The Company is a core subsidiary of SPIC, the ultimate holding company, for conventional energy business and has been an ultimate platform for its conventional energy business and assets reorganization and also a leader of its technological innovation and institutional innovation. The Company is proactively implementing its transformation and development strategy with commitment to the development of clean energy, and the construction to an integrated energy company.
In January 2016, the Company entered into the letter of intent with SPIC, pursuant to which the Company intended to acquire 100% equity interest in Henan Electric power under the SPIC. Currently, the audit and evaluation on this project are progressing in an orderly manner. The Company will carry out the relevant acquisition works depending on the market conditions and the interest level of the investors, meanwhile will continue to promote the injection of quality clean energy assets from the parent company. The assets injection mentioned above fully reflects the strong support that has been given to the Company by SPIC.
SPIC is currently the only one integrated energy group which simultaneously owns coal-fired power, hydropower, nuclear power and renewable energy resources in the PRC with an installed capacity reached 117GW by the end of 2016. In the future, the Company will realize a leaping growth in development and enhance its competitiveness through integration of injected projects and optimization of asset structures.
In 2016, the power plants of the Group involved in direct power supply transactions are located in Anhui, Henan, Hubei and Shanxi with a total direct transacted electricity of 10,823,412MWh. The average agreed tariff was reduced by RMB33/MWh as compared with the benchmark tariff.
In 2016, the domestic coal industry has strictly enforced the elimination overcapacity policies of government, and the entire industry exceeded targets set for the full year. Coal price in China surged in the second half of the year as a result, which largely eroded profit margin in the coal-fire power segment.
In 2017, the policies on elimination of overcapacity in domestic coal industry will continue to affect the supply and demand of the market. Having considered factors such as the change in pattern of coal consumption, the change of imported coal quantity and the state policy to stabilize coal price, the Company estimates that the coal price in 2017 will remain stable as compared with that in 2016.
According to the forecast of China Electricity Council, the electricity consumption will remain a slow speed growth and the national total electricity consumption is expected to increase in 2017 as compared with the previous year. While China government have introduced policies on controlling the installed capacity growth of coal-fire power, the installed capacity for the year continued to rise by 110 million kilowatts, according to China Electricity Council. Generally, the situation of supply and demand for power remains much challenging in 2017, and the Group is under a greater pressure in boosting utilization hours of coal-fire power generation.
In 2016, the capital expenditure of the Group for the year was RMB7,630,700,000. Among which, the capital expenditure for the coal-fired power segment was RMB3,613,547,000, which was mainly used for the construction of new power generating units and technical upgrade for the existing power generating units. While the capital expenditure for the clean energy segment was RMB3,963,454,000, which was mainly used for the construction of new power plants and power stations.
In 2017, the Group has planned a capital expenditure of approximately RMB8,197,000,000. Of which, the expected expenditures for coal-fired power segment and clean energy segment will be approximately RMB3,567,000,000 and approximately RMB4,630,000,000 respectively, which will mainly use for the construction of new power generating units and technical upgrade for the existing power generating units.
The dividend policy of the Company has fully taken into account of the cash flows and development needs of the Group and the dividend payout ratio of the peers in the industry.
The Board recommended the dividend payment of RMB0.160 per ordinary share for the year 2016, and dividend payout ratio was 50%. Apart from our commitment of a dividend payout ratio of not less than 25%, we will continue to take the above mentioned factors into full consideration when formulating our dividend policy in the future.