In 2020, the net profit of the Group amounted to RMB2,925,551,000, representing an increase of RMB724,401,000 or 32.91% as compared with the previous year.
In 2020, the net profit (loss) of each business segment and their respective changes over the previous year were as follows:
As compared with 2019, the changes in net profit were mainly due to the following factors:
The revenue of the Group was derived from the sales of electricity to regional and provincial power grid companies and the provision of power generation while the Group recognized its revenue when its performance obligations have been satisfied. In 2020, the Group recorded a revenue of RMB28,427,721,000, representing an increase of 2.39% as compared with RMB27,763,287,000 of the previous year.
In 2020, the details of revenue of each business segment are set out as follows:
Revenue from wind power and photovoltaic power increased by RMB1,076,248,000 in aggregate due to the commencement of commercial operation of various new power generating units and the strengthening clean energy consumption under the national promotion of green development.
The electricity sales of hydropower increased due to the increase in the amount of rainfall in the river basins where the hydropower plants are located during the second half of 2020, resulting in an increase of RMB286,316,000 in revenue from hydropower.
Revenue from coal-fired power decreased by RMB698,130,000, which was attributable to the decrease in electricity sales and average on-grid tariff of coal-fired power as compared with the previous year.
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 2020, the operating costs of the Group amounted to RMB22,393,465,000, representing a drop of 0.77% as compared with RMB22,567,558,000 of the previous year. The decrease in operating costs was mainly due to the net effect of the decline in fuel costs and the increase in depreciation and staff costs.
Total Fuel Costs
The total fuel costs decreased by RMB781,956,000 as a result of the year-on-year decline in coal price and reduced fuel consumption due to the decline in sales of coal-fired power.
Unit Fuel Cost
The average unit fuel cost of the Group’s coal-fired power business was RMB197.10/MWh, representing a decrease of 5.29% from that of RMB208.11/MWh of the previous year, which was mainly because the Group exercised strict control over coal costs, while at the same time benefitting from the low-carbon power generation efficiency of the large-capacity power generating units.
Depreciation and Staff Costs
Depreciation of property, plant and equipment and the right-of-use assets and staff costs increased by RMB992,919,000 in aggregate as a result of business expansion and the large number of new power generating units that commenced commercial operation during the year.
The net gains from other gains and losses increased by RMB46,599,000, mainly due to the net effect of the increase in profits on sales of heat, trading of coal, coal by-products, spare parts and others, and the increase in the impairment of assets as compared with the previous year.
Other operating expenses reduced by RMB372,619,000, mainly due to an impairment loss on the amount due from a joint venture in 2019 whilst there was no such impairment last year, and the reduction in loss on disposal from separation and transfer of the Water/Power/Gas Supply and Property Management (三供一業) as compared with the previous year.
In 2020, the Group’s operating profit was RMB6,371,860,000, representing an increase of 16.25% as compared with the operating profit of RMB5,481,339,000 of the previous year.
In 2020, the finance costs of the Group amounted to RMB3,203,698,000 (2019: RMB3,165,881,000), representing an increase of RMB37,817,000 or 1.19% as compared with the previous year. The increase in interest expense was mainly due to the rise of debts level.
In 2020, the share of results of associates was profits of RMB283,952,000, representing an increase of RMB59,248,000 or 26.37% as compared with RMB224,704,000 of the previous year. The increase in profits was mainly due to the increase in net profits of the associates engaging in coal-fired power related business as a result of the reduced coal price as compared with the previous year.
In 2020, the share of results of joint ventures was profits of RMB43,661,000, representing an increase in profits of RMB18,186,000 as compared with RMB25,475,000 of the previous year. The increase in profits was mainly due to the profit contribution from newly established joint ventures.
In 2020, income tax expense of the Group was RMB900,576,000, representing an increase of RMB387,563,000 as compared with RMB513,013,000 of the previous year. The increase was mainly due to the substantial increase in profits of some hydropower plants and the successive expiration of the preferential tax policy of “3+3 Years Tax Holiday (三免三減半)” of certain power plants.
At the Board meeting held on 18 March 2021, the Board recommended the payment of a final dividend for the year ended 31 December 2020 of RMB0.13 (equivalent to HK$0.1556 at the exchange rate announced by the People’s Bank of China on 18 March 2021) per ordinary share (2019: RMB0.13 (equivalent to HK$0.1426) per ordinary share), totaling RMB1,274,895,000 (equivalent to HK$1,525,952,000) (2019: RMB1,274,895,000 (equivalent to HK$1,398,462,000)), which is based on 9,806,886,321 shares (2019: 9,806,886,321 shares) in issue on 18 March 2021 (2019: 26 March 2020).
As at 31 December 2020, the carrying amount of equity instruments at fair value through other comprehensive income was RMB3,061,952,000, accounting for 1.96% of total assets, including listed equity securities of RMB2,586,640,000 and unlisted equity investments of RMB475,312,000.
Listed equity securities represent the equity interests in Shanghai Power held by the Group. As at 31 December 2020, the Group held 13.88% of the issued share capital of Shanghai Power, the A shares of which are listed on Shanghai Stock Exchange. It was categorized into the level 1 financial assets of fair value measurements, and its fair value decreased by 11.55% as compared with RMB2,924,502,000 as at 31 December 2019.
Unlisted equity investments represent the Group’s investment in equity of some unlisted companies principally engaged in financial services, coal production, water supply and electricity trading services respectively. They were categorized into the level 3 financial assets of fair value measurements. As at 31 December 2020, the aggregate fair value of unlisted equity investments owned by the Group was RMB493,189,000 (including an unlisted equity investment in the PRC as part of disposal groups classified as held for sale), representing an increase of 8.21% from RMB455,785,000 as at 31 December 2019.
The valuation technique and key inputs used for measuring the fair value of the above level 3 financial assets were market approach, i.e. fair value of such equity instruments is estimated by calculating the appropriate value ratio based on market multiples derived from a set of comparable listed companies in the same or similar industries. Key inputs were (i) the market value of the said equity interests, (ii) price-to-book ratio of the comparable companies (0.43-2.96), and (iii) the marketability discount (25.60%-30.78%).
The fair value loss on equity instruments at fair value through other comprehensive income for the year ended 31 December 2020 of RMB240,003,000 (net of tax) (2019: gain of RMB58,435,000) was recognized in the consolidated statement of comprehensive income.
In June 2020, Guangxi Company (a wholly-owned subsidiary of the Company) entered into a Joint Venture Agreement with Jilin Electric, CEC and Sinohydro B11 to form a Joint Venture in Guangxi Zhuang Autonomous Region of the PRC. Guangxi Company made contribution by way of both Asset Injection and cash. Guangxi Company used its equity interests in Lingchuan Wind Power, Lingshan Wind Power and Jinzishan Wind Power (all being subsidiaries of Guangxi Company) as its contribution. Upon completing the transfer of equity interests in these three subsidiaries, they ceased to be subsidiaries of the Company. For details, please refer to the announcement of the Company dated 2 July 2020.
In July 2020, Changzhou Hydropower entered into an Equity Transfer Agreement with Guangxi Overseas, pursuant to which Changzhou Hydropower agreed to sell, and Guangxi Overseas agreed to acquire 45% of equity interests in Lingshan Wind Power at a consideration of RMB93,618,000. Upon completion of the Equity Transfer, Guangxi Overseas would hold the entire equity interest of Lingshan Wind Power, and the Group would indirectly hold 40% equity interest of Lingshan Wind Power through Guangxi Overseas. For details, please refer to the announcement of the Company dated 29 July 2020.
In October 2020, Wu Ling Power signed an Equity Transfer Confirmation on exercise of the Original Shareholder’s Option to buy back the equity interests of Yuanjiang Company held by Huabao Trust and ABC Financial at the exercise price of RMB3 billion. Immediately following the completion of the transaction, Huabao Trust and ABC Financial ceased to hold any equity interest in Yuanjiang Company, Yuanjiang Company would then become a wholly-owned subsidiary of Wu Ling Power, and a 63%-owned indirect subsidiary of the Company. For details, please refer to the announcement of the Company dated 29 October 2020.
Save as disclosed above, the Group did not have any other material acquisitions and disposals during the year under review.
As at 31 December 2020, cash and cash equivalents of the Group were RMB1,316,351,000 (31 December 2019: RMB1,238,290,000). Current assets amounted to RMB14,121,267,000 (31 December 2019: RMB8,352,076,000), current liabilities amounted to RMB40,556,194,000 (31 December 2019: RMB32,436,962,000) and current ratio was 0.35 (31 December 2019: 0.26).
In April 2019, the Company renewed the Financial Services Framework Agreement with SPIC Financial for a term of three years, pursuant to which SPIC Financial has agreed to provide the Group with deposit services, settlement services, loan services and other financial services approved by the CBIRC on a non-exclusive basis. The Annual Cap in respect of the maximum daily balance of deposit (including accrued interests) placed by the Group with SPIC Financial shall not exceed RMB4.2 billion during the term of this Framework Agreement. For the year ended 31 December 2020, the maximum daily balance of deposit (including accrued interests) placed by the Group with SPIC Financial was approximately RMB4.18 billion.
In order to ensure that the relevant business is in compliance with the terms of the above financial services framework agreements, the Company had designated personnel to monitor the funds deposited with SPIC Financial, performed daily real-time inquiries on the funds deposited with SPIC Financial, and collected deposit rates offered by major domestic commercial banks for comparison with the deposit rates offered by SPIC Financial on a monthly basis.
In addition to the deposit offers as agreed in the above agreements, SPIC Financial also provides internal treasury management platform, cross-border fund allocation platform and other financial services to the Group through its own financial resources, such as the business information system and cross-border fund allocation channels. Such platforms enable the real-time monitoring of account balances as well as income and expenditure, thereby safeguarding against funding risks. At the same time, they facilitate flexible and efficient fund allocation across borders, which gives rise to more flexible capital flow at home and abroad, broadens financing channels for domestic subsidiaries and reduces uncertainties in inbound and outbound capital flows due to changes in foreign exchange regulatory policies.
During the year under review, the Group recorded a net increase in cash and cash equivalents (including cash and cash equivalents as part of the disposal groups classified as held for sale) of RMB80,276,000 (2019: a net decrease of RMB610,933,000). For the year ended 31 December 2020:
net cash generated from operating activities amounted to RMB5,501,876,000 (2019: RMB5,158,172,000).
net cash used in investing activities amounted to RMB15,768,455,000 (2019: RMB15,816,887,000), which mainly represented the cash outflow of capital expenditure on the Group’s payments for property, plant and equipment and prepayments for construction of power plants.
net cash generated from financing activities amounted to RMB10,346,855,000 (2019: RMB10,047,782,000). The increase in net cash inflow, as compared with the previous year, was mainly attributable to the increase in cash inflow from drawdown of bank borrowings.
The financial resources of the Group were mainly derived from cash inflow generated from operating activities, borrowings from banks and related parties, and project financing.
As at 31 December 2020, total debts of the Group amounted to RMB91,431,935,000 (31 December 2019: RMB78,568,268,000). All debts of the Group are denominated in RMB, Japanese Yen (“JPY”) or United States Dollars (“USD”).
As at 31 December 2020, the Group’s gearing ratio, calculated as net debt (being total debts less cash and cash equivalents) divided by total capital (being total equity plus net debt), was approximately 66% (31 December 2019: approximately 63%). The Group’s gearing ratio remained stable.
As at 31 December 2020, the amount of borrowings granted by SPIC Financial was approximately RMB4.06 billion (31 December 2019: approximately RMB3.88 billion).
The details of the Group’s debt as at 31 December 2020 and 2019 are set out as follows:
The above debts were repayable as follows:
Among the above debts, approximately RMB41,237,926,000 (31 December 2019: approximately RMB29,325,084,000) are subject to fixed interest rates, and the remaining debts denominated in RMB are subject to adjustment based on the relevant rules of the People’s Bank of China and bearing interest rates ranged from 1.65% to 5.55% (2019: ranged from 3.92% to 5.23%) per annum.
When there is any indication of impairment, the Group will conduct an impairment test on assets such as property, plant and equipment and right-of-use assets to assess whether an impairment has occurred. In the process of conducting impairment tests, the Company has fully considered the impact of the COVID-19 pandemic in the year of 2020 and in the future.
In 2020, the Group made impairment provisions of RMB703,276,000 in total, which mainly included a provision for impairment of RMB587,327,000 made on the assets classified as held for sale, and an impairment of goodwill of RMB84,599,000 made for a hydropower plant that remained in loss-making position.
In May 2020, the Company issued the second tranche of a super & short-term commercial paper in the PRC in a principal amount of RMB500 million, at the interest rate of 2.00% per annum and with a maturity period of 270 days. The proceeds were fully used for repayment of the existing borrowings. The aggregate principal amount of such super & short-term commercial paper was RMB1 billion. It has an effective registration period of two years with effect from August 2019 and can be issued in tranches on a revolving basis within the effective registration period.
In July 2020, Wu Ling Power, a subsidiary of the Company, received confirmation in relation to the acceptance of its application for the issuance of a super & short-term commercial paper in the PRC in the aggregate principal amount of RMB2 billion, with an effective registration period of two years and to be issued in tranches within the effective registration period. On 17 August 2020, Wu Ling Power completed the issuance of the 2020-first-tranche of super & short-term commercial paper in a principal amount of RMB1 billion, at the interest rate of 2.50% per annum and with a maturity period of 270 days. The proceeds were fully used for repayment of the existing borrowings.
In October 2020, the Company received confirmation in relation to the acceptance of its application for the issuance of perpetual medium-term notes in the PRC in the aggregate principal amount of RMB3 billion, with an effective registration period of two years and to be issued in tranches within the effective registration period. On 5 and 18 November 2020, the Company issued the perpetual medium-term notes in the principal amount of RMB1.5 billion each at the interest rate of 4.35% and 4.60% per annum, respectively, and both with a maturity period of 3+N (3) years. The proceeds were fully used for repayment of the existing borrowings and replenishment of working capital of the Group.
In 2020, the capital expenditure of the Group was RMB18,269,260,000 (2019: RMB15,873,323,000). In particular, the capital expenditure for clean energy segments (hydropower, wind power and photovoltaic power) was RMB14,136,015,000 (2019: RMB11,936,314,000), which was mainly applied for the project construction of new power plants and power stations; whereas the capital expenditure for coal-fired power segment was RMB3,902,112,000 (2019: RMB3,791,184,000), which was mainly applied for the project construction of new coal-fired power generating units and technical upgrade for the existing power generating units. These expenditures were mainly funded by project financing, funds generated from business operations and borrowings from related parties.
As at 31 December 2020, the Group pledged certain property, plant and equipment with a net book value of RMB262,915,000 (31 December 2019: RMB392,981,000) to certain banks (31 December 2019: related parties) to secure bank borrowings (31 December 2019: borrowings from related parties) in the amount of RMB129,620,000 (31 December 2019: RMB196,820,000). In addition, certain bank borrowings, borrowings from related parties and lease liabilities totaling RMB19,546,007,000 (including bank borrowings as part of disposal groups classified as held for sale) (31 December 2019: RMB20,134,405,000) were secured by the rights on accounts receivable of certain subsidiaries of the Group. The accounts receivable secured under these borrowings amounted to RMB2,476,191,000 (including accounts receivable as part of disposal groups classified as held for sale) (31 December 2019: RMB3,760,170,000).
As at 31 December 2020, a subsidiary of the Group was named as the defendant in certain legal disputes in relation to relocation compensations. As of the date hereof, the above legal proceedings are still in progress, of which none of the final outcome can be determined at present. The Board considered that the outcome of these pending disputes will have no material adverse effect either on the financial position or the operating results of the Group.