Interim Results

Datang Intl Power Generation Co Ld 25 August 2004 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 2004 Interim Results Financial Highlights * For the six months ended 30th June 2004, consolidated operating revenue of the Company amounted to approximately Rmb6,041 million, representing an increase of 34.20% as compared to the corresponding period of the previous year. * Consolidated net profit of the Company amounted to Rmb1,113 million, representing an increase of approximately 41.89% as compared to the corresponding period of the previous year. * Basic earnings per share of the Company amounted to approximately Rmb0.22, representing an increase of approximately Rmb0.07 per share as compared to the corresponding period of the previous year. I. INTERIM RESULTS The board of directors (the 'Board') of Datang International Power Generation Co., Ltd. (the 'Company') hereby announces the unaudited operating results of the Company and its subsidiaries for the six months ended 30th June 2004 (the 'Period') prepared in accordance with the International Financial Reporting Standards. Such operating results have been reviewed and confirmed by the Company's audit committee (the 'Audit Committee'). Consolidated operating revenue of the Company for the Period amounted to approximately Rmb6,041 million, while consolidated net profit of the Company was approximately Rmb1,113 million. Basic earnings per share of the Company was approximately Rmb0.22 for the Period. The Board is satisfied with the above results. Please refer to the unaudited condensed consolidated financial statements set out below for detailed operating results. CONDENSED CONSOLIDATED INCOME STATEMENT (Unaudited) FOR THE SIX MONTHS ENDED 30 JUNE 2004 (Amounts expressed in thousands of Rmb, except per share data) Six months ended 30th June Notes 2004 2003 Operating revenue 2 6,041,467 4,501,679 Operating costs 6 (4,137,151) (3,129,463) Operating profit 1,904,316 1,372,216 Share of (loss)/profit of associates (6,633) 7,223 Interest income 19,362 24,503 Finance costs 6 (158,386) (233,700) Profit before taxation 1,758,659 1,170,242 Taxation 3 (484,395) (390,427) Profit before minority interests 1,274,264 779,815 Minority interests (161,484) 4,418 Net profit 1,112,780 784,233 Earnings per share - basic (Rmb) 4 0.22 0.15 - diluted (Rmb) 4 0.21 N/A 1. Principal accounting policies The accompanying condensed consolidated financial statements are prepared in accordance with International Accounting Standard ('IAS') No. 34, Interim Financial Reporting, and Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The principal accounting policies adopted for the preparation of the condensed consolidated financial statements as at and for the six months ended 30 June 2004 are consistent with those adopted for the preparation of the consolidated financial statements as at and for the year ended 31 December 2003. 2. Operating revenue Six months ended 30th June 2004 2003 '000 '000 Electricity 6,035,508 4,501,679 Heat 5,959 - 6,041,467 4,501,679 Pursuant to the power purchase agreement entered into between the Company and its subsidiaries and the regional or provincial power grid companies, the Company and its subsidiaries are required to sell their entire net generation of electricity to these power companies at an approved tariff rate as determined based on a regulatory process. For the six months ended 30 June 2004, all of the electricity generated by the Company and its subsidiaries were sold to North China Grid Company Limited and its subsidiaries. 3. Taxation Six months ended 30th June 2004 2003 '000 '000 PRC enterprise income tax - Current tax 469,356 428,552 - Deferred tax 15,039 (38,125) 484,395 390,427 Enterprise 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. Except for Datang Tuoketuo and Fengning Hydropower, the applicable PRC enterprise income tax rate for the Company and its subsidiaries is 33%. Pursuant to document Guo Ban Fa (2001) 73 issued by State Council of PRC and document Cai Shui (2001) 202 issued by State Administration of Taxation of PRC, Datang Tuoketuo, as an enterprise set up in western area of PRC and engaged in business encouraged by the State, is granted a tax concession to pay PRC income tax at a preferential rate of 15% from 2001 to 2010. As a newly set up domestic invested enterprises engaged in power generation in western area of PRC, Datang Tuoketuo is also exempted from PRC enterprise income tax during the first and second year of operation and is granted a tax concession to pay PRC enterprise income tax at 50% of preferential rate during the third to fifth year of operation. Datang Tuoketuo started commercial operation in 2003. The applicable PRC enterprise income tax rates approved by the local tax authority in 2003 and 2004 are 15% and 0%, respectively. Pursuant to document Feng Zheng (1996) 51 issued by the local government, all the enterprise income tax paid by Fengning Hydropower is refunded for ten years starting from 2002. 4. Earnings per share The calculation of basic earnings per share for the six months ended 30 June 2004 was based on net profit of approximately Rmb1,112,780,000 (2003 - Rmb784,233,000) and on the weighted average number of 5,162,849,000 shares (2003 - 5,162,849,000 shares) outstanding during the period. The diluted earnings per share is calculated adjusting the weighted average number of ordinary share 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. No diluted earnings per share have been presented for the six months ended 30 June 2003 as there were no dilutive potential ordinary shares outstanding by then. Six months ended 30 June 2004 Net profit attributable to shareholders (Rmb '000) 1,112,780 Interest expense on convertible debt (net of tax) (Rmb '000) 18,502 Net profit used to determine diluted earnings per share (Rmb '000) 1,131,282 Weighted average number of ordinary shares in issue (shares in thousand) 5,162,849 Adjustments for assumed conversion of convertible debt (shares in thousand) 215,813 Weighted average number of ordinary shares for diluted earnings per share (shares in thousand) 5,378,662 Diluted earnings per share (Rmb) 0.21 5. Profit appropriations Dividends On 17 March 2004, the Board of Directors proposed a dividend of Rmb0.175 per share, totalling approximately Rmb903,499,000 for the year ended 31 December 2003. The proposed dividend distribution was approved by the shareholders in their general meeting dated 22 June 2004. Reserves During the Period, approximately Rmb16,180,000 has been transferred from the restricted reserve, which is specifically set up to reflect the reduction of the statutory public welfare fund under PRC GAAP, to retained earnings. This amount represented amortisation of deferred housing benefits for the six months ended 30 June 2004. Pursuant to the Accounting System for Business Enterprises of the PRC, statutory public welfare fund is transferred to discretionary surplus reserve upon utilisation for the collective benefits of the employees. For the six months ended 30 June 2004, approximately Rmb7,860,000 (2003 - Rmb16,673,000) of the statutory public welfare fund was transferred to discretionary surplus reserve. On 17 March 2004, the Board of Directors proposed an appropriation of approximately Rmb509,077,000 to the discretionary reserve for the year ended 31 December 2003. The proposed profit appropriation was approved by the shareholders in their general meeting dated 22 June 2004. 6. Supplemental financial information Six months ended 30th June 2004 2003 '000 '000 Interest expenses 406,271 254,991 Less: amount capitalised in property, plant and equipment (213,778) (85,416) 192,493 169,575 Exchange loss, net 1,840 13 Fair value (gain)/loss on an interest rate swap (35,947) 64,112 Finance costs 158,386 233,700 Cost of inventories - Fuel 2,060,780 1,524,410 - Spare parts and consumable supplies 29,450 22,112 Depreciation and amortisation 993,906 716,794 Dividend income (18,702) (10,063) II. MANAGEMENT DISCUSSION AND ANALYSIS The People's Republic of China (the 'PRC') achieved gross domestic product ('GDP') growth of 9.70% during the Period. Driven by domestic economic growth, power demand in the PRC increased substantially. Aggregate social power consumption during the Period increased by 15.77% as compared to the corresponding period of the previous year. Power generation by the Company and its subsidiaries during the Period increased by 37.72% as compared to the corresponding period of the previous year. Consolidated operating revenue and consolidated net profit during the Period increased by 34.20% and 41.89%, respectively, as compared to the corresponding period of the previous year. 1. Production As at 30th June 2004, the installed capacity of operating units owned by the Company and its subsidiaries was 8,110MW. Total power generation amounted to approximately 25.123 million MWh during the Period, representing an increase of approximately 37.72% as compared to the corresponding period of the previous year. Total on-grid electricity amounted to approximately 23.578 million MWh during the Period, representing an increase of 37.77% as compared to the corresponding period of the previous year. The increase in power generation and on-grid electricity during the Period was mainly attributable to: (1) increase in installed capacity as compared to the corresponding period of the previous year - Unit 2 of Inner Mongolia Datang Tuoketuo Power Generation Company Limited ('Datang Tuoketuo') and Units 1 and 2 of Shanxi Datang International Yungang Thermal Power Company Limited ('Datang Yungang') were put into operation in the middle and the second half of 2003, respectively, and Unit 1 of Hebei Datang International Tangshan Thermal Power Company Limited ('Datang Tangshan') was put into operation in the first quarter of 2004. As such, the managed capacity of the Company for the Period has increased by 1,340MW as compared to the corresponding period of the previous year; (2) continued increase in power demand - merely the sales of power to the Beijing-Tianjin-Tangshan ('BTT') Power Grid has increased by 18.06% while utilisation ratio of power plants has increased by 4.4% as compared to the corresponding period of the previous year; (3) safe and stable operation of the existing units at high operating levels - the equivalent availability factor of the Company's managed units for the Period reached 93.13%, representing an increase of 0.98 percentage point as compared to the corresponding period of the previous year; and (4) secured fuel supply - fuel supply was tight since the fourth quarter of the previous year. The Company proactively coordinated to further secure coal supply for its power generation and hence, smooth operation was ensured. Operating conditions of the Company's major power plants during the Period were as follows: * The power generation of the Company's wholly-owned power plants, namely Gao Jing Thermal Power Plant, Dou He Power Plant, Zhang Jia Kou Power Plant and Xia Hua Yuan Power Plant, with a total installed capacity of 4,950MW, was approximately 15.418 million MWh during the Period, representing an increase of 8.02% as compared to the corresponding period of the previous year; * The power generation of the Company's subsidiaries, namely Tianjin Datang Panshan Power Generation Limited, Hebei Datang International Huaze Hydropower Development Company Limited ('Fengning Hydropower'), Datang Tuoketuo, Datang Yungang and Datang Tangshan, with a total installed capacity of 3,160MW, was approximately 9.704 million MWh during the Period, representing an increase of 144.58% as compared to the corresponding period of the previous year. 2. Operational Management The Company and its subsidiaries achieved a consolidated operating revenue of approximately Rmb6,041 million during the Period, representing an increase of approximately 34.20% as compared to the corresponding period of the previous year. The increase in consolidated operating revenue was mainly attributable to the increase in on-grid electricity of the Company and its subsidiaries. During the Period, the Company and its subsidiaries achieved a consolidated net profit of approximately Rmb1,113 million, representing an increase of 41.89% as compared to the corresponding period of the previous year. The substantial increase in the consolidated net profit was mainly attributable to: (1) the increase in on-grid electricity of the Company and its subsidiaries; (2) the increase in proportion of low cost power generation. Due to fuel price increase during the Period, fuel costs of the Company and its subsidiaries increased substantially as compared to the corresponding period of the previous year. In addition to its proactive and effective measures, the Company achieved fruitful results in carrying out its strategy of power plant development in the regions where it has cost advantages. Increase in low-fuel-cost power generation from power plants such as Datang Tuoketuo has effectively kept the Company's fuel cost increase under check. Despite the increase in unit fuel cost of existing power plants by approximately 10%, there was a period-on-period decrease of 1.59% in unit fuel costs across-the-board; (3) finance costs reduced due to the change of fair value of the US dollar interest rate swap of Datang Tuoketuo; and (4) the Company and its subsidiaries continued to implement effective energy saving measures and improve the operating efficiencies of its generating units, resulting in a decrease in consolidated self electricity consumption rate of the plants by approximately 0.03 percentage point during the Period as compared to the corresponding period of the previous year, and a decrease of 2.5g/kWh during the Period in coal consumption rate as compared to the corresponding period of the previous year. 3. Business Expansion During the Period, while continuously and proactively implementing the expansion strategy, the Company also placed much emphasis on the management of construction-in-progress and pre-construction projects. Currently, the progress of the construction-in-progress and pre-construction projects are as follows: (1) Projects which have commenced production: * Unit 1 (1X300MW) of Datang Tangshan was put into commercial operation in March 2004. * Unit 3 (1X600MW) of Datang Tuoketuo commenced commercial operation in August 2004. (2) Construction-in-progress: * Unit 4 (1X600MW) of Datang Tuoketuo, Unit 2 (1X300MW) of Datang Tangshan, Unit 1 (1X500MW) of Shanxi Datang Shentou Power Generation Company Limited, Unit 1 (1X300MW) of Gansu Datang Liancheng Power Generation Company Limited are expected to start power generation in 2004. * The coal-fired units (2X300MW) to be installed by Yunnan Datang Honghe Power Generation Development Company Limited has commenced construction. * Generating units (3X50MW) of Yunnan Datang Nalan Hydropower Development Company Limited and Yayangshan Hydropower Project (2X60MW), one of the construction projects of Yunnan Datang Lixianjiang Hydropower Development Company Limited, have progressed smoothly. (3) Pre-construction projects: * The Company's proposal with respect to the construction of Pengshui Hydropower Project by Chongqing Datang Pengshui Hydropower Development Company Limited ('Pengshui Hydropower') was approved by the National Development and Reform Commission (the 'NDRC') on 3rd August 2004. The Company holds 40% equity interest of Pengshui Hydropower. Pengshui Hydropower Project is located in Pengshui, Chongqing City and has been included in the State's 'Tenth Five-Year Plan'. Pengshui Hydropower Project has five 350MW units and is expected to commence power generation in 2007. * The project proposal with respect to Phase 3 of Datang Tuoketuo (2X600MW) was approved by the NDRC on 4th August 2004. To date, the planned capacity of Datang Tuoketuo has reached 3,600MW. 4. Financial Analysis (1) Operating Results During the Period, the Company and its subsidiaries achieved consolidated net profit of approximately Rmb1,113 million, representing an increase of approximately 41.89% as compared to the corresponding period of the previous year. Basic earnings per share of the Company was approximately Rmb0.22 for the Period, representing an increase of approximately Rmb0.07 per share as compared to the corresponding period of the previous year. * Operating revenue: consolidated operating revenue of the Company and its subsidiaries for the Period amounted to approximately Rmb6,041 million, representing an increase of 34.20% as compared to the corresponding period of the previous year. * Operating costs: consolidated operating costs of the Company and its subsidiaries for the Period amounted to Rmb4,137 million, representing an increase of approximately 32.21% as compared to the corresponding period of the previous year. Among the increase, fuel costs were approximately Rmb2,061 million, 35.19% higher as compared to the corresponding period of the previous year. This was mainly attributable to increase in on-grid electricity and fuel prices. However, with appropriate adjustments made to power generation structure and effective energy saving measures, unit fuel cost was reduced by 1.59% as compared to the corresponding period of the previous year. Depreciation of fixed assets increased by approximately 38.66% as compared to the corresponding period of the previous year mainly because of additional depreciation of Units 1 and 2 of Datang Tuoketuo and Units 1 and 2 of Datang Yungang which were put into operation in the middle and the second half of 2003, respectively, and Unit 1 of Datang Tangshan which was put into operation during the Period. * Finance costs: Finance costs of the Company for the Period decreased by approximately 32.23% as compared to the corresponding period of the previous year, which was mainly attributable to the change of fair value of the US dollar interest rate swap of Datang Tuoketuo. (2) Financial Position As at 30th June 2004, total consolidated assets of the Company and its subsidiaries amounted to approximately Rmb42,226 million, representing an increase of approximately Rmb6,682 million as compared to 31st December 2003. Total consolidated liabilities of the Company amounted to approximately Rmb24,867 million, representing an increase of approximately Rmb6,285 million as compared to 31st December 2003. Minority interests of the Company amounted to approximately Rmb1,429 million, representing an increase of approximately Rmb189 million as compared to 31st December 2003. Shareholders' equity of the Company amounted to approximately Rmb15,931 million, representing an increase of approximately Rmb210 million as compared to 31st December 2003. The increase in total assets of the Company mainly resulted from the implementation of the Company's expansion strategy and the increase in investments in construction-in-progress. (3) Liquidity As at 30th June 2004, the asset-to-liability ratio (i.e. the ratio between total liabilities and total assets, excluding minority interests) for the Company was 58.89%. The net debt-to-equity ratio (i.e. (total loans + convertible bonds - cash and cash equivalents - short-term bank deposit with a maturity of over 3 months - investments held for trading) / shareholders' equity) of the Company was 97.89%. (4) Cash As at 30th June 2004, total cash and cash equivalents and short-term bank deposits with a maturity of over 3 months of the Company amounted to approximately Rmb 5,922 million, among which the equivalent of approximately Rmb1,462 million was in foreign currencies. The Company has no entrusted deposits or overdue fixed deposits during the Period. (5) Loan As at 30th June 2004, short-term loans of the Company and its subsidiaries amounted to approximately Rmb5,079 million, bearing annual interest rates ranging from 2.88% to 4.78%. Long-term loans of the Company (excluding those due within 1 year) amounted to approximately Rmb14,513 million and long-term loans due within 1 year amounted to approximately Rmb869 million at annual interest rates ranging from 2.88% to 5.76%, of which an equivalent of approximately Rmb3,611 million was denominated in US Dollars. The convertible bond of the Company was denominated in US Dollars and equivalent to Rmb1,055 million. The Company and its subsidiaries pay active attention to foreign exchange rate fluctuations and constantly assess foreign currency risks. As at 30th June 2004, the guarantee provided by the Company for the loans of its subsidiaries amounted to approximately Rmb8,867 million. Other than that, the Company had not provided guarantee in whatever forms for any other company. 5. Outlook In the first half of 2004, the PRC government has issued several documents which have significant impact on the tariffs of the Company. The documents set clearly the tariff levels of units under different circumstances. Thus, on-grid electricity tariffs are clearly set for the Company's existing units, new units and construction-in-progress, which create favourable effects for the Company from this year onwards. Although the continued domestic economic growth is beneficial to the business development of the Company, the increase in fuel prices will affect its operating results. Therefore, based on the market conditions and the operation targets set by the Board at the beginning of the year, the Company will proactively carry on various tasks, namely fully utilise the favourable market environment and make good use of its competitive edges in order to develop the domestic and international business; make down-to-earth efforts to improve on fundamentals such as controlling costs effectively, ensuring safe production, and strengthening fuel management to ensure sufficient supply of coal for electricity generation; and continue to implement energy saving measures, strive to increase electricity generation and revenue and to attain improved economies of scale. III. SHARE CAPITAL AND DIVIDENDS 1. Share Capital No new shares were issued by the Company during the Period. As at 30th June 2004, the total share capital of the Company was RMB5,162,849,000, divided into 5,162,849,000 shares of Rmb1.00 each. 2. Substantial Shareholders During the Period, the following persons (other than a director, chief executive or supervisor of the Company) have interests or short positions in the shares or underlying shares as recorded in the register required to be kept by the Company pursuant to section 336 of the Securities and Futures Ordinance (Chapter 571) ('SFO'): Percentage of Class of Number of share capital Name of shareholder shares shares held (%) China Datang Corporation Domestic Shares* 1,828,768,200 35.43 Beijing International Power Development and Investment Company Domestic Shares* 671,792,400 13.01 Hebei Construction Investment Company Domestic Shares* 671,792,400 13.01 Tianjin Jinneng Investment Company Domestic Shares* 559,827,000 10.84 * Shareholder's own interest in the long position 3. Dividends Pursuant to a resolution at meeting of the Board on 17th March 2004 and as approved at the annual general meeting held on 22nd June 2004, the Company declared a dividend of Rmb 0.175 per share for year 2003 payable to shareholders of the Company whose names appear on the Company's register of members as at 22nd May 2004. The above-mentioned dividend has been paid by 30th June 2004 and dividends to domestic shares shareholders were declared and paid in Rmb. Dividends to overseas shares (the 'H Shares') shareholders were declared in Rmb and paid in Hong Kong Dollars. The Board does not recommend the payment of any interim dividend for year 2004. 4. Shareholdings of Directors and Supervisors At any time during the Period, none of the directors, supervisors, senior executives of the Company or their connected parties held or were deemed to hold any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (as defined in the SFO), nor were they granted any rights to subscribe for or acquire any interests in shares or debentures of the Company or any of its associated corporations. IV. PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES During the Period, the Company had not purchased, sold or redeemed any of its listed securities. V. SIGNIFICANT EVENT At the 2004 extraordinary general meeting, class meeting of the holders of H Shares and class meeting of the holders of domestic shares convened on 22nd June 2004, the Board was approved to make final decision in relation to the proposal of the issue of not more than 1,000,000,000 A shares of the Company. VI. CODE OF BEST PRACTICE During the Period, the Company has complied with the Code of Best Practice set out in Appendix 14 of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited. VII. THE AUDIT COMMITTEE The Audit Committee of the Company, together with the management, has reviewed the accounting principles, accounting standards and accounting practices adopted by the Company, and has discussed the issues on internal controls. It has also reviewed the unaudited condensed consolidated financial statements for the six months ended 30th June 2004. By Order of the Board Zhai Ruoyu Chairman Beijing, PRC, 23rd August 2004 As at the date of this announcement, the directors of the Company are: Zhai Ruoyu, Zhang Yi, Hu Shengmu, Kou Bingen, Yang Hongming, Liu Haixia, Guan Tiangang, Su Tiegang, Ye Yonghui, TongYunshang, Xie Songlin*, Xu Daping*, Liu Chaoan*, Yu Changchun* and Xia Qing* * independent non-executive directors The interim report of the Company for the six months ended 30th June 2004, containing all the information required by paragraph 46(1) to 46(6) inclusive of Appendix 16 to the Listing Rules, will be published on the website of The Stock Exchange of Hong Kong Limited (http://www.hkex.com.hk) in due course. This information is provided by RNS The company news service from the London Stock Exchange

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