6-K 1 form6k.htm FORM 6-K



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 August 2018

(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.
Huaneng Building,
6 Fuxingmennei Street,
Xicheng District,
Beijing, 100031 PRC




This Form 6-K consists of:

A copy of 2018 interim report of Huaneng Power International, Inc. (the Registrant”).


 

 
THE OBJECTIVES OF THE COMPANY
 
As a power company, devoted to providing sufficient, reliable and eco-friendly energy to the community; as a listed company, devoted to creating long-term, stable and increasing returns for shareholders; and as a first class power producer, devoted to having excellency in operation, becoming a leading power enterprise in China and an advanced enterprise internationally.
 




CONTENTS
4
 
Interim Results
4
 
Business Review for the First Half of the Year
5
 
Prospects for the Second Half of 2018
7
 
Management’s Discussion and Analysis (Prepared Under IFRS)
18
 
Share Capital Structure
18
 
Purchase, Sale or Redemption of Shares
19
 
Major Shareholding Structure
20
 
Material Interests and Short Positions in Shares and Underlying Shares of the Company
21
 
Directors’ and Supervisors’ Right to Purchase Shares
21
 
Public Float
22
 
Dividends
22
 
Disclosure of Material Events
22
 
Corporate Governance
35
 
Review by the Audit Committee
35
 
Legal Proceedings
35
 
Documents for Inspection

PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
37
 
Consolidated Interim Statement of Financial Position (Unaudited)
39
 
Consolidated Interim Statement of Comprehensive Income (Unaudited)
41
 
Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
43
 
Condensed Consolidated Interim Statement of Cash Flows (Unaudited)
44
 
Notes to the Unaudited Condensed Consolidated Interim Financial Information
102
 
Financial Statements Reconciliation between PRC GAAP and IFRS


INTERIM RESULTS
The Board of Directors of Huaneng Power International, Inc. (the “Company”) announces the unaudited operating results for the six months ended 30 June 2018 and a comparison with the operating results for the same period of last year. For the six months ended 30 June 2018, the Company and its subsidiaries recorded consolidated operating revenue of RMB82.405 billion, representing an increase of 15.36% compared to the same period of last year. The net profit attributable to equity holders of the Company was RMB1.731 billion, representing an increase of 609.74% compared to the same period of last year. The earnings per share was RMB0.11.

Please refer to the unaudited financial information below for details of the operating results.

BUSINESS REVIEW FOR THE FIRST HALF OF THE YEAR
In the first half of 2018, the Company took the initiative to cope with to the severe challenges arising from power, fuel and capital markets. While maintaining safe and clean production with stability, the Company strived to streamline and strengthen its structure, and improve its efficiency and performance. The Company continuously optimized the power structure, stayed competitive and strengthened the ability of securing fuel supply and cost control, in order to better accomplish the intended objectives and tasks.

1.
POWER GENERATION
In the first half of this year, the power plants of the Company in operation within China achieved a total power generation of 208.167 billion kWh on a consolidated basis, representing an increase of 11.51% from the same period of last year, as well as an aggregate sales volume of 196.387 billion kWh, representing an increase of 11.51% from the same period of last year, and with 2,051 utilization hours, representing an increase of 150 hours compared to the same period of the previous year.

The increase in the Company’s power generation was mainly attributable to (1) the growth in the macro-economy was better than expected; (2) the growth rate of electricity consumption for residents’ electricity, tertiary industries and non high-energy-consuming manufacturing industries increased significantly; and (3) in the first half of the year, the growth rate of hydropower generation in the country was relatively low, far lower than the growth rate of the electricity consumption of the whole society and national power generation while the Company has a relatively higher proportion of thermal power units and seized the opportunity to increase power generation.

In addition, the aggregate power generation of Tuas Power Ltd., which is wholly owned by the Company, accounted for a market share of 20.8%, representing a decrease of 0.7 percentage point from the same period of last year.




2.
COST CONTROL
Since the first half of year 2018, the coal market has followed the trend from the fourth quarter of last year to continue to volatile at a high level. With a close watch on market development trends, the relevant State authorities adopted a series of measures to ensure the coal supply, and stabilized the market coal price. After thorough market research and analysis, the Company strengthened and deepened its cooperation with large coal enterprises, strictly implemented the medium and long term contracts for the thermal coal, and ensured the fulfillment. The Company also put in place strict measures to curb prices as well as to regulate bidding procurement of market coals, and to optimize imported coal so as to fully control the fuel costs.

3.
ENERGY CONSERVATION AND ENVIRONMENTAL PROTECTION
The Company maintained its leading positions in certain economic and technical indicators for power sector, such as coal consumption for power supply and house consumption rate. All of its coal-fired power plants have obtained the sewage discharge permit. Emission of all kinds of pollutants has met the national and local environmental requirements.

4.
PROJECT DEVELOPMENT AND CONSTRUCTION
In the first half of 2018, the Company’s power generation projects went well and a total capacity of 124.6 MW had been put into operation, including the projects in Huaneng Heilongjiang Shuangyu Photovoltaic with a total capacity of 46.6 MW, 30 MW PV units of the Huaneng Jiangsu Huaiyin Photovoltaic Power Plant, 10 MW PV units of the Huaneng Jiangsu Taicang Photovoltaic Ash Field Phase II, 8 MW PV units of Huaneng Hainan Chengmai Photovoltaic, 20 MW PV units of the Jilin ZhenLai Wind Farm, and 10 MW PV units of the Shanxi Yushe Photovoltaic. As of 30 June 2018, the Company had a controlled installed capacity of 104,425 MW, and an equity-based installed capacity of 91,894 MW, of which 15.58% was from clean energy sources (gas turbine, hydro, wind, photovoltaic and biomass power generation).

PROSPECTS FOR THE SECOND HALF OF 2018
In the first half of the year, in spite of the external environment of increasing uncertainties in the international outlook with intensifying competition, China’s economic performance has achieved a continuous positive trend, though there are still many uncertainties to be faced with in the future development. In the second half of the year, the Company will continue to prepare for meeting all kind of challenges, adhere to the overall work tone of seeking progress while maintaining stability and focus on the structural reform on the supply side as the main line. The Company will also attach more emphasis on encouraging promotion, optimizing environment and improving quality efficiency so as to strive to accomplish its full-year development goal.



In terms of the power market, China’s power market reform has steadily advanced. In the second half of the year, economic growth and power demand will continue to grow steadily, with newly increased installed capacity still large in scale and nationwide power supply capacity having surplus on the whole. The Company will strengthen communication and coordination with governments at all levels and power grid companies, actively participate in the power industry reform, examine and closely monitor the market trends so as to identify and seize business opportunities for maintaining and expanding the Company’s market share.

In terms of the coal market, under the guidance of the policy by the National Development and Reform Commission for the purpose of ensuring the stable supply of coal and of promoting reasonable coal price, the market supply and demand is expected to reach a basic balance in the second half of the year. The coal price will become rational where it is unlikely that there will be a substantial increase or decrease in coal price. The Company will continue to study and analyse the market trends and strengthen the research on policy interpretation. The Company will also intensify its efforts to develop new resources, and will strive for railway capacity support for transportation. It will also strive to ensure full delivery of coal supplies and on-site procurement under the long- and medium-term contracts, optimise imported coal so as to firmly control fuel costs.

In terms of the capital market, the State Council Executive Meeting recently confirmed that the prudent monetary policy currently executed by the People’s Bank of China would be carried out in a well-regulated and befitted manner so as to maintain the financing available in the market at appropriate level as well as a reasonably ample liquidity. It is expected that in the second half of this year, the central bank will, in response to the changes of the situation, make slight policy adjustments and modifications (either in advance or so) and impose target-oriented measures to ensure the stability and aptness of the scales of monetary credit and social financing. The Company will keep a close watch on the changes in monetary policy and capital market so as to ensure its fund safety.

In the second half of this year, the Company will continue to put great efforts on innovative development, safe production, quality improvement and deepening reforms. By way of thorough research on and analysis of the market, the Company will take effective measures to prevent operational risks, continuously enhance its business performance, and strive to create more value for the country, society, and its shareholders.



MANAGEMENT’S DISCUSSION AND ANALYSIS (PREPARED UNDER IFRS)
I.
COMPARISON AND ANALYSIS OF OPERATING RESULTS
Summary
According to the preliminary statistics of the Company, for the second quarter of 2018, the Company’s total power generation by power plants within China on consolidated basis amounted to 103.856 billion kWh, representing an increase of 14.52% over the same period last year. Total electricity sold by the Company amounted to 98.075 billion kWh, representing an increase of 14.54% over the same period last year. In the first half of 2018, the Company’s total power generation by the power plants within China on consolidated basis amounted to 208.167 billion kWh, representing an increase of 11.51% over the same period last year. Total electricity sold by the Company amounted to 196.387 billion kWh, representing an increase of 11.51% over the same period last year. In the first half of 2018, the Company’s average on-grid electricity settlement price for its power plants within China amounted to RMB418.57 per MWh (VAT included), representing an increase of 2.72% over the same period last year.

The increase in the Company’s power generation was mainly attributable to the following factors: (i) the growth in the macro-economy was better than expected; (ii) the growth rate of electricity consumption for residents’ electricity, tertiary industries and non high-energy-consuming manufacturing industries increased significantly; and (iii) in the first half of the year, the growth rate of hydropower generation in the country was relatively low, far lower than the growth rate of the electricity consumption of the whole society and national power generation while the Company has a relatively higher proportion of thermal power units and seized the opportunity to increase power generation.




The power generation (in billion kWh) by each region of the Company’s domestic power plants is listed below:

Region
 
Power Generation
   
Electricity sold
 
   
April to June 2018
   
Change
   
January to June 2018
   
Change
   
April to June 2018
   
Change
   
January to June 2018
   
Change
 
                                                 
                                                 
Heilongjiang Province
   
3.630
     
14.06
%
   
6.930
     
8.01
%
   
3.417
     
14.55
%
   
6.503
     
8.12
%
Coal-fired
   
3.343
     
16.61
%
   
6.387
     
6.79
%
   
3.130
     
17.06
%
   
5.969
     
6.81
%
Wind-power
   
0.275
     
-13.07
%
   
0.528
     
21.05
%
   
0.274
     
-11.22
%
   
0.518
     
21.52
%
PV
   
0.0127
     
     
0.0160
     
     
0.0080
     
     
0.0112
     
 
Jilin Province
   
2.778
     
40.13
%
   
5.089
     
27.77
%
   
2.643
     
40.81
%
   
4.822
     
28.52
%
Coal-fired
   
2.389
     
47.49
%
   
4.403
     
28.89
%
   
2.268
     
48.37
%
   
4.161
     
29.57
%
Wind-power
   
0.285
     
0.68
%
   
0.519
     
21.92
%
   
0.278
     
1.48
%
   
0.506
     
23.28
%
Hydro-power
   
0.039
     
3.06
%
   
0.043
     
-4.59
%
   
0.039
     
2.71
%
   
0.042
     
-4.83
%
PV
   
0.0064
     
2,259.26
%
   
0.0122
     
4,391.16
%
   
0.0063
     
2,284.19
%
   
0.0121
     
4,465.92
%
Biomass power
   
0.058
     
41.91
%
   
0.112
     
16.68
%
   
0.052
     
42.85
%
   
0.101
     
17.97
%
Liaoning Province
   
4.728
     
40.66
%
   
9.320
     
8.74
%
   
4.429
     
41.30
%
   
8.654
     
8.00
%
Coal-fired
   
4.550
     
40.54
%
   
9.005
     
7.57
%
   
4.253
     
41.19
%
   
8.341
     
6.74
%
Wind-power
   
0.119
     
16.83
%
   
0.210
     
23.84
%
   
0.118
     
16.91
%
   
0.209
     
23.99
%
Hydro-power
   
0.015
     
19.93
%
   
0.023
     
64.36
%
   
0.015
     
19.86
%
   
0.022
     
63.74
%
PV
   
0.0439
     
367.82
%
   
0.0826
     
382.25
%
   
0.0434
     
379.26
%
   
0.0817
     
394.30
%
Inner Mongolia
   
0.065
     
2.11
%
   
0.128
     
14.20
%
   
0.064
     
2.39
%
   
0.126
     
14.12
%
Wind-power
   
0.065
     
2.11
%
   
0.128
     
14.20
%
   
0.064
     
2.39
%
   
0.126
     
14.12
%
Hebei Province
   
3.611
     
-7.42
%
   
6.439
     
-4.85
%
   
3.388
     
-7.76
%
   
6.050
     
-4.92
%
Coal-fired
   
3.534
     
-7.69
%
   
6.264
     
-5.66
%
   
3.314
     
-8.06
%
   
5.881
     
-6.01
%
Wind-power
   
0.061
     
0.35
%
   
0.144
     
35.66
%
   
0.059
     
1.04
%
   
0.140
     
61.16
%
PV
   
0.0157
     
44.09
%
   
0.0305
     
46.31
%
   
0.0151
     
46.81
%
   
0.0293
     
49.62
%
Gansu Province
   
2.654
     
37.69
%
   
6.503
     
27.26
%
   
2.518
     
38.56
%
   
6.178
     
27.56
%
Coal-fired
   
2.163
     
42.28
%
   
5.523
     
25.61
%
   
2.044
     
43.15
%
   
5.231
     
25.82
%
Wind-power
   
0.491
     
20.57
%
   
0.980
     
37.44
%
   
0.475
     
21.72
%
   
0.947
     
38.09
%
Ningxia
   
0.0069
     
1,495.35
%
   
0.0108
     
2,419.15
%
   
0.0066
     
1,512.89
%
   
0.0104
     
2,439.24
%
PV
   
0.0069
     
1,495.35
%
   
0.0108
     
2,419.15
%
   
0.0066
     
1,512.89
%
   
0.0104
     
2,439.24
%
Beijing
   
1.755
     
83.22
%
   
3.958
     
18.26
%
   
1.702
     
82.07
%
   
3.775
     
19.86
%
Coal-fired
   
0.00
     
     
0.436
     
-59.88
%
   
0.00
     
     
0.381
     
-59.63
%
Combined Cycle
   
1.755
     
83.22
%
   
3.522
     
55.79
%
   
1.702
     
82.07
%
   
3.393
     
53.93
%
Tianjin
   
1.568
     
6.16
%
   
3.595
     
10.81
%
   
1.474
     
5.40
%
   
3.368
     
10.44
%
Coal-fired
   
1.311
     
23.69
%
   
2.878
     
6.97
%
   
1.224
     
23.41
%
   
2.672
     
6.51
%
Combined Cycle
   
0.256
     
-38.59
%
   
0.716
     
29.14
%
   
0.249
     
-38.71
%
   
0.694
     
28.34
%
PV
   
0.0009
     
800
%
   
0.0016
     
11,187.59
%
   
0.0009
     
     
0.0016
     
 
Shanxi Province
   
2.247
     
-20.96
%
   
4.793
     
-11.37
%
   
2.081
     
-22.00
%
   
4.483
     
-12.03
%
Coal-fired
   
2.227
     
5.30
%
   
3.596
     
4.41
%
   
2.061
     
5.20
%
   
3.318
     
4.19
%
Combined Cycle
   
0.001
     
-99.90
%
   
1.161
     
-40.89
%
   
0.001
     
-99.91
%
   
1.128
     
-41.00
%
PV
   
0.0189
     
5,300
%
   
0.0368
     
10,315.31
%
   
0.0191
     
     
0.0370
     
 


Region
 
Power Generation
   
Electricity sold
 
   
April to June 2018
   
Change
   
January to June 2018
   
Change
   
April to June 2018
   
Change
   
January to June 2018
   
Change
 
                                                 
Shandong Province
   
21.724
     
2.42
%
   
42.866
     
2.42
%
   
20.380
     
2.27
%
   
40.113
     
2.28
%
Coal-fired
   
21.399
     
1.70
%
   
42.258
     
1.73
%
   
20.062
     
1.52
%
   
39.539
     
1.60
%
Wind-power
   
0.207
     
55.24
%
   
0.416
     
61.62
%
   
0.201
     
52.20
%
   
0.383
     
53.15
%
PV
   
0.1184
     
222.78
%
   
0.1923
     
251.39
%
   
0.1174
     
249.04
%
   
0.1909
     
277.56
%
Henan Province
   
6.763
     
38.31
%
   
12.693
     
16.74
%
   
6.380
     
38.21
%
   
11.963
     
16.63
%
Coal-fired
   
6.321
     
44.46
%
   
12.138
     
23.06
%
   
5.947
     
44.60
%
   
11.418
     
23.19
%
Combined Cycle
   
0.413
     
-16.28
%
   
0.495
     
-48.91
%
   
0.405
     
-16.18
%
   
0.485
     
-48.85
%
Wind-power
   
0.021
     
12.28
%
   
0.046
     
21.35
%
   
0.021
     
12.28
%
   
0.046
     
21.49
%
PV
   
0.0072
     
402.1
%
   
0.0132
     
823.41
%
   
0.0071
     
400.54
%
   
0.0130
     
820.58
%
Jiangsu Province
   
9.823
     
-14.58
%
   
20.526
     
-4.02
%
   
9.317
     
-14.69
%
   
19.474
     
-4.03
%
Coal-fired
   
7.703
     
-24.43
%
   
16.678
     
-11.95
%
   
7.241
     
-24.89
%
   
15.705
     
-12.35
%
Combined Cycle
   
1.712
     
55.94
%
   
2.957
     
46.93
%
   
1.679
     
55.97
%
   
2.902
     
46.97
%
Wind-power
   
0.388
     
96.83
%
   
0.855
     
104.19
%
   
0.378
     
96.62
%
   
0.834
     
115.06
%
PV
   
0.0207
     
72.5
%
   
0.0347
     
189.32
%
   
0.0191
     
62.67
%
   
0.0329
     
180.86
%
Shanghai
   
4.488
     
24.53
%
   
10.001
     
14.09
%
   
4.246
     
24.50
%
   
9.472
     
13.95
%
Coal-fired
   
4.024
     
26.42
%
   
9.204
     
17.44
%
   
3.791
     
26.42
%
   
8.693
     
17.39
%
Combined Cycle
   
0.465
     
10.29
%
   
0.797
     
-14.16
%
   
0.455
     
10.52
%
   
0.780
     
-14.12
%
Chongqing
   
1.683
     
8.27
%
   
4.517
     
7.28
%
   
1.540
     
7.57
%
   
4.173
     
6.67
%
Coal-fired
   
1.547
     
14.34
%
   
4.127
     
18.54
%
   
1.408
     
13.88
%
   
3.793
     
18.45
%
Combined Cycle
   
0.136
     
-32.55
%
   
0.390
     
-46.53
%
   
0.132
     
-32.41
%
   
0.380
     
-46.51
%
Zhejiang Province
   
8.257
     
14.93
%
   
14.798
     
10.08
%
   
7.945
     
15.08
%
   
14.231
     
10.19
%
Coal-fired
   
8.020
     
14.02
%
   
14.439
     
9.35
%
   
7.712
     
14.14
%
   
13.878
     
9.43
%
Combined Cycle
   
0.219
     
58.90
%
   
0.330
     
52.51
%
   
0.215
     
59.47
%
   
0.324
     
53.10
%
PV
   
0.0187
     
40.49
%
   
0.0293
     
29.05
%
   
0.0186
     
47.32
%
   
0.0292
     
33.50
%
Hubei Province
   
3.545
     
42.29
%
   
8.064
     
23.46
%
   
3.305
     
42.47
%
   
7.534
     
23.29
%
Coal-fired
   
3.329
     
44.91
%
   
7.715
     
23.80
%
   
3.111
     
46.07
%
   
7.221
     
24.10
%
Wind-power
   
0.103
     
29.89
%
   
0.192
     
31.57
%
   
0.083
     
6.25
%
   
0.159
     
11.24
%
Hydro-power
   
0.107
     
-7.24
%
   
0.146
     
-4.96
%
   
0.104
     
-6.83
%
   
0.142
     
-4.31
%
PV
   
0.0066
     
65,900
%
   
0.0111
     
110,400
%
   
0.0065
     
     
0.0110
     
 
Hunan Province
   
2.328
     
71.45
%
   
5.526
     
41.41
%
   
2.185
     
72.92
%
   
5.191
     
42.05
%
Coal-fired
   
2.061
     
86.75
%
   
5.038
     
47.37
%
   
1.922
     
89.75
%
   
4.709
     
48.49
%
Wind-power
   
0.160
     
17.62
%
   
0.326
     
12.64
%
   
0.159
     
17.49
%
   
0.322
     
12.60
%
Hydro-power
   
0.096
     
-17.26
%
   
0.146
     
-26.38
%
   
0.094
     
-17.32
%
   
0.143
     
-26.44
%
PV
   
0.0102
     
608.33
%
   
0.0161
     
1,014.96
%
   
0.0100
     
594.30
%
   
0.0157
     
994.51
%


Region
 
Power Generation
   
Electricity sold
 
   
April to June 2018
   
Change
   
January to June 2018
   
Change
   
April to June 2018
   
Change
   
January to June 2018
   
Change
 
                                                 
                                                 
Jiangxi Province
   
4.830
     
8.36
%
   
10.043
     
11.74
%
   
4.615
     
8.55
%
   
9.609
     
11.86
%
Coal-fired
   
4.737
     
7.31
%
   
9.856
     
10.83
%
   
4.524
     
7.29
%
   
9.424
     
10.83
%
Wind-power
   
0.093
     
115.45
%
   
0.187
     
95.93
%
   
0.091
     
163.61
%
   
0.185
     
113.86
%
Anhui Province
   
1.358
     
1.12
%
   
2.806
     
-1.39
%
   
1.296
     
1.13
%
   
2.677
     
-1.76
%
Coal-fired
   
1.249
     
-2.80
%
   
2.620
     
-4.27
%
   
1.188
     
-2.96
%
   
2.497
     
-4.56
%
Wind-power
   
0.073
     
188.72
%
   
0.138
     
134.22
%
   
0.073
     
189.11
%
   
0.131
     
125.15
%
Hydro-power
   
0.035
     
9.77
%
   
0.048
     
-3.43
%
   
0.035
     
9.90
%
   
0.048
     
-3.42
%
Fujian Province
   
3.049
     
39.70
%
   
5.963
     
48.16
%
   
2.880
     
40.11
%
   
5.634
     
48.52
%
Coal-fired
   
3.045
     
39.55
%
   
5.957
     
48.01
%
   
2.876
     
39.93
%
   
5.628
     
48.36
%
PV
   
0.0037
     
1,581.82
%
   
0.0062
     
2,790.47
%
   
0.0037
     
     
0.0062
     
 
Guangdong Province
   
7.683
     
46.87
%
   
14.083
     
52.50
%
   
7.361
     
47.36
%
   
13.498
     
52.75
%
Coal-fired
   
7.677
     
46.91
%
   
14.072
     
52.55
%
   
7.355
     
47.39
%
   
13.487
     
52.80
%
PV
   
0.0058
     
11.42
%
   
0.0109
     
8.87
%
   
0.0058
     
11.50
%
   
0.0109
     
8.97
%
Guangxi
   
0.132
     
     
0.169
     
     
0.127
     
     
0.162
     
 
Combined Cycle
   
0.132
     
     
0.169
     
     
0.127
     
     
0.162
     
 
Yunnan Province
   
1.601
     
77.77
%
   
2.573
     
36.80
%
   
1.478
     
77.48
%
   
2.376
     
36.32
%
Coal-fired
   
1.461
     
82.53
%
   
2.264
     
38.84
%
   
1.343
     
82.41
%
   
2.075
     
38.31
%
Wind-power
   
0.139
     
39.55
%
   
0.309
     
23.50
%
   
0.135
     
39.94
%
   
0.301
     
24.01
%
Guizhou Province
   
0.052
     
268.42
%
   
0.111
     
226.39
%
   
0.051
     
270.26
%
   
0.109
     
227.83
%
Wind-power
   
0.052
     
268.42
%
   
0.111
     
226.39
%
   
0.051
     
270.26
%
   
0.109
     
227.83
%
Hainan Province
   
3.496
     
13.74
%
   
6.661
     
16.02
%
   
3.246
     
13.84
%
   
6.202
     
16.24
%
Coal-fired
   
3.423
     
14.73
%
   
6.507
     
16.39
%
   
3.175
     
14.90
%
   
6.050
     
16.64
%
Combined Cycle
   
0.008
     
317.96
%
   
0.023
     
195.57
%
   
0.007
     
316.26
%
   
0.022
     
195.43
%
Wind-power
   
0.017
     
-15.62
%
   
0.046
     
-11.79
%
   
0.016
     
-15.68
%
   
0.045
     
-11.69
%
Hydro-power
   
0.037
     
-41.55
%
   
0.062
     
-22.42
%
   
0.036
     
-41.69
%
   
0.062
     
-22.48
%
PV
   
0.0118
     
116.07
%
   
0.0226
     
124.20
%
   
0.0117
     
117.19
%
   
0.0224
     
125.27
%
                                                                 
Total
   
103.856
     
14.52
%
   
208.167
     
11.51
%
   
98.075
     
14.54
%
   
196.387
     
11.51
%





For the second quarter of 2018, the power generation of Tuas Power Limited in Singapore, which is wholly-owned by the Company, accounted for a market share of 21.1% in Singapore, representing a decrease of 0.7 percentage point compared to the same period of last year (21.8%). In the first half of 2018, the accumulated power generation accounted for a market share of 20.8%, representing a decrease of 0.7 percentage point compared to the same period last year.

The consolidated net profit attributable to the equity holders of the Company for the first half of 2018 was RMB1.731 billion, representing an increase of 609.74% over RMB244 million for the same period of last year. The net profit attributable to the equity holders of the Company from domestic operations was RMB1.894 billion, representing an increase of 287.39% over the same period of last year, which is mainly due to increase of electricity tariff and demand. The net loss attributable to the equity holders of the Company from its operations in Singapore was RMB163 million, representing a loss decrease of RMB82 million over the same period of last year.

1.
Operating revenue, taxes and levies
Operating revenue mainly consists of revenue from electricity sold. For the first half of 2018, the consolidated operating revenue of the Company and its subsidiaries amounted to RMB82.405 billion, representing an increase of 15.36% from RMB71.434 billion for the same period of last year. The operating revenue from domestic operations of the Company increased by RMB10.461 billion over the same period last year, of which operating revenue from new generating units was RMB1.495 billion. The operating revenue from operations of the Company in Singapore increased by RMB510 million over the same period last year.

Tax and levies mainly consist of value-added tax surcharges, property tax, land holding tax, stamp duty and environment protection tax. For the first half of 2018, the taxes and levies on operations of the Company and its subsidiaries were RMB876 million, representing an increase of RMB227 million from RMB649 million for the same period last year.

2.
Operating expenses
For the first half of 2018, the total operating expenses of the Company and its subsidiaries was RMB73.818 billion, representing an increase of 12.32% from the same period last year. The operating expenses in domestic operations of the Company increased by RMB7.726 billion, or 12.72%, from the same period of last year, which was mainly due to increased domestic fuel costs and increased power generation. The operating expenses of new generating units amounted to RMB1.064 billion. The operating expenses from the operations in Singapore increased by RMB0.374 billion, or 7.48%, from the same period last year.

2.1
Fuel costs
Fuel costs represent the largest portion of the operating expenses of the Company and its subsidiaries, which were RMB51.600 billion for the first half of 2018, representing an increase of 17.27% over the same period last year. The fuel costs from domestic operations of the Company increased by RMB7.591 billion from the same period last year, which was mainly due to increased fuel costs and increased power generation. Fuel costs for new generating units amounted to RMB0.727 billion. The fuel costs from the operations in Singapore increased by RMB7 million from the same period last year.

2.2
Depreciation
Depreciation expenses of the Company and its subsidiaries for the first half of 2018 were RMB10.123 billion, which represents a decrease of RMB24 million over the same period last year. The depreciation expenses of domestic operations of the Company increased by RMB53 million compared to the same period last year, of which the depreciation expenses incurred by new generating units were RMB0.220 billion. The depreciation expenses of its operations in Singapore decreased by RMB77 million compared to the same period last year.




2.3
Labor
Labor costs consist of salaries to employees, housing funds, medical insurance, pension and unemployment insurance payable to relevant government authorities, and accrued training expenses. Labor costs of the Company and its subsidiaries amounted to RMB4.500 billion for the first half of 2018, representing an increase of RMB0.186 billion from RMB4.314 billion for the same period last year, which is mainly due to business expansion. The labor costs for domestic operations of the Company increased by RMB0.195 billion over the same period last year, of which RMB0.043 billion is attributable to operation of new generating units. The labor costs for Singapore operations decreased by RMB10 million.

2.4
Maintenance
Maintenance expenses of the Company and its subsidiaries amounted to RMB1.721 billion for the first half of 2018, representing an increase of RMB6 million from RMB1.715 billion for the same period last year. The maintenance expenses of the Company’s domestic operations increased by RMB4 million compared to the same period last year. The maintenance expenses of operations in Singapore increased by RMB2 million compared to the same period last year.

2.5
Other operating expenses (including electricity power purchase costs and service fees payable to Huaneng International Power Development Corporation)
Other operating expenses (including electricity power purchase costs and services fees paid to Huaneng International Power Development Corporation) of the Company and its subsidiaries for the first half of 2018 was RMB5.873 billion, representing an increase of RMB0.333 billion from RMB5.541 billion for the same period last year. Other operating expenses from the Company’s domestic operations decreased by RMB0.119 billion over the same period last year, of which RMB0.038 billion is attributable to operation of new generating units. Other operating expenses of operations in Singapore increased by RMB0.452 billion compared to the same period last year.

3.
Financial expenses, net
The consolidated net financial expenses of the Company and its subsidiaries for the first half of 2018 amounted to RMB5.207 billion, representing an increase of RMB0.595 billion from RMB4.612 billion for the same period last year, which is mainly due to increased interest bearing debts and increased interest rate. The financial expenses of domestic operations increased by RMB0.543 billion, of which RMB0.172 billion is attributable to new generating units. The financial expenses of operations in Singapore increased by RMB52 million.

4.
Share of profits less losses of associates and joint ventures
The share of profits less losses of associates and joint ventures of the Company and its subsidiaries for the first half of 2018 was RMB385 million, representing an increase of RMB229 million from RMB156 million for the same period last year. This was mainly attributable to the increased profits of the associates and joint ventures of the Company.

5.
Income tax expenses
For the first half of 2018, the Company and its subsidiaries recognised income tax expenses of RMB0.745 billion, representing an increase of RMB0.266 billion from RMB0.479 billion for the same period last year. The income tax expenses for the domestic operations increased by RMB0.245 billion over the same period last year mainly due to the increased profitability of domestic operations during the period. The income tax expenses of operations in Singapore increased by RMB21 million over the same period last year.




6.
Consolidated net profit attributable to equity holders of the Company
The consolidated net profit attributable to equity holders of the Company amounted to RMB1.731 billion for the first half of 2018, representing an increase of RMB1.487 billion from RMB244 million for the same period last year. The net profit attributable to equity holders of the Company from its domestic operations was RMB1.894 billion, representing an increase of 287.32% over the same period last year. The increase was mainly due to increased electricity tariff and demand. The net loss attributable to equity holders of the Company from its operations in Singapore was RMB163 million, representing a decrease of RMB82 million over the same period last year.

7.
Comparison of financial positions
As of 30 June 2018, consolidated total assets of the Company and its subsidiaries were RMB398.786 billion, representing an increase of 0.55% from RMB396.590 billion as of 31 December 2017. As of 30 June 2018, total assets of operations in Singapore were RMB27.419 billion, representing a decrease of 1.94% from RMB27.961 billion as of 31 December 2017.

8.
Major financial position ratios
Calculation formula of the financial ratios:

Ratio of liabilities to equity holders’ equity = balance of liabilities at the end of the period/balance of equity holders’ equity (excluding non-controlling interests) at the end of the period

Current ratio = balance of the current assets at the end of the period/balance of current liabilities at the end of the period

Quick ratio = (balance of current assets at the end of the period – net amounts of inventories at the end of the period)/balance of current liabilities at the end of the period

Multiples of interest earned = (profit before tax + interest expenses)/interest expenditure (including capitalized interest)


   
The Company and its subsidiaries
 
Item
 
As of
30 June 2018
   
As of
31 December 2017
 
             
             
Ratio of liabilities to equity holders’ equity
   
3.30
     
3.30
 
Current ratio
   
0.40
     
0.31
 
Quick ratio
   
0.33
     
0.26
 


Item
 
For the
six months ended
30 June 2018
   
For the
six months ended
30 June 2017
 
             
             
Multiples of interest earned
   
1.52
     
1.11
 





The ratio of liabilities to equity holders’ equity is unchanged from the beginning of this year. Current ratio and quick ratio increased from the beginning of this year principally due to increase of current assets resulting from the increased bank balances and cash, as well as decrease of current liabilities resulting from the decreased short-term loans. The multiples of interest earned increased from the same period last year because of increased pre-tax profit for the first half of 2018.

As of 30 June 2018, the Company and its subsidiaries had net current liabilities of RMB85.091 billion. Based on the successful financing history of the Company, the undrawn banking facilities available to the Company and its good credit rating, the Company believes it would be able to refinance through long-term loans to meet its liabilities when they fall due and secure the funds required for operations.

II.
LIQUIDITY AND CASH RESOURCES
1.
Liquidity
   
For the
six months
ended
30 June 2018
   
For the
six months
ended
30 June 2017
   
Change
 
Item
 
(RMB in billion)
   
(RMB in billion)
   
(%)
 
                   
Net cash provided by operating activities
   
15.116
     
14.302
     
5.69
%
Net cash used in investing activities
   
(6.104
)
   
(20.269
)
   
(69.89
%)
Net cash (used in)/provided by financing activities
   
(2.095
)
   
10.269
     
(120.40
%)
Effect of exchange rate fluctuations on cash held
   
(0.010
)
   
0.022
     
(145.45
%)
                         
                         
Net increase in cash and cash equivalents
   
6.907
     
4.324
     
59.74
%
Cash and cash equivalents at beginning of the reporting period
   
9.282
     
7.811
     
18.83
%
                         
                         
Cash and cash equivalents at the end of the reporting period
   
16.189
     
12.135
     
33.41
%
 
The net cash provided by operating activities of the Company for the first half of 2018 was RMB15.116 billion, representing an increase of 5.69% over the same period last year. The increase was mainly due to the increase of electricity sales.

Net cash used in investing activities of the Company was RMB6.104 billion, representing a decrease of 69.89% from the same period last year, which was mainly due to consideration paid for acquisition during the same period last year.

The financing activities of the Company were principally debt financings. During the first half of 2018, the Company drew down new loans of RMB62.076 billion, issued super short-term bonds of RMB26.500 billion and long-term bonds of RMB4.5 billion, and repaid loans of RMB67.609 billion and super short-term bonds of RMB17.000 billion upon maturity, and also repaid long-term bonds of RMB4.000 billion upon maturity.




As of 30 June 2018, cash and cash equivalents of the Company and its subsidiaries denominated in RMB and Singapore dollar, U.S. dollar and Japanese Yen, each of which is measured at RMB equivalent, were RMB14.922 billion, RMB0.723 billion, RMB0.545 billion and RMB0.069 million, respectively.

2.
Capital expenditure and cash resources
2.1
Capital expenditure for infrastructure construction and renovation projects
The capital expenditure for construction and renovation projects of the Company for the first half of 2018 was RMB6.880 billion, including RMB571 million for Yantai Bajiao Co-generation project, RMB423 million for Luoyuan Power project, RMB287 million for Yancheng Dafeng New Energy project, RMB234 million for Dongguan Combined Cycle project, RMB231 million for Huaining Wind Power project, RMB179 million for Jiangxi Renewable Energy project, RMB169 million for Luoyuan Port, RMB155 million for Hainan Power project, RMB138 million for Beijing Co-generation project, RMB132 million for Rudong Baxianjiao Offshore Wind Power project, RMB122 million for Yizheng Wind Power project, RMB98 million for Shuangyu Solar Power project, RMB95 million for Kangbao Wind Power project, RMB91 million for Luohuang Power project, RMB84 million for Diandong Energy project, RMB84 million for Huaiyin Power Plant project, RMB79million for Jianchang PV project, RMB77 million for Guanyun Co-generation project, RMB76 million for Fuyuan Wind Power project, RMB71 million for Dalian Co-generation project, RMB71 million for Anyang Energy project, RMB67 million for Suzhou Thermal Power project, RMB65 million for Yueyang Power project, RMB64 million for Zhongxiang Wind Power project, and RMB62 million for Weihai Power project. Expenditure for other infrastructure construction and renovation projects was RMB3.155 billion.

The above capital expenditures are sourced mainly from internal capital, cash flows provided by operating activities, and debt and equity financing. The Company expects to have significant capital expenditures in the next few years. During the course, the Company will make active efforts to improve project planning process on a commercially viable basis. The Company will also actively develop new projects to pave the way for its long-term growth. The Company expects to finance the above capital expenditures through internal capital, cash flows provided by operating activities, and debt and equity financing.

2.2
Cash resources and anticipated financing costs
The Company expects to finance its capital expenditure and acquisition costs primarily from internal capital, cash flows from operating activities, and debt and equity financings.

Good operating results and sound credit status provide the Company with strong financing capabilities. As of 30 June 2018, the undrawn banking facilities available to the Company and its subsidiaries amount to more than RMB241.188 billion from, among others, Bank of China, China Construction Bank and Industrial and Commercial Bank of China.

The Company issued nine installments of unsecured super short-term bonds of RMB4 billion, RMB2 billion, RMB2 billion, RMB4 billion, RMB2.5 billion, RMB4 billion, RMB2 billion, RMB2 billion and RMB4 billion with coupon rate of 4.35%, 4.35%, 4.40%, 4.45%, 4.25%, 4.08%, 3.98%, 3.80% and 4.05% on 24 February, 2 March, 21 March, 23 March, 2 May, 2 May, 18 May, 30 May and 1 June, respectively. Each installment of super short-term bonds is issued at par value in RMB and matures in 90, 90, 150, 180, 180, 150, 180, 90 and 180 days after issuance, respectively.




As of 30 June 2018, the Company and its subsidiaries had outstanding short-term loans of RMB59.526 billion (RMB80.251 billion as of 31 December 2017), of which borrowings from banks were charged at annual interest rates ranging from 3.92% to 5.30% (3.74% to 5.50% as of 31 December 2017).

As of 30 June 2018, the Company and its subsidiaries had outstanding short-term bonds of RMB20.632 billion (RMB11.068 billion as of 31 December 2017).

As of 30 June 2018, the Company and its subsidiaries had outstanding long-term loans (including those maturing within a year) of RMB140.219 billion (RMB125.129 billion as of 31 December 2017), including RMB denominated loans of RMB125.722 billion (RMB110.073 billion as of 31 December 2017), U.S. dollar denominated loans of US$316 million (US$348 million as of 31 December 2017), Euro denominated loans of €26 million (€30 million as of 31 December 2017), Singapore dollar denominated loans of S$2.496 billion (S$2.539 billion as of 31 December 2017), and Japanese yen denominated loans of ¥2.537 billion (¥2.593 billion as of 31 December 2017). All loans denominated in US dollar and Singapore dollar were floating rate, and loans denominated in all other foreign currencies were fixed rate. As of 30 June 2018, the long-term loans of the Company and its subsidiaries from banks were charged at annual interest rates ranging from 0.75% to 6.03% (0.75% to 6.03% as of 31 December 2017).

The Company will maintain close watch on fluctuations of exchange rate and interest rate markets, and prudently assess currency and interest rate risks.

In addition to meeting cash requirements from operations, constructions and acquisitions in its ordinary course, the Company, along with due consideration of overall development of power generation industry and growth of the Company, will make efforts to control financing costs and financial risks, establish an optimal capital structure for effective financial management activities, with the view to providing sustainable and stable returns to its shareholders.

2.3
Other financing requirements
The objective of the Company is to bring long-term, consistent and growing returns to its shareholders. In line with this objective, the Company follows a proactive, stable and balanced dividend policy. Upon the approval from the annual general meeting of the shareholders for the year 2017 held on 3 May 2018, the Company declared a cash dividend of RMB0.10 per ordinary share (inclusive of tax), with total dividends of approximately RMB1.520 billion. As of 30 June 2018, RMB1.086 billion of the aforementioned dividends have been paid, with RMB0.434 billion remaining.

III.
PERFORMANCE AND PROSPECTS OF SIGNIFICANT INVESTMENTS
The Company acquired 25% equity interests in Shenzhen Energy Group (“Shenneng Group”) with payment of RMB2.39 billion on 22 April 2003. In 2011, Shenneng Group divided into a remainder company Shenneng Group and a new company Shenneng Energy Management Company, and the Company holds 25% equity interests in each of the two successors. The Company acquired 200 million shares from Shenzhen Energy Corporation (“Shenzhen Energy”), a subsidiary of Shenneng Group, in December 2007. Shenzhen Energy allotted shares with its capital surplus in 2011. In February 2013, Shenzhen Energy merged Shenzhen Energy Management Company through the combination of directional seasoned offering and cash payment to the shareholders of Shenzhen Energy Management Company. After the merger, the Company directly held 991,741,659 shares of Shenzhen Energy, representing 25.02% of its equity interests. These investments brought a net profit attributable to the equity holders of the Company of RMB65 million for the Company for the first half of 2018 under IFRS. This investment is expected to provide steady returns to the Company.




The Company held 60% direct equity interests in Sichuan Hydropower as of 31 December 2006. In January 2007, Huaneng Group increased its capital investment in Sichuan Hydropower by RMB615 million, thus reducing the Company’s equity interests in Sichuan Hydropower to 49% and making Huaneng Group the controlling shareholder of Sichuan Hydropower. This investment brought to the Company a net profit attributable to the equity holders of the Company of RMB67 million for the first half of 2018 under IFRS. This investment is expected to provide steady returns to the Company.

IV.
EMPLOYEE BENEFITS POLICIES
As of 30 June 2018, the Company and its subsidiaries had 53,203 employees. During this reporting period, there was no significant change regarding remuneration policies and training programs of the Company.

V.
GUARANTEE FOR LOANS AND RESTRICTED ASSETS
As of 30 June 2018, the Company provided guarantees of approximately RMB12.072 billion for Tuas Power; Huaneng Heilongjiang Power Co., Ltd., a subsidiary of the Company, provided guarantees of approximately RMB500 million, RMB1,122 million and RMB521 million for its subsidiaries Huaneng Daqing Thermal Power Co., Ltd., Daqing Lvyuan Wind Power Generation Co., Ltd., and Huaneng Tongjiang Wind Power Co., Ltd., respectively; Huaneng Daqing Thermal Power Co., Ltd., a subsidiary of the Company, provided guarantees of RMB218 million for its subsidiary, Huaneng Yichun Thermal Power Co., Ltd.; Huaneng Shandong Ruyi Coal-fired Co., Ltd., a subsidiary of the Company, provided guarantees of RMB60 million for its subsidiary Huaneng Jiaxiang Power Co., Ltd..

As of 30 June 2018, the details of secured loans of the Company and its subsidiaries are as follows:

1.
As of 30 June 2018, short-term loans of approximately RMB38 million (RMB24 million as of 31 December 2017) represented the notes receivable that were discounted with recourse. As these notes receivable had not yet matured, the proceeds received were recorded as short-term loans.

2.
As of 30 June 2018, long-term loans of approximately RMB3.952 billion (RMB4.605 billion as of 31 December 2017) of the Company and its subsidiaries were secured by certain property, plant and equipment, with net book value of RMB4.527 billion.

3.
As of 30 June 2018, long-term loans of approximately RMB8.767 billion (RMB10.559 billion as of 31 December 2017) were secured by future electricity revenue of the Company and its subsidiaries.

As of 30 June 2018, the restricted bank deposits of the Company and its subsidiaries were RMB75 million (RMB82 million as of 31 December 2017).

As of 31 December 2018, the property, plant and equipment leased under finance lease of the Company and its subsidiaries with net book value amounted to RMB1.573 billion (RMB2.565 billion as of 31 December 2017).

As of 30 June 2018, notes receivable discounted or endorsed neither matured nor derecognized of the Company and its subsidiaries with net book value amounted to RMB1.887 billion (RMB1.677 billion as of 31 December 2017).

As of 30 June 2018, the Company and its subsidiaries had no material contingent liability.




VI.
RISK FACTORS
For the second half of 2018, the prudent monetary policy currently executed by the People’s Bank of China would be carried out in a well-regulated and befitted manner so as to maintain the financing available in the market at appropriate level as well as a reasonably ample liquidity. Most of the Company’s debts are interest bearing debts denominated in RMB, and the change of RMB interest rates will directly affect the Company’s borrowing costs. The Company will keep close watch on market conditions to make reasonable financing arrangements, explore new financing initiatives to control financing costs while meeting funding requirements. The interest bearing debts denominated in non-RMB currencies are mostly charged with floating interest rates. The Company has hedged approximately half of its debts with floating interest rates by interest rate swap agreements, and the fluctuation of the interest rates on non-RMB currency borrowings will not have material adverse impact on the Company.

The Company had certain debts denominated in U.S. dollar and Euro, and could incur exchange gain or loss from fluctuation of relevant exchange rates. The debts denominated in foreign currencies accounted for less than 6% of the total interest bearing debts of the Company, most of which were denominated in U.S. dollar. The recent fluctuations in exchange rates are not expected to have material adverse impact on the Company due to limited amount of its borrowings denominated in foreign currencies.

SHARE CAPITAL STRUCTURE
As at 30 June 2018, total issued share capital of the Company amounted to 15,200,383,440 shares, of which 10,500,000,000 shares were domestic shares, representing 69.08% of the total issued share capital of the Company, and 4,700,383,440 shares were foreign shares, representing 30.92% of the total issued share capital of the Company. In respect of foreign shares, China Huaneng Group Co., Ltd. (“Huaneng Group”) through its wholly-owned subsidiary China Hua Neng Group Hong Kong Limited held 472,000,000 shares, representing 3.11% of the total issued share capital of the Company. In respect of domestic shares, Huaneng International Power Development Corporation (“HIPDC”) owned a total of 5,066,662,118 shares, representing 33.33% of the total issued share capital of the Company, while Huaneng Group held 1,555,124,549 shares, representing 10.23% of the total issued share capital of the Company. Through its controlling subsidiary China Huaneng Finance Corporation Limited, Huaneng Group held 74,139,853 shares, represents 0.49% of the total issued share capital of the Company. Other domestic shareholders held a total of 3,804,073,480 shares, representing 25.03% of the total issued share capital of the Company.

PURCHASE, SALE OR REDEMPTION OF SHARES
The Company and its subsidiaries did not sell any other types of its securities and did not purchase or redeem its own shares or other securities in the first half of 2018.




MAJOR SHAREHOLDING STRUCTURE
The following table summarizes the shareholdings of the top ten shareholders of the Company as at 30 June 2018:

Name of Shareholders
 
Total
Shareholdings
as at end of the
reporting period
   
Percentage of
shareholding in
total issued
shares (%)
 
             
Huaneng International Power Development Corporation
   
5,066,662,118
     
33.33
%
HKSCC Nominees Limited*
   
4,019,698,699
     
26.44
%
China Huaneng Group Co., Ltd.
   
1,555,124,549
     
10.23
%
Hebei Construction & Investment Group Co., Ltd.
   
527,548,946
     
3.47
%
China Hua Neng Group Hong Kong Limited
   
472,000,000
     
3.11
%
Jiangsu Provincial Investment & Management Limited Liability
   
416,500,000
     
2.74
%
China Securities Finance Corporation Limited
   
413,567,472
     
2.72
%
Fujian Investment Development (Group) Co., Ltd.
   
372,818,249
     
2.45
%
Liaoning Energy Investment (Group) Limited Liability Company
   
362,200,722
     
2.38
%
Dalian Municipal Construction Investment Company Limited
   
301,500,000
     
1.98
%
                 


Notes:

*
HKSCC Nominees Limited acts as nominee of holders of H shares of the Company and its shareholdings in the Company represent the total number of H shares held by it as nominee of H shareholders.




MATERIAL INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY
As at 30 June 2018, the interests or short positions of persons who were entitled to exercise or control the exercise of 5% or more of the voting power at any of the Company’s general meetings (excluding the Directors, Supervisors and chief executive) in the shares and underlying shares of equity derivatives of the Company as recorded in the register required to be kept under Section 336 of the Securities and Futures Ordinance (Hong Kong Law Cap. 571) (the “SFO”) were as follows:

Name of shareholder
Class of shares
 
Number of
shares held
(share)
 
Capacity
 
Approximate
percentage of
shareholding in
the Company’s
total issued
share capital
   
Approximate
percentage of
shareholding in
the Company’s
total issued
domestic shares
   
Approximate
Percentage of
shareholding in
the Company’s
total issued
H Shares
 
                             
Huaneng International Power Development Corporation (Note 2)
Domestic shares
   
5,066,662,118(L
)
Beneficial owner
   
33.33
%(L)
   
48.25
%(L)
   
 
                                     
China Huaneng Group Co., Ltd.(Note 3)
Domestic shares
   
1,629,264,402(L
)
Beneficial owner
   
10.72
%(L)
   
15.52
%(L)
   
 
                                     
China Huaneng Group Co., Ltd.(Note 4)
H Shares
   
472,000,000(L
)
Beneficial owner
   
3.11
%(L)
   
     
10.04
%(L)
                                     
Hebei Construction & Investment
Group Co., Ltd.
Domestic shares
   
527,548,946(L
)
Beneficial owner
   
3.47
%(L)
   
5.02
%(L)
   
 
                                     
Blackrock, Inc. (Note 5)
H Shares
   
297,572,526(L
)
Interest of controlled corporation
   
1.95
%(L)
   
     
6.33
%(L)
       
45,526,000(S
)
Interest of controlled corporation
   
0.29
%(S)
   
     
0.96
%(S)
                                     
JPMorgan Chase & Co. (Note 6)
H Shares
   
63,430,419(L
)
Beneficial owner
   
0.41
%(L)
   
     
1.34
%(L)
       
8,157,760(S
)
Beneficial owner
   
0.05
%(S)
   
     
0.17
%(S)
       
147,890,000(L
)
Investment manager
   
0.97
%(L)
   
     
3.14
%(L)
       
11,160(L
)
Trustee
   
0.00007
%(L)
   
     
0.0002
%(L)
       
66,725,755(P
)
Custodian
   
0.43
%(L)
   
     
1.41
%(L)
                                     
Luo Yi 駱奕 (Note 7)
H Shares
   
380,208,000(L
)
Beneficial owner
   
2.50
%(L)
   
     
8.08
%(L)
                                     
Qiu Guogen 裘國根 (Note 7)
H Shares
   
380,208,000(L
)
Beneficial owner
   
2.50
%(L)
   
     
8.08
%(L)




Note:

(1)
The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interest in a lending pool.

(2)
As of the Latest Practicable Date, China Huaneng Group Co., Ltd. holds 75% direct interests and 25% indirect interests in HIPDC.

(3)
Of the 1,629,264,402 domestic shares, China Huaneng Group Co., Ltd. through its controlling subsidiary, Huaneng Finance, held 74,139,853 domestic shares.

(4)
China Huaneng Group Co., Ltd. held 472,000,000 H shares through its wholly owned subsidiary, China Hua Neng Group Hong Kong Limited.

(5)
Long position of 199,320 shares and short position of 7,270,000 were held through cash settled derivatives (on exchange).

(6)
Long position of 1,963,040 shares and short position of 397,760 shares were held through physically settled derivatives (on exchange). Short position of 3,434,000 shares was held through cash settled derivatives (on exchange). Long position of 12,038,000 shares and short position of 182,000 shares were held through physically settled derivatives (off exchange). Long position of 1,200,000 shares and short position of 116,000 shares were held through cash settled derivatives (off exchange).

(7)
Long position of 173,062,000 H shares was held by 上海重陽戰略投資有限公司 Shanghai Chongyang Strategic Investment Co., Ltd., while long position of 156,132,000 H shares was held by 上海重陽投資管理股份有限公司 Shanghai Chongyang Investment Management Co., Ltd., long position of 30,800,000 H shares was held by 重陽集團有限公司 Chongyang Group Co., Ltd. and long position of 20,214,000 H shares was held by 重陽國際資產管理有限公司 Chongyang International Asset Management Co., Ltd. Qiu Guogen is the spouse of Luo Yi who is the ultimate beneficial owner of each of Shanghai Chongyang Strategic Investment Co., Ltd., Shanghai Chongyang Investment Management Co., Ltd., Chongyang Group Co., Ltd. and Chongyang International Asset Management Co., Ltd..

Save as stated above, as at 30 June 2018, in the register required to be kept under Section 336 of SFO, no other persons were recorded to hold any interests or short positions in the shares or underlying shares of the equity derivatives of the Company.

DIRECTORS’ AND SUPERVISORS’ RIGHT TO PURCHASE SHARES
The Company has adopted a code with the standard not lower than that of the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“Listing Rules”). Following enquiries made by the Company, all Directors and Supervisors confirmed that they have complied with the Code throughout the first half of 2018.

As at 30 June 2018, 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 definition of Part XV of the Securities and Futures Ordinance (“SFO”) which was required to be notified to the Company and the Stock Exchange of Hong Kong Limited (“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 officer 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.

PUBLIC FLOAT
As at the date of this report, the Company has maintained the prescribed public float under the Listing Rules and as agreed with the Hong Kong Stock Exchange, based on the information that is publicly available to the Company and within the knowledge of the directors of the Company.




DIVIDENDS
It was resolved by the Board not to distribute dividends for the first half of 2018.

DISCLOSURE OF MATERIAL EVENTS
1.
The Company has reviewed and approved the proposal of appointment of President at the 14th meeting of the ninth session of the Board held on 31 July 2018, and appointed Mr. Zhao Keyu as President of the Company.

2.
Due to work requirements, Mr. Liu Guoyue (Director and President of the Company) tendered his resignation report to the Board of Directors of the Company, resigning from the position as the Director and President of the Company, on 16 May 2018. At the same time, he also ceased to act as the Chairman of the Strategy Committee and a member of the Remuneration and Appraisal Committee of the Board of Directors. Before the Company appoints the new President and the chairman of the Strategy Committee, Mr. Cao Peixi, the Chairman of the Company, shall take the role of the President and chairman of the Strategy Committee.

3.
Due to work requirements, Mr. Fan Xiaxia (Director and Vice President of the Company) tendered his resignation report to the Board of Directors fo the Company, resigning from the position as the Director and Vice President of the Company, on 28 February 2018. At the same time, he also ceased to act as a member of Strategy Committee and Nomination Committee of the Board of Directors of the Company.


CORPORATE GOVERNANCE
The Company always places emphasis on corporate governance. After years of experience and practice, the Company has gradually formed a standardized and enhanced governance structure, thereby establishing a sound and effective system that is appropriate to the Company’s own development requirements. The Company persists on maximizing the benefits of the Company and its shareholders as a whole, treating all of its shareholders fairly and striving for the long-term, stable and increasing returns for shareholders of the Company.

During the reporting period, the Company has complied with the relevant provisions of Corporate Governance Code and Corporate Governance Report set out in Appendix 14 of the Listing Rules, except for code provision A.2.1.

Code provision A.2.1 provides that the roles of chairman and chief executive (president) should be separate and should not be performed by the same individual. Mr. Cao Peixi, Chairman of the Board and Executive Director of the Company, took up the position of the President starting from 16 May 2018. As the Board of Directors meets regularly to consider matters relating to business operations of the Company, the Board of Directors is of the view that the above arrangement will not impair the balance of power and authority of the Board of Directors and the executive management. The effectiveness of corporate planning and implementation of corporate strategies and decisions will generally not be affected.




(A)
CODE OF CORPORATE GOVERNANCE
In recent years, the Company adopted the following measures in order to strengthen corporate governance and enhance the Company’s operation quality:

(1)
Enhancing and improving corporate governance
In addition to complying with the provisions of the applicable laws, as a public company listed in three markets both domestically and internationally, the Company is subject to the regulations of the securities regulatory authorities of the three listing places and the supervision of investors at-large. Accordingly, our fundamental principles are to adopt a corporate governance structure that balances and coordinates the decision-making powers, supervisory powers and operating powers, to act with honesty and integrity, and to operate in accordance with laws and regulations.

Over the years, the Board has formulated and implemented the Rules and Procedures of the General Meetings; Rules and Procedures of the Board of Directors Meetings; the Rules and Procedures of the Supervisory Committee Meetings; the Detailed Rules on the Work of the President; the Detailed Rules on the Work of the Strategy Committee of the Board of Directors; the Detailed Rules on the Work of the Audit Committee of the Board of Directors; the Detailed Rules on the Work of the Nomination Committee of the Board of Directors; the Detailed Rules on the Work of the Remuneration and Appraisal Committee of the Board of Directors; the System on Work of Independent Directors, the System on Work of Independent Directors on the annual report and the Work Regulations on Annual Report for the Audit Committee, and amended relevant regulations and systems according to the applicable laws and the development needs of the Company.

In order to better adapt to market and regulatory changes, the Company has also revised the Articles of Association and clarified the party organization in playing the leading role and political core role in the Company.

All members of the Board jointly perform the duty of corporate governance.

During the reporting period, the Board has included the followings in its scope of duties and authority:

1.
Establishing and reviewing the Company’s corporate governance policies and codes, and making such amendments as it deems necessary to ensure the effectiveness of such policies and codes;

2.
Reviewing and supervising the training and sustained professional development of the Company’s directors and senior management;

3.
Reviewing and supervising the Company’s policies and codes regarding the observance of laws and regulatory requirements;

4.
Formulating, reviewing and supervising the codes of conduct and compliance handbook applicable to directors and employees; and

5.
Reviewing the Company’s compliance with the Code on Corporate Governance Practices and the disclosures made in the Corporate Governance Report.

(2)
Enhancing and improving the information disclosure system
The Company stresses on the importance of external information disclosure. The Company has established the Information Disclosure Committee which comprises the secretary to the Board of Directors, the chief accountant, managers of each functional department, and is responsible for reviewing the Company’s regular reports. The Company has implemented the system of holding regular information disclosure meetings every Monday chaired by the secretary to the Board of Directors who will report on the Company’s important matters of the week, thereby ensuring the Company’s performance of the relevant information disclosure obligations. The Company has successively formulated and implemented the relevant information disclosure system, and has made timely amendments thereto according to regulatory requirements. The current functioning systems include the Measures on Information Disclosure Management, the Measures on Connected Transaction Management, Management Measures on Insiders, the Measures on Investor Relations Management, the Detailed Rules on the Work of the Information Disclosure Committee, Management Measures for Pursuing Responsibility regarding Material Errors in Information Disclosure of Annual Report, etc. The above measures and system ensure the regulated operation of the Company, strengthen the truthfulness, accuracy, completeness and the timely disclosure of information, and at the same time enhance the quality as well as transparency of the information disclosure.



Relevant departments of the Company compiled answers (and subsequent updates) to questions regarding the hot topics of market concerns, and the Company’s production, operation and operating results in a timely manner. The replies shall become the basis of external communication upon the approval of the Company’s management and the authorized representatives of the Information Disclosure Committee. Also, the Company engages professional personnel to conduct specialized training for the staff of the Company who are responsible for information disclosure on an irregular basis in order to continuously enhance their expertise.

(3)
Regulating financial management system, strengthening internal control
In 2018, the Company sticks to its principle of good faith and fair treatment to its shareholders and makes a lot of detailed work in preparing the financial reports and connected practice standard and on aspect of internal controls. The credibility of a listed company, to a large extent, relates to the quality of the preparation of financial statements and a regulated operation of financial activities. In order to regulate its financial management, the Company has completed a large amount of specific and detailed work, including:

1.
In order to strictly implement the accounting rules, accounting standards and accounting systems, to strengthen accounting and accounts supervision, and to truthfully and fairly reflect the financial position, operating results and cash flow, the Company has formulated the Measures on Accounting, the Basic Measures on Construction Accounting, the Measures on Fixed Assets Management, Lists of Fixed Assets and the Measures on Cost Management. The Company’s Board, the Supervisory Committee and the Audit Committee have reviewed the Company’s financial reports on a regular basis and the Company has fulfilled the requirements of making the Chairman, the President and the Chief Accountant responsible for the truthfulness and completeness of the financial reports.

2.
In regard to fund management, the Company has formulated a number of management measures including the Measures on Financial Management, the Measures on the Management of the Income and Expenditure of the Funds, the Measures on the Assessment of Management of Receipt and Payment of Funds, the Measures on the Use and Management of Large Amount by Headquarter of the Company, the Measures on the Management of Bills of Exchange, the Measures on Management of Fund Raising, Rules on the Management of Transactions Involving Financial Derivatives, the Measures on the Management of Provision of Security to Third Parties and the Measures for Regulating Fund Transfers with the Related Parties. The Company’s Articles of Association also set out provisions relating to loans, guarantees and investment. In the annual reports of the Company over the previous years, the Company has engaged certified accountants to conduct auditing on the use of funds by the controlling shareholders and other related parties, and issue specific statements according to the requirements of the China Securities Regulatory Commission (“China Securities Regulatory Commission”) and the Shanghai Stock Exchange (“Shanghai Stock Exchange”) for confirmation that there has not been any violation of rules relating to the use of funds. Moreover, the Company also conducted quarterly checking and clearing with related parties in relation to the operational fund transfers in order to ensure the safety of funds.



3.
The overall objective of internal control of the Company is to promote implementation of the corporate strategy. Specific goals are to maintain lawful operation and management of the Company, asset safety, and truthfulness and completeness of financial reports and related information, thus promoting the overall enhancement of operating efficiency and actual effect.

The Company has formulated a comprehensive system for five businesses including development and construction, production and management, financial assets, integrated management and supervision and evaluation in order to achieve the institutionalization of management. The Company has comprehensively sort out internal and external risks and various business processes, and completed the “Internal Control Manual”, the fifth version of which in use detailed 23 business processes and organizational structures including income, material procurement, fuel management and fund management, and 19 soft elements including human resources management, anti-fraud and risk management in terms of five areas including environment control, risk assessment, process control, information and communication, and monitoring, thereby comprehensively elaborating the Company’s guiding principles and policies, work procedures and job duties of various posts, regulating the standard procedures of various business processes and realizing a streamlined system.

The Company has compiled the “Internal Control Evaluation Handbook” specifying the three-tier internal control evaluation management system, the internal control evaluation mode comprised of routine evaluation and supervision on key area, regulating the internal control evaluation procedures, evaluation methods, defect defining procedures and standards in order to realize standardization of internal control evaluation. The Company conducts annual assessment on the applicability and effectiveness of the above system and regularly conducts revision and perfection in order to realize dynamic maintenance of the internal control system.

The Company has established 48 items of risks falling into 16 categories involving strategic management, production and operation, legal affairs, financial management, use of capital, safety protection, energy conservation and environment protection, fundamental construction and compliance observation, and has divided risk management at all levels of business departments. For the purpose of risk identification, the “Internal Control Manual” stipulates the corresponding control measures and defines key control points. Through the implementation of the “one post for one item system” at each control point, the control responsibility is divided to every post at various levels so that internal control and job responsibilities are combined and all members of staff can participate in the construction of internal control. The Company has implemented the internal control routine evaluation mechanism, set up the post of internal control evaluators in each department and subordinate unit respectively, conducted monthly internal control evaluation, and established a three-tier evaluation quality supervision mechanism respectively at the three levels of the Company, regional offices and basic level units by way of the internal control management system in order to conduct real-time tracking of the implementation of internal control. During the first half of the year, the Company has successfully completed a six-month internal control routine evaluation, and launched key inspection on high-risk units after combining the risk assessment results thus effectively protecting and promoting the sustained and healthy development of the businesses of the Company and realizing the stable operation of the internal control system. The Company has combined the new requirements and new changes in business and management and constantly advanced experience and common issues, and launched comprehensive and multi-level internal control training each year, and widely publicized internal control concepts and knowledge, thus continuously optimizing the internal control environment.




The internal control and management departments, internal audit department and external auditors regularly report the internal control work situation to the Audit Committee of the Board of Directors respectively, thus ensuring the continued and effective operation of the internal control system. The Company constantly improves the internal control review system, formulated the “Internal Control Review and Evaluation Management Regulations”, regularly conducts internal control target reviews and comprehensive evaluations, circulating notices within the Company after combining the assessment results, thus realizing the review results in a timely manner, effectively guiding the units at all levels to focus on the quality of internal control work and practically realizing of the deep level objective of management enhanced by internal control.

Upon full assessment, the management of the Company is of the opinion that the internal control system of the Company is sound and effective.

(B)
SECURITIES TRANSACTIONS BY DIRECTORS
As the Company is listed in three jurisdictions, the Company has strictly complied with the relevant restrictive clauses on securities transactions by directors imposed by the regulatory authorities of the US, Hong Kong and China and we insist on the principle of complying with the strictest clause, which is, abiding by the strictest clause among three jurisdictions. We have adopted a set of standards not less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules as the model code for securities dealings by directors of the Company, namely, Management Rules regarding the Company’s Securities Information and Trading. The Company has also formulated and implemented the Management Rules in respect of the Shares of the Company held by the Directors, Supervisors and Senior Management of Huaneng Power International, Inc. The model codes for the trading of securities by the Company’s directors include: trading the Company’s shares strictly in accordance with the Companies Law and relevant regulations, prohibiting those who are in possession of securities transaction inside information using inside information in securities trading; and setting out detailed rules for those who are in possession of inside information. Following a specific enquiry on all the directors and senior management of the Company, all the directors and senior management currently do not hold any shares of the Company and there is no material contract in which the directors and senior management directly or indirectly have material interests.

(C)
BOARD OF DIRECTORS
The Board of Directors of the Company comprises of 12 members. Of the members of the ninth session of the board of directors, Mr. Cao Peixi as the Chairman; Mr. Huang Jian, Mr. Wang Yongxiang, Mr. Mi Dabin, Mr. Guo Hongbo, Mr. Cheng Heng and Mr. Lin Chong as the Non-executive Directors; and Mr. Yue Heng, Mr. Xu Mengzhou, Mr. Liu Jizhen, Mr. Xu Haifeng and Mr. Zhang Xianzhi as the Independent Non-executive Directors.

The Board of Directors of the Company has held six meetings during the reporting period including regular meetings and ad hoc meetings. For details, please see the relevant announcements.




Details of the attendance of directors at the board meetings are as follows:

Name
 
Number of
meetings to
be attended
   
Number of
meetings
attended in
person
   
Number of
meetings
attended by
proxy
   
Rate of
Attendance
(%)
 
                         
Executive Director
                       
Cao Peixi
   
6
     
5
     
1
     
83.33
%
                           
(Attendance by
proxy rate of
16.67%)
 
                                 
Non-executive Directors
                               
Huang Jian
   
6
     
6
     
0
     
100
%
Wang Yongxiang
   
6
     
6
     
0
     
100
%
Mi Dabin
   
6
     
5
     
1
     
83.33
%
                           
(Attendance by
proxy rate of
16.67%)
 
Guo Hongbo
   
6
     
5
     
1
     
83.33
%
                           
(Attendance by
proxy rate of
16.67%)
 
Cheng Heng
   
6
     
6
     
0
     
100
%
Lin Chong
   
6
     
6
     
0
     
100
%
                                 
Independent non-executive Directors
                               
Yue Heng
   
6
     
5
     
1
     
83.33
%
                           
(Attendance by
proxy rate of
16.67%)
 
Xu Mengzhou
   
6
     
6
     
0
     
100
%
Liu Jizhen
   
6
     
4
     
2
     
66.66
%
                           
(Attendance by
proxy rate of
33.4%)
 
Xu Haifeng
   
6
     
6
     
0
     
100
%
Zhang Xianzhi
   
6
     
5
     
1
     
83.33
%
                           
(Attendance by
proxy rate of
16.67%)
 
Directors who had resigned
                               
Liu Guoyue
   
4
     
4
     
0
     
100
%
Fan Xiaxia
   
1
     
1
     
0
     
100
%





As stated in the previous Corporate Governance Reports, the Company’s Articles of Association set out in detail the duties and operational procedures of the Board (please refer to the Company’s Articles of Association for details). The Board of the Company holds regular meetings to hear the reports on the Company’s operating results and makes timely decisions. Material decisions on operation shall be discussed and approved by the Board. Ad hoc meetings may be held if necessary. Board meetings include regular meetings and ad hoc meetings. Regular meetings of the Board include: annual meetings, first quarterly meetings, half-yearly meetings and third quarterly meetings.

All arrangements for regular meetings have been notified to all directors at least 14 days prior to the meeting and the Company has ensured that each director thoroughly understood the agenda of the meeting and fully expressed his/her opinions, while all Independent Non-executive Directors expressed their independent directors’ opinions on their respective duties. Minutes have been taken for all the meetings and filed at the Office of the Board.

Moreover, the Independent Non-executive Directors have submitted their independent non-executive director confirmation letters of 2017 according to the requirements of the Listing Rules.

The Directors considered that they have complied with the laws and regulations, and provisions of the Articles of Association, and have actively performed the duties faithfully and diligently. Apart from regular and ad hoc meetings, the Directors obtained information through the Chairman Office and the President Office in a timely manner in order to monitor the objectives and strategies of the management, the Company’s financial position and operating results and signing and performance of material agreements. The Directors reviewed the reports, data etc. of the Company regularly to understand the situation on production operation of the Company. Through on-site investigation, the independent non-executive Directors provided practical resolutions to the Company. All specialized committees under the Board actively carried out works and provided recommendations and policies which formed the basis of accurate policies for the Board.

During the period when the Board was not in session, the Chairman, together with the Vice Chairman, discharged part of the duties of the Board, including (1) to examine and approve the proposals in respect of establishing or cancelling development and construction projects; (2) to examine and approve proposals of the president in relation to the appointment, removal and transfer of managers of various departments of the Company and managers of external branches; (3) to examine and approve plans on the use of significant funds; (4) to examine and approve proposals on the establishment or cancellation of branch companies or branch organs; and (5) to examine and approve other major issues.

The Board has summarized the implementation and execution of work during the reporting period taking into consideration of opinions of the Supervisory Committee and the Senior Management of the Company. The Board is of the opinion that it has effectively fulfilled its duties to safeguard the interests of the Company and its shareholders.

Directors who attended the 2018 first extraordinary general meeting of the Company were Mr. Liu Guoyue (Director and the Chairman of the Strategy Committee), Mr. Wang Yongxiang (Non-executive Director), Mr. Xu Mengzhou (Independent non-executive Director), Mr. Xu Haifeng (Independent non-executive Director) and Mr. Zhang Xianzhi (Independent non-executive Director and Chairman of the Remuneration and Appraisal Committee); Directors who attended the annual general meeting for 2017 of the Company were Mr. Liu Guoyue (Director and the Chairman of the Strategy Committee), Mr. Mi Dabin (Director), Mr. Xu Mengzhou (Independent non-executive Director) and Mr. Zhang Xianzhi (Independent non-executive Director and Chairman of the Remuneration and Appraisal Committee).




(D)
CHAIRMAN AND PRESIDENT
The Company shall have a Chairman and a President who shall perform their duties respectively and separately according to the Articles of Association. During the reporting period, Mr. Cao Peixi acts as Chairman of the Board. Due to work requirements, Mr. Liu Guoyue resigned from the position as the President of the Company. Before the Company appoints the new President and the chairman of the Strategy Committee, Mr. Cao Peixi, the Chairman of the Company, shall take the role of the President and chairman of the Strategy Committee. On 31 July 2018, the Board resolved to appoint Mr. Zhao Keyu as the President of the Company.

The division of duties of the Board and the senior management remained the same as disclosed in the previous Corporate Governance Reports.

(E)
NON-EXECUTIVE DIRECTORS
According to the Articles of Association, the term of office of each member of the Board of the Company shall not exceed three years (inclusive) and the members may be eligible for re-election. However, the term of office of Independent Non-executive Directors shall not exceed six years (inclusive) according to the relevant regulations of the China Securities Regulatory Commission.

The respective terms of office of the Non-executive Directors are as follows:

Name of Non-executive Directors
Term of office
     
Huang Jian
13 June 2017-2020
Wang Yongxiang
13 June 2017-2020
Mi Dabin
13 June 2017-2020
Guo Hongbo
13 June 2017-2020
Cheng Heng
13 June 2017-2020
Lin Chong
13 June 2017-2020


(F)
DIRECTORS’ REMUNERATION
According to the relevant PRC laws and the Articles of Association, the Board has established the Remuneration and Appraisal Committee which operates in accordance with the Detailed Rules on the Work of the Remuneration and Appraisal Committee and is mainly responsible for studying the appraisal standards of the directors and senior management personnel of the Company, conducting appraisals and making proposals; responsible for studying and examining the remuneration policies and proposals of the directors and senior management personnel of the Company. The Remuneration and Appraisal Committee will review and submit annual total wages to the board of directors annually. Each of the Executive Directors has signed a director’s service contract in accordance with the requirement of the Hong Kong Stock Exchange.

Members of the ninth session of the Remuneration and Appraisal Committee are Mr. Zhang Xianzhi, Mr. Guo Hongbo, Mr. Cheng Heng, Mr. Yue Heng, Mr. Liu Jizhen and Mr. Xu Haifeng, which Mr. Yue Heng, Mr. Liu Jizhen, Mr. Xu Haifeng and Mr. Zhang Xianzhi are Independent Non-executive Directors and Mr. Zhang Xianzhi is the chairman of the committee.




The Remuneration and Appraisal Committee under the Board operates in accordance with the Detailed Rules on the Work of the Remuneration and Appraisal Committee. The Remuneration and Appraisal Committee convened the first meeting in 2018 on 12 March 2018, at which the Report of Total Wage Expenses was reviewed and the Company’s arrangement for the total wage in 2018 was approved. The second meeting in 2018 was convened on 28 June 2018 when the adjustment to the remuneration of the independent directors was considered and the proposal to revise the remuneration for independent directors of the Company was passed unanimously. In the second half of 2018, the Remuneration and Appraisal Committee will carry out the work according to the actual situation and the above Detailed Rules at appropriate time.

During the reporting period, the attendance of meetings of the Remuneration and Appraisal Committee of the Company’s Board was as follows:

Name of meeting
 
Date of meeting
 
Members who attended the meeting in person
 
Members who attended the meeting by proxy
             
First meeting of the Remuneration and Appraisal Committee of the Ninth Session of the Board in 2018
 
12 March 2018
 
Zhang Xianzhi,
 Liu Guoyue,
 Guo Hongbo,
 Cheng Heng,
 Yue Heng,
 Liu Jizhen and
 Xu Haifeng
 
             
Second meeting of the Remuneration and Appraisal Committee of the Ninth Session of the Board in 2018
 
28 June 2018
 
Zhang Xianzhi,
 Guo Hongbo,
 Cheng Heng,
 Yue Heng,
 Liu Jizhen and
 Xu Haifeng
 





(G)
NOMINATION OF DIRECTORS
According to the relevant PRC laws and the relevant provisions of the Articles of Association, the Board has established the Nomination Committee. Governed by the Detailed Rules on the Works of the Nomination Committee, the Committee is mainly responsible for studying the selection standards and procedures for candidates for directors and senior management personnel of the Company according to the directors’ qualifications requirements under the Companies Law and Securities Law and the needs of the operational management of the Company, and making proposals thereon to the Board; searching for qualified candidates for directors and suitable persons for senior management personnel on a wide basis; and examining the candidates for directors and suitable persons for senior management personnel and making proposals thereon. Currently, the nomination of the candidates for directors of the Company is mainly made by shareholders. The nominations, after examination of the relevant qualification by the Nomination Committee, will be submitted to the Board of Directors. The President of the Company was appointed by the Board and the candidates for the Vice President and management were nominated by the President. Such nominations, after examination of the relevant qualification by the Nomination Committee, will be submitted to the Board of Directors.

Members of the ninth session of the Nomination Committee are Mr. Liu Jizhen, Mr. Mi Dabin,Mr. Lin Chong, Mr. Yue Heng, Mr. Xu Mengzhou and Mr. Zhang Xianzhi, among whom Mr. Liu Jizhen, Mr. Yue Heng, Mr. Xu Mengzhou and Mr. Zhang Xianzhi are Independent Non-executive Directors and Mr. Liu Jizhen is the chairman of the committee.

The operation of the Remuneration and Appraisal Committee under the Board complied with the Detailed Rules on the Work of the Remuneration and Appraisal Committee. The Remuneration and Appraisal Committee convened the first meeting in 2018 on 29 March 2018, at which the proposal regarding the appointment of the Vice President of the Company was passed and the assessment report regarding the appointment qualification of the candidate(s) for the Vice President of the Company was formulated and resolved to be submitted to the Board for review. The report provided the basis and recommendation for decision by the Board. In the second half of 2018, the Remuneration and Appraisal Committee will carry out the work according to the actual situation and the above Detailed Rules at appropriate time.

During the reporting period, the attendance of meetings of the Remuneration and Appraisal Committee of the Company’s Board was as follows:




Name of meeting
 
Date of meeting
 
Members who attended the meeting in person
 
Members who attended the meeting by proxy
             
First meeting of the Nomination Committee of the Ninth Session of the Board in 2018
 
29 March 2018
 
Liu Jizhen,
 Mi Dabin,
 Lin Chong,
 Yue Heng,
 Xu Mengzhou,
 Zhang Xianzhi
 


(H)
APPOINTMENT OF AUDITORS
As approved at the 2017 annual general meeting, the Company has appointed KPMG Huazhen LLP as the domestic auditors and U.S. 20F annual report auditors of the Company, and KPMG as the Company’s Hong Kong auditors for 2018.

(I)
AUDIT COMMITTEE
According to the requirements of the regulatory authorities of the jurisdictions where the Company is listed and the relevant provisions of the Articles of Association, the Board has established the Audit Committee. Governed by the Detailed Rules on the work of the Audit Committee, the Audit Committee is mainly responsible for assisting the Board in the supervision of:

(1)
the accuracy of the Company’s financial statement;

(2)
the Company’s compliance with laws and regulations;

(3)
the qualification and independence of the Company’s independent auditors;

(4)
the performance of the Company’s independent auditors and internal auditing departments of the Company; and

(5)
the control and management of the related party transactions of the Company.
 
The Company convenes four regular meetings of the Audit Committee of the Board of Directors each year, at least two of which will be conducted with the Company’s external auditors to listen to reports on audit planning, work arrangement and audit works generally. The Board has formulated the Management Rules on Whistler Blowing through telephone or emails, and, pursuant to which the Audit Committee will be responsible for the management.

Members of the Audit Committee comprises of five directors. Members of the Audit Committee of the ninth session are, namely, Mr. Yue Heng, Mr. Xu Mengzhou, Mr. Liu Jizhen, Mr. Xu Haifeng, Mr. Zhang Xianzhi, among whom Mr. Yue Heng is the chairman of the committee.

During the reporting period, the Audit Committee has held three meetings. As per Audit Committee’s duties, the Audit Committee has communicated separately and respectively with the Company’s counsels, external auditors, management and the relevant functional departments of the Company. With the understandings on the applicable laws and regulations of those jurisdictions in which the shares of the Company are listed, the anti-fraud position in the Company, the recruitment of staff, the implementation and execution of internal control mechanisms, the audit work carried out by external auditors and the responsible officers of the audit department, the Audit Committee has rendered their views and suggestions.

During the reporting period, the attendance of meetings of members of the Audit Committee was as follows:




Name of meeting
 
Date of meeting
 
Members who attended the meeting in person
 
Members who attended the meeting by proxy
             
First meeting of the Audit Committee of the Ninth Session of the Board in 2018
 
24 February 2018
 
Yue Heng,
 Xu Mengzhou,
 Liu Jizhen,
 Xu Haifeng,
 Zhang Xianzhi
 
             
Second meeting of the Audit Committee of the Ninth Session of the Board in 2018
 
12 March 2018
 
Yue Heng,
 Xu Mengzhou,
 Xu Haifeng,
 Zhang Xianzhi
 
Liu Jizhen
             
Third meeting of the Audit Committee of the Ninth Session of the Board in 2018
 
23 April 2018
 
Yue Heng,
 Xu Mengzhou,
 Liu Jizhen,
 Xu Haifeng,
 Zhang Xianzhi
 


(J)
RESPONSIBILITY STATEMENT BY THE DIRECTORS IN RELATION TO THE FINANCIAL STATEMENTS
The Directors of the Company confirm that they shall assume the relevant responsibility in relation to the preparation of the financial statements of the Company, ensure that the preparation of the financial statements of the Company complies with the relevant laws and regulations and the applicable accounting standards and also warrant that the financial statements of the Company will be published in a timely manner.

(K)
SHARES HELD BY SENIOR MANAGEMENT
None of the senior management of the Company holds shares of the Company.

(L)
STRATEGY COMMITTEE
For compliance with the relevant requirements of the regulations in the jurisdictions where the shares of the Company are listed as well as the Articles of Association of the Company, the Board has established a Strategy Committee. Governed by the Detailed Rules on the Work of the Strategy Committee, the Strategy Committee is primarily responsible for:

(1)
reviewing and advising on the Company’s long-term strategic development plan;

(2)
reviewing and advising on the major fund raising proposals that need to be approved by the Board;

(3)
reviewing and advising on the major production and operating projects that need to be approved by the Board;

(4)
studying and advising on the matters that would significantly affect the development of the Company;




(5)
examining the implementation of the above-mentioned matters;

(6)
comprehensive risk management of the Company to improve the Company’s overall risk resistance; and

(7)
other matters as requested by the Board of Directors.

The ninth session of the Strategy Committee comprises of four directors, namely, Mr. Huang Jian, Mr. Wang Yongxiang, Mr. Liu Jizhen, Mr. Xu Haifeng, of whom Mr. Liu Jizhen and Mr. Xu Haifeng are Independent Non-executive Directors.

On 25 April 2018, the Strategy Committee considered and approved the Enterprise Comprehensive Risk Management Report of Huaneng Power International, Inc. in 2018, and submitted the report to the Audit Committee of the Board of the Company on 31 July 2018 for review.

The risk management work of the Company has been conducted in an orderly manner, which effectively controlled each risk and successively strengthened and enhanced the Company’s internal controls and risk management system.

During the reporting period, the attendance of meetings of the Strategy Committee was as follows:


Name of meeting
 
Date of meeting
 
Members who attended the meeting in person
 
Members who attended the meeting by proxy
             
First meeting of the Strategy  Committee of the Ninth Session of the  Board in 2018
 
25 April 2018
 
Liu Guoyue,
 Huang Jian,
 Wang Yongxiang,
 Liu Jizhen,
 Xu Haifeng
 


(M)
DIRECTORS’ AND SENIOR MANAGEMENT’S TRAINING
The Company organizes its Directors and Supervisors to attend the trainings provided by regulatory authorities every year. During the reporting period, the directors and supervisors of the Company attended training of directors and supervisors according to regulatory requirements. The secretary to the Board attended the 46th session enhanced professional development seminar for joint members provided by The Hong Kong Institute of Chartered Secretaries.

The Company conducts introduction by lawyers in places where the Company’s shares are listed specifically to all Independent Non-executive Directors of the Audit Committee of the Company twice a year with respect to the updated regulatory laws, the application of relevant systems to the Company and the Company’s performance of the rules and regulations in places where the Company’s shares are listed.

The Company attaches importance to the training and continuing development of senior management. The Company organizes members of senior management to participate the training courses provided by relevant State authorities, industrial managing authorities and industrial associations.




REVIEW BY THE AUDIT COMMITTEE
The interim results of 2018 have been reviewed by the Audit Committee of the Company.

DOCUMENTS FOR INSPECTION
The Company will also file the interim report in Form 6-K with the US Securities and Exchange Commission. Copies of the interim report for 2018 will be available at the following addresses and websites:

LEGAL PROCEEDINGS
As at 30 June 2018, the Company and its subsidiaries were not involved in any material litigation or arbitration and no material litigation or claim of material importance was pending or threatened against or by the Company as far as the Company is aware.


PRC
Huaneng Power International, Inc.
 
Huaneng Building
 
6 Fuxingmennei Street
 
Xicheng District
 
Beijing
 
The People’s Republic of China
   
 
Telephone Number: (8610) 6322 6999
 
Fax Number: (8610) 6322 6888
 
Website: http://www.hpi.com.cn
   
Hong Kong
Wonderful Sky Financial Group Limited
 
9th Floor, Central Plaza,
 
99 Queen’s Road Central,
 
Hong Kong
   
 
Tel: (852) 2851 1038
 
Fax: (852) 2851 1352
   
Websites of the Company
http://www.hpi.com.cn;
 
http://www.hpi-ir.com.hk


 
By Order of the Board
 
Huaneng Power International, Inc.
 
Cao Peixi
 
Chairman




As at the date of this report, the directors of the Company are:

Cao Peixi
(Executive Director)
Yue Heng
(Independent Non-executive Director)
Huang Jian
(Non-executive Director)
Xu Mengzhou
(Independent Non-executive Director)
Wang Yongxiang
(Non-executive Director)
Liu Jizhen
(Independent Non-executive Director)
Mi Dabin
(Non-executive Director)
Xu Haifeng
(Independent Non-executive Director)
Guo Hongbo
(Non-executive Director)
Zhang Xianzhi
(Independent Non-executive Director)
Cheng Heng
(Non-executive Director)
 
Lin Chong
(Non-executive Director)
 


Beijing, the PRC
1 August 2018


Consolidated Interim Statement of Financial Position (Unaudited)
AS AT 30 JUNE 2018
(Amounts expressed in thousands of RMB)

   
 
 
Note
   
As at 30
June 2018
   
As at 31
December 2017
 
               
(Note)
 
ASSETS
                 
                   
Non-current assets
                 
Property, plant and equipment
   
5
     
278,822,750
     
284,328,093
 
Investments in associates and joint ventures
           
19,694,225
     
19,517,623
 
Investment property
           
219,368
     
217,406
 
Available-for-sale financial assets
   
3(a)
 
   
     
1,604,993
 
Other equity instrument investments
   
7
     
2,080,871
     
 
Land use rights
   
6
     
11,212,378
     
11,264,785
 
Power generation licenses
           
3,880,557
     
3,916,246
 
Mining rights
           
1,646,271
     
1,646,271
 
Deferred income tax assets
   
19
     
2,008,369
     
2,300,091
 
Derivative financial assets
   
7
     
92,933
     
75,328
 
Goodwill
   
8
     
15,387,868
     
15,484,120
 
Other non-current assets
   
9
     
7,554,585
     
7,696,845
 
                         
Total non-current assets
           
342,600,175
     
348,051,801
 
                         
Current assets
                       
Inventories
           
8,950,286
     
7,385,411
 
Other receivables and assets
   
10
     
5,717,279
     
6,081,517
 
Accounts receivable
   
11
     
24,878,005
     
25,447,595
 
Derivative financial assets
   
7
     
375,631
     
258,364
 
Bank balances and cash
   
24
     
16,264,513
     
9,364,823
 
                         
Total current assets
           
56,185,714
     
48,537,710
 
                         
Total assets
           
398,785,889
     
396,589,511
 


The notes on pages 44 to 101 are an integral part of this unaudited condensed consolidated interim financial information.



         
As at 30
   
As at 31
 
   
 
Note
   
June 2018
   
December 2017
 
               
(Note)
 
EQUITY AND LIABILITIES
                 
                   
Capital and reserves attributable to equity holders of the Company
                 
Share capital
         
15,200,383
     
15,200,383
 
Perpetual corporate bonds
         
4,999,950
     
5,068,550
 
Capital surplus
         
24,435,402
     
24,114,400
 
Surplus reserves
         
8,140,030
     
8,140,030
 
Currency translation differences
         
(868,868
)
   
(675,054
)
Retained earnings
         
35,877,891
     
35,793,257
 
                       
           
87,784,788
     
87,641,566
 
                       
Non-controlling interests
         
20,969,294
     
19,973,038
 
                       
Total equity
         
108,754,082
     
107,614,604
 
                       
Non-current liabilities
                     
Long-term loans
   
13
     
118,558,847
     
107,030,958
 
Long-term bonds
   
14
     
20,486,433
     
15,993,833
 
Deferred income tax liabilities
   
19
     
4,288,212
     
4,566,680
 
Derivative financial liabilities
   
7
     
58,773
     
148,486
 
Other non-current liabilities
   
15
     
5,363,068
     
5,284,462
 
                         
Total non-current liabilities
           
148,755,333
     
133,024,419
 
                         
Current liabilities
                       
Accounts payable and other liabilities
   
16
     
35,526,103
     
38,900,132
 
Contract liabilities
   
3(c
)
   
593,675
     
 
Taxes payable
           
1,070,653
     
1,302,210
 
Dividends payable
           
1,948,404
     
1,735,426
 
Derivative financial liabilities
   
7
     
15,194
     
62,178
 
Short-term bonds
   
17
     
20,631,759
     
11,068,357
 
Short-term loans
   
18
     
59,525,772
     
80,251,348
 
Current portion of long-term loans
   
13
     
21,660,142
     
18,098,458
 
Current portion of long-term bonds
   
14
     
     
3,997,033
 
Current portion of other non-current liabilities
   
15
     
304,772
     
535,346
 
                         
Total current liabilities
           
141,276,474
     
155,950,488
 
                         
Total liabilities
           
290,031,807
     
288,974,907
 
                         
Total equity and liabilities
           
398,785,889
     
396,589,511
 

Note:
The Company and its subsidiaries have initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative information is not restated. See note 3.
 
The notes on pages 44 to 101 are an integral part of this unaudited condensed consolidated interim financial information.


Consolidated Interim Statement of Comprehensive Income (Unaudited)
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(Amounts expressed in thousands of RMB, except per share data)

         
For the six months ended 30 June
 
   
 
Note
   
2018
   
2017
 
               
(Note i)
 
Operating revenue
   
4
     
82,404,919
     
71,433,689
 
Tax and levies on operations
           
(876,085
)
   
(648,556
)
                         
Operating expenses
                       
Fuel
           
(51,599,895
)
   
(44,001,200
)
Maintenance
           
(1,721,161
)
   
(1,715,061
)
Depreciation
           
(10,123,301
)
   
(10,146,899
)
Labor
           
(4,499,789
)
   
(4,314,259
)
Service fees on transmission and transformer
facilities of HIPDC
           
(48,360
)
   
(48,360
)
Purchase of electricity
           
(2,197,348
)
   
(1,807,341
)
Others
           
(3,627,746
)
   
(3,684,999
)
                         
Total operating expenses
           
(73,817,600
)
   
(65,718,119
)
                         
Profit from operations
           
7,711,234
     
5,067,014
 
                         
Interest income
           
107,974
     
95,234
 
                         
Financial expenses, net
                       
Interest expense
           
(5,138,907
)
   
(4,662,641
)
Exchange (loss)/gain and bank charges, net
           
(68,294
)
   
50,667
 
                         
Total financial expenses, net
           
(5,207,201
)
   
(4,611,974
)
                         
Share of profits less losses of associates and joint ventures
           
385,030
     
156,070
 
Loss on fair value changes of financial assets/liabilities
           
(1,488
)
   
(6,374
)
Other investment income
           
11,010
     
120,066
 
                         
Profit before income tax expense
   
21
     
3,006,559
     
820,036
 
                         
Income tax expense
   
22
     
(744,586
)
   
(478,875
)
                         
Net profit
           
2,261,973
     
341,161
 

The notes on pages 44 to 101 are an integral part of this unaudited condensed consolidated interim financial information.


      
For the six months ended 30 June
 
 
 Note 
 
2018
   
2017
 
           
(Note i)
 
Other comprehensive (loss)/income, net of tax
             
               
Items that will not be reclassified to profit or loss:
             
Fair value changes of other equity instrument investments
     
(538
)
   
 
Share of other comprehensive loss of investees accounted for under the equity method
     
(46,047
)
   
 
                   
Items that may be reclassified subsequently to profit or loss:
                 
Fair value changes of available-for-sale financial asset (Note ii)
     
     
293,611
 
Share of other comprehensive loss of investees accounted for under the equity method
     
(147,194
)
   
(3,574
)
Effective portion of cash flow hedges
     
225,362
     
(248,452
)
Translation differences of the financial statements of foreign operations
     
(213,473
)
   
282,485
 
                   
                   
Other comprehensive (loss)/income, net of tax
     
(181,890
)
   
324,070
 
                   
                   
Total comprehensive income
     
2,080,083
     
665,231
 
                   
                   
Net profit attributable to:
                 
– Equity holders of the Company
     
1,731,372
     
243,944
 
– Non-controlling interests
     
530,601
     
97,217
 
                   
                   
       
2,261,973
     
341,161
 
                   
                   
Total comprehensive income attributable to:
                 
– Equity holders of the Company
     
1,569,157
     
572,696
 
– Non-controlling interests
     
510,926
     
92,535
 
                   
                   
       
2,080,083
     
665,231
 
                   
Earnings per share attributable to the ordinary shareholders of the Company
                 
(expressed in RMB per share)
                 
– Basic and diluted
23
   
0.11
     
0.02
 
                   

Note:

(i)
The Company and its subsidiaries have initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative information is not restated. See note 3.

(ii)
This amount arose under the accounting policies applicable prior to 1 January 2018. As part of the opening balance adjustments as at 1 January 2018 the balance of this reserve has been reclassified to fair value reserve (non-recycling) and will not be reclassified to profit or loss in any future periods. See note 3(b).

The notes on pages 44 to 101 are an integral part of this unaudited condensed consolidated interim financial information.

Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(Amounts expressed in thousands of RMB)


   
Attributable to equity holders of the Company
             
         
Capital surplus
                                     
   
Share Capital
   
Share premium
   
Hedging reserve
   
Available- for-sale financial assets evaluation reserve
   
Other capital reserve
   
Subtotal
   
Surplus reserves
   
Currency translation differences
   
Retained earnings
   
Total
   
Non- controlling interests
   
Total equity
 
Balance as at 1 January 2017
   
15,200,383
     
22,226,889
     
(24,084
)
   
1,445,912
     
1,111,614
     
24,760,331
     
8,140,030
     
(787,881
)
   
38,690,132
     
86,002,995
     
16,183,742
     
102,186,737
 
                                                                                                 
Profit for the six months ended 30 June 2017
   
     
     
     
     
     
     
     
     
243,944
     
243,944
     
97,217
     
341,161
 
Other comprehensive income/(loss):
                                                                                               
Fair value changes of available-for-sale financial assets, net of tax
   
     
     
     
293,666
     
     
293,666
     
     
     
     
293,666
     
(55
)
   
293,611
 
Share of other comprehensive income of investees accounted for under the equity method, net of tax
   
     
     
     
(3,574
)
   
     
(3,574
)
   
     
     
     
(3,574
)
   
     
(3,574
)
Effective portion of cash flow hedges, net of tax
   
     
     
(248,452
)
   
     
     
(248,452
)
   
     
     
     
(248,452
)
   
     
(248,452
)
Currency translation differences
   
     
     
     
     
     
     
     
287,112
     
     
287,112
     
(4,627
)
   
282,485
 
                                                                                                 
Total comprehensive (loss)/income for the six months ended 30 June 2017
   
     
     
(248,452
)
   
290,092
     
     
41,640
     
     
287,112
     
243,944
     
572,696
     
92,535
     
665,231
 
                                                                                                 
Dividends relating to 2016
   
     
     
     
     
     
     
     
     
(4,408,111
)
   
(4,408,111
)
   
(636,237
)
   
(5,044,348
)
Capital injections from non-controlling interests of subsidiaries
   
     
     
     
     
     
     
     
     
     
     
370,288
     
370,288
 
Business combination
   
     
     
     
     
     
     
     
     
     
     
6,292,577
     
6,292,577
 
                                                                                                 
Balance as at 30 June 2017 (Note)
   
15,200,383
     
22,226,889
     
(272,536
)
   
1,736,004
     
1,111,614
     
24,801,971
     
8,140,030
     
(500,769
)
   
34,525,965
     
82,167,580
     
22,302,905
     
104,470,485
 


Note:
The Company and its subsidiaries have initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative information is not restated. See note 3.

The notes on pages 44 to 101 are an integral part of this unaudited condensed consolidated interim financial information.




   
Attributable to equity holders of the Company
             
               
Capital surplus
                                     
   
Share capital
   
Perpetual corporate bonds
   
Share premium
   
Hedging reserve
   
Fair value Reserve (non-recycling)
   
Other reserve in other comprehensive income
   
Other capital reserve
   
Subtotal
   
Surplus reserve
   
Currency translation differences
   
Retained earnings
   
Total
   
Non- controlling interests
   
Total equity
 
Balance as at 31 December 2017
   
15,200,383
     
5,068,550
     
22,250,503
     
38,769
     
     
713,514
     
1,111,614
     
24,114,400
     
8,140,030
     
(675,054
)
   
35,793,257
     
87,641,566
     
19,973,038
     
107,614,604
 
                                                                                                                 
Impact on initial application of IFRS 9 (Note 3(b))
   
     
     
     
     
944,603
     
(574,657
)
   
     
369,946
     
     
     
     
369,946
     
     
369,946
 
                                                                                                                 
Adjusted balance as at 1 January 2018
   
15,200,383
     
5,068,550
     
22,250,503
     
38,769
     
944,603
     
138,857
     
1,111,614
     
24,484,346
     
8,140,030
     
(675,054
)
   
35,793,257
     
88,011,512
     
19,973,038
     
107,984,550
 
                                                                                                                 
Profit for the six months ended 30 June 2018
   
     
126,700
     
     
     
     
     
     
     
     
     
1,604,672
     
1,731,372
     
530,601
     
2,261,973
 
Other comprehensive (loss)/income:
                                                                                                               
 Fair value changes of other equity  instrument investments, net of tax
   
     
     
     
     
(522
)
   
     
     
(522
)
   
     
     
     
(522
)
   
(16
)
   
(538
)
 Share of other comprehensive income of investees  accounted for under the equity method, net of tax
   
     
     
     
     
(46,047
)
   
(147,194
)
   
     
(193,241
)
   
     
     
     
(193,241
)
   
     
(193,241
)
 Effective portion of cash flow hedges, net of tax
   
     
     
     
225,362
     
     
     
     
225,362
     
     
     
     
225,362
     
     
225,362
 
 Currency translation differences
   
     
     
     
     
     
     
     
     
     
(193,814
)
   
     
(193,814
)
   
(19,659
)
   
(213,473
)
                                                                                                                 
Total comprehensive income/(loss) for the six months ended 30 June 2018
   
     
126,700
     
     
225,362
     
(46,569
)
   
(147,194
)
   
     
31,599
     
     
(193,814
)
   
1,604,672
     
1,569,157
     
510,926
     
2,080,083
 
                                                                                                                 
Cumulative distribution of perpetual corporate bonds (Note 12)
   
     
(195,300
)
   
     
     
     
     
     
     
     
     
     
(195,300
)
   
     
(195,300
)
Dividends relating to 2017 (Note 12)
   
     
     
     
     
     
     
     
     
     
     
(1,520,038
)
   
(1,520,038
)
   
(115,439
)
   
(1,635,477
)
Capital injections from non-controlling interests of subsidiaries
   
     
     
     
     
     
     
     
     
     
     
     
     
600,769
     
600,769
 
Share of other capital reserve change of investees accounted for under the equity method
   
     
     
     
     
     
     
(80,543
)
   
(80,543
)
   
     
     
     
(80,543
)
   
     
(80,543
)
                                                                                                                 
Balance as at 30 June 2018
   
15,200,383
     
4,999,950
     
22,250,503
     
264,131
     
898,034
     
(8,337
)
   
1,031,071
     
24,435,402
     
8,140,030
     
(868,868
)
   
35,877,891
     
87,784,788
     
20,969,294
     
108,754,082
 


The notes on pages 44 to 101 are an integral part of this unaudited condensed consolidated interim financial information.



Condensed Consolidated Interim Statement of
Cash Flows (Unaudited)
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(Amounts expressed in thousands of RMB)

      
For the six months ended 30 June
 
 
Note   
2018
   
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES
             
               
Cash generated from operations
     
20,314,698
     
18,954,210
 
Tax paid
     
(5,199,168
)
   
(4,652,195
)
                   
Net cash provided by operating activities
     
15,115,530
     
14,302,015
 
                   
CASH FLOWS FROM INVESTING ACTIVITIES
                 
                   
Payment for the purchase of property, plant and equipment and other non-current non-financial assets
     
(6,879,513
)
   
(10,482,941
)
Cash consideration paid for acquisition of subsidiaries, net of cash acquired
     
     
(10,817,107
)
Other cash flows arising from investing activities
     
775,390
     
1,030,663
 
                   
Net cash used in investing activities
     
(6,104,123
)
   
(20,269,385
)
                   
CASH FLOWS FROM FINANCING ACTIVITIES
                 
                   
Issuance of bonds
     
30,999,985
     
15,988,679
 
Proceeds from loans
     
62,076,368
     
77,214,819
 
Repayments of bonds and loans
     
(88,619,645
)
   
(74,200,417
)
Interest paid
     
(5,138,661
)
   
(4,777,300
)
Dividends paid to shareholders of the Company
     
(1,085,658
)
   
(3,045,000
)
Other cash flow arising from financing activities
     
(326,902
)
   
(911,996
)
                   
Net cash (used in)/provided by financing activities
     
(2,094,513
)
   
10,268,785
 
                   
Effect of exchange rate fluctuations on cash held
     
(9,873
)
   
22,665
 
                   
Net increase in cash and cash equivalents
     
6,907,021
     
4,324,080
 
                   
Cash and cash equivalents as at beginning of the period
     
9,282,390
     
7,810,501
 
                   
Cash and cash equivalents as at end of the period
24
   
16,189,411
     
12,134,581
 

The notes on pages 44 to 101 are an integral part of this unaudited condensed consolidated interim financial information.

Notes to the Unaudited Condensed Consolidated
Interim Financial Information
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(Amounts expressed in thousands of RMB unless otherwise stated)
1.
COMPANY ORGANIZATION AND PRINCIPAL ACTIVITIES
Huaneng Power International, Inc. (the “Company” or “HPI”) was incorporated in the People’s Republic of China (the “PRC”) as a Sino-foreign joint stock limited company on 30 June 1994. The registered address of the Company is Huaneng Building, 6 Fuxingmennei Street, Xicheng District, Beijing, the PRC. The Company and its subsidiaries are principally engaged in the generation and sale of electric power to the respective regional or provincial grid companies in the PRC and in the Republic of Singapore (“Singapore”). The Company conducts its business in Singapore through SinoSing Power Pte. Ltd. (“SinoSing Power”) and its subsidiaries.

The directors consider Huaneng International Power Development Corporation (“HIPDC”) and China Huaneng Group Co., Ltd. (“Huaneng Group”) as the parent company and ultimate parent company of the Company, respectively. Both HIPDC and Huaneng Group are incorporated in the PRC. HIPDC does not produce financial statements available for public use.

2.
BASIS OF PREPARATION
This unaudited condensed consolidated interim financial information (“interim financial information”) for the six months ended 30 June 2018 have been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including compliance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. This interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (the “IASB”). This interim financial information was approved for issue on 31 July 2018.

The interim financial information has been prepared in accordance with the same accounting policies adopted in the 2017 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2018 annual financial statements. Details of any changes in accounting policies are set out in note 3.

The preparation of an interim financial information in conformity with IAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

This interim financial information contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Company and its subsidiaries since the 2017 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for a full set of financial statements prepared in accordance with IFRSs.




2.
BASIS OF PREPARATION (Continued)
The financial information relating to the financial year ended 31 December 2017 that is included in the interim financial information as comparative information does not constitute the Company’s annual consolidated financial statements for that financial year but is derived from those financial statements. The annual consolidated financial statements for the year ended 31 December 2017 are available from the Company’s registered office. The auditor has expressed an unqualified opinion on those financial statements in their report date 13 March 2018.

As at and for the six months ended 30 June 2018, a portion of the Company and its subsidiaries’ funding requirements for capital expenditures were partially satisfied by short-term financing. Consequently, as at 30 June 2018, the Company and its subsidiaries have net current liabilities of approximately Renminbi Yuan (“RMB”) 85.091 billion. Taking into consideration of the expected operating cash flows of the Company and its subsidiaries and the undrawn available banking facilities of approximately RMB241.19 billion as at 30 June 2018, the Company and its subsidiaries are expected to refinance certain of its short term loans and bonds and also consider alternative sources of financing, where applicable and when needed. Therefore, the directors of the Company are of the opinion that the Company and its subsidiaries will be able to meet its liabilities as and when they fall due within the next twelve months and accordingly, the interim financial information are prepared on a going concern basis.

3.
PRINCIPAL ACCOUNTING POLICIES
(a)
Overview
The Company and its subsidiaries have adopted the following relevant new standards and amendments to standards that are first effective for the current accounting period. A number of other new standards are effective from 1 January 2018 but they do not have a material effect on the Company and its subsidiaries’ financial statements.

IFRS 9, “Financial instrument”.

IFRS 15, “Revenue from contracts with customers”.

IFRIC 22, “Foreign currency transactions and advance consideration”.

The Company and its subsidiaries have not applied any new standard or interpretation that is not yet effective for current accounting period.

Details of the changes in accounting policies are discussed in note 3(b) for IFRS 9 and 3(c) for IFRS 15.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(a)
Overview (Continued)
Under the transition methods chosen, the Company and its subsidiaries recognise cumulative effect of the initial application of IFRS 9 and IFRS 15 as an adjustment to the opening balance of equity at 1 January 2018. Comparative information is not restated. The following table gives a summary of the opening balance adjustments recognised for each line item in the consolidated interim statement of financial position that has been impacted by IFRS 9 and/or IFRS 15:
 
   
As at 31 December 2017
   
Impact on Initial application of IFRS9 Reclassification
   
Impact on Initial application of IFRS9 Remeasurement
   
Impact on Initial application of IFRS15
   
As at 1 January 2018
 
         
(Note 3(b))
   
(Note 3(b))
   
(Note 3(c))
       
Available-for-sale financial assets
   
1,604,993
     
(1,604,993
)
   
     
     
 
Other equity instrument investments
   
     
1,604,993
     
476,595
     
     
2,081,588
 
Total non-current assets
   
348,051,801
     
     
476,595
     
     
348,528,396
 
                                         
Total assets
   
396,589,511
     
     
476,595
     
     
397,066,106
 
                                         
Capital surplus
   
24,114,400
     
     
369,946
     
     
24,484,346
 
Total equity
   
107,614,604
     
     
369,946
     
     
107,984,550
 
                                         
Deferred income tax liabilities
   
4,566,680
     
     
106,649
     
     
4,673,329
 
Total non-current liabilities
   
133,024,419
     
     
106,649
     
     
133,131,068
 
                                         
Accounts payable and other liabilities
   
38,900,132
     
     
     
(1,504,926
)
   
37,395,206
 
Contract liabilities
   
     
     
     
1,504,926
     
1,504,926
 
Total current liabilities
   
155,950,488
     
     
     
     
155,950,488
 
                                         
Total liabilities
   
288,974,907
     
     
106,649
     
     
289,081,556
 
                                         
Total equity and liabilities
   
396,589,511
     
     
476,595
     
     
397,066,106
 
 
 
Further details of these changes are set out in sub-sections (b) and (c) of this note.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments
IFRS 9 replaces IAS 39, Financial instruments: recognition and measurement. It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items.

The Company and its subsidiaries have applied IFRS 9 retrospectively to items that existed at 1 January 2018 in accordance with the transition requirements. The Company and its subsidiaries have recognised the cumulative effect of initial application as an adjustment to the opening equity at 1 January 2018. Therefore, comparative information continues to be reported under IAS 39.

The following table summarises the impact of transition to IFRS 9 on reserves at 1 January 2018.
 
Other reserve in other comprehensive income
     
Transferred to fair value reserve (non-recycling) relating to equity instrument investments now measured at fair value through other comprehensive income
   
(574,657
)
         
Fair value reserve (non-recycling)
       
Transferred from other reserve in other comprehensive income relating to equity instrument investments now measured at fair value through other comprehensive income and increase in fair value reserve (non-recycling) at 1 January 2018
   
944,603
 

 
Further details of the nature and effect of the changes to previous accounting policies and the transition approach are set out below:




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(i)
Classification of financial assets and financial liabilities
IFRS 9 categories financial assets into three principal classification categories: measured at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value through profit or loss (FVPL). These supersede IAS 39’s categories of held-to-maturity investments, loans and receivables, available-for-sale financial assets and financial assets measured at FVPL. The classification of financial assets under IFRS 9 is based on the business model under which the financial asset is managed and its contractual cash flow characteristics.

Non-equity investments held by the Company and its subsidiaries are classified into one of the following measurement categories:

amortised cost, if the investment is held for the collection of contractual cash flows which represent solely payments of principal and interest. Interest income from the investment is calculated using the effective interest method;

FVOCI – recycling, if the contractual cash flows of the investment comprise solely payments of principal and interest and the investment is held within a business model whose objective is achieved by both the collection of contractual cash flows and sale. Changes in fair value are recognised in other comprehensive income, except for the recognition in profit or loss of expected credit losses, interest income (calculated using the effective interest method) and foreign exchange gains and losses. When the investment is derecognised, the amount accumulated in other comprehensive income is recycled from equity to profit or loss; or

FVPL, if the investment does not meet the criteria for being measured at amortised cost or FVOCI (recycling). Changes in the fair value of the investment (including interest) are recognised in profit or loss.

An investment in equity securities is classified as FVPL unless the equity investment is not held for trading purposes and on initial recognition of the investment the Company and its subsidiaries make an irrevocable election to designate the investment at FVOCI (non-recycling) such that subsequent changes in fair value are recognised in other comprehensive income. Such elections are made on an instrument-by-instrument basis, but may only be made if the investment meets the definition of equity from the issuer’s perspective. Where such an election is made, the amount accumulated in other comprehensive income remains in the fair value reserve (non-recycling) until the investment is disposed of. At the time of disposal, the amount accumulated in the fair value reserve (non-recycling) is transferred to retained earnings. It is not recycled through profit or loss. Dividends from an investment in equity securities, irrespective of whether classified as at FVPL or FVOCI (non-recycling), are recognised in profit or loss as other investment income.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(i)
Classification of financial assets and financial liabilities (Continued)
With respect to the financial assets classified as “available-for-sale” under IAS 39, the Company and its subsidiaries elected to designate these investments as FVOCI (non-recycling) on 1 January 2018 and have recognised fair value changes in respect of these investments in other comprehensive income as an adjustment to the opening balance of the Company and its subsidiaries’ equity, and reclassed the available-for-sale financial assets to other equity instrument investments as at 1 January 2018. Please refer to sub-section (a) of this note for the original carrying amount determined in accordance with IAS 39, the new carrying amount determined in accordance with IFRS 9, the adjustment amounts of reclassification and remeasurement.

With respect to the financial assets classified as “loans and receivables” (which were measured at amortised cost) and “financial assets measured at FVPL” under IAS 39, the Company and its subsidiaries have assessed the business model under which the financial assets are managed and its contractual cash flow characteristics, and these financial assets will continue with their respective classification and measurements upon the adoption of IFRS 9, and the carrying amounts of these financial assets as at 1 January 2018 have not been impacted by the initial application of IFRS 9.

The measurement categories for all financial liabilities of the Company and its subsidiaries remain the same, except for financial guarantee contracts.

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

After initial recognition at fair value, an issuer of such a contract shall subsequently measure it at the higher of: (i) the amount of the loss allowance determined in accordance with Note 3(b)(ii) and (ii) the amount initially recognised less, when appropriate, the cumulative amount of income recognised.

The carrying amounts for all financial liabilities of the Company and its subsidiaries as at 1 January 2018 have not been significantly impacted by the initial application of IFRS 9.

The Company and its subsidiaries did not designate or de-designate any financial asset or financial liability at FVPL as at 1 January 2018.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(ii)
Credit losses
IFRS 9 replaces the “incurred loss” model in IAS 39 with the “expected credit loss” (“ECL”) model. The ECL model requires an ongoing measurement of credit risk associated with a financial asset and therefore recognises ECLs earlier than under the “incurred loss” accounting model in IAS 39.

The Company and its subsidiaries applies the new ECL model to the following items:

financial assets measured at amortised cost;

contract assets as defined in IFRS 15 (note 3(c));

debt securities measured at FVOCI (recycling);

lease receivables; and

financial guarantee contracts issued (note 3(b)(i)).

Financial assets measured at fair value, including debt securities or equity instrument investments measured at FVPL, other equity instrument investments designated at FVOCI (non-recycling) and derivative financial assets, are not subject to the ECL assessment.

Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Company and its subsidiaries in accordance with the contract and the cash flows that the Company and its subsidiaries expect to receive).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company and its subsidiaries are exposed to credit risk.

In measuring ECLs, the Company and its subsidiaries take into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(ii)
Credit losses (Continued)
ECLs are measured on either of the following bases:

12-month ECLs: these are losses that are expected to result from possible default events within the 12 months after the reporting date; and

lifetime ECLs: these are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies.

Loss allowances for accounts receivable, lease receivables and contract assets are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Company and its subsidiaries’ historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date.

For all other financial instruments, the Company and its subsidiaries recognise a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition or the financial instrument is not determined to have low credit risk at the reporting date, in which cases the loss allowance is measured at an amount equal to lifetime ECLs.

Low credit risk
If the financial instrument has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations, the credit risk on a financial instrument is considered low.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(ii)
Credit losses (Continued)
Significant increases in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Company and its subsidiaries compare the risk of default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. The Company and its subsidiaries consider both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

failure to make payments of principal or interest on their contractually due dates;

an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available);

an actual or expected significant deterioration in the operating results of the debtor; and

existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Company and its subsidiaries.

Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.

The Company and its subsidiaries assume that the credit risk on a financial asset has increased significantly if it is more than 30 days past due, unless the Company and its subsidiaries have reasonable and supportable information that is available without undue cost or effort, that demonstrates that the credit risk has not increased significantly since initial recognition even though the contractual payments are more 30 days past due.

The Company and its subsidiaries consider a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company and its subsidiaries in full, without recourse by the Company and its subsidiaries to actions such as realising security (if any is held).




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(ii)
Credit losses (Continued)
ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Company and its subsidiaries recognise an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt securities that are measured at FVOCI (recycling), for which the loss allowance is recognised in other comprehensive income and accumulated in the fair value reserve (recycling).

Basis of calculation of interest income on credit-impaired financial assets
Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset.

At each reporting date, the Company and its subsidiaries assess whether a financial asset is credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable events:

significant financial difficulties of the debtor;

a breach of contract, such as a default or delinquency in interest or principal payments;

it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation;

significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; or

the disappearance of an active market for a security because of financial difficulties of the issuer.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(ii)
Credit losses (Continued)
Write-off policy
The gross carrying amount of a financial asset, lease receivable or contract asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company and its subsidiaries determine that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs.

Opening balance adjustment
The Company and its subsidiaries assessed the ECLs of financial assets measured at amortised cost and lease receivables as at 1 January 2018. There was not significant change to the loss allowance for these financial assets of the Company and its subsidiaries as at 1 January 2018.

(iii)
Hedge accounting
The Company and its subsidiaries have elected to adopt the new general hedge accounting model in IFRS 9. Depending on the complexity of the hedge, this new accounting model allows a more qualitative approach to assessing hedge effectiveness compared to IAS 39 to be applied, and the assessment is always forward-looking. The adoption of IFRS 9 has not had a significant impact on the Company and its subsidiaries’ financial statements in this regard.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(b)
IFRS 9, Financial instruments (Continued)
(iv)
Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below:

Information relating to comparative periods has not been restated. Differences in the carrying amounts of financial assets resulting from the adoption of IFRS 9 are recognised in reserves as at 1 January 2018. Accordingly, the information presented for 2017 continues to be reported under IAS 39 and thus may not be comparable with the current period.

The following assessments have been made on the basis of the facts and circumstances that existed as at 1 January 2018:

the determination of the business model within which a financial asset is held; and

the designation of investments in equity instruments not held for trading to be classified as at FVOCI (non-recycling).

If, at the date of initial application, the assessment of whether there has been a significant increase in credit risk since initial recognition would have involved undue cost or effort, a lifetime ECL has been recognised for that financial instrument.

All hedging relationships designated under IAS 39 as at 31 December 2017 met the criteria for hedge accounting under IFRS 9 as at 1 January 2018 and are therefore regarded as continuing hedging relationships. Changes to hedge accounting policies have been applied prospectively.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(c)
IFRS 15, Revenue from contracts with customers
IFRS 15 establishes a comprehensive framework for recognising revenue and some costs from contracts with customers. IFRS 15 replaces IAS 18, Revenue, which covered revenue arising from sale of goods and rendering of services, and IAS 11, Construction contracts, which specified the accounting for construction contracts.

The Company and its subsidiaries have elected to use the cumulative effect transition method and have recognised the cumulative effect of initial application as an adjustment to the opening balance of equity as at 1 January 2018. Therefore, comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. As allowed by IFRS 15, the Company and its subsidiaries have applied the new requirements only to contracts that were not completed before 1 January 2018, referred to as open contracts.

Since more than 95% of the Company and its subsidiaries’ revenue comprised of contracts with customers from rate-regulated sales of electricity and heat, where revenue continue to be recognised upon transmission to the customers. The adoption of IFRS 15 did not have a material impact on the consolidated financial statements except for presentation.

Further details of the nature and effect of the changes on previous accounting policies are set out below:




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(c)
IFRS 15, Revenue from contracts with customers (Continued)
(i)
Timing of revenue recognition
Previously, revenue from sale of goods was generally recognised at a point in time when the risks and rewards of ownership of the goods had passed to the customers, whereas revenue arising from construction contracts and provision of services was recognised over time.

Under IFRS 15, revenue is recognised when the customer obtains control of the promised good or service in the contract. This may be at a single point in time or over time. IFRS 15 identifies the following three situations in which control of the promised good or service is regarded as being transferred over time:

When the customer simultaneously receives and consumes the benefits provided by the entity’s performance, as the entity performs;

When the entity’s performance creates or enhances an asset (for example work in progress) that the customer controls as the asset is created or enhanced;

When the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

If the contract terms and the entity’s activities do not fall into any of these 3 situations, then under IFRS 15 the entity recognises revenue for the sale of that good or service at a single point in time, being when control has passed. Transfer of risks and rewards of ownership is only one of the indicators that is considered in determining when the transfer of control occurs.

Since more than 95% of the Company and its subsidiaries’ revenue comprised of contracts with customers from rate-regulated sales of electricity and heat, where revenue continue to be recognised upon transmission to the customers. The adoption of IFRS 15 did not have a significant impact on timing of revenue recognition.




3.
PRINCIPAL ACCOUNTING POLICIES (Continued)
(c)
IFRS 15, Revenue from contracts with customers (Continued)
(ii)
Presentation of contract assets and liabilities
Under IFRS 15, accounts receivable is recognised only if the Company and its subsidiaries have an unconditional right to consideration. If the Company and its subsidiaries recognise the related revenue before being unconditionally entitled to the consideration, then the entitlement to consideration is classified as a contract asset. Similarly, a contract liability, rather than a payable, is recognised when a customer pays consideration, or is contractually required to pay consideration and the amount is already due, before the Company and its subsidiaries recognise the related revenue. For a single contract with the customer, either a net contract asset or a net contract liability is presented. For multiple contracts, contract assets and contract liabilities of unrelated contracts are not presented on a net basis.

Previously, contract balances relating to “amounts received in advance” and “other deferred income” were presented in the statement of financial position under “accounts payable and other liabilities” and “other non-current liabilities”, respectively.

To reflect these changes in presentation, the Company and its subsidiaries have made the following adjustments as at 1 January 2018, as a result of the adoption of IFRS 15:

“Accounts payable and other liabilities – amounts received in advance” amounting to RMB1,505 million as at 1 January 2018 is now presented as “contract liabilities”.

“Other non-current liabilities – other deferred income” amounting to RMB1,750 million as at 1 January 2018 is now presented as “Other non-current liabilities – contract liabilities”.

(d)
IFRIC 22, Foreign currency transactions and advance consideration
This interpretation provides guidance on determining “the date of the transaction” for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) arising from a transaction in which an entity receives or pays advance consideration in a foreign currency.

The Interpretation clarifies that “the date of the transaction” is the date on initial recognition of the non-monetary asset or liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance of recognising the related item, the date of the transaction for each payment or receipt should be determined in this way. The adoption of IFRIC 22 does not have any material impact on the financial position and the financial result of the Company and its subsidiaries.



4.
REVENUE AND SEGMENT INFORMATION
(a)
Disaggregation of revenue
In the following table, revenue is disaggregated by major products and/or service lines of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Company and its subsidiaries’ reportable segments (Note 4(b)).
 
   
PRC power segment
   
Singapore segment
   
All other segments
   
Inter- segment revenue
   
Total
 
For the six months ended 30 June 2018
                             
                               
– Sales of power and heat
   
75,481,830
     
5,302,547
     
     
     
80,784,377
 
– Sales of coal and raw material
   
523,659
     
     
     
     
523,659
 
– Port service
   
     
     
227,303
     
(162,768
)
   
64,535
 
– Transportation service
   
     
     
106,316
     
(82,318
)
   
23,998
 
– Others
   
902,819
     
100,774
     
24,975
     
(20,218
)
   
1,008,350
 
                                         
Total
   
76,908,308
     
5,403,321
     
358,594
     
(265,304
)
   
82,404,919
 


   
PRC power segment
   
Singapore segment
   
All other segments
   
Inter- segment revenue
   
Total
 
For the six months ended 30 June 2017
                             
                               
– Sales of power and heat
   
65,237,710
     
4,842,072
     
     
     
70,079,782
 
– Sales of coal and raw material
   
545,091
     
     
     
     
545,091
 
– Port service
   
     
     
219,437
     
(108,948
)
   
110,489
 
– Transportation service
   
     
     
94,823
     
(52,373
)
   
42,450
 
– Others
   
601,977
     
51,086
     
19,022
     
(16,208
)
   
655,877
 
                                         
Total
   
66,384,778
     
4,893,158
     
333,282
     
(177,529
)
   
71,433,689
 
 

The revenue from sales of power and heat and sales of coal and raw materials is recognised at a point in time upon the transfer of products, whereas the revenue from port service and transportation service is recognised over time during the provision of service.




4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information
Directors and certain senior management of the Company perform the function as the chief operating decision maker (collectively referred to as the “senior management”). The senior management reviews the internal reporting of the Company and its subsidiaries in order to assess performance and allocate resources. The Company has determined the operating segments based on these reports. The reportable segments of the Company are the PRC power segment, Singapore segment and all other segments (mainly including port and transportation operations). No operating segments have been aggregated to form a reportable segment.

Senior management assesses the performance of the operating segments based on a measure of profit before income tax expense under China Accounting Standard for Business Enterprises (“PRC GAAP”) excluding dividend income received from other equity instrument investments and operating results of the centrally managed and resource allocation functions of headquarters(“Segment results”). Other information provided, except as noted below, to the senior management of the Company is measured under PRC GAAP.

Segment assets exclude prepaid income tax, deferred income tax assets, other equity instrument investments and assets related to the centrally managed and resource allocation functions of headquarters that are not attributable to any operating segment (“corporate assets”). Segment liabilities exclude current income tax liabilities, deferred income tax liabilities and liabilities related to the centrally managed and resource allocation functions of headquarters that are not attributable to any operating segment (“corporate liabilities”). These are part of the reconciliation to total assets and liabilities of statement of financial position.




4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
(Under PRC GAAP)
   
PRC power segment
   
Singapore segment
   
All other segments
   
Total
 
For the six months ended 30 June 2018
                       
                         
Total revenue
   
76,908,308
     
5,403,321
     
358,594
     
82,670,223
 
Inter-segment revenue
   
     
     
(265,304
)
   
(265,304
)
                                 
Revenue from external customers
   
76,908,308
     
5,403,321
     
93,290
     
82,404,919
 
                                 
Segment results
   
3,785,293
     
(194,692
)
   
170,866
     
3,761,467
 
                                 
Interest income
   
72,253
     
34,393
     
1,328
     
107,974
 
Interest expense
   
(4,815,582
)
   
(221,712
)
   
(52,259
)
   
(5,089,553
)
Impairment loss
   
(16
)
   
257
     
     
241
 
Credit loss
   
2,378
     
(4,155
)
   
     
(1,777
)
Depreciation and amortization
   
(9,279,472
)
   
(380,701
)
   
(71,090
)
   
(9,731,263
)
Net gain/(loss) on disposal of non-current assets
   
3,806
     
(481
)
   
(7
)
   
3,318
 
Share of profits less losses of associates and joint ventures
   
189,222
     
     
104,434
     
293,656
 
Income tax expense
   
(906,463
)
   
29,854
     
(11,245
)
   
(887,854
)
                                 
For the six months ended 30 June 2017
                               
                                 
Total revenue
   
66,384,778
     
4,893,158
     
333,282
     
71,611,218
 
Inter-segment revenue
   
     
     
(177,529
)
   
(177,529
)
                                 
Revenue from external customers
   
66,384,778
     
4,893,158
     
155,753
     
71,433,689
 
                                 
Segment results
   
2,057,236
     
(295,187
)
   
(54,403
)
   
1,707,646
 
                                 
Interest income
   
59,217
     
35,281
     
736
     
95,234
 
Interest expense
   
(4,296,671
)
   
(226,908
)
   
(77,495
)
   
(4,601,074
)
Impairment loss
   
5
     
(900
)
   
     
(895
)
Depreciation and amortization
   
(8,990,464
)
   
(458,019
)
   
(103,217
)
   
(9,551,700
)
Net (loss)/gain on disposal of non-current assets
   
(117
)
   
148
     
     
31
 
Share of profits less losses of associates and joint ventures
   
132,941
     
     
(22,588
)
   
110,353
 
Income tax expense
   
(742,136
)
   
50,576
     
(3,241
)
   
(694,801
)
 
 




4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
(Under PRC GAAP)
   
PRC power segment
   
Singapore segment
   
All other segments
   
Total
 
30 June 2018
                       
                         
Segment assets
   
337,170,808
     
27,288,007
     
10,296,474
     
374,755,289
 
                                 
Including:
                               
Additions to non-current assets (excluding financial assets and deferred income tax assets)
   
5,334,552
     
40,012
     
369,189
     
5,743,753
 
Investments in associates
   
12,442,987
     
     
3,254,482
     
15,697,469
 
Investments in joint ventures
   
1,429,210
     
     
1,070,824
     
2,500,034
 
Segment liabilities
   
(266,916,633
)
   
(13,535,252
)
   
(2,774,615
)
   
(283,226,500
)
                                 
31 December 2017
                               
                                 
Segment assets
   
334,379,104
     
27,817,680
     
9,978,885
     
372,175,669
 
                                 
Including:
                               
Additions to non-current assets (excluding financial assets and deferred income tax assets)
   
24,447,658
     
260,240
     
328,061
     
25,035,959
 
Investments in associates
   
12,577,836
     
     
2,919,860
     
15,497,696
 
Investments in joint ventures
   
1,457,247
     
     
1,025,534
     
2,482,781
 
Segment liabilities
   
(264,115,887
)
   
(14,000,442
)
   
(3,026,229
)
   
(281,142,558
)
 
 



4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
A reconciliation of segment results to profit before income tax expense is provided as follows:
 
   
For the six months ended 30 June
 
   
2018
   
2017
 
Segment results (PRC GAAP)
   
3,761,467
     
1,707,646
 
Reconciling items:
               
Loss related to the headquarters
   
(181,508
)
   
(152,363
)
Investment income from China Huaneng Finance Co., Ltd. (“Huaneng Finance”)
   
92,653
     
62,436
 
Dividend income of available-for-sale financial assets
   
     
114,241
 
Dividend income of other equity instrument investments
   
612
     
 
Impact of IFRS adjustments*
   
(666,665
)
   
(911,924
)
                 
Profit before income tax expense per unaudited consolidated interim statement of comprehensive income
   
3,006,559
     
820,036
 

 


4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information
Reportable segments’ assets are reconciled to total assets as follows:
 
   
As at 30
   
As at 31
 
   
June 2018
   
December 2017
 
Total segment assets (PRC GAAP)
   
374,755,289
     
372,175,669
 
Reconciling items:
               
Investment in Huaneng Finance
   
1,304,704
     
1,336,777
 
Deferred income tax assets
   
2,810,112
     
2,980,303
 
Prepaid income tax
   
280,409
     
150,838
 
Available-for-sale financial assets
   
     
1,654,993
 
Other equity instrument investments
   
2,080,871
     
 
Corporate assets
   
351,562
     
395,148
 
Impact of IFRS adjustments*
   
17,202,942
     
17,895,783
 
                 
Total assets per unaudited consolidated interim statement of financial position
   
398,785,889
     
396,589,511
 
 
Reportable segments’ liabilities are reconciled to total liabilities as follows:
 
   
As at 30
   
As at 31
 
   
June 2018
   
December 2017
 
Total segment liabilities (PRC GAAP)
   
(283,226,500
)
   
(281,142,558
)
Reconciling items:
               
Current income tax liabilities
   
(279,181
)
   
(430,703
)
Deferred income tax liabilities
   
(1,270,283
)
   
(1,283,950
)
Corporate liabilities
   
(2,981,608
)
   
(3,632,847
)
Impact of IFRS adjustments*
   
(2,274,235
)
   
(2,484,849
)
                 
Total liabilities per unaudited consolidated interim statement of financial position
   
(290,031,807
)
   
(288,974,907
)
 



4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
Other material items:
 
   
Reportable Segment total
   
Headquarters
   
Investment income from Huaneng Finance
   
Impact of IFRS adjustments*
   
Total
 
For the six months ended 30 June 2018
                             
                               
Total revenue
   
82,404,919
     
     
     
     
82,404,919
 
Interest expense
   
(5,089,553
)
   
(49,354
)
   
     
     
(5,138,907
)
Depreciation and amortization
   
(9,731,263
)
   
(14,604
)
   
     
(604,215
)
   
(10,350,082
)
Impairment loss
   
241
     
     
     
     
241
 
Credit loss
   
(1,777
)
   
     
     
     
(1,777
)
Share of profits less losses of associates and joint ventures
   
293,656
     
     
92,653
     
(1,279
)
   
385,030
 
Net gain on disposal of non-current assets
   
3,318
     
11
     
     
(139
)
   
3,190
 
Income tax expense
   
(887,854
)
   
     
     
143,268
     
(744,586
)
                                         
For the six months ended 30 June 2017
                                       
                                         
Total revenue
   
71,433,689
     
     
     
     
71,433,689
 
Interest expense
   
(4,601,074
)
   
(61,567
)
   
     
     
(4,662,641
)
Depreciation and amortization
   
(9,551,700
)
   
(21,183
)
   
     
(806,660
)
   
(10,379,543
)
Impairment loss
   
(895
)
   
     
     
     
(895
)
Share of profits less losses of associates and joint ventures
   
110,353
     
     
62,436
     
(16,719
)
   
156,070
 
Net gain/(loss) on disposal of non-current assets
   
31
     
(4
)
   
     
(18
)
   
9
 
Income tax expense
   
(694,801
)
   
     
     
215,926
     
(478,875
)
 
*
The GAAP adjustments above primarily represented the classification adjustments and other adjustments. Other than the classification adjustments, the differences will be gradually eliminated following subsequent depreciation and amortization of related assets or the extinguishment of liabilities.




4.
REVENUE AND SEGMENT INFORMATION (Continued)
(b)
Segment information (Continued)
Geographical information (Under IFRS):

(i)
External revenue generated from the following countries:
   
For the six months ended 30 June
 
   
2018
   
2017
 
PRC
   
77,001,598
     
66,540,531
 
Singapore