Interim Report 2007
Datang Intl Power Generation Co Ld
13 September 2007
Datang International Power Generation Co., Ltd.
Interim Report 2007
Diversifying with Flying Colours
In recent years, Datang Power has been actively pursuing expansion of its
business scope, mapping out a strategic deployment of its power generation
sources. The Company's power source structure has transformed from the previous
single power generation mode to the currently diversified and balanced
portfolio comprising hydropower, thermal power, wind power and nuclear power.
The business assets structure has also transformed from a pure power generation
business in the past to a conglomerate today with power generation as the
principal business but integrated with related upstream and downstream business
assets.
Datang Power will continue to actively develop power source projects and enhance
the Company's operating efficiency through assets integration, with a view to
laying down an even stronger foundation for the Company's resource reserve.
Datang Power firmly believes that its business strategy of diversified
development will develop the Company into a multifaceted company among PRC's
power generation enterprises, marching into success with flying colours.
Contents
Company Results
Management Discussion and Analysis
Share Capital and Dividends
Significant Events
Purchase, Sale and Redemption of the Company's Listed Securities
Compliance with the Code on Corporate Governance Practices
Compliance with the Model Code
Audit Committee
Condensed Consolidated Interim Balance Sheet (Unaudited)
Condensed Consolidated Interim Income Statement (Unaudited)
Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
Condensed Consolidated Interim Cash Flow Statement (Unaudited)
Notes to the Condensed Consolidated Interim Financial Information (Unaudited)
Company Results
- Consolidated operating revenue amounted to approximately RMB15,465
million, representing an increase of 42.26% over the first half of 2006.
- Consolidated net profit attributable to the equity holders of the
Company amounted to approximately RMB1,807 million, representing an increase of
41.86% over the first half of 2006.
- Basic earnings per share attributable to the equity holders of the
Company amounted to approximately RMB0.16, representing an increase of
approximately RMB0.04 per share over the first half of 2006.
The board of directors (the 'Board') of Datang International Power Generation
Co., Ltd. (the 'Company') hereby announces the unaudited consolidated operating
results of the Company and its subsidiaries and jointly controlled entities (the
'Company and its Subsidiaries') prepared in conformity with the International
Financial Reporting Standards ('IFRS') for the six months ended 30 June 2007
(the 'Period'), together with the unaudited consolidated operating results of
the first half of 2006 (the 'Same Period Last 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
Period was approximately RMB15,465 million, representing an increase of 42.26%
as compared to the Same Period Last Year. The realised consolidated net profit
attributable to the equity holders of the Company was approximately RMB1,807
million, representing an increase of approximately 41.86% as compared to the
Same Period Last Year. Basic earnings per share attributable to the equity
holders of the Company for the Period amounted to approximately RMB0.16
(including the impact of the bonus issue of 10 bonus shares issued for every 10
shares held by way of capitalisation of the capital reserve fund), representing
an increase of approximately RMB0.04 per share as compared to the Same Period
Last Year.
The Board does not recommend any payment of interim dividend for 2007.
Please refer to the unaudited condensed consolidated interim financial
information for details of the consolidated operating results.
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
mainly focusing on coal-fired power generation. As at 30 June 2007, the Company
managed a total installed capacity of 19,430 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 Gansu Power Grid, the Zhejiang Power Grid, the Yunnan Power Grid, the
Fujian Power Grid and the Guangdong Power Grid.
During the Period, the PRC's economy maintained a relatively fast growth under a
favourable domestic macro-economic environment, with a gross domestic product
('GDP') growth rate of 11.5% over the Same Period Last Year. During the Period,
the social power consumption increased by about 15.56% over the Same Period Last
Year while nationwide power generation increased by approximately 16% over the
Same Period Last Year. The power generation of the power grids where the power
generation businesses of the Company and its Subsidiaries were distributed also
maintained rapid growth.
Business Review
During the Period, the Company and its Subsidiaries faced production operation
pressures brought by a decline in utilisation rates in the power market and
persistent high fuel prices. Nevertheless, the Company and its Subsidiaries
actively capitalised on market opportunities, diligently carried out effective
production operations and implemented measures to boost revenue and reduce
costs. The Company and its Subsidiaries overcame difficulties and strove to
complete the production objectives of the Period, with a sustained and steady
growth in profit. Total power generation increased by about 35.54% over the Same
Period Last Year while consolidated net profit attributable to the equity
holders of the Company rose by approximately 41.86% over the Same Period Last
Year.
1. Production and Environmental Protection
During the Period, total power generation of the Company and its Subsidiaries
amounted to 56.042 billion kWh, an increase of 35.54% when compared to the Same
Period Last Year. Total on-grid power generation of the Company and its
Subsidiaries amounted to 52.812 billion kWh, an increase of 35.79% over the Same
Period Last Year. The increases in 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 Same
Period Last Year, the Company and its Subsidiaries have increased its installed
capacity by 4,020 MW as new generation units commenced commercial operation in
the second half of 2006, thereby substantially increasing the overall power
generation capacity of the Company and its Subsidiaries.
(2) Increased demand in service areas: During the Period, the power demand
within the service areas of the Company and its Subsidiaries maintained steady
rapid growth.
(3) Improvement in operating reliability of generation units: During the
Period, the operating generation units of the Company and its Subsidiaries
achieved an equivalent availability factor of 93.88%, representing an increase
of 1.13 percentage points when compared to the Same Period Last Year.
Power generation details of the Company and its Subsidiaries during the Period
(Unit: billion kWh):
Power Plant / Company Name Power Generation Growth
for the First Half (%)
of 2007
(billion kWh)
1 Gao Jing Thermal Power Plant 1.835 7.18
2 Dou He Power Plant 5.391 2.72
3 Xia Hua Yuan Power Plant 1.312 -0.91
4 Zhang Jia Kou Power Plant 7.655 0.42
5 Zhejiang Datang Wushashan Power Generation
Company Limited ('Wushashan Power Company') 6.399 695.89
6 Tianjin Datang International Panshan Power Generation
Company Limited ('Panshan Power Company') 3.371 -4.91
7 Inner Mongolia Datang International Tuoketuo Power Generation
Company Limited ('Tuoketuo Power Company') 9.852 -7.02
8 Shanxi Datang International Yungang Thermal Power
Company Limited ('Yungang Thermal Power Company') 1.439 2.35
9 Hebei Datang International Tangshan Thermal Power
Company Limited ('Tangshan Thermal Power Company') 2.013 -13.30
10 Shanxi Datang International Shentou Power Generation
Company Limited ('Shentou Power Company') 2.597 -0.92
11 Gansu Datang International Liancheng Power Generation
Company Limited ('Liancheng Power Company') 2.043 15.55
12 Hebei Datang International Wangtan Power Generation
Company Limited ('Wangtan Power Company') 3.541 87.65
13 Guangdong Datang International Chaozhou Power Generation
Company Limited ('Chaozhou Power Company') 2.857 1,070.9
14 Fujian Datang International Ningde Power Generation
Company Limited ('Ningde Power Company') 3.206 -
15 Yunnan Datang International Honghe Power Generation
Company Limited ('Honghe Power Company') 2.219 2,140.41
16 Yunan Datang International Nalan Hydropower Development
Company Limited ('Nalan Hydropower Company') 0.190 38.69
17 Yunnan Datang International Lixianjiang Hydropower Development
Company Limited ('Lixianjiang Hydropower Company') 0.111 -
18 Hebei Datang International Huaze Hydropower Development
Company Limited ('Huaze Hydropower Company') 0.0105 2.94
Total 56.042 35.54
While endeavouring to increase power generation, the Company and its
Subsidiaries also put a strong emphasis on the implementation of environmental
protection projects in accordance with the State's environmental protection
requirements. As at 30 June 2007, the installed capacity of the Company and its
Subsidiaries with desulphurisation facilities in use accounted for about 70% of
the coal-fired units of the Company and its Subsidiaries. Meanwhile, other
environmental protection projects such as denitration and denitrification
upgrades are currently in progress as scheduled.
2. Operational Management
During the Period, the Company and its Subsidiaries achieved a consolidated
operating revenue of approximately RMB15,465 million, representing an increase
of approximately 42.26% over the Same Period Last Year. Consolidated net profit
attributable to the equity holders of the Company amounted to approximately
RMB1,807 million, representing an increase of approximately 41.86% over the Same
Period Last Year. The sustained, steady growth in profit of the Company and its
Subsidiaries was mainly attributable to the following factors:
(1) Increase in on-grid power generation. On-grid power generation increased by
approximately 13.919 billion kWh over the Same Period Last Year, thereby
increasing the revenue by approximately RMB3,836 million accordingly.
(2) Increase in average on-grid power tariff. As a result of the implementation
of the Fuel-Tariff Pass-through Mechanism which led to power tariff adjustments
in the second half of 2006, and the increased number of the Company and its
Subsidiaries' units adopting the tariff rates for desulphurised units in the
first half of 2007, as well as the rational adjustment in the power generation
structure, the Company's on-grid tariff (tax included) increased by
approximately RMB16.86 per MWh over the Same Period Last Year, leading to a
corresponding increase of about RMB758 million in revenue over the Same Period
Last Year.
(3) Stringent cost control to strive for energy savings and consumption
reduction. During the Period, as a result of rising fuel prices and changes in
the power structure of regions with high fuel costs, the unit fuel cost for the
Company and its Subsidiaries increased by approximately RMB20.35/MWh over the
Same Period Last Year. In light of this, the Company and its Subsidiaries
exercised all sorts of stringent cost control measures to strive for energy
savings and consumption reduction while securing fuel supply. During the Period,
unit coal consumption for power supplied amounted to 336.99g/kWh, representing a
decrease by approximately 8g/kWh over the Same Period Last Year, while the
consolidated self electricity consumption rate was 5.78%, down approximately 0.2
percentage point over the Same Period Last Year.
(4) Financing channels were expanded to reduce financing costs. During the
Period, the Company issued RMB3,000 million of 'short-term commercial papers' in
the inter-bank bond market. The coupon rate was 3.48%, which was lower than the
issuing rate of a same term for comparable issuers.
3. Business Expansion
During the Period, the Company continued to implement its development
strategies, which include the transformation from a single mode of coal-fired
power generation to the development of renewable energy including hydropower,
nuclear power, wind power and so forth; the transformation of the business
structure from simply an electricity producer into a chain of relevant
businesses. As the Company worked diligently on projects under construction
during the Period, it also actively initiated preliminary studies and
development works on certain development projects. Among these:
(1) Thermal projects: The Phase 1 project (installed capacity: two 600 MW
units) of Ningxia Datang International Daba Power Generation Company Limited, an
associate of the Company in which the Company holds 45% interests, was approved
by the relevant State authorities and construction would commence within the
current year.
(2) Hydropower projects: The Hengjiang region Luoze River Two-Level hydropower
projects (total installed capacity: 48 MW), both controlled and constructed by
the Company, were respectively approved by the relevant State authorities and
construction is expected to commence within the current year.
(3) Nuclear power project: Fujian Ningde Nuclear Power Company Limited (two
1,000 MW units), in which the Company holds 49% interests, reported smooth
progress in its preliminary works. At present, the project has finished the
compilation of the 'Project Application Report'.
(4) Wind power project: The Bayin Wind Power Plant Phase II (installed
capacity: 48 MW), developed and constructed by the Company's wholly-owned
subsidiary Inner Mongolia Datang International Zhouzi Wind Power Co., Ltd., and
the Shanxi Datong Zuoyun Wing 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. Construction of these projects is expected to
officially commence within the current year.
(5) Coal chemical projects: Based on substantial preliminary studies and
experiments, the Board of the Company has considered and approved the
development and construction of the 'Coal-based Olefin Project in Duolun County,
Xilinguole League, Inner Mongolia' with a controlling interest in the project.
The plant of the project is located in Duolun County, Xilinguole League of the
Inner Mongolia Autonomous Region. The project uses the coal from Shengli Coal
Mine in Inner Mongolia, of which the Company participated in the development, as
raw materials. It produces chemical products with the world's advanced
technologies, including the pulverised coal gasification technology, the
synthetic gas purification technology, the methanol-to-propylene technology and
the propylene polymerisation technology. It is the most advanced coal chemical
project utilising clean, efficient and high added-value coal. The project is
expected to produce annually 460,000 tonnes of polypropylene and other
by-products. The Inner Mongolia Development and Reform Commission has approved
the preliminary application for the project. The National Development and Reform
Commission has also approved the project's tax exemption application for
introduction of equipment and technological research. The Company expects the
project, upon successful development and construction, to become the Company's
new source of profit growth.
(6) Other energy projects: In March 2007, the Company entered into an equity
transfer agreement with Inner Mongolia Huineng Group to participate in the
development of Changtan Coal Mine in Ordos City of Inner Mongolia. It is
expected that the relevant acquisition procedures will be completed before the
end of the current year.
Major Financial Indicators and Analysis
During the Period, the Company and its Subsidiaries realised RMB15,465 million
in revenue from principal operations, representing a 42.26% increase over the
Same Period Last Year. Net profit attributable to the equity holders of the
Company was RMB1,807 million, representing a 41.86% increase over the Same
Period Last Year. Basic earnings per share attributable to the equity holders of
the Company was RMB0.16, representing an increase of RMB0.04 per share over the
Same Period Last Year (the outstanding ordinary shares increased as a result of
the bonus issue of 10 shares issued for every 10 shares held by way of
capitalisation of the capital reserve fund, without affecting the balance held
of total equity, hence the basic earnings per share for the reported periods
were adjusted retrospectively to reflect the bonus issue).
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 revenue from principal operations mainly comprises
revenue from electricity sales and heat sales.
During the Period, the Company and its Subsidiaries realised an operating
revenue of RMB15,465 million, representing an increase of approximately RMB4,594
million or 42.26% over the Same Period Last Year, owing to the following main
reasons:
- Increase in installed capacity and on-grid power generation. During
the Period, the Company's installed capacity under management increased by 4,020
MW as compared to the Same Period Last Year as new generation units commenced
commercial operation in the second half of 2006. On-grid power generation
increased by approximately 13.919 billion kWh, thereby increasing the revenue by
approximately RMB3,836 million.
- Increase in average on-grid power tariff. As a result of the
implementation of the Fuel-Tariff Pass-through Mechanism from 30 June 2006, the
increase in the number of the Company and its Subsidiaries' units adopting the
tariff rates for desulphurised units as well as the Company's rational
adjustment in the power generation structure, the average on-grid tariff
(consolidated, tax included) of the Company and its Subsidiaries increased by
approximately RMB16.86 per MWh over the Same Period Last Year, leading to a
corresponding increase of about RMB758 million in revenue.
2. Operating Costs
During the Period, the total consolidated operating costs of the Company and its
Subsidiaries amounted to RMB11,545 million, representing an increase of 42.51%
over the Same Period Last Year. The major reasons were increases in fuel costs
and fixed costs.
During the Period, fuel costs accounted for 62.18% of operating costs. Following
the increases of the Company's newly commenced operating generation units and
the increase in power generation, as well as the continued rise in nationwide
fuel prices, fuel costs increased by about RMB2,620 million or approximately
57.49% over the Same Period Last Year. Of such increased amount, the increase in
fuel costs as a result of a rise in on-grid electricity volume amounted to
approximately RMB1,552 million. The rise in the unit fuel cost has led to an
increase in fuel costs of approximately RMB1,068 million.
During the Period, fixed costs increased by approximately RMB823 million or
23.24% over the Same Period Last Year, which was mainly attributable to the
increases in depreciation charges for generation units, maintenance costs, water
expenses and pollution discharge fees incurred by newly commenced operating
generation units of the Company over the Same Period Last Year. Among these, the
depreciation charges increased by approximately 33.88% over the Same Period Last
Year.
3. Net Financing Costs
During the Period, the financing costs of the Company amounted to approximately
RMB973 million, representing an increase of 73.46% over the Same Period Last
Year. The relatively rapid increase was attributable to the increase in interest
expenses on short-term and long-term loans during the Period.
4. Profit
During the Period, the Company and its Subsidiaries reported a consolidated
profit before tax amounting to RMB2,985 million, representing an increase of
34.47% over the Same Period Last Year. Consolidated profit attributable to the
equity holders of the Company amounted to approximately RMB1,807 million,
representing an increase of 41.86% over the Same Period Last Year. The increase
in the Company's profit was mainly attributable to the increase in operating
revenue as well as stringent and effective cost controls adopted by the Company.
5. Financial Position
As at 30 June 2007, total consolidated assets of the Company and its
Subsidiaries amounted to approximately RMB101,329 million, representing an
increase of approximately RMB10,618 million as compared to the end of 2006.
Total consolidated liabilities amounted to approximately RMB70,631 million,
representing an increase of approximately RMB7,121 million over the end of 2006.
Minority interests amounted to approximately RMB4,579 million, representing an
increase of approximately RMB1,275 million over the end of 2006. Total equity
amounted to approximately RMB30,698 million, representing an increase of
approximately RMB3,497 million over the end of 2006. The increase in total
assets was primarily caused by 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 30 June 2007, the asset-to-liability ratio for the Company and its
Subsidiaries was approximately 69.70%. The net debt-to-equity ratio (i.e. (loans
+ convertible bonds + short-term commercial papers - cash and cash equivalents
- short-term bank deposits with a maturity of over 3 months)/total equity) was
approximately 172.85%.
As at 30 June 2007, total cash and cash equivalents and bank deposits with a
maturity of over 3 months of the Company and its Subsidiaries amounted to
approximately RMB5,658 million, of which the deposits with a total amount
equivalent to approximately RMB83 million were in foreign currencies. The
Company and its Subsidiaries had no entrusted deposits or overdue fixed deposits
during the Period.
As at 30 June 2007, short-term loans of the Company and its Subsidiaries
amounted to approximately RMB10,516 million, carrying annual interest rates
ranging from 4.96% to 6.60%. Long-term loans (excluding those due within 1 year)
amounted to approximately RMB43,675 million and long-term loans due within 1
year amounted to approximately RMB1,253 million, at annual interest rates
ranging from 3.60% to 6.57%, of which an amount equivalent to approximately
RMB2,557 million was denominated in US dollar. The Company and its Subsidiaries
pay regular and active attention to foreign exchange market fluctuations and
constantly assess foreign currency risks.
As at 30 June 2007, North China Grid Company Limited ('NCG', originally North
China Power (Group) Corp. and its subsidiaries) and some minority shareholders
of the Company's subsidiaries provided guarantees for the loans of the Company
and its Subsidiaries amounting to approximately RMB2,808 million. 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 the Second Half of 2007
In 2007, competition in the power market has been intensifying. The utilisation
rates of generation units continue to decrease. The rise in coal prices and the
uncertainties regarding coal quality increase the difficulty for cost control
and operation management. Facing a difficult environment, the Company will
further improve and enhance the management quality and work harder to strive for
encouraging results. In the second half of 2007, the Company will focus on the
following tasks:
1. Continuing the implementation of the Company's diversified development
strategy, dedicating further effort to the preliminary works of development
projects and striving to expand the reserve of preliminary projects, thereby
laying the foundation for the Company's sustainable development.
2. Further reinforcing on production safety efforts by enforcing safety
production accountabilities and strengthening the management of significant risk
sources; elevating the effort on specific management of equipment to enhance the
safety level of equipment, thereby ensuring the safe and stable operation of
generation units for increased power generation.
3. Strengthening fuel management to strive for a reduction in fuel costs on
the premise of ensuring fuel supply.
4. Strengthening the management of projects under construction, so as to
ensure the generation units planned to commence operation will be in operation
with safe and good quality operation as scheduled within 2007.
5. Striving to secure funding for the Company's development by actively
studying and exploring more varied and low-cost financing channels.
Share Capital and Dividends
Share Capital
As at 30 June 2007, the total share capital of the Company amounted to
5,833,079,077 shares, divided into 5,833,079,077 shares carrying a nominal value
of RMB1.00 each.
Shareholding of Substantial Shareholders
So far as the directors of the Company are aware, as at 30 June 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
percentage Approximate Approximate
to total percentage to percentage to
issued share total issued A total issued H
Class of Number of capital of the Shares of the Shares of the
Name of Shareholder Shares shares held Company (%) Company (%) Company (%)
China Datang Corporation A Shares 1,979,620,580 33.94 46.78 -
Beijing Energy Investment
(Group) Company A Shares 671,792,400 11.52 15.87 -
Hebei Construction
Investment Company A Shares 671,792,400 11.52 15.87 -
Tianjin Jinneng Investment
Company A Shares 606,006,300 10.39 14.32 -
Allianz SE H Shares 109,663,000 (L) 1.88 (L) - 7.21 (L)
UBS AG H Shares 105,980,298 (L) 1.82 (L) - 6.66 (L)
19,820,000 (S) 0.34 (S) - 1.25 (S)
JPMorgan Chase & Co. H Shares 91,061,286 (L) 1.56 (L) - 5.72 (L)
69,118,059 (P) 1.18 (P) - 4.34 (P)
(L) means long position (S) means short position (P) means lending pool
Dividends
The Company had considered and approved the distribution proposals on paying the
2006 cash dividends and share capital expansion by utilising the capital reserve
fund at its 2006 annual general meeting held on 29 June 2007. The above
distribution proposals were completed before the publication date of this
report.
The Board does not recommend any payment of interim dividend for 2007.
Shareholding by the Directors and Supervisors
As at 30 June 2007, Mr. Fang Qinghai, director of the Company, was interested in
1,000 A Shares of the Company. As at 27 August 2007, Mr. Fang Qinghai's
interests in the Company's A Shares increased to 2,000 shares due to the
Company's implementation of the proposal on share capital expansion by way of
capitalisation of the capital reserve fund for the year 2006. Save as disclosed
above, none of the directors, supervisors and chief executive 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 SFO) that were required to be notified to the Company and
The Stock Exchange of Hong Kong Limited (the 'Hong Kong Stock Exchange') under
the provisions of Divisions 7 and 8 of Part XV of the SFO, or required to be
recorded in the register mentioned in the SFO pursuant to section 352 or
otherwise required to be notified to the Company and the Hong Kong Stock
Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers (the 'Model Code') in Appendix 10 of the Rules Governing the
Listing of Securities on the Hong Kong Stock Exchange (the 'Listing Rules').
Significant Events
1. 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
that (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 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 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.
2. Pursuant to the written resolutions formed at the twenty-third
meeting of the fifth session of the Board held on 12 June 2007, Mr. Zhou Gang
and Mr. Qin Jianming were appointed Deputy General Managers of the Company
whilst Mr. Yang Hongming ceased to be a Deputy General Manager of the Company.
3. Pursuant to the resolutions passed at the twenty-eighth meeting of
the fifth session of the Board held on 29 June 2007, Mr. Zhou Gang was appointed
as Secretary to the Board (and Company Secretary) of the Company and Mr. Mok
Chung Kwan, Stephen was appointed as Joint Company Secretary of the Company,
whilst Mr. Yang Hongming ceased to be the Secretary to the Board (and Company
Secretary) of the Company.
Purchase, Sale and Redemption of the Company's Listed Securities
During the Period, the Company and its Subsidiaries have not purchased, sold or
redeemed any of its listed securities.
Compliance with the Code on Corporate Governance Practices
To the knowledge of the Board, the Company has complied with the code provisions
in the Code on Corporate Governance Practices as set out in Appendix 14 of the
Listing Rules during the Period.
Compliance with the Model Code
Upon specific enquiries made to all the directors of the Company and in
accordance with information provided, the Board confirmed that all directors of
the Company have complied with the provisions under the Model Code as set out in
Appendix 10 of the Listing Rules during the Period.
Audit Committee
The Audit Committee has reviewed the accounting principles and methods adopted
by the Company and its Subsidiaries with the management of the Company. It has
also discussed matters regarding internal controls and the annual financial
statements, including the review of the unaudited condensed consolidated interim
financial information for the six months ended 30 June 2007.
The Audit Committee considers that the financial information of the Company and
its Subsidiaries for the first half of 2007 have complied 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, 27 August 2007
Condensed Consolidated Interim Balance Sheet (Unaudited)
As at 30 June 2007
(Amounts expressed in thousands of Renminbi ('Rmb'))
30 June 31 December
Note 2007 2006
(Note 17)
ASSETS
Non-current assets
Property, plant and equipment, net 3 84,943,932 77,574,619
Investments in associates 960,677 857,421
Available-for-sale investments 2,952,883 1,774,184
Land use rights 637,008 572,599
Intangible assets 85,791 83,576
Deferred housing benefits 263,686 300,232
Other long-term assets 87,850 87,850
Deferred income tax assets 156,553 142,969
90,088,380 81,393,450
Current assets
Inventories 1,011,125 806,965
Other receivables and current assets 905,294 710,472
Accounts receivable 4 3,622,233 3,337,529
Notes receivable 43,076 11,132
Short-term bank deposits over three months 45,000 -
Cash and cash equivalents 5 5,613,437 4,451,284
11,240,165 9,317,382
Total assets 101,328,545 90,710,832
30 June 31 December
Note 2007 2006
(Note 17)
EQUITY AND LIABILITIES
Capital and reserves attributable to the
Company's equity holders
Share capital 5,833,079 5,662,849
Reserves 20,285,394 18,233,202
26,118,473 23,896,051
Minority interests 4,579,319 3,304,667
Total equity 30,697,792 27,200,718
Non-current liabilities
Long-term loans 6 43,674,608 40,273,581
Convertible bonds 7 275,976 1,111,810
Deferred income 299,975 273,257
Deferred income tax liabilities 742,658 421,682
44,993,217 42,080,330
Current liabilities
Accounts payable and accrued liabilities 8 8,988,842 7,648,155
Short-term loans 6 10,516,067 9,300,496
Current portion of long-term loans 6 1,253,076 2,942,804
Taxes payable 529,397 538,329
Dividends payable 1,350,154 -
Other current liabilities 3,000,000 1,000,000
25,637,536 21,429,784
Total liabilities 70,630,753 63,510,114
Total equity and liabilities 101,328,545 90,710,832
The accompanying notes are an integral part of this unaudited condensed
consolidated interim financial information.
Condensed Consolidated Interim Income Statement (Unaudited)
For the six months ended 30 June 2007
(Amounts expressed in thousands of Rmb, except per share data)
Six months ended 30 June
Note 2007 2006
(Note 17)
Operating revenue 9 15,465,022 10,870,962
Operating costs 14(b) (11,544,567) (8,100,949)
Operating profit 3,920,455 2,770,013
Share of profit/(loss) of associates 6,905 (3,426)
Interest income 31,121 14,463
Finance costs 14(b) (973,005) (560,936)
Profit before taxation 2,985,476 2,220,114
Taxation 10 (732,806) (598,386)
Profit for the period 2,252,670 1,621,728
Attributable to:
- Equity holders of the Company 1,807,257 1,273,947
- Minority interests 445,413 347,781
2,252,670 1,621,728
Earnings per share for profit attributable
to the equity holders of the Company
during the period
- basic (Rmb) 11 0.16 0.12
- diluted (Rmb) 11 0.16 0.12
The accompanying notes are an integral part of this unaudited condensed
consolidated interim financial information.
Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
For the six months ended 30 June 2007
(Amounts expressed in thousands of Rmb)
Attributable to equity holders of the Company
Reserves
Statutory Statutory Discretionary
Share Capital surplus public surplus
Note capital reserve reserve welfare fund reserve
Balance as at
1 January
2006,
as previously
reported 5,162,849 3,653,421 1,977,048 559,456 4,981,377
Adjustment to
statutory
surplus
reserve 2 - - (333,446) - -
Balance as at
1 January
2006,
as restated 5,162,849 3,653,421 1,643,602 559,456 4,981,377
Minority
interests
arising from
business
combination - - - - -
Capital
injection
from
minority
shareholders
of
subsidiaries - - - - -
Dividends
declared - - - - -
Currency
translation
differences - - - - -
Profit for
the period - - - - -
Transfer
between
reserves - - 559,456 (559,456) -
Release of
restricted
reserve - - - - -
Transfer to
discretionary
surplus
reserve - - - - 759,910
Balance as at
30 June 2006 5,162,849 3,653,421 2,203,058 - 5,741,287
Attributable to equity holders of the Company
Reserves
Currency
Restricted translation Other Retained Total Minority Total
Note reserve differences reserve earnings reserves interests equity
Balance as at
1 January
2006, as
previously
reported 173,510 (184) 149,796 1,668,189 13,162,613 2,403,475 20,728,937
Adjustment to
statutory
surplus
reserve 2 - - - 333,446 - - -
Balance as at
1 January
2006, as
restated 173,510 (184) 149,796 2,001,635 13,162,613 2,403,475 20,728,937
Minority
interests
arising from
business
combination - - - - - 64,263 64,263
Capital
injection
from
minority
shareholders
of
subsidiaries - - - - - 251,000 251,000
Dividends
declared - - - (1,177,130) (1,177,130) (551,018) (1,728,148)
Currency
translation
differences - (165) - - (165) - (165)
Profit for
the
period - - - 1,273,947 1,273,947 347,781 1,621,728
Transfer
between
reserves - - - - - - -
Release of
restricted
reserve (28,005) - - 28,005 - - -
Transfer to
discretionary
surplus
reserve - - - (759,910) - - -
Balance as at
30 June 2006 145,505 (349) 149,796 1,366,547 13,259,265 2,515,501 20,937,615
Attributable to equity holders of the Company
Reserves
Statutory Discretionary
Share Capital surplus surplus
Note capital reserve reserve reserve
Balance as at
1 January 2007,
as previously 5,662,849 6,432,245 2,914,599 5,741,287
reported
Adjustment to
Statutory 2 - - (465,538) -
reserves
Balance as at
1 January 2007, as
restated. 5,662,849 6,432,245 2,449,061 5,741,287
Conversion of
convertible 7 170,230 796,394 - -
bonds
Capital injection
from minority
shareholders of - - - -
subsidiaries
Dividends declared 12 - - - -
Currency - - - -
translation
differences
Profit for the - - - -
period
Release of
restricted reserve 12 - - - -
Transfer to
discretionary
surplus reserve 12 - - - 1,020,774
Fair value gains,
net of tax:
available-for-sale - - - -
financial assets
Balance as at
30 June 2007 5,833,079 7,228,639 2,449,061 6,762,061
Attributable to equity holders of the Company
Reserves
Currency
Restricted translation Other Retained Total Total
Note reserve differences reserve earnings reserves equity
Balance as at
1 January
2007,
as previously
reported 237,354 422 840,304 2,066,991 18,233,202 27,200,718
Adjustment to
Statutory
reserves 2 - - - 465,538 - -
Balance as at
1 January
2007, as
restated. 237,354 422 840,304 2,532,529 18,233,202 27,200,718
Conversion of
convertible
bonds 7 - - (112,673) - 683,721 853,951
Capital
injection from
minority
shareholders
of
subsidiaries - - - - - 1,006,010
Dividends
declared 12 - - - (1,348,714) (1,348,714) (1,525,485)
Currency
translation
differences - (2,426) - - (2,426) (2,426)
Profit for the
period - - - 1,807,257 1,807,257 2,252,670
Release of
restricted
reserve 12 (34,162) - - 34,162 - -
Transfer to
discretionary
surplus
reserve 12 - - - (1,020,774) - -
Fair value
gains, net of
tax:
available-for-sale
financial
assets - - 912,354 - 912,354 912,354
Balance as at
30 June 2007 203,192 (2,004) 1,639,985 2,004,460 20,285,394 30,697,792
The accompanying notes are an integral part of this unaudited condensed
consolidated interim financial information.
Condensed Consolidated Interim Cash Flow Statement (Unaudited)
For the six months ended 30 June 2007
(Amounts expressed in thousands of Rmb)
Six months ended 30 June
Note 2007 2006
Net cash provided by operating activities 6,817,751 4,020,004
Net cash used in investing activities 14 (9,380,255) (7,636,519)
Net cash provided by financing activities 14 3,727,161 3,831,013
Net increase in cash and cash equivalents 1,164,657 214,498
Cash and cash equivalents, beginning of period 4,451,284 1,029,339
Exchange losses on cash and cash equivalents (2,504) (4,200)
Cash and cash equivalents, end of period 5,613,437 1,239,637
The accompanying notes are an integral part of this unaudited condensed
consolidated interim financial information.
Notes to the Condensed Consolidated Interim Financial Information (Unaudited)
For the six months ended 30 June 2007
(Amounts expressed in thousands of Rmb unless otherwise stated)
1. Company organisation and principal activities
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 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 stock limited company 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. Principal accounting policies
The unaudited condensed consolidated interim financial information for the six
months ended 30 June 2007 has been prepared in accordance with International
Accounting Standard ('IAS') 34 'Interim Financial Reporting' promulgated by the
International Accounting Standards Board and Appendix 16 of the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited. The
unaudited condensed consolidated interim financial information should be read in
conjunction with the annual financial statements for the year ended 31 December
2006.
The principal accounting policies applied in the preparation of this unaudited
condensed consolidated interim financial information are consistent with those
applied in the preparation of the annual financial statements for the year ended
31 December 2006 except that the Company and its Subsidiaries have adopted the
revised/new International Financial Reporting Standards ('IFRS') which are
effective for accounting period commencing on or after 1 January 2007, which are
detailed as follows:
- IFRS 7, Financial Instruments: Disclosures and a complementary
amendment to IAS 1, Presentation of Financial Statements !X 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 was no significant impact from adopting IFRIC
Interpretation 10 on the financial statements of the Company and its
Subsidiaries.
The Company and its Subsidiaries adopted the Accounting Standards for Business
Enterprises promulgated by the Ministry of Finance of the PRC on 15 February
2006 (the 'new PRC GAAP') since 1 January 2007. According to relevant
requirements under the new PRC GAAP, retrospective adjustment to the provision
of statutory reserves is required as a result of the retrospective adjustments
in retained earnings upon first-time adoption. In addition, the new PRC GAAP no
longer permits share of statutory reserves of subsidiaries at consolidation
level. Hence aforementioned adjustments have been made retrospectively in this
unaudited condensed consolidated interim financial information as change of
accounting policy.
3. Property, plant and equipment, net
30 June 31 December
2007 2006
Beginning of the period/year 77,574,619 58,948,110
Changes in consolidation scope - 3,809,097
Acquisition 613,370 529,137
Additions 9,155,845 18,428,568
Disposals (1,066) (13,451)
Depreciation (2,398,836) (4,126,842)
End of the period/year 84,943,932 77,574,619
4. Accounts receivable
Accounts receivable of the Company and its Subsidiaries mainly represents the
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 30 June 2007 and 31 December 2006, all tariff
revenue receivables from the respective grid companies were aged within three
months, and no doubtful debt provisions were considered necessary.
5. Cash and cash equivalents
30 June 31 December
2007 2006
Bank deposits 5,612,578 4,450,799
Deposits with China Datang Group Finance
Company Limited ('Datang Finance') 103 10
Cash on hand 756 475
5,613,437 4,451,284
6. Loans
As at 30 June 2007, the Company and its Subsidiaries had short-term and
long-term loans payable to Datang Finance totalling Rmb1,938,300,000 and
Rmb203,500,000 respectively (31 December 2006 - Rmb761,200,000 and
Rmb189,500,000).
7. Convertible bonds
The movement in liability component of convertible bonds during the six months
ended 30 June 2007 was as follows:
Balance at 1 January 2007 1,111,810
Conversion to share capital (833,570)
Interest expense 14,924
Interest payments (2,674)
Exchange rate adjustment (14,514)
Balance at 30 June 2007 275,976
The carrying amount of the liability component at 30 June 2007 of the
convertible bonds approximated its fair value.
During the six months ended 30 June 2007, holders of the convertible bonds with
face value of USD115,684,000 have exercised their conversion rights and
increased the number of H Shares of the Company by 170,230,077 shares with par
value of Rmb1 each.
8. Accounts payable and accrued liabilities
30 June 31 December
2007 2006
(Note 17)
Construction costs and deposits payable to
contractors 4,304,564 5,393,189
Fuel and material costs payable 3,924,007 1,500,801
Salary and welfare payable 125,375 147,078
Interest rate swap liability - 12,766
Interest payable 135,282 137,480
Assets acquisition payable 11,296 50,546
Others 488,318 406,295
8,988,842 7,648,155
As at 30 June 2007 and 31 December 2006, other than certain deposits for
construction which were aged between one and three years, substantially all
accounts payable were aged within one year.
As at 30 June 2007, the notional principal amount of the outstanding interest
rate swap contract of Inner Mongolia Datang International Tuoketuo Power
Generation Company Limited 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
5.38% (31 December 2006 - 5.61%) (LIBOR offered by British Bankers' Association
on 11 January 2007), respectively.
9. Operating revenue
Six months ended 30 June
2007 2006
(Note 17)
Electricity 15,347,761 10,742,226
Heat 78,182 73,639
Others 39,079 55,097
15,465,022 10,870,962
Pursuant to the Power Purchase Agreements entered into between the Company and
its Subsidiaries and the regional or provincial grid companies, the Company and
its Subsidiaries sell their entire net generation of electricity to these grid
companies at approved tariff rates.
10. Taxation
Six months ended 30 June
2007 2006
Current tax 794,005 613,951
Deferred tax (61,199) (15,565)
732,806 598,386
Income tax is provided on the basis of the statutory profit for financial
reporting purposes, adjusted for income and expense items, which are not
assessable or deductible for income tax purposes.
Income tax has been provided on the estimated assessable profit for the period
at their prevailing rates of taxation. Certain of the subsidiaries, being
located in specially designated regions, are subject to preferential income tax
rates. In addition, certain subsidiaries are exempted from the PRC income tax
for two years starting from the first year of operation followed by a 50%
exemption of the applicable tax rate for the next three years.
In March 2007, the PRC government promulgated the Corporate Income Tax Law which
will be effective from 1 January 2008. According to the Corporate Income Tax
Law, both domestic and foreign invested enterprise will be subject to a single
income tax rate of 25%.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 will be abolished simultaneously. The Corporate Income Tax
Law has an impact on the deferred income tax assets and liabilities of the
Company and its Subsidiaries. As the detailed implementations rulings have not
yet been released, the Company and its Subsidiaries adjusted deferred income tax
balances as at 30 June 2007 based on their best estimates and will continue to
access the impact of such new law in the future.
11. Earnings per share
On 23 July 2007, the Company announced the payment of final dividends in respect
of the year ended 31 December 2006 and a bonus issue of 10 shares for every 10
shares outstanding. The basic and diluted earnings per share included in this
unaudited condensed consolidated interim financial information have been
adjusted retrospectively to reflect the bonus issue (see Note 12).
(i) Basic earnings per share
The calculation of basic earnings per share for profit attributable to the
equity holders of the Company was based on profit attributable to equity holders
of the Company and on the weighted average amount of shares outstanding during
the period.
Six months ended 30 June
2007 2006
Profit attributable to equity holders of Company (Rmb'000) 1,807,257 1,273,947
Weighted average number of ordinary shares
in issue (shares in thousand) 5,763,261 5,162,849
Impact of bonus issue (shares in thousand) (Note 12) 5,763,261 5,162,849
Weighted average number of ordinary shares for
basic earnings per share (shares in thousand) 11,526,522 10,325,698
Basic earnings per share for profit attributable to
the equity holders of the Company (Rmb) 0.16 0.12
(ii) Diluted earnings per share
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 bond is assumed to have been
converted into ordinary shares and the net profit is adjusted to eliminate the
interest expenses less the tax effect.
Six months ended 30 June
2007 2006
Profit attributable to equity holders of Company (Rmb'000) 1,807,257 1,273,947
Interest expense on convertible debt (net of tax) (Rmb'000) 3,328 19,551
Profit used to determine diluted earnings per share (Rmb'000) 1,810,585 1,293,498
Weighted average number of ordinary shares for
basic earnings per share (shares in thousand) 11,526,522 10,325,698
Adjustments for assumed conversion of
convertible bonds (including the impact of
share capital expansion*) (shares in thousand) 112,176 444,254
Weighted average number of ordinary shares for
diluted earnings per share (shares in thousand) 11,638,698 10,769,952
Diluted earnings per share for profit attributable to
the equity holders of the Company (Rmb) 0.16 0.12
* According to the terms and conditions of the convertible bonds, if the
Company makes a bonus issue (in either case credited as fully paid by way of
capitalisation of profits or reserves), the conversion price will be adjusted to
mirror the change of outstanding ordinary shares due to the bonus issue, hence
the assumed conversion of convertible bonds have been adjusted retrospectively
due to the bonus issue approved in the general meeting held on 29 June 2007 (see
Note 12).
12. Profit appropriations
Dividends
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. The amounts have been reflected as an appropriation of retained earnings
for the six months ended 30 June 2007. 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. As
of the date of this unaudited condensed consolidated interim financial
information approved for issue, the legal process of the share capital expansion
has not been completed. Therefore, no adjustment was made to the share capital
as at 30 June 2007.
Reserves
During the period, approximately Rmb34,162,000 have been transferred from the
restricted reserve to retained earnings. This amount represented amortisation of
deferred housing benefits for the six months ended 30 June 2007, net of the
additional deferred housing benefits incurred during the same period.
An appropriation of approximately Rmb1,020,774,000 to the discretionary surplus
reserve for the year ended 31 December 2006 was approved by the shareholders on
the general meeting held on 29 June 2007.
As described in Note 2 above, the opening balances of statutory surplus reverse
of all the presented periods have been restated as a result of the adoption of
new PRC GAAP.
13. Related parties and transactions
(i) The related parties of the Company and its Subsidiaries are as follows:
Name of related parties Nature of relationship
Related parties in which the Company has
no equity interest
China Datang Significant shareholder of the Company
Tianjin Jinneng Investment Company ('Tianjin Jinneng') Shareholder of the Company
Beijing Energy Investment (Group) Company Shareholder of the Company
Hebei Construction Investment Company Shareholder of the Company
Other state-controlled entities Related parties of the Company
Related parties in which the Company has equity interest
North China Electric Power Research Institute Associate
Company Limited ('NCEPR')
Beijing Texin Datang Heat Company Limited ('Datang Texin') Associate
Ningxia Datang International Daba Power Associate
Generation Company Limited ('Daba Power Company')
Tongmei Datang Tashan Coalmine Company Limited Associate
('Tashan Coalmine')
Datang Finance Associate
(ii) The following is a summary of the major related party transactions
undertaken by the Company and its Subsidiaries during the period:
Six months ended 30 June
2007 2006
Ash disposal fee to China Datang 28,946 28,946
Rental fee to China Datang 3,614 3,614
Technical supervision, assistance and testing service fee to NCEPR 21,096 16,916
Heat revenue from Datang Texin 28,045 25,488
Fuel management fee to China Datang - 3,134
Interest expense to Datang Finance 49,681 15,740
Interest expense to Tianjin Jinneng 1,425 -
Transactions with other state-controlled entities
The PRC government controls a significant portion of the assets and a
substantial number of entities in the PRC. The PRC government is considered to
be 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 privatisation programs. Nevertheless, management believes that the Company
and its Subsidiaries have provided meaningful disclosures of related party
transactions, with inclusion of the following disclosures of material
transactions and balances with other state-controlled entities.
Six months ended 30 June
2007 2006
Sales of electricity 15,347,761 10,742,226
Sales of heat 78,182 73,639
Interest income from state-owned banks/non-bank financial institution 31,121 14,463
Interest expense on loans borrowed from state-owned
banks/non-bank financial institution 1,551,987 1,151,356
Purchases of property, plant and equipment
(including construction-in-progress) 4,920,848 9,899,414
Purchases of fuel 8,916,362 3,584,270
Purchases of spare parts and consumable supplies 538,763 93,632
Drawdown of short-term loans from state-owned
banks/non-bank financial institution 10,343,967 9,115,920
Repayments of short-term loans from state-owned
banks/non-bank financial institution 9,128,396 6,829,434
Drawdown of long-term loans borrowed from state-owned
banks/non-bank financial institution 8,543,231 7,873,168
Repayments of long-term loans borrowed from state-owned
banks/non-bank financial institution 6,363,745 3,771,589
Acquisition of Hebei Shayu Railway Company Limited - 288,719
Other charges
- Repairs and maintenance services 51,656 93,578
- Transportation expenses 9,284 139,442
30 June 31 December
2007 2006
Guaranteed loans
Loans guaranteed by
- North China Grid Company Limited ('NCG') 869,298 921,648
- Minority shareholders of subsidiaries 1,939,316 3,008,081
(iii) Key Management Compensation
Six months ended 30 June
2007 2006
Basic salaries and allowances 634 403
Bonus 1,820 1,319
Retirement benefits 149 98
Other benefits 476 677
14. Supplemental financial information
(a) Condensed consolidated balance sheet
30 June 31 December
2007 2006
Net current liabilities 14,397,371 12,112,402
Total assets less current liabilities 75,691,009 69,281,048
(b) Condensed consolidated income statement
Six months ended 30 June
2007 2006
Interest expense 1,663,791 1,194,282
Less: amount capitalised in property, plant and equipment (590,529) (559,979)
1,073,262 634,303
Exchange gain, net (83,206) (25,656)
Fair value gain on an interest rate swap (17,051) (47,711)
Finance costs 973,005 560,936
Cost of inventories sold
- Fuel 7,178,182 4,557,820
- Spare parts and consumable supplies 114,427 55,967
Depreciation 2,389,709 1,785,011
Amortisation
- Land use rights 8,262 4,157
- Intangible assets 4,145 3,352
Dividend income (51,699) (28,052)
Donation to State Environmental Bureau - 34,000
Amortisation of deferred housing benefits 49,198 40,755
(c) Condensed consolidated cashflow statement
Six months ended 30 June
2007 2006
Investing activities, included:
Additions to property, plant and equipment (9,262,247) (6,929,412)
Financing activities, included:
Drawdown of short-term loans 10,655,760 9,115,920
Repayments of short-term loans (9,456,686) (6,829,434)
Drawdown of long-term loans 6,793,549 7,923,500
Repayments of long-term loans (6,450,995) (3,869,493)
(d) Acquisition of a jointly controlled entity
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 Huhehaote Guoneng Power Company Limited at a cash consideration of
Rmb6,002,000.
15. Commitments
(a) Capital commitments
As at 30 June 2007, the Company and its Subsidiaries had capital commitments of
investments amounted to Rmb13,533 million (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 electric utility plants
not provided for in the balance sheet were as follows:
30 June 31 December
2007 2006
Authorised and contracted for 14,450,020 21,972,218
Authorised but not contracted for 11,705,157 19,484,254
26,155,177 41,456,472
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 for this coal mining
project.
(b) Operating lease commitments
Operating lease commitments extending to November 2016 in relation to buildings
were as follows:
30 June 31 December
2007 2006
Amounts repayable
Within one year 7,228 10,372
Between one to five years 28,912 28,912
Over five years 25,298 36,140
61,438 75,424
16. Financial Guarantees
30 June 31 December
2007 2006
Guarantee for loan facilities granted to associates 497,000 1,084,850
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.
17. Reclassification
Certain comparative figures have been reclassified to conform to the current
year presentation.
18. Net assets and net profit reconciliation between PRC GAAP and IFRS
The consolidated financial statements, which are prepared by the Company and its
subsidiaries in conformity with PRC GAAP, differ in certain respects from IFRS.
Major differences between PRC GAAP and IFRS, which affect the net assets and net
profit of the Company and its subsidiaries, are summarized as follow:
Net assets
30 June 31 December
2007 2006
(Note)
Net assets under PRC GAAP 30,528,023 26,992,067
Impact of IFRS adjustments:
Difference in the recognition policy on
housing benefits to the employees (a) 56,020 74,693
Difference in the commencement of depreciation of property,
plant and equipment (b) (106,466) (106,466)
Difference in accounting treatment on
monetary housing benefits (c) 207,666 225,539
Others (17,151) (16,750)
Applicable deferred tax impact of the
above GAAP differences (e) 29,700 31,635
Net assets under IFRS 30,697,792 27,200,718
Net assets
For six months ended 30 June
2007 2006
(Note)
Net profit under PRC GAAP 2,303,804 1,692,047
Impact of IFRS adjustments:
Difference in the recognition policy on
housing benefits to the employees (a) (18,673) (18,673)
Difference in accounting treatment on monetary housing benefits (c) (30,525) (22,102)
Difference in accounting treatment of performance payroll accrual (d) - (30,229)
Applicable deferred tax impact of the above GAAP differences (e) (1,936) 685
Net profit under IFRS 2,252,670 1,621,728
Note: Since the Company and its Subsidiaries adopted the new PRC GAAP, the
comparative figures have been restated accordingly (Note 2).
(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 to be
a housing benefit 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 property, plant
and equipment
Under PRC GAAP, depreciation of property, plant and equipment commences from one
month after the relevant assets are completed and ready for their 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 the retained earnings
and statutory public welfare fund after approval 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 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.
(e) Applicable deferred tax impact on the above GAAP differences
This represents the deferred tax effect on the above GAAP differences where
applicable.
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