form6_k.htm

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


 For the month of August, 2010

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
 
Form 20-F
   X   
Form 40-F
      
  
 
 

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. )
 
Yes
      
No
   X   
  

(If "Yes" is marked, indicate below the file number assigned to registrant in connection with Rule 12g3-2(b): 82-__________. )
N/A

Huaneng Power International, Inc.
Huaneng Building,
4 Fuxingmennei Street,
Xicheng District,
Beijing, 100031 PRC


 
 
 


This Form 6-K consists of:

 
The 2010 interim report of Huaneng Power International, Inc. (the “Registrant”), made by the Registrant on August 11, 2010.
 
 

 
 
 

CONTENTS

2
Interim Results
2
Business Review for the First Half of the Year
5
Prospects for the Second Half of the Year
8
Management’s Discussion and Analysis (Prepared under IFRS)
19
Share Capital Structure
19
Purchase, Sale or Redemption of Shares
20
Major Shareholding Structure of the Company
21
Directors’ and Supervisors’ Right to Purchase Shares
21
Public Float
21
Dividends
21
Major Events
23
Corporate Governance
33
Review by the Audit Committee
33
Legal Proceedings
34
Documents for Inspection
 
Prepared in accordance with International Financial Reporting Standards
36
Condensed Consolidated Interim Balance Sheet (Unaudited)
38
Condensed Consolidated Interim Statement of Comprehensive Income (Unaudited)
40
Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
42
Condensed Consolidated Interim Statement of Cash Flow (Unaudited)
43
Notes to the Unaudited Condensed Consolidated Interim Financial Information
 
Prepared in accordance with PRC Accounting Standards
71
Balance Sheets (Unaudited)
73
Income Statements (Unaudited)
74
Cash Flow Statements (Unaudited)
76
Consolidated Statements of Changes in Equity (Unaudited)
78
Statements of Changes in Equity (Unaudited)
79
Notes to the Financial Statements (Unaudited)
156
Supplemental Information (Unaudited)

INTERIM RESULTS

The Board of Directors (the "Board") of Huaneng Power International, Inc. (the "Company") announces the unaudited operating results for the six months ended 30 June 2010 and a comparison with the operating results for the same period of 2009. For the six months ended 30 June 2010, the Company and its subsidiaries recorded consolidated operating revenue of RMB48.854 billion, representing an increase of 45.36% as compared to the same period of 2009. The profit attributable to equity holders of the Company was RMB1.932 billion, representing an increase of 3.32% as compared to the same period last year. The earnings per share were RMB0.16 and net asset value per share (excluding minority interests) was RMB3.39.

Please refer to the unaudited financial information below for details of the operating results.

BUSINESS REVIEW FOR THE FIRST HALF OF THE YEAR

During the first half of 2010, the Company overcame the pressure on costs brought about by the increase in fuel price and the adverse effects arising from the downward adjustment of capital market, and addressed the difficulties for its operation due to extreme climate changes by grasping the growth trend of the national economy and the favourable conditions where national electricity consumption continued to increase. The Company strived to attain productivity excellence, strengthen its profitability and enhance its corporate management. As a result, the Company achieved new developments in various aspects including production safety, cost control, energy saving and capital operation.

1.
Power Generation

During the first half of this year, the Company’s power plants within China achieved a total power generation of 118.836 billion kWh based on a consolidated basis, an increase of 38.01% over the same period of last year. Accumulated on-grid electricity sold amounted to 112.014

 
 
 


billion kWh. The increase in power generation of the Company was mainly attributable to the following reasons: (1) the Company has increased its sales efforts, thereby grasping the growth trend of the national economy in 2010 and the favourable conditions for substantial increase in the national power demand, expanding various marketing channels and increasing power generation; (2) under the impact of the global financial crisis, the national power demand for the first half year of 2009 was depressed. The base number of the power generation was relatively low, resulting in a relatively high growth in 2010 as compared to the same period of last year; and (3) the power generation contributed by the newly operating generating units and the newly acquired power plants during the second half year of 2009.

During the first half of 2010, the total power generation of Tuas Power Ltd. in Singapore accounted for a market share of 24.5%, an increase of 0.4 percentage point compared to 24.1% in the same period of last year.

2.
Cost Control

During the first half of 2010, the Company’s purchase cost of coal increased with the higher key coal contract price and market purchase price, which was considerably higher than those in the same period of last year. The Company adopted various measures including making projection and analysis of fuel market, optimizing the coal supply structure, increasing imported coal purchase volume and rationalizing inventories arrangements according to production requirements, with an aim to reducing average coal purchase prices.

3.
Energy Saving and Environmental Protection

The Company attaches great importance to energy saving and environmental protection work. All coal-fired generating units are equipped with flue-gas desulphurization facilities and the Company has strengthened the operation and maintenance management of flue-gas desulphurization facilities on coal-fired generating units. The Company is enhancing the capacity of desulphurization facilities in certain generating units to improve their desulphurization capability in order to ensure that sulfur dioxide emissions would not exceed the relevant standards under the situation where the quality of coal drops due to its limited supply.

4.
Project Development and Construction

During the first half of 2010, the gas co-generation expansion project of Beijing Co-generation Power Plant and the Phase II wind power project of Qidong Wind Power Plant of the Company obtained approval.

Generating unit No. 5 of Fuzhou Power Plant completed the 168-hour full-load trial run in July 2010. To date, the controlling generation capacity and the equity-based generation capacity of the Company are 50,033MW and 46,512MW respectively.
 
5. Capital Operation
   
1.
On 15 January 2010, the resolutions regarding the New A Share Issue (Original Proposal) and the New H Share Issue (Original Proposal) were considered and approved in writing at the 8th Meeting of the Sixth Session of the Board of Directors of the Company.
   
 
On 16 March 2010, relevant resolutions regarding the New Issue (Original Proposal) were approved at the 2010 First Extraordinary General Meeting, the 2010 First Class Meeting of Holders of A Shares and the 2010 First Class Meeting of Holders of H Shares, respectively.
   
 
On 26 July 2010, resolutions regarding the New A Share Issue (Revised Proposal) and the New H Share Issue (Revised Proposal) by the Company were considered and approved in writing at the 11th Meeting of the Sixth Session of the Board of Directors of the Company. The adjusted scheme was as follows: Target investors of the New A Share Issue (Revised Proposal) shall include not more than 10 designated investors including China Huaneng Group ("China Huaneng"). The target investor of the New H Share Issue (Revised Proposal) shall be China Hua Neng Group H.K. Ltd. ("Hua Neng HK"). All target subscribers shall subscribe in cash. The total shares to be issued under the New A Share Issue (Revised Proposal) shall not exceed 1,500 million shares and the total H shares issued shall not exceed 500 million shares. The subscription price of the shares to be issued under the New A Share Issue (Revised Proposal) shall not be less than 90% of the average trading price per A Share for the twenty trading days prior to the Price Determination Date, (i.e., 26 July 2010). The subscription price in concrete terms shall be ascertained on the bidding basis following the obtaining of approvals. The subscription price per share pursuant to the New H Share Issue (Revised Proposal) shall be based on the average trading price per H share as quoted for the twenty trading days prior to the Price Determination Date, with a premium of 3%.
   
 
Such resolutions shall be subject to approval at the Company’s general meeting and separate class meetings. Upon obtaining approvals at the Company’s general meeting and each class meetings, these resolutions shall replace the resolutions in relation to the New A
 
 
 
 

 
Share Issue (Original Proposal) and the New H Share Issue (Original Proposal) passed at the Company’s 2010 First Extraordinary General Meeting, 2010 First Class Meeting for holders of A Shares and 2010 First Class Meeting for holders of H Shares.
   
 
The New A Share Issue (Revised Proposal) and the New H Share Issue (Revised Proposal) shall be implemented upon obtaining the approval from the China Securities Regulatory Commission ("CSRC") and the implementation shall be based on the resolutions as ultimately approved by the CSRC. Pursuant to the requirements of applicable laws, the New Issue (Revised Proposal) shall also obtain approvals from the relevant government authorities on matters related to the New Issue (Revised Proposal).
   
2.
On 31 December 2009, the Company entered into an Equity Interest Transfer Contract with ShanDong Electric Power Corporation and ShanDong Luneng Development Group Company Limited for acquiring various power plants (together with their ancillary coal mines), marine transportation facilities and port assets owned by ShanDong Electric Power Corporation and ShanDong Luneng Development Group. The acquisition is being vetted by the relevant government authorities. The target assets of the acquisition will fully capitalise the advantages of joint operation of coal enterprises and power enterprises, thus providing long-term stable income for the Company. The acquisition also brings about the combined synergy effect from the facilities of coal, power and harbour, which is conducive to cultivate new profit growth points of the Company.

PROSPECTS FOR THE SECOND HALF OF THE YEAR

The impact of the international financial crisis is expected to persist through the second half of 2010. Even though the economy of China is expected to be developed following the macroeconomic control policy, there are still various uncertainties existed.

As regards power market, during the first half of 2010, the nationwide power generation achieved swift growth as a result of continuous economic recovery. The power generation of nationwide large-scale power plants increased by 19.3% compared to the same period of last year. The coal-fired power generation increased by 21.90% compared to the same period of last year. According to the forecast of China Electricity Council, the estimated nationwide power generation is expected to increase by approximately 12%, and the average utilization hours of coal-fired power generation equipment will exceed 5,000 hours. Most of the Company’s power plants located along riverside or seaside in southeast China, where the power market condition is better than that of the nationwide level as a whole. In addition to the completion of annual plan in power generation for domestic units of 230 billion kWh set out at the beginning of this year, the Company strives to achieve the coal-fired power generation equipment utilization hours to be over 5,200 hours. However, power market in the second half of this year remains uncertainties, following the continuous increase of power supply, the realization of macroeconomic adjustments, the pace of economic growth is expected to slowdown, and the power generation is expected to slowdown gradually as well. At the same time, the Company will comply with higher requirement in future development projects after the government’s restructuring of new energy sector and vigorous promotion of clean energy and renewable energy development.

As regards coal market, the market price remained at high level since the beginning of the year. However, as a result of the significant increase in hydropower generation, the policy adjustments on high energy consumption industries by the State and implementation of certain policies in monitoring the performance of key coal supply contracts by the government in late June, the market price of power coal decreased slightly. At present, coal inventory level of power plants is relatively sufficient and the power coal supply is getting better. In the second half of this year, following the end of flood season, the coal-fired power generation will increase while the effect of the State’s macroeconomic adjustments is expected to realize. The uncertainties on intense supply and price increase will also increase.

As regards energy saving and environmental protection compliance requirements, the Company always strictly complies with the government’s policies and regulations on energy saving and environmental protection, applying advanced technologies to develop advanced, large capacity and effective coal-fired generating units and further strengthens the management of the existing environmental protection facilities of generating units, so as to effectively reduce pollutant emission and to control costs on energy saving and environmental protection.

As regards capital market, the State will maintain continuity and stability of macroeconomic policy, and in the meantime make efforts to increase the pertinence and flexibility of such policy. This requires the Company to have good judgment on the influence, schedule and main focus of the policy. The Company would need to actively expand its financing channels in order to secure funds for its expansion.

The Company will fully leverage its own advantages in terms of resources, scale, geographical coverage and costs. It will actively expand the room for development, strengthen marketing work, strive to exceed the annual power generation target, strictly control costs and increase the Company’s profitability. Meanwhile, the Company will actively implement the "green development" initiatives; the structural adjustment will be proceeded at a faster pace; the coal-fired capacity structure will be further streamlined; generating units with high capacity, high efficiency and low emission, large-scale coal-power co-operation, joint operation of coal enterprises and power enterprises and efficient co-generation projects will be constructed at a faster pace; the operating efficiency of the coal-fired generating units will be improved; the clean energy

 
 
 

development will be further enhanced; and we strive to be a green company, which is efficient, energy-saving, clean and environmental-friendly.

The major tasks of the Company for the second half of 2010 include:

1.
to strengthen corporate governance, improve internal control, and maximize the shareholders’ interests;
   
2.
to strengthen safe production and management and ensure stable operation of its generating units;
   
3.
to strengthen the sales force, achieve the annual power generation target of 230 billion kWh for the domestic generating units; strive to achieve more than 5,200 hours of annual utilization of its coal-fired generating units;
   
4.
to enlarge supply channels, optimize the purchase structure, enhance coal self-sufficiency capacity, and to control fuel purchase prices;
   
5.
to continue to promote energy saving and emissions reduction work and secure its leading position in energy consumption indices among the industry players;
   
6.
to actively push forward preliminary work of projects; further optimize power structure and adjust their deployment by making use of the "Twelfth Five-year Plan" of power development; actualize effective, proper and orderly development; and further enhance the Company’s profitability;
   
7.
to strengthen the management of infrastructure construction, commence the operation of a batch of 1,000MW and 600MW ultra-supercritical coal-fired generating units, and achieve a wind power operating capacity of 300MW; and
   
8.
to actively explore financing channels, complete the non-public issue of A Shares and H Shares during the year, and further improve the Company’s capital structure.

MANAGEMENT’S DISCUSSION AND ANALYSIS (PREPARED UNDER IFRS)

I.
Comparison and Analysis of Operating Results

Comparison of operating results between the first half of 2010 and 2009.

Summary

According to the Company’s preliminary statistics, for the six months ended 30 June 2010, the Company and its subsidiaries’ total domestic power generation on a consolidated basis amounted to 118.836 billion kWh, representing an increase of 38.01% over the same period in 2009. The Company’s total on-grid electricity sold amounted to 112.014 billion kWh.

The increase in the Company and its subsidiaries’ power generation was mainly due to the following reasons:

1.
the Company has increased its sales efforts, thereby grasping the growth trend of the national economy in 2010 and the favourable conditions for substantial increase in the national electricity demand, expanding various marketing channels and increasing power generation;
   
2.
under the impact of the global financial crisis, the national electricity demand for the first half year of 2009 was depressed. The base number of the power generation was relatively lower, resulting in a relatively higher growth in 2010 as compared to the same period of last year; and
   
3.
the electricity generation contributed by the newly operating generating units and the newly acquired power plants during the second half year of 2009.

The power generation and on-grid electricity sold by each of the Company’s domestic power plants in the first half of 2010 are listed below (in billion kWh):

 
 
 


Domestic Power Plant
Power
generation in
the first half
year of 2010
Power
generation in
the first half
year of 2009
Change
On-grid
electricity sold
for the first
half year
of 2010
         
Dalian
4.160
3.739
11.26%
3.968
Dandong
1.927
1.962
-1.78%
1.835
Yingkou
4.918
4.394
11.93%
4.624
Yingkou Cogeneration
1.811
—
—
1.684
Huade Wind Power
0.074
—
—
0.073
Shang’an
6.564
5.925
10.78%
6.174
Pingliang
4.017
2.398
67.51%
3.804
Beijing Cogeneration
2.312
1.963*
17.78%
2.033
Yangliuqing Cogeneration
3.045
2.760*
10.33%
2.832
Yushe
2.490
2.095
18.85%
2.300
Dezhou
7.610
6.678
13.96%
7.179
Jining
2.495
1.082
130.59%
2.313
Xindian
1.645
1.723
-4.53%
1.548
Weihai
1.903
1.684
13.00%
1.791
Rizhao Phase II
3.771
2.989
26.16%
3.585
Qinbei
6.673
5.693
17.21%
6.312
Nantong
4.057
3.382
19.96%
3.881
Nanjing
1.796
1.548
16.02%
1.695
Taicang
5.849
5.518
6.00%
5.508
Huaiyin
3.981
3.177
25.31%
3.749
Jinling Combined-cycle
0.941
1.314
-28.39%
0.919
Jinling Coal-fired
3.297
—
—
3.135
Qidong Wind Power
0.114
0.089*
28.09%
0.112
Shidongkou First
3.720
3.329
11.75%
3.504
Shidongkou Second
3.041
3.166
-3.95%
2.922
Shanghai Combined-cycle
0.533
0.116
359.48%
0.520
Luohuang
6.301
4.639
35.83%
5.800
Changxing
0.866
0.692
25.14%
0.797
Yuhuan
10.338
8.890
16.29%
9.851
Yueyang
2.697
1.897
42.17%
2.509
Jinggangshan
3.772
1.274
196.08%
3.593
Fuzhou
2.844
3.770
-24.56%
2.707
Shantou Coal-fired
3.649
3.033
20.31%
3.413
Haimen
5.625
—
—
5.344
         
Total
118.836
86.107
38.01%
112.014


*
The figures relating to the power generation of Beijing Co-generation Power Plant, Yangliuqing Co-generation Power Plant and Qidong Wind Power Plant for the first half year of 2009 are included for reference only and were not accounted for in the Company’s total power generation for the first half year of 2009.

The accumulated power generation of Tuas Power Limited in Singapore for the first half year of 2010 accounted for a market share of 24.5% in Singapore, representing an increase of 0.4 percentage points as compared to 24.1% of the same period last year.

The increase of the Company’s power generation from the same period of last year contributed to the increase of operating revenue by 45.36%. As a result of increase in fuel cost, the expansion of operating scale of the Company and the increase of power generation, the current period operating expenses of the Company increased by 49.45% as compared to the same period of last year. As a whole, profit attributable to equity

 
 
 

holders of the Company for the first half of 2010 amounted to RMB1.932 billion, representing a 3.32% increase over RMB1.870 billion for the same period of last year. The increase of net profit was mainly attributable to the expansion of operating scale of the Company.

 
1.
Operating revenue and sales tax

Operating revenue mainly represents revenue received from electricity sold. For the six months ended 30 June 2010, the consolidated operating revenue of the Company and its subsidiaries amounted to RMB48.854 billion, representing a 45.36% increase over RMB33.610 billion for the same period of last year.

The increase in operating revenue is mainly attributable to the increase in power generation. The new generating units and the newly acquired power plants contributed RMB6.384 billion and RMB2.259 billion, respectively, to the increase in the consolidated revenue of the Company.

Sales tax mainly consists of value-added tax surcharges. According to relevant administrative regulations, such surcharges include the City Construction Tax and Education Tax calculated at prescribed percentages of the amount of the value-added tax paid. Such surcharges are currently not applicable to direct foreign investments approved by the government, hence certain power plants of the Company are not subject to such surcharges. For the six months ended 30 June 2010, the sales tax decreased to RMB62.0 million, by RMB17.0 million from RMB79.0 million for the same period of last year.

 
2.
Operating expenses

For the six months ended 30 June 2010, the total operating expenses of the Company and its subsidiaries increased by 49.45% to RMB44.577 billion from RMB29.827 billion for the same period of last year.

The increase was mainly attributable to the increase in fuel prices and power generation amount, as well as the expansion of operating scale of the Company. The operations of new generating units contributed to an increase of consolidated operating expenses of RMB5.595 billion while the operations of newly acquired power plants contributed to an increase of consolidated operating expenses of RMB2.140 billion.

2.1
Fuel cost

Fuel cost represents a major portion of the operating expenses of the Company and its subsidiaries. Such cost increased by 58.46% to RMB31.749 billion for the first half of 2010 from RMB20.036 billion for the same period of last year. The increase in fuel cost was primarily due to the increase in fuel prices and power generation volume, as well as the expansion of operating scale of the Company. Operations of new generating units accounted for RMB4.425 billion of the increase in fuel cost, while the operations of newly acquired power plants contributed to an increase of fuel cost of RMB1.316 billion.

2.2
Depreciation expenses

Depreciation expenses of the Company and its subsidiaries increased by 27.43% to RMB5.226 billion for the first half of 2010 from RMB4.101 billion for the same period of last year. The increase of depreciation expenses is mainly due to the expansion of operating scale of the Company.

2.3
Labor costs

Labor costs include salaries to employees and contributions to government agencies for employees’ housing fund, medical insurance, pension, and unemployment insurance as well as training expenses, etc. Labor costs of the Company and its subsidiaries amounted to RMB1.819 billion for the first half of 2010, representing an increase of RMB257 million from RMB1.562 billion for the same period of last year, which are primarily due to the increase in labor costs of operations of new generating units and newly acquired power plants.

2.4
Other operating expenses (including purchase of electricity and service fees on power transmission of Huaneng International Power Development Corporation ("HIPDC") )

Other operating expenses (including purchase of electricity and service fees on power transmission of HIPDC) of the Company and its subsidiaries amounted to RMB4.822 billion for the first half of 2010, representing an increase of RMB1.459 billion from RMB3.363 billion for the first half of 2009. Operations of new generating units contributed to an increase of RMB211million while purchase of electricity by Tuas Power increased by RMB1.129 billion. The increase of electricity purchased was mainly attributable to the increase of both the purchase volume and unit purchase price.

 
 
 

3.
Financial expenses

The consolidated net financial expenses of the Company and its subsidiaries for the first half of 2010 amounted to RMB2.309 billion, representing an increase of RMB65 million from RMB2.244 billion for the same period of last year. The increase was primarily attributable to the expensing instead of capitalizing interest upon commercial operation of new generating units. The operations of new generating units accounted for RMB498 million of the increase, while the increase of exchange gains after netting bank charges was RMB195 million.

4.
Share of profits of associates

The share of profits of associates of the Company and its subsidiaries for the first half of 2010 was RMB378 million, representing a decrease of RMB8 million from RMB386 million for the same period of last year.

5.
Enterprise income tax (“EIT”)

For the first half of 2010, the Company and its subsidiaries recorded a consolidated EIT expense of RMB422 million, representing an increase of RMB367 million from an EIT expense of RMB55 million for the same period of last year. The increase in EIT was mainly due to the increase of net profit for the first half of 2010 and the utilization of unrecognized tax losses of previous year during the same period of last year.

6.
Net profit attributable to equity holders of the Company (excluding non-controlling interests)

The net profit attributable to equity holders of the Company amounted to RMB1.932 billion for the first half of 2010, representing an increase of 3.32% from RMB1.870 billion for the same period of last year. The increase was mainly attributable to the expansion of operation scale of the Company.

7.
Comparison of financial positions

At 30 June 2010, total assets of the Company and its subsidiaries amounted to RMB206.565 billion, representing an increase of 4.39% from the RMB197.887 billion as at 31 December 2009.

The capital expenditure for infrastructure construction and renovation projects of the Company and its subsidiaries for the first half of 2010 amounted to RMB9.351 billion, which was mainly financed by internal funding, debts financing and cash flows generated from operating activities.

8.
Major financial position ratios

Calculation formula of the financial ratios:

Ratio of liabilities and
 shareholders’ equity
=
balance of liabilities as at period end / balance of shareholders’ equity (excluding non-controlling interests) as at period end
     
Current ratio
=
balance of the current assets as at period end/ balance of current liabilities as at period end
     
Quick ratio
=
(balance of current assets as at period end- net amounts of inventories as at period end) / balance of current liabilities as at period end
     
Multiples of interest earned
=
(profit before income tax expense + interest expense) / interest expenditure (inclusive capitalized interest)


 
 
 


 
The Company and its subsidiaries
Item
As at
30 June 2010
As at
31 December 2009
     
Ratio of liabilities and shareholders’ equity
3.84
3.50
Current ratio
0.43
0.41
Quick ratio
0.35
0.34
     
Item
For the
six months ended
30 June 2010
For the
six months ended
30 June 2009
     
Multiples of interest earned
1.68
1.46

The ratio of liabilities and shareholders’ equity increased slightly compared to the beginning of the year, which was mainly attributable to the increase in loans raised for acquisition and construction. The current ratio and quick ratio maintain at similar level as the beginning of the year.

The multiples of interest earned increased, which was mainly attributable to the increase of net profit for the first half of 2010.

As at 30 June 2010, the Company and its subsidiaries have a negative working capital balance of RMB38.485 billion. Based on the successful financing history of the Company, the undrawn banking facilities available to the Company and its good credit rating, the Company believes that it will be able to meet its liabilities as and when they fall due and to secure the funds required for operations. In addition, the Company continued to make use of its favorable credit rating and minimized interest expense by drawing short-term borrowings which bore relatively lower interest rate.

II.
Liquidity and Cash Resources

 
1.
Liquidity

Item
For the
six months end
30 June 2010
For the six
months ended
30 June 2009
Change
 
(RMB in billion)
(RMB in billion)
(%)
       
Net cash provided by operating activities
9.038
6.385
41.55%
Net cash used in investing activities
(11.578)
(9.971)
16.12%
Net cash provided by financing activities
3.130
4.056
-22.83%
Exchange (loss)/gain
(0.013)
0.010
-230.00%
       
Net increase in cash and cash equivalents
0.577
0.480
20.21%
Cash and cash equivalent, beginning of the period
5.227
5.567
-6.11%
       
Cash and cash equivalent as at the end of the period
5.804
6.047
-4.02%


The net cash provided by operating activities amounted to RMB9.038 billion for the first half of 2010, which was higher than that of same period of last year mainly due to the expansion of operation scale of the Company and the increase in operating revenue.

Net cash used in investing activities mainly consisted of capital expenditures for projects under construction and the prepayment for acquisition of subsidiaries.

The main financing activities of the Company were mainly repayments of the loans and redemption of short-term bonds, as well as new project financing activities. During the first half of 2010, the Company repaid loans of RMB29.858 billion and redeemed short-term bonds of RMB10 billion, drawdown new loans of RMB41.025 billion, and issued short-term bonds of RMB4.980 billion.

 
 
 

As at 30 June 2010, cash and cash equivalents of the Company and its subsidiaries denominated in RMB, Singapore dollar, U.S. dollar and Japanese Yen measured at RMB equivalent are RMB2.855 billion, RMB1.690 billion, RMB1.253 billion and RMB6 million, respectively.

 
2.
Capital expenditure and cash resources

2.1
Capital expenditures for infrastructure construction and renovation projects

The capital expenditures for infrastructure construction and renovation projects for the first half of 2010 amounted to RMB9.351 billion, including RMB674 million for Yueyang expansion project, RMB926 million for Qinbei expansion project, RMB615 million for Haimen project, RMB347 million for Jinggangshan expansion project, RMB205 million for Jinling Coal-fired project, RMB222 million for Shanghai generation project, RMB157 million for Jining Cogeneration project, RMB268 million for Yingkou Cogeneration project, RMB729 million for Fuzhou expansion project, RMB670 million for Weihai expansion project, RMB302 million for Pingliang expansion project, RMB486 million for Zuoquan project and RMB 786 million for Jiuquan project. Expenditures on construction for overseas operations and other domestic power plants amounted to RMB504 million and RMB1.417 billion, respectively, and expenditures on renovation amounted to RMB1.043 billion.

The above capital expenditures were sourced mainly from internal funding, debts financing and cash flows provided by operating activities.

The Company expects to incur significant capital expenditures in the next few years. During the course, the Company will actively improve the project planning process on a commercially viable basis. The Company will also actively develop newly planned projects to pave the way for its long-term development. The Company expects to finance the above capital expenditures through internal funding, debts and equity financing and cash flows from operating activities.

2.2
Cash resources and anticipated financing costs

The Company expects to finance its capital expenditures and acquisition costs primarily from internal funds, cash flows from operating activities as well as future debts and equity financing.

Good credit status equips the Company with strong financing capabilities. As at 30 June 2010, the Company and its subsidiaries had undrawn banking facilities of over RMB100 billion.

Upon approval by the general meeting of shareholders, on 24 March 2010, the Company issued unsecured short-term bonds amounting to RMB5 billion bearing coupon rates of 2.55% per annum. These bonds are denominated in RMB, issued at par and have a term of 270 days. Effective interest rate on these bonds is 3.11% per annum.

As at 30 June 2010, total interest-bearing debts of the Company and its subsidiaries amounted to approximately RMB135.066 billion, including current portion of approximately RMB47.764 billion. These debts included borrowings denominated in U.S. dollar of approximately US$995 million, Singapore dollar of approximately S$3.085 billion, Euro of approximately Û100 million and Japanese Yen of approximately JPY238 million. The current portions of foreign currency denominated borrowings were US$135 million, S$48 million, Û9 million and JPY238 million, respectively. Besides the debts denominated in RMB, the remaining interest-bearing debts included approximately RMB2.037 billion of fixed-rate borrowings with an average interest rate of 4.55%, representing 9.05% of total interest-bearing debts excluding borrowings denominated in RMB, and approximately RMB20.478 billion floating-rate borrowings with an average interest rate of benchmark rate plus 1.46%, representing 90.95% of total interest-bearing debts excluding borrowings denominated in RMB.

As at 30 June 2010, the long-term loans of the Company and its subsidiaries mainly comprised fixed-rate loans (with annual interest rates ranging from 2.00% to 7.05%). As at 30 June 2010, in accordance with original loan agreements, floating-rate loans of the Company and its subsidiaries included balances of US$816 million (with an interest rate ranging from libor+0.075% to libor+1%), S$3.074 billion (with interest rates of sibor+1.65% or DBS prime rate), and JPY238 million (with an interest rate of libor+0.30%).

2.3
Other financing requirements

The objective of the Company is to bring sustainable and stable returns to the shareholders. In line with this objective, the Company follows a proactive, stable and balanced dividend policy. On 22 June 2010, the Company declared a cash dividend of RMB0.21 per ordinary share (tax included), with total dividends amounting to approximately RMB2.528 billion, as approved in the 2009 shareholders’ general meeting. For the six months ended 30 June 2010, the Company has not settled the dividends yet.

 
 
 


2.4
Maturity of long-term loans

Unit: RMB in billion

Project
within 1 year
1 ~ 2 years
2 ~ 3 years
3 ~ 4 years
4 ~ 5 years
           
Planned repayment of principal
5.762
12.541
14.976
6.050
4.043


III.
Performance and Prospects of Significant Investments

On 22 April 2003, the Company paid RMB2.390 billion to acquire 25% equity interest in Shenzhen Energy Group. In December 2007, the Company acquired 200 million shares of Shenzhen Energy, a subsidiary of Shenzhen Energy Group. In addition, Shenzhen Energy acquired most of the assets of Shenzhen Energy Group by issuing and placing new shares and Shenzhen Energy Group will be liquidated when appropriate. Upon its liquidation, the Company will hold directly a total of 25.01% equity interest in Shenzhen Energy. This investment brought the Company a share of profit of RMB236 million for the first half of 2010 under the International Financial Reporting Standards. The Company expects this investment will provide reasonable returns to the Company in the future.

As at 31 December 2006, the Company directly held 60% equity interest in Sichuan Hydropower. In January 2007, China Huaneng increased its capital investment in Sichuan Hydropower by RMB615 million which resulted the decrease of the Company’s equity interest in Sichuan Hydropower to 49%. China Huaneng took the place of the Company becoming the controlling shareholder of Sichuan Hydropower. This investment brought a share of profit of RMB129 million for the first half year of 2010. The Company expects this investment will provide reasonable returns to the Company in the future.

IV.
Employee Benefits Policies

As at 30 June 2010, the Company and its subsidiaries had 33,365 employees. During this reporting period, there was no significant change with respect to remuneration policies and training programs of the Company.

V.
Guarantees on Loans and restricted assets

As at 30 June 2010, the Company provided guarantees for the long-term loans of SinoSing Power, a wholly-owned subsidiary of the Company, which amounted to approximately RMB14.825 billion.

As at 30 June 2010, the details of pledged loans of the Company and its subsidiaries were as follows:

1.
For the first half of 2010, the Company pledged part of its receivables against short-term bank loans. As at 30 June 2010, the balance of the loans was approximately RMB1.596 billion and the book value of the receivables pledged was approximately RMB1.673 billion.
   
2.
As at 30 June 2010, the Company and its subsidiaries secured short-term loans of RMB218 million from discounting notes receivable.

As at 30 June 2010, restricted bank deposits amounted to RMB239 million, which were mainly deposits for letters of credits.

The Company had no material contingent liabilities as at 30 June 2010.

VI.
Risk factors

The impact of the international financial crisis is expected to persist through the second half of 2010. Even though the economy of China is expected to be developed following the macroeconomic control policy, there are still various uncertainties existed.

As regards power market, during the first half of 2010, the nationwide power generation achieved swift growth as a result of continuous economic recovery. The power generation of nationwide large-scale power plants increased by 19.3% compared to the same period of last year. The coal-fired power generation increased by 21.90% compared to the same period of last year. According to the forecast of China Electricity Council, the estimated nationwide power generation is expected to increase by approximately 12%, and the average utilization hours of coal-fired power generation equipment will exceed 5,000 hours. Most of the Company’s power plants located along riverside or seaside in southeast China, where the power market condition is better than that of the nationwide level as a whole. In addition to the completion of

 
 
 

annual plan in power generation for domestic units of 230 billion kWh set out at the beginning of this year, the Company strives to achieve the coal-fired power generation equipment utilization hours to be over 5,200 hours. However, power market in the second half of this year remains uncertainties, following the continuous increase of power supply, the realization of macroeconomic adjustments, the pace of economic growth is expected to slowdown, and the power generation is expected to slowdown gradually as well. At the same time, the Company will comply with higher requirement in future development projects after the government’s restructuring of new energy sector and vigorous promotion of clean energy and renewable energy development.

As regards coal market, the market price remained at high level since the beginning of the year. However, as a result of the significant increase in hydropower generation, the policy adjustments on high energy consumption industries by the State and implementation of certain policies in monitoring the performance of key coal supply contracts by the government in late June, the market price of power coal decreased slightly. At present, coal inventory level of power plants is relatively sufficient and the limited supply of power coal is eased. In the second half of this year, following the end of flood season, the coal-fired power generation will increase while the effect of the State’s macroeconomic adjustments is expected to realize. The uncertainties on intense supply and price increase will also increase.

As regards energy saving and environment protection compliance requirements, the Company always strictly complies with the government’s policies and regulations on energy saving and environment protection, applying advanced technologies to develop advanced, large capacity and effective coal-fired generating units and further strengthens the management of the existing environmental protection facilities of generating units, so as to effectively reduce pollutant emission and to control costs on energy saving and environmental protection.

As regards capital market, the State will maintain continuity and stability of macroeconomic policy, and in the meantime make efforts to increase the pertinence and flexibility of such policy. This requires the Company to have good judgment on the influence, schedule and main focus of the policy. The Company would need to actively expand its financing channels in order to secure funds for its expansion.

As regards financial risks, the power sector in which the Company operates is capital intensive and as such its assets and liabilities are relatively substantial. The Company is exposed to interest rate and exchange rate risks arising from the State’s adjustment to monetary policies and the changes and volatility in both domestic and international financial market.

i)
Interest rate risk

Debts denominated in RMB account for a majority of the Company’s debts. The change of benchmark lending interest rate will directly affect on the Company’s borrowing costs. Currently, the chance that the RMB interest rate increase is low, hence may not have material adverse impact on its short-term finance costs. Foreign currency debts were principally denominated in U.S. dollar and most of which were at floating interest rates. Low interest rates are predicted to remain for some time, hence may not have material adverse impact on its short-term finance costs.

The Company has entered into interest rate swap contracts to hedge against its exposures to interest rate risks of loans denominated in Singapore dollar and in U.S. dollar.

ii)
Exchange rate risk

A portion of the borrowings of the Company denominated in U.S. dollar, Euro and Japanese Yen are yet to mature, thus fluctuations in foreign exchange rates will result in exchange gain or loss. As the portion of foreign currency denominated borrowings of the Company remains low, the management does not expect any material adverse impact caused by recent fluctuations of exchange rates.

Some exchange fluctuation is expected between Singapore dollar and U.S. dollar. Tuas Power has entered into forward exchange contracts to hedge against its exposure to potential exchange rate risks.

The Company will mitigate interest rate risk through reinforcing capital management, utilizing capital effectively and keep expanding funding channels. The Company will also keep a close watch on the fluctuations of foreign exchange market. The Company is confident about leveraging its advantages to improve risk identification, analysis, and reporting as well as control mechanism, proactively reacting to changes in money and currency markets, and controlling interest rate risks and exchange rate risks.

SHARE CAPITAL STRUCTURE

As at 30 June 2010, total issued share capital of the Company amounted to 12,055,383,440 shares, of which 9,000,000,000 shares were domestic shares, representing 74.66% of the total issued share capital of the Company, and 3,055,383,440 shares were foreign shares,

 
 
 

representing 25.34% of the total issued share capital of the Company. In respect of the foreign shares, China Huaneng through its wholly owned subsidiary, China Hua Neng Group Hong Kong Limited, held 20,000,000 shares, representing 0.17% of the total issued share capital of the Company. In respect of domestic shares, HIPDC owned a total of 5,066,662,118 shares, representing 42.03% of the total issued share capital of the Company, while China Huaneng held 1,055,124,549 shares, representing 8.75% of the total issued share capital of the Company. Other domestic shareholders held a total of 2,878,213,333 shares, representing 23.88% of the total issued share capital of the Company.

PURCHASE, SALE OR REDEMPTION OF SHARES

The Company and its subsidiaries did not sell any other types of its securities and did not purchase or redeem its own shares or other securities in the first half of 2010.

MAJOR SHAREHOLDING STRUCTURE OF THE COMPANY

The following table summaries the shareholdings of the top ten shareholders of the Company as at 30 June 2010:

Name of Shareholders
Total
Shareholdings
Percentage of
shareholding
in total issued
shares
   
(%)
     
Huaneng International Power Development Corporation
5,066,662,118
42.03
China Huaneng Group
1,075,124,549
8.92
Hebei Construction & Investment Group Co., Ltd*
603,000,000
5.00
Jiangsu Provincial Investment & Management Limited
 Liability Company
416,500,000
3.45
Fujian Investment Enterprise Holdings Limited
374,466,667
3.11
Liaoning Energy Investment (Group) Limited Liability Company
332,913,333
2.76
Dalian Municipal Construction Investment Company Limited*
301,500,000
2.50
Nantong Investment & Management Limited Company
92,188,035
0.76
Horizon Asset Management, Inc.
72,224,800
0.60
Minxin Group Limited
72,000,000
0.60

*
The former Hebei Provincial Construction Investment Company has been reformed to Hebei Construction & Investment Group Co., Ltd.
   
*
The former Dalian Municipal Construction Investment Company has been reformed to Dalian Municipal Construction Investment Company Limited.

 
DIRECTORS’ AND SUPERVISORS’ RIGHT TO PURCHASE SHARES

The Company has adopted a code in relation to the securities transactions by the directors and supervisors with the standard not lower than that of the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited ("Listing Rules"). Following enquiries made by the Company, all Directors and Supervisors confirmed that they have complied with the Code throughout the first half of 2010.

As at 30 June 2010, none of the directors, chief executive officer or supervisors of the Company had any interest or short position in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the definition of Part XV of the Securities and Futures Ordinance ("SFO") which was required to be notified to the Company and the Stock Exchange of Hong Kong Limited ("Hong Kong Stock Exchange") pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short position which any such Director, chief executive officer or Supervisor is taken or deemed to have under such provisions of the SFO) or which was required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which was otherwise required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies as contained in Appendix 10 to the Listing Rules.
 
 
PUBLIC FLOAT

 
 
 
 
As at the date of this report, the Company has maintained the prescribed public float under the Listing Rules and as agreed with the Hong Kong Stock Exchange, based on the information that is publicly available to the Company and within the knowledge of the directors of the Company.

DIVIDENDS

It was resolved by the Board not to distribute dividends for the first half of 2010.

MAJOR EVENTS

1.
On 15 January 2010, the resolutions regarding the New A Share Issue (Original Proposal) and the New H Share Issue (Original Proposal) were considered and approved in writing at the 8th Meeting of the Sixth Session of the Board of Directors of the Company.
   
 
On 16 March 2010, resolutions regarding the New Issue (Original Proposal) were approved at the 2010 First Extraordinary General Meeting, the 2010 First Class Meeting of Holders of A Shares and the 2010 First Class Meeting of Holders of H Shares, respectively.
   
 
On 26 July 2010, resolutions regarding the New A Share Issue (Revised Proposal) and the New H Share Issue (Revised Proposal) by the Company were considered and approved in writing at the 11th Meeting of the Sixth Session of the Board of Directors of the Company. The adjusted scheme was as follows: Target investors of the New A Share Issue (Revised Proposal) shall include not more than 10 designated investors including China Huaneng. The target investor of the New H Share Issue (Revised Proposal) shall be Hua Neng HK. All target subscribers shall subscribe in cash. The total shares to be issued under the New A Share Issue (Revised Proposal) shall not exceed 1,500 million shares and the total H shares issued shall not exceed 500 million shares. The subscription price of the shares to be issued under the New A Share Issue (Revised Proposal) shall not be less than 90% of the average trading price per A Share for the twenty trading days prior to the Price Determination Date, i.e. 26 July 2010. The subscription price in concrete terms shall be ascertained on the bidding basis following the obtaining of approvals. The subscription price per share pursuant to the New H Share Issue (Revised Proposal) shall be based on the average trading price per H share as quoted for the twenty trading days prior to the Price Determination Date, with a premium of 3%.
   
 
Such resolutions shall be subject to approval at the Company’s general meeting and separate class meetings. Upon obtaining approvals at the Company’s general meeting and each Class Meetings, these resolutions shall replace the resolutions in relation to the New A Share Issue (Original Proposal) and the New H Share Issue (Original Proposal) passed at the Company’s 2010 First Extraordinary General Meeting, 2010 First Class Meeting for holders of A Shares and 2010 First Class Meeting for holders of H Shares.
   
 
The New A Share Issue (Revised Proposal) and the New H Share Issue (Revised Proposal) shall be implemented upon obtaining the approval from the CSRC and the implementation shall be based on the resolutions as ultimately approved by the CSRC. Pursuant to the requirements of applicable laws, the New Issue (Revised Proposal) shall also obtain approvals from the relevant government authorities on matters related to the New Issue (Revised Proposal).
   
2.
On 31 December 2009, the Company entered into an Equity Interest Transfer Contract with ShanDong Electric Power Corporation and ShanDong Luneng Development Group Company Limited for acquiring various power plants (together with their ancillary coal mines), marine transportation facilities and port assets owned by ShanDong Electric Power Corporation and ShanDong Luneng Development Group. The acquisition is being vetted by the relevant government authorities. The target assets of the acquisition will fully capitalise the advantages of joint operation of coal enterprises and power enterprises, thus providing long-term stable income for the Company. The acquisition also brings about the combined synergy effect from the facilities of coal, power and harbour, which is conducive to cultivate new profit growth points of the Company.

CORPORATE GOVERNANCE

The Company has been stressing the importance of corporate governance through promoting innovation on the Company’s system management and strengthening the establishment of the Company’s system. It strives to enhance the transparency of the Company’s corporate governance standards and to maintain high-quality corporate governance on an ongoing basis. The Company insists on adopting the principle of "maximizing the benefits of the Company and of all shareholders" as the starting point and treats all shareholders fairly to strive for the generation of long-term, stable and growing returns for shareholders.

 
 
 


(a)
Code of Corporate Governance

In recent years, the Company adopted the following measures in order to strengthen corporate governance and enhance the Company’s operation quality:

 
(1)
Enhancing and improving corporate governance

In addition to complying with the provisions of the applicable laws, as a public company listed in three markets both domestically and internationally, the Company is subject to the regulations of the securities regulatory authorities of the three listing places and the supervision of investors at-large. Accordingly, our fundamental principles are to adopt a corporate governance structure that balances and coordinates the decision-making powers, supervisory powers and operating powers, to act with honesty and integrity, and to comply with the law and operate in accordance with the law.

Over the past years, the Company’s Board has pursuant to the development needs formulated and implemented the Rules and Procedures of the Board of Directors Meetings; the Rules and Procedures of the Supervisory Committee Meetings; the Detailed Rules on the Work of the General Manager; the Detailed Rules on the Work of the Strategy Committee of the Board of Directors; the Detailed Rules on the Work of the Audit Committee of the Board of Directors; the Detailed Rules on the Work of the Nomination Committee of the Board of Directors; the Detailed Rules on the Work of the Remuneration and Appraisal Committee of the Board of Directors; the System on Work of Independent Directors, the System on Work of Independent Directors on the annual report and the Work Regulations on Annual Report for the Audit Committee, and amended the Articles of Association according to the applicable laws and the Company’s need.

 
(2)
Enhancing and improving the information disclosure system

The Company stresses on the importance of external information disclosure. The Company has established the Information Disclosure Committee which comprises the Vice President, the Chief Accountant, securities representatives and responsible persons of each functional department, and is responsible for examining the Company’s regular reports. The Company has implemented the system of holding regular information disclosure meetings every Mondays chaired by the Vice President and the Chief Accountant who will report on the Company’s important matters of the week, thereby warranting the Company’s performance of the relevant information disclosure obligations. The Company has successively formulated and implemented the relevant information disclosure system, and has made timely amendments thereto according to regulatory requirements. The current systems which have been implemented include the Measures on Information Disclosure Management, the Measures on Investor Relations Management, the Detailed Rules on the Work of the Information Disclosure Committee, the Measures on Work Management of Securities Finance and Capital Operation, Rules of Procedures for the Shareholders’ Meetings and the Rules on the Management of the Shares held by the Directors, Supervisors and Senior Management of Huaneng Power International, Inc. and other regulations. Relevant departments of the Company compiled answers (and subsequent updates) to questions regarding the hot topics of market concerns, and the Company’s production, operation and operating results in a timely manner. The replies shall become the basis of external communication after being approved by the Company’s management and the authorized representatives of the Information Disclosure Committee. Also, the Company engages professional personnel to conduct specialised training for the staff of the Company who are responsible for information disclosure on an irregular basis in order to continuously enhance their level of professionalism.

 
(3)
Regulating financial management system, strengthening internal control

The credibility of a listed company, to a large extent, relates to the quality of the preparation of financial statements and a regulated operation of financial activities. In order to regulate its financial management, the Company has completed a large amount of specific and detailed work, including:

1.
In order to strictly implement the accounting rules, accounting standards and accounting systems, to strengthen accounting and accounts supervision, and to truthfully and fairly reflect the financial position, operating results and cash flow, the Company has compiled the Measures on Accounting, the Measures on Construction Accounting, the Guidelines on Infrastructure Construction Accounting and Auditing, the Measures on Fixed Assets Management, Lists of Fixed Assets and the Measures on Cost Management. The Company’s Board, the Supervisory Committee and the Audit Committee have examined the Company’s financial reports on a regular basis and the Company has fulfilled the requirements of making the Chairman, the President and the Chief Accountant responsible for the truthfulness and completeness of the financial reports.
   
2.
In order to safeguard the independence of the listed company, the Company maintained the separation of personnel in organizational structure and specifically established the relevant institutions responsible for the entrusted business so that the Company may realize the complete separation of the listed company and the controlling shareholder in terms of personnel, assets and finances according to the laws and regulations of the State and the requirements of regulatory rules.


 
 
 


3.
Since 2003, the Company has initiated a comprehensive plan to enhance internal control, in order to establish a sound internal control system for the Company, to achieve an efficient operating effect for ensuring the reliability of financial reports, and to effectively enhance the capability of risk prevention. For the past seven years, the Company has established an internal control strategic plan and highlighted the targets for internal control. By promoting the internal control, the Company’s development capability, competitive edges and risk resistance ability have been further enhanced. The Company has realised its strategic targets, established a system for internal control and reinforced the work requirements for internal control systems for the corporate level, the branch level and the power plants level. Based on the COSO control framework, the Company has established an internal control procedure that was consistent with the management features of the Company, and has designed and promulgated the internal control handbook which was identified as having the highest authority to govern the Company’s internal management issues. The Company has insisted on organising various self-assessments on internal control every year, discovering control deficiencies and implementing rectifications in time. The Company also held all-rounded internal publicity and training on the philosophy and knowledge for internal control.
   
 
Based on a comprehensive assessment, the management believes that the improvement work to the Company’s internal control system and procedure is effective. These improvement measures have effectively enhanced efficiency regarding the internal control over financial reporting.
   
4.
In regard to fund management, the Company has successfully formulated a number of management measures including the Measures on Financial Management, the Interim Measures on the Management of the Income and Expenditure of the Funds and the relevant examination measures, the Measures on Management of Fund Raising and the Measures on the Management of Bills of Exchange. The Company’s Articles of Association also set out provisions relating to loans, guarantees and investment. In the annual reports of the Company over the previous years, the Company has engaged certified accountants to conduct auditing on the use of funds by the controlling shareholders and other related parties, and issue specific statements according to the requirements of the CSRC and the Shanghai Stock Exchange for confirmation that there has not been any violation of rules relating to the use of funds. Moreover, the Company also conducted checking and clearing with related parties on a quarterly basis in relation to the operational fund transfers in order to ensure the safety of funds. At the same time, the Company has reported the fund use position each quarter to the Beijing Securities Regulatory Bureau of CSRC and urged itself to comply with the relevant requirements at any time.
   
 
The above systems and measures have formed a sound management framework for our production and operation. The timely formulation and strict implementation of the above systems ensures an on-going standardization of operations of the Company and a gradual enhancement of corporate management quality. Besides the various awards disclosed in the annual report 2009, in the selection campaign of the Corporate Governance Asia magazine, which has just come to the end, the Company has been awarded the "The Sixth Asia Corporate Governance Recognition Award", and hence establishes a good overall image for the Company in both the domestic and international capital markets.

(b)
Securities Transactions by Directors

As the Company is listed on three jurisdictions, the Company has strictly complied with the relevant binding clauses on securities transactions by directors imposed by the regulatory authorities of the US, Hong Kong and China and we insist on the principle of complying with the strictest clause, which is, implementing the strictest clause among three places. We have adopted a set of standards not less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules as the model code for securities dealings by directors of the Company, namely, Management Rules regarding the Company’s Securities Information and Trading. The Company has also formulated and implemented the Management Rules in respect of the Shares of the Company held by the Directors, Supervisors and Senior Management of Huaneng Power International, Inc. The model codes for the trading of securities by the Company’s directors include: trading the Company’s shares strictly in accordance with the stipulations under the Companies Law and relevant regulations, prohibiting those who are in possession of securities transaction insider information using insider information in securities trading; and setting out detailed rules for those who are in possession of insider information. Following a specific enquiry on all the directors and senior management of the Company, all the directors and senior management currently do not hold any shares in the Company and there is no material contract in which the directors and senior management directly or indirectly have material interests.

(c)
Board of Directors

The Company’s Board of Directors comprised 15 members. Mr. Cao Peixi acted as Chairman, and Mr. Huang Long as Vice Chairman of the Board. The Executive Directors of the Company are Mr. Cao Peixi (Chairman), Mr. Liu Guoyue (President) and Mr. Fan Xiaxia (Vice President); other Non-executive Directors are Mr. Huang Long, Mr. Wu Dawei, Mr. Huang Jian, Mr. Shan Qunying, Mr. Xu Zujian, Ms. Huang Mingyuan and Mr. Liu Shuyuan. The Company has five Independent Non-executive Directors, accounting for one-third of the

 
 
 

members of the Company’s Board of Directors, namely, Mr. Liu Jipeng, Mr. Yu Ning, Mr. Shao Shiwei, Mr. Zheng Jianchao and Mr. Wu Liansheng.

Details of the attendance of directors at the board meetings are as follows:

Name
Number of
meetings to
be attended
Number of
meetings
attended
in person
Number of
meetings
attended
by proxy
Rate of
Attendance in
person (%)
         
Executive Directors
        
Cao Peixi
5
4
1
80%
(Attendance by
proxy rate: 20%)
Liu Guoyue
5
5
0
100%
Fan Xiaxia
5
5
0
100%
         
Non-executive Directors
        
Huang Long
5
5
0
100%
Wu Dawei
5
5
0
100%
Huang Jian
5
5
0
100%
Shan Qunying
5
5
0
100%
Xu Zujian
5
5
0
100%
Huang Mingyuan
5
5
0
100%
Liu Shuyuan
5
3
2
60%
(Attendance by
proxy rate: 40%)
         
Independent Non-executive Directors
      
Liu Jipeng
5
5
0
100%
Yu Ning
5
4
1
80%
(Attendance by
proxy rate: 20%)
Shao Shiwei
5
5
0
100%
Zheng Jianchao
5
3
2
60%
(Attendance by
proxy rate: 40%)
Wu Liansheng
5
4
1
80%
(Attendance by
proxy rate: 20%)

As stated in the previous Corporate Governance Reports, the Company’s Articles of Association set out in detail the duties and operational procedures of the Board (please refer to the Company’s Articles of Association for details). The Board of the Company holds regular meetings to hear the reports on the Company’s operating results and makes timely decisions. Material decisions on operation shall be discussed and approved by the Board. Ad hoc meetings may be held if necessary. Board meetings include regular meetings and ad hoc meetings. Regular meetings of the Board include: annual meetings, half-yearly meetings, first quarterly meetings and third quarterly meetings.

All arrangements for regular meetings have been notified to all directors at least 14 days in advance and the Company has ensured that each director thoroughly understood the agenda of the meeting and fully expressed his/her opinions, while all Independent Non-executive Directors expressed their independent directors’ opinions on their respective duties. Minutes have been taken for all the meetings and filed at the Office of the Board of Directors of the Company.

Moreover, the Independent Directors of the Company have submitted their annual confirmation letters of 2009 in relation to their independence according to the requirements of the Listing Rules.

 
 
 

Apart from regular and ad hoc meetings, the Board obtained information through the Chairman Office in a timely manner in order to monitor the objectives and strategies of the management, the Company’s financial position and operating results and terms and conditions of material agreements.

During the period when the Board was not in session, the Chairman, together with the Vice Chairman, discharged part of the duties of the Board of Directors, including (1) to examine and approve the proposals in respect of establishing or cancelling development and construction projects; (2) to examine and approve proposals of the President in relation to the appointment, removal and transfer of managers of various departments of the Company and managers of external branches; (3) to examine and approve plans on the use of significant funds; (4) to examine and approve proposals on the establishment or cancellation of branch companies or branch organs; and (5) to examine and approve other major issues.

The management of the Company shall be in charge of the production and operational management of the Company according to the Articles of Association. It shall implement annual operation plans and investment proposals and formulate the Company’s management rules.

The Chairman of the Company shall sign the management authorization letter with the President of the Company, and confirm the respective authorities and duties of the Board and senior management. The Company’s senior management reports on the actual implementation of various authorizations each year.

(d)
Chairman and President

The Company shall have a Chairman and a President who shall perform their duties respectively according to the Articles of Association. During the reporting period, Mr. Cao Peixi acts as Chairman of the Board and Mr. Liu Guoyue acts as President of the Company.

The division of duties of the Board and the senior management remained the same as disclosed in the Corporate Governance Report of 2009.

(e)
Non-executive Directors

According to the provisions of the Articles of Association, the term of office of each member of the Board of the Company shall not exceed three years (including three years) and the members may be eligible for re-election. However, the term of office of Independent Non-executive Directors shall not exceed six years (including six years) according to the related provisions of the CSRC.

The respective terms of office of the Non-executive Directors are as follows:

Name of Non-executive Directors
Term of office
   
Huang Long
13 May 2008 - May 2011
Wu Dawei
13 May 2008 - May 2011
Huang Jian
27 August 2008 - May 2011
Shan Qunying
13 May 2008 - May 2011
Xu Zujian
13 May 2008 - May 2011
Huang Mingyuan
13 May 2008 - May 2011
Liu Shuyuan
13 May 2008 - May 2011


(f)
Directors’ Remuneration

According to the provisions of the relevant laws of the PRC and the Articles of Association, the Board of the Company has established the Remuneration and Appraisal Committee mainly responsible for studying the appraisal standards of the directors and senior management personnel of the Company, conducting appraisals and making proposals; responsible for studying and examining the remuneration policies and proposals of the directors and senior management personnel of the Company; and to be accountable to the Board. As the Executive Directors of the Company are also the senior management of the Company, their performance appraisals were reflected in the appraisal of the senior management by the Board of Directors. During the reporting period, Mr. Liu Guoyue and Mr. Fan Xiaxia received salary from the Company as Executive Directors. Their salaries were recorded in the annual total remuneration and determined in accordance with the Company’s internal pay scale. The total remuneration, after examined by the Remuneration and Appraisal Committee, was then submitted to the Board of Directors. The Executive Directors have entered into the director service contracts in compliance with the requirements of the Stock Exchange

 
 
 


using the template set out by the Hong Kong Stock Exchange.

Members of the Sixth Session of the Remuneration and Appraisal Committee comprised seven directors. Members of the Remuneration and Appraisal Committee were Mr. Liu Jipeng, Mr. Liu Guoyue, Mr. Xu Zujian, Mr. Liu Shuyuan, Mr. Shao Shiwei, Mr. Zheng Jianchao and Mr. Wu Liansheng, of whom Mr. Liu Jipeng, Mr. Shao Shiwei, Mr. Zheng Jianchao and Mr. Wu Liansheng were Independent Non-executive Directors. Mr. Liu Jipeng acted as Chief Member of the Remuneration and Appraisal Committee.

The operation of the Remuneration and Appraisal Committee under the Board of Directors did properly follow the Detailed Rules on the Work of the Remuneration and Appraisal Committee. The Remuneration and Appraisal Committee of the Sixth Session of the Board of Directors convened a meeting on 22 March 2010, at which the 2010 Report of Total Wage Expenses was reviewed and approved the Company’s arrangement for the total wage in 2010.

During the reporting period, the attendance of meetings of the Remuneration and Appraisal Committee of the Company’s Board was as follows:

Name of meeting
Date of meeting
Members who attended
the meeting in person
Members who attended
the meeting by proxy
       
First meeting of the
  Remuneration and
  Appraisal Committee
  of the Sixth Session
  of the Board in 2010
22 March 2010
Liu Guoyue, Xu Zujian,
  Shao Shiwei,
  Wu Liansheng
Liu Jipeng, Liu Shuyuan,
  Zheng Jianchao


(g)
Nomination of Directors

According to the relevant laws of the PRC and the relevant provisions of the Articles of Association, the Board of the Company has established the Nomination Committee. The Committee is mainly responsible for studying the selection standards and procedures for candidates for directors and senior management personnel of the Company according to the directors’ qualifications under the Companies Law and Securities Law and the needs of the operational management of the Company, and making proposals thereon to the Board; searching for qualified candidates for directors and suitable persons for senior management personnel on a wide basis; and examining the candidates for directors and suitable persons for senior management personnel and making proposals thereon. Currently, the nomination of the candidates of directors of the Company is made by the shareholders. The nominations, after examination of the relevant qualification by the Nomination Committee, will be submitted to the Board of Directors. The President of the Company was appointed by the Board and the candidates for the Vice President and management were nominated by the President. Such nominations, after examination of the relevant qualification by the Nomination Committee, will be submitted to the Board of Directors.

Members of the Sixth Session of the Nomination Committee were Mr. Shao Shiwei, Mr. Fan Xiaxia, Mr. Shan Qunying, Ms. Huang Mingyuan, Mr. Liu Jipeng, Mr. Yu Ning and Mr. Wu Liansheng, of whom Mr. Shao Shiwei, Mr. Liu Jipeng, Mr. Yu Ning and Mr. Wu Liansheng were Independent Non-executive Directors. Mr. Shao Shiwei acted as the Chief Member of the Nomination Committee.

(h)
Appointment of Auditors

PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian CPAs Limited Company were appointed respectively as the international and domestic auditors of the Company for 2010.

(i)
Audit Committee

According to the requirements of the regulatory authorities of the jurisdictions where the Company is listed and the relevant provisions of the Articles of Association, the Board of Directors of the Company has established the Audit Committee mainly responsible for: assisting the Board of Directors in the supervision of (1) the accuracy of the Company’s financial statement; (2) the Company’s compliance with laws and regulations; (3) the qualification and independence of the Company’s independent auditors; and (4) the performance of the Company’s independent auditors and internal auditing departments.

Members of the Sixth Session of the Audit Committee comprised five directors, namely, Mr. Wu Liansheng, Mr. Liu Jipeng, Mr. Yu Ning, Mr.

 
 
 

Shao Shiwei and Mr. Zheng Jianchao; all the above members are Independent Non-executive Directors. Mr. Wu Liansheng acted as Chief Member of the Audit Committee.

During the reporting period, the Audit Committee has held four meetings. As per Audit Committee’s duties, the Audit Committee interviewed with the Company’s counsels, external auditors, management and the relevant departments separately and exchange ideas and communicated with them. With the understandings on the applicable laws and regulations of those jurisdictions in which the shares of the Company are listed, anti-fraud position in the Company, recruitment of staff, implementation and execution of internal control mechanism and audit work carried out by external auditors, the external auditors has rendered their views and opinion and made certain proposals. During the meetings, the following resolutions of the Company have been passed: the brief report of complaints handling for 2009, the employment report, the audit working report of the Audit Department in 2009, the working plan and budget for auditing in 2010, the monitoring report of the internal control and self-evaluation for 2009, the evaluation report of fraud risk for 2009, the self-evaluation report of internal control for 2009, the results of financial auditing for 2009, the results of internal control auditing for 2009, the 2010 budget report, the 2009 financial statements, the 2009 profit distribution proposal, the proposal on appointment of external auditors for 2010, the external auditor’s review for the first quarter of 2010 and the report of auditing and relevant matters for 2010, the report of internal control for the first quarter of 2010, the financial report for the first quarter of 2010, the resolution regarding the amendment of Measures Regarding Telephone Reporting and Mailbox Management of Huaneng Power International, Inc., the explanation submitted by the Risk Management Office regarding the Report on Classification, Prevention and Control Measures on Risk for 2010, the audit working report of the Audit Department for the first half of 2010, the report of internal control for the second quarter of 2010, the review of interim report for 2010 and the explanation of the interim financial report for 2010.

During the reporting period, the attendance of meetings of members of the Audit Committee was as follows:

Name of meeting
Date of meeting
Members who attended
the meeting in person
Members who attended
the meeting by proxy
       
First meeting of the Audit Committee of the
  Sixth Session of the Board in 2010
9 February 2010
Wu Liansheng, Liu Jipeng,
  Yu Ning, Shao Shiwei,
  Zheng Jianchao
  
       
Second meeting of the Audit Committee of the
  Sixth Session of the Board in 2010
22 March 2010
Wu Liansheng, Liu Jipeng,
  Yu Ning, Shao Shiwei
Zheng Jianchao
       
Third meeting of the Audit Committee of the
  Sixth Session of the Board in 2010
19 April 2010
Wu Liansheng, Liu Jipeng,
  Yu Ning, Shao Shiwei,
  Zheng Jianchao
  
       
Fourth meeting of the Audit Committee of the
  Sixth Session of the Board in 2010
9 August 2010
Liu Jipeng, Shao Shiwei,
 
Wu Liansheng, Yu Ning,
  Zheng Jianchao

(j)
Responsibility statement by the directors in relation to the financial statements

The Directors confirm that they shall assume the relevant responsibility in relation to the preparation of the financial statements of the Company, ensure that the preparation of the financial statements of the Company complies with the relevant laws and regulations and the applicable accounting standards and also warrant that the financial statements of the Company will be published in a timely manner.

(k)
Shares held by senior management

As at 30 June 2010, none of the senior management of the Company holds shares in the Company.

(l)
Strategy Committee

For compliance with the relevant requirements of the regulations in the jurisdictions where the shares of the Company are listed as well as the Articles of Association of the Company, the Board has established a Strategy Committee with the following key responsibilities: (1) reviewing and advising on the Company’s long-term strategic development plan; (2) reviewing and advising on the major fund raising proposals that need to be approved by the Board; (3) reviewing and advising on the major production and operating projects that need to be approved by the Board; (4) studying and advising on the matters that would significantly affect the development of the Company; (5) examining the

 
 
 

implementation of the above-mentioned matters; and (6) attending those matters at the request of the Board.

Members of the Sixth Session of the Strategy Committee comprised seven directors, namely, Mr. Huang Long, Mr. Wu Dawei, Mr. Huang Jian, Mr. Liu Guoyue, Mr. Fan Xiaxia, Mr. Shao Shiwei and Mr. Zheng Jianchao, of whom Mr. Shao Shiwei and Mr. Zheng Jianchao were Independent Non-executive Directors. Mr. Huang Long acted as Chief Member of the Strategy Committee.

On 14 January 2010, the Strategy Committee convened a meeting and considered and approved the Proposal regarding the Scheme for Non-public Issue of A Shares and the Non-public Issue of H Shares of Huaneng Power International, Inc., which was submitted to the Board of Directors for approval.

On 17 May 2010, the Strategy Committee considered and approved the Report on Classification, Prevention and Control Measures on Risk of Huaneng Power International, Inc. in 2010 which was submitted to the Audit Committee of the Board of the Company on 9 August 2010.

REVIEW BY THE AUDIT COMMITTEE

The interim results of 2010 have been reviewed by the Audit Committee of the Company.

LEGAL PROCEEDINGS

As at 30 June 2010, the Company was not involved in any material litigation or arbitration and no material litigation or claim was pending or threatened against or by the Company as far as the Company is aware.

DOCUMENTS FOR INSPECTION

The interim report for 2010 of the Company containing all the information required by the Listing Rules will be published on the Hong Kong Stock Exchange’s website. The Company will also file the interim report in Form 6-K with the US Securities and Exchange Commission. Copies of the interim report for 2010 will be available at the following addresses and websites:

Beijing
Huaneng Power International, Inc.
 
Huaneng Building
 
4 Fuxingmennei Street
 
Xicheng District
 
Beijing
 
The People’s Republic of China
   
 
Telephone Number: (8610) 6322 6999
 
Fax Number: (8610) 6641 2321
 
Postal code: 100031
   
Hong Kong
Wonderful Sky Financial Group Limited
 
Unit 3102-05, 31/F., Office Tower,
 
Convention Plaza, 1 Harbour Road,
 
Wanchai, Hong Kong
   
 
Tel: (852) 2851 1038
 
Fax: (852) 2815 1352
   
Websites of the Company
http://www.hpi.com.cn
 
http://www.hpi-ir.com.hk




By Order of the Board
Cao Peixi
Chairman

 
 
 



As at the date of this report, the directors of the Company are:

Cao Peixi
Liu Jipeng
(Executive Director)
(Independent Non-executive Director)
Huang Long
Yu Ning
(Non-executive Director)
(Independent Non-executive Director)
Wu Dawei
Shao Shiwei
(Non-executive Director)
(Independent Non-executive Director)
Huang Jian
Zheng Jianchao
(Non-executive Director)
(Independent Non-executive Director)
Liu Guoyue
Wu Liansheng
(Executive Director)
(Independent Non-executive Director)
Fan Xiaxia
  
(Executive Director)
  
Shan Qunying
  
(Non-executive Director)
  
Xu Zujian
  
(Non-executive Director)
  
Huang Mingyuan
  
(Non-executive Director)
  
Liu Shuyuan
  
(Non-executive Director)
  

Beijing, the PRC
11 August 2010


 
 
 


Condensed Consolidated Interim Balance Sheet (Unaudited)
As at 30 June 2010
(Prepared in accordance with International Financial Reporting Standards)
(Amounts expressed in thousands of RMB)

 
ASSETS
Note
As at 30
June 2010
As at 31
December 2009
         
 
Non-current assets
      
 
Property, plant and equipment
5
144,573,524
140,777,336
 
Investments in associates
  
10,110,986
9,568,576
 
Available-for-sale financial assets
  
2,343,010
2,555,972
 
Land use rights
  
3,782,794
3,843,719
 
Power generation licence
6
3,877,750
3,898,121
 
Deferred income tax assets
  
614,058
374,733
 
Derivative financial assets
  
-
44,863
 
Goodwill
  
11,554,482
11,610,998
 
Other non-current assets
  
1,029,069
1,023,096
         
 
Total non-current assets
  
177,885,673
173,697,414
         
 
Current assets
      
 
Inventories
  
5,211,687
4,083,986
 
Other receivables and assets
7
7,020,001
4,468,940
 
Accounts receivable
8
10,397,112
10,042,903
 
Derivative financial assets
  
7,496
141,886
 
Bank balances and cash
19
6,043,303
5,452,050
         
 
Total current assets
  
28,679,599
24,189,765
         
 
Total assets
  
206,565,272
197,887,179


 
EQUITY AND LIABILITIES
Note
As at 30
June 2010
As at 31
December 2009
         
 
Capital and reserves attributable to equity
  holders of the Company
      
 
Share capital
  
12,055,383
12,055,383
 
Capital surplus
  
9,476,712
10,041,203
 
Surplus reserves
  
6,604,200
6,096,100
 
Currency translation differences
  
(399,628)
(362,067)
 
Retained earnings
      
 
— Proposed dividend
  
-
2,531,631
 
— Others
  
13,189,877
11,761,933
         
     
40,926,544
42,124,183
 
Non-controlling interests
  
8,447,655
8,523,937
         
 
 Total equity
  
49,374,199
50,648,120
         


 
 
 


 
Non-current liabilities
      
 
Long-term loans
10
73,486,833
71,266,755
 
Long-term bonds
11
13,815,450
13,800,115
 
Deferred income tax liabilities
  
1,851,489
1,839,362
 
Derivative financial liabilities
  
155,263
850
 
Other non-current liabilities
  
717,014
750,369
         
 
Total non-current liabilities
  
90,026,049
87,657,451
         
 
Current liabilities
      
 
Accounts payable and other liabilities
12
15,669,117
14,524,620
 
Taxes payables
  
663,929
650,800
 
Dividends payable
9
2,652,217
20,734
 
Salary and welfare payables
  
278,755
290,527
 
Derivative financial liabilities
  
136,936
13,403
 
Short-term bonds
13
5,022,316
10,101,460
 
Short-term loans
14
36,979,440
24,729,816
 
Current portion of long-term loans
10
5,762,314
9,250,248
         
 
Total current liabilities
  
67,165,024
59,581,608
         
 
Total liabilities
  
157,191,073
147,239,059
         
 
Total equity and liabilities
  
206,565,272
197,887,179
 
 
Condensed Consolidated Interim Statement of Comprehensive Income (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with International Financial Reporting Standards)
(Amounts expressed in thousands of RMB except per share data)

     
For the six months ended 30 June
   
Note
2010
2009
         
 
Operating revenue
4
48,853,859
33,609,727
 
Sales tax
  
(61,986)
(79,006)
         
 
Operating expenses
      
 
Fuel
  
(31,748,648)
(20,035,830)
 
Maintenance
  
(960,464)
(764,821)
 
Depreciation
  
(5,226,172)
(4,101,086)
 
Labor
  
(1,818,990)
(1,561,956)
 
Service fees on transmission and transformer
  facilities of HIPDC
  
(70,386)
(70,386)
 
Purchase of electricity
  
(2,683,066)
(1,553,600)
 
Others
  
(2,068,774)
(1,738,875)
         
 
Total operating expenses
  
(44,576,500)
(29,826,554)
         
 
Profit from operations
  
4,215,373
3,704,167
         
 
Interest income
  
26,826
35,193


 
 
 


 
Financial expenses, net
      
 
Interest expense
  
(2,498,136)
(2,238,470)
 
Exchange gain and bank charges, net
  
188,722
(5,822)
         
 
Total financial expenses, net
  
(2,309,414)
(2,244,292)
         
 
Share of profits of associates
  
378,064
385,642
 
Gain / (Loss) from fair value change
  
12,140
(32,498)
 
Investment income
  
55,017
—
         
 
Profit before income tax expense
16
2,378,006
1,848,212
         
 
Income tax expense
17
(422,103)
(54,531)
         
 
Profit for the period
  
1,955,903
1,793,681
         
 
Other comprehensive (loss) /
  income for the period, net of tax
      
         
 
Available-for-sale financial asset fair value changes
  
(159,722)
828,055
 
Proportionate share of other comprehensive income
  of investee measured using the equity
  method of accounting
  
(27,083)
6,520
 
Cash flow hedges
  
(377,686)
606,371
 
Currency translation differences
  
(37,804)
(22,556)
         
 
Other comprehensive (loss) /
  income for the period, net of tax
  
(602,295)
1,418,390
         
 
Total comprehensive income for the period
  
1,353,608
3,212,071


     
For the six months ended 30 June
   
Note
2010
2009
         
 
Profit / (Loss) attributable to:
      
 
— Equity holders of the Company
  
1,932,463
1,870,377
 
— Non-controlling interests
  
23,440
(76,696)
         
     
1,955,903
1,793,681
         
 
Total comprehensive income / (loss)  attributable to:
      
 
— Equity holders of the Company
  
1,330,411
3,289,054
 
— Non-controlling interests
  
23,197
(76,983)
         
     
1,353,608
3,212,071
         
 
Dividends paid
9
-
341,633
         
 
Earnings per share for profit attributable to
  the equity holders of the Company
  (expressed in RMB per share)
      
 
— Basic and diluted
18
0.16
0.16


 
 
 


The notes on pages 43 to 70 are an integral part of this unaudited condensed consolidated interim financial information.

Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with International Financial Reporting Standards)
(Amounts expressed in thousands of RMB)

 
Attributable to equity holders of the Company
Non-controlling interests
Total equity
 
Share
capital
Capital surplus
Surplus reserves
Currency translation difference
Retained earnings
Total
    
   
Share premium
Hedging reserve
Available-for-sale financial asset revaluation reserve
Other capital reserve
Subtotal
            
                         
Balance as at 1 January 2010
12,055,383
8,506,769
128,044
896,919
509,471
10,041,203
6,096,100
(362,067)
14,293,564
42,124,183
8,523,937
50,648,120
Profit for the six months  ended
  30 June 2010
—
—
—
—
—
—
—
—
1,932,463
1,932,463
23,440
1,955,903
Other comprehensive loss:
                        
Fair value changes from available-for-sale
  financial asset, net of tax
—
—
—
(159,722)
—
(159,722)
—
—
—
(159,722)
—
(159,722)
Proportionate share of
  other comprehensive income of
  investee measured using the equity
  method of accounting, net of tax
—
—
—
(28,978)
1,895
(27,083)
—
—
—
(27,083)
—
(27,083)
Changes in fair value of effective portion
  of cash flow hedges, net of tax
—
—
(365,165)
—
—
(365,165)
—
—
—
(365,165)
—
(365,165)
Cash flow hedges recorded
  in shareholders’ equity reclassified to
  profit and loss, net of tax
—
—
(12,521)
—
—
(12,521)
—
—
—
(12,521)
—
(12,521)


 
 
 


Currency translation differences
—
—
—
—
—
—
—
(37,561)
—
(37,561)
(243)
(37,804)
                         
Total comprehensive income for the six
  months ended 30 June 2010
—
—
(377,686)
(188,700)
1,895
(564,491)
—
(37,561)
1,932,463
1,330,411
23,197
1,353,608
Transfer to surplus reserves (Note 9)
—
—
—
—
—
—
508,100
—
(508,100)
—
—
—
Dividends relating to 2009 (Note 9)
—
—
—
—
—
—
—
—
(2,528,050)
(2,528,050)
(208,819)
(2,736,869)
Capital injections from non-controlling
  interests of subsidiaries
—
—
—
—
—
—
—
—
—
—
109,340
109,340
                         
Balance as at 30 June 2010
12,055,383
8,506,769
(249,642)
708,219
511,366
9,476,712
6,604,200
(399,628)
13,189,877
40,926,544
8,447,655
49,374,199


 
Attributable to equity holders of the Company
Non-controlling interests
Total equity
 
Share
capital
Capital surplus
Surplus reserves
Currency translation difference
Retained earnings
Total
    
   
Share premium
Hedging reserve
Available-for-sale financial asset revaluation reserve
Other
capital reserve
Subtotal
            
                         
Balance as at 1 January 2009
12,055,383
8,506,769
(476,601)
114,157
498,292
8,642,617
6,096,100
(534,433)
10,569,653
36,829,320
5,730,633
42,559,953
Profit for the six months ended
  30 June 2009
—
—
—
—
—
—
—
—
1,870,377
1,870,377
(76,696)
1,793,681
Other comprehensive income:
                        
Fair value changes from available-for-sale
  financial asset, net of tax
—
—
—
828,055
—
828,055
—
—
—
828,055
—
828,055
Proportionate share of
  other comprehensive income of
  investee measured using the equity
  method of accounting, net of tax
—
—
—
6,520
—
6,520
—
—
—
6,520
—
6,520
Changes in fair value of effective
  portion of cash flow hedges, net of tax
—
—
476,261
—
—
476,261
—
—
—
476,261
—
476,261
Cash flow hedges recorded
—
—
130,110
—
—
130,110
—
—
—
130,110
—
130,110


 
 
 


  in shareholders’ equity reclassified to
  profit and loss, net of tax
                        
Currency translation differences
—
—
—
—
—
—
—
(22,269)
—
(22,269)
(287)
(22,556)
                         
Total comprehensive income for the six
  months ended 30 June 2009
—
—
606,371
834,575
—
1,440,946
—
(22,269)
1,870,377
3,289,054
(76,983)
3,212,071
Acquisition of a subsidiary
—
—
—
—
—
—
—
—
—
—
27,615
27,615
Dividends relating to 2008 (Note 9)
—
—
—
—
—
—
—
—
(1,205,633)
(1,205,633)
(65,980)
(1,271,613)
Capital injection from non-controlling
  interests of a subsidiary
—
—
—
—
—
—
—
—
—
—
170,000
170,000
                         
Balance as at 30 June 2009
12,055,383
8,506,769
129,770
948,732
498,292
10,083,563
6,096,100
(556,702)
11,234,397
38,912,741
5,785,285
44,698,026


The notes on pages 43 to 70 are an integral part of this unaudited condensed consolidated interim financial information.

 
 
 

Condensed Consolidated Interim Statement of Cash Flow (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with International Financial Reporting Standards)
(Amounts expressed in thousands of RMB)

     
For the six months ended 30 June
   
Note
2010
2009
         
 
Net cash provided by operating activities
  
9,038,964
6,385,193
         
 
Net cash used in investing activities
19
(11,578,377)
(9,971,115)
         
 
Net cash provided by financing activities
19
3,129,825
4,056,073
         
 
Exchange (loss) / gain
  
(13,119)
10,676
         
 
Net increase in cash and cash equivalents
  
577,293
480,827
         
 
Cash and cash equivalents as
  at beginning of the period
  
5,226,982
5,566,625
         
 
Cash and cash equivalents as at end of the period
19
5,804,275
6,047,452

The notes on pages 43 to 70 are an integral part of this unaudited condensed consolidated interim financial information.
 
Notes to the Unaudited Condensed Consolidated Interim Financial Information
For the six months ended 30 June 2010
(Prepared in accordance with International Financial Reporting Standards)
(Amounts expressed in thousands of RMB unless otherwise stated)

1.
COMPANY ORGANIZATION AND PRINCIPAL ACTIVITIES

Huaneng Power International, Inc. (the "Company") was incorporated in the People’s Republic of China (the "PRC") as a Sino-foreign joint stock limited company on 30 June 1994. The registered address of the Company is West Wing, Building C, Tianyin Mansion, 2C Fuxingmennan Street, Xicheng District, Beijing, the PRC. The Company and most of its subsidiaries are principally engaged in the generation and sale of electric power to the respective regional or provincial grid companies in the PRC. SinoSing Power Pte. Ltd. ("SinoSing Power"), a wholly-owned subsidiary of the Company and its subsidiaries are principally engaged in the power generation and sale in the Republic of Singapore ("Singapore").

The directors consider Huaneng International Power Development Corporation ("HIPDC") and China Huaneng Group ("Huaneng Group") as the parent company and ultimate parent company of the Company, respectively. Both HIPDC and Huaneng Group are incorporated in the PRC. Neither Huaneng Group nor HIPDC produced financial statements available for public use.

This unaudited condensed consolidated interim financial information was approved for issue on 10 August 2010.

2.
BASIS OF PREPARATION

This unaudited condensed interim consolidated financial information for the six months ended 30 June 2010 have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting". This unaudited condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") promulgated by the International Accounting Standards Board (the "IASB").

 
 
 

As at and for the six months ended 30 June 2010, a portion of the Company and its subsidiaries’ funding requirements for capital expenditures were partially satisfied by short-term financing. Consequently, as at 30 June 2010, the Company and its subsidiaries have a negative working capital balance of approximately RMB 38.5 billion. Taking into consideration of the expected operating cash flows of the Company and its subsidiaries and the undrawn available banking facilities, the Company and its subsidiaries will refinance and / or restructure certain short-term borrowings into long-term borrowings and also consider alternative sources of financing, where applicable. Therefore, the directors of the Company are of the opinion that the Company and its subsidiaries will be able to meet its liabilities as and when they fall due within the next twelve months and have prepared this unaudited condensed consolidated interim financial information on a going concern basis.

3.
PRINCIPAL ACCOUNTING POLICIES

Except as described below, the principal accounting policies adopted are consistent with those applied in the annual financial statements for the year ended 31 December 2009 described in those annual financial statements.

The Company and its subsidiaries have adopted the following amendments to standards in 2010.

•
IAS 17 (Amendment), ‘Leases’. The amendment deleted the specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating using the general principles of IAS 17. The Company and its subsidiaries have land use rights in both the PRC and Singapore. Based on assessments, land use rights located in the PRC are classified as operating leases while land use rights located in Singapore are classified as finance leases. All of the land use rights are amortized or depreciated over time using straight-line method.
   
•
IAS 24 (Revised), ‘Related party disclosures’. This revised standard introduces a partial exemption from the disclosure requirements of IAS 24 for transactions with government-related entities. Those disclosures are replaced with requirements to disclose the name of related government and the nature of its relationship with the Company and its subsidiaries, the nature and amount of any individually-significant transactions, and qualitative or quantitative disclosures for collectively-significant transactions. The Company and its subsidiaries have elected to early adopt the partial exemption described above from 1 January 2010.
   
•
IAS 27 (Revised), ‘Consolidated and separate financial statements’. The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognized in profit and loss. The Company and its subsidiaries apply this standard prospectively to transactions with non-controlling interests from 1 January 2010 onwards.
   
•
IAS 38 (Amendment), ‘Intangible Assets’. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination when it is not traded in an active market. It also permits the grouping of intangible assets as a single asset if each asset has similar economic useful lives. The Company and its subsidiaries apply this amendment prospectively to all business combinations from 1 January 2010 onwards.

3.
PRINCIPAL ACCOUNTING POLICIES (CONT’D)

The Company and its subsidiaries have adopted the following amendments to standards in 2010. (Cont’d)

•
IFRS 3 (Revised), ‘Business combinations’. The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the consolidated statement of comprehensive income. It clarifies the reassessment requirements on acquisition date should there be any hedging arrangements existed in the acquirees. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interests in the acquiree either at fair value or at the non-controlling interests’ proportionate shares of the acquiree’s net assets. All acquisition-related costs should be expensed. Contingent liabilities assumed in a business combination are recognized at the acquisition date even if it is not probable that an outflow of resources embodying economic benefits will be required settle the obligation. After the date of the business combination, contingent liabilities are re-measured at the higher of the original amount and the amount under the relevant standard, IAS 37. The Company and its subsidiaries apply this standard prospectively to all business combinations from 1 January 2010 onwards.
   
•
IFRS 5 (Amendment), ‘Non-current assets held for sale and discontinued operations’. The amendment provides clarification that IFRS


 
 
 


 
5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It clarifies that all assets and liabilities of a subsidiary are classified as held for sale if a partial disposal sale plan results in loss of control, and relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met. The amendment also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The Company and its subsidiaries apply IFRS 5 (amendment) from 1 January 2010 onwards.

4.
REVENUE AND SEGMENT INFORMATION

Revenues recognized during the period are as follows:

   
For the six months ended 30 June
   
2010
2009
       
 
Sales of power and heat
48,296,467
33,301,437
 
Port service
104,440
125,358
 
Others
452,952
182,932
       
 
Total
48,853,859
33,609,727


Directors and certain senior management of the Company perform the function as chief operating decision makers (collectively referred to as the "senior management"). The senior management reviews the internal reporting of the Company and its subsidiaries in order to assess performance and allocate resources. The Company has determined the operating segments based on these reports. Currently, the operating segments of the Company were grouped into power segment and other segment (port operations).

Senior management assesses the performance of the operating segments based on a measure of profit/(loss) before income tax expense under China Accounting Standard for Business Enterprises ("PRC GAAP") in related periods excluding dividend income received from available-for-sale financial assets and operating results of those centrally managed and resource allocation functions in headquarters. Other information provided, except as noted below, to the senior management of the Company is also measured under PRC GAAP.

Segment assets exclude prepaid income tax, deferred income tax assets, available-for-sale financial assets and its related dividends receivable and assets related to those centrally managed and resource allocation functions in headquarters that are not attributable to any operating segment ("corporate assets"). Segment liabilities exclude current income tax liabilities, deferred income tax liabilities and liabilities related to those centrally managed and resource allocation functions in headquarters that are not attributable to any operating segment ("corporate liabilities"). These are part of the reconciliation to total balance sheet assets and liabilities.

All sales among the operating segments were performed at market price or close to market price, and have been eliminated as internal transactions when preparing unaudited condensed consolidated interim financial information.

4.
REVENUE AND SEGMENT INFORMATION (CONT’D)

(Under PRC GAAP)

   
Power segment
Other segment
Total
         
 
For the six months ended 30 June 2010
      
 
Total segment revenue
48,749,419
203,815
48,953,234
 
Inter-segment revenue
-
(99,375)
(99,375)
         
 
Revenue from external customers
48,749,419
104,440
48,853,859
         
 
Segment results
2,640,040
50
2,640,090
         


 
 
 


 
Interest income
26,722
104
26,826
 
Interest expense
(2,354,937)
(19,683)
(2,374,620)
 
Depreciation and amortization
(5,132,950)
(24,798)
(5,157,748)
 
Net gain on disposal of property,
  plant and equipment
8,596
-
8,596
 
Share of profits of associates
338,367
-
338,367
 
Income tax expense
(457,452)
(13)
(457,465)
         
 
For the six months ended 30 June 2009
      
 
Total segment revenue
35,468,870
212,251
35,681,121
 
Inter-segment revenue
—
(86,893)
(86,893)
         
 
Revenue from external customers
35,468,870
125,358
35,594,228
         
 
Segment results
2,018,166
7,918
2,026,084
         
 
Interest income
37,123
605
37,728
 
Interest expense
(2,254,002)
(21,050)
(2,275,052)
 
Depreciation and amortization
(4,528,649)
(22,992)
(4,551,641)
 
Net gain on disposal of property,
  plant and equipment
14,460
—
14,460
 
Share of profits of associates
345,425
—
345,425
 
Income tax expense
(72,445)
(1,682)
(74,127)

4.
REVENUE AND SEGMENT INFORMATION (CONT’D)

(Under PRC GAAP)

   
Power segment
Other segment
Total
         
 
30 June 2010
      
 
Segment assets
194,739,502
1,554,786
196,294,288
         
 
Including:
      
 
Additions to non-current assets
  (excluding financial assets
  and deferred income tax assets)
9,134,096
1,138
9,135,234
 
Investments in associates
9,239,037
-
9,239,037
 
Segment liabilities
(144,391,077)
(830,212)
(145,221,289)
         
 
31 December 2009
      
 
Segment assets
188,444,809
1,517,972
189,962,781
         
 
Including:
      
 
Additions to non-current assets
  (excluding financial assets
  and deferred income tax assets)
27,563,073
36,967
27,600,040
 
Investments in associates
8,715,779
—
8,715,779
 
Segment liabilities
(137,099,373)
(792,750)
(137,892,123)

A reconciliation of revenue from external customers to operating revenue is provided as follows:


 
 
 


   
For the six months
ended 30 June
   
2010
2009
       
 
Revenue from external customers (PRC GAAP)
48,853,859
35,594,228
 
Reconciling item:
    
 
Impact of business combinations under common control*
-
(1,984,501)
       
 
Operating revenue per consolidated statement
  of comprehensive income
48,853,859
33,609,727

4.
REVENUE AND SEGMENT INFORMATION (CONT’D)

A reconciliation of segment results to profit before income tax expense is provided as follows:

   
For the six months
ended 30 June
   
2010
2009
       
 
Segment results (PRC GAAP)
2,640,090
2,026,084
 
Reconciling items:
    
 
Operating loss of the headquarters
(87,369)
(20,692)
 
Investment income from China Huaneng
  Finance Co., Ltd. ("Huaneng Finance")
32,400
48,697
 
Impact of business combination under common control*
-
(47,371)
 
Impact of other IFRS adjustments**
(207,115)
(158,506)
       
 
Profit before income tax expense per
  consolidated statement of comprehensive income
2,378,006
1,848,212


Reportable segments’ assets are reconciled to total assets as follows:

   
As at 30 June 2010
As at 31 December 2009
       
 
Total segment assets (PRC GAAP)
196,294,288
189,962,781
 
Reconciling items:
    
 
Investment in Huaneng Finance
598,102
570,917
 
Deferred income tax assets
713,449
547,664
 
Prepaid income tax
40,288
40,815
 
Available-for-sale financial assets and its
    
 
  related dividends receivable
2,406,588
2,555,972
 
Corporate assets
2,683,678
318,977
 
Impact of IFRS adjustments**
3,828,879
3,890,053
       
 
Total assets per consolidated balance sheet
206,565,272
197,887,179


 
 
 


4.
REVENUE AND SEGMENT INFORMATION (CONT’D)

Reportable segments’ liabilities are reconciled to total liabilities as follows:

 
 
 


   
As at 30 June 2010
As at 31 December 2009
       
 
Total segment liabilities (PRC GAAP)
(145,221,289)
(137,892,123)
 
Reconciling items:
    
 
Current income tax liabilities
(248,479)
(292,509)
 
Deferred income tax liabilities
(1,360,440)
(1,386,493)
 
Corporate liabilities
(8,276,141)
(5,709,119)
 
Impact of IFRS adjustments**
(2,084,724)
(1,958,815)
       
 
Total liabilities per consolidated balance sheet
(157,191,073)
(147,239,059)

Other material items:

   
Reportable
segment
total
Headquarters
Investment
income
from
Huaneng
Finance
Impact of
business
combinations
under common
control*
Impact of
other IFRS
adjustments**
Total
               
 
For the six months
  ended 30 June 2010
            
 
Interest expense
(2,374,620)
(123,516)
-
-
-
(2,498,136)
 
Depreciation and
            
 
  amortization
(5,157,748)
(12,107)
-
-
(156,604)
(5,326,459)
 
Share of profits
            
 
  of associates
338,367
-
32,400
-
7,297
378,064
 
Income tax expense
(457,465)
-
-
-
35,362
(422,103)
               
 
For the six months
  ended 30 June 2009
            
 
Interest expense
(2,275,052)
(79,613)
—
116,195
—
(2,238,470)
 
Depreciation and amortization
(4,551,641)
(9,918)
—
478,469
(104,664)
(4,187,754)
 
Share of profits of associates
345,425
—
48,697
—
(8,480)
385,642
 
Income tax expense
(74,127)
—
—
(3,626)
23,222
(54,531)

*
Under PRC GAAP, the business combinations under common control are accounted for under merger accounting method; the operating results for all periods presented are retrospectively restated by combining the financial information of the businesses acquired as if they had been combined from the date when the combining entities first came under the control of the controlling party. Therefore, the financial information of business acquired before the acquisition date is shown as the difference between PRC GAAP and IFRS.
   
**
The GAAP adjustments above were primarily brought forward from prior years. Such differences will be gradually eliminated following subsequent depreciation and amortization of related assets or the extinguishment of liabilities.

4.
REVENUE AND SEGMENT INFORMATION (CONT’D)

 
Geographical information (Under IFRS):

(i)
External revenue generated from the following countries:

   
For the six months
ended 30 June
   
2010
2009
       
 
The PRC
41,596,841
28,937,295
 
Singapore
7,257,018
4,672,432
       
   
48,853,859
33,609,727


 
 
 


(ii)
Non-current assets (excluding financial assets and deferred income tax assets) are located in the following countries:

   
As at 30 June 2010
As at 31 December 2009
       
 
The PRC
153,652,343
149,590,150
 
Singapore
21,111,483
21,056,775
       
   
174,763,826
170,646,925


The information on the portion of external revenue of the Company and its subsidiaries which is generated from sales to major customers of the Company and its subsidiaries at amounts equal to or more than 10% of external revenue is as follows:

   
For the six months ended 30 June
   
2010
2009
   
Amount
Proportion
Amount
Proportion
           
 
JiangSu Electric
  Power Company
6,391,900
13%
4,663,898
14%
 
ShanDong Electric
  Power Corporation
  ("Shandong Power")
5,824,202
12%
4,775,013
14%
 
ZheJiang Electric
  Power Corporation
4,186,007
9%
3,627,372
11%

5.
PROPERTY, PLANT AND EQUIPMENT

   
As at 30 June 2010
As at 31 December 2009
       
 
Beginning of the period / year
140,777,336
116,737,198
 
Acquisitions
-
7,617,197
 
Additions
9,082,829
25,738,329
 
Disposals / Write-off
(19,602)
(226,760)
 
Depreciation charge
(5,235,977)
(8,579,330)
 
Impairment charge
-
(629,674)
 
Currency translation differences
(31,062)
120,376
       
 
End of the period / year
144,573,524
140,777,336

6.
POWER GENERATION LICENCE

   
As at 30 June 2010
As at 31 December 2009
       
 
Beginning of the period / year
3,898,121
3,811,906
 
Currency translation differences
(20,371)
86,215
       
 
End of the period / year
3,877,750
3,898,121


 
 
 


7.
OTHER RECEIVABLES AND ASSETS

Other receivables and assets comprised the following:

   
As at 30 June 2010
As at 31 December 2009
       
 
Prepayments for inventories
1,044,644
783,672
 
Prepayments for constructions
379,609
407,920
 
Prepayments for investments
2,389,982
387,000
 
Prepaid income tax
40,288
40,815
 
Others
90,936
41,792
       
 
Total prepayments
3,945,459
1,661,199
       
 
Staff advances
25,748
13,032
 
Dividends receivable
123,578
—
 
Others
689,730
638,399
       
 
Subtotal other receivables
839,056
651,431
 
Less: provision for doubtful accounts
(38,621)
(38,628)
       
 
Total other receivables, net
800,435
612,803
       
 
VAT recoverable
2,274,107
2,194,938
       
 
Net total
7,020,001
4,468,940

Prepayments for investments primarily represent prepayments for acquisitions of certain equity interests. Please refer to Note 21(a) for details.

8.
ACCOUNTS RECEIVABLE

Accounts receivable comprised the following:

   
As at 30 June 2010
As at 31 December 2009
       
 
Accounts receivable
9,810,389
9,717,681
 
Notes receivable
612,789
351,630
       
   
10,423,178
10,069,311
 
Less: provision for doubtful accounts
(26,066)
(26,408)
       
   
10,397,112
10,042,903


The Company and its subsidiaries usually grant about one month’s credit period to local power grid customers from the end of the month in which the sales are made except for SinoSing Power and its subsidiaries which credit periods ranged from 5 days to 60 days from the dates of billing.

Ageing analysis of accounts receivable was as follows:


 
 
 


   
As at 30 June 2010
As at 31 December 2009
       
 
Within 1 year
10,393,131
10,035,455
 
Between 1 to 2 years
25,453
29,726
 
Between 2 to 3 years
464
—
 
Over 3 years
4,130
4,130
       
   
10,423,178
10,069,311

As at 30 June 2010, the maturity period of the notes receivable ranged from 3 months to 6 months (31 December 2009: 3 months to 7 months).

9.
PROFIT APPROPRIATIONS

(a)
Dividends

   
As at 30 June 2010
As at 31 December 2009
       
 
Due to equity holders of the Company*
2,529,375
—
 
Due to non-controlling interests of subsidiaries
122,842
20,734
       
   
2,652,217
20,734

*
On 22 June 2010, upon the approval from the annual general meeting of the shareholders, the Company declared 2009 final dividend of RMB 0.21 (2008 final: RMB 0.10) per ordinary share, totaled approximately RMB 2,528 million (2008 final: RMB 1,206 million). For the six months ended 30 June 2010, the Company did not make any dividend payments in that connection (for the six months ended 30 June 2009: approximately RMB 342 million).

(b)
Surplus reserves

On 22 June 2010, upon the approval from the annual general meeting of the shareholders, the Company appropriated 10% of profit attributable to equity holders of the Company for the year ended 31 December 2009 as determined under the PRC GAAP to the statutory surplus reserve, amounting to RMB 508 million (for the six months ended 30 June 2009: nil).

10.
LONG-TERM LOANS

Long-term loans comprised the following:

   
As at 30 June 2010
As at 31 December 2009
       
 
Loans from Huaneng Group (a)
800,000
800,000
 
Bank loans (b)
71,146,001
72,052,664
 
Other loans (c)
7,303,146
7,664,339
       
   
79,249,147
80,517,003
 
Less: Current portion of long-term loans
(5,762,314)
(9,250,248)
       
   
73,486,833
71,266,755

(a)
Loans from Huaneng Group

Details of loans from Huaneng Group of the Company and its subsidiaries are as follows:


 
 
 


   
As at 30 June 2010
   
Original currency
RMB equivalent
Less: Current portion
Non-current portion
Annual interest rate
   
’000
        
             
 
Loans from Huaneng Group
          
 
Unsecured
          
 
RMB
          
 
— Fixed rate
800,000
800,000
-
800,000
4.05%-4.60%


   
As at 31 December 2009
   
Original currency
RMB equivalent
Less: Current portion
Non-current portion
Annual
interest rate
   
’000
        
             
 
Loans from Huaneng Group
          
 
Unsecured
          
 
RMB
          
 
— Fixed rate
800,000
800,000
—
800,000
4.05%-4.60%

10.
LONG-TERM LOANS (CONT’D)

(b)
Bank loans

Details of bank loans of the Company and its subsidiaries are as follows:

   
As at 30 June 2010
   
Original currency
RMB equivalent
Less: Current portion
Non-current portion
Annual interest rate
   
’000
        
             
 
Bank loans
          
 
Unsecured
          
 
RMB
          
 
— Fixed rate
48,759,753
48,759,753
(4,572,123)
44,187,630
3.51%-7.05%
 
US$
          
 
— Fixed rate
178,206
1,210,181
(643,009)
567,172
5.95%-6.97%
 
— Variable rate
813,462
5,524,138
(257,017)
5,267,121
0.51%-2.65%
 
S$
          
 
— Variable rate
3,066,224
14,825,497
(175,276)
14,650,221
2.23%-2.46%
 
         
 
— Fixed rate
99,919
826,432
(77,281)
749,151
2.00%-2.15%
             
     
71,146,001
(5,724,706)
65,421,295
  


 
 
 


   
As at 31 December 2009
   
Original currency
RMB equivalent
Less: Current portion
Non-current portion
Annual
interest rate
   
’000
        
             
 
Bank loans
          
 
Unsecured
          
 
RMB
          
 
— Fixed rate
48,971,239
48,971,239
(8,316,379)
40,654,860
3.60%-7.56%
 
US$
          
 
— Fixed rate
225,791
1,541,744
(648,187)
893,557
5.95%-6.97%
 
— Variable rate
816,208
5,573,234
(43,204)
5,530,030
1.44%-3.57%
 
S$
          
 
— Variable rate
3,074,120
14,941,760
(77,444)
14,864,316
2.41%-2.46%
 
         
 
— Fixed rate
104,591
1,024,687
(91,539)
933,148
2.00%-2.15%
             
     
72,052,664
(9,176,753)
62,875,911
  

10.
LONG-TERM LOANS (CONT’D)

(c)
Other loans

Details of other loans of the Company and its subsidiaries are as follows:

   
As at 30 June 2010
   
Original currency
RMB equivalent
Less: Current portion
Non-current portion
Annual interest rate
   
’000
        
             
 
Other loans
          
 
Unsecured
          
 
RMB
          
 
— Fixed rate
7,230,000
7,230,000
-
7,230,000
4.05%-4.86%
 
US$
          
 
— Variable rate
2,857
19,350
(19,350)
-
0.93%
 
S$
          
 
— Variable rate
7,350
35,538
-
35,538
4.25%
 
JPY
          
 
— Variable rate
238,095
18,258
(18,258)
-
0.85%
             
     
7,303,146
(37,608)
7,265,538
  

   
As at 31 December 2009
   
Original currency
RMB equivalent
Less: Current portion
Non-current portion
Annual
interest rate
   
’000
        
             
 
Other loans
          
 
Unsecured
          
 
RMB
          
 
— Fixed rate
7,573,000
7,573,000
(36,420)
7,536,580
4.05%-5.35%
 
US$
          
 
— Variable rate
4,286
29,263
(19,508)
9,755
2.99%-5.87%
 
S$
          
 
— Variable rate
7,350
35,725
—
35,725
4.25%
 
JPY
          
 
— Variable rate
357,143
26,351
(17,567)
8,784
2.76%-5.80%
 
 
 
 
 
 
 
             
     
7,664,339
(73,495)
7,590,844
  


 
 
 


11.
LONG-TERM BONDS

The Company issued bonds with maturity of 5 years, 7 years and 10 years in December 2007 with face values of RMB 1 billion, RMB 1.7 billion and RMB 3.3 billion bearing annual interest rates of 5.67%, 5.75% and 5.90%, respectively. The total actual proceeds received by the Company were approximately RMB 5.885 billion. These bonds are denominated in RMB and issued at par. Interest is payable annually while principal will be paid when the bonds fall due. The annual effective interest rates of those bonds are 6.13%, 6.10% and 6.17%, respectively. Interest paid per annum during the tenure of the bonds are RMB 57 million, RMB 98 million and RMB 195 million, respectively. As at 30 June 2010, interest payables for these bonds above amounted to approximately RMB 181.36 million (31 December 2009: RMB 6.79 million).

The Company issued bonds with maturity of 10 years in May 2008 with face value of RMB 4 billion bearing annual interest rate of 5.20%. The actual proceeds received by the Company were approximately RMB 3.933 billion. These bonds are denominated in RMB and issued at par. Interest is payable annually while principal will be paid when the bonds fall due. The annual effective interest rate of bond is 5.42%. Interest paid per annum during the tenure of the bonds is RMB 208 million. As at 30 June 2010, interest payables for these bonds above amounted to approximately RMB 30.19 million (31 December 2009: RMB 134.19 million).

Please refer to Note 20(b) for details of long-term bonds of the Company guaranteed by HIPDC and government-related banks.

The Company issued medium-term notes with maturity of 5 years in May 2009 with face value of RMB 4 billion bearing annual interest rate of 3.72%. The actual proceeds received by the Company were approximately RMB 3.940 billion. These notes are denominated in RMB and issued at par. Interest is payable annually while principal will be paid when the notes fall due. The annual effective interest rate of these notes is 4.06%. Interest paid per annum during the tenure of the notes is RMB 149 million. As at 30 June 2010, interest payables for these notes above amounted to approximately RMB 19.16 million (31 December 2009: 94.17 million).

12.
ACCOUNTS PAYABLE AND OTHER LIABILITIES

Accounts payable and other liabilities comprised:

   
As at 30 June 2010
As at 31 December 2009
       
 
Accounts and notes payable
5,211,671
4,386,461
 
Other payables and accrued liabilities
10,457,446
10,138,159
       
   
15,669,117
14,524,620

Ageing analysis of accounts and notes payable was as follows:

   
As at 30 June 2010
As at 31 December 2009
       
 
Within 1 year
5,195,783
4,365,569
 
Between 1 to 2 years
12,156
5,875
 
Over 2 years
3,732
15,017
       
   
5,211,671
4,386,461

13.
SHORT-TERM BONDS

The Company issued unsecured short-term bonds amounting to RMB 5 billion bearing annual interest rate of 2.55% on 24 March 2010. Such bonds are denominated in RMB and issued at face value and will mature in 270 days from the issuance date. The annual effective interest rate of these bonds is 3.11%. As at 30 June 2010, interest payables for these bonds above amounted to approximately RMB 34.58 million.

 
 
 

The Company issued unsecured short-term bonds with face values of RMB 5 billion and RMB 5 billion bearing annual interest rates of 1.88% and 2.32% on 24 February 2009 and on 9 September 2009, respectively. Such bonds are denominated in RMB and issued at face value and were mature in 365 days and 270 days from respective issuance dates. The annual effective interest rates of these bonds are 2.29% and 2.87%, respectively. As at 30 June 2010, such short-term bonds were fully repaid on schedule.

14.
SHORT-TERM LOANS

Short-term loans are as follows:

   
As at 30 June 2010
As at 31 December 2009
   
Original currency
RMB
equivalent
Annual interest rate
Original currency
RMB
equivalent
Annual interest rate
   
’000
    
’000
    
               
 
Secured
            
 
RMB
            
 
— Fixed rate
1,595,915
1,595,915
3.89%
698,362
698,362
3.89%-4.54%
 
— Fixed rate-discounted
    notes receivable
218,425
218,425
2.40%-4.78%
141,594
141,594
2.28%-5.70%
               
     
1,814,340
    
839,956
  
               
 
Unsecured
            
 
RMB
            
 
— Fixed rate
35,109,496
35,109,496
3.79%-4.78%
23,885,000
23,885,000
3.79%-7.47%
               
 
S$
            
 
— Variable rate
11,500
55,604
1.73%-1.84%
1,000
4,860
1.81%-2.10%
               
     
35,165,100
    
23,889,860
  
               
     
36,979,440
    
24,729,816
  

As at 30 June 2010, secured short-term loans of RMB 218 million (31 December 2009: RMB 142 million) represented the discounted notes receivable with recourse. As these notes receivable were yet to mature, the proceeds received were recorded as short-term loans.

As at 30 June 2010, secured short-term loans of RMB 1,596 million (31 December 2009: RMB 698 million) are secured by accounts receivable of the Company with net book value amounting to RMB 1,673 million (31 December 2009: RMB 1,032 million).

15.
ADDITIONAL FINANCIAL INFORMATION ON UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2010, the net current liabilities of the Company and its subsidiaries amounted to approximately RMB 38,485 million (31 December 2009: RMB 35,392 million). On the same date, total assets less current liabilities were approximately RMB 139,400 million (31 December 2009: RMB 138,306 million).

16.
PROFIT BEFORE INCOME TAX EXPENSE

Profit before income tax expense was determined after charging and (crediting) the following:

 
 
 

   
For the six months
ended 30 June
   
2010
2009
 
 
 
 
       
 
Interest expense on
    
 
— loans
2,405,376
2,314,137
 
— short-term bonds
120,814
170,297
 
— long-term bonds
367,698
308,393
 
 
 
 
       
 
Total interest expense on borrowings
2,893,888
2,792,827
 
Less: amounts capitalized in property, plant and equipment
(395,752)
(554,357)
 
 
 
 
       
 
Interest expense charged in statement
  of comprehensive income
2,498,136
2,238,470
 
Depreciation on property, plant and equipment
5,226,172
4,106,401
 
Gains on disposals of property, plant and equipment, net
(8,623)
(13,994)
 
Amortization on land use rights
58,336
41,719
 
Amortization on other non-current assets
30,572
39,634
 
Reversal of provision for doubtful debts
(1,634)
(295)
 
Bad debts recovery
(31)
(2,623)
 
 
 
 

17.
INCOME TAX EXPENSE

No Hong Kong profits tax was provided for the six months ended 30 June 2010 (for the six months ended 30 June 2009: nil) as the Company and its subsidiaries had no estimated assessable profit arising in or deriving from Hong Kong.

Income tax expense of the Company and its subsidiaries has been provided on the estimated assessable profit for the period at their prevailing rates of taxation.

17.
INCOME TAX EXPENSE (CONT’D)

Upon the effective of the "Corporate Income Tax Law of the People’s Republic of China" on 1 January 2008, domestic subsidiaries with original applicable tax rate of 33% apply income tax rate of 25% from 1 January 2008 onwards. Domestic entities of the Company and its subsidiaries which originally enjoyed preferential tax treatments will transit to 25% gradually from 1 January 2008 onwards. Pursuant to Guo Fa [2007]39 document, starting from 1 January 2008, entities which originally enjoyed two-year tax exemption and three-year 50% reduction tax treatments, continue to follow the original tax laws, administrative regulations and relevant documents until respective expiration dates. However, those not being entitled to preferential tax treatment as a result of tax losses, the preferential period started from 2008 onwards.

The income tax rate applicable to Singapore subsidiaries is 17% (for the six months ended 30 June 2009: 17%).

For the six months ended 30 June 2010, the weighted average effective tax rate applicable to the Company and its subsidiaries is approximately 17.75% (for the six months ended 30 June 2009: 2.95%). The variation of weighted average effective tax rate was primarily attributable to the utilization of prior year unrecognized tax losses in the same period of last year.

18.
EARNINGS PER SHARE

The basic earnings per share is calculated by dividing the consolidated profit attributable to the equity holders of the Company by the weighted average number of the Company’s outstanding ordinary shares during the period:

   
For the six months
ended 30 June
   
2010
2009
       
 
Consolidated profit attributable to
  equity holders of the Company
1,932,463
1,870,377
 
 
 
 


 
Weighted average number of the Company’s
  outstanding ordinary shares
12,055,383
12,055,383
 
Basic earnings per share
0.16
0.16


There was no dilutive effect on earnings per share since the Company had no dilutive potential ordinary shares for the six months ended 30 June 2010 and 2009.

19.
NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS

Cash flows used in investing and provided by financing activities included the following:

   
For the six months
ended 30 June
   
2010
2009
       
 
Investing activities:
    
 
Purchases of property, plant and equipment, other non-current
  assets and prepayments of land use rights
(9,350,537)
(10,108,040)
 
Cash dividend received
-
126,653
 
Capital injections in associates
(251,430)
—
 
Prepayments for acquisitions of equity interests (Note 21(a))
(2,000,000)
—
 
Others
23,590
10,272
       
 
Net cash used in investing activities
(11,578,377)
(9,971,115)
       
 
Financing activities:
    
 
Drawdown of:
    
 
— short-term loans
33,371,717
8,196,795
 
— short-term bonds
4,979,850
4,980,000
 
— long-term loans
7,653,000
15,760,000
 
— long-term bonds
-
3,939,850
 
Capital injections from non-controlling interests of the subsidiaries
109,340
170,000
 
Government grants
940
311,959
 
Repayments of:
    
 
— short-term loans
(21,196,000)
(11,020,000)
 
— short-term bonds
(10,000,000)
—
 
— long-term loans
(8,662,413)
(15,309,563)
 
Dividends paid to shareholders of the Company
-
(341,633)
 
Dividends paid to non-controlling interests of the subsidiaries
(106,711)
(65,980)
 
Interest paid
(2,967,756)
(2,546,407)
 
Others
(52,142)
(18,948)
       
 
Net cash provided by financing activities
3,129,825
4,056,073


The breakdown of the bank balances and cash is as follows:

   
As at 30 June 2010
As at 31 December 2009
       
 
Restricted cash
239,028
225,068
 
Cash and cash equivalents
5,804,275
5,226,982
       
 
Total
6,043,303
5,452,050


 
 
 


20.
RELATED PARTY TRANSACTIONS

The related parties of the Company and its subsidiaries that had transactions with the Company and its subsidiaries are as follows:

 
Names of related parties
Nature of relationship
     
 
Huaneng Group
Ultimate parent company
 
HIPDC
Parent company
 
Xi’an Thermal Power Research Institute Co., Ltd.
  ("Xi’an Thermal") and its subsidiaries
Subsidiaries of Huaneng Group
 
Huaneng Energy & Communications Holdings Co., Ltd.
  ("HEC") and its subsidiaries
Subsidiaries of Huaneng Group
 
Huaneng New Energy Industrial Holding Limited Company
  ("Huaneng New Energy")
A subsidiary of Huaneng Group
 
Huaneng Guicheng Trust Co., Ltd. ("Huaneng Guicheng Trust")
A subsidiary of Huaneng Group
 
Huaneng Hulunbeier Energy Development Company Ltd. ("Hulunbeier Energy")
A subsidiary of Huaneng Group
 
Hebei Huaneng Industrial Development Limited Liability Company
A subsidiary of Huaneng Group
 
Gansu Huating Coal and Power Co., Ltd.
A subsidiary of Huaneng Group
 
Inner Mongolia Power Fuel Co. Ltd.
A subsidiary of Huaneng Group
 
Huaneng Hainan Power Co., Ltd.
A subsidiary of Huaneng Group
 
Huaneng Suzhou Thermoelectric Power Company Ltd.
A subsidiary of Huaneng Group
 
Huaneng Building Construction and Management Co., Ltd.
A subsidiary of Huaneng Group
 
Huaneng Heilongjiang Power Generation Co., Ltd.
A subsidiary of Huaneng Group
 
Alltrust Insurance Company of China Limited
A subsidiary of Huaneng Group
 
Shandong Huaneng Power Generation Co., Ltd.
A subsidiary of Huaneng Group
 
Huaneng Ruijin Power Generation Co., Ltd.
A subsidiary of HIPDC
 
Shandong Rizhao Power Company Ltd. ("Rizhao Power Company")
An associate of the Company
 
Huaneng Finance
An associate of the Company
 
Chongqing Huaneng Lime Company Limited ("Lime Company")
An associate of a subsidiary
 
Government-related enterprises*
Related parties of the Company

*
Huaneng Group is a state-owned enterprise. In accordance with the revised IAS 24, ‘Related Party Disclosures’, government-related entities, other than entities under Huaneng Group, which the PRC government has control, joint control or significant influence over are also considered as related parties of the Company and its subsidiaries.
   
 
The majority of the business activities of the Company and its subsidiaries are conducted with government-related entities. For the purpose of the related party transactions disclosure, the Company and its subsidiaries have established procedures to determine, to the extent possible, the identification of the ownership structure of its customers and suppliers as to whether they are government-related entities. However, many government-related entities have a multi-layered corporate structure and the ownership structures change over time as a result of transfers and privatization programs. Nevertheless, management believes that material related party transactions have been adequately disclosed.

20.
RELATED PARTY TRANSACTIONS (CONT’D)

In addition to the related party information shown elsewhere in this unaudited condensed consolidated interim financial information, the following is a summary of significant related party transactions entered into in the ordinary course of business between the Company and its subsidiaries and their related parties during the period.

 
 
 


(a)
Related party transactions

   
For the six months ended 30 June
   
2010
2009
       
 
Huaneng Group
    
 
Interest expense on long-term loans
(18,221)
(34,814)
       
 
HIPDC
    
 
Service fees on transmission and transformer facilities
(70,386)
(70,386)
 
Rental charge on land use rights of Huaneng Nanjing Power Plant
(667)
(667)
 
Rental charge on office building
(8,967)
(13,000)
       
 
Xi’an Thermal and its subsidiaries
    
 
Technical services and industry-specific technological project
  contracting services obtained from Xi’an Thermal
  and its subsidiaries
(85,674)
(56,187)
 
Purchase of equipment from Xi’an Thermal and its subsidiaries
(30,893)
—
       
 
HEC and its subsidiaries
    
 
Purchase of coal from HEC and its subsidiaries
  and service fee incurred for transportation
(911,656)
(339,535)
 
Purchase of equipment from HEC and its subsidiaries
(379,088)
(383,893)
       
 
Huaneng New Energy
    
 
Interest expense on long-term loans
(3,922)
—
       
 
Huaneng Guicheng Trust
    
 
Drawdown of short-term loans
1,180,000
—
 
Interest expense on short-term loans
(2,501)
—
       
 
Hulunbeier Energy
    
 
Purchase of coal from Hulunbeier Energy
(415,977)
(609,411)
       
 
Hebei Huaneng Industrial Development Limited
  Liability Company
    
 
Purchase of coal from Hebei Huaneng Industrial
  Development Limited Liability Company
(8,333)
—
       
 
Gansu Huating Coal and Power Co., Ltd.
    
 
Purchase of coal from Gansu Huating Coal and Power Co., Ltd.
(772,557)
—
       
 
Inner Mongolia Power Fuel Co. Ltd.
    
 
Purchase of coal from Inner Mongolia Power Fuel Co. Ltd.
(25,615)
—

20.
RELATED PARTY TRANSACTIONS (CONT’D)

(a)
Related party transactions (Cont’d)

   
For the six months ended 30 June
   
2010
2009
       
 
Huaneng Hainan Power Co., Ltd.
    
 
Sale of coal to Huaneng Hainan Power Co., Ltd.
71,526
—
       
 
Huaneng Suzhou Thermoelectric Power Company Ltd.
    
 
Sale of coal to Huaneng Suzhou Thermoelectric
  Power Company Ltd.
46,975
—


 
 
 


       
 
Huaneng Building Construction and
  Management Ltd. Company
    
 
Rental charge on office building
(21,765)
—
       
 
Huaneng Heilongjiang Power Generation Co., Ltd.
    
 
Service fee relating to the purchase of equipment
(520)
—
       
 
Alltrust Insurance Company of China Limited
    
 
Premium for property insurance
(28,629)
—
       
 
Huaneng Ruijin Power Generation Co., Ltd.
    
 
Sale of coal to Huaneng Ruijin Power Generation Co., Ltd.
208,362
—
       
 
Rizhao Power Company
    
 
Purchase of coal from Rizhao Power Company
(1,116,465)
(610,603)
       
 
Huaneng Finance
    
 
Drawdown of short-term loans
275,000
1,000
 
Interest expense on short-term loans
(4,678)
(29,059)
 
Interest expense on long-term loans
(5,620)
(3,177)
       
 
Lime Company
    
 
Purchase of lime from Lime Company
(54,935)
(42,713)

In addition, during this period, the Company provides management service to certain power plants owned by Huaneng Group and HIPDC. The Company did not receive any management fee. At the same time, Shandong Huaneng Power Generation Co., Ltd. provided management services to certain branches and subsidiaries of the Company which located in Shandong Province. The Company did not pay any management fee for such arrangements.

20.
RELATED PARTY TRANSACTIONS (CONT’D)

(a)
Related party transactions (Cont’d)

Transactions with government-related enterprises

For the six months ended 30 June 2010 and 2009, the Company and its domestic subsidiaries sold substantially all their products to local government-related power grid companies. Please refer to Note 4 for details of sales information to major power companies. The Company and its domestic subsidiaries maintained most of its bank deposits in government-related financial institutions while lenders of most of the Company and its domestic subsidiaries’ loans are also government-related financial institutions, associated with the respective interest income or interest expense incurred.

For the six months ended 30 June 2010 and 2009, other collectively-significant transactions with government-related entities also included a large portion of fuel purchases, property, plant and equipment construction and related labor employed.

(b)
Guarantees

   
As at 30 June 2010
As at 31 December 2009
       
 
(i)
Long-term loans guaranteed by
    
   
— Huaneng Group
1,106,929
1,349,547
   
— HIPDC
2,788,093
3,015,661


 
 
 


         
 
(ii)
Long-term bonds guaranteed by
    
   
— HIPDC
4,000,000
4,000,000
   
— Government-related banks
6,000,000
6,000,000


(c)
Pre-tax benefits and social insurance of key management personnel

   
For the six months
ended 30 June
   
2010
2009
       
 
Salaries
3,400
2,621
 
Pension
486
629
       
 
Total
3,886
3,250

21.
CAPITAL AND OTHER COMMITMENTS

(a)
Capital commitments

   
As at 30 June 2010
As at 31 December 2009
       
 
Contracted but not provided for
    
 
equity investments*
6,625,000
8,625,000
 
acquisitions of property, plant and equipment
19,770,563
19,438,254
       
   
26,395,563
28,063,254
       
 
Authorized but not contracted for
    
 
acquisitions of property, plant and equipment
931,068
1,704,416
       
 
Total
27,326,631
29,767,670

*
On 31 December 2009, the Company entered into an Equity Interest Transfer Agreement with Shandong Power and Shandong Luneng Development Group Company Limited ("Luneng Development"), pursuant to which the Company agreed to acquire from Shandong Power and Luneng Development the Target Equity Interests for an aggregate consideration of RMB 8.625 billion. Target Equity Interests, which includes 100% equity interest of Yunnan Diandong Energy Limited Company, 100% equity interest of Yunnan Diandong Yuwang Energy Limited Company, 100% equity interest of Shandong Zhanhua Co-generation Limited Company, 100% equity interest of Jilin Luneng Biological Power Generation Limited Company, 60.25% equity interest of Fujian Luoyuanwan Luneng Harbour Limited Liability Company, 58.30% equity interest of Fuzhou Port Luoyuanwan Pier Limited Liability Company, 73.46% equity interest of Luoyuan Luneng Ludao Pier Limited Liability Company, 100% equity interest of Qingdao Luneng Jiaonan Port Limited Company, 53% equity interest of Shandong Luneng Sea Transportation Limited Company, preliminary stage project development rights, all of which are owned by Shandong Power; and 39.75% equity interest of Fujian Luoyuanwan Luneng Harbour Limited Liability Company owned by Luneng Development.
   
 
For the six months ended 30 June 2010, the Company has prepaid considerations amounted to RMB 2 billion.

(b)
Other material long-term commitments

Jinling Power Company entered into a Gas Purchase Agreement with PetroChina Company Limited ("PTR") on 29 December 2004, pursuant to which Jinling Power Company purchases gas from PTR from the date on which it commenced commercial operations to 31 December 2023. According to the agreement, Jinling Power Company is required to pay to PTR at a minimum annual price equivalent to 486.9 million standard cubic meter of gas from 2008 to the end of gas supply period. The purchase price is negotiated annually between the contracting parties based on the latest ruling set out by the National Development and Reform Commission. Purchases for the six months ended 30 June 2010 amounted

 
 
 

to RMB 270 million (for the six months ended 30 June 2009: RMB 362 million).

21.
CAPITAL AND OTHER COMMITMENTS (CONT’D)

(b)
Other material long-term commitments (Cont’d)

As at 30 June 2010, according to the gas purchase contracts signed by SinoSing Power and its subsidiaries, gas purchase commitments is as follows:

 
Plateau period*
Purchase amount per day
     
 
Before the year end of 2013
175.1
billion British Thermal Unit ("BBtu")
 
2014
32.6
BBtu
 
2015-2023
15.0
BBtu

*
The various gas supply contracts remain valid after the above period, but the contractual quantity may deviate from the quantity disclosed in above subject to applicable conditions as stipulated in the respective agreements.

Purchase during the six months ended 30 June 2010 amounted to approximately S$ 592.4 million (equivalent to RMB 2,889.9 million) (for the six months ended 30 June 2009: S$ 400.2 million (equivalent to RMB 1,835 million)).

22.
EVENTS AFTER REPORTING PERIOD

The Company issued unsecured short-term bonds amounting to RMB 5 billion bearing annual interest rate of 3.20% on 2 July 2010. Such bonds are denominated in RMB and issued at face value and will mature in 365 days from the issuance date.

 
 
 

Balance Sheets (Unaudited)
As at 30 June 2010
(Prepared in accordance with PRC Accounting Standards)
(All amounts are stated in RMB Yuan unless otherwise stated)

   
30 June
2010
31 December
2009
30 June
2010
31 December
2009
ASSETS
Note
Consolidated
Consolidated
The Company
The Company
           
CURRENT ASSETS
          
Bank balances and cash
5(1)
6,043,302,668
5,452,049,814
1,099,020,689
1,461,569,493
Derivative financial assets
5(2)
7,495,792
141,885,707
-
—
Notes receivable
5(3)
612,788,528
351,630,301
169,751,228
41,816,000
Accounts receivable
5(4), 11(1)
9,784,323,730
9,691,272,481
5,291,672,584
5,231,868,409
Advances to suppliers
5(6)
1,221,963,981
1,024,217,112
1,147,500,658
898,157,690
Interest receivable
  
101,719
707,768
10,934,334
14,393,786
Dividend receivable
  
123,577,766
—
296,827,657
58,600,861
Other receivables
5(5), 11(2)
3,306,214,466
1,183,405,939
3,991,877,977
1,087,555,177
Inventories
5(7)
5,211,687,386
4,083,985,593
2,428,400,569
1,699,440,182
Current portion of
          
  non-current assets
  
18,978,390
19,547,650
-
—
Other current assets
  
75,058,899
46,123,151
8,816,865,534
7,931,343,151
           
Total current assets
  
26,405,493,325
21,994,825,516
23,252,851,230
18,424,744,749
           
NON-CURRENT ASSETS
          
Available-for-sale
  financial assets
5(8)
2,081,036,419
2,293,998,840
2,081,036,419
2,293,998,840
Derivative financial assets
5(2)
-
44,863,269
-
39,585,882
Long-term equity
  investments
5(9), 11(3)
10,113,053,024
9,550,498,199
31,947,687,881
29,990,652,656
Fixed assets
5(11)
117,737,595,097
108,768,695,177
57,838,471,180
58,120,774,578
Construction-in-progress
5(12)
19,397,229,707
23,636,990,139
6,666,529,139
5,974,997,478
Construction materials
5(13)
8,015,048,941
8,764,873,990
3,086,359,425
3,405,535,273
Intangible assets
5(14)
7,014,926,066
7,085,887,464
1,725,934,539
1,737,823,371
Goodwill
5(15)
10,855,642,739
10,912,159,288
1,528,308
1,528,308
Long-term deferred expenses
  
162,480,733
164,133,436
12,255,087
12,792,579
Deferred income tax assets
5(16)
713,448,501
547,664,305
408,977,306
272,566,233
Other non-current assets
  
240,437,049
232,537,231
10,395,000,000
10,395,000,000
           
Total non-current assets
  
176,330,898,276
172,002,301,338
114,163,779,284
112,245,255,198
           
TOTAL ASSETS
  
202,736,391,601
193,997,126,854
137,416,630,514
130,669,999,947


LIABILITIES AND
  
30 June
31 December
30 June
31 December
SHAREHOLDERS’
EQUITY
Note
2010
Consolidated
2009
Consolidated
2010
The Company
2009
The Company
           
CURRENT LIABILITIES
          
Short-term loans
5(17)
36,979,439,977
24,729,816,119
27,975,914,776
17,638,361,762
Derivative financial liabilities
5(2)
136,935,768
13,403,141
-
—
 
 
 
 

Notes payable
  
128,512,893
71,475,000
71,475,000
71,475,000
Accounts payable
5(18)
5,083,158,426
4,314,985,860
2,896,002,831
2,091,342,954
Advance from customers
  
4,313,470
102,728,785
850,588
45,452,777
Salary and welfare payables
5(19)
278,755,328
290,527,379
138,107,907
130,388,810
Taxes payable
5(20)
(1,610,177,965)
(1,544,137,768)
(562,369,617)
(613,098,027)
Interest payables
  
436,252,826
490,239,080
278,308,854
342,698,089
Dividends payable
5(21)
2,652,216,697
20,733,907
2,529,374,719
—
Other payables
5(22)
8,714,076,594
8,374,609,135
4,220,165,995
4,605,533,250
Current portion of
          
  non-current liabilities
5(23)
5,762,313,608
9,250,248,143
2,351,483,030
7,073,302,033
Other current liabilities
5(24)
5,495,221,657
10,442,145,076
5,315,552,482
10,379,065,434
           
Total current liabilities
  
64,061,019,279
56,556,773,857
45,214,866,565
41,764,522,082
           
NON-CURRENT LIABILITIES
          
Long-term loans
5(25)
73,486,833,447
71,266,754,880
37,052,895,392
32,518,894,102
Derivative financial liabilities
5(2)
155,262,877
849,636
107,837,665
—
Bonds payable
5(26)
13,815,449,563
13,800,114,589
13,815,449,563
13,800,114,589
Long-term payables
  
16,558,409
23,858,743
-
—
Deferred income tax liabilities
5(16)
1,360,440,286
1,386,493,492
-
—
Other non-current liabilities
5(27)
2,210,785,773
2,245,400,134
2,087,383,602
2,117,300,914
           
Total non-current liabilities
  
91,045,330,355
88,723,471,474
53,063,566,222
48,436,309,605
           
TOTAL LIABILITIES
  
155,106,349,634
145,280,245,331
98,278,432,787
90,200,831,687
           
SHAREHOLDERS’ EQUITY
          
Share capital
5(28)
12,055,383,440
12,055,383,440
12,055,383,440
12,055,383,440
Capital surplus
5(29)
8,784,638,442
9,349,129,414
7,079,307,733
7,376,680,693
Special reserves
  
15,328,472
—
15,328,472
—
Surplus reserves
5(30)
6,650,444,719
6,142,345,063
6,650,444,719
6,142,345,063
Undistributed profits
5(31)
12,820,543,095
13,830,728,702
13,337,733,363
14,894,759,064
Currency translation differences
  
(399,628,457)
(362,067,301)
-
—
           
Shareholder’s equity attributable to
  shareholders of the Company
  
39,926,709,711
41,015,519,318
39,138,197,727
40,469,168,260
Minority interests
5(32)
7,703,332,256
7,701,362,205
-
—
           
TOTAL SHAREHOLDERS’
  EQUITY
  
47,630,041,967
48,716,881,523
39,138,197,727
40,469,168,260
           
TOTAL LIABILITIES AND
  SHAREHOLDERS’ EQUITY
  
202,736,391,601
193,997,126,854
137,416,630,514
130,669,999,947


The accompanying notes form an integral part of these financial statements.

 
Person in charge of
Person in charge of
  
Legal representative:
accounting function:
accounting department:
  
Cao Peixi
Zhou Hui
Huang Lixin
  


 
 
 

Income Statements (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with PRC Accounting Standards)
(All amounts are stated in RMB Yuan unless otherwise stated)

   
For the six months ended 30 June
   
2010
2009
2010
2009
 
Note
Consolidated
Consolidated
The Company
The Company
     
(Restated)
    
           
1.  Operating revenue
5(33), 11(4)
48,853,858,545
35,594,228,228
24,771,629,684
19,189,602,922
Less:  Operating cost
5(33), 11(4)
(43,286,965,986)
(30,622,135,724)
(21,892,784,584)
(16,243,024,936)
Tax and levies on operations
5(34)
(61,986,453)
(90,412,543)
(19,866,048)
(16,482,464)
Selling expenses
  
(1,713,960)
(596,354)
-
—
General and administrative expenses
  
(1,279,473,006)
(950,352,637)
(819,525,193)
(625,385,325)
Financial expenses, net
5(35)
(2,282,588,313)
(2,322,884,451)
(1,290,799,995)
(1,259,128,482)
Assets impairment loss
  
1,682,635
3,097,512
49,942
22,527
Gain / (Loss) from changes in fair value
  
12,139,878
(32,497,954)
-
—
Add:  Investment income
5(36), 11(5)
425,783,665
394,121,402
758,301,078
520,681,982
Including:  share of profit of associates
  
370,767,037
394,121,402
370,039,462
393,712,282
           
2.  Operating profit
  
2,380,737,005
1,972,567,479
1,507,004,884
1,566,286,224
Add:  Non-operating income
5(37)
225,356,474
92,823,099
110,028,757
87,537,605
Less:  Non-operating expenses
5(38)
(20,972,448)
(11,301,414)
(17,423,459)
(8,256,691)
Including:  loss on disposals of non-current assets
  
(781,373)
(760,124)
(160,634)
(5,674)
           
3.  Profit before taxation
  
2,585,121,031
2,054,089,164
1,599,610,182
1,645,567,138
Less:  Income tax expense
5(39)
(457,464,640)
(74,127,259)
(120,486,553)
125,245,838
           
4.  Net profit
  
2,127,656,391
1,979,961,905
1,479,123,629
1,770,812,976
           
Including:  net profit generated by acquiree before
            business combination under common control
  
-
50,996,758
-
——
Attributable to:
          
  Shareholders of the Company
  
2,025,963,723
1,972,541,791
1,479,123,629
1,770,812,976
  Minority interests
  
101,692,668
7,420,114
-
——
           
5.  Earnings per share (based
          
  on the net profit attributable to
  shareholders of the Company)
          
Basic earnings per share
5(40)
0.17
0.16
    
Diluted earnings per share
  
0.17
0.16
    
           
6.  Other comprehensive (loss) / income
5(41), 11(6)
(602,295,435)
1,418,545,620
(297,372,960)
834,430,567
           
7.  Total comprehensive income
  
1,525,360,956
3,398,507,525
1,181,750,669
2,605,243,543
           
Attributable to
          
  — Shareholders of the Company
  
1,423,911,595
3,391,238,792
1,181,750,669
2,605,243,543
  — Minority interests
  
101,449,361
7,268,733
-
——

The accompanying notes form an integral part of these financial statements.

 
Person in charge of
Person in charge of
  
Legal representative:
accounting function:
accounting department:
  
Cao Peixi
Zhou Hui
Huang Lixin
  
 
 
 
 

Cash Flow Statements (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with PRC Accounting Standards)
(All amounts are stated in RMB Yuan unless otherwise stated)

   
For the six months ended 30 June
   
2010
2009
2010
2009
Items
Note
Consolidated
Consolidated
The Company
The Company
     
(Restated)
    
           
1.  Cash flows generated from operating activities
          
Cash received from sales of
  goods and services rendered
  
53,433,784,158
39,702,602,532
28,571,515,029
22,170,076,743
Cash received from return of taxes and fees
  
4,934,309
778,908
-
—
Other cash received relating to operating activities
  
308,573,318
124,844,226
187,191,391
36,933,418
           
Sub-total of cash inflows of
          
  operating activities
  
53,747,291,785
39,828,225,666
28,758,706,420
22,207,010,161
           
Cash paid for goods and services received
  
(39,772,283,053)
(27,183,007,535)
(21,713,293,119)
(15,236,573,667)
Cash paid to and on behalf of employees
  
(1,994,560,741)
(1,678,333,801)
(1,150,705,201)
(1,055,756,781)
Payments of all types of taxes
  
(2,475,906,807)
(3,461,586,742)
(1,409,071,415)
(1,976,364,203)
Other cash paid relating to operating activities
5(42)
(465,576,902)
(396,222,114)
(261,644,720)
(199,605,643)
           
Sub-total of cash outflows
          
  of operating activities
  
(44,708,327,503)
(32,719,150,192)
(24,534,714,455)
(18,468,300,294)
           
Net cash flows generated
  from operating activities
5(43)
9,038,964,282
7,109,075,474
4,223,991,965
3,738,709,867
           
2.  Cash flows generated from
      investing activities
          
Cash received on investment
  income
  
-
126,652,500
631,903,622
339,906,815
Net cash received from
  disposals of fixed assets,
  intangible assets and other
  long-term assets
  
18,967,605
6,577,242
14,731,480
5,409,222
Other cash received relating
  to investing activities
  
19,716,723
7,171,518
-
—
           
Sub-total of cash inflows of
          
  investing activities
  
38,684,328
140,401,260
646,635,102
345,316,037
           
Cash paid to acquire fixed
  assets, intangible assets
  and other long-term assets
  
(9,350,536,591)
(10,380,744,441)
(3,855,696,174)
(4,425,380,610)


 
 
 


Cash paid for investments
  
(2,266,524,400)
(1,020,000)
(4,537,732,375)
(5,895,093,533)
           
Sub-total of cash outflows
          
  of investing activities
  
(11,617,060,991)
(10,381,764,441)
(8,393,428,549)
(10,320,474,143)
           
Net cash flows used in investing activities
  
(11,578,376,663)
(10,241,363,181)
(7,746,793,447)
(9,975,158,106)

   
For the six months ended 30 June
   
2010
2009
2010
2009
Items
Note
Consolidated
Consolidated
The Company
The Company
     
(Restated)
    
           
3.  Cash flows generated from financing activities
          
Cash received from investments
  
109,340,000
170,000,000
-
—
Including:  cash received from
          
            minority shareholders of
          
            subsidiaries
  
109,340,000
170,000,000
-
—
Cash received from borrowings
  
41,024,717,430
25,600,794,500
32,930,000,000
15,885,000,000
Cash received from issuing
  long-term bonds and short-term bonds
  
4,979,850,000
8,919,850,000
4,979,850,000
8,919,850,000
Other cash received relating
  to financing activities
  
940,000
314,258,600
940,000
288,364,600
           
Sub-total of cash inflows of
          
  financing activities
  
46,114,847,430
35,004,903,100
37,910,790,000
25,093,214,600
           
Repayments of borrowings
  
(39,858,412,720)
(28,042,907,693)
(32,745,172,957)
(16,833,423,010)
Repayment for dividends, profit appropriation or
  interest expense payments
  
(3,074,468,415)
(3,218,281,540)
(1,973,820,886)
(1,735,623,546)
Including:  dividends paid to
          
            minority shareholders
          
            of subsidiaries
  
(106,711,239)
(65,979,700)
-
—
Other cash paid relating to
  financing activities
  
(52,141,668)
(18,947,880)
(33,085,716)
(12,772,192)
           
Sub-total of cash outflows
          
  of financing activities
  
(42,985,022,803)
(31,280,137,113)
(34,752,079,559)
(18,581,818,748)
           
Net cash flows generated
  from financing activities
  
3,129,824,627
3,724,765,987
3,158,710,441
6,511,395,852
           
4.  Effect of foreign exchange
      rate changes on cash
  
(13,118,823)
10,675,848
1,093,846
6,762,959
           
5.  Net increase/(decrease) in cash
  
577,293,423
603,154,128
(362,997,195)
281,710,572
Add:  Cash at beginning of the period
  
5,226,981,648
6,029,251,473
1,276,282,336
1,525,591,653
           
6.  Cash at end of the period
5(43)
5,804,275,071
6,632,405,601
913,285,141
1,807,302,225


The accompanying notes form an integral part of these financial statements.

 
Person in charge of
Person in charge of
  
Legal representative:
accounting function:
accounting department:
  
Cao Peixi
Zhou Hui
Huang Lixin
  


 
 
 


Consolidated Statements of Changes in Equity (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with PRC Accounting Standards)
(All amounts are stated in RMB Yuan unless otherwise stated)

   
Attributable to shareholders of the Company
Minority interests
Total shareholders’ equity
   
 
Items
Note
Share capital
Capital surplus
Special reserves
Surplus reserves
Undistributed profits
Currency translation difference
                   
Balance as at 31 December 2008
  
12,055,383,440
8,669,423,555
—
6,142,345,063
9,913,855,780
(534,432,581)
5,326,223,183
41,572,798,440
Business combination under
  common control
  
—
1,635,360,574
—
—
145,792,508
—
1,979,503,777
3,760,656,859
                   
Balance as at 1 January 2009,
  restated
  
12,055,383,440
10,304,784,129
—
6,142,345,063
10,059,648,288
(534,432,581)
7,305,726,960
45,333,455,299
                   
Changes for the six months ended
  30 June 2009
                  
Net profit
  
—
—
—
—
1,972,541,791
—
7,420,114
1,979,961,905
Other comprehensive income
5 (41)
—
1,440,966,238
—
—
—
(22,269,237)
(151,381)
1,418,545,620
Capital injection by shareholders
  
—
—
—
—
—
—
170,000,000
170,000,000
Acquisition of subsidiaries
  
—
—
—
—
—
—
27,615,152
27,615,152
Profit appropriation
                  
Dividends payable to
  shareholders
5 (31)
—
—
—
—
(1,205,633,044)
—
(65,979,700)
(1,271,612,744)
Dividends payable before
  common control become
  effective
  
—
—
—
—
(96,883,000)
—
(139,417,000)
(236,300,000)
                   
Balance as at 30 June 2009, restated
  
12,055,383,440
11,745,750,367
—
6,142,345,063
10,729,674,035
(556,701,818)
7,305,214,145
47,421,665,232


   
Attributable to shareholders of the Company
Minority interests
Total shareholders’ equity
   
 
Items
Note
Share capital
Capital surplus
Special reserves
Surplus reserves
Undistributed profits
Currency translation difference
                   
Balance as at 1 January 2010
  
12,055,383,440
9,349,129,414
—
6,142,345,063
13,830,728,702
(362,067,301)
7,701,362,205
48,716,881,523
                   
Changes for the six months ended
  30 June 2010
                  
Net profit
  
—
—
—
—
2,025,963,723
—
101,692,668
2,127,656,391
Other comprehensive loss
5(41)
—
(564,490,972)
—
—
—
(37,561,156)
(243,307)
(602,295,435)
Capital injection by shareholders
  
—
—
—
—
—
—
109,340,000
109,340,000
Acquisition of subsidiaries
  
—
—
—
—
—
—
—
—
Profit appropriation
                  
Transfer to surplus reserves
5(30)
—
—
—
508,099,656
(508,099,656)
—
—
—


 
 
 


Dividends payable to
  shareholders
5(31)
—
—
—
—
(2,528,049,674)
—
(208,819,310)
(2,736,868,984)
Special reserves
  
—
—
15,328,472
—
—
—
—
15,328,472
                   
Balance as at 30 June 2010
  
12,055,383,440
8,784,638,442
15,328,472
6,650,444,719
12,820,543,095
(399,628,457)
7,703,332,256
47,630,041,967

The accompanying notes form an integral part of these financial statements.

 
Person in charge of
Person in charge of
  
Legal representative:
accounting function:
accounting department:
  
Cao Peixi
Zhou Hui
Huang Lixin
  


 
 
 

Statements of Changes in Equity (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with PRC Accounting Standards)
(All amounts are stated in RMB Yuan unless otherwise stated)

Items
Note
Share capital
Capital surplus
Special reserves
Surplus reserves
Undistributed profits
Total shareholders’ equity
               
Balance as at 1 January 2009
  
12,055,383,440
7,244,448,142
—
6,142,345,063
12,281,250,072
37,723,426,717
               
Changes for the six
  months ended 30 June 2009
              
Net profit
  
—
—
—
—
1,770,812,976
1,770,812,976
Other comprehensive income
  
—
834,430,567
—
—
—
834,430,567
Profit appropriation
              
Dividends payables to shareholders
  
—
—
—
—
(1,205,633,044)
(1,205,633,044)
               
Balance as at 30 June 2009
  
12,055,383,440
8,078,878,709
—
6,142,345,063
12,846,430,004
39,123,037,216
               
Balance as at 1 January 2010
  
12,055,383,440
7,376,680,693
—
6,142,345,063
14,894,759,064
40,469,168,260
               
Changes for the six
  months ended 30 June 2010
              
Net profit
  
—
—
—
—
1,479,123,629
1,479,123,629
Other comprehensive loss
  
—
(297,372,960)
—
—
—
(297,372,960)
Profit appropriation
              
Transfer to surplus reserves
  
—
—
—
508,099,656
(508,099,656)
—
Dividends payables to shareholders
  
—
—
—
—
(2,528,049,674)
(2,528,049,674)
Special reserves
  
—
—
15,328,472
—
—
15,328,472
               
Balance as at
  30 June 2010
  
12,055,383,440
7,079,307,733
15,328,472
6,650,444,719
13,337,733,363
39,138,197,727

The accompanying notes form an integral part of these financial statements.

 
Person in charge of
Person in charge of
  
Legal representative:
accounting function:
accounting department:
  
Cao Peixi
Zhou Hui
Huang Lixin
  


 
 
 


Notes to the Financial Statements (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with PRC Accounting Standards)
(All amounts are stated in RMB Yuan unless otherwise stated)

1.
COMPANY PROFILE

Huaneng Power International, Inc. (hereinafter referred to as the "Company") was incorporated in the People’s Republic of China (the "PRC") as a Sino-foreign joint stock company on 30 June 1994. The place of registration of the Company is West Wing, Building C, Tianyin Mansion, 2C Fuxingmennan Street, Xicheng District, Beijing, PRC.

The Company and most of its subsidiaries are principally engaged in the generation and sale of electric power to the respective regional or provincial grid companies.

The Company’s Overseas Listed Foreign Shares were listed on the New York Stock Exchange and The Stock Exchange of Hong Kong Limited on 6 October 1994 and 4 March 1998, respectively. The Company has listed its A share on the Shanghai Stock Exchange on 6 December 2001.

The Company’s ultimate parent company is China Huaneng Group ("Huaneng Group"). Huaneng Group is a state-owned enterprise registered in the PRC, please refer to Note 7(1) for details.

These financial statements were approved by the board of directors of the Company on 10 August 2010.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(1)
Basis of preparation

The Company and its subsidiaries prepare financial statements in accordance with the basic Standard and the 38 specific accounting standards of the "Accounting Standards for Business Enterprises" issued by Ministry of Finance on 15 February 2006, and the Application Guidance for the Accounting Standards for Business Enterprises, Interpretation of the Accounting Standards for Business Enterprises and other related regulations (hereinafter collectively referred to as the "Accounting Standards for Business Enterprises").

(2)
Statement of compliance with the Accounting Standards for Business Enterprises

The consolidated and Company’s financial statements for the six months ended 30 June 2010 are prepared in accordance with the Accounting Standards for Business Enterprises, and present truly and completely the financial position as at 30 June 2010 and their financial performance and cash flows and other related information for the six months ended 30 June 2010 of the Company and its subsidiaries as well as the Company alone.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(3)
Accounting year

The accounting year of the Company and its subsidiaries starts on 1 January and ends on 31 December.

(4)
Reporting currency

The reporting currency of the Company and its domestic subsidiaries is Renminbi ("RMB"), and the reporting currency for the oversea subsidiaries is the currency of the country in which they operate.

(5)
Foreign currency translation

 
(a)
Foreign currency transaction
     


 
 
 


   
Foreign currency transactions are translated into the reporting currency using the spot exchange rate of the transaction dates. On balance sheet date, foreign currency monetary items are translated into reporting currency at the spot exchange rate of balance sheet date. Exchange differences are directly expensed in the profit and loss of current period unless it arises from foreign currency loans borrowed for the purchase or construction of qualifying assets which is eligible for capitalization and qualifying cash flow hedges which is deferred in equity.
     
 
(b)
Foreign currency translation of financial statements
     
   
Asset and liability items in each balance sheet of foreign operations are translated at the spot exchange rates of balance sheet date; equity items excluding retained earnings are translated at the spot exchange rates of the date of the transactions. Income and expense items in the income statements of the foreign operations are translated at average exchange rates approximating the rate of the transaction dates. All resulting translation differences above are recognized as a separate component of equity.
     
   
The cash flows of overseas business are translated at average exchange rates approximating the rates of the dates when cash flows incurred. The impact of the foreign currency translation on the cash and cash equivalents is presented in the cash flow statement separately.
     
   
When a foreign operation is partially disposed of or sold, translation differences that were recorded in equity are recognized in the income statements as part of the disposal gain or loss.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(6)
Cash and cash equivalents

Cash and cash equivalents represents cash on hand, deposits held at call with banks, short-term (3 months or less), highly-liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

(7)
Financial assets

Financial assets are classified as the following categories at initial recognition: at fair value through profit or loss, loans and receivables, available-for-sale financial assets and held-to-maturity investments. The classification depends on the intention and ability of the Company and its subsidiaries to hold the financial assets. In the current reporting period, the financial assets held by the Company and its subsidiaries are classified as the following categories: at fair value through profit or loss, loans and receivables and available-for-sale.

 
(a)
Financial assets at fair value through profit or loss
     
   
Financial assets at fair value through profit or loss are financial assets held for trading including held-for-trading financial assets and financial assets designated upon initial recognition as at fair value through profit or loss. Except for designated hedging instruments, derivative financial instruments are classified as held-for-trading.
     
 
(b)
Loans and receivables
     
   
Loans and receivables refer to the non-derivative financial assets with fixed or determinable amount for which there is no quotation in the active market. Except for maturities greater than 12 months after the balance sheet dates which are categorized as non-current assets, they are included in current assets. Loans and receivables include notes receivable, accounts receivable, interest receivable, dividends receivable, other receivables, other current assets and other non-current assets etc.
     
 
(c)
Available-for-sale financial assets
     
   
Available-for-sale financial assets are non-derivative financial assets that are designated in this category.


 
 
 


2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(7)
Financial assets (Cont’d)

 
(d)
Recognition and measurement
     
   
Financial assets are recognized initially at fair value when the Company and its subsidiaries become a party to the contractual provisions of a financial instrument. Transaction costs relating to financial assets at fair value through profit or loss are directly recorded in income statements as incurred. Transaction costs for other financial assets are included in the carrying amount of assets at initial recognition.
     
   
Financial assets at fair value through profit or loss and available-for-sale are subsequently measured at fair value.
     
   
Changes in the fair value of financial assets at fair value through profit or loss are recorded in the income statements in the current period as gain or loss from changes in fair value. Interest or cash dividends received in the duration of such assets and gain or loss on disposal of such assets are recorded in the income statements in the current period. The subsequent changes in the fair value of derivative financial instruments are recorded in gain or loss from changes in fair value, except for the gain or loss arising from the effective portion of qualified hedging instruments of cash flow hedges being deferred in equity (refer to Note 2(7)(e)).
     
   
Except for impairment loss and translation differences on monetary financial assets, changes in the fair value of available-for-sale financial assets are recognized in equity. When these financial assets are derecognized, the accumulated fair value adjustments recognized in equity are included in the income statements or initial recognized cost of non-financial assets as investment income. Dividends on available-for-sale equity instruments are recorded in investment income when the right of the Company and its subsidiaries to receive payments is established.
     
   
Loans and receivables are measured at amortized cost using the effective interest method.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(7)
Financial assets (Cont’d)

 
(e)
Cash flow hedge
     
   
Cash flow hedge represents a hedge against the exposure to variability in cash flows where such cash flow is originated from a particular risk associated with a highly probable forecast transaction and could affect the income statements.
     
   
The hedged items of cash flow hedge are the designated items with respect to the risks associated with future cash flow changes in the Company and its subsidiaries. Hedging instruments are designated derivatives with cash flows are expected to offset the cash flows of a hedged item.
     
   
The fair value of a hedged item is classified as a non-current asset or liability when the remaining maturity of the hedge item is more than 12 months.
     
   
The Company and its subsidiaries document their assessments, both at the inception of hedging and on an ongoing basis, of whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows of the hedged items. The Company and its subsidiaries apply ratio analysis method to evaluate the prospective effectiveness of cash flow hedge.
     
   
Changes in the fair value of the effective portion of derivatives that are designated and qualified as cash flow hedges are recognized as a separate component in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statements.
     
   
Amounts accumulated in equity are recycled to the income statements in the periods when the hedged item affects profit or loss. When the hedged forecast transaction results in the recognition of a non-financial asset, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. When the Company and its subsidiaries expect all or a portion of net loss previously recognized in equity will not be recovered in future accounting periods, the irrecoverable portion will be charged to the income statements.
     
   
When a hedging instrument expires or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge


 
 
 


   
accounting, the Company and its subsidiaries will stop hedge accounting. Any cumulative gain or loss previously recorded in equity remains in equity and is recycled to the income statements or initial measurement of the cost of non-financial assets when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was previously recorded in equity is transferred to the income statements immediately.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(7)
Financial assets (Cont’d)

 
(f)
Impairment of financial assets
     
   
Except for financial assets at fair value through profit or loss, the Company and its subsidiaries assess the book value of financial assets at balance sheet date. Provision for impairment is made when there is objective evidence indicating that a financial asset is impaired.
     
   
When there is a significant or prolonged decline in the fair value of available-for-sale financial assets, accumulated loss in fair value that previously recorded in shareholders’ equity should be recorded as impairment loss. Impairment loss on available-for-sale equity investments is reversed through equity when the fair value subsequently increases as a result of changes in circumstances occurring after the impairment loss was originally recognized.
     
   
When financial assets carried at amortized cost are impaired, the carrying amount of the financial assets is reduced to present value of estimated future cash flows (excluding future credit losses that have not been incurred). The impairment amount is recognized as assets impairment loss in the current period. If there is objective evidence that the value of the financial assets is recovered as a result of changes in circumstances occurring after the impairment loss was originally recognized, the originally recognized impairment loss is reversed through the income statements.
     
 
(g)
Derecognition of financial assets
     
   
Financial assets are derecognized when: (a) the rights to receive cash flows from the financial assets have expired; or (b) all risks and rewards relating to the ownership of the financial assets have been transferred; or (c) the Company and its subsidiaries have neither transferred nor retained all risks and rewards relating to the ownership but gave up control on the financial assets.
     
   
The difference between book value and consideration value with accumulated changes in fair value recorded in equity is recognized in the income statements in the current period.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(8)
Receivables

Receivables including accounts receivable, notes receivable and other receivables, etc. are recognized initially at fair value.

When there is objective evidence that the Company and its subsidiaries will not be able to collect all amounts due according to the original terms of the receivables, impairment test is performed on individual account and related provision for doubtful accounts is made based on the shortfall between carrying amounts and respective present value of estimated future cash flow. The carrying amounts of the receivables are reduced through the use of allowance accounts, and the amount of the provision is recognized in the income statements as asset impairment loss. When a receivable is uncollectible, it is written off against the allowance account for receivable. Subsequent recoveries of amounts previously written off are recognized in the income statements as credit against assets impairment loss.

(9)
Inventories

Inventories include fuel, materials for repairs and maintenance and spare parts, etc. and are stated at lower of cost and net realizable values.

Inventories are initially recorded at cost and are charged to fuel costs or repairs and maintenance according to the actual situation respectively when used, or capitalized to fixed assets when installed, as appropriate, using weighted average cost basis. Cost of inventories mainly includes costs of purchase and transportation costs.

 
 
 


When the forecast transaction that is hedged results in the recognition of the inventory, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the inventory.

Provision for inventory obsolescence is determined by the excess of cost over its net realizable value on an item-by-item basis. For inventories that are voluminous and at relatively low unit price, provision is determined based on individual categories. Net realizable values are determined based on the estimated selling price less estimated conversion costs during power generation, estimated selling expenses and related taxes in the ordinary course of business.

The Company and its subsidiaries apply perpetual inventory system.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(10)
Long-term equity investments

Long-term equity investments include equity investments in subsidiaries, associates and long-term equity investments in entities where i) the Company and its subsidiaries have no control, joint control or significant influence, ii) there is no quoted price in an active market and, iii) the fair value of such investments cannot be reliably measured.

 
(a)
Subsidiaries
     
   
Subsidiaries are investees over which the Company have the power to exercises control, i.e. the power to govern the financial and operating policies to obtain benefits from the operating activities of the investees. When determining whether the Company exercises control over an investee, the impact from potential voting rights of the investee, such as currently convertible bonds and exercisable warrants, etc. is taken into account. The investments in subsidiaries are accounted for using cost method in the financial statements. They are adjusted in accordance with equity method when preparing the consolidated financial statements.
     
   
If the Company purchases further interests of its subsidiaries from the minority shareholders, the consideration paid is compared with the relative newly-acquired proportionate share of net assets of the subsidiary carried based on the fair value exercise on the acquisition date. Any excess or shortfall is recorded in shareholders’ equity. The gain or loss on disposals or deemed disposals of a portion of equity interests in subsidiaries to minority shareholders is recorded in shareholders’ equity.
     
 
(b)
Associates
     
   
Associates are investees over which the Company and its subsidiaries, in substance, have significant influence on the financial and operation decisions. Significant influence refers to the right of participation in investee’s financial and operating policies without necessarily having full control or joint control over these policies with other parties. It applies equity method to investment to associates.
     
 
(c)
Other long-term equity investments
     
   
Other long-term equity investments are accounted for using cost method where i) the Company and its subsidiaries have no control, joint control, or significant influence, ii) there is no quoted price in an active market, and iii) the fair value of the investments cannot be reliably measured.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(10)
Long-term equity investments (Cont’d)

 
(d)
Recognition and measurement
     
   
Long-term equity investments accounted for using cost method are measured at initial investment cost. Cash dividends or income appropriation declared by the investees are recognized as investment income in the current period.
     
   
The excess of initial investment cost of long-term equity investments measured using equity method of accounting over the


 
 
 


   
proportionate share of fair value of net identifiable assets of the investee acquired is recognized as long-term equity investment cost at initial investment cost. Any shortfall of the initial investment cost to the proportionate share of the fair value of identifiable net assets of investee acquired is recognized in current period profit and loss, the cost of long-term investment is adjusted accordingly.
     
   
When applying equity method, the Company and its subsidiaries adjust net profit or loss of the investees, including the fair value adjustments on the net identifiable assets of the associates and the adjustments to align with the accounting policies of the Company and different periods. Current period investment income is then recognized based on the proportionate share of the Company and its subsidiaries in the investees’ net profit or loss. Net losses of investees are recognized to the extent of book value of long-term equity investments and any other constituting long-term equity investments in investees in substance. The Company and its subsidiaries will continue to recognize investment losses and measure them as provision if they bear additional obligations which meet the recognition criteria under the provision standard. The Company and its subsidiaries adjust the carrying amount of the investment and directly recognize into capital surplus based on their proportionate share on other shareholders’ equity movements of the investees other than net profit or loss, given there is no change in shareholding ratio. When the investees appropriate profit or declare dividends, the book value of long-term equity investments are reduced correspondingly by the proportionate share of the distribution. Unrealized profit or loss from transactions between the Company and its subsidiaries and the associates is eliminated to the extent of interest of the Company and its subsidiaries in the associates. Loss from transactions between the Company and its subsidiaries and the associates is not eliminated when there is evidence for asset impairment.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(10)
Long-term equity investments (Cont’d)

 
(e)
Long-term equity investments impairment
     
   
When the recoverable amounts of investments in subsidiaries or associates are less than its book value, the carrying amounts are reduced to recoverable amounts. Please refer to Note 2(15) for details.
     
   
For other long-term equity investments, impairment loss is recognized in the income statements based on the shortfall between carrying amounts and the present value of such investments (deriving from discounting of future cash flow of similar investments at current market return rate).

(11)
Fixed assets and depreciation

Fixed assets consist of ports facilities, buildings, electric utility plant in service, transportation facilities and others. Fixed assets acquired or constructed are initially recognized at cost. Fixed assets obtained during the Reorganization were initially recorded at their appraisal value approved by relevant stated-owned assets administration authorities.

Subsequent costs about fixed assets are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Company and its subsidiaries and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. Other subsequent expenditures are all charged in the current period profit or loss when they are incurred.

Depreciation of fixed assets is provided based on book value less estimated residual value over estimated useful life using straight-line method. For those impaired fixed assets, depreciation is provided based on book value after deducting impairment provision over estimated useful life.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(11)
Fixed assets and depreciation (Cont’d)

The estimated useful lives, residual value rates and annual depreciation rates of the fixed assets are as follows:


 
 
 


 
Estimated
useful lives
Estimated
residual
value rate
Annual
depreciation rate
       
Ports Facilities
20-40 years
5%
2.38%-4.75%
Buildings
8-35 years
0%-11%
2.71%-11.88%
Electric utility plant in service
5-35 years
0%-11%
2.71%-20.00%
Transportation facilities
6-14 years
0%-11%
6.79%-16.67%
Others
3-18 years
0%-11%
5.56%-33.33%

At the end of each year, the Company and its subsidiaries review the estimated useful life, estimated residual value and the depreciation method of the fixed assets for adjustment when necessary.

Fixed assets is derecognized when they are disposed of, or expected that cannot bring economic benefit through use or disposal. The amount of disposal income arising from sale, transfer, disposal or write-off of fixed assets less book value and related tax expenses is recorded in the income statements.

The carrying amount of fixed assets is written down immediately to its recoverable amount when its carrying amount is greater than its recoverable amount. Please refer to Note 2(15).

(12)
Construction-in-progress

Construction-in-progress is recorded at cost. Cost comprises construction expenditures, installation expenditures, and other expenditures necessary for the purpose of preparing the assets for their intended use and those borrowing costs arising from borrowings for the purpose of preparing the assets for their intended use and eligible for capitalization. Construction-in-progress is transferred to the fixed assets when the assets are ready for their intended use, and depreciation begins from the following month.

When the recoverable amount of construction-in-progress becomes lower than its carrying amount, construction-in-progress is impaired to its recoverable amount. Please refer to Note 2(15).

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(13)
Intangible assets and amortization

Intangible assets, which include land use right and power generation licence, are initially recognized at cost. The Company’s intangible assets obtained during the Reorganization were initially recorded at their appraisal value approved by relevant stated-owned assets administration authorities.

Intangible assets with definite useful lives are amortized using the straight-line method over their useful lives. The expected useful lives and amortization method applied to intangible assets with definite useful lives are reviewed at each financial year-end and adjusted when necessary.

Intangible assets with indefinite useful lives are not amortized. The useful lives of intangible assets with indefinite useful lives are reviewed by the Company and its subsidiaries in every accounting period.

When the recoverable amount of intangible assets becomes lower than their carrying amount, the intangible assets are impaired to their recoverable amount. Please refer to Note 2(15).

(14)
Goodwill

Goodwill is the cost of business combination not under common control over the proportionate share of the fair value of the net identifiable assets on the acquisition date. Goodwill arising from business combinations is presented separately on consolidated financial statements.

Separately presented goodwill in consolidated financial statements is tested for impairment at least annually. When performing impairment test, the carrying amount of goodwill is allocated to assets group or group of assets groups that are expected to benefit from the synergies arising from the business combination. The Company and its subsidiaries allocate goodwill to assets group or group of assets groups primarily based on region where they operate. Please refer to Note 2(15) for the accounting policy of impairment of assets group or group of assets groups. Goodwill is presented at cost less accumulated impairment loss.

 
 
 


2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(15)
Long-term assets impairment

Separately presented goodwill in consolidated financial statements and intangible assets with indefinite useful lives are tested for impairment at least annually regardless of whether there are indications of impairment. Fixed assets, construction-in-progress, intangible assets with definite useful lives and long-term equity are tested for impairment when there is any impairment indication on balance sheet date. If impairment test result shows that the recoverable amount of asset is less than its book value, that difference is recognized as impairment provision. Recoverable amount is the higher of fair value less cost to sell of the asset and present value of its expected future cash flows. Asset impairment is calculated and recognized on individual asset basis. If it is difficult to estimate recoverable amount for the individual assets, the recoverable amount is determined based on the recoverable amount of the assets group to which asset belongs. An asset group is the smallest group of assets that independently generates cash flows.

The long-term assets impairment referred above cannot be reversed after recognition even if the amount is recovered subsequently.

(16)
Financial liabilities

Financial liabilities are classified as financial liabilities at fair value through profit or loss and other financial liabilities at initial recognition. The Company and its subsidiaries’ financial liabilities are mainly held-for-trading financial liabilities, payables and loans, etc.

Payables including accounts payable, notes payable and other payables, etc. are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method. Payables due within one year (including one year) are classified as current liabilities and the remaining classified as non-current liabilities.

Loans are initially recognized at fair value less transaction expense and subsequently measured at amortized cost using the effective interest method. Loans are classified as current liabilities unless the Company and its subsidiaries have an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

The corporate bonds are initially recorded as liabilities at fair value less transaction cost and subsequently measured at amortized cost using the effective interest method over the terms of the bonds.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(17)
Borrowing costs

The borrowing costs incurred which are directly attributable to the acquisition or construction of assets where the acquisition and construction take a substantial period of time to get ready for the intended use, are capitalized and recorded in the costs of the assets when the capital expenditure and borrowing costs are incurred and the necessary acquisition or construction activities to prepare the asset for its intended use begin. The capitalization of the borrowing costs is ceased when the asset under acquisition or construction is ready for the intended use, and the borrowing costs incurred afterward are expensed off. If the acquisition or construction of an asset is interrupted abnormally for more than 3 months, the capitalization of the borrowing costs is suspended till such activities resume. For specific borrowings for the acquisition or construction of an asset eligible for capitalization, the capitalized amount of interests is determined based on the interest expense incurred after deducting any interest income earned from the deposits or investment income from the temporary investment funded by the unused borrowing balance. For general borrowings used for acquisition or construction of an asset eligible for capitalization, the capitalized interest is determined by multiplying the weighted average excess of accumulated capital expenditure over specific borrowings by the capitalization rate of such general borrowings. The capitalization rate is determined according to the weighted average interest rate of the general borrowings.

Other borrowing costs are expensed in the current period.

(18)
Employee benefits

Employee benefits include all expenditures relating to the employees for their services.

 
 
 


The Company and its subsidiaries recognize employee benefits as liabilities during the accounting period when employees render services and allocates to related cost of assets and expenses based on different beneficiaries.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(19)
Deferred income tax assets and liabilities

Deferred income tax assets and liabilities are recognized based on the differences between tax bases of assets and liabilities and respective book value (temporary differences). For deductible tax losses or tax credit that can be brought forward in accordance with tax law requirements for deduction of taxable income in subsequent years, it is considered as temporary differences and related deferred income tax assets are recognized. No deferred income tax liability is recognized for temporary difference arising from initial recognition of goodwill. For those temporary differences arising from initial recognition of an asset or liability in a non-business combination transaction that affects neither accounting profit nor taxable profit (or deductible loss) at the time of the transaction, no deferred income tax asset and liability is recognized.

The Company and its subsidiaries recognize deferred income tax assets to the extent that it is probable that taxable profit will be available to offset the deductible temporary difference, deductible tax loss and tax credit.

On the balance sheet date, deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or liability is settled.

Deferred income tax assets and deferred income tax liabilities are offset when meeting all the conditions below:

(a)
The Company and its subsidiaries have the legal enforceable right to settle current income tax assets and current income tax liabilities;

(b)
Deferred income tax assets and deferred income tax liabilities are related to the income tax levied by the same tax authority of the Company and its subsidiaries.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(20)
Revenue recognition

Revenue is recognized based on the following methods:

The amount of revenue was determined by the fair value of the amount received or receivable according to contract or agreement, when sales of goods and rendering of services occur during the operating activities of the Company and its subsidiaries. Revenue and income are recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and its subsidiaries, the amount of the revenue and income can be measured reliably and meet particular conditions of revenue recognition of following business activities.

 
(a)
Product sales revenue
     
   
Product sales revenue mainly refers to amounts earned from electricity sales (net of related taxes). The Company and its subsidiaries recognize revenue when electricity is sold to consumers.
     
 
(b)
Service revenue
     
   
Service revenue refers to amounts received from service of port loading and conveying. The Company and its subsidiaries recognize revenue when the relevant service was provided.
     
 
(c)
Other income
     
   
Interest income from deposits is recognized on a time proportion basis using effective yield method.
     
   
Rental income under operating leases is recognized on a straight-line basis over the relevant lease term.


 
 
 


2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(21)
Leases

Leases where all the risks and rewards incidental to ownership of the assets are in substance transferred to the lessees are classified as finance leases. All other leases are operating leases.

 
(a)
Operating lease (Lessee)
     
   
Operating lease expenses are capitalized or expensed on a straight-line basis over the lease term.
     
 
(b)
Finance lease (Lessor)
     
   
The Company and its subsidiaries recognize the aggregate of the minimum lease receipts and the initial direct costs on the lease inception date as the receivable. The difference between the aggregate of the minimum lease receipts and the initial direct costs and their respective present values shall be recognized as unrealized finance income. The Company and its subsidiaries adopt the effective interest method to allocate such unrealized finance income over the lease term. On balance sheet date, the Company and its subsidiaries present the net amount of finance lease receivable after deducting any unrealized finance income in other non-current assets and current portion of non-current assets respectively.
     
   
Please refer to Note 2(7)(f) for impairment test of the finance lease receivable.

(22)
Government grants

Government grants are recognized when the Company and its subsidiaries fulfill the conditions attaching to them and are able to receive them. When government grants are in form of monetary assets, they are measured at the amount received or receivable.

Asset-related government grant is recognized as deferred income and is amortized evenly in income statements over the useful lives of related assets.

Income-related government grant that is used to compensate subsequent related expenses or losses of the Company and its subsidiaries are recognized as deferred income and recorded in the income statements when related expenses or losses incurred. When the grant is used to compensate expenses or losses that were already incurred, they are directly recognized in current period profit and loss.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(23)
Dividends appropriation

Cash dividend is recognized as a liability in the period when the proposed dividend is approved by the general meeting of shareholders.

(24)
Business combinations

Business combinations under common control refers to combinations where the combining entities are controlled by the same party or parties before and after the combination and that control is not transitory; business combinations not under common control refers to combinations where the combining entities are not controlled by the same party or parties before and after the combination.

 
(a)
Business combinations under common control
     
   
The acquirer measures both the consideration paid and net assets obtained at their carrying amounts. The difference between the carrying amounts of the net assets obtained and the carrying amount of the consideration paid is recorded in capital surplus (share premium), with any excess over capital surplus (share premium) being adjusted against undistributed profits. Any direct transaction cost attributable to the business combination is recorded in the income statements in the current period. However, the handling fees, commissions and other expenses incurred for the issuance of equity instruments or bonds to effect the business combination are recorded in the initial measurement of the equity instruments and bonds respectively.
     


 
 
 


 
(b)
Business combinations not under common control
     
   
The cost of a combination is measured as the fair value of the assets given and liabilities incurred or assumed at the date of exchange. Any direct transaction cost attributable to the business combination is recorded in the income statements in the current period. However, the handling fees, commissions and other expenses incurred for the issuance of equity instruments or bonds to effect the business combination are recorded in the initial measurement of the equity instruments and bonds respectively. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the combination date. The excess of the combination cost over the fair value of the Company and its subsidiaries’ share in the identifiable net assets acquired is recorded as goodwill. If the combination cost is less than the fair value of the net assets of the subsidiary acquired, it is recognized in the income statements.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(25)
Preparation of consolidated financial statements

The scope of consolidated financial statements includes the Company and its subsidiaries.

Subsidiaries are consolidated from the date when control is transferred to the Company. They are de-consolidated from the date when control ceases. All the significant intra-group balances, transactions and unrealized profit or loss are eliminated in the preparation of the consolidated financial statements. The portion of the shareholders’ equity and net profit or loss of the subsidiaries, which is not attributable to the parent company, is separately presented as minority interests and minority profit and loss in the shareholders’ equity and net profit in the consolidated financial statements.

When there is any inconsistency on the accounting policies or financial period adopted between subsidiaries and the Company, the financial statements of subsidiaries are adjusted according to the accounting policies or financial period adopted by the Company.

For subsidiaries acquired under business combinations not under common control, when preparing consolidated financial statements, adjustments are made on the financial statements of subsidiaries based on the fair value of the net identifiable assets acquired on the acquisition date. For subsidiaries acquired under business combinations of common control, when preparing consolidated financial statements, the consolidated financial statements include the assets, liabilities, operating results and cash flows of such subsidiaries from the earliest period presented as if the business combinations had occurred at the beginning of the earliest comparative period presented and the net profit of the acquiree realized before combination date is separately disclosed in the consolidated income statements.

(26)
Segment Information

The Company and its subsidiaries determine the operation segment based on the internal organization structure, management requirement and internal reporting system and thereafter determine the reporting segment and present the segment information.

The operation segment is a component in the company and its subsidiaries that meets all the conditions below: (a) the component earns revenue and incurs expense during the daily operation activities; (b) the management of the company and its subsidiaries can regularly review the component’s operation results in order to make decision on allocating resources and assessing performance; (c) the component’s financial performance, operating results, cash flow and other related information are available. When the two or more operation segments have similar economical characteristic and meet certain conditions, the Company and its subsidiaries will combine them as one operation segment.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(27)
Determination of the fair value of financial instruments

When an active market exists for a financial instruments, fair value is determined based on quoted prices in the active market. When no such an active market exists, fair value is determined by using valuation techniques. Valuation techniques include making reference to the prices used by knowledgeable and willing parties in a recent transaction, the current fair value of other financial assets that are same in substance, discounted cash flow method and option pricing model, etc. When applying valuation techniques, the Company and its subsidiaries use market parameters, rather than specific parameters of the Company and its subsidiaries, to the fullest extent possible.

 
 
 


(28)
Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Company and its subsidiaries make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:

 
(a)
Accounting estimates on impairment of goodwill and power generation licence
     
   
The Company and its subsidiaries perform test annually whether goodwill and power generation licence have suffered any impairment, in accordance with the accounting policy stated in Note 2(14) and 2(13).The recoverable amounts of assets group or group of assets groups are the present value of future cashflow. These calculations require the use of estimates. It is reasonably possible, based on existing knowledge, that outcomes within the next financial period that are different from assumptions could require a material adjustment to the carrying amount of goodwill and power generation licence.
     
 
(b)
Useful life of power generation licence
     
   
As at the period end, management of the Company and its subsidiaries considered the estimated useful lives for its power generation licence as indefinite. This estimate is based on the expected renewal of power generation licence without significant restriction and cost, together with the consideration on related future cash flows generated and the expectation of management in continuous operations. Based on existing knowledge, that outcomes within the next financial period that are different from assumptions could require a change on carrying amount of power generation licence.

2.
PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONT’D)

(28)
Critical accounting estimates and judgments (Cont’d)

 
(c)
Useful lives of fixed assets
     
   
Management of the Company decided the estimated useful lives of fixed assets and respective depreciation. The accounting estimate is based on the expected wears and tears incurred during power generation. Wears and tears can be significantly different following renovation each time. When the useful lives differ from the original estimated useful lives, management will adjust the estimated useful lives accordingly. It is possible that the estimates made based on existing experience are different to the actual outcomes within the next financial period and could cause a material adjustment to the carrying amount of fixed assets as well as the depreciation expense.
     
 
(d)
Estimated impairment of fixed assets
     
   
The Company and its subsidiaries test whether fixed assets suffered any impairment whenever any impairment indication exists. In accordance with Note 2(15), an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount. It is reasonably possible, based on existing knowledge, that outcomes within the next financial period that are different from assumptions could require a material adjustment to the carrying amount of fixed assets.
     
 
(e)
Restraint in construction of new power plants
     
   
The receiving of the ultimate approval from National Development and Reform Commission ("NDRC") on certain power plant construction projects of the Company and its subsidiaries is a critical estimate and judgment of the management of the Company. Such estimate and judgment are based on initial approval documents received as well as their understanding of the projects. Based on historical experience, the management believes that the Company and its subsidiaries will receive final approval from NDRC on the related power plant projects. Deviation from the estimate and judgment could result in significant adjustment to the carrying amount of property, plant and equipment, construction-in-progress and construction materials.


 
 
 


3.
TAXATION

(1)
Value Added Tax (“VAT”)

The domestic power and heat sales of the Company and its subsidiaries are subject to VAT. VAT payable is determined by applying 17% on the taxable revenue after offsetting deductible input VAT of the period.

(2)
Business Tax (“BT”)

The port service of the Company and its subsidiaries are subject to BT, with applicable tax rate of 3%.

(3)
Goods and Service Tax (“GST”)

The overseas power sales of the Company and its subsidiaries are subject to GST of the country where they operate, with applicable tax rate of 7%.

(4)
Income tax

In accordance with relevant provisions of the Income tax law, since 1 January 2008, branches and subsidiaries of the Company which used to enjoy preferential tax rates or holidays will transit to 25% gradually in the next five years from 1 January 2008 onwards. The subsidiaries with applicable tax rate of 33% apply tax rate of 25% from 1 January 2008 onwards. In accordance with Guo Fa [2007]39, since 1 January 2008, the enterprises which used to enjoy tax holidays such as two-years’ tax exemption and three-years’ 50% tax rate reduction continues to follow the original tax laws, administrative regulations and relevant circulars until respective expiration date. However, for those whose tax holiday has not commenced due to tax-losses, the tax holiday is deemed to begin from 2008 onwards.

Oversea subsidiaries of the Company apply income tax rate of 17%.

In accordance with Guo Shui Han [2009]33, effective from 1 January 2008, the Company calculate and file income tax centrally at company level according to relevant tax laws and regulations. The original regulations specifying locations for power plants and branches of the Company to make enterprise income tax payments was abolished.

4.
BUSINESS COMBINATION AND CONSOLIDATED FINANCIAL STATEMENTS

(1)
Subsidiaries

 
(a)
Subsidiaries acquired through establishment or other ways

 
Type of
subsidiaries
Place of
registration
Registered
capital
Business nature
and scope of operations
Percentage
of equity
interest (%)
Percentage
of voting
right (%)
Included in
consolidated
financial
statements
               
Huaneng Power International
  Fuel Limited Liability Company ("Fuel Company")
Direct holding
Beijing
RMB200,000,000
Wholesale of coal
100%
100%
Yes
Huaneng Shanghai Shidongkou Power
  Generation Limited Liability
  Company ("Shidongkou Power Company")
Direct holding
Shanghai
RMB990,000,000
Power generation
50%
50%
Yes*
Huaneng Nantong Power
  Generation Limited Liability
  Company ("Nantong Power Company")
Direct holding
Nantong, Jiangsu
  Province
RMB1,560,000,000
Power generation
70%
70%
Yes
Huaneng Yingkou Port Limited
  Liability Company ("Yingkou Port")
Direct holding
Yingkou Liaoning
  Province
RMB720,235,000
Loading and conveying
  service
50%
50%
Yes*
Huaneng Yingkou Power
  Generation Limited Liability Company
  ("Yingkou Cogeneration")
Direct holding
Yingkou Liaoning
  Province
RMB830,000,000
Production and sales
  of electricity and heat
100%
100%
Yes


 
 
 


Huaneng Hunan Xiangqi
  Hydropower Co., Ltd. ("Xiangqi Hydropower")
Direct holding
Qiyang county,
  Hunan
  Province
RMB100,000,000
Construction, operation and
  management of
  hydropower
  and related projects
100%
100%
Yes
Zhuozhou Liyuan
  Cogeneration Co., Ltd. ("Zhuozhou Liyuan")
Direct holding
Zhuozhou,
  Hebei
  Province
RMB5,000,000
Construction, operation and management of
  cogeneration
  power plants and related projects
100%
100%
Yes
Huaneng Zuoquan Coal-fired Power Generatoin Limited
  Liability Company ("Zuoquan
  Coal-fired Power Company")
Direct holding
Jinzhong,
  Shanxi
  Province
RMB960,000,000
Preparation of power plant
  construction and related
  operation service
80%
80%
Yes
Huaneng Kangbao Wind Power Utilization Limited
  Liability Company ("Kangbao Wind Power")
Direct holding
Kangbao
  county,
  Hebei
  Province
RMB5,000,000
Construction, operation
and management of wind power generation and related projects
100%
100%
Yes
Huaneng Jiuquan Wind
  Power Generation Co., Ltd ("Jiuquan Wind power")
Direct holding
Jiuquan,
  Gansu
  Province
RMB1,667,000,000
Construction, operation and management of wind power  generation and related projects
100%
100%
Yes
Tuas Power Generation Pte Ltd.
Indirect holding
Singapore
SGD1,183,000,001
Power generation and related by products, derivatives; developing power supply resources, operating electricity and power sales
100%
100%
Yes
TP Utilities Pte Ltd.
Indirect holding
Singapore
SGD160,000,001
Provide utilities & services - electricity, steam, industrial
water, waste management
100%
100%
Yes

 
*
Pursuant to agreements with other shareholders, the Company has controls over these entities.

4.
BUSINESS COMBINATION AND CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(1)
Subsidiaries (Cont’d)

 
(b)
Subsidiaries acquired from business combinations under common control

 
Type of
subsidiaries
Place of
registration
Registered
capital
Business nature
and scope of operations
Percentage
of equity
interest (%)
Percentage
of voting
right (%)
Included in
consolidated
financial
statements
               
Huaneng (Suzhou Industrial
  Park) Power Generation
  Co. Ltd. ("Taicang
  Power Company")
Direct holding
Suzhou,
  Jiangsu
  Province
RMB632,840,000
Power generation
75%
75%
Yes
Huaneng Qinbei Power
  Generation Limited Liability
  Company ("Qinbei
  Power Company")
Direct holding
Jiyuan,
  Henan
  Province
RMB810,000,000
Power generation
60%
60%
Yes


 
 
 


Huaneng Yushe Power
  Generation Co., Ltd.
  ("Yushe Power Company")
Direct holding
Yushe County,
  Shanxi
  Province
RMB615,760,000
Power generation
60%
60%
Yes
Huaneng Hunan Yueyang
  Power Generation Limited
  Liability Company ("Yueyang
  Power Company")
Direct holding
Yueyang,
  Hunan
  Province
RMB1,055,000,000
Power generation
55%
55%
Yes
Huaneng Chongqing Luohuang
  Power Generation Limited
  Liability Company("Luohuang
  Power Company")
Direct holding
Chongqing
RMB1,748,310,000
Power generation
60%
60%
Yes
Huaneng Pingliang Power
  Generation Limited Liability
  Company ("Pingliang Power Company")
Direct holding
Pingliang,
  Gansu
  Province
RMB924,050,000
Power generation
65%
65%
Yes
Huaneng Nanjing Jinling Power
  Company ("Jinling Power Company")
Direct holding
Nanjing,
  Jiangsu
  Province
RMB1,302,000,000
Power generation
60%
60%
Yes
Huaneng Qidong Wind Power
  Generation Co., Ltd ("Qidong Wind Power")
Direct holding
Qidong,
  Jiangsu
  Province
RMB200,000,000
Development of wind power
  project, production and
  sales of electricity
65%
65%
Yes
Tianjin Huaneng Yangliuqing
  Co-generation Limited
  Liability Company ("Yangliuqing
  Power Company")
Direct holding
Tianjin
RMB1,537,130,909
Power generation, heat supply
55%
55%
Yes
Huaneng Beijing Co-generation
  Limited Liability Company
  ("Beijing Cogeneration")
Direct holding
Beijing
RMB1,600,000,000
Construction and operation of
  power plants and related
  construction projects
41%
66%*
Yes

 
*
According to the agreement between the company and the rest of the shareholders, a shareholder who owns 25% voting interest in Beijing Cogeneration entrust the Company for the right to vote for free.

The subsidiaries above and the Company are all controlled by Huaneng Group before and after the acquisitions.

4.
BUSINESS COMBINATION AND CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(1)
Subsidiaries (Cont’d)

 
(c)
Subsidiaries acquired from business combinations not under common control

 
Type of
subsidiaries
Place of
registration
Registered
capital
Business nature
and scope of operations
Percentage
of equity
interest (%)
Percentage
of voting
right (%)
Included in
consolidated
financial
statements
               
Huaneng Weihai Power Limited
  Liability Company
  ("Weihai Power Company")
Direct holding
Weihai,
  Shandong
  Province
RMB761,838,300
Power generation
60%
60%
Yes
Huaneng Taicang Power
  Co., Ltd. ("Taicang II
  Power Company")
Direct holding
Taicang,
  Jiangsu
  Province
RMB804,146,700
Power generation
75%
75%
Yes
Huaiyin Power Generation
  Co., Ltd. ("Huaiyin
  Power Company")
Direct holding
Huai’an,
  Jiangsu
  Province
RMB265,000,000
Power generation
100%
100%
Yes


 
 
 


Huaneng Huaiyin II Power
  Limited Company ("Huaiyin II
  Power Company")
Direct holding
Huai’an,
  Jiangsu
  Province
RMB930,870,000
Power generation
63.64%
63.64%
Yes
Huaneng Xindian Power
  Co., Ltd. ("Xindian II
  Power Company")
Direct holding
Zibo,Shandong
  Province
RMB100,000,000
Power generation
95%
95%
Yes
Huaneng Shanghai Combined
  Cycle Power Limited Liability
  Company ("Shanghai
  Combined Cycle
  Power Company")
Direct holding
Shanghai
RMB699,700,000
Power generation
70%
70%
Yes
SinoSing Power Pte. Ltd.
  ("SinoSing Power")
Direct holding
Singapore
USD1,098,014,668
Investment holding
100%
100%
Yes
Huade County Daditaihong
  Wind Power Utilization
  Limited Liability
  Company ("Daditaihong")
Direct holding
Huade County,
  Inner
  Mongolia
RMB5,000,000
Wind Power exploitation
  and utilization
99%
99%
Yes
Kaifeng Xinli Power Generation
  Co., Ltd ("Kaifeng Xinli")
Indirect holding
Kaifeng,
  Henan
  Province
RMB146,920,000
Power generation
33%
55%*
Yes


 
*
Kaifeng Xinli is a subsidiary held by Qinbei Power Company.

4.
BUSINESS COMBINATION AND CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(1)
Subsidiaries (Cont’d)

 
(c)
Subsidiaries acquired from business combinations not under common control (Cont’d)

 
Type of
subsidiaries
Place of
registration
Registered
capital
Business nature
and scope of operations
Percentage
of equity
interest (%)
Percentage
of voting
right (%)
Included in
consolidated
financial
statements
               
Tuas Power Ltd. ("Tuas Power")
Indirect holding
Singapore
SGD1,338,050,000
Supply gas and electricity,
  holding companies
100%
100%
Yes
Tuas Power Supply Pte Ltd.
Indirect holding
Singapore
SGD500,000
Power sales
100%
100%
Yes
TP Asset Management Pte Ltd.
  ("TPAM")*
Indirect holding
Singapore
SGD2
Render of environmental
  engineering services
100%
100%
Yes
TPGS Green Energy Pte Ltd.
Indirect holding
Singapore
SGD1,000,000
Render of utility services
75%
75%
Yes
New Earth Pte Ltd.
Indirect holding
Singapore
SGD10,111,841
Waste recycling advisory
60%
60%
Yes
New Earth Singapore Pte Ltd.
Indirect holding
Singapore
SGD12,516,050
Industrial waste management
  and recycling
75%
75%
Yes


 
*
On 5 January 2010, the subsidiary of the Company "Tuas Power Utilities Pte Ltd." was renamed as "TPAM".


 
 
 


(2)
New entities included in consolidation scope for the six months ended 30 June 2010

 
Net assets as at 30 June 2010
Net profit
     
Jiuquan Wind Power
50,000,000
—
Kangbao Wind Power
76,320,000
—


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1)
Cash

   
30 June 2010
31 December 2009
   
Original currency amount
Exchange rate
RMB
equivalent
Original currency amount
Exchange rate
RMB
equivalent
               
Cash
— RMB
1,505,639
1
1,505,639
1,158,844
1
1,158,844
 
— SGD
7,001
4.8351
33,851
4,663
4.8605
22,667
               
Sub-total
      
1,539,490
    
1,181,511
               
Bank deposits
— RMB
2,936,644,255
1
2,936,644,255
3,389,961,719
1
3,389,961,719
 
— USD
206,057,598
6.7909
1,408,600,447
69,893,019
6.8282
475,457,672
 
— JPY
81,114,379
0.0767
6,267,294
81,114,379
0.0738
5,953,272
 
— SGD
349,579,364
4.8351
1,690,251,182
324,965,670
4.8605
1,579,495,640
               
Sub-total
      
6,041,763,178
    
5,450,868,303
               
       
6,043,302,668
    
5,452,049,814

Please refer to Note 5(43)(b) for the balances and changes of cash and cash equivalents stated in the cash flow statement.

Please refer to Note 7(6) for cash deposits in a related party.

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(2)
Derivative financial assets and liabilities

 
30 June 2010
31 December 2009
     
Derivative financial assets
    
— Hedging instrument of cash flow hedge
      (fuel contract)
562,727
151,285,914
— Hedging instrument of cash flow hedge
      (exchange forward contract)
6,933,065
—
— Hedging instrument of cash flow hedge
      (interest rate contract)
-
39,585,882
— Financial instrument at fair value through profit
    
      or loss (fuel contract)
-
(4,122,820)
     
Sub-total
7,495,792
186,748,976
Less: non-current derivative financial assets
-
(44,863,269)
     
Total
7,495,792
141,885,707
     


 
 
 


Derivative financial liabilities
    
— Hedging instrument of cash flow hedge
      (fuel contract)
142,005,398
(1,368,141)
— Hedging instrument of cash flow hedge
      (exchange forward contract)
2,803,113
9,344,693
— Hedging instrument of cash flow hedge
      (interest rate contract)
149,232,492
—
— Financial instrument at fair value through profit
    
      or loss (fuel contract)
(1,842,358)
6,276,225
     
Sub-total
292,198,645
14,252,777
Less: non-current derivative financial liabilities
(155,262,877)
(849,636)
     
Total
136,935,768
13,403,141

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(2)
Derivative financial assets and liabilities (Cont’d)

Overseas subsidiaries of the Company uses forward exchange contracts to hedge foreign exchange risk arising from highly probable forecast purchase transactions. The subsidiaries also use fuel swap contracts to hedge fuel price risk arising from highly probable forecast fuel purchases.

The Company and its overseas subsidiaries use interest rate swap contracts to hedge interest rate risk arising from floating rate borrowing.

The fair value of the exchange forward contracts, fuel swap contracts and interest rate swap contracts was measured based on market price.

(3)
Notes receivable

 
30 June 2010
31 December 2009
     
Banking notes receivable
556,088,528
351,630,301
Commercial notes receivable
56,700,000
—
     
 
612,788,528
351,630,301

As at 30 June 2010, the balance of notes discounted by the Company and its subsidiaries that are yet to mature amounted to RMB218,425,221. As these notes receivable were yet to mature, the proceeds received were recorded as short-term loans (Note 5(17)) (31 December 2009: RMB141,593,857).

As at 30 June 2010, the Company and its subsidiaries had no pledged notes receivable.

(4)
Accounts receivable

 
30 June 2010
31 December 2009
     
Accounts receivable
9,939,621,738
9,846,912,352
Less: provision for doubtful accounts
(155,298,008)
(155,639,871)
     
 
9,784,323,730
9,691,272,481

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(4)
Accounts receivable (Cont’d)

 
(a)
The ageing analysis of accounts receivable are as follows:


 
 
 


 
30 June 2010
31 December 2009
     
Within 1 year
9,780,343,102
9,683,824,538
1-2 years
25,452,742
29,726,315
2-3 years
464,395
—
3-4 years
-
—
4-5 years
-
2,228,170
Over 5 years
133,361,499
131,133,329
     
 
9,939,621,738
9,846,912,352

 
(b)
As at 30 June 2010, there was no accounts receivable from shareholders who held 5% or more of the equity interest in the Company (31 December 2009: Nil).
     
 
(c)
As at 30 June 2010, accounts receivable (within one year and no provision) of the Company and its subsidiaries approximately RMB1,672,926,021 (31 December 2009: RMB1,031,926,931) was secured to a bank as collateral against a short-term loan of RMB1,595,914,776 (31 December 2009: RMB698,361,762) (Note5(17)).

(5)
Other receivables

 
30 June 2010
31 December 2009
     
Receivable from Administration Center of Housing
 Fund for proceeds from sales of staff quarters
63,809,079
39,192,045
Staff advances
25,747,530
13,032,325
Prepayments to constructions and projects
293,225,609
209,166,442
Prepayments for investments *
2,389,981,600
387,000,000
Receivable from HIPDC
-
119,589,978
Receivable from Huaneng Group
125,845
—
Others
571,945,625
454,083,677
     
Total
3,344,835,288
1,222,064,467
Less: provision for doubtful accounts
(38,620,822)
(38,658,528)
     
 
3,306,214,466
1,183,405,939

*
Prepayments for investments primarily represent prepayments for Luneng Acquisition Project. See Note 9(1)(b).

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(5)
Other receivables (Cont’d)

 
(a)
The ageing analysis of other receivables is as follows:

 
30 June 2010
31 December 2009
     
Within 1 year
2,970,554,085
913,355,024
1-2 years
177,933,266
167,726,450
2-3 years
59,270,743
11,659,017
3-4 years
16,129,710
15,131,425
4-5 years
20,889,094
17,615,463
Over 5 years
100,058,390
96,577,088
     
 
3,344,835,288
1,222,064,467


 
 
 


 
(b)
As at 30 June 2010, there was no other receivable from shareholders who held 5% or more of the equity interest in the Company, except for receivable from Huaneng Group of RMB125,845 mentioned above (31 December 2009: receivable from HPIDC RMB119,589,978).
     
   
Please refer to Note 7 for related party balances.

(6)
Advances to suppliers

 
(a)
The ageing analysis of advances to suppliers is as follows:

 
30 June 2010
31 December 2009
Ageing
Amount
Percentage
Amount
Percentage
         
Within one year
1,202,181,874
98.38%
580,884,979
56.72%
1-2 years
1,828,000
0.15%
425,453,081
41.54%
2-3 years
383,660
0.03%
143,185
0.01%
Over 3 years
17,570,447
1.44%
17,735,867
1.73%
         
 
1,221,963,981
100.00%
1,024,217,112
100.00%

 
(b)
As at 30 June 2010, there were no advances to suppliers who held 5% or more of the equity interest in the Company (31 December 2009: Nil).
     
   
Please refer to Note 7 for related party balances.

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(7)
Inventories

 
30 June 2010
31 December 2009
 
Book value
Provision
Net book value
Book value
Provision
Net book value
             
Fuel (coal and oil)
4,038,308,874
-
4,038,308,874
2,986,232,942
—
2,986,232,942
Materials and
  spare parts
1,360,081,981
(186,703,469)
1,173,378,512
1,286,565,521
(188,812,870)
1,097,752,651
             
 
5,398,390,855
(186,703,469)
5,211,687,386
4,272,798,463
(188,812,870)
4,083,985,593


(8)
Available-for-sale financial assets

 
30 June 2010
31 December 2009
     
Available-for-sale equity instrument
2,081,036,419
2,293,998,840

Available-for-sale financial assets represent the equity investment in China Yangtze Power Co., Ltd. ("Yangtze Power"). As at 30 June 2010, the Company had approximately 171.71 million shares of Yangtze Power, representing 1.56% (31 December 2009: approximately 171.71 million shares, 1.56%) of its total share capital. The fair value of the above available-for-sale equity instrument as at 30 June 2010 was determined based on the closing market price of RMB12.49 per share quoted in the Shanghai Stock Exchange on the last trading day of the first half of 2010, excluding the dividend declared (31 December 2009: the closing market price of Yangtze Power was RMB13.36 per share quoted in the Shanghai Stock Exchange on the last trading day of 2009).

 
 
 


(9)
Long-term equity investments

 
30 June 2010
31 December 2009
     
Associates (a)
9,837,138,334
9,286,696,309
Other long-term equity investments
282,002,933
269,890,133
     
 
10,119,141,267
9,556,586,442
Less:  impairment provision for long-term equity
         investments
(6,088,243)
(6,088,243)
     
 
10,113,053,024
9,550,498,199


The long-term investments of the Company and its subsidiaries are not subject to restriction on conversion into cash or remittance of investment income.

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(9)
Long-term equity investments (Cont’d)

 
(a)
Associates

     
Increase or decrease during the period
      
 
Initial
investment
cost
31 December
2009
Additions or
deductions
Net profit or
loss adjusted
by the equity
method
Dividends
declared
Other equity
movement
30 June
2010
Provision
Provision for
the year
                   
Shandong Rizhao Power
  Company Ltd ("Rizhao Power Company")
561,502,261
417,584,283
—
(29,350,137)
—
—
388,234,146
—
—
Shenzhen Energy Group Co., Ltd. ("SEG")
2,269,785,209
3,547,097,074
—
140,732,500
—
—
3,687,829,574
—
—
Hebei Hanfeng Power Generation Limited Liability
  Company ("Hanfeng Power Company")
1,382,210,557
1,172,796,322
—
(18,462,316)
—
—
1,154,334,006
—
—
Chongqing Huaneng
  Lime Company Limited ("Lime Company")
24,295,710
27,713,601
—
727,575
—
—
28,441,176
—
—
China Huaneng Finance
  Corporation Ltd ("Huaneng Finance")
440,634,130
570,917,025
—
32,399,948
—
(5,215,141)
598,101,832
—
—
Huaneng Sichuan Hydropower
  Co., Ltd.("Sichuan Hydropower Company")
1,221,257,497
1,199,452,729
—
137,546,639
—
(144,163)
1,336,855,205
—
—
Shenzhen Energy Corporation ("SEC")
1,448,200,000
1,687,581,135
—
95,313,953
(60,000,000)
(21,724,180)
1,701,170,908
—
—
Yangquan Coal Industry Group
  Huaneng Coal-fired Electricity
  Investment Co., Ltd ("Yangmei Huaneng Company")
490,000,000
458,054,140
—
11,858,875
—
15,328,472
485,241,487
—
—
Huaneng Shidaowan Nuclear
  Power Development Co., Ltd ("Shidaowan Nuclear Power")
300,000,000
150,000,000
150,000,000
—
—
—
300,000,000
—
—
Bianhai Railway Co., Ltd. ("Bianhai Railway")
143,930,000
55,500,000
88,430,000
—
—
—
143,930,000
—
—
Huaneng Shenbei Cogeneration Co., Ltd.
  ("Shenbei Cogeneration)
13,000,000
—
13,000,000
—
—
—
13,000,000
—
—
                   
   
9,286,696,309
251,430,000
370,767,037
(60,000,000)
(11,755,012)
9,837,138,334
    


 
 
 


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(10)
Investment to associates

Investee
Place of
  Registration
Registered capital
Business nature and scope of operation
Percentage
of equity
interest
Percentage
of voting
right
           
Rizhao Power Company
Rizhao, Shandong Province
RMB1,245,587,900
Power generation
44%
44%
SEG
Shenzhen, Guangdong
 Province
RMB955,555,556
Development, production and sale of regular energy,
  new energy and energy construction project, etc.
25%
25%
Hanfeng Power Company
Handan,Hebei Province
RMB1,975,000,000
Power generation
40%
40%
Lime Company
Chongqing
RMB50,000,000
Lime production and sale of construction materials
  and bio-chemical products
15%
25%*
Huaneng Finance
Beijing
RMB2,000,000,000
Provision of deposits services, loans and finance
  lease arrangement; notes receivable and
  discounting; and entrusted loans and investments
  for membership entities within Huaneng Group.
20%
20%
Sichuan Hydropower Company
Chengdu, Sichuan Province
RMB979,600,000
Development, investment, construction, operation
  and management of hydropower
49%
49%
SEC
Shenzhen, Guangdong
  Province
RMB2,202,495,332
Energy and investment in related industries
9.08%
9.08%
Yangmei Huaneng Company
Taiyuan, Shanxi Province
RMB1,000,000,000
Development, investment, consulting, service and
  management of coal and power generation projects
49%
49%
Shidaowan Nuclear Power
Rongcheng, Shandong
  Province
RMB1,000,000,000
Preparation for construction of Yashuidui
  Power Plant project
30%
30%
Bianhai Railway
Yingkou, Liaoning Province
RMB150,000,000
Railway construction, freight transport, material
  supplies, agency service, logistics and storage at
  coastal industrial base in Yingkou, Liaoning
37%
37%
Shenbei Cogeneration
Shenyang, Liaoning Province
RMB70,000,000
Generation and sales of electricity and heat;
  Construction, operation and
  management of power plant
40%
40%

*
Lime Company is the associate of Luohuang Power Company (one of the subsidiaries of the Company).

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(11)
Fixed assets

 
31 December
2009
Reclassification
Additions of
 the period
Deductions of
the period
Currency translation
difference
30 June
2010
             
Total of original cost
190,909,761,951
—
14,116,272,600
(55,755,024)
(67,239,111)
204,903,040,416
             
Ports facilities
1,315,393,029
—
—
—
—
1,315,393,029
Buildings
3,407,335,917
181,453,380
33,890,313
(8,123,141)
—
3,614,556,469
Electric utility plant in service
182,096,771,031
(225,793,650)
14,010,818,595
(36,710,094)
(65,446,290)
195,779,639,592
Transportation facilities
305,333,508
—
—
—
—
305,333,508
Others
3,784,928,466
44,340,270
71,563,692
(10,921,789)
(1,792,821)
3,888,117,818
             
Total of accumulated depreciation
77,743,503,728
—
5,101,949,859
(36,126,422)
(21,754,653)
82,787,572,512
             
Ports facilities
37,411,164
—
18,705,582
—
—
56,116,746
Buildings
1,247,040,415
23,655,551
63,712,560
(4,233,038)
—
1,330,175,488


 
 
 


Electric utility plant in service
74,123,627,800
(38,772,217)
4,887,423,604
(21,490,586)
(20,501,175)
78,930,287,426
Transportation facilities
214,762,971
—
7,029,732
—
—
221,792,703
Others
2,120,661,378
15,116,666
125,078,381
(10,402,798)
(1,253,478)
2,249,200,149
             
Total of book value
113,166,258,223
——
——
——
——
122,115,467,904
             
Ports facilities
1,277,981,865
——
——
——
——
1,259,276,283
Buildings
2,160,295,502
——
——
——
——
2,284,380,981
Electric utility plant in service
107,973,143,231
——
——
——
——
116,849,352,166
Transportation facilities
90,570,537
——
——
——
——
83,540,805
Others
1,664,267,088
——
——
——
——
1,638,917,669
             
Total of provision
4,397,563,046
—
—
—
(19,690,239)
4,377,872,807
             
Ports facilities
—
—
—
—
—
-
Buildings
—
—
—
—
—
-
Electric utility plant in service
4,397,563,046
—
—
—
(19,690,239)
4,377,872,807
Transportation facilities
—
—
—
—
—
-
Others
—
—
—
—
—
-
             
Total of net book value
108,768,695,177
——
——
——
——
117,737,595,097
             
Ports facilities
1,277,981,865
——
——
——
——
1,259,276,283
Buildings
2,160,295,502
——
——
——
——
2,284,380,981
Electric utility plant in service
103,575,580,185
——
——
——
——
112,471,479,359
Transportation facilities
90,570,537
——
——
——
——
83,540,805
Others
1,664,267,088
——
——
——
——
1,638,917,669

For the six months ended 30 June 2010, depreciation charged to operations cost, general and administrative expenses and other operating cost amounted to RMB5,075,313,363, RMB11,132,965 and RMB5,665,411, respectively, (for the six months ended 30 June 2009 (restated): depreciation charged to operations cost and general and administrative expenses amounted to RMB4,489,075,768 and RMB90,939,695, respectively).

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(12)
Construction-in-progress

Project
Budget
31 December
2009
Additions of
the period
Transfers to
fixed assets
during the
period
Currency
translation
difference
30 June
2010
Percentage
of capital
expenditure
incurred over
budget
Accumulated
capitalized
borrowing
cost
Including:
capitalized
borrowing
cost of the
period
                   
Fuzhou Power Plant Phase III project
5,327,250,000
1,684,477,663
577,370,120
—
—
2,261,847,783
75%
289,712,214
85,275,404
Haimen Power Plant project
7,150,830,000
595,581,443
816,891,363
—
—
1,412,472,806
34%
35,250,483
35,250,483
Jinggangshan Power Plant Expansion project
4,500,310,000
1,644,438,295
375,990,655
(1,640,739,391)
—
379,689,559
95%
—
—
Weihai Power Company Expansion project
4,983,490,000
1,869,790,749
992,265,570
—
—
2,862,056,319
80%
237,253,123
71,320,475
Qinbei Power Company Expansion project
7,552,480,000
690,098,760
862,993,972
—
—
1,553,092,732
43%
104,491,919
57,122,429
Yueyang Power Company Expansion project
4,275,630,000
860,521,161
967,459,431
—
—
1,827,980,592
77%
161,761,873
48,741,128
Jinling Power Company Coal-fired project
9,069,050,000
5,451,200,502
973,455,838
(3,324,134,586)
—
3,100,521,754
83%
186,287,160
51,579,958
Shidongkou Power Company project
5,925,000,000
4,251,183,582
272,639,291
(4,346,840,792)
—
176,982,081
78%
139,117,089
—
Zuoquan Coal-fired Company Phase I project
4,800,000,000
60,163,146
280,479,184
—
—
340,642,330
18%
1,395,565
1,395,565


 
 
 


SinoSing Power Tembusu project Phase I
SGD537,000,000
—
362,316,525
—
(3,201,148)
359,115,377
14%
—
—
SinoSing Power Neste Oil project
SGD110,280,000
333,285,593
110,828,145
(71,052,154)
(2,093,114)
370,968,470
83%
—
—
Other projects
  
6,196,249,245
3,155,762,178
(4,600,177,507)
25,988
4,751,859,904
  
240,440,779
45,067,042
                   
   
23,636,990,139
9,748,452,272
(13,982,944,430)
(5,268,274)
19,397,229,707
  
1,395,710,205
395,752,484

Source of financing of all projects above are loans, bonds and internal funds.

For the six months ended 30 June 2010, interest expense capitalized for construction-in-progress of the Company and its subsidiaries amounted to RMB395,752,484 with capitalization rate of 4.85% per annum (For the six months ended 30 June 2009 (restated): RMB561,290,597 with capitalization rate of 5.59% per annum).

As at 30 June 2010 and 31 December 2009, there was no indication that the construction-in-progress of the Company and its subsidiaries was impaired, and thus, no provision for impairment loss was made.

(13)
Construction materials

 
30 June 2010
31 December 2009
     
Specialised materials and equipment
2,169,763,110
2,591,631,193
Prepayments for major equipment
5,826,299,136
6,159,350,214
Tools and spare parts
18,986,695
13,892,583
     
 
8,015,048,941
8,764,873,990


Please refer to Note 7 for related party balances.

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(14)
Intangible assets

 
31 December
2009
Additions
of the period
Deductions
 of the period
Currency
translation
difference
30 June 2010
           
Total of original cost
8,155,050,638
17,134,687
—
(24,631,256)
8,147,554,069
           
Land use rights
3,888,825,765
1,200
—
(3,847,706)
3,884,979,259
Power generation licence
3,898,121,000
—
—
(20,370,805)
3,877,750,195
Others
368,103,873
17,133,487
—
(412,745)
384,824,615
           
Total of accumulated amortization
846,582,837
64,828,305
—
(200,316)
911,210,826
           
Land use rights
782,196,715
46,993,873
—
(156,970)
829,033,618
Power generation licence
—
—
—
—
-
Others
64,386,122
17,834,432
—
(43,346)
82,177,208
           
Total of book value
7,308,467,801
——
——
——
7,236,343,243
           
Land use rights
3,106,629,050
——
——
——
3,055,945,641
Power generation licence
3,898,121,000
——
——
——
3,877,750,195
Others
303,717,751
——
——
——
302,647,407


 
 
 


           
Total of impairment provision
222,580,337
—
—
(1,163,160)
221,417,177
           
Land use rights
222,580,337
—
—
(1,163,160)
221,417,177
Power generation licence
—
—
—
—
-
Others
—
—
—
—
-
           
Total of net book value
7,085,887,464
——
——
——
7,014,926,066
           
Land use rights
2,884,048,713
——
——
——
2,834,528,464
Power generation licence
3,898,121,000
——
——
——
3,877,750,195
Others
303,717,751
——
——
——
302,647,407

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(14)
Intangible assets (Cont’d)

As at 30 June 2010 and 31 December 2009, no intangible assets of the Company and its subsidiaries were used for pledge or guarantee.

The Company acquired the power generation licence as part of the business combination with Tuas Power. As the power generation licence is expected to be renewed without significant restriction and cost, with the consideration of related future cash flows generated and the expected continuous operations of management, such a power generation licence is considered to have indefinite useful life. The Company and its subsidiaries will perform annual impairment test on the power generation licence as at 2010 year end.

(15)
Goodwill

 
31 December
2009
Additions
of the period
Currency
translation
difference
30 June
2010
         
Goodwill
11,040,072,329
—
(56,516,549)
10,983,555,780
Less: impairment provision
(127,913,041)
—
—
(127,913,041)
         
 
10,912,159,288
—
(56,516,549)
10,855,642,739

The Company and its subsidiaries will perform annual impairment test on goodwill as at 2010 year end.

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(16)
Deferred income tax assets and liabilities

 
(a)
Deferred income tax assets before offsetting

 
30 June 2010
31 December 2009
 
Amount
Deductible
temporary
difference and deductible
losses
Amount
Deductible
temporary
difference and deductible
losses
         
Provision for assets impairment
209,716,156
998,946,485
210,144,068
1,001,772,180
Fixed assets depreciation
57,593,946
238,862,982
57,598,876
237,529,805


 
 
 


Accrued expenses
112,042,047
455,565,355
85,911,416
351,149,228
Tax refund on purchase of domestically -
 manufactured equipment
361,523,826
1,452,923,986
346,370,083
1,455,789,864
Deductible tax losses
175,611,739
729,158,922
154,348,353
627,088,136
Derivative financial
 instruments-fair value change
58,729,868
294,722,673
—
—
Others
148,637,871
583,433,743
147,224,149
616,120,243
         
 
1,123,855,453
4,753,614,146
1,001,596,945
4,289,449,456


 
(b)
Deferred income tax liabilities before offsetting

 
30 June 2010
31 December 2009
 
Amount
Taxable
temporary
difference
Amount
Taxable
temporary
difference
         
Fixed assets depreciation
707,185,427
4,150,851,200
681,280,528
4,000,735,213
Intangible assets
715,204,946
4,207,087,917
720,929,482
4,240,761,662
Available-for-sale-fair value change
292,369,592
1,169,478,367
345,610,197
1,382,440,788
Derivative financial instruments-fair value change
-
-
28,290,182
147,784,186
Others
56,087,273
239,949,702
64,315,743
252,312,886
         
 
1,770,847,238
9,767,367,186
1,840,426,132
10,024,034,735

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(16)
Deferred income tax assets and liabilities (Cont’d)

 
(b)
Deferred income tax liabilities before offsetting (Cont’d)

The net balance of deferred income tax assets and deferred income tax liabilities after offsetting are as follows:

 
30 June 2010
31 December 2009
     
The net balance of deferred income tax assets
713,448,501
547,664,305
The net balance of deferred income tax liabilities
1,360,440,286
1,386,493,492


(17)
Short-term loans

   
30 June 2010
31 December 2009
   
Original
currency
amount
Exchange rate
RMB equivalent
Original
currency
amount
Exchange rate
RMB equivalent
               
Unsecured loans
RMB
35,109,496,330
1
35,109,496,330
23,885,000,000
1
23,885,000,000
 
SGD
11,500,000
4.8351
55,603,650
1,000,000
4.8605
4,860,500
Guaranteed loans(a)
              
— Pledge
RMB
1,595,914,776
1
1,595,914,776
698,361,762
1
698,361,762
— Discounted notes
RMB
218,425,221
1
218,425,221
141,593,857
1
141,593,857
               
       
36,979,439,977
    
24,729,816,119


 
 
 


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(17)
Short-term loans (Cont’d)

 
(a)
As at 30 June 2010, the guaranteed short-term loans include:
     
   
Bank loans of RMB218,425,221 (31 December 2009: RMB141,593,857) represented the discounted notes receivable with recourse. As these notes receivable were yet to mature, the proceeds received were recorded as short-term loans (see Note 5(3)).
     
   
As at 30 June 2010, pledged bank loans of RMB1,595,914,776 were secured by accounts receivable of the Company with book value amounting to RMB1,672,926,021 (31 December 2009: pledged bank loans of RMB698,361,762 was secured by accounts receivable of the Company with book value amounting to RMB1,031,926,931) (see Note 5(4)).
     
   
As at 30 June 2010, short-term loans of RMB275,000,000 were borrowed from Huaneng Finance, with annual interest rate 4.78% for the six months ended 30 June 2010 (31 December 2009: RMB100,000,000, with annual interest rates ranging from 4.78% to 6.72% for the six months ended 30 June 2009) (see Note 7(5)).
     
   
As at 30 June 2010, short-term loans of RMB1,180,000,000 were borrowed from Huaneng Guicheng Trust Co., Ltd. ("Huaneng Guicheng Trust"), with annual interest rates ranging from 4.35% to 4.51% for the six months ended 30 June 2010 (2009:Nil) (see Note 7(5)).
     
   
For the six months ended 30 June 2010, annual interest rates of unsecured RMB loans ranged from 3.79% to 4.78% (for the six months ended 30 June 2009: 4.09% to 7.47%); and annual interest rates of unsecured SGD loans ranged from 1.73% to 1.84% (for the six months ended 30 June 2009: 1.81% to 2.01%); annual interest rates of discounted notes loans ranged from 2.40% to 4.78% (for the six months ended 30 June 2009: 2.28% to 5.70%); annual interest rate of pledged short-term RMB loans was 3.89% (for the six months ended 30 June 2009: annual interest rate of pledged short-term RMB loans was 4.54% and of pledged short-term SGD loans ranged from 1.41% to 2.49%).

(18)
Accounts payable

Accounts payable mainly represents the amounts due to coal suppliers. As at 30 June 2010 and 31 December 2009, there was no accounts payable to any shareholder who held 5% or more of the equity interest in the Company, and there was no significant accounts payable aged over 1 year.

Please refer to Note 7 for related party balances.

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(19)
Salary and welfare payable

   
30 June 2010
31 December 2009
       
 
Salary, bonus, allowance and subsidy
73,127,704
91,275,225
 
Welfare, award and welfare fund
99,093,149
107,721,825
 
Social insurance
13,725,679
8,971,440
 
Including:
Medical insurance
4,175,604
5,596,103
   
Basic pension insurance
888,142
93,149
   
Unemployment insurance
2,172,889
88,510
   
Industrial injury insurance
283,946
1,266
   
Childbirth insurance
173,291
—
   
Singapore central provident funds
1,767,991
2,460,098
 
Housing fund
24,379,517
23,780,482
 
Labor union fee and employee education fee
30,348,886
18,408,050
 
Termination benefits
38,080,393
40,370,357
       
   
278,755,328
290,527,379


 
 
 


(20)
Taxes payable

The detailed breakdown of taxes payable is as follows:

   
30 June 2010
31 December 2009
       
 
EIT payable
248,479,120
292,509,304
 
VAT recoverable
(1,980,632,034)
(1,957,516,135)
 
Others
121,974,949
120,869,063
       
   
(1,610,177,965)
(1,544,137,768)

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(21)
Dividends payable

   
30 June 2010
31 December 2009
       
 
Huaneng Group
221,576,155
—
 
HIPDC
1,063,999,045
—
 
Heibei Construction & Investment Group Co., Ltd
126,630,000
—
 
Jiangsu Provincial Investment & Management Limited
  Liability Company
87,465,000
—
 
Fujian Investment Enterprises Holdings Limited
78,638,000
—
 
Liaoning Energy Investment (Group)
  Limited Liability Company
69,911,800
—
 
Dalian Municipal Construction Investment Company Limited
63,315,000
—
 
China Huaneng Group Hong Kong Co., Ltd
45,122,500
—
 
Shenergy Company, Ltd
40,500,000
—
 
Hunan Xiangtou International Investment Company Limited
16,485,571
—
 
Gemeng International Co., Ltd.
20,733,907
20,733,907
 
Other Tradeable A shares
817,839,719
—
       
   
2,652,216,697
20,733,907


(22)
Other payables

The breakdown of other payables is as follows:

   
30 June 2010
31 December 2009
       
 
Payables to contractors
2,756,372,576
2,870,314,154
 
Payables for purchases of equipment
3,119,546,812
2,774,184,715
 
Retention fee
1,127,459,244
932,091,648
 
Payables for purchases of materials
157,954,017
160,818,701
 
Payables to HIPDC
75,465,765
50,799,571
 
Payables to Huaneng Group
404,920,833
277,798,547
 
Accruals of various expenses
56,749,119
76,792,477
 
Bonus payables for construction
67,138,037
45,811,807
 
Payables of housing maintenance funds
33,032,925
30,857,632
 
Payables of pollutants discharge fees
38,430,042
17,393,055
 
Sale of Capacity quota of closing down power plant
160,506,769
170,000,000


 
 
 


 
Customer deposits of electricing sales
1,158,101
90,269,806
 
Others
715,342,354
877,477,022
       
   
8,714,076,594
8,374,609,135

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(22)
Other payables (Cont’d)

As at 30 June 2010, there were no other payables due to shareholders who held 5% or more of the equity interest in the Company, except for payables due to HIPDC of RMB75,465,765 and payables due to Huaneng Group of RMB404,920,833 (31 December 2009: due to HIPDC of RMB50,799,571, due to Huaneng Group of RMB277,798,547) mentioned above.

As at 30 June 2010, other payables aged over 1 year amounting to approximately RMB1,837.47 million (31 December 2009: RMB1,443.52 million) mainly comprised of payables to contractors and retention fees which have not been settled for constructions that had not been completed.

Please refer to Note 7 for related party balances.

(23)
Current portion of non-current liabilities

All the current portion of non-current liabilities of the Company and its subsidiaries are current portion of long-term loans, the breakdown is as follows:

   
30 June 2010
31 December 2009
       
 
Guaranteed loans
932,122,186
843,661,839
 
Unsecured loans
4,830,191,422
8,406,586,304
       
   
5,762,313,608
9,250,248,143


Please refer to Note 5(25) for details of current portion of non-current liabilities.

(24)
Other current liabilities

Other current liabilities are mainly short-term bonds payable. The Company issued RMB5 billion of unsecured short-term bonds with coupon rate of 2.55% per annum on 24 March 2010. The bond is denominated in RMB, issued at par and will mature in 270 days from its issue date with the effective interest rate of approximately 3.11% per annum. As at 30 June 2010, the interest payable of the above-mentioned bond was RMB34.58 million.

The Company issued two tranches of RMB5 billion (total: RMB10 billion) of unsecured short-term bonds with coupon rate of 1.88% per annum and 2.32% per annum on 24 February 2009 and 9 September 2009 respectively. These bonds are denominated in RMB, issued at par and will mature in 365 days and 270 days from their issue date with the effective interest rate of approximately 2.29% and 2.87% per annum, respectively. These bonds has been repaid on time with no interest payable outstanding by 30 June 2010 (31 December 2009: the balance of interest payable was approximately RMB116.05 million).

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(25)
Long-term loans

Long-term loans comprised of:

 
 
 


   
30 June 2010
31 December 2009
       
 
Long-term loans from ultimate parent company (a)
800,000,000
800,000,000
 
Long-term bank loans (b)
71,146,000,809
72,052,663,921
 
Other long-term loans (c)
7,303,146,246
7,664,339,102
       
   
79,249,147,055
80,517,003,023
 
Less: current portion of long-term loans
(5,762,313,608)
(9,250,248,143)
       
   
73,486,833,447
71,266,754,880
 
 
(a)
Long-term loans from ultimate parent company
     
   
As at 30 June 2010, detailed information of the long-term loans from ultimate parent company is as follows:

 
Lender
30 June 2010
Terms of loan
Annual
interest rate
Current
portion
Terms
             
 
RMB loans
          
 
Entrusted loans from
 Huaneng Group
 through Huaneng
 Finance
200,000,000
2004-2013
4.05%-4.32%
Nil
Unsecured
 
Entrusted loans from
 Huaneng Group
 through Huaneng
 Finance
600,000,000
2004-2013
4.60%
Nil
Unsecured
             
   
800,000,000
        

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(25)
Long-term loans (Cont’d)

 
(b)
Long-term bank loans
     
   
The breakdown of long-term bank loans (including the current portion) is as follows:

   
30 June 2010
   
Original
currency
amount
Exchange rate
RMB
equivalent
Less: current
portion
Long-term
portion
Annual
interest rate
               
 
Unsecured loans
            
 
— RMB loans
46,759,753,391
1
46,759,753,391
(4,572,123,391)
42,187,630,000
3.51%-7.05%
 
— USD loans
781,825,227
6.7909
5,309,296,932
(214,049,168)
5,095,247,764
1.44%-6.97%
 
— EUR loans
47,641,128
8.2710
394,039,769
(44,018,863)
350,020,906
2.00%
 
Guaranteed loans*
            
 
— RMB loans
2,000,000,000
1
2,000,000,000
—
2,000,000,000
5.00%
 
— USD loans
209,842,879
6.7909
1,425,022,006
(685,977,540)
739,044,466
0.51%-6.60%
 
— SGD loans
3,066,223,516
4.8351
14,825,497,323
(175,275,509)
14,650,221,814
2.23%-2.46%
 
— EUR loans
52,278,006
8.2710
432,391,388
(33,260,876)
399,130,512
2.15%
               
       
71,146,000,809
(5,724,705,347)
65,421,295,462
  


 
 
 


   
*
Bank loans amounting to approximately RMB2.788 billion and RMB1.069 billion (31 December 2009: approximately RMB3.016 billion and RMB1.294 billion) were guaranteed by HIPDC and Huaneng Group, respectively (see Note 7).

   
As at 30 June 2010, bank loans borrowed by an oversea subsidiary of the Company amounting to RMB14.825 billion (31 December 2009: RMB14.942 billion) were guaranteed by the Company (see Note 8).

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(25)
Long-term loans (Cont’d)

 
(c)
Other long-term loans
     
   
The breakdown of other long-term loans (including the current portion) is as follows:

   
30 June 2010
   
Original
currency
amount
Exchange rate
RMB
equivalent
         
 
RMB loans
7,230,000,000
1
7,230,000,000
 
USD loans
2,857,143
6.7909
19,349,570
 
SGD loans
7,350,000
4.8351
35,537,985
 
JPY loans
238,095,239
0.0767
18,258,691
         
       
7,303,146,246
 
Less: current portion of other long-term loans
    
(37,608,261)
         
       
7,265,537,985


   
As at 30 June 2010, the breakdown of other long-term loans is as follows:

 
Lender
30 June 2010
Terms of Loan
Annual interest
rate
Current portion
Terms
             
 
RMB loan
7,230,000,000
2008-2012
4.05%-4.86%
—
Unsecured loan
 
USD loan
19,349,570
1996-2011
0.93%
(19,349,570)
Guaranteed by Huaneng Group
 
SGD loan
35,537,985
2006-2021
4.25%
—
Unsecured loan
 
JPY loan
18,258,691
1996-2011
0.85%
(18,258,691)
Guaranteed by Huaneng Group
             
   
7,303,146,246
    
(37,608,261)
  


   
Loans amounting to approximately RMB0.230 billion (31 December 2009: approximately RMB0.230 billion) were borrowed from Huaneng Finance. The company and its subsidiaries repaid the long-term loans on-lent from Huaneng New Energy Industrial Holding Limited Company ("Huaneng New Energy") in the current period, which amounted to approximately RMB0.343 billion as at 31 December 2009 (see Note 7).


 
 
 


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(26)
Bonds payable

   
30 June 2010
31 December 2009
       
 
Phase I Corporate Bonds, 2007 (5 years)
990,022,108
988,078,031
 
Phase I Corporate Bonds, 2007 (7 years)
1,678,037,693
1,675,798,598
 
Phase I Corporate Bonds, 2007 (10 years)
3,250,138,861
3,247,329,483
 
Phase I Corporate Bonds, 2008
3,944,822,217
3,942,038,367
 
Phase I Medium-term Notes, 2009
3,952,428,684
3,946,870,110
       
   
13,815,449,563
13,800,114,589


Bond information is as follows:

   
Face value
Issue date
Maturity
Issue amount
           
 
Phase I Corporate Bonds,
        
 
  2007 (5 years)
1,000,000,000
December 2007
5 years
1,000,000,000
 
Phase I Corporate Bonds,
        
 
  2007 (7 years)
1,700,000,000
December 2007
7 years
1,700,000,000
 
Phase I Corporate Bonds,
        
 
  2007 (10 years)
3,300,000,000
December 2007
10 years
3,300,000,000
 
Phase I Corporate Bonds, 2008
4,000,000,000
May 2008
10 years
4,000,000,000
 
Phase I Medium-term
  Notes, 2009
4,000,000,000
May 2009
5 years
4,000,000,000


Interest payable for the bonds is as follow:

   
30 June 2010
31 December 2009
       
 
Phase I Corporate Bonds, 2007 (a)
181,364,028
6,789,028
 
Phase I Corporate Bonds, 2008 (a)
30,193,548
134,193,548
 
Phase I Medium-term Note, 2009 (b)
19,160,548
94,172,055
       
 
Total
230,718,124
235,154,631

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(26)
Bonds payable (Cont’d)

(a)
As is authorized by Document No. 489 [2007], CSRC, the Company can publicly issue corporate bonds with a total amount no more than RMB10 billion. The Company issued bonds with maturity of 5 years, 7 years and 10 years respectively in December 2007 totaling RMB6 billion. The face value of such bonds are RMB1 billion, RMB1.7 billion and RMB3.3 billion with interest rates of 5.67%, 5.75% and 5.90% per annum, respectively. The Company issued bonds with maturity of 10 years in May 2008 and the face value of RMB4 billion bearing an interest rate of 5.20% per annum and guaranteed by HIPDC.
   
(b)
The Company issued medium-term notes with a maturity of 5 years in May 2009. The face value of such notes is RMB4 billion with annual interest rate of 3.72% per annum.

The bonds mentioned above are all denominated in RMB and issued at par. Interest is payable annually and the principals will be paid when the bonds fall due.

 
 
 


(27)
Other non-current liabilities

   
30 June 2010
31 December 2009
       
 
Asset-related government subsidies
2,161,015,063
2,230,073,796
 
Other
49,770,710
15,326,338
       
   
2,210,785,773
2,245,400,134


(28)
Share capital

   
30 June 2010
31 December 2009
       
 
Shares with lock-up limitation —
    
 
State-owned shares
1,055,124,549
1,055,124,549
 
State-owned legal person shares
5,066,662,118
5,066,662,118
       
   
6,121,786,667
6,121,786,667
       
 
Shares without lock-up limitation —
    
 
Domestic shares
2,878,213,333
2,878,213,333
 
Overseas listed shares
3,055,383,440
3,055,383,440
       
   
5,933,596,773
5,933,596,773
       
   
12,055,383,440
12,055,383,440


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(29)
Capital surplus

   
30 June 2010
31 December 2009
       
 
Share premium
7,864,018,087
7,864,018,087
 
Other capital surplus-
    
 
Changes in fair value of available-for-sale
  financial assets
700,807,259
889,507,771
 
Cash flow hedge
(249,641,714)
128,043,958
 
Others
469,454,810
467,559,598
       
 
Subtotal
920,620,355
1,485,111,327
       
   
8,784,638,442
9,349,129,414


(30)
Surplus reserves

   
30 June 2010
31 December 2009
       
 
Statutory surplus reserve
6,618,042,030
6,109,942,374
 
Discretionary surplus reserve
32,402,689
32,402,689
       
   
6,650,444,719
6,142,345,063

According to the Company Law of the PRC, the Company’s articles of association and board resolutions, the Company appropriates 10% of each year’s net profit to the statutory surplus reserve until such a reserve reaches 50% of the registered share capital when the Company can

 
 
 


opt out. Upon the approval from relevant authorities, this reserve can be used to make up any losses incurred or to increase share capital. Except for offsetting against losses, this reserve can not fall below 25% of the registered share capital after being used to increase share capital. According to the Company’s Articles of Associations and the profit appropriation plan approved by board on 23 March 2010, the Company plan to appropriate 10% of 2009’s net profit attributable to the shareholders to the statutory surplus reserve, amounting to RMB508,099,656, and none to the discretionary surplus reverse fund. The above mentioned proposal was approved by the annual general meeting of the shareholders on 22 June 2010.

(31)
Unappropriated profit

As at 22 June 2010, after approval from the annual general meeting of the shareholders, the Company declared 2009 final dividend of RMB0.21 (2008: RMB0.10) per ordinary share, totaling approximately RMB2,528,049,674 (2008: RMB1,205,663,044).

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(32)
Minority interests

Minority interests attributable to the minority shareholders of the subsidiaries are:

   
30 June 2010
31 December 2009
       
 
Weihai Power Company
453,946,484
415,426,141
 
Huaiyin II Power Company
258,120,214
255,530,953
 
Taicang Power Company
218,623,399
202,983,774
 
Taicang II Power Company
240,717,017
260,489,853
 
Qinbei Power Company
640,403,128
644,261,541
 
Yushe Power Company
(26,812,878)
33,843,455
 
Xindian II Power Company
(4,232,926)
2,251,553
 
Yueyang Power Company
484,276,061
497,219,039
 
Luohuang Power Company
871,814,271
828,561,653
 
Shanghai Combined Cycle Power Company
236,206,872
260,890,153
 
Pingliang Power Company
364,688,837
388,681,271
 
Jinling Power Company
845,004,334
804,740,845
 
Subsidiaries of SinoSing Power
46,568,559
47,178,600
 
Shidongkou Power Company
437,008,951
495,000,000
 
Nantong Power Company
234,000,000
234,000,000
 
Daditaihong
120,444
50,000
 
Yingkou Port
362,630,818
362,612,013
 
Beijing Cogeneration
1,157,571,476
1,187,968,585
 
Qidong Wind Power
70,197,965
68,717,074
 
Yangliuqing Power Company
684,449,168
678,922,407
 
Kaifeng Xinli
32,030,062
32,033,295
 
Zuoquan Coal-fired Power Company
96,000,000
—
       
   
7,703,332,256
7,701,362,205


 
 
 
 
5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(33)
Operating revenue and operating cost

   
For the six months ended
30 June 2010
For the six months ended
30 June 2009
(Restated)
   
   
   
Revenue
Cost
Revenue
Cost
           
 
Principal operations
48,400,906,368
42,926,806,864
35,380,506,860
30,471,699,123
 
Other operations
452,952,177
360,159,122
213,721,368
150,436,601
           
 
Total
48,853,858,545
43,286,965,986
35,594,228,228
30,622,135,724

The principal operations of the Company and its subsidiaries are mainly sales of power and heat and port service.

Details of other operating revenue and cost categorized are as follows:

   
For the six months ended
30 June 2010
For the six months ended
30 June 2009
(Restated)
   
   
   
Other
operating
revenue
Other
operating
cost
Other
 operating
revenue
Other
operating
 cost
           
 
Sales of fuel and steam
357,431,474
328,962,994
154,361,005
117,118,061
 
Others
95,520,703
31,196,128
59,360,363
33,318,540
           
 
Total
452,952,177
360,159,122
213,721,368
150,436,601

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(34)
Tax and levies on operations

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
City construction tax
25,349,728
43,881,703
 
Education surcharge
18,615,532
36,497,830
 
Others
18,021,193
10,033,010
       
   
61,986,453
90,412,543


(35)
Financial expenses, net

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Interest expense
2,498,136,130
2,354,664,227
 
Less: interest income
(26,825,760)
(37,727,980)
 
Exchange losses
1,345,479
27,615,104
 
Less: exchange gains
(208,179,248)
(67,831,784)
 
Others
18,111,712
46,164,884
       
   
2,282,588,313
2,322,884,451


 
 
 


(36)
Investment income

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Proportionate share of net profit of investee
 measured using the equity method of accounting
370,767,037
394,121,402
 
Gains from available-for-sale financial assets
63,577,766
—
 
Losses from derivative financial instruments
(8,561,138)
—
       
   
425,783,665
394,121,402


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(37)
Non-operating income

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Gains on fixed assets disposal
9,377,795
15,219,828
 
Amortization of deferred income and government subsidies
211,248,070
68,348,173
 
Other
4,730,609
9,255,098
       
   
225,356,474
92,823,099

(38)
Non-operating expenses

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Losses on fixed assets disposal
781,373
760,124
 
Donations
1,378,188
2,018,887
 
Losses caused by natural calamities
8,648,877
—
 
Other
10,164,010
8,522,403
       
   
20,972,448
11,301,414


(39)
Income tax expense

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Current income tax
497,431,307
92,894,894
 
Deferred income tax
(39,966,667)
(18,767,635)
       
   
457,464,640
74,127,259


 
 
 


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(40)
Earnings per share

Basic earnings per share

The basic earnings per share is calculated by dividing the consolidated net profit attributable to the shareholders of the Company by the weighted average number of the Company’s outstanding ordinary shares:

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Consolidated net profit attributable to shareholders of the Company
2,025,963,723
1,972,541,791
 
Weighted average number of
  the Company’s outstanding ordinary shares
12,055,383,440
12,055,383,440
       
 
Basic earnings per share
0.17
0.16
       
 
Including:
    
 
Continuing operation basic earnings per share
0.17
0.16
 
Discontinuing operation basic earnings per share
-
—

For the six months ended 30 June 2010, as there were no potential dilutive ordinary shares (for the six months ended 30 June 2009: nil), both the basic earnings per share and the diluted earnings per share were the same.

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(41)
Other comprehensive (losses) / income

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Available-for-sale financial assets
    
 
— (Losses) / gains in the period
(212,962,421)
1,104,072,795
 
Less: Income tax impact
53,240,605
(276,018,199)
       
 
Subtotal
(159,721,816)
828,054,596
       
 
Shares in investees’ other comprehensive (losses) /
  income under equity method
(35,524,406)
8,549,349
 
Less: Income tax impact
8,440,922
(2,173,378)
       
 
Subtotal
(27,083,484)
6,375,971
       
 
Hedging instruments of cash flow hedge
    
 
— (Losses) / gains in the period
(458,065,113)
580,413,876


 
 
 


 
Less: Transfer from other comprehensive income
    
 
        recorded in prior period to the income
    
 
        statements in the period
(11,187,364)
156,758,169
 
Less: Income tax impact
91,566,805
(130,801,374)
       
 
Subtotal
(377,685,672)
606,370,671
       
 
Currency translation differences
(37,804,463)
(22,555,618)
 
Other
-
300,000
 
Less: Income tax impact
-
—
       
 
Subtotal
(37,804,463)
(22,255,618)
       
 
Total
(602,295,435)
1,418,545,620

5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(42)
Notes to the cash flow statement

Other cash paid relating to operating activities

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Pollutants discharge fees paid
270,328,393
214,401,274
 
Other
195,248,509
181,820,840
       
   
465,576,902
396,222,114


(43)
Supplementary information on the cash flow statement

 
(a)
Supplementary information on the cash flow statement
     
   
Reconciliation of net profit to cash flows from operating activities

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Net profit
2,127,656,391
1,979,961,905
 
Add:
Reversal of provision for assets impairment
(1,682,635)
(3,097,512)
   
Depreciation of fixed assets
5,092,111,739
4,498,115,463
   
Amortization of intangible assets
63,631,095
48,231,039
   
Amortization of long-term deferred expenses
14,111,841
15,212,008
   
Gains on disposal of fixed assets
(8,596,422)
(14,459,704)
   
(Gains)/losses on changes in fair value
(12,139,878)
32,497,954
   
Financial expenses
2,305,245,803
2,392,917,650
   
Investment income
(434,344,803)
(394,121,402)
   
Amortization of deferred income
(83,717,466)
(65,277,311)
   
(Increase)/decrease in deferred income
  tax assets
(165,798,759)
69,382,489


 
 
 


   
Increase/(decrease) in deferred income
   tax liabilities
125,832,092
(88,150,124)
   
(Increase)/decrease in inventories
(1,130,069,465)
912,576,742
   
Non-operating expense
-
1,392,127
   
Increase in operating receivable items
(1,217,103,322)
(2,694,034,147)
   
Increase in operating payable items
2,363,828,071
417,928,297
       
 
Net cash flows generated from operating activities
9,038,964,282
7,109,075,474


5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

(43)
Supplementary information on the cash flow statement (Cont’d)

 
(b)
Cash and cash equivalents

   
30 June 2010
31 December 2009
       
 
Cash —
    
 
Cash on hand
1,539,490
1,181,511
 
Cash in bank
6,041,763,178
5,450,868,303
       
 
Subtotal
6,043,302,668
5,452,049,814
 
Less: restricted cash*
(239,027,597)
(225,068,166)
       
 
Cash and cash equivalents at end of
    
 
the period
5,804,275,071
5,226,981,648


 
*
Restricted cash is mainly deposits for letter of credit.

6.
SEGMENT REPORTING

Directors and certain senior management of the Company perform the function as chief operating decision makers (collectively referred to as the "senior management"). The senior management reviews the internal reporting of the Company and its subsidiaries in order to assess performance and allocate resources. The company has determined the operating segments based on these reports. Currently, the operating segments of the Company include power segment and other segments (port operations).

The senior management assesses the performance of the operating segments based on a measure of profit/ (loss) before income tax expense in related periods excluding dividend income received from available-for-sale financial assets and operating results of those centrally managed and resource allocation functions in headquarters.

Segment assets exclude prepaid income tax, deferred income tax assets, available-for-sale financial assets and related dividends receivable, and assets related to those centrally managed and resource allocation functions in headquarters that are not attributable to any operating segment ("corporate assets"). Segment liabilities exclude current income tax liabilities, deferred income tax liabilities and liabilities related to those centrally managed and resource allocation functions in headquarters that are not attributable to any operating segment ("corporate liabilities"). These are part of the reconciliation to total balance sheet assets and liabilities.

All sales among the operating segments were performed at the price sold to the third party and have been eliminated as internal transactions when preparing the consolidated financial statements.

 
 
 


6.
SEGMENT REPORTING (CONT’D)

   
Power segment
Other segments
Total
         
 
For the six months ended 30 June 2010
      
 
Total segment revenue
48,749,419,009
203,814,728
48,953,233,737
 
Inter-segment revenue
-
(99,375,192)
(99,375,192)
         
 
Revenue from external customers
48,749,419,009
104,439,536
48,853,858,545
         
 
Segment results
2,640,040,195
50,146
2,640,090,341
         
 
Interest income
26,721,592
104,168
26,825,760
 
Interest expense
(2,354,936,709)
(19,683,225)
(2,374,619,934)
 
Depreciation and amortization
(5,132,949,908)
(24,797,713)
(5,157,747,621)
 
Net gains on disposal of fixed assets
8,596,422
-
8,596,422
 
Share of profits of associates
338,367,089
-
338,367,089
 
Income tax expense
(457,452,103)
(12,537)
(457,464,640)
         
 
For the six months ended 30 June 2009 (Restated)
      
 
Total segment revenue
35,468,870,339
212,251,075
35,681,121,414
 
Inter-segment revenue
—
(86,893,186)
(86,893,186)
         
 
Revenue from external customers
35,468,870,339
125,357,889
35,594,228,228
         
 
Segment results
2,018,166,116
7,918,259
2,026,084,375
         
 
Interest income
37,122,949
605,031
37,727,980
 
Interest expense
(2,254,001,623)
(21,049,599)
(2,275,051,222)
 
Depreciation and amortization
(4,528,648,507)
(22,992,275)
(4,551,640,782)
 
Net gains on disposal of fixed assets
14,459,704
—
14,459,704
 
Share of profits of associates
345,424,710
—
345,424,710
 
Income tax expense
(72,444,999)
(1,682,260)
(74,127,259)

6.
SEGMENT REPORTING (CONT’D)

   
Power segment
Other segments
Total
         
 
30 June 2010
      
 
Segment assets
194,739,501,824
1,554,786,305
196,294,288,129
         
 
Including:
      
 
Additions to non-current assets
  (excluding financial assets
  and deferred income tax assets)
9,134,095,922
1,137,554
9,135,233,476
 
Investment in associates
9,239,036,501
-
9,239,036,501
 
Segment liabilities
(144,391,076,851)
(830,212,131)
(145,221,288,982)
         
 
31 December 2009
      
 
Segment assets
188,444,809,332
1,517,971,177
189,962,780,509
         
 
Including:
      
 
Additions to non-current assets
  (excluding financial assets
  and deferred income tax assets)
27,563,072,945
36,967,501
27,600,040,446
 
Investment in associates
8,715,779,284
—
8,715,779,284
 
Segment liabilities
(137,099,373,591)
(792,749,677)
(137,892,123,268)


 
 
 


A reconciliation of segment result to profit before income tax expense provided as follows:

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
       
 
Segment result
2,640,090,341
2,026,084,375
 
Reconciling item:
    
 
 Loss related to the headquarters
(87,369,258)
(20,691,903)
 
 Investment income from Huaneng Finance
32,399,948
48,696,692
       
 
Profit before income tax expense
2,585,121,031
2,054,089,164

6.
SEGMENT REPORTING (CONT’D)

Reportable segments’ assets are reconciled to total assets as follows:

   
30 June 2010
31 December 2009
       
 
Total segment assets
196,294,288,129
189,962,780,509
 
Reconciling items:
    
 
Long-term equity investment on Huaneng Finance
598,101,832
570,917,025
 
Deferred income tax assets
713,448,501
547,664,305
 
Prepaid current income tax
40,287,823
40,815,287
 
Available-for-sale financial assets and related
  dividend receivable
2,144,614,185
2,293,998,840
 
Other long-term equity investment
261,973,500
261,973,500
 
Corporate assets
2,683,677,631
318,977,388
       
 
Total assets per consolidated balance sheet
202,736,391,601
193,997,126,854


Reportable segments’ liabilities are reconciled to total liabilities as follows:

   
30 June 2010
31 December 2009
       
 
Total segment liabilities
(145,221,288,982)
(137,892,123,268)
 
Reconciling items:
    
 
Current income tax liabilities
(248,479,120)
(292,509,304)
 
Deferred income tax liabilities
(1,360,440,286)
(1,386,493,492)
 
Corporate liabilities
(8,276,141,246)
(5,709,119,267)
       
 
Total liabilities per consolidated balance sheet
(155,106,349,634)
(145,280,245,331)

6.
SEGMENT REPORTING (CONT’D)

Other material items:

 
 
 


   
Reportable segment totals
Headquarters
Investment income from Huaneng Finance
Totals
           
 
For the six months ended
  30 June 2010
        
 
Depreciation and amortization
(5,157,747,621)
(12,107,054)
-
(5,169,854,675)
 
Share of profits of associates
338,367,089
-
32,399,948
370,767,037
 
Interest expense
(2,374,619,934)
(123,516,196)
-
(2,498,136,130)
           
 
For the six months ended
  30 June 2009 (Restated)
        
 
Depreciation and amortization
(4,551,640,782)
(9,917,728)
—
(4,561,558,510)
 
Share of profits of associates
345,424,710
—
48,696,692
394,121,402
 
Interest expense
(2,275,051,222)
(79,613,005)
—
(2,354,664,227)

 
Geographical information:

(a)           External revenue generated from:

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
     
(Restated)
       
 
— The PRC
41,596,840,647
30,921,795,842
 
— Singapore
7,257,017,898
4,672,432,386
       
   
48,853,858,545
35,594,228,228

6.
SEGMENT REPORTING (CONT’D)

(b)
Non-current assets (excluding financial assets and deferred income tax assets) are located in the following countries:

   
30 June 2010
31 December 2009
       
 
— The PRC
152,282,093,408
147,984,078,478
 
— Singapore
21,111,482,899
21,056,775,021
       
   
173,393,576,307
169,040,853,499


The information on the portion of external revenue of the Company and its subsidiaries which generated from sales to major customers of the Company and its subsidiaries which is equal to or more than 10% of external revenue is as follows:

   
For the six months ended
30 June 2010
For the six months ended
30 June 2009 (Restated)
   
Amount
Proportion
Amount
Proportion
           
 
Jiangsu Electric Power Company
6,391,899,650
13%
4,687,590,838
13%
 
Shandong Electric Power
  Corporation ("Shandong Power")
5,824,202,300
12%
4,775,013,325
13%
 
Zhejiang Electric Power Corporation
4,186,007,132
9%
3,627,372,351
10%


 
 
 


7.
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

(1)
Nature of the parent company

 
(a)
Nature of the parent company

 
Name of entity
Place of
  registration
Business nature and
  scope of operations
Type of enterprise
Legal representative
           
 
Huaneng Group
Beijing
Investments in power stations,
State-owned enterprise
Cao Peixi
     
  coal, minerals, railways,
    
     
  transportation, petrochemical,
    
     
  energy-saving facilities, steel,
    
     
  timber and related industries
    
           
 
HIPDC
Beijing
Investments, construction and
Sino-foreign equity
Cao Peixi
     
  operations of power plants and
  joint stock limited
  
     
  development, investments and
  liability company
  
     
  operations of other export-
    
     
  oriented enterprises
    

The ultimate parent company of the company is Huaneng Group.

 
(b)
Registered capital of the parent company and respective changes

 
Name of entity
Currency
31 December 2009
Additions of the period
30 June 2010
           
 
Huaneng Group
RMB
20,000,000,000
—
20,000,000,000
 
HIPDC
USD
450,000,000
—
450,000,000


 
(c)
Shareholding or equity interest held by parties that control /are controlled by the Company and respective changes

   
31 December 2009
Additions of the period
30 June 2010
 
Name of entity
Amount
%
Amount
%
Amount
%
               
 
Huaneng Group*
1,075,124,549
8.92
—
—
1,075,124,549
8.92
 
HIPDC
5,066,662,118
42.03
—
—
5,066,662,118
42.03

 
*
A wholly-owned subsidiary of Huaneng Group registered in Hong Kong holds approximately 0.17% of the Company’s H share.

7.
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT’D)

(2)
Nature of the Subsidiaries

Please refer to Note 4 for the nature and related information of the subsidiaries.

(3)
Nature of the Associates

Please refer to Note 5(9), 5(10) for the nature and related information of the associates.

 
 
 


(4)
Nature of other related parties

 
Name of related parties
Relationship with the Company
     
 
Xi’an Thermal Power Research Institute Co., Ltd ("Xi’an Thermal") and its subsidiaries
A subsidiary of Huaneng Group
 
Huaneng Energy & Communications Holdings Co., Ltd. ("HEC") and its subsidiaries
A subsidiary of Huaneng Group
 
Huaneng Hulunbeier Energy Development Company Ltd. ("Hulunbeier Energy")
A subsidiary of Huaneng Group
 
Huaneng New Energy
A subsidiary of Huaneng Group
 
Huaneng Group Technology Innovation Center ("Huaneng Group Innovation Center")
A subsidiary of Huaneng Group
 
Huaneng Guicheng Trust
A subsidiary of Huaneng Group
 
Huaneng Building Construction and Management Co. Ltd. ("Huaneng Building")
A subsidiary of Huaneng Group
 
Gansu Huating Coal and Power Co., Ltd.("Huating Coal")
A subsidiary of Huaneng Group
 
Huaneng Heilongjiang Power Generation Co., Ltd. ("Heilongjiang Power")
A subsidiary of Huaneng Group
 
Alltrust Insurance Company of China Limited ("Alltrust Insurance")
A subsidiary of Huaneng Group
 
Hebei Huaneng Industrial Development Limited Liability Company
  ("Hebei Huaneng Industrial Development")
A subsidiary of Huaneng Group
 
Inner Mongolia Power Fuel Company ("Inner Mongolia Power")
A subsidiary of Huaneng Group
 
Huaneng Hainan Power Co., Ltd. ("Hainan Power")
A subsidiary of Huaneng Group
 
Huaneng Suzhou Thermoelectric Power Company Ltd. ("Suzhou Thermoelecctirc")
A subsidiary of Huaneng Group
 
Huaneng Ruijin Power Generation Co., Ltd. ("Ruijin Power")
A subsidiary of HIPDC
 
Rizhao Power Company
An associate of the Company
 
Huaneng Finance
An associate of the Company
 
Lime Company
An associate of the
 Company’s subsidiary

7.
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT’D)

(5)
Related party transactions

 
(a)
Related party transactions

 
Related party
The type of related
 party transactions
The nature of related
 party transactions
For the six months ended
30 June 2010
Amount
For the six
months ended
30 June 2009
Amount
         
(Restated)
           
 
HIPDC
Rental service on land use rights
Rental charge on land use rights
  of Huaneng Nanjing Power Plant
667,093
667,093
 
HIPDC
Rental fees
Rental charge on office building
8,966,667
13,000,000
 
HIPDC
Service on transmission
  and transformer facilities
Service fees expenses on transmission
  and transformer facilities
70,385,525
70,385,525
 
Huaneng Group
Entrusted loans
Interest expense on long-term loans
18,220,667
34,813,805
 
Huaneng Building
Rental fees
Rental charge on office building
21,764,877
—
 
Huating Coal
Coal purchase
Purchase of coal
772,556,608
—
 
Huaneng Finance
Long-term loans
Interest expense on long-term loans
5,620,050
5,081,130
 
Huaneng Finance
Long-term loans
Drawdown of long-term loans
-
100,000,000
 
Huaneng Finance
Short-term loans
Interest expense on short-term loans
4,678,110
29,059,220
 
Huaneng Finance
Short-term loans
Drawdown of short-term loans
275,000,000
1,000,000
 
Ruijin Power
Coal sales
Sale of coal
208,362,128
—
 
Huaneng New Energy
Long-term loans
Interest expense on long-term loans
3,922,034
10,514,543
 
Huaneng Guicheng Trust
Short-term loans
Interest expense on short-term loans
2,501,158
—
 
Huaneng Guicheng Trust
Short-term loans
Drawdown of short-term loans
1,180,000,000
—
 
HEC and its subsidiaries
Coal purchase
Purchase of coal and transportation service
911,655,908
339,534,663
 
HEC and its subsidiaries
Equipment purchase
Purchase of equipments and products
379,088,038
383,892,782
 
Xi’an Thermal and its subsidiaries
Technical services
Information and technology supporting services
85,673,641
50,221,050


 
 
 


 
Xi’an Thermal and its subsidiaries
Equipment purchase
Purchase of equipments and products
30,893,305
6,102,301
 
Hulunbeier Energy
Coal purchase
Purchase of coal
415,977,194
609,410,899
 
Lime Company
Lime purchase
Purchase of Lime
54,934,778
42,713,153
 
Heilongjiang Power
Equipment purchase
Service fee related to equipment purchase
520,000
—
 
Inner Mongolia Power
Coal purchase
Purchase of coal
25,615,491
—
 
Hebei Huaneng Industrial Development
Coal purchase
Purchase of coal
8,333,087
—
 
Alltrust Insurance
Property insurance
Insurance fees
28,628,887
—
 
Rizhao Power Company
Coal purchase
Purchase of coal
1,116,464,645
610,603,363
 
Hainan Power
Coal sales
Sale of coal
71,525,835
—
 
Suzhou Thermoelecctirc
Coal sales
Sale of coal
46,974,670
—

7.
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT’D)

(5)
Related party transactions (Cont’d)

 
(a)
Related party transactions (Cont’d)
     
   
The related party transactions of the company and its subsidiaries adopt the negotiated contract price based on the market transaction.
     
   
For the six months ended 30 June 2010, certain power plants and subsidiaries of the Company which located in Shandong Province were managed by the Shandong Huaneng Company which is owned by Huaneng Group and under this arrangement, the Company does not pay management fees. The Company also provides management services to certain power plants owned by Huaneng Group and HIPDC. For the six months ended 30 June 2010, no management service fees were earned for such management services.
     
   
Please refer to Note 5(25) for details of long-term loans on-lent from Huaneng Group through Huaneng Finance to the Company and its subsidiaries.
     
   
Please refer to Note 5(25) and 5(26) for details of the long-term bank loans and bonds payable of the Company and its subsidiaries guaranteed by HIPDC and Huaneng Group.
     
   
Please refer to Note 5(17) and 5(25) for details of short-term loans and long-term loans from Huaneng Finance and Huaneng Guicheng Trust to the Company and its subsidiaries.
     
 
(b)
Senior management’ emolument

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
(Restated)
       
 
Senior management’ emolument
3,400,000
2,621,000
 
Retirement assurance
486,000
629,000
       
   
3,886,000
3,250,000


(6)
Cash deposits in a related party

   
30 June 2010
31 December 2009
       
 
Current deposits in Huaneng Finance
1,632,402,404
2,742,184,017


 
 
 


As at 30 June 2010, the annual interest rates for these current deposits placed with Huaneng Finance ranged from 0.36% to 1.44% (31 December 2009: from 0.36% to 1.35%).

7.
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT’D)

(7)
Receivables from and payables to related parties

   
30 June 2010
31 December 2009
   
Amount
Percentage attributable to related balance
Amount
Percentage attributable to related balance
           
 
Prepayments
        
 
Prepayments to Xi’an Thermal and its
  subsidiaries
330,000
0.03%
173,103
0.02%
 
Prepayments to HEC and its subsidiaries
-
-
22,164,993
2.16%
 
Prepayments to Rizhao Power Company
-
-
37,711,719
3.68%
 
Other receivables
        
 
Receivables from HIPDC
-
-
119,589,978
10.11%
 
Receivables from Huaneng Group
125,845
-
—
—
 
Receivables from Hainan Power
36,900,158
1.12%
—
—
 
Receivables from Ruijin Power
10,455,190
0.32%
—
—
 
Construction materials
        
 
Prepayments to HEC and its subsidiaries
471,335,288
5.88%
507,490,726
5.79%
 
Prepayments to Xi’an Thermal and
  its subsidiaries
1,854,670
0.02%
7,868,415
0.09%
 
Construction In Progress
        
 
Prepayments to HEC
33,522,745
0.17%
—
—
 
Prepayments to Xi’an Thermal and
  its subsidiaries
8,737,538
0.05%
17,139,956
0.07%
 
Accounts payable
        
 
Payables to Lime Company
5,288,589
0.10%
3,296,123
0.08%
 
Payables to Xi’an Thermal and its subsidiaries
4,974,601
0.10%
5,063,900
0.12%
 
Payables to HEC and its subsidiaries
241,863,231
4.76%
243,835,929
5.65%
 
Payables to Huating Coal
78,217,085
1.54%
—
—
 
Payables to Hulunbeier Energy
62,955,913
1.24%
—
—
 
Payables to Hebei Huaneng
  Industrial Development
4,129,021
0.08%
—
—
 
Payables to Inner Mongolia Power
25,615,491
0.50%
—
—
 
Interest payables
        
 
Interest payables on loans
  from Huaneng Finance
8,886,842
2.04%
3,748,525
0.76%
 
Interest payables on loans from Huaneng Group
20,671,813
4.74%
2,451,146
0.50%
 
Interest payables on loans from
  Huaneng New Energy
-
-
560,291
0.11%
 
Interest payables on loans from
  Huaneng Guicheng Trust
203,108
0.05%
—
—


 
 
 


7.
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT’D)

(7)
Receivables from and payables to related parties (Cont’d)

   
30 June 2010
31 December 2009
   
Amount
Percentage attributable to related balance
Amount
Percentage attributable to related balance
           
 
Other payables
        
 
Payables to HIPDC
75,465,765
0.87%
50,799,571
0.61%
 
Payables to Huaneng Group
404,920,833
4.65%
277,798,547
3.32%
 
Payables to Rizhao Power
7,417,014
0.09%
—
—
 
Payables to Huaneng Building
21,764,877
0.25%
—
—
 
Payables to Alltrust Insurance
3,014,226
0.03%
—
—
 
Payables to Xi’an Thermal and its subsidiaries
54,922,343
0.63%
60,575,323
0.72%
 
Payables to HEC and its subsidiaries
35,639,290
0.41%
47,469,559
0.57%
 
Payables to Huaneng Group Innovation Center
-
-
41,800,000
0.50%
 
Payables to other subsidiaries of Huaneng Group
-
-
277,011,171
3.31%
 
Notes Payable
        
 
Payables to HEC and its subsidiaries
53,037,893
41.27%
—
—

The receivables and payables with related parties above were unsecured, not guaranteed and non-interest bearing.

In addition, please refer to Notes 5(17) and 5(25) for loans borrowed from related parties.

8.
CONTINGENT LIABILITY

   
30 June 2010
 
Item
The Company and its subsidiaries
The Company
       
 
Guarantees on the long-term bank loans of
  SinoSing Power Company
—
14,825,497,323

Guarantees on the long-term bank loans above had no significant financial impact on the operations of the Company.

9.
COMMITMENTS

(1)
Capital commitments

(a)
Expenditure on construction projects which mainly relate to the construction of new power projects and renovation projects which were contracted but not recognized in Balance Sheet as at 30 June 2010 amounted to approximately RMB19.771 billion (31 December 2009: RMB19.438 billion).
   
(b)
On 31 December 2009, the Company entered into an Equity Interest Transfer Agreement with Shandong Power and Shandong Luneng Development Group Company Limited ("Luneng Development"), pursuant to which the Company agreed to acquire from Shandong Power and Luneng Development the Target Equity Interests for an aggregate consideration of RMB8.625 billion. Target Equity Interests include 100% equity interest of Yunnan Diandong Energy Limited Company, 100% equity interest of Yunnan Diandong Yuwang Energy Limited Company, 100% equity interest of Shandong Zhanhua Co-generation Limited Company, 100% equity interest of Jilin Luneng Biological Power Generation Limited Company, 60.25% equity interest of Fujian Luoyuanwan Luneng Harbour Limited Liability Company, 58.30% equity interest of Fuzhou Port Luoyuanwan Pier Limited Liability Company, 73.46% equity interest of Luoyuan Luneng Ludao Pier Limited Liability Company, 100% equity interest of Qingdao Luneng Jiaonan Port Limited Company, 53% equity interest of Shandong Luneng Sea Transportation Limited Company, preliminary stage project development rights, all of which are owned by Shandong Power; and 39.75% equity interest of Fujian Luoyuanwan Luneng Harbour Limited Liability Company owned by Luneng Development.
   
 
For the six months ended 30 June 2010, the Company had prepaid consideration amounted to RMB2 billion.


 
 
 


(2)
Operating lease commitments

The Company entered into various operating lease arrangements for land and buildings. Total non-cancellable future minimum lease payments for these operating leases are as follows:

   
30 June
2010
31 December
2009
       
 
Land and buildings
    
 
Within 1 year
5,917,109
44,098,890
 
1-2 years
6,153,022
3,253,383
 
2-3 years
6,220,455
3,253,383
 
Over 3 years
110,810,057
107,884,990
       
   
129,100,643
158,490,646

9.
COMMITMENTS (CONT’D)

(2)
Operating lease commitments (Cont’d)

In addition, in accordance with a 30-year operating lease agreement signed by Huaneng Dezhou Power Plant ("Dezhou Power Plant") and Shandong Land Bureau for the land occupied by Dezhou Power Plant Phases I and II in June 1994, annual rental amounted to approximately RMB30 million effective from June 1994 and is subject to revision at the end of the fifth year from the contract date. Thereafter, the annual rental is subject to revision once every three years. The increment for each rental revision is restricted to no more than 30% of the previous annual rental amount.

(3)
Fuel purchase commitments

As at 30 June 2010, commitment related to coal purchase contracts of the Company and its subsidiaries amounted to approximately RMB32.612 billion (31 December 2009: RMB7.242 billion).

Jinling Power Company entered into a Gas Purchase Agreement with PetroChina Company Limited ("PTR") on 29 December 2004, pursuant to which Jinling Power Company purchases gas from PTR from the date on which it commenced commercial operations to 31 December 2023. According to the agreement, Jinling Power Company is required to pay to PTR at a minimum annual price equivalent to 486.9 million standard cubic meter of gas from 2008 to the end of gas supply period. The purchase price is negotiated annually between the contracting parties based on the latest ruling set out by the National Development and Reform Commission.

As at 30 June 2010, according to the gas purchase contract signed by SinoSing Power, a subsidiary of the Company, SinoSing Power has the following gas purchase commitments:

 
Plateau period*
Purchase amount per day
     
 
Before the year end of 2013
175.1    billion British Thermal Unit ("BBtu")
 
2014
32.6    BBtu
 
2015-2023
15.0    BBtu

*
The various gas supply contracts remain valid after the above period, but the contractual quantity may deviate from the quantity disclosed in above subject to applicable conditions as stipulated in the respective agreements.

10.
EVENT AFTER THE BALANCE SHEET DATE

The Company issued unsecured short-term bonds on 2 July 2010, amounting to RMB5 billion bearing interest rate of 3.20% per annum. Such bonds are denominated in RMB, issued at face value and will mature in 365 days from the issuance date.

 
 
 


11.
NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS

(1)
Accounts receivable

   
30 June
2010
31 December
2009
       
 
Accounts receivable
5,291,672,584
5,231,868,409
 
Less: provision for doubtful accounts
-
—
       
   
5,291,672,584
5,231,868,409

(a)
The ageing analysis of accounts receivable is as follows:

   
30 June
2010
31 December
2009
       
 
Within 1 year
5,291,672,584
5,227,867,459
 
1-2 years
-
4,000,950
       
   
5,291,672,584
5,231,868,409

(b)
As at 30 June 2010, there was no accounts receivable from shareholders who held 5% or more of the equity interest in the Company (31 December 2009: Nil).
   
(c)
As at 30 June 2010, there was no account receivable from related party in the Company (31 December 2009: Nil).
   
(d)
As at 30 June 2010, accounts receivable (within one year and no provision) of the Company approximately RMB1,672,926,021 (31 December 2009: RMB1,031,926,931) was secured to a bank as collateral against a short-term loan of RMB1,595,914,776 (31 December 2009: RMB698,361,762).

11.
NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS (CONT’D)

(2)
Other receivables

   
30 June 2010
31 December 2009
       
 
Receivable from Administration Center of
  Housing Fund for sales of staff quarters
17,260,314
14,984,890
 
Staff advances
13,932,108
6,617,989
 
Services fees from subsidiaries and
  prepayments to projects
79,639,605
85,689,508
 
Prepayments for investments *
2,452,981,600
450,000,000
 
Receivables from subsidiaries for repairs
  and maintenance services rendered
5,489,051
2,890,641
 
Receivables from subsidiaries for fuel and materials
216,420,605
217,212,195
 
Receivables from subsidiaries for interests
  and prepayments for subsidiaries
919,490,908
23,830,857
 
Others
304,477,116
304,180,133
       
   
4,009,691,307
1,105,406,213
 
Less: provision for doubtful accounts
(17,813,330)
(17,851,036)
       
   
3,991,877,977
1,087,555,177


 
 
 


*
Prepayments for investments primarily represent prepayments for Luneng Acquisition Project. Please refer to Note 9(1)(b) for details.

11.
NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS (CONT’D)

(2)
Other receivables (Cont’d)

(a)
The ageing analysis of other receivable is as follows:

   
30 June 2010
31 December 2009
       
 
Within 1 year
3,781,800,902
954,997,252
 
1-2 years
75,171,890
98,252,143
 
2-3 years
101,177,848
518,098
 
3-4 years
4,100,994
11,661,930
 
4-5 years
7,835,598
4,178,904
 
Over 5 years
39,604,075
35,797,886
       
   
4,009,691,307
1,105,406,213

(b)
As at 30 June 2010, there was no other receivable from shareholders who held 5% or more of the equity interest in the Company (31 December 2009: receivable from HIPDC RMB96,883,000).

(3)
Long-term equity investments

   
30 June
2010
31 December
2009
       
 
Subsidiaries(a)
22,084,040,800
20,676,720,025
 
Associates
9,808,697,158
9,258,982,708
 
Other long-term equity investments
269,890,133
269,890,133
       
   
32,162,628,091
30,205,592,866
 
Less: impairment provision for long-term equity investments
(214,940,210)
(214,940,210)
       
   
31,947,687,881
29,990,652,656

11.
NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS (CONT’D)
(3)
Long-term equity investments (Cont’d)
 
(a)
Long-term equity investments in subsidiaries


 
 
 


 
The initial investment cost
31 December
2009
Addition
of the period
30 June
2010
Percentage of
 equity interest
Percentage of
voting rights
Provision
Provision
of the period
Dividends declared
of the period
                   
Weihai Power Company
604,038,793
574,038,793
30,000,000
604,038,793
60%
60%
—
—
—
Taicang Power Company
469,706,560
469,706,560
—
469,706,560
75%
75%
—
—
—
Huaiyin Power Company
760,884,637
760,884,637
—
760,884,637
100%
100%
(208,851,967)
—
—
Huaiyin II Power Company
592,403,600
592,403,600
—
592,403,600
63.64%
63.64%
—
—
—
Yushe Power Company
374,449,895
374,449,895
—
374,449,895
60%
60%
—
—
—
Qinbei Power Company
977,325,722
977,325,722
—
977,325,722
60%
60%
—
—
—
Xindian II Power Company
442,320,000
442,320,000
—
442,320,000
95%
95%
—
—
—
Taicang II Power Company
603,110,000
603,110,000
—
603,110,000
75%
75%
—
—
(136,033,920)
Yueyang Power Company
622,984,838
622,984,838
—
622,984,838
55%
55%
—
—
(20,149,030)
Luohuang Power Company
1,249,218,249
1,249,218,249
—
1,249,218,249
60%
60%
—
—
—
Shanghai Combined Cycle Power Company
489,790,000
489,790,000
—
489,790,000
70%
70%
—
—
(94,500,000)
Pingliang Power Company
942,717,154
917,717,154
25,000,000
942,717,154
65%
65%
—
—
—
Jinling Power Company
1,172,760,502
1,172,760,502
—
1,172,760,502
60%
60%
—
—
—
Fuel Company
200,000,000
200,000,000
—
200,000,000
100%
100%
—
—
—
SinoSing Power
7,841,267,424
7,069,292,849
771,974,575
7,841,267,424
100%
100%
—
—
—
Shidongkou Power Company
495,000,000
495,000,000
—
495,000,000
50%
50%
—
—
—
Daditaihong
122,692,000
122,692,000
—
122,692,000
99%
99%
—
—
—
Nantong Power Company
546,000,000
546,000,000
—
546,000,000
70%
70%
—
—
—
Yingkou Port
360,117,500
360,117,500
—
360,117,500
50%
50%
—
—
—
Xiangqi Hydropower
110,000,000
100,000,000
10,000,000
110,000,000
100%
100%
—
—
—
Qidong Wind Power
128,044,837
128,044,837
—
128,044,837
65%
65%
—
—
—
Beijing Cogeneration
776,926,953
776,926,953
—
776,926,953
41%
66%
—
—
(74,000,900)
Yangliuqing Power Company
796,935,936
796,935,936
—
796,935,936
55%
55%
—
—
—
Yingkou Cogeneration
830,000,000
830,000,000
—
830,000,000
100%
100%
—
—
—
Zhuozhou Liyuan
5,000,000
5,000,000
—
5,000,000
100%
100%
—
—
—
Zuoquan Coal-fired Power Company
444,026,200
—
444,026,200
444,026,200
80%
80%
—
—
—
Kangbao Wind Power Company
76,320,000
—
76,320,000
76,320,000
100%
100%
—
—
—
Jiuquan Wind Power Company
50,000,000
—
50,000,000
50,000,000
100%
100%
—
—
—
                   
   
20,676,720,025
1,407,320,775
22,084,040,800
    
(208,851,967)
—
(324,683,850)


 
 
 


11.
NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS (CONT’D)

(4)
Operating revenue and operating cost

   
For the six months ended
30 June 2010
For the six months ended
30 June 2009
   
Revenue
Cost
Revenue
Cost
           
 
Principal operations
24,703,902,065
21,855,534,602
18,850,932,840
16,006,431,376
 
Other operations
67,727,619
37,249,982
338,670,082
236,593,560
           
 
Total
24,771,629,684
21,892,784,584
19,189,602,922
16,243,024,936


The principal operations of the Company are mainly sales of power and heat.

Other operating revenue and cost are as follows:

   
For the six months ended
30 June 2010
For the six months ended
30 June 2009
   
Other operating revenue
Other operating cost
Other operating revenue
Other operating cost
           
 
Sales of fuel and steam
12,029,053
11,982,223
213,233,873
208,635,289
 
Other operations
55,698,566
25,267,759
125,436,209
27,958,271
           
 
Total
67,727,619
37,249,982
338,670,082
236,593,560


(5)
Investment income

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
       
 
Gains from available-for-sale financial assets
63,577,766
—
 
Proportionate share of net profit of investee measured
  using the equity method of accounting
370,039,462
393,712,282
 
Dividends declared by investees measured using
  the cost method of accounting
324,683,850
126,969,700
       
   
758,301,078
520,681,982


11.
NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS (CONT’D)

(6)
Other comprehensive (losses)/income

   
For the six
months ended
30 June 2010
For the six
months ended
30 June 2009
       
 
Available-for-sale financial assets
    
 
— (Losses)/gain in the period
(212,962,421)
1,104,072,795


 
 
 


 
Less: Income tax impact
53,240,605
(276,018,199) 
       
 
Subtotal
(159,721,816)
828,054,596
       
 
Shares in investees’ other comprehensive (losses)/
  income under equity method
(35,524,406)
8,549,349
 
Less: Income tax impact
8,440,922
(2,173,378)
       
 
Subtotal
(27,083,484)
6,375,971
       
 
Hedging instruments of cash flow hedge
    
 
— Losses in the period
(187,862,217)
—
 
Less:  Transfer from other comprehensive income recorded
        in prior period to the income statements in the period
40,438,670
—
 
Less: Income tax impact
36,855,887
—
       
 
Subtotal
(110,567,660)
—
       
 
Total
(297,372,960)
834,430,567

Supplemental Information (Unaudited)
For the six months ended 30 June 2010
(Prepared in accordance with PRC Accounting Standards)
(All amounts are stated in RMB Yuan unless otherwise stated)

1.
DETAILS FOR NON-RECURRING ITEMS

   
For the six
moths ended
30 June 2010
For the six
moths ended
30 June 2009
     
(Restated)
       
 
Net gain from disposal of non-current assets
8,596,422
14,459,704
 
Government grants recorded in the profit and loss
211,248,070
68,348,173
 
Net profit of subsidiaries acquired from business
  combination under common control
-
50,996,758
 
The gain on fair value change of held-for-trading
  financial assets and liabilities (excluding effective
  hedging instruments related to operating activities
  of the Company) and disposal of held-for-trading
  financial assets and liabilities and
  available-for-sale financial assets
3,578,740
(32,497,954)
 
Reversal of provision for doubtful accounts
  receivable individually tested for impairments
(163,077)
2,622,834
 
Non-operating income and expenses (excluding items above)
(15,460,466)
(1,286,192)
       
   
207,799,689
102,643,323
       
 
Impact of income tax
(30,587,471)
9,598,172
 
Impact of minority interests (after Tax)
(36,525,986)
(58,403,924)
       
   
140,686,232
53,837,571


 
 
 


Basis of preparing breakdown of non-recurring items

In accordance with "Interpretation on Information Disclosures of Listed Companies No.1 - Non-recurring Items [2008]" promulgated by China Securities Regulatory Commission, non-recurring items refer to those transactions or events which do not directly relate to business operations or those which relate to business operations but will distort the appropriate judgment made by the user of financial statements on the operating performance and profitability of the Company due to their special and non-recurring nature.

2.         FINANCIAL STATEMENTS RECONCILIATION

The financial statements, which are prepared by the Company and its subsidiaries in conformity with the Accounting Standards for Business Enterprises ("PRC GAAP"), differ in certain respects from that of IFRS. Major impact of adjustments for IFRS, on the net consolidated profit and net assets of the Company, are summarized as follows:

   
Net Profit
For the six months ended 30 June
Net Assets
   
   
2010
2009
30 June 2010
31 December 2009
     
(Restated)
    
           
 
Under PRC GAAP
2,025,963,723
1,972,541,791
39,926,709,711
41,015,519,318
           
 
Impact of IFRS adjustments:
        
 
Effect of reversal of the recorded amounts received
  in advance of previous years (a)
-
—
(829,896,600)
(829,896,600)
 
Amortization of the difference in the recognition of
  housing benefits of previous years (b)
(11,378,749)
(16,172,177)
(124,496,597)
(113,117,848)
 
Difference on depreciation related to borrowing
  costs capitalized in previous years (c)
(14,846,399)
(14,901,771)
389,702,204
404,548,603
 
Differences in accounting treatment on
  business combinations under common control (d)
-
(50,996,758)
3,582,881,564
3,582,881,564
 
Difference in depreciation and amortization of
  assets acquired in business combinations under
  common control (d)
(208,850,165)
(138,359,618)
(1,146,046,627)
(937,196,462)
 
Applicable deferred income tax impact of
  the GAAP differences above (e)
36,830,745
22,996,491
18,082,339
(18,748,406)
 
Others
26,491,320
11,152,553
(146,069,402)
(157,232,250)
 
Profit attributable to minority interests
  on the adjustments above
78,252,129
84,116,255
(744,322,704)
(822,574,833)
           
 
Under IFRS
1,932,462,604
1,870,376,766
40,926,543,888
42,124,183,086

2.         FINANCIAL STATEMENTS RECONCILIATION (CONT’D)

(a)         Effect of recording the amounts received in advance of previous years

In accordance with the tariff setting mechanism applicable to certain power plants of the Company in previous years, certain power plants of the Company receive advanced payments in the previous years (calculated at 1% of the original cost of fixed assets) as the major repairs and maintenance cost of these power plants. Such receipts in advance are recognized as liabilities under IFRS and are recognized as revenue when the repairs and maintenance is performed and the liabilities are extinguished. In accordance with PRC GAAP, when preparing the financial statements, revenue is computed based on actual power sold and the tariff currently set by the State, no such amounts are recorded.

 
 
 


(b)
Difference in the recognition of housing benefits to the employees of the Company and its subsidiaries in previous years

The Company and its subsidiaries once provided staff quarters to the employees of the Company and its subsidiaries and sold such staff quarters to the employees of the Company and its subsidiaries at preferential prices set by the local housing reform office. Difference between cost of the staff quarters and proceeds from the employees represented the housing losses, and was borne by the Company and its subsidiaries.

Under Previous Accounting Standards and Accounting System ("Previous PRC GAAP") , in accordance with the relevant regulations issued by the Ministry of Finance, such housing losses incurred by the Company and its subsidiaries are fully charged to non-operating expenses in previous years. Under IFRS, such housing losses incurred by the Company and its subsidiaries are recognized on a straight-line basis over the estimated remaining average service lives of the employees.

(c)
Effect of depreciation on the capitalization of borrowing costs in previous years

In previous years, under Previous PRC GAAP, the scope of capitalization of borrowing costs was limited to specific borrowings, and thus, borrowing costs arising from general borrowings were not capitalized. In accordance with IFRS, the Company and its subsidiaries capitalized borrowing on general borrowing used for the purpose of obtaining qualifying assets in addition to the capitalization of borrowing costs on specific borrowings. From 1 January 2007 onwards, the Company and its subsidiaries adopted PRC GAAP No. 17 prospectively, the current adjustments represent the related depreciation on capitalized borrowing costs included in the cost of related assets under IFRS in previous years.

2.         FINANCIAL STATEMENTS RECONCILIATION (CONT’D)

(d)
Differences in accounting treatment on business combinations under common control

Huaneng Group is the parent company of HIPDC, which in turn is also the ultimate parent of the Company. The Company carried out a series of acquisitions from Huaneng Group and HIPDC in previous years. As the acquired power companies and plants and the Company were under common control of Huaneng Group before and after the acquisitions, such acquisitions are regarded as business combinations under common control.

In accordance with PRC GAAP, under common control business combination, the assets and liabilities acquired in business combinations are measured at the carrying amounts of the acquirees on the acquisition date. The difference between carrying amounts of the net assets acquired and the consideration paid is adjusted to equity account of the acquirer. The transaction costs directly attributable to the business combinations incurred by the acquirer are recorded in the income statement as incurred. The operating results for all periods presented are retrospectively restated as if the current structure and operations resulting from the acquisition had been in existence since the beginning of the earliest year presented, with financial data of previously separate entities consolidated. The cash consideration paid by the Company is treated as an equity transaction in the year of acquisition.

For the business combination occurred prior to 1 January 2007, in accordance with Previous PRC GAAP, when equity interests acquired is less than 100%, the assets and liabilities of the acquirees are measured at their carrying amounts. The excess of consideration over the proportionate share of the carrying amounts of the net assets acquired was recorded as equity investment difference and amortized on a straight-line basis for not more than 10 years. When acquiring the entire equity, the entire assets and liabilities are accounted for in a method similar to purchase accounting. Goodwill arising from such transactions is amortized over the estimated useful lives on a straight-line basis. The transaction costs incurred were recorded in the income statement as incurred. On 1 January 2007, in accordance with PRC GAAP, the unamortized equity investment differences and goodwill arising from business combinations under common control were written off against undistributed profits.

Under IFRS, the Company and its subsidiaries adopted the purchase method to account for the acquisitions above. The assets and liabilities acquired in acquisitions were recorded at fair value by the acquirer. Direct transaction costs incurred by the acquirer were included in the acquisition cost. The excess of acquisition cost over the proportionate share of fair value of net identifiable assets acquired was recorded as goodwill. Goodwill is not amortized but is tested annually for impairment and carried at cost less accumulated impairment losses. The operating results of the acquirees are consolidated in the operating results of the Company and its subsidiaries from the acquisition dates onwards.

As mentioned above, the differences in accounting treatment under PRC GAAP and IFRS on business combinations under common control affect both equity and profit. Meanwhile, due to different measurement basis of the assets acquired, depreciation and amortization in the period subsequent to the acquisition will be affected which will also affect the equity and profit or loss upon subsequent disposals of such investments.

 
 
 


(e)         Deferred income tax impact on GAAP differences

This represents related deferred income tax impact on the GAAP differences above where applicable.

3.         RETURN ON NET ASSETS AND EARNINGS PER SHARE

   
Weighted average
return on net assets
(%)
For the six moths
ended 30 June
Earnings per share (RMB/Share)
   
Basic earnings per
share
For the six moths
ended 30 June
Diluted earnings per
share
For the six moths
ended 30 June
   
   
   
2010
2009
2010
2009
2010
2009
     
(Restated)
  
(Restated)
  
(Restated)
               
 
Net profit attributable to shareholders
  of the Company
5.01
5.04
0.17
0.16
0.17
0.16
 
Net profit attributable to shareholders
  of the Company (excluding
  non-recurring items)
4.66
4.90
0.16
0.16
0.16
0.16

 

 
 
 
 
 
 
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/ Gu Biquan
 
 
 
 
Name:  Gu Biquan
 
Title:  Company Secretary

 

 

 
Date:    August 24, 2010
 
 

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