FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November, 2004
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F __X__ Form 40-F _____
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.)
Yes ____ No __X__
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-__________.)
N/A
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 on disposal and connected transactions of Huaneng Power
International, Inc. (the "registrant") in English made on November 3, 2004 by
the registrant.
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 3, 2004
-------------------------------------------------------------------------------
CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ACTION
-------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------
HUANENG POWER INTERNAIONAL, INC.
(A Sino-foreign joint stock limited company incorporated in the
People's Republic of China)
(STOCK CODE: 902)
DISCLOSEABLE AND CONNECTED TRANSACTION
Financial Adviser to Huaneng Power International, Inc.
[JPMorgan logo graphic omitted]
J.P. Morgan Securities (Asia Pacific) Limited
Independent Financial Adviser to the Independent Directors and
Independent Shareholders
[ROTHSCHILD logo graphic omitted]
N M Rothschild & Sons (Hong Kong) Limited
-------------------------------------------------------------------------------
A letter from the Board of Huaneng Power International, Inc. (the "Company") is
set out on pages 4 to 16 of this circular. A letter from the Independent
Directors is set out on page 17 of this circular. A letter from N M Rothschild
& Sons (Hong Kong) Limited to the Independent Directors and Independent
Shareholders is set out on pages 18 to 31 of this circular.
A NOTICE CONVENING AN EXTRAORDINARY GENERAL MEETING OF THE COMPANY TO BE HELD
AT 9 A.M. ON 17TH DECEMBER 2004 AT BEIJING INTERNATIONAL CONVENTION CENTRE AT
NO. 8 BEICHEN EAST ROAD, CHAOYANG DISTRICT, BEIJING, THE PEOPLE'S REPUBLIC OF
CHINA IS SET OUT ON PAGES 65 TO 71 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.
3rd November 2004
--------------------------------------------------------------------------------
CONTENTS
--------------------------------------------------------------------------------
Page
DEFINITIONS ..................................................................1
LETTER FROM THE BOARD
1. Introduction .......................................................4
2. Transfer Agreements ................................................6
3. Reasons for the Acquisition and Pricing Factors ....................9
4. Impact of the Acquisition .........................................9
5. Information Regarding the Target Power Plants .....................10
6. Selected Financial Information of the Target Power Plants .........13
7. Connected Transactions under Shanghai Listing Rules ...............14
8. The EGM ...........................................................15
9. Recommendation ....................................................15
10. Other Information .................................................16
LETTER FROM THE INDEPENDENT DIRECTORS .......................................17
LETTER FROM ROTHSCHILD ......................................................18
APPENDIX I - PROPERTY VALUATION REPORT ..............................32
APPENDIX II - PLANT AND MACHINERY VALUATION ..........................46
APPENDIX III - GENERAL INFORMATION ....................................61
NOTICE OF EXTRAORDINARY GENERAL MEETING .....................................65
i
-------------------------------------------------------------------------------
DEFINITIONS
-------------------------------------------------------------------------------
In this document, unless the context otherwise requires, the following
expressions have the following meanings:
"Acquisition" the purchase by the Company of the Sichuan Hydro Power Interest and
Pingliang Power Plant Interest;
"Associate" the meaning ascribed to it in the Hong Kong Listing Rules;
"Baoxinghe Company" Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company;
"Closing" the closing of the Acquisition;
"Company" Huaneng Power International, Inc.;
"Directors" the directors of the Company;
"Dongxiguan Company" Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company;
"EGM" an extraordinary general meeting of the Company to be held for
shareholders of the Company on 17th December 2004 to consider and
approve the Acquisition;
"Fujiang Company" Sichuan Huaneng Fujiang Hydro Power Limited Liability Company;
"HIPDC" Huaneng International Power Development Corporation;
"Hong Kong Listing Rules" the Rules Governing the Listing of Securities on the Hong Kong Stock
Exchange;
"Huaneng New Energy" Huaneng New Energy Environmental Protection Holdings Limited
Company, a wholly owned subsidiary of Huaneng Group;
"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 Acquisition;
"Independent Shareholders" shareholders of the Company other than Huaneng Group, HIPDC and
their respective Associates;
"Jialingjiang Company" Sichuan Huaneng Jialingjiang Hydro Power Limited Liability Company;
"JP Morgan" J.P. Morgan Securities (Asia Pacific) Limited, which is licensed by
the Securities and Futures Commission for Types 1, 4, 6 and 7
regulated activities under the SFO, being the financial adviser to
the Company in respect of the Acquisition;
"Kangding Company" Sichuan Huaneng Kangding Hydro Power Limited Liability Company;
"Latest Practicable Date" 29th October 2004, being the latest practicable date prior to the
publication of this circular for ascertaining certain information
referred to in this circular;
"Mingtai Company" Sichuan Huaneng Mingtai Power Limited Liability Company;
"Pingliang Power Plant" Gansu Huaneng Pingliang Power Generation Limited Liability Company,
a limited liability company incorporated in the PRC with an existing
registered capital of RMB623 million, in which Huaneng Group holds
65% equity interest;
1
"Pingliang Power Plant Interest" the 65% equity interest in Pingliang Power Plant (including the
earnings of Pingliang Power Plant generated from 1st July 2004
proportional to the 65% equity interest) which is owned by Huaneng
Group and to be sold to the Company;
"Pingliang Power Plant Transfer the transfer agreement dated 26th October 2004 entered into between
Agreement" the Company and Huaneng Group relating to the purchase of Pingliang
Power Plant Interest;
"PRC" the People's Republic of China;
"RMB" the lawful currency of the PRC;
"Rothschild" N M Rothschild & Sons (Hong Kong) Limited, an institution registered
with the Securities and Futures Commission to carry out Types 1, 4,
6 and 9 regulated activities under the SFO, being the independent
financial adviser appointed by the Company to make recommendation to
the Company's independent board committee and shareholders as to
whether the terms of the Acquisition are fair and reasonable and
whether the Acquisition is in the interests of the Company and the
shareholders as a whole and to advise the Company's shareholders on
how to vote;
"SFO" Securities and Futures Ordinance (Chapter 571 of the Laws of Hong
Kong);
"Shanghai Listing Rules" The Listing Rules of Shanghai Stock Exchange;
"Sichuan Hydro Power" Sichuan Huaneng Hydro Power Development Limited Liability Company, a
limited liability company incorporated in the PRC with an existing
registered capital of RMB800 million, in which Huaneng Group holds
100% equity interest;
"Sichuan Hydro Power Interest" the 60% equity interest in Sichuan Hydro Power (including the
earnings of Sichuan Hydro Power generated from 1st August 2004
proportional to the 60% equity interest) which is owned by Huaneng
Group and to be sold to the Company;
"Sichuan Hydro Power Transfer the transfer agreement dated 26th October 2004 entered into between
Agreement" the Company and Huaneng Group relating to the purchase of Sichuan
Hydro Power Interest;
"Stock Exchange" The Stock Exchange of Hong Kong Limited;
"Taipingyi Company" Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company;
"Target Power Plants" Sichuan Hydro Power and Pingliang Power Plant;
"Transfer Agreements" Sichuan Hydro Power Transfer Agreement and Pingliang Power Plant
Transfer Agreement;
"Zhonghua" Beijing Zhonghua Accounting and Consultancy Limited Company, a
assets appraisal firm in China, which is qualified in practising
securities related matters.
For the purposes of this circular, unless otherwise indicated, Renminbi amounts
have been translated into Hong Kong dollars using the rate of HK$1: RMB1.06.
2
--------------------------------------------------------------------------------
LETTER FROM THE BOARD
--------------------------------------------------------------------------------
HUANENG POWER INTERNAIONAL, INC.
(A Sino-foreign joint stock limited company incorporated in the
People's Republic of China)
Directors: Legal Address:
Li Xiaopeng West Wing, Building C,
Wang Xiaosong Tianyin Mansion,
Huang Yongda No. 2C Fuxingmennan Street,
Ye Daji Xicheng District,
Huang Jinkai Beijing 100031,
Liu Jinlong People's Republic of China.
Shan Qunying
Yang Shengming
Xu Zujian
Liu Shuyuan
Independent Directors:
Gao Zongze
Zheng Jianchao
Qian Zhongwei
Xia Donglin
Liu Jipeng
3rd November, 2004
To the Shareholders
Dear Sir or Madam,
DISCLOSEABLE AND CONNECTED TRANSACTION
1. INTRODUCTION
On 26th October 2004, the Company entered into the Sichuan Hydro Power Transfer
Agreement with Huaneng Group, pursuant to which the Company agreed to acquire
from Huaneng Group its 60% equity interest in Sichuan Hydro Power. On the same
date, the Company entered into the Pingliang Power Plant Transfer Agreement
with Huaneng Group, pursuant to which the Company agreed to acquire from
Huaneng Group its 65% equity interest in Pingliang Power Plant. The total
consideration for acquiring such interest amounts to RMB2,025 million, to be
satisfied by the Company's internal cash surplus.
The Company and its subsidiaries develop, construct, operate and manage
large-scale coal-fired power plants throughout China. The Company is one of the
largest independent power producers in China which owns a total generation
capacity of 19,012 MW on an equity basis.
Huaneng Group is principally engaged in the operation and management of
industrial investment; the development, investment, construction, operation and
management of power sources; organising the generation and sale of (thermal)
power; and the development, investment, construction, production and sale of
products in relation to information, transportation, new energy and
environmental protection industries.
The relationship between the Company, Huaneng Group and HIPDC is as follows:
-------------
Huaneng Group
-------------
| 51.98%
|
-------------
HIPDC
-------------
| 42.88%
|
-------------
the Company
-------------
3
--------------------------------------------------------------------------------
LETTER FROM THE BOARD
--------------------------------------------------------------------------------
Huaneng Group, PRC state-owned enterprise, is an indirect controlling
shareholder of the Company, holding an approximately 51.98% interest in HIPDC.
As of the Latest Practicable Date, HIPDC held approximately 42.88% of the total
issued share capital of the Company. The transactions as contemplated by the
Transfer Agreements constitute connected transactions to the Company, which are
subject to Independent Shareholders' approval pursuant to Rule 14A.18
respectively of the Hong Kong Listing Rules. Huaneng Group, HIPDC and their
respective associate will abstain from voting in the EGM in respect of the
ordinary resolutions to approve the Acquisition (including the Transfer
Agreements).
Taking the acquisition of Sichuan Hydro Power Interest and the acquisition of
Pingliang Power Plant as a whole in accordance with Rule 14.22 of the Hong Kong
Listing Rules, the total consideration amounts to RMB2,025 million. Therefore
the transactions as contemplated by the Acquisition also constitute a
discloseable transaction to the Company.
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 Rothschild as the independent
financial adviser to advise the Independent Directors and the Independent
Shareholders as to whether the terms of the Acquisition are fair and reasonable
and whether the Acquisition is in the interest of the Company and its
shareholders as a whole and to advise the Company's shareholders on how to vote
in respect of the Acquisition.
THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH FURTHER INFORMATION IN
RELATION TO THE ACQUISITION AND THE TRANSFER AGREEMENTS, AND TO SET OUT THE
RECOMMENDATION OF THE INDEPENDENT DIRECTORS AND THE NOTICE OF THE EGM.
2. TRANSFER AGREEMENTS
(1) Sichuan Hydro Power Transfer Agreement
The Sichuan Hydro Power Transfer Agreement was approved by the Directors at the
board meeting on 26th October 2004 and signed by Huaneng Group and the Company
on the same day.
Date: 26th October 2004
Parties: Seller: Huaneng Group
Purchaser: the Company
Interest to be acquired: equity interest representing 60%
of the registered capital of Sichuan Hydro Power.
The parties also agreed that for commercial
reasons, the earnings of Sichuan Hydro Power
generated from 1st August 2004 proportional to the
60% equity interest would belong to the Company.
Consideration: The consideration for the purchase of 60% equity
interest in Sichuan Hydro Power is RMB1,219
million, payable in cash on the Closing date. The
purchase price was determined with reference to,
inter alia, the valuation report prepared by
Zhonghua in relation to the net assets of Sichuan
Hydro Power and on the basis of normal commercial
terms and arm's length negotiation between the
parties thereto, and the agreement was entered
into in the ordinary and usual course of business
of the Company.
Conditions: Closing is subject to the satisfaction or waiver
of the following conditions:
(1) Conditions which need to be satisfied:
o Rothschild has advised the
Independent Directors that the terms
and conditions of the transaction
contemplated by the Sichuan Hydro
Power Transfer Agreement are fair and
reasonable so far as the Independent
Shareholders are concerned;
4
--------------------------------------------------------------------------------
LETTER FROM THE BOARD
--------------------------------------------------------------------------------
o the Independent Directors recommended
that the shareholders vote in favour
of the transfer of Sichuan Hydro Power
Interest and the Sichuan Hydro Power
Transfer Agreement;
o the Sichuan Hydro Power Transfer
Agreement and the transfer of Sichuan
Hydro Power Interest have been
approved and adopted by the
Independent Shareholders;
o the Company has obtained all
necessary government approvals for the
Sichuan Hydro Power Transfer Agreement
and the transfer of Sichuan Hydro
Power Interest; and
o the simultaneous closing or closing
of the Pingliang Power Plant Transfer
Agreement.
(2) Conditions which the Company may waive under
the Sichuan Hydro Power Transfer Agreement:
o representations and warranties of
Huaneng Group in the Sichuan Hydro
Power Transfer Agreement are true and
complete in all material respects; and
o Huaneng Group has fulfilled in all
material respects its obligations
under the Sichuan Hydro Power Transfer
Agreement.
(3) Conditions which Huaneng Group may waive
under the Sichuan Hydro Power Transfer
Agreement:
o representations and warranties of the
Company in the Sichuan Hydro Power
Transfer Agreement are true and
complete in all material respects; and
o the Company has fulfilled in all
material respects its obligations
under the Sichuan Hydro Power Transfer
Agreement.
In the case that any conditions for closing are
waived, further announcement will be made by the
Company accordingly.
Completion: Closing shall take place on the day agreed upon
by both parties, within 30 days after
the conditions have been satisfied or waived.
(2) Pingliang Power Plant Transfer Agreement
The Pingliang Power Plant Transfer Agreement was approved by the Directors at
the board meeting on 26th October 2004 and signed by Huaneng Group and the
Company on the same day.
Date: 26th October 2004
Parties: Seller: Huaneng Group
Purchaser: the Company
Interest to be acquired: equity interest representing 65%
of the registered capital of Pingliang Power
Plant. The parties also agreed that for
commercial reasons, the earnings of Pingliang
Power Plant generated from 1st July 2004
proportional to the 65% equity interest would
belong to the Company.
Consideration: The consideration for the purchase of Pingliang
Power Plant Interest is RMB806 million, payable
in cash on the Closing date.
The purchase price was determined with reference
to, inter alia, the valuation report prepared by
Zhonghua in relation to the net assets of
Pingliang Power Plant and on the basis of normal
commercial terms and arm's length negotiation
between the parties thereto, and the agreement
was entered into in the ordinary and usual course
of business of the Company.
5
--------------------------------------------------------------------------------
LETTER FROM THE BOARD
--------------------------------------------------------------------------------
Conditions: Closing is subject to the satisfaction or waiver
of the following conditions:
(1) Conditions which need to be satisfied:
o Rothschild has advised the
Independent Directors that the terms
and conditions of the transactions
contemplated by the Pingliang Power
Plant Transfer Agreement are fair and
reasonable so far as the Independent
Shareholders are concerned;
o the Independent Directors
recommended that the shareholders
vote in favour of the transfer of
Pingliang Power Plant Interest and
the Pingliang Power Plant Transfer
Agreement;
o the Pingliang Power Plant Transfer
Agreement and the transfer of Huaneng
Group Interest have been approved and
adopted by the Independent
Shareholders;
o the Company has obtained all
necessary government approvals for
the Pingliang Power Plant Transfer
Agreement and the transfer of
Pingliang Power Plant Interest; and
o the simultaneous closing or closing
of the Sichuan Hydro Power Transfer
Agreement.
(2) Conditions which the Company may waive
under the Pingliang Power Plant Transfer
Agreement:
o representations and warranties of
Huaneng Group in the Pingliang Power
Plant Transfer Agreement are true and
complete in all material respects;
and
o Huaneng Group has fulfilled in all
material respects its obligations
under the Pingliang Power Plant
Transfer Agreement.
(3) Conditions which Huaneng Group may waive
under the Pingliang Power Plant Transfer
Agreement:
o representations and warranties of
the Company in the Pingliang Power
Plant Transfer Agreement are true and
complete in all material respects;
and
o the Company has fulfilled in all
material respects its obligations
under the Pingliang Power Plant
Transfer Agreement.
In the case that any conditions for closing are
waived, further announcement will be made by the
Company accordingly.
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
The Acquisition will improve the generation and fuel structure of the Company
and it has also realised one of the guiding principles of the Company's long
term strategy of placing equal emphasis on both coal fuel and other types of
fuel. Sichuan Hydro Power is located in Sichuan Province, the hydro power
generation capacity of which ranks number one in China. The Acquisition is the
first move of the Company to participate in hydro power. This indicates that
the Company commences to adjust its generation structure. The fuel sources of
the Company will be diversified and become much balanced. The cost control
pressure due to the shortage of coal supply will be relieved effectively.
The Acquisition will enlarge the Company's operating scale and geographical
scope, thus enhancing the profitability of the Company as well as consolidating
the Company's position as China's largest independent power company. After the
completion of the Acquisition, the total generation capacity of the Company on
an equity basis will increase by 1,146 MW (including Jialingjiang Company's 34
6
--------------------------------------------------------------------------------
LETTER FROM THE BOARD
--------------------------------------------------------------------------------
MW generating unit which was put into operation this year) from 19,012 MW to
20,158 MW, representing an increase of 6.0%. Furthermore, the Acquisition also
brings about an increase of capacity under construction on an equity basis of
389 MW, which assures the increase of capacity as well as an increase of the
Company's revenue in future years. The Acquisition provides an opportunity for
the Company to enter for the first time into Sichuan Province, a rapidly
growing power market, and into Gansu Province, the West China power market.
This has realised the Company's development strategy of "consolidation in the
coastal area, expansion in Central China and entering into West China".
In light of the strong increase of power demand and shortage of coal fuel in
China, the acquisition of hydro power assets will rationalize the Company's
fuel structure. The acquisition of mine-mouth power plant (Pingliang Power
Plant) will bring about a decrease in average fuel costs of the Company and as
a result, will enhance the Company's profitability and effectively contain the
increase in fuel costs.
The Acquisition price has been determined through arm's length negotiations
between the parties and their respective financial advisers, taking into
account various factors, including the market environments, the technical and
operating conditions of the Power Plants, the Power Plants' earnings potentials
and their abilities to generate cash flow. The Company has also considered the
appraisal report provided by Zhonghua which values the Sichuan Hydro Power
Interest at RMB1,212.1 million as of 31st July 2004 and Pingliang Power Plant
Interest at RMB791.73 million as of 30th June 2004 using the replacement cost
approach. The board of Directors believes that the Acquisition price and terms
are fair and reasonable to the Company and its shareholders.
4. IMPACT OF THE ACQUISITION
The Company believes that with the growth of the power markets in which the
Target Power Plants operate and through further strengthening management, the
Acquisition will bring satisfactory returns to the Company and has a positive
impact on the Company's future earnings, thus benefiting the Company and its
shareholders. For reference only, according to International Financial
Reporting Standards, the unaudited total net profit of the Target Power Plants
in 2003 was approximately RMB264 million.
The Acquisition does not have any material impact on the net assets of the
Company.
5. INFORMATION REGARDING THE TARGET POWER PLANTS
Sichuan Hydro Power
Sichuan Hydro Power was established on 12th July 2004 as a state-owned limited
liability company wholly owned by Huaneng Group while on the same day, Huaneng
Group transferred its owned equity in the registered capital of Baoxinghe
Company, Taipingyi Company, Dongxiguan Company, Fujiang Company, Kangding
Company, Mingtai Company and Jialingjiang Company to Sichuan Hydro Power. The
registration for the change of shareholder of the power plants under Sichuan
Hydro Power from Huaneng Group to Sichuan Hydro Power was completed in July
2004. The power plants under Sichuan Hydro Power own installed generation
capacity of 999 MW. The generation capacity on equity basis is 610 MW. In
addition, the power plants under Sichuan Hydro Power has a generation capacity
under construction of 882 MW. The generation capacity under construction on
equity basis is 648 MW. Details of the power plants under Sichuan Hydro Power
are set out below:
REGISTERED EQUITY HELD
POWER PLANTS UNDER CAPITAL BY SICHUAN
SICHUAN HYDRO POWER (RMB) HYDRO POWER OTHER SHAREHOLDERS
Baoxinghe Company 516,100,000 68% Changjiang Hydro Power Development Co.,
Ltd.: 8%
Sichuan Province Power Development
Company: 12%
Yaan City State-owned Assets Management
Co., Ltd.: 10%
Sichuan Yaan Power (Group) Joint-stock
Limited Company: 2%
7
Taipingyi Company 100,000,000 60% Aba Hydro Power Development Co., Ltd.:
40%
Dongxiguan Company 156,725,000 55.33% Sichuan Province Power Development Co.,
Ltd.: 8.38%
Sichuan Province Port and Navigation
Development Co., Ltd.: 6%
Sichuan Wushengguangming Industrial Co.,
Ltd.: 12%
Sichuan Province Pengxi County Power Co.,
Ltd.: 6.2%
Daying Electricity Supply Bureau under
Mianyang Electricity Bureau: 3.8%
Sichuan Province Yuechiyintai Investment
(Holdings) Limited: 4%
Several individuals: 4.29% in aggregate
Fujiang Company 150,000,000 95% Sichuan Province Pingwu Power (Group)
(paid up as at Co., Ltd.: 5%
31st July 2004:
97,880,000)
Kangding Company 194,000,000 60% Ganzi Region Hydro Power Development Co.,
Ltd.: 40%
Mingtai Company 97,700,000 52.2% Sichuan Yongan Hydro Power Joint-stock
Limited Company: 42.98%
Mianyang City Power Co., Ltd: 3.27%
Mianyang Qimingxing Group Co., Ltd: 1.53%
Jialingjiang Company 193,080,000 55% Sichuan Province Port and Navigation
(paid up as at Development Co., Ltd.: 30% Nanchong City
31st July 2004: Power Development Co., Ltd.: 15%
152,119,800)
Sichuan Hydro Power is a wholly owned subsidiary of Huaneng Group. Huaneng
Group will transfer its owned 60% equity interest in the registered capital of
Sichuan Hydro Power to the Company where such transfer is not subject to any
pre-emption right of other shareholders.
Furthermore, the Company has been given to understand that Huaneng Group is
prepared to transfer its remaining 40% interest in Sichuan Hydro Power to
Huaneng New Energy, its wholly owned subsidiary.
Upon completion of the acquisition of Sichuan Hydro Power Interest by the
Company and the aforesaid arrangement, the equity interest in the registered
capital of Sichuan Hydro Power will be held as to 60% by the Company and as to
40% by Huaneng New Energy.
Huaneng Group has warranted that its 60% interest in Sichuan Hydro Power and
Sichuan Hydro Power's interest in the power plants under Sichuan Hydro Power
are not subject to any pledge, mortgage, lien or third party right, nor
involved in any disputes, litigations, arbitrations or legal proceedings.
8
The following table set out certain operating data of the power plants under
Sichuan Hydro Power in 2003:
BAOXINGHE TAIPINGYI DONGXIGUAN FUJIANG KANGDING MINGTAI JIALINGJIANG
COMPANY COMPANY COMPANY COMPANY COMPANY COMPANY COMPANY
Name of power Yucheng, Taipingyi Dongxiguan Shuiniujia Lengzhuquan, Mingtai Qingju
plants owned Tongtou, (under Xiaotiandu (under
Xiaoguanzi, construction), (under construction)
Qiaoqi Ziyili construction)
(under (under
construction) construction),
Muzuo (under
construction)
Generation Yucheng: 60 260 180 Shuiniujia: Lengzhuguan: 45 136
capacity (MW) Tongtou: 80 70 (under 180
Xiaoguanzi: construction) Xiaotiandu:
160 Qiaoqi: Ziyili: 130 240 (under
240 (under (under construction)
construction) construction)
Muzuo: 100
(under
construction)
Power Yucheng: 1.47 0.77 (such data Lengzhuguan: 0.17 (such data
generation 0.64 is not 0.83 (data is not
(billion kWh) Tongtou: available for available
0.64 for power Xiaotiandu for power
Xiaoguanzi: plant under is not plant under
0.71 (data construction) available as construction)
for Qiaoqi it is a
is not power plant
available as under
it is a construction)
power plant
under
construction)
Utilisation Yucheng: 5,638 4,285 (such data Lengzhuguan: 3,775 (such data
hours (hours) 4,588 is not 4,621 (data is not
Tongtou: available for available
4,588 for power Xiaotiandu for power
Xiaoguanzi: plant under is not plant under
4,434 (data construction) available as construction)
for Qiaoqi it is a
is not power plant
available as under
it is a construction)
power plant
under
construction)
House Yucheng: 4.0 1.6 (such data Lengzhuguan: 1.3 (such data
consumption 1.36 is not 2.7 (data is not
rate (%) Tongtou: available for available
1.36 for power Xiaotiandu for power
Xiaoguanzi: plant under is not plant under
2.86 (data construction) available as construction)
for Qiaoqi it is a
is not power plant
available as under
it is a construction)
power plant
under
construction)
Average Yucheng: 221 293 (such data Lengzhuguan: 272 (such data
on-grid power 291 is not 221 (data is not
rate (RMB/MWh, Tongtou: available for available
VAT included) 291 for power Xiaotiandu for power
Xiaoguanzi: plant under is not plant under
195 (data construction) available as construction)
for Qiaoqi it is a
is not power plant
available as under
it is a construction)
power plant
under
construction)
Unit cost for 85 60 90 (such data Lengzhuguan: 124 (such data
power sold is not 86 (data is not
(RMB/MWh) available for available
for power Xiaotiandu for power
plant under is not plant under
construction)
available
as
construction)
it
is
a
power plant
under
construction)
Pingliang Power Plant
Pingliang Power Plant Phase I consists of four 300 MW domestic built coal-fired
generating units. Generating units No. 1 and No. 2 began construction in June
1998 and commenced commercial operation in 2000 and 2001 respectively. Units
No. 3 and No. 4 began in May 2001 and were put into commercial operation in
June and November 2003 respectively. The estimated depreciation period of the
generating units at Pingliang Power Plant is approximately 14 years. Currently,
the generating units operate properly. In 2003, annual power generation by the
four generating units was 5.89 billion kWh with a house consumption rate of
4.5%. Power tariffs are determined according to the rates prescribed by the
relevant pricing bureau.
9
--------------------------------------------------------------------------------
LETTER FROM THE BOARD
--------------------------------------------------------------------------------
Huaneng Group holds 65% equity interest in Pingliang Power Plant. The remaining
35% interest is held by Gansu Provincial Power Construction Investment
Development Corporation whereby it has given up its pre-emptive right in the
transfer of Pingliang Power Plant Interest.
Huaneng Group has warranted that its 65% interest in Pingliang Power Plant is
not subject to any mortgage, pledge, lien or other third party right, nor
involved in any disputes, litigations, arbitration or other legal proceedings.
The following table sets out certain operating data of Pingliang Power Plant in
2003:
Generation capacity (MW) 1,200
Power generation (billion KWh) 5.89
Utilization hours (hours) 7,444
House consumption rate (%) 4.5
Average on-grid power rate (RMB/MWh, VAT included) 196
Coal consumption rate for power sold (grams/kWh) 340
Unit fuel cost for power sold (RMB/MWh) 53.3
6. SELECTED FINANCIAL INFORMATION OF THE TARGET POWER PLANTS
The following is a summary of unaudited consolidated financial information of
Sichuan Hydro Power and its subsidiaries as at 31st December 2002, 2003 and
31st July 2004 and for the years/period then ended and the summary of unaudited
financial information of Pingliang Power Plant as at 31st December 2002, 2003
and 30th June 2004 and for the years/period then ended, prepared in accordance
with International Financial Reporting Standards ("IFRS").
(RMB in thousands)
SICHUAN HYDRO POWER AND ITS SUBSIDIARIES PINGLIANG POWER PLANT
31ST 31ST 31ST 31ST 31ST 30TH
DECEMBER DECEMBER JULY DECEMBER DECEMBER JUNE
2002 2003 2004 2002 2003 2004
(consolidated) (consolidated) (consolidated)
--------- --------- --------- --------- --------- ---------
Plant and machinery 1,154,894 1,081,165 1,566,913 1,762,101 2,852,155 2,732,349
Properties 1,237,272 1,253,285 2,008,948 873,477 978,721 951,517
Other assets 1,697,820 2,188,426 2,560,213 1,287,696 496,822 641,393
Total assets 4,089,986 4,522,876 6,136,074 3,923,274 4,327,698 4,325,259
--------- --------- --------- --------- --------- ---------
Total liabilities 2,816,076 3,099,655 4,358,835 3,611,363 3,768,507 3,599,838
Receivables 300,227 242,849 217,991 130,707 187,492 265,662
Contingent items 15,690 15,500 6,500 4,416 4,416 4,416
Net assets 975,028 1,108,571 1,281,113 311,911 559,191 725,421
Interest attributable to 60% 60% 60% 65% 65% 65%
Huaneng Group
Net assets attributable to 585,017 665,143 768,668 202,742 363,474 471,524
Huaneng Group according to
the above ratio
Revenue from principal business 422,978 494,611 410,826 543,439 939,493 740,073
Operating profit/(loss) 250,588 315,103 266,503 (11,777) 274,391 280,565
Profit/(loss) before taxation 165,045 240,399 225,492 (136,454) 135,888 192,139
Effective tax rate 13.7% 12.8% 17.0% (14.3)% 15.6% 14.9%
Net profit/(loss) after taxation 105,474 148,994 128,108 (116,901) 114,620 163,430
7. CONNECTED TRANSACTIONS 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.
After Closing, certain transactions in relation to the Target Power Plants,
including the guarantees to be provided by the Company to the banks in respect
of the Target Power Plants' bank loans and the loans obtained from Huaneng
Group and its associate, China Huaneng Finance Company, both being connected
persons of the Company, by the Target Power Plants in the ordinary and usual
course of the Target Power Plants' business, which are subject to compliance
with the relevant requirements of the Hong Kong Listing Rules, will constitute
connected transactions under the Shanghai Listing Rules ("Shanghai Connected
Transactions"), 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 Shanghai Connected
Transactions. Details of the Shanghai Connected Transactions will be set out in
the notice of EGM to be issued to the Company's shareholders.
10
--------------------------------------------------------------------------------
LETTER FROM THE BOARD
--------------------------------------------------------------------------------
In accordance with Rule 7.3.11(9) of the Shanghai Listing Rules, the Company
has appointed Guotai Junan as the PRC independent financial adviser in respect
of the Acquisition.
Upon careful and necessary enquiry, Guotai Junan is of the view that the
Acquisition and the Shanghai Connected Transactions 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, reflecting the principles of equality,
justice and reasonableness; and that 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 the Shanghai Connected Transactions; and (2) the
Acquisition and the Shanghai Connected Transactions are fair to the Company's
shareholders.
8. THE EGM
The transactions as contemplated by the Transfer Agreements constitute
discloseable and connected transactions to the Company. The Company will
convene an EGM on 17th December, 2004 to consider the approval of the
Acquisition (including the Transfer Agreements), and Shanghai Connected
Transactions. The voting at such meeting will be taken on a poll and the
Company will make an announcement of the poll result. Huaneng Group, HIPDC and
their respective Associates will abstain from voting in the EGM in respect of
the ordinary resolutions to approve the Acquisition (including the Transfer
Agreements). Notice of the EGM is set out on pages 65 to 71 in this circular.
A reply slip and a form of proxy for use by the Independent Shareholders at the
Extraordinary General Meeting are 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 27th November, 2004. 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.
9. 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 Agreements). Rothschild has been appointed
as an independent financial adviser to advise the Independent Directors and the
Independent Shareholders with respect to the fairness and reasonableness of the
Acquisition (including the Transfer Agreements).
The Independent Directors, having taken into account the advice of Rothschild,
consider the terms of the Transfer Agreements to be fair and reasonable insofar
as the Shareholders are concerned and consider the transaction contemplated by
the Transfer Agreements to be in the interests of the Company and its
Independent Shareholders. Accordingly, the Independent Directors recommend that
the Independent Shareholders vote in favour of the resolutions to approve the
Acquisition and the Transfer Agreements at the EGM.
10. OTHER INFORMATION
Your attention is also drawn to the letter from the Independent Directors and
the letter from Rothschild, 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
11
-------------------------------------------------------------------------------
LETTER FROM THE INDEPENDENT DIRECTORS
-------------------------------------------------------------------------------
HUANENG POWER INTERNAIONAL, 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
3rd November, 2004
To the Independent Shareholders
Dear Sir or Madam,
DISCLOSEABLE AND 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 3rd November,
2004, 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 constitutes both a
discloseable and a connected transaction for the Company. Accordingly, the
Acquisition will require the approval of the Independent Shareholders at the
EGM.
We wish to draw your attention to the letter of advice from Rothschild set out
on pages 18 to 31 of the Circular. We have discussed the letter and the opinion
contained in it with Rothschild.
Having considered, inter alia, the factors and reasons considered by, and the
opinion of, Rothschild, as stated in its aforementioned letter, we consider the
Acquisition 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 EGM set out at the end
of the Circular to be proposed at the EGM to be held on 17th December, 2004 and
thereby approve the Acquisition and the Transfer Agreements.
Yours faithfully,
GAO ZONGZE ZHENG JIANCHAO QIAN ZHONGWEI XIA DONGLIN LIU JIPENG
Independent Directors
12
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
[ROTHSCHILD GRAPHIC OMITTED]
3 November 2004
To the Independent Directors and
Independent Shareholders
Dear Sir or Madam,
DISCLOSEABLE AND CONNECTED TRANSACTION
We refer to our engagement to advise the Independent Directors and Independent
Shareholders with respect to the Acquisition, details of which are contained in
the circular of the Company dated 3 November 2004 to its shareholders (the
"Circular") of which this letter forms a part. Rothschild has been appointed
the independent financial adviser to advise the Independent Directors and
Independent Shareholders as to: (a) whether or not the Transfer Agreements are
on normal commercial terms (as defined under the Hong Kong Listing Rules) and
the terms of the Transfer Agreements are fair and reasonable so far as the
Independent Shareholders are concerned; (b) whether or not entering into the
Transfer Agreements is in the interest of the Company and its shareholders as a
whole; and (c) how the Independent Shareholders should vote at the EGM in
respect of the Acquisition.
The terms used in this letter shall have the same meanings as defined elsewhere
in the Circular unless the context otherwise requires.
As at the Latest Practicable Date, Huaneng Group owned approximately 51.98% of
HIPDC, which in turn owned approximately 42.88% of the issued share capital of
the Company. Pursuant to the Hong Kong Listing Rules, the Transfer Agreements
constitute a discloseable and connected transaction for the Company, which will
be subject to, inter alia, the Independent Shareholders' approval at the EGM.
For the avoidance of doubt, we are not engaged to advise the Independent
Directors in respect of the Shanghai Connected Transactions, details of which
are set out in the section headed "7. Connected transactions under Shanghai
Listing Rules" in the "Letter from the Board" of the Circular. The opinion of
the Independent Directors thereof and the basis of their opinion are set out in
the "Letter from the Independent Directors" contained in the Circular.
In formulating our recommendation, we have relied on the information and facts
supplied to us by the Company and/or its advisers and have assumed that any
representations made to us are true, accurate and complete in all material
respects as at the date hereof and that they may be relied upon. We have also
assumed that all information, representations and opinions contained or
referred to in the Circular are fair and reasonable and have relied on them.
NM Rothschild & Sons (Hong Kong) Limited Telephone: (852)2525-5333
16th Floor, ALexandra House Fax: (852)2868-1728
16-20 Chater Road, Central (852)2810-6997
Hong Kong SAR
13
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
We have been advised by the Directors that no material facts have been omitted
and we are not aware of any facts or circumstances which would render the
information provided and the representations made to us untrue, inaccurate or
misleading. We have no reason to doubt the truth, accuracy and completeness of
the information and representations provided to us by the Company and/or its
advisers. The Directors have collectively and individually accepted full
responsibility for the accuracy of the information contained in the Circular
and have confirmed, 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 in the Circular misleading. We consider that we have
reviewed sufficient information to reach an informed view in order to provide a
reasonable basis for our advice. We have not, however, conducted any
independent in-depth investigation into the business and affairs of the
Company, the Target Power Plants or any of their respective subsidiaries and
associated companies.
PRINCIPAL FACTORS AND REASONS
In arriving at our opinion, we have taken into consideration the following
principal factors and reasons:
1. Background and rationale
The principal activities of the Company and its subsidiaries are to develop,
construct, operate and manage large-scale coal-fired power plants throughout
the PRC. The Board is of the view that the Acquisition follows the Company's
long-term business and development strategy of "placing equal emphasis on both
coal fuel and other types of fuel". In addition, the acquisition of Sichuan
Hydro Power would enable the Company to make its first move into hydro power
generation in Sichuan province, the province with the highest hydro power
generation capacity in the PRC, and would allow the Company to adjust its
generation structure from sole dependence on coal fired generation to having
both coal fired and hydro power generation. Accordingly, the Company would to
some extent diversify fuel sources for its overall generation portfolio and,
through hydro power generation, reduce its reliance on coal and average fuel
costs of generation. Furthermore, the acquisition of Pingliang Power Plant,
which is a mine-mouth power plant, would bring about a decrease in fuel costs
and enhance the Company's profitability by effectively controlling the increase
in fuel costs.
The Acquisition would enlarge the operational scale and geographical coverage
of the Company as well as consolidate the Company's position as one of the
PRC's largest independent power companies. Upon Closing, the Company's
installed generation capacity will increase by 1,146 megawatts ("MW") on an
equity basis (including Jialingjiang Company's generation capacity of 34 MW
which commenced operation in 2004), an increase in its total installed
generating capacity from 19,012 MW to 20,158 MW on an equity basis,
representing a percentage increase of approximately 6.0% and an increase in its
capacity under construction of 389 MW on an equity basis.
The Acquisition would also enable the Company to enter the Sichuan and Gansu
provinces for the first time, which are provinces located in the West China
power market and have rapid growth in power demand. This is consistent with the
Company's marketing strategy of "consolidating in the coastal areas, expansion
in Central China and entering into West China".
2. The Acquisition
(a) Assets to be acquired
On 26 October 2004, the Company entered into the Sichuan Hydro Power Transfer
Agreement, pursuant to which the Company has conditionally agreed to acquire
from Huaneng Group a 60% equity interest in Sichuan Hydro Power (including the
earnings of Sichuan Hydro Power generated from 1 August 2004 proportional to
60% of its registered capital) for a consideration of RMB1,219 million
(equivalent to approximately HK$1,150 million) (the "Sichuan Hydro Power
Consideration"). On 26 October 2004, the Company also entered into the
Pingliang Power Plant Transfer Agreement, pursuant to which the Company has
conditionally agreed to acquire from Huaneng Group a 65% equity interest in
Pingliang Power Plant (including the earnings of Pingliang Power Plant
generated from 1 July 2004 proportional to 65% of its registered capital) for a
consideration of RMB806 million (equivalent to approximately HK$760 million)
(the "Pingliang Power Plant Consideration").
In addition, we note that the Company has been informed that Huaneng Group is
prepared to transfer its remaining 40% in Sichuan Hydro Power to Huaneng New
Energy.
14
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
Set out below is a summary of certain financial and operational information
relating to the Target Power Plants. The financial information is extracted
from the section headed "6. Selected financial information of the Target Power
Plants" in the "Letter from the Board" of the Circular.
Installed
capacity Net
on an asset
equity value
basis Sales Net profit/(loss) (RMB
Location (MW) (RMB million) (RMB million) million)
As at For the financial For the For the financial For the As at
31 July year ended 31 latest year ended 31 latest the
December available December available latest
period in period in available
date in
2004 2002 2003 2004* 2002 2003 2004* 2004*
Sichuan Hydro Power Sichuan 366 423.0 494.6 410.8 105.5 149.0 128.1 1,281.1
Pingliang Power Plant Gansu 780 543.4 939.5 740.0 (116.9) 114.6 163.4 725.4
* Seven months ended 31 July 2004 (or as at 31 July 2004) for Sichuan Hydro
Power and six months ended 30 June 2004 (or as at 30 June 2004) for
Pingliang Power Plant
From our discussions with the management of the Company, we understand that
Sichuan Hydro Power experienced a positive growth trend in sales and net profit
for the two financial years ended 31 December 2003 and 7 months ended 31 July
2004 primarily as a result of increase in on-grid electricity volume, as well
as the decrease in financial expense in 2004. With respect to Pingliang Power
Plant, the positive growth trend in sales for the financial year ended 31
December 2003 and the six months ended 30 June 2004 was mainly attributable to
a combination of increase in on-grid electricity volume and tariff. The net
loss in 2002 was primarily due to the fact that only two generators were
operational in 2002 as the third and fourth generators commenced operation in
2003 while the increase in sales volume for 2003 and the first half of 2004
resulted in improved efficiency and a corresponding positive growth trend in
net profit.
(b) Basis of the consideration
The Transfer Agreements were entered into after arm's length negotiation among
the Company, Huaneng Group and their respective financial advisers, taking into
account various factors, including the market environments, the technical and
operating conditions of the Target Power Plants, the earnings potential of the
Target Power Plants and their ability to generate cash flow. The Sichuan Hydro
Power Consideration and the Pingliang Power Plant Consideration, which will be
satisfied as to 100% by the Company's cash-on-hand, were determined with
reference to, inter alia, the asset appraisal reports prepared by Zhonghua
using the replacement cost approach. However, given that Zhonghua is a
qualified asset appraisal firm in the PRC which does not carry on such business
in Hong Kong, we have not relied on its valuation in arriving at our opinion.
(c) Valuation of the Target Power Plants
Based on the Sichuan Hydro Power Transfer Agreement and information provided by
the Company, the enterprise value (the "EV") of Sichuan Hydro Power (only
relating to the installed generation capacity but excluding Jialingjiang
Company's generation capacity of 34MW which commenced operation in 2004)
attributable to the interests to be acquired by the Company would be
approximately RMB2,414 million, equivalent to the sum of the Sichuan Hydro
Power Consideration of RMB1,219 million (equivalent to approximately HK$1,150
million), of which an amount of RMB1,033 million of the Sichuan Hydro Power
Consideration relates to the purchase price for installed generation capacity
while RMB186 million relates to the purchase price for capacity under
construction (determined by investment cost-to-date), and the aggregate net
debt of Sichuan Hydro Power (only relating to the installed generation capacity
and excluding net debt attributable to Jialingjiang Company and Fujiang
Company) attributable to interests to be acquired by the Company as at 31
December 2003.
We list below the multiples for the Sichuan Hydro Power Interest based on the
Sichuan Hydro Power Consideration for installed generation capacity under the
Sichuan Hydro Power Transfer Agreement:
15
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
o an EV/earnings before interest, tax, depreciation and amortisation
("EBITDAi") multiple of approximately 8.6 times, based on the EBITDA
attributable to the Sichuan Hydro Power Interest for the financial year
ended 31 December 2003 of approximately RMB282.3 million;
o an EV/MW of approximately RMB6.8 million, based on the equity installed
generation capacity of 355MW (excluding Jialingjiang Companyi|s
generation capacity of 34MW which commenced operation in 2004)
attributable to the Sichuan Hydro Power Interest;
o a price to earnings multiple of approximately 10.9 times, based on the
net profit of Sichuan Hydro Power attributable to the Sichuan Hydro Power
Interest for the financial year ended 31 December 2003 of approximately
RMB94.7 million; and
o a price to net asset value ("NAVi") ratio of approximately 1.8
times, based on the aggregate NAV of Sichuan Hydro Power attributable to
the Sichuan Hydro Power Interest as at 31 December 2003 of approximately
RMB572.4 million.
Based on the Pingliang Power Plant Transfer Agreement and information provided
by the Company, the EV of Pingliang Power Plant attributable to Huaneng Group
would be approximately RMB2,980 million, equivalent to the sum of the Pingliang
Power Plant Consideration of RMB806 million (equivalent to approximately HK$760
million) and the aggregate net debt of Pingliang Power Plant attributable to
Huaneng Group as at 31 December 2003.
We list below the multiples for the Pingliang Power Plant Interest based on the
Pingliang Power Plant Consideration under the Pingliang Power Plant Transfer
Agreement:
o an EV/EBITDA multiple of approximately 9.0 times, based on the EBITDA of
Pingliang Power Plant attributable to Huaneng Group for the financial
year ended 31 December 2003 of approximately RMB331.6 million;
o an EV/MW of approximately RMB3.8 million, based on the equity installed
capacity of 780 MW of Pingliang Power Plant attributable to Huaneng
Group;
o a price to earnings multiple of approximately 10.8 times, based on the
net profit of Pingliang Power Plant attributable to Huaneng Group for the
financial year ended 31 December 2003 of approximately RMB74.5 million;
and
o a price to NAV ratio of approximately 2.2 times, based on the aggregate
NAV of Pingliang Power Plant attributable to Huaneng Group as at 31
December 2003 of approximately RMB363.5 million.
We have analysed the Sichuan Hydro Power Consideration and the Pingliang Power
Plant Consideration by reviewing: (a) the trading multiples of listed companies
comparable to the Acquisition; and (b) the transaction multiples of recent
acquisitions of electricity power generation companies in the PRC.
In assessing the fairness of the Sichuan Hydro Power Consideration and the
Pingliang Power Plant Consideration, we are of the view that the analysis of
the EV/EBITDA multiple versus those of comparable listed companies and
comparable transactions is the most important and appropriate valuation
benchmark. Due to its common use as a valuation benchmark in the electric power
generation industry, we have also compared the EV/MW multiple of the Sichuan
Hydro Power Consideration and the Pingliang Power Plant Consideration with
those of comparable listed companies and comparable transactions. In addition,
we have reviewed the price/earnings ratio and the price/NAV ratio of the
Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration
versus those of comparable listed companies and comparable transactions, for
supplemental crosschecking purposes.
(i) Comparable company analysis
Since the revenue of the Target Power Plants is derived from their electric
power generation business in the PRC, the comparable companies we have chosen
are listed power companies which are primarily focused on electric power
generation in the PRC. The companies which we have identified under the above
selection criteria are PRC power generation companies primarily listed on the
Stock Exchange, the Shanghai Stock Exchange and the Shenzhen Stock Exchange,
some of which are listed on more than one stock exchange. It should be noted
that the Shanghai Stock Exchange and the Shenzhen Stock Exchange are divided
into the A-share and B-share markets, which are two separate markets with
16
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
different regulations and restrictions. The shares traded on the A-share market
can only be invested in by domestic investors and qualified foreign
institutional investors (with certain trading and ownership restrictions)
whereas shares traded on the B-share market are open for investment by both
international and domestic investors. We consider that the trading multiples of
companies traded solely on an A-share market in the PRC are not an appropriate
benchmark for the Sichuan Hydro Power Consideration and the Pingliang Power
Plant Consideration given that trading in the PRC A-share markets is highly
restricted. It should also be noted that trading in the PRC B-share markets is
relatively inactive and the total market capitalisation is small. Accordingly,
we consider the trading multiples of the B-share electric power generation
companies less comparable for our valuation purpose.
Based on the above selection criteria, we set out in the following table the
relevant ratios of the selected comparable listed companies based on their
respective share prices as at the Latest Practicable Date and their latest
published audited full year financial statements.
Company name EV(1)/ EV(1)/ Price(2)/ Price(2)/
EBITDA(3) MW(4) earnings(5) NAV(6)
(Times) (RMB million) (Times) (Times)
PRIMARY COMPARABLES
Hong Kong listed comparable companies(7)
Beijing Datang Power Generation Co. Ltd. 9.6 5.9 18.7 2.2
Huadian Power International Corp. Ltd. 6.9 3.3 13.5 1.5
The Company 7.6 5.4 13.8 2.2
China Resources Power Holdings Co. Ltd. ("CR Power")(8) 19.3 12.6 28.7 1.9
Average 10.8 6.8 18.7 1.9
Average (excluding CR Power)(8) 8.0 4.9 15.3 2.0
SECONDARY COMPARABLES
B-shares companies
Guangdong Electric Power Development Co. Ltd 4.9 5.2 10.5 1.5
Huadian Energy Co. Ltd(9) 8.4 2.8 18.9 1.1
Shenzhen Nanshan Power Station Co. Ltd 6.7 5.3 9.2 2.9
Zhejiang Southeast Electric Power Co. Ltd 6.6 5.5 17.6 1.8
Average 6.6 4.7 14.0 1.8
SICHUAN HYDRO POWER CONSIDERATION(10) 8.6 6.8 10.9 1.8
PINGLIANG POWER PLANT CONSIDERATION 9.0 3.8 10.8 2.2
Sources: Bloomberg and latest published audited full year financial statements
of the relevant companies available on the Latest Practicable Date
Notes:
(1) EV of a company refers to the sum of its market capitalisation as at the
Latest Practicable Date and its net indebtedness as per its latest
published audited full year financial statements available on the Latest
Practicable Date.
(2) Price refers to the market capitalisation based on the closing price of a
Hong Kong listed power company with main operations in the PRC as quoted
on the Stock Exchange or the closing price of the B-shares of the
relevant company on the Latest Practicable Date and the total number of
shares in issue as at the year-end date according to the relevant
company's latest published audited full year financial statements. For
companies which also have an A-share listing, their A-share stock prices
were not used in the above calculation of market capitalisations.
(3) EBITDA refers to the earnings before interest, tax, amortisation and
depreciation expenses as per the latest published audited full year
financial statements of the relevant company available on the Latest
Practicable Date.
(4) MW refers to the net installed capacity in megawatts of the respective
companies as at the year-end date according to the relevant company's
latest published audited full year financial statements.
(5) Earnings refer to net profit excluding extraordinary items as per the
latest published audited full year financial statements of the relevant
company available on the Latest Practicable Date.
(6) NAV refers to net asset value as per the latest published audited full
year financial statements of the relevant company available on the Latest
Practicable Date.
17
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
(7) Hong Kong listed comparable companies refers to Hong Kong listed power
companies with main operations in the PRC and excludes China Power
International Development Limited which listed on the Stock Exchange on
15 October 2004 as it is still under price stabilisation.
(8) CR Power is considered less comparable to the Target Power Plants than
other H-share power generation companies as it is trading at
significantly higher multiples, in terms of EV/EBITDA, EV/MW and
price/earnings, due to the fact that CR Power has a much smaller asset
base and is expected to have a much higher growth ratio after its power
generation assets under construction and development have become
operational in the future.
(9) Huadian Energy Co. Ltd is formerly known as Heilongjiang Electric Power
Co. Ltd.
(10) Computation of multiples for the Sichuan Hydro Power Consideration is
based on operational generation capacity only and excludes purchase
price, enterprise value, EBITDA, MW, earnings and net assets respectively
attributable to capacity under construction at Jialingjiang Company
(including the 34MW which commenced operations in 2004) and Fujiang
Company.
(11) An exchange rate of RMB8.28 = US$1.00 has been used.
As illustrated above, the EV/MW multiple of approximately RMB6.8 million/MW for
the Sichuan Hydro Power Consideration is higher than the range and average
trading multiples of the Hong Kong listed comparable companies (excluding CR
Power) as most of the generation assets of the comparable companies are coal
fired power plants which typically have lower EV/MW multiples than hydro
plants. The EV/MW multiple of approximately RMB3.8 million/MW for the Pingliang
Power Plant Consideration is within the range and lower than the average
trading multiples of the Hong Kong listed comparable companies (excluding CR
Power). The price/earnings multiple of approximately 10.9 times and 10.8 times
for the Sichuan Hydro Power Consideration and the Pingliang Power Plant
Consideration respectively are lower than the respective ranges and average
trading multiples of the Hong Kong listed comparable companies (excluding CR
Power).
In terms of EV/EBITDA, the multiples for the Sichuan Hydro Power Consideration
and Pingliang Power Plant Consideration of approximately 8.6 times and 9.0
times respectively and price/NAV multiple of approximately 1.8 times and 2.2
times respectively are within the respective ranges of and in line with the
respective averages of the trading multiples of the Hong Kong listed comparable
companies (excluding CR Power).
In addition, we have compared the aforementioned acquisition multiples under
the Transfer Agreements with the trading multiples of the B-share comparable
companies for supplemental comparison purposes. The EV/EBITDA and EV/MW
multiples for the Sichuan Hydro Power Consideration are both higher than the
ranges and averages of the respective trading multiples of the B-share
comparable companies, whereas the price/earnings multiple is within the range
and lower than the average trading multiples, and the price/NAV multiple is
within the range and in line with the average trading multiples.
The EV/MW and price/earnings multiples for the Pingliang Power Plant
Consideration are both within the ranges and lower than the averages of the
respective trading multiples of the B-share comparable companies, whereas the
EV/EBITDA multiple is higher than the range and the average trading multiples,
and the price/NAV multiple is within the range and higher than the average
trading multiples.
(ii) Comparable transaction analysis
Our analysis also includes research into acquisition transactions in the
Chinese electric power generation sector which have taken place since the
recent power industry reform started in the PRC in early 2002. In selecting the
comparable transactions, we have focused on material transactions and have
taken into account the availability of reliable transaction information and
comparability of the power plants acquired with the Target Power Plants. Due to
the inherent differences in the economics of hydro versus thermal plants, we
have analysed the Sichuan Hydro Power Consideration and Pingliang Power Plant
Consideration separately. The following table sets out our findings:
18
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
COMPARABLE TRANSACTION ANALYSIS
Net
installed EV(1)/ EV(1)/ Price(2)/ Price(2)/
Date Seller Buyer capacity Fuel EBITDA(3) MW earnings(3) NAV
(MW) (Times) (RMB (Times) (Times)
million)
Hydro power plants
08/08/2003(4) China China 2,800 Hydro n.a. 6.7 n.a. n.a.
Changjiang Yangtze
Sanxia Power Co.
Engineering
Development
Co.
SICHUAN HYDRO POWER CONSIDERATION 8.6 6.8 10.9 1.8
Coal fired power plants
16/04/2004(5) Huaneng The Company 3,036 Coal 5.7 3.8 8.7 1.7
Group & HIDPC
05/06/2003(6) Huaneng Group The Company 570 Coal 6.8 2.9 9.7 4.8
09/05/2003(7) China Huadian Shandong 480 Coal 9.1 4.3 18.4 1.0
Corporation International
Power
Development
Co. Ltd
16/11/2002(8) Huaneng Group The Company 390 Coal 4.2 1.8 7.2 3.2
09/05/2002(9) Huaneng Group The Company 1,687 Coal 4.5 2.3 8.1 2.0
AVERAGE 6.1 3.0 10.4 2.5
PINGLIANG POWER PLANT CONSIDERATIOn 9.0 3.8 10.8 2.2
Source: Companies' public filings available on the Latest Practicable Date
n.a.: not available
Notes:
(1) EV refers to the sum of the equity purchase consideration paid in an
acquisition and the proportional net indebtedness of the target power
plant(s) as at the latest full year audited financial year end date prior
to the acquisition.
(2) Price refers to the equity purchase consideration paid in an acquisition.
(3) EBITDA and earnings based on the latest full year audited financials of
the relevant target power plants before the acquisition took place.
(4) China Yangtze Power Company Limited acquired 100% in four hydro power
generators in Hubei Province.
(5) The Company acquired 40% of Hebei Hanfeng Power Generation Limited
Liability Company in Hebei Province, 90% of Jinggangshan Huaneng Power
Generation Limited Liability in Jiangxi Province, 55% of Huaneng Hunan
Yueyang Power Generation Limited Liability Company in Hunan Province, 60%
in Huaneng Chongqing Luohuang Power Generation Limited Liability Company
in Chongqing Province and 100% of Huaneng International Power Development
Corporation Yingkou Branch Company in Liaoning Province.
(6) The Company acquired 100% of China Huaneng Group Xindian Power Plant in
Shandong Province, 60% in Shanxi Huaneng Yushe Power Limited Liability
Company in Shanxi Province, and 55% of Henan Huaneng Qinbei Power
Generation Limited Liability Company in Henan Province.
(7) Shandong International Power Development Company Limited acquired 80% in
Sichuan Guangan Power Generation Company Limited in Sichuan Province.
(8) The Company acquired 30% in Shanghai Shidongkou Power Limited Company in
Shanghai and 5% of Suzhou Industrial Park Huaneng Power Limited Liability
Company in Jiangsu Province.
(9) The Company acquired 70% in Shanghai Shidongkou Power Limited Company in
Shanghai, 70% in Suzhou Industrial Park Huaneng Power Limited Liability
Company in Jiangsu Province, 44.16% in Jiangsu Huaneng Huaiyin Power
Limited Company in Jiangsu Province, and 100% of China Huaneng Group
Company Zhejiang Changxing Power Plant in Zhejiang Province.
Our review of the EV/MW multiple of approximately RMB6.8 million/MW for the
Sichuan Hydro Power Consideration is comparable to the precedent transaction.
We note that the Pingliang Power Plant Consideration multiples of approximately
9.0 times for EV/EBITDA, RMB3.8 million/MW for EV/MW and 10.8 times for
price/earnings indicate that the aforementioned multiples are higher than the
respective averages but are within the respective ranges of the precedent
transactions. We are of the view that the higher multiples of the Pingliang
Power Plant Consideration are mainly attributable to the fact that the MW
weighted average age of the Pingliang Power Plant is only approximately 2.2
years as compared to the average age of approximately 3.4 to 10.0 years for the
precedent transactions. Furthermore, two of the four units at Pingliang Power
Plant commenced commercial operations in June 2003 and November 2003
respectively, and hence the financial results of the Pingliang Power Plant for
19
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
the financial year ended 31 December 2003 did not reflect the full earnings
capability of the four current operating units on which the Pingliang Power
Plant Consideration was priced, resulting in higher acquisition multiples. The
price/NAV multiple of approximately 2.2 times for the Pingliang Power Plant
Consideration is lower than the average multiple of the precedent transactions,
consistent with the fact that the Pingliang Power Plant is a younger plant than
those in the precedent transactions. In addition, the Pingliang Power Plant is
a mine-mouth power plant, with lower transportation cost of coal and higher
reliability of coal supply than some other coal fired plants, alleviating two
major financial and operational risks many coal fired plants in China are
currently exposed to.
On the above basis, we consider the Sichuan Hydro Power Consideration and the
Pingliang Power Plant Consideration under the respective Transfer Agreements
are fair and reasonable so far as the Independent Shareholders are concerned.
(d) Conditions of the Acquisition
Completion of the Transfer Agreements is conditional upon fulfilment of various
conditions including the approval of the Acquisition by the Independent
Shareholders at the EGM. Further details of the other conditions precedent to
the completion of the Acquisition are set out in the section headed "2.
Transfer Agreements" in the "Letter from the Board" of the Circular.
3. Potential financial effects
This section sets out various analyses on the potential financial effects of
the Acquisition, which were prepared based on the audited financials of the
Company and its subsidiaries (the "Group") for the financial year ended 31
December 2003 and the unaudited financials of the Group for the six months
ended 30 June 2004, and the unaudited financials of Sichuan Hydro Power and its
subsidiaries for the financial year ended 31 December 2003 and the seven months
ended 31 July 2004, as well as the unaudited financials of Pingliang Power
Plant for the financial year ended 31 December 2003 and the six months ended 30
June 2004, which were prepared based on the International Financial Reporting
Standards, further details of which are summarised in the section headed "6.
Selected financial information of the Target Power Plants" in the "Letter from
the Board" of the Circular. Upon completion of the Acquisition, the Target
Power Plants will become subsidiaries of the Company, and accordingly their
financials will be consolidated into the financial statements of the Group. It
should be noted that the figures and financial effects shown in this section
are for illustrative purposes only.
(a) Net income
The net profit (before taking into consideration any adjustments relating to
the Acquisition) of the Target Power Plants for the financial year ended 31
December 2003 was approximately RMB149.0 million and approximately RMB114.6
million for Sichuan Hydro Power and Pingliang Power Plant respectively, and the
Company is acquiring a 60% equity interest and a 65% equity interest in the
Sichuan Hydro Power and Pingliang Power Plant respectively.
(b) Net assets
Based on our discussion with the management of the Company, we understand that
there will be no material change to the NAV of the Group as a result of the
Acquisition.
(c) Net gearing
The total consideration of the Acquisition of approximately RMB2,025 million
will be satisfied by cash payment upon completion of the Acquisition, which
would add to the Group's net debt position of approximately RMB12,552 million
as at 30 June 2004. In addition, based on the information provided by the
Company, the Group is acquiring the Sichuan Hydro Power with net debt of
approximately RMB3,436 million as at 31 July 2004 and the Pingliang Power Plant
with net debt of approximately RMB3,079 million as at 30 June 2004.
SUMMARY
Having considered the above principal factors and reasons, we draw your
attention to the following in arriving at our conclusion:
20
-------------------------------------------------------------------------------
LETTER FROM ROTHSCHILD
-------------------------------------------------------------------------------
(i) the Acquisition would enlarge the operational scale and increase the
geographical coverage of the Company in the PRC and is in line with the
Company's long-term business and development strategy;
(ii) the Acquisition would enable the Company to make its first move into
hydro power generation which would allow the Company to adjust its
generation structure from sole dependence on coal fired generation to
both coal fired and hydro generation, and would allow the Company to
diversify to some extent the fuel sources for its overall generation
portfolio and reduce its reliance on coal and average fuel costs of
generation;
(iii) the acquisition multiples for the Sichuan Hydro Power Consideration and
the Pingliang Power Plant Consideration are considered to be at a
reasonable level comparing to the trading multiples of comparable
companies, having considered the differences in nature of the generation
assets, as well as plant specific operational factors;
(iv) the EV/MW multiple for the Sichuan Hydro Power Consideration is
comparable to the precedent transaction while the multiples for Pingliang
Power Plant Consideration are higher than the respective averages but are
within the respective ranges of precedent transactions, and considered to
be at a reasonable level having considered the prevailing economic
environment and conditions for each transaction, as well as plant
specific operational factors; and
(v) the Company is acquiring a 60% equity interest and a 65% equity interest
in the Sichuan Hydro Power and Pingliang Power Plant respectively for
which the net income for Sichuan Hydro Power and Pingliang Power Plant
for the financial year ended 31 December 2003 was approximately RMB149.0
million and RMB114.6 million respectively, and the aggregate net debt was
approximately RMB3,436 million and RMB3,079 million as at the respective
latest available date in 2004 for the Sichuan Hydro Power and Pingliang
Power Plant respectively.
RECOMMENDATION
Having considered all the above principal factors and reasons, we consider that
(a) the Transfer Agreements are on normal commercial terms (as defined under
the Hong Kong Listing Rules) and the terms of the Transfer Agreements are fair
and reasonable so far as the Independent Shareholders are concerned; and (b)
entering into the Transfer Agreements is in the interest of the Company and its
shareholders as a whole. Accordingly, we advise the Independent Directors to
recommend the Independent Shareholders to vote in favour of the ordinary
resolutions to approve the Acquisition as detailed in the notice of the EGM
which is set out at the end of the Circular.
Yours very truly,
For and on behalf of
N M ROTHSCHILD & Sons (Hong Kong) Limited
Liu Xiaofeng
Director
21
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
[VIGERS logo graphic omitted]
Vigers Appraisal & Consulting Limited
International Assets Appraisal Consultants 3 November, 2004
10th Floor, The Grande Building
398 Kwun Tong Road
Kwun Tong
Kowloon
Hong Kong
The Directors
Huaneng Power International, Inc.
West Wing, Building C,
Tianyin Mansion,
2C Fuxingmennan Street,
Xicheng District,
Beijing 100031,
The People's Republic of China
Dear Sirs,
In accordance with your instructions for us to value the property interests to
be acquired by Huaneng Power International, Inc. (the "Company") in the
People's Republic of China ("the PRC"), we confirm that we have carried out
inspections, made relevant enquiries and obtained such further information as
we consider necessary for the purpose of providing you with our opinion of the
open market value of such property interests as at 31 July 2004.
Our valuation is our opinion of the open market value which we would define as
intended to mean - "the best price at which the sale of an interest in property
might reasonably be expected to have been completed unconditionally for cash
consideration on the date of valuation assuming:
(a) a willing seller;
(b) that, prior to the date of valuation, there had been a reasonable period
(having regard to the nature of the property and the state of the market)
for the proper marketing of the interest, for the agreement of price and
terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances
were, on any earlier assumed date of exchange of contracts, the same as
on the date of valuation;
(d) that no account is taken of any additional bid by a special purchaser
with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently
and without compulsion."
In valuing the property in the PRC, we have adopted a combination of the market
and depreciated replacement cost approaches in assessing the land portions of
the property and the buildings and structures standing on the land
respectively. Hence, the sum of the two results represents the market value of
the property as a whole. In the valuation of the land portions, reference has
been made to the standard land price and the sales evidence as available to us
in the locality. Due to the nature of the buildings and structures cannot be
valued on the basis of open market value, they have therefore been valued on
the basis of their depreciated replacement cost. The depreciated replacement
cost approach considers the cost to reproduce or replace in new condition the
property appraised in accordance with current construction costs for similar
property in the locality, with allowance for accrued depreciation as evidenced
by observed condition or obsolescence present, whether arising from physical,
functional or economic causes. The depreciated replacement cost approach
generally furnishes the most reliable indication of value for property in the
absence of a known market based on comparable sales.
Our valuation has been made on the assumption that the owner sells the property
interests on the open market in its existing state without the benefit of a
deferred terms contract, leaseback, joint venture, management agreement or any
similar arrangement which would serve to increase the value of the property
interests.
22
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
We have provided with extracts from title documents relating to such property
interest. We have not, however, searched the original documents to verify
ownership or to verify existence of any lease amendment which do not appear on
the copies handed to us. All documents and leases have been used for reference
only. All dimensions measurements and areas are approximations.
We have inspected the exterior and, where possible, the interior of the
properties. However, we have not carried out a structural survey nor have we
inspected woodwork or other parts of the structures which are covered,
unexposed or inaccessible and we are therefore unable to report that any such
parts of the property interests are free from defect.
We have relied to a considerable extent on information provided by you and have
accepted advise given to us by you on such matters as planning approvals or
statutory notices, easements, tenure, occupation, lettings, site and floor
areas and in the identification of those property interests in which the Group
has a valid interest.
No allowance has been made in our valuation for any charges, mortgages or
amounts owing on the property nor for any expenses or taxation which may be
incurred in effecting a sale. Unless otherwise stated, it is assumed that the
property interests are free from encumbrances restrictions and outgoings of an
onerous nature which could affect their values.
Unless otherwise stated, all money amounts stated are in Renminbi. The exchange
rate used in valuing the property interests in the PRC on at 31 July 2004 was
HK$1=RMB1.06. There has been no significant fluctuation in exchange rate
between that date and the date of this letter.
We enclose herewith a summary of our valuation and the valuation certificate.
Yours faithfully,
For and on behalf of
VIGERS APPRAISAL & CONSULTING LTD
Raymond Ho Kai Kwong,
Registered Professional Surveyor
MRICS, MHKIS MSc(e-com)
Executive Director
Note: Raymond K.K. Ho, Chartered Surveyor, MRICS, MHKIS has extensive
experience in undertaking valuations of properties in Hong Kong and Macau
and has over ten years' experience in the valuation of properties in the
PRC.
23
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
SUMMARY OF VALUATION
Property Capital value in
existing state as at
31 July 2004
(RMB)
1. Land, various buildings and structures of Sichuan Huaneng No commercial
value Baoxinghe Power Joint Stock Limited Company, Sichuan Province, The
PRC.
2. Land, various buildings and structures of Sichuan Huaneng 57,060,000
Taipingyi Hydro Power Limited Liability Company, Sichuan
Province, The PRC.
3. Land, various buildings and structures of Sichuan Huaneng No commercial
value Dongxiguan Hydro Power Joint Stock Limited Company, Sichuan
Province, The PRC.
4. Various structures of Sichuan Huaneng Fujiang Hydro Power No commercial
value Limited Liability Company, Sichuan Province, The PRC.
5. Land, various buildings and structures of Sichuan Huaneng 500,000
Kangding Hydro Power Limited Liability Company, Sichuan
Province, The PRC.
6. Land, various buildings and structures of Sichuan Huaneng 290,730,000
Mingtai Power Limited Liability Company, Sichuan Province,
The PRC.
7. Various structures of Sichuan Huaneng Jialingjiang Hydro No commercial
value Power Limited Liability Company, Sichuan Province, The PRC.
8. Land, various buildings and structures of Gansu Huaneng 41,210,000
Pingliang Power Generation Limited Liability Company, Gansu
Province, The PRC.
9. Various buildings of Sichuan Huaneng Hydro Power Development No
commercial value Limited Liability Company, Sichuan Province, The PRC.
------------------------
Total: 389,500,000
=======================
24
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
VALUATION CERTIFICATE
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
1. Land, various The property comprises 28 parcels of land The No commercial value
buildings and with a site area of approximately 655,199 property is
structures of sq.m. and a number buildings and occupied as
Sichuan Huaneng structures erected thereon. power plant.
Baoxinghe Power
Joint Stock Limited The buildings and structures of the
Company, property has a total gross floor area of
Sichuan Province, approximately 37,770 sq.m. Major buildings
The PRC. and structures on the site include the
power station building, tunnel, water
gates and transformer station.
These buildings and structures of the
property was completed between 1996 to 2003.
Notes:
1. Pursuant to the State-owned Land Use Rights Certificate (document
no.: [GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC
OMITTED][GRAPHIC OMITTED]5294[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](96)[GRAPHIC OMITTED][GRAPHIC
OMITTED]263[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-006[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-009[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-004[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-005[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-013[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-008[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-012[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-010[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]166[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]-005[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0427[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0428[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0472[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]21[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0461[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0467[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0468[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0474[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0476[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0469[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0471[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0466[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0473[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0462[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0463[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0464[GRAPHIC OMITTED][GRAPHIC OMITTED]), the land use rights
of the property is vested to Sichuan Huaneng Baoxinghe Power Joint
Stock Limited Company.
2. Pursuant to the Building Ownership Certificates (document nos.:
[GRAPHIC OMITTED][GRAPHIC OMITTED]0045531[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]0045532[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]0045529[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]0045533[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]0045527[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]0045530[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]0045352[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]0045357[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]0045359[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]620[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]622[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]621[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]389[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]2422[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]2423[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]14041[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]14040[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]2421[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]0045360[GRAPHIC OMITTED][GRAPHIC OMITTED]), the building
ownership of the property is vested in Sichuan Huaneng Baoxinghe
Power Joint Stock Limited Company.
3. The depreciated replacement cost of the buildings and structures
portion of the property as at 31 July 2004 was RMB 967,460,000 and
the incurred construction cost in respect of construction in progress
as at 31 July 2004 was RMB 263,300,000.
4. The land portion of the property is administratively allocated land
in nature. As this portion of the property cannot be freely
transferred in the open market, in valuing this portion of the
property and buildings and structures thereon, we have attributed no
commercial value to it.
5. Based on the assumption that the land portion of the property can be
freely transferred in the open market , the capital value of the land
portion of the property as at 31 July 2004 was as follows:
NATURE CAPITAL VALUE
(RMB)
Administratively allocated land 68,000,000
Granted Land -
_______________
Total: 68,000,000
25
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
2. Land, various The property comprises 11 parcels of land The RMB57,060,000
buildings and with a site area of approximately 65,763 property is
structures of sq.m. and a number buildings and occupied as
Sichuan Huaneng structures erected thereon. power plant.
Taipingyi Hydro
Power Limited The buildings and structures of the
Liability Company, property has a total gross floor area of
Sichuan Province, approximately 55,044 sq.m. Major buildings
The PRC. and structures on the site include the
power station building, tunnel, water
gates and transformer station.
These buildings and structures of the
property was completed between 1991 to 2003.
Notes:
1. Pursuant to the State-owned Land Use Rights Certificate (document
no.: [GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC
OMITTED][GRAPHIC OMITTED]468[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]466[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]475[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]469[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]467[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]465[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]464[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]472[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]473[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]474[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2001)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1149[GRAPHIC OMITTED][GRAPHIC OMITTED]), the land use rights
of the property is vested to Sichuan Huaneng Taipingyi Hydro Power
Limited Liability Company.
2. Pursuant to the Building Ownership Certificates (document nos.:
[GRAPHIC OMITTED][GRAPHIC OMITTED]0875250, 0875253, 0875254,
0875251[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]438[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]439[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]440[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC
OMITTED][GRAPHIC OMITTED]0472[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0486[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0487[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](1999)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0497[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]0879714, 0879710, 0879717, 0879712[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]442[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]441[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]440[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC
OMITTED][GRAPHIC OMITTED]1169[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](1998)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1333[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1170[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1171[GRAPHIC OMITTED][GRAPHIC OMITTED] ), the building
ownership of the property is vested in Sichuan Huaneng Taipingyi
Hydro Power Limited Liability Company.
3. The depreciated replacement cost of the buildings and structures
portion of the property as at 31 July 2004 was RMB 981,050,000 and
the incurred construction cost in respect of construction in progress
as at 31 July 2004 was RMB 1,810,000.
4. A portion of land of the property is administratively allocated land
in nature. As this portion of the property cannot be freely
transferred in the open market, in valuing this portion of the
property and buildings and structures thereon, we have attributed no
commercial value to it.
5. In valuing the granted land portion and buildings and structures
erected thereon of the property, we have assumed that the aforesaid
portion of the property can be freely transferred in the open market.
6. Based on the assumption that the land portion of the property can be
freely transferred in the open market , the capital value of the land
portion of the property as at 31 July 2004 was as follows:
NATURE CAPITAL VALUE
(RMB)
Administratively allocated land 6,200,000
Granted Land 4,400,000
_________________
Total: 10,600,000
26
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
3. Land, various The property comprises 5 parcels of land The No commercial value
buildings and with a site area of approximately 763,946 property is
structures of sq.m. and a number buildings and occupied as
Sichuan Huaneng structures erected thereon. power plant.
Dongxiguan Hydro
Power Joint Stock The buildings and structures of the
Limited Company, property has a total gross floor area of
Sichuan Province, approximately 41,755 sq.m. Major buildings
The PRC. and structures on the site include the
power station building, tunnel, water
gates and transformer station.
These buildings and structures of the
property was completed between 1994 to 2002.
Notes:
1. Pursuant to the State-owned Land Use Rights Certificate (document
no.: [GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC
OMITTED][GRAPHIC OMITTED]0011114[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1453[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1452[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1451[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED][GRAPHIC OMITTED][GRAPHIC
OMITTED]3330[GRAPHIC OMITTED][GRAPHIC OMITTED] ), the land use rights
of the property is vested to Sichuan Huaneng Dongxiguan Hydro Power
Joint Stock Limited Company.
2. Pursuant to the Building Ownership Certificates (document nos.:
[GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]001-2, 4#, [GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC
OMITTED][GRAPHIC OMITTED]001-2, 5#, [GRAPHIC OMITTED][GRAPHIC
OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC OMITTED]001-2, 3#, [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]001-1, 6#, [GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC
OMITTED][GRAPHIC OMITTED]001-1, 7#, [GRAPHIC OMITTED][GRAPHIC
OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC OMITTED]001-3, 11#, [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]001-3, 9#, [GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC
OMITTED][GRAPHIC OMITTED]001-3, 10#, [GRAPHIC OMITTED][GRAPHIC
OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC OMITTED]001, 8#, [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]001-2, 1#, 2#, [GRAPHIC OMITTED][GRAPHIC
OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC OMITTED]001-3, 12#, [GRAPHIC
OMITTED][GRAPHIC OMITTED]00168970[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]00168966[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]00168967[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]00168968[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]00168969[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]1097679[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]1097680[GRAPHIC
OMITTED][GRAPHIC OMITTED]), the building ownership of the property is
vested in Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited
Company.
3. The depreciated replacement cost of the buildings and structures
portion of the property as at 31 July 2004 was RMB 915,220,000.
4. The land portion of the property is administratively allocated land
in nature. As this portion of the property cannot be freely
transferred in the open market, in valuing this portion of the
property and buildings and structures thereon, we have attributed no
commercial value to it.
5. Based on the assumption that the land portion of the property can be
freely transferred in the open market , the capital value of the land
portion of the property as at 31 July 2004 was as follows:
NATURE CAPITAL VALUE
(RMB)
Administratively allocated land 56,720,000
Granted Land -
_______________
Total: 56,720,000
27
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
4. Various structures The property comprises various structures The No commercial value
of Sichuan including tunnel, water gates and property is
Huaneng Fujiang ancillary facilities. under
Hydro Power construction.
Limited Liability
Company,
Sichuan Province,
The PRC.
Notes:
1. As advised by the Company, the structures of the property were
constructed on various lots and the incurred construction cost in
respect of construction in progress as at 31 July 2004 was RMB
287,660,000.
2. The land portion of the property is administratively allocated land
in nature. As this portion of the property cannot be freely
transferred in the open market, in valuing this portion of the
property and buildings and structures thereon, we have attributed
no commercial value to it.
28
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
5. Land, various The property comprises 11 parcels of land The No commercial value
buildings and with a site area of approximately 209,599 property is
structures of sq.m. and a number buildings and occupied as
Sichuan Huaneng structures erected thereon. power plant.
Kangding Hydro
Power Limited The buildings and structures of the
Liability Company, property has a total gross floor area of
Sichuan Province, approximately 21,889 sq.m. Major buildings
The PRC. and structures on the site include the
power station building, tunnel, water
gates and transformer station.
These buildings and structures of the
property was completed in 2000.
Notes:
1. Pursuant to the State-owned Land Use Rights Certificate (document
no.: [GRAPHIC OMITTED][GRAPHIC OMITTED](2002)[GRAPHIC
OMITTED][GRAPHIC OMITTED]035[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](2002)[GRAPHIC OMITTED][GRAPHIC
OMITTED]034[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2002)[GRAPHIC OMITTED][GRAPHIC
OMITTED]036[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](98)[GRAPHIC OMITTED][GRAPHIC
OMITTED]A00165[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2002)[GRAPHIC OMITTED][GRAPHIC
OMITTED]033[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2002)[GRAPHIC OMITTED][GRAPHIC
OMITTED]048[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]189[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1227[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1226[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2002)[GRAPHIC OMITTED][GRAPHIC
OMITTED]020[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004) [GRAPHIC OMITTED][GRAPHIC
OMITTED]384[GRAPHIC OMITTED][GRAPHIC OMITTED]), the land use rights
of the property is vested to Sichuan Huaneng Kangding Hydro Power
Limited Liability Company.
2. Pursuant to the Building Ownership Certificates (document nos.:
[GRAPHIC OMITTED][GRAPHIC OMITTED]02693[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]02693[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]02693[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED]02693[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]02693[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]02693[GRAPHIC
OMITTED][GRAPHIC OMITTED]), the building ownership of the property is
vested in Sichuan Huaneng Kangding Hydro Power Limited Liability
Company.
3. The depreciated replacement cost of the buildings and structures
portion of the property as at 31 July 2004 was RMB 431,900,000 and
the incurred construction cost in respect of construction in progress
as at 31 July 2004 was RMB 98,200,000.
4. The land portion of the property is administratively allocated land
in nature. As this portion of the property cannot be freely
transferred in the open market, in valuing this portion of the
property and buildings and structures thereon, we have attributed no
commercial value to it.
5. Based on the assumption that the land portion of the property can be
freely transferred in the open market , the capital value of the land
portion of the property as at 31 July 2004 was as follows:
NATURE CAPITAL VALUE
(RMB)
Administratively allocated land 21,200,000
Granted Land 500,000
_________________
Total: 21,700,000
29
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
6. Land, various The property comprises 3 parcels of land The 290,730,000
buildings and with a site area of approximately 90,378 property is
structures of sq.m. and a number buildings and occupied as
Sichuan Huaneng structures erected thereon. power plant.
Mingtai Power
Limited Liability The buildings and structures of the
Company, property has a total gross floor area of
Sichuan Province, approximately 10,696 sq.m. Major buildings
The PRC. and structures on the site include the
power station building, tunnel, water
gates and transformer station.
These buildings and structures of the
property was completed between 1997 to 2001.
Notes:
1. Pursuant to the State-owned Land Use Rights Certificate (document
no.: [GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC
OMITTED][GRAPHIC OMITTED]145708[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]145709[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]145710[GRAPHIC OMITTED][GRAPHIC OMITTED]), the land use
rights of the property is vested to Sichuan Huaneng Mingtai Power
Limited Liability Company.
2. Pursuant to the Building Ownership Certificates (document nos.: (95)
[GRAPHIC OMITTED][GRAPHIC OMITTED] NO005839[GRAPHIC OMITTED][GRAPHIC
OMITTED]), the building ownership of the property is vested in
Sichuan Huaneng Mingtai Power Limited Liability Company.
3. The depreciated replacement cost of the buildings and structures
portion of the property as at 31 July 2004 was RMB 268,070,000.
4. In the course of valuation, we have assumed that the property the
property can be freely transferable in the open market.
5. Based on the assumption that the land portion of the property can be
freely transferred in the open market , the capital value of the land
portion of the property as at 31 July 2004 was as follows:
NATURE CAPITAL VALUE
(RMB)
Administratively allocated land -
Granted Land 22,660,000
_______________
Total: 22,660,000
30
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
7. Various structures The property comprises various structures The No commercial value
of Sichuan including mainly tunnel, water gate and property is
Huaneng ancillary facilities. occupied as
Jialingjiang Hydro ancillary
Power Limited These structures of the property was facilities
Liability Company, completed between 2001 to 2004. to power
Sichuan Province, plant.
The PRC.
Notes:
1. The depreciated replacement cost of the structures portion of the
property as at 31 July 2004 was RMB 277,790,000 and the incurred
construction cost in respect of construction in progress as at 31
July 2004 was RMB 83,240,000.
2. The land portion of the property is administratively allocated land
in nature. As this portion of the property cannot be freely
transferred in the open market, in valuing this portion of the
property and buildings and structures thereon, we have attributed
no commercial value to it.
31
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
8. Land, various The property comprises 27 parcels of land The 41,210,000
buildings and with a site area of approximately property is
structures of Gansu 1,559,575 sq.m. and a number buildings and occupied as
Huaneng Pingliang structures erected thereon. power plant.
Power Generation
Limited Liability The buildings and structures of the
Company, property has a total gross floor area of
Gansu Province, approximately 1,313,710 sq.m. Major
The PRC. buildings and structures on the site
include the power station building, chimneys,
coal storage facilities and transformer
station.
These buildings and structures of the
property was completed between 2001 to 2003.
Notes:
1. Pursuant to the State-owned Land Use Rights Certificate (document
no.: [GRAPHIC OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC
OMITTED][GRAPHIC OMITTED]1814[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1811[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1810[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1809[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1813[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1812[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1808[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1807[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1806[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1805[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1804[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1803[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1802[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1801[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1800[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1799[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1798[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1797[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1796[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1795[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1794[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1793[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1822[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2000)[GRAPHIC OMITTED][GRAPHIC
OMITTED]1821[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0517[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0602[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED](2004)[GRAPHIC OMITTED][GRAPHIC
OMITTED]0603[GRAPHIC OMITTED][GRAPHIC OMITTED]), the land use rights
of the property is vested to Gansu Huaneng Pingliang Power Generation
Limited Liability Company.
2. Pursuant to the Building Ownership Certificates (document nos.:
[GRAPHIC OMITTED][GRAPHIC OMITTED]022567[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]022549[GRAPHIC
OMITTED][GRAPHIC OMITTED]-022555, 022557[GRAPHIC OMITTED][GRAPHIC
OMITTED], 022562[GRAPHIC OMITTED][GRAPHIC OMITTED]-022566[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]022556[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED] 8731[GRAPHIC OMITTED][GRAPHIC OMITTED],
[GRAPHIC OMITTED][GRAPHIC OMITTED]022560[GRAPHIC OMITTED][GRAPHIC
OMITTED], [GRAPHIC OMITTED][GRAPHIC OMITTED]022559[GRAPHIC
OMITTED][GRAPHIC OMITTED], [GRAPHIC OMITTED][GRAPHIC
OMITTED]022558[GRAPHIC OMITTED][GRAPHIC OMITTED], [GRAPHIC
OMITTED][GRAPHIC OMITTED] 022561[GRAPHIC OMITTED][GRAPHIC OMITTED]),
the building ownership of the property is vested in Gansu Huaneng
Pingliang Power Generation Limited Liability Company.
3. The depreciated replacement cost of the buildings and structures
portion of the property as at 31 July 2004 was RMB 1,040,180,000.
4. A portion of land of the property is administratively allocated land
in nature. As this portion of the property cannot be freely
transferred in the open market, in valuing this portion of the
property and buildings and structures thereon, we have attributed no
commercial value to it.
5. In valuing the granted land portion and buildings and structures
erected thereon of the property, we have assumed that the aforesaid
portion of the property can be freely transferred in the open market.
6. Based on the assumption that the land portion of the property can be
freely transferred in the open market , the capital value of the land
portion of the property as at 31 July 2004 was as follows:
NATURE CAPITAL VALUE
(RMB)
Administratively allocated land 192,030,000
Granted Land 1,570,000
_______________
Total: 193,600,000
32
--------------------------------------------------------------------------------
APPENDIX I PROPERTY VALUATION REPORT
-------------------------------------------------------------------------------
Capital value in
Particulars existing state as at
Property Description of occupancy 31 July 2004
9. Various buildings The property comprises various buildings The No commercial value
of Sichuan including mainly office buildings and property is
Huaneng Hydro dormitory buildings. occupied as
Power Development office and
Limited Liability The property has a gross floor area of dormitory.
Company, approximately 10,083 sq.m..
Sichuan Province,
The PRC. These buildings of the property was
completed between 1997 to 2000.
Notes:
1. Based on the assumption that the property can be freely transferred
in open market, the value of the buildings of the property as at 31
July 2004 was RMB 74,600,000.
2. In the course of valuation, the building ownership certificate of
these buildings of the property are being in the process of
application. In this regard, we have attributed not commercial
value to the property.
33
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
[VIGERS logo graphic omitted]
Vigers Appraisal & Consulting Limited
International Assets Appraisal Consultants 3 November, 2004
10th Floor, The Grande Building
398 Kwun Tong Road
Kwun Tong
Kowloon
Hong Kong
The Directors
Huaneng Power International, Inc.
West Wing, Building C,
Tianyin Mansion,
2C Fuxingmennan Street,
Xicheng District,
Beijing 100031,
The People's Republic of China
Dear Sirs,
In accordance with your instructions for us to value the plant machinery and
equipment (collectively referred to as the "Machinery") exhibited to us as
being owned by various power generation plants (the "Plants") and to be
acquired by Huaneng Power International, Inc. (the "Company"), we confirm that
we have carried out inspections, made relevant enquiries and obtained such
further information as we consider necessary for the purpose of providing you
with our opinion of the fair market value in continued use of the Machinery as
at 31 July, 2004.
BASIS OF VALUATION
We have valued the Machinery on the basis of its fair market value in continued
use which is defined as the estimated amount at which the subject assets in
their continued use might be expected to be purchased and sold between a
willing buyer and a willing seller, neither being under compulsion, each having
a reasonable knowledge of all relevant facts and with equity to both, and
contemplating the retention of the assets in their present existing use as part
of an on-going business.
The opinion of fair market value is not necessarily intended to represent the
amount that might be realized from piecemeal disposition of the subject
Machinery in the open market or from alternative use of the Machinery.
In forming our opinion of the fair market value in continued use, we have
assumed that the Machinery will continue in its present existing use in the
business of the Company for which it was designed, built and erected, subject
to potential profitability of the business.
ASSETS APPRAISED
The fixed assets subject of this appraisal, as per the list provided to us,
consist of machinery and equipment, motor vehicles and transport equipment, and
electronics equipment utilized in electric power generation and operated by
eight (8) hydro-electric power plants, one (1) coal-fired power plant and one
(1) hydro-electric power plant under construction.
Hydro-electric power plant is one of the cleanest producers of renewable energy
source and designed to operate for decades. It converts the kinetic energy
contained in falling water held in a reservoir or lake behind a dam into
electricity using a water turbine. A water turbine is a rotary engine that
takes energy from moving water. The force of water being released from the
reservoir through the dam spins the blade of the water turbine, which rotation
is transferred to a connected generator that produces electricity. The amount
of electric power that can be generated is dependant on the vertical distance
through which water falls, called "head" and the flow rate of water measured as
volume per unit time. There are different types of hydro-electric power plants
namely: high head, low head and pumped storage.
Coal-fired power plant is an energy source that produces electricity by the
process of heating water in a boiler using coal as fuel. The steam that is
produced is under tremendous pressure flows into a steam turbine that spins the
connected generator to produce electricity.
34
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company
Yucheng Downstream Plant
The hydro-electric power plant is a low head type with a total rated output of
60 MW was fully operated in 1996. It consists of 3 x 20 MW hydro-electric
generating sets utilizing a vertical Kaplan type reaction water turbine. The
designed head and flow rate is 15.5 m and 150 m3/sec, respectively. The
generator is a conventional suspended shaft type. The concrete gravity type dam
measures approximately 248 m L x 31 m H x 12.5 m W (top), and equipped with
radial type gates for water control. Further particulars of each equipment are
as follows:
Water Turbine (3-units)
Origin : China
Model : ZZ569-LH-500
Output : 20,725 KW
Head (design) : 15.5 m
Head (max.) : 17.4 m
Flow Rate (design) : 149.61 m3/sec
Specific Speed : 115.4 rpm
Runaway Speed : 310 rpm
Generator (3-units)
Origin : China
Model : SF-20-52/7250
Rated Power : 25,000 KVA (20 MW)
Rated Voltage : 10.5 KV
Rated Current : 1,375 amperes
Power Factor : 0.80
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 310 rpm
Xiao Guanzi Upstream Plant
This low head type hydro-electric power plant, which fully operated in 2001,
has a total rated output of 160 MW. The generating sets consist of 4 x 40 MW
hydro-electric units. The water turbine is a vertical Francis type reaction
turbine. The designed head and flow rate is 136.5 m and 32.5 m3/sec,
respectively. The generator is a conventional suspended shaft type. The
concrete gravity type dam, which diverts water into a penstock is approximately
10 kms from the turbine house, measures approximately 150 m L x 20 m H x 10 m W
(top), and equipped with radial type gates for water control. A single penstock
feeds water to the water turbines. Four hydraulic operated butterfly type
valves control the flow of water to the turbines. Further particulars of each
equipment are as follows:
Water Turbine (4-units)
Origin : China
Model : HLD242-LJ-205
Output : 40 MW
Head (design) : 136.5 m
Head (max.) : 152.3 m
Flow Rate (design) : 32.5 m3/sec
Specific Speed : 375 rpm
Runaway Speed : 770 rpm
Generator (4-units)
Origin : China
Model : SF40-16/4250
Rated Power : 40 MW
Rated Voltage : 10.5 KV
Rated Current : 2,588 amperes
Power Factor : 0.85
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 770 rpm
35
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
Tong Tou Midstream Plant
The hydro-electric power plant is a low head type that provides 80 MW of
capacity was fully operated in 1996. It consists of 4 x 20 MW hydro-electric
generating sets using a vertical Francis type reaction water turbine and a
conventional suspended vertical shaft generator. The designed head is 80 m and
the flow rate is 28.5 m3/sec. The concrete gravity arch type dam, which is
located approximately 3 kms from the turbine house, has a measurement of
approximately 109 m L x 75 m H x 15.5 m W (top), and equipped with vertical
lift sliding type gates for water control. A single penstock feeds water to the
water turbines. Four hydraulic operated butterfly type valves control the flow
of water to the turbines. Further particulars of each equipment are as follows:
Water Turbine (4-units)
Origin : China
Model : HLA153-LJ-180
Output : 20,555 KW
Head (design) : 80 m
Head (max.) : 90 m
Flow Rate (design) : 28.5 m3/sec
Specific Speed : 333.3 rpm
Runaway Speed : 714 rpm
Generator (4-units)
Origin : China
Model : SF20-18/4000
Rated Power : 25,000 KVA (20 MW)
Rated Voltage : 10.5 KV
Rated Current : 1,300 amperes
Power Factor : 0.80
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 714 rpm
Sichuan Huaneng Jialingjiang Hydro Power Limited Liability Company
The hydro-electric power plant is a low head type designed to produce 136 MW of
electric power from four (4) units of 34 MW hydro-electric generating sets. At
the time of our inspection, the first generating set, which was operated in
early 2004, was in commercial operation. The installation of the remaining
three (3) generating sets was in-progress. The water turbine is a bulb (pit)
type reaction turbine. The designed head and water flow is 11 m and 347.72
m3/sec, respectively. The main dam, which is a concrete gravity type, is
located about 1 km from the turbine house measures approximately 179.5 m L x
48.3 m H x 27 m W (top), and equipped with vertical lift sliding type gates for
water control. An overflow dam measuring approximately 222.6 m L x 26.25 m H x
5.92 m W (top) is also provided. Further particulars of each equipment are as
follows:
Water Turbine (1-unit operational, 3-units under construction)
Origin : China
Model : GZ-WP-615
Output : 34 MW
Head (design) : 11 m
Head (max.) : 12.84 m
Flow Rate (design) : 347.72 m3/sec
Specific Speed : 93.75 rpm
Runaway Speed : 220/290 rpm
36
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
Generator (1-unit operational, 3-units under construction)
Origin : China
Model : SFWG34-64/6700
Rated Power : 34 MW
Rated Voltage : 10.5 KV
Rated Current : 2,032 amperes
Power Factor : 0.92
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 290 rpm
Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company
This low head type hydro-electric power plant, with a total rated output of 180
MW, was fully put into commercial operation in 1996. It consists of 4 x 45 MW
hydro-electric generating sets using a vertical Kaplan type reaction water
turbine. The designed head is 17 m and designed water flow is 312 m3/sec. The
generator is conventional suspended vertical shaft type. A concrete gravity
type main dam located about 4 kms from the turbine house has a measurement of
approximately 175.2 m L x 47.2 m H x 28 m W (top) and equipped with vertical
lift sliding type gates for water control. An overflow dam and a controlled
diversion canal for marine vessel passage are also provided. Further
particulars of each equipment are as follows:
Water Turbine (4-units)
Origin : China
Model : ZZ500-LH-640
Output : 45 MW
Head (design) : 17 m
Head (max.) : 24.3 m
Flow Rate (design) : 312 m3/sec
Specific Speed : 93.75 rpm
Runaway Speed : 190/270 rpm
Generator (4-units)
Origin : China
Model : SF45-64/9200
Rated Power : 52,941 KVA (45 MW)
Rated Voltage : 10.5 KV
Rated Current : 2,911 amperes
Power Factor : 0.85
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 270 rpm
Sichuan Huaneng Mingtai Power Limited Liability Company
The plant is a low head hydro-electric generating power plant with a rated
capacity of 45 MW generated from 3 x 15 MW units. It commenced full commercial
operation in 1997. The water turbine is vertical Kaplan type reaction turbine
and connected to a conventional suspended vertical shaft generator. The
designed head is 13.3 m and flow rate is 136.3 m3/sec. The concrete gravity
type dam, which measures approximately 425 m L x 18 m H x 15 m W (top), is
fitted with vertical lift sliding type gates for water control. Further
particulars of each equipment are as follows:
Water Turbine (3-units)
Origin : China
Model : ZZ560-LH-430
Output : 15 MW
Head (design) : 13.3 m
Flow Rate (design) : 136.3 m3/sec
Specific Speed : 125 rpm
Runaway Speed : 265 rpm
37
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
Generator (3-units)
Origin : China
Model : SF15-48/6400
Rated Power : 15 MW
Rated Voltage : 10.5 KV
Rated Current : 1,032 amperes
Power Factor : 0.80
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 265 rpm
Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company
The total rated output of this low head hydro-electric generating power plant
is 260 MW generated from 4 x 65 MW units. The operation of first generating
unit started in 1994. Full commercial operation was in 1996. The water turbine
is vertical Francis type reaction turbine and connected to a conventional
suspended vertical shaft generator. The designed head is 108 m and flow rate is
66.2 m3/sec. The main dam located about 13 kms from the turbine house is a
concrete gravity type, measuring approximately 232 m L x 29 m H x 14 m W (top),
is fitted with radial type gates for water control. A penstock feeds water to
the water turbines and four hydraulic controlled butterfly type valves
approximately 3.4 m in diameter control the flow of water. Further particulars
of each equipment are as follows:
Water Turbine (4-units)
Origin : China
Model : HLTF13-LJ-292
Output : 65 MW
Head (design) : 108 m
Flow Rate (design) : 66.2 m3/sec
Specific Speed : 250 rpm
Runaway Speed : 490 rpm
Generator (4-units)
Origin : China
Model : SF65-24/6440
Rated Power : 65 MW
Rated Voltage : 10.5 KV
Rated Current : 4,205 amperes
Power Factor : 0.85
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 490 rpm
Sichuan Huaneng Kangding Hydro Power Limited Liability Company
The total generating power of this hydro-electric power plant is 180 MW of
electric power from 3 x 60 MW generating sets. It commenced commercial
operation in 2000. The water turbine is vertical Francis reaction type with a
designed head of 362 m and a flow rate of 59 m3/sec., connected to a
conventional suspended vertical shaft generator. The concrete gravity type dam
measures approximately 233.43 L x 24 H m and provided with gates for water
control. Further particulars of the each equipment are as follows:
Water Turbine (3-units)
Origin : China
Model : HL(E)-LJ-234
Output : 60 MW
Head (design) : 362 m
Flow Rate (design) : 59 m3/sec
Specific Speed : 500 rpm
Runaway Speed : 782 rpm
38
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
Generator (3-units)
Origin : China
Model : SF-J60-12/4100
Rated Power : 60 MW
Rated Voltage : 10.5 KV
Rated Current : 3,666 amperes
Power Factor : 0.90
Frequency : 50 hz
Number of Phases : 3
Speed (max) : 500 rpm
Gansu Huaneng Pingliang Power Generation Limited Liability Company
This coal-fired power plant has a total rated output of 1,200 MW. It consists
of 4 x 300 MW generating facilities. The operation of the first generating unit
commenced in 2000, while the fourth unit was operated in December 2003. Various
companies from the People's Republic of China supplied the machinery and
equipment and auxiliaries. The boilers each rated at 1,025 tons per hour are
outdoor type natural circulation with rain proof, wind proof, corrosion proof
and lighting provisions. The steam turbines with a rating of 300 MW each are
multi-stage, impulse, single reheat, condensing type with single shaft directly
coupled with the generators. The generators which are rated at 300 MW each are
hydrogen-cooled with a direct water cooling system for the stator winding, a
direct hydrogen cooled rotor winding, with a static excitation system. Further
particulars of each equipment are as follows:
Steam Boilers (4-units)
Origin : China
Model : HG-1025/18.2YM11
Type : Furnace Coal Fired
Steam Flow : 1,025 T/H
Steam Pressure Outlet : 18.283 MPa
Steam Temperature Outlet : 541(degree)C
Reheat Steam Condition : 834 T/H
Steam Turbines (4-units)
Origin : China
Model : N300-16.7/538/538
Rated Output : 300 MW
Steam Pressure Inlet : 16.67 MPa
Steam Temperature Inlet : 538(degree)C
Reheat Steam Temperature : 538(degree)C
Speed : 3000 rpm
Generators (4-units)
Origin : China
Model : QFSN-300-2
Rated Power : 300 MW
Rated Terminal Voltage : 20 KV
Rated Phase Current : 10,190 A
Power Factor : 0.85
Frequency : 50 hz
Number of Phases : 3
Speed : 3000 rpm
Sichuan Huaneng Fujiang Hydro Power Limited Liability Company
This hydro-electric power plant, which is under construction, is deigned to
produce 300 MW of electric power from three generating plants consisting of 2 x
35 MW, 2 x 65 MW and 2 x 50 MW. Reportedly the plants will be equipped with
Chinese manufactured water turbines, generators and auxiliary equipment. The
concrete gravity type dams of the three plants measures 279 L x 108 H m, 96.5 L
x 20 H m and 39.25 L x 21 H m.
Other major and ancillary equipment include SF6 switching and insulation
system, ABB control and monitoring system, electrostatic precipitators, ball
mills, condensing plant, coal and ash handling equipment, blowers, air
39
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
pre-heaters, classifiers, coal feeders, hydrogen production system, chemical
water treatment plant, water supply and discharge plant, overhead traveling
cranes, compressed air system, heating and ventilating and air-conditioning
system, instrumentation and controls, transformers, switchyard, electrical
cables and raceway system, piping system and fire protection system.
Construction-In-Progress are assets that are not fully constructed or
installed. The value indicated is based on the recorded costs as reported to us
as of the appraisal date.
At the time of our inspection, the Machinery was observed to be generally in
good working condition. It is our opinion that it is capable of performing the
function for which it was designed, built and erected. The Machinery undergoes
periodic maintenance in accordance with the manufacturer's schedule and system.
The Machinery of the hydro-electric power plants was inspected at various
locations in Sichuan Province while the coal-fired power plant was inspected at
Ping Liang, Gansu Province all in the People's Republic of China.
VALUATION METHODOLOGY
In arriving at our opinion of value, we have considered the two generally
accepted approaches to values; namely:
Cost Approach - considers the cost to reproduce or replace in new condition the
assets appraised in accordance with current market prices for similar assets,
with allowance for accrued depreciation arising from condition, utility, age,
wear and tear, or obsolescence present, taking into consideration past and
present maintenance policy and rebuilding history.
Physical depreciation is the loss in value due to physical deterioration
resulting from wear and tear in operation and exposure to elements.
Deterioration due to age and deterioration due to usage are the main factors
that affect physical condition. Physical condition due to wear and tear is
proportional to use rather than age. Use is the best indicator to estimate
physical deterioration.
Market Data or Comparative Sales Approach - considers prices recently paid for
similar assets, with adjustments made to the indicated market prices to reflect
condition and utility of the appraised assets relative to the market
comparative. Asset for which there is an established secondhand market
comparable is best appraised by this approach.
SCOPE OF INVESTIGATION AND CONSIDERATIONS
Before arriving at our opinion of value, we have personally conducted a
physical inventory and inspection of the subject Machinery, investigated market
condition, interviewed personnel, and examined documents and specifications
provided to us.
During our inspection we observed the various Machinery. Any deferred
maintenance, physical wear and tear, operating malfunctions, lack of utility,
or any observable conditions distinguishing the appraised Machinery from assets
of like kind in new conditions were noted and made part of our judgement in
arriving at the values.
In arriving at our opinion of the defined value using the cost approach, we
have considered the cost of reproduction new of the subject assets, defined as
the estimated amount of money needed to acquire in like kind and in new
condition an asset or group of assets, taking into consideration current prices
of materials, labor, manufactured equipment, contractor's overhead, profit and
fees, and all other attendant costs associated with its acquisition and
installation in place, without provision for overtime or bonuses for labor, and
premiums for materials.
Consideration has been given to accrued depreciation that was based on the
observed condition and present and prospective serviceability in comparison
with new units of like kind.
We have assumed that the Machinery will be used in its present existing state
with the benefit of continuity of the tenure of land and buildings during the
foreseeable future.
We have relied to a considerable extent on information such records, listings
and specifications provided to us by the Plants. We have made no investigation
of and assume no responsibility for titles to or liabilities against the
Machinery appraised.
We have not made any deduction in respect of any grant either available or
received, neither has any adjustment been made for any outstanding amounts
owing under financing agreements.
40
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
Our investigation was restricted to a detailed inventory and appraisal of the
subject Machinery and does not attempt to arrive at any conclusion of values of
the Plants as a total business entity.
OPINION OF VALUE
Based on the foregoing and as supported by the accompanying summary, we are of
the opinion that as at 31 July 2004, the fair market value in continued use of
the Machinery, as part of a going-concern, is fairly represented in the amount
of Rmb5,174,074,000 (Renminbi Five Billion One Hundred Seventy Four Million
Seventy Four Thousand), broken down as follows:
Rmb
Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company 669,383,000
Sichuan Huaneng Jialingjiang Hydro Power Limited Liability Company 154,329,000
Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company 301,871,000
Sichuan Huaneng Mingtai Power Limited Liability Company 134,422,000
Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company 231,406,000
Sichuan Huaneng Kangding Hydro Power Limited Liability Company 487,541,000
Gansu Huaneng Pingliang Power Generation Limited Liability Company 3,029,549,000
Sichuan Huaneng Hydro Power Development Limited Liability Company 722,000
Sichuan Huaneng Fujiang Hydro Power Limited Liability Company 164,851,000
-----------------
Total 5,174,074,000
We hereby certify that we have neither present nor prospective interest in the
Plants and Company or the appraised Machinery or the value reported.
Yours faithfully,
For and on behalf of
VIGERS APPRAISAL & CONSULTING LIMITED
RAYMOND HO KAI KWONG MAXIMO I. MONTES JR.
Registered Professional Surveyor PME BSME
MRICS MHKIS MSc(e-com) Associate Director
Executive Director Plant and Machinery Valuation
Note: Maximo I. Montes Jr. is a Professional Mechanical Engineer who has
34 years experience in industrial plant valuation. He has 24 years
experience in the valuation of plant machinery and equipment in Hong
Kong, the PRC and Asia Pacific Rim.
41
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
SUMMARY OF VALUES
Fair Market Value
in continued use
as at 31 July, 2004
Rmb
SICHUAN HUANENG BAOXINGHE POWER JOINT STOCK LIMITED COMPANY
Machinery and Equipment 642,651,000
Motor Vehicles & Transportation Equipment 6,021,000
Electronics Equipment 3,781,000
Construction-In-Progress 16,929,540
-------------------
Sub-total 669,382,540
Rounded to 669,383,000
SICHUAN HUANENG JIALINGJIANG HYDRO POWER LIMITED LIABILITY COMPANY
Machinery and Equipment 149,534,000
Motor Vehicles & Transportation Equipment 3,428,000
Electronics Equipment 1,005,000
Construction-In-Progress 361,603
-------------------
Sub-total 154,328,603
Rounded to 154,329,000
SICHUAN HUANENG DONGXIGUAN HYDRO POWER JOINT STOCK LIMITED COMPANY
Machinery and Equipment 295,908,000
Motor Vehicles & Transportation Equipment 4,688,000
Electronics Equipment 1,243,000
Construction-In-Progress 32,276
-------------------
Sub-total 301,871,276
Rounded to 301,871,000
SICHUAN HUANENG MINGTAI POWER LIMITED LIABILITY COMPANY
Machinery and Equipment 131,254,000
Motor Vehicles & Transportation Equipment 1,117,000
Electronics Equipment 396,000
Construction-In-Progress 1,655,254
-------------------
Sub-total 134,422,254
Rounded to 134,422,000
SICHUAN HUANENG TAIPINGYI HYDRO POWER LIMITED LIABILITY COMPANY
Machinery and Equipment 210,569,000
Motor Vehicles & Transportation Equipment 5,170,000
Electronics Equipment 3,865,000
Construction-In-Progress 11,802,379
-------------------
Sub-total 231,406,379
Rounded to 231,406,000
42
--------------------------------------------------------------------------------
APPENDIX II PLANT AND MACHINERY VALUATION
--------------------------------------------------------------------------------
SICHUAN HUANENG KANGDING HYDRO POWER LIMITED LIABILITY COMPANY
Machinery and Equipment 478,492,000
Motor Vehicles & Transportation Equipment 6,160,000
Electronics Equipment 2,889,000
-------------------
Sub-total 487,541,000
GANSU HUANENG PINGLIANG POWER GENERATION LIMITED LIABILITY COMPANY
Machinery and Equipment 2,964,717,000
Motor Vehicles & Transportation Equipment 11,878,000
Electronics Equipment 25,838,000
Construction-In-Progress 27,116,048
-------------------
Sub-total 3,029,549,048
Rounded to 3,029,549,000
SICHUAN HUANENG HYDRO POWER DEVELOPMENT LIMITED LIABILITY COMPANY
Motor Vehicles & Transportation Equipment 442,000
Electronics Equipment 280,000
-------------------
Sub-total 722,000
SICHUAN HUANENG FUJIANG HYDRO POWER LIMITED LIABILITY COMPANY
Construction-In-Progress 164,850,474
Rounded to 164,851,000
Grand total: 5,174,074,000
===================
43
--------------------------------------------------------------------------------
APPENDIX III 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, chief executive
officer or Supervisors of the Company had any interest or short position
in the shares, underlying shares and/or debentures (as the case may be)
of the Company or any of its associated corporations (within the meaning
of Part XV of the SFO) which was required to be notified to the Company
and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV
of the SFO (including interest and short position which any such
Director, chief executive or supervisor is taken or deemed to have under
such provisions of the SFO) or which was required to be entered in the
register required to be kept by the Company pursuant to Section 352 of
the SFO or which was otherwise required to be notified to the Company and
the Hong Kong Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Companies as contained in Appendix 10
to the Listing Rules.
(b) As at the Latest Practicable Date, so far as the Directors, chief
executive officer and Supervisors of the Company are aware, each of the
following persons, not being a Director, chief executive or Supervisor of
the Company, had an interest in the Company's shares which falls to be
disclosed to the Company and the Hong Kong Stock Exchange under the
provisions of Divisions 2 and 3 of Part XV of the SFO:
SHARES HELD/APPROXIMATE SHAREHOLDING PERCENTAGE
Interest
Approximate Approximate
percentage percentage Approximate
of share of percentage
holding in shareholding of
the in the shareholding
Company's Company's in the
total total Company's
issued issued total
Number of share domestic issued H Short
Name of shareholder Shares shares held capital shares shares position
HIPDC (Note) domestic 42.88% 57.44% - -
shares 5,169,680,000
Hebei Provincial domestic 904,500,000 7.50% 10.05% - -
Construction Investment shares
Company
Fujian International Trust domestic 669,700,000 5.56% 7.44% - -
& Investment Company shares
Jiangsu Province domestic 624,750,000 5.18% 6.94% - -
International Trust & shares
Investment Company
Liaoning Energy Investment domestic 624,750,000 3.81% 5.10% - -
(Group) Limited Liability shares
Company
Dalian Municipal 452,250,000 3.75% 5.03% - -
Construction Investment
Company
Note: As at the Latest Practicable Date, China Huaneng Group holds
approximately 51.98% of the equity interest in HIPDC.
Save as disclosed above and so far as the Directors, chief executive
officer and Supervisors of the Company are aware, as at the Latest
Practicable Date, no other person had an interest or short position in
44
--------------------------------------------------------------------------------
APPENDIX III GENERAL INFORMATION
--------------------------------------------------------------------------------
the Company's shares or underlying shares (as the case may be) which
would fall to be disclosed to the Company and the Hong Kong Stock
Exchange under the provisions of Divisions 2 and 3 Part XV of the SFO, or
was otherwise a substantial shareholder (as such term is defined in the
Listing Rules) 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, none of JPMorgan, Rothschild nor
Vigers had 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, Supervisors,
JPMorgan, Rothschild nor Vigers 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, 2003, the date to which the latest
published financial statements of the Company and its subsidiaries were
made up.
(g) As at the Latest Practicable Date, none of the Directors or Supervisors
(and their respective associates) has interests competing with the
Company.
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, 2003, the date to which
the latest published audited financial statements of the Company and of its
subsidiaries were made up.
4. LITIGATION
None of the Company, nor its subsidiaries is engaged in any litigation or
arbitration of material importance and there is no litigation or claim of
material importance known to the Directors to be pending or threatened by or
against the Company or its subsidiaries.
5. QUALIFICATIONS OF EXPERTS
The following are the qualifications of the professional advisers who have
given opinions or advice contained in this circular:
NAMES QUALIFICATIONS
JPMorgan licensed by the Securities and Futures
Commission for Types 1, 4, 6 and 7
regulated activities under the Securities
and Futures Ordinance
Rothschild an institution registered with the
Securities and Futures Commission to
carry out Types 1, 4, 6 and 9 regulated
activities under the Securities and
Futures Ordinance
Vigers Appraisal & Consulting Chartered surveyor
Limited ("Vigers")
6. CONSENT
Each of JPMorgan, Rothschild and Vigers 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.
7. PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS
Pursuant to the articles of association of the Company, all voting at
shareholders meeting shall be made by poll.
45
--------------------------------------------------------------------------------
APPENDIX III GENERAL INFORMATION
--------------------------------------------------------------------------------
8. MATERIAL CONTRACTS
The following contracts (including contracts not entered into in the ordinary
course of business) have been entered into by the Company and its subsidiaries
(including the Target Power Plants) within the two years immediately preceding
the date of this circular, and are or may be material:
(a) An agreement regarding the acquisition of the interest in three power
plants by the Company from Huaneng Group dated 5th June, 2003, details of
which were set out in the Company's circular dated 12th June, 2003;
(b) The agreement for the acquisition of 40% interest in Hebei Hanfeng Power
Generation Limited Liability Company and 90% interest in Jinggangshan
Huaneng Power Generation Limited Liability Company held by China Huaneng
Group by the Company dated 16th April, 2004, details of which were set
out in the Company's circular dated 29th April, 2004;
(c) The agreement for the acquisition of 55% interest in Huaneng Hunan
Yueyang Power Generation Limited Liability Company, 60% interest in
Huaneng Chongqing Luohuang Power Generation Limited Liability Company and
the entire assets and liabilities of Huaneng International Power
Development Corporation Yingkou Branch Company dated 16th April, 2004,
details of which were set out in the Company's circular dated 29th April,
2004;
(d) Sichuan Hydro Power Transfer Agreement; and
(e) Pingliang Power Plant Transfer Agreement.
9. 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. As at the date hereof,
the Company has not appointed Qualified Accountant as required under the
Hong Kong Listing Rules.
10. 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 17th December, 2004:
(1) the Transfer Agreements;
(2) the letter from the Independent Directors as set out in this circular;
(3) the letter from Rothschild as set out in this circular;
(4) the written consent referred to in paragraph 6 of this appendix;
(5) the material contracts referred to in paragraph 8 of this appendix;
(6) the annual report of the Company for the year ended 31st December, 2003;
(7) the property valuation report and the plant and machinery valuation
report set out in Appendix I and Appendix II; and
(8) the articles of association of the Company.
46
--------------------------------------------------------------------------------
NOTICE OF EXTRAORDINARY GENERAL MEETING
--------------------------------------------------------------------------------
HUANENG POWER INTERNAIONAL, 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 17th December,
2004 (Friday) 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
resolutions:
ORDINARY RESOLUTIONS:
1.1 To approve the acquisition of 60% equity interest in Sichuan Huaneng
Hydro Power Development Limited Liability Company by the Company from
China Huaneng Group and the transfer agreement thereof.
1.2 To approve the acquisition of 65% equity interest in Gansu Huaneng
Pingliang Power Generation Limited Liability Company by the Company from
China Huaneng Group and the transfer agreement thereof.
2.1 To approve the guarantee arrangement and the relevant agreements between
Gansu Huaneng Pingliang Power Generation Limited Liability Company,
Sichuan Huaneng Hydro Power Development Limited Liability Company and
the subsidiaries thereof and China Huaneng Group. (Note 1)
2.2 To approve to continue to implement the asset swap arrangement between
Sichuan Huaneng Hydro Power Development Limited Liability Company and
Sichuan Huaneng Industrial Company. (Note 2)
2.3 To approve the loan and deposit arrangement between Gansu Huaneng
Pingliang Power Generation Limited Liability Company, Sichuan Huaneng
Hydro Power Development Limited Liability Company and the subsidiaries
and China Huaneng Finance Limited Liability Company. (Note 3)
By Order of the Board
HUANG LONG
Company Secretary
3rd November, 2004
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. (Terms used hereinafter shall have the same meaning as stated in the
circular of the Company dated 3rd November 2004)
(1) Pursuant to the Guarantee Contract signed between Gansu Provincial
Power Company, Pingliang Power Plant and State Development Bank on
18th July 1998, Gansu Provincial Power Company provided guarantee
for the RMB1,418,000,000 loan borrowed by Pingliang Power Plant
from State Development Bank. Pursuant to the Guarantee Contract
signed between Gansu Provincial Power Company and Bank of China and
Bank of China Gansu Branch on 30th December 2001, Gansu Provincial
Power Company provided guarantee for 65% of the RMB2,075,000,000
loan (i.e. RMB1,348,750,000) borrowed by Pingliang Power Plant from
Bank of China and Bank of China Gansu Branch.
According to the spirits of the Approval Document in relation to
the Proposal on the Restructuring and Allocation of the Power
Generating Assets of State Power Corporation issued by the original
State Development and Planning Commission and other related
documents, the 65% interest in the registered capital of Pingliang
47
--------------------------------------------------------------------------------
NOTICE OF EXTRAORDINARY GENERAL MEETING
--------------------------------------------------------------------------------
Power Plant held by Gansu Provincial Power Company shall be
transferred to Huaneng Group. Huaneng Group and Gansu Provincial
Power Company signed the Agreement on the Transfer and Handover of
the Power Generating Projects under the Power System Reforms in
December 2003 pursuant to which the guarantees provided by Gansu
Provincial Power Company for Pingliang Power Plant's commercial
bank loans shall all be changed to guarantees provided by Huaneng
Group. As at 30th June 2004, the balance of the two guarantee
transactions referred to above totalled RMB1,715,625,000.
(2) Pursuant to the State Development Bank Loan Guarantee Contract
signed between Huaneng Group and State Development Bank, Huaneng
Group provided guarantee for the loan borrowed by the original
China Huaneng Group Company Sichuan Branch (now Sichuan Hydro
Power) from State Development Bank. As at 31st July 2004, the
balance of the above guarantee transaction was RMB561,830,000.
(3) Pursuant to the China Construction Bank (Loan) Guarantee Contract
signed between Huaneng Group and China Construction Bank Sichuan
Branch Jincheng Sub-branch on 13th August 1998, Huaneng Group
provided guarantee for the RMB64,583,000 loan borrowed by the
Baoxinghe Company from China Construction Bank Sichuan Branch
Jincheng Sub-branch. As at 31 July 2004, the balance of the above
guarantee transaction was RMB595,830,000.
Pursuant to the Maximum Amount Guarantee Contract signed between
Huaneng Group and China Construction Bank Chengdu City Jincheng
Sub-branch and China Construction Bank Yaan Sub-branch on 18th
December 2002, Huaneng Group provided maximum amount guarantee for
the loan borrowed by Baoxinghe Company from China Construction Bank
Chengdu City Jincheng Sub-Branch during the period from 1st January
2003 to 31st December 2010 with a maximum amount of
RMB1,085,000,000; Huaneng Group provided maximum amount guarantee
for the loan borrowed by Baoxinghe Company from China Construction
Bank Ya'an Sub-branch during the period from 1st January 2003 to
31st December 2010 with a maximum amount of RMB500,000,000. As at
31st July 2004, the balance of the above guarantee transactions was
RMB470,000,000.
(4) Pursuant to the Maximum Amount Guarantee Contract signed between
Huaneng Group and the sub-branch directly under China Construction
Bank Sichuan Branch on 28th May 2002, Huaneng Group provided
maximum amount guarantee for the loan borrowed by Taipingyi Company
from the sub-branch directly under China Construction Bank Sichuan
Branch during the period from 28th May 2002 to 27th May 2012 with a
maximum amount of RMB260,000,000. As at 31st July 2004, the balance
of the above guarantee transaction was RMB250,000,000.
(5) Pursuant to the Maximum Amount Guarantee Contract signed between
Huaneng Group and Agricultural Bank of China Pingwu County
Sub-branch on 9th April 2002, Huaneng Group provided maximum amount
guarantee for the loan borrowed by Fujiang Company from
Agricultural Bank of China Pingwu County Sub-branch during the
period from 10th April 2002 to 31st December 2004 with a maximum
amount of RMB481,440,000. Pursuant to the Maximum Amount Guarantee
Contract signed between Huaneng Group and Agricultural Bank of
China Pingwu County Sub-branch, Huaneng Group provided maximum
amount guarantee for the loan borrowed by Fujiang Company from
Agricultural Bank of China Pingwu County Sub-branch during the
period from 1st January 2004 to 31st December 2007 with a maximum
amount of RMB1,351,100,000. As at 31st July 2004, the balance of
the above guarantee transactions was RMB531,440,000.
(6) Pursuant to the Guarantee Contract signed between Huaneng Group and
China Construction Bank Chengdu City Xinhua Sub-branch, Huaneng
Group provided guarantee for the RMB304,000,000 loan borrowed by
Kangding Company from China Construction Bank Chengdu City Xinhua
Sub-branch. As at 31st July 2004, the balance of the above
guarantee transaction was RMB232,000,000.
Pursuant to the Guarantee Contract signed between Huaneng Group and
China Construction Bank Chengdu City Xinhua Sub-branch, Huaneng
Group provided guarantee for the RMB322,850,000 loan borrowed by
Kangding Company from China Construction Bank Chengdu City Xinhua
Sub-branch. As at 31st July 2004, the balance of the above
guarantee transactions was RMB258,000,000.
48
--------------------------------------------------------------------------------
NOTICE OF EXTRAORDINARY GENERAL MEETING
--------------------------------------------------------------------------------
Pursuant to the Guarantee Contract signed between Huaneng Group and
China Construction Bank Ganzi Zang Autonomous Prefecture Branch on
9th December 2003, Huaneng Group provided guarantee for the
RMB130,000,000 loan borrowed by Kangding Company from China
Construction Bank Ganzi Zang Autonomous Prefecture Branch. As at
31st July 2004, the balance of the above guarantee transaction was
RMB130,000,000.
(7) Pursuant to the Guarantee Contract signed between Huaneng Group and
Agricultural Bank of China Santai County Sub-branch on 14th June
2002, Huaneng Group provided guarantee for the RMB130,000,000 loan
borrowed by Mingtai Company from Agricultural Bank of China Santai
County Sub-branch. As at 31st July 2004, the balance of the above
guarantee transaction was RMB130,000,000.
(8) Pursuant to the Guarantee Contract signed between Huaneng Group and
the Business Division of China Construction Bank Nanchong Branch on
12th December 2001, Huaneng Group provided guarantee for the
RMB30,000,000 loan borrowed by Jialingjiang Company from the
Business Division of China Construction Bank Nanchong Branch. As at
31st July 2004, the balance of the above guarantee transaction was
RMB30,000,000.
Pursuant to the Maximum Amount Guarantee Contract signed between
Huaneng Group and the Business Division of China Construction Bank
Nanchong Branch on 28 January 2002, Huaneng Group provided maximum
amount guarantee for the loan borrowed by Jialingjiang Company from
the Business Division of China Construction Bank Nanchong Branch
during the period from 1st January 2002 to 31st December 2005 with
a maximum amount of RMB589,500,000. As at 31st July 2004, the
balance of the above guarantee transaction was RMB450,000,000.
2. (Terms used hereinafter shall have the same meaning as stated in the
circular of the Company dated 3rd November 2004)
According to the decision of Huaneng Group to reorganise the original China
Huaneng Group Company Sichuan Branch into a limited liability company (that is
Sichuan Hydro Power), certain office building assets owned by Sichuan Huaneng
Industrial Company shall be transferred to Sichuan Hydro Power with
compensation and certain office buildings and dormitory assets owned by the
original China Huaneng Group Company Sichuan Branch shall be transferred to
Sichuan Huaneng Industrial Company with compensation, the difference of the
mutually transferred assets (approximately RMB61,090,000) shall be indemnified
by Sichuan Hydro Power to Sichuan Huaneng Industrial Company. As at the date of
signing the Sichuan Hydro Power Transfer Agreement, the building ownership
certificates of the properties involved in the above asset transfers are being
processed, and the payment for the above asset difference has yet to be fully
completed (as at 31st July 2004, the balance payable by Sichuan Hydro Power to
Sichuan Huaneng Industrial Company was approximately RMB21,120,000).
3. (Terms used hereinafter shall have the same meaning as stated in the
circular of the Company dated 3rd November 2004)
(1) Pursuant to the Renminbi Loan Contract signed between Mingtai
Company and Huaneng Finance Company on 30th September 2003, Mingtai
Company borrowed a RMB20,000,000 loan from Huaneng Finance Company
and the loan period shall be from 30th September 2003 to 30th
September 2004 and the loan interest rate shall be 3.9825% per
month. The above loan interest rate does not exceed the loan
interest rate stipulated by People's Bank of China on the date of
signing the above contract. As at 31st July 2004, the balance of
the above loan was RMB20,000,000.
Pursuant to the Renminbi Loan Contract signed between Mingtai
Company and Huaneng Finance Company on 15th December 2003, Mingtai
Company borrowed a RMB10,000,000 loan from Huaneng Financial
Company and the loan period shall be from 15th December 2003 to
15th December 2006 and the loan interest rate shall be 4.1175% per
month. The above loan interest rate does not exceed the loan
interest rate stipulated by People's Bank of China on the date of
signing the above contract. As at 31st July 2004, the balance of
the above loan was RMB10,000,000.
(2) Pursuant to the Renminbi Loan Contract signed between Dongxiguan
Company and Huaneng Finance Company on 22nd December 2003,
Dongxiguan Company borrowed a RMB30,000,000 loan from Huaneng
Finance Company and the loan period shall be from 22nd December
2003 to 22nd December 2006 and the loan interest rate shall be
4.1175% per month. The above loan interest rate does not exceed the
loan interest rate stipulated by People's Bank of China on the date
of signing the above contract. As at 31st July 2004, the balance of
the above loan was RMB25,000,000.
Pursuant to the Renminbi Loan Contract signed between Dongxiguan
Company and Huaneng Finance Company on 12th January 2004,
Dongxiguan Company borrowed a RMB20,000,000 loan from Huaneng
49
--------------------------------------------------------------------------------
NOTICE OF EXTRAORDINARY GENERAL MEETING
--------------------------------------------------------------------------------
Financial Company and the loan period shall be from 12th January
2004 to 12th January 2007 and the loan interest rate shall be
4.1175% per month. The above loan interest rate does not exceed the
loan interest rate stipulated by People's Bank of China on the date
of signing the above contract. As at 31st July 2004, the balance of
the above loan was RMB20,000,000.
(3) As at 30th June 2004, the deposit balance of Pingliang Power Plant
with Huaneng Finance Company was RMB165,625,542. The above deposit
interest rate is not lower than the bank deposit interest rate for
the same period.
(4) As at 31st July 2004, the deposit balance of Sichuan Hydroelectric
Power with Huaneng Finance Company was RMB376,161. The above
deposit interest rate is not lower than the bank deposit interest
rate for the same period.
(5) As at 31st July 2004, the deposit balance of Baoxinghe Company with
Huaneng Finance Company was RMB44,347,766. The above deposit
interest rate is not lower than the bank deposit interest rate for
the same period.
(6) As at 31st July 2004, the deposit balance of Taipingyi Company with
Huaneng Finance Company was RMB160,217,532. The above deposit
interest rate is not lower than the bank deposit interest rate for
the same period.
(7) As at 31st July 2004, the deposit balance of Dongxiguan Company
with Huaneng Finance Company was RMB10,494,449. The above deposit
interest rate is not lower than the bank deposit interest rate for
the same period.
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 17th November, 2004 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 27th November, 2004.
50
--------------------------------------------------------------------------------
NOTICE OF EXTRAORDINARY GENERAL MEETING
--------------------------------------------------------------------------------
(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).
7. Closure of Register of Members
The register of members of the Company will be closed from 17th November, 2004
to 17th December, 2004 (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
51
HUANENG POWER INTERNAIONAL, INC.
(A Sino-foreign joint stock limited company incorporated in the
--------------------------|---------------------
Number of Shares related | H Shares/Domestic
to the proxy form (Note 1)| Shares*
--------------------------|---------------------
Proxy Form for Extraordinary General Meeting
I/(We)(Note 2) ________________________________________________________________
of ____________________________________________________________________________
Shareholders' Account: ___________________ and I.D. No.:_______________________
being the holder(s) of ________________H Share(s)/Domestic Share(s)* of Huaneng
Power International, Inc .(the "Company") now appoint (Note 3), _______________
I.D. No.: ______________________________(of ___________________________________
_____________________________________________________________________________),
or failing him the Chairman of the meeting as my(our) proxy to attend and vote
for me(us) on the following resolution in accordance with the instruction(s)
below and on my(our) behalf at the Extraordinary General Meeting to be held at
9:00 a.m. on Friday, 17th December, 2004 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 ordinary resolutions as set out in the notice convening the said meeting.
In the absence of any indication, the proxy may vote for or against the
resolutions at his own discretion.(Note 6)
|-----------|---------------------------------------------------------------------|----------------|---------------------|
| |Ordinary Resolutions | For (Note 4) | Against (Note 4) |
|-----------|---------------------------------------------------------------------|----------------|---------------------|
|1.1 |To approve the acquisition of 60% equity ainterest in Sichua|n | | |
| |Huaneng Hydro Power Development Limited Liability Company by the | | |
| |Company from China Huaneng Group and the transfer agreement thereof. | | |
|-----------|---------------------------------------------------------------------|----------------|---------------------|
|1.2 |To approve the acquisition of 65% equity interest in Gansu Huaneng | | |
| |Pingliang Power Generation Limited Liability Company by the Company | | |
| |from China Huaneng Group and the transfer agreement thereof. | | |
|-----------|---------------------------------------------------------------------|----------------|---------------------|
|2.1 |To approve the guarantee arrangement and the relevant agreements | | |
| |between Gansu Huaneng Pingliang Power Generation Limited Liability | | |
| |Company, Sichuan Huaneng Hydro Power Development Limited Liability | | |
| |Company and the subsidiaries thereof and China Huaneng Group. | | |
|-----------|---------------------------------------------------------------------|----------------|---------------------|
|2.2 |To approve to continue to implement the asset swap arrangement | | |
| |between Sichuan Huaneng Hydro Power Development Limited Liability | | |
| |Company and Sichuan Huaneng Industrial Company. | | |
|-----------|---------------------------------------------------------------------|----------------|---------------------|
|2.3 |To approve the loan and deposit arrangement between Gansu Huaneng | | |
| |Pingliang Power Generation Limited Liability Company, Sichuan | | |
| |Huaneng Hydro Power Development Limited Liability Company and the | | |
| |subsidiaries thereof and China Huaneng Finance Limited Liability | | |
| |Company. | | |
|-----------|---------------------------------------------------------------------|----------------|---------------------|
Date: ____________________________________2004 Signature: _______________________________________(Note 5)
Notes:
1. Please insert the number of Share(s) registered in your name(s) relating
to this form of proxy. If no number is inserted, this form of proxy will
be deemed to relate to all of the shares in the capital of the Company
registered in your name(s).
2. Please insert full name(s) and address(es) in BLOCK LETTERS.
3. Please insert the name and address of your proxy. If this is left blank,
the chairman of the Extraordinary General Meeting will act as your proxy.
One or more proxies, who may not be member(s) of the Company, may be
appointed to attend and vote in the meeting provided that such proxies
must attend the meeting in person on your behalf. Any alteration made to
this proxy form must be signed by the signatory.
4. Attention: If you wish to vote FOR any resolution, please indicate with a
"6" in the appropriate space under "For". If you wish to vote AGAINST any
resolution, please indicate with a "6" in the appropriate space under
"Against". In the absence of any such indication, the proxy will vote or
abstain at his discretion.
5. This form of proxy must be signed underhand by you or your attorney duly
authorised in that behalf. If the appointer is a corporation, this form
must be signed under its common seal or under hand by any directors or
agents duly appointed by such corporation.
6. This form of proxy together with the power of attorney or other
authorisation document(s) which have been notarised, must be delivered,
in the case of a holder of Domestic Share(s), to the Company and in the
case of a holder of H Share(s), to Hong Kong Registrars Limited, at least
24 hours before the time designated for the holding of the Extraordinary
General Meeting.
* Please delete as appropriate.
52
HUANENG POWER INTERNAIONAL, INC.
(A Sino-foreign joint stock limited company incorporated in the
Reply Slip for Extraordinary General Meeting
I/(We)_________________________________________________________________________
of_____________________________________________________________________________
Telephone number: ____________________and Fax number:_________________________,
being the holder(s) of___________________H Share(s)/Domestic Share(s)* of
Huaneng Power International, Inc. (the "Company") hereby reply that I/(We) wish
to attend or appoint a proxy to attend (on my/(our) behalf) the extraordinary
general meeting (the "EGM") to be held at 9:00 a.m. on Friday, 17th December,
2004 at Beijing International Convention Centre at No. 8 Beichen East Road,
Chaoyang District, Beijing, the People's Republic of China.
Signature: _______________________________
Date: _______________________________
Note: Eligible shareholders who wish to attend the EGM are advised to complete
and return this reply slip to the Company at West Wing, Building C,
Tianyin Mansion, 2C, Fuxingmennan Street, Xicheng District, Beijing
100031, the PRC by post or by facsimile (Fax no.: (+86)-10-66491888).
Failure to sign and return this reply slip, however, will not preclude an
eligible shareholder from attending the EGM.
* Please delete as appropriate.