Chairman’s Statement:
On behalf of the Board of Directors, I am pleased to report that the Company has achieved remarkable operating results in 2008. For the financial year ended 31 December 2008, the Company recorded a turnover of RMB3,693 million, representing an increase of 100.2% over the same period last year of RMB1,845 million, and a net profit of RMB131 million, while the loss for the corresponding period in 2007 was RMB267 million, basic earnings per share amounted to RMB0.14. The Board recommends the payment of a final dividend of HK 2.3 cents per share for 2008.
Business Review
2008, was an extraordinary year for the Company, represented the first financial year of the Company after its successful listing in Hong Kong. With our dedicated efforts, the Company has attained satisfactory performance despite encountering a series of adverse factors such as the continual and substantial increase in coal prices and the economic slowdown, while the company still managed to achieve encouraging results in profit although the overall power industry has suffered losses.
Such results was mainly achieved through the application of a diversified development strategy, which places strong emphasis on environmentally friendly and renewable energy by the Company over the past decade. Besides the environmentally friendly cogeneration plants that are fuelled by coal, the Company also owns clean energy cogeneration plants fuelled by natural gas, renewable energy cogeneration plants fuelled by biomass materials and incineration plant fuelled by municipal solid waste. Such plants account for almost half of the attributable installed capacity of the Company, which was the main reason attributed to the Company’s profit in 2008 even under the negative effect of the substantial surge in coal prices.
Meanwhile, the outstanding execution capability of our management team was another indispensable element for the Company to achieve such excellent results. In view of the surge in coal prices, the Company’s management team adopted a series of effective measures in a timely manner, which has successfully increased our revenue and reduced our expenses. On the one hand, the Company ensured the high fulfillment rate of key coal contracts and increased the fuel proportion of low price coal sludge with low heating value, resulting the average unit coal cost of the Company in 2008 increased merely by 26.7% over last year, apparently lower than the rate of increase of coal prices in the market. On the other hand, the Company also endeavored to develop its steam business and promote the “coal-heat-pricepass- through mechanism”. In 2008, the sales volume of steam and the average steam price both recorded substantial growth, therefore leading to an increase of steam sales revenue of RMB 453 million as compared to the same period last year.
The Company persisted in the development of environmentally friendly and renewable energy. In January 2008, the Company acquired 49% equity interest in China Resources Golden Concord (Beijing) Cogeneration Co., Ltd., thereby expanded the weight attributable to gasfuelled cogeneration plants in the overall business portfolio of the Company. In March 2008, the Company acquired 100% equity interest in Xilingol Guotai Wind Power Generation Co., Ltd., which marked the first step of the Company into the wind power industry.
Acquisition of new power plants
The acquisition of 100% equity interest of Xilingol Guotai Wind Power Generation Co., Ltd., (“Huitengliang Project”) and 49% equity interest of China Resources Golden Concord (Beijing) Cogeneration Power Co., Ltd, (“China Resources Beijing Cogeneration Plant”) were completed in the first quarter of the year. For the Huitengliang Wind Power Plant, we have the right to develop a wind generation power plant with a total installed capacity of 49.5 MW in Inner Mongolia. This is the first wind generation power plant of the Group.
Electricity – Generation Volume
Total gross generation volume of electricity (including subsidiaries and associated power plants) was 5,931,979MWh for the year ended 31 December 2008, representing an increase of 11 .9% as compared with 5,300,202MWh in 2007. Total electricity sales volume (including subsidiaries and associated power plants) was 5,462,730MWh for 2008, representing an increase of 13.6% as compared with 4,809,142MWh in 2007. The increase was mainly due to the acquisition of 49% equity interest in China Resources Beijing Cogeneration Plant.
Financial Review
Gross Profit Margin
Overall gross profit margin for the year was 13.5% compared to 19.6% for the same period last year. The decrease was stemming from the substantial surge in coal price in 2008.
Other Income
Other income amounted to RMB168.5 million for the year ended 31 December 2008, representing a 54.3% increase from RMB109.2 million for the same period last year. The increase was mainly due to the consolidation of the first full year other income from acquisition of subsidiaries and increase in (1) government subsidies income granted by local government during the year, (2) revenue from technical support and consultation services provided to customers; and (3) revenue of scrap materials.
Finance costs
The finance costs of the Group for the year was RMB258.7 million, representing an increase of 60.2% compared to RMB161.5 million in 2007. It was mainly due to the consolidation of first full year finance costs from acquisition of subsidiaries.
Share of Results of Associates
For the year ended 31 December 2008, share of results of associates mainly represented the Group’s share of 49% profit in China Resources Beijing Cogeneration Plant which was acquired in January 2008.
Income Tax
Income tax expenses for the year ended 31 December 2008 was RMB27.1 million, as compared with a credit of RMB4.0 million for the year ended 31 December 2007. The reason for the increase was due to the fact that the Group has been subject to withholding taxes on dividend income for those subsidiaries established in the PRC since 1 January 2008. Apart from that, Suzhou Cogeneration Plant was no longer entitled to full tax exemption since January 1, 2008.
Net cash provided by operating activities represented the main source of cash for the Group. The net cash provided by operating activities in 2008 amounted to RMB643.8 million which was higher than that of last year of RMB214.0 million due to the increase in profit from operation. Net cash used in investing activities was mainly used in acquisition of a 49% equity interest in China Resources Beijing Cogeneration Plant, properties, power generation plant and machinery. The main financing activities of the Group in 2008 were repayments of loans and bank interest and drawdown of new borrowings. During the year, the Group repaid loans of RMB1,755.3 million and drawdown new loan of RMB1,524.8 million.
