华电国际电力股份(01071) - 2019 - 中期财报

Business Review and Company Overview The Group reported increased turnover and profit, expanded its power generation assets across 14 provinces, and continued capacity growth with new units and ongoing construction projects Financial and Operational Highlights During this period, the Group achieved year-on-year growth in both turnover and profit, with turnover approximately RMB 43.263 billion, a 4.90% increase, and profit attributable to equity holders of the company approximately RMB 1.638 billion; the Board recommended no interim dividend | Metric | Amount | YoY Change | | :--- | :--- | :--- | | Turnover | RMB 43.263 billion | +4.90% | | Profit attributable to equity holders of the company | RMB 1.638 billion | - | | Profit attributable to shareholders of the company | RMB 1.417 billion | - | | Basic Earnings Per Share | RMB 0.144 | - | - The Board recommended no interim dividend for this period[4] Major Assets Overview The Group is one of China's large integrated energy companies, primarily engaged in power plant construction and operation, with generation assets across 14 provinces and a total controlled installed capacity of 53,542.5 MW as of the reporting date, predominantly coal-fired power - The Group's primary business involves constructing and operating power plants, with assets distributed across 14 provinces, autonomous regions, and municipalities nationwide, mainly located in power load centers, heat load centers, or coal-rich areas[4] | Asset Type | Controlled Installed Capacity (MW) | | :--- | :--- | | Coal-fired Power | 40,885 | | Gas-fired Power | 6,411.1 | | Renewable Energy (Hydro, Wind, Solar, etc.) | 6,246.4 | | Total | 53,542.5 | - The report details the specific conditions of the Group's 60 controlled power plants, including installed capacity, company equity, and unit composition for coal-fired, gas-fired, and renewable energy units[5][12] Capacity Changes and Projects Under Construction From the beginning of the year to the reporting date, the Group added 3,590.1 MW of new generating unit capacity, primarily coal-fired and gas-fired, while 5,116.9 MW of various units are under construction, indicating ongoing capacity expansion | Unit Type | New Installed Capacity (MW) | | :--- | :--- | | Coal-fired Power | 1,660 | | Gas-fired Power | 1,746.6 | | Wind Power | 49.5 | | Solar Power | 134 | | Total | 3,590.1 | | Unit Type | Planned Installed Capacity (MW) | | :--- | :--- | | Coal-fired Units | 2,350 | | Gas-fired Units | 1,373.6 | | Hydroelectric Units | 354 | | Wind Power Units | 1,039.3 | | Total | 5,116.9 | Management Discussion and Analysis The Group's performance benefited from increased power generation and favorable market conditions, leading to profit growth and improved financial leverage, despite facing macroeconomic and market-specific challenges Macroeconomy and Power Demand In the first half of 2019, China's macroeconomy maintained growth, but electricity consumption growth slowed, with GDP increasing by 6.3% year-on-year, while total electricity consumption grew by 5.0%, a 4.4 percentage point decrease in growth rate - China's GDP grew by 6.3% year-on-year in the first half of 2019[18] - National total electricity consumption increased by 5.0% year-on-year, with the growth rate decreasing by approximately 4.4 percentage points; among these, electricity consumption by the tertiary industry and urban and rural residents grew faster, by 9.4% and 9.6% respectively[18] Production and Operations During this period, the Group's power generation and on-grid electricity both increased by over 5.5% year-on-year, primarily due to new units, with coal-fired unit utilization hours at 2,202 and coal consumption for power supply significantly below the national average, reflecting high operational efficiency | Metric | Value | YoY Change | | :--- | :--- | :--- | | Power Generation | 101.13 million MWh | +5.54% | | On-grid Electricity | 94.54 million MWh | +5.66% | | Average Utilization Hours of Generating Units | 1,927 hours | - | | Average Utilization Hours of Coal-fired Units | 2,202 hours | - | | Coal Consumption for Power Supply | 294.92 g/kWh | - | Financial Performance Analysis Benefiting from increased power generation, falling coal prices, and rising electricity tariffs, the Group's turnover and operating profit both grew, while some operating expenses like maintenance and staff costs increased significantly, and finance costs decreased Revenue and Profit Turnover for this period increased by 4.90% year-on-year, primarily driven by a 9.12% growth in electricity sales revenue, while operating profit surged by 23.21% due to falling coal prices, increased power generation, and higher electricity tariffs (excluding tax) | Revenue Item | Amount | YoY Change | | :--- | :--- | :--- | | Electricity Sales Revenue | RMB 34.412 billion | +9.12% | | Heat Sales Revenue | RMB 3.172 billion | +12.81% | | Coal Sales Revenue | RMB 5.680 billion | -17.62% | | Total Turnover | RMB 43.263 billion | +4.90% | - Operating profit was approximately RMB 4.297 billion, an increase of approximately 23.21% year-on-year, primarily due to falling coal prices, increased power generation, and higher electricity tariffs (excluding tax)[20] Major Operating Expenses Fuel costs, the largest expense, increased by 5.87% year-on-year with higher power generation, while maintenance and staff costs rose significantly by 25.14% and 32.33% respectively, and administrative expenses sharply declined due to a higher base in the prior period | Expense Item | Amount (RMB billion) | YoY Change | Primary Reason | | :--- | :--- | :--- | :--- | | Fuel Costs | 21.755 | +5.87% | Increased power generation | | Coal Sales Costs | 5.313 | -18.40% | Changes in coal prices and sales volume | | Depreciation and Amortization | 5.553 | +8.02% | Newly commissioned units and accounting standard changes | | Maintenance, Upkeep, and Inspection Expenses | 1.856 | +25.14% | Increase in consumable material costs | | Staff Costs | 2.854 | +32.33% | Growth in employee remuneration and timing differences in cost recognition | | Administrative Expenses | 0.592 | -26.19% | Impact of coal mine relocation compensation in prior period | Other Income and Finance Costs Net other income and gains surged by 56.24% year-on-year, mainly from increased sales of power generation by-products, while finance costs slightly decreased by 1.92% due to lower funding costs; however, profit from associates and joint ventures fell by 28.27%, primarily impacted by reduced earnings from equity-invested coal mining companies - Net other income and gains were approximately RMB 0.592 billion, an increase of approximately 56.24% year-on-year, mainly due to increased sales revenue from power generation by-products such as fly ash[22] - Finance costs were approximately RMB 2.650 billion, a decrease of approximately 1.92% year-on-year, primarily due to a lower funding cost rate[23] - Profit from associates and joint ventures was approximately RMB 0.321 billion, a decrease of approximately 28.27% year-on-year, primarily due to the impact of lower earnings from equity-invested coal mining companies[23] Financial Position and Liquidity As of period-end, the Group secured borrowings through asset pledges and mortgages, with overall debt slightly decreasing and the debt-to-asset ratio falling to 68.40%, while contingent liabilities remained small and cash and cash equivalents were ample Asset Pledges and Mortgages As of June 30, 2019, the Group pledged electricity and heat tariff collection rights of approximately RMB 20.073 billion and mortgaged generating units and related assets of approximately RMB 3.374 billion to secure borrowings - Electricity and heat tariff collection rights were pledged to secure borrowings of approximately RMB 20.073 billion[24] - Generating units and related equipment, land use rights, and mining rights were mortgaged to secure borrowings of approximately RMB 3.374 billion[24] Debt Position At period-end, the Group's total borrowings were approximately RMB 99.425 billion, with a debt-to-asset ratio of 68.40%, a 1.60 percentage point decrease from end-2018, indicating improved financial leverage | Metric | Amount (RMB) | | :--- | :--- | | Total Borrowings | Approximately RMB 99.425 billion | | Debt-to-Asset Ratio | 68.40% | | Balance of Super Short-term Commercial Papers | Approximately RMB 9.643 billion | | Balance of Medium-term Notes Payable | Approximately RMB 10.480 billion | | Balance of Lease Liabilities | Approximately RMB 3.106 billion | Contingent Liabilities and Cash Flow The Group has a contingent liability of RMB 43.58 million for a bank loan guarantee, and held approximately RMB 9.203 billion in cash and cash equivalents at period-end - As of June 30, 2019, the Group's subsidiary, Guang'an Company, provided a bank loan guarantee of RMB 43.58 million for Sichuan Huaying Mountain Longtan Coal Industry Co., Ltd[26] - As of June 30, 2019, the Group held cash and cash equivalents of approximately RMB 9.203 billion[26] Business Outlook and Risks The Group anticipates positive impacts from national policies on economic growth and financing costs, while actively managing risks related to power and coal markets, funding, and environmental regulations Business Outlook The Group anticipates benefiting in the second half from favorable national policies such as expanded opening-up, increased infrastructure investment, tax cuts, and a relaxed financing environment, which will drive economic growth, enhance operating performance, and reduce financing costs - Favorable national policies provide advantageous conditions for the Group to improve quality and efficiency, including: - Expanded opening-up and increased infrastructure investment driving economic growth - Continued tax cuts and fee reductions boosting operating performance - A relatively relaxed financing environment helping to lower financing costs[27] Key Risk Analysis The Group faces challenges in four areas: power, coal, capital markets, and environmental protection, with uncertain electricity demand and intensified market competition potentially impacting generation efficiency, high coal prices and supply concentration posing systemic risks, regional imbalances in the capital market, and rising environmental standards increasing operating costs - Electricity Market Risk: Downward economic pressure leads to uncertain electricity demand growth, and intensified market competition may result in declining power generation efficiency; the Group will strengthen market research and optimize bidding strategies[27] - Coal Market Risk: Coal prices remain high, and production concentration in the "Sanxi" region increases transportation dependence and systemic risks; the Group will adjust its coal procurement strategy, optimize channels, and reduce costs[27] - Capital Market Risk: Although capital market costs are slowly decreasing, regional credit imbalances persist; the Group will broaden financing channels, reduce costs, and control risks[28] - Environmental Protection Risk: Increasingly stringent environmental protection requirements lead to higher operating and maintenance costs for environmental facilities; the Group will strengthen daily management and operation of environmental protection facilities[28] Corporate Governance and Shareholder Information The company underwent significant board changes and related party transactions, while maintaining a stable shareholder structure and adhering to stringent corporate governance practices Significant Events During the reporting period, the company underwent significant board member changes, including resignations and new appointments for the chairman, vice chairman, and several directors, and also injected RMB 0.71064 billion into associate Huadian Jinshajiang Upstream Hydropower Development Co., Ltd. to support its development strategy - The company convened an extraordinary general meeting to elect and appoint Mr. Wang Xuxiang, Mr. Chen Haibin, Mr. Tao Yunpeng, and Mr. Chen Cunlai as company directors[29] - Former Chairman Mr. Zhao Jianguo, Vice Chairman Mr. Chen Bin, and Non-executive Director Mr. Chu Yu resigned due to work or age reasons[30] - The company participated in the capital increase of Huadian Jinshajiang, contributing RMB 0.71064 billion in cash based on a 12% equity stake, which constitutes a connected transaction[32][33] Shareholder Information As of June 30, 2019, controlling shareholder China Huadian Corporation held 45.97% of the company's A shares and 0.87% of H shares, with other major shareholders including Shandong Development Investment Holding Group Co., Ltd. and BlackRock, Inc. | Shareholder Name | Share Class | Shareholding Percentage (of total share capital) | | :--- | :--- | :--- | | China Huadian | A Shares & H Shares | 46.84% (Total) | | Shandong Development Investment Holding Group Co., Ltd. | A Shares | 8.12% | | BlackRock, Inc. | H Shares | 1.01% | - Non-executive Director Mr. Gou Wei personally holds 10,000 of the company's A shares[38] Corporate Governance Practices The company asserts its corporate governance meets Hong Kong Listing Rules requirements and adopts stricter standards in some areas, such as establishing a strategy committee and formulating specific securities dealing codes for directors, supervisors, and all employees - The company complied with the code provisions of the Corporate Governance Code set out in Appendix 14 of the Hong Kong Listing Rules[45] - The company's adopted corporate governance is stricter than the code provisions, as evidenced by: - Establishing specific securities dealing codes for directors, supervisors, and employees - Setting up a Strategy Committee in addition to the Audit, Remuneration and Appraisal, and Nomination Committees - Having an Audit Committee composed of five members, exceeding the regular requirement[45] Condensed Consolidated Financial Statements The condensed consolidated financial statements, reviewed with an unmodified conclusion, show significant profit growth, a stable financial position, and detailed notes on accounting policy changes, revenue, related party transactions, and liquidity management Review Report International auditor BDO Limited, Hong Kong, reviewed the Group's interim condensed consolidated financial statements and issued an unmodified review conclusion, deeming the statements prepared in all material respects in accordance with International Accounting Standard 34 - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410[49] - The review conclusion stated that nothing had come to their attention that caused them to believe the condensed consolidated financial statements were not prepared in all material respects in accordance with International Accounting Standard 34[50] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2019, the Group achieved turnover of RMB 43.263 billion, a 4.9% year-on-year increase, with profit for the period significantly growing by 72.2% to RMB 2.101 billion from RMB 1.220 billion in the prior period, and basic earnings per share at RMB 0.144 | Item (RMB thousand) | 2019 H1 (Unaudited) | 2018 H1 (Unaudited) | | :--- | :--- | :--- | | Turnover | 43,263,433 | 41,241,534 | | Operating Profit | 4,297,375 | 3,487,863 | | Profit Before Tax | 2,612,297 | 1,647,526 | | Profit for the Period | 2,100,553 | 1,220,044 | | Profit attributable to equity holders of the company | 1,637,885 | 1,041,312 | | Basic Earnings Per Share (RMB) | 0.144 | 0.106 | Condensed Consolidated Statement of Financial Position As of June 30, 2019, the Group's total assets were RMB 229.308 billion, total liabilities RMB 156.846 billion, and net assets RMB 72.462 billion, showing an increase in net assets compared to end-2018 and maintaining a sound financial position | Item (RMB thousand) | June 30, 2019 (Unaudited) | December 31, 2018 (Audited) | | :--- | :--- | :--- | | Non-current Assets | 200,573,297 | 201,724,007 | | Current Assets | 28,734,422 | 25,772,114 | | Total Assets | 229,307,719 | 227,496,121 | | Current Liabilities | 73,928,488 | 75,534,410 | | Non-current Liabilities | 82,917,380 | 83,719,847 | | Total Liabilities | 156,845,868 | 159,254,257 | | Net Assets | 72,461,851 | 68,241,864 | Condensed Consolidated Statement of Changes in Equity During this period, the Group's total equity increased from RMB 68.242 billion at the beginning to RMB 72.462 billion at the end, primarily due to profit for the period, issuance of perpetual capital securities, and non-controlling shareholder contributions, partially offset by dividends paid - Total equity increased from RMB 68.242 billion at the end of 2018 to RMB 72.462 billion as of June 30, 2019[56] - Key items in equity changes include: total comprehensive income for the period of RMB 2.123 billion, issuance of perpetual capital securities of RMB 2.994 billion, and dividends paid of RMB 0.651 billion[56] Condensed Consolidated Statement of Cash Flows During this period, the Group generated net cash of RMB 6.277 billion from operating activities, had net cash outflow of RMB 4.139 billion from investing activities, and net cash inflow of RMB 0.427 billion from financing activities, with cash and cash equivalents increasing by RMB 2.565 billion to RMB 9.203 billion at period-end | Item (RMB thousand) | 2019 H1 (Unaudited) | 2018 H1 (Unaudited) | | :--- | :--- | :--- | | Net cash from operating activities | 6,276,958 | 4,249,826 | | Net cash used in investing activities | (4,138,890) | (7,119,171) | | Net cash from financing activities | 426,865 | 2,016,256 | | Increase/(Decrease) in cash and cash equivalents | 2,564,933 | (853,089) | | Cash and cash equivalents at end of period | 9,203,259 | 6,563,712 | Notes to the Financial Statements The notes to the financial statements detail accounting policies, key accounting estimates, and specifics of each statement item, including the impact of adopting IFRS 16 "Leases" from January 1, 2019, turnover composition, significant related party transactions, and liquidity risk management measures Changes in Accounting Policies (IFRS 16) Effective January 1, 2019, the Group adopted IFRS 16 "Leases" using the modified retrospective approach, resulting in the recognition of approximately RMB 10.025 billion in right-of-use assets and RMB 3.408 billion in lease liabilities at inception, significantly impacting the statement of financial position without restating comparative periods - The Group applied IFRS 16 using the modified retrospective approach, with the cumulative effect of initial application recognized in retained earnings on January 1, 2019, and comparative information not restated[64] | Impact of Adjustments to Opening Balances as at January 1, 2019 (RMB thousand) | Increase / (Decrease) | | :--- | :--- | | Right-of-use assets | 10,024,834 | | Property, plant and equipment | (4,559,281) | | Prepaid leases | (3,553,529) | | Intangible assets | (1,549,118) | | Lease liabilities | 3,408,478 | | Finance lease payables | (3,014,378) | Revenue The Group's turnover primarily derives from electricity, heat, and coal sales, with electricity sales being the main revenue source, accounting for 79.5% of total turnover and achieving a 9.12% year-on-year growth this period | Revenue Category (RMB thousand) | 2019 H1 | 2018 H1 | | :--- | :--- | :--- | | Electricity sales revenue | 34,411,588 | 31,534,768 | | Heat sales revenue | 3,171,501 | 2,811,439 | | Coal sales revenue | 5,680,344 | 6,895,327 | | Total | 43,263,433 | 41,241,534 | Related Party Transactions The Group engages in extensive daily operating transactions with its parent company China Huadian, its fellow subsidiaries, and associates, including purchasing coal, obtaining loans, and paying interest and rent from related parties, while also providing guarantees for related parties and receiving guarantees from the parent company - Significant related party transactions include: purchasing coal from associates and fellow subsidiaries, totaling over RMB 2.14 billion; and obtaining loans from associates and fellow subsidiaries, totaling over RMB 3 billion[128][130] - At period-end, the Group's outstanding shareholder loans from parent company China Huadian amounted to RMB 1.75 billion, and outstanding loans from associate China Huadian Finance amounted to RMB 7.76 billion[134] - The Group provided a bank loan guarantee of RMB 43.58 million for associate Longtan Coal Power Company, while also receiving bank loan guarantees of RMB 2.764 billion from parent company China Huadian[136][137] Liquidity Risk Management Despite a net current liability of RMB 45.194 billion at the reporting period end, management mitigates liquidity risk by maintaining ample cash reserves and available credit lines, with unused bank credit facilities totaling RMB 139.1 billion and unissued bond quotas of RMB 35 billion at period-end, demonstrating sufficient financing capacity for short-term liquidity needs - At the end of the reporting period, the Group's net current liabilities amounted to RMB 45.194 billion[152] - To manage liquidity risk, as of June 30, 2019, the Group had unused bank credit facilities totaling RMB 139.1 billion and unissued bond quotas of RMB 35 billion[152]