With the reform of China's power market, the PRC government has gradually introduced changes to the structure of the power supply market. Previously, electricity was only supplied by power generators through power grid operators to end-users, subject to the qualification application and approval by the relevant authorities, large-volume electricity end-users are now allowed to trade directly with power generation companies ("direct power supply") with a view to eventually opening up a direct power supply market. As the size of direct power supply transactions continued to expand, the competition in the power generation industry is further intensified.
In 2016, China announced the national "13th Five-year" plans for energy and power, and it successively rolled out a number of energy policies, offering significant guidance for the development of power industry. On the whole, Chinese government values environmental protection and proactively makes efforts to cope with global climate change, further strictly restricts the consumption of fossil energy, and enhances the guarantee of clean energy. In the meantime, with the deepening of market-oriented reform on the power system, the markets of electricity sales and distribution and integrated energy services will be further opened in an orderly manner.
The main achievements made by the Group in 2016 are as follows:
Achieved effective operation. Taking full advantage of cascade watershed adjustment optimized hydropower production efficiency in maintaining profits. New operating wind and photovoltaic power stations continued to increase revenue and profit. Through technical upgrade for the existing coal-fired power generating units, the Group has expanded the heat supply capacity, secured ultra-low emission tariffs and obtained various fiscal subsidies. By actively broadening different financing channels, enhanced the debt structure and reduced the financing costs.
Attained significant results from strategical transformation and development. The Group put into operation a number of wind power and photovoltaic power stations during the year under review, including Datong Power Station which is the first "Top Runner" photovoltaic power project in operation under the "13th Five-year Plan" of China. During the year, the Group participated in the investment in Gui'an New District (貴安新區), one of the national comprehensive power reform pilots (國家綜合電改試點) in Guizhou Province, and entered into the domain of local electricity sales and distribution by acquiring 12.17% of equity interest in Sichuan Energy Investment (四川能投), and actively developed integrated energy services in Guangxi, Guangdong, Sichuan, Anhui and other places.
Fulfilled its environmental and social responsibilities earnestly. The Group has actively coped with global climate change and increased the proportion of clean energy by developing renewable energy. We also promoted the ultra-low-emission improvement plans for the coal-fired power generating units. This significantly reduced the emission of major pollutants and cut net coal consumption rate for power supply and greenhouse gas emission.
In 2016, the Group overcame various difficulties and maintained stable operating results. In 2016, total electricity sold amounted to 60,760,318 MWh, representing a decrease of 0.18% over the last year, and profit attributable to owners of the Company was RMB2,365,868,000, representing a decrease of 28.78% over the last year, after deducting the one-off after tax gain on disposal of part of equity interests in Shanghai Power in 2015, mainly due to the reduction of on-grid tariffs of coal-fired power and the impact of rising coal prices. Basic earnings per share was approximately RMB0.32. Net assets per share, excluding non-controlling interests, was approximately RMB3.71, on par with that as at 31 December 2015.
Attributable Installed Capacity
As a result of new generating units commenced operation during the year, the attributable installed capacity of the Group's power plants reached 16,728.6MW as at 31 December 2016, representing an increase of 474.0MW as compared with the previous year. Among which, the attributable installed capacity of renewable energy including hydropower, wind power and photovoltaic power was 3,682.5MW, accounting for approximately 22.01% of the total attributable installed capacity, representing an increase of approximately 2.27 percentage points as compared with the previous year.
In 2016, the Group efficiently boosted the construction of renewable energy plants. Among which, Datong Power Station with 100MW of photovoltaic power is the feature of "Top Runner" projects. The Group will continue to vigorously promote the development of renewable energy and actively participate in the "Top Runner" photovoltaic programs supported by the government, in order to increase the proportion of renewable energy.
The Group's new power generating units that commenced commercial operation during the year under review included:
| Power Plant |
Type of
Power Plant |
Installed Capacity
(MW) |
Interest
(%) |
Attributable Installed Capacity
(MW) |
Timeline for
Commercial
Operation |
| Pingwei Power Plant III |
Coal-fired power |
2,000 |
60 |
1,200 |
May & September 2015 |
| Suoluogou Power Plant |
Hydropower |
24 |
63 |
15.1 |
June 2015 |
| Yaoposhan Power Plant |
Wind power |
14 |
63 |
8.8 |
February 2015 |
| Shanshan Power Plant |
Wind power |
49.5 |
63 |
31.2 |
March 2015 |
| Donggangling Power Plant |
Wind power |
50 |
63 |
31.5 |
December 2015 |
| Total |
|
2,137.5 |
|
1,286.6 |
|
* CP Jiangmen included two photovoltaic power projects.
Notes:
Apart from the above additional power generating units, as compared with the previous year, the Group recorded a net increase in attributable installed capacity of 474.0MW when accounted for commercial operation of a photovoltaic power station of an associate, Changshu Power Plant and the changes in the installed capacity of Shanghai Power.
Power Generation, Electricity Sold and Utilization Hours
In 2016, the details of power generation and electricity sold of the Group are set out as follows:
|
|
2016
(MWh) |
2015
(MWh) |
Changes
(%) |
| Total power generation |
|
63,403,445 |
63,531,141 |
–0.20 |
| Coal-fired power |
|
44,604,876 |
44,645,118 |
–0.09 |
| Hydropower |
|
18,075,229 |
18,570,520 |
–2.67 |
| Wind power |
|
465,293 |
315,503 |
47.48 |
| Photovoltaic power |
|
258,047 |
N/A |
N/A |
|
| Total electricity sold |
|
60,760,318 |
60,868,493 |
–0.18 |
| Coal-fired power |
|
42,244,478 |
42,252,014 |
–0.02 |
| Hydropower |
|
17,819,196 |
18,313,257 |
–2.70 |
| Wind power |
|
441,614 |
303,222 |
45.64 |
| Photovoltaic power |
|
255,030 |
N/A |
N/A |
In 2016, the details of electricity sold of the Group's main associates and joint ventures are set out as follows:
|
|
2016
(MWh) |
2015
(MWh) |
Changes
(%) |
| Total electricity sold |
|
20,498,973 |
18,887,820 |
8.53 |
| Changshu Power Plant |
|
|
|
|
| Coal-fired power |
|
16,988,901 |
15,842,150 |
7.24 |
| Photovoltaic power |
|
14,693 |
N/A |
N/A |
| Xintang Power Plant |
|
|
|
|
| Coal-fired power |
|
3,495,379 |
3,045,670 |
14.77 |
In 2016, the average utilization hours of coal-fired power generating units of the Group was 3,714 hours, representing a decrease of 385 hours as compared with the previous year, mainly affected by the national electricity supply growth exceeds the demand growth and the surge in hydropower generation that squeezed the space for coal-fired power generation in certain regions where the Group's coal-fired power plants are located. The average utilization hours of hydropower generating units was 3,780 hours, representing a decrease of 113 hours as compared with the previous year. The average utilization hours of wind power generating units was 1,581 hours, representing a slight decrease of 49 hours as compared with the previous year.
The Group will continue to strengthen the analysis on policies and trend of the electricity market, to adjust the distribution and arrangement of power plants and power supply and to set effective sales strategy in order to cope with the national power system reform and the emphasis on environmental protection. To align with electricity market change, we strive to promote the sales of direct power supply, speed up the transformation to energy integration and clean energy, to maintain and enlarge market share and lift the utilization hours of generating units.
On-Grid Tariff
In 2016, the Group's average on-grid tariffs compared to the previous year:
coal-fired power was approximately RMB309.08/MWh, representing a decrease of approximately RMB34.25/MWh;
hydropower was approximately RMB302.76/MWh, representing an increase of approximately RMB0.39/MWh;
wind power was approximately RMB475.03/MWh, representing a decrease of approximately RMB28.76/MWh; and
photovoltaic power was approximately RMB801.32/MWh.
The decrease in the average on-grid tariff of coal-fired power was mainly due to the downward adjustments of on-grid tariffs for coal-fired power generating companies announced by the National Development and Reform Commission with effect from April 2015 and January 2016 respectively. The adverse effect of such decrease in on-grid tariff was partly offset by the green electricity subsidy tariffs approved by the local governments to some of our coal-fired power plants during the year. The Group will continue to closely monitor the development of the environmental protection policies from the PRC government and strengthen the research on the green energy tariff policies in order to actively seeking for more green electricity subsidies.
Unit Fuel Cost
In 2016, the average unit fuel cost of the Group's coal-fired power business was approximately RMB154.41/MWh, representing an increase of approximately 6.23% from that of approximately RMB145.36/MWh of the previous year. During the year under review, the Group committed efforts on strengthening the coal-price management, optimizing the coal inventory in response to the market changes in a timely manner, seeking new coal supply channels to raise bargaining power for reducing procurement costs. On the other hand, the energy-saving advantages of large capacity power generating units also helped driving down the coal consumption. This resulted in the increase in unit fuel cost lower than that of Bohai-Rim Steam-Coal Price Index.
Coal Consumption
In 2016, the average net coal consumption rate of the Group was approximately 304.93g/KWh, representing a decrease of approximately 2.15g/KWh as compared with the previous year, equivalent to a saving of approximately 90,000 tons of standard coal. Apart from the decrease in pollutant emission, the impact on profit from the declining net coal consumption rate becomes even more significant amid the rising coal prices.
Recently, the Group's environmental friendly power generating units with large capacity and high parameter have been commencing operation successively and the energy-saving advantages have further driven down the net coal consumption rate significantly.
Heat Sold
In 2016, total heat sold by the Group (including associates and joint ventures) was 14,047,494 GJ, representing an increase of 4,136,256 GJ.
In recent years, the Group started to develop the heat supply projects and renovate with heat supply functions on suitable power generating units by making use of residual heat as a new source to secure profit growth and thus enhancing the utilization of energy integration as well as aligning with the direction of government emphasis on environmental protection and achieving the goal on energy saving and consumption reduction. As at 31 December 2016, nine power generating units of the Group (including an associate) have completed the heat supply renovation and three power generating units are expected to complete the heat supply renovation projects during 2017.
Operating Results of 2016
In 2016, the net profit of the Group amounted to RMB3,255,487,000, representing a decrease of RMB2,074,111,000 as compared with the previous year. Among which, save for the one-off after tax gain on disposal of partial interest in Shanghai Power of RMB827,207,000 in 2015, the net profit decreased by 27.69% as compared with the previous year. Contribution to net profit from renewable energy business was 60.24%, representing an increase of 16.72 percentage points year-on-year. Net profit contribution of renewable energy business increased gradually. In 2016, the net profits from the principal segment businesses and their respective ratio of contribution to the total net profit are as follows:
coal-fired power was RMB1,294,237,000 (39.76%, 2015: 56.48%);
hydropower was RMB1,890,131,000 (58.06%, 2015: 43.23%); and
wind power and photovoltaic power was RMB71,119,000 (2.18%, 2015: 0.29%).
As compared with 2015, the decrease in net profit (save for the one-off after tax gain on disposal of partial interest in Shanghai Power) was mainly due to the following factors:
the average on-grid tariff of coal-fired power declined as compared with the previous year, resulting in a decrease in revenue of coal-fired power segment by RMB1,449,529,000;
the increase in unit fuel cost by approximately RMB9.05/MWh as a result of increase in coal price during the year, increasing the fuel costs by approximately RMB385,099,000;
the business expansion and the increase in the number of new power generating units led to the increase in depreciation of property, plant and equipment of RMB248,730,000; and
the decrease in the share of profits of associates by RMB200,198,000.
However, part of the profit decrease for the year under review was offset by the following factors:
the finance costs reduced by RMB170,330,000 as a result of lending interest-rate cut;
The provision for impairment of property, plant and equipment, and interests in a joint venture totaling of RMB480,647,000 in 2015. There is no such provision for impairment in this year; and
the decrease in the income tax expense by RMB204,821,000 (after deducting the relevant income tax expense of RMB279,964,000 resulting from the one-off gain on disposal of partial interest in Shanghai Power in 2015 for comparison).
Revenue
The revenue of the Group was mainly derived from the sales of electricity. In 2016, the Group recorded a revenue of RMB18,866,153,000, representing a decrease of 6.59% as compared with RMB20,196,670,000 of the previous year. The decrease in revenue was mainly due to the decrease in average on-grid tariff of coal-fired power by approximately 9.98% year-on-year as a result of lowered tariff, decreasing the revenue of coal-fired power by RMB1,449,529,000.
Segment Information
The reportable segments identified by the Group meeting the quantitative thresholds required by HKFRS 8 are now the "generation and sales of coal-fired electricity" and "generation and sales of hydropower electricity". Although the "generation and sales of wind and photovoltaic power electricity" does not meet such quantitative thresholds required for reportable segments, as it is closely monitored by the chief operating decision maker, who has been identified as executive Directors and certain senior management, as a potential growth business and is expected to gradually make a greater contribution to the Group's results in the future, it has been reported separately for the year under review.
Operating Costs
Operating costs of the Group mainly consist of fuel costs for coal-fired power generation, repairs and maintenance expenses for power generating units and facilities, depreciation and amortization, staff costs, consumables and other operating expenses.
In 2016, the operating costs of the Group amounted to RMB14,432,405,000, representing an increase of 5.01% as compared with RMB13,743,347,000 of the previous year. The increase in operating costs was mainly due to the increase in fuel costs resulting from the rising coal prices as well as the increase in depreciation and repairs and maintenance resulting from the business expansion and the increasing number of new power generating units.
The supply-side structural reform in the coal industry continues to advance, with significant decrease in raw coal output in the PRC as compared with the previous year. The swift change of loose coal supply resulted in the sharp rise in coal price in the market since the beginning of the second half of 2016 and a significant increase in the operating costs of coal-fired power enterprises.
Operating Profit
In 2016, the Group's operating profit was RMB5,350,578,000, representing a decrease of 31.94% as compared with the operating profit of RMB7,861,789,000 of the previous year. Save for the one-off pre-tax gain on disposal of partial interest in Shanghai Power in the previous year, the Group's operating profit decreased by 20.79% as compared with the previous year. The decrease in operating profit was mainly due to the decrease in average on-grid tariff of coal-fired power and the increase in coal price.
Finance Costs
In 2016, the finance costs of the Group amounted to RMB2,067,966,000, representing a decrease of 7.61% as compared with RMB2,238,296,000 of the previous year. As bank lending interest rate cuts, the Group has taken advantage of the changes in market interest rates and made continuous efforts to replace high-interest rate loans to lower the average interest rate.
Share of Results of Associates
In 2016, the share of profits of associates was RMB540,353,000, representing a decrease in profits of RMB200,198,000 or 27.03% as compared with the share of profits of RMB740,551,000 of the previous year. The decrease in profits was mainly because of the decreased profit contribution from an associate, Changshu Power Plant (principally engaged in coal-fired power generation).
Share of Results of Joint Ventures
In 2016, the share of profits of joint ventures was RMB150,158,000, representing an increase in profits of RMB4,044,000 or 2.77% as compared with the share of profits of RMB146,114,000 of the previous year, which was mainly due to the Group ceased sharing the loss of a joint venture (principally engaged in coal mining) in 2016.
Income Tax Expense
In 2016, income tax expense of the Group was RMB738,641,000, representing a decrease of RMB484,785,000 as compared with RMB1,223,426,000 of the previous year. Such decrease was mainly caused by the disposal of 40,173,628 shares of Shanghai Power in the public market by the Group in the previous year, resulted in relevant income tax expense of RMB279,964,000. Taking out this effect, the income tax expense decreased by RMB204,821,000 as compared with the previous year. The decrease was mainly due to the decrease in operating profit.
For the year ended 31 December 2016, certain subsidiaries of the Group were either exempted from PRC Enterprise Income Tax or entitled to the preferential tax rates of 7.5%, 12.5% or 15% (2015: 12.5%).
As at 31 December 2016, two subsidiaries of the Group had investment tax credits ("Tax Credits") with an accumulated amount of RMB189,308,000 (31 December 2015: RMB189,308,000) of which RMB103,983,000 (31 December 2015: RMB102,573,000) were utilized against their income tax charges since the granting of such Tax Credits. The Tax Credits are calculated based on 10% of the purchase price of specific environmental friendly, water- and energy-saving, safety enhanced facilities used in the Group's coal-fired power business. The Tax Credits are recognized as a reduction of current income tax when they are realized. The portion of Tax Credits that has not been utilized can be carried forward over a period of no more than five years.
Earnings per Share and Final Dividend
In 2016, the basic and diluted earnings per share for profit attributable to owners of the Company were approximately RMB0.32 (2015: approximately RMB0.58) and approximately RMB0.32 (2015: approximately RMB0.56) respectively.
At the Board meeting held on 23 March 2017, the Board recommended the payment of a final dividend for the year ended 31 December 2016 of RMB0.160 (equivalent to HK$0.1805 at the exchange rate announced by the People's Bank of China on 23 March 2017) per ordinary share (2015: RMB0.232 (equivalent to HK$0.2770) per ordinary share), totaling RMB1,176,826,000 (equivalent to HK$1,327,607,000) (2015: RMB1,706,398,000 (equivalent to HK$2,037,381,000)), which is based on 7,355,164,741 shares (2015: 7,355,164,741 shares) in issue on 23 March 2017 (2015: 23 March 2016).
Projects Under Construction
As at 31 December 2016, the Group's projects under construction cover a wide range of projects such as coal-fired power, hydropower, wind power and photovoltaic power, with 21.47% of the attributable installed capacity of renewable energy. The Group's projects under construction are as follows:
| Power Plant |
Type of Power Plant |
Installed
Capacity
(MW) |
Interest
(%) |
Attributable
Installed
Capacity
(MW) |
Expected
Timeline for
Commercial
Production |
| CP Pu'an Power Plant |
Coal-fired power |
1,320 |
100 |
1,320 |
2018 |
| Jiesigou Power Plant |
Hydropower |
24 |
44.1 |
10.6 |
2017 |
| Luoshuidong Power Plant |
Hydropower |
35 |
63 |
22.1 |
2018 |
| Mawo Power Plant |
Hydropower |
32 |
63 |
20.2 |
2018 |
| Xinshao Longshan Power Plant |
Wind power |
50 |
63 |
31.5 |
2017 |
| Daqingshan Power Plant |
Wind power |
50 |
63 |
31.5 |
2017 |
| Xinping Power Plant |
Wind power |
49.5 |
32.1 |
15.9 |
2017 |
| Lianyuan Longshan Power Plant |
Wind power |
49.9 |
44.1 |
22 |
2017 |
| Jingzhushan Power Plant |
Wind power |
50 |
63 |
31.5 |
2017 |
| Weishan Power Plant |
Wind power |
70 |
63 |
44.1 |
2018 |
| Songmutang Power Plant |
Wind power |
50 |
63 |
31.5 |
2018 |
| Taihexian Power Plant |
Wind power |
50.5 |
63 |
31.8 |
2018 |
| Ziyunshan Power Plant |
Wind power |
50 |
44.1 |
22.1 |
2018 |
| Shangjiangxu Power Plant |
Wind power |
70 |
44.1 |
30.9 |
2018 |
| New Barag Left Banner |
Photovoltaic power |
10 |
63 |
6.3 |
2017 |
| Power Station^ |
|
|
|
|
|
| Yiyang Power Station |
Photovoltaic power |
20 |
44.1 |
8.8 |
2017 |
| Total |
|
1,980.9 |
|
1,680.8 |
|
^ The total installed capacity of New Barag Left Banner Power Station is 20MW, of which 10MW commenced operation in 2016.
New Development Projects
The development of the renewable energy has become a major goal for the Group in response to the national clean energy development strategy to promote resources conservation and environmental protection. The Group will appropriately adjust the development and construction of coal-fired power projects, the project of Pingwei Power Plant IV and expansion project of Yaomeng which are previously expected to be developed during the national economic "13th Five-year Plan", have been postponed.
Currently, the total installed capacity of new projects at a preliminary development stage (including projects which the approvals from government of the PRC have been applied for) is approximately 8,000MW. In recent years, the Group has been actively seeking development opportunities in areas with rich resources, regional and market advantages, and devoting efforts to expedite development of the projects located in those areas. Currently, the total installed capacity of the renewable energy projects at a preliminary development stage is approximately 2,900MW which are mainly located in Hunan, Shanxi and Xinjiang, the regions where the Group has competitive advantages.
In addition, the installed capacity of natural gas power projects of the Group either have been granted approval or pending for approval is approximately 1,100MW.
Available-for-sale Financial Assets
The Group recognizes its shareholding in Shanghai Power as "Available-for-sale financial assets". As at 31 December 2016, the Group had interest in 16.98% of the issued share capital of Shanghai Power, whose A-shares were listed on the Shanghai Stock Exchange.
As at 31 December 2016, the fair value of the shareholding held by the Group was RMB4,410,367,000, representing a decrease of 17.53% from that of RMB5,347,661,000 as at 31 December 2015.
Material Acquisitions and Disposals
On 18 January 2016, the Company entered into a letter of intent with SPIC, its ultimate holding company, whereby the Company proposed to acquire and SPIC proposed to sell 100% of the equity interest in Henan Electric Power. Currently, the audit and valuation on the assets and liabilities of Henan Electric Power are progressing in an orderly manner.
The Company will carry out the relevant acquisition works depending on the market conditions and the wishes of the investors and will aim to promote the injection of high quality clean energy from the parent company.
During the year under review, the Group did not have material acquisition or disposal.
