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 April, 2004
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
----- -----
(Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes No X
----- -----
(If "Yes" is marked, indicate below the file number assigned to registrant in
connection with Rule 12g3-2(b): 82-__________. )
N/A
Huaneng Power International, Inc.
West Wing, Building C, Tianyin Mansion
No. 2C Fuxingmennan Street
Xicheng District
Beijing, 100031 PRC
This Form 6-K consists of:
An announcement on the major and connected transaction, made on April
16, 2004, in English by Huaneng Power International Inc.
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
content of this announcement.
[GRAPHIC OMITTED]
HUANENG POWER INTERNATIONAL, INC.
(a Sino-foreign joint stock limited company incorporated in the People's
Republic of China)
(Stock Code: 902)
MAJOR AND CONNECTED TRANSACTION
o On 16th April, 2004, the Company entered into the Agreement for
Transfer of Huaneng Group Interest with Huaneng Group, pursuant to
which the Company agreed to acquire from Huaneng Group its 40% equity
interest in Hanfeng Power Plant and 90% equity interest in
Jinggangshan Power Plant. The purchase price for acquiring the
Huaneng Group Interest is RMB1,949 million. Half of the purchase
price will be funded by the Company's cash-on-hand and half by bank
loans. The purchase price was determined on arm's length terms.
o On the same day, the Company also entered into the Agreement for
Transfer of HIPDC Interest with HIPDC, pursuant to which the Company
agreed to acquire from HIPDC its equity interest in the following
plants: 55% equity interest in Yueyang Power Plant, 60% equity
interest in Luohuang Power Plant and the entire assets and
liabilities of Yingkou Power Plant. The purchase price for acquiring
HIPDC Interest is RMB2,564 million. Half of the purchase price will
be funded by the Company's cash-on-hand and half by bank loans. Such
purchase price was determined on arm's length terms.
o HIPDC is the controlling shareholder of the Company and Huaneng Group
holds 51.98% interest in HIPDC. Therefore, both of HIPDC and Huaneng
Group are connected persons to the Company. The transactions as
contemplated by the Acquisition constitute connected transactions to
the Company.
o Taking the above two transactions as a whole, the transactions as
contemplated by the Acquisition also constitute a major transaction
to the Company.
o The Company will convene an EGM for the purposes of seeking the
approvals of Independent Shareholders for the Acquisition (including
the Transfer Agreements), subject to certain conditions as set out in
this announcement and the circular to be despatched in respect of the
Acquisition. According to the Hong Kong Listing Rules, Huaneng Group,
HIPDC and their respective Associates will abstain from voting in
respect of the resolution relating to the Acquisition.
o The Company and the Independent Directors have reviewed the
Acquisition. The Company has appointed JP Morgan as the financial
adviser in connection with the Acquisition. The Company has also
appointed Rothschild as the independent financial adviser to make
recommendation to the Company's independent board committee and
shareholders as to whether the terms of the Acquisition are fair and
reasonable and whether the Acquisition is in the interests of the
Company and its shareholders as a whole and to advise the Company's
shareholders on how to vote. The Company expects that the notice of
the EGM and the Circular giving further information on the
Acquisition and containing the advice of Rothschild, and the
recommendation from the Independent Directors are expected to be
despatched to shareholders within 21 days from the date of this
announcement.
o Trading of the Company's H Shares on the Stock Exchange was suspended
at 9:30 a.m. on 16th April, 2004 pending publication of this
announcement. Application has been made to the Stock Exchange to
resume trading of the Company's H Shares with effect from 9:30 a.m.
on 19th April, 2004.
Background
The Company and its subsidiaries develop, construct, operate and manage
large-scale coal-fired power plants throughout China. The Company is one of
the largest independent power producers in China which owns a total generation
capacity of 15,736 MW on an equity basis.
Huaneng Group is principally engaged in operation and management of industrial
investment; development, investment, construction, operation and management of
power sources; organising the generation and sale of power (thermal);
development, investment, construction, production and sale of products in
relation to information, transportation, new energy and environmental
protection industries. HIPDC, as a subsidiary of Huaneng Group, is principally
engaged in construction and operation of the power plants and the related
projects, including raising domestic and foreign funds, import of full set and
auxiliary equipment and machinery and providing the industrial materials and
fuels for the construction and operation of power plants.
The relationship between the Company, Huaneng Group and HIPDC is as follows:
|---------------------|
| Huaneng Group |
|---------------------|
| 51.98%
|---------------------|
| HIPDC |
|---------------------|
| 42.39%
|---------------------|
| the Company |
|---------------------|
Huaneng Group is an indirect controlling shareholder of the Company, holding a
51.98% interest in HIPDC. As of the Latest Practicable Date, HIPDC held 42.39%
of the total issued share capital of the Company. The transactions as
contemplated by the Transfer Agreements constitute major and connected
transactions to the Company, which are subject to Independent Shareholders'
approval pursuant to Rule 14.44 and Rule 14A.18 respectively of the Hong Kong
Listing Rules.
TRANSFER AGREEMENTS
(1) Agreement for Transfer of Huaneng Group Interest
The Agreement for Transfer of Huaneng Group Interest was approved by the
Directors at the board meeting on 16th April, 2004 and signed by Huaneng Group
and the Company on that day.
Date: 16th April, 2004
Parties: Seller: Huaneng Group
Purchaser: the Company
(i) equity interest representing 40% of the
registered capital of Hanfeng Power
Huaneng Group Interest to be Plant; and
acquired:
(ii) equity interest representing 90% of the
registered capital of Jinggangshan Power
Plant.
Consideration: The consideration for the purchase of Huaneng
Group Interest is RMB1,949 million payable in
cash on the Closing date. The purchase price
was determined with reference to, inter alia,
the asset appraisal report prepared by
Zhongchenghua and on the basis of normal
commercial terms and arm's length negotiation
between the parties thereto, and the agreement
was entered into in the ordinary and usual
course of business of the Company.
Conditions: Closing is subject to the satisfaction or waiver of the
following conditions:
(1) Conditions which need to be satisfied or waived by both
parties:
o Rothschild, the independent financial advisor to the
Independent Directors and the Company's shareholders,
has advised the Independent Directors that the terms and
conditions of the transaction contemplated by the
Agreement for Transfer of Huaneng Group Interest are
fair and reasonable so far as the Independent
Shareholders are concerned;
o the Independent Directors recommended that the
shareholders vote in favour of the transfer of Huaneng
Group Interest and the Agreement for Transfer of Huaneng
Group Interest;
o the transfer of Huaneng Group Interest and the Agreement
for Transfer of Huaneng Group Interest have been
approved and adopted by the the Independent
Shareholders;
o the relevant PRC government agencies have no objection
to the transfer of the Huaneng Group Interest;
o the Company has obtained all necessary government
approvals on the Agreement for Transfer of Huaneng Group
Interest and the transfer of Huaneng Group Interest; and
o the simultaneous closing or closing of the Agreement for
Transfer of HIPDC Interest.
(2) Conditions which the Company may waive under the Agreement
for Transfer of Huaneng Group Interest:
o representations and warranties of Huaneng Group in the
Agreement for Transfer of Huaneng Group Interest are
true and complete in all material respects; and
o Huaneng Group has fulfilled in all material respects its
obligations under the Agreement for Transfer of Huaneng
Group Interest.
(3) Conditions which Huaneng Group may waive under the Agreement
for Transfer of Huaneng Group Interest:
o representations and warranties of the Company in the
Agreement for Transfer of Huaneng Group Interest are
true and complete in all material respects; and
o the Company has fulfilled in all material respects its
obligations under the Agreement for Transfer of Huaneng
Group Interest.
In the case that any conditions for closing are waived,
further announcement will be made by the Company
accordingly.
Completion: Closing shall take place on the day agreed upon by both parties,
within 30 days after the conditions have been satisfied or
waived.
(2) Agreement for Transfer of HIPDC Interest
The Agreement for Transfer of HIPDC Interest was approved by the Directors at
the board meeting on 16th April, 2004 and signed by HIPDC and the Company on
that day.
Date: 16th April, 2004
Parties: Seller: HIPDC
Purchaser: the Company
(i) equity interest representing 55% of the
registered capital of Yueyang Power Plant;
HIPDC Interest to be acquired:
(ii) equity interest representing 60% of the
registered capital of Luohuang Power Plant; and
(iii) the entire assets and liabilities in Yingkou
Power Plant.
Consideration: The consideration for the purchase of HIPDC Interest
is RMB2,564 million payable in cash on the Closing
date.
In view of the fact of that the accounts receivable
balances of Yueyang Power Plant and Luohuang Power
Plant consist of a significant amount of overdue
receivables (i.e. over 30 days) for power sold (as at
31 December 2003, such amount were RMB140.41 million
for Yueyang Power Plant and RMB398.09 million for
Luohuang Power Plant) and taking into account the
uncertainity on the collectibility of such overdue
receivable balances in full, HIPDC and the Company
have agreed the following arrangements as the basis
for adjustment of the acquisition price: The net
overdue receivable balances will be fixed by taking
into account the provisions for the bad debts in the
accounts of the power plants. In case of the
occurance of the events as stipulated by the transfer
agreement which cause the net overdue receivable
balances not being collected in full, HIPDC is
required to pay the difference to the Company in
proportion to its shareholding interests in Yueyang
Power Plant and Luohuang Power Plant respectively.
If, by 31st December 2006, the net overdue receivable
balances cannot be collected in full, and if HIPDC
has not made any payment to the Company in this
regard, HIPDC should pay the difference to the
Company in proportion to its shareholding interests
in Yueyang Power Plant and Luohuang Power Plant
respectively. If the net overdue receivable balances
have been collected in full or if payment has been
made by HIPDC, the amount received over the book
balance should be reimbursed to HIPDC based on the
shareholding interests of HIPDC in proportion to its
shareholding in Yueyang Power Plant and Luohuang
Power Plant respectively.
The purchase price was determined with reference to,
inter alia, the asset appraisal report prepared by
Zhongchenghua and on the basis of normal commercial
terms and arm's length negotiation between the
parties thereto, and the agreement was entered into
in the ordinary and usual course of business of the
Company.
Conditions: Closing is subject to the satisfaction or waiver of
the following conditions:
(1) Conditions which need to be satisfied or waived by both
parties:
o Rothschild, the independent financial advisor to the
Independent Directors and the Company's shareholders,
has advised the Independent Directors that the terms and
conditions of the transactions contemplated by the
Agreement for Transfer of HIPDC Interest are fair and
reasonable so far as the Independent Shareholders are
concerned;
o the Independent Directors recommended that the
shareholders vote in favour of the transfer of HIPDC
Interest and the Agreement for Transfer of HIPDC
Interest;
o the transfer of HIPDC Interest and the Agreement for
Transfer of HIPDC Interest have been approved and
adopted by the Independent Shareholders;
o the relevant PRC government agencies have no objection
to the transfer of HIPDC Interest;
o the Company has obtained all necessary government
approvals on the Agreement for Transfer of HIPDC
Interest and the transfer of HIPDC Interest; and
o the simultaneous closing or closing of the Agreement for
Transfer of Huaneng Group Interest.
(2) Conditions which the Company may waive under the Agreement
for Transfer of HIPDC Interest:
o representations and warranties of HIPDC in the Agreement
for Transfer of HIPDC Interest are true and complete in
all material respects; and
o HIPDC has fulfilled in all material respects its
obligations under the Agreement for Transfer of HIPDC
Interest.
(3) Conditions which HIPDC may waive under the Agreement for
Transfer of HIPDC Interest:
o representations and warranties of the Company in the
Agreement for Transfer of HIPDC Interest are true and
complete in all material respects; and
o the Company has fulfilled in all material respects its
obligations under the Agreement for Transfer of HIPDC
Interest.
In the case that any conditions for closing are wavied, further
announcement will be made by the Company accordingly.
Completion: Closing shall take place on the day agreed upon by both parties,
within 30 days after the conditions have been satisfied or
waived.
REASONS FOR THE ACQUISITION AND PRICING FACTORS
The Acquisition follows the Company's business and development strategy of
placing equal emphasis on acquisition of existing power plants and development
of new power plants, and is an important strategic move under the backdrop of
deepening power reforms in China. With favourable market conditions of strong
power demand, which is brought about by the rapid and stable economic
development of the PRC, the Company believes that to enlarge its operational
scale by way of acquisition of power assets, thus increasing its market
shares, is conducive to enhancing the competitiveness of the Company and
increasing shareholders' return.
After the completion of the Acquisition, the generation capacity on an equity
basis of the Company will increase by 3,036 MW while the total generation
capacity on an equity basis will increase from 15,736 MW to 18,772 MW,
representing an increase of 19.3%. Upon the completion of the Acquisition and
the acquisition of the 10% interest in Jinggangshan Power Plant from Jiangxi
Province Investment Corporation, the generation capacity on an equity basis of
the Company will increase 3,096 MW while the total generation capacity will
increase from 15,736 MW to 18,832 MW, representing an increase of 19.7%. The
Company will gain 1,050 MW of additional capacity under construction (on an
equity basis).
Further, the Acquisition helps the Company to strengthen its leading position
in Liaoning Province and Hebei Province, which are with rapid economic growth
and strong power demand. The Company's generation capacity on an equity basis
in Liaoning will increase from 2,100 MW to 2,740 MW, representing an increase
of 30.5%. In Hebei Province, by completion of the Acquisition, the Company's
generation capacity on an equity basis will increase from 1,300 MW to 1,828
MW, representing an increase of 40.6%.
The Acquisition also enables the Company for the first time to enter into the
central-south region of China and the provinces with rapid growth in power
demand, namely Jiangxi Province, Hunan Province and Chongqing municipality.
This is consistent with the Company's marketing strategy of "consolidating its
position in coastal regions and exploring the market in Central China".
The Company understands that the State is considering to introduce a pilot
scheme on tariffs reform in the northeast region. However the detail of the
pilot scheme is still under the formulation process. The Company therefore is
unable to ascertain the impact on the operating results of Yingkou Power
Plant, which is located in the northeast region of China, of the
implementation of the proposed tariff reform scheme. As such, the Company has
not taken account of such factor in the evaluation and consideration of the
impact of the Acquisition on the Company's future financial position and
operating results.
The Acquisition price has been determined through arm's length negotiations
between the parties and their respective financial advisors, taking into
account various factors, including the market environments, the technical and
operating conditions of the Power Plants, the Power Plants' earnings
potentials and their abilities to generate cash flow. The Company has also
considered the appraisal report provided by Zhongchenghua which values the
Huaneng Group Interest at RMB1.507 billion and HIPDC Interest at RMB2.721
billion as of 31st December, 2003 using the replacement cost approach. The
total purchase price implies a blended 8.8 times of 2003 earnings of
attributed interest of the five Target Power Plants and a blended 5.7 times
firm value/2003 EBITDA (the firm value includes the account payable of RMB1.26
billion of Yingkou Power Plant which is treated as debt). According to
International Financial Reporting Standards, the total net profit of the
Target Power Plants in 2003 was approximately RMB1.009 billion, of which
RMB516 million would be attributable to the acquired interests (not including
the profit contributed by the acquisition of the 10% interest in Jinggangshan
Power Plant held by Jiangxi Province Investment Corporation). If the
Acquisition had taken place on 1st January, 2003 and half of the acquisition
price had been paid by the Company's cash-on-hand and half by bank loans, the
pro-forma net income of the Company in 2003 would have increased by RMB225
million, or 4.2%. The Company believes that with the growth of the power
markets in which the Target Power Plants operate and through further
strengthening management, the Acquisition will bring satisfactory returns to
the Company.
The board of Directors believes that the Acquisition price and terms are fair
and reasonable to the Company and its shareholders. This transaction is
consistent with the Company's long-term business strategy and will benefit the
Company and its shareholders.
INFORMATION REGARDING THE TARGET POWER PLANTS
Hanfeng Power Plant
Hanfeng Power Plant is situated in Handan Municipality of Hebei Province.
According to the information available on the State Statistics Bureau's
website (http://www.stats.gov.cn) and China State Grid Corporation's website
(http://www.sgcc.com.cn), Hebei Province is situated in the northern part of
Huabei Plateau and extends over Inner Mongolia Highland, and is adjacent to
the capital Beijing and Tianjin which is an important commercial port in the
northern region. Hebei Province is endowed with rich energy resources with an
accumulated proven coal reserve amounting to 16.72 billion tonnes. Two large
coalmines, Kailuan and Feng Feng, and Huabei Oilfield are situated within
Hebei Province. The area of Hebei Province is 187,700 square kilometres. At
the end of 2003, the population was approximately 67,690,000. In 2003, the
gross domestic product of the province amounted to RMB709.5 billion,
representing an increase of 11.6% over the previous year (the average annual
growth rate of the whole nation is 9.1%) and is the highest growth rate since
1998. Hebei power grids are divided into the northern part (mainly supplying
the Jingjintang region) and the southern part (mainly supplying six
administrative regions including Shijiazhuang, Handan, Xingtai, Baoding,
Hengshui and Cangzhou, with a total population of 43,660,000). At the end of
2003, the generation capacity of Hebei South Grid amounted to approximately
10,150 MW. In 2003, the power consumption of Hebei South Grid was
approximately 60.8 billion kWh, representing an increase of 8.0% when compared
with the same period in 2002.
The planned generation capacity of Hanfeng Power Plant is 2,400MW. The
construction work of the 2 x 660 MW imported coal-fired generating units in
its first phase commenced in June 1997 and the commercial operation of these
two generating units started in March and September 2001 respectively. The
estimated depreciation period of Hanfeng Power Plant's generating units is
approximately 20 years. Currently, the generating units operate properly. In
2003, the annual power generation of two generating units was 8.04 billion kWh
with a house consumption rate of 5.91%. Power tariffs are determined according
to the rate prescribed by the relevant pricing bureau.
Upon Closing, the Company will guarantee the loans owed by the power plant, to
an extent which is proportional to the Company's interest in the power plant,
upon normal commercial terms. The bank loans to be guaranteed by the Company
as at 31st March 2004 were RMB1,484.3 million.
Upon Closing, the Company will hold 40% interest in Hanfeng Power Plant . The
other shareholders of Hanfeng Power Plant are Hebei Province Construction and
Investment Corporation, Siemens Power Development Hanfeng Limited Liability
Company and Hamburg Power Investment Hanfeng Limited Liability Company, which
are holding 20%, 24% and 16% interest, respectively.
The following table sets out certain operating data of Hanfeng Power Plant for
2003:
Generation capacity (MW) 1,320
Power generation (billion kWh) 8.040
Utilisation hours (hours) 6,091
Availability factor (%) 90.53
House consumption rate (%) 5.91
Average on-grid power rate (RMB/MWh, VAT included) 345.70
Coal consumption rate for power sold (grams/kWh) 327.14
Unit fuel cost for power sold (RMB/MWh) 76.56
Jinggangshan Power Plant
Jinggangshan Power Plant is situated in Jian Municipality of Jiangxi Province.
According to the information available on the State Statistics Bureau's
website (http://www.stats.gov.cn) and China State Grid Corporation's website
(http://www.sgcc.com.cn), Jiangxi Province is situated in the southeast part
of China, along the southern part of the middle and lower reaches of
Changjiang. The area of the province is 166,900 square kilometres. At the end
of 2002, the population was approximately 42,220,000. In 2002, the gross
domestic product of the province amounted to RMB245 billion, representing an
increase of 10.5% over the previous year (the average growth rate of the whole
nation in 2002 is 8.0%), which is the fastest growth rate since 1998 (Note:
The aforementioned website does not contain the relevant figures of 2003 for
Jiangxi Province). Jiangxi Province forms an important part of the power grids
of the four provinces in Central China (Jiangxi, Henan, Hubei and Hunan) with
its power consumption load growing at a high speed during the recent years. At
the end of 2003, the generation capacity of Jiangxi Province amounted to
approximately 6,087 MW. In 2003, the power consumption of Jiangxi Province was
approximately 29.843 billion kWh, representing an increase of 21.0% when
compared with the same period in 2002.
The planned generation capacity of Jinggangshan Power Plant is 1,200MW. The
main construction work of the 2 x 300 MW domestic made coal-fired generating
units in its first phase commenced in November 1998 and the commercial
operation of these two generating units started in December 2000 and August
2001 respectively. The estimated depreciation period of Jinggangshan's
generating units is approximately 14 years. Currently, the generating units
operate properly. In 2003, the annual power generation of two generating units
was 3.194 billion kWh with a house consumption rate of 5.65%. Power tariffs
are determined according to the rate prescribed by the relevant pricing
bureau.
Upon Closing, the Company will hold a 90% interest in Jinggangshan Power
Plant. The other shareholder is Jiangxi Province Investment Corporation. On
16th April 2004, the Company has entered into a transfer agreement with
Jiangxi Province Investment Corporation, pursuant to which Jiangxi Province
Investment Corporation agreed to transfer its 10% interest in Jinggangshan
Power Plant to the Company at RMB62 million, where the price was determined
consistent with the pricing principle of the Acquisition. Upon the closing of
the Acquisition, together with the completion of the acquisition of such 10%
interest, Jinggangshan Power Plant will be wholly owned by the Company. The
Company will guarantee the bank loans owned by the power plant. As at 31st
March 2004, the outstanding guarantee amount was RMB1,245.25 million.
The following table sets out certain operating data of Jinggangshan Power
Plant for 2003:
Generation capacity (MW) 600
Power generation (billion kWh) 3.194
Utilisation hours (hours) 5,324
Availability factor (%) 88.79
House consumption rate (%) 5.65
Average on-grid power rate (RMB/MWh, VAT included) 318.89
Coal consumption rate for power sold (grams/kWh) 348.21
Unit fuel cost for power sold (RMB/MWh) 128.74
Yueyang Power Plant
Yueyang Power Plant is situated in Yueyang Municipality of Hunan Province.
According to the information available on the State Statistics Bureau's
website (http://www.stats.gov.cn) and China State Grid Corporation's website
(http://www.sgcc.com.cn), Hunan Province is situated in the southern part of
Dongtinghu along the middle and lower reaches of Changjiang. It is situated in
the southeast hinterland linking the coastal provinces in the east and the
inland provinces in the west. Hunan Province is a province with a relatively
high coal production output in the southern part of China, with proven coal
reserves amounting to 3.4 billion tonnes, and its coal reserves occupy the top
position amongst the nine provinces (regions) in Jiangnan. The area of the
province is 211,800 square kilometres. At the end of 2003, the population was
approximately 66,630,000. In 2003, the gross domestic product of the province
amounted to RMB463.4 billion, representing an increase of 9.6% over the
previous year (the average growth rate of the whole nation is 9.1%), which is
the fastest growth rate since 1998. At the end of 2003, the installed capacity
of Hunan Province amounted to approximately 12,940 MW, and the ratio between
hydropower and thermal power capacity was 50: 50. Among the power source
construction in progress in Hunan province, thermal power is a beneficial
supplement to hydroelectric power. Particularly during the dry season, thermal
power becomes a supporting power source for stable power supply. In 2003, the
power consumption of Hunan Province was approximately 54.774 billion kWh,
representing an increase of 14.7% when compared with the same period in 2002.
The first phase of Yueyang Power Plant consists of two 362.5 MW sub-critical
coal-fired generating units. Their construction work began in August 1988 and
the commercial operation of these two generating units commenced in September
and December 1991 respectively. The estimated depreciation period of Yueyang
Power Plant's generating units is approximately 13 years. Currently, the
generating units operate properly. In 2003, the annual power generation of two
generating units was 4.411 billion kWh with a house consumption rate of 8.15%.
Power tariffs are determined according to the rate prescribed by the relevant
pricing bureau.
The preparation work for the commencement of the construction work of Yueyang
Power Plant's second phase, which consists of 2 x 300 MW coal-fired generating
units, has been commenced in April 2003.
Upon Closing, the Company will hold a 55% interest in Yueyang Power Plant. The
remaining 45% interest is held by Hunan Province Local Power Asset Management
Limited Company.
The following table sets out certain operating data of Yueyang Power Plant for
2003:
Generation capacity (MW) 725
Power generation (billion kWh) 4.411
Utilisation hours (hours) 6,085
Availability factor (%) 92.86
House consumption rate (%) 8.15
Average on-grid power rate (RMB/MWh, VAT included) 301.86
Coal consumption rate for power sold (grams/kWh) 341.13
Unit fuel cost for power sold (RMB/MWh) 112.87
Luohuang Power Plant
Luohuang Power Plant is situated in Chongqing Municipality. According to the
information available on the State Statistics Bureau's website
(http://www.stats.gov.cn) and the China State Grid Corporation's website
(http://www.sgcc.com.cn), Chongqing Municipality is an economic centre at the
upper reaches of Changjiang, and is the largest multi-functional modern
industrial and commercial city in the western part of China. Dominant natural
resources products are coal and natural gas etc. Proven coal reserves amount
to 3.3 billion tonnes and proven natural gas reserves amount to 320 billion
cubic metres. It is an important production base for coal and natural gas in
the southern part of China. The area of the city is 82,400 square kilometres.
At the end of 2003, the population was approximately 31,300,000. In 2003, the
gross domestic product of the city amounted to RMB225 billion, representing an
increase of 11.4% over the previous year (the average growth rate of the whole
nation is 9.1%), which is the fastest growth rate since the establishment of
the municipality directly under the Central Government. Chongqing municipality
is one of the load centres of the power grids in the western part of China
with high outputs of coal and natural gas and high protection levels for
energy supply. At the end of 2003, the installed capacity of Chongqing
Municipality amounted to approximately 4,356 MW. In 2003, the power
consumption of Chongqing Municipality was approximately 27.034 billion kWh,
representing an increase of 9.0% when compared with the same period in 2002.
Luohuang Power Plants consists of two operating plants, namely Jiangjin
Luohuang Power Plant and Jiangbei Combined-cycle Power Plant. Each of the
first and second phases of Jiangjin Luohuang Power Plant consists of 2 x 360
MW coal-fired generating units. The construction works of those two phases
commenced in September 1988 and December 1996 respectively. The two generating
units in its first phase commenced operation in September 1991 and February
1992 respectively while the two generating units in the second phase were put
into commercial operation in December 1998. The construction work of the 108
MW Combined-cycle generating unit of Jiangbei Combined-cycle Power Plant
started in 1988 with commercial operation beginning from 1991. The estimated
depreciation period of Luohuang's generating units is approximately 13 years.
Currently, the generation units operate properly. In 2003, the annual power
generation of the generating units of Jiangjin Luohuang Power Plant was 7.351
billion kWh with a house consumption rate of 10.40% (the house consumption
rate of Jiangjin Luohuang Power Plant was relatively high mainly because it is
an environmentally friendly thermal power plant with installation of the first
desulphurization system in China, which results in an increase of about 3% in
the house consumption rate) while the annual output of the power generation of
Jiangbei Combined-cycle Power Plant was 0.147 billion kWh with a house
consumption rate of 7.69%. Power tariffs are determined according to the rate
prescribed by the relevant pricing bureau.
Jiangjin Power Plant is planning to undergo its third phase expansion work,
which will consist of 2 X 600 MW domestically built sub-critical coal-fired
generating units with simultaneous installation of desulphurization system.
The project proposal has been approved by the State Development and Reform
Committee and the State Council. Currently, the power plant is preparing the
feasibility report.
Upon Closing, the Company will hold a 60% interest in Luohuang Power Plant.
The remaining 40% interest is held by Chongqing Municipal Construction and
Investment Corporation.
The following table sets out certain operating data of Luohuang Power Plant
for 2003:
Jiangbei
Jiangjin Luohuang Combined-cycle
Power Plant Power Plant
Generation capacity (MW) 1,440 108
Power generation (billion kWh) 7.351 0.147
Utilisation hours (hours) 5,105 1,358
Availability factor (%) 88.54 94.68
House consumption rate (%) 10.40 7.69
Average on-grid power rate (RMB/MWh, VAT included) 281.24 282.90
Coal consumption rate for power sold (grams/kWh) 340.90 --
Unit fuel cost for power sold (RMB/ MWh) 72.82 207.84
Yingkou Power Plant
Yingkou Power Plant is an enterprise directly under HIPDC and is not a legal
person.
Yingkou Power Plant is situated in Yingkou Municipality of Liaoning Province.
According to the information available on the State Statistics Bureau's
website (http://www.stats.gov.cn) and China State Grid Corporation's website
(http://www.sgcc.com.cn), Liaoning Province is a coastal region in the
southern part of Northeast China. It is an important connecting part for the
economic regions in Northeast China and the economic regions surrounding
Bohai, and is an important passageway for foreign trade and international
communication in Northeast China. Liaohe Oilfield within the province is the
third largest gas and oil field in China with petroleum and natural gas
reserves accounting for 15% and 10% of the PRC respectively. The area of the
province is 145,900 square kilometres. At the end of 2003, the population was
approximately 42,100,000. In 2003, the gross domestic product of the province
amounted to RMB600.3 billion, representing an increase of 11.5% over the
previous year (the average growth rate of the whole nation is 9.1%). Liaoning
Province occupies a decisive position in the northeast power grids of the PRC
and its power load has been growing rapidly during the recent years. At the
end of 2003, the generation capacity of Liaoning Province amounted to
approximately 15,099 MW. In 2003, the power consumption of Liaoning Province
was approximately 90.791 billion kWh, representing an increase of 12.2% when
compared with the same period in 2002.
The planned generation capacity of Yingkou Power Plant is 1,200MW. Its first
phase consists of 2 X 320 MW supercritical coal-fired generating units, which
commenced operation in January and December respectively. The estimated
depreciation period of Yingkou Power Plant's generating units is approximately
13 years. Currently, the generating units operate properly. In 2003, the
annual power generation of two generating units was 3.986 billion kWh with a
house consumption rate of 5.53%. Power tariffs are determined according to the
rate prescribed by relevant pricing bureau. R14.58(9) According to Yingkou
Power Plant's balance sheet as at 31st December 2003 audited by KPMG, Yingkou
Power Plant owed to HIPDC a short term payable of RMB1,264,651,910 and a long
term loan of RMB614,275,497. According to the Agreement for Transfer of HIPDC
Interest, upon completion, the Company should repay the short term payable of
RMB1,264,651,910 in full (without interest) to HIPDC within two years from the
closing of the acquisition of the HIPDC Interest; while in relation to the
RMB614,275,497 long-term loan owed by Yingkou Power Plant to HIPDC, the
Company should arrange an entrusted loan arrangement with HIPDC through China
Huaneng Finance Company, with a term of 5 years payable by equal instalments
annually at an annual interest rate as quoted by The People's Bank of China
from time to time.
Upon Closing, Yingkou Power Plant will be wholly owned by the Company.
The following table sets out certain operating data of Yingkou Power Plant for
2003:
Generation capacity (MW) 640
Power generation (billion kWh) 3.986
Utilisation hours (hours) 6,228
Availability factor (%) 88.42
House consumption rate (%) 5.53
Average on-grid power rate (RMB/MWh, VAT included) 293.57
Coal consumption rate for power sold (grams/kWh) 339.00
Unit fuel cost for power sold (RMB/MWh) 106.15
SELECTED FINANCIAL INFORMATION OF THE TARGET POWER PLANTS
The following is a summary of financial information of certain balance sheet
items as at 31st December 2001, 2002 and 2003 and certain income statement
items for the three years ended 31st December 2003 of the Target Power Plants,
prepared in accordance with International Financial Reporting Standards
("IFRS"). The financial information is extracted from the financial
information of the Target Power Plants audited by KPMG.
(RMB in thousands)
Hanfeng Power Plant Jinggangshan Power Plant
2001 2002 2003 2001 2002 2003
Total assets: 8,123,691 7,919,688 7,348,051 2,575,462 2,312,261 2,179,205
Total liabilities 6,330,399 5,681,741 4,916,132 2,147,810 1,951,504 1,765,845
Accounts 150,433 426,262 415,538 55,760 89,440 142,294
receivable
Net assets 1,793,292 2,237,947 2,431,919 427,652 360,757 413,360
(liabilities)
Revenue from 744,543 2,133,187 2,235,503 269,022 586,599 820,152
principal
business
Operating 134,598 961,460 995,726 (3,918) 29,508 187,559
profit/(loss)
Profit/(loss) (86,864) 617,376 702,010 (83,471) (73,901) 94,163
before taxation
Net (79,850) 604,553 701,111 (58,086) (70,235) 60,855
profit/(loss)
after tax
(RMB in thousands)
Yueyang Power Plant Luohuang Power Plant Yingkou Power Plant
2001 2002 2003 2001 2002 2003 2001 2002 2003
Total assets: 1,575,502 1,667,390 1,326,935 4,850,729 4,588,837 4,037,810 2,806,621 2,594,671 2,449,555
Total
liabilities 1,840,009 1,986,225 1,004,900 4,149,961 4,035,694 3,043,954 2,379,627 2,160,626 1,924,034
Accounts
receivable 228,810 386,427 278,294 697,830 719,460 588,235 57,433 157,122 204,287
Net assets
(liabilities) (264,507) (318,835) 322,035 700,768 553,143 993,856 426,994 434,045 525,521
Revenue from
principal
business 868,120 795,059 1,045,273 1,196,111 1,419,574 1,616,536 722,873 812,694 944,803
Operating
profit/(loss) 196,720 123,885 227,558 251,817 317,141 435,228 64,351 104,874 137,138
Profit/(loss)
before
taxation 120,943 (60,789) 109,344 58,170 7,418 86,832 (25,367) 7,051 91,476
Net
profit/(loss)
after tax 120,943 (60,789) 78,424 58,170 7,418 76,648 (25,367) 7,051 91,476
CONNECTED TRANSACTIONS UNDER SHANGHAI LISTING RULES
As the domestic public shares of the Company are listed on the Shanghai Stock
Exchange, the Company is required, in addition to the Hong Kong Listing Rules,
to comply with the Shanghai Listing Rules.
After Closing, certain transactions in relation to the Target Power Plants,
including the guarantees to be provided by the Company to the banks in respect
of the Target Power Plants' bank loans and the loans obtained from Huaneng
Group and its associate, China Huaneng Finance Company, both being connected
persons of the Company, by the Target Power Plants in the ordinary and usual
course of the Target Power Plants' business, which are subject to compliance
with the relevant requirements of the Hong Kong Listing Rules, will constitute
connected transactions under the Shanghai Listing Rules ("Shanghai Connected
Transactions"), which shall be subject to the approval of the Company's
shareholders. The connected persons (as defined under the Shanghai Listing
Rules) shall abstain from voting on resolutions related to Shanghai Connected
Transactions. Details of the Shanghai Connected Transactions will be set out
in the notice of EGM to be issued to the Company's shareholders.
In accordance with Rule 7.3.11(9) of the Shanghai Listing Rules, the Company
has appointed Guotai Junan as the PRC independent financial adviser in respect
of the Acquisition.
Upon careful and necessary enquiry, Guotai Junan is of the view that the
Acquisition and the Shanghai Connected Transactions met the relevant legal
requirements under the Company Law of the PRC, the Securities Law of the PRC
and the Shanghai Listing Rules (as amended in 2001) and the requirements of
the articles of association of the Company, reflecting the principles of
equality, justice and reasonableness; and that the Acquisition will not in any
way affect the interests of either the Company or the non-connected
shareholders.
The Independent Directors are of the view that (1) the board of Directors has
met the relevant requirements of Shanghai Listing Rules and the articles of
association of the Company regarding approval of the relevant resolutions of
the Acquisition and the Shanghai Connected Transactions; and (2) the
Acquisition and the Shanghai Connected Transactions are fair to the Company's
shareholders.
APPOINTMENT OF INDEPENDENT FINANCIAL ADVISER AS PER HONG KONG LISTING RULES
According to the requirements of the Hong Kong Listing Rules, the Independent
Directors will advise the Independent Shareholders in connection with the
Acquisition (including the Transfer Agreements). Rothschild has been appointed
as an independent financial adviser to make recommendation to the Company's
independent board committee and shareholders as to whether the terms of the
Acquisition are fair and reasonable and whether the Acquisition is in the
interests of the Company and the shareholders as a whole and to advise the
Company's shareholders on how to vote.
THE EGM
The transactions as contemplated by the Transfer Agreements constitute major
and connected transactions to the Company. R14.60(5) The Company will convene
an EGM in mid June, 2004 to consider the approval of the Acquisition
(including the Transfer Agreements), and Shanghai Connected Transactions. The
voting at such meeting will be taken on a poll and the Company will make an
announcement of the poll result. Huaneng Group, HIPDC and their respective
Associates will abstain from voting in the EGM in respect of the ordinary
resolutions to approve the Acquisition (including the Transfer Agreements).
The Company expects that the notice of the EGM and the Circular giving further
information on the Acquisition and containing the advice of Rothschild, an
independent financial adviser appointed by the Company to make recommendation
to the Company's independent board committee and shareholders as to whether
the terms of the Acquisition are fair and reasonable and whether the
Acquisition is in the interests of the Company and the shareholders as a whole
and to advise the Company's shareholders on how to vote, and the
recommendation from the Independent Directors are expected to be despatched to
shareholders within 21 days from the date of this announcement.
RESUMPTION OF TRADING
Trading of the Company's H Shares on the Stock Exchange was suspended at 9:30
a.m. on 16th April, 2004 pending publication of this announcement. Application
has been made to the Stock Exchange to resume trading of the Company's H
Shares with effect from 9:30 a.m. on 19th April, 2004.
JP Morgan has been appointed as financial advisor to the Company in respect of
the Acquisition.
DEFINITIONS
"Acquisition" the purchase by the Company of the Huaneng
Group Interest and HIPDC Interest;
"Agreement for Transfer of the transfer agreement dated 16th
HIPDC Interest" April, 2004 entered into between the
Company and HIPDC relating to the purchase
of HIPDC Interest by the Company;
"Agreement for Transfer Of
Huaneng Group Interest" the transfer agreement dated 16th April,
2004 entered into between the
Company and Huaneng Group relating to the
purchase of Huaneng Group Interest by the
Company;
"Associate" the meaning ascribed to it in the Hong Kong
Listing Rules;
"Closing" the closing of the Acquisition;
"Company" Huaneng Power International, Inc.;
"Directors" the directors of the Company;
"EGM" an extraordinary general meeting of the
Company to be held for shareholders of the
Company to consider and approve the
Acquisition;
"GDP" Gross Domestic Product
"Hanfeng Power Plant" Hebei Hanfeng Power Generation Limited
Liability Company, a company with limited
liability incorporated in the PRC in
October 1996 with an existing registered
capital of RMB1.975 billion, in which
Huaneng Group holds 40% equity interest;
"HIPDC" Huaneng International Power Development
Corporation;
"HIPDC Interest" the equity interest of 55% equity interest
in Yueyang Power Plant, 60% equity interest
in Luohuang Power Plant and all assets and
liabilities of Yingkou Power Plant which
are owned by HIPDC and to be sold to the
Company;
"Hong Kong Listing Rules" the Rules Governing the Listing of
Securities on the Hong Kong Stock Exchange;
"Huaneng Group" China Huaneng Group;
"Huaneng Group Interest" the equity interest of 40% equity interest
in Hanfeng Power Plant and 90% equity
interest in Jinggangshan Power Plant, which
are owned by Huaneng Group and to be sold
to the Company;
"Independent Directors" the independent directors of the Company,
who are invited to advise the Independent
Shareholders in connection with the
Acquisition;
"Independent Shareholders" shareholders of the Company other than
Huaneng Group, HIPDC and their respective
Associates;
"Jinggangshan Power Plant" Jinggangshan Huaneng Power Generation
Limited Liability Company, a company with
limited liability incorporated in the PRC
in March 1996 with an existing registered
capital of RMB53.319 million, in which
Huaneng Group holds 90% equity interest;
"JP Morgan" J.P. Morgan Securities (Asia Pacific)
Limited, which is licensed by the
Securities and Futures Commission for Types
1, 4, 6 and 7 regulated activities under
the SFO, being the financial adviser to the
Company in respect of the Acquisition;
"Latest Practicable Date" 15th April, 2004, being the latest
practicable date prior to the publication
of this announcement for ascertaining
certain information referred to in this
announcement;
"Luohuang Power Plant" Huaneng Chongqing Luohuang Power Generation
Limited Liability Company, a company with
limited liability incorporated in the PRC
in December 2003 with an existing
registered capital of RMB900 million, in
which HIPDC holds 60% equity interest;
"Target Power Plants" Hanfeng Power Plant, Jinggangshan Power
Plant, Yueyang Power Plant, Luohuang Power
Plant and Yingkou Power Plant;
"PRC" the People's Republic of China;
"RMB" the lawful currency of the PRC;
"Rothschild" N M Rothschild & Sons (Hong Kong) Limited,
which is licensed by the Securities and
Futures Commission for Types 1, 4, 6 and 9
regulated activities under the SFO, being
the independent financial adviser appointed
by the Company to make recommendation to
the Company's independent board committee
and shareholders as to whether the terms of
the Acquisition are fair and reasonable and
whether the Acquisition is in the interests
of the Company and the shareholders as a
whole and to advise the Company's
shareholders on how to vote;
"SFO" Securities and Futures Ordinance (Chapter
571 of the Laws of Hong Kong);
"Shanghai Listing Rules" The Listing Rules of Shanghai Stock
Exchange
"Stock Exchange" The Stock Exchange of Hong Kong Limited;
"Transfer Agreements" Agreement for Transfer of Huaneng Group
Interest and Agreement for Transfer of
HIPDC Interest;
"Yingkou Power Plant" Huaneng International Power Development
Corporation Yingkou Branch Company, in
which HIPDC owns all the assets and
liabilities;
"Yueyang Power Plant" Huaneng Hunan Yueyang Power Generation
Limited Liability Company, a company with
limited liability incorporated in the PRC
in December 2003 with an existing
registered capital of RMB560 million, in
which HIPDC holds 55% equity interest;
"Zhongchenghua" Beijing Zhongchenghua Assets Appraisal
Limited Company, a assets appraisal firm in
China, which is qualified in practising
securities related matters.
By Order of the Board
Huaneng Power International, Inc.
Huang Long
Company Secretary
The Board comprises of:
Li Xiaopeng (Non-executive director) Gao Zongze (Independent director)
Wang Xiaosong (Non-executive director) Zheng Jianchao (Independent director)
Ye Daji (Executive director) Qian Zhongwei (Independent director)
Huang Jinkai (Non-executive director) Xia Donglin (Independent director)
Liu Jinlong (Non-executive director)
Shan Qunying (Non-executive director)
Yang Shengming (Non-executive director)
Xu Zujian (Non-executive director)
Beijing, the PRC
16th April, 2004
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
under-signed, thereunto duly authorized.
HUANENG POWER INTERNATIONAL, INC.
By /s/ Wang Xiaosong
-------------------------------
Name: Wang Xiaosong
Title: Vice Chairman
Date: April 16, 2004