Final Results

Beijing Datang Power Generation Com 8 March 2000 BEIJING DATANG POWER GENERATION COMPANY LIMITED 1999 Results Announcement ANNUAL RESULTS The Board of Directors of Beijing Datang Power Generation Company Limited (the 'Company') hereby announces the consolidated audited operating results of the Company and its subsidiaries for the year ended 31st December, 1999 (the 'Year'), together with the operating results for the corresponding period in 1998 (the 'Previous Year'). The operating revenue of the Company and its subsidiaries for the Year amounted to Rmb5,219,621,000, representing a 3.01% growth compared to the Previous Year. Net profit amounted to Rmb1,250,143,000, representing a 2.75% growth over the Previous Year. Earnings per share for the Year amounted to Rmb0.24. The Board of Directors is satisfied with the results. Please refer to the consolidated audited financial information of the Company and its subsidiaries prepared under International Accounting Standards set out below for details of the operating results. CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31st December, 1999 (Except for per share data, all amounts are expressed in thousands of Renminbi ('Rmb')): Note 1999 1998 -------- ------- ------- Operating revenue, net 2 5,219,621 5,067,337 ------------ ------------ Operating costs: Local government surcharges (68,427) (63,984) Fuel cost (1,669,746) (1,678,877) Repair and maintenance (202,474) (227,721) Depreciation and amortisation (734,715) (636,474) Labour (249,140) (215,127) General and administration (260,961) (259,040) Others, net (208,822) (219,985) ----------- ----------- Total operating costs (3,394,285) (3,301,208) ------------ ----------- Operating profit 1,825,336 1,766,129 Financial income, net 48,392 42,902 -------- -------- Profit before taxation 1,873,728 1,809,031 Taxation 3 (623,585) (592,321) ---------- --------- Profit after taxation 1,250,143 1,216,710 Transfer to reserves (940,372) (968,893) Dividends (309,771) (247,817) ---------- ---------- Retained earnings - - --------- --------- Earnings per share (Rmb) 4 0.24 0.24 --------- --------- Dividend per share (Rmb) 4 0.060 0.048 CONSOLIDATED BALANCE SHEET As at 31st December, 1999 (All amounts are expressed in thousands of Rmb): Note 1999 1998 -------- -------- ------- Property, plant and equipment, 11,689,300 10,444,022 net ------------ ----------- Long-term investment 46,020 46,020 -------- -------- Current assets Cash and cash equivalents 1,384,049 669,696 Short-term bank deposits for 2,554,615 2,621,764 over three months Inventories 238,161 209,071 Prepayments and other 130,017 170,297 receivables Due from a shareholder 165,865 356,496 ---------- ---------- Total current assets 4,472,707 4,027,324 ----------- ---------- Current liabilities Short-term bank loan (55,000) - Current portion of long-term (100,370) (161,800) bank loans Current portion of long-term (40,660) (141,510) loans payable to shareholders Accounts payable (499,059) (306,109) Other payables and accruals (437,005) (240,741) Taxes payable (263,790) (316,351) Dividends payable (309,771) (247,817) ----------- ---------- Total current liabilities (1,705,655) (1,414,328) ----------- ---------- Net current assets 2,767,052 2,612,996 ----------- ---------- Long-term bank loans (2,590,288) (2,053,100) Long-term loans payable to (117,098) (310,749) shareholders Minority interest (239,710) (125,000) ---------- ----------- Net assets 11,555,276 10,614,189 ===== ===== Representing: Share capital 5,162,849 5,162,849 Reserves 5 6,392,427 5,451,340 --------- --------- Shareholders' equity 11,555,276 10,614,189 ====== ====== NOTES: 1.ORGANISATION, OPERATIONS AND BASIS OF PRESENTATION Beijing Datang Power Generation Company Limited (the 'Company') was incorporated in Beijing, the People's Republic of China (the 'PRC'), on 13th December, 1994 as a joint stock limited company. Subsequent to the listing of its H shares on The Stock Exchange of Hong Kong Limited and the London Stock Exchange Limited on 21st March, 1997, the Company was registered as a sino-foreign joint venture on 13th May, 1998. The Company currently owns and operates four power plants in Hebei Province and Beijing City of the PRC. Particulars of the Company's power plants are as follows: Total Commencement Power plants installed of operations Principal capacity activities (MW) Dou He Power Plant 1,550 1975-87 Power generation Gao Jing Power Plant 600 1960-74 Power generation Xia Hua Yuan Power Plant 400 1982-88 Power generation Zhang Jia Kou Power Plant 1,500 1991-99 Power (Units No. 1, 3, 4, 5 and 6) generation On 29th December, 1999, the feasibility study of Inner Mongolia (Tuoketuo) Thermal Power Project (the 'Tuoketuo Project') was approved and 60% of the investment right of the Tuoketuo Project was granted to the Company by the State Development Planning Commission. The construction works of the Tuoketuo Project will be conducted through Tuoketuo Power Generation Company Limited ('Tuoketuo Power Company') which is a limited liability company established in the PRC to construct and operate the Tuoketuo Project. Accordingly, the amounts previously paid by the Company for the pre-development works of the Tuoketuo Project were converted into equity interest in Tuoketuo Power Company which thus became a subsidiary of the Company, in which the Company has a 60% shareholding interest. Particulars of the Company's principal subsidiaries, all of which are limited companies established and operated in PRC, are as follows: Date of Attributable Company name establishment Paid-up Principal capital interest activities '000 Panshan Power Generation 6th August, 700,791 75% Power Co. Ltd. 1997 Generation (construct ion-in- progress) Tuoketuo Power Generation 17th 115,980 60% Power Co. Ltd. November, Generation 1995 (construct ion-in- progress) All material inter-group transactions and balances have been eliminated on consolidation. 2.OPERATING REVENUE Operating revenue comprises the amount of tariffs billed, net of sales discounts, for electricity generated and transmitted to North China Power Group Company ('NCPGC'). Operating revenue is billed and recognised upon transmission of electricity to the power grid controlled and owned by NCPGC. Pursuant to a Power Purchase Agreement between the Company and NCPGC, for the years up to and inclusive of 1999, the amount of NCPGC's minimum purchase commitment for electricity generated by the Company is equal to the average generation capacity of the Company's power plants during the year multiplied by 5,500 hours less the amount of electricity consumed by the Company's power plants in generating electricity. A certain percentage of the marginal profit earned by the Company for electricity purchased by NCPGC in excess of the minimum purchase commitment is shared with NCPGC in accordance with a pre-determined rate and recorded as sales discounts. 3.TAXATION The Company provides for taxation on the basis of its statutory profit for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes. The applicable PRC enterprise income tax rate for the Company is 33% (1998 - 33%). 4.EARNINGS PER SHARE AND DIVIDEND PER SHARE The calculation of earnings per share for the year ended 31st December, 1999 was based on the profit after taxation of approximately Rmb1,250,143,000 (1998 - Rmb1,216,710,000) and on the weighted average number of 5,162,849,000 shares (1998 - 5,162,849,000 shares) in issue during the year. Dividend per share for the year ended 31st December, 1999 was calculated based on the proposed dividends of approximately Rmb309,771,000 (1998 - Rmb247,817,000) divided by the number of 5,162,849,000 shares (1998 - 5,162,849,000 shares) in issue as at 31st December, 1999. 5.RESERVES Movements of the reserves during the year were: 1999 Statutory Discretionary Capital Statutory public surplus reserve surplus welfare reserve (Note a) reserve fund '000 '000 '000 '000 Beginning of year 3,652,706 259,364 259,364 1,279,906 Profit after - - - - taxation Profit - 125,014 125,014 690,344 appropriations (Note b) Transfer between - 155,703 (155,703) - reserves (Note c) Proposed dividends- - - - Donated capital 715 - - - End of year 3,653,421 540,081 228,675 1,970,250 1998 Retained Total Total earnings '000 '000 '000 - 5,451,340 4,482,447 1,250,143 1,250,143 1,216,710 (940,372) - - - - - (309,771) (309,771) (247,817) - 715 - - 6,392,427 5,451,340 (a) Capital reserve mainly represents the difference between the nominal amount of the domestic shares issued and the value of the net assets injected during the Company's reorganisation as at 31st December, 1994, and proceeds from the issuance of H shares in excess of their par value, net of expenses relating to the issuance of the shares. (b) In accordance with the relevant laws and regulations of the PRC and the Company's articles of association, appropriations to each of the statutory surplus reserve and statutory public welfare fund were made at 10% of the Company's profit after taxation as determined in accordance with PRC accounting standards and regulations. The appropriation of profit to the discretionary surplus reserve is made in accordance with the Company's articles of association and the recommendation of the Board of Directors and is subject to shareholders' approval at a general meeting. The current policy is to transfer all unappropriated retained earnings to the discretionary surplus reserve. In accordance with the articles of association, the Company's distributable profit after appropriation to statutory reserves is to be determined based on the lower of the amount as reported in accordance with PRC accounting standards and regulations and that reported in accordance with IAS. Difference between the two amounts as at 31st December, 1999 was not material. (c) In accordance with the relevant laws and regulations of the PRC, approximately Rmb155,703,000 which represented the cost of staff quarters completed during the year were transferred from statutory public welfare fund to the statutory surplus reserve. REVIEW OF OPERATIONS Despite encountering various difficulties, the Company has continued with its endeavours in all aspects and achieved satisfactory results in 1999. Safe and reliable power supply During the Year, the Company focused on safety management, enhanced staff awareness of production safety and carefully inspected potential hazards in its equipment, facilities and instruments in order to improve the safety and reliability of power supply. During the summer period of the Year, North China, where the Company operates, experienced the longest prolonged period of high temperature ever recorded in the past 40 years and historical peak in the loading of power supply. The Company's power plants did not experience any unscheduled stoppages or interruption to power supply despite the high temperature and heavy rainfall. During the Year: Power generation amounted to 20,439,314MWh, representing a 3.93% growth over the Previous Year. On-grid generation amounted to 18,998,103MWh, representing a 4.25% growth over the Previous Year. The equivalent availability factor of the Company's generator units was 93.47%, up by 2.82 percentage points over the Previous Year. The number of unscheduled stoppages was reduced by 9 times as compared to the Previous Year. The Company is fully aware of the correlation between power production and the environment, and has invested various sums of money and implemented relevant measures for protecting the environment: The modification of boiler ash disposal system was implemented systematically. By the end of 1999, 16 ash disposal systems had been installed in the Company's power plants and all units of the Company were in compliance with the latest national standards for the discharge of ash. The boiler low-nitrogen burner modification project was implemented systematically and the discharged volume of oxidized nitrogen was reduced. The Company mainly used coal with low sulphur content for fuel. The Company implemented acidic and alkaline waste water recycling. A preliminary study on the desulphurization and recycling sulpuhurization plate modification project was diligently pursued. Strong efforts in cost-savings and efficiency enhancement Through implementing measures for the efficient regulation of and modification to the combination of fuel, the Company succeeded in increasing the level of economic operation and reducing unit fuel cost during the Year. Project costs were lowered with stronger management over construction works in progress. With enhanced management of funds, interest expenses also decreased. The average coal consumption rate for power supply was 368.5g/MWh, a decrease of 3.5g/MWh compared to the Previous Year. Fuel costs continued to decrease, with unit fuel cost reducing by Rmb4.24/MWh compared to the Previous Year. After deducting the electricity growth factor, fuel cost was reduced by Rmb80,540,000. Given the reduction in deposit/loan rates and increase in loan balances, interest expenses were reduced as a result of strengthened fund management. A net interest income of Rmb48,392,000 was recorded. Smooth progress of construction projects During the Year, the Company's construction projects progressed smoothly: Unit 5 of Zhang Jia Kou Power Plant, wholly invested by the Company, was integrated into the power grid at the end of 1998 and put into commercial operation on 5th March, 1999. Unit 6 commenced commercial operation by the end of 1999. Installation of major equipment for Unit 7 has started. Unit 7 is expected to begin commercial operation by the end of 2000. As the first two construction projects mentioned above were all put into operation as scheduled, the Company's installed capacity was increased to 4050MW by the end of 1999. The construction of Panshan Power Plant Phase II which is developed by the Company's subsidiary, Tianjin Datang Panshan Power Company Limited, commenced in June 1999 and has progressed smoothly since then. Currently the construction of the first generation unit has started and installation is well under progress and such unit is expected to begin commercial operation in 2001. The feasibility study report for Tuoketuo Power Generation Project ('Tuoketuo Project') Phase I was approved by the State Development Planning Commission ('SDPC') on 29th December, 1999. Pursuant to the approval of SDPC, the Company has been granted the right to establish Tuoketuo Power Generation Company Limited and to develop Tuoketuo Project. The Tuoketuo Power Generation Company Limited will be invested by the Company (60%), Beijing International Power Investment Company (25%) and Inner Mongolia Power Company (15%). The preparation work is currently underway and construction is expected to begin in 2000. With the smooth progress of the above projects, the Company's production scale will be further expanded and its target of achieving a capacity of 5682MW will be achieved by 2002. This will contribute to the Company's operating results and return for shareholders for 2000 and beyond. FUTURE OUTLOOK In 1999, the development of China's economy was steady and the growth of the nation's power demand was faster than expected. It is anticipated that the China's economy will continue to grow steadily in 2000 which in turn will benefit the Company. The Company will continue with its strong endeavours and strive to achieve its annual targets in operation, construction and profitability, which include: 1. Strengthening the management of production safety and implementing a production safety duty system for safe and stable production in order to achieve power generation targets; 2. Strengthening the budget management and exercising stringent control on expenditure. Efforts to explore income sources and reduce costs will continue with a view to increasing profits; 3. Focusing on safety, quality and work schedules of construction in progress to ensure that Zhang Jia Kou Power Plant Unit 7 will be completed and put into commercial operation as scheduled so that the Company's total installed capacity will be increased to 4,350MW by the end of 2000. 4. Prudent investment, pro-active expansion and detailed research of new ways to use the Company's capital to improve the Company's financial structure to ensure the ongoing and long-term development of the Company. SHARE CAPITAL AND DIVIDEND (1) Share Capital No new shares were issued by the Company during the Year. As at 31st December, 1999, the total share capital of the Company amounted to Rmb5,162,849,000, divided into 5,162,849,000 shares with a nominal value of Rmb1. (2) Substantial Shareholders During the Year, the substantial shareholders holding more than 10% of the Company's shares were as follows: Percentage of Name of Shareholder Class of Number of Shares Held Shares Shares (%) NCPGC Domestic 1,828,768,200 35.43 Shares Beijing International Power Development and Investment Domestic 671,792,400 13.01 Company Shares Hebei Construction Investment Domestic 671,792,400 13.01 Company Shares Tianjin Jinneng Investment Domestic 559,827,000 10.84 Company Shares (3) Dividend The Board of Directors recommends a dividend of Rmb0.06 per share for the Year. Dividends to domestic shareholders will be declared and paid in Rmb while dividends for H shares will be declared in Rmb and paid in Hong Kong dollars. The exchange rate of Hong Kong dollar to Rmb shall be based on the average daily closing prices of the Hong Kong Dollar/Rmb exchange rate quoted by the People's Bank of China on each business day for the week immediately prior to the payment of dividends. The dividend shall be payable on 30th June, 2000. USE OF PROCEEDS The Company's shares were listed on The Stock Exchange of Hong Kong Limited and on the London Stock Exchange Limited on 21st March, 1997. The net proceeds raised were approximately Rmb3,701,606,000. As at 31st December, 1999, approximately Rmb3,147,275,000 had been used as follows: approximately Rmb1,103,000,000 for the construction of Zhang Jia Kou Power Plant Phase II; approximately Rmb525,511,000 for the capital contribution for Panshan Power Company; Rmb135,764,000 for the capital contribution for Tuoketuo Power Generation Company Limited; and Rmb1,383,000,000 for the acquisition of Unit 1 of Zhang Jia Kou Power Plant Unit 1. The balance is currently deposited with commercial banks in foreign currency and will be used as equity investment in power projects in line with the Company's development strategy. SIGNIFICANT EVENTS (1) Housing Scheme In accordance with 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 and its subsidiaries have finalised a scheme for selling staff quarters to its staff in 1999. Under the scheme, the Company and its subsidiaries will provide subsidies, which represent the difference between the net book value of the staff quarters to be sold and the proceeds to be collected from the employees, to eligible staff for them to buy staff quarters from the Company and its subsidiaries at preferential prices calculated based on their length of service and position in the Company pursuant to the prevailing local regulations. The estimated subsidies of approximately Rmb304,980,000 is expected to benefit the Company and its subsidiaries over 10 years which is the estimated remaining average service life of the relevant employees. Accordingly, the Company and its subsidiaries accrued for the relevant portion of the subsidies amounting to approximately Rmb30,498,000 for the year ended 31st December, 1999 and recorded as operating expense in the profit and loss accounts. Upon completion of the sales of the staff quarters to the employees, the total amount of the subsidies will be recorded by offsetting against the accruals previously made and the remaining balance will be recorded as deferred asset which will be amortized over the remaining average service life of the relevant employees. (2) The Company's Annual General Meeting for the year 1998 was held in Beijing on 29th April, 1999. At the meeting, Zhang Yi and Gao Zhifu were appointed as executive directors of the Company and Tong Yunshang was appointed as non-executive director of the Company. (3) At the Extraordinary General Meeting held on 12th October, 1999 in Beijing, Mr Yu Hongji was appointed as executive director of the Company. (4) Year 2000 Issues The Board of Directors of the Company considered resolving the Year 2000 (Y2K) issue as a matter of high priority and formulated and implemented comprehensive plans to deal with the issue. During the Year, 329 (100%) of the systems in the Company's power plants were tested, of which 148 (100%) of the systems were modified. All equipment of the Company went through the transition from 1999 to 2000 smoothly without interruption. The Company's expenses in relation to resolving the Y2K issue amounted to Rmb12,710,000 during the Year. (5) As at 31st December, 1999, the Company has no designated deposit or overdue fixed deposit. PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES During the Year, the Company did not purchase, sell or redeem any of the its listed securities. CODE OF BEST PRACTICE The Company had complied with the Code of Best Practice set out in Appendix 14 of the Rules Governing the Listing Securities on The Stock Exchange of Hong Kong Limited. In accordance with the resolution of the Board of Directors on 18th August, 1999, an Audit Committee would be set up in compliance with the requirements of Paragraph 14 of the Code of Best Practice. By Order of the Board Jiao Yian Chairman Beijing, 6th March, 2000

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