FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PAGE 1 OF 30 PAGES
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
November, 2002
Huaneng Power International, Inc.
West Wing, Building C, Tianyin Mansion
No. 2C Fuxingmennan Street
Xicheng District
Beijing, 100031 PRC
This Form 6-K consists of:
A circular of Huaneng Power International on November 22, 2002, in
English about a connected transaction.
A circular of Huaneng Power International on November 22, 2002, in
English about regarding an on-going connected transaction.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
under- signed, thereunto duly authorized.
HUANENG POWER INTERNATIONAL, INC.
By /s/ Wang Xiaosong
-----------------------
Name:Wang Xiaosong
Title:Vice Chairman
Date: November 26, 2002
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ACTION
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If you are in any doubt as to any aspect of this circular or as to the action
to be taken, you should consult your stockbroker, bank manager, solicitor,
professional accountant or other professional adviser.
If you have sold or transferred all your shares in Huaneng Power
International, Inc., you should at once hand this circular and the
accompanying form of proxy to the purchaser or transferee or to the bank,
stockbroker or other agent through whom the sale or transfer was effected for
transmission to the purchaser or transferee.
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this circular, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this circular.
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[GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(A Sino-foreign joint stock limited company incorporated in the
People's Republic of China)
CONNECTED TRANSACTION
Financial Adviser to Huaneng Power International, Inc.
[GRAPHIC OMITTED] JPMorgan logo
J.P. Morgan Securities (Asia Pacific) Limited
Independent Financial Adviser to the Independent Directors
[GRAPHIC OMITTED] CLSA logo
CLSA Equity Capital Markets Limited
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A letter from the Board of Huaneng Power International, Inc. (the "Company")
is set out on pages 3 to 13 of this circular. A letter from the Independent
Directors is set out on page 14 of this circular.
A notice convening an Extraordinary General Meeting of the Company to be held
at 9 a.m. on 31st December 2002 at Beijing International Convention Centre at
No. 8 Beichen East Road, Chaoyang District, Beijing, the People's Republic of
China has already been sent to the Shareholders of the Company on 16th
November 2002 and is set out on pages 25 to 27 of this circular. Whether or
not you are able to attend the meeting, you are requested to complete and
return the enclosed reply slip and form of proxy in accordance with the
instructions printed thereon as soon as possible and in any event the form of
proxy should be returned not less than 24 hours before the time appointed for
holding such meeting.
Completion and return of the form of proxy shall not preclude you from
attending and voting in person at the meeting or at any adjourned meeting
should you so wish.
22nd November 2002
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CONTENTS
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Page
Definitions ................................................................ 1
Letter from the Board
1. Introduction ................................................... 3
2. Transfer Agreement ............................................. 4
3. Reasons for the Acquisition and Pricing Factors ................ 6
4. Information Regarding the Power Plants ......................... 7
5. Selected Financial Information of the Target Power Plants ..... 10
6. Connected Transaction under Shanghai Listing Rules ............ 11
7. The EGM ....................................................... 12
8. Recommendation ................................................ 12
9. Other Information ............................................ 13
Letter from the Independent Directors ..................................... 14
Letter from CLSA Equity Capital Markets Limited ........................... 15
Appendix I -- General Information ......................................... 23
Notice of Extraordinary General Meeting ................................... 25
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DEFINITIONS
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In this document, unless the context otherwise requires, the following
expressions have the following meanings:
"Acquisition" the purchase by the Company of the
Huaneng Group Interest;
"Arthur Andersen o Hua Qiang" ArthurAndersen o Hua Qiang Certified
Public Accountants, PRC qualified
accountants;
"Associate" the meaning ascribed to it in the Hong
Kong Listing Rules;
"Closing" the closing of the Acquisition;
"CLSA" CLSA Equity Capital Markets Limited;
"Company" Huaneng Power International, Inc.;
"Directors" the directors of the Company;
"EGM" an extraordinary general meeting of
the Company shareholders to be held
for shareholders of the Company to
consider and approve the Acquisition;
"HIPDC" Huaneng International Power
Development Corporation;
"Hong Kong Listing Rules" the Rules Governing the Listing of
Securities on the Hong Kong Stock
Exchange;
"Huaneng Group" China Huaneng Group;
"Huaneng Group Interest" the 30% equity
interest in Shanghai Shidongkou First
Power Plant and 5% equity interest in
Jiangsu Taicang Power Plant, which are
expected to be transferred to Huaneng
Group pursuant to China's electricity
industry restructuring plan and to be
sold to the Company;
"Independent Directors" the independent directors of the
Company, who are invited to advise the
Independent Shareholders in connection
with the Acquisition;
"Independent Shareholders" shareholders of the Company other than
HIPDC and its Associates;
"Jiangsu Taicang Power Plant" Suzhou Industrial Park Huaneng Power
Limited Liability Company, a company
with limited liability incorporated in
the PRC;
"JPMorgan" J.P. Morgan Securities (Asia Pacific)
Limited;
"Latest Practicable Date" publication of this circular for
ascertaining certain information
referred to in this circular;
"PRC" the People's Republic of China;
"Previous Acquisition" the acquisition
by the Company of, amongst other
things, certain interests in the
Target Power Plants, details of which
were set out in the Company's
announcement dated 9th May 2002 and
circular dated 13th May 2002;
"RMB" the lawful currency of the PRC;
"SDI Ordinance" Securities (Disclosure of Interests)
Ordinance (Chapter 396 of the Laws of
Hong Kong);
"Shanghai Listing Rules" The Listing Rules of Shanghai Stock
Exchange;
"Shanghai Shidongkou First Shanghai Shidongkou
Power Limited Company, a company with
limited liability incorporated in the
PRC; Power Plant"
"Stock Exchange" The Stock Exchange of Hong Kong
Limited;
"Target Power Plant s" Shanghai Shidongkou First Power Plant
and Jiangsu Taicang Power Plant;
"Transfer Agreement" the transfer agreement
dated 15th November 2002 entered into
by the Company and Huaneng Group
relating to the purchase of the
Huaneng Group Interest; and
"Zhonghua" Zhonghua Financial and Accounting
Consulting Company, a qualified assets
appraisal firm in China.
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LETTER FROM THE BOARD
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[GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(A Sino-foreign joint stock limited company incorporated
in the People's Republic of China)
Directors: Legal Address:
Li Xiaopeng Xu Zujian West Wing, Building C,
Wang Xiaosong Liu Shuyuan Tianyin Mansion,
Ye Daji Bai Changnian No. 2C Fuxingmennan Street,
Chen Baoliang Shen Weibing Xicheng District,
Huang Long Shen Zongmin Beijing 100031,
Hu Jianmin People's Republic of China.
Wu Dawei
Liu Guoyue
Wang Defang
Shan Qunying
Yang Shengming
Independent Directors:
Gao Zongze
Zheng Jianchao
Qian Zhongwei
22nd November 2002
To the Shareholders
Dear Sir or Madam,
CONNECTED TRANSACTION
1. INTRODUCTION
On 16th November 2002, the Board of Directors announced that the Company
had entered into a Transfer Agreement with Huaneng Group, pursuant to which
the Company agreed to acquire the Huaneng Group Interest for a total
consideration of RMB415 million. The Acquisition is expected to be funded by
the Company's internal cash reserves. The purchase price for the Acquisition
is based on normal commercial terms and was determined through arm's length
negotiation between the Company and Huaneng Group.
Huaneng Group is an indirect controlling shareholder of the Company,
holding a 51.98% interest in HIPDC. As of the Latest Practicable Date, HIPDC
held 2,554,840,000 domestic shares in the Company, representing 42.58% of the
total issued share capital (domestic shares and H Shares) of the Company.
Accordingly, the Acquisition contemplated by the Transfer Agreement
constitutes a connected transaction for the Company within the meaning of the
Hong Kong Listing Rules, and is subject to approval by the Independent
Shareholders.
The Company and the Independent Directors have reviewed the Acquisition.
The Company has appointed JPMorgan as the financial adviser in connection with
the Acquisition. The Company has also appointed CLSA as the independent
financial adviser to provide opinions to the Independent Directors in
connection with the Acquisition.
Please refer to the Company's announcement dated 9th May 2002 and
circular dated 13th May 2002 regarding the Previous Acquisition. The
consideration in respect of the Previous Acquisition was RMB2,050 million.
The purpose of this circular is to provide you with further information
in relation to the Acquisition and the Transfer Agreement, and to set out the
recommendation of the Independent Directors and the Notice of the EGM.
2. TRANSFER AGREEMENT
The Transfer Agreement was approved by the Directors at the board
meeting on 15th November 2002 and signed by Huaneng Group and the Company on
that day.
Date: 15th November 2002
Parties: Seller: Huaneng Group
Purchaser: the Company
Huaneng Group Interest
to be acquired: (i) Huaneng Group Interest in the
registered capital of Shanghai
Shidongkou First Power Plant; and
(ii) Huaneng Group Interest in the
registered capital of Jiangsu
Taicang Power Plant.
Consideration: The consideration for the Acquisition is
RMB415 million payable in cash on the
Closing date. The purchase price for the
Acquisition was determined on the basis
of normal commercial terms and arm's
length negotiation between the parties
thereto. The Acquisition, when aggregated
with the Previous Acquisition, does not
constitute a disclosable transaction
under the Hong Kong Listing Rules.
Conditions: Closing is subject to the satisfaction or
waiver of the following conditions:
(1) Conditions which need to be satisfied
or waived (except for condition (a)) by
both parties:
(a) Huaneng Group has obtained the
legal ownership of the Huaneng
Group Interest;
(b) CLSA, the independent financial
adviser to the Independent
Directors, has advised the
Independent Directors that the
terms and conditions of the
transactions contemplated under
the Acquisition are fair and
reasonable so far as the
Independent Shareholders are
concerned;
(c) the Independent Directors
recommended that the shareholders
vote in favour of the Acquisition
and the Transfer Agreement;
(d) the Transfer Agreement and the
Acquisition have been approved and
adopted by the Independent
Shareholders;
(e) the relevant PRC government
agencies have no objection to the
Acquisition; and
(f) the Company has obtained all
necessary government approvals on
the Transfer Agreement and the
Acquisition.
(2) Conditions which the Company may
waive under the Transfer Agreement:
(a) representations and warranties of
Huaneng Group in the Transfer
Agreement are true and complete in
all material respects; and
(b) Huaneng Group has fulfilled in all
material respects its obligations
under the Transfer Agreement.
(3) Agreement:
(a) representations and warranties of
the Company in the Transfer
Agreement are true and complete in
all material respects; and
(b) the Company has fulfilled in all
material respects its obligations
under the Transfer Agreement.
Completion: Closing shall take place on the day
agreed upon by both parties, within 30
days after the conditions have been
satisfied or waived.
3. REASONS FOR THE ACQUISITION AND PRICING FACTORS
One of the Company's development strategies is placing equal emphasis on
acquiring existing power plants and developing new power plants. Capturing a
greater market share in the coastal regions with increasing demand for power
will enable the Company to continue its earnings growth. The Acquisition will
further increase the Company's market share in Eastern China, a region with
high economic growth and strong demand for power, which is consistent with the
Company's long-term development strategy.
After the completion of the Acquisition, the Company will gain 390 MW of
additional net generation capacity, and thus its total net generation capacity
will increase to 14,285 MW.
All generation units of the Target Power Plants under the Acquisition
are coal-fired units made in the PRC. The average availability factor of the
Target Power Plants in 2001 was 93.8%, slightly higher than the Company's
level of 92.18% in 2001. The average utilization hours in 2001 were 6,068
hours for Shanghai Shidongkou First Power Plant and 5,781 hours for Jiangsu
Taicang Power Plant, which were higher than the Company's average actual
utilization hours of 5,166 hours in 2001. The total on-grid output of the
Target Power Plants in 2001 reached approximately 10.2 billion kWh, out of
which the Huaneng Group Interest accounted for approximately 2.2 billion kWh,
which is equivalent to 4.1% of the 54.1 billion kWh total on-grid output of
the Company in 2001.
The Company believes that the Acquisition will enhance its effective
management of the Target Power Plants. After the completion of the
Acquisition, the Shanghai Shidongkou First Power Plant will be wholly-owned by
the Company and the Company's interest in the Jiangsu Taicang Power Plant will
be increased to 75%. Further, according to the unaudited financial
information, the total net profit after taxation of the Shanghai Shidongkou
First Power Plant and the Jiangsu Taicang Power Plant for the 9 month period
ending on 30th September 2002 is RMB101.45 million and RMB83.42 million,
respectively. Profit attributable to the Huaneng Group Interest in respect of
the Shanghai Shidongkou First Power Plant and the Jiangsu Taicang Power Plant
is RMB30.44 million and RMB4.17 million, respectively. The Acquisition will be
beneficial for increasing the Company's profits in the future.
The Acquisition price has been determined through arm's length
negotiations between the two parties and their respective financial advisers,
taking into account various factors, including the market environments, the
operating conditions of the Target Power Plants, the Target Power Plants'
earnings potentials and their abilities to generate cash flow. The Company has
also considered all the appraisal reports provided by Zhonghua. According to
the appraisal reports provided by Zhonghua, the value of the Huaneng Group
Interest is RMB413 million. According to the financial statements for the year
2001 of each Target Power Plant audited by Arthur Andersen o Hua Qiang, the
net assets value (book value) of the Shanghai Shidongkou First Power Plant and
the Jiangsu Taicang Power Plant attributable to the Huaneng Group Interest is
RMB128.9 million and RMB34.9 million, respectively. The consideration is 153%
higher than such net assets values in total. The book value reflected the
comparatively low amount of the historical construction costs and has taken
into account depreciations of those assets. Whereas, the consideration has
reflected the value of the Target Power Plants which can be generated through
their future operation.
The board of Directors believes that the Acquisition price and terms are
fair and reasonable to the Company and its shareholders. This transaction is
consistent with the Company's long-term business strategy and will benefit the
Company and its shareholders.
4. INFORMATION REGARDING THE POWER PLANTS
(1) Overview of the provinces and municipality where the Power Plants
are located
The Target Power Plants are located in the affluent Eastern China
region. The Eastern China Power Grid is one of the largest
inter-provincial grids in the PRC in terms of installed capacity. By the
end of 2000, the installed capacity of the three provinces and one
municipality in Eastern China (Jiangsu Province, Zhejiang Province,
Anhui Province and Shanghai Municipality) reached approximately 56,663
MW. In 2000, the power consumption of these three provinces and one
municipality reached approximately 260.8 billion kWh, representing an
increase of 14.7% over that in 1999. A summary of the power market
conditions in Shanghai Municipality and Jiangsu Province where the
Target Power Plants are located is as follows:
Shanghai Municipality
Shanghai Municipality holds the leading position in China's
industrial, business and financial services sectors. The
development of the Pudong Development Area during the past ten
years has further strengthened Shanghai's leading position in the
Yangtse River delta. In 2000, Shanghai had a population of
approximately 16.74 million. In 2001, Shanghai's GDP reached
RMB495.1 billion and the average annual GDP growth rate over the
past ten years from 1992 to 2001 has exceeded 10%.
By the end of 2000, the installed capacity in Shanghai
Municipality reached approximately 10,604 MW. In 2000, the power
consumption of Shanghai Municipality reached approximately 55.94
billion kWh, representing an increase of 11.6% over that in 1999.
Jiangsu Province
Jiangsu Province is one of the most affluent provinces in the PRC.
By the end of 2000, Jiangsu Province had a population of approximately
74.38 million in an area of 102,600 sq.km., and it is the most densely
populated province in the PRC. In 2001, Jiangsu Province's GDP reached
RMB951.5 billion and it maintains being one of the highest annual growth
rates of Gross Domestic Product in the PRC over the past ten years.
By the end of year 2000, the installed capacity in Jiangsu
Province reached approximately 19,252 MW. In 2000, the power consumption
in Jiangsu Province reached approximately 97.13 billion kWh,
representing an increase of 14.6% over that in 1999.
(2) Description of the Target Power Plants
(The power tariffs mentioned below do not include value-added tax)
Shanghai Shidongkou First Power Plant
Shanghai Shidongkou First Power Plant is located in the northern
region of the Shanghai Power Grid. It has a total installed capacity of
1,200 MW and was a major energy infrastructure construction project of
the PRC during the Seventh Five Year Plan period. It is the first
harbour side power plant which has an installed capacity exceeding 1,000
MW within the Shanghai Power Grid. The plant comprises 4 X 300 MW
domestic coal-fired generation units, which commenced operation in
February 1988, December 1988, September 1989 and May 1990 respectively,
and has an economic life of 15 years. Details of the analysis of the
economic life of the power plant are set out in the 2001 financial
statements audited by Arthur Andersen o Hua Qiang. At present, the four
generation units are operating normally. The plant generated a total
volume of electricity of 7.28 billion kWh in the year 2001 and its
internal consumption rate was 5.9%. The power plant's power tariff was
determined in accordance with the approval granted by the Shanghai
Municipal Pricing Bureau.
Huaneng Group originally owned 70% interest in Shanghai Shidongkou
First Power Plant. According to a transfer agreement between the Company
and Huaneng Group dated 9th May 2002, Huaneng Group transferred its 70%
interest in Shanghai Shidongkou First Power Plant to the Company (for
details, please see the announcement made by the Company on 10th May
2002 and the circular issued by the Company on 13th May 2002). Such
transfer was completed on 1st July 2002.
The remaining 30% interest is held by Shanghai Municipal Power
Corporation which is expected to be transferred to Huaneng Group
pursuant to China's electricity industry restructuring plan. Upon
Closing, Shanghai Shidongkou First Power Plant will be wholly owned by
the Company. According to the Company Law of the PRC, except for those
wholly owned by the State, limited liability companies shall have two or
more than two shareholders. As such, after completion of the
Acquisition, the Company will cancel Shanghai Shidongkou First Power
Plant's independent legal person status.
Jiangsu Taicang Power Plant
Jiangsu Taicang Power Plant is located in the most affluent area
in the vicinity of Suzhou, Wuxi and Changzhou, and has a total installed
capacity of 600 MW. Jiangsu Taicang Power Plant is an ancillary facility
of the China-Singapore Suzhou Industrial Park. Jiangsu Taicang Power
Plant comprises 2 X 300 MW domestic coal-fired generation units, which
commenced operation in December 1999 and April 2000 respectively, and
has an economic life of 15 years. Details of the analysis of the
economic life of the power plant are set out in the 2001 financial
statements audited by Arthur Andersen o Hua Qiang. At present, the two
generation units are operating normally. The plant generated a total
volume of electricity of 3.47 billion kWh in year 2001 and its internal
consumption rate was 4.8%. The power plant's power tariff was determined
in accordance with the approval given by the Jiangsu Provincial Pricing
Bureau.
Huaneng Group originally owned 70% interest in Jiangsu Taicang
Power Plant. According to a transfer agreement between the Company and
Huaneng Group dated 9th May 2002, Huaneng Group transferred its 70%
interest in Taicang Power Plant to the Company (for details, please see
the announcement made by the Company on 10th May 2002 and the circular
issued by the Company on 13th May 2002). Such transfer was completed on
1st July 2002. At present, the other owners of Jiangsu Taicang Power
Plant are Suzhou Industrial Park Company Limited, China-Singapore Suzhou
Industrial Park Development Company, Jiangsu Provincial Power Company,
Jiangsu International Trust and Asset Management Group Limited and
Taicang Energy Development Company, which are holding 10%, 6%, 5%, 5%
and 4% interest, respectively. The 5% equity interest owned by Jiangsu
Provincial Power Company mentioned above is expected to be transferred
to Huaneng Group pursuant to China's electricity industry restructuring
plan.
Upon Closing, the Company will hold 75% interest in Jiangsu
Taicang Power Plant.
The following table sets out certain operating data of the Target
Power Plants for 2001:
Shanghai Jiangsu
Shidongkou First Taicang
Power Plant Power Plant
Installed capacity (MW) 1,200 600
Generation volume (billion kWh) 7.28 3.47
Utilisation hours (hours) 6,068 5,781
Availability factor (%) 92.3% 96.8%
Internal consumption rate (%) 5.9% 4.8%
Weighted average on-grid power tariff (RMB/MWh) 224 287
Coal consumption rate for power sold (grams/kWh) 358 338
Unit fuel cost for power sold (RMB/MWh) 106 101
5. SELECTED FINANCIAL INFORMATION OF THE TARGET POWER PLANTS
The following is a summary of the financial information of the Target
Power Plants for the year ended 31st December 2001. The financial information
has been extracted from the financial statements of the Target Power Plants
audited by Arthur Andersen o Hua Qiang:
Shanghai Jiangsu
Shidongkou First Taicang
Power Plant Power Plant
(RMB in millions, except percentage)
Total assets: 1,264.9 2,507.4
Cash and bank deposits 127.3 91.7
Total accounts receivable 171.6 222.3
Total liabilities: 835.2 1,809.0
Borrowings 790.1 1,660.7
Net assets 429.7 698.4
Revenue from principal business 1,532.6 949.2
Depreciation cost 202.2 168.9
Profit from principal business 316.7 356.4
Applicable tax rate 33% 33%
Net profit: 130.4 169.0
Huaneng Group Interest 30% 5%
Net assets attributable to
Huaneng Group Interest
according to the above ratio 128.9 34.9
The audited financial statements of the Power Plants have been prepared
based on the applicable accounting standards and regulations in the PRC ("PRC
GAAP"), which differs in certain material respects from International
Financial Reporting Standards ("IAS"). The Directors estimate that the
significant unaudited IAS adjustments to the income statement would include
the following:
(a) Under PRC GAAP, the operating costs and interest expenses incurred
during the six-month trial production period were capitalized as
part of the construction costs of the generators constructed in
previous years. Depreciation was provided starting from the month
following the completion of the trial production period. Under
IAS, depreciation should be provided when the generators were
ready for use (i.e. upon completion) and all expenses incurred
(including interest expenses) should be charged to the income
statement thereafter. For the year ended 31st December 2001,
depreciation expense charged to the income statement under IAS was
lower than that charged under PRC GAAP.
(b) The Power Plants have sold staff quarters to its employees at
preferential prices. The cost of such housing benefits represented
the difference between the net book value of the staff quarters
sold and the proceeds collected from the employees. Under PRC
GAAP, in accordance with the relevant regulations issued by the
Ministry of Finance, costs relating to a housing benefits scheme
approved by the government before 6th September 2000 were charged
to opening retained earnings as of 1st January 2001, while those
approved after 6th September 2000 were charged to non-operating
expenses as incurred. Under IAS, the costs are recognised on a
straight-line basis over the estimated remaining average service
life of the employees. Under PRC GAAP, a substantial portion of
the cost of housing benefits were charged to opening retained
earnings as of 1st January 2001, whereas under IAS such costs were
amortised in 2001. Accordingly, for the year ended 31st December
2001, the cost of housing benefits charged to the income statement
under IAS was higher than that charged under PRC GAAP.
(c) Under PRC GAAP, the impact of deferred taxation is not recorded.
Under IAS, deferred taxation is provided, using the liability
method, on all significant timing differences. For the year ended
31st December 2001, taxation charged to the income statement under
IAS was more than that charged under PRC GAAP.
Reconciliation between PRC GAAP and IAS (for the year ended 31st
December 2001):
Shanghai Jiangsu
Shidongkou First Taicang
Power Plant Power Plant Total
(RMB in millions)
Net profit under PRC GAAP 130.4 169.0 299.4
(a) Depreciation charges 36.1 -- 36.1
(b) Housing benefits (0.6) (5.4) (6.0)
(c) Deferred tax charges (0.4) (4.2) (4.6)
----- ----- -----
Net profit under IAS 165.5 159.4 324.9
===== ===== =====
Taking into consideration the major IAS adjustments, the unaudited net
profit after taxation under IAS of Shanghai Shidongkou First Power Plant and
Jiangsu Taicang Power Plant for the year ended 31st December 2001 were
estimated to be approximately RMB165.5 million and RMB159.4 million
respectively. The aggregate amount of the unaudited net profit after taxation
under IAS of the Target Power Plants for the year ended 31st December 2001 was
estimated to be approximately RMB324.9 million, representing approximately 9%
increase in the aggregate amount of net profit after taxation under PRC GAAP.
6. CONNECTED TRANSACTION UNDER SHANGHAI LISTING RULES
As the domestic public shares of the Company are listed on the Shanghai
Stock Exchange, the Company is required, in addition to the Hong Kong Listing
Rules, to comply with the Shanghai Listing Rules.
The Acquisition constitutes a connected transaction under the Shanghai
Listing Rules, which shall be subject to the approval of the Company's
shareholders. The connected persons (as defined under the Shanghai Listing
Rules) shall abstain from voting on resolutions related to the Shanghai
Connected Transactions.
In accordance with Rule 7.3.11(9) and Rule 7.3.12 of the Shanghai
Listing Rules, the Company has appointed Beijing H&J Vanguard Consulting
Limited ("Hejun") as the PRC independent financial advisor in respect of the
Acquisition.
Upon careful and necessary enquiry, Hejun is of the view that the
Acquisition has met the relevant legal requirements under the Company Law of
the PRC, the Securities Law of the PRC and the Shanghai Listing Rules (as
amended in 2001) and the requirements of the articles of association of the
Company. Hejun is of the view that the relevant legal procedures and
disclosure requirements have been followed and met, reflecting the principles
of equality, justice and reasonableness; and the Acquisition will not in any
way affect the interests of either the Company or the non-connected
shareholders.
The Independent Directors are of the view that (1) the board of
Directors has met the relevant requirements of Shanghai Listing Rules and the
articles of association of the Company regarding approval of the relevant
resolutions of the Acquisition; and (2) the Acquisition is fair to the
Company's shareholders.
7. THE EGM
The Company will convene an EGM at 9 a.m. on 31st December 2002 at
Beijing International Convention Centre at No. 8 Beichen East Road, Chaoyang
District, Beijing, PRC to consider the approval of the Acquisition (including
the Transfer Agreement). Huaneng Group and its Associates will abstain from
voting in the EGM in respect of the ordinary resolution to approve the
Acquisition (including the Transfer Agreement). Notice of the EGM is set out
on pages 25 to 27 in this circular.
A reply slip and a form of proxy for use by the Independent Shareholders
at the Extraordinary General Meeting is enclosed with this circular. Whether
or not you intend to attend the meeting in person, you are requested to
complete and return the reply slip in accordance with the instructions printed
thereon to the registered office of the Company at West Wing, Building C,
Tianyin Mansion, 2C, Fuxingmennan Street, Xichang District, Beijing, PRC as
soon as possible but in any event by 11th December 2002. The enclosed form of
proxy should be completed and returned to the Company's H Share Registrar,
Hong Kong Registrars Limited, at Room 1901-5, 19/F, Hopewell Centre, 183
Queen's Road East, Hong Kong or the registered office of the Company in
accordance with the instructions printed thereon as soon as practicable and in
any event by not later than 24 hours before the time appointed for the holding
of the EGM. Completion and return of the form of proxy will not preclude you
from attending and voting in person at the meeting should you so wish.
8. RECOMMENDATION
According to the requirements of the Hong Kong Listing Rules, the
Independent Directors will advise the Independent Shareholders in connection
with the Acquisition (including the Transfer Agreement). CLSA has been
appointed as an independent financial adviser to advise the Independent
Directors with respect to the fairness and reasonableness of the Acquisition
(including the Transfer Agreement).
The Independent Directors, having taken into account the advice of CLSA,
consider the terms of the Transfer Agreement to be fair and reasonable insofar
as the Independent Shareholders are concerned and consider the transaction
contemplated by the Transfer Agreement to be in the interests of the Company
and its shareholders. Accordingly, the Independent Directors recommend that
the Independent Shareholders vote in favour of the resolutions to approve the
Acquisition and the Transfer Agreement at the Extraordinary General Meeting.
9. OTHER INFORMATION
Your attention is also drawn to the letter from the Independent
Directors and the letter from CLSA, which sets out its advice to the
Independent Directors, and the additional information set out in the
appendices of this circular.
Yours faithfully,
For and on behalf of
Huaneng Power International, Inc.
Wang Xiaosong
Vice Chairman
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LETTER FROM THE INDEPENDENT DIRECTORS
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[GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(A Sino-foreign joint stock limited company incorporated in the
People's Republic of China)
Registered office:
West Wing, Building C
Tianyin Mansion
2C Fuxingmennan Street
Xicheng District
Beijing 100031
The People's Republic of China
22nd November 2002
To the Independent Shareholders
Dear Sir or Madam,
CONNECTED TRANSACTION
We, the Independent Directors of Huaneng Power International, Inc., are
advising the Independent Shareholders in connection with the Acquisition,
details of which are set out in the letter from the Board contained in the
circular ("Circular") of the Company to the Shareholders dated 22nd November
2002, of which this letter forms a part. Terms defined in the Circular shall
have the same meanings when used herein unless the context otherwise requires.
Under the Hong Kong Listing Rules, the Acquisition and the Transfer
Agreement constitute connected transactions for the Company. Accordingly, the
Acquisition and the Transfer Agreement will require the approval of the
Independent Shareholders at the Extraordinary General Meeting.
We wish to draw your attention to the letter of advice from CLSA set out
on pages 15 to 22 of the Circular. We have discussed the letter and the
opinion contained in it with CLSA.
We have also considered the opinion of Beijing H&J Vanguard Consulting
Limited with respect to the Acquisition.
Having considered, inter alia, the factors and reasons considered by,
and the opinion of, CLSA, as stated in its aforementioned letter, we consider
the Acquisition and the Transfer Agreement to be fair and reasonable so far as
the Independent Shareholders are concerned. Accordingly, we recommend that the
Independent Shareholders vote in favour of the ordinary resolutions in the
Notice of Extraordinary General Meeting set out at the end of the Circular to
be proposed at the Extraordinary General Meeting to be held on 31st December
2002 and thereby approve the Acquisition and the Transfer Agreement.
Yours faithfully,
Gao Zongze Zheng Jianchao Qian Zhongwei
Independent Directors
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LETTER FROM CLSA EQUITY CAPITAL MARKETS LIMITED
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[GRAPHIC OMITTED]
CLSA logo
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ASIA.LATIN AMERICA.EMERGING EUROPE.MIDDLE EAST.AFRICA
22nd November 2002
To the Independent Directors of
Huaneng Power International, Inc.
Dear Sirs,
CONNECTED TRANSACTION
We refer to our engagement under which CLSA Equity Capital Markets
Limited ("CLSA") has been appointed to advise the Independent Directors in
connection with the terms of the Acquisition. Pursuant to the Listing Rules,
the Acquisition constitutes a connected transaction for the Company and is
subject to the approval of the Independent Shareholders at a general meeting.
Details of the Acquisition are set out in the letter from the Board included
in the circular dated 22nd November 2002 (the "Circular") issued by the
Company to its shareholders ("Shareholders" and individually each a
"Shareholder"). This letter has been prepared for inclusion in the Circular
and terms used in this letter have the same meanings as defined in the
Circular unless the context otherwise requires.
In our capacity as independent financial adviser to the Independent
Directors, our role is to give an independent opinion as to whether the terms
of the Acquisition are fair and reasonable insofar as the Independent
Shareholders are concerned. Our opinion letter to the Independent Directors
has been prepared and delivered in accordance with the requirements of the
Listing Rules for the purposes of assisting the Independent Directors in their
duties to evaluate the terms of the Acquisition and for no other reason. The
assumptions made and the analysis conducted in our letter were undertaken in
accordance with the customs and practices employed in similar transactions in
Hong Kong.
In formulating our opinion, we have relied on the information, opinions
and facts supplied, and representations made to us, by the Directors and
representatives of the Company (including those contained or referred to in
the Circular) and have assumed that all such information, opinions, facts and
representations, which have been provided by the Directors and such
representatives, and for which they are wholly responsible, are true and
accurate in all respects. We have also relied on certain information available
to the public and we have assumed such information to be accurate and
reliable, and we have not independently verified the accuracy of such
information. Further, we have relied on the representations of the Directors
that they have made all reasonable inquiries, and to the best of their
knowledge and belief, that there are no other facts, the omission of which
would make any statement contained in the Circular untrue or misleading. We
have also assumed that statements and representations made or referred to in
the Circular were accurate at the time they were made and continue to be
accurate at the date of despatch of the Circular.
CLSA Equity Capital Markets Limited
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18/F, One Pacific Place, 88 QUeensway, Hong Kong TeL (852) 2600 8888
Fax: (852) 2877 0110 Telex: 81678 CLSA HX www.clsa.com
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LETTER FROM CLSA EQUITY CAPITAL MARKETS LIMITED
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We consider that we have reviewed sufficient information to enable us to
reach an informed view and to justify relying on the accuracy of the
information provided in the Circular as well as to provide a reasonable basis
for our advice. We have not, however, made any independent evaluation or
appraisal of, nor have we conducted any form of independent investigation
into, the business affairs or assets and liabilities of the Target Power
Plants or the Company. Additionally, we did not conduct any physical
inspection of the properties or facilities of the Target Power Plants or the
Company. It is not within our terms of reference to comment on the commercial
feasibility of the Acquisition, which remains the responsibility of the
Directors. As the independent financial adviser to the Independent Directors,
we have not been involved in the negotiations in respect of the terms of the
Acquisition. Our opinion with regard to the terms thereof has been made on the
assumption that all obligations to be performed by each of the parties to the
Acquisition will be fully performed in accordance with the terms thereof.
Our opinion is necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
publicly available to us as of the date of the opinion. We have no obligation
to update this opinion to take into account events occurring after the date
that this opinion is delivered to the Independent Directors. As a result,
circumstances could develop prior to completion of the Acquisition that, if
known at the time we rendered our opinion, would have altered our opinion.
CLSA is a registered investment adviser under the Securities Ordinance
(Chapter 333 of the laws of Hong Kong) and together with its affiliates
provide a full range of investment banking and broking services, which, in the
course of normal trading activities, may from time to time effect transactions
and hold securities, including derivative securities, of the Company for our
own account and the accounts of customers. We will receive a fee from the
Company for rendering this opinion. The Company has also agreed to indemnify
CLSA and certain related persons against certain liabilities and expenses in
connection with this engagement.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In arriving at our opinion with regard to the terms of the Acquisition,
we have considered the principal factors and reasons set out below. None of
these factors or reasons considered by us was assigned a greater significance
than any other. We did not form a conclusion as to whether any individual
factors or reasons, considered in isolation, supported or failed to support
our opinion, although we are not aware of any matter which would have rendered
our opinion differently by the results of our analyses of any such individual
factors or reasons. Rather, in reaching our conclusion, we have considered the
results of the analyses in light of each other and ultimately reached our
opinion based on the results of all analyses taken as a whole.
1. The Transfer Agreement
On 16th November 2002, the Directors announced that the Company had
entered into the Transfer Agreement, pursuant to which, the Company agreed to
acquire from Huaneng Group its 30% interest in Shanghai Shidongkou First Power
Plant and 5% interest in Jiangsu Taicang Power Plant, for a consideration of
RMB415 million (approximately HK$391million), which is payable in cash on
completion of the Acquisition.
Details of the Acquisition are set out in the letter from the Board
contained in the Circular.
2. Reasons for the Acquisition
The Target Power Plants are located in the coastal regions of Shanghai
Municipality and Jiangsu Province respectively. The Directors believe that the
Acquisition will further increase the Company's market share in Eastern China,
which is a region with high economical growth and strong demand for power. The
Directors believe the Acquisition is consistent with the Company's long-term
development strategy. After the completion of the Acquisition, the total net
installed capacity of the Company will increase to 14,285MW, representing an
increase of 390MW.
For further details of the reasons for the Acquisition, please refer to
the letter from the Board contained in the Circular.
3. Interest to be acquired
Set out below are certain financial information of the Target Power
Plants extracted from the audited financial statements of the Target Power
Plants as at 31st December 2001 prepared under PRC GAAP and after taking into
account the unaudited adjustments in order to comply with IAS.
In RMB million unless stated otherwise
Equity
Book Installed Interest
Net Value of Capacity to be
Location Sales Profit Equity (MW) acquired
Shanghai Shidongkou Shanghai 1,532.6 165.5 312.4 1,200.0 30%
First Power Plant Municipality
Jiangsu Taicang Jiangsu 949.2 159.4 750.7 600.0 5%
Power Plant Province
We have also considered the unaudited management accounts of the Target
Power Plants for the nine-month period ended 30th September 2002 as supplied
to us by the Directors of the Company. We noted that the net profits of
Shanghai Shidongkou First Power Plant and Jiangsu Taicang Power Plant for the
2002 nine-month period were Rmb101.45 million and Rmb83.42 million
respectively under PRC GAAP, which compare to Rmb130.37 million and Rmb169.01
million respectively under PRC GAAP for the full year 2001. We understand from
the Directors that the net profit of Jiangsu Taicang Power Plant for the 2002
nine-month period was adversely affected by, inter-alia, a non-operating
expense of Rmb43.94 million which relates to the losses incurred in the sale
of staff quarters to employees, and which is considered a non-recurring
extra-ordinary expense by the Directors.
Further details relating to the Target Power Plants are set out in the
letter from the Board in the Circular.
4. Funding of the Acquisition
The consideration for the Acquisition will be funded by internal
resources of the Company.
As disclosed in the financial statements as at 30th June 2002, the
Company had total cash and cash equivalent resources of approximately RMB4,791
million, and its long term and short term debts were approximately RMB10,785
million, representing a net debt to equity ratio of approximately 21%. The
Directors believe the Company will have sufficient resources for future
working capital purposes after the Acquisition.
5. Consideration and valuation
The consideration was determined through arm's length negotiations and
based on normal commercial terms between the parties thereto, after taking
into account the appraisal conducted by Zhonghua, an independent appraiser
qualified in the PRC.
According to the audited accounts under PRC GAAP and the unaudited
adjustments to comply with IAS, the net book value of the Huaneng Group
Interest as at 31st December 2001 was RMB163.8 million in accordance with PRC
GAAP and RMB131.3 million in accordance with IAS. The consideration for the
acquisition of the Huaneng Group Interest of RMB415 million (approximately
HK$391 million) represents approximately a premium of 153% and 216% to the net
book value under PRC GAAP and IAS respectively. Under PRC GAAP, the
Acquisition price represents 8.7 times of 2001 earnings attributable to the
Huaneng Group Interest and implies a ratio of 4.1 of enterprise value to 2001
EBITDA attributable to the Huaneng Group Interest. Taking into account the
unaudited adjustements to comply with IAS, the Acquisition price represents
7.2 times of 2001 earnings attributed to the Huaneng Group Interest and
implies an enterprise value to 2001 EBITDA ratio of 4.2.
In formulating our opinion, we have considered the current market
multiples of various comparable and listed companies based in the PRC and
other Asian countries based on their respective market price as at the Latest
Practicable Date and their latest available full year financial statements.
Set out below are certain details of the comparable listed companies
that are engaged in the power generation business.
For the purpose of comparison only, we have considered various
measures including:
-- the enterprise value to net sales ratio,
-- the enterprise value to EBITDA ratio,
-- the enterprise value to EBIT ratio,
-- the price to earnings ratio,
-- the price to book value of equity ratio,
-- the price to cash flow ratio,
-- the enterprise value per MW ratio,
based on publicly available data as at the Latest Practicable Date and the
listed companies' latest available full year financial statements.
EnterpriseEnterprise Enterprise Price/
Value/ Value/ Value/ Price/ Book Value Price/ Enterprise
Country Net Sales EBITDA EBITEarnings of Equity Cash Flow Value/ MW
X X X X X X (US$'000/
MW)
PRC H SHARE
Beijing Datang Power
Generation Co. Ltd PRC 2.6 5.4 8.2 9.9 1.0 5.7 417.5
Huaneng Power Int'l Inc. PRC 2.8 5.3 8.8 11.4 1.4 5.9 493.1
Shangdong Int'l Power
Development Co. Ltd. PRC 2.3 4.6 6.4 7.0 1.2 4.0 400.5
Average 2.6 5.1 7.8 9.5 1.2 5.2 437.0
PRC B SHARE
Shenzhen Nanshan Power
Station Co. Ltd PRC 2.3 6.9 9.3 13.1 2.5 8.8 608.0
Heilongjiang Electric
Power Co. Ltd PRC 3.7 9.2 13.6 18.0 1.6 11.6 453.9
Zhejiang Southeast
Electric Power Co. Ltd PRC 3.0 7.0 10.3 14.1 1.8 8.6 743.0
Guangdong Electric
Power Development Co. Ltd PRC 2.6 4.7 6.2 10.7 1.7 6.4 565.0
Average 2.9 7.0 9.9 14.0 1.9 8.9 592.4
HONG KONG
CLP Holdings Ltd Hong Kong 3.3 7.6 8.1 10.5 2.2 9.6 N/M
Hong Kong Electric
Holdings Ltd Hong Kong 7.4 8.9 10.8 10.2 2.0 8.2 N/M
Average 5.3 8.2 9.4 10.3 2.1 8.9 N/M
Price/
Value/ Value/ Value/ Price/ Book Value Price/ Enterprise
Country Net Sales EBITDA EBITEarnings of Equity Cash Flow Value/ MW
X X X X X X (US$'000/
MW)
OTHER ASIAN COUNTRIES
Malakoff Berhad Malaysia 3.6 6.2 7.5 10.9 1.6 7.3 600.3
Powertek Berhad Malaysia 4.8 8.8 11.1 11.6 2.3 8.2 501.3
YTL Power Int'l Berhad Malaysia 4.1 6.8 8.1 14.4 1.6 11.2 501.6
Manila Electric Company Philippines 0.3 4.5 9.2 10.0 0.2 2.3 N/M
Electricity Generating
Public Co. Ltd Thailand 4.0 5.4 7.4 6.6 1.0 3.8 460.8
Ratchaburi Electricity
Generating Holding
Public Co Ltd Thailand 2.1 6.7 8.7 8.2 1.3 5.9 232.4
Korea Electric Power Corp. South Korea 1.9 4.4 9.7 7.4 0.4 1.9 631.4
----- ----- ----- ----- ----- ----- -----
Average 3.0 6.1 8.8 9.9 1.2 5.8 488.0
Overall Sample 3.2 6.4 9.0 10.9 1.5 6.8 508.4
Average
Huaneng Group Interest 1.4 4.2 6.4 7.2 3.2 3.6 214.4
Source: Bloomberg and annual reports of the respective companies
Notes:
For the purpose of comparison only:
(1) The ratios were calculated on the basis of the companies' respective
market capitalisation determined as according to Bloomberg as at the
Latest Practicable Date and the companies' financial data as at the end
of financial year 2001 as according to Bloomberg and the companies'
respective annual reports.
(2) Price refers to market capitalisation as at the Latest Practicable Date.
(3) Enterprise Value refers to the sum of market capitalisation as at the
Latest Practicable Date and net indebtedness as at the end of financial
year 2001.
(4) Earnings refer to net profit excluding extraordinary items as according
to the finanical statements for financial year 2001.
(5) EBITDA refers to the earnings before interest, tax, amortisation and
depreciation expenses as according to the finanical statements for
financial year 2001.
(6) EBIT refers to the earnings before interest and tax as according to the
financial statements for financial year 2001.
(7) Cash Flow refers to the sum of net profit and amortisation and
depreciation expenses as according to the finanical statements
for financial year 2001.
(8) MW refers to the announced or installed capacity in megawatt of the
respective companies.
(9) We have derived the implied valuation multiples of the Huaneng Group
Interest on the basis of the consideration and the audited financial
statements of the Target Power Plants as at 31st December 2001 prepared
in accordance with PRC GAAP and after taking into account the unaudited
adjustments in order to comply with IAS.
(10) The country and regional averages are included for the convenience of
the reader only and do not necessarily represent the actual country and
regional averages if other power generation companies are included.
(11) N/M means "not meaningful".
(12) An exchange rate of RMB8.3=US$1.0 has been used.
(13) An exchange rate of HK$7.8=US$1.0 has been used.
(14) An exchange rate of Malaysian Ringgit 3.8=US$1.0 has been used.
(15) An exchange rate of Philippines Peso 53.4=US$1.0 has been used
(16) An exchange rate of Thai Baht 43.5=US$1.0 has been used.
(17) An exchange rate of Korean Won 1,208.5=US$1.0 has been used.
As indicated earlier, the consideration for the Acquisition represents
approximately 2.5 times and 3.2 times of the book value of Huaneng Group
Interest as at 31st December 2001 under PRC GAAP and IAS respectively. As
stated in the letter from the Board contained in the Circular, the book value
reflected the comparatively low amount of the historical costs of construction
and has taken into account depreciation of those assets, whereas the
consideration reflects the value of the Target Power Plants which can be
generated by their operation. The book value of Huaneng Group Interest is
stated net of the attributable portion of the debts of the Target Power
Plants, which, after netting of the attributable portion of cash and bank
deposit, amounted to approximately Rmb277 million as at 31st December 2001
under PRC GAAP. Save for this price to book value of equity multiple, the
consideration for the Acquisition as multiples to the other measures set out
in the above table is within the ranges of the multiples of the comparable
companies set out in the table. However, because of the inherent differences
between the businesses, operations and prospects of the Target Power Plants
and those of the companies included in the comparable companies group, the
market multiples comparison above should be used with care.
Having considered the above-mentioned principal factors (items 1 to 5),
we are of the opinion that the transactions contemplated under the Acquisition
are fair and reasonable so far as the Independent Shareholders are concerned.
OPINION
Having considered the above-mentioned principal factors, we are of the
opinion that the terms of the Acquisition are fair and reasonable so far as
the Independent Shareholders are concerned and the transactions contemplated
thereunder are in the interest of the Company as a whole.
Yours faithfully
For and on behalf of
CLSA Equity Capital Markets Limited
William Yeung
Managing Director
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APPENDIX 1 GENERAL INFORMATION
--------------------------------------------------------------------------------
1. RESPONSIBILITY STATEMENT
This circular includes particulars given in compliance with the Hong
Kong Listing Rules for the purpose of giving information with regard to the
Company. The Directors collectively and individually accept full
responsibility for the accuracy of the information contained in this circular
and confirm, having made all reasonable enquiries, that to the best of their
knowledge and belief there are no other facts the omission of which would make
any statement herein misleading.
2. DISCLOSURE OF INTERESTS
(a) As at the Latest Practicable Date, none of the Directors or
Supervisors had any interest in the securities of the Company or
any associated corporation (within the meaning of the SDI
Ordinance) which (i) would be required to be notified to the
Company and the Stock Exchange pursuant to section 28 of the SDI
Ordinance (including interests which a Director or Supervisor would
be taken or deemed to have under section 31, or Part I of the
schedule to, the SDI Ordinance); or (ii) would be required to be
entered in the register kept by the Company pursuant to section 29
of the SDI Ordinance; or (iii) would be required to be notified to
the Company and the Stock Exchange pursuant to the Model Code for
Securities Transactions by Directors of Listed Companies.
(b) As at the Latest Practicable Date, HIPDC held 2,554,840,000
Domestic Shares, representing approximately 42.58% of the total
issued share capital (both domestic shares and foreign shares) of
the Company. Apart from HIPDC and Huaneng Group which holds 51.98%
of the equity interest in HIPDC, so far as is known to the
Directors or Supervisors, as at the Latest Practicable Date, there
was no other person who was interested, directly or indirectly, in
10% or more of the nominal value of any class of share capital
carrying rights to vote in all circumstances at general meetings of
the Company.
(c) None of the Directors or Supervisors is materially interested in
any contract or arrangement subsisting at the date of this circular
which is significant in relation to the business of the Company.
(d) As at the Latest Practicable Date, none of the Directors or
Supervisors had entered, or proposed to enter, into a service
contract with the Company which is not determinable by the Company
within one year without payment of compensation, other than
statutory compensation.
(e) As at the Latest Practicable Date, CLSA does not have any
shareholding in the Company or any right (whether legally
enforceable or not) to subscribe for or to nominate persons to
subscribe for securities in the Company.
(f) As at the Latest Practicable Date, none of the Directors or
Supervisors nor CLSA had any direct or indirect interest in any
asset which had been acquired, or disposed of by, or leased to the
Company, or was proposed to be acquired, or disposed of by, or
leased to the Company, since 31st December 2001, the date to which
the latest published financial statements of the Company and its
subsidiaries were made up.
3. MATERIAL ADVERSE CHANGE
The Directors are not aware of any material adverse change in the
financial or trading position of the Company since 31st December 2001, the
date to which the latest published audited financial statements of the Company
and of its subsidiaries were made up.
4. CONSENT
CLSA has given and has not withdrawn its written consent to the issue of
this circular with the inclusion of and references to its name and letter or
report (as the case may be), in the form and context in which they appear.
5. MISCELLANEOUS
(1) The legal address of the Company is at West Wing, Building C,
Tianyin Mansion, 2C Fuxingmennan Street, Xicheng District, Beijing,
The People's Republic of China.
(2) The share registrar of the Company in Hong Kong is Hong Kong
Registrars Limited at Room 1901-5, 19/F, Hopewell Centre, 183
Queen's Road East, Hong Kong.
(3) The secretary of the Company is Mr. Huang Long.
(4) The following is the qualification of the expert who has given an
opinion or advice which is contained in this circular:
CLSA: Registered investment adviser
6. DOCUMENTS FOR INSPECTION
Copies of the following documents will be available for inspection at
the offices of Herbert Smith at 23rd Floor, Gloucester Tower, 11 Pedder
Street, Hong Kong during normal business hours on any day (except public
holidays) up to and including 30th December 2002:
(1) the Transfer Agreement;
(2) the letter from the Independent Directors as set out in this
circular;
(3) the letter from CLSA as set out in this circular;
(4) the written consent referred to in paragraph 4 of this appendix;
(5) the annual report of the Company for the year ended 31st December
2001; and
(6) the articles of association of the Company.
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NOTICE OF EXTRAORDINARY GENERAL MEETING
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[GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(A Sino-foreign joint stock limited company incorporated in the
People's Republic of China)
Notice is hereby given that an extraordinary general meeting of Huaneng
Power International, Inc. (the "Company") will be held at 9 a.m. on 31st
December 2002 (Tuesday) at Beijing International Convention Centre at No. 8
Beichen East Road, Chaoyang District, Beijing, The People's Republic of China,
for the purpose of considering and, if thought fit, passing the following
ordinary resolution:
Ordinary resolution:
"The terms of the Transfer Agreement (as defined in the announcement
made by the Company dated 16th November 2002) entered into by the Company and
China Huaneng Group on 15th November 2002, and the transaction contemplated
therein is hereby approved and confirmed."
By Order of the Board
Huang Long
Company Secretary
16th November 2002
Registered address of the Company:
West Wing, Building C, Tianyin Mansion,
2C Fuxingmennan Street, Xicheng District,
Beijing 100031,
The People's Republic of China
Notes:
1. Eligibility for attending the Extraordinary General Meeting
Holders of the Company's foreign Shares whose names appear on the HK$
Dividend foreign Shares Register and/or the US$ Dividend foreign Shares
Register maintained by Hong Kong Registrars Limited and holders of domestic
shares whose names appear on the domestic shares register maintained by the
Company at the close of business on 6th December 2002 are eligible to attend
the Extraordinary General Meeting.
2. Proxy
(i) A member eligible to attend and vote at the Extraordinary General
Meeting is entitled to appoint, in written form, one or more
proxies to attend and vote on behalf of him. A proxy needs not be
a shareholder.
(ii) A proxy should be appointed by a written instrument signed by the
appointor or its attorney duly authorised in writing. If the form
of proxy is signed by the attorney of the appointor, the power of
attorney authorising that attorney to sign or other authorisation
document(s) shall be notarised.
(iii) To be valid, the power of attorney or other authorisation
document(s) which have been notarised together with the completed
form of proxy must be delivered, in the case of holders of
domestic shares, to the Company and, in the case of holders of
foreign Shares, to Hong Kong Registrars Limited, not less than 24
hours before the time designated for holding of the Extraordinary
General Meeting.
(iv) A proxy may exercise the right to vote by a show of hands or by
poll. However, if more than one proxy is appointed by a
shareholder, such proxies shall only exercise the right to vote
by poll.
3. Registration procedures for attending the Extraordinary General Meeting
(i) A shareholder or his proxy shall produce proof of identity when
attending the meeting. If a shareholder is a legal person, its
legal representative or other persons authorised by the board of
directors or other governing body of such shareholder may attend
the Extraordinary General Meeting by producing a copy of the
resolution of the board of directors or other governing body of
such shareholder appointing such persons to attend the meeting.
(ii) Holders of foreign Shares and domestic shares intending to attend
the Extraordinary General Meeting should return the reply slip
for attending the Extraordinary General Meeting to the Company on
or before 11th December 2002.
(iii) Shareholders may send the above reply slip to the Company in
person, by post or by fax (Attn: The Secretary office of the
Board).
4. Closure of Register of Members
The register of members of the Company will be closed from 1st December
2002 to 30th December 2002 (both days inclusive).
5. Other Businesses
(i) The Extraordinary General Meeting will not last for more than
half day. Shareholders who attend shall bear their own travelling
and accommodation expenses.
(ii) The address of the share registrar for Foreign Shares of the
Company, Hong Kong Registrars Limited is at:
1901-5
19/F., Hopewell Centre
183 Queen's Road East,
Hong Kong
(iii) The registered address of the Company is at:
West Wing, Building C,
Tianyin Mansion,
2C Fuxingmennan Street,
Xicheng District,
Beijing 100031,
The People's Republic of China
Telephone No.: (+86)-10-66491999
Facsimile No.: (+86)-10-66491860
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ACTION
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If you are in any doubt as to any aspect of this circular or as to the action
to be taken, you should consult your stockbroker, bank manager, solicitor,
professional accountant or other professional adviser.
If you have sold or transferred all your shares in Huaneng Power
International, Inc., you should at once hand this circular and the
accompanying form of proxy to the purchaser or transferee or to the bank,
stockbroker or other agent through whom the sale or transfer was effected for
transmission to the purchaser or transferee.
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this circular, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this circular.
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[GRAPHIC OMITTED][GRAPHIC OMITTED]
(A Sino-foreign joint stock limited company
incorporated in the People's Republic of China)
ON-GOING CONNECTED TRANSACTION
Financial Adviser to Huaneng Power International, Inc.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
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A letter from the Board of Huaneng Power International, Inc. (the "Company")
is set out on pages 3 to 11 of this circular.
A notice convening an Extraordinary General Meeting of the Company to be held
at 9:00 a.m. on 23rd December, 2002 at Beijing International Convention Centre
at No.8 Beichen East Road, Chaoyang District, Beijing, the People's Republic
of China has already been sent to the shareholders of the Company on 7th
November, 2002 and is set out on pages 28 to 43 of this circular. Whether or
not you are able to attend the meeting, you are requested to complete and
return the enclosed reply slip and form of proxy in accordance with the
instructions printed thereon as soon as possible and in any event the form of
proxy should be returned not less than 24 hours before the time appointed for
holding such meeting.
Completion and return of the form of proxy shall not preclude you from
attending and voting in person at the meeting or at any adjourned meeting
should you so wish.
22nd November, 2002
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CONTENTS
-------------------------------------------------------------------------------
43
Page
DEFINITIONS .................................................................. 1
LETTER FROM THE BOARD ....................................................... 3
1. INTRODUCTION ........................................................ 3
2. ENTRUSTED MANAGEMENT AGREEMENT ...................................... 4
3. RATIONALE FOR THE TRANSACTION AND PRICING FACTORS ................... 5
4. INFORMATION REGARDING THE ENTRUSTED POWER PLANTS .................... 6
5. CONNECTED TRANSACTION ............................................... 9
6. DIRECTORS' OPINION ON THE TRANSACTION ............................... 9
7. WAIVER TO BE SOUGHT ................................................. 9
8. CONNECTED TRANSACTION UNDER SHANGHAI LISTING RULES ................. 10
9. THE EGM ............................................................ 11
APPENDIX I - GENERAL INFORMATION ................................... 12
APPENDIX II - LETTER FROM BEIJING H&J Vanguard
Consulting Limited .................................... 14
NOTICE OF EXTRAORDINARY GENERAL MEETING ..................................... 28
-------------------------------------------------------------------------------
DEFINITIONS
-------------------------------------------------------------------------------
In this document, unless the context otherwise requires, the
following expressions have the following meanings:
"Associate" the meaning ascribed to it in the Hong Kong
Listing Rules;
"Company" Huaneng Power International, Inc.;
"Deutsche Bank" Deutsche Bank AG, Hong Kong Branch;
"Directors" the directors of the Company;
"Entrusted Management" the management of the Entrusted Power Plants
entrusted by Huaneng Group and HIPDC to the
Company pursuant to the Entrusted Management
Agreement;
"Entrusted Management Agreement" the entrusted management
agreement entered into among the Company, Huaneng
Group and HIPDC on 6th November, 2002;
"Entrusted Power Plants" the power plants currently or in
the future managed or controlled by Huaneng Group
or HIPDC, the management of which will be
entrusted to the Company in accordance with the
Entrusted Management Agreement;
"EGM" an extraordinary general meeting of the Company
to be held on 23rd December, 2002 for
shareholders of the Company to consider and
approve the Transaction;
"HIPDC" Huaneng International Power Development
Corporation;
"Hong Kong Listing Rules" the Rules Governing the Listing of Securities on
the Hong Kong Stock Exchange; "Huaneng Group"
China Huaneng Group;
"Independent Directors" the independent directors of the Company, who are
invited to advise the Independent Shareholders in
connection with the Transaction;
"Independent Shareholders" shareholders of the Company other than Huaneng
Group, HIPDC and their respective Associates;
"Latest Practicable Date" 6th November, 2002, being the
latest practicable date prior to the publication
of this circular for ascertaining certain
information referred to in this announcement;
"Net Installed Capacity" calculated on 100% equity basis) and uncontrolled
power plants (of which be calculated on owned
equity basis);
"PRC" the People's Republic of China;
"RMB" the lawful currency of the PRC;
"SDI Ordinance" the Securities (Disclosure of Interests)
Ordinance (Chapter 396 of the Laws of Hong Kong);
"Shanghai Listing Rules" The Listing Rules of Shanghai Stock Exchange;
"Stock Exchange" The Stock Exchange of Hong Kong Limited; and
"Transaction" the subject of the Entrusted Management
Agreement.
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LETTER FROM THE BOARD
-------------------------------------------------------------------------------
[GRAPHIC OMITTED][GRAPHIC OMITTED]
(A Sino-foreign joint stock limited company
incorporated in the People's Republic of China)
Directors: Legal Address:
Li Xiaopeng Xu Zujian West Wing, Building C,
Wang Xiaosong Liu Shuyuan Tianyin Mansion,
Ye Daji Bai Changnian No. 2C Fuxingmennan Street,
Chen Baoliang Shen Weibing Xicheng District,
Huang Long Shen Zongmin Beijing 100031,
Hu Jianmin People's Republic of China.
Wu Dawei
Liu Guoyue
Wang Defang
Shan Qunying
Yang Shengming
Independent Directors:
Gao Zongze
Zheng Jianchao
Qian Zhongwei
22nd November, 2002
To the Shareholders
Dear Sir or Madam,
CONNECTED TRANSACTION
1. INTRODUCTION
On 7th November, 2002, the Board of Directors announced that the
Company had entered into the Entrusted Management Agreement with Huaneng Group
and HIPDC pursuant to which Huaneng Group and HIPDC agreed to engage the
Company to manage the Entrusted Power Plants.
Huaneng Group is an indirect controlling shareholder of the Company,
holding a 51.98% interest in HIPDC. As of the Latest Practicable Date, HIPDC
held 2,554,840,000 domestic shares in the Company, representing 42.58% of the
total issued share capital (domestic shares and foreign shares) of the
Company. Accordingly, the transaction contemplated by the Entrusted Management
Agreement constitutes a connected transaction for the Company within the
meaning of the Hong Kong Listing Rules.
The purpose of this circular is to provide you with further
information in relation to the Entrusted Management Agreement, and to set out
the opinion provided by the PRC independent financial advisor under Shanghai
Listing Rules, and the Notice of the EGM.
2. ENTRUSTED MANAGEMENT AGREEMENT
The Entrusted Management Agreement was approved by the Directors at
the board meeting held on 5th November, 2002 and signed by Huaneng Group,
HIPDC and the Company on 6th November, 2002.
Date of the Entrusted 6th November, 2002
Management Agreement:
Parties: Entrusting Party: Huaneng Group HIPDC
Managing Party: The Company
Assets entrusted: (i) 17 Entrusted Power Plants
currently managed and power
plants in the future controlled
by the Huaneng Group;
(ii) 5 Entrusted Power Plants
currently managed and power
plants in the future controlled
by HIPDC.
Service rendered: Management service provided by the
Company in respect of the Entrusted Power
Plants. The Entrusted Management
Agreement has a term of 5 years. Upon the
expiry of the Entrusted Management
Agreement, unless any party intends
otherwise, it will continue to be
operational. The Entrusted Management
Agreement may also be terminated by,
inter alia, (i) Huaneng Group and/or
HIPDC giving 30 days notice to the
Company or (ii) the Company giving 90
days notice to Huaneng Group and/or
HIPDC.
Service fee: The total management fee per year in
respect of the Entrusted Management is
approximately RMB50.6 million. If the
aggregate Net Installed Capacity of the
Entrusted Power Plants exceeds 14,000 MW,
the monthly service fee payable by
Huaneng Group and/or HIPDC to the Company
shall be adjusted as follows:
the aggregate of the actual
the service fee payable Net Installed Capacity consigned under the
for the previous month x Entrusted Management for that month
-----------------------------------------------
the aggregate of the actual Net Installed
Capacity consigned under the Entrusted
Management for the previous month
The service fee (excluding the
incentive/penalty element) is payable
monthly by Huaneng Group and HIPDC to the
Company. The service fee in respect of
the Entrusted Management was determined
on the basis of normal commercial terms
and arm's length negotiation between the
parties thereto with reference to
international practice.
Condition: Entrusted Management Agreement) being
approved and adopted by the Independent
Shareholders.
3. RATIONALE FOR THE TRANSACTION AND PRICING FACTORS
The Company currently operates 17 power plants in the PRC with a net
generation capacity of 13,895 MW. The Company develops, constructs, operates
and manages large thermal power plants in China nationwide. It is the largest
independent power producer in China.
The Company is able to gain more management experience and improve
its management abilities through the management of the Entrusted Power Plants,
thereby minimizing competition with related parties. By reason of the above,
the Company will be able to further strengthen its leading position in the
power generation market of the PRC. At the same time as streamlining the
management structure of the thermal power generation assets of the Huaneng
Group, the Entrusted Management is in accordance with the long-term
development strategy of the Company.
The Entrusted Management will also enable the Company to obtain
direct knowledge of the development status of more power markets, thereby
exploring new development opportunities. The Entrusted Management will be one
of the main driving forces of the Company's future development.
The service fee payable by Huaneng Group and HIPDC comprises the
following three components:
(i) costs (including set-up, operational and other recurrent
items to be incurred by the Company in managing the
Entrusted Power Plants), namely RMB46 million per annum;
(ii) a premium to cover estimation risks which represents 10% of
the costs, namely RMB4.6 million per annum; and
(iii) an incentive / penalty component which is calculated based
on the confirmed results of the Entrusted Management and
shall not exceed 15% of the costs in (i), namely either an
incentive or a penalty of not more than RMB6.9 million per
annum.
The costs in (i) will be adjusted annually in accordance with the
Entrusted Management Agreement, which will be by reference to the inflation
rate of the previous year as published by the State Statistic Department and
the salary component of the service fee will be adjusted by the percentage
increase approved by the board of the Company. This methodology is consistent
with international practice and is equitable to all shareholders of the
Company.
4. INFORMATION REGARDING THE ENTRUSTED POWER PLANTS
The Entrusted Power Plants include 17 plants currently managed by
Huaneng Group with a total Net Installed Capacity of 10,799 MW and 5 plants
currently managed by HIPDC with a total Net Installed Capacity of 3,644 MW.
(1) Entrusted Power Plants currently managed by Huaneng Group
Registered Installed Percentage
Capital capacity of ownership
Name of Entrusted Date of Nature of (RMB (no. of by Huaneng
Power Plant establishment entity thousands) Location units x MW) Group Other shareholders
1. Huaneng Group 1st State-owned Shandong 2 x 220 100%
Xindian Power February, branch Province 2 x 100
Plant 2001 entity Zibo City
2. Huaneng Group 1st State-owned Shandong 3 x 50 100%
Baiyang River February, branch Province
Power Plant 2001 entity Zibo City
3. Yimin Huaneng 18th May, Limited 583,900 Inner 2 x 500 51% Liaoning Provincial
Dongdian Coal- 1995 Liability Mongolia Power Company,
Fired Power Company Autonomus Heilongjiang
Limited Region Provincial
Liability Hulunbei- Power Company and
Company ermeng Jilin Provincial
Power
Company
4. Tianjin Huaneng 17th May, Limited 300,000 Tianjin 2 x 300 54.02% Tianjin Municipal
Yangliuqing 1996 Liability City 1 x 125 Jinneng Investment
Power Company 2 x 100 Company and Huabei
Generation Power Development
Limited Company
Liability
Company
5. Jinggangshan 18th Limited 529,850 Jiangxi 2 x 300 60% Jiangxi Provincial
Huaneng Power March, Liability Province Power Company and
Generation 1996 Company Jian City Jiangxi Provincial
Limited Investment Company
Liability Company
6. Daqing Huaneng 24th Limited 110,000 1 x 200 70% Heilongjiang
Xinhua Power December, Liability Heilongjiang 2 x 100 Provincial
Generation 1997 Company Province 2 x 50 Power Development
Limited Daqing Company
Liability City
Company
7. Shanxi Huaneng 29th Limited 80,000 Shanxi 2 x 100 50% Shanxi Provincial
Yushe Power November, Liability Province Regional Power
Limited 1994 Company Yushe Company
Liability County and Shanxi
Company Provincial
Power Company
8. Suzhou 15th Limited 20,000 Jiangsu 1 x 6 53.45% Suzhou Municipal
Huaneng September, Liability Province 1 x 3 Huqiu District
Thermal Power 1997 Company Suzhou State-owned
Limited City (Collective) Asset
Liability Management Company
Company and Jiangsu
Changjiang
Energy Saving
Industrial
Development Company
9. Henan Huaneng 26th Limited 10,000 Henan 2 x 600 55% Henan Provincial
Qinbei Power December, Liability Province Construction and
Generation 2001 Company Jiyuan Investment
Limited City Corporation, Henan
Liability Provincial Power
Company Company and Henan
Provincial Jiyuan
City Construction
and Investment
Company
10. Hubei Huaneng 4th Limited 90,595 Hubei 3 x 100 53.25% Hubei Provincial
Sujiawan Power January, Liability Province Power Company, Hubei
Generation 1999 Company Wuhan City Yangxin Aluminium
Limited Plant, E'cheng Iron
Liability and Steel Group Limited
Company Liability Company
and Hubei Aluminium
Group Limited Liability
Company
11. Changshan 25th State-owned 60,000 Jilin 2 x 100 68.27% Jilin Provincial
Huaneng August, 1997 Province Energy
Thermal Power Songyuan and Transportation
Plant City Corporation
12. Wuhan Huazhong 13th Company 650,000 Hubei 4 x 300 40% Central China Power
Huaneng Power September, Limited Province (Note 1) Corporation, Wuhan
Generation Joint 1996 by Shares Wuhan City Power Development
Stock Limited Company, Central
Company China Power
Development Company
and Wuhan Tianli
Property Company
13. Guangdong 3rd Limited 360,000 Guangdong 2 x 300 49% Guangdong Provincial
Yuehwa Power December, Liability Province 4 x 125 (Note 2) Yuedian Asset
Generation 1986 Company Guangzhou Operation Company
Limited City Limited
Liability
Company
14. Inner Mongolia 12th May, Company 944,980 Inner 4 x 200 12.73% Inner Mongolia Power
Mengdian 1994 Limited Mongolia 3 x 100 (Group) Limited
Huaneng by Shares Autonomous 5 x 50 Liability Company,
Thermal Power (Listed) Region 3 x 25 state-owned
Generation Huhehaote shares, listed RMB
Company City domestic shares
Limited
15. Liaoning 31st Sino-Foreign716,457.7 Liaoning 2 x 200 32.97% Liaoning Energy
Nenggang August, 1998 Co-operatio (actual paid Province Corporation and
Power Plant up capital Fushun City Liaogang Power
Company 477,890) Company Limited
Limited
16. Haikou Thermal 20th Company 540,510 Hainan 2 x 125 15.55% Hainan Provincial
Power October, Limited Province 1 x 100 Power Company,
Generation 1994 by Shares Haikou Zhongyin
Company City Group Investment
Limited Company Limited,
Haikou Gangao
Power Investment
Company, Huaneng
(Hainan) Joint
Stock Company,
Hainan Qiongshen
Property Development
Company Limited,
Hainan Provincial
State-owned
Assets Administration
Bureau, Hainan
Foreign Economic
and Trade
Bidding Company
and Hainan
Tianhe Industrial
Company
17. Hegang Power 24th Limited 300,000 Heilongjiang 2 x 300 13% Northern China Power
Generation February, Liability Province Corporation, Guohua
Limited 1998 Company Hegang City Energy Company
Liability Limited,
Company Heilongjiang
Provincial
Power Development
Company and
Heilongjiang
Provincial
Power Company
(2) Entrusted Power Plants currently managed by HIPDC
Registered Installed
Name of Capital capacity Percentage of
Entrusted Power Date of (RMB (no. of ownership Other
Plant establishment Nature of entity thousands) Location units x MW) by HIPDC shareholders
1. HIPDC 8th June, Branch of Chongqing 4 x 360 (Note 3) (Note 4)
Chongqing 1985 Sino-foreign City
Branch Company equity joint
(Luohuang venture
Power Plant)
2. HIPDC 8th June, Branch of Chongqing 2 x 36.75 (Note 3) (Note 4)
Chongqing 1985 Sino-foreign City 1 x 35.1
Branch Company equity joint
(Chongqin CCGT) venture
3. HIPDC Yueyang 16th Branch of Hunan 2 x 362.5 (Note 3) (Note 4)
Branch Company October, Sino-foreign Province
1996 equity joint Yueyang
venture
4. HIPDC Yingkou 27th Branch of Liaoning 2 x 300 (Note 3) (Note 4)
Branch Company February, Sino-foreign Province
1988 equity joint Yingkou
venture
5. HIPDC Beijing 21st Branch of Beijing City 2 x 165 (Note 3) (Note 4)
Branch January, Sino-foreign 2 x 220
Company 1991 equity joint
(Beijing venture
Huaneng
Thermal Power
Plant)
Note 1: Huaneng Group has the management right of such power plant.
Note 2: The board of directors is controlled by Huaneng Group.
Note 3: The structure of the investment is subject to confirmation. However,
HIPDC will have an interest in them of more than 50%.
Note 4: Beneficiaries nominated by the local governments.
5. CONNECTED TRANSACTION
As Huaneng Group and HIPDC are indirect and direct substantial
shareholders of the Company due to HIPDC's 42.58% ownership of the Company and
Huaneng Group's 51.98% ownership in HIPDC, under the Hong Kong Listing Rules,
Huaneng Group and HIPDC are connected persons of the Company. The Transaction
therefore constitutes a connected transaction for the Company under Rule
14.25(1) of the Hong Kong Listing Rules.
The estimated service fee payable in respect of the Transaction per
annum falls below the deminimus threshold of the higher of HK$10,000,000 or 3%
of the net tangible assets of the Company (and its subsidiaries) under Rule
14.25(1) of the Hong Kong Listing Rules.
6. Directors' opinion on the Transaction
The Directors (including the Independent Directors) consider that the
Transaction is and will be carried out in the Company's ordinary course of
business on an arm's length basis, on normal commercial terms and is fair and
reasonable to the shareholders of the Company. The Directors believe that the
consideration under the Transaction is reasonable and is fair to both the
Company and all its shareholders. The Entrusted Management is in accordance
with the long-term development strategy of the Company.
7. Waiver to be sought
As the Directors consider that it would be impracticable for the
Company to comply strictly with the connected transactions requirements of the
Hong Kong Listing Rules on each occasion when the Transaction arises, the
Company will apply to the Hong Kong Stock Exchange for a waiver of the
Transaction from strict compliance with such requirements:
(a) the Transaction will be (i) in the ordinary and usual course
of business of the Company; and (ii) either on normal
commercial terms, or on terms no less favourable than those
available to (or from) independent third parties; or (iii)
where there is no available comparison for the purpose of
determining whether (i) or (ii) is satisfied, on terms that
are fair and reasonable so far as the shareholders of the
Company are concerned;
(b) the aggregate value of the Transaction in each financial
year will not exceed 3% of the net tangible assets of the
Company (as disclosed in the Company's published
consolidated accounts) during the latest period;
(c) details of the Transaction as required by Rule 14.25(1)(A)
to (D) of the Hong Kong Listing Rules to be disclosed in the
Company's next and subsequent published annual reports;
(d) the Independent Directors shall review annually the
Transaction and confirm in the Company's annual report that
the Transaction has been conducted in the manner stated in
conditions (a) and (b) above; and
(e) the auditors of the Company shall review annually the
Transaction, and confirm to the board of Directors in
writing (a copy of which will be provided to the Stock
Exchange) that the Transaction:
(i) received the approval of the Directors;
(ii) has been entered into at price levels consistent
with the pricing policies as stated in the relevant
agreements;
(iii) has been entered into in accordance with the terms
of the agreement governing the Transaction; and
(iv) has not exceeded the cap as set out in condition
(b) above.
Where, for whatever reason, the auditor declines to accept the
engagement or is unable to provide the letter, the Directors shall notify the
Stock Exchange immediately.
8. CONNECTED TRANSACTION UNDER SHANGHAI LISTING RULES
As the A shares of the Company are listed on the Shanghai Stock
Exchange, the Company is required, in addition to the Hong Kong Listing Rules,
also to comply with the Shanghai Listing Rules.
The Transaction constitutes a connected transaction under the
Shanghai Listing Rules, which shall be subject to the approval of the
Company's shareholders. The connected persons (as defined under the Shanghai
Listing Rules) shall abstain from voting on resolutions related to the
Transactions.
In accordance with Rule 7.3.11(9) of the Shanghai Listing Rules, the
Company has appointed Beijing H&J Vanguard Consulting Limited ("Hejun") as the
PRC independent financial advisor to the Independent Directors in respect of
the Transaction.
Details of Hejun's views regarding the Transaction are set out in
Appendix II on pages 14 to 27 of this Circular for information only.
The Independent Directors are of the view that (1) the board of
Directors has met the relevant requirements of the Shanghai Listing Rules and
the articles of association of the Company regarding approval of the relevant
resolutions of the Transaction; and (2) the Transaction arising therefrom is
fair to the Company's shareholders.
9. THE EGM
The Company will convene an EGM at 9:00 a.m. on 23rd December, 2002
at Beijing International Convention Centre at No. 8 Beichen East Road,
Chaoyang District, Beijing, PRC to seek the approval by the Independent
Shareholders of the Entrusted Management Agreement. Huaneng Group, HIPDC and
their respective Associates will abstain from voting in the EGM in respect of
the ordinary resolution to approve the Entrusted Management Agreement. Notice
of the EGM is set out on pages 28 to 43 in this circular.
A reply slip and a form of proxy for use by the Independent
Shareholders at the Extraordinary General Meeting is enclosed with this
circular. Whether or not you intend to attend the meeting in person, you are
requested to complete and return the reply slip in accordance with the
instructions printed thereon to the registered office of the Company at West
Wing, Building C, Tianyin Mansion, 2C, Fuxingmennan Street, Xichang District,
Beijing, PRC as soon as possible but in any event by [2nd December], 2002. The
enclosed form of proxy should be completed and returned to the Company's H
Share Registrar, Hong Kong Registrars Limited, at 1901-5, 19/F, Hopewell
Centre, 183 Queen's Road East, Hong Kong or the registered office of the
Company in accordance with the instructions printed thereon as soon as
practicable and in any event by not later than 24 hours before the time
appointed for the holding of the EGM. Completion and return of the form of
proxy will not preclude you from attending and voting in person at the meeting
should you so wish.
Yours faithfully,
For and on behalf of
Huaneng Power International, Inc.
Wang Xiaosong
Vice Chairman
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APPENDIX I GENERAL INFORMATION
-------------------------------------------------------------------------------
1. RESPONSIBILITY STATEMENT
This circular includes particulars given in compliance with the Hong
Kong Listing Rules for the purpose of giving information with regard to the
Company. The Directors collectively and individually accept full
responsibility for the accuracy of the information contained in this circular
and confirm, having made all reasonable enquiries, that to the best of their
knowledge and belief there are no other facts the omission of which would make
any statement herein misleading.
2. DISCLOSURE OF INTERESTS
(1) As at the Latest Practicable Date, none of the Directors or
Supervisors had any interest in the securities of the
Company or any associated corporation (within the meaning of
the SDI Ordinance) which (i) would be required to be
notified to the Company and the Stock Exchange pursuant to
section 28 of the SDI Ordinance (including interests which a
Director or Supervisor would be taken or deemed to have
under section 31, or Part I of the schedule to, the SDI
Ordinance); or (ii) would be required to be entered in the
register kept by the Company pursuant to section 29 of the
SDI Ordinance; or (iii) would be required to be notified to
the Company and the Stock Exchange pursuant to the Model
Code for Securities Transactions by Directors of Listed
Companies.
(2) As at the Latest Practicable Date, HIPDC held 2,554,840,000
domestic shares, representing approximately 42.58% of the
total issued share capital (both domestic shares and foreign
shares) of the Company. Apart from HIPDC and other than
Huaneng Group which holds 51.98% of the equity interest in
HIPDC, so far as is known to the Directors or supervisors,
as at the Latest Practicable Date, there was no other person
who was interested, directly or indirectly, in 10% or more
of the nominal value of any class of share capital carrying
rights to vote in all circumstances at general meetings of
the Company.
(3) None of the Directors or supervisors is materially
interested in any contract or arrangement subsisting at the
date of this circular which is significant in relation to
the business of the Company.
(4) As at the Latest Practicable Date, none of the Directors or
supervisors had entered, or proposed to enter, into a
service contract with the Company which is not determinable
by the Company within one year without payment of
compensation, other than statutory compensation.
(5) As at the Latest Practicable Date, none of the Directors or
supervisors had any direct or indirect interest in any asset
which had been acquired, or disposed of by, or leased to the
Company, or was proposed to be acquired, or disposed of by,
or leased to the Company, since 31st December, 2001, the
date to which the latest published financial statements of
the Company and its subsidiaries were made up.
3. MATERIAL ADVERSE CHANGE
The Directors are not aware of any material adverse change in the
financial or trading position of the Company since 31st December, 2001, the
date to which the latest published audited financial statements of the Company
and of its subsidiaries were made up.
4. CONSENT
Hejun has given and has not withdrawn its written consent to the
issue of this circular with the inclusion of and references to its name and
letter or report (as the case may be), in the form and context in which it
appears.
5. MISCELLANEOUS
(1) The legal address of the Company is at West Wing, Building
C, Tianyin Mansion, 2C Fuxingmennan Street, Xicheng
District, Beijing, The People's Republic of China.
(2) The share registrar of the Company in Hong Kong is Hong Kong
Registrars Limited at 1901-5 19th Floor, Hopewell Centre,
183 Queen's Road East, Hong Kong.
(3) The secretary of the Company is Mr. Huang Long.
6. DOCUMENTS FOR INSPECTION
Copies of the following documents will be available for inspection at
the offices of Herbert Smith at 23rd Floor, Gloucester Tower, 11 Pedder
Street, Hong Kong during normal business hours on any day (except public
holidays) up to and including 23rd December, 2002:
1. Resolutions of the board of Directors and minutes signed by the
Directors;
2. Entrusted Management Agreement; and
3. Opinion of Beijing H&J Vanguard Consulting Limited (as the PRC
independent financial advisor).
-------------------------------------------------------------------------------
APPENDIX II LETTER FROM BEIJING H&J Vanguard Consulting Limited
-------------------------------------------------------------------------------
7th November, 2002
Dear Sirs,
Special Reminder
Huaneng Power International, Inc. is a public company listed on the
New York Stock Exchange, The Stock Exchange of Hong Kong Limited and Shanghai
Stock Exchange.
Huaneng Power International, Inc. has appointed Beijing H&J Vanguard
Consulting Limited as the PRC independent financial advisor in respect of this
Connected Transaction according to the request of Shanghai Stock Exchange.
This Independent Financial Advisor's Report is primarily prepared for
review by the independent shareholders in the PRC.
I. Interpretation
Unless the context otherwise requires, the following expressions have
the following meanings:
Huaneng International/the Company: Huaneng Power International, Inc.
Huaneng Group: China Huaneng Group
HIPDC: Huaneng International Power Development Corporation
Entrusted Management Agreement: the entrusted management agreement entered into between Huaneng
International, Huaneng Group and HIPDC on 6th November, 2002
Connected Transaction: the connected transaction under which Huaneng Group and HIPDC
propose to entrust Huaneng International with the management of
their existing and/or future thermal power generation assets
according to the terms and conditions set out in the Entrusted
Management Agreement
Announcement: the announcement on the Connected Transaction of Huaneng Power
International, Inc. published by the Board of Directors of
Huaneng International on 7th November, 2002
Entrusted Power Plants: in the future managed or controlled by Huaneng Group or HIPDC,
the management of which will be entrusted to Huaneng
International in accordance with the Entrusted Management
Agreement. A list of the Entrusted Power Plants is set out in
clause 1 "List of Entrusted Power Plants" of Section 4 "Basic
Information about the Entrusted Items" of this report.
According to the terms of the Entrusted Management Agreement,
the scope of the Entrusted Power Plants shall be consistent
with Schedule 1 of the Entrusted Management Agreement, as
amended from time to time
Shanghai Listing Rules: The Listing Rules of Shanghai Stock Exchange, as amended from
time to time
PRC/Local Independent Financial Advisor: Beijing H&J Vanguard Consulting Limited
II. Introduction
On 7th November, 2002, the Board of Directors of Huaneng
International published an Announcement stating that, pursuant to the
Entrusted Management Agreement entered into between Huaneng International,
Huaneng Group and HIPDC on 6th November, 2002, Huaneng International accepted
the entrusted management of the Entrusted Power Plants from Huaneng Group and
HIPDC. Huaneng Group and HIPDC will pay a corresponding service fee to Huaneng
International. Huaneng Group holds a 51.98% interest in HIPDC and HIPDC holds
42.58% of the shares in Huaneng International. The transaction contemplated
under the Entrusted Management Agreement constitutes a connected transaction
for Huaneng International.
Beijing H&J Vanguard Consulting Limited has been appointed by Huaneng
International to act as the PRC Independent Financial Advisor of this
Connected Transaction to give an independent opinion to the independent
domestic shareholders of the Company in relation to the legality, necessity
and fairness of this Connected Transaction in order to assist them in making a
decision when voting on the Connected Transaction at an Extraordinary General
Meeting to be held on 23rd December, 2002. Accordingly, we issue an
independent financial advisor's report in relation to this Connected
Transaction. This report is prepared according to the recognised practices and
ethical standards of the industry and on the basis of objective and equitable
principles and the spirit of diligence and responsibility, in accordance with
the laws and regulations of the Company Law of The People's Republic of China,
Securities Law of The People's Republic of China and Shanghai Listing Rules
and after careful study of the relevant information provided by the parties to
the transaction andacquisition of a thorough understanding of this Connected
Transaction. The parties to this Connected Transaction are responsible for the
authenticity, accuracy, completeness and timeliness of the information
provided by them. We hereby state as follows:
A. We are not interested with the parties to this Connected
Transaction;
B. We have not appointed or authorised any other organisation
or individual to provide us with any information which is
not included in this Independent Financial Advisor's Report
or to give any explanation or description in relation to the
contents of this report.
III. Connected Relationship and Basic Information of the Connected Parties
A. Connected Relationship and Connected Transaction
Huaneng International, Huaneng Group and HIPDC entered into
the Entrusted Management Agreement on 6th November, 2002.
According to the Entrusted Management Agreement, Huaneng
Group and HIPDC agreed to entrust the management of the
Entrusted Power Plants to Huaneng International and pay
service fees to Huaneng International.
Huaneng Group holds a 51.98% interest in HIPDC and is the
controlling shareholder of HIPDC. HIPDC holds 42.58% of the
shares of Huaneng International and is the largest
shareholder of Huaneng International. According to article
12 of clause 3 of Section 3 "Connected Transaction" of the
Shanghai Listing Rules, this transaction constitutes a
connected transaction. The Board of Directors of Huaneng
International should give an opinion as to whether the
transaction is in the interest of the Company and appoint an
independent financial advisor to give an opinion as to
whether the Connected Transaction is fair and reasonable so
far as all its shareholders are concerned.
B. Basic information about the parties to the Connected Transaction
(1) Huaneng International
Address: West Wing, Building C, Tianyin Mansion, 2C Fuxingmennan
Street, Xicheng District, Beijing
Registered capital: RMB6 billion
Legal representative: Mr. Li Xiaopeng
Stock abbreviation: Huaneng International
Stock code: 600011 (Shanghai), 902 (Hong Kong), HNP (New York)
Industry: Power generation
Major business: power plants; development, investment and operation of
other related enterprises mainly engaged in the export
business
Huaneng International was established on 30th June,
1994. In October 1994, the Company for the first
time publicly issued 1.25 billion overseas-listed
foreign shares and was listed on the New York Stock
Exchange, USA by way of the issue of 31,250,000
American Depository Receipts ("ADR", each ADR
represents 40 foreign shares). In May 1997, Huaneng
International successfully issued US$200,000,000
convertible notes in the international capital
markets. In June 1997, the Company further issued
US$30,000,000 convertible notes. In January 1998,
the foreign shares of Huaneng International were
listed on The Stock Exchange of Hong Kong Limited
by way of an introduction. In March 1998, Huaneng
International successfully placed 250,000,000 H
shares and at the same time placed 400,000,000
State-owned Legal Person Shares to HIPDC. In
November 2001, Huaneng International issued
350,000,000 Renminbi denominated ordinary shares (A
Shares), of which: 250,000,000 shares were issued
to the public and 100,000,000 State-owned Legal
Person Shares were placed to HIPDC. At present, the
tradable A Shares of Huaneng International listed
on the Shanghai Stock Exchange amount to
250,000,000 shares with a total share capital of
RMB6 billion.
As regards to the shareholding structure of Huaneng
International, HIPDC has a 42.58% shareholding,
other legal person investors have a 28.25%
shareholding, domestic public shareholders have a
4.17% shareholding and foreign shareholders have a
25% shareholding.
Currently, Huaneng International is the largest
independent power generation company in the PRC and
wholly-owns 12 power plants, has a controlling
interest in three power plants and has an interest
in two power plants. The power plants are
extensively located in provinces and cities of the
PRC with fast economic growth, including Liaoning,
Hebei, Shandong, Jiangsu, Shanghai, Zhejiang,
Fujian and Guangdong.
(2) Huaneng Group
Registered address: A23 Fuxing Road, Haidian District, Beijing
Registered capital: RMB1.9 billion
Legal representative: Mr. Li Xiaopeng
Major businesses: transportation, petrochemical, energy-saving facilities,
steel, timber, cement and related industries by way of
exclusive funds derived from the substitution of oil by
coal; investing in exported products which generates
foreign exchange; organising power generation and sale;
trading of products developed and produced by the Group
and the relevant necessary raw materials; technical
development and introduction of technologies in
substituting oil by coal and reasonable utilisation of
energy, and the sale of those developed technologies;
equipment leasing and import and export business as
approved by the Ministry of Economics and Trade; managing
and co-ordinating various businesses of the members of the
group; providing technical and information advisory
services.
Huaneng Group was duly established upon the
approval of the State Council in 1998. It is a
large State-owned enterprise group with power
generation as its core business. It was established
from the State oil to coal substitution
professional funds for the purpose of implementing
the State policy on substituting oil by coal. As at
the end of year 2001, the total amount of the
consolidated assets of Huaneng Group was RMB145.6
billion; the total amount of consolidated
liabilities was RMB103.5 billion; net assets
amounted to RMB42.1 billion; the total amount of
the consolidated profit was RMB4.35 billion; the
realised sales income for the year was RMB34
billion.
(3) HIPDC
Registered address: 2C Fuxingmennan Street, Xicheng District, Beijing
Registered capital: US$450,000,000
Legal representative: Mr. Li Xiaopeng
Major businesses: construction and operation of power plants and the relevant
construction works, including raising funds inside and
outside the PRC, importing principal and ancillary
equipment and machinery and providing raw materials, fuel
and materials for the construction and operation of the
power plants
HIPDC is a Sino-foreign joint venture limited
liability company jointly invested and established
by Huaneng Refined Coal Company, BOC (Hong Kong)
Investment Company Limited, China Resources
(Holdings) Company Limited, China Construction Bank
and China Water Conservancy Power Foreign Company
in June 1985 upon approval of the State Council.
The shareholding held by Huaneng Refined Coal
Company is currently held by
Huaneng Group whereas the shareholding held by
China Construction Bank is currently held by China
Xinda Trust Investment Company. As at the end of
2001, the net assets of HIPDC amounted to RMB13.173
billion and the realised net profit for the year
amounted to RMB1.587 billion.
IV. Basic Information about the Entrusted Power Plants
A. List of Entrusted Power Plants
According to the Entrusted Management Agreement, the scope
of the Entrusted Power Plants shall be consistent with Schedule 1 of
the Entrusted Management Agreement duly amended from time to time.
The Entrusted Power Plants set out in Schedule 1 are as follows:
1. Entrusted by Huaneng Group
Huaneng Group Xindian Power Plant
Huaneng Group Baiyang River Power Plant
Yimin Huaneng Dongdian Coal-Fired Power Limited
Liability Company
Tianjin Huaneng Yangliuqin Power Generation Limited
Liability Company
Jinggangshan Huaneng Power Generation Limited
Liability Company
Daqing Huaneng Xinhua Power Generation Limited
Liability Company
Shanxi Huaneng Yushe Power Limited Liability Company
Suzhou Huaneng Thermal Power Limited Liability
Company
Henan Huaneng Qinbei Power Generation Limited
Liability Company
Hubei Huaneng Sujiawan Power Generation Limited
Liability Company
Changshan Huaneng Thermal Power Plant
Wuhan Huazhong Huaneng Power Generation Joint Stock
Limited Company
Guangdong Yuehwa Power Generation Limited Liability
Company
Inner Mongolia Mengdian Huaneng Thermal Power
Generation Company Limited
Liaoning Nenggang Power Plant Company Limited
Haikou Thermal Generation Company Limited
Hegang Power Generation Company Limited
2. Entrusted by HIPDC
HIPDC Chongqin Branch Company (Luohuang Power Plant)
HIPDC Chongqing Branch Company (Chongqing CCGT)
HIPDC Yueyang Branch Company
HIPDC Yingkou Branch Company
HIPDC Beijing Branch Company (Beijing Huaneng
Thermal Power Plant)
Please refer to the Announcement published by Huaneng
International for the specific operational information of
the Entrusted Power Plants listed above.
V. Principles in relation to this Connected Transaction
To comply with the provisions of the laws, legal stipulations and
relevant policies of the State;
To comply with the principles of equal negotiations and equal
consideration;
To comply with the principles of openness, fairness, fair play and
honesty;
To fully protect the interests of all the shareholders, particularly
the interests of the independent shareholders.
VI. Matters relating to the Entrusted Management
The Entrusted Management Agreement was signed by Huaneng Group, HIPDC
and Huaneng International on 6th November, 2002.
A. Details of the Entrusted Management
According to the provisions of the Entrusted Management
Agreement, Huaneng International shall provide management service in
respect of the Entrusted Power Plants to the entrusting parties in
accordance with all applicable regulations, with reference to the
management and operation experience applicable to thermal power
plants both inside and outside the PRC and advance and effective
management methods formed by the Company over the past years. The
management service provided by Huaneng International shall include
all or part of the provisions stipulated in Chapter 2 of the
Entrusted Management Agreement but shall not exceed the management
right to which the entrusting parties are entitled in respect of any
Entrusted Power Plant according to the law or pursuant to the
relevant agreements or arrangements, including: comprehensive planned
management, annual planned management, power operation and sale
management, production management of power plants, fuel management,
construction management, financial management, human resources and
labour wages management, comprehensive affairs management,
shareholding management and reporting/co-ordination management.
B. Principles used in determining the service fee for the entrusted
management
According to the Entrusted Management Agreement, Huaneng
Group and HIPDC shall pay a service fee to Huaneng International. The
service fee comprises of the following three components:
1. costs (including set-up, operational, staff and
other recurrent items to be incurred by Huaneng
International in managing the Entrusted Power
Plants);
2. premium (which covers estimation risks); and
3. an incentive/penalty component.
The costs as referred to in (1) above will be adjusted
annually in accordance with the Entrusted Management Agreement, which
is by reference to the inflation rate and the salary component will
be adjusted by the percentage increase approved by the board of the
Company.
C. Service fee of this entrustment
Huaneng Group, HIPDC and Huaneng International agree that
the service fee will comprise the following three components:
1. costs, namely RMB46 million per annum;
2. a premium to cover estimation risks which represents 10% of
the costs, namely RMB4.6 million per annum; and
3. an incentive/penalty component which is calculated based on
the confirmed results and does not exceed 15% of the costs,
namely either an incentive or a penalty of not more than
RMB6.9 million.
There will be no adjustments of the service fee if the
aggregate Net Installed Capacity of the Entrusted Power Plants does
not exceed 14,000 MW. If the aggregate net installed capacity of the
Entrusted Power Plants exceeds 14,000 MW, the monthly service fee
payable by Huaneng Group and/or HIPDC to the Company shall be
adjusted as follows:
the aggregate of the actual net installed capacity
the service fee payable consigned under the entrusted management
for the previous month x for that month
--------------------------------------------------------
the aggregate of the actual net installed capacity
consigned under the entrusted management for the
previous month
The total service fee will be adjusted annually by reference
to the inflation rate of the previous year as published by the State
Statistic Department and the salary component will be adjusted by the
percentage increase approved by the board of the Company.
D. Confirmation of Results
Huaneng Group and HIPDC will confirm the management services
of Huaneng International according to, including but not limited to,
the following two categories of results confirmation standards: (i)
extent of annual achievement compared with the budget (including but
not limited to indications such as power output, profit); and (ii)
safe production.
E. Payment Method of Service Fee
Huaneng Group and HIPDC will pay the service fee to Huaneng
International in cash. The costs and the premium component of the
service fee will be settled monthly. Huaneng Group and HIPDC will pay
the service fee for the current month to Huaneng International before
the tenth day of each month. The incentive or penalty component of
the service fee will be paid no later than a period of 90 days after
conclusion of each year after confirmation of the performance by
Huaneng International.
F. Conditions for Taking Effect of the Entrusted Management Agreement
The Entrusted Management Agreement becomes effective after
approval by Huaneng Group, HIPDC and Huaneng International through
appropriate procedures and approval at an Extraordinary General
Meeting of Huaneng International.
G. Period for the Performance of the Entrusted Management Agreement
Except otherwise agreed by Huaneng Group, HIPDC and Huaneng
International, the term of the Entrusted Management Agreement will be
5 years. Upon expiry of the term of the Entrusted Management
Agreement, the Entrusted Management Agreement will continue to be
effective unless any party intends otherwise. This entrustment may
be: (i) terminated as a result of a breach by Huaneng International;
(ii)
terminated as a result of a breach by Huaneng Group and/or HIPDC;
(iii) terminated as a result of the issue of 30 days' prior
termination notice by Huaneng Group and/or HIPDC to Huaneng
International or issue of 90 days' prior termination notice by
Huaneng International to Huaneng Group and/or HIPDC; and (iv)
terminated if Huaneng Group and/or HIPDC and/or Huaneng International
becomes bankrupt or loses its repayment ability.
VII. Opinion of the Independent Financial Advisor
A. Basic Assumptions
Our opinion on this Connected Transaction is given on the
following assumptions:
1. the information on which we have relied is true,
accurate and complete;
2. there is no material change in the existing laws,
legal stipulations, guiding principles and policies
of the State;
3. there is no material change in the social and
operating environment in which Huaneng
International, Huaneng Group, HIPDC and the
Entrusted Power Plants involved in this Connected
Transaction are situated;
4. there is no material adverse change caused by other
unforeseen or force majeure factors.
B. Factors of Consideration
We have considered the following factors when issuing our
opinion on this Connected Transaction:
1. main terms of the Entrusted Management Agreement;
2. completion of the legal works of this Connected
Transaction;
3. performance of the legal procedures of this
Connected Transaction;
4. prices of power generation companies in the major
markets including the PRC, Hong Kong and South-east
Asia;
5. important data of similar transactions in the PRC,
Hong Kong etc;
6. operation and market conditions of the Entrusted
Power Plants.
C. Assessment on this Connected Transaction
After conducting careful and necessary investigations and
reviewing the documents, data and information which we consider
necessary for issuing this opinion including but not limited to the
basic
information on the Entrusted Management Agreement, the parties to the
transaction and the subject enterprises involved in this Connected
Transaction and information on the securities markets available to
the public, and after conducting relevant inquiries and detailed
discussions on the relevant matters, our opinion is as follows:
1. This entrusted management transaction is legal
Huaneng International and Huaneng Group and HIPDC have
signed the Entrusted Management Agreement in relation to this
Connected Transaction, pursuant to which Huaneng Group and HIPDC
represent and warrant that there is no third party consent relating
to all Entrusted Power Plants without which this entrustment may not
be conducted.
At the 22nd meeting of the Third Board of Directors of
Huaneng International held on 5th November, 2002, the relevant
resolutions related to this Connected Transaction were adopted.
Directors of Huaneng International having an interest in this
transaction have not participated in the voting of the resolution
related to this Connected Transaction.
As the entrusted parties, Entrusted Power Plants and
relevant intermediaries have performed the relevant legal work
according to the legal procedures, we consider that this Connected
Transaction is lawful.
2. This entrusted management transaction will have an active
impact on the future production of Huaneng International
Huaneng International is currently the largest power
generation company in the PRC and is listed on the Shanghai Stock
Exchange of the PRC, the Hong Kong Stock Exchange and the New York
Stock Exchange of the USA. The Company possesses extensive experience
and resources in the operation and management of power generation, in
particular management of thermal power generation assets. Huaneng
Group and HIPDC own substantial thermal power generation assets.
Accordingly, Huaneng Group and HIPDC are willing to entrust Huaneng
International with the management of the thermal power assets
controlled by them or in which they have interests in order to
enhance the management efficiency of the assets, to ensure reasonable
allocation of resources and to permit full performance of Huaneng
International's experience and ability in the management of thermal
power generation assets.
This entrustment will bring an active impact on the future
development of Huaneng International.
After implementation of this entrustment, Huaneng
International will be entrusted with the management of power assets
with an installed capacity of 14,443 MW, thus increasing the
installed capacity under the management of Huaneng International from
14,820 MW to 29,263 MW, representing an increase of 97% which will
enhance the ability and experience of the Company in the operation
and management of large-scale power generation assets.
This entrustment will bring new sources of income for
Huaneng International. The annual revenue of Huaneng International in
2001 was RMB15,791,000,000. The annual revenue of Huaneng
International will increase by RMB57,500,000 as a result of the
service fee of this entrustment if the Company receives the costs,
the premium and the incentive component in full.
This entrustment will further strengthen the leading
position of Huaneng International in the power generation market of
the PRC. Through the management of new power assets, Huaneng
International will have the opportunity to broaden its operation and
management scope of the power markets in Liaoning Province, Shandong
Province and Hebei Province, etc. and enter into the rapidly
developing power markets of Hubei Province, Hunan Province, Inner
Mongolia, Chongqing, etc. Accordingly, the power assets of Huaneng
International by way of shareholding, equity participation and
entrusted management will cover 19 provinces, cities and autonomous
regions in the PRC.
This entrustment will lay a foundation for future mergers
and acquisitions by Huaneng International. Huaneng International will
ascertain information of the Entrusted Power Plants during the
process of operation and management thereby obtaining more experience
in the operation and management of such plants. It also establishes a
foundation for potential acquisitions or assets restructuring. All
the above will have an active impact on the operation and development
of the Company.
3. The service fee of this entrusted management transaction is
reasonable
We consider that the pricing method of the service fee of
this entrusted management has been formulated after full
consideration of the potential costs and risks arising from the
provision of the management services by Huaneng International to the
Entrusted Power Plants and included a certain proportion of profit
margin. After our detailed examination of the pricing method of the
service fee, we are of the opinion that: the pricing method of the
service fee of this entrustment is reasonable and appropriate which
reflects the value of the management services provided by Huaneng
International.
4. The risk faced by Huaneng International in this entrusted
management transaction is relatively small
The Entrusted Management Agreement also sets out an
incentive and penalty mechanism for Huaneng International, and also
stipulates the maximum incentive and penalty amounts on the basis of
the confirmed results. We are of the opinion that such provision is
instrumental in encouraging and supervising the due performance of
the obligations stipulated in the Entrusted Management Agreement by
Huaneng International. The maximum incentive or penalty amounts shall
not exceed 15% of the management costs, and, accordingly the risks
faced by Huaneng International during the normal performance of the
Agreement is controlled to a certain extent.
Both Huaneng Group and HIPDC are large State-owned power
generation companies in the PRC. The debt structures of the two
companies are reasonable with good credit ratings. It is anticipated
that the implementation of management of the Entrusted Power Plants
will further enhance the operation efficiency of the power plants and
improve and enhance the financial conditions of the two companies.
The amount of the service fee stipulated in the Entrusted Management
Agreement is relatively small compared with the recurrent operating
expenses of the two companies. As the service fee has to be paid each
month according to the relevant provisions, we consider that the
possibility of default in the payment of the service fee is very
minimal.
Based on the above considerations, we believe this Connected
Transaction has been concluded through arm's length negotiations
between the parties to the transaction and the terms are reasonable.
The Connected Transaction is also fair as far as all the shareholders
of Huaneng International are concerned. This entrusted transaction
will be instrumental in enhancing the management experience of
Huaneng International and will make an impact on the future
development of the Company, and the potential risk faced by Huaneng
International will be relatively small in this transaction.
D. Independent Opinion
We consider that this Connected Transaction complies with
the relevant laws and legal stipulations of the Contract Law of The
People's Republic of China, Company Law of The People's Republic of
China, Securities Law of The People's Republic of China and the
Shanghai Listing Rules and the provisions of the Articles of
Association of Huaneng International and adheres to the principle of
fairness, reasonableness, justness and honesty, and the consideration
of the transaction is reasonable without damaging the interests of
the Company and independent shareholders of the Company.
VIII. Reminder to the Shareholders
A. This Connected Transaction falls into the category of a
connected transaction between a listed company and its
controlling shareholders and the parent company of the
controlling shareholders.
B. Gao Zongze, Zheng Jianchao and Qian Zhongwei, independent
directors of Huaneng International are of the opinion that:
1. The voting procedures of the Board of Directors of
Huaneng International in relation to this Connected
Transaction and this Connected Transaction comply
with the provisions of the Articles of Association
of the Company and the Shanghai Listing Rules.
2. This Connected Transaction is fair as far as
Huaneng International and all its shareholders are
concerned.
C. This Connected Transaction is subject to approval at the
Extraordinary General Meeting of Huaneng International to be
held on 23rd December, 2002. According to the provisions of
the Shanghai Listing Rules, when voting is being conducted
on this Connected Transaction at the general meeting,
associates interested in this Connected Transaction will
abstain from voting in respect of the relevant resolution
relating to this Connected Transaction at the general
meeting.
D. We would especially remind all the independent shareholders
of Huaneng International to carefully read the relevant
documents, including the Entrusted Management Agreement, the
board resolutions and the Announcement on the connected
transaction. The above documents are kept at the Securities
Department of Huaneng International.
IX. Documents for inspection
A. Resolutions of the 22nd meeting of the Third Board of
Directors of Huaneng International;
B. Entrusted Management Agreement entered into between Huaneng
International, Huaneng Group and HIPDC; and
C. Announcement on the Connected Transaction.
Beijing H&J Vanguard Consulting Limited
7th November, 2002
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NOTICE OF EXTRAORDINARY GENERAL MEETING
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[GRAPHIC OMITTED][GRAPHIC OMITTED]
(A Sino-foreign joint stock limited company
incorporated in the People's Republic of China)
Notice is hereby given that an extraordinary general meeting of Huaneng Power
International, Inc. (the "Company") will be held at 9:00 a.m. on 23rd
December, 2002 (Monday) at Beijing International Convention Centre at No. 8
Beichen East Road, Chaoyang District, Beijing, The People's Republic of China,
for the purpose of considering and, if thought fit, passing the following
special resolution and ordinary resolutions:
Special Resolution:
1. To consider and approve the amendments to the articles of
association of the Company (for details of the amendments,
see Note 1).
Ordinary resolutions:
2. To consider and approve the proposal for change of session
of directors (for biographies of the candidates of
directors, see Note 2):
2.1 Elect Mr. Li Xiaopeng as Director of the Company.
2.2 Elect Mr. Wang Xiaosong as Director of the Company.
2.3 Elect Mr. Ye Daji as Director of the Company.
2.4 Elect Mr. Huang Jinkai as Director of the Company.
2.5 Elect Mr. Liu Jinlong as Director of the Company.
2.6 Elect Mr. Shan Qunying as Director of the Company.
2.7 Elect Mr. Yang Shengming as Director of the Company.
2.8 Elect Mr. Xu Zujian as Director of the Company.
2.9 Elect Mr. Gao Zongze as Independent Director of the
Company.
2.10 Elect Mr. Zheng Jianchao as Independent Director of
the Company.
2.11 Elect Mr. Qian Zhongwei as Independent Director of
the Company.
2.12 Elect Mr. Xia Donglin as Independent Director of
the Company.
3. To consider and approve the proposal for change of session
of supervisors (for biographies of the candidates of
supervisors, see Note 3):
3.1 Elect Mr. Wei Yunpeng as Supervisor of the Company.
3.2 Elect Mr. Pan Jianmin as Supervisor of the Company.
3.3 Elect Mr. Liu Shuyuan as Supervisor of the Company.
3.4 Elect Mr. Li Yonglin as Supervisor of the Company.
3.5 Elect Mr. Shen Weibing as Supervisor of the Company.
3.6 Elect Mr. Shen Zongmin as Supervisor of the Company.
4 To approve the establishment of Strategy Committee, Audit
Committee, Nomination Committee, and Remuneration and
Appraisal Committee under the Board of Directors.
5. To approve and confirm the terms of the Entrusted Management
Agreement (as defined in the announcement made by the
Company dated 7th November, 2002) entered into by the
Company, China Huaneng Group and Huaneng International Power
Development Corporation on 6th November, 2002, and the
transaction contemplated therein.
By Order of the Board
Huang Long
Company Secretary
7th November, 2002
Registered address of the Company:
West Wing, Building C,
Tianyin Mansion,
2C Fuxingmennan Street,
Xicheng District,
Beijing 100031,
The People's Republic of China
Notes:
1. Proposed amendments to the Articles of Association
1.1 The original second and third paragraphs of Article 1 which
provides that:-
"These Articles of Association (hereinafter referred to as
the "Articles of Association" or the "Company's Articles of
Association") are formulated in accordance with the "Company
Law of the People's Republic of China" (hereinafter referred
to as the "Company Law"); the "Special
Regulations of the State Council Relating to Issuance of
Shares and Overseas Listing of Joint Stock Limited
Companies" (hereinafter referred to as the "Special
Regulations"), the "Mandatory Provisions of the Articles of
Association for Companies Listing Overseas" (hereinafter
referred to as the "Mandatory Provisions") and the relevant
provisions of other applicable laws and administrative
regulations together with the articles of association
adopted by the First General Shareholders Meeting held on
30th June, 1994 (hereinafter referred as the "Original
Articles")
The State Commission of Restructuring the Economic System of
the People's Republic of China, pursuant to the document Ti
Gai Sheng (1994) No. 74, and the Ministry of Foreign Trade
and Economic Cooperation of the People's Republic of China,
pursuant to the document Wai Jing Mao Han Zi No. 338,
approved the establishment of the Company by the promoter
method. The Company registered at the State Administration
for Industry and Commerce of the People's Republic of China
and obtained its business license on 30th June, 1994. The
number of its business license is Gong Shang Qi He Zi No.
0496."
is hereby amended as follows:-
"These Articles of Association (hereinafter referred to as
the "Articles of Association" or the "Company's Articles of
Association") are formulated in accordance with the "Company
Law of the People's Republic of China" (hereinafter referred
to as the "Company Law"), the "Special Regulations of the
State Council Relating to Issuance of Shares and Overseas
Listing of Joint Stock Limited Companies" (hereinafter
referred to as the "Special Regulations"), the "Mandatory
Provisions of the Articles of Association for Companies
Listing Overseas" (hereinafter referred to as the "Mandatory
Provisions") and the relevant provisions of other applicable
laws and administrative regulations together with the
articles of association adopted by the First General
Shareholders Meeting held on 30th June, 1994 together with
the subsequent amendments made up to the date when this
articles of association (hereinafter referred as the
"Original Articles") take effect."
The State Commission for Restructuring the Economic System
of the People's Republic of China, pursuant to the document
Ti Gai Sheng (1994) No. 74, and the Ministry of Foreign
Trade and Economic Cooperation of the People's Republic of
China, pursuant to the document Wai Jing Mao Han Zi No. 338,
approved the establishment of the Company by the promoter
method. The Company registered at the State Administration
for Industry and Commerce of the People's Republic of China
and obtained its business license on 30th June, 1994. The
registration number of its business license is Gong Shang Qi
He Zi No. 000496."
1.2 The original Article 4 which provides that:-
"The legal representative of the Company is the
Chairman of the Board of Directors".
is hereby amended as follows:-
"The Chairman of the Board of Directors is the
legal representative of the Company."
1.3 The original Article 17 which provides that:-
"Subject to approval of the Company's plans to
issue overseas listed foreign shares and domestic
shares by the securities supervisory authorities of
the State Council, the Board of Directors of the
Company may make arrangement to implement such
plans for the issue of such shares.
The Company's plan to issue overseas listed foreign
shares and domestic shares respectively pursuant to
the provisions aforesaid may be implemented
respectively within 15 months from the date of
approval of the Securities Commission of the State
Council."
is hereby amended as follows:-
"Subject to approval of the Company's plans to
issue overseas listed foreign shares and domestic
shares by the securities supervisory authorities of
the State Council, the Board of Directors of the
Company may make arrangement to implement such
plans for the issue of such shares.
The Company's plan to issue overseas listed foreign
shares and domestic shares respectively pursuant to
the provisions aforesaid may be implemented
respectively within 15 months from the date of
approval of the securities regulatory body of the
State Council."
1.4 The original Article 18 which provides that:-
"In issuing the planned shares, the Company shall
issue the domestic shares and the overseas listed
foreign shares in one tranche, respectively.
Subject to the approval by the State Council
Securities Committee, the Company may issue shares
in different tranches in special circumstances."
is hereby amended as follows:-
"In issuing the planned shares, the Company shall
issue the domestic shares and the overseas listed
foreign shares in one tranche, respectively.
Subject to the approval by the State Council's
securities regulatory bodies, the Company may issue
shares in different tranches in special
circumstance."
1.5 the original Article 84 which provides that:-
"Except for other classes of shareholders, holders
of domestic shares and overseas listed foreign
shares are deemed to be different classes of
shareholders.
The special procedures for approval by class
shareholders shall not apply to the following
circumstances:
(1) where the Company issues, upon approval by
special resolution of the shareholders in
a general meeting, either separately or
concurrently once every twelve months, not
more than twenty percent (20%) of each of
the existing issued domestic shares and
overseas listing foreign shares of the
Company;
(2) where the Company's plan to issue domestic
shares and overseas listed foreign shares
upon its establishment is implemented
within fifteen (15) months from the date
of approval by the State Council
Securities Committee."
is hereby amended as follows:-
"Except for other classes of shareholders, holders
of domestic shares and overseas listed foreign
shares are deemed to be different classes of
shareholders.
The special procedures for approval by class
shareholders shall not apply to the following
circumstances:
(1) where the Company issues, upon approval by
special resolution of the shareholders in
a general meeting, either separately or
concurrently once every twelve months, not
more than twenty percent (20%) of each of
the existing issued domestic shares and
overseas listed foreign shares of the
Company;
(2) where the Company's plan to issue domestic
shares and overseas listed foreign shares
upon its establishment is implemented
within fifteen (15) months from the date
of approval by the State Council's
securities regulatory bodies."
1.6 The original Article 85 which provides that:-
"The Company shall have a board of directors which
shall consist of nineteen (19) members. There shall
be one (1) Chairman and one (1) Vice-Chairman."
is hereby amended as follows:-
"The Company shall have a board of directors
comprising of 12 directors. External directors
shall account for more than (and including) half of
the total number of members of the board of
directors, of which independent directors
(directors not holding any post other than being a
director of the Company and there is no
relationship with the Company and major
shareholders of the Company which might hinder
their independent and objective judgment, the same
below) shall account for more than (and including)
one-third of the total number of members of the
board of directors, and that the independent
directors shall include at least one accounting
professional. The board of directors shall have a
Chairman and Deputy Chairman.
The board of directors shall establish Audit,
Nomination, Strategy, Remuneration and Appraisal
committees. All the members of such special
committees shall comprise of directors, of which
independent directors shall account for the
majority of the members of the Audit, Nomination,
Remuneration and Appraisal committees and shall act
as the convenor."
1.7 The original Article 86 which provides that:-
"Directors shall be elected by shareholders at
shareholders' general meetings. The term of the
office of the directors shall be three years.
Directors may be re-elected after the expiration of
their term.
A person nominated for election as a director,
unless he is a Director whose term is complete (or
he has been selected by the Board of Directors)
shall give notice in writing to the Company's
shareholders of his intentions and of his
willingness to be elected at least seven (7) days
before the date of such shareholders' general
meeting.
The Chairman and Vice-Chairman shall be elected and
removed by more than one-half of the total number
of directors. The Chairman and Vice-Chairman have
three (3) year terms and may be re-elected after
the expiration of their terms.
The shareholders' general meeting may, by ordinary
resolution, remove any director before the
expiration of his term of office (but without
prejudice to such director's right to claim damages
based on any contract) on the condition that all
the relevant laws and administrative regulations
are fully complied with.
A director is not required to hold shares in the
Company."
is hereby amended as follows:-
"Directors shall be elected by shareholders at
shareholders' general meetings. The term of the
office of the directors shall be not more than
three years. Directors may be re-elected after the
expiration of their term.
A person nominated for election as a director,
unless he is a Director whose term is complete (or
he has been selected by the Board of Directors)
shall give notice in writing to the Company's
shareholders of his intentions and of his
willingness to be elected at least seven (7) days
before the date of such shareholders' general
meeting.
The Chairman and Vice-Chairman shall be elected and
removed by more than one-half of the total number
of directors. The terms of Chairman and
Vice-Chairman shall be same as the term of the
relevant session and may be re-elected after the
expiration of their terms.
The shareholders' general meeting may, by ordinary
resolution, remove any director before the
expiration of his term of office (but without
prejudice to such director's right to claim damages
based on any contract) on the condition that all
the relevant laws and administrative regulations
are fully complied with.
The Board of Directors shall put forward a proposal
at a shareholders' meeting to remove those
independent directors who fail to attend a board
meeting in person three times in succession and
those directors who fail to attend a board meeting
in person twice in succession and fail to appoint
other directors to attend. Except the above
circumstances and conditions disallowing the
holding of the post of director stipulated in the
Company Law, an independent director may not be
removed without reason before expiration of his
term of office. If an Independent Director is
removed prior to expiration of his term of office,
the Company shall disclose the same as a special
disclosure. The removed Independent Director may
make a public announcement if he considers the
reason for his removal is inappropriate.
A director is not required to hold shares in the
Company."
1.8 The following three new Articles 87, 88 and 89 be
added immediately after the original Article 86:-
Article 87
Directors may tender their resignation prior to
expiration of their term of office. If a director
resigns, he should submit a written resignation
report to the board of directors. Independent
Directors also have to state the circumstances
relating to their resignation or which they
consider necessary to arouse the concern of the
shareholders and creditors of the Company.
If the resignation of a director causes the number
of board members of the Company to be less than the
quorum, the resignation report of such director
shall only become effective when the succeeding
director fills his vacancy created as a result of
his resignation. The directors shall convene an
extraordinary general meeting as soon as possible
and elect a director to fill the vacancy created as
a result of the resignation of the director. Before
the passing of a resolution in relation to the
election of directors at a shareholders' meeting,
the power of the director tendering his resignation
and the members of the Board of Directors shall be
subject to reasonable restrictions.
If the proportion of independent directors in the
Board of Directors is less than the minimum
requirement stipulated in the Articles of
Association as a result of the resignation of an
independent director, the resignation report of
such Independent Director shall be effective when
his vacancy is filled by the succeeding Independent
Director.
Article 88
Independent directors shall comply with the
following basic requirements:
(1) possessing the qualifications for acting
as a director of the Company according to
the laws, administrative regulations and
other relevant stipulations;
(2) possessing independence as required by the
relevant laws, administrative regulations
and departmental rules;
(3) possessing basic knowledge in relation to
the operation of listed companies and
being familiar with the relevant laws,
administrative regulations and rules;
(4) possessing more than five years' working
experience relating to law or economics or
that is necessary for the performance of
duties of independent directors;
(5) other conditions stipulated in the
Articles of Association.
Article 89
Candidates for Independent Directors of the Company
shall be nominated by the Board of Directors,
Supervisory Committee and shareholders singly or
jointly holding more than 1% of the issued shares
of the Company.
1.9 The original Article 104 which provides that:-
"The Supervisory Committee shall consist of three (3)
supervisors, one of whom is the chairman of the committee.
The term of office for a supervisor is three (3) years and a
supervisor is eligible for re-election after the expiration
of the three year term.
The election and removal of the Chairman of the Supervisory
Committee shall be passed by two-thirds or more than
two-thirds of its members."
is hereby amended as follows:-
"The Supervisory Committee shall consist of seven (7)
Supervisors, one of whom is the Chairman of the committee
and one acts as Vice-Chairman. External supervisors shall
account for more than half of the total number of members of
the Supervisory Committee. The term of office for a
Supervisor shall not more than three (3) years and a
Supervisor is eligible for re-election after the expiration
of the three year term.
The election and removal of the Chairman and Vice Chairman
of the Supervisory Committee shall be passed by two-thirds
or more than two-thirds of its members."
1.10 The original Article 105 which provides that:-
"The members of the Supervisory Committee shall be two (2)
representatives of the shareholders and one (1) employee
representative. The election and removal of the
representatives of the shareholders shall be decided at
shareholders' general meetings. The election and removal of
the employee representative shall be democratically decided
by the employees of the Company."
is hereby amended as follows:-
"The members of the Supervisory Committee shall be six (6)
representatives of the shareholders and one (1) employee
representative. The election and removal of the
representatives of the shareholders shall be decided at
shareholders' general meetings. The election and removal of
the employee representative shall be democratically decided
by the employees of the Company."
1.11 The following new Article 116 be added immediately after
Article 112:
"Independent directors must possess independence. The
following personnel shall not act as Independent Directors:
(1) personnel holding posts in the Company or
subsidiaries of the Company and the immediate
family of such personnel or persons possessing
major social relationship (immediate family shall
mean spouses, parents, children etc; major social
relationship shall mean siblings, fathers-in-law,
mothers-in-law, sons-in-law, daughters-in-law,
spouses of siblings, siblings of spouses etc);
(2) natural person shareholders directly or indirectly
holding more than 1% of the issued shares of the
Company or the top 10 shareholders of the Company
and their immediate family;
(3) personnel holding any post in the shareholders
units directly or indirectly holding more than 5%
of the issued shares of the Company or the top 5
shareholder units of the Company and their
immediate family;
(4) personnel under the circumstances as set out in
(1) to (3) above within the latest year;
(5) personnel providing financial, legal or advisory
services to the Company or subsidiaries of the
Company;
(6) personnel confirmed by the securities regulatory
organ of the State Council not being allowed to
act as Independent Directors."
1.12 The original Article 134 which provides that:-
"The financial statements of the Company shall not only be
prepared in accordance with PRC accounting standards and
regulations but also be prepared in accordance with
international accounting standards or the accounting
standards of the place where the shares are listed. If
there are material differences in the financial statements
prepared using two different accounting standards, the
differences should be set out in the notes to the
financial statements. In distributing after-tax profits of
the relevant fiscal year, the after-tax profits shall be
the smaller amount in those two financial statements."
is hereby amended as follows:-
"The financial statements of the Company shall not only be
prepared in accordance with PRC accounting standards and
regulations but also be prepared in accordance with
international accounting standards. If there are material
differences in the financial statements prepared using two
different accounting standards, the differences should be
set out in the notes to the financial statements. In
distributing after-tax profits of the relevant fiscal
year, the after-tax profits shall be the smaller amount in
those two financial statements."
1.13 The original Article 135 which provides that:-
"Any interim results or financial information publicly
announced or disclosed by the Company shall be prepared in
accordance with PRC accounting standards and regulations
and, at the same time, shall also be prepared in
accordance with international accounting standards or the
accounting standards of the place where the shares are
listed."
is hereby amended as follows:-
"Any interim results, annual results or other relevant
financial information publicly announced or disclosed by
the Company shall be prepared in accordance with PRC
accounting standards and regulations and, at the same
time, shall also be prepared in accordance with
international accounting standards."
1.14 The original Article 136 which provides that:-
"In each fiscal year, the Company shall publicly announce
twice its financial reports. The interim financial reports
shall be publicly announced within sixty (60) days after
the end of the first six (6) months of the fiscal year and
the annual financial reports shall be publicly announced
within one hundred and twenty (120) days after the end of
the fiscal year."
is hereby amended as follows:-
"In each fiscal year, the Company shall publicly announce
four times its financial reports. The first quarterly report
shall be published with thirty (30) days after the end of
the first six (6) months of the preceding accounting year.
The interim financial reports shall be publicly announced
within sixty (60) days after the end of the first six (6)
months of the accounting year. The third quarterly report
shall be publicly announced with thirty (30) days after the
end of the first nine (9) months of the preceding accounting
year. The annual financial reports shall be publicly
announced within one hundred and twenty (120) days after the
end of the fiscal year."
1.15 The original Article 143 which provides that:-
"The Company shall appoint an independent firm of
accountants that satisfies the relevant requirements of the
PRC to audit the annual financial reports of the Company and
review other financial information."
is hereby amended as follows:-
"The Company shall appoint an independent firm of
accountants that satisfies the relevant requirements of the
PRC to audit or review the financial reports of the
Company."
1.16 the original Article 164 which provides that:-
"Amendments to these Articles of Association which involve
the provisions in the Mandatory Provisions shall be
effective after approval by the company approval authority
designated by the State Council and the State Council
Securities Committee. If the amendments involve registration
matters of the Company, the Company shall amend its
registration in accordance with the applicable laws."
is hereby amended as follows:-
"Amendments to these Articles of Association which involve
the provisions in the Mandatory Provisions shall be
effective after approval by the company approval authority
designated by the State Council. If the amendments involve
registration matters of the Company, the Company shall amend
its registration in accordance with the applicable laws."
The numbering of the Articles shall be adjusted accordingly
in light of the amendments.
2. Biographies of candidates of directors
Li Xiaopeng Mr. Li is Vice President of State Power Corporation,
Chairman of Huaneng Power International, Inc. (the "Company"), Chairman and
President of Huaneng International Power Development Corporation ("HIPDC"), as
well as Chairman and President of China Huaneng Group. From June, 1994 to
January, 2000, Mr. Li was Vice President, President and Vice Chairman of the
Company as well as Vice President and Vice Chairman of HIPDC. Before joining
HIPDC, he had successively served as Engineer of the Power System Research
Division, as Deputy Division Chief of the Planning and Operations Division,
and as General Manager of the Power Technology and Economic Research Division,
Electric Power Research Institute. Mr. Li is a senior engineer and graduated
from the North China Institute of Electric Power specializing in power plants
and power systems.
Wang Xiaosong Mr. Wang is Vice Chairman of the Company, Director and
Vice President of HIPDC, and Director and Vice President of China Huaneng
Group. From June, 1994 to January, 2000, he was General Manager of the
Securities Department of the Company, Vice President of the Company and Vice
President of HIPDC. Before joining the Company, he had served as Deputy
General Manager of Fushun Power Plant, General Manager of Yuanbaoshan Power
Plant and Chief of the Labour and Wages Division of Northeast Power
Administration. Mr. Wang is a senior engineer and graduated from Beijing
Institute of Electric Power specializing in thermal power engineering.
Ye Daji Mr. Ye is Director and President of the Company and Director
of China Huaneng Group. He has been Deputy General Manager of Huaneng Shanghai
Branch and General Manager of Huaneng Shanghai Shidongkou Second Power Plant.
From December, 1995 to January, 2000, he was Vice President of the Company and
Vice President of HIPDC. Before joining the Company, he had served as Deputy
Chief Engineer of Shanghai Shidongkou Power Plant. Mr. Ye is a senior engineer
and graduated from Shanghai Jiaotong University specializing in mechanical
engineering.
Huang Jinkai Mr. Huang is the Vice Chairman of the board of directors
of China Huaneng Group. He served as Director (General Manager) of the
Northeast Power Administration, Chairman of HIPDC and General Manager
(Director) of North China Power Group Corporation (Power Administration). He
is a senior engineer.
Liu Jinlong Mr. Liu is the Vice Chairman of China Huaneng Group. He
served as General Manager of Central China Power Group Corporation and
Director of Central China Power Administration, Chairman, General Manager,
Vice Chairman of China Huaneng Group. Mr. Liu is a senior engineer.
Shan Qunying Mr. Shan is Director of the Company and Vice President
of Hebei Provincial Construction Investment Company. He had been the Division
Chief of Hebei Provincial Construction Investment Company. Mr. Shan is a
senior engineer and graduated from Beijing Steel Institute specializing in
automation.
Yang Shengming Mr. Yang is Director of the Company, Vice President of
Fujian International Trust and Investment Company Limited and Chairman of
Fujian International Leasing Company. Mr. Yang is a senior economist and
graduated from Beijing Light Industries Institute.
Xu Zujian Mr. Xu is Director of the Company, and Chairman of Jiangsu
Investment Management Co. Ltd. He was the Vice President of Jiangsu
International Trust and Investment Company Limited, President of Jiangsu
Investment Management Co. Ltd., Director and Vice President of Jiangsu
International Asset Management Group Limited Company. Mr. Xu is a senior
economist. He graduated from Liaoning Finance Institute majoring in
infrastructure finance.
Gao Zongze Mr. Gao is an Independent Director of the Company and
Senior Partner at C&I Partners. He is an approved arbitrator of China
International Economic and Trade Arbitration Commission and China Marine
Affairs Arbitration Commission and President of All China Lawyers Association.
Mr. Gao graduated from Dalian Marine Institute and received a master's degree
in law from the Law Department of the Graduate School of the Institute of
China Academy of Social Sciences.
Zheng Jianchao Mr. Zheng is an Independent Director of the Company
and Honorary President of Electric Power Research Institute in China and
Chairman of its Academic Committee. He was elected to the Chinese Academy of
Engineering in 1995 and became Deputy Director of the Energy and Mining
Engineering Department of the Academy. He was also a member of the Academic
Committee of CIGRE, Vice President of China Electrical Engineering Institute
and editor-in-chief of the Journal of Chinese Electrical Engineering. Mr.
Zheng graduated from Qinghua University majoring in electrical engineering and
graduated from its Graduate School in 1965.
Qian Zhongwei Mr. Qian is an Independent Director of the Company and
the Vice President of the United Association of China Electric Enterprises. He
has been the Deputy Chief Engineer, Chief Engineer and Deperty head of the
Eastern China Power Industry Management Bureau, Head of Shanghai Electricity
Bureau and President of Eastern China Power Group Company. Mr. Qian is a
senior engineer and graduated from the electrical engineering department of
Qinghua University.
Xia Donglin Mr. Xia is a professor and Ph.D. master of the Economic
and Management School of Qinghua University. He is also the Advisory
Specialist of the Accounting Standard Committee of the PRC Ministry of
Finance, committee member of the China Accountiing Society, and independent
director of Zhejiang Zhongdai companies. Mr. Xia was the manager of Zhonghua
Finance Accounting and Advisory Company, head of Department Accounting of
Economic and Management School of Qinghua University, Mr. Xia is a registered
accountant (non-practising member). He graduated from the Finance and
Administration Science Research Institute of Ministry of Finance, specialising
in accounting and was awarded a PH.D. degree.
3. Biographies of candiates of Supervisors
Wei Yunpeng Mr. Wei is the Chief Accountant of China Huaneng Group,
Adjunct Chief Accountant of Huaneng International Power Development
Corporation, Chairman of China Huaneng Finance Limited Liability Company. He
served as Chief Accountant of the Company. He is senior accountant.
Pan Jianmin Mr. Pan is a Supervisor of the Company and General
Manager of the Finance Department of China Huaneng Group. He has served as
Deputy Division Chief of the Finance Department and Deputy General Manager of
the Supervising and Auditing Department of China Huaneng Group and Deputy
General of Beijing Huaneng Real Estate Development Company. Mr. Pan is a
senior accountant and graduated from Liaoning Economic and Finance Institute
specializing in infrastructure finance and credit.
Liu Shuyuan Mr. Liu is Director of the Company and President of
Liaoning Enterprises Group Company and Liaoning Energy Corporation. He has
been the General Manager of Liaoning Tieling Steel Plant, Director of Tieling
Municipal Construction Commission and Assistant to the Mayor. Mr. Liu is a
senior economist and a postgraduate specializing in economic management.
Li Yonglin Mr. Li is the head of the Power Department of Dalian
Municipal Construction Investment Company. He was a departmental grade
researcher of the Energy Exchange Department of Dalian Municipal Planning
Committee. Mr. Li graduated from Changchun Hydro-electric School of Ministry
of Hydro-electric Power, specializing in power plants, grids and power
systems.
Shen Weibing Mr. Shen is the chief officer of Nantong Investment
Management Center. He was the vice president and president of Nantong
Municipal Oil Company, vice president and legal representative of Nantong
Municipal Construction Investment Company, and deputy chief officer and chief
officer of Nantong Investment Management Centre. Mr. Shen graduated from the
Department of Materials Management of Beijing Materials Management Institute.
In 2002, he studied the MBA course in Nanjing University and obtained a master
degree in busines administration. Mr. Shen is a senior economist.
Shen Zongmin Mr. Shen is the President of Shantou Electric Power
Development Company and Chairman of Shantou Power Development Joint Stock
Company Limited. Previously, he was the President of Shantou Light Industry
Mechanical (Group) Company.
4. Eligibility for attending the Extraordinary General Meeting
Holders of the Company's foreign Shares whose names appear on the HK$
Dividend foreign Shares Register and/or the US$ Dividend foreign Shares
Register maintained by Hong Kong Registrars Limited and holders of domestic
shares whose names appear on the domestic shares register maintained by the
Company at the close of business on 29th November, 2002 are eligible to attend
the Extraordinary General Meeting.
5. Proxy
(i) A member eligible to attend and vote at the Extraordinary
General Meeting is entitled to appoint, in written form, one
or more proxies to attend and vote on behalf of him. A proxy
needs not be a shareholder.
(ii) A proxy should be appointed by a written instrument signed
by the appointor or its attorney duly authorised in writing.
If the form of proxy is signed by the attorney of the
appointor, the power of attorney authorising that attorney
to sign or other authorisation document(s) shall be
notarised.
(iii) To be valid, the power of attorney or other authorisation
document(s) which have been notarised together with the
completed form of proxy must be delivered, in the case of
holders of domestic shares, to the Company and, in the case
of holders of foreign Shares, to Hong Kong Registrars
Limited, not less than 24 hours before the time designated
for holding of the Extraordinary General Meeting.
(iv) A proxy may exercise the right to vote by a show of hands or
by poll. However, if more than one proxy is appointed by a
shareholder, such proxies shall only exercise the right to
vote by poll.
6. Registration procedures for attending the Extraordinary General Meeting
(i) A shareholder or his proxy shall produce proof of identity
when attending the meeting. If a shareholder is a legal
person, its legal representative or other persons authorised
by the board of directors or other governing body of such
shareholder may attend the Extraordinary General Meeting by
producing a copy of the resolution of the board of directors
or other governing body of such shareholder appointing such
persons to attend the meeting.
(ii) Holders of foreign Shares and domestic shares intending to
attend the Extraordinary General Meeting should return the
reply slip for attending the Extraordinary General Meeting
to the Company on or before 2nd December, 2002.
(iii) Shareholders may send the above reply slip to the Company in
person, by post or by fax.
7. Closure of Register of Members
The register of members of the Company will be closed from 22nd
November, 2002 to 22nd December, 2002 (both days inclusive).
8. Other Businesses
(i) The Extraordinary General Meeting will not last for more
than half day. Shareholders who attend shall bear their own
travelling and accommodation expenses.
(ii) The address of the share registrar for Foreign Shares of the
Company, Hong Kong Registrars Limited is at:
1901-5
19/F, Hopewell Centre
183 Queen's Road East
Hong Kong
(iii) The registered address of the Company is at:
West Wing, Building C
Tianyin Mansion
2C Fuxingmennan Street
Xicheng District
Beijing 100031
The People's Republic of China
Telephone No.: (+86)-10-66491999
Facsimile No.: (+86)-10-66491860