Letter to Investors In 2019, the company achieved healthy development amid challenges, secured Beijing Energy Group as a strategic shareholder, and shifted its operational focus to refined management 2019 Performance Overview | Metric | 2019 Data | | :--- | :--- | | Revenue | Approx. RMB 2,168 million | | Clean Energy Installed Capacity | Approx. 2 GW | | Annual Green Power Generation | Approx. 3,172,916 MWh | - On February 18, 2020, Beijing Energy Group (BEH) became the largest shareholder with an approximate 32% stake after subscribing to roughly 7.177 billion new shares, positioning the company as its key platform for clean energy and overseas business[4],[5] - The company shifted its operational focus from "scale expansion through extensive management" to "quality and efficiency improvement through refined management," effectively reducing operational costs[6] - In 2019, the company received a total of RMB 871 million from the fifth, sixth, and seventh batches of renewable energy subsidies, which improved the cash flow of its power stations[7] - The company plans to expand beyond its photovoltaic base into wind, hydrogen, and energy storage to build a green, multi-energy, and intelligent clean energy ecosystem[10] Company Profile and Information Company Profile The company is a leading eco-development solutions provider focused on investing in and operating renewable energy power stations Company Scale as of December 31, 2019 | Metric | Value | | :--- | :--- | | Number of Renewable Energy Power Stations | 61 | | Total Installed Capacity | Approx. 2 GW | | 2019 Green Power Generation | Approx. 3,172,916 MWh | Corporate Information This section provides basic corporate data, including board members, committees, auditors, legal advisors, and principal banks - The company's auditor is PricewaterhouseCoopers (PwC)[12] Biographies of Directors and Senior Management This section details the professional backgrounds and industry experience of the company's directors and senior management - Mr. Zhang Ping was appointed as Executive Director, Chairman of the Board, and CEO on February 21, 2020; he is also the Assistant to the General Manager of the controlling shareholder, BEH, with over 30 years of experience in the energy industry[13] - Mr. Huang Hui was appointed as Chief Financial Officer on February 21, 2020; he also serves as a director and deputy general manager of the controlling shareholder's subsidiary, Beijing Energy Group (Hong Kong) Co, Limited, possessing extensive financial and management experience[22] 2019 Major Events and Awards In 2019, the company achieved significant milestones, including a major share issuance and a strategic partnership with BEH - In March 2019, the company successfully completed a new share issuance to institutions including China Merchants New Energy and Huarong Overseas, raising over HK$1.7 billion[24] - In August 2019, the company signed a Memorandum of Understanding with BEH, indicating BEH's intention to become a strategic investor[26] - In December 2019, the 50MW Baotou Top Runner project in Inner Mongolia was successfully connected to the grid, becoming the company's sixth Panda Solar Power Plant[27] - The company received multiple honors, including the "Most Socially Responsible Hong Kong Stock Listed Company Award" and a top ten ranking for "Brand Value of Power Plant Investors in 2018"[25],[28] Management Discussion and Analysis Business Review In 2019, the Group focused on managing its solar power business, divesting assets to improve quality and efficiency Power Station Portfolio Change (2018 vs 2019) | Metric | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Number of Power Stations | 61 | 74 | | Total Installed Capacity (MW) | 1,979.2 | 2,329.6 | - In line with the Group's strategy to enhance quality and development efficiency, all solar power plants in the UK and certain plants in China were disposed of during the year[37] Power Generation from Continuing Operations | Year | Total Power Generation (MWh) | Y-o-Y Growth | | :--- | :--- | :--- | | 2019 | 3,172,916 | +2.03% | | 2018 | 3,109,894 | - | Financial Review The Group recorded a significant loss of RMB 3.495 billion in 2019, primarily due to substantial non-cash impairment charges Annual Loss and Key Reasons (RMB) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Loss for the year | 3.495 billion | 454 million | | Impairment of intangible assets | 1.362 billion | 279 million | | Provision for loss on financial assets | 1.094 billion | - | | Impairment of property, plant and equipment | 958 million | - | | Loss on disposal of subsidiaries | 302 million | - | Core Financial Indicators from Continuing Operations (RMB) | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 2.168 billion | 2.023 billion | | EBITDA | 1.920 billion | 1.700 billion | - An impairment loss on development rights of RMB 831 million was mainly due to the Tibetan government's policy of lowering on-grid tariffs for hydropower[50] - An impairment loss on concession rights of RMB 531 million was due to regional power curtailment issues and uncertainty regarding the exercise of rights nearing expiration[51] - An impairment loss on property, plant and equipment of RMB 797 million was mainly due to persistent regional power curtailment issues in northwestern provinces affecting future earnings[52] - A loss on impairment of financial assets of RMB 1.094 billion was recognized for deposits and other receivables for potential projects, as management was not optimistic about their recoverability due to a lack of progress[53] Liquidity, Financial Resources, and Capital Structure The Group's gearing ratio increased to 81.4% due to equity reduction from impairments, and it faces liquidity pressure Capital Structure Change (RMB million) | Indicator | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Borrowings | 18,875 | 22,773 | | Net Debt | 15,911 | 19,553 | | Total Equity | 3,641 | 5,870 | | Gearing Ratio | 81.4% | 76.9% | Key Performance Indicators | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | EBITDA Margin | 89% | 84% | | Debt to EBITDA Ratio | 8.3 | 11.5 | | Interest Coverage Ratio | 2.15 | 1.77 | - After the year-end, the Group failed to comply with non-financial covenants of a US$150 million bank loan, triggering cross-default clauses for other borrowings of approximately RMB 6.846 billion; however, directors believe immediate repayment will not be demanded, and BEH has agreed to provide financial support to ensure the company's sustainable operation[63] Material Events After the Financial Period Post-period end, the company issued new senior notes and completed a directed share issuance to BEH - In January 2020, the company successfully issued new senior notes with a principal amount of approximately US$372 million to settle existing senior notes due in January 2020[71] - In February 2020, the company completed the allotment and issuance of 7.177 billion subscription shares to BEH, with gross proceeds of approximately HK$1.795 billion[72] Response to Auditor's Disclaimer of Opinion The company formed an independent committee to investigate matters leading to the auditor's disclaimer of opinion - The auditor's disclaimer of opinion relates to three incidents: (i) deposits and other payments to NEX Group; (ii) a deposit to Shenzhen Zhiyuan; and (iii) a payment to Partner A of Haozhen Partnership[76] - The company established an Independent Investigation Committee, comprising independent non-executive directors, and engaged KPMG to investigate; the draft report indicates the incidents were solely related to former directors Mr. Li Yuan and Mr. Li Hong[76] - The company has recognized the deposits paid to NEX Group and Shenzhen Zhiyuan as an impairment loss, which will not have a continuing impact on the company's development[77] - The payment made to Partner A of Haozhen Partnership has been recovered through a settlement arrangement and will not have a continuing impact on the company's development[77] Corporate Governance Report Board of Directors and Committees The Board's composition changed significantly, with its five committees overseeing governance, audit, and risk functions - As of the end of the reporting period, the Board consisted of twelve directors, including three executive, five non-executive, and four independent non-executive directors, in compliance with Listing Rules[85] - On February 21, 2020, Mr. Zhang Ping was appointed as both Chairman and CEO, a deviation from the Corporate Governance Code's provision that these roles should be separate[88] - The Audit Committee, chaired by Mr. Kwan Kai Cheong who has professional accounting qualifications, comprises two independent non-executive directors and one non-executive director; it held three meetings during the year to review financial reports and internal controls[96],[97] - The Risk Control Committee and the Strategy Committee did not hold any meetings during 2019[109],[110] Internal Control and Risk Management The Board is responsible for the risk management and internal control systems, which are reviewed annually by KPMG - The Board confirms its responsibility for the risk management and internal control systems and reviews their effectiveness annually through the Audit Committee[121] - The company has engaged KPMG to review its internal controls for the year ended December 31, 2019, and will enhance its internal control management based on their recommendations[121] - The Group's principal identified risks include: weather and climate risk, policy risk, development and construction risk, operation and maintenance risk, competition risk, and financial risk[122],[123],[124],[125],[126] Shareholder Communication and Rights The company maintains a shareholder communication policy and outlines procedures for shareholders to convene meetings or propose motions - Shareholders holding not less than one-tenth of the paid-up capital of the company carrying voting rights may request the Board to convene a special general meeting by written requisition[132] - Shareholders may nominate a candidate for election as a director at a general meeting, subject to the procedures and notice periods set out in Article 85 of the Company's Articles of Association[133] Report of the Directors Principal Business and Performance The Group is an investment holding company focused on renewable energy projects and does not recommend a dividend for the year - The Directors do not recommend the payment of any dividend for the year ended December 31, 2019[140] Major Customers and Suppliers The Group has a high concentration of customers, with the top five accounting for 100% of total revenue in 2019 - The Group's largest customer and five largest customers accounted for approximately 20% and 100% of total revenue, respectively[142] Share Option Scheme The report details the status of share options granted under the company's scheme, with 483 million options available for issue - As of August 24, 2020, 482,845,548 share options were available for issue under the Share Option Scheme, representing approximately 2.15% of the total issued shares[160] Interests of Substantial Shareholders The company's major shareholders include China Merchants Group and China Huarong, with BEH becoming a key shareholder post-period - Jingneng Investment (a wholly-owned subsidiary of BEH) holds an interest in 7,176,943,498 shares, representing 47.06% of the issued shares (a post-period event reflected in the register)[163],[166] - China Merchants Group and its parties acting in concert held a combined interest of approximately 25.13%[163] - China Huarong Asset Management Co, Ltd and Huaqing Photovoltaic Co, Limited each held an interest of approximately 19.99%[164] Connected Transactions The company engaged in several discloseable connected transactions, including share issuances and asset sales to related parties - Issued new shares to nominees of China Merchants New Energy Group and China Huarong at a price of HK$0.3 per share[170] - Sold a total of 34% equity interest in Fengxian Huize Photovoltaic Energy Co, Ltd to an associate of China Merchants New Energy Group for a total consideration of RMB 86.7 million[170],[171] - Continuing connected transactions included the sale of solar power to a subsidiary of China Merchants Logistics and the leasing of office premises from a subsidiary of China Merchants[175],[177] Public Float The company's public float fell to 24.15%, below the minimum requirement, and management is addressing the shortfall - The company's public float was approximately 24.15%, which is below the minimum 25% requirement under the Listing Rules[187] Independent Auditor's Report Independent Auditor's Report PwC issued a disclaimer of opinion due to insufficient audit evidence for certain transactions and noted a material uncertainty related to going concern - The auditor issued a Disclaimer of Opinion because they were unable to obtain sufficient and appropriate audit evidence regarding certain material transactions[190] - The basis for the disclaimer involved: deposits and other payments to NEX Group (totaling approx. HK$686 million), a deposit to SZZY (RMB 500 million), and a payment to a partner of Haozhen Limited Partnership (RMB 303.7 million), for which the auditor could not verify the nature, business rationale, and commercial substance[191],[192],[193],[195] - The report highlights a "Material Uncertainty Related to Going Concern" based on factors including a loss for the year of RMB 3.495 billion, net current liabilities of RMB 2.857 billion, and non-compliance with loan covenants post year-end, which could trigger immediate repayment of borrowings[199] Consolidated Financial Statements Consolidated Statement of Profit or Loss The Group's total loss for the year was RMB 3.495 billion, driven by significant impairments on assets and financial instruments Consolidated Statement of Profit or Loss Summary (RMB million) | Item | 2019 | 2018 (Restated) | | :--- | :--- | :--- | | Revenue (Continuing operations) | 2,168 | 2,023 | | EBITDA (Continuing operations) | 1,920 | 1,700 | | Impairment loss on property, plant and equipment | (958) | – | | Impairment loss on intangible assets (Concession+Development) | (1,362) | (279) | | Loss on impairment of financial assets | (1,094) | – | | Loss for the year from continuing operations | (3,499) | (469) | | Profit for the year from discontinued operations | 4 | 15 | | Total loss for the year | (3,495) | (454) | | Basic loss per share (RMB cents) | (23.37) | (4.73) | Consolidated Statement of Financial Position Total assets decreased significantly due to impairments, resulting in a net current liability position of RMB 2.857 billion Consolidated Statement of Financial Position Summary (RMB million) | Item | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Non-current assets | 17,551 | 24,157 | | Of which: Property, plant and equipment | 14,246 | 17,115 | | Of which: Intangible assets | 869 | 2,245 | | Current assets | 7,905 | 6,618 | | Total assets | 25,456 | 30,775 | | Current liabilities | 10,762 | 7,546 | | Non-current liabilities | 11,053 | 17,359 | | Total liabilities | 21,815 | 24,905 | | Total equity | 3,641 | 5,870 | Consolidated Statement of Cash Flows The Group generated positive operating cash flow but experienced a net cash outflow from financing activities, reducing year-end cash Consolidated Statement of Cash Flows Summary (RMB million) | Item | 2019 | 2018 (Restated) | | :--- | :--- | :--- | | Net cash inflow from operating activities | 1,681 | 354 | | Net cash outflow from investing activities | (120) | (2,257) | | Net cash (outflow)/inflow from financing activities | (1,593) | 672 | | Net decrease in cash and cash equivalents | (32) | (1,231) | | Cash and cash equivalents at beginning of year | 407 | 1,593 | | Cash and cash equivalents at end of year | 239 | 407 | Notes to the Financial Statements (Selected) Basis of Preparation The financial statements were prepared on a going concern basis, which is subject to material uncertainties mitigated by the new major shareholder's support - The Board established an Independent Investigation Committee to investigate matters including deposits to NEX Group (HK$598 million) and other payments (HK$88 million), and a deposit to SZZY (RMB 500 million)[219] - Based on the investigation and recoverability assessment, the Group recognized an impairment loss of approximately RMB 1.022 billion on deposits to NEX and SZZY, and an impairment loss of approximately RMB 72 million on receivables from NEX Group, totaling approximately RMB 1.094 billion[225] - Material uncertainty exists regarding going concern, due to an annual loss of RMB 3.495 billion, net current liabilities of RMB 2.857 billion, and cross-defaults triggered by loan covenant breaches; the company's ability to continue as a going concern depends on obtaining continued bank financing, covenant compliance, and financial support from BEH[226],[231] - To mitigate going concern risks, the company completed a new share issuance (raising approx. RMB 1.565 billion) and obtained a credit enhancement guarantee of RMB 8-10 billion and a financial support letter from BEH[227],[229],[230] Property, Plant and Equipment The carrying value of PP&E decreased significantly due to an impairment charge of RMB 958 million related to power curtailment issues Movement in Net Book Value of PP&E (RMB million) | Item | Amount | | :--- | :--- | | Net book value at Dec 31, 2018 | 17,115 | | Disposal of subsidiaries | (1,839) | | Depreciation charge | (581) | | Impairment loss | (958) | | Additions and other | 409 | | Net book value at Dec 31, 2019 | 14,246 | - An impairment loss of RMB 958 million was recognized, mainly for power stations in provinces like Gansu, Qinghai, Xinjiang, and Ningxia, which face persistent regional power curtailment due to lower industrial and household consumption, affecting future earnings[353] Intangible Assets The net book value of intangible assets plummeted due to a massive RMB 1.362 billion impairment on concession and development rights Intangible Asset Impairment Details (RMB million) | Item | 2019 Impairment Loss | 2018 Impairment Loss | | :--- | :--- | :--- | | Concession rights | 531 | 279 | | Development rights | 831 | – | | Total | 1,362 | 279 | - The impairment of concession rights was mainly due to the NDRC's reduction of PV on-grid tariffs and regional power curtailment issues affecting future revenue forecasts[360] - The impairment of development rights was mainly due to a notice from the Tibet Autonomous Region government to gradually reduce the on-grid tariff for hydropower projects from RMB 0.44/kWh to RMB 0.341/kWh, with little likelihood of recovery to the higher tariff[364] Trade and Bills Receivables and Tariff Surcharge Receivable Total receivables decreased slightly, with the majority comprising tariff surcharge receivables which management deems fully recoverable Composition of Receivables (RMB million) | Item | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Trade receivables | 49 | 72 | | Tariff surcharge receivables | 3,695 | 2,929 | | Bills receivables | 64 | 1,092 | | Total | 3,808 | 4,093 | - During the year, the Group received a total of RMB 828 million in subsidies from the 5th, 6th, and 7th batches of the catalogue[404] - Under a new 2020 policy, the central government will replace the subsidy catalogue with a list-based system to simplify settlement; management believes all eligible stations will be included and the receivables are fully recoverable[403] Five-Year Financial Summary Five-Year Financial Summary The five-year summary shows consistent revenue growth but a sharp reversal to significant losses in 2018 and 2019 Five-Year Results and Financial Position Summary (RMB million) | Item | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue (Continuing operations) | 2,168 | 2,023 | 1,522 | 998 | 631 | | (Loss)/Profit for the year | (3,495) | (454) | 153 | 382 | 373 | | Total assets | 25,456 | 30,775 | 28,594 | 17,181 | 12,969 | | Total liabilities | (21,815) | (24,905) | (22,166) | (14,573) | (10,739) | | Net assets | 3,641 | 5,870 | 6,428 | 2,608 | 2,230 |
北京能源国际(00686) - 2020 - 年度财报