Chairman's Statement [Financial Performance](index=6&type=section&id=%E6%A5%AD%E7%B8%BE%E8%A1%A8%E7%8F%BE) In H1 2020, revenue fell 33% to HKD 2.29 billion, and profit decreased 41% to HKD 407 million due to lower construction income and higher finance costs | Metric | H1 2020 (HKD million) | H1 2019 (HKD million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 2,285.0 | 3,401.7 | -33% | | Gross Profit | 1,251.1 | 1,622.6 | -23% | | Profit for the Period | 406.7 | 694.6 | -41% | | Profit Attributable to Equity Holders | 334.5 | 590.2 | -43% | - The decrease in profit was mainly due to: (i) a reduction in revenue from construction services; and (ii) an increase in finance costs resulting from a higher average total of corporate bonds, bank and other borrowings[15](index=15&type=chunk) [Business Review](index=6&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) The Group advanced its solar, wind, and clean heating businesses, secured strategic investments, and improved cash flow through asset sales | Business Segment | Operating Scale (as of June 30, 2020) | H1 2020 Power Generation/Sales | Y-o-Y Growth | | :--- | :--- | :--- | :--- | | Centralized Solar | 2,143 MW cumulative installed capacity | 1.671 billion kWh (consolidated) | 5% | | Distributed Solar | Over 600 MW total installed capacity | | | | Wind Power | 225 MW grid-connected (over 1,400 MW total scale) | 298 million kWh | 43% | | Clean Heating | Approx. 27.4 million sq.m. operational area | - | - | - The Group's weighted average utilization of solar power stations was **674 hours**, higher than the national average of 595 hours; the weighted average utilization of wind farms was **1,541 hours**, exceeding the national average of 1,123 hours, indicating high operational efficiency[16](index=16&type=chunk) - The Group recovered **over RMB 500 million in cash flow** by selling two solar projects in Jiangsu Province to reduce debt and strengthen operating cash flow, while also securing **RMB 400 million in subsequent strategic investments** from Ping An and CICC[18](index=18&type=chunk) [Future Outlook](index=8&type=section&id=%E6%9C%AA%E4%BE%86%E5%B1%95%E6%9C%9B) The Group will adhere to its clean energy mission by strengthening risk management and focusing on cost reduction and efficiency improvements - The Group will continue to advance the energy production and consumption revolution, building a clean, low-carbon, safe, and efficient energy system to seek new opportunities amid crises and changing situations[20](index=20&type=chunk) Management Discussion and Analysis [Business Review](index=9&type=section&id=1.%20%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) In H1 2020, the Group focused on high-margin businesses, resulting in stable power sales revenue but a 95% drop in construction services income [Power Sales and Consignment Operation](index=10&type=section&id=1.1%20%E9%9B%BB%E5%8A%9B%E9%8A%B7%E5%94%AE%E5%8F%8A%E5%A7%94%E8%A8%97%E7%B6%93%E7%87%9F) Total revenue from power sales and consignment operations remained stable at HKD 1.71 billion, with total electricity sales volume up 9% | Business Segment | H1 2020 Revenue (HKD million) | H1 2019 Revenue (HKD million) | Change | | :--- | :--- | :--- | :--- | | Centralized Solar Power Sales | 1,234.2 | 1,277.7 | -3.4% | | Distributed Solar Power Sales | 217.5 | 200.4 | +8.5% | | Wind Power Sales | 149.7 | 111.5 | +34.3% | | Consignment Operation Services | 110.5 | 133.8 | -17.4% | - As of June 30, 2020, the total grid-connected capacity of centralized solar power stations was **2,143 MW**, distributed solar was over **600 MW**, and wind power was **225 MW**[27](index=27&type=chunk)[34](index=34&type=chunk)[38](index=38&type=chunk) - The weighted average utilization of the Group's solar power stations was **674 hours**, higher than the national average of 595 hours; wind farms' utilization was **1,541 hours**, exceeding the national average of 1,123 hours[33](index=33&type=chunk)[42](index=42&type=chunk) [Engineering, Procurement & Construction (EPC) and Technical Consulting Services](index=16&type=section&id=1.2%20%E5%B7%A5%E7%A8%8B%E3%80%81%E6%8E%A1%E8%B3%BC%E5%8F%8A%E5%BB%BA%E9%80%A0%E6%9C%8D%E5%8B%99%E4%BB%A5%E5%8F%8A%E6%8A%80%E8%A1%93%E8%AB%AE%E8%A9%A2%E6%9C%8D%E5%8B%99) Due to a strategic shift, revenue from external EPC services plummeted 95% to HKD 60.9 million, now comprising only 3% of total revenue | Service Type | H1 2020 Revenue (HKD million) | H1 2019 Revenue (HKD million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Engineering, Procurement & Construction Services | 60.9 | 1,106.4 | -95% | | Technical Consulting Services | 28.7 | 72.6 | -60% | [Provision of Clean Heating Services](index=17&type=section&id=1.3%20%E6%8F%90%E4%BE%9B%E6%B8%85%E6%BD%94%E4%BE%9B%E6%9A%96%E6%9C%8D%E5%8B%99) The clean heating business remained stable with revenue of HKD 464 million and an operational heating area of 27.4 million square meters - As of June 30, 2020, the Group held and/or managed 17 operational clean heating projects in provinces including Henan, Hebei, and Shanxi, with a total heating area of approximately **27.4 million square meters**[47](index=47&type=chunk) [Other Clean Energy Businesses](index=17&type=section&id=1.4%20%E5%85%B6%E4%BB%96%E6%B8%85%E6%BD%94%E8%83%BD%E6%BA%90%E6%A5%AD%E5%8B%99) The Group is actively exploring new clean energy opportunities, including hydropower as a new strategic business and energy storage - Hydropower is positioned as a **new strategic business** to optimize the Group's clean energy asset portfolio and contribute stable income[49](index=49&type=chunk) - The Group views energy storage as a key technology for advancing renewable energy substitution and building the energy internet, and will continue its technological development[50](index=50&type=chunk) [Financial Performance](index=19&type=section&id=2.%20%E8%B2%A1%E5%8B%99%E8%A1%A8%E7%8F%BE) H1 2020 revenue fell 33% to HKD 2.29 billion, but the gross margin rose to 54.8% due to a higher mix of power sales, while the net gearing ratio was 69% [Revenue and Gross Profit Margin](index=19&type=section&id=2.1%20%E5%96%B6%E6%A5%AD%E6%94%B6%E5%85%A5%E5%8F%8A%E6%AF%9B%E5%88%A9%E7%8E%87) Revenue decreased 33% to HKD 2.29 billion, while the gross margin increased from 47.7% to 54.8% due to a shift in business mix | Business Segment | H1 2020 Gross Margin | H1 2019 Gross Margin | | :--- | :--- | :--- | | Solar Power Business | 66.3% | 68.3% | | Wind Power Business | 71.0% | 61.6% | | Construction Services | 17.2% | 20.3% | | Provision of Clean Heating Services | 12.3% | 30.0% | | **Total** | **54.8%** | **47.7%** | [Finance Costs](index=20&type=section&id=2.4%20%E8%B2%A1%E5%8B%99%E8%B2%BB%E7%94%A8) Finance costs increased by HKD 93.6 million to HKD 678 million, primarily due to a higher average balance of borrowings and bonds - Finance costs for H1 2020 were approximately **HKD 678 million**, an increase from HKD 584 million in the same period last year[56](index=56&type=chunk) [Contract Assets](index=21&type=section&id=2.13%20%E5%90%88%E7%B4%84%E8%B3%87%E7%94%A2) Contract assets stood at HKD 5.85 billion, mainly comprising HKD 4.73 billion in renewable energy subsidy receivables - Contract assets consist primarily of two components: (i) **RMB 4.73 billion** in receivables for renewable energy subsidies; and (ii) **RMB 1.15 billion** in receivables for EPC services[64](index=64&type=chunk) [Capital Expenditure](index=23&type=section&id=2.21%20%E8%B3%87%E6%9C%AC%E6%94%AF%E5%87%BA) Total capital expenditure for the period was HKD 1.75 billion, a slight decrease from HKD 1.89 billion in the prior year period | Capital Expenditure Item | H1 2020 (HKD million) | H1 2019 (HKD million) | | :--- | :--- | :--- | | Development of clean energy projects and other property, plant and equipment | 1,599.6 | 1,452.2 | | Investment in and acquisition of interests in subsidiaries, joint ventures and associates | 151.3 | 412.5 | | **Total** | **1,753.5** | **1,891.3** | [Liquidity and Financial Resources](index=24&type=section&id=2.22%20%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90) The Group maintained a net gearing ratio of 69% and enhanced its capital structure by issuing RMB 900 million in bonds and securing RMB 400 million in investments - The **net gearing ratio** (net debt / (net debt + total equity)) was **69%**, a slight increase from 68% at the end of 2019[79](index=79&type=chunk) - On April 29, 2020, the Company issued the second tranche of corporate bonds with a principal amount of **RMB 900 million** and an annual interest rate of 5.50%[77](index=77&type=chunk) - The Group's subsidiary, Tianjin Beiqing, received a total of **RMB 400 million** in new capital injection from the second batch of investors introduced by Ping An[78](index=78&type=chunk) Condensed Consolidated Financial Statements [Condensed Consolidated Statement of Profit or Loss](index=28&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E8%A1%A8) For the six months ended June 30, 2020, revenue was HKD 2.285 billion, gross profit was HKD 1.251 billion, and profit for the period was HKD 407 million | Metric (HKD million) | H1 2020 | H1 2019 | | :--- | :--- | :--- | | Revenue | 2,285.0 | 3,401.7 | | Gross Profit | 1,251.1 | 1,622.6 | | Profit Before Tax | 470.2 | 842.7 | | Profit for the Period | 406.7 | 694.6 | | Profit Attributable to Equity Holders of the Company | 334.5 | 590.2 | [Condensed Consolidated Statement of Financial Position](index=30&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of June 30, 2020, the Group had total assets of HKD 51.58 billion, total liabilities of HKD 40.66 billion, and total equity of HKD 10.92 billion | Metric (HKD million) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Non-current Assets | 34,017.5 | 33,771.4 | | Total Current Assets | 17,562.6 | 18,420.9 | | **Total Assets** | **51,580.1** | **52,192.3** | | Total Current Liabilities | 17,141.4 | 16,814.4 | | Total Non-current Liabilities | 23,518.4 | 24,372.1 | | **Total Liabilities** | **40,659.8** | **41,186.5** | | **Total Equity** | **10,920.3** | **11,005.8** | [Condensed Consolidated Statement of Cash Flows](index=34&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) In H1 2020, net cash from operations was HKD 1.11 billion, while net cash used in investing and financing was HKD 1.76 billion and HKD 187 million, respectively | Cash Flow (HKD million) | H1 2020 | H1 2019 | | :--- | :--- | :--- | | Net cash from operating activities | 1,113.7 | 1,196.3 | | Net cash used in investing activities | (1,762.9) | (3,057.1) | | Net cash (used in)/from financing activities | (187.2) | 3,419.9 | | Net decrease/increase in cash and cash equivalents | (836.3) | 1,559.0 | Notes to the Condensed Consolidated Financial Statements [Note 2: Operating Segment Information](index=37&type=section&id=2.%20%E7%B6%93%E7%87%9F%E5%88%86%E9%A1%9E%E8%B3%87%E6%96%99) The Group's business is divided into construction-related and clean energy operations, with the latter contributing the vast majority of revenue and profit | H1 2020 (HKD million) | Construction-related Business | Operation of Clean Energy Projects | Total | | :--- | :--- | :--- | :--- | | External Revenue | 109.5 | 2,175.5 | 2,285.0 | | Segment Results | 35.1 | 812.9 | 848.0 | [Note 11: Trade and Bills Receivables](index=46&type=section&id=11.%20%E8%B2%BF%E6%98%93%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85%E5%8F%8A%E6%87%89%E6%94%B6%E7%A5%A8%E6%93%9A) Total trade and bills receivables were HKD 3.92 billion, including HKD 730 million in listed subsidy receivables - Total trade and bills receivables amounted to **HKD 3.92 billion**, which included **HKD 730 million** in receivables for feed-in tariff subsidies[128](index=128&type=chunk) [Note 15 & 16: Interest-bearing Borrowings and Corporate Bonds](index=49&type=section&id=15.%20%E8%A8%88%E6%81%AF%E9%8A%80%E8%A1%8C%E5%8F%8A%E5%85%B6%E4%BB%96%E5%80%9F%E6%AC%BE) As of June 30, 2020, interest-bearing borrowings totaled HKD 12.89 billion, supplemented by HKD 1.54 billion in outstanding corporate bonds - Total bank and other borrowings amounted to **HKD 12.89 billion**, of which HKD 9.85 billion were unsecured[137](index=137&type=chunk) - On April 29, 2020, the Company issued unsecured corporate bonds with a principal amount of **RMB 900 million** and an interest rate of 5.50%, maturing in 2023[139](index=139&type=chunk) [Note 24: Events After the Reporting Period](index=54&type=section&id=24.%20%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%BE%8C%E4%BA%8B%E9%A0%85) Post-reporting period, the Group's subsidiary secured RMB 400 million in new investment and provided a RMB 483 million finance lease guarantee - On July 30, 2020, the Group's subsidiary Tianjin Beiqing entered into a capital increase agreement with a second batch of investors, introducing **RMB 400 million** in capital, which was completed on September 11[153](index=153&type=chunk) - On August 17, 2020, Tianjin Beiqing provided a finance lease guarantee of up to **RMB 483 million** for Yingshang Ju'an Solar Power Co, Ltd[153](index=153&type=chunk) Disclosure of Interests [Interests of Substantial Shareholders](index=60&type=section&id=%E4%B8%BB%E8%A6%81%E8%82%A1%E6%9D%B1%E5%8F%8A%E5%85%B6%E4%BB%96%E4%BA%BA%E5%A3%AB%E6%96%BC%E8%82%A1%E4%BB%BD%E5%8F%8A%E7%9B%B8%E9%97%9C%E8%82%A1%E4%BB%BD%E4%B9%8B%E6%AC%8A%E7%9B%8A) As of June 30, 2020, substantial shareholders included BEWG (31.88%), CITIC Private Equity related entities (23.91%), and Tus-Holdings (6.37%) | Substantial Shareholder | Shareholding Percentage | Note | | :--- | :--- | :--- | | Beijing Enterprises Holdings Limited (and its associates) | 31.88% | Held indirectly through Beijing Enterprises Water Group | | CITIC Securities Company Limited (and its associates) | 23.91% | Held through entities like CITIC Private Equity Funds | | Tsinghua University (and its associates) | 6.37% | Held indirectly through Tus-Holdings | [Share Option Scheme](index=63&type=section&id=%E8%B3%BC%E8%82%A1%E6%AC%8A%E8%A8%88%E5%8A%83) As of June 30, 2020, 1.03 billion outstanding share options were held, representing approximately 1.62% of issued shares - As at June 30, 2020, there were **1,030,000,000** valid and outstanding share options[173](index=173&type=chunk) - All outstanding share options were granted on September 18, 2017, with an exercise price of **HKD 0.199** and vest in five tranches[182](index=182&type=chunk) [Specific Performance of the Controlling Shareholder](index=67&type=section&id=%E6%8E%A7%E8%82%A1%E8%82%A1%E6%9D%B1%E4%B9%8B%E7%89%B9%E5%AE%9A%E5%B1%A5%E7%B4%84%E8%B2%AC%E4%BB%BB) Several financing agreements contain specific performance clauses tied to the shareholding and control of the controlling shareholders - Multiple financing agreements require Beijing Enterprises Water Group to maintain a beneficial interest of **not less than 25% or 27%** in the Company and to remain the single largest shareholder[189](index=189&type=chunk) - The agreements also have corresponding requirements on the shareholding and control of Beijing Enterprises Holdings in BEWG, and of BE Group in Beijing Enterprises Holdings[189](index=189&type=chunk) Corporate Governance [Corporate Governance Compliance](index=69&type=section&id=%E9%81%B5%E5%AE%88%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%AE%88%E5%89%87) The Board confirmed that the Company complied with all applicable code provisions of the Corporate Governance Code during the reporting period - The Company confirmed its compliance with all applicable code provisions of the Corporate Governance Code during the reporting period[192](index=192&type=chunk) - The Audit Committee, comprising three independent non-executive Directors, has reviewed this interim result and considers its preparation appropriate and disclosure adequate[194](index=194&type=chunk)

[Chairman's Report](index=4&type=section&id=Chairman%27s%20Report) [Performance Review](index=6&type=section&id=Performance%20Review) In H1 2019, the Group's revenue decreased by 13% to HKD 3.402 billion, while gross margin rose to 48%, but profit attributable to equity holders fell by 15% due to increased finance costs Key Performance Indicators for H1 2019 | Indicator | H1 2019 | H1 2018 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | HKD 3.402 billion | - | -13% | | Gross Margin | 48% | 38% | +10 p.p. | | Total Gross Profit | - | - | +10% | | Profit Attributable to Equity Holders | HKD 590 million | - | -15% | - The primary reasons for the profit decline were increased **finance costs** and higher profit attributable to **non-controlling interests** due to increased profits from some non-wholly owned subsidiaries[10](index=10&type=chunk) [Business Review](index=6&type=section&id=Business%20Review) The Group steadily advanced its core photovoltaic, wind power, and clean heating businesses, achieving strong growth in installed capacity and utilization hours, while actively exploring emerging energy storage sectors - As of June 30, 2019, the Group held an accumulated installed capacity of approximately **2,233 MW** for grid-connected centralized photovoltaic power stations, and a total installed capacity of over **600 MW** for distributed photovoltaic power stations[11](index=11&type=chunk) - Photovoltaic power generation increased by **26% year-on-year**, with weighted average utilization hours reaching **659 hours**, exceeding the national average of 576 hours[11](index=11&type=chunk) - Total wind power project scale exceeded **1,400 MW**, with grid-connected installed capacity of approximately **167 MW**, power generation increasing by **212% year-on-year**, and weighted average utilization hours reaching **1,538 hours**, higher than the national average of 1,133 hours[11](index=11&type=chunk) - The actual operating clean heating area exceeded **25 million square meters**[12](index=12&type=chunk) - The Group owned four energy storage projects in Beijing, Tibet, Jiangsu, and Shanxi, with a total capacity of approximately **69 MWh**, and received multiple industry awards[12](index=12&type=chunk) [Corporate Governance and Sustainable Development](index=8&type=section&id=Corporate%20Governance%20and%20Sustainable%20Development) The Group enhances operational excellence and risk control through optimized risk assessment, cost management, and e-procurement, while fostering corporate culture and strengthening safety management - The Group comprehensively optimized its **risk assessment model** and **COSO framework risk management system**, and reorganized the supply chain management department into a cost accounting center to implement full-process cost management[13](index=13&type=chunk) - The Group, guided by core values of 'responsibility, value, and sharing,' continuously optimizes its talent training and employee development systems[13](index=13&type=chunk) [Management Discussion and Analysis](index=8&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=9&type=section&id=1.%20Business%20Review) In H1 2019, the Group strategically shifted towards high-margin electricity sales and clean heating, reducing construction services, resulting in significant growth in clean heating revenue and progress in emerging energy businesses Financial Summary for H1 2019 | Indicator | H1 2019 | H1 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue (HKD thousands) | 3,401,678 | 3,897,240 | (13)% | | Gross Profit (HKD thousands) | 1,622,592 | 1,469,018 | 10% | | Gross Margin (%) | 47.7 | 37.7 | +10 p.p. | | Profit for the Period (HKD thousands) | 694,576 | 708,009 | (2)% | | Profit Attributable to Equity Holders (HKD thousands) | 590,160 | 690,921 | (15)% | | Basic Earnings Per Share (HK cents) | 0.87 | 1.09 | (20)% | [Electricity Sales and Entrusted Operation](index=10&type=section&id=1.1%20Electricity%20Sales%20and%20Entrusted%20Operation) Consolidated revenue from electricity sales and entrusted operation services grew by 17% to HKD 1.724 billion, driven by a 33% increase in total electricity sales volume from expanded PV and wind power operations - Revenue from electricity sales and entrusted operation services totaled approximately **HKD 1,723.5 million**, representing a **17% increase** compared to the same period last year[20](index=20&type=chunk) - Total electricity sales volume was approximately **1.76 million MWh**, a **33% increase** compared to the same period last year[20](index=20&type=chunk) [Engineering, Procurement and Construction Services and Technical Consulting Services](index=15&type=section&id=1.2%20Engineering%2C%20Procurement%20and%20Construction%20Services%20and%20Technical%20Consulting%20Services) To optimize its business structure, the Group reduced lower-margin EPC services revenue by 47% to HKD 1.106 billion, decreasing its share of total revenue from 53% to 33%, while technical consulting revenue also declined - Revenue from engineering, procurement, and construction services totaled approximately **HKD 1,106.4 million**, a **47% decrease** year-on-year, with its proportion of total revenue falling to **33%**[37](index=37&type=chunk) - Construction revenue of approximately **HKD 40.1 million** was recognized during the period for clean heating projects undertaken on a **BOT basis**[38](index=38&type=chunk) - Revenue from technical consulting services was approximately **HKD 72.6 million**, a year-on-year decrease[38](index=38&type=chunk) [Provision of Clean Heating Services](index=16&type=section&id=1.3%20Provision%20of%20Clean%20Heating%20Services) Clean heating business revenue surged over 8 times to HKD 459 million, with 15 operational projects covering over 25 million square meters, demonstrating strong growth potential - Revenue from the provision of clean heating services was approximately **HKD 459.1 million**, an increase of **over 8 times** compared to the same period last year[39](index=39&type=chunk) - As of June 30, 2019, the Group held and/or managed **15 operational projects**, with a total actual clean heating area exceeding **25 million square meters**[39](index=39&type=chunk) [Other Clean Energy Businesses](index=16&type=section&id=1.4%20Other%20Clean%20Energy%20Businesses) The Group actively explores diverse clean energy businesses, notably completing energy storage projects totaling 69 MWh and earning industry awards, showcasing its potential in integrated energy services - The Group steadily developed its energy storage business, completing project construction with a total capacity of approximately **69 MWh** in Beijing, Tibet, Jiangsu, and Shanxi, China[41](index=41&type=chunk) - During the period, the Group received multiple awards, including '2019 China Energy Storage Industry Best Integrated Energy Service Provider' and '2019 China Top Ten Energy Storage Project Operators'[41](index=41&type=chunk)[42](index=42&type=chunk) [Financial Performance](index=18&type=section&id=2.%20Financial%20Performance) In H1 2019, revenue decreased by 13% to HKD 3.402 billion, but gross margin improved to 47.7% due to business mix shift, while finance costs rose, and total assets increased to HKD 50.075 billion with a 66% net debt-to-equity ratio Gross Profit Performance by Business Segment (For the Six Months Ended June 30) | Business Segment | 2019 Revenue (HKD millions) | 2019 Gross Margin (%) | 2018 Revenue (HKD millions) | 2018 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Electricity Sales (PV) | 1,478.2 | 68.3 | 1,276.8 | 66.3 | | Electricity Sales (Wind) | 111.5 | 61.6 | 42.7 | 66.5 | | Construction Services | 1,146.5 | 20.3 | 2,247.3 | 14.9 | | Technical Consulting Services | 72.6 | 84.4 | 128.5 | 86.7 | | Entrusted Operation Services | 133.8 | 84.0 | 154.1 | 87.0 | | Provision of Clean Heating Services | 459.1 | 30.0 | 47.8 | 29.5 | | **Total** | **3,401.7** | **47.7** | **3,897.2** | **37.7** | - Due to changes in revenue mix, the overall gross margin increased from **37.7%** in the same period last year to **47.7%** in the current period[45](index=45&type=chunk) - Administrative expenses decreased to **HKD 254 million** due to the implementation of cost controls[47](index=47&type=chunk) - Finance costs increased to **HKD 584 million**, primarily due to an increase in the average borrowing balance[49](index=49&type=chunk) - As of June 30, 2019, the **net debt-to-equity ratio** was **66%**, a slight increase from **64%** at the end of 2018[66](index=66&type=chunk) [Liquidity and Financial Resources](index=23&type=section&id=2.23%20Liquidity%20and%20Financial%20Resources) As of June 30, 2019, the Group maintained a sound financial position with HKD 4.283 billion in cash, HKD 26.160 billion in total borrowings (82% long-term), HKD 3.501 billion in net current assets, and HKD 2.584 billion in unutilized bank facilities Financial Resources Status (June 30, 2019) | Indicator | Amount (HKD millions) | | :--- | :--- | | Cash and Cash Equivalents | 4,283.3 | | Total Borrowings | 26,159.9 | | - Bank and Other Borrowings | 11,558.1 | | - Finance Lease Liabilities | 14,601.8 | | Net Current Assets | 3,501.1 | | Unutilized Bank Facilities | 2,583.5 | - In November 2018, the Group issued perpetual capital instruments with a principal amount of **RMB 1 billion**, classified as equity instruments, to supplement working capital[65](index=65&type=chunk) [Condensed Consolidated Financial Statements](index=25&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statement of Profit or Loss](index=25&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) For H1 2019, the Group reported HKD 3.402 billion in revenue and HKD 1.623 billion in gross profit, with profit for the period at HKD 695 million (down 2%) and profit attributable to equity holders at HKD 590 million (down 15%) Condensed Consolidated Statement of Profit or Loss Summary (For the Six Months Ended June 30) | Item (HKD thousands) | 2019 (Unaudited) | 2018 (Unaudited) | | :--- | :--- | :--- | | Revenue | 3,401,678 | 3,897,240 | | Gross Profit | 1,622,592 | 1,469,018 | | Finance Costs | (584,319) | (424,502) | | Profit Before Tax | 842,694 | 770,852 | | Income Tax Expense | (148,118) | (62,843) | | Profit for the Period | 694,576 | 708,009 | | Profit Attributable to Equity Holders of the Company | 590,160 | 690,921 | [Condensed Consolidated Statement of Financial Position](index=27&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2019, total assets increased by 15% to HKD 50.075 billion, total liabilities reached HKD 38.577 billion, and total equity was HKD 11.498 billion, driven by growth in property, plant, equipment, and borrowings Condensed Consolidated Statement of Financial Position Summary | Item (HKD thousands) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | | :--- | :--- | :--- | | **Non-current Assets** | 31,041,181 | 28,738,651 | | **Current Assets** | 19,033,846 | 14,669,499 | | **Total Assets** | **50,075,027** | **43,408,150** | | **Current Liabilities** | 15,532,702 | 12,594,257 | | **Non-current Liabilities** | 23,044,104 | 19,938,486 | | **Total Liabilities** | **38,576,806** | **32,532,743** | | **Total Equity** | **11,498,221** | **10,875,407** | [Condensed Consolidated Statement of Cash Flows](index=30&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For H1 2019, operating activities generated HKD 1.196 billion in net cash, while investing activities used HKD 3.057 billion, and financing activities provided HKD 3.420 billion, leading to a period-end cash balance of HKD 4.283 billion Condensed Consolidated Statement of Cash Flows Summary (For the Six Months Ended June 30) | Item (HKD thousands) | 2019 (Unaudited) | 2018 (Unaudited) | | :--- | :--- | :--- | | Net Cash from/(used in) Operating Activities | 1,196,277 | (1,064,692) | | Net Cash used in Investing Activities | (3,057,143) | (1,316,150) | | Net Cash from Financing Activities | 3,419,914 | 977,568 | | Net Increase/(Decrease) in Cash and Cash Equivalents | 1,559,048 | (1,403,274) | | Cash and Cash Equivalents at End of Period | 4,103,636 | 3,288,204 | [Notes to the Condensed Consolidated Financial Statements](index=32&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [Changes in Accounting Policies and Disclosures](index=33&type=section&id=1.3%20Changes%20in%20Accounting%20Policies%20and%20Disclosures) The Group adopted HKFRS 16 Leases on January 1, 2019, recognizing right-of-use assets and lease liabilities for prior operating leases, significantly impacting the financial position and adjusting retained earnings - The Group first adopted **HKFRS 16 Leases** and applied the modified retrospective approach, recognizing the cumulative effect of initial adoption on **January 1, 2019**[87](index=87&type=chunk)[88](index=88&type=chunk) Impact of HKFRS 16 Adoption on Financial Position as of January 1, 2019 (HKD thousands) | Item | Increase/(Decrease) | | :--- | :--- | | **Assets** | | | Property, Plant and Equipment | 851,809 | | Prepaid Land Lease Payments | (254,742) | | Prepayments, Deposits and Other Receivables | (47,185) | | **Liabilities** | | | Lease Liabilities | 15,260,167 | | Amounts Due Under Finance Leases | (14,692,353) | | **Equity** | | | Retained Earnings | (51,579) | [Contract Assets](index=44&type=section&id=10.%20Contract%20Assets) As of June 30, 2019, total contract assets were HKD 5.160 billion, mainly comprising HKD 3.260 billion in electricity price subsidy receivables and construction contract amounts Composition of Contract Assets (HKD thousands) | Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Receivables from Electricity Price Subsidies | 3,260,157 | 2,491,836 | | Construction Contracts | 1,346,208 | 1,693,796 | | Retention Money | 585,389 | 339,917 | | **Total (Before Impairment)** | **5,191,754** | **4,525,549** | [Trade and Bills Receivables](index=45&type=section&id=11.%20Trade%20and%20Bills%20Receivables) As of June 30, 2019, total trade and bills receivables were HKD 4.302 billion, including HKD 919 million in electricity price subsidies, with HKD 937 million in non-subsidy receivables over one year Composition of Trade and Bills Receivables (HKD thousands) | Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Trade Receivables | 2,748,893 | 1,971,260 | | Bills Receivables | 671,841 | 625,804 | | Receivables from Electricity Price Subsidies | 919,057 | 711,821 | | **Total (Before Impairment)** | **4,339,791** | **3,308,885** | [Commitments](index=55&type=section&id=20.%20Commitments) As of June 30, 2019, the Group's total contracted but unprovided capital commitments were HKD 1.807 billion, mainly for clean energy project construction and joint venture capital injections Capital Commitments (HKD thousands) | Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Construction, Material and Equipment Costs for Clean Energy Projects | 1,200,478 | 1,839,241 | | Capital Injection into Joint Ventures | 606,915 | 606,364 | | **Total** | **1,807,393** | **2,445,605** | [Disclosures](index=57&type=section&id=Disclosures) [Disclosure of Interests](index=58&type=section&id=Disclosure%20of%20Interests) This section discloses interests of directors, chief executives, and substantial shareholders, including Beijing Enterprises Water Group Limited (31.88%), Funds managed by CITIC Private Equity Funds Management Co., Ltd. (23.91%), and TusHoldings Co., Ltd. (6.37%) Major Shareholder Holdings (June 30, 2019) | Shareholder Name | Shareholding Percentage | | :--- | :--- | | Beijing Enterprises Water Group Limited (Indirect) | 31.88% | | Funds managed by CITIC Private Equity Funds Management Co., Ltd. (Indirect) | 23.91% | | TusHoldings Co., Ltd. (Indirect) | 6.37% | [Share Option Scheme](index=63&type=section&id=Share%20Option%20Scheme) The Company's share option scheme had 1.46 billion outstanding options as of June 30, 2019, with an exercise price of HKD 0.199, vesting in tranches from 2020 to 2024 - As of June 30, 2019, the total number of outstanding share options was **1,460,000,000**[163](index=163&type=chunk) - All outstanding share options were granted on September 18, 2017, with an exercise price of **HKD 0.199**, and an exercise period from September 18, 2020, to September 17, 2027[164](index=164&type=chunk) [Specific Performance Obligations of Controlling Shareholder](index=67&type=section&id=Specific%20Performance%20Obligations%20of%20Controlling%20Shareholder) The Group's financing agreements include specific performance obligations requiring controlling shareholders to maintain minimum shareholding or largest shareholder status, with potential for immediate repayment upon breach - Multiple borrowing and finance lease agreements, totaling **billions of HKD** and **hundreds of millions of USD**, are subject to specific performance obligations of the controlling shareholder[169](index=169&type=chunk) - Performance obligations primarily include: Beijing Enterprises Water Group must maintain at least **25% or 27% beneficial equity interest** in the Company and remain the single largest shareholder; Beijing Enterprises Holdings and BE Group must also maintain corresponding shareholding percentages and control over their respective subsidiaries[170](index=170&type=chunk) [Corporate Governance](index=68&type=section&id=Corporate%20Governance) [Compliance with Corporate Governance Code](index=69&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The Board confirms the Company's consistent compliance with all applicable code provisions of the Corporate Governance Code during the six months ended June 30, 2019 - The Board believes that the Company has consistently complied with all applicable code provisions of the **Corporate Governance Code** during the period[173](index=173&type=chunk) [Audit Committee](index=69&type=section&id=Audit%20Committee) The Audit Committee, comprising three independent non-executive directors, reviews and monitors financial reporting, risk management, and internal controls, having deemed the interim results properly prepared and sufficiently disclosed - The Audit Committee is composed of **three independent non-executive directors**, with Mr. Li Fujun serving as Chairman[175](index=175&type=chunk) - The Audit Committee has reviewed the Group's interim results for the six months ended June 30, 2019, and believes they were prepared using appropriate accounting policies and provided sufficient disclosures[175](index=175&type=chunk)