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Datang Power 2016 Annual Performance Press Conference Q&A

Conference theme: DatangInternational Power Generation Co., Ltd.

2016 Annual Performance Press Conference

Date: March 21, 2017 

Place: Shanghai, China

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Host:

Dear investors, good afternoon!

Thank you for taking time outof your busy schedule to attend 2016 Annual Performance Press Conference ofDatang International Power Generation Co., Ltd. at the scene or byteleconference. I am the host Sun Yan. First of all, please allow me tointroduce leaders attending this conference. They are:

Mr. Ying Xuejun, the executivedirector, vice-general manager, and secretary of the board of DatangInternational Power Generation Co., Ltd.;

Mr. Bai Fugui, the director ofFuel Management Department of Datang International Power Generation Co., Ltd.;

Mr. Sun Yanwen, the directorof Financial Management Department of Datang International Power GenerationCo., Ltd.;

Ms. Wei Yuping, the securitiesaffairs representative of Datang International Power Generation Co., Ltd.;

Next, welcome Ying Xuejun, theexecutive director, vice-general manager, and secretary of the board of DatangInternational Power Generation Co., Ltd. to make an opening speech. Welcome,Mr. Ying!

Ying Xuejun:

Ladies and gentlemen, goodafternoon!

I am very glad to get togetherwith all investors and analysts present in Shanghai in luxuriant March. I wouldlike to express the heartfelt thanks to you for your care and support for us onbehalf of Datang International Power Generation Co., Ltd.!

Due to stable performance withgood momentum of the real economy, the year-on-year increase of the electricityconsumption in the whole society of the nation was 5%, with the year-on-yeargrowth of increase speed of 4% in 2016. In the same year, the newly-increasedinstalled capacity was 120 million kilowatts in the whole nation, and excess ofsupplied electric power was intensified further in local areas. The number ofhours of thermal power equipment utilization was reduced further to 4165 hours,which was the lowest level since 1964.

Theelectricity-coal price rose constantly with the larger increasing range in thefirst ten months, but it declined with a small decline range in the middle andlater periods of the fourth quarter. Lowering the grid purchase price wasstarted on January 1, 2016 and the market share of electric quantities wasenlarged within the year, which played an obvious drop-down role in averagegrid purchase price of the company in 2016. In the face of lots of severeconditions, the company stuck with value & profit-oriented thought to carryout the catch-up plan roundly, thus, the completed generating capacity reached172.4 billion kilowatts-hours in the whole year. It was the first time toachieve the positive growth of electric quantities in recent five years. Theprofit of the power generation plate reached 9.194 billion yuan and all platesinvolved in power generation businesses of coal machine, fuel machine, hydroelectricity,wind electricity, PV and nuclear power gained profits.Asset restructuring of the coal chemical industry which the capital market paidclose attention to was completed successfully in this year. On August 31, theasset delivery was achieved. Affected by the collective impairment arising fromasset restructuring of the coal chemical industry, the net profit attributableto shareholders of the listed company was reduced by 5.52 billion yuan in 2016.

To sum up, according to InternationalAccounting Standards, the net profit attributable to shareholders of the listedcompany was -2.623 billion yuan in the whole year of 2016 with the year-on-yeardecrease of 193.37%.

Next, I will specificallyintroduce our company’s performance in 2016, after which I and my workmateswill carry out in-depth discusses on market problem concerned with you. Thankyou!

Ladies and gentlemen, dearinvestors and analysts:

Goodafternoon! It's an honor for me, on behalf of the executives of DatangInternational Power Generation Co., Ltd., to have you here to look back to andanalyze the annual results of 2016, to analyze the current marketingenvironment in 2017, and introduce the development strategy and key points ofthe13th Five-Year Plan.

First, I’ll introduce the main business performanceand business progress achieved the previous year, and conduct brief analysis.

Let’s look at the company’s operation in 2016. By theend of 2016, the company’s gross installed capacity has reached 44,338MW, witha yoy increase of 4.72%: the gross generation has realized 172.4747billion KWh,with a yoy increase of 1.61%; the company’s average utilization hours hasachieved to 4000 hours, with a yoty decrease of 5.67%; the company’s averageon-grid tariff has achieved 371.12 RMB/MWh, with a yoy decrease of 8.66%.

According to the international accounting standards,in 2016 the company has achieved consistent operating revenue of 57.292billionRMB, with a yoy decrease of 4.59%; impacted by the coal-chemical assetreorganization, the company’s net profit attributable to shareholders hasachieved -2.754billion RMB, with a yoy decrease of 198.78%; the company’sconsistent earnings per share has reached 0.2458RMB/Share, with a yoy decreaseof 38.15%; by the end of 2016, the company’s consolidated debt to asset ratiohas achieved 74.8%, with a yoy decrease of 4.58 percentage point。

Next, let’s analyze and look back to the corporatepower generation business. In 2016, a total of 2008 MW of the holdingmanagement capacity had been put into commercial operation, including 1,660 MWfrom the thermal power project, 50 MW from the hydropower project and 188 MWfrom the wind power project. In addition, 1,089 MW capacity from the #4 unit ofFujian Ningde Nuclear Power Co., Ltd. had been put into commercial operation.The installed capacity and equity capacity increased 4.72% and 4.90% from theearlier year, the corporate power generation capacity is steadily increasing.

In 2016, the corporate power supply was continuallyrestructured, and the proportion of clean energy was further enhanced. Thoughproportion of coal power increased slightly, its high-capacity units had theproportion dramatically increased. Up to the end of the 2016, hydropower, gasturbine, wind power and the photovoltaic capacity was accounted for 13.86%,6.52%, 4.65% and 0.68% respectively.

Influenced by loose supply and local excess of powermarket, the corporate power generation units embodied a year-on-year drop inutilization hours in 2016. Average utilization hours of 4000 of all powergeneration units throughout the year had turned out to be a 240-houryear-on-year drop, and such drop had been apparently narrowed compared with2015; among which 4,172 hours of thermal power unit turned out to be a 310-hourdrop, however, 2,072 hours of power units had turned out to be a 197-hourgrowth, and the 3,719 hours of the thermal power units had turned out to be a124-hour growth.

Although the negative year-on-year growth, theutilization hours of corporate power generation units were still higher thanindustry average. The utilization hours of all corporate power generation unitswere 215 hours above the industry average; utilization hours of corporatethermal power, hydropower and wind power generation units were higher than the industryaverage, which had fully showed the corporate advantages in regionaldistribution, unit capacity, equipment status and the management level.

In 2016, affected by multiple adversefactors such as lower electricity price, rising coal price and lowerutilization hours of units, overall profits made by corporate power generationbusiness had embodied a year-on-year drop despite the positive contributionsmade by all business sectors. Except for year-on-year drop in coal power andhydropower profits, the rest of gas turbine, wind power and photovoltaic hadall shown a substantial year-on-year profit growth.

The following shows the brief analysis on corporatepower generation cost structure and variation in 2016.

In 2016, the company had achieved success in overallcost control to some extent. General and administration expense, care andmaintenance expenses as well as the financial expenses covered in thecontrollable expenses showed a year-on-year drop in terms of proportion of thetotal power generation cost. Affected by the considerable rise in coal price in2016, the fuel cost which holding the largest ration in the cost structure hadembodied a year-on-year rise., Unit fuel cost (excluding fuel gas) of 2016reached 132.98 Yuan / MWh which increased by 4.79% compared with 2015.

In 2016, the company continued to carry out energysaving and emission reduction as well as the environmental protectiongovernance, and the unit power supply coal consumption fell continually, andemission indexes of major pollutants including sulfur dioxide, nitricoxide,smoke dust and waste water showed a notable year-on-year decline. In2016, ultra-low emission transformation of 28 units was completed environmentalgovernance level of the company improved greatly.

In 2016, the preparation work of project was carriedforward in a proper order.

In 2016, the company has approved a total of 1,579MWproject by putting the development pattern into transformation and adjustingstructure actively in preliminary work of project under leadership of newdevelopment strategy, including a total of 750MW of photovoltaic project, whichis mainly distributed in Inner Mongolia, Jiangxi, Yunnan, Liaoning and Qinghai,etc.; a total of 210MW hydropower project, which is located in Yunnan; a totalof 619MW wind power project, which is mainly distributed in Jiangxi, Qinghai,Hebei, Liaoning and Fujian, etc.. Approval and further construction andoperation of these projects will be favorable to improve the capacitypercentage and electric energy production percentage of non-water renewableenergy sources, also favorable to further optimize power structure of company.

Now, let us introduce the non-electrical business ofthe company:

The reorganization work in coal chemical industry andrelevant assets has been accomplished in 2016, which are the most significantachievements in the sector of non-electrical business of the company.Reorganized assets delivery of coal chemical industry on August 31, 2016 markscompletion of two-year reorganization work in coal chemical industry.Completion of assets reorganization in coal chemical industry reduced RMB77.2billion of the company’s total assets, led to total liability of RMB72 billionand net assets of RMB5.2 billion, taking down 4.65 percentage point of thecompany‘ s liability ratio of assets; by the end of August, the company has atotal asset of RMB228.3 Billion, total liability of RMB171.0 Billion and netassets of RMB57.3 Billion, with liability ratio of assets of 74.89%; due toreorganization in coal chemical industry, total profits on consolidatedstatements of the company reduced RMB4.83 billion, net profits attributable toparent company reduced RMB5.52 billion; total profits on statements of theparent company reduced RMB18.039 billion.

Now, let us analyze the market environment confrontedby power generation enterprises in 2017 briefly.

Considering multiple factors such as macro-economicsituation, service industry and development trend of residential electricityconsumption, electric power replacement, real estate and policy adjustment inautomobile industry comprehensively, power consumption across the country in2017 is expected to increase by 3%.

In 2017, 1100MW of installed capacity will be newlyincreased, including 600MW by non-fossil energy. By the end of 2017, nationalinstalled capacity will reach 1.75 billion KW, including 6600MW by non-fossilenergy, of which the installed capacity proportion will rise to 38%.

Electric power supply across the country is expectedto be surplus, of which power supply and demand of power grid in Northern Chinawill be overall balanced, that for power grid in Eastern China, Central Chinaand Southern China will be overall sufficient, while that for power grid inNortheast and Northwest will have large surplus. Utilization hours ofgenerating equipment will be 3,600 hours, in which utilization hours of thermalpower equipment will reduced to around 4,000 hours.

In 2017, considering many factors such as growth rateof economy, adjustment of energy structure, environmental constraint, treatmentof scattered coal and weather, etc. comprehensively, coal demands in 2017 maycontinuously descend.

Seen from strength and determination on reform ofnational coal supply-side, production policy of de-capacity and reduction hasachieved results while not completed. The policy will be promoted unswervingly,also be applied more flexibly. There is no doubt that 2017 will be a “policymarket”, and it is a great possibility for coal price to be remained undercurrent level and stable state, and there is little possibility for price priceto fluctuate largely.

2016 is the beginning of the “13th Five-Year Plan”.The electric power system reform is surging, and substantive breakthroughs hasbeen made in electricity market. On the one hand, the policies in respect ofevery level of electric power system were released; on the other hand, variouspilots have made all-around progress. Until the end of 2016, electric powersystem reform pilot work is implemented in 29 provinces (district, city)(including the Xinjiang Production and Construction Corps) . Until September,apart from 2 national electric power exchange centers, 31 provincial powercenters have been formally established in China except Hainan Province.

National Development and Reform Commission andNational Energy Administration issued the notice of Administrative Measuresfor Admittance and Exit of Power Sales Companies and AdministrativeMeasures for Orderly Release of Power Distribution Network Business onOctober 8, 2016, indicating that Chinese electric power system reform has comeinto a new stage, and electricity side market will be launched comprehensively.

By the end of 2016, National Development and ReformCommission and National Energy Administration released Basic Rules forMedium and Long Term Electricity Transactions (for Interim Implementation)which is the first fundamental rules of electricity transaction since theissuing of Several Opinions of the Communist Party of China CentralCommittee and State Council on Further Strengthening Reform on Power Mechanisms(Z.F. [2015 No. 9]) and other supportive documents, indicating that continuedadvances toward the direction of rule optimization are made in the reformationof electric power system in 2017.

In 2017, it is estimated that the electric powermarket competition will be more intense, and trial of direct electricitypurchase by large consumer will be carried out nationwide; hence, powergeneration industry will encounter great operating pressure.

Next, I will briefly introduce development strategy ofthe company and key point and objectives of the 13th five-year plan.

After successfully staying out of coal chemicalindustry, the company actively adjusts development strategy in line with freshprogress of Chinese economy transition and new requirements of electric powersystem reform, emphasizes the development quality and benefit, adopts aproactive approach to adapt new normal in economic development and assetreorganization structure, focuses on forging the updated version of powergeneration industry, boosts the structure adjustment, and completely stimulatesthe entrepreneurial vitality, so as to give a better play to the role of powergeneration industry.

During 13th Five-Year , the company will make a bigpush to exploit non-water renewable energy, cleanly and orderly develop coalindustry, construct medium and large scale hydropower engineering, and givepriority to develop gas turbine, thus building the upgrading version of powergeneration industry. Launch selling business of heat supply in positive way,properly develop, merge and purchase matching heat supply network, to seize theheat supply market as early as possible. Take relative steady and harmonioussteps to develop coal business with power generation industry, and focus ondemonstration project to strategically promote the business developmentregarding alumina extraction from coal ash. Speed up the development of blankarea, expedite the international development process, and exploit newdevelopment area and space. Actively enter the electricity distribution andselling field, participate in the construction of carbon trading market, andaccomplish the transformation from single power generation enterprises tocomprehensive energy service provider.

According to the basic scheme of company‘s 13thFive-Year Plan, Datang plans to construct power project of 21891MW, and putpower project into production of 21959MW. In late 2020, total installed capacityof Datang will reach  64297.2MW, andelectric power structure will be: installed capacity of coal power will reach42814MW, taking up 66.59% of total installed capacity; gas power generation6222.8MW, 9.68%; water and electricity 8955.8MW, 13.93%; wind power 5119.6 MW,7.96%; solar power 1185MW, 1.84%; non-fossil energy and clean energy 23.73% and33.41% respectively.

That's all for the introduction to companyperformance! Thank you!

Host:

Thanks for Mr. Ying’sintroduction. Next is the questions & answers link. Welcome everybody hereand analysts participating in the teleconference to ask questions actively.Please tell us your organization first and then ask the questions, thank you!

Questions:

Dear leaders, I am Wang Longfrom Shanghai Houshan Investment Management Co., Ltd. May I ask you threequestions?

First, the asset restructuring of the coalchemical industry has been completed and the seasoned equity offering is beingdone now, so do you have any plan for the next step? Do you have any idea onasset injection from strong shareholders?

Second, the undistributedprofit of the company was about -9 billion yuan as of the end of 2016. Does itmean that there will not be any dividend in annual report of 2017, 2018 or even2019?

Third, there were 4 units putinto operation in the fourth quarter in Ningde Nuclear Power Co., Ltd. The month-on-monthincrease was 1 billion kilowatt-hours compared with the third quarter in termsof on-grid energy. But the income from investment was only 0.14 billion yuan inthe fourth quarter. Can you tell me reasons why the performance in the fourthquarter was less than that of the third quarter?

Wei Yuping:

I would like to answer thefirst question. The company is carrying out non-public offering of A-shares andH-shares. Up to now, the company has obtained the preliminary approval forrelevant schemes from Securities and Futures Commission of Hong Kong andExchange in Hong Kong. In the next step, these schemes will be submitted to thegeneral meeting of shareholders held on March 31 for approval. After theseschemes on non-public offering are approved by shareholders, we will apply toChina Securities Regulatory Commission for carry out offering. During theseperiods, the schemes on the company’s future acquisition of strong shareholders’assets will not be influenced. So far, relevant asset acquisition schemes orDatang’s schemes on asset sales have not been formed and there is not aspecific schedule. But, non-public offering does not contradict with the strongshareholders’ asset injection. Thus, the company will carry out correspondingwork at an opportune moment when the schemes are mature.

Sun Yanwen:

I would like to answer the second question. Indeed,due to the restructuring of the coal chemical industry, the undistributedprofit of the parent company was about -9 billion yuan. But, a proposal to makeup the loss of the undistributed profit by surplus reserves has been putforward in the general meeting of shareholders in this year. Once this proposalis approved by deliberation of the general meeting of shareholders, the loss of-9 billion yuan will be made up totally. Thus, only if there is the normaloperation capacity in 2017, it is no problem to have dividends in 2018.

Then, I want to continue toanswer the third question on Ningde Nuclear Power Co., Ltd. in the fourthquarter. Indeed, Ningde Nuclear Power Co., Ltd. has made greater contributionsto the profit of our company since it put into operation. According toaccounting as per equity method, the income from investment was about 0.7billion yuan in 2016. For the third and fourth quarters you just mentioned,there were two reasons. First, some costs and expenses were not balanced duringaccounting. According to the standards, costs that should be recorded shall berecorded before the end of the year in the whole year of the accounting period.Second, Ningde Nuclear Power Co., Ltd. was also confronted with the pressurefrom the electricity market. What it had was not entirely the basic electricquantities. It also participated in market transactions, thus profit could bediluted. Overall speaking, Ningde Nuclear Power Co., Ltd. made greater contributionsin last year. According to accounting as per the equity method, the income frominvestment should be 0.71 billion yuan.

Questions:

I am Liu Xiaoning from ShenwanHongyuan Securities. Would you like to answer these questions?

First, based on disclosure, your company’sfuel cost per kilowatt-hour was about 0.13 yuan in 2016. Now, the coal price ishigh. Can you tell me the cost of the fuel per kilowatt-hour in the first twomonths of 2017? If being converted to the coal price, how much was the averageprice in 2016? And how much is it now?

Second, last year, the profitin the fourth quarter after stripping coal chemical industry was 0.5 billionyuan, of which, the income from investment was 0.49 billion yuan, includingcontributions made by Ningde Nuclear Power Co., Ltd. Can you explain theconstitution of the 0.5 billion yuan? How much was the profit from normalcoal-electricity management? How much was the income from investment of thecoal-electricity? Is it possible to calculate the condition in 2017 by the dataon the premise that the coal price is constant and kept in this level? Whatfactors in 2017 are different from those in the fourth quarter? Is it possibleto speculate the condition of the whole year in 2017 according to factors inthe fourth quarter?

Third, the financial expensecondition dropped obviously in the fourth quarter after stripping coal chemicalindustry. The total expense was more than 1.3 billion yuan with the largermonth-on-month decrease compared with 1.8 billion yuan of each quarter in thefirst half year. Can you tell me whether this data is able to continue until2017 or, in other words, whether there will be a decrease space in 2017?

Sun Yanwen:

For the first question, theunit fuel cost in the whole year of 2016 was about 0.132 yuan. The total trendof coal price was increase after decrease last year. Increase began from thethird quarter basically and October and November of the fourth quarterincreased rapidly. The unit fuel cost of the whole year was 0.132 yuan, but thefuel cost in the fourth quarter reached about 0.15 and 0.16 yuan, which wasrelative high. The coal price of the fourth quarter also reached 530 and 540. Youropinion on using the condition of the fourth quarter to speculate that of thisyear is very professional. In fact, the coal price in the fourth quarter,especially November and December, reached the high point, after which a smalldecrease trend is shown now. If using the condition of the fourth quarter tospeculate this year, we could acquire that the fuel cost may reach about 0.15yuan and the total cost will be higher than that of last year, because thestart point was very low last year. This year, the cost may decline slowly froma high point, but the trend will not be obvious. Thus, the performance infourth quarter will be similar to that in the whole year of this year, butthere is also a difference, that is, the electric quantities are better frombeginning of this year. In addition, financial expense also will be concerned.Actually, the financial expense of this year may be lower than that of lastyear, because we made lots of debt restructuring at the appropriate time whenthe interest rate was relatively slack, that is, we required to negotiate withbanks on decreasing amplitude of the loan contracts and loan interest rate signedin the difficult times last year. Compared with the lastyear, a warped-tail phenomenon will result in decrease, thus the wholefinancial expenses may decrease.

Ying Xuejun

I then explain the secondquestion. Just now, we mentioned whether it is possible to make the splitprofit of the fourth quarter to continue until this year. Besides the coalprice, there is also a difference, that is, the coal price declines after thecoal prices reached to the high point in the fourth quarter. In addition, thereis the third factor: the proportion of the market electric quantity in thefourth quarter was much larger than that of the first half year. Thus, there isa problem in carrying out extending directly by the data of the fourth quarterand extending to 2017 by the financial indexes.

Questions:

Mr. Sun, how much do you saythe average coal price last year?

Sun Yanwen:

Compared with about 400 yuanin 2015, the average price of the whole year of last year was 434 yuan, whichincreased by about 30 yuan. Due to season, the price began to increase from thesecond half year. The average price reached 530 yuan and 540 yuan in the fourthquarter, but the data has not been issued completely now.

Questions:

Can you tell me the blendingcombustion proportion of the coal at present?

Bai Fugui

The total blending combustion proportion reached about40% last year. It is estimated that the proportion of this year will not belower than that of last year.

Questions:

I mainly want to pay attention to the seasonedequity offering. If I remember it correctly, our company may be the first orrare company financing by means of simultaneous offering of A + H shares in twoplaces. First, there is obvious difference in offering price in the two places.Especially for the Hong Kong investors, if offering is carried out at about 0.5time of PB, the national asset may lose, even if it is the group offering. Interms of this kind of offering scheme, how does the company communicate withthe small and medium visitors better to make the scheme approved in the generalmeeting of shareholders? After all, the strong shareholders need to vote forthe scheme. So, how do you think about this question?

Besides, what do you thinkabout the use of subsequent funds after completing seasoned equity offering?Thank you!

Wei Yuping

I will simply introduce thepricing process of the scheme on seasoned equity offering of A-shares andH-shares. First, from the perspective of issuance quantities, at present,adjustment is made to the issuance quantities of the A-shares, limited by refinancingnew deal. It is estimated that the highest issuance quantities will be about2.662 billion shares. In terms of raised fund, the originally decided raisedfund was 9.95 billion yuan according to equity investment project andarrangement on loan repayment. But, considering that if the effective use ofthe raised fund can be guaranteed, under the principle of new deal, the strongshareholders give a premise guaranteeing the lowest price, that is, no matterwhen the offering is carried out, if the share price ratio is lower, thecapital injection price of the strong shareholders will not be lower than 3.47yuan in any time. This price will guarantee that the raised fund only willdecrease by 10% compared with the total fund amount at present, thus, 90% canbe guaranteed. 90% is the use quantity of the raised fund.

Second, in terms of H-shares,the initially determined issue price is 2.12 Hong Kong dollars according to thedetermined pricing principles. But, the final issue price will be determined asper the share price on the day before the general meeting of shareholders.There is a price adjustment mechanism on H-shares. If the share price on theday before the general meeting of shareholders is more than 5% higher than 2.12Hong Kong dollars, the final price of the H-shares will not be larger than 5%,i.e. 5% of 2.12 Hong Kong dollars, compared with 2.12 Hong Kong dollars. Inother words, the final price will not be larger than about 2.26 Hong Kongdollars. Under this premise, our company will guarantee the issuance quantitiesof the H-shares and correspondingly increase the raised funds based on theagreement with the strong shareholders, which is the implementation result ofthe H-share pricing mechanism. The current pricing level, either 2.23 or 2.12Hong Kong dollars, is lower than the net asset per share in 2015 indeed.Certainly, the state-owned enterprises need to obtain approval from Management Departmentof state-owned assets, thus, the issue price of the H-shares also needs to beapproved by Management Department of state-owned assets.

Third, a mechanism is alsodetermined for this issue scheme, that is, A-share offering and H-shareapproval are the premise of each other. If the issue scheme of the H-share isnot approved by the general meeting of shareholders, A-share offering will notbe achieved. Vice versa, if A-share offering scheme is not approved by thegeneral meeting of shareholders, H–share offering will also not be achieved.Thus, offering will be carried out only when offering schemes on both sharesare approved by the supervision organization finally.

Questions:

Dear leaders, good afternoon!I am Jin Ning from Changjiang Securities. I have four questions:

First, the electric power dataof your company from January to February has been disclosed. According to thedisclosure, the whole condition of electricity consumption rose again and theutilization hours of the thermal power also rose. I want to know whether the company'sutilization hours of the thermal power will follow the general situation.

Second, I want to know themarket electricity problem of 2016. Just now, it is mentioned that the marketelectricity ratio in the fourth quarter of 2016 was very high, butwhat is the situation of the market electricity ratio in the whole year of2016? What is the price decrease condition of the market electricity of your company?The National Development and Reform Commission has disclosed that the averagedecrease price of the market electricity in the whole nation was about 0.06yuan in 2016, can you tell me whether it is feasible for so large decreaseprice under the condition of high coal price in 2017. In other words, is itpossible that loss will occur when one kilowatt-hour of electricity isgenerated in terms of the market electricity of thermal power?

Third, in terms of theinternational aspect of Datang, how many tens of thousands coals are involvedin the long-term contract? What is the proportion of the long-agreement coalsin the coals of the whole 2017? Is there any other coal source except marketcoals? For example, if coals produced by the group company’s coal enterprisesbelong to the company’s own coals, is there any other coal source? How many isthe coal price of other sources?

Fourth, the electricitycapacity reduction policy is carried out vigorously this year. What is thecompany's future planning in the aspect of the thermal power? Especially, is itpossible that the planning in the aspect of the coal-fired power generationwill be influenced by the current coal electricity capacity reduction? Thereare some policies showing that the production of coal electricity of theprovinces with the red risk pre-warning in 2016 must be stopped only if it wasstarted in 2016. So, can you tell me whether it will affect your company’sfuture development of coal-fired power generation? Thank you!

Ying Xuejun:

The first one is related to company’s data in 2012.The data of the first quarter has not been disclosed. In fact, the generalsituation of national electricity in first two months is better relatively. Forexample, it is originally estimated that Beijing-Tianjin-Tangshan region willbe confronted with halt of lots of fuel gas units during the Spring Festival,but the reality is better and the fuel gas unit is still operating.

In terms of the situation of the market electricquantities last year, it was intensive relatively in the fourth quarter indeed.From the perspective of the whole year of last year, the market electricquantities generally can be divided into three parts. The first part was electricquantity purchased by big consumers, which was 23.6 billion kilowatt-hourswith the average decreasing range of 0.0497 yuan per kilowatt-hour. The secondpart was electric quantity supplied across provinces and regions, which was 4.2billion kilowatt-hours with the decreasing range of 0.093 yuan perkilowatt-hour. The last part was electric quantity for generation rights trade,which was about 5.2 billion kilowatt-hours with the decreasing range of 0.11yuan per kilowatt-hour. Above-mentioned contents are the overall market pricereduction scale of last year.

For the third question, withthe rising of the market coal price, is it possible for the price reductionrange of the market electric quantities of last year to continue? In fact,compared with 2016, the market electric quantities are enlarged slightly in2017. From the perspective of the price reduction range, it fluctuates completelyin accordance with the market behavior. At present, we cannot determine howmuch the reduced price is. But, there is a phenomenon that everyone could see.For example, the price reduction range of the electricity purchased by bigconsumers last year was larger than that in this year with the rising of thecoal price under the same condition, which is a market behavior in fact.

The capacity reduction is arelatively large problem. The nation has introduced “three-batch” policy, i.e.cancelling a batch, putting off approval for a batch and putting off building abatch. In fact, the policy does not have a large influence on the company. Ourprojects that are being constructed, including the Leizhou Power Station, arenot affected basically.

Only several projects whose approval is putoff are subject to a certain influence because they are not the electricity forpeople’s livelihood, including the phase II of Wushashan (two sets of 1 millionkilowatt-hours) and Shaxian project (two sets of 0.35 million kilowatt-hours)in Fujian. Besides, the project with two sets of 1 million kilowatt-hours inXinyu has been approved so far, but it is limited by the construction withinthe province, thus, its construction has not been started, but we will makepreparations well. In the next step, with the introduction of the nationalcapacity limit policy, the company’s development will be influenced to someextent in next few years. Although projects under construction are not seriouslyaffected, the company’s development is affected. The new approval projects ofthermal power will be reduced basically in 2017, 2018 or later, and we will paymore attention to development of new energy resources and non-water renewableenergy sources. Development of non-water renewable energy sources is also theinternal demand of the company. At present, the proportion of non-water renewableenergy sources is lower, thus we will follow the national policies to carry outexploitation rapidly.

Bai Fugui

I will answer the question related to the fuel datayou just mentioned.

The total volume of coalsinvolved in the long-term contracts of the company is 43.17 million tons in2017, accounting for 70% of the total demand volume of 62 million tons. Theactual supply volume of the self-produced coals was 5.5 million tons and it ispredicted that the actual supply volume of the self-produced coals will reach 7million tons, accounting for 11% of the total demand volume in this year. Priceof the self-produced coal will be determined according to the market because weare mainly a jointly operated coal mine. At present, it is implemented as perthe long-agreement price.

Questions:

Good afternoon, I am arepresentative of China Merchants Securities. I have two questions:

First, is there any new measure in your company afterpower reform?

Second, how about the processof the seasoned equity offering?

Ying Xuejun:

I answer the first questionfirst.

The new power reform is a largest matter for powergeneration industry. The new power reform policy pays more attention to pushingthe original planned electricity to the market electricity. Thus, what thecompany could do is nothing but getting refined internally and externally. Fromthe internal perspective, the company mainly should reduce the energyconsumption and strengthen environmental protection and control to meet therequirements of national industrial policies in next few years. In terms ofthese aspects, the company has made lots of work in environmental protectionand control and upgrading and rebuilding.

During the twelfth five-year plan, the powergeneration coal consumption of the company’s equipment per kilowatt-hour isreduced by more than 7g. In these years, the equipment upgrading and rebuildingare carried out continuously. The purpose of the environmental protection andcontrol is to meet the national environmental protection requirements to beentitled to participate in power generation. And we have made large investmentsand active preparations in these aspects.

In the aspect of development, the company mainlydevelops the high-parameter and large-capacity units. Although, the companyis being constructing the thermal power units in recent years, but the thermalpower units under construction are the high-parameter and large-capacity unitsor the heat supply units for electricity for people’s livelihood, thus, thecompany’s competitive capacity is enhanced. In addition, the company willdevelop the non-water renewable energy sources. During the thirteenth five-yearplan, the company will increase the proportion of the capacity of the non-waterrenewable energy sources from about 5% previously to 8%. There will be nearlyone million wind electricity and PV put into production every year, whichembodies that we will conform to the requirements of the national policies topromote the company’s competitive capacity and competition qualifications.

From the external perspective, we mainly will enlargethe ability to react to market conditions, which mostly requires the marketing.In these years, the company has strengthened the personnel allocation andpersonnel training in recent years and is provided with the Plan Marketing Departmentin various grass-roots factories at present for specially being responsible forthe marketing. In terms of systems and mechanisms, the company attaches greatimportance to building of the electricity sales company so as to respond to themarket flexibly by the electricity sales company. At present, the electricitysales companies have been or are being built in the provinces and regionsrelated to Datang International, except the Beijing-Tianjin-Tangshan region. Itis predicted that the electricity sales companies will cover various provincesand regions in this year. These two aspects are the key to strengthen thecapacity to respond to the external market, strengthen policy research,strengthen cost analysis, strengthen the customer service and enlarge our abilityto react to market conditions rapidly in the market competition.

Questions:

0k. Thank you. How about thecurrent process of the seasoned equity offering?

Wei Yuping:

At present, scheme on seasonedequity offering of H-shares has been reviewed initially by Securities andFutures Commission of Hong Kong and Hong Kong Stock Exchange. The scheme willbe submitted to the general meeting of shareholders on March 31 for approval.After the scheme is approved by shareholders, we will submit the A-shareoffering scheme and H-share offering scheme respectively to Issue Departmentand International Department of China Securities Regulatory Commission. Afterapproval, the corresponding offering of the A-shares will be completed within 6months and that of H-shares will be completed within 12 months.

Questions:

Dear leaders, I am Zheng Sien,an analyst from Hong Kong. May I ask you two questions:

First, Mr. Ying, you just mentioned thatthe 2020 Planning required the proportion of power generation capacity of thenon-water renewable energy sources to reach about 8%. But, from the wholeinstalled structure of your company, the installed proportion of the non-water renewableenergy sources will be only about 10% till 2020, so can we achieve this goal?

Second, does the average price of coalinclude the tax in 2016? How much is the average price in the first two monthin 2017?

Ying Xuejun:

For the first question, what you mentionedis a fact. We only have 10% installed capacity and there is a certain gapbetween it and the national requirements, which is the problem we areconfronted with. 10% is the basic goal that we can achieve based on the currentcondition. With the progress of the follow-up work, we may acquire a higherproportion. In addition, the current level of listed companies of the five powergeneration group is at nearly the same level basically. In fact, our speed willbe adjusted properly every year during the thirteenth five-year plan and may beincreased in the future. But the goal proposed by us is the basic goal.

Sun Yanwen:

For the second question whether the coal price of 434includes tax in 2016, from the perspective of the current coal price, the highestprice may exceed 600 last year, and it may decrease. Now, I cannot tell you theaccurate data because the data of the first quarter has not been issued. But,the highest data exceeded 600 last year.

Questions:

Question 1: how much was theunit price of standard coal every quarter from the first quarter to the fourthquarter last year?

Question 2: how many thermalpower loss scales are happening in Datang Group including the listed companiesat present?

Sun Yanwen:

I do not remember that clearlyin every quarter. But I know that in the first quarter was about 330 yuan;compared with the first quarter, that increased by about ten yuan in the secondquarter; that in the first half year was about 340 yuan; that in the thirdquarter increased to about more than 400 yuan and that in the fourth quarterwas about 530 yuan.

For the second question, I donot know the whole condition of the Datang Group. But, in terms of DatangInternational, the loss scale was about one third from the perspective of thewhole operation condition.

Liu Xiaoyu from ShenwanHongyuan Securities

I want to ask another severalquestions:

First, National Energy Administration issuedan exposure draft saying that the planned electric quantities will not be givento the newly installed machine after March 2017. How about the implementationof this policy?

Second, how do you arrange thecapitalexpenditure plan this year and how much was the capital expenditurelast year?

Ying Xuejun:

For the first question, I know that theplanned electric quantities will not be given to the newly installed machineafter March 15, 2015. So far, the nation has not issued the exposure draft orthis implementation phase has not been started, thus, we have not beenconfronted with this problem. In fact, two sets of units were put intoproduction before 2017 so as to eliminate the influence of not having theplanned electric quantities. However, we have not been confronted with this matterin terms of execution. For the capital expenditure plan, it spent 13.8 billionyuan on the large-scale capital construction last year. While, the initiallyplanned investment on the large-scale capital construction is 12 billion yuanthis year, which is nearly equal to that of last year. During theimplementation of this year, adjustment may be carried out. But, the totalamount in this year will be nearly equal to that of last year.

Ying Xuejun:

Ladies and gentlemen!

Just now, I introduced the relevant situation of theannual performance of 2016 on behalf of Datang International. In addition, ourteam has carried out the in-depth discusses on market problem concerned withall of you and we appreciate it that you have cared for and paid attention tous for a long period. In 2007, our company will focus on improving quality andincreasing benefits to guarantee safety, increase benefits and strengthenmanagement based on the goal of comprehensively improving the work quality. Wewill accelerate implementation of the development planning during thethirteenth five-year plan, concentrate on solving of the problem restrainingdevelopment, i.e. too low proportion of the non-water renewable energy sources;we will implement comprehensive benchmarking, make up short slab, give fullplay to advantages, and enhance the safety management and control and improvethe competitive advantage in market; we will insist on focusing on improvingthe development quality and benefits and taking building of the powergeneration industrial upgrading plate as the main line to speed up structure adjustment,lift the power generation advantages comprehensively and create more brilliantperformances to pay back the shareholders and society.

Finally, I would like to express the sincere thanks toall analysts for your belief in and support for our company for a long period!

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