Governance Framework
The Board
Board Composition
The Board comprises a total of six Directors, executive Director and the President of the Company, Mr. TIAN Jun, two non-executive Directors, Mr. GUAN Qihong and Mr. WANG Xianchun, and three independent non-executive Directors, namely Mr. KWONG Che Keung, Gordon, Mr. LI Fang and Mr. YAU Ka Chi. Profiles of the Directors are set out in the section headed "Directors and Senior Management Profiles" of this annual report.
Members of the Board possess various experience, capabilities, and expertise suitable for and relevant to the Company's businesses. The Board includes experts in electric power technology and management, professionals in finance and law. They are not only experienced, but also have progressive thinking.
More than one-third of our Board members are independent non-executive directors who can help the Board to make more effective independent judgment. The non-executive Directors (including the independent non-executive Directors) who form the majority of the Board possess diverse expertise. As such, they are able to make decisions in an objective and professional manner, to assist the management in formulating the Company's development strategies, and to ensure that the preparation of financial and other mandatory reports by the Board are in strict adherence to appropriate standards in order to protect the interests of the shareholders and the Company.
The Board has received annual written confirmation of independence from each of the independent non-executive Directors and believed that, as at the date of this annual report, they were independent of the Company in accordance with the relevant requirements of the Listing Rules.
Chairman and Chief Executive
The Chairman provides leadership for the Board and is responsible for ensuring that all Directors receive adequate information, which must be complete and reliable, in a timely manner and that Directors are properly briefed on issues arising at the Board meetings. He also ensures that the Board works effectively and discharges its responsibilities; good corporate governance practices and procedures are established; and appropriate steps are taken to provide effective communication with shareholders and those views of shareholders are communicated to the Board as a whole.
The Chairman encourages all Directors to make a full and active contribution to the Board's affairs and take the lead to ensure that it acts in the best interests of the Company. He encourages Directors with different views to voice their concerns, allow sufficient time for discussion of issues and ensure that Board decisions fairly reflect Board consensus. He promotes a culture of openness and debate by facilitating the effective contribution of non-executive Directors in particular and ensuring constructive relations between executive and non-executive Directors.
Mr. YU Bing resigned as an executive Director and chairman of the Board on 27 July 2018 due to new work arrangement, the Board has not yet appointed a new Chairman as at the date of this annual report. After Mr. YU left the Company, the other directors of the Board have been taking up the role of the Chairman for different occasions from time to time.
The President of the Company, Mr. TIAN Jun is the chief executive of the Company. He takes charge of the decision-making on matters concerning the Group's daily management and business, and oversees the execution of the Group's business strategies. He is also the chairman of the Executive Committee.
Appointment and Re-election of Directors
In accordance with the Company's articles of association, one-third of the Directors (including non-executive Directors with fixed term of three years) will retire from office by rotation for re-election by shareholders at the annual general meetings. In addition, any new appointment to the Board is subject to re-appointment by shareholders at the upcoming general meeting. Every director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years.
If an independent non-executive Director serves more than nine years, his/her further appointment should be subject to a separate resolution to be approved by shareholders. The documents attached to shareholders accompanying that resolution should include the process used for identifying the individual and why the Board believes the individual should be elected and the reasons why it considers the individual to be independent; if the proposed independent non-executive director will be holding their seventh (or more) listed company directorship, why the board believes the individual would still be able to devote sufficient time to the board; the perspectives, skills and experience that the individual can bring to the Board; and how the individual contributes to diversity of the Board.
The Company has in place a Nomination Policy setting out the selection and recommendation criteria and the appropriate procedures to be adopted when considering nomination and appointment of suitable candidates for directorship to the Board. Please refer to the section headed "Nomination Policy" of this Corporate Governance Report for its details.
Training of Directors and Code of Conduct
Every newly appointed Director will receive a comprehensive, formal and tailored induction on the first occasion of his/her appointment, so as to ensure that he/she has a proper understanding of the operations and business of the Company, and that he/she is fully aware of his/her responsibilities under Statutes and Common Law, the Listing Rules, applicable rules and other regulatory requirements, and especially the governance policies of the Company.
All Directors are required to disclose to the Company their offices held in public companies or organizations and other significant commitments. Every Director should ensure that he can give sufficient time and attention to the Company's affairs.
All Directors have been given the "Guidelines on Directors' Duties" and "Working Guidelines for the Board" of the Company. The Company Secretary will continuously update and refresh Directors on the latest law, rules and regulations regarding their duties and responsibilities.
Directors' training is an ongoing process, in order to ensure that their contribution to the Board remains informed and relevant. The Company encourages all Directors to participate in appropriate training programs. During the year under review, all members of the Board have provided their records of training to the Company Secretary for record. Their trainings included attending seminars and discussion forums, reading briefings and updated materials on rules and regulations.
The Company has adopted a set of Code of Conduct for Securities Transactions by Directors ("Code of Conduct"), the terms of which are not less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules. Having made specific inquiries to all Directors, all Directors confirmed that they have complied with the Code of Conduct throughout the year 2018.
The Company has arranged appropriate insurance cover on Directors' and officers' liabilities in respect of legal actions against its Directors and senior management arising out of corporate activities.
Power of and Delegation by the Board
The Board is the highest decision-making and managing body of the Company. Having regard to the best interests of the Company and its shareholders, the Board provides leadership and guidance to the Group's activities. It reviews and approves major matters such as business strategies, policies, business plans, financial budgets, major investments as well as mergers and acquisitions. In addition, the Directors have acknowledged that the principal responsibilities of the Board also include overseeing risk management and internal control systems, corporate governance, environmental and social responsibilities governance, supervising and administrating the operation and financial position of the Company, approving the result announcements and other disclosures as required in accordance with applicable laws and regulatory rules, optimizing corporate governance structure and promoting the communication with our shareholders.
There are currently four committees under the Board, namely Audit Committee, Risk Management Committee, Remuneration and Nomination Committee and Executive Committee to implement internal supervision and control on each relevant aspects of the Group.
The Board delegates certain management and operational functions to the Executive Committee and the management, and reviews such arrangements periodically to ensure that they remain appropriate to the Group's needs.
The management has overall responsibility for the Group's daily operations. The Board establishes clear responsibilities and authorities for management to ensure the daily operational efficiency. It acts within the authority approved by the Board to fulfill the day-to-day management responsibilities and makes timely decisions. With regard to matters beyond its authority, the management will report to the Board or the Executive Committee in a timely manner in accordance with the relevant working guidelines.
Board Committees
Audit Committee
The Company established the Audit Committee on 24 August 2004 with written terms of reference in compliance with the Listing Rules and the CG Code provisions. The primary duties and functions of the Audit Committee set out in its terms of reference, inter alia, include the following:
- To communicate with internal auditor and determine annual internal audit plans, discuss internal audit procedures with the internal auditor at least once every six months, review and monitor the internal control system, internal audit functions and effects of annual internal audit plans.
- To make proposals to the Board on the appointment, re-appointment and removal of the external auditor, review and monitor the independence, objectivity and audit effectiveness of the external auditor in accordance with the relevant standards issued by the Hong Kong Institute of Certified Public Accountants, formulate and implement the engagement policy on the provision of non-audit services by the external auditor.
- To review financial information of the Company.
- To supervise the financial reporting system and internal control system including the adequacy of resources, qualifications and experience of staff of the Company's accounting and financial reporting function, and their training programs and budget.
- To conduct any inspection authorized by the Board based on its terms of reference, in that case, the committee is entitled to solicit any necessary information from any employees while who have been instructed to assist the committee to satisfy any of its requirements.
The Audit Committee comprises of three members, namely Mr. KWONG Che Keung, Gordon, Mr. LI Fang and Mr. YAU Ka Chi, all of whom are independent non-executive Directors. The chairman and the secretary of the Audit Committee are served by Mr. KWONG Che Keung, Gordon and the Company Secretary of the Company respectively. For the purpose of reinforcing their independence, all members of the Audit Committee have appropriate professional qualifications, accounting or related financial management experience referred to in the Listing Rules.
The details of the terms of reference of the Audit Committee have been posted on the websites of the Company and the Hong Kong Stock Exchange.
The Audit Committee held two meetings during 2018 (average attendance was 100%). The committee's work performed during the year including:
- reviewed the annual financial statements and corporate governance reports for the year ended 31 December 2017 and the interim financial statements for the six months ended 30 June 2018, including the major accounting issues raised by the external auditor;
- reviewed and approved the audit strategy submitted by the external auditor for the year ended 31 December 2018;
- reviewed the internal control reports prepared by the Company's Internal Audit Department relating to the Company's internal audit plan, internal control system and risk management procedures;
- reviewed the continuing connected transactions of the Company;
- considered and approved the terms of engagement and remuneration of external auditor for its provision of audit and permitted non-audit related services; and
- reviewed the internal and independent audit results and discussed matters relating to audit, internal control system and financial reporting, including the adequacy of resources, staff qualifications and experience of the Company's accounting, internal audit and financial reporting functions, together with the senior management, internal and independent auditors of the Company.
Risk Management Committee
The Company established the Risk Management Committee on 23 March 2016 with written terms of reference in compliance with the Listing Rules and the CG Code provisions. The primary duties and functions of the Risk Management Committee set out in its terms of reference, inter alia, include the following:
- To review and recommend for the Board's approval the Group's overall risk management strategies and risk appetite/tolerance which shall take into account of the strategic, financial, operational, compliance and all the relevant risks faced by the Group and the prevailing and prospective market and economic conditions at least annually.
- To review and recommend for the Board's approval the Group's risk management framework, risk management system and corporate governance framework including their appropriateness, effectiveness and independence of risk management functions at least annually.
- To review reports from the management and to make recommendations to the Board on the Group's risk management policies which governs the identification, assessment, monitoring and reporting of the major risks faced by the Group.
- To oversee the implementation of risk management policies and the compliance with the respective statutory rules and regulations.
- To report any significant risk management issues to the Board and suggest solutions.
The Risk Management Committee comprises of three members, namely the three independent non-executive Directors, Mr. KWONG Che Keung, Gordon, Mr. LI Fang and Mr. YAU Ka Chi. Since the resignation of Mr. YU Bing, the ex-chairman of the Risk Management Committee on 27 July 2018, the other independent non-executive Directors have taken up the role of chairman at the committee's meetings. The secretary of the Risk Management Committee is served by the Company Secretary of the Company.
The details of the terms of reference of the Risk Management Committee have been posted on the websites of the Company and the Hong Kong Stock Exchange.
The Risk Management Committee held three meetings during 2018 (average attendance was 100%). The committee's work performed during the year including:
- reviewed the risk management report for the year 2017 and the first half of 2018 and risk management plan for the year 2018 prepared by the Company's Internal Audit Department relating to the Group's risk management framework, effectiveness of the risk management system, risk management policies which governs the identification, assessment, monitoring and reporting of the major risks faced by the Group;
- reviewed, discussed and approved the continuing connected transactions in relation to the coal futures purchase and sale of CP Guorui and the subsidiaries of SPIC in June 2018, and made recommendations to the Board; and
- reviewed and approved the human resources report of Internal Audit Department regarding the adequacy of resources, staff qualifications and experience of the Company's risk management function.
The management's annual confirmation on the effectiveness of the Group's risk management and internal control systems was reviewed/endorsed by the Risk Management Committee/Audit Committee and was reported to the Board.
Remuneration and Nomination Committee
The Company established the Remuneration and Nomination Committee on 24 August 2004 with written terms of reference in compliance with the Listing Rules and the CG Code provisions. The primary duties and functions of the Remuneration and Nomination Committee set out in its terms of reference, inter alia, include the following:
Remuneration
- To make recommendations to the Board on the remuneration policy and structure for all Directors and senior management of the Company, and to make recommendations on the establishment of a formal and transparent procedure for formulating remuneration policy.
- To review and approve the management's remuneration proposals with reference to the Board's corporate goals and objectives.
- To make recommendations to the Board on the remuneration packages of individual executive Directors and senior management of the Company with reference to their experience, performance, duties and market conditions. This should include benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their office or appointment.
- To make recommendations to the Board on the remuneration of non-executive Directors.
Nomination
- To review the structure, size and composition (including the skills, knowledge and experience) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company's corporate strategy.
- To identify individuals suitably qualified to become Board members based on a range of diverse perspectives and select or make recommendations to the Board on the selection of individuals nominated for directorships.
- To make recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors, in particular the chairman and the chief executive.
- To assess the independence of independent non-executive Directors.
Nomination Policy
(A) Selection Criteria
In evaluating and selecting any candidate for directorship, the following criteria should be considered:
| (a) |
Character and integrity. |
| (b) |
Qualifications including professional qualifications, skills, knowledge, expertise and experience that are relevant to the Company's business and corporate strategy. |
| (c) |
Good records of accomplishments in present and prior positions. |
| (d) |
Potential contributions the candidate can bring to the Board in terms of diversity in its all aspects under the Company's Board diversity policy. |
| (e) |
Commitment of the candidate to devote sufficient time to effectively carry out his/her duties. |
| (f) |
Potential or actual conflicts of interest that may arise if the candidate is selected. |
| (g) |
Independence of the candidate. |
(B) Nomination Procedures and Process
1. Appointment of new Director
| (a) |
Upon receipt of the proposal on appointment of new Director, the Committee identifies or selects candidates, with or without assistance from external agencies or the Company, and evaluate such candidate based on the criteria as set out in this Policy to determine whether such candidate is qualified for directorship. |
| (b) |
The Committee may use any process it deems appropriate to evaluate the candidates, which may include personal interviews, background checks, presentations or written submissions by the candidates and third party references. |
| (c) |
The Committee should then recommend to the Board to appoint the appropriate candidate for directorship, as applicable, and provide to the Board with all the information required including information set out in the Listing Rules in relation to the candidates. |
| (d) |
The Board should deliberate and decide on the appointment based upon the recommendations of the Committee. |
2. Re-election of Director
| (a) |
The Committee should review the overall contribution and service to the Company of the retiring Director and the level of participation and performance on the Board. In the case of a proposed re-appointment of a retiring independent non-executive Director, also consider the number of years he/she has already served. |
| (b) |
The Committee should also review and determine whether the retiring Director continues to meet the criteria as set out in this Policy. |
| (c) |
The Committee and/or the Board should then make recommendations to shareholders in respect of the proposed re-election of Director at the general meeting. |
Board Diversity Policy
The policy is summarized as follows:
- for identifying suitably qualified candidates to become Board members, it should be based on a number of diverse aspects, including Board members with different background, skills, regional and industry experience, gender and other qualities, that are in balanced and complementary with each other, creating synergy, and enabling the Board to function effectively as a whole.
- when reviewing and assessing the composition of the Board, it should be based on the Company's own business position and management needs from time to time, considering a number of factors including but not limited to the above mentioned background, skills, regional and industry experience, and other factors in order to achieve the Board with a reasonable structure that runs efficiently.
The Remuneration and Nomination Committee has three members, namely Mr. LI Fang, Mr. KWONG Che Keung, Gordon, and Mr. YAU Ka Chi, all of whom are independent non-executive Directors. The chairman and the secretary of the Remuneration and Nomination Committee are served by Mr. LI Fang and the Company Secretary of the Company respectively.
The details of the terms of reference of the Remuneration and Nomination Committee have been posted on the websites of the Company and the Hong Kong Stock Exchange.
The Remuneration and Nomination Committee held two meetings during 2018 (average attendance was 100%). The committee's work performed during the year including:
- considered and approved the overall remuneration package of the Directors and senior management of the Company in 2017 with reference to the remuneration system of the parent companies;
- reviewed the Company's matters relating to remuneration in 2018 and made recommendations to the Board;
- considered the personal profile of the Directors who would retire from office by rotation and stand for re-election at the annual general meeting in accordance with the Company's articles of association and made recommendations to the Board; and
- considered and approved the resignation of Mr. YU Bing, the former executive Director and the chairman of the Board, Risk Management Committee and the Executive Committee, and the appointment of Mr. TIAN Jun to succeed Mr. YU as the chairman of the Executive Committee and the authorized representative of the Company.
Pursuant to the CG Code provision B.1.5, the remuneration of the members of the senior management by remuneration band for the year ended 31 December 2018 is set out below:
Remuneration band
(RMB) |
Number of individuals |
| 0 to 1,000,000 |
11 |
Executive Committee
The Company established the Executive Committee in 2008. As a committee under the Board, the Executive Committee conducts its work under the guidance of the Board and reports to the Board pursuant to the "Working Guidelines for the Executive Committee" approved by the Board. The chairman of the Executive Committee is served by Mr. TIAN Jun, the executive Director and the President of the Company. The members of the committee include the executive Director and all the vice presidents of the Company. It has been delegated with the responsibilities to ensure the effective direction and control of the business and to deliver the Group's long-term strategies and goals. It advises the Board in formulating policies in relation to the Group's business operations, monitors the performance and compliance of the business, and supervises the management to implement the Board resolutions.
The Executive Committee acts as a bridge for communication and connection between the Board and the management, and plays a crucial role in enhancing the quality of corporate governance as well as strengthening the management efficiency of the Company. It ensures that the Board can timely hear the voices of the operation and management staff and acts timely in respect of material operation affairs of the Company. It meets on a regular basis to review the Group's activities and discuss management and operational issues.
The Executive Committee held thirteen meetings during 2018. The executive Director, the vice presidents and the senior management of the Company attended the meetings.
Company Secretary
Ms. CHEUNG Siu Lan, secretary of the company, is an employee of the Company, appointed by the Board, and responsible to the Board. The Company Secretary is responsible for ensuring that the activities of the Board conducted efficiently and effectively, and the procedures and all applicable laws and regulations are followed. She also supports and facilitates the training and professional development of Directors.
The Company Secretary reports to the Chairman and the Board, provides advice on corporate governance and corporate transactions, and assists the Board in discharging its obligations to shareholders pursuant to the Listing Rules. All Directors may call upon her for advice and assistance at any time in respect to their duties and the effective operation of the Board and the Board Committees.
During the year under review, Ms. CHEUNG has attended relevant professional seminars to update her skills and knowledge. She has complied with the Listing Rules to take no less than 15 hours of relevant professional training in a financial year.
Operation of Meetings and Supply of and Access to Information
Throughout the year under review, arrangements were in place to ensure all Directors were given an opportunity to include matters in the agenda for regular Board meetings. Notice of at least fourteen days was given of a regular Board meeting to give all Directors an opportunity to attend. For all other Board meetings, reasonable notice was also given.
Full Board or committee papers were sent to all Directors at least three days before the intended date of a Board meeting or a committee meeting. Management had supplied the Board and its committees with adequate information and explanations so as to enable them to make an informed assessment of the financial and other information put before the Board and its committees for approval. Management was also invited to join the Board or committee meetings where appropriate.
It is our principle, if a substantial shareholder or a Director has a conflict of interest in a matter to be considered by the Board which the Board has determined to be material, the matter must be dealt with by a physical Board meeting rather than a written resolution. Independent non-executive Directors who, and whose close associates, have no material interest in the transaction shall be present at that Board meeting. Any Director who has a conflict of interest must abstain from voting.
During the year under review, minutes of Board meetings and meetings of Board Committee were recorded in detail the matters considered by the Board or Board Committees and decisions reached. Draft and final versions of minutes of Board meetings and meetings of Board Committees were sent to all Directors for their comments within a reasonable time after the Board or committee meetings were held. Minutes of the meetings are always kept by our Company Secretary, and the Board and committee members may inspect the documents and minutes of the Board and Board Committees at any reasonable time by giving reasonable notice.
At all time, where necessary, the Directors can seek separate independent professional advice at the Company's expenses so as to discharge his/her duties to the Company. All the Directors are also entitled to have access to timely information in relation to our business and make further enquiries where necessary, and they have separate and independent access to senior management of the Company.
Directors' Attendance Record
In the year 2018, the attendance records of the Directors at Board meetings, Audit Committee meetings, Risk Management Committee meetings, Remuneration and Nomination Committee meetings and the annual general meeting are as follows:
| Directors |
Board |
Audit Committee |
Risk Management Committee |
Remuneration and Nomination Committee |
Annual General Meeting |
| Executive Directors: |
|
|
|
|
|
| TIAN Jun (President) |
6/6 |
– |
– |
– |
1/1 |
| YU Bing (Note) |
3/4 |
– |
2/2 |
– |
0/1 |
| |
|
|
|
|
|
|
| Non-executive Directors: |
|
|
|
|
|
|
| GUAN Qihong |
6/6 |
– |
– |
– |
1/1 |
| WANG Xianchun |
5/6 |
– |
– |
– |
1/1 |
| |
|
|
|
|
|
|
Independent
Non-executive Directors: |
|
|
|
|
|
|
KWONG Che Keung, Gordon
(Chairman of the Audit Committee) |
6/6 |
2/2 |
3/3 |
2/2 |
1/1 |
LI Fang
(Chairman of the Remuneration and
Nomination Committee) |
6/6 |
2/2 |
3/3 |
2/2 |
1/1 |
| YAU Ka Chi |
6/6 |
2/2 |
3/3 |
2/2 |
1/1 |
Notes: Mr. YU Bing resigned as the Chairman of the Board and an executive Director with effect from 27 July 2018.
Accountability and Audit
Financial Reporting
Directors acknowledge their responsibility for preparing the financial statements on a going concern basis, with supporting assumptions or qualifications as necessary. The Company's financial statements are prepared in accordance with the Listing Rules, Hong Kong Companies Ordinance and also the accounting principles and practices generally accepted in Hong Kong. Appropriate accounting policies are selected and applied consistently; judgments and estimates made are prudent and reasonable.
During the year 2018, all Directors have been given on a monthly basis the latest information and briefings about the financial position, changes in the business and the development of the Group. "Letter to the Shareholders" from the President contained a summary of the Company's performance in this annual report and how the Company will preserve value over the long term and our strategies for delivering the Company's objectives. The Directors ensured a balanced, clear and understandable assessment of the Company's performance, position and prospects in annual reports, interim reports, inside information announcements and other disclosures required under the Listing Rules and other statutory requirements.
Risk Management and Internal Controls
The Board puts particular emphasis on risk management and strengthening internal control system. In respect of organizational structure, the Company has set up the Audit Committee, the Risk Management Committee, the Remuneration and Nomination Committee and the Executive Committee. The principles of the internal control framework of the Company are: to strengthen the Company's internal monitoring and control in accordance with the requirements of the Hong Kong Stock Exchange, continuously improve the Company's corporate governance structure, build up corporate integrity culture, establish an effective control system, continuously assess the competence of the internal control system and the efficiency of the management through auditing, risk assessments and internal assessments, review identified risk exposures and ensure the effective running of the control system.
The Company has an Internal Audit Department in place and has been ensuring the independence of its organization, staffing and work, which is crucial to the Company's internal controls. The Internal Audit Department provides internal control assessment reports to the management on a regular as well as ad hoc basis. It also reports to the Audit Committee, the Risk Management Committee and the Board at least twice a year on internal control and risk management matters. To minimize risks faced by the Company, the department evaluates and reviews the Company's internal control processes to avoid risks and provide a solid foundation for building up an effective internal control system.
The Company has a comprehensive internal control system which includes seven parts, namely "basic framework of the internal control system", "management authorization manual", "staff disciplinary code", "code on conflicts of interests", "operational standards for internal control activities", "assessment standards for internal control system", and "implementation standards for internal audit", details of which are contained in our "Risk Management and Internal Control Specifications".
While taking into full account the risk management framework requirements of The Committee of Sponsoring Organizations of the Treadway Commission (the "COSO"), the promoter of the National Commission on Fraudulent Financial Reporting, and risk management guidelines set out by the Hong Kong Institute of Certified Public Accountants, the internal control system of the Company also learns from the experience of outstanding management companies and takes into consideration our actual situation and business characteristics in formulating the control framework for assessing the efficiency and competence of the internal control system, which provide a solid foundation to ensure the effectiveness of the Company's operating activities, reliability of its financial reports and compliance of laws and regulations.
The Board through the Audit Committee and Risk Management Committee has reviewed the efficiency of internal control system of the Group in aspects such as financial controls, operational controls, regulatory compliance and risk management. The Directors believe that the risk management and internal control systems are efficient and adequate, and controls effectively the risks that may have impacts on the Company in achieving its goals.
During the year under review, the Company strictly complied with the relevant code provisions of the CG Code in relations to risk management and internal control. The work performed by the Internal Audit Department during the year including the following:
- Organized training courses to staff of newly acquired subsidiary companies for optimizing the work in relation to the transition of internal control and risk management system and placing greater emphasis on information disclosure and compliance monitoring and auditing of continuing connected transactions.
- Continued to carry out management audit and special audits, and conducted independent supervision and objective assessment of the adequacy and effectiveness of the risk management and internal control systems in operation as adhering to the goal of full coverage of rotating audits. As revealed by the audits, the Department set rectification requirements for 23 issues, added 56 proposals to strengthen controls and followed up actively. It ensured the rectification measures were effectively implemented for improvement of the relevant issues.
- Carried out risk assessment in the area of information collection, and the key business processes for risk identification and analyses of various business units, including special risk assessment in areas such as new energy projects and material procurement. According to the results of the risk analyses, combined with the risk tolerance and existing risk checkpoints as well as the risk/reward tradeoffs, the Department determined the corresponding risk strategies and response measures and make specific recommendation for risk management, thereby implementing the risk management responsibility to the specific power plants/business units. The risks faced by each business unit and its risk management and control system capabilities were reflected to the management in a timely manner so as to continuously monitor the risks and evaluate the effectiveness of the risk management, through which the Group's defense capability against risks has continued to improve.
- Tracked the Group's major risk management controls quarterly, regularly updated the risk management ledger and kept abreast of the conditions, changes and trends of major risk prevention in a timely manner. Comprehensive risk tracking and prevention were achieved through the risk management approach that integrates risk checkpoints with market coverage.
- Continued to step up its efforts in the establishment of the internal control compliance system and expanded it into other major areas. It has also completed the defect elimination and improvement of internal control compliance in full and pushed forward the implementation of digitalization, hence realizing an online operation system for internal control compliance. Regular assessments have been carried out on the establishment of internal control compliance system to identify defects during the course of operation in a timely manner and make recommendations for improvement with a view to optimizing rectification measures on a continuous basis.
- Promoted the establishment of internal control compliance system in key areas such as procurement management and contract execution, and implemented digitalization for these areas simultaneously. The measures include, amongst others, regulations for material procurement management and enhanced refined management at every stage of procurement which were adopted to further enhance the management level and economic benefits of the Company.
- Distributed letters of undertaking in respect of internal control compliance to all staff members and organized trainings on internal control compliance for relevant staff from time to time in order to enhance the staff's initiative and awareness towards compliance and risks.
- Adopted appropriate measures to review quarterly the implementation of the Group's existing continuing connected transactions. During the year under review, the relevant companies had monitored strictly pursuant to the pricing policies and terms of the continuing connected transactions in the actual course of business operation and did not exceed those relevant annual caps as disclosed.
Whistleblowing Policy
For good corporate governance practice, the Board approved launching a "Whistleblowing Policy" in April 2012, for employees and those who deal with the Group (e.g. customers and suppliers) to raise concerns, in secure and confidence manner, with the Internal Audit Department about possible improprieties in any matter related to the Group, and through the Internal Audit Department reports directly to the Audit Committee.
Inside Information
The Company adopted its own "Inside Information Management Policy" setting out the procedures and internal controls for handling and dissemination of inside information in August 2013 with reference to the "Guidelines on Disclosure of Inside Information" issued by the Securities and Futures Commission in June 2012.
The Company incorporated the topic on inside information into its annual internal training to its senior management regarding the continuing disclosure obligations under the Securities and Futures Ordinance and the Listing Rules.
External Auditor's and its Remuneration
The Company appointed Deloitte Touche Tohmatsu as the Company's auditor (the "Auditor"). The Audit Committee is responsible for making recommendations to the Board on the appointment, reappointment and removal of the Auditor, and to approve the remuneration and terms of engagement of the Auditor, and any questions of its resignation or dismissal.
For the year ended 31 December 2018, the Audit Committee reviewed and monitored the Auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standards.
For the year ended 31 December 2018, the fees payable by the Company to the Auditor in respect of audit and non-audit services provided were as follows:
| |
HK$'000 |
| Audit services |
7,280 |
| Non-audit services: |
|
| Interim review |
1,470 |
| Continuing connected transactions |
210 |
| Issuance of medium-term notes |
500 |
Communication with Shareholders
Apart from reporting to the shareholders and investors on its operations and financial conditions semi-annually and annually, the Company also discloses relevant information such as electricity generation of the Company regularly so that the investors have a better understanding about the operation of the Company. The Company maintains a corporate website at www.chinapower.hk where important and updated information about the Group's activities and corporate matters such as annual and interim reports, announcements, business development and operations, corporate governance practices and other information are available for review by shareholders and other stakeholders. When announcements are made through the Hong Kong Stock Exchange, the same information is made available on the Company's website.
The Company also holds regular press conferences and meetings with financial analysts and investors, during which the Company's management will directly provide relevant information and data to the media, financial analysts, fund managers and investors, as well as answer their enquiries in a prompt, complete and accurate manner. The Company's website is updated continuously, providing up-to-date information regarding every aspect of the Company to investors and the public.
The Company has a Capital Markets & Investor Relations Department, which takes charge of the Company? relationship with investors by providing information and services to investors, promptly replying to their enquiries, and maintaining channels of active and timely communication with them.
Shareholders Communication Policy
In March 2012, the Board adopted a "Shareholders Communication Policy" of the Company which aims to set out the provisions with the objective of ensuring that the shareholders and potential investors are provided with ready, equal and timely access to balanced and understandable information about the Company, in order to enable shareholders to exercise their rights in an informed manner, and to allow shareholders and potential investors to engage actively with the Company. The "Shareholders Communication Policy" of the Company is posted on the Company's website under the "Corporate Governance" section.
According to the CG Code provision E.1.2, chairman of the board should attend the annual general meeting. The then Chairman of the Board, Mr. YU Bing, was unable to attend the Company' annual general meeting held on 5 June 2018. He had arranged Mr. TIAN Jun, the executive Director and President of the Company, who is very familiar with the Group's business and operations, to attend and chair the meeting. Other Directors, including three independent non-executive Directors, being the chairman/members of the Audit committee, the members of the Risk Management Committee, and the chairman/members of the Remuneration and Nomination Committee, together with the external independent auditor attended the annual general meeting and answered questions from the attending shareholders and investors. All resolutions proposed were duly passed by shareholders' voting at the meeting.
Dividend Policy
On 21 January 2019, the Company revised and adopted a new dividend policy to replace the one adopted in October 2004 when the Company launched the global offering of its shares and then listed on the Main Board of the Hong Kong Stock Exchange.
The Company may declare and distribute annual cash dividends to its shareholders in an amount representing not less than 50% (previously 25%) of the profit attributable to owners of the Company in any financial year, subject to the criteria set out in the Dividend Policy. In addition to cash, the dividends may be paid up in the form of the Company's shares, by the distribution of specific assets of any kind or by distribution of any form.
A decision to declare or to pay any dividends, and the amount of dividends, will be based on the recommendation of the Board after taking into consideration of, inter alia, the following factors:
| (i) |
the financial results and financial condition of the Group; |
| (ii) |
the Group's actual and future operations and liquidity position;
|
| (iii) |
the Group's expected working capital requirements, capital expenditure requirements and future expansion plans; |
| (iv) |
the Group's debt-to-equity ratio, return on equity and committed financial covenants; |
| (v) |
the retained earnings and distributable reserves of the Company and each of the members of the Group; |
| (vi) |
the general economic conditions, the national policies for energy and related industries, and other internal or external factors that may have an impact on the business or financial performance and position of the Company; |
| (vii) |
the shareholders' and the investors' expectation and industry's norm; and |
| (viii) |
any other factors that the Board deems appropriate. |
The Company shall prioritize payment of cash dividends to its shareholders. Such declaration and payment of dividends shall remain to be determined at the sole discretion of the Board and subject to all applicable requirements under the Company Ordinance (Chapter 622 of the Laws of Hong Kong) and the articles of association of the Company.
Shareholders' Rights
Procedures for Shareholders to Convene General Meeting
Shareholders of the Company (the ?hareholders?? entitled to have right to request the Company to convene a general meeting pursuant to Division 12 of the Hong Kong Companies Ordinance. The procedures are as follows:
- The Directors are required to call a general meeting if the Company has received requests to do so from the Shareholders representing at least 5% of the total voting rights of all the members having a right to vote at general meetings.
- A request -
| (a) |
must state the general nature of the business to be dealt with at the general meeting; and |
| (b) |
may include the text of a resolution that may properly be moved and is intended to be moved at the general meeting. |
- Requests may consist of several documents in like form that –
| (a) |
may be sent to the Company in hard copy form or in electronic form; and |
| (b) |
must be authenticated by the person or persons making it. |
- Directors must call a general meeting with 21 days after the date on which they become subject to the requirement, and must be held on a date not more than 28 days after the date of the notice convening the general meeting.
- If the requests received by the Company identify a resolution that may properly be moved and is intended to be moved at the general meeting, the notice of the general meeting must include notice of the resolution.
- If the resolution is to be proposed as a special resolution, the Directors are to be regarded as not having duly called the general meeting unless the notice of the general meeting includes the text of the resolution and specifies the intention to propose the resolution as a special resolution.
Voting by Poll
Save as provided under the Listing Rules, resolutions put to vote at the general meetings of the Company (other than procedural matters) are taken by poll. Procedures regarding the conduct of the poll are explained to the Shareholders at the commencement of each general meeting, and questions from Shareholders regarding the voting procedures are answered. The poll results are posted on the respective websites of the Company and the Hong Kong Stock Exchange on the same day of the poll.
Procedures for Shareholders Sending Enquiries to the Board
Shareholders should direct their questions about their shareholdings to the Company's registrar and whose details are as follows:
Computershare Hong Kong Investor Services Limited
Shops 1712–1716, 17/F., Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong
Tel: (852) 2862 8628
Fax: (852) 2865 0990
The Company Secretary and the Capital Markets & Investor Relations Department of the Company also handle both telephone and written enquiries from Shareholders from time to time. Shareholders' enquiries and concerns will be forwarded to the Board and/or relevant Board Committees of the Company, where appropriate, to answer the Shareholders' questions. For Shareholders and investors' enquiries, the contact information is set out in the "Useful Information for Investors" section of this annual report.
Other Procedures for Shareholders' Proposals
The details of the following procedures are available at the Company's website at www.chinapower.hk under the "Corporate Governance" section for review.
- Procedures for Shareholders making proposals at general meetings
- Procedures for Shareholders to nominate a person to stand for election as a Director
Constitutional Documents
The Company's constitutional documents have been posted on the Company's website at www.chinapower.hk under the "Corporate Governance" section. During the year under review, there was no change in the Company's articles of association.
