[Company Information](index=4&type=section&id=%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99) The report provides core company information including board members, committees, registered office, and key advisors - The report provides core company information including board members, committee members, registered office, principal place of business, company secretary, auditor, legal counsel, and principal bankers[7](index=7&type=chunk) [Company Overview](index=6&type=section&id=%E5%85%AC%E5%8F%B8%E6%A6%82%E8%A7%88) Xinao Energy positions itself as a leading clean energy distributor and service provider in China, aiming for sustainable returns and a low-carbon future - Xinao Energy is positioned as a leading clean energy distributor and energy service provider in China, aiming to create a safe, convenient, and low-carbon future for customers and sustainable returns for shareholders[9](index=9&type=chunk) 2020 Key Performance Highlights | Category | Indicator | 2019 | 2020 | Change | | :--- | :--- | :--- | :--- | :--- | | **Business Growth** | City Gas Projects (units) | 217 | 235 | +18 | | | Natural Gas Sales (million cubic meters) | 26,963 | 29,569 | +9.7% | | | Integrated Energy Projects (units) | 98 | 119 | +21 | | | Integrated Energy Sales (million kWh) | 6,847 | 12,042 | +75.9% | | **Carbon Reduction Performance** | Carbon Emission Reduction for Society and Users (million tons) | 35.11 | 42.11 | +19.9% | | | Carbon Emission Intensity (tons CO2e/billion m³) | 9,751 | 7,092 | -27.3% | | **Operational Performance** | Customer Satisfaction | 93.0% | 94.1% | +1.1 ppt | [9](index=9&type=chunk) - The company received multiple industry honors and ratings, including Platts Energy Information's "Excellent Downstream Enterprise Award," and was included in the Hang Seng ESG 50 Index and Hang Seng Corporate Sustainability Index. In terms of financial ratings, it received investment-grade ratings of **BBB from S&P**, **Baa2 from Moody's**, and **BBB from Fitch**[12](index=12&type=chunk) [Shareholder Value](index=8&type=section&id=%E8%82%A1%E6%9D%B1%E5%83%B9%E5%80%BC) The company maintains an annual dividend distribution policy to share profits while ensuring financial stability for business growth - The company adopts an annual dividend distribution policy, aiming to share profits with shareholders while ensuring financial stability to support business growth. Since 2004, dividend amounts have steadily increased in most years[14](index=14&type=chunk) 2020 Share Price Performance | Indicator | Value | | :--- | :--- | | Highest Closing Price (2020/12/30) | 115.00 HKD | | Average Closing Price | 90.42 HKD | | 2020 Share Price Change | +33.6% | | Total Investment Return | 36.5% | [16](index=16&type=chunk) [Business Footprint](index=10&type=section&id=%E6%A5%AD%E5%8B%99%E7%89%88%E5%9C%96) As of year-end 2020, the company's operations span 20 provinces and municipalities in China, managing 235 city gas projects and 119 integrated energy projects - As of the end of 2020, the company's business footprint covered 20 provinces, municipalities, and autonomous regions in China, operating **235 city gas projects** and **119 integrated energy projects**[17](index=17&type=chunk)[18](index=18&type=chunk)[25](index=25&type=chunk) [Operating and Financial Highlights](index=12&type=section&id=%E7%87%9F%E9%81%8B%E5%8F%8A%E8%B2%A1%E5%8B%99%E6%91%98%E8%A6%81) This section presents key operational and financial data for 2020, highlighting growth in projects, users, sales volumes, and improved profitability and financial health 2020 Key Operating Data | Indicator | 2019 | 2020 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Number of City Gas Projects | 217 | 235 | +8.3% | | Cumulative Household Users (thousand households) | 20,920 | 23,213 | +11.0% | | Cumulative Industrial & Commercial Users (locations) | 148,761 | 177,128 | +19.1% | | Natural Gas Retail Sales Volume (million cubic meters) | 19,924 | 21,953 | +10.2% | | Gas Wholesale Sales Volume (million cubic meters) | 7,039 | 7,616 | +8.2% | | Cumulative Integrated Energy Projects in Operation | 98 | 119 | +21.4% | | Integrated Energy Sales Volume (million kWh) | 6,847 | 12,042 | +75.9% | [29](index=29&type=chunk) 2020 Key Financial Data (RMB million) | Indicator | 2019 | 2020 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Total Revenue | 70,183 | 71,617 | +2.0% | | Total Gross Profit | 11,265 | 12,332 | +9.5% | | Core Profit | 5,278 | 6,237 | +18.2% | | Free Cash Flow | 2,694 | 3,016 | +12.0% | | Total Assets | 81,245 | 90,043 | +10.8% | | Earnings Per Share (HKD) | 5.05 | 5.59 | +10.7% | | Dividend Per Share (HKD) | 1.67 | 2.42 | +44.9% | | Return on Equity | 21.9% | 20.5% | -1.4 ppt | | Net Gearing Ratio | 37.9% | 30.6% | -7.3 ppt | [30](index=30&type=chunk) [Ten-Year Performance Comparison](index=14&type=section&id=%E5%8D%81%E5%B9%B4%E6%A5%AD%E7%B8%BE%E6%AF%94%E8%BC%83) The company achieved sustained high growth over the past decade, with significant increases in revenue, profit, and key operational metrics - The company achieved sustained high growth over the past decade. Revenue grew from **RMB 15.1 billion in 2011** to **RMB 71.6 billion in 2020**, with a compound annual growth rate of approximately **19%**[40](index=40&type=chunk). Profit attributable to owners increased from **RMB 1.25 billion to RMB 6.28 billion**, with a compound annual growth rate of approximately **19.6%**[43](index=43&type=chunk) Key Operating Indicators Ten-Year Growth (2011 vs 2020) | Indicator | 2011 | 2020 | Growth Multiple | | :--- | :--- | :--- | :--- | | Number of Connected Household Users (thousand households) | 6,815 | 23,213 | 3.4x | | Daily Designed Gas Supply Capacity for Industrial & Commercial Users (thousand cubic meters) | 25,767 | 141,787 | 5.5x | | Total Piped Gas Sales Volume (thousand cubic meters) | 5,112,616 | 21,989,245 | 4.3x | | Existing Pipeline Length (kilometers) | 18,854 | 63,096 | 3.3x | [32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) [Strategic Report](index=16&type=section&id=%E7%AD%96%E7%95%A5%E5%A0%B1%E5%91%8A) [Chairman's Report](index=16&type=section&id=%E4%B8%BB%E5%B8%AD%E5%A0%B1%E5%91%8A) The Chairman's Report highlights the company's strong performance in 2020 despite the pandemic, driven by robust growth in natural gas retail and integrated energy businesses 2020 Performance Highlights | Indicator | 2020 Value | Year-on-Year Change | | :--- | :--- | :--- | | Revenue | RMB 71.617 billion | +2.0% | | Profit Attributable to Owners | RMB 6.278 billion | +10.7% | | Core Profit | RMB 6.237 billion | +18.2% | | Basic Earnings Per Share | RMB 5.59 | +10.7% | | Proposed Dividend Payment | 2.42 HKD/share | +44.9% | [57](index=57&type=chunk) - Natural gas retail sales volume recorded a **10.2% increase** for the full year, outperforming the national average. Integrated energy sales volume surged by **75.9%** to **12.042 billion kWh**, with **30%** of projects incorporating renewable energy applications[57](index=57&type=chunk) - The company actively seized industry consolidation opportunities, acquiring operating rights for **20 city gas projects** during the year, which are expected to drive over **2.8 billion cubic meters** of natural gas sales in the next three years. Concurrently, the company invested **RMB 181 million** to enhance digitalization and smart management, with online gas purchases exceeding **50%**[59](index=59&type=chunk)[61](index=61&type=chunk) - The company places high importance on ESG governance, linking management remuneration to ESG indicators and successfully issuing **USD 750 million** in offshore green bonds. MSCI ESG rating improved to **BBB**[65](index=65&type=chunk)[67](index=67&type=chunk) [Management Discussion and Analysis](index=24&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E8%88%87%E5%88%86%E6%9E%90) This section details the operational performance of each business segment, including steady growth in natural gas retail and significant expansion in integrated energy [Natural Gas Retail Business](index=24&type=section&id=%E5%A4%A9%E7%84%B6%E6%B0%A3%E9%9B%B6%E5%94%AE%E6%A5%AD%E5%8B%99) In 2020, natural gas retail sales volume grew by 10.2%, with industrial and commercial users driving the increase, while revenue saw a slight rise due to lower gas prices Natural Gas Retail Sales Volume Analysis (billion cubic meters) | User Type | 2020 Sales Volume | Year-on-Year Growth | Proportion | | :--- | :--- | :--- | :--- | | Industrial & Commercial Users | 16.878 | +13.5% | 76.9% | | Residential Users | 4.185 | +10.1% | 19.1% | | **Total** | **21.953** | **+10.2%** | **-** | [72](index=72&type=chunk) [New User Development](index=25&type=section&id=%E6%96%B0%E7%94%A8%E6%88%B6%E9%96%8B%E7%99%BC) The company successfully developed 28,367 new industrial and commercial users and 2.29 million new household users in 2020, increasing the overall gasification rate - Among new household users developed in 2020, new housing, old housing, and "coal-to-gas" users in rural areas accounted for **74%**, **5%**, and **21%** respectively[78](index=78&type=chunk) [Integrated Energy Business](index=26&type=section&id=%E7%B6%9C%E5%90%88%E8%83%BD%E6%BA%90%E6%A5%AD%E5%8B%99) The integrated energy business achieved rapid growth, adding 21 new projects and significantly increasing energy sales volume, while also initiating hydrogen production projects - Upon full production, the integrated energy demand from projects under construction and already in operation is expected to reach **31.861 billion kWh**[79](index=79&type=chunk)[80](index=80&type=chunk) - The company began construction of its first hydrogen production project in Huludao, Liaoning, and invested in a hydrogen refueling station in Shanghai, serving as a demonstration for promoting hydrogen energy supply[82](index=82&type=chunk) [Value-Added Services](index=27&type=section&id=%E5%A2%9E%E5%80%BC%E6%A5%AD%E5%8B%99) Despite a revenue decline due to the pandemic, value-added services significantly improved gross margin by promoting high-end and smart products, indicating substantial growth potential - Value-added services gross margin increased from **62.2% (2019)** to **77.9% (2020)**[88](index=88&type=chunk) [Business Expansion](index=28&type=section&id=%E6%89%B擴%E5%85%85%E7%B6%93%E7%87%9F%E7%89%88%E5%9C%96) The company expanded its operational footprint by acquiring exclusive operating rights for 20 city gas projects, bringing the total to 235 across 20 provinces and municipalities - The company secured a **30-year exclusive operating right** for the Sino-German Tianjin Daqiuzhuang Eco-City through bidding, a region with a strong industrial base, presenting development opportunities for gas sales and integrated energy services[90](index=90&type=chunk)[91](index=91&type=chunk) [Energy Trading Business](index=29&type=section&id=%E8%83%BD%E6%BA%90%E8%B2%BF%E6%98%93%E6%A5%AD%E5%8B%99) Energy trading (gas wholesale) volume increased by 8.2%, and despite a revenue decrease due to lower LNG prices, gross profit more than doubled - Energy trading business gross margin increased from **0.9% (2019)** to **2.0% (2020)**[93](index=93&type=chunk)[94](index=94&type=chunk) [Financial Review](index=30&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) This section reviews the company's 2020 financial performance, highlighting revenue growth, improved gross margin, strong cash flow, and optimized financial structure 2020 Financial Performance Overview | Indicator | 2020 Value | Year-on-Year Change | | :--- | :--- | :--- | | Revenue | RMB 71.617 billion | +2.0% | | Overall Gross Margin | 17.2% | +1.1 ppt | | Profit Attributable to Owners | RMB 6.278 billion | +10.7% | | Core Profit | RMB 6.237 billion | +18.2% | | Finance Costs | RMB 609 million | -16.2% | [94](index=94&type=chunk)[95](index=95&type=chunk) Financial Resources and Liquidity (as of year-end) | Indicator | 2019 | 2020 | Change | | :--- | :--- | :--- | :--- | | Bank Balances and Cash (RMB million) | 7,373 | 8,630 | +1,257 | | Total Borrowings (RMB million) | 19,145 | 19,684 | +539 | | Net Gearing Ratio | 37.9% | 30.6% | -7.3 ppt | | Unutilized Credit Facilities (RMB million) | 13,448 | 12,001 | -1,447 | [97](index=97&type=chunk) - The company successfully issued **USD 750 million** in ten-year green senior notes in September 2020, to support green projects such as renewable energy and energy efficiency[99](index=99&type=chunk)[231](index=231&type=chunk) - Capital expenditure was **RMB 6.741 billion**, a **24.4% year-on-year decrease**, primarily for piped gas and integrated energy projects[108](index=108&type=chunk) [Governance](index=36&type=section&id=%E7%AE%A1%E6%B2%BB) [Directors and Senior Management](index=36&type=section&id=%E8%91%A3%E4%BA%8B%E8%88%87%E9%AB%98%E7%B4%9A%E7%AE%A1%E7%90%86%E5%B1%A4) This section provides detailed biographies of the company's executive, non-executive, and independent non-executive directors, along with senior management - Mr. Wang Yusuo, the Chairman of the Board, is the Group's founder with over **30 years of experience** in China's energy industry[114](index=114&type=chunk) - The senior management team comprises the Chief Human Resources Officer, Chief Financial Officer, Chief Digital Officer, Executive Vice President, and several Senior Vice Presidents, responsible for core functions such as human resources, finance, digitalization, safety and environmental protection, and regional market sales[119](index=119&type=chunk)[120](index=120&type=chunk) [Corporate Governance Report](index=40&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%A0%B1%E5%91%8A) This report details the company's corporate governance structure and practices, confirming full compliance with the Corporate Governance Code and outlining board and committee functions - The Board of Directors consists of **10 directors**, including **4 executive directors**, **2 non-executive directors**, and **4 independent non-executive directors**, with independent non-executive directors accounting for **40%**, exceeding the Listing Rules' requirement of one-third[141](index=141&type=chunk) - The company has established four Board committees: Audit, Remuneration, Nomination, and Risk Management, as well as four functional committees: Executive, ESG, Share Award, and Independent Directors, to streamline Board duties and enhance governance efficiency[151](index=151&type=chunk)[170](index=170&type=chunk) - The Audit Committee, composed entirely of independent non-executive directors, held **4 meetings** during the year, reviewing financial statements, continuing connected transactions, and the effectiveness of internal control systems[152](index=152&type=chunk)[153](index=153&type=chunk) - The company has established a comprehensive risk management and internal control system covering four stages: risk identification, assessment, response, and monitoring and reporting, with the Board confirming the system's effectiveness and adequacy during the year[176](index=176&type=chunk)[178](index=178&type=chunk) [Directors' Report](index=60&type=section&id=%E8%91%A3%E4%BA%8B%E6%9C%83%E5%A0%B1%E5%91%8A) This report outlines the company's principal activities, business review, performance, dividend distribution, share capital changes, and related party transactions - The Board recommends a final dividend of **HKD 2.10 per share** and a special dividend of **HKD 0.32 per share**, totaling approximately **RMB 2.302 billion**[201](index=201&type=chunk) - As of the end of 2020, Chairman Mr. Wang Yusuo and his spouse, through controlled companies, collectively held approximately **32.84%** of the company's share interests[209](index=209&type=chunk)[225](index=225&type=chunk) - During the reporting period, the company engaged in continuing connected transactions with the controlling shareholder, the Wang family group, primarily involving equipment procurement, engineering construction, IT services, LNG procurement, and receiving station usage services, with annual transaction amounts within the approved limits[229](index=229&type=chunk) - Some of the company's loan agreements require the controlling shareholder, Mr. Wang Yusuo, to maintain a shareholding of no less than **20% or 25%**[231](index=231&type=chunk) [Financial Statements](index=76&type=section&id=%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8) [Independent Auditor's Report](index=76&type=section&id=%E7%8D%A8%E7%AB%8B%E6%A0%B8%E6%95%B8%E5%B8%AB%E5%A0%B1%E5%91%8A) Deloitte Touche Tohmatsu issued an unqualified opinion on the consolidated financial statements, identifying goodwill impairment assessment and fair value measurement of commodity derivatives as key audit matters - The auditor issued a standard unqualified opinion, stating that the financial statements fairly and truly reflect the Group's financial position in accordance with Hong Kong Financial Reporting Standards[237](index=237&type=chunk) - Key audit matters include: - **Goodwill impairment assessment for the integrated energy business**: Due to the significant carrying amount of goodwill (**RMB 2.028 billion**) and the significant estimates involved in determining the recoverable amount - **Fair value measurement of commodity derivative contracts**: Due to the judgment and estimation required in establishing valuation methods and input data [240](index=240&type=chunk)[241](index=241&type=chunk) [Consolidated Financial Statements](index=79&type=section&id=%E5%90%88%E4%BD%B5%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8) The consolidated financial statements show robust financial growth in 2020, with increased revenue, profit attributable to owners, expanding assets, and strong operating cash flow Consolidated Income Statement Summary (RMB million) | Indicator | 2019 | 2020 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 70,183 | 71,617 | +2.0% | | Gross Profit | 11,265 | 12,332 | +9.5% | | Profit for the Year | 6,861 | 7,331 | +6.9% | | Profit Attributable to Owners of the Company | 5,670 | 6,278 | +10.7% | | Basic Earnings Per Share (RMB) | 5.05 | 5.59 | +10.7% | [247](index=247&type=chunk) Consolidated Statement of Financial Position Summary (RMB million) | Indicator | December 31, 2019 | December 31, 2020 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Assets | 81,245 | 90,043 | +10.8% | | Total Liabilities | 50,225 | 53,871 | +7.3% | | Total Equity | 31,020 | 36,172 | +16.6% | [248](index=248&type=chunk)[249](index=249&type=chunk) Consolidated Statement of Cash Flows Summary (RMB million) | Indicator | 2019 | 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 11,690 | 9,696 | | Net Cash Used in Investing Activities | (6,696) | (6,491) | | Net Cash Used in Financing Activities | (5,547) | (1,901) | | Net Increase (Decrease) in Cash and Cash Equivalents | (553) | 1,304 | [253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk) [Notes to the Consolidated Financial Statements](index=86&type=section&id=%E5%90%88%E4%BD%B5%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E9%99%84%E8%A8%BB) These notes provide detailed explanations and supplementary information to the consolidated financial statements, covering accounting policies, segment information, and financial instrument risk management - Segment information shows that in 2020, the natural gas retail business contributed **RMB 40.51 billion** in revenue and **RMB 6.49 billion** in segment profit; the integrated energy business contributed **RMB 5.04 billion** in revenue and **RMB 900 million** in segment profit[334](index=334&type=chunk) - Goodwill impairment testing showed that the carrying amount of goodwill allocated to the integrated energy business was **RMB 2.028 billion**, and management assessed it based on a **5-year cash flow forecast** and a **15.23% discount rate**, finding no impairment[374](index=374&type=chunk)[375](index=375&type=chunk) - The company hedges foreign exchange risk for its USD-denominated debt through foreign currency derivative contracts, with a total notional amount of **USD 750 million**. Concurrently, it hedges price risk for LNG procurement through commodity derivative contracts[398](index=398&type=chunk)

Revenue and Profit - Revenue for the first half of 2020 decreased by 10.8% to RMB 31,543 million compared to RMB 35,344 million in the same period of 2019[5] - Profit attributable to owners of the company fell by 19.9% to RMB 2,693 million, down from RMB 3,362 million year-on-year[5] - Revenue for the six months ended June 30, 2020, was RMB 31,543 million, a decrease of 10.1% from RMB 35,344 million in the same period of 2019[34] - Net profit for the period was RMB 3,165 million, a decline of 19.7% compared to RMB 3,945 million in the same period of 2019[34] - Total comprehensive income for the period was RMB 2,997 million, down from RMB 3,948 million year-on-year[34] - The company’s net profit attributable to owners for the six months ended June 30, 2020, was RMB 5,152 million, an increase from RMB 4,541 million in the same period of 2019[106] Sales and Volume - Total natural gas sales volume increased by 4.8% to 13,832 million cubic meters compared to the previous year[6] - Natural gas retail sales volume increased by 4.0% year-on-year to 10.163 billion cubic meters, while revenue decreased by 10.5% to RMB 18.191 billion due to lower upstream natural gas prices[10] - The gas wholesale business recorded a sales volume of 3.669 billion cubic meters, a year-on-year increase of 6.8%, despite a 15.1% decline in revenue to RMB 7.919 billion due to falling LNG prices[21] - The revenue from integrated energy sales and services was RMB 2,120 million, up from RMB 1,148 million in the previous year, marking an increase of approximately 84.5%[121] User Development and Market Expansion - The number of industrial users developed during the period was 8,326, with a designed daily gas supply capacity of 6,559,072 cubic meters[9] - Cumulative residential users reached 21,945,000, with an average pipeline gasification rate of 61.2%[5] - The company plans to leverage urbanization trends to expand residential user development opportunities[9] - The company plans to focus on expanding its natural gas retail business and aims to increase the number of residential and industrial users[32] Financial Performance and Assets - Gross profit remained stable at RMB 5,602 million, slightly up from RMB 5,598 million year-on-year[34] - The total debt of the company as of June 30, 2020, was RMB 20.72 billion, an increase of RMB 1.575 billion compared to December 31, 2019[35] - Non-current assets increased to RMB 64,443 million as of June 30, 2020, compared to RMB 61,730 million at the end of 2019[35] - Current assets rose to RMB 21,140 million, up from RMB 19,515 million at the end of 2019[35] Cost Management and Efficiency - The overall gross profit margin increased by 2.0 percentage points to 17.8% due to a diversified gas procurement strategy[6] - Gross profit from natural gas retail grew by 9.4% to RMB 3.036 billion, benefiting from diversified upstream procurement and cost savings from imported LNG[10] - The company is focusing on energy efficiency improvements and cost reduction for clients, which is expected to drive sustained growth in energy demand[10] Capital Expenditure and Investments - As of June 30, 2020, the company's capital expenditure for the six-month period was RMB 28.60 billion, primarily for pipeline gas projects and new acquisitions, down from RMB 33.84 billion in the same period of 2019[47] - The company has committed to purchasing LNG from three international suppliers, with contracts starting from 2018 and lasting for five to ten years[146] Debt and Financing - The company has hedged $950 million of its borrowings, achieving a hedging ratio of 75.1% for long-term USD debt as of June 30, 2020, up from 62.0% at the end of 2019[36] - The company plans to issue long-term bonds overseas to replace maturing priority notes, which is expected to improve its net current liabilities significantly[43] - The company has unused bond issuance capacity of RMB 2,900 million and unused credit financing of approximately RMB 10,379 million as of June 30, 2020[111] Shareholder Information and Governance - The company was included in the Hang Seng ESG 50 Index and the Hang Seng Sustainable Development Enterprises Benchmark Index for the first time as of June 30, 2020[27] - The board members re-elected at the annual general meeting on May 13, 2020, received over 96% support from shareholders[57] - The company has adopted the Standard Code for securities trading by directors, ensuring compliance during the six months ending June 30, 2020[60] Risk Management and Compliance - The company continues to focus on enhancing its risk management strategies and hedging policies related to international LNG procurement[54] - The audit committee has reviewed the unaudited interim financial report for the six months ending June 30, 2020, with Deloitte as the independent auditor[56] - The company’s financial statements were prepared based on the going concern basis, indicating confidence in meeting financial obligations in the foreseeable future[111] Acquisitions and Divestitures - The company acquired Zhejiang Pujiang Gaofeng Pipeline Gas Co., Ltd. and Inner Mongolia Huayi Energy Co., Ltd. for a total consideration of RMB 335 million, enhancing its market share in the natural gas retail business[177] - The company sold 100% equity of Wenzhou Xin'ao Transportation Clean Energy Co., Ltd. for RMB 2 million on April 30, 2020[184] - The company sold 55% equity of Dongguan Xin'ao Vehicle Gas Development Co., Ltd. for RMB 55 million on June 5, 2020[184] Stock Options and Employee Incentives - The company has established stock option and share award plans to attract, retain, and motivate key employees, including directors and business consultants[67] - The total number of unexercised options as of June 30, 2020, is 145,000 at an exercise price of HKD 40.34[75] - The company has a total of 15,185,060 share options available for issuance under the 2012 plan, representing 1.35% of the total issued shares[73]

Financial Performance - The company's revenue for the six months ended June 30, 2019, was RMB 35.344 billion, an increase of 33.2% compared to the same period last year[4]. - Gross profit reached RMB 5.598 billion, reflecting a 20.1% increase year-on-year, with a gross margin of 15.8%, down 1.8 percentage points[5]. - Net profit attributable to shareholders was RMB 3.362 billion, an 88.7% increase year-on-year, with basic earnings per share rising to RMB 2.99, up 82.3%[4]. - Total natural gas sales volume reached 13.204 billion cubic meters, a 19.4% increase year-on-year, with retail natural gas sales volume growing by 15.1% to 9.769 billion cubic meters[7]. - The company reported a significant increase in operating cash flow, which grew by 124.9% to RMB 4.294 billion, enhancing its ability to generate free cash flow[7]. - Revenue from integrated energy sales increased by 176.2% to RMB 1.019 billion, with gross profit rising by 635.7% to RMB 206 million[13]. - LNG sales volume recorded 3.435 billion cubic meters, a year-on-year growth of 33.6%, driving energy trading revenue up by 41.5% to RMB 9.33 billion[16]. - The company reported a total comprehensive income of RMB 3,948 million for the period, compared to RMB 2,270 million in the same period of the previous year[82]. - The company declared dividends totaling RMB 1,176 million for the period, consistent with the previous year, indicating a stable dividend policy[88]. User Growth and Market Expansion - The number of new residential users added was 1,287, while new industrial and commercial users increased by 12,110 locations during the period[4]. - The cumulative number of residential users reached 19.787 million, a 14.4% increase year-on-year, while industrial and commercial users totaled 133.209 million, up 30,566 locations[4]. - The group developed 12,110 industrial users during the period, with a daily designed gas supply capacity of 8,637,801 cubic meters, of which 33.3% were new users under the "coal-to-gas" initiative[9]. - The company acquired exclusive operating rights for 14 city gas projects and expanded into 3 new operational areas, covering an additional population of 2.45 million, which is expected to drive 800 million cubic meters of natural gas sales over the next three years[19]. - The company is positioned to benefit from national policies promoting natural gas consumption, with a target of 360 billion cubic meters by 2020[23]. Debt and Financial Management - The total debt of the company as of June 30, 2019, was RMB 19.181 billion, a decrease of RMB 1.068 billion from December 31, 2018, primarily due to cash generated from operating activities[26]. - The company's net debt ratio decreased to 40.8% as of June 30, 2019, down from 48.2% as of December 31, 2018[26]. - The company's short-term debt as a percentage of total debt decreased from 57.1% at the end of the previous year to 43.3% as of June 30, 2019, improving the net current liabilities to RMB 10.449 billion[33]. - The company plans to repay two bonds totaling RMB 2.944 billion due in 2019, including a $65 million unsecured bond maturing in October, which will be repaid using internal resources[31]. - The company has unutilized credit facilities of approximately RMB 10,374 million, ensuring sufficient liquidity for future obligations[96]. Governance and Compliance - The company has established an ESG committee to enhance management of environmental, social, and governance performance[21]. - The company formed an Environmental, Social, and Governance (ESG) Committee on March 21, 2019, to support the board in developing ESG strategies and overseeing their implementation[48]. - The company established an Audit Committee in accordance with the Listing Rules to review accounting principles and practices, as well as discuss audit, internal control, risk management, and financial reporting matters[45]. - Deloitte Touche Tohmatsu was appointed as the independent auditor for the fiscal year ending December 31, 2019, with over 98% shareholder approval at the annual general meeting held on May 30, 2019[45]. Share Options and Employee Incentives - The company has implemented stock option and share award plans to attract, retain, and motivate key employees, including directors and business consultants[54]. - The total number of share options available under the 2002 plan is 200,000 shares, representing 0.02% of the company's issued shares[59]. - The company’s governance and other information indicate a structured approach to share option grants, ensuring alignment with performance targets[59]. - The company adopted a share incentive plan on November 30, 2018, which is effective for ten years until November 29, 2028[67]. - The total number of unexercised options as of June 30, 2019, was 17,953,035, indicating a significant potential dilution for shareholders[157]. Acquisitions and Investments - The company acquired 80% of Fujian Minsheng Gas Co., Ltd. for RMB 40 million on February 12, 2019[164]. - The total consideration for the acquisition of Jin Hong Gas was RMB 258 million, with a net asset value of RMB 273 million[165]. - The company invested approximately RMB 38 million in Cangzhou Nandagang Management Area Shengde Gas Co., Ltd. to acquire 65% of its registered capital[164]. - The company aims to expand its market share through acquisitions in the natural gas retail business[164]. - The company plans to continue engaging with local governments and potential sellers to acquire local operating rights and energy-related assets[170].

Financial Performance - Total revenue for the year increased by 25.7% to RMB 60.698 billion, compared to RMB 48.269 billion last year, driven by a rise in gas sales volume and average selling prices [12]. - Annual profit increased by 3.9% to RMB 3.818 billion, with a net profit margin of 6.3%, down 1.3 percentage points year-on-year [13]. - Adjusted net profit attributable to shareholders grew by 19.8% to RMB 4.471 billion, excluding other income and expenses [13]. - The gross profit margin was 15.7%, a decrease of 1.6 percentage points, primarily due to changes in revenue structure [13]. - The company reported a total of 3,620 million RMB in joint ventures in 2018, a slight decrease from 3,929 million RMB in 2017, indicating a decline of about 7.9% [49]. - The company’s net profit for the year was RMB 3,818 million, up from RMB 3,673 million in 2017, indicating a growth of 3.9% [194]. - The total comprehensive income for the year was RMB 3,777 million, compared to RMB 3,543 million in 2017, showing an increase of 6.6% [194]. - The company reported a foreign exchange gain of RMB 635 million in 2018, compared to a loss of RMB 358 million in 2017, showing a significant improvement [200]. Revenue Sources - Total natural gas sales volume reached 23.328 billion cubic meters, representing an annual growth of 18.9% [12]. - Pipeline gas sales revenue rose by 31.3% to RMB 31.434 billion, accounting for 51.8% of total revenue [12]. - The company’s energy sales revenue accounted for 88.0% of total revenue, indicating an optimized business mix [14]. - The average gas selling price increased, contributing to the overall revenue growth [12]. - The company sold 5.958 billion cubic meters of natural gas through its energy trading business, marking a 15.9% annual growth [60]. - The revenue from the energy trading business reached RMB 1.8107 billion, reflecting a substantial annual increase of 241.8% [60]. User Growth and Market Expansion - The number of industrial and commercial users served reached 121,105, with an annual increase of 29,226 users [14]. - The total number of residential users connected reached 18,523 thousand households in 2018, up from 16,221 thousand in 2017, representing a growth of approximately 14.2% [49]. - The company is focusing on expanding its customer base in industrial and residential markets, leveraging its large end-user customer base [20]. - The company plans to enhance its natural gas distribution business and actively engage in LNG imports and storage facility investments [20]. - The company has secured exclusive operating rights for 18 pipeline gas projects, bringing the total number of urban gas projects in China to 187, covering a population of approximately 94.57 million [15]. Project Development and Operations - The company completed construction and commenced operation of 31 integrated energy projects during the year, bringing the total to 62 projects [14]. - The total number of integrated energy projects in operation increased to 62, including 18 park-type and 44 standalone projects [60]. - A total of 257 new integrated energy projects were signed during the year, with a potential annual sales scale exceeding 100 billion kWh, increasing the total number of projects to 323, with an annual energy usage scale of 122 billion kWh [62]. Financial Health and Investments - The company received a credit rating upgrade to BBB+ from S&P with a "stable" outlook, while Moody's maintained a Baa2 rating and Fitch retained a BBB rating, indicating strong financial resources for long-term development [17]. - The company’s total borrowings amounted to RMB 20.249 billion as of December 31, 2018, an increase of RMB 2.182 billion from the previous year [68]. - The net debt ratio improved to 48.2% as of December 31, 2018, down from 49.9% in the previous year, indicating a stronger capital structure [68]. - The company has established a comprehensive risk management policy to mitigate foreign exchange risks associated with its foreign currency-denominated bonds and loans [73]. Corporate Governance - The company emphasizes strong corporate governance as a key factor in enhancing shareholder value and trust [81]. - The board of directors has adopted the Corporate Governance Code as the main guideline for governance practices since listing on the Hong Kong Stock Exchange [82]. - The company has implemented the standard code for securities trading for its directors and senior management, ensuring compliance with trading restrictions and disclosure requirements [83]. - The board consists of 10 members, including 5 executive directors and 4 independent non-executive directors, ensuring diverse expertise in legal, accounting, finance, and governance [86]. Sustainability and Social Responsibility - The company is committed to sustainability, aiming for a 50% reduction in carbon footprint by 2025 [78]. - Charitable donations made by the group during the year reached RMB 73.15 million [143]. - The company maintains a dividend policy that allows shareholders to share in profits while reserving sufficient reserves for future development, with a minimum annual dividend of 15% of the consolidated annual profit attributable to shareholders [140]. Related Party Transactions - The company engaged in related party transactions with the Wang family group, including energy efficiency technology services amounting to RMB 187,640,000 against an annual cap of RMB 594,000,000 [165]. - The independent non-executive directors reviewed the related party transactions and confirmed they were fair and reasonable, benefiting the company's shareholders [167]. Shareholder Engagement - The company emphasizes effective communication with shareholders, ensuring timely access to comprehensive and clear information regarding financial performance and strategic goals [129]. - The company encourages shareholder participation in annual general meetings to ensure accountability and timely understanding of the group's strategies and developments [129]. - The company’s independent auditor is invited to attend the annual general meeting to address questions related to audit work and independence [129].