Core Viewpoint - The report discusses the accounting estimate change by Haitan Water Group Co., Ltd., focusing on the adjustment of bad debt provisions for receivables related to national renewable energy subsidies, aiming to enhance the accuracy and reasonableness of financial reporting [1][4]. Group 1: Management and Auditor Responsibilities - The management of Haitan Water Group is responsible for preparing the accounting estimate change in accordance with relevant accounting standards and maintaining necessary internal controls to prevent material misstatements due to fraud or error [1][2]. - The auditor's responsibility is to provide an opinion on the accounting estimate change based on the audit evidence obtained, ensuring compliance with Chinese auditing standards [2]. Group 2: Details of the Accounting Estimate Change - The company has changed its accounting estimate for bad debt provisions on receivables, specifically treating national renewable energy subsidies as a separate category with a provision rate of 5%, reflecting the actual risk associated with these receivables [4][5]. - The change is motivated by the need to align the bad debt provision policy with the distinct credit risk characteristics of different receivables, particularly those related to government subsidies, which differ significantly from other customer credit risks [4][5]. Group 3: Impact of the Change - The adjustment in accounting estimates is expected to improve the accuracy of financial reporting and better reflect the company's financial position and operational results [4][5]. - Prior to the change, the company used an aging method for estimating expected credit losses, with rates varying from 5% for receivables within one year to 100% for those over three years [5].

Group 1: Water Supply and Wastewater Treatment Projects - The company operates and is constructing water supply projects with a capacity of approximately 4.3 million tons per day and wastewater treatment projects exceeding 4.8 million tons per day, with most projects expected to be operational between 2025 and 2026 [2][3]. Group 2: Accounts Receivable Management - The company has seen an increase in accounts receivable due to expanded business operations, and it places a high priority on managing accounts receivable and actively pursuing collections [2]. Group 3: Waste Incineration Power Generation Projects - The Chengdu Wanxing Environmental Power Plant (Phase III) is under construction, with a waste processing capacity of 5,100 tons per day, sludge co-processing capacity of 800 tons per day, and kitchen waste processing capacity of 800 tons per day, expected to be operational in 2026 [3]. Group 4: Pricing Mechanism for Water Supply - The company can submit water price adjustment requests to the government price administration department based on national policies and relevant agreements, with adjustments subject to cost monitoring and public hearings [3]. Group 5: Future Capital Expenditure and Dividends - The company has significant capital expenditures due to multiple ongoing water supply and waste projects, which are expected to decrease as these projects become operational in the next 1-2 years. The company is focused on increasing cash dividend ratios and will consider further enhancing shareholder returns once major projects are operational [3].