2007 Annual Results
Datang Intl Power Generation Co Ld
28 March 2008
DATANG INTERNATIONAL POWER GENERATION CO., LTD.
(a sino-foreign joint stock limited company incorporated in the People's
Republic of China)
(Stock Code: 991)
ANNOUNCEMENT OF 2007 ANNUAL RESULTS
OPERATING AND FINANCIAL HIGHLIGHTS:
• Consolidated operating revenue amounted to approximately RMB32,829 million, representing an increase of 31.85%
over 2006.
• Consolidated net profit attributable to equity holders of the Company amounted to approximately RMB3,406
million, representing an increase of 22.62% over 2006.
• Basic earnings per share amounted to approximately RMB0.29, representing an increase of approximately RMB0.02
per share over 2006.
• The Board has recommended the distribution of proposed dividend of RMB0.12 per share for the year of 2007.
I. COMPANY RESULTS
The board of directors (the 'Board') of Datang International Power Generation Co., Ltd. (the 'Company')
hereby announces the audited consolidated operating results of the Company and its subsidiaries and jointly
controlled entities (hereinafter referred to as the 'Company and its Subsidiaries') prepared in conformity
with the International Financial Reporting Standards ('IFRS') for the year ended 31 December 2007 (the
'Year'), together with the audited consolidated operating results of the year of 2006 (the 'Previous Year')
for comparison. Such operating results have been reviewed and confirmed by the Company's audit committee (the
'Audit Committee').
Consolidated operating revenue of the Company and its Subsidiaries for the Year was approximately RMB32,829
million, representing an increase of 31.85% as compared to the Previous Year. The 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. Basic earnings per share of the Company for the Year
amounted to approximately RMB0.29, representing an increase of approximately RMB0.02 per share as compared to
the Previous Year.
In view of the operating results of the Company during the Year, the Board of the Company has recommended the
distribution of proposed dividend of RMB0.12 per share for the Year.
Please refer to the audited financial statements set out in the Appendix for details of the consolidated
operating results.
II. MANAGEMENT DISCUSSION AND ANALYSIS
The Company is one of the largest independent power companies in the People's Republic of China (the 'PRC
'), primarily engaged in power generation businesses which mainly focus on coal-fired power generation.
Currently, the Company wholly owns four operating power plants and manages 38 power generation companies and
other energy companies. As at 31 December 2007, the Company managed a total installed capacity of 20,134.7 MW.
The power generation businesses of the Company are primarily distributed in the North China Power Grid
(including the Beijing-Tianjin-Tangshan ('BTT') Power Grid and the Shanxi Power Grid), the Zhejiang Power
Grid, the Gansu Power Grid, the Yunnan Power Grid, the Fujian Power Grid and the Guangdong Power Grid.
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.
(A) 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 Growth
Generation
Power Plant/Company Name for 2007 (%)
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
Power Growth
Generation
Power Plant/Company Name for 2007 (%)
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 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 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.
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, (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.
(B) Major Financial Indicators and Analysis
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 operation
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 to 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 ceasation of interest
capitalisation of the new generation put into operation in 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 paid close attention to foreign
exchange market fluctuations and constantly 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.
(C) 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 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 cost savings. 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.
III. SHARE CAPITAL AND DIVIDENDS
(A) 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.
(B) Shareholding of Substantial Shareholders
So far as the directors of the Company are aware, as at 31 December 2007, the persons below with
interests or short positions in the shares or underlying shares of the Company which are required to be
disclosed to the Company under section 336 of the Securities and Futures Ordinance (the 'SFO')
(Chapter 571 of the Law of Hong Kong) were as follows:
Approximate Approximate Approximate
percentage percentage percentage
to total issued to total issued to total issued
Number of share capital of A shares of H shares of
Name of Class of Shares shares held the Company the Company the Company
Shareholder
(%) (%) (%)
China Datang A Shares 3,959,241,160 33.74 46.775 -
Corporation
Beijing Energy
Investment
(Group) Company A Shares 1,343,584,800 11.45 15.873 -
Limited
Hebei
Construction
Investment
Company A Shares 1,343,584,800 11.45 15.873 -
Tianjin Jinneng
Investment
Company A Shares 1,200,012,600 10.33 14.177 -
USB AG H Share 273,701,482 (L) 2.33 - 8.39(L)
27,480,000 (S) 0.23 - 0.84(S)
JPMorgan Chase & H Share 238,144,391 (L) 2.03 - 7.33(L)
Co
6,962,917 (S) 0.06 0.21(S)
156,842,414 (P) 1.34 4.83(P)
(L) means long position (S) means short position (P) means lending pool
(C) Dividends
The Board recommends a cash dividend of approximately RMB0.12 per share based on the total amount of
registered shares on the record date for the Company's distribution of dividends. Dividends to be
distributed to the domestic shareholders of the Company 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.
(D) Shareholding by the Directors and Supervisors
As at 31 December 2007, save and except Mr. Fang Qinghai, director of the Company, who was interested in
24,000 A Shares of the Company, none of the directors, supervisors and chief executives of the Company
nor their associates had any interest and short positions in the shares, underlying shares and debentures
of the Company or any of its associated corporation (within the meaning of the SFO) that were required to
be notified to the Company and The Stock Exchange of Hong Kong Limited (the 'Hong Kong Stock Exchange
') under the provisions of Divisions 7 and 8 of Part XV of the SFO, or required to be recorded in the
register mentioned in the SFO pursuant to section 352 or otherwise required to be notified to the Company
and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers as set out in the Rules Governing the Listing of Securities on the Hong Kong Stock
Exchange (the 'Listing Rules').
IV. SIGNIFICANT EVENTS
1. Pursuant to the resolutions passed at the 2006 annual general meeting of the Company held on 29 June
2007, the Company declared and paid a cash dividend of RMB0.23075 per share to all shareholders on the
basis of the total share capital as at 18 July 2007 (5,844,880,580 shares), and implemented the bonus
issue of 10 bonus shares for every 10 shares held by way of capitalisation of the capital reserve fund.
2. The term of the members of the fifth session of the Company's Board and Supervisory Committee expired
on 30 June 2007. Pursuant to the resolutions passed at the 2006 annual general meeting held on 29 June
2007, it was resolved that the following individuals be appointed as members of the sixth session of the
Company's Board and the 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 Guoqiang and Mr. Shi Xiaofan be appointed as members of
the sixth session of the supervisory committee (among whom Mr. Zhang Jie and Mr Shi Xiaofan are
supervisors representing the staff) for a term from 1 July 2007 to 30 June 2010.
V. PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the Year, the Company or any of its Subsidiaries has not purchased, sold or redeemed any of its listed
securities.
VI. COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES
To the knowledge of the Board, the Company has complied with all of the code provisions in the Code on Corporate
Governance Practices as set out in Appendix 14 to the Listing Rules during the Year.
VII. COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS
Upon specific enquiries made to all the directors of the Company and in accordance with the information
provided, the Board confirmed that all directors of the Company have complied with the provisions under the
Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing
Rules during the Year.
VIII. AUDIT COMMITTEE
In accordance with the Listing Rules, the Company has set up an Audit Committee which is responsible for, among
other things, reviewing the Company's financial reporting procedures and internal controls.
The Audit Committee has reviewed the accounting principles and methods adopted by the Company and its
Subsidiaries with the management of the Company. They have also discussed matters regarding internal controls
and the annual financial statements, including the review of the financial statements for the 12 months ended 31
December 2007.
The Audit Committee considers that the 2007 annual financial statements of the Company and its Subsidiaries have
compiled with the applicable accounting standards, and that the Company has made appropriate disclosure thereof.
By Order of the Board
Zhai Ruoyu
Chairman
Beijing, the PRC, 26 March 2008
As at the date of this announcement, the directors of the Company are:
Zhai Ruoyu, Zhang Yi, Hu Shengmu, Fang Qinghai, Zhou Gang, Liu Haixia, Guan
Tiangang, Su Tiegang, Ye Yonghui, Li Gengsheng, Xie Songlin*, Liu Chaoan*, Yu
Changchun* and Xia Qing*
* Independent non-executive directors
Please refer to the audited financial statements set out in the Appendix for
details of the consolidated operating results.
A. FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS PREPARED UNDER IFRS (All amounts expressed in
thousands of Rmb)
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
Note 2007 2006
Operating revenue 3 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 7,740,244 5,988,190
Share of result of associates 108,393 9,458
Interest income 68,022 24,674
Finance costs 4 (2,080,118) (1,358,713)
Profit before income tax 5,836,541 4,663,609
Taxation 5 (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 1,348,714 1,177,130
Proposed dividends 1,408,090 1,348,714
Proposed dividend per share (Rmb) 6 0.12 0.231
Earnings per share for profit attributable to
the equity holders of the Company during the year
- basic (Rmb) 7 0.29 0.27
- diluted (Rmb) 7 0.29 0.26
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2007
Note 2007 2006
ASSETS
Non-current assets
Property, plant and equipment 102,585,084 77,505,966
Investments in associates 1,341,906 857,421
Available-for-sale investments 4,733,764 1,774,184
Land use right 813,935 632,599
Deferred housing benefits 260,945 300,232
Intangible assets 202,190 83,576
Other long-term assets 170,000 87,850
Deferred income tax assets 156,792 142,969
110,264,616 81,384,797
Current assets
Short-term entrusted loans to associates 47,751 -
Inventories 1,051,181 806,965
Prepayments and other receivables 1,018,112 719,319
Accounts receivable 8 4,945,475 3,337,529
Notes receivable 747,917 11,132
Short-term bank deposits over three months 49,500 -
Cash and cash equivalents 3,648,823 4,451,284
11,508,759 9,326,229
Total assets 121,773,375 90,711,026
EQUITY AND LIABILITY
Capital and reserves attributable to the
equity holders of the Company
Share capital 11,734,083 5,662,849
Reserves 6 17,863,420 18,233,202
29,597,503 23,896,051
Minority interests 4,643,359 3,304,667
Total equity 34,240,862 27,200,718
Non-current liabilities
Long-term loans 44,272,875 40,273,581
Convertible bonds 9 - 1,111,810
Deferred income 387,056 273,157
Deferred income tax liabilities 1,141,953 421,682
Other long term liabilities 98,667 -
45,900,551 42,080,230
Current liabilities
Accounts payable and accrued liabilities 10 10,743,690 7,648,449
Taxes payable 942,917 538,329
Dividend payable 40,757 -
Short-term loans 22,608,530 9,300,496
Short-term bonds 3,000,000 1,000,000
Current portion of long-term loans and bonds 4,296,068 2,942,804
41,631,962 21,430,078
Total liabilities 87,532,513 63,510,308
Total equity and liabilities 121,773,375 90,711,026
Notes:
1. 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.
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) 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.
2. ACCOUNTING POLICIES
The principle accounting policies adopted are consistent with those applied in the annual financial statements for
the year ended 31 December 2006. The following new interpretation and standard are mandatory for financial year
with annual year period beginning on or after 1 January 2007 and relevant to the operations of 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 (effective for annual
periods beginning on or after 1 January 2007). 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, management 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 (effective for annual periods beginning on or after 1
November 2006). 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. Management considered there will be no
significant impact from adopting IFRIC Interpretation 10 on the financial statements of the Company and
its Subsidiaries.
Prior year comparatives
Certain comparative figures of 2006 have been reclassified to conform to the presentation of financial statements
for the year ended 31 December 2007.
3. OPERATING REVENUE
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 materials 7,848 48,879
Others 69,614 14,523
32,829,305 24,898,620
Pursuant to the Power Purchase Agreements entered into between the Company and its Subsidiaries, 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.
4. FINANCE COSTS
2007 2006
Interest expense 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.
5. 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 Company are
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 is 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. Currently, the Company and its Subsidiaries applied the tax rates under the existing
tax laws. The CIT Law has provided a 5-year transitional period for those entities that applied FIE and FE tax
laws in previous years.
6. PROFIT APPROPRIATION
Dividends
On 26 March 2008, the Board of Directors recommends a cash dividend of approximately Rmb0.12 per share based on
the total amount of registered shares on the registration date for the Company distribution of dividends. The
total dividends would amounted to approximately Rmb1,408,090,000 based on the number of shares outstanding as of
31 December 2007.
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 result in an increase in share
capital of the Company by Rmb5,844,880,580 with a corresponding amount of reduction in capital reserve.
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. Approximately
Rmb310,036,000 (2006-Rmb253,658,000) have been appropriated to statutory surplus reserve for the year ended 31
December 2007.
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.
7. EARNINGS PER SHARE AND DIVIDEND 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 10 bonus shares for every 10 shares held) 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 (Rmb '000) 3,406,233 2,777,781
Interest expense on convertible bonds (net of tax) (Rmb '000) 3,915 38,625
Profit used to determine diluted earnings per share (Rmb '000) 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 45,087 444,254
(a) (b))
Weighted average number of ordinary shares for diluted earnings per share (shares in 11,657,536 10,819,268
thousand)
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 6).
(b) As at 31 December 2007, the conversion price was HKD2.6 per share (31 December 2006- HKD5.4 per share).
8. 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. The tariff revenue is settled on a monthly basis according to the payment provisions in the power
purchase agreements. As at 31 December 2007 and 2006, all tariff revenues receivables from the respective grid
companies were aged within three months, and no doubtful debts were considered necessary.
9. CONVERTIBLE BONDS
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:
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.
10. ACCOUNT PAYABLES AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are detailed as follows:
As at 31 December
2007 2006
Construction costs and deposits payable to contractors 6,350,445 5,393,189
Fuel and material costs payable 2,983,131 1,500,801
Salary and welfare payable 337,995 147,078
Interest rate swap liability 51,970 12,766
Interest payable 247,128 137,480
Assets acquisition payable 361,184 50,546
Others 411,837 406,589
10,743,690 7,648,449
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), with 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.
11. SUPPLEMENTAL FINANCIAL INFORMATION
(a) Condensed consolidated balance sheet
As at 31 December
2007 2006
Net current liabilities 30,123 12,104
Total assets less current liabilities 80,141 69,281
(b) Condensed consolidated income statement
2007 2006
Cost of inventories
- Fuel 15,262,965 10,663,815
- Spare parts and consumable supplies 316,388 164,827
Depreciation
- Capitalised as contribution-in-process 30,254 17,571
- Included as operating expenses 4,930,137 4,109,271
Dividend income (51,899) (28,091)
- From listed investments (50,229) (27,927)
- From unlisted investments (1,670) (164)
Donation 4,481 73,702
Loss on disposal of property, plant and equipment 60,646 1,269
B. FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS PREPARED UNDER PRC ACCOUNTING STANDARDS
1. FINANCIAL HIGHLIGHTS AND FINACIAL RATIOS
For the year ended 31 December
Unit 2007 2006 Variance
(%)
Revenue from operations Rmb'000 32,829,305 24,898,620 31.85%
Profit before taxation and minority interests Rmb'000 5,838,992 4,831,968 20.84%
Net profit (attributable to equity holders
of the company) Rmb'000 3,411,141 2,918,389 16.88%
Net profit (attributable to equity holders of
the company and excluding non-recurring items) Rmb'000 3,480,792 2,998,358 16.09%
31 December 31 December
2007 2006 Variance
(%)
Total assets Rmb'000 121,515,641 90,481,934 34.30%
Shareholders' equity (including minority Rmb'000 34,007,341 26,992,067 25.99%
interests)
Net cash flow from operating activities Rmb'000 10,580,058 7,450,924 42.00%
For the year ended 31 December
Unit 2007 2006 Variance
(%)
Earnings per share(weighted average) Rmb 0.29 0.28 3.57%
Earnings per share (fully diluted) Rmb 0.29 0.27 7.41%
Earnings per share calculated based on net profit
attributable to equity holders of the Company and
excluding non-recurring items(weighted average) Rmb 0.30 0.29 3.45%
Retrun on net assets(weighted average) % 12.93% 15.32% -15.60%
Retrun on net assets(fully diluted) % 11.61% 12.31% -5.69%
Retrun on net assets calculated based on net
profit
attributable to equity holders of the Company and
excluding non-recurring items (weighted average) % 13.19% 15.74% -16.20%
Return on net assets calculated based on net
profit
attributable to equity holders of the Company and
excluding non-recurring items (fully diluted) % 11.84% 12.64% -6.33%
Net cah flow from operating activities per share Rmb 0.90 0.66 36.36%
31 December 31 December
Unit 2007 2006 Variance
(%)
Net assets (attributable to equity holders of the
Company) per share Rmb 2.50 2.09 19.62%
2. PROFIT AND LOSS ACCOUNTS
2007 2006
RMB'000 RMB'000
Revenue 32,829,305 24,898,620
Less: Cost (23,630,965) (17,552,366)
Tax and levies on principal operation (352,987) (279,485)
Selling expense (21,687) -
General and administration expense (1,059,190) (851,920)
Financial cost, net (1,976,078) (1,357,686)
Add:Fair value (loss)/gain (36,018) 23,647
Investment income 160,445 37,549
Operating profit 5,912,825 4,918,359
Add: Non-operating income 18,738 17,296
Less:Non-operating expense (92,571) (103,687)
Profit before taxation and minority interests 5,838,992 4,831,968
Less: Income tax (1,430,391) (1,081,863)
Net profit 4,408,601 3,750,105
3. NOTES
(1) Basis of preparation
The Company and its Subsidiaries previously prepared financial statements in accordance with the
Accounting Standards for Business Enterprises promulgated before 15 February 2006 and
'Accounting Systems for Business Enterprises' promulgated on 29 December 2000 (hereinafter
collectively referred to as the 'Previous Accounting Standards and Accounting Systems'). The
Company and its subsidiaries adopted the < Accounting Basic Standards for Business Enterprises >
and 38 detailed Accounting Standars promulgated by Minister of Finance of the PRC on 15 February
2006, Application Giudance of the Accounting Standards, Accounting Standards Explanation for
Business Enterprises and other related regulations (hereinafter all referred to as the 'Accounting
Standards for Business Enterprises') since 1 January 2007. The Company and its Subsidiaries'
financial statements for the year ended 31 December 2007 are the first yearly financial statements
prepared in accordance with Accounting Standards for Business Enterprises.
(2) The Company and its Subsidiaries previously prepared and announced financial statements in
accordance with Previous Accounting Standards and Accounting Systems and international financial
and reporting standards. As at 1 January 2007, the Company and its Subsidiaries retrospectively
adjusted the financial statements in accordance with item 5 to 19 in < Accounting Standards for
Business Enterprises No. 38 - First time adoption of Accounting Standards for Business
Enterprises > and retrospectively adjusted the financial statements for the year ended 31 December
2006 in accordance with < No. 1 of Professional's Suggestions to the Application of Accounting
Standards for Business Enterprises > . Relative comparative figures of 2006 retrospectively
adjusted have been represented.
4. NET ASSETS AND NET PROFIT RECONCILIATION BETWEEN PRC GAAP AND IFRS
The consolidated financial statements prepared by the Company and its Subsidiaries in conformity with the
Accounting Standards 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 31 December
Notes 2007 2006
RMB'000 RMB'000
(note 1)
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 recognition of 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
Notes 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 The Company and its Subsidiaries adopted the Accounting Standards for Business Enterprises since 1
1: January 2007 therefore relative comparative figures in the financial statements for the year ended
31 December 2006 have been restated (Note 3).
(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 public welfare fund
after approved by the Shareholders meeting of the Company and its Subsidiaries.
Under IFRS, these benefits are recorded as deferred assets and amortised on a straight-line basis
over the estimated service lives of relevant employees.
(d) Difference in recognition of negative goodwill arising from acquisition of Yuzhou Mining Company
Under PRC GAAP, the fair value of the net assets of Kailuan (Group) Yuzhou Mining Company Limited
('Yuzhou Mining Company') that was acquired by the Company below the consideration therefore
resultal in a goodwill.
However, obtain GAAP differences reduced 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.
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