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Investor Relations

Datang Power 2016 Interim Results Presentation and Investors Q&A

Topic:2016 Interim Results Presentation of Datang International Power Generation Co.,Ltd.

Date:August 30, 2016

Place:Shanghai

Chairperson:Distinguished investors, friends, good afternoon! Thank you in person or bytelephone for attending 2016 Interim Results Presentation of DatangInternational Power Generation Co.,Ltd. I am Guan Na, the chairpersonof this on-the-spot conference, and we also thank Zhang Xia, the on-line hostof this conference. In the following, I would like to introduce to you theleaders of this results presentation, they are:

Mr.Wang Xin, Vice Chariman and General Manager of Datang International PowerGeneration Co. Ltd., Mr. Ying Xuejun, Chief Economist and Secretary of theBoard of Directors of Datang International Power Generation Co. Ltd., Mr. SunYanwen, Director of the Finance Department of Datang International PowerGeneration Co. Ltd., and Ms. Wei Yuping, Deputy Director of Department ofSecurities and Capital Operation of Datang International Power Generation Co.Ltd.. Next welcome Mr. Wang Xin, Vice Chairman and General Managerof Datang International Power Generation Co. Ltd. to give us the openingspeech.

Mr. Wang Xin: Ladies andgentlemen, I am very pleased to meet you, the investors and analysts inpresence again in Shanghai, here, let me express our gratitude for your concernand support of Datang Power Generation! At the first half of 2016, thoughfacing complicate domestic and international situations, China's economy showsan overall smooth, stabilized and accelerated development, and achieved anoverall growth of GDP by 6.7%.National electricity consumption of the whole society in the first halfincreased 2.7% on year-on-year basis, with an increase rate of 1.4 percentagepoints year-on-year. Electricity situation has improved over the previous year;however, the situation of growing of the generating capacity higher than thatof the whole society has not changed.

Due to decrease of average utilization hours of the area where the operating unitsare located year-on-year in the first half and increase of the eco-renovationunits, the electricity production of the Company decreased by about 5.8%, whileunder the influence of national policy on cutting overcapacity of the coalindustry, the power coal price has been showing a sustained rising trend sincethe second quarter, bringing greater pressure to fuel cost management andcontrol of the Company. Furthermore, the reduction of pool purchase price ofthermal power implemented from January 1, 2016 has a significant pull-downeffect on the average pool purchase price of the Company.

Facingthe outside harsh business conditions and the unfavorable situation of sharpdecline of the performance of the Company in the first quarter, the newleadership of the Company proposed a slogan of "Work energetically for thesecond quarter and strive for making a profit of two billion", meanwhile,deployed two great tasks, i.e., fully carrying out catch-up plan andcomprehensively creating a special-grade team. Through the tireless efforts of all staff, the Company achieved significant growth in the second-quartercompared with the first quarter. Inaccordance with Chinese Accounting Standards, in the first half of 2016, theCompany achieved the net profit of RMB 1.693 billion Yuan, 17.15%reduced year-on-year, which is assigned to the shareholders of the listedcompany; excluding the influence of non-power plate, the Company achieved agross profit of RMB 6.13billion Yuan in the power plate, 1.74% increased year-on-year.

In the following, Mr. Ying Xuejun, the Chief Economist of the Company will give usa specific introduction of the 2016 interim results of the Company, after whichmy colleagues and I will have an in-depth discussion with you on the issuesconcerned in the market.

Mr. Ying Xuejun: Ladies andgentlemen, investors and analysts, friends, good afternoon! It is my honor onbehalf of the management of Datang Power Generation to review and analyze toyou the operating performance of the first half of 2016 and the market policyenvironment of the first half, and forecast the prospects of the operatingbusiness of the second half of 2016.

Firstof all, let me highlight the main business performance and business progressstatus achieved by the Company in the first half. As of the end of June, 2016,the installed capacity of the Company reached 43.472 million kW, an increase by4.69% compared with 2015 on year-on-year basis, and the accumulated annualenergy output of the first half totaled 81.956 billion kWh, a decrease by 5.8%year-on-year. The accumulated coal output of the holding coal mines by theCompany in the first half totaled 12.51 million tons, suffering a year-on-yeardrop of 37.3%, and the polypropylene production totaled 76,900 tons, attaininga year-on-year increase of 457.24%. With respect to the overall financialsituation, the Company achieved a revenue of RMB 29.199 billion Yuan inthe first half, year-on-year drop of 5.85%; the net profit assigned to theshareholders of the listed company totaled RMB 1.694 billion Yuan,year-on-year drop of 17.15%; earning per share achieved RMB 0.1272Yuan, year-on-year drop of 17.19%; and the combined asset liability ratio ofthe Company realized 79.62%, year-on-year increase of 0.52 percentage points.

In the following I will show you the analysis and review of the performance of thepower generation of the Company. In the first half, the holding managementcapacity of the Company putting into commercial operation totaled 1.15 millionkW, including one million kW in the thermal power project, 25,000 kWin the hydropower project and 110,000kW in the photovoltaic power generationproject, which further optimize the power supply structure; the managementinstalled capacity and equity installed capacity of the Company increased by2.68% and 1.93 respectively compared to the end of 2015, which means that thepower generation capacity of the Company attained a continuous improvement.

Under the influence of macroeconomic and slowdown of growth in demand, theutilization hours of the generator unit of the Company in the first halfdropped on year-on-year basis: the average utilization hours of the fullcaliber of the unit totaled 1,928 hours, year-on-year drop of 161 hours, andthe average utilization hours of the thermal power unit totaled 2,024 hours,year-on-year drop of 226 hours; however, the average utilization hours of thehydropower unit totaled 1,700 hours, year-on-year increase of 236 hours, andthat of the wind turbine generator unit totaled 1,087 hours, year-on-yearincrease of 44 hours. Although the utilization hours of the generator unit ofthe Company show a negative growth year-on-year, it is still higher than thenational average. In the first half, the utilization hours of the thermalpower, hydropower, wind power and full caliber of the unit are all higher thanthe national average, which fully demonstrates the advantages in regionallayout, unit capacity, and equipment status and management level of theCompany.

The performance in the first half shows that the power plate of the Company had anobvious advantage, and the thermal power made an outstanding contribution;although it is influence by the reduction of electricity price, drop ofutilization hours, rising of coal price and other adverse external factors, thepower plate business in the first half still achieved a profit of RMB 6.13billion Yuan, year-on-year increase of 1.74%. In the first half, coal powercombined caliber achieved a profit of RMB 5.076 billion Yuan,accounting for 82.4% of the total earnings of the power plate, and the otherpower plates of the Company all achieved profitability.

Now I would like to give a brief analysis on the generation cost structure and thechanges in the first half of 2016. In the first half of 2016, the costmanagement and control witnesses a remarkable achievement, the fuel cost, whichis the largest proportion in the cost structure, only accounts for 40.17% ofthe total operating costs, having a significant dropping compared with the sameperiod of last year. In the first half of 2016, the unit fuel cost for thermalpower generation achieved RMB 106.73Yuan per megawatt hour, dropped by 23.1% compared with 2015 year-on-year.

In the first half of 2016, the Company continued and striven to carry out  energy-saving and emission reduction andenvironmental protection, achieved the unit power supply coal consumption of296.67g/kWh, year-on-year drop of 8.04g/kWh, and the main pollutant indexesincluding sulfur dioxide, nitrogen oxide, smoke dust and waste water alsodropped significantly. In the first half, the comprehensive efficiency fornational desulfurization and denitrification achieved 97.4% and 81.7%respectively, maintaining a high level. In the first half, the Companycompleted 10 units super emission improvement, which greatly improved theenvironmental protection level.

During the first half of 2016, the preparatory work of the projects of the Company hasbeen proceeding in an orderly manner, from beginning of the year to present, atotal of six power projects have been approved, with a total capacity of 0.4million, and all of which are of the renewable energy power projects, includingtwo hydropower projects, 0.21 million in total, distributed in Yunnan, and fourphotovoltaic projects, 0.19 million in total, mainly distributed in Yunnan,Inner Mongolia and Jiangxi.

Now I would like to introduce the non-power business of the Company. In the firsthalf of 2016, the annual raw coal output of the four holding coal mines of theCompany achieved 12.51 million tons, year-on-year drop exceeding 30%. Theaccumulated production of polypropylene by Duolun coal chemical projectachieved 76,900 tons, and the total production of natural gas by Keqi coal gasificationproject reached 392 million m3(N), both seeing sharp growth inproduction on year-on-year basis. With respect to coal chemical businessrestructuring, the Termination Agreement on the Framework Agreement forRestructuring of Coal Chemical and Related Projects signed between China ReformHoldings Corporation Ltd. and the Company on March 29 confirmed to terminatethe "Framework Agreement on Restructuring". On April 27, the Companysigned a framework agreement on asset restructuring of coal chemical industrywith China Datang Corporation, officially launched a new round of assetrestructuring of coal chemical industry. On June 30, the Company signed"Assignment Agreement of Coal Chemical and Associated Projects" withZhongxin Nenghua Technology Co., Ltd., which is approved through the deliberationsof the Board of Directors. At the second extraordinary shareholders' meeting onAugust 29, the motion on assignment agreement of coal chemical and associatedprojects signed between Zhongxin Nenghua Technology Co., Ltd. and the Companywas approved by the shareholders through voting.

In the following I would like to analyze the market policy environment of thepower generation enterprises facing in the first half. In terms of powerdemand: the national power demand in the first half experienced a steadygrowth, however, the overall contradiction between supply and demand was stillprominent, in the first half the national GDP increased 6.7% year-on-year,while the electricity consumption of the whole society increased 2.7%year-on-year under the effect of economic restructuring, but the increase rateonly increased 1.4 percentage points on year-on-year basis. As of the end ofJune, the national installed capacity of above-scale power plants achieved 1.52billion kW, year-on-year increase of 11.3%. In the first half of the year, theaverage utilization hours of the national power generating equipmentaccumulated to 1,797 hours, year-on-year drop of 138 hours, in which theaverage utilization hours of the thermal power equipment achieved 1,964 hours,year-on-year drop of 194 hours, and that of the hydropower equipment achieved1,658 hours due to the abundant rain water throughout the nation, year-on-yearincrease of 146 hours.

Interms of coal market: in the first half of 2016, under the effect of cuttingovercapacity policy in the coal industry and steady growth in power demand, theelectricity price terminated the trend of fluctuating at lower level, and beganto rise. It is expected that in the second half of the year the coal supply maybe staged tight, and the corresponding coal price will have a certain amount ofrising. However, due to the steady growth of demand, it is expected that therising range of the coal price will be narrowed.

Interms of electricity market reform; the progress of the electricity marketreform has been quickened since the Spring Festival of this year, with focusingon the following: the reform pilots of the transmission and distribution wereextended from 7 to 18provinces; the reform of electricity suppliers was continued topromote in Chongqing and Guangdong; the comprehensive pilot reform was extendedfrom Yunnan and Guizhou to Shanxi and Guangxi; Beijing and Guangzhou electricpower trading centers have been established, and the electric power tradingcenters in Xinjiang, Jiangsu, Guangxi and other regions have been establishedin succession; Hunan, Gansu, Liaoning and other provinces have reported pilotprogram for power system reform successively. New electricity reform has alarge effect on the power generation companies, and the main manifestation isthat the increasing number of the amount of electricity will be transacted inthe market-oriented manner, including direct power supply for the major users. Inthe case of excess electricity supply, for the electricity through markettransaction, the transaction price will be significantly lower than thebenchmark price.

Now I would like to forecast the business prospect of the Company in the secondhalf of 2016. The power generation business of the Company still faces greatpressure in the second half, mainly reflected in the following three aspects:first, utilization hours: the national electricity supply is still in a surplussituation, and the utilization hours will continue to drop. Second, electricityprice: the State cut the price of thermal power generation units in April, 2015and January, 2016 successively, which created a large pressure to the thermalpower generation units of the Company. Third, coal price: since 2016 the coalprice has basically been rendered a rising trend, and the Bohai-Rim Price Indexhas been increased from RMB 380Yuan/ton to RMB 460Yuan/ton. Though facing with these pressures, the Company will actively respondto and brave difficulties to strive to seek effective countermeasures. First ofall, increase its marketing efforts in the power market, to compete for moremarket power. Secondly, strengthen the coal restructuring and pricenegotiations, increase the intensity of coal blending burning, and make effortto control the coal price level. Thirdly, take effective measures to reduce management costs andfinancial expenses. Finally, effectively take advantage of the weatherconditions, and increase the hydroelectric generating capacity.

After approving the program of coal chemical and related asset transfer by thestock-holder meeting of the Company on August 29, the Company will spare noeffort to promote the subsequent related work of coal chemical and relatedasset transfer, and strive for fully complete coal chemical and related assettransfer. This transfer of coal chemical and related assetshas a great significance to the Company, as shown in the following: beneficialto reduce the large loss due to the financial operation of the Company;beneficial to reduce the financial risk of the Company; and furthermore,beneficial to the healthy and sustainable development of the Company. Theinfluences on the financial status of the Company mainly lie on the followingthree aspects: firstly, it is expected to reduce the asset-liability ratio ofthe Company by 3%; secondly, it is expected that the undistributed profit in2016 of the parent company will be negative, which will affect the currentdividends of the shareholders distributed by the Company; thirdly, it isexpected that the annual profit in 2016 of the Company will decrease by aboutRMB 6billion Yuan in the consolidated accounts level.

The Company will persist in the development ideas of innovation, coordination,green, openness and sharing during the“13th Five-Year Plan”.  We will closely follow the new trend ofenergy revolution to actively adapt the new normal of the economic developmentby improving and developing quality and benefits as the center, creating anupgrade version of the power generation industry as the mainline, takingtechnology innovation as the driving force, and making the energy Internet asthe platform; we will persist in value thinking, and benefit-oriented, seizethe strategic opportunities of electric power system reform, and speed upstructure adjustment, to achieve an effective docking of production and sales;we will refine the market classification and the service objects, to achieveintegrated, systemic, efficient service of the multiple typed products; in aword, we will create Datang Power Generation into a first-class comprehensiveenergy service provider with prominent core competitiveness and strongsustainable development capacity.

Chairperson:we'd like to thank Mr. Ying for his introduction. The following is Q&Atime. Welcome the friends in presence or on-line to ask questions, and beforeasking the questions please tell us which institution you are representing.

Zhang Jin from BNP Paribas: I have three questions, the first question is on direct power purchase and marketelectric capacity, and I wonder how much the Company signed in the first half,what is the expected in the second half, about what percentage it accounts forin the total national generating capacity, and how much the discount is. Thesecond question, how much the contribution of the income on investment ofNingde Nuclear Power in the first half of this year? The third question, justnow the management said that the situation in the first half of this year wasnot optimistic, and I would like to ask the prospect of the annual utilizationhours by the Company, one is for all the units, and the second is for thermalpower units; as well as coal prices, as the Company did a good job in the unitfuel cost coal prices in the first half of this year, then what is expected forthe whole year?

Mr. Ying Xuejun: as for directpower purchase and market electric capacity, with the depending of electricitymarket reform this year, we had a rapid growth in the proportion of the wholemarket electricity quantity; the data from January to July shows that theCompany achieved about 21.4 billion kWh of the market electricity quantity inthe first seven months, the market electricity quantity that has been settledis up to 12 billion kWh, and at present the market quantity of the first sevenmonths accounts for more than 13% of the total settled electricity quantity ofthe Company. Direct power purchase for the large users has been carried out inthe 12 regions of the Company, except for Beijing, Tianjin and Tangshan. Atpresent, the signed direct power purchase for the large users is about 16.2billion kWh, and the average price reduction is RMB 0.044 Yuan/kWh;currently the settled electricity quantity is 9.38 billion kWh, and theactually settled price reduction is RMB 0.034-0.035Yuan/kWh.

The second section of the market electricity quantity is the alternativeelectricity quantity. The signed alternative electricity quantity of theCompany in the first seven months is 3.58 billion kWh, the price reduction ofthis part of the electricity quantity is relatively high, and at present thesigned price reduction for the residents is up to RMB 0.177Yuan/kWh.As of the end of July, the actually settled electricity quantity is 980 millionkWh, and the average reduction is RMB 0.103 Yuan/kWh. In addition, someof the electricity quantity is delivered across provinces and regions. Atpresent, this part electricity quantity has been actually settled up to 1.67billion kWh, the average price reduction is RMB 0.083 Yuan, and thisis actually signed. With the gradual introduction of the national policies, theamount of the electricity quantity of this section is progressively increasedin the provinces and regions. As for the prospect of the whole year, I'd liketo say that the situation in the second half of each year will be better thanthat of the first year, this is a law. Therefore, we have proposed our forecastfor the whole year. At present, from the overall perspective of the Company,the various market electricity quantities in this year will be up to about 30billion kWh, 10 billion kWh more than that of the last year. It is expectedthat the direct power purchase for the large users in the whole year willaccount for two-thirds, about 21 billion kWh, and the price reduction of thispart shall be about RMB 0.04Yuan. The second section of the market electricity quantity shall be about 6billion kWh, and this section has the maximum price reduction, which may be upto RMB 0.17Yuan or so. Furthermore, the electricity quantity delivered across theprovinces and regions is expected to be 3 billion kWh in the whole year, andthe basic price reduction is about RMB 0.07 Yuan. Should the annualmarket electricity quantity is up to 30 billion kWh, it shall account for 15% -20% of the annual generating capacity of the Company, and this part ofelectricity quantity does not include the direct power purchase to be carriedout immediately in Beijing-Tianjin-Tangshan Region in the nest step; and we arealso making active preparations for this. At present, this is just to bestarted, and only a forecast for the whole year.

With respect of the utilization hours in the second half, judging from the situationof the first half, the national utilization hours was actually 138 hours lessthan those of the first half of last year; in accordance with the predicationof CEC, there will be an increase of 2.5% of the power consumption by end ofthis year, and the data was released by CEC on July 29. In fact, we alsonoticed that the growth of power consumption of the whole society was 2.7%between January and June, while the growth of that in July was up to 3.6%,which means that the quantity in single July was increased by 8.17% comparedwith the last year on year-on-year basis, and this growth is very large.Despite the greater increase, it may be related to the lower base of the lastyear. As it was a negative growth in July of last year, while the weather inthis July was relative hot, these two factors have a great impact on the higheryear-on-year growth of this July. Of course we can find that there are twocharacteristics for the electricity growth this year: firstly, the secondaryindustry of the Company in the last year was of negative growth, while it is apositive value of 0.5% in the first seven months of this year. Secondly, thedemand for electricity consumption has been increasing. I think the predictionof annual electricity consumption increasing by 2.5% released by CEC on July 29is relatively conservative. The annual average utilization hours in theindustry foretasted by CEC at the beginning of the year was 3,700, and thethermal power was 4,000, while they were only increased by 50 hoursrespectively in the forecast report released on July 29. In the second half,conservatively speaking, we think it will continue to maintain a stablesituation of the first half; if somewhat more optimistic, the power consumptionin the second half will be more than that of the first half; therefore, wethink the Company still has some opportunities in the second half. In addition,with the increasing proportion of direct power purchase for large users in thesecond half, we are actively planning in this aspect, aiming to strive for moremarket share in the market electricity quantity to increase the profitabilityand level of the Company.

Mr. Sun Yanwen: As regards issueson the Ningde Nuclear Power and coal prices, I think you are more focusing onthe issue of Ningde Nuclear Power. In July of this year, 4# unit was put intocommercial operation, which means that all of the four units were put intooperation.  In the first half, the profitof Ningde Nuclear Power totaled close to RMB 600 million Yuan, andits contribution to the income on investment of the Company was up to RMB 250million Yuan. The second question is about coal prices. In the first half ofthe year, the Company took various measures, including strictly controlling thepurchase prices, coal blending burning and other ways, therefore, the coalprices in the first half were well-controlled, and the average price was aboutRMB 340Yuan/ton. However, with the coming summer heavy load in June and July, the coalprices rose rapidly, especially in August, the price increased by RMB 40-50Yuan/ton in a single month. As the price increase in August is related to thewhole policy environment of this year, and it also has a staged relationshipwith the summer heavy load in July and August, it is expected that the coalprice will rise to the end of the year, nevertheless, there will not be a sharpincrease. We predict that the coal price in the second half shall be more thanRMB 400Yuan/ton, and the annual average price shall be about RMB 380Yuan/ton, which will have a larger impact on the overall thermal poweroperation of the Company.

Wang Long from Shanghai HoushanInvestment: I have a few questions: the first is about the coal chemicalrestructuring. The losses in 2014 were calculated to about RMB 18billion Yuan, and why it was only a negative value of RMB 6billion Yuan in the financial statements? What is the difference between theboth? Secondly, as we know, the ultra-high voltage line from Xiliguole Leagueto Shandong Province has been put into operation recently, and half of theelectricity is transmitted to Shandong, and the other part toBeijing-Tianjin-Tangshan Region. At present, we cannot find any effect on us.Furthermore, another two ultra-high voltage lines will be put into operationnext year, and a new ultra high voltage line has been approved. In this case, Iwonder whether these ultra-high voltage lines will have a great impact on thebusiness in Beijing-Tianjin-Tangshan Region and Shandong Province. The thirdquestion is about the production plans in the next two years. When will theHuangjinping, Leizhou and Phase 5 of Togtoh be probably put into production?The fourth question: from current point, what is the unit price of the standardcoal?

Mr. Sun Yanwen: with thecompletion of restructuring of the coal chemical restructuring, it will have theimpact on the financial affairs of the Company in the following two levels: thefirst level is the impact on the parent company of Datang Power Generation. Forthe parent company, it is indeed negative RMB 18 billion Yuan,including RMB 8billion Yuan of the losses of the investment cost, and the losses not more thanRMB 10billion Yuan in this exemption, RMB 18 billion Yuan in total. Thesecond level is the impact on the consolidated accounts. In accordance with ourinitial estimation, with the approving of this program in the shareholders'meeting through voting on August 29, it will affect about RMB 6billion Yuan, and there is an issue of consolidation rule. The reason is thatthe profits and losses of the entire coal chemical industry from January toAugust are in the scope of consolidation, only in this point of August 31 theassets are peeled off, but the entrusted loan we exempted belongs to thesubsidiaries of the Company, therefore, there will be consolidation and offsetin between, and the ultimate impact is probably RMB6 billion Yuan.

For the unit price of the standard coal, on the whole, we expect that the unitprice of the standard coal will probably exceed RMB 400 Yuan/ton in thesecond half. In our interim report, the average unit price of the standard coalis probably up to RMB 340Yuan/ton, about RMB 350Yuan/ton in June, and the recent data is the standard coal price in August,probably RMB 410Yuan/ton or so.

Mr. Ying Xuejun: I'd like tointroduce the UHV from Xilinguole League to Shandong Province. This line isfrom Inner Mongolia to Shandong Province through Beijing; actually it is atransmission line from Inner Mongolia to Shandong Province. At present, thepower supply points have not yet been fully established, but the UHV in thesection from Beijing to Shandong has been built up. Therefore, immediatelyafter completion of this line this year, it is arranged by the National EnergyAdministration and the State Grid to launch 2.5 billion kWh of electricityquantity; as it is launched suddenly, we achieved 516 million kWh ofelectricity quantity in this process.

My opinion to this matter is that the main channel is transmitted from InnerMongolia to Shandong through Beijing, even if the UHV line from Inner Mongoliais not built up, the electricity shall be transmitted through this line,because there is demand for this; however, it does not mean this is a normalstate in the future. From the second consideration, at present, actually theutilization hours in Beijing, that is, Beijing-Tianjin-Tangshan Region, is morethan 2,100hours in the first half, though it is dropped by more than 350 hours onyear-on-year basis, it is still above the national average. Relativelyspeaking, Shandong is also an area with surplus load. If the electricity istransmitted from Beijing-Tianjin-Tangshan to Shandong in the future, it isuncertain whether there will always be so much quantity or not; therefore, thismatter will have little material impact on the power grid ofBeijing-Tianjin-Tangshan Region, and it just has demand in synchronizedscheduling in electricity.

Of course, our current focus is that it will be implemented direct power purchasefor the major users in Beijing-Tianjin-Tangshan Region, and this is the focusof our work. As for the issue of production, there is 1.135 million kWh intotal in the first half of this year, mainly including a million KW unit inFuzhou. In addition, two small 25,000 kW units in Huangjinping Power Station ofGanzi Hydropower Station have been put into production. Furthermore, aphotovoltaic project with 80,000 kW capacity in Qinghai has been put intoproduction, and a photovoltaic project with 30,000 kW capacity in Yunnan hasalso been put into production, both are put into production in the first halfIt is expected that two wind-power stations will be put into production in thesecond half: one is Jiangxi Province, with 40,000 kW capacity, 16 units intotal, and the other is in Shanxi Province, with a capacity of 48,000kW,16 units in total. In addition, one unit of Phase 5 of Togtoh will be put intoproduction as much as possible. Phase 5 of Togtoh had been expected to completeat the beginning of next year. However, we received the document issued by theState on releasing orderly power generation schedule. Though this is a draftfor comment, it required that the thermal power units put into production afterMarch 15 may be implemented zero schedule. We also attach great importance tothis draft, and strove for completing one of the two units in Togtoh at the endof this year, and another unit will be put into production in the first quarterof next year. Furthermore, Yu County power plant and Shendong power plant underthe construction are expected to put into production at the end of next year orat the beginning of the year after next; Leizhou power plant is expected to putinto production at the end of the year after next; and the four 650,000 kWunits in Changheba Hydropower Station, with a total capacity of 2.6 million kW,for the moment is expected to put into production in the second half of nextyear.

Wang Long from Shanghai HoushanInvestment: I wonder whether the four hydroelectric power of Changheba isdigested in the local or transmitted to the outside in the future.

Mr.Ying Xuejun: for the moment it will be digested in the local.

JPMorgan:I will add a question. I'd like to know the layout of the new energy,especially wind power next year, then what is the target for the newlyinstalled capacity?

Mr.Ying Xuejun: Currently the wind power projects under construction in Jiangxiare 13 units with a total capacity of 32,500 kW, and 32,000 kW in Pinhu,Zhejiang. In fact, there are still a number of wind power projects to beconstructed in the next step, it is about more than 900,000 kW, but there maybe a discount. These projects are mainly concentrated in Jiangxi, InnerMongolia, Qinghai, Fujian and other regions, including three wind fields inJiangxi, with a capacity about 210,000 kW; two wind fields in Inner Mongolia,with a capacity of 400,000 kW, two wind fields in Qinghai, with a capacity of100,000 kW, and an offshore wind field in Fujian, with a capacity of 200,000kW. However, the three 200,000 kW wind fields in Fujian and Inner Mongolia maybe difficulty to be approved during the current year; if approved, they areexpected to start next year, but it is still not fully confirmed.

BNP Paribas: Two more questions,the first is about wind power. We find the utilization hours of the Companythis year are in rising trend, while the other new energy companies decreased alot. Why the utilization hours of the Company were not affectedby the policy of abandoning wind power and limiting electricity? The second ison the cost of capital of the Company in the first half, and the estimated costin the whole year?

Mr. Ying Xuejun: With respect tothe rising of the utilization hours of wind power, the main reason lies instructural and regional factors. As the difference of the distribution areas ofthe companies, the wind power projects of the Company are mainly distributed inthe three regions, Liaoning, Hebei and Inner Mongolia, and these regions, suchas Hebei, Beijing-Tianjin-Tangshan, have a better absorptive capacity for thewind power. The growth of the utilization hours is nothing more than twofactors: the first is due to good wind this year, and the second results in theimprovement of the absorptive capacity of wind power. The absorptive capacityin Inner Mongolia is a little weaker; however, due to thepolicy-oriented influence of wind power, it is less restrictive in this regard.The absorptive capacity of wind power in Hebei is relatively lower, however,its absorptive capacity is much stronger, and the situation in this regard inLiaoning is the same with that in Hebei. From a comprehensive point of view, wemay be better than the other companies in the utilization hours of wind power.

Mr.Sun Yanwen: The average interest rate of the Company in the first half is about4.5%. At present, the whole monetary policy is relatively loose, and some loanswith the benchmark interest rates borrowed by the Company in 2010 and 2011,including some exempted loans, have been decreased by 10% through signingsupplementary agreements with banks this year, including the loans of RMB 15-16billion Yuan in Ganzi projects just mentioned above, which is decreased to 10%through our efforts to negotiate with banks. Of course the whole costs arestill in the process of regulation and controlling. As we know, the costs inthe coal chemical industry are relatively higher, if the coal chemical industryis excluded, it will be lower, about a little over 4%; generally speaking, thecosts are relatively low. The operating interest rates in the entire bondmarket are very low, and the consolidated interest rate is not more than 3%, onlybetween 2.6-2.7%. We are using these means in an extensive way, and it isexpected that the annual average interest rate will be even lower than that of4.5% of the first half of this year after transferring of the coal chemicalassets.

Questions: The first question,under the circumstances of the profitability of the whole thermal power beingsuppressed by hydropower and insufficient demand in the second half, how can weachieve a significant improvement on month-on-month basis? The second one, as theCompany also holds equity interest in the power platforms in many places, Iwonder, in addition to the original power generation and direct power purchaseafter electric power system reform, how to participate in the subsequentelectricity sales. The third one, previously, the parent company had acommitment to asset injection. This is because the coal chemical restructuringhas been delayed, while at present the coal chemical restructuring has beenbasically completed. How is the subsequent arrangement? Can it be pushedsmoothly forward?

Mr. Sun Yanwen: compared with thefirst quarter, the earnings in the second quarter had a great improvementmonth-on-month. Indeed the overall performance in the first quarter is not verygood, and this is mainly because that the situation in the first quarter wasaffected by the social power consumption of Spring Festival. After the newleadership assuming the posts in the second quarter, we comprehensively carriedout catching-up and surpassing plans, and completed for electricity quantitywith full strength. As a result, the electricity quantity, on the whole,especially in May, has a substantial rise over the same period. Another work isto control the coal prices. The unit price of the standard coal in the firsthalf ranked in the second place in the Top 5 groups, and the coal prices areunder the control by optimizing energy structure. The third aspect is relatedto cost reduction. only through debt restructuring in the first half, that is,decreasing the loans above the original benchmark interest rate, the costs inthe entire power sector reduced about RMB 300-400million Yuan in the first half, excluding the factor of cutting down ofinterest rate by the State.  Anotheraspect is on controllable costs. Such as management fees, we also strengthenedbenchmarks against the Top 5 power groups, so as to find which can be improved.Meanwhile, we tried to obtain some preferential policies, such as currentlyso-called environmental policy and VAT rebate policy, in order to get everybenefit for the Company. By taking these measures, the Company achieved a sharpimprovement in the second-quarter performance compared with the first quarter,in particular electricity consumption, which somewhat decreased compared withthat of last year in the context of the entire electric power environment.

Mr.Ying Xuejun: I'd like to add something about the issue. That is, competing forelectricity quantity, controlling coal prices, reducing costs and striving forsome policies. In particular to competing electricity quantity and reducingcoal price, we really achieved prominent performance. For example, theelectricity quantity of the Company in the first quarter dropped by 5.8%,compared with the same caliber, the dropping range was only about 2%. In fact, theutilization hours of the Company exceeded the regional average, and theutilization hours of the Company in the first half were 2,071 hours, 120 hoursmore than those of grid average. The extent of these 120 hours is quite largein fact, therefore, competing for electricity quantity showed a prominenteffect. In many regions, the Company's major units, such as the large units inChaozhou, Fuzhou and Wushashan, always rank the top places compared with thesimilar units within the regions; it shall be mentioned that we did a good jobin competing for electricity quantity, especially in the second quarter. Afterpeeling off the chemical restructuring business, the Company will be able toconcentrate more on doing the main business, and strengthening production andmanagement in this field.

With respect to how power system reform participating in electricity sales business,currently, the Company is taking active actions. On one hand, we activelypromote the establishment of electricity sales companies. We have establishedthe related electricity sales company in Chongqing, and are planning toestablish the other related electricity sales companies in other regions. Theaim is to enhance the rapid response to the market through the electricity salescompanies, compete for market shares, and carry out sensitivity test to themarket through the mode of the electricity sales companies; as well as increasethe generating capacity of the units through bilateral consultations to someextent. In addition, in response to the quickening of the marketization processof the electric market reform, the Company also made some adjustment inpersonnel and organization. For example, we have set up marketing departmentsin various grass-roots units, which is the new initiative this year. The maintask to set up such department is to increase marketing capacity.

Wei Yuping: first of all, allowme to thank the shareholders of the Company and all of you present here forconcerning and supporting the coal chemical assets transfer matters. Theapproval of the program with almost 100% favorable rate in the shareholders'meeting on August 29 also laid the groundwork for injecting capital by themajor shareholders in the next step. In accordance with the commitments made bymajor shareholders, the scheme on injection of major shareholders will beinitiated after confirmation of the coal chemical transfer program. Accordingto our preliminary estimates, as of the end of 2015, the installed capacityowned by the major shareholders is 127 million kW, including about65 million kW incorporated in the listed company, and about 60 million kW notincorporated in the listed company, of which about 50 million kW of thermalpower installed capacity. In accordance with the requirements to the assetsinjected in the listed company by the regulatory authority, the injected assetsshall not be diluted the performance of the listed company. Therefore, theassets scale that can be injected by the major shareholders shall be reviewedby comparing with the performance of the Company after completing coal chemicalrestructuring. Nevertheless, I believe the major shareholders should becomplete related assets injection before the end of October,2018. Forthe time being, there is no specific assets injection program and specifictimetable.

Chairperson:due to the time constraint, we have to end today's Q&A time. Thank you foryour enthusiastic speech, however, pleasant communications are alwaystransient; next welcome Mr. Wang Xin, Vice President and General Manager ofDatang International Power Generation Co. Ltd. to give us the closing speech.

Wang Xin: ladies and gentlemen, a moment ago Mr. Ying Xuejun, on behalf of DatangPower Generation, introduced 2016 interim performance and related matters ofthe Company, and the management of the Company had the in-depth communicationwith you on the concerned issues of the current market. Now I'd like to give abrief introduction of some key points of work of Datang Power Generation of thesecond half of 2016. In the second half, the Company will firmly focus on theannual profit target and do a good job in eight areas: generating more safetypower, cost control, optimizing development, creating fine works ininfrastructure, coal chemical restructuring, energy-saving and emissionreduction, and team construction, and strive to give a satisfactory reward tothe shareholders and investors all year round.

With respect to the coal chemical restructuring which is highly concerned in themarket, the Company will spare no effort to ensure the completion of allrelated matters within the year. We believe that if the coal chemical andrelated assets of the Company are not included in the consolidated accounts ofthe Company, the Company will get rid of surplus burdens and concentrate ourefforts to best operate the power generation industry and overall enhance thevalue of the Company.

I'd like to add something on coal price. In the second quarter, our main strategyis to consolidate two foundations: the first is the consolidate safetyproduction, as safety production is the eternal subject of the electric powerindustry. The second is to consolidate our economic foundation. The economicfoundation includes two aspects: one is to complete for electricity quantity,and the other is to control coal price, this is because the current coal priceaccounts for 60-70% of the cost of electricity. The main means to control coalprice not only merely rely on negotiating with the coal companies to cut downthe coal price, but furthermore to adopt coal blending burning and strengtheninternal material management. In the first quarter, the ratio of coal blendingburning only accounted for about 10%, while it achieved 54% in a sudden in thesecond quarter. This is a very large ratio, and the coal price is controlledsubstantially. Through which we accomplished good performance.

Inconclusion, I'd like to offer my sincere gratitude to the analysts andinvestors for your trust and support of the Company for so long time. Thankyou!

Chairperson: now I announcetoday's results presentation is over. Thank you again for your activeparticipation and wish your health and success! Wish Datang Power Generation toachieve greater performance. If you have any questions after meeting, pleaseleave your telephone numbers for further communication. Thank you!

Editor:郝思剑    Source:6165金沙证券与资本运营部

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