-foreign joint stock limited company on 13 May 1998. The Company was renamed to Datang International Power Generation Company Limited on 15 March 2004. As at 31 December 2007, the registered capital of the Company amounted to approximately RMB5.663 billion, with total consolidated assets of the Company and its subsidiaries amounting to approximately RMB121.773 billion.

Development Strategies

Diversification of Power Generation Structure

Vertical Integration of Business Structure

Datang Power was listed in Hong Kong and London on 21 March 1997, raising proceeds of approximately RMB3.7 billion with the issue of approximately 1.431 billion H shares. In 2001, the Company's American Depositary Receipts (ADRs) were approved to be traded in the U.S. over-the-counter market. In September 2003, the Company successfully issued 5-year convertible bonds of US$153.8 million. In December 2006, the A shares of the Company were listed on the Shanghai Stock Exchange, raising net proceeds of approximately RMB3.279 billion.

As one of the largest independent power producers in China, Datang Power is principally engaged in the development and operation of power plants, the sale of electricity and thermal power, and the repair and maintenance of power equipment and power-related technical services. As at the end of 2007, the total installed capacity in operation of the Company amounted to 20,134.7 MW.

11.45% Beijing Energy Investment (Group) Company	11.45% Beijing Energy Investment (Group) Company	11.45% Hebei Construction Investment Company
10.33% Tianjin Jinneng Investment Company	5.29% Other holders of domestic shares	27.74% Holders of H Shares
DATANG INTERNATIONAL POWER GENERATION CO., LTD.

100% Dou He Power Plant (1,550MW)

100% Gao Jing Power Plant (600MW)

100% Xia Hua Yuan Power Plant (400MW)

100% Zhang Jia Kou Power Plant (2,400MW)

100% Beijing Datang Fuel Company Limited	100% Datang International Hydropower Development Company Limited	100% Datang International Chemical Technology Research Institiute Company Limited
100% Datang International (Hong Kong) Limited	100% Jiangxi Datang International Xinyu Power Generation Company Limited (400MW)	100% Yunnan Datang International Power Generation Company Limited
100% Inner Mongolia Datang International Zhuozi Wind Power Company Limited (88MW)	100% Inner Mongolia Datang International Xilinhaote Mining Company Limited	90.43% Hebei Datang International Huaze Hydropower Development Company Limited (20MW)
90% Jiangsu Datang International Lusigang Power Generation Company Limited (2,640MW)	80% Hebei Datang International Tangshan Thermal Power Company Limited (600MW)	80% Shanxi Datang International Yungang Thermal Power Company Limited (440MW)
80% Shanxi Datang International Yuncheng Power Generation Company Limited (1,200MW)	80% Sichuan Datang International Ganzi Hydropower Development Company Limited (3,400MW)	75% Tianjin Datang International Panshan Power Generation Company Limited (1,200MW)
75% Guangdong Datang International Chaozhou Power Generation Company Limited (1,200MW)	70% Hebei Datang InternationalWangtan Power Generation Company Limited (1,200MW)	70% Yunnan Datang International Honghe Power Generation Company Limited (600MW)
70% Yunnan Datang International Lixianjiang Hydropower Development Company Limited (1,435MW)	70% Chongqing Datang International Shizhu Power Generation Company Limited (700MW)	70% Yunnan Datang International Hengjiang Hydropower Development Company Limited
60% Inner Mongolia Datang International Tuoketuo Power Generation Company Limited (3,600MW)	60% Yunnan Datang International Wenshan Hydropower Development Company Limited (300MW)	60% Shanxi Datang International Shentou Power Generation Company Limited (1,000MW)
55% Gansu Datang International Lianchang Power Generation Company Limited (600MW)	51% Zhejiang Datang Wushashan Power Generation Company Limited (2,400MW)	51% Fujian Datang International Ningde Power Generation Company Limited (1,200MW)
51% Inner Mongolia Datang International Hohhot Thermal Power Generation Company Limited (600MW)	51% Chongqing Datang International Wulong Hydropower Development Company Limited (600MW)	51% Yunnan Datang International Nalan Hydropower Development Company Limited (150MW)
51% Inner Mongolia Datang International Duolun Hydropower Multiple Development Company Limited	50% Hebei Yuzhou Energy Multiple Development Company Limited (1,320MW)	45% Ningxia Datang International Daba Power Generation Company Limited (1,200MW)
26% Inner Mongolia Datang Tongfang Silicon Aluminum Technology Company Limited	40% Chongqing Datang International Pengshui Hydropower Development Company Limited (1,750MW)	40% Yunnan Datang International Deqin Hydropower Development Company Limited
26% Inner Mongolia Datang International Renewable Energy Resource Development Company Limited

Major Events for 2007

January

The first wind power generation unit of Zhuozi Windpower Company carried out trial operation.

March

Tangshan Thermal Power Company closed three 50 MW obsolete generation units.

April

The exclusive rail-line project for Duolun coal chemical plant commenced construction in Duolun County.

May

The State Electricity Regulatory Commission of the PRC held the 2007 Conference on Power Reliability Indicators and conducted reliability evaluation for coal-fired generation units. Evaluation was conducted in two classes, namely the 300 MW class and the 600 MW class, with the top 10 units of each class named the 'Annual Golden Units of Reliability'. Datang Power had five units ranked among the top 10, namely: Unit 8 of Zhang Jia Kou Power Plant (300 MW class); Unit 2 and Unit 5 of Tuoketuo Power Company, Unit 3 of Panshan Power Company and Unit 1 of Wangtan Power Company (600 MW class).

June

The Development and Reform Commission of Inner Mongolia Autonomous Region approved the Zhuozi Wind Power Plant Phase II project (48 MW).

July

The Development and Reform Commission of Hebei Province approved the Duofeng Railway (Hebei Section) project.

The first generation unit of Lixianjiang Hydropower Company's Longma Hydropower Station commenced operation.

The first generation unit of Lixianjiang Hydropower Company's Tukehe Hydropower Station commenced operation.

September

Unit 1 of Yuncheng Power Company carried out trial operation.

Successful hoisting of C3 knockout tower, the outsize equipment of Duolun coal chemical project.

October

Unit 2 of Lixianjiang Hydropower Company's Tukehe Hydropower Station commenced operation.

November

Unit 2 of Yuncheng Power Company carried out trial operation.

December

The 7th Chinese Business Top 100 was held in Shanghai and Datang Power was named among the '2006 Top 100 Chinese Listed Companies'.

Unit 1 of Lixianjiang Hydropower Company's Tukehe Hydropower Station commenced operation.

Distribution of Datang Power's

Business Projects

The Four Power Plants Wholly-owned by Datang Power 

1	Gao Jing Thermal Power Plant	Beijing City
2	Dou He Power Plant	Hebei Province
3	Zhang Jia Kou Power Plant	Hebei Province
4	Xia Hua Yuan Power Plant	Hebei Province
Companies Managed by Datang Power
Coal-Fired Power Business:
5	Tianjin Datang International Panshan Power Generation Company Limited ('Panshan Power Company')	Tianjin City
6	Hebei Datang International Tangshan Thermal Power Company Limited ('Tangshan Thermal Power Company')	Hebei Province
7	Hebei Datang International Wangtan Power Generation Company Limited ('Wangtan Power Company')	Hebei Province
8	Inner Mongolia Datang International Tuoketuo Power Generation Company Limited ('Tuoketuo Power Company')	Inner Mongolia Autonomous Region
9	Inner Mongolia Datang International Hohhot Thermal Power Generation Company Limited ('Hohhot Thermal Power Company')	Inner Mongolia Autonomous Region
10	Shanxi Datang International Yungang Thermal Power Company Limited ('Yungang Thermal Power Company')	Shanxi Province
11	Shanxi Datang International Shentou Power Generation Company Limited ('Shentou Power Company')	Shanxi Province
12	Shanxi Datang International Yuncheng Power Generation Company Limited ('Yuncheng Power Company')	Shanxi Province
13	Gansu Datang International Liancheng Power Generation Company Limited ('Liancheng Power Company')	Gansu Province
14	Ningxia Datang International Daba Power Generation Company Limited ('Daba Power Company')	Ningxia Municipality
15	Chongqing Datang International Shizhu Power Generation Company Limited ('Shizhu Power Company')	Chongqing City
16	Jiangxi Datang International Xinyu Power Generation Company Limited ('Xinyu Power Company')	Jiangxi Province
17	Jiangsu Datang International Lusigang Power Generation Company Limited ('Lusigang Power Company')	Jiangsu Province
18	Zhejiang Datang Wushashan Power Generation Company Limited ('Wushashan Power Company Limited')	Zhejiang Province
19	Fujian Datang International Ningde Power Generation Company Limited ('Ningde Power Company')	Fujian Province
20	Guandong Datang International Chaozhou Power Generation Company Limited ('Chaozhou Power Company')	Guangdong Province
21	Yunnan Datang International Honghe Power Generation Company Limited ('Honghe Power Company')	Yunnan Province
Hydropower Business:
22	Datang International Hydropower Development Company Limited ('Hydropower Company')	Beijing City
23	Hebei Datang International Huaze Hydropower Development Company Limited ('Huaze Hydropower Company')	Hebei Province
24	Sichuan Datang International Ganzi Hydropower Generation Development Company Limited ('Ganzi Hydropower Company')	Sichuan Province
25	Chongqing Datang International Pengshui Hydropower Development Company Limited ('Pengshui Hydropower Company')	Chongqing City
26	Chongqing Datang International Wulong Hydropower Development Company Limited ('Wulong Hydropower Company')	Chongqing City
27	Yunnan Datang International Power Generation Company Limited ('Yunnan Power Company')	Yunnan Province
28	Yunnan Datang International Lixianjiang Hydropower Development Company Limited('Lixianjiang Hydropower Company')	Yunnan Province
29	Yunnan Datang International Nalan Hydropower Development Company Limited ('Nalan Hydropower Company')	Yunnan Province
30	Yunnan Datang International Wenshan Hydropower Development Company Limited ('Wenshan Hydropower Company')	Yunnan Province
31	Yunnan Datang International Deqin Hydropower Development Company Limited ('Deqin Hydropower Company')	Yunnan Province
32	Yunnan Datang International Hengjiang Hydropower Development Company Limited ('Hengjiang Hydropower Company')	Yunnan Province
33	Inner Mongolia Datang International Duolun Hyropower Multiple Development Company Limited ('Dolun Hydropower Company')	Inner Mongolia Autonomous Region
Wind Power Business:
34	Inner Mongolia Datang International Zhuozi Windpower Company Limited ('Zhuozi Windpower Company')	Inner Mongolia Autottnomous Region
Other Businesses:
35	Hebei Yuzhou Energy Multiple Development Company Limited ('Yuzhou Energy Conpany')	Hebei Province
36	Datang International (Hong Kong) Limited ('Hong Kong Company')	Hong Kong
37	Datang International Chemical Technology Research Institute Company Limited ('Chemical Technology Development Institute')	Beijing City
38	Beijing Datang Fuel Company Limited ('Fuel Company')	Beijing City
39	Inner Mongolia Datang Tongfang Silicon Aluminum Technology Company Limited ('Silicon Aluminum Technology Company')	Inner Mongolia Autonomous Region
40	Inner Mongolia Datang International Xilinhaote Mining Company Limited ('Xilinhaote Mining Company')	Inner Mongolia Autonomous Region
41	Inner Mongolia Datang International Renewable Energy Resource Development Company Limited ('Renewable Energy Company')	Inner Mongolia Autonomous Region

Financial and Operating Highlights

Consolidated Income Statements  (Amounts expressed in millions of RMB)

For the year ended 31 December	2003	2004	2005	2006	2007
Net operating revenue	9,951	13,584	17,994	24,899	32,829
Profit before taxation	2,858	3,663	3,863	4,664	5,836
Taxation	(989)	(919)	(813)	(1,081)	(1,446)
Net profit for the year attributable to:	1,869	2,744	3,050	3,583	4,390
- Equity holders of the Company	1,812	2,293	2,351	2,778	3,406
- Minority interests	57	451	699	805	984

Note:    No analysis of turnover by geographical location has been prepared as 100% of turnover comes from the PRC, and no contribution to profit from any of the geographical location is substantially out of line with normal ratio of profit to turnover.

Consolidated Balance Sheet  (Amounts expressed in millions of RMB)

As at 31 December	2003	2004	2005	2006	2007
Total assets	35,544	49,475	64,536	90,711	121,773
Total liabilities	(18,582)	(30,396)	(43,807)	(63,510)	(87,532)
Minority interests	(1,241)	(1,969)	(2,404)	(3,305)	(4,643)
Shareholders' equity	15,721	17,110	18,325	23,896	29,598

Expand Coal-Fired Capacity

Sustain Rapid Profit Growth 

In 2007, besides acquiring Xinyu Power Generation Company's 400MW generation units to open up a development path in Jiangxi Province for the Company, Datang Power has also commenced construction work on the Phase I project with two 600MW generation units at Daba Power Generation in Ningxia approved by the State, thereby filling the Company's void in Ningxia region. In addition, two 600MW generation units of Yuncheng Power Company commenced commercial operation in January 2008. Datang Power will continue to expand its capacity in coal-fired power generation to maintain the Company's rapid profit growth momentum and to ensure a steady supply of power.

Chairman's Statement

To all shareholders:

In 2007, Datang Power made proud achievements in the areas of production, operation and project construction, accelerating its development backed by stronger integral capabilities. The Company's installed capacity continued to grow rapidly, with power generation and profit achieving significant growth.

For the year ended 31 December 2007 (the 'Year'), the total consolidated assets of the Company and its subsidiaries and a jointly controlled entity (the 'Company and its Subsidiaries') amounted to approximately RMB121.773 billion, an increase of approximately RMB31.062 billion over the year of 2006 (the 'Previous Year'). The consolidated operating revenue amounted to approximately RMB32.829 billion, an increase of approximately 31.85% over the Previous Year. Profit attributable to the Company's shareholders amounted to approximately RMB3.406 billion, an increase of approximately 22.62% over the Previous Year. Earnings per share was approximately RMB0.29, an increase of approximately RMB0.02 per share over the Previous Year. As at 31 December 2007, total installed capacity of the Company and its Subsidiaries amounted to 20,134.7 MW.

During 2007, the Company continued to maintain a high level of safe production with an overall equivalent availability factor of 94.62%. Power generated by the Company and its Subsidiaries increased by 26.56% over the Previous Year. Coal consumption was approximately 336.97g/kWh, a decrease of approximately 6.22g/kWh over the Previous Year. Weighted self-consumption rate was approximately 5.84%, a decrease of approximately 0.16 percentage point as compared to the Previous Year.

In 2008, the economic development of the PRC will be highlighted by the following characteristics: firstly, the national economy will continue to grow rapidly. To achieve the target of tripling the per capita GDP by 2020, the PRC economy has to maintain rapid growth over the next few years. Currently, the PRC is in a stage of industrialisation, accelerated urbanisation and private consumption structural upgrade, with ample momentum of internal development which will facilitate the continued, steady and rapid growth of the national economy. Secondly, the efforts on economic structural adjustments will be further reinforced. Through various approaches such as fiscal policies, tax policies and resource price adjustments, the State will rein in the excessive development and low-quality, redundant construction in high-energy consumption and high-pollution industries. The production scale of high-energy consumption and high-pollution enterprises will be subject to more stringent restrictions, and the progress on phasing out obsolete production capacity will be further accelerated. Thirdly, energy conservation and environmental protection requirements will be further raised. Year 2008 will be a crucial year to complete the energy conservation and emission reduction targets under the 11th Five-year Plan. To ensure the achievement of such targets, the State will continue to introduce policies and measures which facilitate resource conservation and environmental protection, as well as strengthening the effort on supervision and inspection. Fourthly, prices of resources including coal will remain on a continued upswing. The PRC has a shortage of resources and the current prices do not adequately reflect the value and rarity of resources or fully embody the policy direction of resource conservation. Accordingly, raising the tax rates on resources and resource prices is inevitable. Under the multiple effects of imminent energy and resource pricing structure and supply-demand dynamics, prices of resources such as coal and petroleum will further increase. The fifth characteristic is a further tightening of the monetary policy. To prevent the structural increase in product prices from becoming a significant inflation, the State will adopt a contractionary monetary policy. Accordingly, it is necessary to exercise even stricter control over the credit scale and there is a possibility of a further rise in the benchmark interest rates. For power generation enterprises, the above-mentioned characteristics of the PRC economy bring immense development opportunities and tough challenges at the same time.

In 2008, the Company will seize the development opportunities available to the industry, and will continue to pursue rapid, sustainable growth and unceasing enhancement of its integral capabilities. On the other hand, the Company will emphasize the balance between the pace of growth and the quality and effectiveness of growth, aiming to achieve synchronous growth in operating scale and effectiveness. The Company will be careful in selecting and improving on its projects, controlling construction costs and preventing investment and operational risks. In short, the Company will further enhance shareholder value, maximise profitability and strengthen its competitiveness and productivity, with a view to providing high-quality and safe power supply to the public and pushing forward a rapid, sustainable development of the Company.

Meanwhile, the Company will continue to count on its investors for their views and opinions and to seek effective communication with its shareholders, so as to achieve high management effectiveness and transparency. We will enhance our efforts in communicating with the market in various forms and in cultivating the Company's influence in the market, in an endeavour to uphold its positive image and to procure a continued growth in shareholder value. 

Last but not least, may I express my sincere gratitude to all shareholders, various organisations and friends for their trust and support over the year.

Zhai Ruoyu

Chairman

26 March 2008

Push Forward Hydropower

Build Complementary Resources

In 2007, the Company continued to actively develop hydropower projects. Besides 450MW of installed capacity added by Lixianjiang Hydropower Company, the two-level hydropower projects at Yunnan Luoze River have also commenced construction. In the future, the Company will continue to push forward the development in hydropower to leverage the complementary advantages of varied resources, strengthening the Company's competitiveness in the power generation industry.

Management Discussion and Analysis

Operating Environment

During 2007, the national economy maintained a steady and rapid growth, with an impressive 11.4% gross domestic product (GDP) growth reported. Robustly driven by economic development, the power industry also witnessed rapid growth. During the Year, approximately 100,000 MW of installed capacity was added nationwide. The social power consumption increased by 14.42% over the Previous Year while nationwide power generation increased by approximately 14.44% over the Previous Year. 

The major service areas of the Company and its Subsidiaries also maintained rapid growth in power generation, with the power generation of the BTT Power Grid, the Shanxi Power Grid, the Zhejiang Power Grid, the Fujian Power Grid, the Guangdong Power Grid, the Gansu Power Grid and the Yunnan Power Grid reporting increases of approximately 18.92%, 22.80%, 26.96%, 15.30%, 11.20%, 16.59% and 20.78% over the Previous Year, respectively.

BUSINESS REVIEW

During the Year, the nationwide shortage in supply of electricity was further alleviated due to the commencement of operation of a substantial number of new generation units. Utilisation hours of operating generation units also reported a decrease as compared to the Previous Year, while coal prices hovered at a high level. Facing the operating pressure in the power market, the Company and its Subsidiaries actively capitalised on market opportunities, diligently carried out effective production operations and overcame difficulties, striving to complete the production objectives of the Year. During 2007, total power generation of the Company and its Subsidiaries amounted to 118.271 billion kWh, representing an increase of 26.56% as compared to the Previous Year. While power generation increased, the Company and its Subsidiaries further refined their operating strategies to strive for higher production level and revenue. Accordingly, the overall efficiency of the Company and its Subsidiaries reported a relatively significant increase over the Previous Year. During the Year, the Company and its Subsidiaries realised a consolidated operating revenue of approximately RMB32,829 million, representing an increase of approximately 31.85% as compared to the Previous Year. Consolidated net profit attributable to equity holders of the Company was approximately RMB3,406 million, representing an increase of approximately 22.62% as compared to the Previous Year.

1.    Production

As at 31 December 2007, the total power generation of the Company and its Subsidiaries for the Year amounted to 118.271 billion kWh, representing an increase of 26.56% as compared to the Previous Year. The total on-grid power generation of the Company and its Subsidiaries amounted to 111.411 billion kWh, representing an increase of approximately 26.74% as compared to the Previous Year. The increases in the total power generation and on-grid power generation were mainly attributable to the following reasons:

(1)    Increased capacity of operating generation units: Compared to the Previous Year, the Company and its Subsidiaries have increased its installed capacity by 850 MW and the new generation units commencing operation in the second half of 2006 were in satisfactory condition during the Year, thereby substantially increasing the overall power generation capacity of the Company and its Subsidiaries.

(2)    Increased demand in service areas: During the Year, the power demand within the service areas of the Company and its Subsidiaries - the BTT Power Grid, the Shanxi Power Grid, the Gansu Power Grid, the Yunnan Power Grid, the Zhejiang Power Grid, the Fujian Power Grid and the Guangdong Power Grid maintained rapid growth.

(3)    The power generation obstruction problem at Wangtan Power Company, a subsidiary of the Company, was completely resolved and its generation units are now operating in full capacity, with the power generation increased by approximately 60% as compared to the same period of the Previous Year.

(4)    High operating reliability of generation units: During the Year, the operating generation units of the Company and its Subsidiaries achieved an equivalent availability factor of 94.62%.

Power generation details of the Company and its Subsidiaries for 2007 (Unit: billion kWh)

Power Plant/Company Name	Power Generation for 2007	Growth (%)
Gao Jing Thermal Power Plant	3.4642	0.03
Dou He Power Plant	11.2043	6.24
Xia Hua Yuan Power Plant	2.5566	4.63
Zhang Jia Kou Power Plant	15.1455	6.64
Tianjin Datang International Panshan Power Generation Company Limited ('Panshan Power Company')	7.1369	1.79
Inner Mongolia Datang International Tuoketuo Power Generation Company Limited ('Tuoketuo Power Company')	21.6869	1.31
Shanxi Datang International Yungang Thermal Power Company Limited ('Yugang Thermal Power Company')	2.8655	-4.39
Hebei Datang International Tangshan Thermal Power Company Limited ('Tangshan Thermal Power Company')	3.7969	-2.05
Shanxi Datang International Shentou Power Company Limited ('Shentou Power Company')	5.7444	0.72
Gansu Datang International Liancheng Power Generation Company Limited ('Liancheng Power Company')	4.1100	18.00
Hebei Datang International Wangtan Power Generation Company Limited ('Wangtan Power Company')	7.5769	58.00
Zhejiang Datang Wushashan Power Generation Company Limited ('Wushashan Power Company')	14.1641	159.96
Guangdong Datang International Chaozhou Power Generation Company Limited ('Chaozhou Power Company')	6.0035	172.81
Fujian Datang International Ningde Power Generation Company Limited ('Ningde Power Company')	7.1078	159.24
Yunnan Datang International Honghe Power Generation Company Limited ('Honghe Power Company')	3.9209	120.84
Jiangxi Datang International Xinyu Power Generation Company Limited ('Xinyu Power Company')	0.4615	-
Hebei Datang International Huaze Hydropower Development Company Limited ('Huaze Hydropower Company')	0.0228	-26.09
Yunnan Datang International Nalan Hydropower Development Company Limited ('Nalan Hydropower Company')	0.6051	14.39
Yunnan Datang International Lixianjiang Hydropower Development Company Limited ('Lixianjiang Hydropower Company')	0.6895	194.66
Inner Mongolia Datang International Duolun Hydropower Multiple Development Company Limited ('Duolun Hydropower Company')	0.0078	-
Total	118.2711	26.56

2.    Environmental Protection and Energy Conservation and Emission Reduction

While endeavouring to increase power generation, the Company also actively responds to the State's calls for environmental protection and energy conservation and emission reduction, implementing environmental protection projects and enforcing energy conservation and emission reduction measures. As at the end of 2007, the Company and its Subsidiaries closed three 50 MW obsolete units of Tangshan Thermal Power Company in accordance with the State policy opting for 'large generation units over small ones'. The installed capacity of the Company and its Subsidiaries with desulphurisation facilities in use accounted for 83.4% of the coal-fired units of the Company and its Subsidiaries. Meanwhile, desulphurisation upgrade projects for the remaining units are currently in progress and are expected to be completed within 2008.

As desulphurisation upgrade projects are underway, treatment for the flue-gas denitro-oxidisation of the Company and its Subsidiaries were successfully completed, of which at Gao Jing Thermal Power Plant achieved a denitro-oxidisation percentage of 80%.

During the Year, the Company actively pushed ahead new technologies, new methods and new ideas for energy conservation and emission reduction. Focusing on the major and difficult issues on energy conservation faced by its power plants, the Company devised its energy conservation and environmental protection work plans and compiled energy conservation training materials and maintenance management guidelines for relevant facilities. Relevant training sessions were organised, while energy conservation technologies were promoted and energy conservation measures were enforced. During the Year, the Company's accomplished impressive results on energy conservation and emission reduction and environmental protection, among which, the emissions of sulphur dioxide, smoke ash and industrial waste water per electricity unit were better than the national average. Meanwhile, coal consumption for power generation is reduced by 6.22g per kWh as compared to the Previous Year; oil consumption for power generation is reduced by 5.76 tonnes per 100 million kWh as compared to the Previous Year; overall water consumption for power generation is reduced by 20% as compared to the Previous Year. Although more desulphurisation facilities had been put into operation, the consolidated electricity consumption rate of the plants decreased by 0.16 percentage point as compared to the Previous Year.

3.    Operational Management

During the Year, the Company and its Subsidiaries achieved a consolidated operating revenue of approximately RMB32,829 million, representing an increase of approximately 31.85% as compared to the same period of the Previous Year. Consolidated net profit attributable to equity holders of the Company amounted to approximately RMB3,406 million, representing an increase of approximately 22.62% as compared to the same period of the Previous Year. The steady growth in the profit of the Company and its Subsidiaries was mainly attributable to the following factors:

(1)    Achieving higher power generation through active marketing and sales efforts and initiating communication and coordination with all relevant parties: On-grid power generation increased by approximately 23.5 billion kWh over the Previous Year, thereby increasing the sales revenue of electricity by approximately RMB6,620 million accordingly.

(2)    Raising the average on-grid power tariff and increasing sales revenue through various efforts to implement the tariff policies: During the Year, the Company's on-grid tariff (tax included) increased by approximately RMB12.56 per MWh over the Previous Year, leading to an increase in sales revenue of approximately RMB1,196 million.

(3)    Maintaining comprehensive budget control to enhance capital utilisation efficiency, as well as refining cost management and exercising stringent cost control: During the Year, apart from the sales revenue increase, the Company also managed to keep its controllable costs and financing costs below the Company's annual budget, thereby laying a foundation for the profit growth for the Year.

4.    Business Expansion

During the Year, the Company continued to implement its development strategies, which included the transformation from a single mode of coal-fired power generation to the development of renewable energy including hydropower and wind power, and the change of the business structure from simply a power generator into an integrated industry chain of power-related businesses. As a result of the gradual implementation of the above-mentioned development strategies, the Company and its Subsidiaries had added an operating capacity of 850 MW during the Year. Remarkable breakthroughs were also made in the development of nuclear power generation as well as power-related upstream and downstream projects such as coal mine - power plant - railway integration and railway construction.

(1)    Thermal projects: During the Year, the Company and its Subsidiaries added 400 MW of coal-fired generation units, primarily a result of acquiring two 200 MW units of Xinyu Power Generation Company.

    Two 600 MW generation units of Yuncheng Power Company, which is controlled and constructed by the Company, commenced commercial operation in January 2008.

    The Phase 1 project (installed capacity: two 600 MW units) of Daba Power Company, of which the Company holds 45% interests, was approved by the relevant State authorities and construction has commenced.

(2)    Hydropower projects: During the Year, the Company and its Subsidiaries added a capacity of 450 MW in hydropower units, including 285 MW at Longma Hydropower Station and 165 MW at Tukehe Hydropower Station of Lixianjiang Hydropower Company.

    The two-level hydropower projects at Yunnan Luoze River (total installed capacity: 63 MW), controlled and constructed by the Company, were respectively approved by the relevant State authorities and construction has commenced during the Year.

(3)    Wind power project: The Zhuozi Bayin Wind Power Plant Phase I (installed capacity: 40 MW) and Phase II (installed capacity: 48 MW) developed and constructed by the Company's wholly-owned subsidiary, Inner Mongolia Datang International Zhuozi Wind Power Company Limited ('Zhuozi Windpower Company'), and the Shanxi Datong Zuoyun Wind Power Plant Phase I (installed capacity: 49.5 MW), planned to be solely developed by the Company, were respectively approved by the relevant State authorities.

(4)    Nuclear power project: Upon the approval by the relevant State departments, the Company made an investment to participate in the construction of four nuclear power generation units of 1,000 MW each at the Ningde region of Fujian Province, and construction of these units commenced in February 2008.

(5)    Other energy-related projects: As at the end of 2007, development of upstream/downstream power-related businesses including coal mining, coal chemical projects and railway construction have achieved substantial progress. (1) Railway project: approval has been obtained for the Inner Mongolia section and the Hebei section of Duofeng Railway project, with an approved mileage of 134 km. (2) coal mine project: exploration rights of Unit 2 of the open-cut coal mine located east of Shengli Coal Mine, Changtan Coal Mine and Kongduigou Coal Mine have been obtained; and the development right of Wujianfang Coal Mine in Inner Mongolia has been obtained to date, (3) Duolun coal chemical project at Inner Mongolia, controlled and developed by the Company, has progressed smoothly. Upon project completion and commencement of production, the project is expected to produce annually 460,000 tonnes of polypropylene and other by-products.

FINANCIAL REVIEW

In 2007, the Company realised RMB32,829 million in revenue, representing a 31.85% increase over the Previous Year. A net profit attributable to equity holders of the Company of RMB3,406 million was realised, representing a 22.62% increase over the Previous Year. Basic earnings per share was approximately RMB0.29, representing an increase of approximately RMB0.02 per share over the Previous Year.

1.    Operating Revenue

The Company is principally engaged in power generation businesses which involve mainly coal-fired power generation. Heat supply also forms a minor part of the operation. The Company's operating revenue mainly comprises revenue from electricity sales and heat sales.

During 2007, the Company and its Subsidiaries realised an operating revenue of RMB32,829 million, representing an increase of approximately RMB7,931 million or 31.85% over the Previous Year, among which, the increase of installed capacity and on-grid power generation led to revenue increase of approximately RMB6,620 million, while the increase of average tariff level led to the Company's revenue increase of approximately RMB1,196 million.

2.    Operating Costs

During the Year, the operating costs of the Company and its Subsidiaries totalled RMB25,089 million, representing an increase of approximately RMB6,179 million or 32.67% over the Previous Year. The major reasons were increases in fuel costs.

During the Year, the fuel costs accounted for 60.84% of operating costs. With more generation units putting into operation and increase in power generation, as well as the continued rise in nationwide fuel prices, fuel costs increased by RMB4,599 million or approximately 43.13% over the Previous Year, such increase exceeding that of power sales revenue.

3.    Net Financing Costs

During 2007, the financing costs of the Company amounted to RMB2,080 million, representing an increase of approximately RMB721 million or 53.09% over the Previous Year. The relatively rapid increase was attributable to the increase in interest expense caused by the cease of interest capitalisation of the new generation put into operation in the Previous Year and the lending interest-rate increases during the Year. However, as the Company and its Subsidiaries adopted various measures, the overall financing costs were therefore below the Year's budget.

4.    Profits

During the Year, the Company and its Subsidiaries reported the consolidated profit before taxation amounting to RMB5,837 million, representing an increase of 25.15% as compared to the Previous Year. The consolidated net profit attributable to equity holders of the Company amounted to approximately RMB3,406 million, representing an increase of 22.62% as compared to the Previous Year. The increase in the profit of the Company and its Subsidiaries was mainly attributable to the Company and its Subsidiaries' further expansion in its operating scale, increase in power generation and average power tariff, as well as stringent and effective cost controls by the Company and its Subsidiaries.

5.    Financial Position

As at 31 December 2007, the consolidated total assets of the Company and its Subsidiaries amounted to approximately RMB121.773 billion, representing an increase of approximately RMB31,062 million as compared to the Previous Year. The consolidated total liabilities amounted to approximately RMB87,533 million, representing an increase of approximately RMB24,022 million as compared to the Previous Year. Minority interests amounted to approximately RMB4,643 million, representing an increase of approximately RMB1,339 million as compared to the Previous Year. Shareholders' equity amounted to approximately RMB34,241 million, representing an increase of approximately RMB7,040 million as compared to the Previous Year. The increase in total assets mainly resulted from the implementation of the expansion strategy by the Company and its Subsidiaries which led to a corresponding increase in investments in construction-in-progress.

6.    Liquidity

As at 31 December 2007, the asset-to-liability ratio for the Company and its Subsidiaries was approximately 71.88%. The net debt-to-equity ratio (i.e. (loans + convertible bonds + short-term bonds - cash and cash equivalents - short-term bank deposits over 3 months)/total equity) was approximately 205.83%.

As at 31 December 2007, the cash and cash equivalents and bank deposits with a maturity of 3 months above of the Company and its Subsidiaries amounted to approximately RMB3,698 million, of which an amount equivalent to approximately RMB98 million was foreign currency deposit. The Company and its Subsidiaries had no entrusted deposits or overdue fixed deposits during the Year.

As at 31 December 2007, the short-term loans of the Company and its Subsidiaries amounted to approximately RMB 22,609 million which bore annual interest rates ranging from 4.96% to 7.29%. Long-term loans (excluding those due within 1 year) amounted to approximately RMB44,273 million and long-term loans due within 1 year amounted to approximately RMB4,188 million, at annual interest rates ranging from 3.60% to 7.41%, of which an amount equivalent to approximately RMB2,229 million was denominated in US dollar. The Company and its Subsidiaries have constantly paid close attention to foreign exchange market fluctuations and prudently assess foreign currency risks.

The Company had not provided any guarantee in whatever forms for any other company apart from its subsidiaries, jointly controlled entities and associates.

OUTLOOK FOR 2008

In 2008, the Company is faced with a daunting task of achieving solid results and maintaining a stable and healthy development in view of both opportunities and challenges lying ahead. According to forecasts, the growth of the PRC economy will remain steady in 2008. GDP is expected to grow by about 9% while power consumption in the PRC is expected to grow at around 13%. Such a scenario will provide new development opportunities to the Company and its Subsidiaries. In view of electricity demand-supply going from a tight condition to a basically steady condition in 2008, utilisation rates of power generation units are expected to decrease slightly with generation capacity increasing. In addition, high coal prices and the uncertainties of coal quality, as well as the mismatch between fuel supply and transportation, will have a more significant impact on the Company's coal cost control in 2008. Meanwhile, the power dispatch approach based on the principles of energy conservation, environmental protection and economic efficiency will further intensify competition in the power generation sector. In addition, a string of interest rate hikes announced in 2007 will further increase the Company's financing costs, thereby increasing the difficulty for operation management.

Facing keen competition and a difficult operation environment, the Company will actively expand its room for development, strengthen the marketing and sales effort to enhance its profitability, by fully utilising its own advantages in resources, scale, location and costs. In 2008, the Company plans that total power generation of the Company amounted to approximately 140 billion kWh, while the growth rate of unit fuel cost will be strived to control at approximately 10%. 

In 2008, the Company will focus on the following tasks:

1.    Strengthening the production safety management and the establishment of an emergency system to enhance the ability to prevent and handle emergencies, so as to safeguard a stable power usage during the Olympic Games.

2.    Strengthening the environmental protection and facilitating clean production: In 2008, the Company will further push ahead environmental protection projects and will implement the capital and construction progress plans for environmental protection projects. The Company will fully accomplish all the environmental protection tasks to achieve a 100% desulphurisation facility installation rate for all coal-fired units, with a 95% desulphurisation facility operation rate and a 95% desulphurisation efficiency.

3.    Strengthening operation management and maintaining steady growth in economic efficiency: The Company will make every effort to control project costs, fuel costs, finance costs and other costs and expenses, so as to achieve the objective of increasing revenue whilst saving cost. The Company will also enhance its coordination of power generation to ensure the accomplishment of the year's power generation plan, so as to maintain the Company's momentum of steadily growing economic gains.

4.    Continuing the implementation of the Company's diversified development strategy, by actively pursuing the expansion of the Company in coal-fired power, renewable energy projects such as hydropower and wind power and nuclear power, coal mining, railway and development of power-related upstream and downstream projects, so as to ensure the Company's sustainable development.

5.    Striving to ensure the construction quality and that electricity projects will commence operation safely and in good quality and making further progress in the development of non-electricity projects.

6.    Actively expanding financing channels to secure fundings for the Company's scale development.

Zhang Yi

President

26 March 2008

Adequately Develop NuclearBroaden Generation Structure

Datang Power's nuclear power generation units (installed capacity: 4,000MW) in the Ningde region of Fujian Province commenced construction in February 2008. Looking ahead, the Company will continue to actively study and introduce innovative power generation technology to allow the Company to advance with time and broaden the Company's power generation structure, thereby achieving sustainable development for the Company.

Corporate Governance Report

During 2007, the Company fully complied with the principles as set out in the Code on Corporate Governance Practices in Appendix 14 to the Rules Governing the Listing of Securities (the 'Listing Rules') on The Stock Exchange of Hong Kong Limited (the 'Hong Kong Stock Exchange') and reached or even exceeded the best recommended practices in the Code on Corporate Governance Practices in certain aspects. The corporate governance condition of the Company is hereby reported as follows:

1.    Shareholders and General Meeting 

For years, apart from committing itself to the operation and expansion of its businesses in order to attain appropriate returns for shareholders, the Company also provides details on the Company's operations management and relevant information to shareholders in a timely and accurate manner through a variety of channels and methods, including: convening and holding general meetings in strict compliance with the Company's articles of association (the 'Articles of Association'), Listing Rules and relevant regulations stipulated by Securities and Futures Commission (the 'SFC'), and timely announcing relevant information to shareholders on an irregular basis according to the stipulations of the Listing Rules. During the reporting period, the Company held a total of three general meetings and a professional lawyer was invited to each general meeting as a witness to ensure all shareholders were treated equally and exercised their rights adequately.

The Company has also established specific divisions to assign specific staff to handle relevant work and receive visitors, with contact numbers published to answer phone enquiries at any time. In addition, the Company's website has been set up to provide updates and past results on the Company, as well as the management organisation of the Company, so as to facilitate a comprehensive understanding of the Company by shareholders and investors.

2.    Directors and the Board

Pursuant to the Articles of Association, major duties of the board of directors of the Company (the 'Board') include: determining the business plans and investment proposals of the Company, formulating its capital addition and reduction plans, formulating its proposal on the amendments to the Articles of Association and merger and demerger schemes, determining its annual financial budgets, final accounts, profit distribution plans and proposals for making up losses, deciding upon the setting up of the Company's internal management organisation and laying down the Company's fundamental management system.

Pursuant to the Articles of Association, the Board comprises 15 directors (the 'Directors'). The new session of the Board was formed in July 2007 and the sixth session of the Board currently has 14 Directors, including four independent Directors. Another independent Director remains to be nominated.

Members of the Board are equipped with various experience, ability, expertise and judgment (see the profiles of the members of the Board as set out in this annual report for details) appropriate for the Board. Directors of the Company consist of experts in power-related technics and management, experts in finance and scholars. Each of them has extensive experience, being intelligent and open-minded.

The Directors fully understood their responsibilities, powers and obligations, and managed to discharge their duties with truthfulness, fiduciary and diligence. In order to enhance the decision-making mechanism, increase the scientific nature of decision-making and improve the quality of substantial decisions, the Board has established three specialised committees, namely Audit Committee, the Strategy and Development Committee and Remuneration and Appraisal Committee, with detailed working rules devised for the respective committees.

During the reporting period, the Board held 12 meetings, of which 5 were non-written correspondence Board meetings. The convention and voting procedures complied with the regulations stipulated by the Articles of Association and the 'Rules of Proceedings for Board Meetings'. The attendance of the Directors (in person or by proxy) was 100%.

Executive Directors	Attendance (%)	Non-executive Directors	Attendance (%)	Independent Non-executive Directors	Attendance (%)
Zhang Yi	100	Zhai Ruoyu (Chairman)	100	Xie Songlin	100
Zhou Gang	100	Hu Shengmu	100	Yu Changchun	100
		Fang Qinghai	100	Liu Chaoan	100
		Liu Haixia	100	Xia Qing	100
		Guan Tiangang	100
		Su Tiegang	100
		Ye Yonghui	100
		Li Gengsheng	100

During 2007, the Directors complied with the Model Code for Securities Transactions by Directors of Listed Issuers (the 'Model Code') as set out in Appendix 10 to the Listing Rules.

During the reporting period, the independent Directors and members of the Audit Committee of the Board were engaged in the preparation of the Company's 2007 annual report. For the Company's 2007 annual results and financial position, the Company had written communications with the independent directors and the Audit Committee members. Based on the annual audit working plan negotiated and confirmed with the accountants, the Audit Committee tracked and monitored the entire process of the annual audit. After the auditors issued the preliminary auditors' opinions, the Company held an independent directors' meeting and a Audit Committee meeting, in which the independent Directors and the Audit Committee members communicated with the Company's senior management and auditors regarding the Company's 2007 results and financial statements and the work of the auditors, forming relevant opinions and resolutions as a result.

3.    Supervisors and the Supervisory Committee

The Company's Supervisory Committee comprises four members, of which two are supervisors representing the staff. The membership and composition of the Supervisory Committee comply with the requirements of the laws and regulations. Supervisory Committee members shall exercise their supervisory duty as mandated by the laws, regulations, the Articles of Association and the rights granted by general meeting, and shall be accountable to the general meeting, in order to ensure that shareholders' interests, the Company's interests and the staff's lawful interests are not violated. During the reporting period, the Supervisory Committee held five meetings and attended all Board meetings and Audit Committee meetings. Through various channels and methods, the Supervisory Committee carried out regular inspections on the Company's finances and substantial matters, as well as supervising the lawfulness and compliance of the Directors, the president and other senior management members in discharging their duties.

4.    Chairman and Chief Executive Officer

The positions of Chairman (chairman of the Board) and President of the Company are held by two different persons respectively. Mr. Zhai Ruoyu and Mr. Zhang Yi are the Chairman and President of the Company, respectively. The power of the Chairman and the president is expressly provided in the Articles of Association The main duties of the Chairman include presiding over the general meetings, convening and presiding over Board meetings and reviewing the status of the implementation of the Board's resolutions. The main duties of the President include: (1) to take charge of the production and operation management of the Company, and coordinate the implementation of the Board resolutions; (2) to coordinate the implementation of the Company's annual operation plans and investment proposals; (3) to formulate the Company's internal management systems; (4) to lay down the Company's fundamental management system; (5) to formulate the fundamental constitution of the Company; (6) to propose the appointment or dismissal of the deputy managers and person in charge of finance; (7) to appoint or dismiss other officers in charge that are not appointed or removed by the Board and so forth.

5.    Non-executive Directors

The Company has a total of 12 non-executive Directors (with one vacancy of independent non-executive Director to be filled), it is provided in the Articles of Association that the term of appointment of Directors (including non-executive Directors) shall not exceed three years and Directors are eligible for re-election and re-appointment. Any new Director will take office only after being elected and approved at the general meeting. 

As stipulated by the regulations of the state supervisory department, the consecutive term of services of Independent non-executive Directors (i.e. independent Directors) shall not exceed six years. The Articles of Association has not expressly provided that the Directors would retire in rotation once every three years.

6.    Remuneration of Directors

During the Year, the Company and the remunerations of the executive Directors and senior management of the Company followed a salary system primarily based on positional salary. In accordance with the decision of the Board, the annual remuneration for each independent non-executive Directors was RMB60,000 (after tax). The remunerations for other non-executive Directors were determined by their respective salary systems as provided and paid by their respective affiliated entities. The Board has established the Remuneration and Appraisal Committee, which comprises four Directors with non-executive Directors making up half of the membership.

The major duties of the Remuneration and Appraisal Committee include: to examine the criteria for the appraisal of Directors and managers, to conduct the appraisal and make recommendations, to examine and review the remuneration policy and plans of the Directors and senior management (as the Company did not enter into service contracts with the executive Directors, thus the duties of the Committee did not include the approval of the terms for the service contracts of the executive Directors). In March 2008, the Remuneration and Appraisal Committee held a meeting to review the performance and level of remuneration for the executive Directors and senior management of the Company in 2007. The composition and level of remuneration were disclosed in this annual report. The attendance of the committee members at meetings is as follows:

Convenor:	Attendance (%)
Liu Chaoan (Independent non-executive Director)	100%
Members:
Xia Qing (Independent non-executive Director)	100%
Hu Shengmu (Non-executive Director)	100%
Zhou Gang (Executive Director) was unable to attend the meeting due to business engagement	0%

7.    Nomination of Directors

It is provided in the Articles of Association that Directors are elected and formed by the general meeting of the Company with each term of appointment not exceeding three years and are eligible for re-election and re-appointment. The Board has yet to set up a nomination committee. Any change to the composition of the Board will be initiated through the Board, for which the Board will publish biographies of candidates recommended before the general meeting of the Company on the basis of recommendations of the shareholders and a review of the candidates' experience, so that all shareholders will be fully aware of the background of the candidates and exercise the power of the shareholders to elect the Directors.

During the Year, the term of the members of the Company's fifth session of the Board expired; the 'Resolution on the Nomination of the Candidates for the sixth Session of the Board ' was considered and approved by way of written resolution, and pursuant to the proposal of the shareholders, the Board agreed to nominate 14 members for the sixth session of the Board, among which 4 are independent directors and 10 are directors who nominated by shareholders. The members of the sixth session of the Board were elected at the 2006 annual general meeting and took office as Directors with effect from 1 July 2007.

8.    Auditors' Fees

During the Year, the audit service fee payable to PricewaterhouseCoopers, and PricewaterhouseCoopers Zhong Tian CPAs Limited Company, the Company's international and local auditor, amounted to approximately RMB11.86 million. On the meeting of the sixth session of the Board convened on 14 April 2008, an additional audit service fee for 2007 of RMB1.816 million was agreed. The non-auditing service fee amounted to approximately RMB30 thousand. Such non-auditing services mainly for capital verification service.

9.    The Audit Committee

The Audit Committee under the Board comprises four Directors, of whom half are independent Directors. Major duties of the Audit Committee include: to supervise the Company's internal audit system and its implementation; to facilitate the communication between internal and external audit parties; to review the Company's financial information and term disclosure; to review the Company's internal control system and to propose the appointment or replacement of external audit firms. The Company's Directors, supervisors, chief financial manager, other senior management members as well as external auditors of the Company are invited to attend the Audit Committee meetings. The Audit Committee is also responsible for discussing the internal control and financial management affairs of the Company. 

During 2007, the Audit Committee convened two meetings. Conscientious audits of the Company's interim and annual results and related financial matters as well as the Company's internal control system were conducted. It also duly assessed the auditors' work. The Audit Committee is of the view that the Company's internal control systems were effectively implemented and the internal control systems have achieved remarkable results, and have effectively controlled the production and operation risks of the Company. Meanwhile, the Audit Committee has proposed to the Board to re-appoint PricewaterhouseCoopers Zhong Tian CPAs Limited Company and PricewaterhouseCoopers as the Company's domestic and international auditors respectively for 2008; the re-appointment will become valid subject to the approval at the 2007 annual general meeting.

During the Year, the attendance by the Audit Committee members to the committee's meetings is as follows:

Convenor:	Attendance (%)
Yu Changchun (Independent non-executive Director, financial management expert)	100%
Members:
Xia Qing (Independent non-executive Director)	100%
Ye Yonghui (Non-executive Director)	100%
Guan Tiangang (Non-executive Director)	100%

10.    Internal Control and Governance of the Company

The Board places a strong emphasis on risk management and emphasises on the establishment and enforcement of the internal control system. From the perspectives of business management, functional management and positional management, the Company established basic corporate management systems such as the internal control system for financial management, the financial and accounting system, the internal audit system, the administrative management system, the information management system and the production management system.

The Company directly owned four power plants at the beginning, and currently it has rapidly expanded with controlling interests or investments in over 50 companies. With its development, the Company's business has also moved from purely coal-fired power generation as at the beginning to diversified power sources and operations, with involvements in aspects such as nuclear power, railways and coal mines. Accordingly, in order to enhance the Company's internal control system and effectively prevent risks, during the reporting period the Company has examined its relevant existing internal control systems and made amendments and additions to the existing internal control systems, with a focus on enhancing the internal control system for finances. Currently, the preliminary drafts for the relevant internal control manual on finances and the self-inspection manual are completed and implemented.

As for organisational structure, the Company has established the audit supervision department, with a comprehensive and effectively operating internal audit system. Meanwhile, several specialised task forces on aspects such as financial budgeting, bidding and tenders, and emergency incidents were established at the management level to assist the Company's President to make major decisions and devise risk-prevention proposals in the daily operation. The Board and the Audit committee conscientiously examined the Company's internal control system and its execution, and were of the view that the internal control system was implemented adequately and had achieved significant result, thereby effectively controlling the Company's production and operation risks.

Further Develop Wind Power Contribute to Environmental Protection

During the Year, the Company's Zhuozi Bayin Wind Power Plant Phase I and Phase II (installed capacity: 88MW) and Shanxi Datong Zuoyun Wind Power Plant Phase I (installed capacity: 49.5MW) have commenced construction, signifying that the Company's wind power operation is developing at full speed. In the future, the Company will strive to further its development of environment-friendly energy sources such as wind power, in order to make contribution to environmental protection.

Human Resources Overview

Structure and Training of Human Resources

In 2007, the Company carried out its human resource management work by adhering to the principle of serving the Company's operations and development needs. Closely aligning with the Company's development and work deployment, the Company has ensured that securing human resources for its development would be the top priority. The Company optimised its human resource deployment, enhanced the internal assignment mechanism and applied stringent controls over the size of the workforce. Meanwhile, the Company made diligent efforts to develop a high-calibre operational management team, a professional technical team and a team of technicians with special skills. Accordingly, the human resource structure was further improved. Among the 2,586 management staff being engaged in the principal business, 2,155 of them were graduates of vocational colleges or above, representing 83% of the management staff of the principal operation. Among the 997 professional technical staff being engaged in the principal operation, 331 of them possessed junior professional qualifications, 284 of them possessed intermediate professional and 129 of them possessed senior professional qualifications, professional technical staff possessed intermediate or senior professional qualifications, representing 42% of the professional technical staff. Among the 7,172 technicians engaged in the principal operation, 1,216 of them were junior workers, 2,316 of them were intermediate grade workers, 2,094 of them were senior workers, and 137 of them were certified technicians or senior technicians, intermediategrade workers, senior workers, certified technicians and senior technicians, representing 31% of the technicians.

In 2007, the Company formulated the 'Human Resource Planning for Datang International Power Generation Co., Ltd. (2007-2011)' in order to build a sizeable, rationally structured and high-quality team of staff catering for the Company's development strategy, thereby facilitating the rapid, coordinated and sustainable development of the Company. The planning worked out estimates on the demand and supply of human resources for professions such as those for senior management, coal-fired power, hydropower, wind power, nuclear power, coal mining, chemical industry and railway. The concrete objectives of human resource planning and assurance measures on implementing the human resource planning by 2011 were set out in the planning.

In 2007, the Company actively organised various training and specialised training programmes. All production operation staff of the power generation division were organised to take the 2007 Professional Qualification Examination of All-purpose Integrated Control Staff of China Datang Corporation (the 'CDC'). The Company also organised the participation in CDC's 2007 1st, 2nd and 3rd Professional Qualification Training and Certification Sessions for Desulphurised Operation staff and Facility Management Staff. 57 staff participated in CDC's 2007 Integrated Control Operation Staff Examination, and 41 staff took part in CDC's National Professional Qualification Training and Appraisal Programme of Corporate Trainers. 100 staff took the combined 'Human Resource Manager' Training Certificate Examination and 'Talent Appraiser' Certificate Examination organised by the Ministry of Labour. 39 staff participated in the 2007 application and certification for instructors and senior instructors of power industry simulators.

Board, Supervisory Committee and Senior Management

Members of the Board

Executive Directors

Zhang Yi

Aged 60 is a post-graduate of North China Power College majoring in thermal engineering and a professor-grade senior engineer. He is currently the Vice Chairman and the President of the Company. Mr. Zhang joined North China Power Corporation in 1982. He had held various positions including Head of the Thermal Engineering Office and Deputy Director of the North China Power Laboratory, Deputy Head of the North China Power Institute, and Plant Manager of the Tianjin Dagang Power Plant. Mr. Zhang was the Deputy Chief Engineer and Manager of the Production Technology Department of North China Power Group Company in 1997. He joined the Company as Vice President in December 1998, and became the Vice Chairman and President of the Company in March 2003. Mr. Zhang is a government-sponsored expert designated by the State Council.

Zhou Gang

Aged 44, graduated from East China Institute of Water Conservancy (currently known as Hehai University) with master of technology and master of business administration, is a senior engineer. He is currently Deputy General Manager of the Company and Secretary to the Board. Mr. Zhou worked for China National Water Resources & Electric Power Materials & Equipment Corporation as Manager of the Information Department, Deputy Director and then Director of the General Manager's Office, Deputy General Engineer and Deputy General Manager; Deputy General Manager of China National Water Resources & Electric Power Materials & Equipment Co., Ltd. and manager of its Shanghai company as well as Deputy Director of the International Cooperation Division of the General Manager's Office of CDC. Mr. Zhou has extensive experience in international cooperation, power resources management and power generation enterprise operation and management. Mr. Zhou has become Vice President of the Company since June 2007, and he has extensive experience in international cooperation, electricity materials management as well as electricity enterprise operation and management.

Non-executive Directors

Zhai Ruoyu

Aged 61, graduated from the Economic Management Department of Liaoning University, is a professor-grade senior engineer. He is currently Chairman of the Company and President of China Datang Corporation. Mr. Zhai worked at the Liaoning Power Plant since 1966 and held various positions including Deputy Director and Director. Since 1992, Mr. Zhai had held various positions including Deputy Chief of the Security and Environmental Protection Division of the Ministry of Energy of the PRC, Deputy chief and Central Disciplinary Committee of Safe Production Division of Ministry of Power Industry, Deputy Director and Director of the PRC Ministry of Supervision's Supervisory Bureau in the PRC Ministry of Power Industry, as well as Head of General Office of the State Power Corporation of the PRC Ministry of Power Industry. In March 1999, Mr. Zhai took up the position of President of the Northeast Branch of the State Power Corporation. He served as President of North China Power Group Company since October 2000. He became President of China Datang Corporation in December 2002. In March 2003, Mr. Zhai was appointed a delegate to the 10th National People's Congress. In March 2008, Mr. Zhai was appointed a delegate to the 11st National Committee of the Chinese People's Political Consultative Conference. With 40 years' experience in the power industry, Mr. Zhai has long been engaged in the fields of power production, production technology management, administration and operations management. He has extensive experience with specific expertise in power generation and operations management.

Hu Shengmu

Aged 47, university graduate, is a senior accountant. He is currently the Chief Financial Controller of China Datang Corporation. Mr. Hu joined North China Power Corporation as he worked in Beijing Power Supply Bureau in 1981. He had been the Deputy Head and the Deputy Manager of the Finance Department of the North China Power Administration Bureau (NCPGC), the Chief Accountant and Financial Manager of the Company and the Chief Accountant of NCPGC. Mr. Hu was appointed Chief Accountant of China Datang Corporation in January 2003. Mr. Hu has been involved in financial management of power system for 22 years. He is knowledgeable in financial management and has extensive experience in financial practices.

Fang Qinghai

Aged 54, post-graduate, is a senior engineer. He is currently the Head of the Planning, Investment and Financing Department of China Datang Corporation. Mr. Fang joined Anshan Power Plant in 1974 and since then took up various positions including Deputy Head of the Communist Party Committee Office of Anshan Power Plant, Division Chief of the Production Planning Division, the Planning Department of Northeast Power Administration Bureau, Engineer Head of the Planning Department, Deputy Head and Head of the Development and Planning Department of the State Power Corporation (Northeast Company), Head of the Power Exchange Centre of Northeast China Power Grid, Deputy Chief Engineer and Head of the Development and Planning Department of Northeast China Power Grid Company Ltd. He became Deputy Chief of the Development and Planning Department of China Datang Corporation in April 2005, and has become Head of the Planning, Investment Planning Department of China Datang Corporation since November 2006. Mr. Fang has been involved in the power system for many years and is well experienced in power generation and operation.

Liu Haixia

Aged 46, graduated from North China Power College majoring in power plant thermal energy. He subsequently pursued postgraduate studies in Business Administration in the Renmin University of China. He is a senior engineer and Assistant to President of Beijing Energy Investment Holding Company Limited. Mr. Liu joined Beijing Electric Power Company in 1983 and since then took up positions of Technician, Engineer and Assistant to Manager and Deputy Manager. He has been Assistant to President of Beijing International Power Development and Investment Company since 1998. He has been Assistant to President of Beijing Energy Investment Holding Company Limited since February 2004. With his long-standing involvement in corporate management and planning management of power companies, Mr. Liu has acquired extensive experience in corporate management and industrial planning and investment.

Guan Tiangang

Aged 40, graduated from North China Power College majoring in thermal dynamics and possesses a master degree in Finance from the Renmin University of China. She is a senior engineer and currently the Vice President and the Secretary to the Board of Directors of Beijing Jingneng International Energy Company Limited. She started her career in 1990, and had worked as a teacher in Shijingshan Thermal Power Plant Education Centre and as Project Manager of the Investment Department Beijing International Power Development and Investment Company. She has become the Manager of the Power Generation and Operation Department of Beijing Energy Investment (Group) Company since December 2004. Since February 2007, she has become the Vice President and the Secretary to the Board of Directors of Beijing Jingneng International Energy Company Limited. Ms. Guan has long been engaged in the work of power investment operation, and has extensive experience in power investment and finance planning and management.

Su Tiegang

Aged 60, university graduate, is a senior engineer. He is currently the Vice President of Hebei Construction Investment Company. He started his career in 1968 and had worked in the Provincial Construction Commission of Qinghai and Qinghai No. 3 Construction Engineering Company. Mr. Su became Head of the Project office of Hebei Construction Investment Company in 1989. In 1991, he served in Hebei Provincial Planning Committee as Head of the Investment Department. He has become Vice President of Hebei Construction Investment Company since May 1993. With his long-standing involvement in corporate management and planning management, Mr. Su is well experienced in corporate management and industrial planning and investment. 

Ye Yonghui

Aged 55, is presently the Deputy Chief Economist of the Energy Business Department of Hebei Construction Investment Company. Mr. Ye started his career in 1969 and joined the Energy Branch of Hebei Construction Investment Company in 1990, holding posts such as Administrative Officer, Deputy Manager and Manager of the Jibei Branch. From September 1999 to January 2004, he was the Manager of the Energy Branch of Hebi Construction Investment Company. From January 2004 to March 2007, he was the Manager of the Energy Business Department of Hebei Construction Investment Company. From 2007 to date, he was the Deputy Chief Economist of Hebei Construction Investment Company. With his long-standing involvement in corporate management and planning management, Mr. Ye has acquired extensive experience in corporate management and industrial planning and investment.

Li Gengsheng

Aged 47, a holder of MBA, graduated from Northeast Power College with a bachelor's degree in thermal dynamic and from China Europe International Business School with a research MBA degree. Mr. Li is a professor-grade senior engineer and he is currently the general manager of Tianjin Jinneng Investment Company. Mr. Li joined Hebei Electric Construction Company in 1983, and subsequently worked as assistant supervisor of the Thermal Control Office of Tianjin Power Scientific Institute, deputy manager of Tianjin Power Infrastructure Subcontracting Company, deputy general manager of Huaneng Yangliuqing Thermal Power Co., Ltd., deputy general manager of Tianjin Jinneng Investment Company, and has been general manager of Tianjin Jinneng Investment Company since 2007. Mr. Li has been engaged in power corporate management and corporate investment for a long time, and has rich experience in corporate management and investment.

Independent Non-executive Directors

Xie Songlin

Aged 66, graduated from the Department of Dynamics at Shannxi Industrial University (now known as Xi'an Jiaotong University) majoring in power generation. He is a Senior Economist and currently Senior Consultant of the State Grid Corporation of China. Mr. Xie started his career in 1965. He had worked as technician at the Xinjiang Prospecting and Design Institute for Hydropower; Engineer and then Director of the Hunan Yiyang Power Industry Bureau. In 1985, he was appointed Deputy Director of Hunan Power Industry Bureau and Deputy Director of the Central China Power Management Bureau. In 1992, he was appointed as Director of the Audit Bureau of the Ministry of Energy. In 1993, he was appointed Chief of the Economic Adjustment Division of the Ministry of Power. In 1997, he was appointed Chief Economist of the State Power Corporation, Chief of the General Management Division of the Ministry of Power and Manager of the Finance and Assets Operation Department. In June 1999, he was Chief Accountant of the State Power Corporation, and became its Vice President in June 1999. He has been Consultant of the State Grid Corporation of China since 2003. Mr. Xie has long been engaged in the production and management of the power industry. He has extensive experience in power generation and management. 

Yu Changchun

Aged 56, holds a PhD degree in economics from the Tianjian University of Finance and Economics. He is currently Head of the Education Department, Professor of Accounting and an Advisor to postgraduates at the Beijing State Accounting Institute. Mr. Yu taught at the Jilin Institute of Finance and Commerce upon graduation in 1978 and subsequently obtained a master degree in economics from Shanghai Social Science Institute and a PhD degree in economics from Tianjian University of Finance and Economics. He was Department Head, Professor and Advisor to postgraduates at the Department of Accounting at the Changchun Institute of Taxation in 1995. He carried out post-doctoral researches in the Financial and Economics Research Institute at the China Academy of Social Sciences in 1997 and worked with the Beijing State Accounting Institute in 1999. Mr. Yu has been engaged in theoretical and practical researches in the areas of Economics and Accounting for many years. The scientific research topics conducted and completed by Mr. Yu have been awarded for a number of Outstanding Achievements at the Ministry (Provincial) Level. He was granted a specific subsidy from the State Council in 1997.

Liu Chaoan

Aged 52, graduated from the Geological Institute of Jilin University. Mr. Liu is a professorgrade senior engineer, currently as Vice President of North China Design Institute Engineering Company Limited of the State Power Corporation. Mr. Liu worked as a technician at the Beijing Power Design Institute in 1980, and subsequently had been the Professional Section Chief, Deputy Chief and Assistant to Director at the North China Design Institute. He was Vice President of North China Design Institute Engineering Company Limited of the State Power Corporation since 2000, and he has been the chairman of Beijing North China Design Institute Engineering Company Limited since 2006. Mr. Liu has extensive experience in engineering design and geological prospecting of the power industry.

Xia Qing

Aged 51, is a graduate of Tsinghua University with a PhD degree in Mechanical and Electrical Engineering. He is a professor and an advisor for PhD students as well as Head of the Research Institute of Economic and Information Technology for Power of the Electrical Engineering Department at Tsinghua University. He was awarded a PhD degree by Tsinghua University in 1989, with major research direction focusing on the power market, power system planning, information technology and economic theories. From March 1996 to March 1997, he was a visiting scholar funded by The Royal Society and was engaged in the research of power markets in the United Kingdom. Mr. Xia has conducted a number of researches on topics including the power market, power resources planning, power demand forecasts and power regulatory issues. He has also been involved in power market design for the four major regions in the PRC. He is a PRC advisor for Asian Development Bank projects, part-time professor of the Communist Party schools of the States Grid Corporation of China and China Power Investment Company, and an advisor to the South China Power Grid.

Members of the Supervisory Committee

Zhang Jie

Aged 59, graduated from the Central Communist Party School majoring in political theories. Mr. Zhang is a senior economist and Chairman of the Supervisory Committee of the Company. He started his career in 1968 and joined the Power Corporation in 1973. Mr. Zhang had held positions including Deputy Head of the Publicity Division, Deputy Director of the Maintenance Office and General Secretary to Party Committee of Datong General Power Plant and Chairman of the Staff Union of Datong Second Power Plant. He worked in Chengde Power Supply Company as Secretary to Party Committee in 1994 and in Beijing Power Supply Company (Power Supply Bureau) as Deputy Secretary to Party Committee in January 1995. Mr. Zhang has become Chairman of the Supervisory Committee of the Company since September 2000. Mr. Zhang has long been engaged in management work at power enterprises and has extensive experience in administrative management.

Zhang Wantuo

Aged 61, graduated from the Tianjian University of Finance and Economics, a senior economist, is presently Vice President of Tianjin Jinneng Investment Company and Vice Chairman of the Supervisory Committee of the Company. Mr. Zhang started his career in 1970 in Tianjin Teachers Institute. He has been the cadre, Deputy Director and Director of the Energy Department of Tianjin Municipal Planning Committee since March 1981. In February 1999, he became Vice President of Tianjin Jinneng Investment Company. With his longstanding involvement in energy planning and planning management, Mr. Zhang has acquired extensive experience in corporate management and power planning and investment.

Fu Guoqiang

Aged 45, a university graduate, is a senior accountant, CPA. Mr. Fu is the Deputy Head of the Finance and Assets Management Department of China Datang Corporation. He was the Head of the Finance and Assets Management Department of Hebei Power Company, Manager of the Finance Department of NCPGC and Deputy Head of the Finance and Assets Management Department of China Datang Corporation. Mr. Fu has been the Head of the Finance and Assets Management Department of China Datang Corporation since December 2003. Mr. Fu has been engaged in fi nance management in power system for an extensive period and has accumulated extensive experience in practice and management.

Shi Xiaofan

Aged 56, tertiary graduate, is a senior economist. He is presently the Assistant to President and the Head of the Human Resources Department of the Company. Mr. Shi had worked in NCPGC as Head of the Personnel Department. He became Head of the Human Resources Department of the Company in 1996 and Assistant to President and Head of the Human Resources Department of the Company in March 2003. Mr. Shi is well-experienced in human resources development and management in the power industry and is well experienced in the management of human resources in the sector.

Secretary to the Board

Zhou Gang

Aged 44, an Executive Director and and Vice President of the Company.

Senior Management

An Hongguang

Aged 49, graduated from Wuhan University majoring in Administration Science and Engineering with a master's degree. He is a senior engineer and currently the Vice President of the Company. Mr. An joined North China Power Corporation in 1982 and since then held various positions including Deputy Head of the Chemical Workshop of Xia Hua Yuan Power Plant, Deputy Head and Head of the Chemical Workshop of Dou He Power Plant, Division Chief of the Biotechnology Unit of Dou He Power Plant, Assistant to Director of Tangshan Thermal Power Plant, Assistant to Director of Dou He Power Plant, Deputy Manager of the Production Department of the Company and Director of Zhangjiakou Power Plant. From June 2005 to December 2005, he served as Assistant to President of the Company. He has become Vice President of the Company since December 2005. Mr. An has more than 20 years' experience in the area of power systems and has been long engaged in production and administration management. He is well experienced in power generation and operation, with specific expertise in production safety management of power plants.

Qin Jianming

Aged 45, graduated from North China Electric Power University majoring in technical economics. He has postgraduate qualification and is a senior engineer. He is currently a Vice President of the Company. Mr. Qin commenced his career in 1984 with Ministry of Water Resources and Power and had been successively person-in-charge of the Office of the Planning Division of the Power Department, Head of the General Office of Project Construction Bureau of the State Power Corporation, Head of the Thermal Power Construction Management Office of the Thermal Power Construction Department, Head of the General Management Office of Power Construction Department and Deputy Director of the Construction Management Department of China Datang Corporation. Mr. Qin has been a Vice President of the Company from June 2007 and he has extensive experience in power project construction and management.

Wang Xianzhou

Aged 53, graduated from Beijing Broadcast and Television University majoring in industrial statistics. He is a senior accountant and the Chief Financial Officer of the Company. Mr. Wang joined North China Power Corporation in 1970 and had held various positions including Head of the Financial Department of Xia Hua Yuan Power Plant and Deputy Chief Accountant and Head of the Financial Division of Zhang Jia Kou Power Plant. Since 1995, Mr. Wang had held various positions including Deputy Financial Manager and Financial Manager of NCPGC, Financial Manager and Chief Accountant of the Company. He has been Chief Financial Officer of the Company since August 2000. Mr. Wang has acquired extensive experience in the financial management of power companies from his longstanding focus in this area.

Integrate Upstream, Downstream Businesses Extend Competitive Advantages

Datang Power has been actively carrying out strategic extension of its competitive advantages through developing relevant upstream and downstream businesses related to power generation. To date, the Company has obtained the exploration rights of the 'Unit 2 of the open-cut coal mine located east of Shengli Coal Mine', the 'Changtan Coal Mine' and the 'Kongduigou Coal Mine', as well as the development right of 'Wujianfang Coal Mine' in Inner Mongolia, thereby laying a solid foundation for the Company's coal resource reserves. Meanwhile, approvals have been obtained for the Company's other railway construction projects such as the Inner Mongolia Section and the Hebei Section of Duofeng Railway, and such railways will ensure the outbound transportation of the Company's coal resources and chemical products. In addition, the construction of the Inner Mongolia Duolun Chemical Project, which is controlled and constructed by the Company, has progressed smoothly. The project is expected to effectively enhance the Company's overall profitability.

Questions Frequently Asked by Investors

1.    What is the Company's view on the supply and demand situation nationwide and in the Company's major service areas for 2008?

    Yu Hai - Shanghai Shenyin Wanguo Research & Consulting Co., Ltd.

The nationwide power demand grew by 14.42% in 2007 as compared to the previous year as a result of the ongoing rapid development of the national economy and the rapid growth momentum sustained by industrial output. At the end of 2007, the nationwide generating installed capacity reached 713,000 MW, an increase of 14.36% as compared to the previous year. Considering both China's current economic policy and the adjustments to be made to the industrial structure in future, the nationwide power and supply situation will be able to maintain a basic balance in general in 2008, with a partial short supply, in terms of generating capacity, for the power grids in the southern region. It is anticipated that in 2008 the increase in social power consumption will be around 12.5%; nationwide investments and production scale of electric power resources will fall slightly from the high level of the previous year; additional installed capacity for infrastructures will be around 90,000 MW, and small-sized coal-fired units with a total capacity of 13,000 MW will be planned for shut down for the whole year. Given the big picture where there is sufficient power supply capacity nationwide, the supply of thermal coal and water as well as the climate factor will all be the most crucial determinants for power supply and demand in various regions in 2008.

The Company's existing service areas are largely located in the Beijing-Tianjin-Tangshan region, the southeastern coastal area and the western region where power demand was rapidly increasing in 2007, with demand from some provinces in these service areas continuing to stay higher than the national average level. For the Beijing-Tianjin-Tangshan region, the birthplace of the Company's business, the ongoing and substantial increase in the production capacity of major heavy industries in the recent two years has led to a rapid growth in power demand from this region. Moreover, owing to the nation's support of the development of large-sized and efficient enterprises for heavy industries in this region, power demand from the development of these industries will remain high for a long period of time in future. 

The southeastern coastal area, in which the Company has established a strong presence since 2006, has been assuming a leading position in the Chinese economy and has been maintaining a rapid growth in power demand. As the area features a relatively stable economic structure, the Company does not expect a substantial fall in power demand from this area.

In the recent two years, the Company has extended its business to another key service area in the western region of China, namely Yunnan, Gansu, Ningxia and other provinces and autonomous regions where power demand has been relatively low because of a less developed economy in the past. However, as a result of the ongoing implementation and intensification of the nation's policy for the 'Go-West Development Project', rich nonferrous metal resources and preferential taxation policies in this region have attracted an enormous number of nonferrous metal deep-processing enterprises qualified under the national industrial policy to settle down and set up factories in this region. These high-energy consuming enterprises have become a major driving force for power demand in this region. The power demand growth driven by the production capacity of such heavy industries is not expected to slow within a short period of time.

2.    What is the Company's business development strategy for the years before 2010?

    Daisy Zhang - BNP Paribas Securities (Asia) Ltd.

The Company will continue to execute in future its development strategy for fuel structure diversification, assets structure diversification and service area diversification. Currently, structure Company's generating units are transforming from the conventional single mode of coal-fired power generation to the development of new energy such as hydropower generation, wind power generation and nuclear power generation. Coal-fired units are gradually transitioning to 1,000 MW ultra-supercritical units. The Company's current preliminary projects are composed of 54.36% 1,000 MW units and 25% 600 MW units. By 2012, 1,000 MW units will become the core coal-fired units of the Company. Moreover, 1,000 MW units are largely located in coastal areas while 600 MW and 300 MW units are largely located in the northern region. The change in the model of power generation units can both effectively mitigate the pressure due to increasing coal cost as well as reduce pollution emissions and save expenses on charges for waste disposal.

The Company's management was aware several years ago of the need to extend its assets chain for effectively spreading risks by means of asset structure diversification to enhance its capability of participating in market competition in future. Over the past two years, the Company has been successively involved in the development of upstream and downstream-related industries such as coal mining, railway construction, ocean transport as well as the design, construction and future operation of coal chemical projects. In 2007, further progress was made in the Company's non-power businesses, of which approval has been obtained successively for the Inner Mongolia section and the Hebei section of Duofeng Railway project, covering an approved mileage of 134 km.; tenders have been won for the investment and exploration rights of Wujianfang Coal Mine; the annual objective has been achieved for the construction of Duolun coal chemical project on schedule, laying a foundation for commencing production on schedule next year; and the first cargo ship invested in by the Company has commenced transportation of coal for the Company's power plants in the coastal areas. The Company will continue to carry out further development in the above sectors in future to consolidate and improve its strategy for assets structure diversification so that these sectors can form a new driving force for enhancing the Company's profitability while working to serve its principal business.

The Company's existing service areas have expanded from the conventional Beijing-Tianjin-Tangshan region to the southeastern coastal area and a number of provinces in the western region. This geographical diversification strategy can minimise geographical risks due to over-concentration of assets while exposing the Company to different favourable geographical locations. In future, the Company will further increase market shares in its existing service areas and open up new markets with aggressive efforts, making itself a power company having assets distributed across the country. 

3.    What is the Company's long-term development strategy for coal? What will the Company plan to maximise the benefits of coal resources other than power generation?

    Simon Lee - Morgan Stanley Asia Ltd.

The retention of coal resources is the Company's long-term development strategy. The Company's demand for coal is growing due to an increasing number of coal-fired units. The Company will face tremendous pressure from fuel cost control as a result of rising coal prices. Under such market environment, the acquisition of coal resources will, to a large extent, assure the supply of fuels and stabilise coal procurement prices, thereby minimising the risks associated with squeezed profitability due to increased fuel costs. Apart from Unit 2 coal mine located east of Shengli Coal Mine in Inner Mongolia which is wholly-owned by the Company, as well as Tashan Coal Mine, Weizhou Coal Mine and Changtan Coal Mine in which the Company made equity investments, the Company will also continue to seek opportunities in provinces with abundant coal reserves, so as to obtain more and better quality coal resources to secure the supply of coal used as fuel for the Company's principal power generation operations. 

Of the coal resources obtainally the Company, a portion will be used as fuel for power generation, with the remaining to be used for coal chemical projects. Since certain types of these coal resources are not suitable for long haulage because of their low-heat output and high-water content, our power plants are not able to fully take up these coal resources due to their application limitations. To maximise the economic value of these coal resources, after a lot of research, the Company has decided to carry out deep processing of these coal resources to convert them into chemical products. As a result of a substantial rise in global oil price, coal chemical products will become more competitive gradually, given the substantial surge in the costs of the chemical industry using oil and natural gas as conventional raw materials. Hence, the Company's development of coal chemical projects can both enhance the utilisation of these coal resources and provide a profit growth engine for the Company.

4.    What is the outlook for the Company's Duolun coal chemical project?

    Michael Tong - Deutsche Bank

The statistics on China's consumption of polypropylene since 1995 suggest that so far the growth curve of China's consumption of polypropylene has been primarily consistent with the linear law. According to forecasts based on this law, the apparent consumption of polypropylene was 9.357 million tonnes in 2007 and will reach 11.6 million tonnes by 2010, and will be even higher if enhanced performance of products and expanded areas of application are taken into account.

The supply and demand figures suggest that the current degree of self-sufficiency of China's polypropylene sector is around 60%, leaving 40% needed to be imported. Based on production capacity statistics to date, polypropylene units with a capacity of approximately 2.2 million tonnes in China are small-sized units with obsolete technology. Following the construction of a large amount of new, large-sized units after 2005, China's production capacity of polypropylene is estimated at around 11 million tonnes by 2010 without taking into account the units being replaced and suspended from production, suggesting that there is still a shortage.

According to forecasts, global total production capacity of polypropylene will reach 60 million tonnes, while consumption will reach 52 million tonnes by 2010. The rate of production will reach the lowest in 2009 and 2010 and will pick up gradually later to more than 90% increasing on a year-on-year basis. These figures suggest that supply and demand in the global polypropylene market will fluctuate slightly in the next several years but will recover very soon. There will not be dramatic changes in the overall global supply and demand situation. 

Global polypropylene capacity is distributed largely in Asia, Western Europe and North America, with Asia recording the fastest growth in polypropylene output. As the major consumer of polypropylene around the globe, Asia is having the most serious shortage, increasing gradually to 2.43 million tonnes in 2007. In terms of the overall supply and demand situation in Asia, 2012 will be a point of inflexion for capacity growth. Capacity will not increase substantially thereafter but consumption will grow rapidly. Import volume in Asia has been increasing since 2005, with total shortage of polypropylene expected to reach 1.3 million tonnes by 2010, and approximately 4 million tonnes by 2015.

The overall rate of production of polypropylene units in Asia will be higher than 90% in the next several years, except 2009 which will see a low rate of nearly 85%. Hence, whether in terms of the global polypropylene market or the neighbouring markets in Asia, the market as a whole will hit a low in 2009 and 2010 but will quickly pick up subsequently, with the rate of production and shortage increasing rapidly. 

For the pricing of propylene products under different crude oil price conditions, a set of measurement modules and pricing policies has been designed for the Sinopec system which has generally taken into account various factors such as historical prices over the past ten years, GDP growth, supply and demand balance, net import, rate of production, international prices, tariffs, foreign exchange rates, commodity prices index, price of raw materials, technical progress, quality and trademark. The modules and data generated from the system have been used as economic measurement indicators for petrochemical enterprises and projects. Based on the guiding ex-factory prices for propylene according to Sinopec's 2004 economic estimates and assuming a crude oil price of US$100/barrel (linear estimation), the ex-factory price of propylene is RMB10,800/tonne. The respective production costs of propylene under different coal price conditions for the Company's Duolun coal chemical project are as follows:

Prices of propylene under different coal price conditions for the Duolun coal chemical project:

Coal price	Production cost of propylene
(Yuan/tonne)	(Yuan/tonne)
50	3,430
100	4,079
150	4,728
200	5,377
250	6,025
300	6,674
350	7,323
400	7,972

Fundamentally, the supply and demand relationship remains as the major factor affecting the prices of polypropylene. Global and Asian polypropylene supply does not have a substantial impact on China's polypropylene sector. There is fundamentally supply-demand balance in the global market but supply fails to meet demand in Asia as a whole, creating a shortage. Moreover, based on the statistics and estimates of the prices of polypropylene, the prices will fluctuate between 2006 and 2010 and will pick up rapid thereafter. Considering the impact of oil prices in particular, polypropylene produced at the Duolun project will be very competitive in the market .

5.    What is the Company's forecast for the supply and demand situation in the coal market in 2008? What is the fuel supply situation of the Company in 2008? 

    Dou Zeyun - Ping An Securities Company Limited

In terms of the major fundamentals which affect coal demand in 2008, on the one hand the ongoing implementation of the country's region development strategies such as the 'Go-West Development Project' and the development of Bohai Rim Economic Zone will drive the rapid growth of investments and heavy industries. On the other hand, China will step up macro-economic control measures to prevent a rebound of investments in fixed assets, particularly the heavy industries such as iron and steel, building materials and nonferrous metals. The growth of power consumption by heavy industries rate will fall in line with the gradual fall in the growth of heavy industrial investments. Social power consumption and generation are expected to maintain a high growth but the growth rate will slow. In terms of the power industry, the rate commencement of production by large-sized advanced generating units will have a major positive impact on the power generation structure. In 2008, small-sized generating units with a total capacity of 10,000 MW will be shut down and the 'energy-saving adjustment' policy is being launched aggressively throughout the country, with priority given to hydropower, nuclear power and large-sized advanced generating units for power generation. All these factors will significantly optimise the power generation structure. Considering the above factors as a whole, coal demand will remain robust in general but the growth rate will slow. 

In terms of the overall coal production capacity, the production capacity of mines with normal production throughout the country was 2.03 billion tonnes/year at the end of 2006. Together with the basic capacity of mines under construction and a minority of unapproved yet operating production capacity, the nationwide production capacity is 2.5 billion tonnes/year. Based on the construction cycle for coal mines, a production capacity of more than 250 million tonnes/year is expected in 2008. Without taking into account the production capacity of small coal mines which may be phased out due to their obsolete technology, the growth in coal production capacity will remain at the present level. 

Growth in coal transport capacity by railway will fall, with a slight increase in bottleneck restrictions on transport in some areas. The nation's railways will add coal transport capacity by around 60 million tonnes/year in 2008, while the Shenshuohuang Line is expected to increase coal transport capacity by around 10 million tonnes/year, representing a remarkable fall in total growth as compared to 2007. Moreover, the additional capacity is still located in the northern passage so that the degree of railway transport restrictions on coal production in some provinces and regions such as the central and southern parts of Shanxi, Shaanxi and Ningxia will increase.

In terms of coal supply, growth in effective domestic supply of coal will be small in 2008 due to the small increase in transport capacity. Moreover, due to various factors such as the high revaluation of Renminbi, increased costs of coal export, decrease in the number of signed-up long-term contracts and the ongoing effect of China's policy on expert restrictions, there is very limited room for coal export to continue to pick up. Net imports of coal are expected for most of the time in 2008. 

Considering the above factors as a whole, the basic balance of supply and demand of coal is expected to remain unchanged in 2008 and prices will be relatively stable, with fluctuations seen in the spot market prices due to seasonal effects.

The Company's demand for coal will amount to approximately 72 million tonnes for the whole year of 2008. Coal supply under contracts already signed up accounts for 67% of the Company's consumption for the whole year, representing approximately 48 million tonnes. Coal prices will increase by approximately 15% for the year as compared to the previous year. 

In 2008, the Company will continue to adopt a variety of measures to assure fuel supply and price stability. Apart from the coal resources locked up by annual contracts, the increasing production capacity at Tashan Coal Mine and Weizhou Coal Mine invested in by the Company will be a positive assurance for satisfying the the coal demand from the Company's power plants in the southeastern coastal area. Moreover, the Company is also aggressively looking for coal resources in overseas market, with a view to partially minimising the risks associated with the Chinese domestic coal market through purchasing coal resources at reasonable prices. Meanwhile, additional large-sized and high-efficiency generating units will be able to effectively lower the Company's coal consumption per average unit, playing a key role in helping withstand the risks associated with coal prices.

Report of the Directors

The Directors are pleased to present the audited results of the Company for the year ended 31 December 2007.

Listing and Issue of Shares

The Company's H Shares have been listed on the Hong Kong Stock Exchange and the London Stock Exchange Limited since 21 March 1997. On 9 September 2003, the Company issued 5-year US Dollar convertible bond of US$153.8 million, which are listed on the Luxembourg Stock Exchange, at 0.75% interest rate per annum and a conversion premium of 30%. The Company's A shares have been listed on the Shanghai Stock Exchange since 20 December 2006. During 2007, due to the conversion of part of the aforementioned US Dollar convertible bond, the Company issued an additional 226,353,893 H shares; pursuant to the resolution passed at the 2006 AGM, the Company utilised its capital reserve fund to issue 10 bonus shares for every 10 shares held and issued an additional 5,844,880,580 shares. Due to such changes, as at 31 December 2007, the total number of shares of the Company was 11,734,083,473 shares. Apart from that, the Company did not issue any new shares.

Performance of the Company's H shares during 2007:

Closing price per H share as at 31 December 2007	HK$6.96
Highest trading price per H share between 1 January and 31 December 2007	HK$12.60
Lowest trading price per H share between 1 January and 31 December 2007	HK$4.78
Total number of H shares traded between 1 January and 31 December 2007	9,087,289,000 shares
Performance of the Company's A shares during 2007:
Closing price per A share as at 27 December 2007	RMB20.62
Highest trading price per A share between 1 January and 27 December 2007	RMB44.08
Lowest trading price per A share between 1 January and 27 December 2007	RMB10.23
Total number of A shares traded between 1 January and 27 December 2007	5,461,528,000 shares

Public Float

The Company confirms that the public float of the Company's H shares and A shares has complied with the requirements under the Listing Rules.

Accounts

The Company and its Subsidiaries' audited results for the year ended 31 December 2007 are set out in the Consolidated Income Statement on page 63. The financial position of the Company and its Subsidiaries as at 31 December 2007 is set out in the Balance Sheets on page 64 and 65.

The Company and its Subsidiaries' consolidated cash flows for the year ended 31 December 2007 are set out in the Consolidated Cash Flow Statement on page 68.

Principal Businesses

The Company is principally engaged in the development and operation of power plants, the sale of electricity and thermal power, and the repair and testing of power equipment and power related technical services.

Major Suppliers and Customers

The percentage of purchases and sales attributable to the Company's suppliers and customers for the Year are as follows:

	2007	2006
Purchases
The largest supplier	12.47%	12.73%
Top five suppliers	39.85%	30.82%
Sales
The largest customer	53.39%	58.97%
Top five customers	90.82%	92.11%

To the knowledge of the Directors, none of the Directors, Supervisors, their respective associates or shareholders of the Company owning 5% or more of the Company's issued share capital of the same class owned any direct or indirect interest in the Company's suppliers and customers mentioned above during the Year.

Subsidiaries, Jointly Controlled Entities and Associates

Details of Subsidiaries, jointly controlled entities and associates of the Company are set out in note 6,7 and 8 of the Notes to the Financial Statements on page 97 to page 106.

Dividend, Earnings per Share

The Board recommended the distribution of proposed cash dividend of RMB0.12 per share for the Year. Dividends to be distributed to domestic shareholders will be declared in and paid by RMB, while those to be distributed to foreign shareholders will be declared in RMB but paid in Hong Kong dollar. The Hong Kong dollar exchange rate for the purpose of dividends payment shall be based on the average of the closing rates of the Hong Kong dollar/RMB exchange rates quoted by the People's Bank of China on each business day within the week immediately prior to payment.

As there may be further conversion of the US dollar convertible bonds into H shares of the Company for the period from 1 January 2008 to the registration date for the Company's distribution of dividends. The Company will distribute cash dividend and adjust relevant data in the Company's profit distribution proposal, according to actual registered shares as on the registration date for the Company's distribution of dividends, the date of dividend distribution.

Details of dividends and earnings per share are set out in note 34 and 35 of the Notes to the Financial Statements on page 148 to page 149.

Reserves

Movements in reserves during the Year are set out in note 20 of the Note to the Financial Statements on page 121 to page 123, among which, the details of the reserves attributable to be distributed to shareholders are set out in Note 20(f) to the Financial statements on page 123.

Property, Plant and Equipment

Details of movements in property, plant and equipment during the Year are set out in note 5 of the Notes to the Financial Statements on page 95 to page 97.

Donation

During the Year, the Company and subsidiaries have made charity and relief donations of approximately RMB4,481,000.

Share Capital

As at 31 December 2007, the total share capital of the Company amounted to 11,734,083,473 shares, divided into 11,734,083,473 shares carrying a nominal value of RMB1.00 each. Movements in share capital during the Year are set out in note 19 of the Notes to the Financial Statements on page 120.

Share Capital Structure

As at 31 December 2007, the total number of shares issued by the Company was 11,734,083,473. The Company's shareholders were China Datang Corporation, Beijing Energy Investment (Group) Company, Hebei Construction Investment Company, Tianjin Jinneng Investment Company, other holders of domestic shares and foreign holders of H shares, holding 3,959,241,160 shares, 1,343,584,800 shares, 1,343,584,800 shares, 1,212,012,600 shares, 605,936,640 shares and 3,269,723,473 shares, respectively, representing 33.74%, 11.45%, 11.45%, 10.33%, 5.16% and 27.87%, respectively, of the issued share capital of the Company.

Number of Shareholders

Details of the shareholders as recorded in the register of members of the Company as at 31 December 2007 were as follows:

Total number of shareholders	347,192
Holders of domestic shares	346,930
Holders of H shares	262

Substantial Shareholders of the Company

As far as the Directors of the Company are aware, as at 31 December 2007, the interests or short positions of the person or entities in the shares or underlying shares of the Company as recorded in the register required to be kept under section 336 of the Securities and Futures Ordinance (the 'SFO') (Chapter 571 of the Law of Hong Kong), were as follows:

Name of shareholder	Class of shares	No. of shares held	Percentage to total issued share capital of the Company	Percentage to total issued A shares of the Company	Percentage to total issued H shares of the Company
			(%)	(%)	(%)
China Datang Corporation (Note)	A shares	3,959,241,160	33.74	46.775	-
Beijing Energy Investment (Holding) Company Limited (Note)	A shares	1,343,584,800	11.45	15.873	-
Hebei Construction Investment Company (Note)	A shares	1,343,584,800	11.45	15.873	-
Tianjin Jinneng Investment Company (Note)	A shares	1,212,012,600	10.33	14.177	-
UBS AG	H shares	273,701,482 (L) 27,480,000 (S)	2.33 0.23	- -	8.39 (L) 0.84 (S)
JPMorgan Chase & Co	H shares	238,144,391 (L) 6,962,917 (S) 156,842,414 (P)	2.03 0.06 1.34	- -	7.33 (L) 0.21 (S) 4.83 (P)

(L) = Long positions (S) = Short positions (P) = Lending pool

Notes:

(1)    Each of Mr. Zhai Ruoyu, Mr. Hu Shengmu and Mr. Fang Qinghai, all non-executive Directors, is an employee of China Datang Corporation.

(2)    Mr. Liu Haixia, a non-executive director, is an employee of Beijing Energy Investment (Holding) Company Limited.

(3)    Ms. Guan Tiangang, a non-executive director, is an employee of Beijing Jingneng International Energy Company Limited, a wholly-owned subsidiary of Beijing Energy Investment (Holding) Company Limited.

(4)    Each of Mr. Su Tiegang and Mr. Ye Yonghui, both non executive Directors, is the employee of Hebei Construction Investment Company.

(5)    Mr. Tong Yunshang, a non-executive Director, is an employee of Tianjin Jinneng Investment Company.

Save as disclosed above, as far as the Directors are aware, as at 31 December 2007, save and except Mr. Fang Qinghai, being a Director, who held 24,000 A Shares of the Company, there is no person (save and except the Directors, senior management and supervisors of the Company) holding interests or short positions in the shares or underlying shares of the Company which required to make disclosure in accordance with the requirements of the SFO.

Interests of Directors, Chief Executives and Supervisors in Share Capital

As at 31 December 2007, save and except Mr. Fang Qinghai, being a Director, who held 24,000 A shares of the Company, none of the Directors, supervisors and chief executives of the Company or their respective associates had any interests and short positions in the shares, underlying shares or debentures of the Company or any of its associated corporation (as defined in Part XV of the SFO) that required to notify the Company and the Hong Kong Stock Exchange pursuant to 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 of the SFO or otherwise required to notify the Company and the Hong Kong Stock Exchange pursuant to the Model Code.

Directors' Service Contracts

As at 31 December 2007, the Company has not entered into any service contracts with its executive Directors.

Interests of Directors and Supervisors in Contracts

No contracts of significance in relation to the Company's business to which the Company or any of its Subsidiaries was a party, and in which any Director or supervisor had a material interest, subsisted at the end of the Year or during the Year.

Directors and Supervisors' Benefits from Rights to Acquire Shares or Debentures

No arrangements were made by the Company or its Subsidiaries at any time during the Year for any Director or Supervisor to acquire any shares in or debentures of the Company or any of its Subsidiaries.

Interests of Substantial Shareholders in Contracts

Save as disclosed in this annual report, none of the Company or any Subsidiaries of the Company have entered into any material contracts or material service contracts with the Company's substantial shareholders or its Subsidiaries.

Highest Paid Individuals

Based on positional salary adopted for the Company Directors, supervisors and senior management, and appraisals were carried out in accordance with the three accountability appraisal management systems. The Remuneration and Appraisal Committee assessed such person's work results and salary level.

All of the highest paid individuals of the Company during the Year include Directors, supervisors and senior management staff. Details of their remuneration are set out in note 33 of the Notes to the Financial Statements on page 146 to page 148.

Purchase, Sale or Redemption of the Company's Listed Securities

There was no purchase, sale or redemption of the Company's listed securities by the Company or its Subsidiaries during the Year.

Bank Borrowings, Overdrafts and Other Borrowings

Apart from the loans from China Datang Corporation Finance Company Limited, short-term loans from banks, other short-term loans, long-term loans from banks, other long-term loans and loans from shareholders as set out in notes 21 and 22 of the Notes to the Financial Statements on page 124 to page 127, there were no other loans of the Company as at 31 December 2007.

Pre-emptive Rights

There are no provisions for pre-emptive rights under the Articles of Association and applicable PRC Laws that require the Company to offer new shares to the existing shareholders in proportion to their shareholding.

Connected Transactions

During the Year, the Company or its Subsidiaries performed the following major continuing connected transactions (as defined in Chapter 14A of the Listing Rules) with its connected parties as defined by the Listing Rules, and such transactions were in compliance with the requirements on connected transactions under Chapter 14A of the Listing Rules.

Details of such major transactions	Amount (RMB'000)
Ash disposal fee to China Datang Corporation (Note 1)	57,892
Rental fee to China Datang Corporation (Note 2)	7,228
Fuel management fee to China Datang Corporation (Note 3)	11,190
Deposits in Datang Finance Company (31 December 2007) (Note 4)	600,296
Balance of average daily deposit per annum (including any interest accrued therefore) in Datang Finance Company (Note 5)	57,615

Note 1:    In 2005, the Company and its controlling shareholder, China Datang Corporation have entered into a supplement agreement of 'Ash removal Agreement') (the 'Supplemental Agreement'). Pursuant to the agreement, from 2005 to 2007, the Company will pay ash disposal fee of not more than RMB60 million to China Datang Corporation annually.

Note 2 and 3:    Pursuant to the Listing Rules, the connected transactions above are exempt from the reporting, announcement and approval from the independent shareholders' requirements.

Note 4 and 5:    In 2007, the Company and China Datang Corporation Finance Company Limited ('Datang Finance'), the subsidiary of China Datang Corporation, entered into the 'Financial Services Agreement', pursuant to the agreement, the Company's daily average deposit at Datang Finance shall not exceed RMB1.3 billion.

The independent non-executive Directors have reviewed the above transactions and confirmed:

(1)    the above transactions were made in the ordinary and the usual course of business of the Company;

(2)    the above transactions were made with the following terms: (a) normal commercial terms (i.e. such terms are applicable to the similar transactions with other similar business entities in China); or (b) terms not worse than those can be obtained from or provided to independent third parties (depending on the situation) if there were no comparable terms.

(3)    the above transactions were made with the following terms: (a) according to the investment terms supervising those transactions or (b) terms not worse than those made with third parties.

The Company's auditors have reviewed the said transactions of the Year and notified the Board of the following for confirmation in writing:

(a)    The said transactions have been approved by the Directors;

(b)    The said transactions have been entered into pursuant to the agreement terms governing those transactions and the pricing method of the Company set out in note 32 to the Notes to the Financial Statements for the year ended 31 December 2007;

(c)    The said transactions have not exceeded the respective cap applicable to those transactions.

On 9 January 2007, the Company and its substantial shareholders, Beijing Energy Investment (Group) Company Limited ('BEIG'), China Datang Corporation ('CDC') and Inner Mongolia Mengdian Huaneng Thermal Power Corporation Limited ('MDHN') entered into the 'Agreement of investment and construction of Tuoketuo Phase 4, 5 4x600 MW coal-fired power generation units' (the 'Investment Agreement'). On 10 February 2007, the investing parties entered into the 'Supplemental Agreement', in which they agreed that Beijing Jingneng International Energy Company Limited ('BEIC'), the subsidiary of BEIG, to replace BEIG as investing parties. Pursuant to the Investment Agreement and the Supplemental Agreement, the investing parties will invest and establish Inner Mongolia Datang International Tuoketuo No. 2 Power Generation Company Limited ('Tuoketuo No. 2 Power Co.'), to develop and construct the aforementioned Phase 4, 5 4x600 MW coal-fired generation units, the total investment amount of the project is approximately RMB10.193 billion (subject to the final approval by the relevant government authorities in the PRC). The final registered capital of Tuoketuo No. 2 Power Co. amounts to approximately RMB2.039 billion. The Company, BEIC, CDGC and MDHN agreed to contribute to the establishment of Tuoketuo No. 2 Power Co. in the proportion of 40%, 25%, 20% and 15%, respectively. The investment matters have been considered and approved by the Board and at the 2007 first extraordinary general meeting of the Company. The connected transaction complied with the requirements as set out in Chapter 14A of the Listing Rules.

Material Litigation

The Company was not involved in any material litigation during the Year.

Retirement Scheme

In accordance with the State's employee retirement scheme, the Company has to pay a basic pension insurance premium on behalf of the employees at a rate of 20% of the staff's salaries whereby the employees would receive a monthly pension payment each month after retirement. In addition, the Company has also implemented an enterprise annuity plan, whereby employees will make monthly contributions at a fixed amount as individual savings pension insurance fund, while the Company will contribute a proportionate amount of the employees' contributions as supplementary pension insurance fund. The Company may at its discretion provide additional non-recurring individual savings pension insurance fund depending on the operating results of the year. When retired, an employee will receive individual savings pension insurance fund and corporate supplemental savings pension insurance fund by the Company. Apart from such contributions, the Company has no other liabilities towards the staff retirement scheme.

Interest Capitalisation

During the Year, interest capitalised in respect of construction-in-progress amounted to approximately RMB1,522,434,000.

Other Significant Matters

1 .    Pursuant to the resolution passed at the 2006 annual general meeting held on 29 June 2007 and based on the total share capital of 5,844,880,580 shares as at 18 July 2007, the Company distributed a 2006 cash dividend of RMB0.23075 per share to all shareholders and implemented the share capital expansion proposal by utilising the capital reserve fund to issue 10 additional shares for every 10 shares held.

2.    The term of the members of the fifth session of the Company's Board and Supervisory Committee had expired on 30 June 2007. Pursuant to the resolutions passed at the 2006 annual general meeting held on 29 June 2007, it was resolved to appoint the following persons as members of the sixth session of the Company's Board and Supervisory Committee:

(1)    Mr. Zhai Ruoyu, Mr. Zhang Yi, Mr. Hu Shengmu, Mr. Fang Qinghai, Mr. Zhou Gang, Mr. Liu Haixia, Ms. Guan Tiangang, Mr. Su Tiegang, Mr. Ye Yonghui, Mr. Li Gengsheng, Mr. Xie Songlin, Mr. Yu Changchun, Mr. Liu Chaoan and Mr. Xia Qing be appointed as members of the sixth session of the Board for a term from 1 July 2007 to 30 June 2010;

(2)    Mr. Zhang Jie, Mr. Zhang Wantuo, Mr. Fu Guogiang and Mr. Shi Xiaofan be appointed as members of the sixth session of the Supervisory Committee (among which Mr. Zhang Jie and Mr Shi Xiaofan are Supervisors representing the staff) for a term from 1 July 2007 to 30 June 2010.

(3)    the term of the fifth session of the Board members, Mr. Yang Hongming, Mr. Tong Yunshang and Mr. Xu Daping has expired, and will no longer be the sixth session of the Board.

The audit Committee considers that the 2007 annual results of the Company and its Subsidiaries have complied with the applicable accounting standards, and that the company has made appropriate disclosure thereof.

Compliance of the Code on Corporate Governance Practices

To the knowledge of the Board, the Company has complied with the Code on Corporate Governance Practices (the 'Code') as set out in Appendix 14 to the Listing Rules during the Year.

Compliance of the Model Code for Securities Transactions by Directors of Listed Issuers

Upon specific enquiries made to all Directors and in accordance with information provided, the Board confirmed that all Directors have complied with the Model Code as set out in Appendix 10 to the Listing Rules as the code of conduct for securities transactions by Directors during the Year.

Independent Non-executive Directors

After making queries and reviewing the annual confirmation letters from all independent non-executive directors in respect of their independence according to Rule 3.13 of the Listing Rules, the Company confirms that all independent non-executive Directors are independent individuals.

Auditors

The Company's 2007 financial statements prepared under International Financial Reporting Standards have been audited by PricewaterhouseCoopers ('PwC'). The 2007 financial statements prepared under the PRC Financial Regulations and Accounting Standards have been audited by PricewaterhouseCoopers Zhong Tian CPAs Co, Ltd. ('PwC Zhong Tian'). A resolution regarding the re-appointment of PwC as the international auditors and PwC Zhong Tian as the domestic auditors will be proposed at the annual general meeting. The Company has not changed its auditors in the previous six years.

By Order of the Board

Zhai Ruoyu

Chairman

26 March 2008

Report of the Supervisory Committee

During 2007, in accordance with the Company Law of the PRC (the 'Company Law'), the Articles of Association of Datang International Power Generation Co., Ltd. (the 'Articles of Association'), Order of Meeting of the Supervisory Committee of Datang International Power Generation Co., Ltd. (the 'Order of Meeting of Supervisory Committee') and the relevant requirements of the listing rules of the Company's listing locations, members of the Company's Supervisory Committee dutifully and conscientiously discharged their duties and exercised their monitoring duty in compliance with the principle of being accountable to all shareholders of the Company to protect the rights of the shareholders of the Company and the interests of the Company.

During the reporting period, the Supervisory Committee held five meetings. The quorum at each meeting was in compliance with the relevant requirements as stipulated by the Company Law and the Articles of Association. On 30 March 2007, the sixth meeting of the fifth session of Supervisory Committee was held, considering and approving the 2006 Work Report of the Supervisory Committee and its summary, the 2006 Financial Report, the 2007 Financial Budget, the Proposed 2006 Profit Distribution Plan and the 'Order of Meeting for the Supervisory Committee of Datang International Power Generation Co., Ltd.'. On 26 April 2007, the seventh meeting of the fifth session of Supervisory Committee was held by way of written correspondence, considering and approving the 2007 First Quarterly Report of the Company. On 11 May 2007, the eighth meeting of the fifth session of the Supervisory Committee was held by way of written correspondence, considering and approving the nominations of the candidates for the sixth session of the Supervisory Committee. On 27 August 2007, the first meeting of the sixth session of the Supervisory Committee was held, considering and approving the 2007 Interim Report and its summary, as well as electing the chairman and vice chairman of the sixth session of the Supervisory Committee. On 25 October 2007, the second meeting of the sixth session of the Supervisory Committee was held, considering and approving the 2007 Third Quarterly Report. The Supervisory Committee attended the 2006 annual general meeting and the 2007 first and second extraordinary general meetings, as well as four Board meetings and two Audit Committee meetings.

During 2007, the Board conscientiously implemented various resolutions approved at the 2006 annual general meeting and the 2007 extraordinary general meetings. All major operation decisions of the Company were rational and the decision-making process was lawful and valid. In the corporate governance self-inspection and reform activities for listed companies initiated by the China Securities Regulatory Commission (the 'CSRC') and the Beijing Securities Regulatory Bureau in 2007, the Company has further established and enhanced its internal control systems in order to further regulate the corporate governance structure and to enhance the Company's competitiveness. The Board and senior management of the Company fulfilled their duties faithfully and diligently during 2007 and conscientiously discharged their respective duties, with no acts of violation of any State laws, regulations or the Articles of Association discovered and no acts which contravene the Company's interests were discovered either. The Board and senior management of the Company strengthened the production safety management of the power plants operated by the Company, and the Company management conscientiously implemented various Board resolutions in a diligent and dutiful manner, thereby achieving encouraging operating results. Total assets amounted to RMB121,773 million and sales revenue amounted to RMB32,829 million, while the consolidated net profit attributable to equity holders of the Company was RMB3,406 million and earnings per share amounted to RMB0.29.

In 2007, the Supervisory Committee conscientiously and carefully examined and reviewed the Company's accounting statements and financial information, and was engaged in the inspection of the 2007 First Quarterly Report, 2007 interim report and 2007 Third Quarterly Report. The Supervisory Committee also took part in reviewing the auditors' report and offered opinions and recommendations on the auditors' work. The Supervisory Committee is of the view that the preparation of the Company's financial statements complies with the relevant requirements of the Accounting Rules for Business Enterprises and the Accounting Standards for Business Enterprises, and that the Company's 2007 financial report truthfully reflects the financial position and operating results of the Company.

On 13 December 2006, the Company completed the issue of 500 million A shares and the shares were listed on the Shanghai Stock Exchange on 20 December 2006. Net proceeds amounted to RMB3,279 million. As at 31 December 2007, the proceeds were not utilised and no improper utilisation of the proceeds was found as at the date of the report.

The connected transactions engaged by the Company during the Year complied with normal commercial terms. Such transactions complied with the requirements of the State laws, regulations and the Articles of Association, while the information disclosure and related obligations were timely and thoroughly fulfi lled in accordance with the listing rules of the Shanghai Stock Exchange and the Hong Kong Stock Exchange.

During 2007, pursuant to the signed agreement, the Company acquired two 200 MW coal-fired generation units of Xinyu Power Plant; pursuant to the equity acquisition agreement signed with Kailuan Group Co., Ltd., the Company acquired from the latter a 34% interest in Yuzhou Mining Company Limited, while the Company's associate Hebei Yuzhou Energy Development Co., Ltd. acquired another 30% interest in Yuzhou Mining Company Limited. Upon completion of the acquisitions, the Company actually owns a 49% interest in Yuzhou Mining Company Limited. The above acquisitions were considered and approved by the Board of the Company who was of the view that the acquisition considerations were reasonable, and the acquisitions did not harm the interests of the Company's shareholders.

PricewaterhouseCoopers Zhong Tian CPAs Company Limited and PricewaterhouseCoopers (Certified Public Accountants, Hong Kong) have issued auditors' reports with unqualified opinions on the financial statements of the Company and its Subsidiary prepared in accordance with the PRC GAAP and International Financial Reporting Standards, respectively. The Supervisory Committee was of the view that the auditors' reports truthfully and objectively reflected the financial position and operating results of the Company and validation was given to the relevant elaborations provided by the auditors.

On 30 June 2007, the term of the Company's fifth session of the Supervisory Committee expired. Mr. Zhang Wantuo and Mr. Fu Guoqiang were elected as supervisors of the sixth session of the Supervisory Committee at the Company's 2006 annual general meeting. Mr. Zhang Jie and Mr. Shi Xiaofan were elected as supervisors representing the staff at the Company's staff representatives general meeting, and they formed the sixth session of the Supervisory Committee together with the supervisors elected at the annual general meeting, for a term ending at 30 June 2010. During 2007, members of the sixth session of the Supervisory Committee have attended the training programmes for listed company directors and supervisors organised by the CSRC in the relevant jurisdiction, and have obtained the passing certificates.

In 2008, pursuant to the requirements of the relevant laws and regulations, regulatory stipulations, the Articles of Association and the Rules of Supervisory Committee Meetings, the members of the supervisory committee will continue to strengthen the enforcement of its supervisory function and attend Board meetings and Audit Committee meetings, so as to timely grasp the Company's major decisions and the lawfulness of the decision-making procedures, thereby further improving the protection of shareholders' interest.

In 2008, the Company's production operation scale will further expand. In order to prevent operating risks, the Supervisory Committee will continue to maintain financial supervision as the focus of the supervision effort, as well as regularly understanding the Company's external investment moves and strengthening the communication with the Company's external auditor, thereby joining the Board and the management to strive for enhancement of the company's internal control standard.

By Order of the Supervisory Committee

Zhang Jie

Chairman of the Supervisory Committee

26 March 2008

Taxation in the United Kingdom

The comments below are a general guide only, based on the tax law and practice in force as at the date of this document that may be subject to changes or revisions. They relate only to certain limited aspects of the tax position of shareholders of the Company who are United Kingdom ('UK') resident, and (if an individual) who are also UK ordinarily resident and domiciled and who hold shares in the Company as an investment, not as a share dealer or financial trader ('Relevant Shareholders'). This section is not intended to be and should not be construed as legal or tax advice to any particular shareholder. If you are in any doubt as to your tax position you should consult an appropriate professional advisor.

Relevant Shareholders will generally be subject to UK income tax or corporation tax on the gross amount of dividends paid by the Company, but will normally be entitled to a credit against such UK income tax or corporation tax for any PRC withholding tax charged on the dividend.

Under the current double taxation treaty between the PRC and the UK, Relevant Shareholders will generally be entitled to a reduced rate of PRC withholding tax on dividends paid to them by the Company (details of which can be obtained from such shareholders' respective UK tax offices). Individual shareholders with a less than 10% shareholding in the company will also be entitled to a non-payable tax credit of one ninth of the distribution (if it is made after 5th April 2008).

Furthermore, corporate Relevant Shareholders who control (directly or indirectly) at least 10% of the voting rights of the Company may be entitled to credit against UK corporation tax chargeable in respect of dividends paid to them by the Company for any underlying PRC tax payable by the Company in respect of the profits out of which dividends were paid.

Relevant Shareholders will be subject to UK taxation of chargeable gains on any gain on a disposal of shares, as computed for the proposes of such tax.

Independent Auditor's Report

To the shareholders of Datang International Power Generation Co., Ltd.

(incorporated in the People's Republic of China with limited liability)

We have audited the consolidated financial statements of Datang International Power Generation Co., Ltd. ('the Company') and its subsidiaries and jointly controlled entities (together, the 'Company and its Subsidiaries') set out on pages 63 to 158 which comprise the consolidated and company balance sheets as of 31 December 2007, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors' responsibility for the financial statements

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and of the Company and its Subsidiaries as of 31 December 2007, and the financial performance and cash flows of the Company and its Subsidiaries for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Other mattes

This report, including the opinion, has been prepared for and only for you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 26 March 2008

Consolidated Income Statement

For the year ended 31 December 2007

(All amounts expressed in thousands of Rmb, except per share data)

	Note	2007	2006
			(Note 41)
Operating revenue	28	32,829,305	24,898,620
Operating costs
Local government surcharges		(352,987)	(279,485)
Fuel		(15,262,965)	(10,663,815)
Depreciation		(4,930,137)	(4,109,271)
Repairs and maintenance		(1,038,676)	(778,081)
Wages and staff welfare		(1,640,048)	(1,236,480)
Others		(1,864,248)	(1,843,298)
Total operating costs		(25,089,061)	(18,910,430)
Operating profit	29	7,740,244	5,988,190
Share of result of associates	8	108,393	9,458
Interest income		68,022	24,674
Finance costs	30	(2,080,118)	(1,358,713)
Profit before income tax		5,836,541	4,663,609
Taxation	31	(1,446,443)	(1,081,256)
Profit for the year		4,390,098	3,582,353
Attributable to:
- Equity holders of the Company		3,406,233	2,777,781
- Minority interests		983,865	804,572
		4,390,098	3,582,353
Dividends paid	34	1,348,714	1,177,130
Proposed dividends	34	1,408,090	1,348,714
Proposed dividend per share (Rmb)	34	0.12	0.234
Earnings per share for profit attributable to the equity holders of the Company during the year
- basic (Rmb)	35	0.29	0.27
- diluted (Rmb)	35	0.29	0.26

The notes on pages 69 to 158 are an integral part of these financial statements.

Balance Sheets

As at 31 December 2007

(All amounts expressed in thousands of Rmb)

		Company and its Subsidiaries  As at 31 December		Company  As at 31 December
	Note	2007	2006	2007	2006
ASSETS
Non-current assets
Property, plant and equipment	5	102,585,084	77,505,966	22,315,989	21,743,101
Investments in subsidiaries	6	-	-	6,503,628	4,759,796
Investment in jointly controlled entities	7	-	-	996,501	200,000
Investments in associates	8	1,341,906	857,421	686,802	708,692
Available-for-sale investments	9	4,733,764	1,774,184	4,650,431	1,700,076
Land use right	10	813,935	632,599	331,199	223,847
Deferred housing benefits	11	260,945	300,232	92,174	153,780
Intangible assets	12	202,190	83,576	38,893	33,561
Long-term entrusted loans to subsidiaries	13	-	-	1,223,657	375,562
Other long-term assets		170,000	87,850	-	87,850
Deferred income tax assets	31	156,792	142,969	14,613	-
		110,264,616	81,384,797	36,853,887	29,986,265
Current assets
Short-term entrusted loans to subsidiaries and associates	15	47,751	-	2,264,492	1,001,589
Inventories	14	1,051,181	806,965	197,815	277,653
Prepayments and other receivables	16	1,018,112	719,319	996,901	473,746
Dividend receivable		-	-	46,462	995
Accounts receivable	17	4,945,475	3,337,529	1,792,788	1,386,805
Notes receivable	17	747,917	11,132	708,000	-
Short-term bank deposits over three months	18	49,500	-	-	-
Cash and cash equivalents	18	3,648,823	4,451,284	1,164,857	4,104,987
		11,508,759	9,326,229	7,171,315	7,245,775
Total assets		121,773,375	90,711,026	44,025,202	37,232,040
EQUITY AND LIABILITY
Capital and reserves attributable to the equity holders of the Company
Share capital	19	11,734,083	5,662,849	11,734,083	5,662,849
Reserves	20	17,863,420	18,233,202	15,315,108	16,439,753
		29,597,503	23,896,051	27,049,191	22,102,602
Minority interests		4,643,359	3,304,667	-	-
Total equity		34,240,862	27,200,718	27,049,191	22,102,602
Non-current liabilities
Long-term loans	21	44,272,875	40,273,581	3,792,700	8,000,000
Convertible bonds	26	-	1,111,810	-	1,111,810
Deferred income	23	387,056	273,157	274,663	216,496
Deferred income tax liabilities	31	1,141,953	421,682	985,838	391,105
Other long term liabilities		98,667	-	-	-
		45,900,551	42,080,230	5,053,201	9,719,411
Current liabilities
Accounts payable and accrued liabilities	24	10,743,690	7,648,449	3,109,050	2,047,611
Taxes payable		942,917	538,329	405,261	262,416
Dividend payable		40,757	-	-	-
Short-term loans	22	22,608,530	9,300,496	4,800,000	2,100,000
Short-term bonds	25	3,000,000	1,000,000	3,000,000	1,000,000
Current portion of long-term loans and bonds	26	4,296,068	2,942,804	608,499	-
		41,631,962	21,430,078	11,922,810	5,410,027
Total liabilities		87,532,513	63,510,308	16,976,011	15,129,438
Total equity and liabilities		121,773,375	90,711,026	44,025,202	37,232,040

Approved by the Board of Directors on 26 March 2008:

    Zhang Yi    Zhou Gang

    Director    Director

The notes on pages 69 to 158 are an integral part of these financial statements.

Consolidated Statement of Changes in Equity

For the Year Ended 31 December 2007

(All amounts expressed in thousands of Rmb)

		Attributable to equity holders of the Company
	Note	Share capital	Capital reserve	Statutory surplus reserve	Statutory public welfare fund	Discretionary surplus reserve	Restricted reserve	Currency translation difference	Other reserve	Retained earnings	Total reserves	Minority interests	Total equity
Balance as at 1 January 2006		5,162,849	3,653,421	1,977,048	559,456	4,981,377	173,510	(184)	149,796	1,668,189	13,162,613	2,403,475	20,728,937
Fair value gains, net of tax: available-for-sale financial assets	20(e)	-	-	-	-	-	-	-	690,508	-	690,508	-	690,508
Profit for the year		-	-	-	-	-	-	-	-	2,777,781	2,777,781	804,572	3,582,353
Currency translation differences		-	-	-	-	-	-	606	-	-	606	-	606
Total recognised income and expense for the year		-	-	-	-	-	-	606	690,508	2,777,781	3,468,895	804,572	4,273,467
Capital injection into subsidiaries from minority shareholders		-	-	-	-	-	-	-	-	-	-	407,463	407,463
Proceeds from issue of A share		500,000	2,778,824	-	-	-	-	-	-	-	2,778,824	-	3,278,824
Adjustment in consolidation scope	5(a)	-	-	-	-	-	-	-	-	-	-	198,600	198,600
Minority interests arising form business combinations		-	-	-	-	-	-	-	-	-	-	64,262	64,262
Dividends declared	34	-	-	-	-	-	-	-	-	(1,177,130)	(1,177,130)	(573,705)	(1,750,835)
Transfer between reserves		-	-	559,456	(559,456)	-	-	-	-	-	-	-	-
Transfer (to)/from restricted reserve	20(d)	-	-	(37,435)	-	-	63,844	-	-	(26,409)	-	-	-
Transfer to discretionary surplus reserve	20(c)	-	-	-	-	759,910	-	-	-	(759,910)	-	-	-
Profit appropriations		-	-	415,530	-	-	-	-	-	(415,530)	-	-	-
Balance as at 31 December 2006		5,662,849	6,432,245	2,914,599	-	5,741,287	237,354	422	840,304	2,066,991	18,233,202	3,304,667	27,200,718
	Note		Share capital	Capital reserve	Statutory surplus reserve	Discretionary surplus reserve	Restricted reserve	Currency translation difference	Other reserve	Retained earnings	Total reserves	Minority interests	Total equity
Balance as at 1 January 2007			5,662,849	6,432,245	2,914,599	5,741,287	237,354	422	840,304	2,066,991	18,233,202	3,304,667	27,200,718
Adjustments to beginning balance	20(g)		-	-	(622,396)	-	(56,110)	-	-	678,506	-	-	-
Balance as at 1 January 2007, adjusted			5,662,849	6,432,245	2,292,203	5,741,287	181,244	422	840,304	2,745,497	18,233,202	3,304,667	27,200,718
Fair value gains, net of tax: available-for-sale financial assets	20(e)		-	-	-	-	-	-	2,624,071	-	2,624,071	-	2,624,071
Profit for the year			-	-	-	-	-	-	-	3,406,233	3,406,233	983,865	4,390,098
Currency translation differences			-	-	-	-	-	(3,266)	-	-	(3,266)	-	(3,266)
Total recognised income and expense for the year			-	-	-	-	-	(3,266)	2,624,071	3,406,233	6,027,038	983,865	7,010,903
Capital injection into subsidiaries from minority shareholders			-	-	-	-	-	-	-	-	-	1,131,510	1,131,510
Conversion of convertible bond	26		226,354	931,649	-	-	-	-	(134,875)	-	796,774	-	1,023,128
Capital reserve transfer to share capital	34		5,844,880	(5,844,880)	-	-	-	-	-	-	(5,844,880)	-	-
Dividends declared	34		-	-	-	-	-	-	-	(1,348,714)	(1,348,714)	(776,683)	(2,125,397)
Transfer (to)/from restricted reserve	20(d)		-	-	-	-	(56,619)	-	-	56,619	-	-	-
Profit appropriations	20		-	-	310,036	1,020,774	-	-	-	(1,330,810)	-	-	-
Balance as at 31 December 2007			11,734,083	1,519,014	2,602,239	6,762,061	124,625	(2,844)	3,329,500	3,528,825	17,863,420	4,643,359	34,240,862

The notes on page 69 to 158 are an integral part of these financial statements.

Consolidated Cash Flow Statement

For the Year Ended 31 December 2007

(All amounts expressed in thousands of Rmb)

	Note	2007	2006
Cash flows from operating activities
Cash generated from operations	36(a)	11,805,527	8,506,743
Income tax paid		(1,293,491)	(1,047,710)
Dividends paid		(2,123,860)	(1,750,835)
Net cash generated from operating activities		8,388,176	5,708,198
Cash flows from investing activities
Purchases of property, plant and equipment		(25,968,399)	(15,394,121)
Increase in short-term bank deposits over three months		(49,500)	-
Increase in investments in associates		(121,110)	(260,900)
Increase in available-for-sale investments		(17,000)	(538,235)
Proceeds from disposal of property, plant and equipment		1,238	48,403
Interest received		68,022	24,674
Dividends received		54,169	30,108
Acquisition of two power plants, net of cash acquired	37(1) (2)	79,338	-
Acquisition of a railway company, net of cash received		-	(280,965)
Acquisition of a mining company, net of cash received	37(3)	4	-
Proceeds from other investments activities		224,272	31,433
Net cash used in investing activities		(25,728,966)	(16,339,603)
Cash flows from financing activities
Capital contribution into subsidiaries from minority shareholders		1,131,510	386,586
Proceeds from issuance of A shares		-	3,278,824
Proceeds from long-term loans		13,182,148	16,980,767
Proceeds from short-term loans		34,863,609	16,201,308
Proceeds from short-term bonds		3,000,000	1,000,000
Repayments of long-term loans		(9,204,153)	(7,710,583)
Repayments of short-term loans		(21,855,496)	(13,682,821)
Repayments of short-term bonds		(1,000,000)	-
Interest paid		(3,520,625)	(2,395,346)
Others		(55,545)	-
Net cash generated from financing activities		16,541,448	14,058,735
Net (decrease)/increase in cash and cash equivalents		(799,342)	3,427,330
Cash and cash equivalents at beginning of year		4,451,284	1,029,339
Exchange losses on cash		(3,119)	(5,385)
Cash and cash equivalents at end of year		3,648,823	4,451,284

The notes on pages 69 to 158 are an integral part of these financial statements.

Notes to the Financial Statements

For the year ended 31 December 2007

(All amounts expressed in thousands of Rmb unless otherwise stated) 

1.    General Information

Datang International Power Generation Co., Ltd. (the 'Company') was incorporated in Beijing, the People's Republic of China (the 'PRC'), on 13 December 1994 as a joint stock limited company. The address of its registered office is No.482 Guanganmennei avenue, Xuanwu District, Beijing, PRC. The Company listed its H Shares on the Stock Exchange of Hong Kong Limited and the London Stock Exchange Limited on 21 March 1997 and was registered as a sino-foreign joint venture on 13 May 1998. On 20 December 2006, the Company listed its A Shares on the Shanghai Stock Exchange.

The principal activity of the Company and its subsidiaries and jointly controlled entities (the 'Company and its Subsidiaries') is power generation and power plant development in the PRC. Substantially all of the businesses of the Company and its Subsidiaries are conducted within one industry segment.

The directors consider that the significant shareholder of the Company is China Datang Corporation ('China Datang'), which is incorporated in the PRC and does not produce financial statements available for public use.

2.    Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a)    Basis of preparation

The financial statements of the Company and its Subsidiaries have been prepared in accordance with International Financial Reporting Standards ('IFRS'). These financial statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale investments and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies of the Company and its Subsidiaries. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4.

A significant portion of the Company and its Subsidiaries' funding requirements for capital expenditure was satisfied by short-term borrowings. Consequently, as at 31 December 2007, the Company and its Subsidiaries had a negative working capital balance of approximately Rmb30,123 million (31 December 2006 - Rmb12,104 million). The Company and its Subsidiaries had significant undrawn borrowing facilities, subject to certain conditions, amounting to approximately Rmb55,069 million (31 December 2006 - Rmb65,791 million) (Note 36(c)) and may refinance and/or restructure certain short-term loans into long-term loans and will also consider alternative sources of financing, where applicable. The directors of the Company and its Subsidiaries are of the opinion that the Company and its Subsidiaries 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.

Standards, interpretations and amendments to published standards are mandatory for financial year with annual period beginning on or after 1 January 2007 and relevant to the Company and its Subsidiaries

‧    IFRS 7, Financial Instruments: Disclosures and a complementary amendment to International Accounting Standard ('IAS') 1, Presentation of Financial statements - Capital Disclosures. IFRS 7 introduces new disclosures relating to financial instruments. This standard introduces certain revised disclosure requirements, including the mandatory disclosures on sensitivity analysis for each type of market risk. It replaces IAS 30, Disclosures in the Financial statements of Banks and Similar Financial Institutions, and disclosure requirements in IAS 32, Financial Instruments: Disclosure and Presentation and is applicable to all entities reporting under IFRS. The amendment to IAS 1 introduces disclosures on the objectives, policies and processes for managing capital. Except for an extension of disclosures, the Company and its subsidiaries considered there was no significant impact from adopting IFRS 7 and the amendment to IAS 1 on the financial statements of the Company and its Subsidiaries.

‧    International Financial Reporting Interpretation Committee Interpretation ('IFRIC Interpretation') 10, Interim Financial Reporting and Impairment. This interpretation prohibits the impairment losses recognised in a previous interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost to be reversed at subsequent balance sheet dates. The Company and its subsidiaries considered there was no significant impact from adopting IFRIC Interpretation 10 on the financial statements of the Company and its Subsidiaries.

Standards, interpretations and amendments to published standards not yet effective and relevant to the operations of the Company and its Subsidiaries

Certain new standards, interpretations and amendments to published standards have been published, that are relevant to the operations of the Company and its Subsidiaries, but not yet effective and have not been early adopted are as follows:

‧    IAS 1 (Revised), 'Presentation of Financial Statements' (effective from 1 January 2009). IAS 1 (Revised) requires all owner changes in equity to be presented in a statement of changes in equity. All comprehensive income is presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). It requires presenting a statement of financial position as at the beginning of the earliest comparative period in a complete set of financial statements when there are retrospective adjustments or reclassification adjustments. However, it does not change the recognition, measurement or disclosure of specific transactions and other events required by other IFRSs. The Company and its Subsidiaries will apply IAS 1 (Revised) from 1 January 2009.

‧    IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). It requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. This amendment will not have an impact on the Company and its Subsidiaries as the option to capitalise the borrowing costs is already applied.

‧    IFRS 8, 'Operating segments' (effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and related information'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The Company and its Subsidiaries will apply IFRS 8 from 1 January 2009. The management is currently assessing the impact of IFRS 8.

‧    IAS 27, 'Consolidated and separate financial statements' (effective for annual periods beginning on or after 1 July 2009). It replaces IAS 27 (revised in 2003) and establishes the amendments to the presentation, accounting treatment and disclosure requirement related to the consolidated financial statements. IAS 27 describes the 'Minority Interest' as the 'Non-controlling Interest' and requires total comprehensive income must be attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Changes in a parent's ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity. Gain or loss is recognised in the income statement when an entity loses control of a subsidiary. Any investment retained in the former subsidiary is measured at its fair value at the date when control is lost. The Company and its Subsidiaries have not early adopted IAS 27 and will apply IAS 27 in its financial statements from 1 January 2010. Since the Company and its Subsidiaries are using 'Parent Company' approach instead of the 'Economic Entity' approach required by the IAS 27 (Revised), therefore the adoption of IAS 27 (Revised) in 2010 will result in a change of accounting policy. However, the management do not expect this change will have material impact to the financial statements of the Company and its Subsidaireis.

‧    IFRS 3 (Revised) 'Business Combination' (effective for business combinations with acquisition date on or after the beginning of the first annual reporting period beginning on or after 1 July 2009). The amendment may bring more transactions into acquisition accounting as combinations by contract alone and combinations of mutual entities are brought into the scope of the standard and the definition of a business has been amended slightly. It now states that the elements are 'capable of being conducted' rather than 'are conducted and managed'. It requires considerations (including contingent consideration), each identifiable asset and liability to be measured at its acquisition-date fair value, except leases and insurance contracts, reacquired right, indemnification assets as well as some assets and liabilities required to be measured in accordance with other IFRSs. They are income taxes, employee benefits, share-based payment and non current assets held for sale and discontinued operations. Any non-controlling interest in an acquiree is measured either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets. The Company and its Subsidiaries will apply IFRS 3 (Revised) from 1 January 2010.

(b)    Consolidation

The consolidated financial statements include the financial statements of the Company and all of its subsidiaries and jointly controlled entities made up to 31 December.

(i)    Subsidiaries

Subsidiaries are all entities over which the Company and its Subsidiaries have the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and its Subsidiaries and are no longer consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. See Note 2(g)(i) for the accounting policy on goodwill. If the cost of acquisition is less than the fair value of the share of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company and its Subsidiaries.

In the Company's balance sheet the investments in subsidiaries are stated at costs less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(ii)    Transactions with minority interests

The Company and its Subsidiaries apply a policy of treating transactions with minority interests as transactions with parties external to the Company and its Subsidiaries. Disposals to minority interests result in gains and losses for the Company and its Subsidiaries that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

(iii)    Jointly controlled entities

The Company and its Subsidiaries' interest in jointly controlled entities is accounted for by proportionate consolidation. The Company and its Subsidiaries combine its share of the jointly controlled entities' individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Company and its Subsidiaries' financial statements. The Company and its Subsidiaries recognise the portion of gains or losses on the sale of assets by the Company and its Subsidiaries to the jointly controlled entities that is attributable to the other venturers. The Company and its Subsidiaries do not recognise its share of profits or losses from the jointly controlled entities that result from the Company and its Subsidiaries' purchase of assets from the jointly controlled entities until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss.

In the Company's balance sheet the investments in jointly controlled entities are stated at cost less provision for impairment losses. The results of the joint controlled entities are accounted for by the Company on the basis of dividends received and receivable.

(iv)    Associates

Associates are all entities over which the Company and its Subsidiaries have significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. Under this method, the Company and its Subsidiaries' share of the post-acquisition profits or losses of associates is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amounts of the investments. The Company and its Subsidiaries' investments in associates include goodwill (net of accumulated impairment loss) on acquisition. When the Company and its Subsidiaries' share of losses in an associate equals or exceeds their interest in the associate, the Company and its Subsidiaries do not recognise further losses, unless the Company and its Subsidiaries have incurred obligations or made payments on behalf of the associates.

Unrealised gains on transactions between the Company and its Subsidiaries and their associates are eliminated to the extent of the Company and its Subsidiaries' interests in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Company and its Subsidiaries.

In the Company's balance sheet the investments in associates are stated at cost less provision for impairment losses. The results of associates are accounted for by the Company on the basis of dividends received and receivable.

(c)    Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. The primary format for reporting segment information of the Company and its Subsidiaries is business segment, with secondary information reported geographically.

(d)    Foreign currency translation

(i)    Functional and presentation currency

Items included in the financial statements of each entity of the Company and its Subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The financial statements are presented in Renminbi ('Rmb'), which is the functional and presentation currency of the Company.

(ii)    Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(iii)    Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

‧    assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

‧    income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

‧    all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, are taken to shareholders' equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

(e)    Property, plant and equipment

Property, plant and equipment, apart from construction-in-progress, are stated at historical cost less accumulated depreciation and accumulated impairment loss. The initial cost comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Construction-in-progress represents plants and properties under construction and is stated at cost. This includes the costs of construction, plant and machinery, prepayments for the equipment and other direct costs. Construction-in-progress is not depreciated until such time as the relevant assets are completed and ready for its intended use when they are transferred to the relevant asset categories.

Depreciation is calculated using the straight-line method to allocate their residual values over their estimated useful lives, as follows:

Dam	45 years
Buildings	20-50 years
Electricity utility plants in service:
- Coal-fired electricity utility plants	12-30 years
- Hydro electricity utility plants	12-45 years
Transportation facilities, computer and others	4-10 years

The assets' residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and its Subsidiaries and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount (Note 2(i)).

Gains and losses on disposals are determined by comparing the proceeds on disposal with the carrying amount and are included in the income statement.

(f)    Land use rights

Land use rights represent upfront prepayments made for the land use rights and lease hold land and are expensed in the income statement on a straight-line basis over the period of the leases or when there is impairment, the impairment is expensed in the income statement.

(g)    Intangible assets

(i)    Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(ii)    Resource use rights

Resource use rights are shown at historical cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost over their estimated useful lives (10 years) and recorded in other operating cost in the income statement.

(iii)    Computer software

Acquired computer software are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives and recorded in other operating cost in the income statement.

(h)    Other long-term assets

Other long-term assets are coal mine exploration costs, which are stated at cost and are reduced to the recoverable amounts should impairment occur.

(i)    Impairment of investment in subsidiaries, associates, jointly controlled entities and non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(j)    Financial assets

The Company and its Subsidiaries classified their financial assets into the following categories: loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(i)    Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as 'notes receivable', 'accounts receivable', 'prepayments and other receivables', 'dividend receivables' 'short-term and long-term entrusted loans to subsidiaries and associates' in the balance sheet.

(ii)    Available-for-sale investments

Available-for-sale investments are non-derivatives financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular-way purchases and sales of investments are recognised on trade date - the date on which the Company and its Subsidiaries commit to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company and its Subsidiaries have transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.

Changes in the fair value of available-for-sale investments are recognised in equity. When available-for-sale investments are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as 'other operating costs'. Dividends on available-for-sale equity instruments are recognised in the income statement when the right of the Company and its Subsidiaries to receive payments is established.

The fair values of quoted investments are based on current bid price. If the market for a financial asset is not active (and for unlisted securities), the Company and its Subsidiaries establish fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs. Investments in equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recorded at cost.

The Company and its Subsidiaries assess at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment loss of the available-for-sale financial investments recorded at cost is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses shall not be reversed. Impairment testing of receivables is described in Note 2(l).

(k)    Inventories

Inventories are stated at the lower of cost and net realisable value. Inventories are expensed to fuel costs or other relevant operating expenses when used, or capitalised to property, plant and equipment when installed, as appropriate, using moving weighted average method. Cost of inventories includes direct material cost and transportation expenses incurred in bringing the materials and supplies to the working locations. Net realisable value is the estimated selling price in the ordinary course of business, less selling expenses.

(l)    Receivables

Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Company and its Subsidiaries will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amounts of the receivables are reduced through the use of allowance accounts, and the amount of the provision is recognised in the income statement within 'operating expenses - others'. Where evidence exists that balance cannot be recovered, for example, debtor is terminated, liquidated, in the position of negative equity, insufficient cash inflow or the balances are outstanding over three years, bad debts are recognised and corresponding provision for bad debt is written off. Subsequent recoveries of amounts previously written off are credited against 'operating expenses - others' in the income statement.

(m)    Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks and financial institution and other short-term highly liquid investments with original maturities of three months or less.

(n)    Accounts payable and other payables

Accounts payable and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(o)    Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in equity, net of income tax effects.

Borrowings are classified as current liabilities unless the Company and its Subsidiaries have contractual or an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(p)    Borrowing costs

Borrowing costs incurred for the construction for any qualifying assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed and included as finance costs in the period in which they are incurred.

(q)    Taxation

(i)    Value-added tax ('VAT')

Under the relevant PRC tax laws, the Company and its Subsidiaries are subject to VAT. The Company and its Subsidiaries are subject to output VAT levied at 17% of the Company and its Subsidiaries' operating revenue, except for the output VAT of heat sales which is levied at 13% and the revenue of Hebei Datang International Huaze Hydropower Development Company Limited ('Huaze Hydropower Company') and Inner Mongolia Datang International Duolun Hydropower Multiple Development Company Limited ('Duolun Hydropower Company') which is levied at 6%. The input VAT can be used to offset the output VAT levied on operating revenue to determine the net VAT payable. Because VAT is tax on the customer and the Company and its Subsidiaries collect such tax from the customers and pay such tax to the suppliers on behalf of the tax authority, VAT is not included in operating revenue or operating expenses.

(ii)    Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

According to the relevant income tax law, Sino-foreign enterprises are, in general, subject to statutory income tax of 33% (30% of Enterprises Income Tax and 3% of local income tax). If these enterprises are located in certain specified locations or cities, or are specifically approved by State Tax Bureau, a lower tax rate would be applied.

Certain power plants are exempted from income tax for two years starting from the year of commercial operation, followed by a 50% reduction of the applicable tax rate for the next three years ('tax holiday').

The statutory income tax is assessed on an individual entity basis, based on each of their results of operations. The commencement date of the tax holiday period of each power plant is individually determined.The income tax charges are based on assessable profit for the year and after considering deferred taxation.

In March 2007, the PRC government promulgated the Corporate Income Tax Law (the 'CIT Law') which will be effective from 1 January 2008. The CIT Law will impose a single income tax rate of 25% for both domestic and foreign invested enterprise. The existing Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises (the 'FIE and FE tax laws') and Provisional Regulations of the People's Republic of China on Enterprise Income Tax (collectively referred to as the 'existing tax laws') will be abolished simultaneously. The power plants of the Company and its Subsidiaries applied the tax rates under the existing tax laws in 2007. The CIT Law has provided a 5-year transitional period for those entities that applied FIE and FE tax laws in previous years.

(iii)    Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

However, deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

(r)    Deferred income

Grants from the government are recognised as deferred income at their fair value when there is reasonable assurance that the grants will be received and the Company and its Subsidiaries will comply with all attached conditions.

Government grants relating to the construction and purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the income statement on a straight-line basis over the expected lives of the related assets.

(s)    Derivative financial instruments

Derivatives are initially recognised at fair value on the date of a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument.

Derivative financial instruments that do not qualify for hedge accounting are classified as held-for-trading and carried at fair value, with changes in fair value included in the income statements. Trading derivatives are classified as a current asset or liability.

(t)    Provisions

Provisions for environmental restoration and legal claims are recognised when: the Company and its Subsidiaries have a present legal or constructive obligation as a resut of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

(u)    Revenue and income recognition

Revenue and income are recognised when it is probable that the economic benefits associated with a transaction will flow to the Company and its Subsidiaries and the revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably and on the following bases:

(i)    Operating revenue

Substantially all operating revenue represents the amount of tariffs billed for electricity generated and transmitted to the respective regional or provincial power companies. Operating revenue is recognised upon transmission of electricity and heat to the customers.

(ii)    Interest income

Interest income from deposits placed with banks and other financial institutions is recognised on a time proportion basis taking into account deposit balances and the effective interest method.

(iii)    Dividend income

Dividend income is recognised when the right to receive payment is established.

(v)    Employee benefits

(i)    Pension and other social obligations

The Company and its Subsidiaries have various defined contribution plans in accordance with the local conditions and practices in the municipalities and provinces in which they operate. A defined contribution plan is a pension and/or other social benefits plan under which the Company and its Subsidiaries pay fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods. The contributions are recognised as employee benefit expenses when they are due.

(ii)    Staff housing benefits

The Company provides housing to its employees at preferential prices. The difference between the selling price and the cost of housing is considered a housing benefit to the employees and is recorded as deferred housing benefits which are amortised on a straight-line basis over the estimated average service lives of the relevant employees and included in wages and staff welfare expenses.

During 2005 to 2007, the Company and some of its subsidiaries also started to provide monetary housing subsidies to their employees. These subsidies are considered housing benefits and are recorded as deferred housing benefits which are amortised on a straight-line basis over the estimated service lives of the relevant employees and included in wages and staff welfare expenses.

Apart from the housing benefits and subsidies, the Company and its Subsidiaries also contribute to the state-prescribed housing fund. Such costs are charged to the income statement as incurred.

(w)    Operating lease

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

(x)    Dividends distribution

Dividend distribution is recorded as a liability in the financial statements of the Company and its Subsidiaries in the period in which they are approved by the shareholders of the Company and its Subsidiaries.

(y)    Financial guarantee contracts

The Company issues financial guarantee contracts that transfer significant insurance risk. Financial guarantee contracts are those contracts that require the issuer to make specified payments to reimburse the holders for losses they incur because specified debtors fail to make payments when due in accordance with the original or modified terms of debt instruments.

At each balance sheet date, liability adequacy tests are performed to ensure the adequacy of the contract liabilities. In performing these tests, current best estimates of future contractual cash flows and related administrative expenses are used. Any deficiency is immediately charged to the income statement by establishing a provision for losses arising from these tests.

(z)    Contingencies

Contingent liabilities are recognised in the financial statements when it is probable that a liability will be recognised. Where no provision is recorded, they are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

A contingent asset is not recognised in the financial statements unless virtually certain but disclosed when an inflow of economic benefits is probable.

3.    Financial Risk Management

(a)    Financial risk factors

The activities of the Company and its Subsidiaries expose them to a variety of financial risks including cash flow and fair value interest rate risk, foreign exchange risk, credit risk and liquidity risk. The Company and its Subsidiaries' overall risk management program focus on the unpredictability of financial markets and seek to minimize potential adverse effects on the Company and its Subsidiaries' financial performance.

(i)    Cash flow and fair value interest rate risk

As the Company and its Subsidiaries have no significant interest-bearing assets, the income and operating cash flows of the Company and its Subsidiaries are substantially independent of changes in market interest rates.

The Company and its Subsidiaries' interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Company and its Subsidiaries to cash flow interest rate risk. Bonds and loans issued at fixed rates expose the Company and its Subsidiaries to fair value interest rate risk. The Company and its Subsidiaries manage its cash flow interest rate risk by using 'pay-fixed-receive-floating' interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. The amounts of long-term borrowings at fixed rates and variable rates are disclosed in Note 21.

At 31 December 2007, if interest rates on borrowings had been 50 basis points (2006: 100 basis points) higher/lower with all other variables held constant, interest expense for the year would have been RMB297 million (2006: RMB428 million) higher/lower. The ranges of such sensitivity disclosed above were based on the observation on the historical trend of related interest rates over the past 1 year.

(ii)    Foreign exchange risk

The businesses of the Company and its Subsidiaries are principally conducted in Rmb, except that purchases and financing of certain electricity utility plant equipment are denominated in United States dollars ('USD'). Dividends to shareholders holding H Shares are declared in Rmb and paid in Hong Kong dollars ('HKD'). As at 31 December 2007, substantially all of the Company and its Subsidiaries' assets and liabilities were denominated in Rmb except for cash and bank deposits of approximately Rmb98 million (31 December 2006 - Rmb54 million), short-term loans of approximately Rmb22 million (31 December 2006 - Nil), long-term loans of approximately Rmb2,229 million (31 December 2006 - Rmb2,860 million) and a convertible bond of approximately Rmb108 million (31 December 2006 - Rmb1,112 million), which were denominated in foreign currencies, principally in USD and HKD. The fluctuation of the exchange rates of Rmb against foreign currencies could affect the Company and its Subsidiaries' results of operation.

The management of the Company and its Subsidiaries maintain a close look at the international foreign currency market on the changing exchange rates and takes these into consideration when investing in foreign currency deposits and loans rising.

At 31 December 2007, if RMB had weakened/strengthened by 5% (31 December 2006: 5%) and 5% (31 December 2006: 5%) against USD and HKD with all other variables constant, post-tax profit for the year would have been RMB113 million (2006: RMB196 million) and RMB113 million (2006: RMB196 million) lower/higher respectively. The ranges of such sensitivity disclosed above were based on the observation of management on the historical trend of related exchange rates.

(iii)    Credit risk

Significant portion of the cash and cash equivalents of the Company and its Subsidiaries, are deposited with certain large state-owned banks of the PRC.

The Company and its Subsidiaries sell electricity generated to their sole customers, the power grid companies of the respective provinces or regions where the power plants operate.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The directors consider that the maximum exposure is reflected by the amount of banks and accounts receivable and other current assets, net of provisions for impairment recognised at the balance sheet date.

The Company and its Subsidiaries communicate with their individual grid companies periodically and believe that adequate provision for doubtful accounts have been made in the financial statements. Management does not expect any losses from non-performance by these power grid companies.

The table below shows the bank deposits balance of major banks as at 31 December 2006 and 2007. As majority of the cash was deposited in major state-owned banks, management do not expect any losses from non-performance by these banks.

Counterparty		As at 31 December
	Rating *	2007	2006
Industrial and Commercial Bank of China	A-	2,096,786	4,340,510
China Construction Bank	A-	393,295	16,042
Agricultural Bank of China	NR	296,350	1,838
Bank of China	A-	84,903	5,961
Bank of Communications	BBB	33,679	99
Others		792,472	86,359
Total		3,697,485	4,450,809

*    The source of current credit rating is from Standard & Poor as of 31 December 2007.

(iv)    Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Company and its Subsidiaries aim to maintain flexibility in funding by maintaining availability under committed credit facilities.

Management monitors the liquidity reserve rolling forecasts of the Company and its Subsidiaries which comprises the undrawn borrowing facility and cash and cash equivalents (Note 36 (c) and 18) available as at each month end in meeting its liabilities.

The table below analyses the financial liabilities of the Company and its Subsidiaries and the Company level alone based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.

	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years	Over 5 years
Company and its Subsidiaries
At 31 December 2007
Accounts payable and other liabilities	11,727,364	-	-	-
Short-term loans	23,719,640	-	-	-
Long-term loans	7,022,217	7,510,527	17,897,939	37,760,817
Short-term bonds	3,045,192	-	-	-
	45,514,413	7,510,527	17,897,939	37,760,817
At 31 December 2006
Accounts payable and other liabilities	8,186,778	-	-	-
Short-term loans	9,831,058	-	-	-
Long-term loans	5,213,807	5,404,079	18,538,500	27,775,926
Short-term bonds	1,016,032	-	-	-
	24,247,675	5,404,079	18,538,500	27,775,926
Company
At 31 December 2007
Accounts payable and other liabilities	3,514,311	-	-	-
Short-term loans	5,046,274	-	-	-
Long-term loans	790,804	259,867	779,601	4,827,594
Short-term bonds	3,045,192	-	-	-
	12,396,581	259,867	779,601	4,827,594
At 31 December 2006
Accounts payable and other liabilities	2,310,027	-	-	-
Short-term loans	2,198,888	-	-	-
Long-term loans	440,235	585,235	2,863,556	7,225,562
Short-term bonds	1,016,032	-	-	-
	5,965,182	585,235	2,863,556	7,225,562

The Company and its Subsidiaries' policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of committed credit facilities to meet their commitments regarding construction of power plants. The amount of undrawn borrowing credit facilities at the balance sheet date is disclosed in Note 36(c).

(v)    Price risk

The Company and its Subsidiaries are exposed to equity security price risk because of investments in Daqin Railway Company Limited ('Daqin Railway') held by the Company and its Subsidiaries and classified on the balance sheets as available-for-sale. The Company and its subsidiaries are not exposed to commodity price risk.

Being a strategic investment in nature, the Company closely monitors the pricing trends in the open market, reviews financial statements and attends shareholders' meeting of the investee on a regular basis in determining their long-term strategic stakeholding decisions.

At 31 December 2007, if the market share price of Daqin Railway decreased/increased by 5% (31 December 2006: 5%) with all other variables constant, available-for-sale investment revaluation reserve would have been RMB186 million (31 December 2006:RMB59 million) lower/higher. The range of such sensitivity disclosed above was based on the observation of management on the historical pricing trends and assessments of the financials of the investee.

(b)    Risk related to financial guarantee provided to subsidiaries, associates and jointly controlled entity

The Company issues financial guarantee contracts to its subsidiaries, associates and jointly controlled entities for their borrowings from banks for business development. The risk under any one financial guarantee contract is the possibility that the insured event (default of a specified debtor) occurs and the uncertainty of the amount of the resulting claims. By the nature of such financial guarantee contracts, the risk is predictable.

Experience shows credit risks from specified debtors are relatively remote. The Company maintains a close watch on the financial position and liquidity of the subsidiaries, associates and jointly controlled entities for which financial guarantees have been granted in order to mitigate such risks (Note 2 (y)). The Company and its Subsidiaries take all reasonable steps to ensure that they have appropriate information regarding their claim exposures. Details of financial guarantee contracts are disclosed in Note 39.

(c)    Fair value estimation

The carrying amounts of the Company and its Subsidiaries' cash and cash equivalents, receivables, other current assets, accounts payable and accrued liabilities, short-term loans and other current liabilities approximate their fair values because of the short maturity of these instruments.

Available-for-sale investments are measured at fair value based on their quoted market price in an active market and if there is no quoted market price in an active market and their fair value cannot be reliably measured, they are measured at cost less any provision for impairment (Note 9).

The fair value of long-term loans, including current portions, of approximately Rmb43,204 million (31 December 2006 - Rmb43,189 million) as at 31 December 2007, have been estimated by applying a discounted cash flow approach using interest rates available for comparable instruments. As at the same date, the book value of these liabilities was approximately Rmb48,460 million (31 December 2006 - Rmb43,216 million).

Fair value estimates are made at a specific point of time and are based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(d)    Capital risk management

The Company and its Subsidiaries' objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost or capital.

In order to maintain or adjust the capital structure, the Company and its Subsidiaries may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.

The Company and its Subsidiaries monitor capital on the basis of the asset-to-liability ratio. This ratio is calculated as total liabilities divided by total assets. During 2007, the strategy of the Company and its Subsidiaries was to retain a relatively stable asset-to-liability ratio as prior year. The asset-to-liability ratio of the Company and its Subsidiaries as at 31 December 2007 was 71.88% (31 December 2006: 70.01%).

4.    Critical Accounting Estimates and Judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Company and its Subsidiaries make accounting estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a)    Useful lives of property, plant and equipment

The directors of the Company and its Subsidiaries determine the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on projected wear and tear incurred during power generation. It could change significantly as a result of technical innovations on power generators. Management will adjust the depreciation charge where useful lives vary with previously estimated lives, or will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of property, plant and equipment.

(b)    Carrying value of investments

The carrying value of investments is reviewed for impairment whenever events or changes in circumstances indicate the carrying amounts may not be recoverable. An impairment loss is recognised for the amounts by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and value-in-use. Estimating the recoverable amounts of assets include various assumptions. Where future events do not correspond to such assumptions, the recoverable amounts will need to be revised, and this may have an impact on the amount of investment in associates and available-for-sale investments.

(c)    Estimated impairment of goodwill

The Company and its Subsidiaries test annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2(g). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (Note 12). It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of goodwill.

(d)    Fair value of derivative financial instrument

The fair value of derivative financial instrument is the current bid price and, for an asset to be acquired or liability held, the asking price. If the market for an instrument is not active, fair value is established by using a valuation technique. Valuation techniques include using recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash analysis and option pricing models. Deviations of future cash flows would result in an adjustment to the value of the derivative financial instrument that could have a significant effect on the assets or liabilities arising from the swap arrangement (Note 24).

(e)    Restraint in construction of new power plants

The receiving of the ultimate approval from National Development and Reform Commission ('NDRC') on certain of the Company and its Subsidiaries' power plants construction projects is a critical estimate and judgment of the directors. Such estimate and judgment are based on initial approval documents received as well as their understanding of the projects. Based on historical experience, the directors believe that the Company and its Subsidiaries will receive final approval from NDRC on the related power plant projects. Deviation from the estimate and judgment could result in significant adjustment to the value of the property, plant and equipment.

5.    Property, Plant and Equipment

	Company and its Subsidiaries
	Dam	Buildings	Electricity utility plants in service	Transportation facilities, computer and others	Construction-in-progress	Total
Cost
At 1 January 2006	-	1,891,738	40,768,922	880,091	27,651,859	71,192,610
Transfer in/(out)	852,467	5,710,340	19,279,965	1,069,282	(26,912,054)	-
Additions	-	76,187	259,883	87,138	17,936,707	18,359,915
Disposals	-	(7,203)	(9,307)	(15,629)	-	(32,139)
Acquisition of a subsidiary	-	29,687	-	495,973	3,477	529,137
Adjustment in consolidation scope (a)	-	183,669	-	37,244	3,604,453	3,825,366
At 31 December 2006	852,467	7,884,418	60,299,463	2,554,099	22,284,442	93,874,889
Reclassification	-	666,597	(661,404)	(5,193)	-	-
Transfer in/(out)	1,349,342	1,378,250	2,098,421	299,876	(5,125,889)	-
Additions	-	69,407	210,232	157,188	27,658,044	28,094,871
Disposals	-	(4,987)	(149,746)	(27,218)	(56,231)	(238,182)
Acquisition of subsidiaries (Note 37)	-	479,553	309,660	520,485	940,848	2,250,546
At 31 December 2007	2,201,809	10,473,238	62,106,626	3,499,237	45,701,214	123,982,124
Accumulated depreciation
At 1 January 2006	-	190,609	11,670,117	383,774	-	12,244,500
Charge for the year	12,432	283,473	3,696,480	134,457	-	4,126,842
Written back on disposals	-	(967)	(7,580)	(10,141)	-	(18,688)
Adjustment in consolidation scope (a)	-	10,543	-	5,726	-	16,269
At 31 December 2006	12,432	483,658	15,359,017	513,816	-	16,368,923
Reclassification	-	(26,510)	38,117	(11,607)	-	-
Charge for the year	34,571	478,382	4,259,252	188,186	-	4,960,391
Written back on disposals	-	(6,030)	(74,168)	(21,302)	-	(101,500)
Acquisition of subsidiaries (Note 37)	-	28,804	9,653	130,769	-	169,226
At 31 December 2007	47,003	958,304	19,591,871	799,862	-	21,397,040
Net book value
At 31 December 2007	2,154,806	9,514,934	42,514,755	2,699,375	45,701,214	102,585,084
At 31 December 2006	840,035	7,400,760	44,940,446	2,040,283	22,284,442	77,505,966
At 1 January 2006	-	1,701,129	29,098,805	496,317	27,651,859	58,948,110

Note a:    On 20 July 2006, the Company entered into an agreement with one of the shareholders of Chongqing Datang International Pengshui Hydropower Development Company Limited ('Pengshui Hydropower Company') who owns 12% of the equity interest of Pengshui Hydropower Company. Pursuant to this agreement, that shareholder of Pengshui Hydropower Company will act in concert with the Company in the financial and operation decision making of Pengshui Hydropower Company. Hence, the Company obtained effective control over Pengshui Hydropower Company, which has been accounted for as a subsidiary of the Company since 20 July 2006.

	Company
	Buildings	Electricity utility plants in service	Transportation facilities, computer and others	Construction-in-progress	Total
Cost
At 1 January 2006	896,421	15,675,879	501,388	12,829,340	29,903,028
Sold to a subsidiary	-	(384)	(19,818)	(4,729,194)	(4,749,396)
Transfer in/(out)	1,566,341	5,862,382	16,043	(7,444,766)	-
Additions	2,454	251,273	47,071	6,562,018	6,862,816
Disposals	-	(9,307)	(14,671)	(10,665)	(34,643)
At 31 December 2006	2,465,216	21,779,843	530,013	7,206,733	31,981,805
Reclassification	(39,452)	37,700	1,752	-	-
Sold to a subsidiary	(1,550,443)	(5,850,343)	(19,736)	(443,804)	(7,864,326)
Transfer in/(out)	54,934	538,300	17,564	(610,798)	-
Additions	13,974	35,244	106,971	9,048,460	9,204,649
Disposals	(3,232)	(76,171)	(20,100)	-	(99,503)
As 31 December 2007	940,997	16,464,573	616,464	15,200,591	33,222,625
Accumulated depreciation
At 1 January 2006	131,379	8,470,396	285,982	-	8,887,757
Sold to a subsidiary	-	(7)	(2,312)	-	(2,319)
Charge for the year	80,851	1,245,636	43,571	-	1,370,058
Written back on disposals	-	(7,580)	(9,212)	-	(16,792)
At 31 December 2006	212,230	9,708,445	318,029	-	10,238,704
Reclassification	(3,909)	3,735	174	-	-
Sold to a subsidiary	(79,860)	(363,259)	(5,340)	-	(448,459)
Charge for the year	135,530	1,012,753	44,548	-	1,192,831
Written back on disposals	(966)	(63,738)	(11,736)	-	(76,440)
As 31 December 2007	263,025	10,297,936	345,675	-	10,906,636
Net book value
At 31 December 2007	677,972	6,166,637	270,789	15,200,591	22,315,989
At 31 December 2006	2,252,986	12,071,398	211,984	7,206,733	21,743,101
At 1 January 2006	765,042	7,205,483	215,406	12,829,340	21,015,271

Interest expense of approximately Rmb1,522 million (2006 - approximately Rmb1,014 million) arising from borrowings entered into for the construction of power plants were capitalised during the year and are included in 'Additions' in property, plant and equipment. Capitalisation rates ranging from 5.20% to 7.20% (year end 31 December 2006 - 3.60% to 6.16%) per annum were used, representing the interest expense of the loans used to finance the projects.

Pursuant to Document No. 32 issued by NDRC in November 2004, the State government has tightened its control over the construction of power plants that have not received the relevant government approvals. The directors of the Company and its Subsidiaries have assessed the approval requirements of Document No. 32 and are of the opinion that their power plants under construction that are affected by Document No. 32 will ultimately obtain approval from NDRC.

As at 31 December 2007 and 2006, no plant, property and equipment was pledged to secure the Company and its Subsidiaries' borrowings.

  6.    Investmentsin Subsidiaries

	Company
	2007	2006
Beginning of year	4,759,796	3,518,426
Adjustment in consolidation scope (Note 5(a))	-	248,900
Additional investments	1,783,832	992,470
Withdraw investments	(40,000)	-
End of year	6,503,628	4,759,796

As at 31 December 2007, the Company directly and indirectly holds equity interests in the following subsidiaries, all of which are unlisted and limited liability companies established and operated in the PRC, except for Datang International (Hong Kong) Limited ('Datang Hong Kong'), which is registered in Hong Kong:

Company name	Date of establishment	Registered capital	Attributable interest	Principal activities
Directly holds
Inner Mongolia Datang International Tuoketuo Power Generation Company Limited ('Tuoketuo Power Company')	17 November 1995	1,714,020	60%	Power generation
Jiangxi Datang International Xinyu Power Generation Company Limited ('Xinyu Power Company') (Note 37)	16 June 1997	319,430	100%	Power generation
Tianjin Datang International Panshan Power Generation Company Limited ('Panshan Power Company')	6 August 1997	831,253	75%	Power generation
Huaze Hydropower Company	29 July 1998	59,162	90.43%	Hydropower generation
Shanxi Datang International Shentou Power Generation Company Limited ('Shentou Power Company')	8 December 1998	748,520	60%	Power generation
Shanxi Datang International Yungang Thermal Power Company Limited ('Yungang Thermal Power Company')	14 July 2000	250,000	80%	Power generation and heat supply
Yunnan Datang International Honghe Power Generation Company Limited ('Honghe Power Company')	27 April 2001	414,550	70%	Power generation
Gansu Datang International Liancheng Power Generation Company Limited ('Liancheng Power Company')	26 August 2001	275,500	55%	Power generation
Hebei Datang International Tangshan Thermal Power Company Limited ('Tangshan Thermal Power Company')	21 February 2002	380,264	80%	Power generation and heat supply
Yunnan Datang International Nalan Hydropower Development Company Limited ('Nalan Hydropower Company')	30 October 2002	173,370	51%	Hydropower generation
Yunnan Datang International Lixianjiang Hydropower Development Company Limited ('Lixianjiang Hydropower Company')	8 November 2002	260,000	70%	Hydropower generation
Shanxi Datang International Yuncheng Power Generation Company Limited ('Yuncheng Power Company')	28 March 2003	99,625	80%	Power generation (under construction)
Pengshui Hydropower Company (Note 5a)	28 August 2003	375,000	40%	Hydropower generation(under construction)
Jiangsu Datang International Lusigang Power Generation Company Limited ('Lusigang Power Company')	18 September 2003	132,222	90%	Power generation (under construction)
Inner Mongolia Datang International Hohhot Thermal Power Generation Company Limited ('Hohhot Thermal Company')	8 November 2003	60,000	51%	Power generation (under construction)
Guangdong Datang Internatinal Chaozhou Power Generation Company Limited ('Chaozhou Power Company')	15 November 2003	180,000	75%	Power generation
Fujian Datang International Ningde Power Generation Company Limited ('Ningde Power Company')	2 December 2003	250,000	51%	Power generation
Datang Hong Kong	3 December 2004	23,511	100%	Import of power related fuel and equipment
Chongqing Datang International Wulong Hydropower Development Company Limited ('Wulong Hydropower Company')	24 January 2005	50,000	51%	Hydropower generation  (under construction)
Yunnan Datang International Wenshan Hydropower Development Company Limited ('Wenshan Hydropower Company')	8 April 2005	60,000	60%	Hydropower generation (under construction)
Hebei Datang International Wangtan Power Generation Company Limited	17 January 2006	450,000	70%	Power generation
Chongqing Datang International Shizhu Power Generation Company Limited ('Shizhu Power Company')	13 March 2006	10,000	70%	Power generation (under construction)
Duolun Hydropower Company	28 March 2006	28,520	51%	Hydropower generation and water supply
Sichuan Datang International Ganzi Hydropower Development Company Limited ('Ganzi Hydropower Company')	3 July 2006	50,000	80%	Hydropower generation (under construction)
Datang International Chemical Technology Research Institute Company Limited ('Chemical Technology Research Institute')	17 August 2006	50,000	100%	Coal chemistry related consulting service
Beijing Datang Fuel Company Limited ('Fuel Company')	8 December 2006	80,000	100%	Trading of coal
Inner Mongolia Datang International Zhuozi Wind Power Company Limited ('Zhuozi Wind Power Company')	21 December 2006	20,000	100%	Wind Power generation (under construction)
Datang International Hydropower Development Company Limited	19 April 2007	50,000	100%	Hydropower generation New energy development
Zhejiang Datang Wushashan Power Generation Company Limited ('Wushashan Power Company')	29 May 2007	1,700,000	51%	Power generation
Inner Mongolia Datang International Xilinhaote Mining Company Limited ('Xilinhaote Mining Company')	23 August 2007	100,000	100%	Coal mining (under construction)
Yunnan Datang International Hengjiang Hydropower Development Company Limited	25 July 2007	2,000	70%	Hydropower development (Pre construction)
Inner Mongolia Datang International Renewable Energy Resource Development Company Limited ('Renewable Energy Resource Development Company') *	26 July 2007	10,000	26%	Production of alumina (under construction)
Yunnan Datang International Electric Power Company Limited	31 August 2007	50,000	100%	Power plant construction and operation (pre construction)
Indirectly holds
Inner Mongolia Datang Fuel Company Limited ('Inner Mongolia Datang Fuel Company')	25 July 2007	10,000	100%	Coal sales
Jiangsu Datang shipping Company Limited ('Jiangsu Datang shipping Company')	6 September 2007	100,000	73.5%	ship transportation

*    The Company entered into agreements with two shareholders of Renewable Energy Resource Development Company, who hold 24% and 25% of the equity interest in this company respectively. Pursuant to which the two shareholders will act in concert with the Company in the financial and operation decision making of this company. Therefore the Company obtained effective control over this company and accounted for this company as a subsidiary since 26 July 2007.

7.    Investment in Jointly Controlled Entities

As at 31 December 2007, the Company directly and indirectly held equity interests in the following jointly controlled entities, which are all unlisted limited liability companies established and operated in the PRC:

Company name	Date of establishment	Registered capital	Attributable interest		Principal activities
			direct	indirect
Kailuan (Group) Yuzhou Mining Company Limited ('Yuzhou Mining Company')	26 March 1998	447,520	34%	15%	Coal mining, sales
Inner Mongolia Huineng Changtan Coal Mining Company Limited ('Changtan Company')	15 September 2005	50,000	40%	-	Coal mining, sales (pre-construction)
Hebei Yuzhou Energy Multiple Development Company Limited ('Yuzhou Energy')	29 September 2005	400,000	50%	-	Power generation (pre-construction) and investment in a railway company and a coal mining company
Fujian Ningde Nuclear Power Company Limited ('Ningde Nuclear Power Company')	23 March 2006	200,000	49%	-	Nuclear power plant investment, construction and operation (under construction)

The following amounts represent the Company's share of the assets and liabilities of the jointly controlled entities.

	As at 31 December
	2007	2006
Assets:
Non-current assets	2,760,051	547,620
Current assets	326,625	7,969
	3,086,676	555,589
Liabilities:
Non-current liabilities	762,426	176,500
Current liabilities	1,216,844	132,496
	1,979,270	308,996
Net assets	1,107,406	246,593
Proportionate interests in jointly controlled entities' commitments	210,914	-
Revenue	222,907	27,426
Loss	(63,856)	(17,669)

As at 31 December 2007, the Company had provided guarantees for loans to the jointly controlled entities according to the Company's shareholding percentage therein, totalling approximately Rmb 567 million (31 December 2006 - Rmb292 million).

8.    Investments in Associates

	Company and its Subsidiaries
	2007	2006
Beginning of year	857,421	793,316
Additional investments	121,110	260,987
Share of results after tax	108,393	9,458
Share of fair value gains, net of tax	355,252	114,291
Dividends	(2,270)	(2,017)
Adjustment in consolidation scope (Notes 5(a))	(98,000)	(248,900)
Other scope changes *	-	(69,714)
End of year	1,341,906	857,421

*    At 31 December 2005, Tongmei Datang Multiple Utilisation Thermal Power Company Limited ('Tongmei Thermal Power Company') was an associate of Yungang Thermal Power Company, a subsidiary of the Company. During 2006, Tongmei Thermal Power Company received additional capital injection from its investors except for Yungang Thermal Power Company. Consequently, Yungang Thermal Power Company's share of equity interest decreased from 20% to 14% and ceased to have the ability to cast significant influence over Tongmei Thermal Power Company and the investment in Tongmei Thermal Power Company has since been treated as an available-for-sale investment thereafter.

	Company
	2007	2006
Beginning of year	708,692	696,692
Additional investments	76,110	260,900
Adjustment in consolidation scope (Note 5(a))	(98,000)	(248,900)
End of year	686,802	708,692

The gross amounts of results, assets and liabilities of the associates of the Company and its Subsidiaries are as follows:

	2007	2006
Assets	22,076,634	12,012,663
Liabilities	(17,449,471)	(10,041,697)
Revenue	2,706,560	880,537
Profit/(Loss) for the year	311,499	(17,452)

As at 31 December 2007, the Company and its Subsidiaries held equity interests in the following associates, all of which are unlisted and limited liability companies established and operated in the PRC except Macro Technologies Inc. (Viet Nam) Limited, which is established and operated in Viet Nam:

Company name	Date of establishment	Registered capital	Attributable interest	Principal activities
Directly held
China Datang Group Finance Company Limited ('Datang Finance')	28 November 1984	500,000	20%	Financial services
North China Electric Power Research Institute Company Limited ('NCEPR')	7 December 2000	100,000	30%	Power related technology services
Beijing Texin Datang Heat Company Limited ('Datang Texin')	27 April 2002	172,800	49%	Heat supply
Ningxia Datang International Daba Power Generation Company Limited ('Daba Power Company')	31 October 2003	40,000	45%	Power generation (under construction)
Tongfang Investment Company Limited	16 June 2004	550,000	36.36%	Project investment and management
Tongmei Datang Tashan Coal Mine Company Limited ('Tashan Coal Mine')	15 July 2004	385,790	28%	Coal mining
Tangshan Huaxia Datang Power Fuel Company Limited	10 August 2004	20,000	30%	Trading of power fuel
Tongmei Datang Tashan Power Generation Company Limited ('Tashan Power Company')	10 October 2006	160,000	40%	Power generation (under construction)
Inner Mongolia Datang Tongfang Silicon and Aluminium Technology Company Limited ('Tongfang Silicon and Aluminium')	26 July 2007	10,000	26%	Development and production of silicon and aluminium alloy
Yunnan Datang International Deqin Hydropower Development Company Limited	11 October 2007	2,000	40%	Hydropower construction, generation (pre-construction)
Indirectly held
Qian'an Datang Thermal Power Company Limited ('Qian'an Power Company')	15 November 2005	20,000	36%	Power generation (pre-construction)
Macro Technologies Inc. (Viet Nam) Limited	26 September 2002	360	35%	Technology service related power generation
COSCO Datang Shipping Company Limited ('COSCO Datang')	19 July 2007	100,000	45%	Ship transportation, goods and technology import

9.    Available-for-sale Investments

	Company and its Subsidiaries		Company
	2007	2006	2007	2006
Beginning of the year	1,774,184	306,294	1,700,076	301,900
Acquisition	9,225	-	-	-
Additional investments	17,000	538,150	17,000	538,150
Revaluation surplus	2,933,355	860,026	2,933,355	860,026
Other scope changes (Note 8*)	-	69,714	-	-
End of the year	4,733,764	1,774,184	4,650,431	1,700,076

Company and its Subsidiaries	At 31 December 2006	Acquisition	Additional investment	Revaluation surplus	At 31 December 2007	Principle activities
China Continent Property And Casualty Insurance Company Limited ('CCPC') (a)	103,000	-	-	-	103,000	Property insurance
Daqin Railway (b)	1,356,176	-	-	2,933,355	4,289,531	Railway transportation
Tanggang Railway Company Limited ('Tanggang Railway') (c)	240,000	-	-	-	240,000	Railway transportation
Tongmei Thermal Power Company Limited (d)	69,714	-	-	-	69,714	Power generation (under construction)
Sichuan Dadu River Shuangjiangkou Hydropower Company Limited ('Dadu River Hydropower Company') (e)	-	-	17,000	-	17,000	Hydropower generation (pre-construction)
Xinyu Yangfang Transportation Company Limited (f)	-	9,225	-	-	9,225	Road transportation
Others	5,294	-	-	-	5,294
Total	1,774,184	9,225	17,000	2,933,355	4,733,764

(a)    This represents a 5.81% unlisted equity investment in CCPC (31 December 2006: 5.81%) directly held by the Company.

(b)    This represents 167,429,000 A shares of Daqin Railway, representing 1.29% of Daqin Railway's issued shares (31 December 2006: 1.29%). Daqin Railway issued its A share in Shanghai Stock Exchange on 1 August 2006. As at 31 December 2007, its share price is Rmb25.62 per share.

(c)    This represents a 14.97% unlisted equity investment held by the Company (31 December 2006: 14.97%).

(d)    This represents a 14% unlisted equity investment held by Yungang Thermal Power Company, a subsidiary of the Company (Note 8*).

(e)    This represents a 17% unlisted equity interest acquired by the Company in 2007.

(f)    This represents a 11.25% unlisted equity interest held by Xinyu Power Company, a subsidiary acquired by the Company in 2007.

(g)    Except for the investment in Daqin Railway, all other investments do not have quoted market prices in an active market. Based on the limited forecast financial information regarding these investments available to the Company and its Subsidiaries, the directors are of the opinion that there are no appropriate methods to reliably measure their fair values. Accordingly, these investments are stated at cost and are subject to review for impairment loss.

There were no provisions for impairment on available-for-sale investments for the years ended 31 December 2007 and 2006.

10.    Land Use Right

Land use rights represent the Company and its Subsidiaries' prepayments for the leasehold land located in the PRC which are held on leases between 37 years to 70 years.

The movement is as follows:

	Company and its Subsidiaries	Company
At 1 January 2006
Cost	492,139	288,982
Accumulated amortisation	(63,692)	(62,871)
Net book value	428,447	226,111
Year ended 31 December 2006
Opening net book value	428,447	226,111
Addition	213,623	3,519
Amortisation charge	(9,471)	(5,783)
Closing net book value	632,599	223,847
At 31 December 2006
Cost	705,762	292,501
Accumulated amortisation	(73,163)	(68,654)
Net book value	632,599	223,847
Year ended 31 December 2007
Opening net book value	632,599	223,847
Addition	201,239	113,722
Amortisation charge	(19,903)	(6,370)
Closing net book value	813,935	331,199
At 31 December 2007
Cost	907,001	406,223
Accumulated amortisation	(93,066)	(75,024)
Net book value	813,935	331,199
Company and its Subsidiaries
	31 December 2007	31 December 2006
Outside of Hong Kong, held on:
Leases between 10 to 50 years	788,658	305,547
Leases over 50 years	25,277	25,652
	813,935	331,199

11.    Deferred Housing Benefits

Pursuant to the 'Proposal on Further Reform of Housing Policy in Urban Areas' of the State and the implementation schemes for staff quarters issued by the relevant provincial and municipal governments, the Company implemented a scheme for selling staff quarters in 1999. Under the scheme, the Company provides housing benefits to its staff to buy staff quarters from the Company at preferential prices. The offer price is calculated based on their length of service and position pursuant to the prevailing local regulations. The deferred housing benefits represent the difference between the net book value of the staff quarters sold and the proceeds collected from the employees, and are amortised over the remaining average service life of the relevant employees.

During 2005 to 2007, the Company and some of its subsidiaries carried out another housing benefit scheme - 'Monetary Housing Benefit Scheme' in accordance with the approval from Housing Reform Office of the local government. Under the Monetary Housing Benefit Scheme, the Company and its Subsidiaries will provide monetary housing subsidies to those employees whose houses do not meet the standard they should have enjoyed based on the duration of service and their posts and ranks. The subsidy payment amounted to approximately Rmb 43,875,000 in 2007 (2006: Rmb180,120,000) and is being amortised over the shorter of a 10-year period or the residual service period prior to their retirements.

	Company and its Subsidiaries
	2007	2006
Cost
Beginning of year	618,657	438,537
Addition	43,875	180,120
End of year	662,532	618,657
Accumulated amortisation
Beginning of year	(318,425)	(250,070)
Charge for the year	(83,162)	(68,355)
End of year	(401,587)	(318,425)
Net book value
End of year	260,945	300,232
Beginning of year	300,232	188,467
	Company
	2007	2006
Cost
Beginning of year	454,630	438,537
Addition	-	16,093
End of year	454,630	454,630
Accumulated amortisation
Beginning of year	(300,850)	(250,070)
Charge for the year	(61,606)	(50,780)
End of year	(362,456)	(300,850)
Net book value
End of year	92,174	153,780
Beginning of year	153,780	188,467

12.    Intangible Assets

	Company and its Subsidiaries				Company
	Goodwill	Resource use rights	Computer software	Total	Goodwill	Computer software	Total
Year ended 31 December 2006
Beginning of year	33,561	19,667	9,076	62,304	33,561	-	33,561
Additions	9,883	8,646	8,558	27,087	-	-	-
Amortisation for the year	-	(2,648)	(3,167)	(5,815)	-	-	-
End of year	43,444	25,665	14,467	83,576	33,561	-	33,561
At 31 December 2006
Cost	43,444	28,646	18,458	90,548	33,561	-	33,561
Accumulated amortisation	-	(2,981)	(3,991)	(6,972)	-	-	-
Net book amount	43,444	25,665	14,467	83,576	33,561	-	33,561
Year ended 31 December 2007
Beginning of year	43,444	25,665	14,467	83,576	33,561	-	33,561
Additions	105,263	2,113	20,843	128,219	-	7,002	7,002
Amortisation for the year	-	(3,183)	(6,422)	(9,605)	-	(1,670)	(1,670)
End of year	148,707	24,595	28,888	202,190	33,561	5,332	38,893
At 31 December 2007
Cost	148,707	30,759	39,301	218,767	33,561	7,002	40,563
Accumulated amortisation	-	(6,164)	(10,413)	(16,577)	-	(1,670)	(1,670)
Net book amount	148,707	24,595	28,888	202,190	33,561	5,332	38,893

  The movement of goodwill is further detailed based on the individual cash generating unit allocated as follows:

	At 31 December 2006	Addition	At 31 December 2007
Zhangjiakou Power Plant No. 2 generator	33,561	-	33,561
Shayu Railway Company(Note 37)	9,883	-	9,883
Hohhot Thermal Company (Note 37)	-	902	902
Xinyu Power Company(Note 37)	-	104,361	104,361
	43,444	105,263	148,707

The directors believe that there is no impairment on the goodwill.

Impairment tests for goodwill of Xinyu Power Plant

Goodwill is allocated to the cash-generating units of the Company and its Subsidiaries identified according to their operations in different regions. Significant portion of the carrying amount of goodwill is allocated to Xinyu Power Company.

The recoverable amount of goodwill of Xinyu Power Company is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. The Company expects cash flows beyond the five-year period will be similar to that of the fifth year based on existing production capacity.

Pre-tax discount rate used for value-in-use calculations is 10.47%.

Key assumptions used for value-in-use calculations include the expected tariff rates, demands of electricity in specific regions where these power plants are located and fuel cost. Management determined these key assumptions based on past performance and its expectations on market development. The discount rates used are pre-tax and reflect specific risks relating to Xinyu Power Company.

Based on the assessments, no goodwill was impaired.

13.    Long-term Entrusted Loans to Subsidiaries

	Company
	As at 31 December
	2007	2006
Entrusted loan receivable from subsidiaries	1,223,657	375,562

On 30 September 2006, the Company provided a loan amounting to USD 50 million to Shentou Power Company through Bank of China, bearing interest at 6-month LIBOR plus 1% with a duration of 89 months. There are no pledges or guarantees on this loan. As at 31 December 2007, the balance was approximately Rmb322,031,000(31 December 2006- 375,562,000), comprising of a principal balance of Rmb321,403,000(31 December 2006- 374,818,000) and an interest receivable balance of Rmb628,000(31 December 2006- 744,000).

On 30 March 2007, the Company provided a loan amounting to Rmb1,000,000,000 to Lusigang Power Company through Datang Finance, bearing interest at basis rate minus 10% with a duration of 2 years. There are no pledges or guarantees on this loan. As at 31 December 2007, the balance was approximately Rmb901,626,000, comprising of a principal balance of Rmb900,000,000 and an interest receivable balance of Rmb1,626,000.

Based on the management's assessment, as of 31 December 2006 and 31 December 2007, the fair value of the entrusted loans approximated their carrying value and no impairment was provided as all the related subsidiaries do not have default history and no other indicators of impairment were noted.

14.    Inventories

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Fuel	562,459	391,005	63,667	108,006
Spare parts and consumable supplies	488,722	415,960	134,148	169,647
	1,051,181	806,965	197,815	277,653

As at 31 December 2007 and 2006, all inventories were carried at cost.

15.    Short-term Entrusted Loans to Subsidiaries and Associates

	Company and its Subsidiaries
	As at 31 December
	2007		2006
	Principal and interest	Including: interest	Principal and interest	Including interest
Entrusted loan to Tongfang Silicon and Aluminium	47,751	96	-	-

	Company
	As at 31 December
	2007		2006
	Principal and interest	Including: interest	Principal and interest	Including: interest
Entrusted loans to:
Tuoketuo Power Company	-	-	400,636	636
Ningde Power Company	-	-	600,953	953
Lixianjiang Hydropower Company	1,002,005	2,005	-	-
Shizhu Power Company	81,563	163	-	-
Xilinhaote Mining Company	229,459	459	-	-
Hohhot Thermal Company	462,832	672	-	-
Renewable Energy Resource Development Company	40,080	80	-	-
Tongfang Silicon and Aluminium	47,751	96	-	-
Xinyu Power Company	400,802	802	-	-
	2,264,492	4,277	1,001,589	1,589

As at 31 December 2006 and 31 December 2007, all the short-term entrusted loans were due within one year and bearing interest at 5.20% and 6.56%, respectively. There are no pledges or guarantees on these loans.

As of 31 December 2006 and 31 December 2007, the fair value of short-term entrusted loans approximated to their carrying value due to the short maturity. No impairment was provided as all the related subsidiaries do not have default history and no other indicators of impairment were noted.

16.    Prepayments and Other Receivables

Prepayments and other receivables comprised the following:

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Prepayment for
- Fuel purchase	62,551	332,389	2,296	145,150
- Construction	661,578	114,749	905,339	89,894
- Land use right	5,000	36,000	-	36,000
Deposit for investment guarantee to local government	-	100,000	-	100,000
Staff house maintenance fund deposit in local government body governing housing management	27,726	35,197	26,042	34,159
Investment in entities not yet legally registered at 31 December	40,000	27,950	40,000	-
Receivables from sale of materials	139,711	19,483	13,024	12,099
Prepaid utility and other miscellaneous expenses	15,106	19,707	2,000	15,052
Advance to employees for travelling	15,623	11,527	1,868	3,251
Others	50,817	22,317	6,332	38,141
Total	1,018,112	719,319	996,901	473,746

Prepayments and other receivables do not contain significant impaired assets. Provision for doubtful accounts are analysed as follows:

	Company and its subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Beginning and end of the year	1,835	1,835	1,833	1,833

As at 31 December 2007, other receivables of RMB7.6million (2006: RMB31.6million) were past due but not impaired. These receivables were contracts bounded with repayment terms on demand. The ageing analysis of these other receivables was as follows:

	Company and its subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Between 1 to 2 years	7,289	-	-	-
Between 2 to 3 years	77	31,635	-	-
Over 3 years	250	-	-	-
	7,616	31,635	-	-

As at 31 December 2007, other receivables of Rmb 1,835,000 (2006: Rmb 1,835,000) were impaired. The individually impaired receivables have been long outstanding without any repayment agreements in place or possibility of renegotiation. The ageing of these other receivables was as follows:

	Company and its subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Between 1 to 2 years	-	-	-	-
Between 2 to 3 years	-	-	-	-
Over 3 years	1,835	1,835	1,833	1,833
	1,835	1,835	1,833	1,833

17.    Accounts Receivable

Accounts receivable of the Company and its Subsidiaries primarily represent receivables from the respective regional or provincial grid companies for tariff revenue. These receivables are unsecured and non-interest bearing. As at 31 December 2007 and 2006, all tariff revenue receivables from the respective grid companies were aged within three months, and no doubtful debts were considered necessary.

Accounts receivable comprised the following:

	The Company and its Subsidiaries		The Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Accounts receivable	4,945,475	3,337,529	1,792,788	1,386,805
Notes receivable	747,917	11,132	708,000	-
	5,693,392	3,348,661	2,500,788	1,386,805
Less: provision for doubtful accounts	-	-	-	-
	5,693,392	3,348,661	2,500,788	1,386,805

The Company and its Subsidiaries usually grant about one month's credit period to local power grid customers from the end of the month in which the sales are made.

Ageing analysis of accounts receivable was as follows:

	The Company and its Subsidiaries		The Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Within 1 year	5,676,185	3,347,951	2,483,581	1,386,115
Between 1 to 2 years	17,207	690	17,207	690
	5,693,392	3,348,641	2,500,788	1,386,805

As at 31 December 2007, there was no indication of impairment relating to accounts receivable which were not past due and no provision was made. Accounts receivable of RMB 17 million (2006: RMB 0.69 million) were past due but not impaired. This amount is mainly related to a receivable from Datang Texin, an associate of the Company, and the management believes that these receivables can be recovered in the future period. The ageing analysis of the past-due accounts receivable was as follows:

	The Company and its subsidiaries		The Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Between 1 to 2 years	17,207	690	17,207	690
	17,207	690	17,207	690

18.    Cash and Bank Deposits

	Company and its Subsidiaries		Company
	As of 31 December		As of 31 December
	2007	2006	2007	2006
Bank deposits	2,989,547	4,450,799	1,164,647	4,104,810
Deposits with Datang Finance	600,296	10	-	2
Cash on hand	838	475	210	175
Other monetary assets	58,142	-	-	-
Cash and cash equivalent	3,648,823	4,451,284	1,164,857	4,104,987
Short-term bank deposits with original maturity over 3 months	49,500	-	-	-
	3,698,323	4,451,284	1,164,857	4,104,987

The effective interest rates on the Rmb and foreign currency cash deposits ranged from 0.72% to 1.71% per annum (2006 - 0.72% to 1.44% per annum) and 1.00% to 5.05% per annum (2006 - 1.00% to 5.15% per annum), respectively. These deposits have an average maturity of 20 days (2006 - 18 days).

As of 31 December 2007, other monetary assets mainly represent deposits for bank note payables.

19.    Share Capital

As at 31 December 2007, the authorised share capital of the Company was Rmb11,734,083,473, divided into 11,734,083,473 shares of Rmb1 each. The movement of issued and fully paid up share capital of the Company during the year is as follows:

	31 December 2006		31 December 2007
	Number of shares	Addition Number of shares	Number of shares	Share capital	Share interest
	'000	'000	'000	'000	%
A Shares	4,232,180	4,232,180	8,464,360	8,464,360	72.13%
H Shares	1,430,669	1,839,054	3,269,723	3,269,723	27.87%
	5,662,849	6,071,234	11,734,083	11,734,083	100.00%

The addition of share capital during the year ended 31 December was a result of (a) bonus issue of 10 shares for every 10 shares outstanding, as a part of the profit appropriation for year 2006 (Note 34); and (b) conversion of convertible bonds during the year.

	31 December 2005		31 December 2006
	Number of shares	Addition/(deduction) Number of shares	Number of shares	Share capital	Share interest
	'000	'000	'000	'000	%
Domestic shares in form of legal person shares	3,732,180	(3,732,180)	-	-	-
A Shares	-	4,232,180	4,232,180	4,232,180	74.74%
H Shares	1,430,669	-	1,430,669	1,430,669	25.26%
	5,162,849	500,000	5,662,849	5,662,849	100.00%

On 13 December 2006, the Company issued 500,000,000 domestic shares and received a cash proceeds of Rmb3,278,824,335. On 20 December 2006, all of the Company's domestic shares were listed on the Shanghai Stock Exchange as A Shares.

As at 31 December 2007, 4,051,599,760 A Shares had certain timing restriction on their sales (31 December 2006: 4,020,180,000). The increase of the number of A Shares that had certain timing restriction was due to the impact of the bonus issue of 10 bonus shares for every 10 shares held (Note 34).

A Shares and H Shares rank pari passu with each other.

20.    Reserves

(a)    Capital reserve

Capital reserve mainly comprised: (i) the difference between the nominal amount of the domestic shares issued and the fair value of the net assets injected into the Company during its formation and also proceeds from the issue of H Shares and A shares in excess of their par value, net of expenses related to the issuance of the shares in 1997 and 2006, and (ii) the premium from convertible bonds converted to shares in 2007 (Note 26). This reserve is non-distributable.

(b)    Statutory surplus reserve

In accordance with the relevant laws and regulations of the PRC and the Company and its Subsidiaries' articles of association, the Company and its Subsidiaries are required to appropriate 10% of its net profit, after offsetting any prior years' losses, to the statutory surplus reserve. When the balance of such a reserve reaches 50% of the Company's share capital, any further appropriation is optional.

The statutory surplus reserve can be used to offset prior years' losses, if any, and may be converted into share capital by issuing new shares to shareholders in proportion to their existing shareholding or by increasing the par value of the shares currently held by them, provided that the remaining balance of the reserve after such an issue is not less than 25% of share capital. The statutory surplus reserve is non-distributable.

(c)    Discretionary surplus reserve

Pursuant to the Company and its Subsidiaries' articles of association, the appropriation of profit to the discretionary surplus reserve and its utilisation are made in accordance with the recommendation of the Board of Directors and is subject to shareholders' approval at their general meeting.

On 26 March 2008, the Board of Directors proposed to appropriate all the residual amount of the profit attributable to the equity holders of the Company for the year ended 31 December 2007, after the aforementioned appropriate of statutory surplus reserve and dividends, to the discretionary surplus reserve. The proposed profit appropriation is subject to the shareholders' approval in their next general meeting.

On 30 March 2007, the Board of Directors proposed an appropriation of profit of approximately Rmb 1,020,774,000 to the discretionary surplus reserve for the year ended 31 December 2006. The proposed profit appropriation was approved by the shareholders in their general meeting dated on 29 June 2007.

The discretionary surplus reserve can be used to offset prior years' losses, if any, and may be converted into share capital by issuing new shares to shareholders in proportion to their existing shareholding or by increasing the par value of the shares currently held by them. The discretionary surplus reserve is distributable.

(d)    Restricted reserve

Pursuant to documents Cai Qi [2000] 295, Cai Qi [2000] 878 and Cai Kuai [2001] 5 issued by Ministry of Finance ('MOF'), deferred housing benefits that were approved by the government, before the effective date of Cai Qi [2005] 295, i.e. 6 September 2000, should be directly deducted from shareholders' equity starting from 2001. Accordingly, approximately Rmb258,881,000 which represented the deferred housing benefits balance in relation to staff quarters sold and approved by the government before September 2000 has been directly deducted from the statutory public welfare fund under PRC accounting standards and regulations ('PRC GAAP'). Consequent to the monetary housing benefit scheme implemented by the Company and its Subsidiaries, payments which represented the monetary subsidies paid to the employees who started work before 31 December 1998, amounting to Rmb43,875,000 in 2007 (2006: Rmb180,120,000), have been directly deducted from retained earnings and the statutory surplus reserve under PRC GAAP.

For financial statements prepared in accordance with IFRS, deferred housing benefits are amortised over the estimated average service lives of the relevant employees (Note 11). To reflect the reduction of the retained earnings and statutory surplus reserve an amount equivalent to the corresponding deferred housing benefits balance was transferred from retained earnings and statutory surplus reserve to a restricted reserve specifically set up for this purpose. Upon amortisation of the deferred housing benefits, an amount equivalent to the amortisation for the period is transferred from the restricted reserve to retained earnings. For the year ended 31 December 2007, no amount had been transferred from statutory surplus reserve to restricted reserve (2006 - approximately Rmb37,435,000 had been transferred from statutory surplus reserve to restricted reserve) and approximately Rmb56,619,000 had been transferred from retained earnings to restricted reserve (2006 - approximately Rmb26,409,000 had been transferred from restricted reserve to retained earnings).

(e)    Other reserve

Other reserve comprised the value of the equity component of the convertible bonds issued on 9 September 2003 (Note 26) and the variance in the fair value of the available-for-sale investment in Daqin Railway (Note 9), net of deferred income tax.

The value of the equity component was determined on the issue of the bonds and does not change in subsequent periods until the conversion of the bonds. The fair value of investment in Daqin Railway is determined based on the quoted market price of its A Share on the last trading date of 2007.

(f)    Basis for profit appropriations

In accordance with document Cai Kuai Zi [1995] 31 issued by MOF, appropriations to statutory reserves are to be determined based on the financial statements prepared in accordance with the PRC GAAP.

In addition, in accordance with the Company's articles of association, the Company declares dividends based on the lower of retained earnings as reported in accordance with PRC GAAP and those reported in accordance with IFRS after deducting current year's appropriations to other reserves. As at 31 December 2007, the amount of retained earnings as determined under IFRS was less than that determined under PRC GAAP by approximately Rmb61 million (As at 31 December 2006, the amount of retained earnings as determined under IFRS was more than that determined under PRC GAAP by approximately Rmb185 million).

The profit attributable to shareholders for the year ended 31 December 2007 includes a profit of approximately Rmb3,003,356,000 (2006 - Rmb2,456,206,000) that has been dealt with in the accounts of the Company.

(g)    Due to the implementation of new China Accounting Standards since 1 January 2007, retrospective adjustments have been made to the Company and its Subsidiaries financial statements prepared under new China Accounting Standards according to the related transitional provisions, including the consequent adjustments to the opening balance of of statutory surplus reserve.

21.    Long-term Loans

Long-term loans include the long-term bank loans and other long-term loans as follows:

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Long-term bank loans (a)	46,785,887	41,490,805	4,292,700	8,000,000
Other long-term loans (b)	1,544,557	1,725,580	-	-
Entrusted loan (c)	130,000	-	-	-
	48,460,444	43,216,385	4,292,700	8,000,000
Less: Amounts due within one year included under current liabilities	(4,187,569)	(2,942,804)	(500,000)	-
	44,272,875	40,273,581	3,792,700	8,000,000

(a)    Long-term bank loans

As at 31 December 2007, approximately Rmb888 million (31 December 2006 - Rmb1,324 million) and Rmb45,898 million (31 December 2006 - Rmb40,167 million) of the long-term bank loans were denominated in USD and Rmb, respectively. Except for approximately Rmb22,189 million (31 December 2006 - Rmb17,492 million) long-term bank loans pledged by right of collection of tariff, all long-term bank loans were unsecured and bore interest at variable rates ranging from 3.60% to 7.41% (2006 - 3.60% to 6.39%) per annum, except for an USD denominated long-term loan amounted to Rmb767 million (31 December 2006 - Rmb1,148 million) bore a fixed interest rate of 4.14% per annum (31 December 2006 - 4.14%). Approximately Rmb1,561 million (31 December 2006 - Rmb2,830 million) of the loans of the subsidiaries were guaranteed by the minority shareholders according to their shareholding percentage in the subsidiaries.

The long-term bank loans were drawn to finance the construction of electricity utility plants. The maturity of these loans was as follows:

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Amounts repayable
Within one year	3,947,979	2,842,149	500,000	-
Between one and two years	4,281,422	3,406,069	-	645,000
Between two and five years	11,143,321	13,291,658	-	1,690,000
Over five years	27,413,165	21,950,929	3,792,700	5,665,000
	46,785,887	41,490,805	4,292,700	8,000,000

(b)    Other long-term loans

As at 31 December 2007, approximately Rmb1,341million (31 December 2006 - Rmb1,536 million) of other long-term loans were borrowed by the Ministry of Finance ('MOF') from International Bank for Reconstruction and Development ('World Bank') and on-lent to the Company's subsidiary, Tuoketuo Power Company, for the construction of electricity utility plant. The other Rmb204 million (31 December 2006 - Rmb190 million) of other long-term loans were borrowed from Datang Finance and on-lent to the Company's subsidiary, Lusigang Power Company, for the construction of electricity utility plants. The maturity of these loans is as follows:

	Company and its Subsidiaries
	As at 31 December
	2007	2006
Amounts repayable
Within one year	109,590	100,655
Between one and two years	315,552	303,913
Between two and five years	377,794	366,355
Over five years	741,621	954,657
	1,544,557	1,725,580

As at 31 December 2007, approximately Rmb1,341 million (31 December 2006 - Rmb1,536 million) of other long-term loans were denominated in USD and the rest of other long-term loans were all denominated in Rmb.

The USD denominated other long-term loans bore interest at the rate of LIBOR Base Rate plus LIBOR Total Spread as defined in the loan agreement between MOF and World Bank, which approximated 5.52% to 5.75% per annum during the year ended 31 December 2007 (2006 - 3.99% to 5.75% per annum). In accordance with a guarantee agreement between North China Grid Company ('NCG') and MOF, NCG agreed to guarantee 60% of the loan balances borrowed from World Bank (Note 32(ii)(l)). As at 31 December 2007, approximately Rmb805 million (31 December 2006 - Rmb922million) of the loans were guaranteed by NCG, while the Company provided a counter-guarantee to NCG in respect of this same amount. According to the agreement entered into between NCG and China Datang in 2004, China Datang guarantees the loans in place of NCG.

As of 31 December 2007, the Rmb denominated other long-term loans bore interest at variable rates ranging from 5.67% to 5.91% (31 December 2006 - 5.67%) .

(c)    Entrusted loan

As at 31 December 2007, entrusted loan represented a loan borrowed by Hohhot Thermal Company from Tuketuo Guoneng Investment Company Limited through Bank of Communication Beijing Branch, bearing interest at 5.76% per annum, with an duration of 2 years and expires on 28 March 2008. This loan has no pledges or guarantees.

22.    Short-term Loans

Short-term loans, as summarised below, were drawn by the Company and its Subsidiaries mainly for the construction of electricity utility plants:

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Short-term bank loans	20,630,029	8,489,296	4,800,000	2,100,000
Other short-term loan	1,978,501	811,200	-	-
	22,608,530	9,300,496	4,800,000	2,100,000

As at 31 December 2007, approximately Rmb22 million (31 December 2006 - Nil) and Rmb20,608 million (31 December 2006 - Rmb8,489 million) of the short-term bank loans were denominated in USD and Rmb, respectively. All short-term bank loans were unsecured and bore interest at variable rates ranging from 4.96% to 7.29% (2006 - 4.70% to 5.67%) per annum. Approximately Rmb295 million (31 December 2006 - Rmb178 million) of short-term bank loans were guaranteed by the minority shareholders according to their shareholding percentage in the subsidiaries.

As at 31 December 2007, other short-term loans represented short-term loans from non-bank financial institutions including Datang Finance, Huazhong Power Finance Co.,Ltd ('Huazhong Power Finance'), Dayawan Nuclear Power Finance Company and Tianjin Jinneng Investment Company ('Tianjin Jinneng'), amounting to Rmb1,926,500,000, Rmb30,000,000, Rmb 22,001,000 and nil, respectively (31 December 2007:Rmb761,200,000, nil, nil, Rmb 50,000,000, respectively). Except loan from Huazhong Power Finance was guaranteed by Jiangxi Province Investment Group(Note 37(2)) and bore interest rate at 7.29%, all other short-term loans were unsecured and bore interest at variable rates ranging from 5.51% to 6.72% (2006 - 4.86% to 5.51%) per annum with no pledges or guarantees.From January 2008,The company will guarantee the loan borrowed from Huazhong Power Finance in place of Jiangxi ProvinceInvestment Group.

23.    Deferred Income

The Company and its Subsidiaries received government grants from local environmental protection authorities for undertaking approved environmental protection projects. Amortisation of deferred income for the year amounted to Rmb8,502,329(2006: Rmb497,144).

24.    Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities and their ageing are detailed as follows:

As at 31 December 2007	Company and its Subsidiaries					Company
	Less than 1 year	Between 1 and 2 years	Between 2 and 3 years	Over 3 years	Total	Less than 1 year	Between 1 and 2 years	Between 2 and 3 years	Over 3 years	Total
Construction costs and deposits payable to contractors	5,344,655	820,313	110,110	75,367	6,350,445	1,657,447	214,799	26,888	787	1,899,921
Fuel and material costs payable	2,866,625	87,274	26,352	2,880	2,983,131	577,824	9,910	24,012	1,507	613,253
Salary and welfare payable	337,995	-	-	-	337,995	163,049	-	-	-	163,049
Interest rate swap liability	51,970	-	-	-	51,970	-	-	-	-	-
Interest payable	247,128	-	-	-	247,128	77,623	-	-	-	77,623
Assets acquisition payable	361,184	-	-	-	361,184	243,126	-	-	-	243,126
Others	408,218	2,774	428	417	411,837	110,642	1,311	125	-	112,078
	9,617,775	910,361	136,890	78,664	10,743,690	2,829,711	226,020	51,025	2,294	3,109,050
As at 31 December 2006	Company and its Subsidiaries					Company
	Less than 1 year	Between 1 and 2 years	Between 2 and 3 years	Over 3 years	Total	Less than 1 year	Between 1 and 2 years	Between 2 and 3 years	Over 3 years	Total
Construction costs and deposits payable to contractors	4,712,175	486,267	116,490	78,257	5,393,189	1,062,365	37,926	1,071	7,665	1,109,027
Fuel and material costs payable	1,488,542	10,760	1,499	-	1,500,801	574,247	2,950	1,495	-	578,692
Salary and welfare payable	147,078	-	-	-	147,078	88,846	-	-	-	88,846
Interest rate swap liability	12,766	-	-	-	12,766	-	-	-	-	-
Interest payable	137,480	-	-	-	137,480	27,957	-	-	-	27,957
Assets acquisition payable	50,546	-	-	-	50,546	-	-	-	-	-
Others	300,985	56,780	24,015	24,809	406,589	162,786	42,264	23,593	14,446	243,089
	6,849,572	553,807	142,004	103,066	7,648,449	1,916,201	83,140	26,159	22,111	2,047,611

As at 31 December 2007, other than certain deposits for construction which were aged over 1 year, substantially all accounts payable were aged within one year.

As at 31 December 2007, the notional principal amount of the outstanding interest rate swap contract of Tuoketuo Power Company was USD186,955,486 (31 December 2006 - USD200,615,486), and the fixed rate and floating rate were 5.15% (31 December 2006 - 5.15%) and 5.39% (31 December 2005 - 
5.61%) (LIBOR offered by British Bankers' Association on 12 July 2007), respectively. This swap contract expires in January 2012.

25.    Short-term Bonds

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Short-term bonds	3,000,000	1,000,000	3,000,000	1,000,000

As at 31 December 2007, short-term bonds represented bonds issued by the Company on 7 June 2007 at par value with an interest rate at 3.48% per annum and a duration within one year.

As at 31 December 2006, short-term bonds represented bonds issued by the Company on 15 September 2006 at par value with an interest rate at 3.59% per annum and a duration of 270 days.

There are no pledges or guarantees on the bonds.

  26.    Current Portion of Long-term Loans and Bonds

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Long-term loans due within one year(Note 21)	4,187,569	2,942,804	500,000	-
Convertible bonds due within one year*	108,499	-	108,499	-
	4,296,068	2,942,804	608,499	-

*    Convertible bonds due within one year

On 9 September 2003, the Company issued USD153,800,000, 0.75% convertible bond at a nominal value of USD153,800,000. The bonds will mature in 5 years from the issue date at their nominal value of USD153,800,000 unless converted into the Company's ordinary shares at the holder's option at the announced conversion price, which initially was HKD5.558 per share. On 18 July 2007, the Company adjusted the conversion price to HKD2.6 per share. The conversion price is subject to adjustment in certain circumstances with a fixed rate of exchange applicable on conversion of the convertible bonds of HKD7.799 per USD1.

The fair value of the liability component and the equity component were determined on the issue of the bonds. The fair value of the liability component was calculated using a market interest rate for equivalent non-convertible bonds. The residual amount, representing the value of the equity component, is included in other reserve, net of deferred income tax.

In subsequent periods, the liability component continues to be presented on the amortised cost basis, until extinguished on conversion or maturity of the bonds. The equity component is determined on the issue of the bond and is not changed in subsequent periods until conversion of the bonds.

The movement of the liability component of the convertible bonds is as follows:

	Company and its Subsidiaries/ Company
	2007	2006
Liability component at beginning of the year	1,111,810	1,098,758
Convert into ordinary share	(1,000,076)	-
Interest expense	21,321	57,649
Interest payments	(3,511)	(9,233)
Exchange rate adjustment	(21,045)	(35,364)
Liability component at end of the year	108,499	1,111,810
Less: Amounts due within one year included under current liabilities	(108,499)	-
	-	1,111,810

The carrying amount of the liability component as at 31 December 2007 of the convertible bonds approximated its fair value.

Interest expense on the bonds is calculated on the effective yield basis of 5.51% (2006 - 5.51%) per annum by applying the effective interest rate for an equivalent non-convertible bonds to the liability component of the convertible bond after considering the effect of issuance cost.

27.    Employee Benefits

Retirement benefits

The Company and its Subsidiaries are required to make specific contributions to the state-sponsored retirement plan at a rate of 20% (2006 - 18% to 20%) of the specified salaries of the PRC employees. The PRC government is responsible for the pension liability to the retired employees. The employees of the Company and its Subsidiaries are entitled to a monthly pension upon their retirements.

In addition, the Company and its Subsidiaries have implemented a supplementary defined contribution retirement scheme. Under this scheme, the employees of the Company and its Subsidiaries make a specified contribution based on their service duration. The Company and its Subsidiaries are required to make a contribution equal to 2 times of the staff's contributions. The Company and its Subsidiaries may, at their discretion, provide additional contributions to the retirement fund depending on the operating results of the year. The employees will receive the total contributions, and any returns thereon, upon retirement.

The total retirement cost incurred by the Company and its Subsidiaries during the year ended 31 December 2007 pursuant to these arrangements amounted to approximately Rmb172,678,000 (2006 - Rmb109,371,000).

Housing benefits

Apart from the housing benefits and monetary subsidies (Note 11), in accordance with the PRC housing reform regulations, the Company and its Subsidiaries are required to make contributions to the state-sponsored housing fund at rate 10% to 20% (2006 - 10% to 20%) of the specified salary amounts of the PRC employees. At the same time, the employees are required to make a contribution equal to the Company and its Subsidiaries' contributions out of their salaries. The employees are entitled to claim the entire sum of the fund under certain specified withdrawal circumstances. The Company and its Subsidiaries have no further obligations for housing benefits beyond the above contributions made. For the year ended 31 December 2007, the Company and its Subsidiaries provided approximately Rmb120,754,000 (2006 - Rmb87,610,000) to the fund.

28.    Operating Revenue and Segment Information

The Company and it Subsidiaries primarily conduct their business within one business segment - the business of power generation in the PRC. Pursuant to the Power Purchase Agreements entered into between the Company and its Subsidiaries and State Grid Corporation of China ('SGCC') and the regional or provincial grid companies, the Company and its Subsidiaries are required to sell their entire net generation of electricity to these grid companies at an approved tariff rate. For the years ended 31 December 2007 and 2006, all of the electricity generated by the Company and its Subsidiaries was sold to SGCC and regional or provincial grid companies. As power generation by the Company and its Subsidiaries are subject to similar business risks, no segment information has been prepared for the year end 31 December 2006 and 2007. The Company and its Subsidiaries also operate within one geographical segment in the PRC. Accordingly, no geographical segment data is presented.

	2007	2006
Sales of electricity	32,483,179	24,685,461
Heat supply	145,452	122,491
Sales of coal	95,985	-
Transportation service fees	27,227	27,266
Sales of material	7,848	48,879
Others	69,614	14,523
	32,829,305	24,898,620

29.    Operating Profit

Operating profit was determined after charging (crediting) the following:

	2007	2006
Loss on disposals of property, plant and equipment	60,646	1,269
Personnel expenses
- Wages	1,134,620	796,662
- Retirement benefits	158,510	105,808
- Staff housing benefits	196,751	151,606
- Other staff costs	150,167	182,404
Depreciation	4,960,391	4,126,842
- Capitalised as construction-in-progress	30,254	17,571
- Included as operating expenses	4,930,137	4,109,271
Auditors' remuneration	11,860	13,044
Cost of inventories
- Fuel	15,262,965	10,663,815
- Spare parts and consumable supplies	316,388	164,827
Operating lease
- Buildings	8,888	13,516
Dividend income	(51,899)	(28,091)
- From listed investments	(50,229)	(27,927)
- From unlisted investments	(1,670)	(164)
Donation	4,481	73,702

30.    Finance Costs

	2007	2006
Interest expense on:
Short-term bank loans	708,172	363,961
Other short-term loans	37,074	44,892
Long-term bank loans
- wholly repayable within five years	1,847,700	173,200
- repayable beyond five years	881,319	1,784,640
Other long-term loans
- wholly repayable within five years	121,333	5,122
- repayable beyond five years	7,210	84,512
Convertible bonds	21,321	57,649
Short-term bonds	67,846	10,471
Discount interest of notes payable	43,038	3,518
	3,735,013	2,527,965
Less: amount capitalised in property, plant and equipment	(1,522,434)	(1,014,377)
	2,212,579	1,513,588
Exchange gain, net	(188,093)	(144,489)
Fair value loss/(gain) on an interest rate swap *	36,018	(23,647)
Other	19,614	13,261
	2,080,118	1,358,713

*    To hedge against its interest rate risk on long-term loans, Tuoketuo Power Company has entered into an interest rate swap, which is carried at fair value. However, since the swap does not qualify as an effective hedge under IAS 39, the variance in its fair value is included in the income statement.

31.    Taxation

	2007	2006
Current income tax	1,509,719	1,119,547
Deferred income tax	(63,276)	(38,291)
Tax charge	1,446,443	1,081,256

The statutory income tax is assessed on an individual entity basis, based on each of results of operations of the Company and its Subsidiaries. The commencement dates of the tax holiday period of each power plant is individually determined. The income tax charges are based on assessable profit for the year and after considering deferred taxation.

The applicable EIT tax rates of the group companies during the 2007 and 2006 are detailed as follows:

	Note	2007	2006
Tuoketuo Power Company	(a), (b)	7.5%	7.5%
Liancheng Power Company	(a), (b)	7.5%	-
Honghe Power Company	(a), (b)	-	-
Lixianjiang Hydropower Company	(a), (b)	-	15%
Nanlan Hydropower Company	(a), (b)	-	-
Fuel Company	(c)	-	33%
Chemical Technology Research Institute	(d)	-	15%
Datang Hong Kong	(e)	17.5%	17.5%
Other group companies		33%	33%

(a)    Pursuant to document Guo Ban Fa [2001] 73 issued by State Council of PRC and document Cai Shui [2001] 202 issued by the State Administration of Taxation of PRC, Tuoketuo Power Company, Liancheng Power Company, Honghe Power Company, Lixianjiang Hydropower Company and Nalan Hydropower Company, being enterprises set up in the western area of the PRC and engaged in a business encouraged by the government, have been granted a tax concession to pay PRC income tax at a preferential rate of 15% from 2001 to 2010.

(b)    As newly set up domestic invested enterprises engaged in power generation in the western area of the PRC, Tuoketuo Power Company, Liancheng Power Company, Honghe Power Company, Lixianjiang Hydropower Company and Nalan Hydropower Company are exempted from PRC enterprise income tax during the first and second years of operation and have been granted a tax concession to pay PRC enterprise income tax at 50% of the preferential rate from the third to fifth year of operation.

(c)    Pursuant to document Cai Shui Zi [1994] 001 issued by MOF and as approved by State Tax Bureau of Beijing Xicheng District, as a newly set up commercial enterprise, Fuel Company is exempted from PRC enterprise income tax in the first operating year.

(d)    Pursuant to document Cai Shui Zi [2006] 88 issued by MOF, Chemical Technology Research Institute, being a high and new technology industrial development enterprise set up in the high and new technology industrial development zone approved by the State Council, and as approved by Tax Bureau of Beijing Fengtai District, is exempted from PRC income tax in the first two operating years and then applies 15% being the preferential rate from the third year, counting from the first year when this Company starts to make profit.

(e)    Datang Hong Kong, as a company registered in Hong Kong, is subject to local income tax levied at 17.5%(2006: 17.5%).

(f)    The taxation of the Company and its Subsidiaries differs from the theoretical amount that would arise by the statutory tax rate in the PRC. The reconciliation is shown as follows:

	2007	2006
Profit before taxation	5,836,541	4,663,609
Tax computed at the statutory tax rate of 33%	1,926,059	1,538,991
Tax effect of additionally deductible items and non deductible items, net	37,116	(13,536)
The new income tax law impact on the deferred income tax balance	14,591	-
Preferential tax rate impact on the income of subsidiaries	(531,323)	(444,199)
Tax charge	1,446,443	1,081,256

  (g)    The movement of deferred income tax assets during the year is as follows:

	Company and its Subsidiaries
	2007								2006
	Preliminary expenses	Depreciation	Fair value of an interest rate swap	Deductible losses accumulated	Government Grant	Gain form transaction with subsidiary	Others	Total	Total
Beginning of year	34,448	35,135	19,365	54,021	-	-	-	142,969	119,303
Reclassification	10,212	-	-	(10,212)	-	-	-	-	-
Charged/(Credited) to income statement	2,278	(3,538)	2,169	(43,809)	17,269	37,218	2,236	13,823	23,666
End of year	46,938	31,597	21,534	-	17,269	37,218	2,236	156,792	142,969

	Company
	2007	2006
	Government grant	Total
Beginning of year	-	19,604
Charged/(Credited) to income statement	14,613	(19,604)
End of year	14,613	-

(h)    The movement in deferred income tax liabilities during the year is as follows:

	Company and its Subsidiaries
	2007										2006
	Deferred housing benefits	Capitalised borrowing costs	Convertible bond	Fair value gain in equity	Safty fund	Future development fund	Depreciation	Assets appraisal surplus	others	Total	Total
Beginning of year	3,497	104,102	30,274	283,809	-	-	-	-	-	421,682	1152,498
Acquisition	-	-	-	-	2,436	4,484	20,966	100,353	-	128,239	-
Credited/(Charged) to income statement	6,159	(48,905)	(6,371)	-	(1,159)	(2,085)	4,620	(1,848)	136	(49,453)	(14,625)
Charged to equity	-	-	(23,052)	664,537	-	-	-	-	-	641,485	283,809
End of year	9,656	55,197	851	948,346	1,277	2,399	25,586	98,505	136	1,141,953	421,682

	Company
	2007					2006
	Deferred housing benefits	Capitalised borrowing costs	Convertible bond	Fair value gain in equity	Total	Total
Beginning of year	3,975	73,047	30,274	283,809	391,105	118,313
Credited/(Charged) to income statement	(2,607)	(37,774)	(6,371)	-	(46,752)	(11,017)
Credited/(Charged) to equity	-	-	(23,052)	664,537	641,485	283,809
End of year	1,368	35,273	851	948,346	985,838	391,105

The amounts of deferred income tax assets and deferred income tax liabilities shown in the consolidated balance sheets include the following:

	Company and its Subsidiaries
	2007	2006
Deferred income tax assets:
- Deferred income tax assets to be recovered after more than 12 months	138,207	85,550
- Deferred income tax assets to be recovered within 12 months	18,585	57,419
	156,792	142,969
Deferred income tax liabilities:
- Deferred income tax liabilities to be settled after more than 12 months	1,132,443	400,654
- Deferred income tax liabilities to be settled within 12 months	9,510	21,028
	1,141,953	421,682

The amounts of deferred income tax assets and deferred income tax liabilities shown in the company balance sheets include the following:

	Company
	2007	2006
Deferred income tax assets:
- Deferred income tax assets to be recovered after more than 12 months	14,613	-
	14,613	-
Deferred income tax liabilities:
- Deferred income tax liabilities to be settled after more than 12 months	983,618	370,965
- Deferred income tax liabilities to be settled within 12 months	2,220	20,140
	985,838	391,105

32.    Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, control the other party or exercise significant influence over the other party in making financial and operation decisions. Parties are also considered to be related if they are subject to common control. Members of key management of the Company and its Subsidiaries are also considered as related parties.

(i)    The related parties of the Company and its Subsidiaries are as follows:

Names of related parties	Nature of relationship
Related parties in which the Company has no equity interest:
China Datang	Substantial Shareholder
Tianjin Jinneng	Shareholder
Beijing Energy Investment Company	Shareholder
Hebei Construction Investment Company	Shareholder
Datang Gansu Power Generation Co., Ltd. Liancheng Power Plant ('Datang Gansu Liancheng Power')	Subsidiary of the Substantial Shareholder
Datang Gansu Power Generation Co., Ltd. Gangu Power Plant ('Datang Gansu Gangu Power')	Subsidiary of the Substantial Shareholder
China National Water Resources and Electric Power Materials and equipment Co., Ltd. ('China Water Resources and Power')	Subsidiary of the Substantial Shareholder
China Datang Technologies and Engineering Co., Ltd. ('Datang Technologies')	Subsidiary of the Substantial Shareholder
Hunan Datang Enertek Technology Co., Ltd. ('Datang Enertek')	Subsidiary of the Substantial Shareholder
Other State-owned Enterprises	Related parties of the Company
Related parties in which the Company has equity interest:
NCEPR	Associate
Datang Texin	Associate
Daba Power Company	Associate
Tashan Coal Mine	Associate
Tashan Power Company	Associate
Datang Finance	Associate
Tongfang Silicon and Aluminium	Associate

(ii)    The following is a summary of the major related party transactions undertaken by the Company and its Subsidiaries during the year:

	Note	2007	2006
Ash disposal fee to China Datang	(a)	57,892	57,892
Rental fee to China Datang	(b)	7,228	7,228
Technical supervision, assistance and testing service fee to NCEPR	(c)	45,734	53,626
Heat revenue from Datang Texin	(d)	56,243	43,767
Fuel management fee to China Datang	(e)	11,190	5,151
Interest expense to Datang Finance	(f)	115,376	49,915
Interest expense to Tianjin Jinneng	(g)	5,348	99
Rental fee to Datang Gansu Liancheng Power	(h)	15,000	15,000
Substitute power generation revenue from Datang Gansu Liancheng Power	(i)	20,160	-
Purchase of materials from Datang Gansu Liancheng Power		11,300	3,098
Purchase of power generation quota from Datang Gansu Gangu Power	(j)	26,011	-
Purchase of equipment from DatangTechnologies		28,501	71,688
Sales of pipeline to China Water Resources and Power		12,736	-
Commission for equipment purchase from China Water Resources and Power		7,436	8,479
Purchase of equipment from Datang Enertek		1,730	1,026
Interest income from Tongfang Silicon and Aluminium		153	-
Interest income from Datang Finance	(k)	400	31

(a)    The ash disposal fee was determined based on ash disposal operating costs, taxes, depreciation of ash yards and a profit margin at 5% to 10% of the total costs incurred by China Datang.

(b)    The Company has leased buildings of 141,671 (2006 - 141,671) square metres from China Datang for an annual rental rate of approximately Rmb7 million in 2007 (2006 - Rmb7 million).

(c)    NCEPR provides technical supervision, assistance and testing services to the Company and its Subsidiaries in relation to the power generation equipment and facilities. Pursuant to the Technical Supervision Services Contract, such services are charged at a pre-determined rate based on the installed capacity of the Company and its Subsidiaries.

(d)    Part of the Company's sales of heat for the year was made to Datang Texin. As at 31 December 2007, the balance due from Datang Texin amounted to Rmb 91,011,000 (31 December 2006 - Rmb44,456,000), which was unsecured, non-interest bearing and included in accounts receivable.

(e)    During 2007 and 2006, China Datang provided fuel management and developing services to the Company. These services were charged at Rmb0.30 (2006 - Rmb0.30) per ton of coal purchased. As at 31 December 2007, the balance due to China Datang amounted to Rmb 6,471,000 (31 December 2006 - Rmb3,134,000).

(f)    As discussed in Note 21(b) and 22, as at 31 December 2007, the Company and its Subsidiaries had a loan payable to Datang Finance totalling approximately Rmb2,130 million (31 December 2006 - Rmb951 million).

(g)    As discussed in Note 22, in 2006, Tianjin Jinneng provided loan to Shentou Power Company, the Company's subsidiary, through Shenzhen Development Bank Tianjin Beichen Branch.

(h)    In 2007, Liancheng Power Company leased public facilities from Datang Gansu Power for an annual rental rate of approximately Rmb15 million in 2007(2006 - 15 million).As at 31 December 2007 and 2006, there is no such payable to Datang Gansu Liancheng Power.

(i)    In 2007, Liancheng Power Company obtained substitute power generation revenue from Datang Gansu Power. As at 31 December 2007, the balance due from China Datang Gansu Liancheng Power amounted to Rmb 2,961,000(31 December 2006 - nil).

(j)    In 2007, The Company and its Subsidiaries purchased certain amount of power generation quota from Datang Gansu Gangu Power based on the price approved by Gansu Provincial Grid Company.

(k)    As at 31 December 2007, the deposits of the Company and its Subsidiaries in Datang Finance amounted to Rmb600,296,000 (31 December 2006 - Rmb10,000), with interest rate of 0.72% to1.71% per annum (31 December 2006 - 0.72%). For the year ended 31 December 2007, interest income from Datang Finance amounted to approximately Rmb 400,000 (year ended 31 December 2006-Rmb 31,000)

(l)    As discussed in Note 21 (b) above, NCG had provided guarantees to the Company and its Subsidiaries' loans totalling approximately Rmb 805 million as at 31 December 2007 (31 December 2006 - Rmb922 million). Pursuant to the Entities Transfer Agreement, China Datang will assume all of NCG's obligations in relation to the guarantees provided for by the Company and its Subsidiaries.

(m)    As at 31 December 2007, the Company had provided guarantees for loans to its associates, Datang Texin, Tashan Coal Mine and Tashan Power Gereration according to the Company's shareholding percentage in its associates totalling approximately Rmb862 million (31 December 2006 - Rmb1,085 million).

(n)    The PRC government controls a significant portion of the assets and a substantial number of entities in the PRC. The PRC government is the Company's ultimate controlling party. Apart from the transactions disclosed above, the Company and its Subsidiaries also conduct a majority of its business with state-controlled entities.

Many state-controlled entities have a multi-layered and complicated corporate structure and the ownership structures change over time as a result of transfers and privatization programs. Nevertheless, management believes that the Company and its Subsidiaries have provided meaningful disclosure of related party transactions, with inclusion of the following disclosures of material transactions and balances with the state-controlled entities other then the aforementioned related party companies.

	2007	2006
Transactions with other state-controlled entities
Sales of electricity	32,483,179	24,685,461
Sales of heat	145,452	122,491
Interest income from state-owned banks/non-bank financial institution	68,022	24,674
Interest expense on loans borrowed from state-owned banks/non-bank financial institution	3,638,644	2,321,801
Purchases of property, plant and equipment (including construction-in-progress)	13,458,609	23,452,082
Purchases of fuel	13,931,157	8,906,505
Purchases of spare parts and consumable supplies	282,477	209,587
Drawdown of short-term loans from state-owned banks/non-bank financial institution	37,863,609	16,909,037
Repayments of short-term loans from state-owned banks/non-bank financial institution	22,855,496	13,592,821
Drawdown of long-term loans borrowed from state-owned banks/non-bank financial institution	13,182,148	17,174,776
Repayments of long-term loans borrowed from state-owned banks/non-bank financial institution	9,103,156	7,828,064
Other charges
- Repairs and maintenance services	141,517	285,731
- Transportation expenses	74,751	46,274

Assets and liabilities with other state-controlled entities	2007		2006
	Company and its Subsidiaries	Company	Company and its Subsidiaries	Company
Short-term bank deposits and cash at bank in state-owned banks/non-bank financial institution	3,698,323	1,164,857	4,450,799	4,104,810
Prepayments for purchase of property, plant and equipment	3,431,348	2,124,131	1,239,915	1,031,587
Accounts payable for purchase of fuel	655,288	94,403	635,286	296,849
Accounts payable for purchase of spare parts and consumable supplies	115,014	13,179	94,968	19,897
Accounts payable for purchase of property, plant and equipment	2,220,440	589,678	510,033	68,823
Balance of short-term loans and bonds borrowed from state-owned banks/non-bank financial institution	25,608,530	7,800,000	9,250,496	2,100,000
Balance of long-term loans borrowed from state-owned banks/non-bank financial institution (including current portion)	47,119,387	4,292,700	41,680,305	8,000,000

	2007	2006
Guaranteed loans
Loans guaranteed by
- NCG	804,634	921,648
- Other state-controlled entities	1,856,578	3,008,081

(iii)    Key management compensation

	2007	2006
Basic salaries and allowances	854	693
Bonus	1,853	1,834
Retirement benefits	166	215
Other benefits	1,849	1,232

33.    Emoluments of Directors, Supervisors and Senior Managements

(a)    Details of directors' and supervisors' emoluments

The remuneration of every director and supervisor for the year ended 31 December 2007 is set out below:

Directors and supervisors	Fees	Basic Salaries and Allowances	Bonus	Retirement benefits	Others	Total
Directors:
Zhai Ruoyu	-	-	-	-	-	-
Zhang Yi	-	173	246	28	407	854
Yang Hongming*	-	106	284	26	382	798
Hu Shengmu	-	-	-	-	-	-
Fang Qinghai	-	-	-	-	-	-
Zhou Gang*	-	78	92	5	47	222
Liu Haixia	-	-	-	-	-	-
Guan Tiangang	-	-	-	-	-	-
Su Tiegang	-	-	-	-	-	-
Ye Yonghui	-	-	-	-	-	-
Li Gengsheng	-	-	-	-	-	-
Xie Songlin	72	-	-	-	-	72
Yu Changchun	72	-	-	-	-	72
Liu Chaoan	72	-	-	-	-	72
Xia Qing	72	-	-	-	-	72
Subtotal	288	357	622	59	836	2,162
Supervisors:
Zhang Jie	-	106	284	26	278	694
Zhang Wantuo	-	-	-	-	-
Fu Guoqiang	-	-	-	-	-	-
Shi Xiaofan	-	103	261	26	328	718
Subtotal	-	209	545	52	606	1,412
Total	288	566	1,167	111	1,442	3,574

The remuneration of every Director and Supervisor for the year ended 31 December 2006 is set out below:

Directors and Supervisors	Fees	Basic Salaries and Allowances	Bonus	Retirement benefits	Others	Total
Directors:
Zhai Ruoyu	-	-	-	-	-	-
Zhang Yi	-	173	384	46	348	951
Yang Hongming	-	158	367	43	313	881
Hu Shengmu	-	-	-	-	-	-
Fang Qinghai	-	-	-	-	-	-
Liu Hiaxia	-	-	-	-	-	-
Guan Tiangang	-	-	-	-	-	-
Su Tiegang	-	-	-	-	-	-
Ye Yonghui	-	-	-	-	-	-
Tong Yunshang	-	-	-	-	-	-
Xie Songlin	72	-	-	-	-	72
Xu Daping	72	-	-	-	-	72
Yu Changchun	72	-	-	-	-	72
Liu Chaoan	72	-	-	-	-	72
Xia Qing	72	-	-	-	-	72
Subtotal	360	331	751	89	661	2,192
Supervisors:
Zhang Jie	-	158	367	43	208	776
Zhang Wantuo	-	-	-	-	-	-
Fu Guoqiang	-	-	-	-	-	-
Shi Xiaofan	-	155	342	42	263	802
Subtotal	-	313	709	85	471	1,578
Total	360	644	1,460	174	1,132	3,770

*    Mr. Zhou Gang became a member of sixth session of the Board while Mr. Yang Hongming ceased to be the director of the Company since July, 2007.

There is no special bonus for directors and supervisors for the year ended 31 December 2007 (year ended 31 December 2006 - Nil).

No director or supervisor had waived or agreed to waive any emoluments for the year ended 31 December 2007 (year ended 31 December 2006 - Nil).

(b)    Details of emoluments paid to the five highest paid individuals including directors and senior managements

The five individuals whose emoluments were the highest for the year include one (2006: two) director. The emoluments of the five individuals whose emoluments were the highest are as followings:

	2007	2006
Basic salaries and allowances	593	802
Bonus	1,359	1,827
Retirement benefits	132	216
Other benefits	1,703	1,370

For the years ended 31 December 2007 and 2006, no emoluments were paid to directors, supervisors or the five highest paid individuals as an inducement to join or upon joining the Company or as compensation for loss of office.

For the years ended 31 December 2007 and 2006, the annual emoluments paid to each of the directors, supervisors and the five highest paid individual did not exceed HKD1,000,000.

34.    Dividends

On 26 March 2008, the Board of Directors proposed a dividend per share of Rmb0.12 Based on the total number of shares as at 31 December 2007, the proposed dividends approximate Rmb1,408,090,000.

In the general meeting held on 29 June 2007, the shareholders approved a cash dividend amounting to Rmb1,348,714,000 in respect of the year ended 31 December 2006. In addition, the shareholders also approved a bonus issue of 10 shares for every 10 shares outstanding by way of capitalisation of capital reserve fund.

On 23 July 2007, the Company announced the payment of final cash dividends of Rmb1,348,714,000 and a bonus issue of 10 shares for every 10 shares outstanding, with reference to the total 5,844,880,580 outstanding ordinary shares as at 18 July 2007. The cash dividend per share is Rmb0.23075 and the ordinary shares in issue is to be increased by 5,844,880,580 shares. The increase in the number of ordinary shares will result in an increase in share capital of the Company by Rmb5,844,880,580 with a corresponding amount of reduction in capital reserve.

35.    Earnings per Share

The calculation of basic earnings per share for the year ended 31 December 2007 was based on the profit attributable to equity holders of the Company of approximately Rmb3,406,233,000 (2006-Rmb2,777,781,000) and on the weighted average number of 11,612,449,000 shares (2006-10,375,014,000 shares, taken into consider of the bonus issue of to bonus shares for every 10 shares held (Note 34)) in issue during the year.

The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The convertible debt is assumed to have been converted into ordinary shares and the net profit is adjusted to eliminate the interest expenses less the tax effect.

	2007	2006
Profit attributable to equity holders of Company	3,406,233	2,777,781
Interest expense on convertible bonds (net of tax)	3,915	38,625
Profit used to determine diluted earnings per share	3,410,148	2,816,406
Weighted average number of ordinary shares in issue (shares in thousand) (Note (a))	11,612,449	10,375,014
Adjustments for assumed conversion of convertible debt (shares in thousand) (Note (a) (b))	45,087	444,254
Weighted average number of ordinary shares for diluted earnings per share (shares in thousand)	11,657,536	10,819,268
Diluted earnings per share (Rmb)	0.29	0.26

Note:

(a)    The number of shares of 2006 included the impact of the bonus issue of 10 bonus shares for every 10 share held, which was implemented in 2007 (Note 34).

(b)    As at 31 December 2007, the conversion price was HKD2.6 per share (31 December 2006- HKD5.4 per share).

36.    Notes to Statement of Cash Flows

(a)    Reconciliation of profit before taxation to cash generated from operations

	Note	2007	2001
Profit before taxation		5,836,541	4,663,609
Adjustments for:
Depreciation of property, plant and equipment		4,930,137	4,109,271
Amortisation of land use right and intangible assets		29,508	15,286
Fair value loss/(gain) on an interest rate swap	30*	36,018	(23,647)
Amortisation of staff housing benefits		83,162	68,355
Loss on disposals of property, plant and equipment		60,646	1,269
Amortisation of Deferred expense		-	(1,325)
Interest income		(68,022)	(24,674)
Interest expenses		2,229,243	1,510,070
Exchange gain		(188,093)	(144,489)
Dividend income		(51,899)	(28,091)
Interest income from loans lent to an associate		(153)	-
Share of loss from associates		(108,393)	(9,458)
Operating profit before working capital changes		12,788,695	10,136,176
Decrease/(Increase) in current assets:
Inventories		(189,031)	(146,168)
Other receivables and current assets		184,483	(356,541)
Accounts receivable		(621,657)	(2,037,781)
Notes receivable		(719,699)	63,303
Increase/(decrease) in current liabilities:
Accounts payable and accrued liabilities		423,033	739,817
Taxes payable		(60,297)	107,937
Cash provided by operations		11,805,527	8,506,743

(b)    Significant non-cash transactions

The Company and its Subsidiaries incurred additional payables of approximately Rmb957million to contractors and equipment suppliers for construction-in-progress for the year ended 31 December 2007 (year ended 31 December 2006 - Rmb2,133 million).

(c)    Undrawn borrowing facilities

The undrawn borrowing facilities in Rmb and USD available to settle the Company's capital commitments for investments in subsidiaries and associates and construction of electricity utility plants as at 31 December 2007, subject to certain conditions, were as follows.

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Expiring within one year	12,975,450	19,216,590	12,975,450	19,216,590
Expiring beyond one year	42,093,782	46,574,682	42,093,782	46,574,682
	55,069,232	65,791,272	55,069,232	65,791,272

37.    Acquisition

(1)    Acquisition of Hohhot Thermal Company

On 15 January 2007, the Company entered into agreements with Tuoketuo Yunlong Energy Investment Company Limited, pursuant to which the Company acquired 51% interest in Hohhot Thermal Company. This acquisition became effective on 15 January 2007.

The details of net assets acquired, goodwill and the related cash flow arising from this acquisition are as follows:

	Acquiree's carrying value	Fair value*
Cash and cash equivalents	151,665	151,665
Inventories and other current assets	108,140	108,140
Property, plant and equipment	731,706	731,706
Current liabilities	(240,581)	(240,581)
Non-current liabilities	(740,930)	(740,930)
Net assets	10,000	10,000
Net assets acquired(51%)		5,100
Add: goodwill		902
Total consideration paid		(6,002)
Cash inflow from the acquiree		77,349
Net cash inflow on acquisition		71,347

*    Since the acquiree was still under construction upon the acquisition, the directors deemed that its carrying value approximated its fair value.

The acquired business contributed nil revenue and net loss of Rmb3 million to the consolidated operation results. If the acquisition had occurred on 1 January 2007, the consolidated revenue would have been Rmb32,829 million and net profit attributable to the equity holders of the Company would have been Rmb3,406 million.

(2)    Acquisition of Xinyu Power Company

On 1 October 2007, the Company entered into an agreement with Jiangxi Provincial Investment Group Corporation, pursuant to which the Company acquired 100% interest in Xinyu Power Company. This acquisition became effective on 1 October 2007

The acquired business contributed revenues of Rmb148 million and net profit of Rmb3 million to the consolidated operating results for the period from1 October 2007 to 31 December 2007. If the acquisition had occurred on 1 January 2007, the consolidated revenue would have been Rmb33,310 million, and profit attributable to the equity holders of the Company would have been Rmb3,801million. These amounts have been calculated using the group's accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied from 1 January 2007, together with the consequential tax effects.

The details of net assets acquired, goodwill and the related cash flow arising from this acquisition are as follows:

	Acquiree's carrying value	Fair value
Cash and cash equivalents	7,991	7,991
Inventories and other current assets	114,562	114,562
Property, plant and equipment	413,099	767,799
Other non-current assets	13,893	14,888
Current liabilities	(904,634)	(904,634)
Non-current liabilities	(15,508)	(104,967)
Net assets	(370,597)	(104,361)
Net assets acquired (100%)		(104,361)
Add: goodwill		104,361
Total consideration paid		(0.001)
Cash inflow on acquisition		7,991
Net cash inflow on acquisition		7,991

(3)    Acquisition of Yuzhou Mining Company

On 31 July 2007, the Company and Yuzhou Energy, its jointly controlled entity, entered into an agreement with Kailuan (Group) Company Limited, pursuant to which the Company and Yuzhou Energy acquired 34% and 30%, respectively, of the equity interest in Yuzhou Mining Company. This acquisition became effective on 31 July 2007.

Since the Company holds 50% of Yuzhou Energy's equity interest, the Company and its Subsidiaries obtained 49% of the equity interest in Yuzhou Mining Company in aggregate.

The acquired business contributed revenues of Rmb195 million and net loss of Rmb28 million to the consolidated operating results for the period from 31 July 2007 to 31 December 2007. If the acquisition had occurred on 1 January 2007, the consolidated revenue would have been Rmb33,125 million, and net profit attributable to the equity holders of the Company would have been Rmb3,465 million. These amounts have been calculated using the group's accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 January 2007, together with the consequential tax effects.

The details of net assets acquired, goodwill and the related cash flow arising from this acquisition are as follows:

	Acquiree's carrying value	Fair value
Cash and cash equivalents	285,264	285,264
Inventories and other current assets	218,244	218,244
Property, plant and equipment	1,830,728	1,919,083
Other non-current liabilities	18,341	18,916
Current liabilities	(563,405)	(563,405)
Non-current liabilities	(737,257)	(759,490)
Net assets	1,051,915	1,118,612
Net assets acquired (49%)		548,120
Add: negative goodwill		(57,957)
Total consideration		490,163
In which cash consideration paid		(139,775)
cash inflow on acquisition		139,779
Net cash inflow on acquisition		4

The negative goodwill has been included in other operating costs in the income statement for the year ended 31 December 2007.

(4)    Acquisition of Shayu Railway Company

Yuzhou Energy entered into agreements with Kailuan (Group) Company Limited, Yuzhou Mining Company Limited and Zhangjiakou Construction and Investment Company Limited, under which Yuzhou Energy acquired 81.27% interest in Shayu Railway Company, with a total consideration of Rmb577 million. This acquisition became effective on 1 January 2006.

	Acquiree's carrying value *	Fair value *
Cash and cash equivalents	2,004	2,004
Inventories and other current assets	6,646	6,646
Property, plant and equipment	470,853	529,138
Accounts payable and accrued liabilities	(194,690)	(194,690)
Net assets	284,813	343,098
Minority interests	(53,346)	(64,262)
Net assets acquired (81.27%)	231,467	278,836
Add: Goodwill		9,883
Total consideration paid		(288,719)
Less: Cash inflow from the acquiree		2,004
Payment on behalf of the acquiree in 2005		5,750
Net cash outflow on acquisition		(280,965)

*    Since Yuzhou Energy is proportionately consolidated by the Company, all the amounts presented in this table represent 50% of the amounts recorded in Yuzhou Energy's financial statements.

The acquired business contributed revenues of Rmb 27 million and net loss of Rmb 13 million to the consolidated operating results for the year ended 31 December 2006. These amounts have been calculated using the group's accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 January 2006, together with the consequential tax effects.

(5)    Acquisition of Pengshui Hydropower Company

As explained in Note 5 a, The Company obtained effective control over Pengshui Hydropower Company, on 20 July 2006 via an act-in-concert agreement with another shareholder of Pengshui Hydropower Company. Hence, Pengshui Hydropower Company was derecognised from an associate company and recognised as a subsidiary of the Company, which constitutes a business combination under IFRS 3

The details of net assets acquired arising from this acquisition are as follows:

	Acquiree's carrying value	Fair value *
Cash and cash equivalents	172	172
Inventories and other current assets	6,669	6,669
Property, plant and equipment	3,859,397	3,859,397
Other non-current assets	5,968	5,968
Current liabilities	(811,376)	(811,376)
Non-current liabilities	(2,563,030)	(2,563,030)
Net assets	497,800	497,800
Net assets acquired		248,900
Total consideration - value of investment in associate that was derecognised upon this business combination (Note 8)		(248,900)
Cash inflow on acquisition		172
Net cash inflow on acquisition		172

*    Since Pengshui Hydropower Company was still under construction upon the acquisition, the directors deemed that its carrying value approximated its fair value.

The acquired business contributed nil revenue and net loss of Rmb0.3 million to the consolidated operating results for the year ended 31 December 2006. If the acquisition had occurred on 1 January 2006, its contribution would be nil revenue and net loss of Rmb0.3 million for the year ended 31 December 2006.

38.    Commitments

(a)    Capital commitments

As at 31 December 2007, the Company had capital commitments related to investments in subsidiaries and associates amounted to Rmb13,423million (31 December 2006 - Rmb12,906 million). In addition, capital commitments of the Company and its Subsidiaries in relation to the construction and renovation of the electricity utility plants not provided for in the balance sheets were as follows:

	Company and its Subsidiaries		Company
	2007	2006	2007	2006
Authorised and contracted for	34,619,857	21,972,218	8,691,599	9,502,768
Authorised but not contracted for	19,999,208	19,484,254	1,021,334	-
	54,619,065	41,456,472	9,712,933	9,502,768

A substantial portion of the above capital commitment is in relation to a coal mining project for which the Company and its Subsidiaries has not yet obtained the relevant mining license. If the mining license is not obtained at the end of the exploration work, there will be no capital commitment.

(b)    Operating lease commitments

Operating lease commitments extending to November 2016 in relation to buildings were as follows:

	Company and its Subsidiaries
	2007	2006
Within one year	11,391	10,372
Between one to five years	37,273	28,912
Over five years	28,913	28,912
	77,577	68,196

39.    Financial Guarantees

	Company and its Subsidiaries		Company
	As at 31 December		As at 31 December
	2007	2006	2007	2006
Guarantees for loan facilities
- granted to associates	862,250	1,084,850	862,250	1,084,850
- granted to a jointly controlled entity	-	-	566,500	291,500
- granted to subsidiaries	-	-	6,739,059	7,751,141
	862,250	1,084,850	8,167,809	9,127,491

Based on historical experience, no claims have been made against the Company and its Subsidiaries since the dates of granting the financial guarantees described above.

40.    Additional Financial Information

As at 31 December 2007, net current liabilities and total assets less current liabilities of the Company and its Subsidiaries amounted to approximately Rmb 30,123 million (31 December 2006 - Rmb12,104 million) and Rmb 80,141 million (31 December 2006 - Rmb69,281 million), respectively.

41.    Reclassification

Certain comparative figures have been reclassified to confirm to the current year presentation.

Net Assets and Net Profit Reconciliation Between PRC GAAP and IFRS

The consolidated financial statements prepared by Datang International Power Generation Co., Ltd (the 'Company') and the Company and its subsidiaries and jointly controlled entity (the 'Company and its subsidiaries') in conformity with the Accounting Standards for Business Enterprises and Accounting Systems for Business Enterprises ('PRC GAAP'), is different from that prepared in accordance with International Financial Reporting Standards ('IFRS') in certain respects. Influences of IFRS adjustments on net assets and net profit in financial statements of the Company and its subsidiaries are summarized as follow:

		Net assets
		31 December 2007	31 December 2006
		RMB'000	RMB'000
			(Note1)
Net assets under PRC GAAP		34,007,341	26,992,067
Impact of IFRS adjustments:
Difference in the recognition policy on housing benefits to the employees	(a)	37,346	74,693
Difference in the commencement of depreciation of fixed assets	(b)	(106,466)	(106,466)
Difference in accounting treatment on monetary housing benefits	(c)	223,598	225,539
Difference in negative goodwill arising from acquisition of Yuzhou Mining Company	(d)	57,957	-
Others		5,501	(16,753)
Applicable deferred tax impact of the above GAAP differences	(f)	15,585	31,638
Net assets under IFRS		34,240,862	27,200,718
		Net profit
		Year 2007	Year 2006
		RMB'000	RMB'000
			(Note 1)
Net profit under PRC GAAP		4,408,601	3,750,105
Impact of IFRS adjustments:
Difference in the recognition policy on housing benefits to the employees	(a)	(37,346)	(37,346)
Difference in accounting treatment on monetary housing benefits	(c)	(45,815)	(31,009)
Difference in accounting treatment of performance payroll accrual	(e)	-	(100,000)
Difference in negative goodwill arising from acquisition of Yuzhou Mining Company	(d)	57,957	-
Others		22,753	-
Applicable deferred tax impact of the above GAAP differences	(f)	(16,052)	603
Net profit under IFRS		4,390,098	3,582,353

Note 1:    The Company and its Subsidiaries adopted Accounting Standards for Business Enterprises issued on 15 Februry 2006 since 1 January 2007, therefore the comparative figures in the financial statements for the year ended 31 December 2006 have been restated.

(a)    Difference in the recognition policy on housing benefits to the employees

The Company provided housing to its employees at a discount price. The price difference between the selling price and the cost of housing is considered as housing benefits and is borne by the Company.

For PRC statutory reporting purposes, in accordance with the relevant regulations issued by the Ministry of Finance of the PRC, the total housing benefits provided by the Company before 6 September 2000 should be directly deducted from the statutory public welfare fund and those provided after 6 September 2000 are charged to non-operating expenses as incurred. Under IFRS, the housing benefits provided by the Company are recognised on a straight-line basis over the estimated remaining average service lives of the employees.

(b)    Difference in the commencement of depreciation of fixed assets

Under PRC GAAP, depreciation of fixed assets commences from one month after the relevant assets are completed and ready for its intended use. Under IFRS, depreciation commences immediately when the relevant assets are ready for its intended use.

(c)    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 retained earnings and statutory surplus reserve after approved by the general meeting of the Company.

Under IFRS, these benefits are recorded as deferred assets and amortised on a straight-line basis over the estimated service lives of relevant employees.

(d)    Difference in minus goodwill arising from acquisition of Yuzhou Mining Company

Under PRC GAAP, the fair value of the net assets of Yuzhou Mining Company that was acquired by the Company below the consideration therefore resultal in a goodwill.

However, obtain GAAP differences increased the fair value of the acquired net identificable assets under IFRS to an amount exceeded the consideration, including reversal of provisions for safety fund and development fund of coal mines etc. Hence, under IFRS, a negative goodwill was recognised and credited to the income statement or non-operating income.

(e)    Difference in accounting treatment of performance payroll accrual

Performance payroll accrued under PRC GAAP, in accordance with relevant government policies, but not paid out at the end of the year does not meet all the criteria of recognising liabilities under IFRS. Therefore these unpaid balances were reversed under IFRS.

(f)    Applicable deferred tax impact of the above GAAP differences

This represents deferred tax effect on the above GAAP difference where applicable.

Corporate Information

REGISTERED NAME OF THE COMPANY

ENGLISH NAME OF THE COMPANY

Datang International Power Generation Company Limited

REGISTERED ADDRESS OF THE COMPANY

No. 482 Guanganmennei Avenue

Xuanwu District

Beijing

People's Republic of China

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

c/o Huen Wong & Co. in association with

Fried, Frank, Harris, Shriver & Jacobson LLP

1105-1108 Gloucester Tower

The Landmark

15 Queen's Road Central

Hong Kong

LEGAL REPRESENTATIVE

Zhai Ruoyu

AUTHORISED REPRESENTATIVES

Zhai Ruoyu

Zhang Yi

SECRETARY TO THE BOARD

Zhou Gang

PRINCIPAL BANKERS

In the PRC:

Industrial and Commercial Bank of

China, Xuanwu Branch

No. 3 Nanbinhe Road

Xuanwu District

Beijing

People's Republic of China

Outside the PRC:

Bank of China, Hong Kong Branch

One Garden Road

Central

Hong Kong

DOMESTIC AUDITORS

PricewaterhouseCoopers Zhong Tian CPAs Limited Company

11th Floor, PricewaterhouseCoopers Center 202 Hin Bin Road,

Shanghai, The People's Republic of China

INTERNATIONAL AUDITORS

PricewaterhouseCoopers

22nd Floor, Prince's Building

Central

Hong Kong

LEGAL ADVISORS

as to PRC law:

Hylands Law Firm

5A Hanwei Plaza

No. 7 Guanghua Road

Chaoyang District

Beijing

People's Republic of China

as to Hong Kong law:

Huen Wong & Co. in association with

Fried, Frank, Harris, Shriver & Jacobson LLP

1105-1108 Gloucester Tower

The Landmark

15 Queen's Road Central

Hong Kong

LISTING INFORMATION

H Shares

The Stock Exchange of Hong Kong Limited

Code: 0991

A Shares

Shanghai Stock Exchange

Code: 601991

H Shares

The London Stock Exchange Limited

Code: DAT

SHARE REGISTER AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited

46/F, Hopewell Center

183 Queen's Road East

Wanchai

Hong Kong

INFORMATION OF THE COMPANY

Available at:

The secretary office of the Board

Datang International Power Generation

Company Limited

No. 482 Guanganmennei Avenue

Xuanwu District

Beijing

People's Republic of China

and

Rikes Communications Limited

Room 1312, Wing On Centre

111 Connaught Road Central

Hong Kong

Glossary of Terms

The following terms have the following meaning in this annual report, unless otherwise required by the context.

'North China Power'	The power transmission network covering Beijing, Tianjin, Hebei Province, Shanxi Province and Inner Mongolia Autonomous Region
'Installed capacity'	The highest level of electrical output which a power plant is designed to be able to maintain continuously without causing damage to the plant
'Gross generation'	For a specified period, the total amount of electrical power produced by a power plant in that period including electrical power consumed in the operation of the power plant
'Total on-grid generation'	The amount of power transmitted to a power network from a power plant as measured by the grid meter
'Equivalent availability factor'	For a specified period and a given power plant, the ratio (usually expressed as a percentage) of the number of available hours in that period (reduced, in the case of hours in which the attainable generating capacity of such plant is less than the installed capacity, by the proportion of installed capacity not so attainable) to the total number of hours in that period
'Utilisation hours'	For a specified period, the number of hours it would take for a power plant operating at installed capacity to generate the amount of electricity actually produced in that period.
'MW'	1,000,000 watts (equivalent to 1,000 kW)
'kWh'	A unit of power generation equivalent to the output generated by 1,000 watts of power in one hour
'MWh'	A unit of power generation equivalent to the output generated by 1,000,000 watts of power in one hour

 

END

 

 

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