Datang Intl H Regulatory News (DAT)

10 Aug 2006 07:00

Datang Intl Power Generation Co Ld10 August 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 2006 Interim Results OPERATING AND FINANCIAL HIGHLIGHTS * Consolidated operating revenue amounted to approximately RMB10,829 million, representing an increase of 26.08% as compared to the corresponding period of the previous year. * Consolidated profit attributable to the equity holders of the Company amounted to approximately RMB1,274 million, representing an increase of 13.86% as compared to the corresponding period of the previous year. * Basic earnings per share attributable to the equity holders of the Company amounted to approximately RMB0.25, representing an increase of approximately RMB0.03 per share as compared to the corresponding period of the previous year. I. COMPANY RESULTS The board of directors (the "Board") of Datang International Power GenerationCo., Ltd. (the "Company") hereby announces the unaudited consolidated operatingresults of the Company and its subsidiaries and a jointly controlled entity(hereinafter referred to as the "Company and its Subsidiaries") prepared inconformity with the International Financial Reporting Standards ("IFRS") for thesix months ended 30 June 2006 (the "Period"), together with the unauditedconsolidated operating results of the corresponding period of the previous yearfor comparison. Such operating results have been reviewed and confirmed by theaudit committee of the Company (the "Audit Committee"). Consolidated operating revenue of the Company and its Subsidiaries for thePeriod was approximately RMB10,829 million, representing an increase ofapproximately 26.08% as compared to the corresponding period of the previousyear. Consolidated profit attributable to the equity holders of the Company forthe Period was approximately RMB1,274 million, representing an increase ofapproximately 13.86% as compared to the corresponding period of the previousyear. Basic earnings per share attributable to the equity holders of the Companyfor the Period was approximately RMB0.25, representing an increase ofapproximately RMB0.03 per share as compared to the corresponding period of theprevious year. Please refer to the unaudited financial statements set out below for details ofthe consolidated operating results of the Company and its Subsidiaries. CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED) AS AT 30 JUNE 2006 (Amounts expressed in thousands of Renminbi ("Rmb")) 30 June 31 December Note 2006 2005 ASSETS Non-current assets Property, plant and equipment, net 66,707,643 59,376,557Investments in associates 985,672 793,316Available-for-sale investments 498,294 306,294Intangible assets 81,557 62,304Deferred housing benefits 157,969 188,467Deferred income tax assets 86,483 119,303 68,517,618 60,846,241 Current assets Inventories 892,014 693,019Other receivables and current assets 635,535 493,081Accounts receivable 2 2,169,896 1,409,528Notes receivable 10,891 64,829Short-term bank deposits over three months 20,000 -Cash and cash equivalents 1,239,637 1,029,339 4,967,973 3,689,796 Total assets 73,485,591 64,536,037 EQUITY AND LIABILITIES Capital and reserves attributable to the Company's equity holders Share capital 5,162,849 5,162,849Reserves 13,259,265 13,162,613 18,422,114 18,325,462Minority interests 2,515,501 2,403,475 Total equity 20,937,615 20,728,937 Non-current liabilities Long-term loans 3 33,579,554 29,215,217Convertible bond 4 1,113,184 1,098,758Government grants 210,942 210,942Deferred income tax liabilities 104,112 152,498 35,007,792 30,677,415 Current liabilities Accounts payable and accrued liabilities 5 6,972,287 4,558,556Short-term loans 3 8,003,766 5,717,280Current portion of long-term loans 3 2,159,715 2,488,884Taxes payable 398,055 358,359Deferred income 6,361 6,606 17,540,184 13,129,685 Total liabilities 52,547,976 43,807,100 Total equity and liabilities 73,485,591 64,536,037 CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2006 (Amounts expressed in thousands of Rmb, except per share data) Six months ended 30 June Note 2006 2005 Operating revenue 6 10,828,881 8,588,707 Operating costs 10 (8,058,868 ) (6,438,097 ) Operating profit 2,770,013 2,150,610 Share of result of associates, net (3,426 ) (3,953 ) Interest income 14,463 24,429 Finance costs 10 (560,936 ) (371,495 ) Profit before taxation 2,220,114 1,799,591 Taxation 7 (598,386 ) (353,436 ) Profit for the period 1,621,728 1,446,155 Attributable to: - Equity holders of the Company 1,273,947 1,118,892 - Minority interests 347,781 327,263 1,621,728 1,446,155 Earnings per share for profit attributable to the equity holders of the Company during the period - basic (Rmb) 8 0.25 0.22 - diluted (Rmb) 8 0.24 0.21 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2006 (Amounts expressed in thousands of Rmb) Attributable to equity holders of the Company Statutory Statutory public Discretionary Share Capital surplus welfare Surplus Restricted Other Note capital reserve reserve fund reserve reserve reserve Balance as at 1 January 2005 5,162,849 3,653,421 1,619,555 464,488 3,593,485 129,441 149,796Capital - - - - - - -injection Dividends 9 - - - - - - -declared Net profit - - - - - - -Transfer from restricted reserve 9 - - - - - (16,180) -Transfer to discretionary surplus 9 - - - - 1,281,777 - -reserve Balance as at 30 June 2005 5,162,849 3,653,421 1,619,555 464,488 4,875,262 113,261 149,796 Retained Total Minority Note earnings reserves Interests Total equity Balance as at 1 January 2005 2,337,382 11,947,568 1,968,309 19,078,726 Capital injection - - 95,600 95,600 Dividends 9 (1,135,827) (1,135,827) (83,883) (1,219,710)declared Net profit 1,118,892 1,118,892 327,263 1,446,155 Transfer from restricted reserve 9 16,180 - - -Transfer to discretionary surplus reserve 9 (1,281,777) - - -Balance as at 30 June 2005 1,054,850 11,930,633 2,307,289 19,400,771 Attributable to equity holders of the Company Statutory Statutory public Discretionary Share Capital surplus welfare surplus Restricted Note capital reserve reserve fund reserve reserve Balance as at 1 January 2006 5,162,849 3,653,421 1,977,048 559,456 4,981,377 173,510 Minority interests arising from business - - - - - -combination Capital - - - - - -injection Dividends 9 - - - - - -declared Currency - - - - - -translation differences Net profit - - - - - -Transfer 9 - - 559,456 (559,456) - -between reserves Transfer from 9 - - - - - (28,005)restricted reserve Transfer to discretionary surplus 9 - - - - 759,910 -reserve Balance as at 5,162,849 3,653,421 2,536,504 - 5,741,287 145,505 30 June 2006 Currency translation Other Retained Total Minority Note difference reserve earnings reserves interests Total equity Balance as at 1 January 2006 (184) 149,796 1,668,189 13,162,613 2,403,475 20,728,937 Minority interests arising from business - - - - 64,263 64,263 combination Capital - - - - 251,000 251,000 injection Dividends 9 - - (1,177,130) (1,177,130) (551,018) (1,728,148)declared Currency (165) - - (165) - (165)translation differences Net profit - - 1,273,947 1,273,947 347,781 1,621,728 Transfer 9 - - - - - -between reserves Transfer from 9 - - 28,005 - - -restricted reserve Transfer to discretionary surplus 9 - - (759,910) - - -reserve Balance as at (349) 149,796 1,033,101 13,259,265 2,515,501 20,937,615 30 June 2006 1. Principal accounting policies The principal accounting policies applied in the preparation of these condensedconsolidated interim financial statements are consistent with those applied inthe preparation of the annual financial statements as at and for the year ended31 December 2005 except that the Company and its Subsidiaries have adopted therevised/new International Financial Reporting Standards ("IFRS") which areeffective for accounting period commencing on or after 1 January 2006. Standards, interpretations and amendments to published standards effective in2006 In 2006, the Company and its Subsidiaries adopted the revised/new standards andinterpretations of IFRS below, which are relevant to the operations of theCompany and its Subsidiaries. IAS 39 and IFRS 4 Amendments Financial guarantee contracts IFRIC Interpretation 4 Determining whether an arrangement contains a lease Management assessed the relevance of the adoption of IAS 39, IFRS 4 and IFRICInterpretation 4 with respect to the operation of the Company and itsSubsidiaries and concluded that these revised/new standards have no materialimpact on the Company and its Subsidiaries' accounting policy and the managementwill continue assessing the impact of this standard in the future. Standards, interpretations and amendments to published standards that are notyet effective Certain new standards, amendments and interpretations to existing standards havebeen published that are relevant to the Company and its Subsidiaries and aremandatory for accounting periods of the Company and its Subsidiaries beginningon or after 1 July 2006 or later periods but which the Company and itsSubsidiaries have not early adopted, as follows: * 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 9, 'Reassessment of Embedded Derivatives', effective for annual periods beginning on or after 1 June 2006. Management believes that this interpretation should not have a significant impact on the reassessment of embedded derivatives as the Company and its Subsidiaries already assess if embedded derivative should be separated using principles consistent with IFRIC 9. 2. Accounts receivable Accounts receivable of the Company and its Subsidiaries mainly represents thereceivable from the respective regional or provincial grid companies for tariffrevenue. This receivable is unsecured and non-interest bearing. The tariffrevenue is settled on a monthly basis according to the payment provisions in thepower purchase agreements. As at 30 June 2006, all tariff revenues receivablefrom the respective grid companies were aged within three months, and nodoubtful debt provisions were made thereof. 3. Loans As at 30 June 2006, the Company and its Subsidiaries had short term and longterm loans payable to China Datang Group Finance Company Limited totallingapproximately Rmb1,380,000,000 and 101,000,000 respectively (31 December 2005 -Rmb187,000,000 and nil). 4. Convertible bond The liability component of convertible bond as at 30 June 2006 was as follows: Liability component at 1 January 2006 1,098,758 Interest expense 29,180 Interest payment (4,643 )Exchange rate adjustment (10,111 ) Liability component at 30 June 2006 1,113,184 The carrying amount of the liability component at 30 June 2006 of theconvertible bond approximated its fair value. 5. Accounts payable and accrued liabilities 30 June 31 December 2006 2005 Construction costs and deposits payable to 4,361,328 3,231,715contractors Fuel and material costs payable 1,637,493 927,648Salary and welfare payable 164,858 93,669Interest rate swap liability - 69,079Others 808,608 236,445 6,972,287 4,558,556 As at 30 June 2006, other than certain deposits for construction which were agedbetween one and two years, substantially all accounts payable were aged withinone year. As at 30 June 2006, the notional principal amount of the outstanding interestrate swap contract of Inner Mongolia Datang International Tuoketuo PowerGeneration Company Limited ("Tuoketuo Power Company") was USD207,155,000 (31December 2005 - USD219,675,000), and the fixed rate and floating rate were 5.15%(31 December 2005 - 5.15%) and 4.73% (31 December 2005 - 3.82%) (LIBOR offeredby British Bankers' Association as at 13 January 2006), respectively. 6. Operating revenue Six months ended 30 June 2006 2005 Electricity 10,755,244 8,541,200Heat 73,637 47,507 10,828,881 8,588,707 Pursuant to the Power Purchase Agreements entered into between the Company andits Subsidiaries and the regional or provincial grid companies, the Company andits Subsidiaries are required to sell their entire net generation of electricityto these grid companies at an approved tariff rate. For the six months ended 30June 2006, most of the electricity generated by the Company and its Subsidiarieswas sold to North China Grid Company ("NCG") and its subsidiaries. 7. Taxation Six months ended 30 June 2006 2005 PRC enterprise income tax - Current tax 613,951 347,233- Deferred tax (15,565 ) 6,203 598,386 353,436 Enterprise income tax is provided on the basis of the statutory profit forfinancial reporting purposes, adjusted for income and expense items, which arenot assessable or deductible for income tax purposes. Except for Tuoketuo PowerCompany, Gansu Datang International Liancheng Power Generation Company Limited("Liancheng Power Company") and Yunnan Datang International Nalan HydropowerDevelopment Company Limited ("Nalan 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 anddocument Cai Shui (2001) 202 issued by the State Administration of Taxation ofPRC, Tuoketuo Power Company, Liancheng Power Company and Nalan HydropowerCompany, as enterprises set up in the western area of PRC and engaged in abusiness encouraged by the government, have been granted a tax concession to payPRC income tax at a preferential rate of 15% from 2001 to 2010. As newly set updomestic invested enterprises engaged in power generation in the western area ofPRC, Tuoketuo Power Company, Liancheng Power Company and Nalan HydropowerCompany are exempted from PRC enterprise income tax during the first and secondyears of operation and have been granted a tax concession to pay PRC enterpriseincome tax at 50% of the preferential rate during the third to fifth year ofoperation. Tuoketuo Power Company commenced commercial operation in 2003. The applicablePRC enterprise income tax rates approved by the local tax authority in 2005 and2006 are 0% and 7.5% respectively. Liancheng Power Company commenced commercial operation in 2005. The applicablePRC enterprise income tax rates approved by the local tax authority in 2005 and2006 are 0%. Nalan Hydropower Company commenced commercial operation in 2006. The applicablePRC enterprise income tax rate approved by the local tax authority in 2006 is0%. 8. Earnings per share The calculation of basic earnings per share for profit attributable to theequity holders of the Company for the six months ended 30 June 2006 was based onnet profit attributable to equity holders of the Company of approximatelyRmb1,273,947,000 (2005 - Rmb1,118,892,000) and on the weighted average number of5,162,849,000 shares (2005 - 5,162,849,000 shares) outstanding during theperiod. The diluted earnings per share is calculated adjusting the weighted averagenumber of ordinary share outstanding to assume conversion of all dilutivepotential ordinary shares. The convertible bond is assumed to have beenconverted into ordinary shares and the net profit is adjusted to eliminate theinterest expenses less the tax effect. Six months ended 30 June 2006 2005 Profit attributable to equity holders of Company (Rmb 1,273,947 1,118,892'000) Interest expense on convertible debt (net of tax) (Rmb 19,551 19,338'000) Profit used to determine diluted earnings per share 1,293,498 1,138,230(Rmb '000) 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) 222,127 222,127 Weighted average number of ordinary shares for diluted earnings per share (shares in thousand) 5,384,976 5,384,976 Diluted earnings per share for profit attributable to the equity holders of the Company (Rmb) 0.24 0.21 9. Profit appropriations Dividends On 27 March 2006, the Board of Directors proposed a dividend of Rmb0.228 pershare, totalling approximately Rmb1,177,130,000 for the year ended 31 December2005 (2004 - Rmb1,135,827,000).The proposed dividend distribution was approvedby the shareholders in their general meeting dated 20 June 2006 and was paidprior to 30 June 2006. Reserves During the period, approximately Rmb28,005,000 has been transferred from therestricted reserve (2005 - Rmb16,180,000) , which is specifically set up toreflect the reduction of the statutory public welfare fund under PRC GAAP, toretained earnings. This amount represented amortisation of deferred housingbenefits for the six months ended 30 June 2006. On 27 March 2006, the Board of Directors proposed an appropriation ofapproximately Rmb759,910,000 to the discretionary surplus reserve for the yearended 31 December 2005 (2004 - Rmb1,281,777,000). The proposed profitappropriation was approved by the shareholders in their general meeting dated 20June 2006. Pursuant to the revised Company Law of the PRC, effective since 1 January 2006,statutory public welfare fund was abolished and accordingly, the Companytransferred the balance of statutory public welfare fund to statutory surplusreserve. 10. Supplemental financial information (a) Condensed consolidated balance sheet 30 June 31 December 2006 2005 Net current liabilities (12,572,211 ) (9,439,889 )Total assets less current liabilities 55,945,407 51,406,352 Six months ended 30 June 2006 2005 Additions to property, plant and equipment 9,153,993 8,488,241 (b) Condensed consolidated income statement Six months ended 30 June 2006 2005 Interest expenses 1,190,821 724,612 Less: amount capitalised in property, plant and (559,979 ) (381,275 )equipment 630,842 343,337 Exchange (gain)/loss, net (25,656 ) 1,411 Fair value (gain)/loss on an interest rate swap (44,250 ) 26,747 Finance costs 560,936 371,495 Cost of inventories - Fuel 4,557,820 3,730,166 - Spare parts and consumable supplies 55,967 38,071 Depreciation 1,785,011 1,294,391 Dividend income (28,052 ) (27,261 )Donation to State Environmental Bureau 34,000 66,000 Amortisation of deferred housing benefits 30,498 36,753 II. MANAGEMENT DISCUSSION AND ANALYSIS The Company and its Subsidiaries are principally engaged in the development,construction and operation of power plants and sale of electricity and thermalpower. As at 30 June 2006, the Company and its Subsidiaries had a total of 16 operatingpower plants, with total capacity in operation amounting to 15,410MW and totalassets amounting to approximately RMB73,486 million. 1. Production and environmental protection During the Period, total power generation of the Company and its Subsidiariesamounted to 41.345 billion kWh, representing an increase of 18.58% as comparedto the corresponding period of the previous year. Total on-grid electricityamounted to 38.893 billion kWh, an increase of 18.42% over the correspondingperiod of the previous year. The increase in power generation and on-gridelectricity was not only attributable to the continued growth of the nationaleconomy and power demand in the People's Republic of China (the "PRC"), but alsodue to the increase in the Company and its Subsidiaries' installed capacity andthe safe and stable operation of the generation units. During the Period, theCompany and its Subsidiaries had a total of 5 hydropower generation units andcoal-fired generation units successively put into operation. Taking into accountof the generation units which commenced operation during the second half of2005, the operation capacity of the Company and its Subsidiaries increased by4,050MW as compared to the corresponding period of the previous year. Theequivalent availability factor of generation units reached 92.75%, representinga rise of approximately 1.16 percentage point as compared to the correspondingperiod of the previous year. During the Period, the operations of the major power plants of the Company andits Subsidiaries are set out as follows: Power Power generation generation for forNo. Name of power the first No. Name of power plant the first plant half of 2006 half of 2006 (billion kWh) (billion kWh) 1. Gao Jing Power 1.712 9. Hebei Datang 2.322 Plant International Tangshan Thermal Power Company Limited ("Tangshan Thermal Power Company") 2. Dou He Power Plant 5.248 10. Gansu Datang 1.768 International Liancheng Power Generation Company Limited ("Liancheng Power Company") 3. Zhang Jia Kou 7.623 11. Shanxi Datang 1.406 Power Plant International Yungang Thermal Power Company Limited ("Yungang Thermal Power Company") 4. Xia Hua Yuan Power 1.324 12. Shanxi Datang 2.621 Plant International Shentou Power Generation Company Limited ("Shentou Power Company") 5. Tianjin Datang 3.545 13. Yunnan Datang 0.099 International International Honghe Panshan Power Power Generation Company Generation Limited Company Limited ("Honghe Power Company") ("Panshan Power Company") 6. Inner Mongolia 10.596 14. Guangdong Datang 0.244 Datang International Chaozhou International Power Generation Company Tuoketuo Power Limited Generation Company Limited ("Chaozhou Power ("Tuoketuo Power Company") Company") 7. Hebei Datang 1.887 15. Hebei Datang 0.01 International International Huaze Wangtan Power Hydropower Development Generation Company Limited Company Limited ("Huaze ("Wangtan Power Hydropower Company") Company") 8. Wushashan Power 0.804 16. Yunnan Datang 0.137 Plant International Nalan Hydropower Development Company Limited ("Nalan Hydropower Company") While endeavouring to increase power generation, the Company also placed strongemphasis on the implementation of environmental protection programmes inaccordance with the PRC State's environmental protection requirements. As at 30June 2006, the Company and its Subsidiaries completed the desulphurisationupgrade projects for generation units totalling approximately 1,650MW. Thedesulphurisation upgrade projects for generation units totalling approximately1,600MW, are expected to be completed before the end of this year. 2. Operational management During the Period, the Company and its Subsidiaries achieved consolidatedoperating revenue of approximately RMB10,829 million, representing an increase of 26.08% as compared to the corresponding period of the previous year, and consolidated profit before taxation was approximately RMB2,220 million,representing an increase of 23.37% as compared to the corresponding period ofthe previous year. Consolidated profit attributable to the equity holders of theCompany amounted to approximately RMB1,274 million, representing an increase ofapproximately 13.86% as compared to the corresponding period of the previousyear. During the Period, the Company and its Subsidiaries faced an unfavourableoperational environment characterised by a decline in utilisation hours for thegeneration units in the power market, persistent high fuel prices, andcontinuous rises in charges for environmental protection and water supply.Despite the above unfavourable factors, the Company and its Subsidiariescontinued to maintain the profit growth momentum by conscientiously carrying outmeasures to increase revenues and reduce expenses. Increases in operatingrevenue and profit were mainly attributable to the following factors: (1)Increase in on-grid electricity: As compared to the corresponding period of theprevious year, on-grid electricity rose by about 6.051 billion kWh. (2) Increasein average on-grid tariffs: Average on-grid tariffs (tax inclusive) increased byapproximately RMB16.86/MWh as compared to the corresponding period of theprevious year. (3) Strengthening of control on fuel costs and endeaveour inenergy conservation and consumption reduction: During the Period, the Companyand its Subsidiaries' fuel consumption for power generation was 345 g/kWh,representing a decrease of 5.57 g/kWh as compared to the corresponding period ofthe previous year. The magnitude of unit fuel cost increase was controlled at acomparatively low level, with only a rise of RMB2.56/MWh as compared to thecorresponding period of the previous year, of which the unit fuel cost of 4wholly-owned power plants of the Company was reduced by RMB1.12/MWh as comparedto the corresponding period of the previous year. 3. Business expansion During the Period, the construction of the Company and its Subsidiaries'coal-fired and hydropower projects progressed smoothly, with a total capacity of1,600MW hydropower and coal-fired generation units having successively commencedoperation. Meanwhile, the Company continued to actively expand into the realmsof renewable or environmentally-friendly energy such as wind power and nuclearpower, as well as into power-related upstream and downstream projects such ascoal mining and railways. (1) Coal-fired projects : During the Period, newly constructed coal-fired generation units of the Company and its Subsidiaries, with a total capacity of approximately 1,500MW successively put into operation. These include Unit 1 (600MW) at Wushashan Power Plant, Unit 1 (600MW) at Chaozhou Power Company and Unit 1 (300MW) at Honghe Power Company. To date, total capacity of coal-fired generation units of the Company and its Subsidiaries having commenced operation reached 15,240MW. During the Period, after obtaining approvals from the relevant PRC authorities, the construction of 2 x 600MW generation units at Yuncheng Power Company, in which the Company has controlling interests, commenced. During the Period, the Company entered into an investment agreement with Datong Coal Mine Group Co., Ltd. to invest (with minority interests) in the proposed construction of 2 x 600MW coal-fired generation units. (2) Hydropower projects: During the Period, 2 x 50MW hydropower generation units at Nalan Hydropower Company successively put into operation. To date, total capacity of hydropower generation units of the Company and its Subsidiaries having commenced operation reached 170MW. During the Period, the Company entered into an investment agreement with Ganzi Prefecture Gantou Hydropower Development Co., Ltd. to invest (with controlling interests) in the proposed construction of 4 x 650MW hydropower generation units in Sichuan Province. (3) Nuclear power projects: During the Period, 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 1,000MW each. To date, the relevant project company has been established and preliminary work on the nuclear project has commenced. (4) Wind power projects: The Board reviewed and approved the Company to construct Bayin Wind Power Plant Phase I in Zhuozi County, Inner Mongolia, a project to be wholly-owned by the Company. The installed capacity of the project is 40MW. Currently, the project has been approved by the Development and Reform Commission of Inner Mongolia and the Company is making preparations for the construction of the project. 4. Financial results and position (1) Operating results During the Period, the Company and its Subsidiaries achieved consolidated profitbefore taxation of approximately RMB2,220 million, representing an increase ofapproximately 23.37% as compared to the corresponding period of the previousyear. Profit attributable to the equity holders of the Company was RMB1,274million, representing an increase of approximately 13.86% as compared to thecorresponding period of the previous year. Major factors for the increase ordecrease of profits were as follows: * Power sale revenue was RMB10,755 million, representing an increase of approximately 25.92% as compared to the corresponding period of the previous year, which was mainly attributable to the increases in power generation and tariffs. * Operating costs increased by 25.17% as compared to the corresponding period of the previous year, which was mainly attributable to increases in depreciation costs, maintenance costs, and material costs brought by the commencement of operation of new generation units during the Period and during the second half of the previous year. Of such increases, fuel costs increased by RMB828 million, representing an increase of approximately 22.19% as compared to the corresponding period of the previous year. * Net expense of finance costs increased by RMB189 million as compared to the corresponding period of the previous year, which was mainly due to increase in interest expenses of long and short-term loans during the Period. (2) Financial position As at 30 June 2006, total consolidated assets of the Company and itsSubsidiaries amounted to approximately RMB73,486 million. Total consolidatedliabilities amounted to approximately RMB52,548 million. Minority interestsamounted to approximately RMB2,516 million. Total equity attributable to theCompany's equity holders amounted to approximately RMB18,422 million. Theincrease in total assets was mainly resulted from the implementation of theexpansion strategy by the Company and its Subsidiaries and the correspondingincrease in investments in construction-in-progress. (3) Liquidity As at 30 June 2006, the asset-to-liability ratio (i.e. the ratio between totalliabilities and total assets) for the Company and its Subsidiaries wasapproximately 71.51%. The net debt-to-equity ratio (i.e. (loans + convertiblebonds - cash and cash equivalents - bank deposits - marketable securities)/totalequity, excluding minority interests) was approximately 236.65%. As at 30 June 2006, total cash and cash equivalents and bank deposits with amaturity of over 3 months of the Company and its Subsidiaries amounted toapproximately RMB1,260 million, of which an amount equivalent to approximatelyRMB433 million was deposits in foreign currencies. The Company and itsSubsidiaries had no entrusted deposits or overdue fixed deposits during thePeriod. As at 30 June 2006, short-term loans of the Company and its Subsidiariesamounted to approximately RMB8,004 million which bore annual interest ratesranging from 4.70% to 5.43%. Long-term loans (excluding those due within 1 year)amounted to approximately RMB33,580 million and long-term loans due within 1year amounted to approximately RMB2,160 million, with annual interest ratesranging from 3.60% to 6.12%, of which an amount equivalent to approximatelyRMB3,573 million was denominated in US dollar. The Company and its Subsidiariespay regular and active attention to foreign exchange market movements andconscientiously assess foreign currency risks. As at 30 June 2006, NCG and some minority shareholders of the Company'ssubsidiaries provided guarantees for the loans of the Company and itsSubsidiaries amounting to approximately RMB4,130 million. The Company had notprovided any guarantee in whatever forms for any other companies apart from itssubsidiaries, jointly controlled entity and associates. 5. Outlook for the second half of 2006 During the second half of this year, the economy and electricity production inthe PRC is expected to continue to maintain a relatively fast growth.Implementation of the fuel-tariff pass-through mechanism of the NationalDevelopment and Reform Commission has already started, enabling further businessdevelopment and a stable increase in the profitability of the Company and itsSubsidiaries. However, the operating results of the Company and its Subsidiariesis expected to be affected by high fuel prices, higher requirements forenvironmental protection and more new generation units coming on stream whichwill result in a decline in average utilisation hours of the generation units inoperation. As such, the Company and its Subsidiaries will endeavour tostrengthen its management, overcome unfavourable factors and implement variousmeasures to increase revenue and reduce expenses and to strive for achievingbetter economic performance: (1) To ensure production safety, striving for more and stable power generation; (2) To implement the tariff policy, to appropriately adjust the power generation structure, striving for better generation efficiency; (3) To continue the strengthening of fuel management and ensure the quality and supply of coal; (4) To implement measures on energy conservation and consumption reduction, strengthening overall cost controls and striving for increase in production and revenue; (5) To implement the financing plans of the Company so as to ensure funds for the Company's development; and (6) To continue an effective management over project construction to ensure completion of production schedules for the full year. III. SHARE CAPITAL AND DIVIDENDS 1. Share capital No new shares were issued by the Company during the Period. As at 30 June 2006,the total share capital of the Company amounted to 5,162,849,000 shares, dividedinto 5,162,849,000 shares with a nominal value of RMB1.00 each. 2. Shareholding of substantial shareholders As far as the directors of the Company (the "Directors") are aware, as at 30June 2006, the persons or entities with interests or short positions in theshares or underlying shares of the Company which are required to be disclosed tothe Company under section 336 of the Securities and Futures Ordinance (the"SFO") (Chapter 571 of the Laws of Hong Kong) are as follows: Percentage to total Percentage Percentage issued to to No. of share total total capital of issued issuedName of shareholder Class of shares held the Company domestic H shares shares shares (%) (%) (%)China Datang Domestic 1,828,768,200 35.43 49 -Corporation shares Beijing Energy Domestic 671,792,400 13.01 18 -Investment (Group) shares Company Hebei Construction Domestic 671,792,400 13.01 18 -Investment Company shares Tianjin Jinneng Domestic 559,827,000 10.84 15 -Investment Company shares Templeton Asset H shares 187,280,320(L) 3.63(L) 13.09(L)Management Limited HSBC Halbis H shares 119,236,000(L) 2.31(L) 8.33(L)Partners (Hong Kong) Limited JP Morgan Chase & H shares 100,714,646(L) 1.95(L) 7.04(L)Co. 70,250,000(P) 1.36(P) 4.91(P) (L) = Long positions (S) = Short positions (P) = Lending pool 3. Dividends In accordance with the proposal made at the meeting of the Board held on 27March 2006 and approved at the annual general meeting of the Company held on 20June 2006, an annual dividend of RMB0.228 per share for year 2005 was declared,and that the dividends concerned would be distributed to shareholders of theCompany whose name appeared on the register of members of the Company on 19 May2006. The above-mentioned dividends have been distributed before 30 June 2006,among which domestic-share dividends were distributed in and paid by Renminbiwhile H-share dividends were distributed in Renminbi and paid by Hong Kongdollars. The Board does not recommend the payment of any interim dividend for year 2006. 4. Interests of directors and supervisors in share capital As at 30 June 2006, none of the Directors, supervisors, chief executive of theCompany or their respective associates had any interests and short positions inthe shares, underlying shares or debentures of the Company or any of itsassociated corporation (as defined in the SFO) that were required to be notifiedto the Company and The Stock Exchange of Hong Kong Limited pursuant to Divisions7 and 8 of Part XV of the SFO; or required to be recorded in the registermentioned in the SFO pursuant to section 352 of the SFO or otherwise required tobe notified to the Company and The Stock Exchange of Hong Kong Limited pursuantto the Model Code for Securities Transactions by Directors of Listed Issuersunder the Listing Rules. IV. PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES During the Period, the Company has not purchased, sold or redeemed any of itslisted securities. V. SIGNIFICANT EVENTS 1. The relevant authorisation given to the Board in respect of the issue of not more than 1 billion A shares of the Company was renewed for one more year at the 2005 annual general meeting, the H shares class meeting and the domestic shares class meeting of the Company, which were held on 20 June 2006. 2. At the 2005 annual general meeting held on 20 June 2006, it was approved by the shareholders for the Company to issue short-term debentures with principal amount of not more than RMB4 billion. VI. COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES To the knowledge of the Board, the Company has complied with all the codeprovisions in the Code on Corporate Governance Practices as set out in Appendix14 of the Listing Rules of The Stock Exchange of Hong Kong Limited (the "ListingRules") during the Period. VII. COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OFLISTED ISSUERS The Company has adopted the Model Code for Securities Transactions by Directorsof Listed Issuers as set out in Appendix 10 of the Listing Rules (the "ModelCode") as code of conduct for securities transactions by all Directors. Uponspecific enquiries made to the Directors and in accordance with informationprovided, the Board confirmed that all Directors have complied with theprovisions under the Model Code during the Period. VIII. AUDIT COMMITTEE In accordance with the Listing Rules, the Company has set up an Audit Committeewhich comprises 3 independent non-executive directors and 2 non-executivedirectors of the Company. The Audit Committee is responsible for reviewing theCompany's financial reporting procedures and internal controls. The Audit Committee has reviewed with the management of the Company theaccounting principles and methods adopted by the Company and its Subsidiaries.It has also discussed matters regarding internal controls and the interimfinancial statements, including the review of the financial statements for thesix months ended 30 June 2006. The Audit Committee considers that the 2006 interim financial reports of theCompany and its Subsidiaries have complied with the applicable accountingstandards, and that the Company has made appropriate disclosure thereof. By Order of the Board Zhai Ruoyu Chairman Beijing, the PRC, 9 August 2006 As at the date of this announcement, the Directors are: Zhai Ruoyu, Zhang Yi, Hu Shengmu, Fang Qinghai, Yang Hongming, Liu Haixia, GuanTiangang, Su Tiegang, Ye Yonghui, Tong Yunshang, Xie Songlin*, Xu Daping*, LiuChaoan*, Yu Changchun* and Xia Qing* * independent non-executive directors of the Company This information is provided by RNS The company news service from the London Stock Exchange