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6165金沙发电股份有限公司

Investor Relations

3Q Results and Investors Q&A for the Year of 2015

Address of Ying Xuejun, the Secretary to the Board

Dear analysts and investors from China and abroad. Good morning! We have just issued the 3rd quarter report for 2015. Now we start the teleconference to make a communication with you. Thank you for your participation.

On behalf of the company, firstly, I will make a brief introduction of the overall operating results of the 3rd quarter of 2015. The sales revenue of the 3rd quarter of 2015 amounted to RMB47,096 million, a year-on-year decrease of 9.97% compared to 2014. Net profit attributable to equity holders of the Company amounted to RMB3587 million in total, a year-on-year decrease of 2.1%. Earning per share reached RMB0.2695, a year-on-year decrease of RMB0.0058 per share. As of the end of the 3rd quarter of 2015, assets-to-liabilities ratio of the company was 78.37%, a decrease of 0.76% compared to the end of 2014; total assets reached RMB300,100 million, a decrease of 0.77% compared to the end of 2014; ownership equity of the company reached RMB45800 million , representing an increase of 4.56% compared to the end of 2014. As of the end of the 3rd quarter of 2015, a total installed capacity reached 41,966,000 kWh, which shows an increase of 1.51% compared to the end of 2014; power generation was 133.193 billion kWh, a year-on-year decrease of 5.65%; utilization hours of all-inclusive generating units of the Company reached 3,212 hours, representing a year-on-year decrease of 325 hours. The total coal consumption of the Company for power supply was 307.58 g/kWh, representing a decrease of 4.18 g/kWh on a year-on-year basis. The equivalent availability coefficient of operational generating units reached 93.64%, an increase of 0.82% on a year-on-year basis. Comprehensive auxiliary power ratio was 5.35%, a year-on-year decrease of 0.17%.

The main results have been introduced above. In the remaining time, you may communicate with the management team of the Company.

  

  • § Investor Q&A

1. How much is the approximate investment return of Ningde Nuclear Power Project in the first three quarters?

In the first three quarters, investment return of Ningde Nuclear Power Project in which the company takes an equity stake amounts to RMB553 million; investment return of the 3rd quarter reached RMB342 million, marking a significant increase compared to the corresponding period last year.

2. What are the projects that have been put into operation in the first three quarters? What is the schedule for putting projects into operation in the next two or three years?

The total installed capacity that has been put into operation accounted for 624.5 MW in the first three quarters, including units 3 and 4 of Huangjinping hydropower project managed by Sichuan Ganzi Hydro Power Company with the total capacity of 400 MW, Jinping hydropower project managed by Sichuan Jinkang Power Company with the total capacity of 81 MW and Jiangxi Yuhuashan wind power project, Jiuhuashan wind power project and Hebei Batou wind power project with the total capacity of 143.5 MW.

The installed capacity planned to be put into operation over the second half of the year is about 1580 MW, including Jiangxi Fuzhou generating unit 1 (1000 MW), units 3 and 4 of Huangjinping hydropower project (400 MW) managed by Sichuan Ganzi Hydro Power Company, units 1 and 2 of Sichuan Jinyuan project (120 MW), Chongqiong Qianzhangyan 5-cascade hydropower (18.9 MW) and Yunnan Binchuan photovoltaic and Qinghai Gonghe photovoltaic (40MW).

In the next two or three years, coal-fired power generating units that have been put into operation includes Hebei Yuxian 2*660MW project, Guangdong Leizhou 2*1000MW project, Hebei Tangshan Beijiao 2*350MW co-generation heat and power project, Inner Mongolia Xilinhaote 2*660MW project, Tuoketuo Phase V 2*660MW project and Liaoning Huludao 2*350MW project. Hydropower units that have been put into operation  includes Sichuan Ganzi Changheba 2600MW, Chongqiong Haokou hydropower project 135MW, Jiaomutang hydropower 70 MW and unit 4 of Ningde nuclear power project, which will be put into operation in August 2016.

3. What progress did the Company make in negotiating for restructuring of coal chemical business? What kind of restructuring scheme will be adopted? When will you issue the detailed scheme? Will the company still hold the shares of the coal chemical companies after the implementation of the restructuring scheme?

The Company singed a restructuring framework agreement on the coal chemical segment with China Reform Holding Corporation Ltd. in July last year. Due diligence investigation and asset assessment have been finished in 2014. Under the leadership of State-owned Assets Supervision and Administration Commission (SASAC), the specific restructuring scheme has been studied for multiple times. Restructuring of coal chemical business is a very significant assets-related decision, so the scheme has not been worked out so far. We believe SASAC will promote the progress along with the reform of state-owned enterprises.

The coal chemical segment will be excluded from the consolidated financial statement after the restructuring scheme of the coal chemical business is finalized. This means that the company will no longer be the holding company of the coal chemical companies. Whether to hold the assets of coal chemical companies continually depends on specific restructuring scheme.

With regard to the specific restructuring scheme, the Company has not received related information and documents so far.

4. We know that National Development and Reform Commission (NDRC) has lowered the on-grid tariff from press release. Has the Company received official notice about it? Has NDRC carried out investigation on the Company?

 In terms of the report of adjusting the on-grid tariff, we also get it from the Internet and the Company did not receive any official notice on adjusting the on-grid tariff. Now the Company carries out the accounting as per the originally approved on-grid tariff.

5. What is the profit of the Company in each quarter of the first three quarters? What percentage does the power generation segment, coal mining segment and coal chemical segment take up?

The Company’s total revenue of the first quarter amounts to RMB15300 million; total revenue of the second quarter amounts to RMB16200 million; total revenue of the third quarter account for RMB15500 million. The total profit of the first quarter reaches RMB1580 million; total profit of the second quarter amounts to RMB2530 million; total profit of the third quarter reaches to RMB2700 million. In the first three quarters, the power generation segment represented an overall year-on-year increase of RMB152 million while the non-electric segment made a year-on-year increase of loss of RMB353 million.

6. How much is fuel unit cost in every quarter of the first three quarters?

Fuel unit cost in the first quarter is RMB161/kWh; fuel unit cost in the second quarter is RMB149/kWh and fuel unit cost in the third quarter is RMB151/kWh.

7. With larger decrease of coal price this year, why does the fuel unit cost still keep an increase on a period-on-period basis?

The fuel unit cost in the announcement includes that of gas turbine units. Without the gas turbine units, the fuel unit cost in the first quarter amounted to RMB147; the fuel unit cost in the second quarter reached RMB129; the fuel unit cost in the third quarter accounted for RMB120, which represented the continual decrease trend.

8. What is the year-on-year change of the utilization hours of coal-fired unit in the first three quarters?

The accumulative utilization hours of the Company’s coal-fired units in the first three quarters amounts to 3532 hours, representing a year-on-year decrease of 420 hours.

9. What is the fuel cost of the Company in the first three quarters?

What is the decrease of annual fuel cost as predicted?

In the first three quarters, comprehensive standard coal price (including gas turbine) we’ve implemented is RMB492.29, a year-on-year decrease of RMB40.58 compared to RMB532.87, the price in the corresponding period last year. Comprehensive standard coal price (not including gas turbine) reached RMB416.5, a year-on-year decrease of RMB90 compared to RMB506.49, the price in the corresponding period last year.

10.What is the main reason for increase of non-operating income in the first three quarters?

Non-operating income increased by RMB740 million in the first three quarters on a year-on-year basis. The main reason is that Gaojing gas turbine power project got government subsidies. The on-grid tariff of Gaojing gas turbine project was RMB0.811, among which RMB0.65 was settled with the power grid and the additional RMB0.161/kWh was the government subsidy. In the first three quarters, we have received government subsidies of approximately RMB600 million allocated by Beijing Municipal Government and it shall be listed as a non-operating income.

The second reason is the Company gained investment income of approximately RMB100 million by selling the shares of Southwest Securities. In addition, a small part income came from amortization of deferred income.

11. What is the trading volume of power supply for large consumers? What is the trading price? How much did it decline comparing to benchmark price?

The company took an active part in the trading of direct power supply to large consumers, which represent a trend of power reform. The Company began actively the trading of direct power supply to large consumers in the areas where generating units are located. Now the signed electricity quantity is 8622 million kWh. It is estimated that annual electricity may reach 9000 million kWh and above.

In the first three quarters of 2015, electricity for implementation of the contracts of direct power supply to large consumers amounted to 5734 million kWh; electricity for settlement reached 4935 million kWh. The average contractual electricity price decreased by RMB42.26/kWh compared to the benchmark price. The units used for power supply for large consumers include both hydropower units and coal-fired power units.

12. As you say, the units used for power supply to large consumers include both hydropower units and coal-fired power units, then is there any difference between the balance of hydro power and benchmark price and that of coal-fired power and benchmark price? Will hydro power be cheaper than coal-fired power?

The Company took different measures to handle the transactions of power supply for large consumers with hydro power units or coal-fired power units. Hydro power units of our Company are mainly located in Chongqing, Yunnan and Sichuan Province. Coal-fired units are mainly situated in Beijing, Tianjin, Tangshan, Guangdong, Jiangsu, and Liaoning. Therefore, there is difference of power supply for large consumers with hydro power units or coal-fired power units in bidding strategy for power supply. The electricity price generated by hydropower units for power supply to large consumers is around RMB60/MWh lower than the benchmark price.

13. What is the profit of Duolun project in the first three quarters? What is the change compared to the Corresponding Period of 2014?

Duolun project caused a loss before tax amounting to approximately RMB2297 million, an increase of RMB150 million on a year-on-year basis.

14. Under the background of transformation and upgrading of nation’s economic increase mode, will the company slow down its step in investment and construction?

The Company has always carried on the value and benefit-oriented development principle and complies with the requirement of the development trend, namely the New Normal of economic development. While grasping the rule of energy development profoundly under the New Normal, adapt and face the opportunity and challenge actively and then constantly improve the competitiveness of the Company in the electricity market. Combining with the actual conditions this year, the company has made an adjustment accordingly to adapt the national economic development mode so as to realize the industrial upgrading. 

We carried out the optimization sequencing in the project selection so as to actively promote good projects with larger unit capacity and better economic cost performance. In the next two or three years, the company will conduct operation commencement plan with the capacity of 2-3 million kW in each year to promote the capital construction.

15. What percentage will the electricity of power supply for large consumers take up of the sold electricity this year? What about next year?

Generally, we cannot calculate the exact electricity for power supply to large consumers, because the electricity is calculated and negotiated separately in different provinces. The trading electricity is determined firstly by the local economic condition and secondly by the local electricity consuming structure. Usually direct power supply to large consumers is designed for enterprises with higher energy consumption, so short supply or increased demand will lead to the fluctuation of the electricity consumption. In terms of the trend, the trading electricity in the next year will increase on the basis of this year, but the growth rate will not be fast.

16. What is the Company’s prediction of the annual decrease of coal price? What will the decrease of fuel unit cost of coal-fired units of the Company be as predicted?

The unit price of standard coal in 2014 was RMB487/tonne. It is predicted that the unit price of standard coal will be around RMB400/tonne in 2015. Calculated based on RMB400/tonne, the unit price will decrease by approximately 18%.

17. What is the current financial cost of the Company? Will the reduction of interest influence the financial expense of the Company?

Average financial cost amounts to 5.21%. Accumulative decrease in the interest rate is approximately 1.25% this year. If all of the Company’s loans are recalculated based on the new loan interest rate, the financial expense will decrease by approximately 10%.

18. What kind of influence the price reform of the natural gas will have on the profit of natural gas power units?

Now the decrease of price of natural gas is out of expectation, but electricity price and natural gas price in each area have been adjusted accordingly. If the price of natural gas decreases, the on-grid tariff will also decrease, which will lead to an increase of the Company’s profit slightly but not obviously.

19. We have been focusing on the expansion of the power generation segment of the Company. According to the Announcement for September this year, power generating assets in Hebei Province of the Group will be injected by selecting a proper opportunity as soon as the restructuring schedule of coal chemical business is determined. How many types of units do the assets in Hebei Province of the Group include? What is the installed capacity according to rough estimation?

The installed capacity of the units in Hebei Province of the Group amounts to 3 million kWh. The installed units are mainly the coal-fired units and include some hydropower units and wind power units. However, as to asset injection, whether to inject all the 3 million kWh assets will be determined after the specific construction scheme is worked out.

   

Statement at the end of the meeting

Liu Quancheng

The fellow friends, good morning! Just now the management team of our Company has had an in-depth communication with you. I hope it will answer your questions in the aspect of the operation and development of the Company, industry reform and other relevant issues. However, time is up. If you still have questions and need to communicate with us, you may contact with the Investment Relation Office of Security Capital & Funds Operation of the Company. We will give you a clear reply to each question.

Now it only has left 2 months this year. Reviewing the annual operational targets and mission, the Company faces considerable pressure and challenge. In the following months this year, we will commit to implementing the six critical measures for ensuring the safety, increasing power generation, decreasing coal price, turning losses into profits, and controlling expenses, reducing emissions. Thanks for your long-time attention and support. That is all for the meeting. Thanks again!

 

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