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, 2004
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 for resolutions passed at the fifth meeting of the
fourth session of the board of directors, an announcement for resolutions
passed at the fourth meeting of the fourth session of the supervisory
committee and an announcement on 2003 results, made on March 16, 2004, in
English by Huaneng Power International Inc.
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.
Exhibit 99.1
[GRAPHIC OMITTED
(a Sino-foreign joint stock limited company
incorporated in the People's Republic of China)
ANNOUNCEMENT FOR RESOLUTIONS PASSED AT
THE FIFTH MEETING OF THE FOURTH SESSION
OF THE BOARD OF DIRECTORS
This announcement is made pursuant to paragraph 2(2) of the Listing Agreement
between Huaneng Power International, Inc. (the "Company") and The Stock
Exchange of Hong Kong Limited.
On 16th March 2004, the Board of Directors ("the Board") of the Company
convened the fifth 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
2003.
2. The working report from the President of the Company for year 2003.
3. The audited financial statements of the Company for year 2003.
4. The profit distribution plan of the Company for year 2003.
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
Rmb5,457,142,551, Rmb5,430,407,607 and Rmb5,470,041,000 respectively.
10% and 7.5% of the net profit for year 2003 of the Company under the
PRC GAAP (Rmb5,457,142,551) should be appropriated to the statutory
surplus reserve fund and the statutory public welfare fund respectively,
amounting to a total of Rmb954,999,946. 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 RMB4,475,407,661. As at 31st December 2003, the
accumulated profit attributable to shareholders was RMB10,967,358,000.
The distribution of profit for year 2003 by the Company should be based
on the total issued share capital of 6,027,671,200 shares of the
Company, and the Company would make a distribution of cash dividends to
all shareholders on the basis of Rmb5 (including tax) together with five
bonus shares for each 10 shares of the Company. It is estimated that the
total amount of dividends and bonus shares to be paid from the profit
attributable to shareholders as at 31st December 2003 would be
Rmb6,027,671,200. The remaining Rmb4,939,686,800 would be reserved for
future distribution.
5. The proposal regarding issue of new shares by conversion of the
additional paid-in capital and the surplus reserve fund.
As at 31st December 2003, the Company's additional paid-in capital and
surplus reserve fund under the PRC GAAP were RMB10,403,229,361 and
4,374,668,188 respectively. On the basis that the Company's total issued
share capital being 6,027,671,200 shares as at the year end of 2003, the
Company will issue additional new shares on the basis of five new shares
for every 10 existing ordinary shares to its shareholders by conversion
of reserve fund (three of which from additional paid-in capital and two
from surplus reserve fund).
6. The Company's 2003 annual report and its extract.
7. 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 2004 with a total remuneration of
US$1.58 million.
8. The proposal regarding the adjustment of the remuneration of independent
directors
(1) During the term of service, the Company shall pay to each
independent director an annual allowance of Rmb60,000 (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.
9. Proposal regarding amendments of the articles of association of the
Company
Details will be disclosed in the notice of annual general meeting of the
Company to be despatched later and be available in the website of
Shanghai Stock Exchange (www.sse.com.cn).
10. "Management Measures for Approving Audit services by the Audit Committee
of Huaneng Power International, Inc."
11. Proposal regarding the convening the Company's annual general meeting
for 2003
Items 1, 3, 4, 5, 7, 8 and 9 of the above resolutions have to be tabled
for approval by the general meeting of the Company. The Company is
prepared to convene annual general meeting for 2003 and will issue
notice of annual general meeting containing the relevant timing, venue,
agenda of the meeting and the details of the proposed resolutions.
By Order of the Board
Li Xiaopeng
Chairman
Beijing, the
PRC 16th March
2004
Exhibit 99.2
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.
[GRAPHIC OMITTED]
(a Sino-foreign joint stock limited company
incorporated in the People's Republic of China)
ANNOUNCEMENT FOR RESOLUTIONS PASSED AT
THE FOURTH MEETING OF THE FOURTH SESSION
OF THE SUPERVISORY COMMITTEE
This announcement is made pursuant to paragraph 2(2) of the Listing Agreement
between Huaneng Power International, Inc. (the "Company") and The Stock
Exchange of Hong Kong Limited.
On 16th March 2004, the fourth meeting of the Fourth Session of the
Supervisory Committee of 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 in person. 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 audited financial statements of the Company for year 2003.
2. The profit distribution plan of the Company for year 2003.
3. The proposal of capitalization of reserve fund.
4. The Company's annual report for year 2003 and its extract.
5. The working report from the Supervisory Committee for year 2003.
The Supervisory Committee was of the view that:
1. In 2003, 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 16th March 2004 in
Beijing.
Supervisory Committee
of
Huaneng Power International, Inc.
Beijing, the PRC
16th March 2004
Exhibit 99.3
[GRAPHIC OMITTED]
(a Sino-foreign joint stock limited company incorporated in
the People's Republic of China)
Announcement of Results for 2003
-------------------------------------------------------------------------------
Power generation: 90.91 billion kWh
Consolidated net operating revenue: Rmb23.388 billion
Net profit: Rmb5.430 billion
Earnings per share: Rmb0.90
Dividends declared: Rmb0.50 per share
Bonus issue of shares on the
basis of 5 bonus shares for
every 10 existing ordinary
shares
Conversion of reserve 5 new shares for every 10
fund into share capital: existing ordinary shares
-------------------------------------------------------------------------------
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 2003 (the "Accounting Year" or
the "Year").
For the twelve months ended 31st December 2003, the Company recorded net
operating revenues of Rmb23.388 billion, representing an increase of 26.60%
over 2002 and a net profit of Rmb5.430 billion, representing an increase of
38.50% over 2002. Basic earnings per share was Rmb0.90, representing an
increase of Rmb0.25 over the preceding year. The Board of Directors was very
satisfied with the operating results of the Year.
The Company's Board of Directors proposed to declare dividend consisting of
both cash and the Company's shares to its shareholders. Under the proposed
dividend and capital conversion plan, every 10 existing ordinary shares of the
Company will be entitled to receiving RMB5.00 in cash and 10 ordinary shares
of the Company.
Details of the operating results are set out in the financial information
attached.
BUSINESS REVIEW OF YEAR 2003
Year 2003 was a year full of challenges and opportunities. The steady growth
of China's economy boosted power demand, the nation's power demand increased
by 15.4% and more than 20 provinces experienced power shortage. During the
Year, the Company continued to strengthen its 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 annual targets.
1. STEADY GROWTH OF OPERATING RESULTS
For the twelve months ended 31st December 2003, the Company recorded net
operating revenues of Rmb23.388 billion and a net profit of Rmb5.430
billion, representing increases of 26.60% and 38.50%, respectively, as
compared to the same period of 2002. Earnings per share was Rmb0.90,
representing an increase of Rmb0.25 over the same period of 2002.
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 impact of project development and asset acquisition also
made significant contribution to the growth of the Company's operating
results for year 2003. At the same time, facing an increasingly
competitive power market, and in view of the twofold pressure of
escalating fuel prices 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. Despite the increase of standard coal price by 2.89%, the
average unit fuel cost for power sold increased only 2.28% over the
previous year.
As at the end of 2003, net asset per share of the Company was Rmb5.63,
representing an increase of 11.05% when compared to 2002.
2. SAFE AND STABLE POWER GENERATION
In 2003, the operating power plants of the Company and its subsidiaries
achieved power generation totalling 90.91 billion kWh on a consolidated
basis (including the power generation from Yushe Power Plant and Xindian
Power Plant in November and December), representing an increase of 27.3%
over the same period of the previous year. The growth in power
generation of the Company in 2003 laid the foundation for the good
operating results.
The growth in the Company's power generation was due to the increased
power demand driven by the rapid and steady economic growth of the
country. On the other hand, the increase in power generation was
attributable to the whole-year power generation contribution from the
two generating units at Dezhou Power Plant Phase III which commenced
operation in 2002, the power generation contribution from the commercial
operation of two generating units at Shandong Jining Power Plant,
together with the contribution of the two months power generation from
the newly acquired Yushe Power Plant and Xindian Power Plant, thus
significantly increasing the power generation capacity of the Company.
At the same time, the rationalised scheduling of the planned maintenance
of the generating units also created favourable conditions for the
increased power generation of the Company.
In 2003, the average availability factor of the power plants of the
Company and its subsidiaries was 92.15%, with an average capacity factor
of 68.06% while the average coal consumption rates for power sold and
for power generated were 335.12 gram/kWh and 318.23 gram/kWh,
respectively. The average house consumption rate was 4.76%. The
Company's technical and economic indices remained at the forefront among
all other power companies in the PRC.
In 2003, the Company's power plants in Shanghai, Liaoning and Jiangsu
participated in the pilot scheme of power pooling in their respective
regions. The power generation subject to power pooling is 5.159 billion
kWh, accounting for 5.98% of the total power sale in the year. Power
pooling not only increased the market share of the Company in local
regions, but also increased the marginal profit of the Company.
Moreover, taking into account the oil price increase and for the purpose
of controlling generation costs, the Company decided to shut down the
two 100MW oil-fired generating units at Xindian Power Plant Phase I,
which have been in operation for 30 years and is making losses
currently. The generation capacity at Xindian Power Plant Phase I (on an
equity basis) was reduced from 650MW to 450MW.
3. BREAKTHROUGHS IN ASSET OPERATION
(1) Through tendering, the Company has acquired 25% interest in Shenzhen
Energy Group Co. Ltd. ("SEG") after the latter's increase in share
capital, enhancing the Company's market share in Guangdong region, a
rapidly-growing market for power demand. The acquisition was effective
on 22nd April 2003.
(2) In 2003, the Company acquired 55% equity interest in the registered
capital of Qinbei Power Plant, 60% equity interest in the registered
capital of Yushe Power Plant, and all the assets and liabilities of
Xindian Power Plant from China Huaneng Group. The acquisitions were
effective on 27th October 2003, thereby increasing the generation
capacity of the Company on an equity basis by 770MW, and the generation
capacity under construction on an equity basis by 1,020MW. These have
enhanced the competitiveness of the Company in Central China and also
contributed to the growth of the Company's annual results.
4. ACHIEVEMENTS IN PROJECT CONSTRUCTION
(1) Owing to the Company's careful organisation and various parties'
efforts, generating units 5 and 6 at Jining Power Plant expansion
project (using Cycled Fluidised Bed Combustion Boilers) commenced
commercial operation in July and August 2003 respectively, thereby
making contribution to the growth in power generation of the Company.
(2) Construction works of Huaiyin Power Plant Phase II project (2x330MW
coal-fired generating units) and the project of one 600 MW coal-fired
generating unit at Shantou Power Plant Phase II have commenced, with
works quality and investment costs under effective control and works
being carried out on schedule.
(3) Construction works of two 600MW coal-fired generating units at
Qinbei Power Plant Phase I and two 300MW coal-fired generating units at
Yushe Power Plant Phase II have been progressing smoothly, and it is
estimated that the plants will be put into full operation in 2004 and
2005 respectively.
5. A NEW CHAPTER OF SUSTAINABLE DEVELOPMENT
The feasibility study report on the project of two 1,000MW ultra
supercritical coal-fired generating units, which is the first case in
China, at Huaneng Yuhuan Power Plant Phase I has been approved by the
relevant government authorities. Project proposals in relation to the
construction of Taicang Power Plant Phase II (2x600MW coal-fired
generating units), Shanghai Gas-fired Power Plant (3x300MW-class
Combined-Cycle-Gas-Turbine generating units) and Jinling Gas-fired Power
Plant (3x300MW-class Combined-Cycle-Gas-Turbine generating units) have
obtained approvals from the State Council. The Company will actively
push forward the progress of the proposed projects in accordance with
commercially viable principles.
PROSPECTS FOR 2004
Year 2004 is also a year of full of challenges and opportunities. In respect
of power generation, the demand will continue to increase with substantial
growth. On the one hand, this provides the Company with a favourable condition
to generate more generation, thus creating more profits. On the other hand,
the consistently heavy loading of the generating units will create pressure on
safety and stability of the operation. As one of the challenges we encounter
this year, we will ensure a safe operation of our generating units and
facilities, thus achieving a safe production.
Another challenge we face is related to coal supply. For a number of reasons,
coal has been in rather short supply since the second half of last year and
coal prices rose. The Company adopted a series of measures to ensure a
sufficient supply of coal. The Company believes that under the government's
guidance, suppliers and customers will co-operate with each other, thus
ensuring a healthy coal market for the power industry.
In respect of development projects, economic growth and rising people's living
standards provide more room for market development, which on the one hand
gives better opportunity to the Company for rapid expansion, and on the other
hand imposes heavy pressure upon project management due to the large-scale
power plant construction. Ensuring the construction projects to be completed
on schedule and with high quality and controlling the construction costs are
also a challenge for the coming year.
As China's power industry continues to evolve, it is only natural that the
Company will encounter competition and challenges. As an independent power
producer that entered the power market at an early stage, the Company
possesses competitive advantages and accumulated experience and is fully
capable of overcoming these difficulties and gradually winning development
opportunities in a regulated competitive market. Our advantages include:
advanced and highly efficient power generation equipment and technology;
regulated and outstanding management and an experienced management team;
abundant capital and solid reputation; economies of scale and geographical
advantage on the distribution of power plants; and strong support from its
parent company. Given these advantages, the Company will develop far and
beyond amidst competition, capture more market share and seize more
opportunities in asset acquisition as a result of the power industry's
re-structuring and from its parent company. The Company has full confidence to
maintain its leadership position among independent power producers in China.
The Company will focus on the following objectives in 2004:
(1) To ensure safe and operating stability of the Company's power
plants, and the achievement of their annual power generation
plans; and on this basis, to analyse and formulate effective
market strategies with respect to power market and power pooling,
and to enlarge our power market shares;
(2) To undertake stringent control of operating costs and other costs,
in particular fuel costs and construction costs;
(3) To actively develop the proposed projects and push forward the
work for the power plants under construction, with a view to
expanding the Company's operating scale and enhancing its business
strength; and
(4) To actively seek new opportunities in order to assure continuous
growth of the Company's profits and shareholders' interests.
The Company will continue to pursue a maximization of shareholders' interests
as its operating objectives and goals. Given the steady and stable economic
growth in China, the good opportunities provided by the power reform, the
strong support from government of all levels and its parent company, and
especially the support and trust from investors and shareholder, the Company
will for sure be able to continue its healthy and steady growth under the
efficient and experienced management team, bringing long-term and stable
growth of return to the shareholders.
OPERATING RESULTS
Comparison of the operating results between the year 2003 and the year 2002.
SUMMARY
In 2003, the Company has achieved very good operating results.
In 2003, the electricity sale of the Company and its subsidiaries reached
86.242 billion kWh, increased by 28.08% from the 67.332 billion kWh of last
year. Accordingly, net operating revenue, net profit and earnings per share
increased considerably when compared with that of 2002. Board of Directors of
the Company was satisfied with the operating results of the year 2003.
The Company's good performance is mainly attributed to the rapid development
of the national economy and concerted efforts of all the staff of the Company.
In 2003, the rapid development of the national economy has resulted in a
strong demand for electricity. The growth rate of the production and
consumption of electricity exceeded that of the GDP. In the peak seasons, such
as in the hot summer days when urban residents had higher demand for
electricity supply, and in the arid winter days when hydro power generation
decreased significantly, there was a serious shortage of electricity supply in
some regions of the country, especially in the comparatively developed
south-eastern coastal areas. The local government called on people to save
electricity, and part of users had to pause electricity consumption or was
restricted in electricity consumption. The local government took measures to
ensure and faster the production of the power-generation enterprises, and to
limit the electricity consumption of high power-consuming enterprises in order
to ensure the supply to residential end-consumers and key users such as
hospitals.
The Company and its subsidiaries face a prosperous environment as the power
output and the operating hours of the domestic thermal power plants had
increased significantly in 2003, due to the strong demand for electricity
caused by: the rapid development of the national economy; the significant
increase of the consumption of high power-consuming enterprises; and the arid
atmosphere in certain areas.
The Company and its subsidiaries accomplished and exceeded the annual
production and sale plan despite of the SARS conditions, urgent conditions of
coal transportation and the rare high temperature in the summer. The Company
and its subsidiaries took advantage of the macro-environment, carefully
maintained the equipments, arranged the overhaul projects with the
consideration of the market demand, managed to meet the demand for fuel. The
superior technology and equipments enhanced the Company's competition
position. For the year ended 31st December 2003, the power generation of the
Company and its subsidiaries reached 90.91 billion kWh, increased by 27.3%
compared to the prior year.
The growth of the Company and its subsidiaries' power generation was
attributed to the following factors:
1) the rapid-growth of the national economy, which resulted in a
significant increase in the demand of electricity and accordingly
the increase of generation of the power plants of the Company and
its subsidiaries;
2) the significant decrease of hydro power generation in Fujian
Province, which resulted in more power generation of the power
plants of the Company in Fujian province;
3) the remarkable increase of the generation capacity of the Company
with two generation units of Jining Power Plant put into operation
in 2003 and the full year generation capacity of two generation
units of Dezhou Power Plant Phase III which were put into
commercial operation in 2002;
4) two months' power generation contribution from Yushe Power Plant
and Xindian Power Plant, both of which were acquired in 2003.
In 2003, the Company made great achievement in capital transaction.
On 22nd April 2003, the Company acquired equity interests representing 25% of
the enlarged share capital of SEG at a consideration of Rmb2.39 billion.
Through this acquisition, the Company entered the Shenzhen power market, which
is a high potential market. The Company is confident that it can work together
with local power developers to exploit the Shenzhen power market, to provide
power to local customers and to obtain satisfactory returns from this
strategic investment.
On 27th October 2003, the Company acquired from China Huaneng Group all the
assets and liabilities of Xindian Power Plant, 60% of the equity interests of
Yushe Power Plant and 55% of the equity interests of Qinbei Power Plant at a
total consideration of Rmb550 million. This acquisition was in the alignment
with the Company's market development strategy to consolidate the advantages
in the coastal regions and to expand in the middle China. The three power
plants mentioned above are located in Shandong Province, Henan Province and
Shanxi Province, respectively. The Company and its subsidiaries' entry into
Henan and Shanxi Province enlarged its regional coverage to the larger power
market in middle China. Henan Province located at the lower reaches of the
Yellow River. It is a main energy base in China with high production output of
coal and oil. Shanxi Province located at North China, and is the top
coal-output province in China with coal reserve accounted for one third of the
total coal reserve in China. The acquisition was the continuance of the
development strategy of the Company "to focus on both self-development and
acquisition".
NET OPERATING REVENUE
Net operating revenue represents operating revenue net of the value-added tax
and deferred revenue. For the year ended 31st December 2003, the consolidated
net operating revenue of the Company and its subsidiaries was Rmb23.388
billion, representing an increase of 26.60% over net operating revenue of
Rmb18.474 billion of last year.
The significant increase of net operating revenue was primarily because of the
28.08% increase of power output compared to last year. Among the power plants
of the Company and its subsidiaries, the operating revenue of Dezhou Power
Plant, Fuzhou Power Plant, Dalian Power Plant and Dandong Power Plant had
increased significantly. The output of Dezhou Power Plant had increased 42.91%
compared to last year. The main reason of the increase was that the Phase III
of Dezhou Power Plant was put into commercial operation in the second half of
2002. The increase of output of Fuzhou Power Plant was because that the
significant reduction of hydro power generation in Fujian Province offered the
opportunity to our plant to enlarge its generation. The operating revenue of
Dalian Power Plant and Dandong Power Plant increased because of the continuous
expansion of the power market in Liaoning Province.
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 2.06% from Rmb325.38 per MWh in 2002 to Rmb318.68 per MWh in
2003. The decrease of the average tariff rate was due to the adjustment of
approved tariff rates and the increase of the percentage of excess generation
portion as the total power output increased. In addition, the tariff rates of
the newly acquired Xindian Power Plant and Yushe Power Plant were lower than
that of the original power plants of the Company and its subsidiaries.
Dalian Power Plant
Dalian Power Plant's net operating revenue increased by 19.74% to Rmb1.900
billion in 2003 from Rmb1.587 billion of last year. The average tariff rate
was Rmb272.69 per MWh, which decreased by 2.79% from Rmb280.53 MWh in 2002.
The power output of Dalian Power Plant reached 8.145 billion kWh, increased by
20.43% compared to last year. The significant increase of power output was due
to the continuous expansion of the power market of Liaoning Province and the
increasing power consumption. The increase of power output net of the impact
caused by the decrease of the average tariff rate and resulted in the
significant increase of the operating revenue.
Fuzhou Power Plant
Fuzhou Power Plant's net operating revenue increased by 26.51% to Rmb2.390
billion in 2003 from Rmb1.889 billion of last year. The average tariff rate
was Rmb331.82 per MWh, which increased by 1.23% from Rmb327.80 MWh in 2002.
The increase of average tariff rate was caused by the change of the structure
the power output, among which, planned generation portion increased and the
excess generation portion decreased. The power output of Fuzhou Power Plant
was 8.464 billion kWh, increased by 23.13% when compared to last year. Both
the increase of the average tariff rate and the power output resulted in
significant increase of the net operating revenue and net operating profit.
The main reason of the increase of the power generation of Fuzhou Power Plant
was mainly that Fuzhou Power Plant had the opportunity to enlarge power
generation since the hydro power generation declined significantly due to the
arid climate in Fujian Province while the power demand increased.
Shang'an Power Plant
Shang'an Power Plant's net operating revenue increased by 4.34% to Rmb2.008
billion in 2003 from Rmb1.924 billion in 2002. The average tariff rate was
Rmb307.94 per MWh, which decreased by 2.44% from Rmb315.65 MWh of last year.
The decrease of the average tariff rate was mainly caused by the change of the
structure of the power sales. All the increased portion of power output was in
the excess generation category with a lower tariff rate. The increase of the
net operating revenue of Shang'an Power Plant was due to the increase of power
output. The lower growth rate of net operating revenue and net profit was
caused by the decrease of the average tariff rate.
Nantong Power Plant
Nantong Power Plant's net operating revenue increased by 9.86% to Rmb2.147
billion in 2003 from Rmb1.955 billion in 2002. The average tariff rate was
Rmb312.52 per MWh, which increased by 0.96% from Rmb309.54 MWh of last year.
The power output of Nantong Power Plant reached 8.078 billion kWh, increased
by 7.65% compared to last year. The increase of the net operating revenue and
the net profit of Nantong Power Plant was caused by two factors: the increase
of the power output and the increase of the average tariff rate. The increase
of the average tariff rate was due to the increase of the tariff rate of the
excess generation.
Shantou Oil-fired Power Plant
Shantou Oil-fired Power Plant's net operating revenue increased by 56.57% to
Rmb178 million in 2003 from Rmb114 million in 2002. The average tariff rate
was Rmb672.41 per MWh, which increased by 8.28% from Rmb621.02 MWh of last
year. The power output of Shantou Oil-fired Power Plant reached 296 million
kWh, increased by 45.15% compared to last year.
Dandong Power Plant
Dandong Power Plant's net operating revenue increased by 22.87% to Rmb927
million in 2003 from Rmb754 million in 2002. The increase of the net operating
revenue was mainly caused by the 20.23% increase of power output of Dandong
Power Plant, which reached 4.046 billion kWh in 2003. The increase of power
output was due to the same factors that benefited Dalian Power Plant, namely
the continuous expansion of the power market of Liaoning Province and the
continuous growth of power consumption. The other significant reason was that
the average tariff rate increased by 1.19% to Rmb276.95 MWh in 2003 from
Rmb273.70 per MWh of last year.
Shantou Coal-fired Power Plant
Shantou Coal-fired Power Plant's net operating revenue increased by 2.33% to
Rmb1.522 billion in 2003 from Rmb1.487 billion in 2002. The average tariff
rate was Rmb435.17 per MWh, which decreased by 4.56% from Rmb455.95 MWh of
last year. The power output of Shantou Coal-fired Power Plant reached 4.125
billion kWh, increased by 6.55% compared to last year. The lower growth rate
of the net operating revenue, when compared with that of power output, was due
to that certain portion of the increase of the power output was offset by the
decrease of the average tariff rate.
Shidongkou Second Power Plant
Shidongkou Second Power Plant's net operating revenue increased by 6.84% to
Rmb2.250 billion in 2003 from Rmb2.106 billion in 2002. The average tariff
rate was Rmb332.85 per MWh, which decreased by 3.77% from Rmb345.90 MWh of
last year. The power output of Shidongkou Second Power Plant reached 8.024
billion kWh, increased by 10.40% compared to last year. The increase of the
power output was due to that the power demand in the East China (especially in
Shanghai) exceeded the power supply in 2003, which resulted in the significant
increase of the net operating revenue and net profit.
Nanjing Power Plant
Nanjing Power Plant's net operating revenue increased by 10.03% to Rmb1.027
billion in 2003 from Rmb933 million in 2002, which was mainly caused by two
factors: 1) The average tariff rate reached Rmb307.31 per MWh in 2003,
increased by 1.07% from Rmb304.07 MWh of last year. The increase of the
average tariff rate was mainly due to the increase of the bidding tariff rate
and the tariff rate for the excess generation. 2) The power output of Nanjing
Power Plant reached 3.867 billion kWh, increased by 7.16% compared to last
year. The increase of power generation was mainly due to the significant
increase of power demand of the East China grid.
Dezhou Power Plant
Dezhou Power Plant's net operating revenue increased by 40.27% to Rmb3.206
billion in 2003 from Rmb2.286 billion in 2002. The average tariff rate was
Rmb333.34 per MWh, which decreased by 1.85% from Rmb339.64 MWh of last year.
The increase of the net operating revenue of Dezhou Power Plant was mainly due
to that the increase in the power output offset the impact of decrease of the
average tariff rate. The increase of power output was mainly due to that the
Phase III project (2X660MW) formed additional stable generation capacity.
Jining Power Plant
Jining Power Plant's net operating revenue increased by 7.28% to Rmb453
million in 2003 from Rmb422 million in 2002. The average tariff rate was
Rmb274.66 per MWh, which decreased by 0.18% from Rmb275.15 per MWh of last
year. The power output of Jining Power Plant reached 1.928 billion kWh,
increased by 6.82% compared to last year. The increase of the net operating
revenue of Jining Power Plant was mainly due to the increase of power output.
The increase of power output was mainly due to that the Phase III project
(2X135MW) was put into commercial operation in 2003, which enlarged the total
installation capacity of Jining Power Plant.
Changxing Power Plant
Changxing Power Plant became a wholly-owned plant of the Company on 1st July,
2002. In 2003, Changxing Power Plant's net operating revenue was Rmb454
million. Its power output was 1.657 billion kWh with the average tariff rate
of Rmb320.57 per MWh.
Shidongkou First Power Plant
The Company acquired 70% of the equity interests of Shidongkou First Power
Plant on 1st July, 2002, and subsequently acquired the remaining 30% equity
interests on 31st December, 2002. Since then, the plant became a wholly-owned
plant. In 2003, the net operating revenue, power output and average tariff
rate of Shidongkou First Power Plant were Rmb1.623 billion, 7.395 billion kWh
and Rmb256.64 per MWh, respectively.
Xindian Power Plant
Xindian Power Plant became a branch of the Company by the end of October 2003.
The net operating revenue of Xindian Power Plant from November to December was
Rmb150 million. The power output and average tariff rate of Xindian Power
Plant were 512 million kWh and Rmb342.41 per MWh, respectively.
Taicang Power Plant
The Company acquired 70% of the equity interests of Taicang Power Plant on 1st
July, 2002 and subsequently acquired 5% of the equity interests on 31st
December, 2002. In 2003, the net operating revenue, power output and average
tariff rate of Taicang Power Plant were Rmb1.105 billion, 4.062 billion kWh
and Rmb321.80 per MWh, respectively.
Huaiyin Power Plant
The Company acquired 44.16% of the equity interests of Huaiyin Power Plant on
1st July, 2002, and subsequently acquired 19.48% equity interests on 31st
December, 2002. In 2003, the net operating revenue, power output and average
tariff rate of Huaiyin Power Plant were Rmb652 million, 2.435 billion kWh and
Rmb317.21 per MWh, respectively.
Weihai Power Plant
The Company owns 60% equity interests in Weihai Power Plant. The net operating
revenue of Weihai Power Plant decreased by 4.66% to Rmb1.340 billion in 2003
from Rmb1.405 billion of last year. The decrease was mainly caused by two
factors: 1) The power output of Weihai Power Plant decreased by 2.79% to 4.107
billion kWh from 4.225 billion kWh of last year. 2) The average tariff rate of
Weihai Power Plant decreased by 1.84% to Rmb386.50 per MWh from Rmb393.74 per
MWh of last year. The decrease of the average tariff rate was mainly due to
the change of the structure of power output, among which the portion of the
planned generation decreased and the portion of the generation applied to
lower tariff rates increased.
Yushe Power Plant
The Company acquired 60% of the equity interests of Yushe Power Plant by the
end of October 2003. The net operating revenue of Yushe Power Plant from
November to December were Rmb57 million. The power output and average tariff
rate of Yushe Power Plant were 259 million kWh and Rmb200.63 per MWh,
respectively.
Qinbei Power Plant
The Company acquired 55% equity interests of Qinbei Power Plant by the end of
October 2003. Two sets of generation units of Qinbei Power Plant, with the
capacity of 600 MW each, were still under construction.
OPERATING EXPENSES
The total operating expenses of the Company and its subsidiaries increased by
26.51% to Rmb16.315 billion in 2003 from Rmb12.896 billion of last year. The
growth rate 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 30.49% to Rmb9.025 billion in 2003, when
compared to Rmb 6.916 billion of last year. The weighted average unit price of
natural coal increased by 2.89% to Rmb239.06 per ton in 2003 from Rmb232.34
per ton in 2002. Accordingly the unit fuel cost of power output increased by
2.28% to Rmb105.05 per MWh. Xindian Power Plant and Yushe Power Plant's unit
fuel cost of power output was Rmb103.48 per MWh, which was lower than the
average level of original power plants of the Company.
MAINTENANCE EXPENSE
The maintenance expense incurred by the Company and its subsidiaries was
Rmb922 million in 2003. The maintenance expense increased by 51.64% when
compared to Rmb608 million of last year. The increase of the maintenance
expense was mainly due to two factors: 1) The plants acquired in 2002,
including Changxing Power Plant, Shidongkou First Power Plant, Taicang Power
Plant and Huaiyin Power Plant, were consolidated in 2003 on a full-year basis.
2) The original power plants such as Dezhou Power Plant, Dalian Power Plant
and Fuzhou Power Plant, carried out major overhaul according the annual plan
and incurred more maintenance expense.
DEPRECIATION AND AMORTIZATION
The depreciation and amortization of the Company and its subsidiaries was
Rmb4.117 billion in 2003, increased by 16.50% from Rmb3.534 billion of last
year. The depreciation and amortization of the original power plants and the
headquarter of the Company were Rmb4.093 billion, increased by 15.82% compared
to last year. The newly acquired power plants including Xindian Power Plant
and Yushe Power Plant incurred depreciation and amortization Rmb24 million in
2003. The increase of depreciation and amortization was mainly due to that the
Phase III of Dezhou Power Plant was put into commercial operation in late
2002, and that the plants acquired in 2002, including Changxing Power Plant,
Shidongkou First Power Plant, Taicang Power Plant and Huaiyin Power Plant,
were consolidated in 2003 on a full-year basis.
LABOR COST
The labor cost of the Company and its subsidiaries was Rmb1.439 billion in
2003, which increased by 38.90% from Rmb1.036 billion of last year. The
increase of labor cost was mainly due to that the plants acquired in second
half of 2002, including Changxing Power Plant, Shidongkou First Power Plant,
Taicang Power Plant and Huaiyin Power Plant, were consolidated in 2003 on a
full-year basis.
SERVICE FEE PAID TO HUANENG INTERNATIONAL POWER DEVELOPMENT CORPORATION
("HIPDC")
The service fee paid to HIPDC refers to a fee for use of its grid connection
and transmission facilities based on reimbursement of cost plus a profit.
In 2003, the company incurred the service fee in relation to the grid
connection and transmission facilities for Shang'an Power Plant and Shantou
Coal-fired Power Plant (HIPDC had transferred the ownership of transmission
and transformation facilities of Fuzhou Power Plant Phase I and Shidongkou
Second Power Plant to Fujian Electric Power Company and Shanghai Power
Corportaion, respectively, on 1st July, 2002. The Company was not required to
pay the service fee for the two plants since the transfer). The service fee
paid to HIPDC was Rmb215 million in 2003, decreased by 18.56% when compared
with Rmb264 million in 2002.
INCOME TAX EXPENSES
Pursuant to the relevant tax regulations, the Company is a Sino-foreign equity
joint venture and enjoys the preferential income tax policy. 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 the 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 Rmb1.149 billion,
which increased by 17.13% compared to Rmb981 million of last year. The income
tax expenses of the original power plants and headquarters of the Company
(excluding the newly acquired power plants in 2003) were Rmb1.138 billion,
increased by 16.00% compared to last year. The consolidated income tax of the
newly acquired plant, including Xindian Power Plant and Yushe Power Plant,
were Rmb11 million.
OTHER EXPENSES
With the rapid growth of the power output, the other expenses of the Company
and its subsidiaries were Rmb597 million in 2003, increased by 10.76% from
Rmb539 million of last year. Another factor that caused the increase of other
expenses was the consolidation of the other expenses of the newly acquired
plants, including Xindian Power Plant, Yushe Power Plant and Qinbei Power
Plant. The consolidated other expenses of the original plants and headquarter
of the Company, excluding the newly acquired Xindian Power Plant, Yushe Power
Plant and Qinbei Power Plant were Rmb581 million, which increased by 7.79%
compared to Rmb539 million of last year.
NET PROFIT BEFORE FINANCIAL EXPENSES
The net profit before financial expenses of the Company and its subsidiaries
in 2003 was Rmb7.073 billion, which increased by 26.80% compared to Rmb5.578
billion in 2002.
FINANCIAL EXPENSES
The consolidated net financial expenses of the Company and its subsidiaries
were Rmb544 million in 2003, which increased by 6.67% compared to Rmb510
million of last year. The increase of financial expenses was mainly due to the
decrease of interest income.
NET PROFIT
The consolidated net profit of the Company and its subsidiaries was Rmb5.430
billion in 2003, increased by 38.50% compared to Rmb3.921 billion of last
year. The significant increase of net profit was primarily due to the increase
of power output, the full year contribution from the plants acquired in 2002
(including Changxing Power Plant, Shidongkou First Power Plant, Taicang Power
Plant and Huaiying Power Plant), the full year contribution from Dezhou Power
Plant Phase III, the commercial operation of the expansion project of Jining
Power Plant and the investment income from SEG.
COMPARISON OF KEY FINANCIAL RATIOS
The Company and its subsidiaries
2003 2002
Current ratio 0.90 1.00
Quick ratio 0.81 0.88
Ratio of liabilities and owner's equity 0.54 0.56
Multiples of interest earned 12.03 8.28
After the investment in SEG and the acquisitions of Xindian Power Plant, Yushe
Power Plant and Qinbei Power Plant, the current ratio and quick ratio of the
Company decreased slightly when compared with that in the beginning of 2003.
Multiples of interest earned of the Company and its subsidiaries increased
when compared with that of last year.
The Company and its subsidiaries had strong financing capability. The Company
obtained unsecured borrowing facilities from bank, amounting to Rmb7 billion
and Rmb5 billion, to finance its funding requirement for a period of three
years starting from 18th September, 2003 and 4th March, 2002, respectively.
After the acquisition of the 25% equity interests of SEG and the acquisitions
of Xindian Power Plant, Yushe Power Plant and Qinbei Power Plant, the Company
and its subsidiaries still maintained its strong debt repayment ability.
As at 31st December, 2003, the loans denominated in foreign currencies of the
Company and its subsidiaries amounted to approximately USD872 million and
Japanese Yen1.786 billion, of which USD250 million and Japanese Yen238 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.
The long-term loan of the Company and its subsidiaries were mainly fixed-rate
loans. As at 31st December, 2003, the balance of the floating-rate loans of
the Company and its subsidiaries were approximately USD262 million and
Japanese Yen1.786 billion according to the original loan agreements. The
Company and its subsidiaries adopted interest swap contracts to reduce its
floating rate risk.
CALCULATION FORMULA OF FINANCIAL RATIOS:
Ratio of liabilities and = 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 - balance of inventories at the end
of the year)/balance of current liabilities
at the end of the year
Multiples of interest = (profit before tax + interest expense)/interest
earned expenditure (including capitalized interests)
SHARE CAPITAL STRUCTURE
As at 31st December 2003, the total issued share capital of the Company,
excluding the shares which might be converted from the convertible notes, was
6,027,671,200 shares, of which 4,500,000,000 shares were domestic shares,
representing approximately 74.66% of the total issued share capital, and
1,527,671,200 shares were foreign shares, representing approximately 25.34% of
the total issued share capital. For domestic shares, HIPDC owns a total of
2,554,840,000 shares, representing 42.39% of the total issued share capital of
the Company. Other domestic shareholders hold a total of 1,945,160,000 shares,
representing 32.27% 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. As at 31st December 2003, there
was an aggregate amount of USD115,000 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 157,520 foreign shares at most.
As at 31st December 2003, the Company had no notice of any person redeemed the
remaining convertible notes into company's shares.
DIVIDENDS AND OTHER DISTRIBUTION
The Company and its subsidiaries aim to bring long-term, stable and growing
returns to the shareholders. In alignment with this target, on the board
meeting held on 16th March, 2004, the Board of Directors resolved to propose
for the year ended 31st December, 2003 a cash dividend of Rmb0.50 per ordinary
share, totaling approximately Rmb3.014 billion, together with an issue of
bonus shares on the basis of 5 bonus shares for every 10 existing ordinary
shares.
Cash dividends will be denominated and declared in Renminbi. Cash dividends on
domestic shares will be paid in Renminbi. Save for the dividends on foreign
shares traded on the Hong Kong Stock Exchange which will be paid in Hong Kong
dollars, cash 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 Rmb8.27715 and HK$1 to Rmb1.06175 respectively.
All the cash dividends will be paid and the bonus shares will be issued to
shareholders on or before 30th June 2004, subject to the approval of the
annual general meeting of the Company.
CONVERSION OF THE ADDITIONAL PAID-IN CAPITAL AND THE STATUTORY SURPLUS RESERVE
FUND
In addition to the dividends and other distribution as mentioned above, on
16th March 2004, the Board resolved to propose to convert part of the
additional paid-in capital and the statutory surplus reserve fund into share
capital by issuing new shares to all of its shareholders on the basis of 5 new
shares for every 10 existing ordinary shares (three of which from additional
paid-in capital and two from statutory surplus reserve fund). The proposal is
subject to shareholders' approval at the annual general meeting to be held on
11th May 2004.
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 2003 were coal suppliers,
namely Shenhua Coal Transportation Company, Datong Coal Limited Company,
Shanxi Guoyang Xinneng Limited Company, Shanxi Coking Coal Group and Zhun Ge
Er Company. The amount of coal supplied by the five major suppliers was about
30.3% of the total coal consumption of the Company in 2003.
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 2003.
CONNECTED TRANSACTIONS
The independent Directors of the Company confirmed that all connected
transactions in 2003 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 its subsidiaries 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 B4 of the financial statements for a brief description of
the connected transactions.
PURCHASE, SALE OR REDEMPTION OF SHARES
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 2003.
DIRECTORS' AND SUPERVISORS' RIGHT TO PURCHASE SHARES
For the year ended 31st December 2003, 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 352 of the Securities and Futures
Ordinance ("SFO") 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
2003 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 THE COMPANY
The following table sets forth the shareholding position of the Company's
shares as at 31st December 2003:
No. of Shares Percentage of
outstanding Shareholding
(in thousands) (%)
Domestic Shares
Huaneng International Power Development
Corporation
2,554,840 42.39
Hebei Provincial Construction Investment Company 452,250 7.50
Fujian International Trust & Investment Company 334,850 5.56
Jiangsu Province International Trust & Investment
Company
312,375 5.18
Liaoning Energy Investment (Group) Co. Ltd* 229,685 3.81
Dalian Municipal Construction Investment Company 226,125 3.75
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 0.31
Dandong Energy Investment Development Centre 6,500 0.11
Domestic public shares 250,000 4.15
Sub-total 4,500,000 74.66
Foreign Shares 1,527,671 25.34
TOTAL 6,027,671 100.00
Note: On 17th September 2003, Liaoning Energy Corporation changed its name to Liaoning Energy
Investment (Group) Co. Ltd. On 15th February, 2004, China Securities Registration Limited
Liability Company altered its record accordingly.
DIRECTORS' AND SUPERVISORS' INTEREST IN CONTRACTS AND SERVICE CONTRACTS
Save for the service contracts mentioned below, as at the end of 2003, 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.
STAFF HOUSING
The Company made allocation to the housing common reserve fund for its
employees in accordance with the relevant PRC regulations.
MAJOR EVENTS
In 2003,
1. Through tendering, the Company has acquired 25% interests of Shenzhen
Energy Group Co. Ltd. after its increase in share capital, enhancing the
Company's market share in Guangdong region, a rapidly-growing market for
power demand. The acquisition was effective on 22nd April 2003.
2. The Company acquired 55% equity interest in Henan Huaneng Qinbei Power
Generation in Limited Liability Company, 60% equity interest in Shanxi
Huaneng Yushe Power Power Plant Limited Liability Company and all of the
assets and liabilities of China Huaneng Group Xindian Power Plant
formerly owned by China Huaneng Group. The acquisition took effect on
27th October 2003.
3. On 6th August 2003, the third meeting of the fourth session of the Board
of Directors of the Company approved the resolution in relation to the
proposal regarding the appointment of Zhang Hong as Vice General
Manager.
PROPOSED AMENDMENT TO ARTICLES OF ASSOCIATION
The Company proposes to make certain amendments to its Articles of Association
in accordance with the relevant requirements under the revised Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited as
announced by the Stock Exchange on 30th January 2004 and the requirements of
China Securities Regulatory Commission. The proposed amendments to the
Articles of Association are subject to the approval of the shareholders of the
Company by way of special resolution at the forthcoming annual general meeting
of the Company. The proposed amendments will be set out in the notice for the
annual general meeting to be published and issued to the shareholders.
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 Listing Rules.
DESIGNATED DEPOSIT
As at 31st December 2003, 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 2003, 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 H share register of the Company will be closed from 11th April 2004 to
10th May 2004 (both dates inclusive). Shareholders on the H share register as
at 16th April 2004 (being the record date) will be entitled to attend the
annual general meeting of the Company to be held on 11th May 2004 and to
receive the cash dividends, bonus shares for 2003 and the new shares issued
pursuant to the capital conversion plan.
INSPECTION OF DOCUMENTS
The Company's annual report for the year 2003 will be published in April, 2004
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 16th March
2004
A. FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS PREPARED UNDER
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31st DECEMBER, 2003
(Amounts expressed in thousands of Rmb, except per share data)
For the year ended
31st December,
Note 2003 2002
Operating revenue, net 3 23,388,237 18,474,469
Operating expenses
Fuel (9,025,013) (6,916,038)
Maintenance (921,561) (607,951)
Depreciation (4,117,478) (3,533,609)
Labor (1,439,673) (1,035,740)
Service fees to HIPDC (214,723) (263,716)
Others (596,627) (539,401)
Total operating expenses (16,315,075) (12,896,455)
Profit from operations 7,073,162 5,578,014
Interest income 53,044 83,015
Interest expense (569,148) (561,875)
Bank charges and exchange losses, net (28,181) (31,405)
Total financial expenses (544,285) (510,265)
Share of profit (loss) of associates 212,091 (11,145)
Gain from disposal of investments 10,705 1,288
Other income, net 4 12,070 --
Profit before tax 6,763,743 5,057,892
Income tax expense 5 (1,149,441) (980,854)
Profit before minority interests 5,614,302 4,077,038
Minority interests (183,894) (156,034)
Net profit attributable to shareholders 5,430,408 3,921,004
Proposed dividend 6 3,013,836 2,049,408
Proposed dividend per share (Rmb) 6 0.50 0.34
Basic earnings per share (Rmb) 7 0.90 0.65
Diluted earnings per share (Rmb) 7 0.90 0.65
Notes
1. Principal Accounting Policies
The Company and its subsidiaries adopted International Financial
Reporting Standards ("IFRS") as promulgated by the International
Accounting Standards Board, in preparing the above consolidated income
statement.
2. Acquisition
For the year ended 31st December, 2003, the Company acquired a number of
power plants from the China Huaneng Group Corporation ("Huaneng Group")
as well as other parties. These acquisitions have been accounted for
under the purchase method of accounting. These acquisitions became
effective when, amongst other things, the Company obtained minority
shareholders' approval where applicable and all necessary government
approvals and made payment of the purchase considerations. All of the
acquisitions by the Company were paid by cash.
Details of these acquisitions are shown in the table below:
For the year ended 31st December, 2003
Acquisition of subsidiaries
and net assets Acquisition of an associate
55% equity interest in Henan Huaneng
Qinbei Power Co., Ltd. (the "Qinbei
Power Company"), 60% equity interest
in Shanxi Huaneng Yushe Power Co.,
Ltd. (the "Yushe Power Company") and 25% equity interest in the
all of the assets and liabilities of enlarged share capital of
Huaneng Xindian Power Plant (the Shenzhen Energy Group Co.,
Equity interest acquired "Xindian Power Plant") Ltd. ("SEG")
Acquired from Huaneng Group Shenzhen Investment
Holding Corporation and
SEG
Effective date 27th October, 2003 22nd April, 2003
Consideration paid Rmb550 million Rmb2,390 million
Direct cost of acquisitions Rmb12 million Rmb15 million
Fair value of net assets acquired Rmb382 million Rmb1,585 million
Goodwill Rmb180 million Rmb820 million
3. Operating Revenue, Net
Net operating revenue represents amounts earned for electricity
generated and transmitted to the respective regional or provincial grid
companies (net of value added tax ("VAT") and deferred revenue). Revenue
is earned and recognized upon transmission of electricity to the power
grid controlled and owned by the respective grid companies.
4. Other Income, Net
Pursuant to a management service agreement entered into with Huaneng
Group and Huaneng International Power Development Corporation ("HIPDC"),
the Company has, in 2003, provided management services to certain power
plants owned by the Huaneng Group and HIPDC in return for a service fee.
Net other income represented the management service fee income net of
relevant expenses.
5. Taxation
For the year ended 31st December, 2003, the weighted average effective
tax rate applicable to the Company and its subsidiaries is 17% (2002:
19%).
Income tax expense comprised:
2003 2002
'000 '000
Income tax expense of the Company and its subsidiaries 1,097,859 975,795
Share of tax of associates 51,582 5,059
1,149,441 980,854
6. Profit Appropriation
(a) Statutory surplus reserve fund and statutory public welfare fund
For the year ended 31st December, 2003, the Board of Directors
resolved the following on 16th March, 2004:
(i) to appropriate 10% and 7.5% (2002: 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. The total
amount of appropriations is approximately Rmb955 million (2002:
Rmb714 million);
(ii) to make no appropriation to the discretionary surplus reserve
fund.
(b) Dividend and other distribution
On 16th March, 2004, the Board of Directors proposed a cash
dividend of Rmb0.5 per share, totaling approximately Rmb3,014
million, together with an issue of bonus shares on the basis of 5
bonus shares for every 10 existing ordinary shares. This proposal
is subject to the approval of the shareholders at the annual
general meeting.
(c) Conversion of additional paid-in capital and statutory surplus
reserve fund
On 16th March, 2004, the Board of Directors further proposed to
convert part of the additional paid-in capital and statutory
surplus reserve fund into the share capital by issuing new shares
to its shareholders on the basis of 5 new shares for every 10
existing ordinary shares (three of which from additional paid-in
capital and two of which from statutory surplus reserve fund).
This proposal is subject to the approval of the shareholders at
the annual general meeting.
7. Earnings Per Share
The calculation of basic earnings per share is based on the net profit
attributable to shareholders of approximately Rmb5,430 million (2002:
Rmb3,921 million) and the weighted average number of 6,019 million
(2002: 6,000 million) ordinary shares in issue during the year.
The calculation of diluted earnings per share is based on the adjusted
net profit attributable to shareholders of Rmb5,433 million (2002:
Rmb3,962 million) and the adjusted weighted average number of 6,028
million (2002: 6,140 million) ordinary shares in issue during the year.
The calculation assumes that the 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. FINANCIAL HIGHLIGHTS AND FINANCIAL RATIOS
(Amounts Expressed In Rmb)
For the year ended
31st December,
Variance
Unit 2003 2002 (%) 2001
Revenues from principal
operations Yuan 23,479,646,958 18,725,340,857 25.39 15,816,656,338
Profit before taxation
and
minority interests Yuan 6,774,080,587 5,212,079,411 29.97 4,422,515,755
Net profit Yuan 5,457,142,551 4,082,350,589 33.68 3,636,064,244
Net profit (excluding
non-
recurring items) Yuan 5,563,916,542 4,111,128,754 35.34 3,667,944,212
31st 31st 31st
December, December, Variance December,
2003 2002 (%) 2001
Total Assets Yuan 53,276,965,016 48,098,755,152 10.77 47,229,708,718
(Shareholders' equity
excluding minority
interests) Yuan 34,787,100,203 31,209,570,014 11.46 28,925,564,005
Net cash flows from
operating activities Yuan 10,156,974,707 7,804,860,642 30.14 7,114,149,193
For the year ended
31st December,
Variance
Unit 2003 2002 (%) 2001
Earnings per share Yuan
(weighted average) /share
0.91 0.68 33.82 0.64
Earnings per share Yuan
(fully diluted) /share
0.91 0.68 33.82 0.61
Return on net assets
(fully diluted)
% 15.69 13.08 19.95 12.57
Return on net assets
calculated based on
net profit excluding
non-recurring items
(fully diluted) % 16.93 13.74 23.22 14.62
Net cash inflow from
operating activities Yuan
per share /share 1.69 1.30 30.00 1.19
31st 31st 31st
December, December, Variance December,
2003 2002 (%) 2001
Net assets per share Yuan/share 5.77 5.20 10.96 4.82
Adjusted net assets Yuan
per share /share
5.76 5.19 10.98 4.82
Note:
Formula of key financial ratios:
Earnings per share (fully diluted) = Net profit / Total number of ordinary
shares as at year end
Return on net assets (fully diluted) = Net profit / Shareholders' equity as at year end x100%
Net assets per share = Shareholder's equity as at year end / Total number of ordinary
shares as at year end
2. PROFIT AND LOSS ACCOUNTS
FOR THE YEAR ENDED 31st December, 2003
Amounts: In Rmb Yuan
For the year ended 31st December,
Consolidated The Company
2003 2002 2003 2002
1. Revenues from principal
operations 23,479,646,958 18,725,340,857 20,287,987,380 15,720,550,997
Less: Cost of principal
operations (15,690,199,491) (12,528,622,594) (13,698,115,361) (10,480,868,719)
Tax and levies on
principal operations (45,334,549) (38,116,331) (7,542,002) (5,839,726)
2. Profit from principal
operations 7,744,112,918 6,158,601,932 6,582,330,017 5,233,842,552
Add: Profit from other
operations 30,574,635 16,821,913 31,991,798 14,421,931
Less: General and
administrative
expenses (441,548,979) (327,188,932) (327,750,541) (229,565,700)
Financial expenses, (559,636,467) (562,719,815) (430,705,990) (450,065,716)
net
3. Operating profit 6,773,502,107 5,285,515,098 5,855,865,284 4,568,633,067
Add/(Less): Income (loss)
from investment 133,885,686 (46,138,983) 567,970,021 288,673,388
Non-operating
Income 20,485,605 50,717,819 2,108,848 19,264,890
Less: Non-operating expenses (153,792,811) (78,014,523) (143,297,291) (71,346,712)
4. Profit before taxation and
minority interests 6,774,080,587 5,212,079,411 6,282,646,862 4,805,224,633
Less: Income tax (1,116,100,498) (963,510,283) (825,504,311) (722,874,044)
Minority interests (200,837,538) (166,218,539) -- --
5. Net profit 5,457,142,551 4,082,350,589 5,457,142,551 4,082,350,589
3. NOTES TO THE REPORT (1) Basis of presentation
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").
(2) Changes in significant accounting policies
Effective 1st July 2003, the Company has adopted the revised
"Accounting Standards for Business Enterprises - Events Occurring
After the Balance Sheet Date". Prior to the adoption of the
revised standards, profit distribution was transferred out of
shareholders' equity and cash dividends were recognized as
payables in the year related to which the Board of Directors
proposed the distribution plan. Subsequent to 1st July 2003,
profit distribution is recognized as a liability in the year when
the distribution plan is approved at the general meeting of the
shareholders. This change in accounting policy has been accounted
for retrospectively and as a result, the net assets as at 1st
January, 2003 have been increased by Rmb2,040,093,146.
(3) Comparing with the annual report for the year ended 31st December,
2002, there is no change to the Company and its subsidiaries'
accounting estimates, and there is no error correction on
accounting method during the reporting year.
(4) The financial statements of Xindian Power Plant, Qinbei Power
Company and Yushe Power Company were consolidated into the
consolidated financial statements of the Company and its
subsidiaries at 31st December, 2003.
4. RELATED PARTY TRANSACTIONS
(1) Related parties that control/are controlled by the Company:
Relationship
Type of Legal Registered with the Principal
Name enterprise representative address Company activities
Huaneng Group State-owned Li Xiaopeng 23 Xueyuan Ultimate Investment in
enterprise South Road, parent power stations,
Haidian District,company coal, minerals,
Beijing railways,
transportation,
petrochemical,
energy-saving
facilities, steel,
timber, cement
and related
industries and
others
HIPDC Sino-foreign Li Xiaopeng 23 Xueyuan Parent Investment in
equity limited South Road, company power plants,
liability Haidian District, development
company Beijing and investment
in other export-
oriented
enterprises
Huaneng Weihai Limited Wu Dawei No. 58 Haifu Subsidiary Power
Power liability
Company (the
"Weihai Power
Company")
company road, Economic generation
Development
Zone, Weihai,
Shandong
province
Suzhou Industrial Limited Hu Jianmin Jinjihupan, Subsidiary Power
Park Huaneng liability
Power Limited
Liability
Company (the
"Taicang Power
Company")
company Sanxing Road, generation
Suzhou, Jiangsu
province
Jiangsu Huaneng Limited Liu Guoyue No. 291 Huaihai Subsidiary Power
Huaiyin Power liability
Limited
Company (the
"Huaiyin
Power
Company")
company West Road, generation
Huaian, Jiangsu
province
Qinbei Power Limited Xiao An Wulong county Subsidiary Power
Company liability
company Jiyuan city, generation
Henan Province
Yushe Power Limited Na Xizhi Dengyu village, Subsidiary Power
Company liability
company Yushe county, generation
Shanxi
Provinces
(2) Registered capital and changes in registered capital of related
parties that control/are controlled by the Company:
1st January, Current year 31st December,
Name Currency 2003 additions 2003
Huaneng Group RMB 1,900,000,000 -- 1,900,000,000
HIPDC US$ 450,000,000 -- 450,000,000
Weihai Power Company RMB 761,832,800 -- 761,832,800
Taicang Power Company RMB 632,840,000 50,000,000 682,840,000
Huaiyin Power Company RMB 265,000,000 -- 265,000,000
Qinbei Power Company RMB 10,000,000 -- 10,000,000
Yushe Power Company RMB 80,000,000 -- 80,000,000
(3) Equity shares and changes in equity shares held by parties that
control/are controlled by the Company:
Current
Current year year
Name 1st January, 2003 additions deduction 31st December, 2003
Amount % Amount % Amount % Amount %
Huaneng Group* 1,675,660,547 51.98 -- -- -- -- 1,675,660,547 51.98
HIPDC** 2,554,840,000 42.58 -- -- -- (0.19) 2,554,840,000 42.39
Weihai Power
Company 457,103,040 60 -- -- -- -- 457,103,040 60
Taicang Power
Company 474,630,000 75 37,500,000 -- -- -- 512,130,000 75
Huaiyin Power
Company 168,646,000 63.64 -- -- -- -- 168,646,000 63.64
Qinbei Power
Company -- -- 148,200,000 55 -- -- 148,200,000 55
Yushe Power
Company -- -- 48,000,000 60 -- -- 48,000,000 60
* Huaneng Group holds 51.98% equity interest in HIPDC.
** In accordance with a shareholders' agreement entered into by
certain founding shareholders, during the operating period of the
Company, the voting rights of seven founding shareholders are
given to HIPDC. Thus, HIPDC holds 70.09% voting rights in the
shareholders' meetings.
(4) Nature of related parties that do not control/are not controlled by
the Company:
Name of related parties Relationship with the Company
China Huaneng Finance Company ("Huaneng Finance") A subsidiary of Huaneng Group
Weihai Power Development Bureau ("WPDB") Minority shareholder of Weihai Power
Company
Henan Construction Investment Company ("Henan Minority shareholder of Qinbei Power
Investment") Company
China Huaneng International Trade A subsidiary of Huaneng Group
Economics Corporation ("CHITEC")
Shanghai Time Shipping Company ("Time Shipping") A Joint venture company of Huaneng
Group
Shandong Rizhao Power Company Ltd. ("Rizhao Power An associate of the Company
Company")
(5) Related party transactions
a. On 30th June, 1994, the Company and HIPDC entered into a ten-year
service agreement pursuant to which HIPDC provides transmission
and transformer facilities to some of the power plants of the
Company and receives service fees. The total service fees paid to
HIPDC for the year ended 31st December, 2003 were approximately
Rmb215 million (for the year ended 31st December, 2002: Rmb264
million).
b. In accordance with the leasing agreement entered into between the
Company and HIPDC, the land use right of Shanghai Power Plant is
leased to the Company for a period of 50 years from 30th June,
1997 at an annual rental payment of Rmb6 million.
c. Pursuant to a leasing agreement entered into amongst the Company,
HIPDC and Nanjing Investment Company, the land use right of
Nanjing Power Plant is leased to the Company for 50 years from 1st
January, 1999 at an annual rental payment of Rmb1.3 million.
d. Pursuant to a leasing agreement between the Company and HIPDC,
HIPDC agreed to lease its building to the Company for 5 years at
an annual rental of Rmb25 million effective from 1st January,
2000.
e. As at 31st December, 2003, the Company and its subsidiaries had
foreign bank loans on-lent by HIPDC amounted to Rmb389 million.
These foreign currency bank loans bore interest at the prevailing
lending rates (both fixed and floating), prescribed by the loan
contracts, which ranged from 3.62% to 4.01% per annum for the year
ended 31st December, 2003 (2002: 4.01% to 7.40%). hese leases are
repayable in accordance with the repayment schedules set by the
banks.
f. As at 31st December, 2003, long-term loan from WPDB amounted to
Rmb106 million (2002: Rmb106 million). The loan was borrowed by
Weihai Power Plant from WPDB to finance its construction with
interest at 5.76% per annum (2002: 6.21%). The loan is unsecured
and is payable in accordance with the repayment schedule agreed
with WPDB.
g As at 31st December, 2003, Huaneng Finance had granted short-term
loans amounted to Rmb1,130 million (2002: Rmb200 million) with
interest ranged at 4.78% to 5.05% per annum (2002: 5.56%) and long
term loans amounted to Rmb610 million (2002: Rmb225 million) with
interest ranged at 4.94% to 5.64% per annum ( 2002: 5.64%) to the
Company and its subsidiaries. Henan Investment had granted
short-term loans amounted to Rmb130 million (2002: nil) with
interest of 4.78% per annum to the Company and its subsidiaries.
The interest rates for such loans are not materially different
from the prevailing market interest rate.
h. As at 31st December, 2003, long-term bank loans of approximately
Rmb4,648 million, Rmb1,096 million, Rmb280 million and Rmb34
million were guaranteed by HIPDC, Huaneng Group, WPDB and Henan
Investment, respectively (2002: Rmb5,544 million, Rmb1,140
million, Rmb280 million and nil, respectively).
i. Guarantees for loan facilities granted to Rizhao Power Company,
Weihai Power Company, Taicang Power Company, Huaiyin Power
Company,Qinbei Power Company and Yushe Power Company by the
Company are as follows:
31st December, 2003
The Company
and
Item its subsidiaries The Company
Guarantee on the long-term bank loans of Rizhao
Power Company 339,250,000 339,250,000
Guarantee on the long-term bank loans of Weihai
Power Company -- 330,000,000
Guarantee on the long-term bank loans of
Taicang Power Company -- 1,114,183,384
Guarantee on the long-term bank loans of
Huaiyin Power Company -- 10,000,000
Guarantee on the long-term bank loans of Qinbei
Power Company -- 905,000,000
Guarantee on the long-term bank loans of Yushe
Power Company -- 101,430,000
339,250,000 2,799,863,384
The above guarantees for various loan facilities had no
significant financial impact on the Company's operation.
j. On 5th June, 2003, the Company entered into an agreement with
Huaneng Group under which the Company agreed to acquire from
Huaneng Group 55% equity interest in Qinbei Power Company, 60%
equity interest in Yushe Power Company and all of the assets and
liabilities of Xindian Power Plant. The total consideration for
the Acquisition of Three Power Plants was Rmb550 million, and the
Company paid the consideration in cash.
k. On 6th November, 2002, the Company entered into a management
service agreement with Huaneng Group and HIPDC. Pursuant to which,
the Company provides management services to certain power plants
owned by Huaneng Group and HIPDC for a period of 5 years. For the
year ended 31st December, 2003, the Company earned service fees
amounted to Rmb33 million from Huaneng Group and paid expenses on
behalf of Huaneng Group's power plants amounted to Rmb7 million
(2002: nil). In addition, the Company earned service fees amounted
to Rmb17 million and paid expenses on behalf of HIPDC's power
plant amounted to Rmb1 million (2002: nil). For the year ended
31st December, 2003, the related cost incurred for the management
service provided was approximately Rmb38 million.
l. For the year ended 31st December, 2003, the Company and its
subsidiaries paid approximately Rmb145 million for coal purchased
from CHITEC (2002: nil).
m. For the year ended 31st December, 2003, the Company and its
subsidiaries paid approximately Rmb457 million for the fuel
purchased and transportation services received from Time Shipping
(2002: Rmb301million).
(6) Cash deposited with a related party
31st December, 31st December,
2003 2002
Deposited in Huaneng Finance:
-Current deposit 2,791,770,168 2,376,197,356
-Fixed deposit -- 570,000,000
2,791,770,168 2,946,197,356
As at 31st December, 2003, the interest rates per annum for the current
deposits placed with Huaneng Finance ranged from 0.72% to 1.44% (31st
December, 2002: 0.72% to 1.44%). As at 31st December, 2002, the interest
rate per annum for the fixed deposit was 1.71%. The interests earned
from these deposits amounted to Rmb14 million (2002: Rmb52 million) in
2003.
(7) Accounts receivable from/ accounts payable to related parties
31st December, 2003 31st December, 2002
Amount Percentage Amount Percentage
Interest receivable (payable) on
deposits in (loans from)
Huaneng Finance (1,418,954) 1.51% 1,630,137 42.98%
Other receivables from fellow
subsidiaries 5,861,825. 3.65% -- --
Accounts payable
Accounts payable to CHITEC (14,484,416) 2.22% -- --
Accounts payable to Time
Shipping (11,434,522) 1.75% (13,917,467) 2.95%
Other payable to HIPDC (87,507,580) 5.24% (100,475,344) 4.41%
The balances with fellow subsidiaries, CHITEC and Time Shipping were
unsecured, non-interest bearing and repayable within one year.
5. NET INCOME RECONCILIATION AMONG 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 among PRC GAAP, IFRS
and US GAAP, which affect the net income of the Company and its
subsidiaries, are summarized as follows:
For the year ended
31st December,
2003 2002
Rmb'000 Rmb'000
Net income under PRC GAAP 5,457,143 4,082,351
Impact of IFRS adjustments:
Effect of recording deferred revenue (a) (47,937) (212,755)
Difference in the recognition policy on housing benefits to the
employees of the Company (b)
(26,259) 6,458
Difference in accounting treatment of convertible notes (c)
(3,228) (35,957)
Difference in capitalization of borrowing costs (d) 12,682 88,412
Applicable deferred tax impact of the above GAAP differences (i)
18,363 (10,458)
Others 19,644 2,953
Net income under IFRS 5,430,408 3,921,004
Impact of US GAAP adjustments (Note 1):
Effect of acquisitions of entities under commoncontrol (e) 125,745 183,417
Effect of acquisition of 30% additional equity interests in
Shidongkou First Power Plant, 5% additional equity interests in Taicang
Power Company and 44.16% equity interests in
Huaiyin Power Company (f) 19,347 10,556
Recording housing benefits provided by HIPDC (b) (26,152) (26,152)
Difference in accounting treatment for acquisition of Shandong
Huaneng (g)
(87,091) (87,091)
Difference in accounting treatment of convertible notes (c)
25,434 5,116
Difference in capitalization of borrowing costs (d) (5,478) (88,412)
Reversal of goodwill amortization (h) 72,009 --
Applicable deferred tax impact of the above GAAP differences (i)
(84,181) 33,674
Net income under US GAAP (Note 1) 5,470,041 3,952,112
Note 1: Consistent with applying the accounting treatment under
US GAAP as described in Note (e) below, the consolidated
financial statements under US GAAP for prior period
presented have been retroactively restated as if the current
structure and operations resulted from the acquisition of
the new power plants had been in existence since the
beginning of the earliest period presented.
(a) Recording of deferred revenue
Under the rate making process applicable to the Company and its
subsidiaries except for certain power plants, major repair and
maintenance expenses determined on the basis of 1% of the fixed asset
cost is recovered through the current power rates. 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 is
recorded as deferred revenue under IFRS and US GAAP. For PRC statutory
financial reporting purposes, in accordance with the requirements 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 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 borne by the Company and HIPDC.
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
lives 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.
(c) 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, 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 recognised 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
amortised cost of the liability component were charged or credited to
the 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.
(d) 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.
(e) Effect of acquisitions of entities under common control
Under PRC GAAP, the excess of the total cost of the acquisition over the
book value of Shidongkou First Power Plant, Taicang Power Company,
Qinbei Power Company and Yushe 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 and Xindian 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
Shidongkou First Power Plant, 70% equity interest in Taicang Power
Company and all of the assets and liabilities of Changxing Power Plant
in 2002 and the acquisition of 55% equity interest in Qinbei Power
Company, 60% equity interest in Yushe Power Company and all of the
assets and liabilities of Xindian Power Plant in 2003. Under the
acquisition method, the results of the acquired businesses 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 the income
statement over its useful economic life, being the remaining weighted
average useful life of the acquired depreciable or amortizable assets.
As the Company, Shidongkou First Power Plant, Taicang Power Company,
Changxing Power Plant, Qinbei Power Company, Yushe Power Company, and
Xindian Power Plant were under common control of Huaneng Group prior to
the acquisitions, under US GAAP, the acquisitions are considered as a
transfer of businesses under common control and the acquired assets and
liabilities are accounted for 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 resulting from the acquisition
had been in existence since the beginning of the earliest period
presented, with financial data of previously separate entities combined.
The cash consideration paid by the Company is treated as an equity
transaction in the year of the acquisitions for US GAAP purposes.
Accordingly, the resulting impact of depreciation and amortization
expenses on income is also different.
(f) Effect of acquisition of 30% additional equity interests in Shidongkou
First 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 Shidongkou First 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 Shidongkou First Power
Plant, the assets and liabilities of Shidongkou First 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 Shidongkou First 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 plants acquired over the total
cost of the acquisition is recorded as goodwill. Such goodwill is
amortized on a systematic basis to income statement over its useful
economic life, being 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 Shidongkou First 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 a reduction of
capital contribution to the Company. Accordingly, the resulting impact
of depreciation and amortization expenses on income is also different.
(g) Acquisition of Shandong Huaneng
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 ("Acquisition of 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. 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. Under US GAAP, the difference between these net asset
values and the cash consideration was recorded as a reduction to the
property, plant and equipment value of the respective power plants.
As the amount of negative goodwill under IFRS is different from the
amount of the reduction to property, plant and equipment under US GAAP
due to the 33.09% portion of the net assets previously owned by Huaneng
Group as described above and also that the negative goodwill under IFRS
is recognized as income over the remaining weighted average useful life
of the acquired depreciable or amortizable assets whereas, for US GAAP
purpose, the property, plant and equipment, after the reduction
described above, are depreciated over the respective assets' useful
life, the net income under IFRS and US GAAP is different.
(h) Reversal of Goodwill Amortization
Under PRC GAAP and IFRS, goodwill are amortized using the straight-line
method over its estimated useful life and recognized in the income
statement as other operating expenses. Under US GAAP, in accordance with
SFAS No.142 "Goodwill and Other Intangible Assets", goodwill is not
amortized but tested for impairment on an annual basis and between
annual tests in certain circumstances.
(i) Deferred Tax Impact
This represents deferred tax effect on the above GAAP differences where
applicable.
The 2003 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.
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 16, 2004