FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
March, 2003
Huaneng Power International, Inc.
West Wing, Building C, Tianyin Mansion
No. 2C Fuxingmennan Street
Xicheng District
Beijing, 100031 PRC
This Form 6-K consists of:
An announcement of 2002 results, an announcement for resolutions
passed at the second meetings of the fourth session of the supervisory
committee and an announcement for resolutions passed at the second meeting of
the fourth session of the board of directors on March 12, 2003, in English.
[LOGO GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(a Sino-foreign joint stock limited company incorporated
in the People's Republic of China)
Announcement of Results for 2002
SUMMARY OF OPERATING RESULTS
The Board of Directors of Huaneng Power International, Inc. (the "Company") is
pleased to announce the audited operating results of the Company and its
subsidiaries for the year ended 31st December 2002 (the "Accounting Year" or
the "Year").
For the twelve months ended 31st December 2002, the Company and its
subsidiaries recorded a net profit of Rmb3.921 billion and net operating
revenues of Rmb18.474 billion, representing increases of 13.63% and 16.99%,
respectively, over 2001. Basic earnings per share was Rmb0.65, representing an
increase of Rmb0.04 over the preceding year. The Board of Directors was
satisfied with the operating results of the Year.
Details of the operating results are set out in the financial information
below.
BUSINESS REVIEW OF YEAR 2002
Year 2002 is a landmark year in the development history of the Company. During
the Year, the Company continued to strengthen management, enlarge market
shares, control costs and enhance efficiency by focusing on economic benefits
and on the basis of safe operation, with a view to optimising shareholders'
interests. The management and all staff of the Company and its subsidiaries
have seized the favourable opportunity of the market upturn and accomplished
various tasks exceeding the annual target.
1. STEADY GROWTH OF OPERATING RESULTS
For the twelve months ended 31st December 2002, the Company recorded net
operating revenues of Rmb18.474 billion and net profit of Rmb3.921 billion,
representing increases of 16.99% and 13.63%, respectively, as compared to the
same period of 2001. Earnings per share was Rmb0.65, representing an increase
of Rmb0.04 over the same period of 2001.
The steady growth in the operating results of the Company was, on the one
hand, attributable to the contribution from increased power generation of the
power plants originally owned by the Company. On the other hand, the
successful acquisition of equity interests in Shanghai Shidongkou Power
Limited Company ("Shidongkou First Power Plant"), Suzhou Industrial Park
Huaneng Power Limited Liability Company ("Taicang Power Plant") and Jiangsu
Huaneng Huaiyin Power Limited Company ("Huaiyin Power Plant") and the net
assets of China Huaneng Group Company Zhejiang Changxing Power Plant
("Changxing Power Plant") formerly owned by China Huaneng Group ("Huaneng
Group") has enlarged the Company's operating scale as well as enhanced its
strength and competitiveness, thereby also making significant contribution to
the remarkable growth of the Company's operating results for the year 2002. At
the same time, facing an increasingly competitive power market, and in view of
the twofold pressure of escalating fuel price and decreasing power tariffs,
the Company and its subsidiaries enlarged market shares, reinforced the sales
strength of the power market, enhanced internal management and strengthened
cost control. As a result, the unit fuel cost has been controlled efficiently.
Despite the increase of coal price, the average unit fuel cost for output,
excluding the power plants acquired in 2002, increased only 6.41% over the
last year despite the increase of coal price.
As at the end of 2002, net asset per share of the Company was Rmb5.07,
representing an increase of 7.42% when compared to 2001.
2. SAFE AND STABLE POWER GENERATION
In 2002, the operating power plants of the Company and its subsidiaries
achieved power generation totalling 71.43 billion kWh on a consolidated basis
(including the power generation of Shidongkou First Power Plant, Taicang Power
Plant and Changxing Power Plant from July to December), representing an
increase of 25.34% over the same period of the preceding year. If the power
generation of the three power plants referred to above is not included, the
Company has achieved power generation of 64.27 billion kWh, exceeding the
annual plan by 12.75% and representing an increase of 12.77% over the same
period of the preceding year on the same basis.
On the one hand, the increase in power generation was attributable to the
contribution of power generation from the acquired Shidongkou First Power
Plant, Taicang Power Plant and Changxing Power Plant and commencement of
operation of generating Unit 5 and Unit 6 of Dezhou Power Plant ahead of
planned schedule, thus significantly increasing the power generation capacity
of the Company. On the other hand, economic growth of the regions where the
power plants of the Company are located boosted local power demand, thus
leading to a general increase in power generation of the Company's power
plants. At the same time, the rationalized scheduling of the planned
maintenance of the generating units also created favourable conditions for the
increased power generation of the Company.
In 2002, the average availability factor of the power plants of the Company
and its subsidiaries was 92.51% and the average capacity factor was 61.95%;
the average coal consumption rates for power sold and power generated were
335.36 gram/kWh and 318.41 gram/kWh, respectively; and the average house
consumption rate was 4.90%. The Company's technical and economic indices
remained to be in the forefront among all other power companies in the PRC.
3. NEW BREAKTHROUGH IN ASSET OPERATION
In 2002:
(1) The Company acquired 70% of the equity interest in the registered capital
of Shidongkou First Power Plant, 70% of the equity interest in the
registered capital of Taicang Power Plant, 44.16% of the interest in the
registered capital of Huaiyin Power Plant and all net assets of Changxing
Power Plant formerly owned by Huaneng Group. The acquisition was
effective on 1st July 2002, thereby increasing the generation capacity of
the Company by 1,687 MW and contributing to the growth of the annual
results of the Company.
(2) After the formal announcement of the power sector reform scheme, the
Company has acquired the remaining 30% equity interest in the registered
capital of Shidongkou First Power Plant and the remaining 5% equity
interest in the registered capital of Taicang Power Plant formerly owned
by Huaneng Group. The acquisition has made Shidongkou First Power Plant a
wholly-owned power plant of the Company and has enhanced the
competitiveness of the Company in East China.
(3) The transfer of 19.48% equity interest in Huaiyin Power Plant from
Huaiyin Municipal Government to the Company has enabled the Company to
obtain the controlling right of Huaiyin Power Plant and the development
right of Huaiyin Power Plant Phase Two. This acquisition was effective on
31st December 2002.
(4) The Company has acquired 3% of the shareholding in China Chang Jiang
Power Co. Ltd., taking the first step in the development of hydro-power.
(5) The Company has entered into an Entrusted Management Agreement with
Huaneng Group and Huaneng International Power Development Corporation
("HIPDC") in relation to the management of their thermal power plants. By
entering into the Entrusted Management Agreement, the Company will
further accumulate management experience as a result of the expansion of
the Company's operation scale and set a precedent for large-scale and
multi-entities entrusted management in the PRC.
In 2003:--
(6) The Company has entered into an agreement with Shenzhen Municipal
Investment Management Corporation and Shenzhen Energy Group Co., Ltd. to
acquire 25% interest of the enlarged share capital of Shenzhen Energy
Group Co., Ltd. by way of international tendering. After the transaction
has obtained the relevant government approvals, the Company will be able
to enlarge its market shares in Guangdong area, a fast growing market for
power demand.
4. ADDING NEW ACHIEVEMENTS TO PROJECT CONSTRUCTION
(1) Owing to the Company's careful organisation and various parties' efforts,
generating Units 5 and 6 of Dezhou Power Plant completed trial operation
of 168 hours on 29th June and 13th October respectively, which was one
year ahead of the project's original planned schedule thereby making
contribution to the power generation growth of the Company.
(2) Construction works of the expansion of project of Jining Power Plant
Phase Two (using Cycled Fluidized Bed Combustion Boilers) have been
progressing smoothly. The quality of the works and investment were under
effective control and the works are being conducted according to
schedule.
5. OPENING A NEW CHAPTER IN SUSTAINABLE DEVELOPMENT
Project Proposals in relation to the planned expansion of Huaneng Shanghai
Gas-fired Power Plant (3x300 MW-class Combined-Cycle-Gas-Turbine generating
units), Huaneng Jinling Gas-fired Power Plant (3x300 MW-class
Combined-Cycle-Gas-Turbine generating units), Huaneng Shantou Coal-fired Power
Plant Phase Two (1x600 MW Coal-fired generating unit), and Huaneng Yuhuan
Power Plant (2x900 MW Coal-fired generating units) have been approved by the
relevant government authorities. The work commencement report of Huaneng
Huaiyin Power Plant Phase Two (2x300 MW Coal-fired generating units) has also
been approved by the relevant government authorities. The aggregate planned
capacity of these planned projects is estimated to be 4,800 MW. The Company
will actively push forward the progress of the proposed projects according to
commercially viable principles.
PROSPECTS FOR 2003
Year 2003 is the first year that the power industry enters into a new era of
stable development and is also the first year after the implementation of the
State's power sector reform scheme. A stable growth trend prevails in the
national economy of the PRC and it is expected that growth in power demand
will be greater than that of last year. With the deepening of the power sector
reform, a new power market and a new set of regulatory mechanisms will be
established. A sound operating environment will be conducive to the Company,
allowing it to bring its advantages into full play amidst competition and to
seize opportunities to expand its operation scale. However, at the same time,
the Company is also aware of challenges in various aspects. For instance, the
market competition will become more severe; the pressure of the rising coal
price will increase difficulties for the Company to control power generation
costs. Moreover, the pressure of downward power tariffs will affect the
profitability of the Company. The Company is fully aware of the co-existence
of opportunities and challenges in 2003. The Company has full confidence and
strength to seize opportunities and deal with challenges, and will endeavour
to fulfill the following objectives in 2003:
(1) To ensure the safety and operating stability of the power plants and the
achievement of their annual plans of power generation;
(2) To reinforce sales and marketing efforts, and to enhance the research on
the power market competition mode for the regions in which power plants
of the Company are located in order to analyse and formulate effective
market strategies, thus bringing economies of scale and integrative
advantages of the Company into full play and continuing to enlarge its
market shares;
(3) To undertake stringent control of operating costs, in particular to
enhance fuel management in order to realise management efficiency;
(4) To actively push forward the preparatory work for the planned projects;
(5) To prepare itself well for asset operation with a view to seizing
opportunities to expand the Company's operating scale and enhance its
business strength; and
(6) To establish an information management system and implement all-inclusive
budget management under comprehensive planning guidance.
The Company is fully confident of its future development. Following the
principles of "emphasizing both development and acquisition, emphasizing both
greenfield and expansion, emphasizing both coal-fuel and other types of fuel
and emphasizing both domestic and overseas funds," the Company will continue
to endeavour to enhance operating efficiency, and maintain a continuous,
stable and healthy development of the Company, so as to provide a long-term
and stable growth of return to the shareholders.
OPERATING RESULTS
Comparison of Operating Results between the years ended 31st December 2002 and
2001.
Summary
During the year ended 31st December 2002, the Company successfully carried out
a number of acquisitions. As at 31st December 2002, the Company had acquired
all the assets and liabilities of Changxing Power Plant, 100% equity interest
in Shidongkou First Power Plant, 75% equity interest in Taicang Power Plant
and 63.64% equity interest in Huaiyin Power Plant. In addition, the Company
acquired the remaining 25% minority interest of Jining Power Plant from
Shandong Electric Power Group Corporation on 18th June 2002. Hence, the
Company now owns 100% of Jining Power Plant after the acquisition since it
originally already owned 75% of Jining Power Plant. Furthermore, Dezhou Power
Plant Phase III, the generating units expansion project with a capacity of
2x660MW, was put into commercial operation in 2002. These acquisitions and the
expansion project enabled the Company to expand its scale of operation,
increase its market share and enhance its geographical coverage and
competitiveness.
Compared to 31st December 2001, Changxing Power Plant, Shidongkou First Power
Plant, Taicang Power Plant and Huaiyin Power Plant were consolidated in the
financial statements of the Company and its subsidiaries as at 31st December
2002. In other words, the total assets and liabilities of the above mentioned
four power plants were included in the consolidated financial statements of
the Company and its subsidiaries as at 31st December 2002. As the Company only
obtained the control of Huaiyin Power Plant on 31st December 2002, the
operating revenue and operating expenses of Huaiyin Power Plant were not
included in the consolidated income statement of the Company and its
subsidiaries, but equity accounting was applied. All of the revenue and
expenses of Changxing Power Plant, Shidongkou First Power Plant and Taicang
Power Plant have been consolidated in the consolidated income statement of the
Company and its subsidiaries since 1st July 2002.
In 2002, the power output of the Company and its subsidiaries increased by
24.45% to 67.3316 billion kWh from 54.1053 billion kWh in 2001. Accordingly,
net operating revenues and net profit were increased significantly when
compared to 2001. In addition, because of the Company's consistent effort on
cost control measure, the Company achieved its cost control target on fuel
costs and other costs.
Net Operating Revenues
Net operating revenues represent operating revenues net of value-added tax and
deferred revenue. For the year ended 31st December 2002, the consolidated net
operating revenues of the Company and its subsidiaries were Rmb18.4745
billion, representing an increase of 16.99% over the net operating revenues of
Rmb15.7914 billion of last year. When compared to the net operating revenues
before deferred revenue, it had increased 18.34% over last year. Deferred
revenue represents the excess of the major repair and maintenance expenses
determined on the basis of 1% of the fixed asset cost recoverable through the
tariff setting process over the major repair and maintenance expenses actually
incurred. Because the excess of repair and maintenance expenses had been
recovered through the tariff but not yet incurred, the Company had recorded
such excess as deferred revenue since 2002 and deducted the same amount from
the major repair and maintenance expenses (i.e. the major repair and
maintenance expenses were recorded as operating expenses based on the amount
actually incurred).
The significant increase of net operating revenues was primarily caused by
increase of power output over last year. Before considering the four power
plants acquired in 2002, the power output of the original twelve power plants
of the Company and its subsidiaries increased by 11.94% over last year.
The lower growth rate of operating revenue, when compared with that of power
output, was due to the decrease of the average tariff rate. The average tariff
rate decreased from Rmb342.03 per MWh to Rmb325.38 per MWh in 2002. The
decrease of the average tariff rate was due to the adjustment of approved
tariff rates and the increase of percentage of excess generation portion as
the total power output increased. In addition, the tariff rates of the newly
acquired power plants were lower than that of the original power plants of the
Company, which also affected the average tariff rate.
Dalian Power Plant
Dalian Power Plant's net operating revenues increased by 5.35% to Rmb1.5870
billion in 2002 from Rmb1.5065 billion of last year. The average tariff rate
was Rmb280.53 per MWh in 2002, which was decreased by 3.72% from Rmb291.38 per
MWh in 2001. The output of Dalian Power Plant increased by 11.81% to 6.7632
billion kWh in 2002 when compared to 2001.
Fuzhou Power Plant
Fuzhou Power Plant's net operating revenues increased by 15.61% to Rmb1.8890
billion in 2002 from Rmb1.6340 billion of last year. The average tariff rate
was Rmb327.80 per MWh in 2002, which was decreased by 7.34% from Rmb353.77 per
MWh in 2001. The output of Fuzhou Power Plant was increased by 27.21% to
6.8742 billion kWh in 2002 when compared to 2001.
Shangan Power Plant
Shangan Power Plant's net operating revenues decreased by 1.64% to Rmb1.9241
billion in 2002 from Rmb1.9561 billion of last year. The average tariff rate
was Rmb315.65 per MWh in 2002, which was decreased by 4.04% from Rmb328.95 per
MWh in 2001. The decrease of average tariff rate was mainly caused by the
adjustment of the approved tariff rate. However, the power output of Shangan
Power Plant increased by 3.53% to 7.2030 billion MWh in 2002, which partially
offset the impact of tariff adjustment.
Nantong Power Plant
Nantong Power Plant's net operating revenues increased by 5.10% to Rmb1.9546
billion in 2002 from Rmb1.8598 billion of last year. The average tariff rate
was Rmb309.54 per MWh in 2002, which was decreased by 2.78% from Rmb318.38 per
MWh in 2001. The output of Nantong Power Plant was increased by 9.70% to
7.5042 billion kWh in 2002 when compared to 2001.
Shantou Oil-fired Power Plant
Shantou Oil-fired Power Plant's net operating revenues increased by 14.45% to
Rmb113.9 million in 2002 from Rmb 99.5 million of last year. The average
tariff rate was Rmb621.02 per MWh in 2002, which was increased by 0.45% from
Rmb618.24 per MWh in 2001. The output of Shantou Oil-fired Power Plant was
increased by 8.13% to 0.2037 billion kWh when compared to 2001.
Shantou Coal-fired Power Plant
Shantou Coal-fired Power Plant's net operating revenues increased by 3.28% to
Rmb1.4870 billion in 2002 from Rmb1.4397 billion of last year. The average
tariff rate was Rmb455.95 per MWh in 2002, which was decreased by 3.78% from
Rmb473.85 per MWh in 2001. The output of Shantou Coal-fired Power Plant was
increased by 9.02% to 3.8714 billion kWh when compared to 2001.
Shidongkou Second Power Plant
Shidongkou Second Power Plant's net operating revenues decreased by 2.57% to
Rmb2.1056 billion in 2002 from Rmb2.1612 billion of last year. The average
tariff rate was Rmb345.90 per MWh in 2002, which was decreased by 1.95% from
Rmb352.78 MWh in 2001. The decrease of average tariff rate was mainly caused
by the adjustment of the approved tariff. However, the power output of
Shidongkou Second Power Plant increased by 2.54% to 7.2681 billion kWh in
2002, which partially offset the impact of tariff adjustment.
Dandong Power Plant
Dandong Power Plant's net operating revenues increased by 11.20% to Rmb754.3
million in 2002 from Rmb678.3 million of last year. The average tariff rate
was Rmb273.70 per MWh in 2002, which was decreased by 8.45% from Rmb298.96 per
MWh in 2001. The output of Dandong Power Plant increased by 26.77% to 3.365
billion kWh when compared to 2001.
Nanjing Power Plant
Nanjing Power Plant's net operating revenues increased by 13.32% to Rmb934.3
million in 2002 from Rmb823.7 million of last year. The average tariff rate
was Rmb304.07 per MWh in 2002, which was decreased by 4.56% from Rmb318.60 per
MWh in 2001. The output of Nanjing Power Plant increased by 19.20% to 3.6083
billion kWh when compared to 2001.
Dezhou Power Plant
Dezhou Power Plant achieved net operating revenues of Rmb2.2855 billion in
2002, which was increased by 21.30% from Rmb1.8842 billion of last year. The
average tariff rate was Rmb339.64 per MWh, which decreased by 0.20% from
Rmb340.33 per MWh in 2001. The output of Dezhou Power Plant increased by
21.45% to 7.8733 billion kWh when compared to 2001. Dezhou Power Plant Phase
III, the expansion project, was put into commercial operation in 2002, with
power output of 1.7650 billion kWh.
Jining Power Plant
Jining Power Plant had become a wholly owned plant of the Company effective
from 18th June 2002. The net operating revenues of Jining Power Plant
increased by 5.58% to Rmb422 million in 2002. The average tariff rate was
Rmb275.15 per MWh, which was increased by 2.93% from Rmb267.31 per MWh of last
year. The output of Jining Power Plant increased by 2.08% to 1.8052 billion
kWh when compared to 2001.
Changxing Power Plant
Changxing Power Plant had become a wholly owned plant of the Company effective
from 1st July 2002. The net operating revenues of Changxing Power Plant from
July to December were Rmb233.5 million. The power output and average tariff
rate of Changxing Power Plant were 0.8635 billion kWh and Rmb316.93 per MWh,
respectively.
Shidongkou First Power Plant
The Company acquired 70% equity interest in Shidongkou First Power Plant on
1st July 2002 and the remaining equity interest of 30% on 31st December 2002.
Hence, it became a wholly owned power plant of the Company as at the same
date. The net operating revenues of Shidongkou I Power Plant from July to
December were Rmb813.0 million. The power output and average tariff rate of
Shidongkou First Power Plant were 3.7930 billion kWh and Rmb252.97per MWh,
respectively.
Taicang Power Plant
The Company acquired 70% equity interest in Taicang Power Plant on 1st July
2002 and additional 5% of equity interest on 31st December 2002. The net
operating revenues of Taicang Power Plant from July to December were Rmb566.4
million. The power output and average tariff rate of Taicang Power Plant were
2.1095 billion kWh and Rmb317.52 per MWh, respectively.
Weihai Power Plant
The Company owns 60% equity interest in Weihai Power Plant. The net operating
revenues of Weihai Power Plant was Rmb1.4051 billion, which was increased by
4.18% from Rmb1.3486 billion of last year. The average tariff rate was
Rmb393.74 per MWh, which was increased by 0.77% from Rmb390.72 per MWh in
2001. The output of Weihai Power Plant was increased by 3.38% to 4.2255
billion kWh when compared to 2001.
Operating Expenses
The total operating expenses of the Company and its subsidiaries increased by
19.66% to Rmb12.8965 billion in 2002, over the Rmb10.7773 billion of last year
(when comparing the operating costs with the repair and maintenance expenses
determined on the basis of 1% the fixed assets cost, the operating expenses
would have been increased by 21.64%). As a result of the effective cost
control measure implemented by the Company, the rate of increase of operating
expenses was lower than that of power output.
The primary operating expenses of the Company and its subsidiaries was fuel
cost. The fuel cost increased by 34.36% to Rmb6.9160 billion in 2002, when
compared to Rmb5.1474 billion in last year. Before considering the four power
plants acquired in 2002, the weighted average unit price of natural coal of
the original twelve power plants increased by 5.29% to Rmb232.34 per ton in
2002 from Rmb220.66 per ton of last year. The unit fuel cost per MWh increased
by 6.41% to Rmb101.20 per MWh. The higher unit fuel cost per MWh of the four
power plants acquired than that of the original twelve power plants resulted
in the increase of unit fuel cost of the Company and its subsidiaries to
Rmb102.71 per MWh in 2002.
Maintenance expense
The maintenance expenses actually incurred by the Company and its subsidiaries
was Rmb608.0 million in 2002 (if the repair and maintenance expenses were
determined on the basis of 1% the fixed assets cost, the maintenance expenses
would have been increased by 7.2% from Rmb765.7 million of last year). The
maintenance expenses of the original twelve power plants and the four power
plants acquired in current year amounted to Rmb535.3 million and Rmb72.7
million, respectively.
Depreciation and amortization
The depreciation and amortization of the Company and its subsidiaries was
Rmb3.5336 billion in 2002. The depreciation and amortization of the original
twelve power plants and the headquarter of the Company was Rmb3.3133 billion,
which was increased by 1.60% from Rmb3.2610 billion of last year. The
depreciation and amortization of the four power plants acquired in current
year was Rmb220.3 million.
Labor cost
The labor cost of the Company and its subsidiaries was Rmb1.0357 billion in
2002. The labor cost of the original twelve power plants and the headquarter
of the Company was Rmb932.5 million. The labor cost of the four power plants
acquired were Rmb103.2 million.
Transmission fees
The transmission fee of the Company and its subsidiaries was Rmb35.8 million,
which decreased by 3.17% from Rmb36.9 million of last year.
The service fee to HIPDC
The service fee paid to HIPDC refers to a fee for the use of its grid
connection and transmission facilities based on reimbursement of cost plus a
profit.
In 2002, the Company incurred the service fee in relation to the grid
connection and transmission facilities for Fuzhou Power Plant Phase I,
Shidongkou Second Power Plant, Shangan Power Plant, Shantou Coal-fired Plant
(HIPDC had transferred the ownership of transmission and transformation
facilities of Fuzhou Power Plant Phase I and Shanghai Shidongkou Second Power
Plant to Fujian Electric Power Company and Shanghai Power Corporation,
respectively, on 1st July 2002. The Company was not required to pay the
service fee for these two plants since the transfer). The service fee to HIPDC
decreased by 14.19% to Rmb263.7 million in 2002, when compared to Rmb307.3
million of last year.
Income tax expenses
Pursuant to the relevant tax regulations, the Company is a sino-foreign joint
venture and enjoys the relevant tax holiday. Each of the power plants of the
Company is exempted from PRC income tax for two years starting from the first
profit-making year after covering any accumulated deficits followed by a 50%
reduction of the applicable tax rate for the next three years. In addition, as
confirmed by the State Tax Bureau, the Company's wholly owned power plants pay
their respective income tax to local tax authorities, although they are not
separate legal entities. The consolidated income tax expenses of the Company
and its subsidiaries were Rmb980.9 million in 2002. The income tax expenses
for the original twelve power plants and the four power plants acquired in
current year amounted to Rmb873.5 million and Rmb107.4 million, respectively.
Jining Power Plant and Changxing Power Plant became wholly owned power plants
of the Company in 2002. As approved by the relevant tax authorities, the
income tax rate of Jining Power Plant was decreased from 33% to 15% effective
from 1st September 2002, and the income tax rate of Changxing Power Plant was
decreased from 33% to 16.5% effective from 1st July 2002.
Other expenses
Other expenses of the Company and its subsidiaries was Rmb503.6 million in
2002, which was increased by 11.46% from Rmb451.9 million of last year. The
increase of other expenses was mainly due to the inclusion of other expenses
of four power plants acquired in current year. Before considering the four
power plants acquired in current year, the other expenses of original twelve
power plants was decreased by 12.68% to Rmb394.5 million, despite the increase
of total power output. This indicated the effectiveness of the cost control
measures.
Profit from operation
The profit from operation of the Company and its subsidiaries increased by
11.25% to Rmb5.5780 billion in 2002 from Rmb5.0140 billion of last year.
Financial expenses
The financial expenses of the Company and its subsidiaries was decreased by
35.91% to Rmb510.3 million in 2002 from Rmb796.2 million of last year. The
financial expense of the original twelve power plants was Rmb492.0 million
which decreased by 43.29% from Rmb867.5 million of last year. In order to
reduce the interest expenses, the Company grasped the opportunity of declining
market interest rate and borrowed loans with lower interest rate to refinance
the high interest rate loans. As a result, the financial expense of the
relevant loans was decreased by USD9.5 million in 2002.
Net profit
The consolidated net profit of the Company and its subsidiaries increased by
13.63% to Rmb3.9210 billion from Rmb3.4507 billion of last year. The increase
was primarily due to the increase of power output, the decrease of the
financial expenses and the profit contributed by the four power plants
acquired in current year.
The net loss of Dangdong Power Plant was Rmb104.4 million in 2002, which was
decreased by 48.20% when compared to last year as the power output was
substantially increased in 2002. The net loss of Shantou Oil-fired Power Plant
was Rmb16.1 million in 2002, which was decreased by Rmb12.9 million.
Comparison of Key Financial Ratios
The Company and its subsidiaries
2002 2001
Current ratio 1.00 1.21
Quick ratio 0.88 1.13
Ratio of liabilities and shareholders' equity 0.56 0.65
Multiples of interest earned 8.28 5.35
After the acquisition of Shidongkou First Power Plant, Taicang Power Plant,
Huaiyin Power Plant and Changxing Power Plant, the Company still maintained
its strong debt repayment ability.
As at 31st December 2002, the loans denominated in foreign currencies of the
Company and its subsidiaries amounted to approximately USD1.122 billion
(including USD20 million liability component of convertible notes), of which
USD262 million was repayable within one year. The Company and its subsidiaries
will closely monitor the fluctuation in the foreign exchange market and
cautiously assess the exchange rate risk.
Most of the long-term loans of the Company and its subsidiaries were
fixed-rate loans. As at 31st December 2002, the balance of the floating-rate
loans of the Company and its subsidiaries amounted to approximately USD433
million according to the loan agreements. The Company and its subsidiaries
made use of interest rate swap contracts, when appropriate, to manage the risk
of interest rate fluctuations.
Calculation formula of the financial ratio:
Ratio of liabilities to = balance of liabilities at the end of the
shareholders' equity year/ balance of shareholders'
equity at the end of the year
Current ratio = balance of current assets at the end of
the year/ balance of current
liabilities at the end of the year
Quick ratio = (balance of current assets at the end of
the year - net amount of inventory at the
end of the year)/ balance of current
liabilities at the end of the year
Multiples of interest earned = (profit before taxation + interest
expenses)/ interest expenditure
(including capitalised interest)
Dividend Payable
On 12th March 2003, the Board of Directors proposed a dividend of Rmb0.34 per
ordinary share, totaling approximately Rmb2.040 billion for the year ended
31st December 2002. The proposed dividend distribution is subject to
shareholders' approval in next annual general meeting.
SHARE CAPITAL STRUCTURE
As at 31st December 2002, the total issued share capital of the Company,
excluding the shares which might be converted from the convertible notes, was
6,000,273,960 shares, of which 4,500,000,000 shares were domestic shares,
representing approximately 75% of the total issued share capital, and
1,500,273,960 shares were foreign shares, representing approximately 25% of
the total issued share capital. For domestic shares, HIPDC owns a total of
2,554,840,000 shares, representing 42.58% of the total issued share capital of
the Company. Other domestic shareholders hold a total of 1,945,160,000 shares,
representing 32.42% of the total issued share capital.
The USD230 million convertible notes issued by the Company are convertible
into foreign shares of the Company at a price of USD29.2 for each American
Depositary Share on or before 21st May 2004. According to the terms as
stipulated in the convertible notes and at the request of a noteholder, the
Company redeemed an aggregate amount of USD209,685,000 convertible notes on
21st May 2002 and issued 273,960 overseas listed shares to holders of
convertible notes as a conversion of USD200,000 convertible notes on 21st
August 2002. As at 31st December 2002, there was an aggregate amount of
USD20,115,000 convertible notes which had not been redeemed. Assuming the
convertible notes were fully converted into foreign shares of the Company, the
total issued share capital of the Company would be increased by 27,554,760
foreign shares at most.
DIVIDENDS
The Board of Directors proposed to distribute a dividend of Rmb0.34 per share
for year 2002 to all the shareholders.
Dividends will be denominated and declared in Renminbi. Dividends on domestic
shares will be paid in Renminbi. Save and except for the dividends on foreign
shares traded on the Hong Kong Stock Exchange which will be paid in Hong Kong
dollars, dividends on foreign shares will be paid in United States dollars.
Exchange rates for dividends paid in United States dollars and Hong Kong
dollars are USD1 to Rmb8.2725 and HK$1 to Rmb1.06095 respectively.
All the dividends will be paid before 30th June 2003, subject to the approval
of the Annual general meeting of the Company.
SUBSIDIARIES AND ASSOCIATED COMPANIES
As regards the subsidiaries and associated companies of the Company, please
refer to Note A3 of the financial statements.
PRE-EMPTIVE RIGHTS
According to the articles of association of the Company and the laws of the
PRC, there are no provisions for pre-emptive rights requiring the Company to
offer new shares to the existing shareholders of the Company in proportion to
their shareholdings.
MAJOR SUPPLIERS AND CUSTOMERS
The five major suppliers of the Company for year 2002 were coal suppliers,
namely Shenhua Coal Transportation Company, Datong Mineral Bureau, Yangquan
Mineral Bureau, Shanxi Coking Coal Group and Zhun Ge Er Company. The amount of
coal supplied by the five major suppliers was about 31.7% of the total coal
consumption of the Company in 2002.
As an independent power producer, the Company sold the electricity generated
by its power plants through local power companies and did not have other
customers.
None of the directors, supervisors or their respective associates (as defined
in the Rules Governing the Listing of Securities on the Stock Exchange of Hong
Kong Limited) had any interests in the five largest suppliers or customers
mentioned above of the Company in 2002.
CONNECTED TRANSACTIONS
The independent Directors of the Company confirmed that all connected
transactions in 2002 to which the Company and/or any of its subsidiaries was a
party:
1. had been entered into by the Company and/or any of its subsidiaries in
the ordinary and usual course of its business;
2. had been entered into either (a) on normal commercial terms (which
expression will be applied by reference to transactions of a similar
nature made by similar entities within the PRC), or (b) where there is no
available comparison, on terms that are fair and reasonable so far as the
shareholders of the Company are concerned, and
3. had been entered into either (a) in accordance with the terms of the
agreements governing such transactions, or (b) where there is no such
agreement, on terms no less favourable than terms available to third
parties.
The auditors of the Company have reviewed the connected transactions of
the Company and confirmed to the Director that:
(a) the transactions had been approved by the Directors; and
(b) the transactions were made in accordance with the terms of the
related agreements governing such transactions.
Please refer to Note B7 of the financial statements for a brief description of
the connected transactions.
PURCHASE, SALE OR REDEMPTION OF SHARES
According to the terms as stipulated in the convertible notes issued by the
Company and at the request of a noteholder, the Company redeemed an aggregate
amount of US$209,685,000 convertible notes on 21st May 2002 and issued 273,960
overseas listed shares to a holder of convertible notes as a conversion of
USD200,000 convertible notes on 21st August 2002. Save and except for the
above, the Company and its subsidiaries did not sell any other types of
securities and did not purchase or redeem its own shares or other securities
in 2002.
DIRECTORS' AND SUPERVISORS' RIGHT TO PURCHASE SHARES
For the year ended 31st December 2002, none of the directors, senior
executives, supervisors or other associates had any beneficial interests in
the securities or debt instruments of the Company which were required to be
recorded in the register pursuant to Section 29 of the Securities (Disclosure
of Interests) Ordinance or as otherwise notified to the Company and the Hong
Kong Stock Exchange pursuant to the Model Code for Securities Transaction by
Directors of Listed Companies. The Company did not have any arrangement during
2002 whereby the above persons would acquire benefits by means of the
acquisition of shares in, or debentures of the Company or other corporate
body.
SHAREHOLDING OF MAJOR SHAREHOLDERS
The following table sets forth the shareholding position of the Company's
shares as at 31st December 2002:
No. of Shares Percentage of
outstanding Shareholding
(in thousands) (%)
Domestic Shares
Huaneng International Power Development Corporation 2,554,840 42.58
Hebei Provincial Construction Investment Company 452,250 7.54
Fujian International Trust & Investment Company 334,850 5.58
Jiangsu Province International Trust & Investment Company 312,375 5.20
Liaoning Energy Corporation 229,685 3.83
Dalian Municipal Construction Investment Company 226,125 3.77
Nantong Investment Management Centre 67,875 1.13
Shantou Electric Power Development Company 46,500 0.77
Shantou Power Development Joint Stock Company Limited 19,000 0.32
Dandong Energy Investment Development Centre 6,500 0.11
Domestic public shares 250,000 4.17
Sub-total 4,500,000 75.00
Foreign Shares 1,500,274 25.00
TOTAL 6,000,274 100.00
Save as aforesaid, the Company had no notice of any interest required to be
recorded under section 16(1) of the Securities (Disclosure of Interests)
Ordinance.
DIRECTORS' AND SUPERVISORS' INTEREST IN CONTRACTS AND SERVICE CONTRACTS
Save for the service contracts mentioned below, as at the end of 2002, the
directors and supervisors of the Company did not have any material interests
in any contracts entered into by the Company.
No director or supervisor has entered into any service contract which is not
terminable by the Company within one year without payment of compensation
(other than statutory compensation).
Each and every director and supervisor of the Company had entered into a
service contract with the Company for a term of three years commencing from
the signing of the contract.
On 23rd December 2002, the Company commenced an extraordinary general meeting
to approve the resolutions relating to the change of session of directors and
supervisors. The appointment of the new session of directors took effect on
the date of the passing of the relevant resolutions and the term of services
was three years commencing from such appointment date.
STAFF HOUSING
The Company made allocation to the housing common reserve fund for its
employees in accordance with the relevant PRC regulations.
STAFF MEDICAL INSURANCE SCHEME
During year 2002, the Company and its subsidiaries have fulfilled their
obligations regarding staff medical insurance in accordance with the relevant
rules and regulations imposed by the local governments of the places where
they are located. The Directors of the Company are of the view that the
performance of such obligations by the Company did not and will not have
significant impact on the Company's financial position.
MAJOR EVENTS
In 2002,
1. The Company acquired from Huaneng Group 70% of the equity interest in the
registered capital of Shidongkou First Power Plant, 70% of the equity
interest in the registered capital of Taicang Power Plant, 44.16% of the
interest in the registered capital of Huaiyin Power Plant and all net
assets of Changxing Power Plant. The acquisition was effective on 1st
July 2002, thereby increasing the generation capacity of the Company by
1,687 MW.
2. After formal announcement of the power sector reform scheme, the Company
has acquired the remaining 30% equity interest in the registered capital
of Shidongkou First Power Plant and the remaining 5% equity interest in
the registered capital of Taicang Power Plant formerly owned by Huaneng
Group. This acquisition has made Shidongkou First Power Plant a
wholly-owned power plant of the Company and has enhanced the
competitiveness of the Company in East China.
3. The transfer of 19.48% equity interest in Huaiyin Power Plant from
Huaiyin Municipal Government to the Company has enabled the Company to
get the controlling right of Huaiyin Power Plant and obtain the
development right of Huaiyin Power Plant Phase Two. This acquisition was
effective on 31st December 2002.
4. The Company has acquired 3% of the shareholding in China Chang Jiang
Power Co. Ltd., taking the first step in the development of hydro-power.
5. The Company has entered into an Entrusted Management Agreement with
Huaneng Group and HIPDC in relation to the management of their thermal
power plants. By entering into the Entrusted Management Agreement, the
Company will further accumulate management experience as a result of the
expansion of the Company's operation scale and set a precedent for
large-scale and multi-entities entrusted management in the PRC.
6. On 23rd December 2002, the Company convened an extraordinary general
meeting to approve the resolutions relating to change of session of the
board of directors. Messrs. Li Xiaopeng, Wang Xiaosong, Ye Daji , Huang
Jinkai, Liu Jinlong, Shan Qunying, Yang Shengming and Xu Zujian were
elected directors of the fourth session of the board of directors of the
Company. Messrs. Gao Zongze, Zheng Jianchao, Qian Zhongwei and Xia
Donglin were elected independent directors of the fourth session of the
board of directors of the Company.
7. On 23rd December 2002, the Company convened an extraordinary general
meeting to approve the resolutions relating to the change of session of
supervisors. Messrs. Wei Yunpeng, Liu Shuyuan, Pan Jianmin, Li Yonglin,
Shen Weibing and Shen Zongmin were elected supervisors of the fourth
session of supervisors of the Company.
8. On 23rd December 2002, the Company convened an extraordinary general
meeting to approve the resolution relating to the establishment of the
Strategy Committee, the Audit Committee, the Nomination Committee, and
the Remuneration and Appraisal Committee.
9. On 23rd December 2002, the Company convened the first meeting of the
fourth session of the board of directors. The meeting has approved the
resolution in relation to the proposal regarding the election of the
Chairman and Vice Chairman of the fourth session of the board of
directors. Mr Li Xiaopeng was elected the Chairman and Mr Wang Xiaosong
was elected Vice Chairman of the fourth session of the board of directors
of the Company.
10. The proposal regarding the appointments of the Vice President, Chief
Economic Engineer, Chief Accountant was considered and approved in the
first meeting of the fourth session of the board of directors. Messrs. Na
Xizhi, Li Shiqi and Huang Jian were appointed Vice President, Chief
Economic Engineer and Chief Accountant of the Company respectively.
In 2003,
11. The Company entered into an agreement with Shenzhen Municipal Investment
Management Corporation and Shenzhen Energy Group Co., Ltd. to acquire 25%
interest of the enlarged share capital of Shenzhen Energy Group Co., Ltd.
by way of international tendering. After the transaction has obtained the
relevant government approvals, the Company will be able to enlarge its
market shares in Guangdong area, a fast growing market for power demand.
CODE OF BEST PRACTICE
During the Year, the Company has complied with the Code of Best Practice as
set out in Appendix 14 of the Rules Governing the Listing of Securities on the
Stock Exchange.
The Company established an audit committee on 23rd December 2002 with written
terms of reference. The primary duties of the audit committee are to review
and supervise the financial reporting process and internal control system of
the Company.
The audit committee comprises five members, among whom two are non-executive
Directors, namely, Messrs. Wang Xiaosong and Shan Qunying, and three are
independent directors, namely, Messrs. Xia Donglin, Zheng Jianchao and Qian
Zhongwei.
The audit committee has reviewed the Company's financial report for the year
ended 31st December 2002 and was of the view that the report has complied with
all applicable accounting standards and relevant regulations and laws, and has
made sufficient disclosure.
DESIGNATED DEPOSIT
As at 31st December 2002, the Company and its subsidiaries did not have any
designated deposit with any financial institutions within the PRC nor any
overdue fixed deposit which could not be recovered.
LEGAL PROCEEDINGS
As at 31st December 2002, the Company and its subsidiaries were not involved
in any material litigation or arbitration and no material litigation or claim
was pending or threatened or made against the Company and its subsidiaries.
ANNUAL GENERAL MEETING AND CLOSURE OF REGISTER
The annual general meeting for 2002 will be held on 28th May 2003. The H share
register of the Company will be closed from 28th April 2003 to 27th May 2003
(both dates inclusive). Shareholders on the H share register as at 8th May
2003 will be entitled to attend the annual general meeting of the Company and
to receive the dividends for 2002.
INSPECTION OF DOCUMENTS
The Company's annual reports will be published in April, 2002 in Hong Kong and
Beijing respectively. The Company will file an annual report in Form 20-F with
the Securities and Exchange Commission of the United States. Copies of annual
reports as well as the Form 20-F, once filed, will be available at:
Beijing: Huaneng Power International, Inc.
Tianyin Mansion
2C Fuxingmennan Street
Xicheng District
Beijing
The People's Republic of China
Tel: (8610) 6649 1999
Fax: (8610) 6649 1888
Hong Kong: Rikes Communications Limited
Room 701, Wanchai Central Building
89 Lockhart Road
Wanchai
Hong Kong
Tel: (852) 2520 2201
Fax: (852) 2520 2241
By Order of the Board
Li Xiaopeng
Chairman
Beijing, the PRC
12th March 2003
A. FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS PREPARED UNDER
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31st DECEMBER, 2002
(Amounts expressed in thousands of Rmb, except per share data)
For the year ended
31st December,
Note 2002 2001
Operating revenue, net 4 18,474,469 15,791,362
Operating expenses
Fuel (6,916,038) (5,147,364)
Maintenance (607,951) (765,712)
Depreciation (3,533,609) (3,261,001)
Labor (1,035,740) (807,136)
Transmission fees (35,754) (36,925)
Service fees to HIPDC (263,716) (307,322)
Others (503,647) (451,868)
Total operating expenses (12,896,455) (10,777,328)
Profit from operations 5,578,014 5,014,034
Interest income 83,015 113,081
Interest expense (561,875) (867,538)
Bank charges and exchange losses, net (31,405) (41,758)
Total financial expenses (510,265) (796,215)
Gain from disposal of investments 1,288 24,671
Share of loss of associates (11,145) (5,381)
Profit before tax 5,057,892 4,237,109
Income tax expense (980,854) (715,220)
Profit before minority interests 4,077,038 3,521,889
Minority interests (156,034) (71,231)
Net profit attributable to
shareholders 3,921,004 3,450,658
Proposed dividend 6 2,040,093 1,800,000
Proposed dividend per share (Rmb) 6 0.34 0.30
Basic earnings per share (Rmb) 7 0.65 0.61
Diluted earnings per share (Rmb) 7 0.65 0.60
Notes
1. Basis of presentation
The Company and its subsidiaries adopt International Financial Reporting
Standards ("IFRS") as published by the International Accounting Standards
Board, in preparing the above consolidated income statement.
2. Acquisitions
(a) Acquisition of the Four Power Plants
------------------------------------
On 9th May, 2002, the Company entered into an agreement with China Huaneng
Group Corporation (the "Huaneng Group") under which the Company agreed to
acquire from Huaneng Group 70% equity interest in Shanghai Shidongkou Power
Limited Company (the "Shidongkou I Power Plant"), 70% equity interest in
Suzhou Industrial Park Huaneng Power Limited Liability Company (the "Taicang
Power Company"), 44.16% equity interest in Jiangsu Huaneng Huaiyin Power
Limited Company (the "Huaiyin Power Company") and all of the assets and
liabilities of Huaneng Changxing Power Plant (the "Changxing Power Plant")
(the "Acquisition of the Four Power Plants"). The total consideration for the
Acquisition of the Four Power Plants was Rmb2,050 million paid in cash. Direct
costs relating to the acquisition amounted to approximately Rmb18 million.
The Acquisition of the Four Power Plants became effective on 1st July, 2002
when the Company obtained the ownership and control over the relevant assets,
after obtaining the necessary government approvals on the Acquisition and
making payment of the purchase consideration on that date.
The purchase method of accounting is used for the Acquisition of the Four
Power Plants. The acquired identifiable assets and liabilities are recorded
based on their respective fair values on 1st July, 2002. The acquired interest
on fair value of the net identifiable assets and liabilities of the Four Power
Plants on that date, before the subsequent acquisition of additional interest
of some of the power plants as described in Note 2 (c), was approximately
Rmb2,047 million. The resulting goodwill on acquisition amounts to
approximately Rmb21 million, which is amortised over the remaining weighted
average useful life of the identifiable acquired depreciable/amortisable
assets on the straight-line basis, starting from 1st July, 2002.
(b) Acquisition of Minority Interest of the Huaneng Jining Power Plant (the
-----------------------------------------------------------------------
"Jining Power Plant")
---------------------
After obtaining all necessary approvals from relevant authorities on 18th
June, 2002, the Company acquired 25% equity interest from the third-party
minority shareholder in Jining Power Plant for a consideration of
approximately Rmb109 million in cash. Purchase method of accounting is used
for this acquisition. As at the acquisition date, the fair value of the net
identifiable assets and liabilities of Jining Power Plant acquired was
approximately Rmb106 million. The resulting goodwill amounted to approximately
Rmb3 million.
(c) Acquisition of Additional Interests of the Three Power Plants
-------------------------------------------------------------
On 15th November, 2002, the Company entered into an agreement with Huaneng
Group under which the Company agreed to acquire from Huaneng Group the
remaining 30% equity interest in Shidongkou I Power Plant and an additional 5%
equity interest in Taicang Power Company. Purchase method of accounting is
used for this acquisition. The total consideration and direct cost of the
acquisition was Rmb419 million paid in cash. The proportionate share of the
fair value of the net identifiable assets and liabilities of Shidongkou I
Power Plant and Taicang Power Company as at acquisition date was approximately
Rmb366 million. The resulting goodwill amounted to approximately Rmb53
million.
On 26th December, 2002, the Company entered into an agreement with a third
party, Jiangsu Huaiyin Investment Company ("JHIC"), under which the Company
agreed to acquire 19.48% equity interest in Huaiyin Power Company from JHIC.
Purchase method of accounting is used for this acquisition. The total
consideration was Rmb185 million paid in cash. The proportionate share of the
fair value of the net identifiable assets and liabilities of Huaiyin Power
Company as at acquisition date was approximately Rmb124 million. The resulting
goodwill amounted to approximately Rmb61 million.
The acquisitions became effective on 31st December, 2002 when the Company
obtained all necessary government approvals on the transaction and paid the
purchase consideration on that date.
After the completion of the Acquisition of the Four Power Plants and the
acquisition of additional interests of the Three Power Plants, the Company
fully owns and operates the assets of Changxing Power Plant and Shidongkou I
Power Plant, and holds 75% equity interests in Taicang Power Company and
63.64% equity interests in Huaiyin Power Company.
3. Investment in subsidiaries and an associate
Details of the Company's subsidiaries as at 31st December, 2002 were as follows:
Country and Percentage of
Name of subsidiaries date of equity interest Issued and fully Principal
incorporation held paid capital activities
Huaneng Weihai Power PRC 60% Rmb761,832,800 Power
Plant (the "Weihai 22nd November, generation
Power Plant") 1993
Taicang Power Company PRC 75% Rmb632,840,000 Power
19th June, 1997 generation
Huaiyin Power Company PRC 63.64% Rmb265,000,000 Power
26th January, 1995 generation
Shandong Rizhao Power Company PRC 25.5% USD150,000,000 Power
Ltd. (the "Rizhao Power 20th March, 1996 generation
Company")
4. Operating revenue, net
Net operating revenue represents amounts earned for electricity generated and
transmitted to the respective regional or provincial power companies (net of
value added tax and deferred revenue). Revenues are earned and recognised upon
transmission of electricity to the power grid controlled and owned by the
respective power companies.
5. Taxation
Certain of the power plants, being located in specially designated regions or
cities, are subject to preferential income tax rates. Except for power plants
acquired in 2001 and 2002 and Shangan Phase II project, all the other power
plants of the Company are exempted from PRC income tax for two years starting
from the first profit-making year (after covering any accumulated deficits)
followed by a 50% reduction of the applicable tax rate for the next three
years ("tax holiday"). For the year ended 31st December, 2002, the weighted
average effective tax rate applicable to the Company and its subsidiaries is
19% (2001: 17%).
6. Profit appropriations
Dividends
On 12th March, 2002, the Board of Directors proposed a dividend of Rmb0.30 per
share, totaling approximately Rmb1,800 million for the year ended 31st
December, 2001. The proposed dividend distribution was approved by the
shareholders in the general meeting dated 15th May, 2002.
On 12th March, 2003, the Board of Directors proposed a dividend of Rmb0.34 per
share, totaling approximately Rmb2,040 million for the year ended 31st
December, 2002. The proposed dividend distribution is subject to shareholders'
approval in their next meeting.
Statutory surplus reserve fund and statutory public welfare fund
For the year ended 31st December, 2002, the Board of Directors resolved the
following on 12th March, 2003:
(i) to appropriate 10% and 7.5% (2001: 10% and 7.5%), respectively, of the
profit after taxation as determined under the PRC accounting standards
and regulations to the statutory surplus reserve fund and the statutory
public welfare fund, amounting to approximately Rmb714 million (2001:
Rmb636 million) in total;
(ii) to make no appropriation to the discretionary surplus reserve fund.
7. Earnings per share
The calculation of earnings per share is based on the net profit distributable
to shareholders of approximately Rmb3,921 million (2001: Rmb3,451 million) and
the weighted average number of 6,000 million (2001: 5,694 million) ordinary
shares in issue during the year.
The calculation of diluted earnings per share is based on the adjusted net
profit distributable to shareholders of Rmb3,962 million (2001: Rmb3,580
million) and the adjusted weighted average number of 6,140 million (2001:
6,009 million) ordinary shares in issue during the year. The calculation
assumes that the 1.75% convertible notes had been fully converted at the
beginning of the year.
B. FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS PREPARED UNDER
PRC ACCOUNTING STANDARDS
1. Profit for the year ended 31st December, 2002
(Amounts Expressed In Rmb)
The Company and
its subsidiaries
2002
Profit before taxation and minority interests 5,212,079,411
Net profit 4,082,350,589
Profit before non-recurring items 4,111,128,754
Profit from principal activities 6,158,601,932
Profit from other operations 16,821,913
Profit from operation 5,285,515,098
Investment loss (46,138,983)
Non-operating expenses, net (27,296,704)
Net cash inflow from operating activities 7,804,860,642
Net increase in cash and cash equivalents 829,465,225
Note: Non-recurring items deducted:
Non-operating expenses, net (27,296,704)
Related tax effect (1,481,461)
Total (28,778,165)
2. Financial highlights and financial ratios
The Company
and its subsidiaries The Company
2002 2001 2000
Operating revenue (Rmb) 18,725,340,857 15,816,656,338 12,558,386,117
Net profit (Rmb) 4,082,350,589 3,636,064,244 2,644,226,947
Total assets (Rmb) 48,098,755,152 47,229,708,718 42,411,333,851
Shareholders' equity (Rmb) 29,169,476,868 27,125,564,005 22,519,441,432
Earnings per share (fully diluted) (Rmb/shares) 0.68 0.61 0.47
Earnings per share (weighted average) 0.68 0.64 0.47
(Rmb/shares)
Earnings per share after deducting the impact 0.69 0.61 0.49
of non-recurring items
(fully diluted) (Rmb/shares)
Net assets per share (fully diluted) (Rmb/share) 4.86 4.52 3.99
Adjusted net assets per share 4.85 4.52 3.98
(fully diluted) (Rmb/share)
Net cash inflow from operating activities per 1.30 1.19 1.21
share (fully diluted) (Rmb/shares)
Return on net assets (fully diluted) (%) 14.00 13.40 11.74
Return on net assets 14.00 14.80 11.80
(weighted average) (%)
Return on net assets after deducting 14.09 14.93 12.36
non-recurring items
(weighted average) (%)
Note:
Formula of key financial ratios
Earnings per share = Net profit / Total number of ordinary shares as at year end
(fully diluted)
Return on net assets = Net profit / Shareholders' equity as at year end x100%
(fully diluted)
Net assets per share = Shareholders' equity as at year end / Total number of ordinary
(fully diluted) shares as at year end
3. Return on net assets and earnings per share
Return on net assets Earnings per share (Rmb/share)
(%)
Fully Weighted Fully Weighted
Profit in 2002 diluted average diluted \naverage
Profit from principal activities 21.11 21.11 1.02 1.02
Profit from operation 18.12 18.12 0.88 0.88
Net profit 14.00 14.00 0.68 0.68
Profit after deducting non-recurring items 14.09 14.09 0.69 0.69
4. Changes in shareholders' equity
(Amounts expressed in Rmb)
Shareholders' As at 1st Addition Deduction As at 31st Reasons of
equity January, 2002 December, 2002 fluctuation
Share capital 6,000,000,000 273,960 -- 6,000,273,960 Conversion of
convertible
notes
Capital surplus 10,259,449,295 1,381,460 -- 10,260,830,755 Conversion of
convertible
notes
Surplus reserves 2,705,256,889 714,411,353 -- 3,419,668,242 Income
appropriation
in 2002
Including: 762,741,506 306,176,294 (15,398,194) 1,053,519,606 Income
Statutory public appropriation
welfare fund in 2002
Undistributed 8,160,857,821 4,082,350,589 (2,754,504,499) 9,488,703,911 Profit and
profits income
appropriation
in 2002
Total
shareholders'
equity 27,125,564,005 4,798,417,362 (2,754,504,499) 29,169,476,868
5. Profit and Loss Account
For the year ended 31st December, 2002
(Amounts expressed in Rmb)
The Company and its subsidiaries The Company
2002 2001 2002 2001
Revenues from principal
operations 18,725,340,857 15,816,656,338 15,720,550,997 14,047,671,476
Less: Cost of principal
operations (12,528,622,594) (10,333,929,258) (10,480,868,719) (9,032,497,748)
Tax and levies on principal
operations (38,116,331) (25,294,665) (5,839,726) (4,618,868)
Profit from principal
activities 6,158,601,932 5,457,432,415 5,233,842,552 5,010,554,860
Add /(less): Profit/(loss)
from other operations 16,821,913 (529,020) 14,421,931 (749,903)
Less: General and
administrative expenses (327,188,932) (175,836,006) (229,565,700) (125,305,716)
Financial expenses, net (562,719,815) (842,777,611) (450,065,716) (778,765,740)
Operating profit 5,285,515,098 4,438,289,778 4,568,633,067 4,105,733,501
(Less)/add: (Loss)/income
from investment (46,138,983) 19,290,314 288,673,388 183,277,931
Non-operating income 50,717,819 30,799,078 19,264,890 30,698,092
Less: Non-operating expenses (78,014,523) (65,863,415) (71,346,712) (65,328,999)
Profit before taxation and
minority interests 5,212,079,411 4,422,515,755 4,805,224,633 4,254,380,525
Less: Income tax (963,510,283) (715,220,304) (722,874,044) (618,316,281)
Minority interests (166,218,539) (71,231,207) -- --
Net profit 4,082,350,589 3,636,064,244 4,082,350,589 3,636,064,244
Add: Undistributed profit
brought forward 8,160,857,821 6,961,104,819 8,160,857,821 6,961,104,819
Unappropriated profit 12,243,208,410 10,597,169,063 12,243,208,410 10,597,169,063
Less: Transfer to statutory
surplus reserve fund (408,235,059) (363,606,424) (408,235,059) (363,606,424)
Transfer to statutory public
welfare fund (306,176,294) (272,704,818) (306,176,294) (272,704,818)
Profit distributable to
shareholders 11,528,797,057 9,960,857,821 11,528,797,057 9,960,857,821
Less: Dividends (2,040,093,146) (1,800,000,000) (2,040,093,146) (1,800,000,000)
Unappropriated profit
carried forward 9,488,703,911 8,160,857,821 9,488,703,911 8,160,857,821
Earnings per share (weighted
average) 0.68 0.64 0.68 0.64
Earnings per share (fully
diluted) 0.68 0.61 0.68 0.61
6. Accounting Policies
The Company and its subsidiaries' financial statements have been prepared in
accordance with the Accounting Standards for Business Enterprises and
Accounting System for Business Enterprises and related supplementary
regulations, published by the Ministry of Finance of the People's Republic of
China ("PRC GAAP").
During the year ended 31st December, 2002, there was no material change of
accounting policies or accounting estimate and no material
accounting error.
The financial statements of Shidongkou I Power Plant, Taicang Power Company,
Changxing Power Plant and Huaiyin Power Company were consolidated into the
consolidated financial statements of the Company and its subsidiaries for the
year ended 31st December, 2002.
7. Related Party Transactions
(1) Related parties that can control/are controlled by the Company:
Relationship
Type of Legal Registered with the
Name enterprise representative address Company Principal activities
Huaneng Power Sino-foreign Li Xiaopeng No.2 Fuxingmen Parent Investment in power
Development equity South Street, company plants, develop and
Corporation investment Xi Cheng invest in other
("HIPDC") joint venture District, export-oriented
Beijing enterprises
Huaneng Group State-owned Li Xiaopeng A23 Fuxing Ultimate Investing in power
enterprise Road, Haidian parent stations, coal,
District, company minerals, railways,
Beijing transportation,
petrochemical,
energy-saving
facilities, steel,
timber, cement, and
related industries and
others.
Weihai Power Limited Wu Dawei No.58 Haifu Subsidiary Power generation
Plant liability road, Economic
company Development
Zone, Weihai
Taicang Power Limited Yu Xinyang Jinjihupan, Subsidiary Power generation
Company liability Sanxing Road,
company Suzhou
Huaiyin Power Limited Liu Guoyue No. 291 Huaihai Subsidiary Power generation
Company liability West Road,
company Huaian
(2) Registered capital and changes in registered capital of related parties
that can control/are controlled by the Company:
Name 31st December,
2002 and 2001
HIPDC USD450,000,000
Huaneng Group Rmb1,900,000,000
Weihai Power Plant Rmb761,832,800
Taicang Power Company Rmb632,840,000
Huaiyin Power Company Rmb265,000,000
(3) Equity shares and changes in equity shares held by parties that can
control/are controlled by the Company:
1st January, Current year Current year 31st December,
Name 2002 addition deduction 2002
Amount % Amount % Amount % Amount %
HIPDC* 2,554,840,000 42.58 -- -- -- -- 2,554,840,000 42.58
Huaneng
Group** 1,675,660,547 51.98 -- -- -- -- 1,675,660,547 51.98
Weihai
Power Plant 457,103,040 60 -- -- -- -- 457,103,040 60
Taicang
Power
Company -- -- 632,840,000 75 -- -- 632,840,000 75
Huaiyin
Power
Company -- -- 168,646,000 63.64 -- -- 168,646,000 63.64
* In accordance with a shareholders' agreement entered into by certain
shareholders, during the operating period of the Company, the voting
rights of seven shareholders are given to HIPDC. Thus, HIPDC holds 70.4%
voting rights in shareholders' meetings.
** Huaneng Group holds 51.98% equity interest of HIPDC.
(4) Nature of related parties that does not control/are not controlled by the
Company:
Name of related parties Relationship with the Company
China Huaneng Finance Company A subsidiary of Huaneng Group
("Huaneng Finance")
Weihai Power Development Bureau Minority shareholder of
("WPDB") Weihai Power Plant
China Huaneng International
Trade Economics Corporation A subsidiary of Huaneng Group
("CHITEC")
Rizhao Power Company An associate of the Company
(5) Related party transactions
a. Pursuant to the relevant service agreements, HIPDC provides
transmission and transformer facilities to some of the power plants
of the Company and receives service fees. Such service fees
represent recoverable costs for rate setting purposes. The total
service fee paid to HIPDC for the year ended 31st December, 2002 was
approximately Rmb264 million (2001: Rmb307 million).
b. At the time of the formation of the Company, HIPDC paid
approximately Rmb148million to obtain the land use rights pertaining
to existing sites occupied by the five original operating plants and
transferred such land use rights to the Company at the same amount.
Payments to HIPDC for the land use rights are being made in 10
equal, non-interest bearing, annual installments starting from 1994.
Such land use rights are recorded as intangible assets in the
balance sheets and amortised over 50 years according to the land use
rights terms.
c. In accordance with the leasing agreement entered into between the
Company and HIPDC, the land use rights of Shanghai Power Plant is
leased to the Company for a period of 50 years at an annual rental
payment of Rmb6 million. During the year ended 31st December, 2002,
the Company paid rental amounting to Rmb6 million to HIPDC (2001:
Rmb6 million).
d. Pursuant to a leasing agreement entered into amongst the Company,
HIPDC and Nanjing Investment, the land use right of Nanjing Power
Plant is leased to the Company for 50 years with an annual rental
payment of Rmb1.334 million.
e. Pursuant to a leasing agreement between the Company and HIPDC, HIPDC
agreed to lease its building to the Company as office for 5 years at
an annual rental of Rmb25 million effective from 1st January, 2000.
f. Long-term loans from shareholders (including current portion)
comprised:
31st December, 2002
Currency Original Exchange Amounts in
rate Rmb
Foreign currency bank
loans on-lent by HIPDC USD 93,965,756 8.277 777,782,754
Less: current portion of
--long-term loans USD (46,982,876) 8.2773 (388,891,359)
46,982,880 388,891,395
As at 31st December, 2002, long-term loans from shareholders comprised:
31st
December, Repayment Interest Current
Lender 2002 period rate portion
Bank loans on-lent by HIPDC
Bank of China 777,782,754 1997 - 2004 LIBOR+0.9% 388,891,359
The foreign currency bank loans bear interest at the prevailing
lending rates (both fixed and floating), prescribed by the loan
contracts, which range from 4.01% to 7.40% per annum for the year
ended 31st December, 2002 (2001: 4.25% to 7.40%), and are repayable
in accordance with the repayment schedules set by the banks.
The foreign-currency bank loans were previously borrowed by HIPDC
for financing the construction of power plants. Upon the
restructuring of the Company in 1994 or on the acquisition of the
relevant power plants from HIPDC, all these outstanding long-term
bank loans were restructured. HIPDC continued to borrow the loans
from the banks and then on-lent the proceeds to the Company as
shareholders' loans. The existing terms of the loans including
interest rates and repayment schedules remained intact after the
restructuring.
g. As at 31st December, 2002, long-term loan from WPDB amounted to
Rmb106 million (no current portion of the loan). The loan was
borrowed by Weihai Power Plant from WPDB to finance its construction
with interest at 6.21% per annum. The loan is unsecured and is
payable in accordance with the repayment schedules.
h. As at 31st December, 2002, Huaneng Finance had granted short-term
loans amounting to Rmb225 million (2001: Rmb40 million) to the
Company and its subsidiaries. The interest rates of such loans are
not materially different from the prevailing market interest rate.
i. As at 31st December, 2002, long-term bank loans of approximately
Rmb5,544 million, Rmb1,140 million and Rmb280 million were
guaranteed by HIPDC, Huaneng Group and WPDB, respectively (2001:
Rmb8,868 million, Rmb1,666 million and Rmb300 million respectively).
j. Guarantee for loan facilities granted to Rizhao Power Company,
Weihai Power Plant, Taicang Power Company and Huaiyin Power Company
by the Company are as follows:
31st December, 2002
The Company and The Company
its subsidiaries
Guarantee for loan facilities
granted to Rizhao Power Company 399,250,000 399,250,000
Guarantee for loan facilities
granted to Weihai Power Plant -- 330,000,000
Guarantee for loan facilities
granted to Taicang Power Company -- 1,480,705,760
Guarantee for loan facilities
granted to Huaiyin Power Company -- 35,000,000
399,250,000 2,244,955,760
Guarantee for loan facilities granted to Rizhao Power Company,
Weihai Power Plant, Taicang Power Company and Huaiyin Power Company
by the Company had no significant financial impact on the Company's
operation.
k. In accordance with an equipment import agency service agreement
entered into between Shandong Huaneng Power Development Co., Ltd
("Shandong Huaneng") and CHITEC, the Company is required to pay an
agency fee at 0.5% of the value of imported equipment in return for
the agency service provided by CHITEC. For the year ended 31st
December, 2002, the Company paid an agency fee to CHITEC amounted to
Rmb3 million for equipment transportation and insurance service
received (2001: Rmb32 million)
l. As at 21st June, 2002, Weihai Power Plant, the subsidiary of the
Company, proposed dividend for the year ended 31st December, 2001
after the approval of the Board of Shareholders. The dividend to be
distributed to WPDB, the minority interest of Weihai Power Plant,
amounted to Rmb50,405,824.
m. On 9th May, 2002, the Company entered into an agreement with Huaneng
Group under which the Company agreed to acquire from Huaneng Group
70% equity interest in Shidongkou I Power Plant, 70% equity interest
in Taicang Power Company, 44.16% equity interest in Huaiyin Power
Company and all of the assets and liabilities of Changxing Power
Plant. The total consideration for the Acquisition of the Four Power
Plants was Rmb2,050 million paid in cash.
n. On 15th November, 2002, the Company entered into an agreement with
Huaneng Group under which the Company agreed to acquire from Huaneng
Group the remaining 30% equity interest in Shidongkou I Power Plant
and an additional 5% equity interest in Taicang Power Company. The
total consideration for the acquisition of additional interests of
Two Power Plants was Rmb415 million payable in cash.
o. On 6th November, 2002, the Company entered into a management service
agreement with Huaneng Group and HIPDC. Under the management service
agreement, the Company will assist in managing certain power plants
owned by Huaneng Group and HIPDC for a service fee. As at 31st
December, 2002, the Company had not yet commenced its management
service and therefore no management service income was recognised
for the year.
(6) Cash deposited in Huaneng Finance
31st December, 31st December,
2002 2001
Deposits in Huaneng Finance
-- Call deposit 2,376,197,356 64,155,874
-- Fixed deposit 570,000,000 3,689,384,421
2,946,197,356 3,753,540,295
The interest rates of the current deposits and fixed deposits placed with
Huaneng Finance were from 0.72% to 1.44% and 1.71%, respectively.
(7) The balance due from/to related parties is as follows:
31st December, 2002 31st December, 2001
Amount(Rmb) Percentage Amount(Rmb) Percentage
Interest receivables Deposit
interest due
from Huaneng Finance 1,630,137 42.98% 3,523,282 21.54%
Other payables Due to HIPDC 100,475,344 4.41% 36,584,373 2.67%
The balances with HIPDC are unsecured, non-interest bearing and repayable
within one year.
8. Net profit reconciliation between PRC GAAP, IFRS and US GAAP
The financial statements, which are prepared by the Company and its
subsidiaries in conformity with PRC GAAP, differ in certain respects from IFRS
and generally accepted accounting principles in the United States of America
("US GAAP"). Major differences between PRC GAAP, IFRS and US GAAP which affect
the net income of the Company and its subsidiaries are summarised below:
Net Income
For the year ended 31st December,
2002 2001
Net income under PRC GAAP 4,082,350,589 3,636,064,244
Impact of IFRS adjustments:
Effect of recording deferred revenue
based on rate making process (a) (212,755,386) (177,982,374)
Difference in the basis of determining
the amount of materials and supplies (b) 3,078,998 2,180,035
Difference in the recognition policy on
housing benefits to the
employees of the Company (c) 6,457,886 5,271,603
Difference in accounting treatment of
amortized cost of the liability component
and put option relating to the convertible
notes (d) (35,957,003) --
Difference in capitalization of
borrowing costs (e) 88,411,906 --
Difference in the recognition of
financial liabilities (i) 2,179,464 (14,875,452)
Applicable deferred tax impact of
the above GAAP differences (j) (10,457,892) --
Others (2,305,261) --
Net income under IFRS 3,921,003,301 3,450,658,056
Impact of US GAAP adjustments (* See Note 1 below):
Recording housing benefits provided by HIPDC (c) (26,152,570) (26,152,570)
Difference in accounting treatment of
convertible notes (d) 5,115,622 --
Difference in capitalization of borrowing costs (e) (88,411,906) --
Difference in amortization of negative goodwill (f) (87,090,760) (87,090,760)
Effect of acquisition of Shidongkou I Power Plant,
Taicang Power Company and Changxing Power Plant (g) 126,497,539 234,127,000
Effect of acquisition of 30% additional equity
interests in Shanghai Shidongkou I Power Plant,
5% additional equity interests in Taicang Power
Company and 44.16% equity interests in
Huaiyin Power Company (h) 10,556,724 --
Applicable deferred tax impact of the above
GAAP differences (j) 33,673,694 --
Net income under US GAAP (* See Note 1 below) 3,895,191,644 3,571,541,726
* Note 1-- Consistent with applying the accounting treatment under US GAAP
as described in Note (g) below, the consolidated financial
statements under US GAAP for prior periods presented have been
retroactively restated as if the current structure and
operations resulted from the acquisition of the Four Power
Plants had been in existence since the beginning of the
earliest period presented.
(a) Recording of deferred revenue based on rate making process
Under the rate making process applicable to the Company and its subsidiaries
(except for power plants acquired in 2001 and 2002), major repair and
maintenance expenses determined on the basis of 1% of the fixed asset cost is
recovered through the current power rates. The Company estimates that, over
the useful life of its power plants, this basis would approximate the total
expenses for major repair and maintenance expenses actually incurred. In a
particular year, to the extent that the actual repair and maintenance expenses
incurred is less than the amount determined on the above basis, the difference
represents revenue collected in excess of actual expenses incurred. Such
difference is recorded as deferred revenue under IFRS and US GAAP. For PRC
statutory financial reporting purposes, in accordance with the requirement of
PRC GAAP, no such amount is recorded and revenue is determined and recognized
based on the actual amount of electricity transmitted to the grid and the
prevailing approved power rates.
(b) Difference in the basis of determining the amount of material and supplies
Under PRC GAAP, materials and supplies have been restated to the appraised
value determined by independent valuer during the reorganization of the five
original operating plants in 1994 and the appraised value has been used as the
basis in determining the amount charged to operating expenses upon actual
utilization. Under IFRS and US GAAP, materials and supplies are charged to
operating expenses at cost based on actual utilization.
(c) Difference in the recognition policy on housing benefits to the employees
of the Company
The Company and HIPDC provided housing benefits to certain qualified employees
of the Company whereby the living quarters owned by the Company and HIPDC were
sold to these employees at preferential prices. The housing benefits represent
the difference between the cost of the staff quarters sold to and the net
proceeds collected from the employees, which are born by the Company and HIPDC
respectively.
For PRC statutory reporting purposes, in accordance with the relevant
regulations issued by the Ministry of Finance, the total housing benefits
provided by the Company are charged to non-operating expenses. Under IFRS, the
housing benefits provided by the Company are recognized on a straight-line
basis over the estimated remaining average service life of the employees.
Under US GAAP, in addition to the recognition of the housing benefits provided
by the Company on the above basis, the amount of housing benefits provided by
HIPDC to the employees of the Company are also reflected as the Company's
operating expenses using the same amortization policy. The corresponding
amount is recorded as an addition of capital contribution of HIPDC.
(d) Accounting Treatment of Convertible Notes
Under PRC GAAP, the Company had accrued for the put premium liability together
with the interest payable on the notes using the effective interest rate of
6.66% as at 21st May, 2002. As at 21st May, 2002, all accrued put premium of
unredeemed notes was charged to the income statement as reversal of interest
expense.
Under IFRS, the proceeds received on the issue of the convertible notes were
allocated into liability and equity components. Upon initial recognition, the
liability component represented the present value, at the issuance date, of
the contractually determined stream of cash flows discounted at the market
interest rate for instruments of comparable credit status providing
substantially the same cash flows, on the same terms, but without the
conversion option. The equity component was then determined by deducting the
liability component from the proceeds received on the issue of the notes.
Under PRC GAAP and US GAAP, the entire proceeds of the issue of convertible
notes were recorded as long-term liabilities without distinguishing between
the equity and liability components.
In accordance with IAS 39, which was effective on 1st January, 2001, the put
option of the convertible notes, which allowed the noteholders to redeem the
convertible notes at a premium, was separated from the host contract and
accounted for as an embedded derivative. This put option was recorded as a
liability and measured at its fair value. When IAS 39 was initially applied in
2001, the difference between the previous carrying amount and the fair value
of the put option was recognised as an adjustment to the opening retained
earnings as at 1st January, 2001. In addition, the liability component was
measured at amortized cost and the resulting difference with the previous
carrying amount was recognized as an adjustment to the opening retained
earnings as at 1st January, 2001. After initial recognition, subsequent
changes in the value of the put option and the amortized cost of the liability
component were charged or credited to income statements.
Under US GAAP, it is permitted not to measure the put option separately at its
fair value, as it represents a derivative embedded in pre-1998 hybrid
instrument. The Company continued to accrue for the put premium liability
together with the interest payable on the notes using effective interest rate
of 6.66% up to the redemption date of 21st May, 2002. On 21st May, 2002, a
portion of the convertible notes was not redeemed by the noteholders. Under US
GAAP, the relevant portion of the accrued put premium attributable to the
remaining convertible notes not redeemed was amortized as a yield adjustment
over the remaining term of the convertible notes because the put price
exceeded the market value of the ordinary shares of the Company at the time of
the redemption.
(e) Capitalization of borrowing costs
Under PRC GAAP, the capitalization of interests is limited to specific
borrowings. No interest can be capitalized on general borrowings.
In accordance with IAS 23, the Company capitalized interests on general
borrowings used for the purpose of obtaining a qualifying asset in addition to
the capitalization of interests on specific borrowings.
Under US regulatory accounting requirements, interests on funds borrowed
generally and used for the purpose of obtaining a qualifying assets were not
capitalized if such interests were not taken into consideration when
determining the recoverable rate base for tariff setting purposes.
(f) Amount of negative goodwill upon acquisition of Shandong Huaneng
As at 1st January,2001, the Company acquired Shandong Huaneng. Under PRC GAAP
and IFRS, upon the completion of the acquisition of Shandong Huaneng, the
entire net assets of Shandong Huaneng are recorded at fair value. The excess
of the fair value of the entire net assets acquired over the total cost of the
acquisition is recorded as negative goodwill.
Huaneng Group is the controlling parent company of HIPDC, which in turn is the
controlling parent of the Company. Huaneng Group used to be one of the
substantial shareholders of Shandong Huaneng, holding 33.09% equity interest
in it before the Company's acquisition of Shandong Huaneng. Under US GAAP,
upon completion of the acquisition of Shandong Huaneng, Huaneng Group's
proportionate share of 33.09% in the net assets of Shandong Huaneng being
transferred to the Company was recorded at the historical carrying value. The
excess of the proportionate share in the book value of the net assets acquired
over the relevant portion of the cash consideration was recorded as capital
contribution to the Company. The book value of the remaining 66.91% of the net
assets continues to be part of the recoverable rate base under the cost
recovery formula of the tariff setting mechanism. The difference between these
net asset values and the cash consideration is recorded as a negative
goodwill.
The amount of negative goodwill determined under PRC GAAP and IFRS are
recognized as income on a systematic basis over the remaining weighted average
useful life of the acquired depreciable or amortizable assets. The amounts of
negative goodwill under US GAAP determined on the basis as described above was
offset against the fixed assets of the respective power plants as a purchase
allocation adjustment. As the amount of negative goodwill under PRC GAAP and
IFRS is different from the amount of the purchase allocation adjustment
determined under US GAAP due to the 33.09% portion of the net assets
previously owned by Huaneng Group as described above, the net impact on income
is also different.
In the unaudited interim financial statements for the six month period ended
30th June, 2002, as disclosed in the interim results announcement on 7th
August, 2002, a Rmb1,116 million gain was recognized for US GAAP purposes as
the cumulative effect of a change in accounting principle upon the initial
adoption of SFAS No. 142 "Goodwill and Other Intangible Assets". This amount
represented the unamortized portion of the excess of net asset fair value over
purchase price associated with the acquisition of Shandong Huaneng. Because
the fair value of the fixed assets represented their recoverable rate base,
the Company and its independent accountants determined, at interim, that such
amount should be treated similar to negative goodwill for purposes of the
transition provisions of SFAS No. 142, and written off as a cumulative effect
adjustment.
At year end, upon further consideration of the appropriateness of recording
this cumulative effect adjustment, the Company and its independent accountants
have determined that such amount should continue to be classified as a
purchase allocation adjustment offset to the fixed asset account, and
amortised.
(g) Effect of acquisition of Shidongkou I Power Plant, Taicang Power Company
and Changxing Power Plant
Under PRC GAAP, the excess of the total cost of the acquisition over the book
value of Shidongkou I Power Plant and Taicang Power Company is recorded as an
"equity investment difference". Such equity investment difference is amortized
on a straight-line basis over 10 years. In addition, all the assets and
liabilities of Changxing Power Plant acquired are recorded at their purchase
price.
Under IFRS, the Company and its subsidiaries adopted the acquisition method to
account for the acquisition of 70% equity interest in Shanghai Shidongkou I
Power Plant, 70% equity interest in Taicang Power Company and all of the
assets and liabilities of Changxing Power Plant in 2002. Under the acquisition
method, the acquired results are included in the results of operations of the
Company and its subsidiaries from the date of the acquisition. The difference
between the purchase consideration and the fair value of the underlying net
assets acquired is treated as goodwill and amortized on a systematic basis to
income statement over the remaining weighted average useful life of the
acquired depreciable or amortizable assets.
As the Company and its subsidiaries, Shanghai Shidongkou I Power Plant,
Taicang Power Company, and Changxing Power Plant were under common control of
Huaneng Group prior to the acquisition, under US GAAP, the acquisition is
considered as a transfer of businesses under common control and the acquired
assets and liabilities is accounted at historical cost in a manner similar to
pooling of interests method. Accordingly, the consolidated financial
statements for all periods presented have been retroactively restated as if
the current structure and operations resulted from the acquisition had been in
existence since inception. The cash consideration paid by the Company is
treated as an equity transaction in the year of the acquisition for US GAAP
purpose.
(h) Effect of acquisition of 30% additional equity interests in Shanghai
Shidongkou I Power Plant, 5% additional equity interests in Taicang Power
Company and 44.16% equity interests in Huaiyin Power Company
On 1st July, 2002, the Company acquired 44.16% equity interests of Huaiyin
Power Company from Huaneng Group. In addition, the Company also acquired 30%
equity interests of Shanghai Shidongkou I Power Plant and 5% equity interests
of Taicang Power Company from Huaneng Group on 31st December, 2002.
Under PRC GAAP, the excess of the total cost of the acquisition over the book
value of Taicang Power Company and Huaiyin Power Company is recorded as an
"equity investment difference". Such equity investment difference is amortized
on a straight-line basis over 10 years. As the Company has acquired all the
equity interest in Shanghai Shidongkou I Power Plant, the assets and
liabilities of Shidongkou I Power Plant are recorded at their fair values.
Under IFRS, upon the completion of the above acquisitions, the relevant equity
interests of net assets of Shanghai Shidongkou I Power Plant, Taicang Power
Company and Huaiyin Power Company are recorded at fair value. The excess of
the total cost of the acquisition over the fair value of the relevant portion
of net assets of power plant acquired over the total cost of the acquisition
is recorded as goodwill. Such goodwill is amortized on a systematic basis to
income statement over the remaining weighted average useful life of the
acquired depreciable or amortizable assets. Under US GAAP, upon completion of
the above acquisitions, Huaneng Group's proportionate share in the net assets
of Shanghai Shidongkou I Power Plant, Taicang Power Company and Huaiyin Power
Company being sold to the Company was recorded at the historical carrying
value. The excess of the total cost of acquisition over the net assets
acquired was recorded as reduction of capital contribution to the Company.
Accordingly, the resulting impact of depreciation and amortization expenses
impacts on income is also different.
(i) Accounting treatment of financial liability
The Company enters into interest rate swap agreements with local banks to
convert certain floating rate debts of the same principal amounts and for the
same maturities to hedge against interest rate risk. As at 31st December,
2002, the notional amount of the outstanding interest rate swap agreement was
approximately USD52 million. For the year ended 31st December, 2002, there was
a gain amounted to approximately Rmb2.2 million arising from changes in the
fair value of the interest rate swaps. Under PRC GAAP, such interest swap
contracts are considered as off balance sheet items. Under IFRS and US GAAP,
derivative instruments are recorded as either assets or liabilities in the
balance sheet at fair value, which is determined based on market conditions at
each balance sheet date. Changes in the fair value of derivatives are recorded
each period in current earnings or recognized directly in equity through the
statement of changes in shareholder's equity, depending on whether a
derivative is designated as part of a hedge transaction and the type of hedge
transaction. Since the hedging relationship does not meet all of the
conditions required for special hedge accounting as set out in IAS 39 and SFAS
No. 133, such gain was credited to the income statement in current year.
(j) Deferred Tax impact
This represents deferred tax effect on the above GAAP differences where
applicable.
The 2002 annual report of the Company and its subsidiaries containing all the
information required by paragraphs 45(1) to 45(3) of Appendix 16 of the
Listing Rules will be published on The Stock Exchange of Hong Kong Limited's
website in due course.
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
[LOGO GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(a Sino-foreign joint stock limited company incorporated
in the People's Republic of China)
ANNOUNCEMENT FOR RESOLUTIONS PASSED AT
THE SECOND MEETING OF THE FOURTH SESSION
OF THE SUPERVISORY COMMITTEE
On 11th March 2003, the second meeting of the Fourth Session of the
Supervisory Committee of Huaneng Power International, Inc. (the "Company") was
convened at the Company's head office at 2C, Fuxingmennan Street, Xicheng
District, Beijing. Seven Supervisors were eligible to attend the meeting. A
total of seven Supervisors attended the meeting (either in person or by
proxy). The convening of this meeting complied with the Companies Law of the
People's Republic of China and the articles of association of the Company. Mr
Wei Yunpeng, the Chairman of the Supervisory Committee, presided over the
meeting. The following resolutions were considered and approved at the
meeting:
1. The working report from the Supervisory Committee for year 2002.
2. The audited financial statements of the Company for year 2002.
3. The profit distribution plan of the Company for year 2002.
4. The Company's annual report for year 2002 and its extract.
5. Rules and Procedures for the meeting of Company's Supervisory Committee.
The Supervisory Committee was of the view that:
1. In 2002, the operation of the Company was in strict compliance with the
Companies Law of the People's Republic of China, the Company's articles
of association and other relevant laws and regulations. In performing
their duties, the Directors and the senior management of the Company have
not contravened any relevant laws and regulations of the People's
Republic of China and the Company's articles of association and have not
done any act which has caused any damage to the interests of the Company.
2. The connected transactions of the Company were fair and reasonable and
under no circumstance, such transactions were detrimental to the
interests of the Company and its shareholders.
The above resolutions were considered and approved on 11th March 2003
in Beijing.
Supervisory Committee
of
Huaneng Power International, Inc.
Beijing, the PRC
12th March 2003
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
[LOGO GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(a Sino-foreign joint stock limited company
incorporated in the People's Republic of China)
ANNOUNCEMENT FOR RESOLUTIONS PASSED AT
THE SECOND MEETING OF THE FOURTH SESSION
OF THE BOARD OF DIRECTORS
On 12th March 2003, the Board of Directors ("the Board") of Huaneng Power
International, Inc. (the "Company") convened the second meeting of the Fourth
Session of the Board at the Company's head office at 2C, Fuxingmennan Street,
Xicheng District, Beijing. Twelve Directors were eligible to attend the
meeting. The attendants of the meeting included twelve Directors (either in
person or by proxy), the Secretary of the Board, the Supervisors and other
senior management of the Company. The convening of this meeting has complied
with the Companies Law of the People's Republic of China and the articles of
association of the Company. Mr Li Xiaopeng, Chairman of the Company, presided
over the meeting. The following resolutions were considered and approved at
the meeting:-
1. The working report from the Board of Directors of the Company for
year 2002.
2. The working report from the President of the Company for year 2002.
3. The audited financial statements of the Company for year 2002.
4. The profit distribution plan of the Company for year 2002.
Having been audited by PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd.
and PricewaterhouseCoopers, the Company's net profit under the PRC GAAP,
International Financial Reporting Standards and US GAAP were
Rmb4,082,350,589, Rmb3,921,003,301 and Rmb3,895,191,644 respectively. 10%
and 7.5% of the net profit for year 2002 of the Company under the PRC
GAAP (Rmb4,082,350,589) should be appropriated to the statutory surplus
reserve fund and the statutory public welfare fund respectively,
amounting to a total of Rmb714,411,353. No appropriation will be made to
discretionary surplus reserve fund. According to the articles of
association of the Company, dividends for distribution by the Company
will be based on the lowest of the amounts determined in accordance with
the aforesaid standards. The amount of the profit attributable to
shareholders was RMB3,180,780,291. The distribution of profit for year
2002 by the Company should be based on the total issued share capital of
6,000,273,960 shares of the Company, and the Company would make a
distribution of cash dividends to all shareholders on the basis of
Rmb3.40 (including tax) for each 10 shares of the Company. It is
estimated that the total amount of dividends to paid would be
Rmb2,040,093,146.40. The remaining Rmb1,140,687,145 would be reserved for
future distribution and the Company would not capitalize the statutory
surplus reserve fund for this year.
5. The Company's 2002 annual report and its extract.
6. The proposal regarding the re-appointment of the Company's auditors.
It was resolved to appoint PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd
as the PRC auditors of the Company and PricewaterhouseCoopers as the
Company's international auditors for 2003 with a total remuneration of
US$1.25 million.
7. The proposal regarding the amendments to the articles of association of
the Company.
8. The Rules and Procedures for Shareholders' meeting.
9. The proposal regarding the remuneration of independent directors
(1) During the term of service, the Company shall pay to each
independent director an annual allowance of Rmb40,000 (tax
exclusive) by two instalments.
(2) The Company shall reimburse to the independent directors all their
expenses (including travelling expenses and administrative expenses)
reasonably incurred by them for the purpose of attending the
meetings of board of directors and shareholders meetings and
performing their duties as required by the relevant laws and under
the Company's articles of association.
(3) Save and except for the above, the Company shall not provide any
other benefits to the independent directors.
10. The proposal regarding the convening of the annual general meeting of
year 2002.
The above resolutions were considered and approved by the board of directors
of the Company on 12th March, 2003 in Beijing.
By Order of the Board
Li Xiaopeng
Chairman
Beijing, the PRC
12th March 2003
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
under- signed, thereunto duly authorized.
HUANENG POWER INTERNATIONAL, INC.
By /s/ Wang Xiaosong
----------------------
Name: Wang Xiaosong
Title: Vice Chairman
Date: March 12, 2003