Datang Intl H Regulatory News (DAT)

28 Mar 2006 07:00

Datang Intl Power Generation Co Ld28 March 2006 Datang International Power Generation Co., Ltd. (a sino-foreign joint stock limited company incorporated in the People's Republic of China) (Stock Code: 991) ANNOUNCEMENT OF 2005 ANNUAL RESULTS OPERATING AND FINANCIAL HIGHLIGHTS * Consolidated operating revenue amounted to approximately RMB17,994 million, representing an increase of 32.47% over the year of 2004* Consolidated profit attributable to the equity holders of the Company amounted to approximately RMB2,351 million, representing an increase of 2.55% over the year of 2004* Basic earnings per share attributable to the equity holders of the Company amounted to approximately RMB0.46, representing an increase of approximately RMB0.02 per share over the year of 2004* The Board has recommended a dividend of RMB0.228 per share for the year of 2005 I. COMPANY RESULTS The board of directors (the "Board") of Datang International Power Generation Company Limited (the "Company") herebyannounces the audited consolidated operating results of the Company and its subsidiaries and a joint controlled entity(hereinafter referred to as the "Company and its Subsidiaries") prepared in conformity with the International FinancialReporting Standards for the year ended 31 December 2005 (the "Year"), together with the audited consolidated operatingresults of the year ended 31 December 2004 (the "Previous Year") for comparison. Such operating results have beenreviewed and confirmed by the Company's Audit Committee. Consolidated operating revenue of the Company and its Subsidiaries for the Year was approximately RMB17,994 million,representing an increase of approximately 32.47% as compared to the Previous Year. Consolidated profit attributable tothe equity holders of the Company for the Year was approximately RMB2,351 million, representing an increase ofapproximately 2.55% as compared to the Previous Year. Basic earnings per share for the Year amounted to approximatelyRMB0.46, representing an increase of approximately RMB0.02 per share as compared to the Previous Year. In view of the operating results of the Company during the Year, the Board has recommended a dividend of RMB0.228 pershare for the Year. Please refer to the audited financial statements set out below for details of the consolidated operating results of theCompany and its Subsidiaries. CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2005 (All amounts expressed in thousands of Rmb, except per share data) Note 2005 2004 Restated Note 1Operating revenue 2 17,994,389 13,583,739 Operating costs Local government surcharges (205,439 ) (168,933 ) Fuel (7,531,789 ) (4,951,410 ) Depreciation (2,767,528 ) (2,086,882 ) Repairs and maintenance (574,362 ) (544,386 ) Wages and staff welfare (1,192,685 ) (873,380 ) Others (1,222,946 ) (859,914 ) Total operating costs (13,494,749 ) (9,484,905 ) Operating profit 4,499,640 4,098,834Share of result of associates (1,273 ) (3,697 )Interest income 40,051 46,970Finance costs 3 (675,494 ) (478,755 ) Profit before income tax 3,862,924 3,663,352Taxation 4 (813,294 ) (919,812 ) Profit for the year 3,049,630 2,743,540 Attributable to:- Equity holders of the Company 2,351,056 2,292,584- Minority interests 698,574 450,956 3,049,630 2,743,540 Proposed dividends 5 1,177,130 1,135,827 Earnings per share for profit attributable to the equity holders of the Company - basic (Rmb) 6 0.46 0.44 - diluted (Rmb) 6 0.44 0.43 Proposed dividend per share (Rmb) 5 0.228 0.220 CONSOLIDATED BALANCE SHEETS As at 31 December 2005 (All amounts expressed in thousands of Rmb) Note 2005 2004 Restated Note 1ASSETSNon-current assets Property, plant and equipment 59,376,557 42,635,793 Investments in associates 793,316 514,415 Available-for-sale investments 306,294 336,700 Deferred housing benefits 188,467 149,385 Intangible assets 62,304 33,561 Long-term deposit - 100,000 Deferred tax assets 119,303 75,547 60,846,241 43,845,401 Current assets Inventories 693,019 442,615 Other receivables and current assets 493,081 224,372 Accounts receivable 7 1,409,528 1,289,931 Notes receivable 64,829 - Short-term bank deposits over three months - 210,409 Cash and cash equivalents 1,029,339 3,462,019 3,689,796 5,629,346 Total assets 64,536,037 49,474,747 EQUITY AND LIABILITIESCapital and reserves attributable to the Company's equity holders Share capital 5,162,849 5,162,849 Reserves 13,162,613 11,947,568 18,325,462 17,110,417Minority interests 2,403,475 1,968,309 Total equity 20,728,937 19,078,726 Non-current liabilities Long-term loans 8 29,215,217 17,949,062 Convertible bonds 9 1,098,758 1,078,027 Government grants 210,942 170,177 Deferred tax liabilities 152,498 155,328 30,677,415 19,352,594 Current liabilities Accounts payable and accrued liabilities 10 4,558,556 3,455,692 Short-term loans 11 5,717,280 5,979,560 Current portion of long-term loans 8 2,488,884 1,106,875 Taxes payable 358,359 501,300 Deferred income 6,606 - 13,129,685 11,043,427 Total liabilities 43,807,100 30,396,021 Total equity and liabilities 64,536,037 49,474,747 Notes: 1. Basis of preparation The financial statements of the Company and its Subsidiaries have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS"). These financial statements have been prepared under the historical costconvention as modified by the revaluation of available-for-sale investments. These policies have been consistentlyapplied to all the years presented by the Company and its Subsidiaries unless otherwise stated. Standards, interpretations and amendments to published standards effective in 2005 In 2005, the Company and its Subsidiaries adopted the revised/new standards and interpretations of IFRS below, whichare relevant to the operations of the Company and its Subsidiaries. The 2004 comparatives have been amended asrequired, in accordance with the relevant requirements. IAS 1 Presentation of Financial StatementsIAS 2 InventoriesIAS 8 Accounting Policies, Changes in Accounting Estimates and ErrorsIAS 10 Events after the Balance Sheet DateIAS 16 Property, Plant, and EquipmentIAS 17 LeasesIAS 21 The Effects of Changes in Foreign Exchange RatesIAS 24 Related Party DisclosuresIAS 32 Financial Instruments: Disclosure and PresentationIAS 33 Earnings per ShareIAS 36 Impairment of AssetsIAS 38 Intangible AssetsIAS 39 Financial Instruments: Recognition and MeasurementIFRS 2 Share-based PaymentIFRS 3 Business CombinationsIFRS 4 Insurance ContractsIFRIC Interpretation 1 Changes in Existing Decommision, Restoration and Similar Liability Management assessed the relevance of the adoption of IAS 1, 2, 8, 10, 16, 17, 21, 24, 32, 33, 38, 39, IFRS 2, 4 andIFRIC Interpretation 1 with respect to the operation of the Company and its Subsidiaries and concluded that they didnot result in substantial changes to the accounting policies of the Company and its Subsidiaries. IAS 1 has affected the presentation of minority interest and other disclosures. IAS 21 had no material effect on the accounting policy of the Company and its Subsidiaries. The functional currency ofeach of the entities has been re-evaluated based on the guidance to the revised standard. Most of the entities of theCompany and its Subsidiaries operate in the PRC and have adopted Rmb as the functional currency as well as theirpresentation currency for their respective entities' financial statements. IAS 24 has extended the identification and disclosure of related parties to include state-owned enterprises and keymanagement personnel of the Company as well as their close family members. The adoption of IFRS 3 and IAS 36 resulted in changes in the accounting policies for goodwill and the assessment bymanagement of asset impairment. In accordance with the provisions of IFRS 3, the Company and its Subsidiaries ceased amortisation of goodwill from 1January 2005. Accumulated amortisation as at 31 December 2004 has been eliminated with a corresponding decrease in thecost of goodwill. From 1 January 2005 onwards, goodwill arising from all acquisitions is tested annually forimpairment, as well as when there are indications of impairment. All changes in the accounting policies have been made in accordance with the transition provisions in the respectivestandards, wherever applicable. All revised/new standards adopted by the Company and its Subsidiaries requireretrospective application other than: * IAS 16 - the initial measurement of an item of property, plant and equipment acquired in an exchange of assets transaction is accounted for at fair value prospectively.* IAS 39 - the derecognition of financial assets is applied prospectively.* IFRS 3 - cessation of goodwill amortisation is applied prospectively, from the first annual period beginning on or after 31 March 2004.* IFRS 4 - the disclosure requirements of this standard is applied prospectively, except for disclosures required about accounting policies, recognised liabilities and expenses. The adoption of IFRS 3 resulted in the following changes: As at 31 December 2005 Rmb'000Non-amortisation of goodwill 5,736 2005 Rmb'000Decrease in operating costs - others 5,736Increase in basic earnings per share (Rmb) - Standards, interpretations and amendments to published standards that are not yet effective Certain new standards, amendments and interpretations to existing standards have been published that are relevant tothe Company and its Subsidiaries and are mandatory for accounting periods of the Company and its Subsidiaries beginningon or after 1 January 2006 or later periods but which the Company and its Subsidiaries have not early adopted, asfollows: * IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts and a complementary Amendment to IAS 32, Financial Instruments: Disclosure and Presentation (effective from 1 January 2006). This amendment requires issued financial guarantees, other than those previously asserted by the entity to be insurance contracts, to be initially recognised at their fair value and subsequently measured at the higher of (i) the unamortised balance of the related fees received and deferred, and (ii) the expenditure required to settle the commitment at the balance sheet date. Management is currently assessing the impact of these amendments to IAS 39 on the operations of the Company and its Subsidiaries.* IFRS 7, Financial Instruments: Disclosures, and a complementary Amendment to IAS 1, Presentation of Financial Statements-Capital Disclosures (effective from 1 January 2007). IFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. It replaces IAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and disclosure requirements in IAS 32, Financial Instruments: Disclosure and Presentation. It is applicable to all entities that report under IFRS. The amendment to IAS 1 introduces disclosures about the level of an entity's capital and how it manages capital. The Company and its Subsidiaries assessed the impact of IFRS 7 and the amendment to IAS 1 and concluded that the main additional disclosures will be the sensitivity analysis to market risk and the capital disclosures required by the amendment of IAS 1. The Company and its Subsidiaries will apply IFRS 7 and the amendment to IAS 1 from annual periods beginning 1 January 2007.* IFRIC Interpretation 4, Determining whether an Arrangement contains a Lease (effective from 1 January 2006). IFRIC Interpretation 4 requires the determination of whether an arrangement is or contains a lease to be based on the substance of the arrangement. It requires an assessment of whether: (i) fulfilment of the arrangement is dependent on the use of a specific asset or assets ("the asset"); and (ii) the arrangement conveys a right to use the asset. Management is currently assessing the impact of IFRIC Interpretation 4 on the operations of the Company and its Subsidiaries. Prior year comparatives Certain comparative figures of 2004 have been reclassified to conform to the presentation of financial statements forthe year ended 31 December 2005. 2. Operating revenue 2005 2004 Rmb'000 Rmb'000Electricity 17,892,564 13,555,492Heat 101,825 28,247 17,994,389 13,583,739 Pursuant to the Power Purchase Agreements entered into between the Company and its Subsidiaries and the regional orprovincial grid companies, the Company and its Subsidiaries are required to sell their entire net generation ofelectricity to these grid companies at an approved tariff rate as determined based on a regulatory process. For theyear ended 31 December 2005, all of the electricity generated by the Company and its Subsidiaries was sold to NorthChina Grid Company Limited ("NCG") and its subsidiaries. 3. Finance costs 2005 2004 Rmb'000 Rmb'000Interest expense 791,095 491,254Exchange (gain)/loss, net (97,285 ) 1,562Fair value gain on an interest rate swap * (18,316 ) (14,061 ) 675,494 478,755 * To hedge against its interest rate risk on long-term loans, Inner Mongolia Datang International Tuoketuo Power Generation Company Limited ("Tuoketuo Power Company") has entered into an interest rate swap, which is carried at fair value. However, since the swap does not meet the definitions of an effective hedge under IAS 39, the change in its fair value is included in the income statement. 4. Taxation 2005 2004 Rmb'000 Rmb'000Current tax 859,880 914,994Deferred tax (46,586 ) 4,818 Tax charge 813,294 919,812 Enterprise income tax is provided on the basis of the statutory profit for financial reporting purposes, adjusted forincome and expense items, which are not assessable or deductible for income tax purposes. Except for Tuoketuo PowerCompany, Gansu Datang International Liancheng Power Generation Company Limited ("Liancheng Power Company") and HebeiDatang International Huaze Hydropower Development Company Limited ("Huaze Hydropower Company"), the applicable PRCenterprise income tax rate for the Company and its Subsidiaries is 33%. Pursuant to document Guo Ban Fa (2001) 73 issued by State Council of PRC and document Cai Shui (2001) 202 issued by theState Administration of Taxation of PRC, Tuoketuo Power Company and Liancheng Power Company as enterprises set up inthe western area of PRC and engaged in a business encouraged by the government, have been granted a tax concession topay PRC income tax at a preferential rate of 15% from 2001 to 2010. As newly set up domestic invested enterprisesengaged in power generation in the western area of PRC, Tuoketuo Power Company and Liancheng Power Company are exemptedfrom PRC enterprise income tax during the first and second years of operation and have been granted a tax concession topay PRC enterprise income tax at 50% of the preferential rate during the third to fifth year of operation. TuoketuoPower Company started commercial operation in 2003. The applicable PRC enterprise income tax rates approved by thelocal tax authority in 2004 and 2005 are 0%. Liancheng Power Company started commercial operation in 2005. Theapplicable PRC enterprise income tax rate approved by the local tax authority in 2005 is 0%. Pursuant to document Ji Zheng Han (2003) 126 issued by People's Government of Hebei Province and document Ji Guo ShuiFa (2003) 179 issued by State Administration of Taxation of Hebei Province, Huaze Hydropower Company, as an enterpriseset up in the autonomous county started from 1 January 2003, is exempted from PRC enterprise income tax during thefirst to third year from the first tax profit year and has been granted a tax concession to pay PRC enterprise incometax at 50% of the tax rate during the fourth to sixth year. Huaze Hydropower Company has the tax profit since the year2003. The applicable PRC enterprise income tax rates approved by the local tax authority in 2004 and 2005 are 0%. 5. Profit appropriation Dividends On 27 March 2006, the Board of Directors proposed a dividend of Rmb0.228 per share, totalling approximatelyRmb1,177,130,000 for the year ended 31 December 2005. The proposed dividends distribution is subject to theshareholders' approval in their next general meeting. On 28 March 2005, the Board of Directors proposed a dividend of Rmb0.22 per share, totalling approximatelyRmb1,135,827,000 for the year ended 31 December 2004. The proposed dividends distribution was approved by theshareholders in their general meeting date 21 June 2005. Statutory surplus reserve In accordance with the relevant laws and regulations of the PRC and the Company and its Subsidiaries' articles ofassociation, the Company and its Subsidiaries are required to appropriate 10% of its net profit, after offsetting anyprior years' losses, to the statutory surplus reserve. When the balance of such a reserve reaches 50% of the company'sshare capital, any further appropriation is optional. Approximately RMB357,493,000 (2004-RMB307,488,000) have beenappropriated to statutory surplus reserve for the year ended 31 December 2005. Statutory public welfare fund In accordance with the Company and its Subsidiaries' articles of association, 5%-10% of its net profit is to beappropriated to a statutory public welfare fund. The statutory public welfare fund can only be utilised on capitalitems for the collective benefits of employees of the Company and its Subsidiaries such as construction of canteen andother staff welfare facilities. Title of these capital items will remain with the Company. This fund isnon-distributable other than in liquidation. Approximately RMB296,783,000 (2004-RMB259,052,000) have been appropriatedto statutory public welfare fund for the year ended 31 December 2005. Discretionary surplus reserve In accordance with the Company and its Subsidiaries' articles of association, the appropriation of profit to thediscretionary surplus reserve and its utilisation are made in accordance with the recommendation of the Board ofDirectors and is subject to shareholders' approval at their general meeting. On 27 March 2006, the Board of Directors proposed an appropriation of profit of approximately Rmb759,910,000 to thediscretionary surplus reserve for the year ended 31 December 2005. The proposed profit appropriation is subject to theshareholders' approval in their next general meeting. On 28 March 2005, the Board of Directors proposed an appropriation of profit of approximately Rmb1,281,777,000 to thediscretionary surplus reserve for the year ended 31 December 2004. The proposed profit appropriation was approved bythe shareholders in their general meeting date 21 June 2005. 6. Earnings per share and dividend per share The calculation of basic earnings per share for the year ended 31 December 2005 was based on the profit attributable toequity holders of the Company of approximately Rmb2,351,056,000 (2004-Rmb2,292,584,000) and on the weighted averagenumber of 5,162,849,000 shares (2004-5,162,849,000 shares) in issue during the year. The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding toassume conversion of all dilutive potential ordinary shares. The convertible debt is assumed to have been convertedinto ordinary shares and the net profit is adjusted to eliminate the interest expenses less the tax effect. 2005 2004 Profit attributable to equity holders of Company (Rmb '000) 2,351,056 2,292,584Interest expense on convertible bonds (net of tax) (Rmb '000) 38,639 37,421 Profit used to determine diluted earnings per share (Rmb '000) 2,389,695 2,330,005 Weighted average number of ordinary shares in issue (shares in thousand) 5,162,849 5,162,849Adjustments for assumed conversion of convertible debt (shares in thousand) * 222,127 215,813 Weighted average number of ordinary shares for diluted earnings per share (shares in 5,384,976 5,378,662thousand) Diluted earnings per share (Rmb)* 0.44 0.43 * On 20 May 2005, the Company adjusted the conversion price from HK$5.558 per share to HK$5.4 per share. According to the adjusted conversion price, the adjustment for assumed conversion of convertible debt in 2004 would be 222,127,000, and the diluted earnings in 2004 would be Rmb0.43 per share. Proposed dividends per share for the year ended 31 December 2005 were calculated based on the proposed dividends ofapproximately Rmb1,177,130,000 (2004-Rmb1,135,827,000) divided by the number of 5,162,849,000 shares(2004-5,162,849,000 shares) in issue as at 31 December 2005. 7. Accounts receivable Accounts receivable of the Company and its Subsidiaries mainly represents the receivable from the respective regionalor provincial grid companies for tariff revenue. This receivable is unsecured and non-interest bearing. The tariffrevenue is settled on a monthly basis according to the payment provisions in the power purchase agreements. As at 31December 2005, all tariff revenues receivable from the respective grid companies were aged within three months, and nodoubtful debt provisions were made thereof. 8. Long-term loans Long-term loans include the long-term bank loans and other long-term loans as follows: As at As at 31 December 2005 31 December 2004 Rmb'000 Rmb'000Long-term bank loans (a) 30,012,563 17,361,017Other long-term loans (b) 1,691,538 1,694,920 31,704,101 19,055,937Less: Amounts due within one year included under current (2,488,884 ) (1,106,875 )liabilities 29,215,217 17,949,062 (a) Long-term bank loans As at 31 December 2005, approximately Rmb2,159 million (2004-Rmb2,198 million) and Rmb27,854 million (2004-Rmb15,163million) of the long-term bank loans were denominated in USD and Rmb, respectively. Except for approximately Rmb13,044million (2004-Rmb2,933 million) long-term bank loans were pledged by right of collection of tariff, all long-term bankloans were unsecured and bore interest at rates ranging from 3.60% to 6.12% (2004-2.88% to 6.12%) per annum.Approximately Rmb445 million (2004-Rmb1,415 million) of the Company's bank loans were guaranteed by NCG. ApproximatelyRmb3,792 million (2004-Rmb4,121 million) of the loans of the subsidiaries were guaranteed by the minority shareholdersaccording to their shareholding percentage in the subsidiaries. The long-term bank loans were drawn to finance the construction of electricity utility plants. The maturity of theseloans was as follows: As at As at 31 December 2005 31 December 2004 Rmb'000 Rmb'000Amount repayable Within one year 2,384,860 1,006,180 Between one and two years 3,394,798 1,829,213 Between two and five years 9,828,003 7,022,151 Over five years 14,404,902 7,503,473 30,012,563 17,361,017 (b) Other long-term loans Other long-term loans were borrowed by MOF from International Bank for Reconstruction and Development ("World Bank")and on-lent to the Company's subsidiary, Tuoketuo Power Company, for the construction of electricity utility plants.The maturity of these loans was as follows: As at As at 31 December 2005 31 December 2004 Rmb'000 Rmb'000Amount repayable Within one year 104,024 100,695 Between one and two years 110,236 106,679 Between two and five years 371,731 359,794 Over five years 1,105,547 1,127,752 1,691,538 1,694,920 All these loans were denominated in USD and unsecured. The other long-term loans bore interest at the rate of LIBORBase Rate plus LIBOR Total Spread as defined in the loan agreement between MOF and World Bank, which approximated 2.03%to 3.99% per annum during the year ended 31 December 2005 (2004-1.36% to 2.03% per annum). In accordance with aguarantee agreement between NCG and MOF, NCG agreed to guarantee 60% of the loan balances. As at 31 December 2005,approximately Rmb1,015 million (2004-Rmb1,017 million) of the loans were guaranteed by NCG, while the Company provideda counter-guarantee to NCG in respect of this amount. 9. Convertible bonds On 9 September 2003, the Company issued USD153,800,000, 0.75% convertible bond at a nominal value of USD153,800,000.The bonds will be matured in 5 years from the issue date at their nominal value of USD153,800,000 unless converted intothe Company's ordinary shares at the holder's option at the announced conversion price, which initially was HKD5.558per share. On 20 May 2005, the Company adjusted the conversion price to HKD5.4 per share. The conversion price issubject to adjustment in certain circumstances with a fixed rate of exchange applicable on conversion of theconvertible bonds of HKD7.799 per USD1. The fair value of the liability component and the equity conversion component were determined on the issue of thebonds. The fair value of the liability component was calculated using a market interest rate for equivalentnon-convertible bonds. The residual amount, representing the value of the equity conversion component, is included inshareholders' equity in other reserve, net of deferred income tax. In subsequent periods the liability component continues to be presented on the amortised cost basis, until extinguishedon conversion or maturity of the bond. The equity component is determined on the issue of the bond and is not changedin subsequent periods. The convertible bonds recognised in the balance sheet as at 31 December 2005 were as follows: 2005 2004 Rmb'000 Rmb'000Liability component at beginning of the year 1,078,027 1,031,722Interest expense 57,671 55,852Interest payment (9,443 ) (9,547 )Exchange rate adjustment (27,497 ) - Liability component at end of the year 1,098,758 1,078,027 The carrying amount of the liability component as at 31 December 2005 of the convertible bonds approximated its fairvalue. Interest expense on the bonds is calculated on the effective yield basis of 5.51% (2004-5.51%) by applying theeffective interest rate for an equivalent non-convertible bond to the liability component of the convertible bond afterconsidering the effect of issue cost. 10. Accounts payables and accrUed liabilities As at As at 31 December 2005 31 December 2004 Rmb'000 Rmb'000Construction costs and deposits payable to contractors 3,231,715 2,290,647Fuel and material costs payable 927,648 678,689Salary and welfare payable 93,669 148,090Interest rate swap liability 69,079 119,885Others 236,445 218,381 4,558,556 3,455,692 As at 31 December 2005, other than certain deposits for construction which were aged between one and two years,substantially all accounts payable were aged within one year. As at 31 December 2005, the notional principal amount of the outstanding interest rate swap contract of Datang Tuoketuowas USD219,675,000 (2004-USD213,911,000), and the fixed rate and floating rate were 5.15% (2004-5.15%) and 3.82%(2004-1.86%) (LIBOR offered by British Bankers' Association on 13 July 2005), respectively. 11. Short-term loans Short-term loans, as summarised below, were drawn by the Company and its Subsidiaries for the construction ofelectricity utility plants: As at As at 31 December 2005 31 December 2004 Rmb'000 Rmb'000Short-term bank loans 5,530,280 5,875,560Short-term loan payables to China Datang Finance Company/ 187,000 104,000North China Power Group Finance Company 5,717,280 5,979,560 As at 31 December 2005, all short-term loans were denominated in Rmb, unsecured and bore interest at rates ranging from4.52% to 5.84% (2004-4.54% to 5.84%) per annum. Approximately Rmb56 million (2004-Rmb1,639 million) of short-term loanswere guaranteed by the minority shareholders according to their shareholding percentage in the Subsidiaries. 12. Supplemental financial information (a) Consolidated balance sheet As at As at 31 December 2005 31 December 2004 Rmb'000 Rmb'000Net current liabilities (9,439,889 ) (5,414,081 )Total assets less current liabilities 51,406,352 38,431,320 2005 2004 Additions of property, plant and equipment 19,781,085 16,927,988 (b) Consolidated income statement 2005 2004 Rmb'000 Rmb'000Interest expense 1,684,453 1,013,506Less: amount capitalised in property, plant and equipment (893,358 ) (522,252 ) 791,095 491,254Exchange (gain)/loss, net (97,285 ) 1,562Fair value gain on an interest rate swap (18,316 ) (14,061 ) Finance costs 675,494 478,755Cost of inventories - Fuel 7,531,789 4,951,410 - Spare parts and consumable supplies 120,569 79,549Depreciation and amortisation 2,787,631 2,099,835Dividend income (45,298 ) (18,783 )Donation 66,000 -Amortisation of deferred housing benefits 56,618 37,347Gain from sale of available-for-sale investment 36,285 433 II. management discussion and analysis Gross domestic product ("GDP") growth rate in the People's Republic of China (the "PRC") was approximately 9.9% duringthe Year. Driven by domestic economic growth, power demand in the PRC grew steadily. The nationwide power generationand power consumption in the PRC during the Year increased by approximately 12.8% and 13.45%, respectively as comparedto the Previous Year. The economy and the power generation market of the service areas in which the Company and itsSubsidiaries are located maintained rapid growth. During the Year, power generation of the Beijing-Tianjin-Tangshan("BTT") Power Grid increased by approximately 17.4% as compared to the Previous Year; power generation of the ShanxiPower Grid increased by 20.51% as compared to the Previous Year; power generation of the Gansu Power Grid increased by11.28% as compared to the Previous Year. During the Year, power generation of the Company and its Subsidiaries roseapproximately 27.10% as compared to the Previous Year, while operating revenue rose approximately 32.47%, profit beforetaxation rose approximately 5.45% and consolidated profit attributable to the equity holders of the Company roseapproximately 2.55%. 1. Production As at 31 December 2005, the installed capacity (managed capacity) of operating units owned by the Company and itsSubsidiaries totalled 13,810 MW. Total power generation of the Company and its Subsidiaries for the Year amounted toapproximately 70.988 million MWh, representing an increase of approximately 27.10% as compared to the Previous Year.Total on-grid electricity amounted to approximately 66.680 million MWh for the Year, representing an increase ofapproximately 27.13% over the Previous Year. The increases in power generation and on-grid electricity were mainlyattributable to: (1) Continued increase in power demand: the nationwide power consumption increased by approximately 13.45% for the Year;(2) Increase in power generation capacity: with seven power generation units of the Company's subsidiaries put into operation during the Year, the Company's managed installed capacity increased by 3,250 MW as compared to the Previous Year;(3) Generation units operated at a high reliability level: During the Year, the Company placed emphasis on strengthening equipment management and operation management, as well as on enhancing control over equipment utilisation, with a number of equipment deficiencies that had affected the safe and economic operation of generation units being eliminated. Reliability in the operation of generation units was improved, with the equivalent availability factor of generation units being at approximately 93.15% for the Year;(4) Secured fuel supply: Through optimising the allocation of coal resources and railway transportation capabilities, the Company deployed good organisation on coal planning and delivery so as to ensure fuel supply for the Company's operating power plants. Operating conditions of the Company's major power plants during the Year were as follows: Annual power Name of Annual powerNo. Name of power plant generation No. power plants generation (million MWh) (million MWh) 1 Gao Jing Thermal Power Plant 3.774 7 Tangshan Thermal Power Company 4.672 2 Dou He Power Plant 10.369 8 Liancheng Power Company 3.284 3 Zhang Jia Kou Power Plant 15.124 9 Yungang Thermal Power Company 2.937 4 Xia Hua Yuan Power Plant 2.835 10 Shentou Power Company 3.911 5 Panshan Power Company 7.805 11 Huaze Hydropower Company 0.0215 6 Tuoketuo Power Company 16.255 While endeavouring to increase power generation, the Company also put a strong emphasis on the implementation ofenvironmental protection projects in accordance with the PRC State's environmental protection requirements. During theYear, the Company completed the desulphurisation upgrade projects for units totalling 1,650 MW, including units atTangshan Thermal Power Company, Dou He Power Plant and Gao Jing Thermal Power Plant. The desulphurisation projects forZhang Jia Kou Power Plant, Yungang Thermal Power Company, Panshan Power Company and Shentou Power Company have alsocommenced. At the same time, renovation works also commenced at the Company and its Subsidiaries with respect to fluegas denitro-oxidisation facilities, of which the project at Gao Jing Thermal Power Plant was classified as a PRC Statemodel project. Upon its completion, Gao Jing Thermal Power Plant will become the only power plant in Beijing thatoperates with boiler flue gas denitro-oxidisation facilities. 2. Operational Management The Company and its Subsidiaries achieved consolidated operating revenue of approximately RMB17,994 million during theYear, representing an increase of approximately 32.47% as compared to the Previous Year. Consolidated profitattributable to the equity holders of the Company and its Subsidiaries amounted to approximately RMB2,351 million forthe Year, an increase of 2.55% as compared to the Previous Year. During the Year, the Company and its Subsidiaries faced a tight supply in coal, electricity, oil and transportationmeans. The imbalance in demand and supply of electricity and coal resulted in a continued substantial upsurge of coalprices. Together with the increase in charges for water supply and environmental protection, the Company's operationwas under enormous pressure. As such, the Company and its Subsidiaries strengthened its budget control and implementedcost controls at all levels as well as carried out measures to increase revenue and reduce expenses, so as to enhanceprofitability for all operating companies which have commenced operation. (1) The tariff adjustment work pursuant to the fuel-tariff pass-through mechanism and the commencement of operation of desulphurisation units was conscientiously carried out, so as to put the relevant adjusted tariffs in place on time.(2) Power generation structure was appropriately adjusted in accordance with the profit margins of units so as to enhance the overall profitability of the Company.(3) The unit fuel costs of the Company and its Subsidiaries were controlled at a level lower than its peers by strengthening fuel costs analysis and scrutinising the change of fuel prices with analysis. More sophisticated energy conservation measures were implemented to lower fuel consumption. The Company's fuel consumption for power generation was decreased by 1.82g/kWh and the consolidated consumption rate of the plants was 6.14%.(4) Cost controls over works under construction were strengthened so as to reduce construction expenses. During the Year, the Company proactively implemented cost controls at all levels. Costs and construction expenses were under control as soon as the construction of power plants started. During the Year, the Company placed a lot of efforts in implementing the legal person accountability system, and reinforced the concept of the project legal person with respect to full responsibility on project construction, production and operation, as well as loan borrowing and repayment. Remarkable results were achieved, as construction costs on the units that commenced operation or were under construction during the Year were less than initial budgets by over 10%. 3. Business Expansion During the Year, the Company has achieved considerable development of coal-fired generation and hydropower generationand a total of 3,250 MW of capacity commenced operation. Proposed coal-fired and hydropower generation units withcapacity totalling 8,950 MW were approved by the National Development and Reform Commission (the "NDRC"). In addition,the Company also made remarkable breakthroughs in the development of nuclear power generation as well as upstream anddownstream assets related to coal mining and railway. (1) Thermal projects: During the Year, newly constructed generation units of the Company and its Subsidiaries, with a total of approximately 3,200 MW, commenced operation. These included Units 5 and 6 (2 x 600 MW) at Tuoketuo Power Company, Unit 2 (500 MW) at Shentou Power Company, Unit 2 (300 MW) at Liancheng Power Company and Units 1 and 2 (2 x 600 MW) at Wangtan Power Project. During the Year, 12 x 600 MW coal-fired generation units with capacity totalling 7,200 MW were approved by the NDRC.(2) Hydropower projects: During the Year, hydropower projects proceeded smoothly, of which Unit 2 (50 MW) at Nalan Hydropower Company commenced operation. During the Year, 5 x 350 MW hydropower units with capacity totalling 1,750 MW were approved by the NDRC.(3) Nuclear power projects: During the Year, the Company entered into an investment agreement with Guangdong Nuclear Investment Company Limited, which proposed to participate in the construction of two nuclear power generation units of 1,000 MW each. At present, the project is included in the electric power development scheme of Fujian Province's "Eleventh Five-Year Plan", and was already submitted to the NDRC for including the same in the State's "Eleventh Five-Year Plan".(4) Other energy projects: During the Year, the Company established a project company with Kailuan Group on a joint venture basis, which proposed to jointly develop coal mine, railway and power plant operations in Weizhou. Unit 2 of Shengli Coal Mine in Inner Mongolia, an open-cut coal mine wholly owned and developed by the Company, obtained exploration rights during the Year. Qiancao Railway, invested in and operated by the Company, commenced normal operation during the Year. In addition to ongoing developments in hydropower, coal-fired and nuclear power projects, the Company started duringthe Year to conduct research in the development and utilisation of environmental friendly and renewable energy such aswind power. 4. Financial Analysis (1) Operating Results During the Year, the Company and its Subsidiaries achieved consolidated profit attributable to the equity holders ofthe Company amounting to RMB2,351 million, representing an increase of approximately 2.55% as compared to the sameperiod of the Previous Year. The major factors for the increase and decrease of profits are as follows: * Power sale revenue increased by RMB4,337 million as compared to the Previous Year, representing a growth of 31.99%. Of this amount, the increase in power sale revenue as a result of rise of tariffs amounted to RMB660 million, while the increase in power sale revenue attributable to power generation growth amounted to RMB3,677 million.* Fuel costs increased by RMB2,580 million or 52.11% as compared to the Previous Year, of which the increase in fuel costs as a result of a rise in on-grid electricity volume amounted to approximately RMB1,335 million. Substantial rise in fuel prices has pushed up the unit fuel cost, which has in turn led to an increase of fuel costs of RMB1,147 million. The increase in fuel costs due to increase in thermal supply amounted to RMB98 million.* Fixed costs increased by RMB148 million as compared to the Previous Year, which was mainly attributable to the increases in depreciation costs, maintenance costs, water expenses and pollution discharge fees incurred by newly commenced generation units during the Year.* Net expense of finance costs increased by RMB197 million as compared to the Previous Year, which was mainly attributable to the increase in interest expenses of short-term and long-term loans of newly commenced companies for the Year. (2) Financial Position As at 31 December 2005, total consolidated assets of the Company and its Subsidiaries amounted to approximatelyRMB64,536 million, representing an increase of approximately RMB15,061 million as compared to the Previous Year. Totalconsolidated liabilities amounted to approximately RMB43,807 million, representing an increase of approximatelyRMB13,411 million as compared to the Previous Year. Minority interests amounted to approximately RMB2,403 million,representing an increase of approximately RMB435 million as compared to the Previous Year. Total equity amounted toapproximately RMB20,729 million, representing an increase of approximately RMB1,650 million as compared to the PreviousYear. The increase in total assets was mainly resulted from the implementation of the expansion strategy by the Companyand its Subsidiaries and the corresponding increase in investments in construction-in-progress. (3) Liquidity As at 31 December 2005, the asset-to-liability ratio (i.e. the ratio between total liabilities and total assets) forthe Company and its Subsidiaries was approximately 67.88%. The net debt-to-equity ratio (i.e. (loans + convertiblebonds - cash and cash equivalents - bank deposits - marketable securities)/total equity excluding minority interests)was approximately 204.58%. As at 31 December 2005, total cash and cash equivalents and bank deposits with a maturity of over 3 months of theCompany and its Subsidiaries amounted to approximately RMB1,029 million, of which an amount equivalent to approximatelyRMB432 million was in foreign currencies. The Company and its Subsidiaries had no entrusted deposits or overdue fixeddeposit during the Year. As at 31 December 2005, short-term loans of the Company and its Subsidiaries amounted to approximately RMB5,717 millionand bore annual interest rates ranging from 4.52% to 5.84%. Long-term loans (excluding those due within 1 year)amounted to approximately RMB29,215 million and long-term loans due within 1 year amounted to approximately RMB2,489million at annual interest rates ranging from 2.03% to 6.12%, of which an amount equivalent to approximately RMB3,851million was denominated in US dollar. The Company and its Subsidiaries pay regular and active attention to foreignexchange market fluctuations and constantly assess foreign currency risks. As at 31 December 2005, NCG and some minority shareholders of the Company's Subsidiaries provided guarantees for theloans of the Company and its Subsidiaries amounting to approximately RMB5,308 million. The Company had not provided anyguarantee in whatever forms for any other company apart from its Subsidiaries. 5. Outlook for 2006 According to forecasts, growth in PRC economy will remain steady in 2006 and it is expected that GDP will grow by about8% while power consumption in the PRC is expected to grow around 11%. Tension in power supply has provided new businessopportunities to the Company and its Subsidiaries. The service areas of the Company have been extended from the BTTPower Grid and the Shanxi Power Grid to the Gansu Power Grid, thereby enhancing the Company's abilities in mitigatingrisks and sustaining development. Implementation of the new tariff policy by the NDRC will steadily enhance theprofitability of the Company and its Subsidiaries as there will be more generation units coming on stream in the comingyear. A number of coal-fired and hydropower generation projects of the Company were approved by the NDRC which hascreated conditions for further development of the Company. However, operating conditions in 2006 also have theirnot-so-optimistic side. With the effect of China's macroeconomic measures, the operating environment of the powermarket has been difficult. As more generation units are commencing operations, utilisation rates of generation unitsare expected to reduce, and the power market characterised by competition will add difficulty to operation. There willbe enormous pressure on fuel supply, and rise in fuel costs and stricter requirements for environment protection mayaffect the earnings of the Company. As such, the Company will strive to strengthen its management and overcome theunfavourable factors, aiming at increasing production and revenue and achieving better economic performance. In 2006,the Company will focus on the following: 1. Actively pursue expansion in coal-fired power, renewable energy projects such as hydropower and wind power, nuclear power, coal mining, railway and power related projects in upstream and downstream projects in accordance with the development strategies of the Company;2. Actively identify different financing channels so as to lower the Company's capital costs and to appropriately rationalise its capital structure; actively prepare for future financing requirements arising from the Company's rapid business expansion;3. Focusing on and comprehensively enhance the operation safety; improve the safety assessment system for substantial risk sources so that the substantial risk sources will be controlled within an acceptable range; establish a safety management system to govern procedures on handling incidents; and improve the quality in inspection and maintenance;4. Implement cost controls at all levels and devote efforts to establishing a cost saving enterprise; control construction expenses; whilst assuring coal supply for the power plants, strive to reduce fuel costs, financial costs and other expenses; enhance energy conservation and consumption reduction; and maintain a steady growth in economic efficiency;5. Strengthen management over works quality and completion schedules; and strive for the power generating units totalling above 5,000 MW to commence operation with high quality in 2006. III. SHARE CAPITAL AND DIVIDENDS (1) Share Capital No new shares were issued by the Company during the Year. As at 31 December 2005, the total share capital of theCompany amounted to 5,162,849,000 shares, divided into 5,162,849,000 shares of RMB1.00 each. (2) Shareholding of Substantial Shareholders As far as the directors of the Company are aware, as at 31 December 2005, the interests or short positions of theperson or entities in the shares or underlying shares of the Company as recorded in the register required to be keptunder section 336 of the Securities and Futures Ordinance (the "SFO") (Chapter 571 of the Law of Hong Kong), or asotherwise required to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, wereas follows: Percentage to Percentage to total issued total issued Percentage to share capital domestic total issuedName of shareholder Class of shares No. of shares held of the Company shares H shares (%) (%) (%)China Datang Corporation Domestic shares 1,828,768,200 35.43 49 -Beijing Energy Investment Domestic shares 671,792,400 13.01 18 - (Holding) Company LimitedHebei Construction Domestic shares 671,792,400 13.01 18 - Investment CompanyTianjin Jinneng Domestic shares 559,827,000 10.84 15 - Investment CompanyUBS AG H shares 169,353,508(L) 3.28 - 11.84(L) 47,859,124(S) 0.93 - 3.35(S)Alliance Capital H shares 157,493,140(L) 3.05 - 11.01(L) Management L.P.JP Morgan Chase & Co. H shares 144,218,597(L) 2.79 - 7.98(L) 86,283,871(P) 1.67 - 6.03(P)Templeton Asset H shares 84,472,320(L) 1.64 - 5.90(L) Management Limited (L)=Long positions (S)=Short positions (P)=Lending pool (3) Dividends The Board has declared dividends of RMB0.228 per share for the Year. Dividends to be distributed to domesticshareholders will be declared in and paid by RMB, while those to be distributed to foreign shareholders will bedeclared in RMB but paid in Hong Kong dollar. Hong Kong dollar exchange rate for the purpose of dividends payment shallbe based on the average of the closing rates of the Hong Kong dollar/RMB exchange rates quoted by the People's Bank ofChina on each business day within the week immediately prior to payment. The dividends will be paid on or before 30June 2006. (4) Shareholding by the Directors and Supervisors As at 31 December 2005, none of the Directors, supervisors and chief executive of the Company had any interest andshort positions in the shares, underlying assets and debentures of the Company or any of its associated corporation(within the meaning of Securities and Futures Ordinance) which should be brought to the attention of the Company andThe Stock Exchange of Hong Kong Limited under the provisions of Divisions 7 and 8 of Part XV of the SFO, or as recordedin the register required to be kept under section 352 of the Securities and Futures Ordinance or as otherwise requiredto notify the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for SecuritiesTransactions by Directors of Listed Issuers in the Rules Governing the Listing of Securities on The Stock Exchange ofHong Kong Limited ("Listing Rules"). IV. SIGNIFICANT EVENTS At the extraordinary general meeting convened on 27 November 2005, the appointment of Mr. Fang Qinghai as non-executivedirector of the Company and the resignation of Mr. Kou Bingen as non-executive director of the Company due to personalreasons were approved. V. PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES During the Year, the Company has not purchased, sold or redeemed any of its listed securities. VI. COMPLIANCE OF THE CODE ON CORPORATE GOVERNANCE PRACTICES To the knowledge of the Board, the Company has complied with the Code on Corporate Governance Practices (the "Code") asset out in Appendix 14 of the Listing Rules of The Stock Exchange of Hong Kong Limited during the Year. (Except for thedeviation from the requirement of the code provision A.4.2 of the Code.) It is provided in the code provision A.4.2 of the Code that every Director (including Directors with designated term)should be subject to retirement by rotation at least once every three years. Pursuant to the articles of association of the Company (the "Articles of Association"), the Company's Directors areappointed by the general meeting with each term of office not exceeding three years, and are entitled to be re-electedand re-appointed. The Company considers that the Company's Directors being re-elected and re-appointed as the Company'sDirectors by the general meeting is in the interest of maintaining continuity of the existing operating measures andpolicies, so the Articles of Association have not stipulated any requirements on the system of retirement by rotation. VII. COMPLIANCE OF THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS Upon specific enquiries made to all the directors of the Company and in accordance with information provided, the Boardconfirmed that all directors of the Company have complied with the provisions under the Model Code for SecuritiesTransactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules during the Year. VIII. AUDIT COMMITTEE In accordance with the Listing Rules, the Company has set up an Audit Committee which comprises 3 independentnon-executive Directors and 2 non-executive Directors. The Audit Committee is responsible for reviewing the Company'sfinancial reporting procedures and internal controls. The Audit Committee has reviewed with the management of the Company the accounting principles and methods adopted bythe Company and its Subsidiaries. It has also discussed matters regarding internal controls and the annual financialstatements, including the review of the financial statements for the twelve months ended 31 December 2005. The Audit Committee considers that the 2005 annual financial reports of the Company and its Subsidiaries have compliedwith the applicable accounting standards, and that the Company has made appropriate disclosure thereof. By order of the Board Zhai Ruoyu Chairman Beijing, the PRC, 27 March 2006 The 2005 annual report of the Company containing all the information required by paragraphs 45(1) to 45(3) of Appendix16 of the Listing Rules will be published on the website of The Stock Exchange of Hong Kong Limited in due course. As at the date of this announcement, the directors of the Company are: Zhai Ruoyu, Zhang Yi, Hu Shengmu, Fang Qinghai, Yang Hongming, Liu Haixia, Guan Tiangang, Su Tiegang, Ye Yonghui, TongYunshang, Xie Songlin*, Xu Daping*, Liu Chaoan*, Yu Changchun* and Xia Qing* * independent non-executive Directors This information is provided by RNS The company news service from the London Stock Exchange