RNS Number:3351J
Zhejiang Southeast Elec Power Co Ld
28 March 2003
Zhejiang Southeast Electric Power Company Limited
(Incorporated in the People's Republic of China)
Annual Report 2002
March 2003
Important:
The Directors of Zhejiang Southeast Electric Power Company Limited (the Company) confirm that there are no false
representations, misleading statements or material omissions in this Report. And they jointly and severally accept
full responsibility for the authenticity, accuracy and integrity of the information contained herein.
Board Chairman of the Company, Hu Jiangchao, General Manager Shou Desheng, Chief Accountant Hu Senjian and Deputy
Manager of Finance Department Yang Xiaodong affirm that the financial statements contained herein are true and
complete. Contents
I. Particulars of the Company 1
II. Summary of Accounting Figures and Operating Figures 2
III. Overview of Shareholders and Changes in Share Capital 4
IV. Particulars of Directors, Supervisors, Senior Management and Employees 8
V. Corporate Governance Structure 10
VI. Shareholders' General Meeting 12
VII. Report of Board of Directors 13
VIII. Report of Supervisory Committee 22
IX. Important Events 25
X. Financial Statements 1 33
(based on the Chinese Enterprise Accounting System) 33
XI. Financial Statements 2 86
(based on international accounting standards) 86
XII. Documents Available for Inspection 112
I. Particulars of the Company
1. Registered Name in Chinese:
Registered Name in English:
Zhejiang Southeast Electric Power Company Limited
Abbreviation of the Company Name: ZSEPC
2. Legal Representative: Hu Jiangchao
3. Secretary to the Board of Directors: Dai Jiancheng
Address: 22-23 Floor, Biao Li Tower, 528 Yan'an Road,
Hangzhou, Zhejiang Province, the People's Republic of China
Tel: 0571-85774566
Fax: 0571-85774321
E-mail Address: djc@zsepc.com
4. Registered Address and Office Location:
22-23 Floor, Biao Li Tower, 528 Yan'an Road,
Hangzhou, Zhejiang Province, P.R. China
Postal Code: 310006
Website Address: http://www.zsepc.com/
5. Designated Press for Information Release:
Shanghai Securities, China Securities, South China Morning Post (Hongkong), Wen Hui Bao (Hongkong)
Website Address for Publication of Annual Reports:
http://www.sse.com.cn/
Venues of the Annual Report on File:
Head office of the Company, Herbert Smith Hongkong Office and London Office
6. Information about Issuance of the Company's Shares
Listing place of B shares: Shanghai Stock Exchange
Abbreviation of B shares: ZSEPC B Shares
Code of B shares: 900949
Listing place of GDRs: London Stock Exchange
Code of GDRs: 0949QLT
7. Other Information
(1) Initial Registration Date: 15 May 1997
Initial Registered Address:
451 Fengqi Road, Hangzhou, Zhejiang Province
Re-registration Date: 8 July 2002
Re-registered Address:
22-23 Floor, Biao Li Tower, 528 Yan'an Road,
Hangzhou, Zhejiang Province
(2) Registration No. of Business License: Qi Gu Zhe Zong Zi No.002189
(3) Taxation Registration No.: State Tax No.330000142943450
Local Tax No.330000142943450
(4) Names and Addresses of Domestic and International Accountants Appointed by the Company:
Domestic: Zhejiang Pan-China Certified Public Accountants
Address: Qianjiang Sci-tech Building, 388 Wensan Road, Hangzhou, China
International: PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd.
Address: Rui'an Plaza, 333 Mid-Huaihai Road, Shanghai, China
II. Summary of Accounting Figures and Operating Figures
1. Main Accounting Figures
(1) Accounting figures based on the domestic accounting standards:
Item Amount (RMB yuan)
Gross Profit 812,753,137.31
Net Profit 545,515,105.11
Net Profit After Deducting Non-recurring Gains/Losses (Note) 551,797,237.70
Principal Operating Profit 1,083,122,228.03
Other Operating Profit 489,090.01
Operating Profit 813,206,952.99
Returns on Investment 33,459,111.29
Subsidy Income -
Net Value of Non-operating Income/Expense -33,912,926.97
Net Cash Flow Generated from Operations 1,040,154,528.73
Net Increase in Cash and Cash Equivalents -142,807,870.93
Note: Items and amounts of non-recurring gains/losses deducted
Net Profit 545,515,105.11
Items deducted 1. Net losses on disposal of fixed assets -28,867,919.89
2. Payment of demurrages and penalties -2,011,780.67
3. Donation -1500.00
4. Inventory overage 6,805,492.23
5. Income from trusted financial management 16,363,090.00
6. Others -44,087.14
Income tax adjustment 1,474,572.88
Net Profit After Deducting Non-recurring Gains/Losses 551,797,237.70
(2) Difference between New Profits Based on Domestic and International Accounting Standards:
Unit: RMB'000 yuan
Net profit based on the Chinese Enterprise Accounting System 545,515
Adjustment made based on the international accounting standards
1. Offset against retroactive adjustment of corporate income tax 22,007
2. Prepaid corporate income tax 12,490
3. Deferred income tax 19,630
4. Offset against other retroactive adjustment 4,105
Net profit based on the international accounting standards 551,523
2. Main Financial Indicators
Unit: RMB yuan
Item Year 2002 Year 2001 Year 2000
After Adjustment Before Adjustment
Principal operating income 3,320,944,888.62 3,370,277,286.61 3,370,277,286.61 3,400,222,722.54
Net profit 545,515,105.11 707,945,727.20 734,057,844.37 621,708,729.65
Earnings per share (diluted) 0.27 0.35 0.37 0.31
Earnings per share 0.27 0.35 0.37 0.31
(weighted average)
Earnings per share after deducting 0.27 0.35 0.37 0.38
non-recurring gains/losses
Yield on net assets (diluted) (%) 10.13 13.26 13.68 12.08
Yield on net assets 9.72 12.90 13.34 11.79
(weighted average) (%)
Yield on net assets after 9.83 12.97 13.42 14.58
deducting non-recurring
gains/losses
(weighted average) (%)
Net cash flow per share generated 0.52 0.65 0.65 0.51
from operating activities
Item End of Year 2002 End of Year 2001 End of Year 2000
After Adjustment Before Adjustment
Total assets 8,602,419,267.42 7,816,313,776.25 7,816,313,776.25 7,269,575,449.16
Shareholders' equity (excluding 5,386,781,727.00 5,339,746,621.89 5,365,858,739.06 5,134,300,894.69
minority shareholders' equity)
Net asset value per share 2.68 2.66 2.67 2.56
Adjusted net asset value per share 2.67 2.66 2.67 2.55
Note: Yield on net asset value and earnings per share calculated based on Regulations (No.9) on Compilation & Release
of Information about Public Listed Companies issued by China Securities Regulatory Commission:
Yield on Net Assets (%) Earnings per Share (yuan/share)
Profit in Reporting Period
Diluted Weighted Average Diluted Weighted Average
Principal Operating Profit 20.11 19.30 0.53 0.53
Operating Profit 15.10 14.49 0.40 0.40
Net Profit 10.13 9.72 0.27 0.27
Net Profit After Deducting 10.24 9.83 0.27 0.27
Non-recurring Gains & Losses
3. Changes in Shareholders' Equity in Current Reporting Period
Unit: RMB yuan
Item Share Capital Capital Reserve Surplus Reserve Statutory Welfare Reserve
Beginning Amount 2,010,000,000.00 1,863,272,079.51 654,057,411.24 327,028,705.62
Increase in Current 0.00 0.00 109,094,896.02 54,547,448.01
Period
Decrease in Current 0.00 0.00 - -
Period
Ending Amount 2,010,000,000.00 1,863,272,079.51 763,152,307.26 381,576,153.63
Causes of Changes - - 10% statutory capital 10% statutory welfare
reserve and 10% welfare fund allocated from the
fund allocated from the net profit realized in
net profit realized in current year
current year
Item Undistributed Profit Shareholders' Equity Total
Beginning Amount 812,417,131.14 5,339,746,621.89 5,339,746,621.89
Increase in Current 436,420,209.09 545,515,105.11 545,515,105.11
Period
Decrease in Current 498,480,000.00 498,480,000.00 498,480,000.00
Period
Ending Amount 750,357,340.23 5,386,781,727.00 5,386,781,727.00
Causes of Changes Incoming transfer of net Net profit increased in Net profit increased in
profit realized in current current year. current year.
year after allocating
statutory capital reserve,
statutory welfare fund and
profit distribution
III. Overview of Shareholders and Changes in Share Capital
Changes in Shares
(1) Structure of Share Capital
Unit : share
Beginning Figures In/de-crease in current year (+, -) Ending Figures
1. Non-negotiable shares
1) Promoters' shares 1,320,000,000 0 1,320,000,000
Including:
Shares held by the State 1,315,000,000 0 1,315,000,000
Shares held by domestic legal persons 5,000,000 0 5,000,000
Shares held by foreign legal persons
Other shares
2) Legal person's shares by subscription
3) Internal employee shares
4) Preference shares and other shares
Sub-total 1,320,000,000 0 1,320,000,000
2. Outstanding shares
1) Domestically listed RMB ordinary shares
2) Domestically listed foreign investment 690,000,000 0 690,000,000
shares
3) Overseas listed foreign investment shares
4) Other shares
Sub-total 690,000,000 0 690,000,000
3.Total number of shares 2,010,000,000 0 2,010,000,000
(2) Issuance of Shares and Public Listing
a. No issuance of shares was conducted in the last 3 years ending on 31 Dec.2002.
b. The Company has no internal employee share.
2. Profile of Shareholders
(1) Total Number of Shareholders
Ending on 31 Dec. 2002, the Company has a total of 86,816 shareholders.
(2) Profile of shareholders holding 5% and above of the Company's shares and the top 10 shareholders
a. Shareholders holding 5% and above of the Company's shares
(a) Zhejiang Provincial Electric Power Development Co. (ZPEPDC)
ZPEPDC holds 799,963,200 shares of state-owned legal person shares, accounting for 39.80% of the total shares as the
largest shareholder of ZSEPC. In the current reporting period, no shares held by ZPEPDC was subjected to pledge or
freeze.
With a registered capital of RMB 2.545 billion yuan, the business scope of ZPEPDC covers fund raising for power
construction, power development, generation and sale of unplanned power, and technical renovation for energy
efficiency. Its legal representative: Shen Zhiyun
ZPEPDC is a wholly-owned subsidiary of Zhejiang Provincial Energy Group Corp. The latter is the de facto controlling
holder of ZSEPC, indirectly holding 39.80% of ZSEPC.
Zhejiang Provincial Energy Group Corp. is a provincial organization managing state-owned energy asset. With a
registered capital of RMB 3.5 billion yuan, its business scope covers operation of the state-owned assets and stocks
of the Group Corp. and its subsidiaries, investment in industrial development and technical consulting service. Its
legal representative: Hu Jiangchao
(b) Zhejiang Provincial Electric Power Co. (ZPEPC)
ZPEPC holds 514,036,800 shares of state-owned legal person shares, accounting for 25.57% of the total shares as the
second largest shareholder of ZSEPC. ZPEPC is the single buyer of electricity in Zhejiang power grid, which buys all
electricity generated by ZSEPC. So ZPEPC produces substantial influence over ZSEPC. In the current reporting period,
no shares held by ZPEPC was subjected to pledge or freeze.
With a registered capital of RMB 4,275,160,000.00 yuan, the business scope of ZPEPC covers power generation and
supply, design and construction of power generation and transmission projects and maintenance of power equipment. Its
legal representative: Chen Jimin
In accordance with Document Ji Ji Chu (2002) 2704 Approval of Plan for Restructuring and Allocation of Generating
Assets of State Power Corp. issued by the State Planning Commission, the 514,036,800 legal person shares held by
ZPEPC is decreed to be transferred to China Huaneng Group Corp. free of charge. After the stock transfer, China
Huaneng Group will hold 514,036,800 shares, accounting for 25.57% of the total as the second largest shareholder of
ZSEPC. ZPEPC no longer hold any shares of the ZSEPC.
b. Shareholding of Top 10 Shareholders
Full Names of Shareholders In/decease Number of Percentage Type of Number Nature of
in Shares of Shares of Shareholders
Current Held at Shareholding Shares
Year Year End in
Pledge
or
Freeze
Zhejiang Provincial Electric Power 0 799,963,200 39.80 Non-negotiable - State-owned
Development Co. Stocks
Zhejiang Provincial Electric Power 0 514,036,800 25.57 Non-negotiable - State-owned
Co. Stocks
NAITO SECURITIES CO.LTD Unknown 14,247,804 0.71 Outstanding Unknown Foreign
Capital
Stocks
SCBHK A/C BROWN BROTHERS HARRIMAN AND Unknown 9,112,918 0.45 Outstanding Unknown Foreign
COBOSTON S/A CMO EMERGING MARKETS Capital
FUND Stocks
TOYO SECURITIES ASIA LTD. A/C CLIENT Unknown 7,305,500 0.36 Outstanding Unknown Foreign
Capital
Stocks
Hua Cong Investment Co. Ltd Unknown 6,807,825 0.34 Outstanding Unknown Foreign
Capital
Stocks
Zhejiang Ba Da Co. Ltd 0 4,000,000 0.20 Non-negotiable 1,070,000 -
shares
in
freeze
HKSBCSB S/A HSBC S/A ABN Unknown 4,000,000 0.20 Outstanding Unknown Foreign
AMRO BANK NV Capital
Stocks
BRITISH AIRWAYS PENSIONS Unknown 3,023,999 0.15 Outstanding Unknown Foreign
Capital
Stocks
SCBHK A/C NOMURA TB/NOMURA ITM Unknown 2,400,000 0.12 Outstanding Unknown Foreign
Capital
Stocks
Note: ZPEPC is the grid operator and single power buyer in Zhejiang power grid. ZPEPDC-invested power plants
(generating companies) have necessary business connections with ZPEPC.
IV. Particulars of Directors, Supervisors, Senior Management and Employees
1. Directors, Supervisors and Senior Management
(1) Profile
a. Shareholding
Name Position Sex Age Tenure Shareholding at Shareholding at Causes of
Year Beginning Year End Changes
Hu Jiangchao Board Chairman Male 51 5/2001-5/2003 0 0 -
Shou Desheng Director, Male 45 5/2000-5/2003 0 0 -
General Manager
Sheng Zhiyun Director Male 46 5/2001-5/2003 0 0 -
Xie Guoxing Director Male 48 5/2000-5/2003 0 0 -
Zhang Huaiyu Director Male 39 5/2002-5/2003 0 0 -
Li Yuan Director Male 46 5/2000-5/2003 0 0 -
Ke Jixin Director Male 34 5/2000-5/2003 0 0 -
Zhu Li Director Male 42 5/2002-5/2003 0 0 -
Li Jianguo Director Male 44 5/2001-5/2003 0 0 -
Fu Muqing Director Male 44 5/2000-5/2003 0 0 -
Dai Jiancheng Director, Male 46 5/2000-5/2003 0 0 -
Secretary to
Board
Wang Jiafu Director Male 49 5/2000-5/2003 0 0 -
Zhu Changrong Director Male 60 5/2000-5/2003 0 0 -
Huang Dongliang Independent Male 47 5/2002-5/2003 0 0 -
Director
Huan Guocang Independent Male 53 5/2002-5/2003 0 0 -
Director
Gu Gongyun Independent Male 45 5/2002-5/2003 0 0 -
Director
Tang Xingen Chairman of Male 55 5/2000-5/2003 0 0 -
Supervisory
Committee
Jiang Huadong Supervisor Male 48 5/2002-5/2003 0 0 -
Hu Genfa Supervisor Male 47 5/2001-5/2003 0 0 -
Zhu Haiming Supervisor Male 46 5/2000-5/2003 0 0 -
Yang Jianxiong Supervisor Male 30 5/2002-5/2003 0 0 -
Wu Hongfei Supervisor Male 36 5/2000-5/2003 0 0 -
Wang Guoqiang Supervisor Male 40 5/2000-5/2003 0 0 -
Wu Yaozhong Deputy General Male 54 5/2001-5/2003 0 0 -
Manager
Chen Juemin Deputy General Male 49 5/2000-5/2003 0 0 -
Manager
Hu Senjian Chief Accountant Male 47 5/2000-5/2003 0 0 -
Qiu Baoxing Director of Male 54 5/2001-5/2003 0 0 -
Trade Union
Committee
b. Profile of Directors/Supervisors Taking Office in Shareholder Organizations
Name Shareholder Organization Position Tenure Whether taking
remuneration or subsidy
from ZSEPC
Hu Jiangchao Zhejiang Provincial Board Chairman 2/2001-3/2003 No
Energy Group Corp.
Shen Zhiyun Zhejiang Provincial Deputy General Manager 5/2001-To date No
Energy Group Corp., ZPEPDC (Energy Group)
General Manager (ZPEPDC)
Xie Guoxing ZPEPC Head of Generation Dept. 7/1995 -2/2003 No
Zhang Huaiyu ZPEPC Head of Planning Dept. 7/1999-To date No
Li Yuan ZPEPDC Deputy General Manager 5/2001-To date No
Ke Jixin ZPEPDC Deputy General Manager 5/2001-To date No
Zhu Li ZPEPC Deputy Head of Finance & 4/2001-To date No
Property Dept.
Tang Xingen ZPEPC Chief Disciplinary 1/1999-To date No
Inspector
Jiang Huadong ZPEPC Chairman of Trade Union 3/2002-To date No
Hu Genfa Zhejiang Provincial Head of Finance Dept. 5/2001-To date No
Energy Group Corp.
Yang Jianxiong Zhejiang Provincial Deputy Head of 2/2002-To date No
Energy Group Corp. Investment & Development
Dept.
(2) Annual Remuneration
The directors and supervisors not taking remuneration from the Company will be paid by the shareholder companies that
second them, without getting any additional wages or welfare benefit from the Company; the directors, supervisors and
other senior management personnel taking remuneration from the Company will get payment and welfare benefit in line
with the wage system of the Company. The annual remuneration of the independent directors is to be decided in the
shareholders' general meeting.
Total annual remuneration RMB 1.614 million yuan
Sum of remuneration of top 3 highest-paid directors RMB 530,000 yuan
Sum of remuneration of top 3 highest-paid senior RMB 559,200 yuan
managers
Subsidy for independent directors Annual subsidy of RMB 50,000 yuan/person-year (excluding
tax)
Other benefits for independent directors Traveling and hotel expenses borne by the Company
Names of directors and supervisors not taking Hu Jiangchao, Shen Zhiyun, Xie Guoxing, Zhang Huaiyu, Li
remuneration or subsidy from ZSEPC Yuan, Ke Jixin, Zhu Li, Tang Xingen, Jiang Huadong, He
Genfa, Zhu Haiming, Yang Jianxiong
Remuneration range
Below 100,000 2 people
Between 100,000 and 150,000 3 people
Between 150,000 and 200,000 6 people
(3) Names and Causes of Directors, Supervisors and Senior Managers Leaving Office in Current Reporting Period
Name Causes for Leaving Office
Zhao Yuanjie Job change
Zhang Dan Retirement
Huang Peigen Job change
Kong Fanxiang Retirement
2. Employees
As of the end of 2002, there are 3,596 employees in total in the Company, of which there are 2,514 production
personnel accounting for 69.91% of the total, 39 financial personnel and 397 management personnel, with 23 holding
senior technical titles, 310 holding medium technical titles, 259 holding university bachelor or above degrees, 734
having senior non-degree education, 315 having medium non-degree education and 2,821 having technical training of
various disciplines. There are 279 retirees.
V. Corporate Governance Structure
1. Corporate Governance
In accordance with the Company Law, the Securities Law and Rules for Governance of Listed Companies issued by China
Securities Regulatory Commission, the Company formulated a series of regulatory documents such as the Corporate
Governance Program, Rules of Procedure for Shareholders' General Meeting, Rules of Procedure for Board Meeting, Rules
of Procedure for Supervisory Committee Meeting and Independent Director System so as to put in place the modern
corporate system and regulate corporate operations, and refined the Articles of Association of the Company, thus
improving the corporate governance structure institutionally.
The Shareholders' General Meeting 2001 was convened on 10 May 2002. Three independent directors were appointed, and
three ad hoc committees under the board of directors i.e. the Strategic, the Auditing and the Wages & Appraisal
Committees were set up. Except the Strategic Committee, the other committees appointed independent directors as
Committee Chairman, which is conducive to scientific, objective and candid decision by the board of directors. In
order to fully represent the medium and small shareholders, the Company adopted the cumulative vote system for the
election of directors for the first time.
Pursuant to Notice about Examination of Modern Corporate System Adopted by Listed Companies jointly issued by China
Securities Regulatory Commission (CSRC) and the State Economic & Trade Commission (SETC), the Company made a serious
all-round self-examination and submitted a self-examination report to CSRC and SETC. The inspection mission
comprising the Listed Company Leadership Group Office of Zhejiang Provincial Government, the CSRC Hangzhou Office and
Zhejiang Economic & Trade Commission affirmed the progress made by the Company in respect of adoption of the modern
corporate system.
Responsible to the shareholders, the Supervisory Committee of the Company carried out their duties and obligations
seriously and implemented effective supervision of the performance of the directors and senior management personnel
of the Company.
2. Performance of Independent Directors
Huang Dongliang, Huan Guocang and Gu Gongyun were appointed as independent directors of the Company in 2002. Since
taking office, the independent directors have performed their duties in strict accordance with the relevant
laws/regulations and the Articles of Association of the Company, attended the shareholders' general meeting, the
board meetings and the ad hoc committee meetings held in 2002, made serious examination of the Company's annual
report, interim report and quarterly reports, and checked closely the office holding and remuneration of the
Company's management team. Based on earnest analysis and investigation, they put forward their independent opinions
on the various important matters of the Company, came up with rational proposals for its normal operation and
sustainable development, thus safeguarding the correctness and rationality of its board decision and protecting the
interest of its medium and small shareholders.
3. Management of Staff, Assets, Finance, Organization and Business Operations Independent of Controlling Shareholders
(1) In respect of staff, the Company has special departments responsible for the management of labor, manpower and wages
with sound labor management system. All the senior administrative staff of the Company such as General Manager,
Deputy General Managers, Chief Accountant and Secretary to the Board of Directors get paid from the Company, none of
them holding important positions in controlling shareholder companies.
(2) In respect of assets, the Company owns complete assets with independent production system and auxiliary production
system. It has clear demarcation of land use right in relation to the controlling shareholder.
(3) In respect of finance, the Company established an independent financial department, opened an independent bank
account and formulated independent accounting system and financial management system.
(4) In respect of organization, the Company has an organization independent of the controlling shareholder with
separate office area.
(5) In respect of business operations, due to the inherent characteristics of the power industry, the Company sold all
its electricity generation to ZPEPC, the single buyer in Zhejiang power grid. In accordance with Document Ji Ji Chu
(2002) 2704 Approval of Plan for Restructuring and Allocation of Generating Assets of State Power Corp. issued by the
State Planning Commission, it is decreed that the 25.57% of the Company's shares held by ZPEPC will be transferred to
China Huaneng Group Corp. After the stock transfer, such related party transaction will no longer occur.
4. Appraisal and Incentive Mechanism for Senior Management
A Wages & Appraisal Committee was established under the Board of Directors of the Company to appraise the work
carried out by the senior management personnel annually against the work targets laid at the year beginning. The
Company will further improve the appraisal and incentive mechanism for better stimulation.
VI. Shareholders' General Meeting
1. Shareholders' General Meeting 2001
The Shareholders' General Meeting for 2001 was held on 10 May 2002. Notice about the time, place, points for
discussions and other matters relating to the meeting was published on Shanghai Securities, China Securities,
Hongkong-based South China Morning Post and Wen Hui Bao dated 18 March 2002.
The meeting was held at Lake-view Hotel in Hangzhou as scheduled. The shareholders and shareholders' representatives
held 1,321,140,000 shares, accounting for 65.73% of the voting shares of the Company. The proceeding of the meeting
complied with the Company Law and the Articles of Association of the Company. It was presided over by Board Chairman
Hu Jiangchao.
The meeting discussed and approved the following through vote casting:
(1) the Work Report of the Board of Directors 2001
(2) the Work Report of the Supervisory Committee 2001
(3) the Final Accounting Statement 2001
(4) the Profit Distribution Proposal 2001
(5) the Budgetary Report 2002
(6) the proposal to institute independent director system
(7) the proposal to establish ad hoc committees under the board of directors
(8) the proposal to adjust appointment of directors, supervisors and to appoint independent directors
(9) the proposal to renew appointment of the accounting firms
(10)the proposal to amend the Articles of Association of the Company
The shareholders' general meeting was notarized by Zhejiang Public Notary Office. A Letter of Legal Opinion was
produced by the witness lawyer who attended the meeting. The announcement of resolutions of the meetings were
published on Shanghai Securities, China Securities, Wen Hui Bao (Hongkong) and South China Morning Post (Hongkong)
dated 11 May 2002.
2. Election and Change of Directors and Supervisors
It was discussed and approved in the shareholders' general meeting 2001 that Zhao Yuanjie and Zhang Dan no longer
hold office of director, and Zhang Huaiyu and Zhu Li were elected directors of the Company; that Huang Peigen and
Kong Fanxiang no longer hold office of supervisor, and Jiang Huadong and Yang Zhixiong were elected supervisors of
the Company; and that Huan Guocang, Gu Gongyun and Huang Dongliang were elected independent directors of the Company.
VII. Report of Board of Directors
1. Business Operations of the Company
(1) Principal Business Scope and Operations
a. Scope of Principal Business
The principal business of the Company is investment in, development and operations of the power business.
b. Business Operations
In 2002, against the backdrop of substantial restructuring of the power industry, the Company struck a balance
between restructuring, development and stability, and fulfilled the various tasks set out in the shareholders'
general meeting at year beginning, attaining principal operating income of RMB 3,321 million yuan and net profit of
RMB 546 million yuan. However, if compared with that of the preceding year, the net profit of the Company decreased
by RMB 162 million yuan or 22.88%. For details, refer to "Analysis of Financial Position, Operating Results and Cash
Flow of the Company" hereafter.
c. Composition of Principal Business
The principal business of the Company is power generation. Compared with that of the preceding year, the composition
of the Company' principal business underwent no change.
Sector or Principal operating Principal operating Gross In/de-crease In/de-crease In/de-crease
Product income cost profit in principal in principal in gross
(RMB yuan) (RMB yuan) rate operating operating profit rate
(%) income cost compared compared with
compared with with that in that in
that in preceding preceding
preceding year (%) year (%)
year (%)
Power 3,320,944,888.62 2,208,191,596.44 33.51 -1.46 0.70 -1.42
Generation
(2) Operating Results of Main Holding and Non-holding Subsidiaries
a. Zhejiang Changxing Power Generation Co. Ltd (ZCPGC)
The Company holds 65% of the equity of ZCPGC.
ZCPGC has a registered capital of RMB 610 million yuan, with its business scope covering generation and sale of
electricity, related production and auxiliary industries. It has two 300 MW generating units, of which Unit 1 went
into commercial operation on 15 Dec. 2002, and Unit 2 under construction is expected to come into production in the
2nd quarter of 2003. In 2002, ZCPGC made a loss of RMB 57,479,548.72 yuan, which was primarily due to the fact that
the ZCPGC's organization cost of RMB 53,225,601.22 yuan was recorded as the current gains and losses.
b. Zhejiang Jiahua Power Generation Co. Ltd (ZJPGC)
The Company holds 24% of the equity of ZJPGC.
As at the end of the current reporting period, ZJPGC has a registered capital of RMB 555,190,000 yuan, with its
business scope covering generation and sale of electricity, related production and auxiliary industries. ZJPGC owns
four 600 MW generating units, which are under construction with no profit yielded as yet.
(3) Main Suppliers and Customer
a. Main Suppliers
Main Suppliers Percentage out of Total Purchase %
1. Ningbo Fuxing Electric Fuel Co. Ltd 59.36
2. Zhejiang Fuxing Electric Fuel Co. Ltd 27.80
3. Beijing Jin San Wei Power Engineering Co. 1.28
4. Howtonhua Engineering Co. 0.32
5. Shanghai Steam Turbine Co. 1.44
b. Customer
Owing to the inherent characteristics of the power industry, ZPEPC is the grid operator and single buyer in Zhejiang
power grid. All the electricity generated by the Company is sold to ZPEPC. The sale income constitutes 100% of the
principal operating income of the Company.
(4) Operational Problems/Difficulties and Solutions
In 2002, the Company was confronted with great operational pressure (refer to "Business Operations" herein for
details). In order to minimize the adverse impact of the cost increase and profit shrinkage, the Company intensified
the internal management to tap the potential and increase the efficiency. In respect of cost curtailment, the Company
strengthened equipment maintenance to further improve equipment reliability, safety and economics. In the past one
year, Taizhou Power Plant achieved a net coal consumption of 346 g/kwh, 2 g/kwh lower than that of the preceding
year, making a record low. Xiaoshan Power Plant achieved a net coal consumption of 352 g/kwh, also 2 g/kwh lower than
that of the preceding year. In respect of income augment, the Company probed into the operational features of the
power market to improve the market forecast and adjust the bidding tactics in a timely fashion in an effort to
maximize the benefit of the market competition. The settlement electricity price averaged RMB 0.335 yuan/kwh in 2002,
going up by 0.002 yuan/kwh in comparison with that in 2001. With efforts, the Company eventually fulfilled the
various targets laid down in the shareholders' general meeting at year beginning.
2. Investment
(1) Application of Proceeds Raised
The proceeds raised from the issuance of the Company's shares in 1997 totaled USD 230 million (equivalent to RMB
1,900 million yuan). This fund has been applied as per the Prospectus as follows:
Invested Projects Amount (in millions yuan) Completion Time Income
Investment in construction of 266 Completed in 1998 Achieved sale income of RMB
Units 7 & 8 of Taizhou Power Plant 702,100,500 yuan in current year
Acquisition of Xiaoshan Power 903 Completed in 1997 Achieved sale income of RMB
Plant 488,911,500 yuan in current year
As approved in the extraordinary shareholders' meeting in 2001, the residual amount of RMB 742 million yuan was used
to
a. make equity investment in Zhejiang Jiahua Power Generation Limited Liability Co. (ZJPGC);
b. supplement the working capital of the Company.
The equity investment in ZJPGC is injected in installments. As at the end of the current reporting period, the
registered capital of ZJPGC amounts to RMB 555,190,000 yuan. The Company injected an equity investment of RMB
133,250,000 million yuan per the investment ratio in 2001.
Based on the Resolution on Increasing Registered Capital adopted in shareholders' general meeting 2001 of ZJPGC held
on 28 Nov. 2002, all the shareholders unanimously agreed to increase the registered capital of ZJPGC to RMB
1,555,190,000 yuan. (Up to 31 Dec. 2002, the registered capital of ZJPGC amounted to RMB 555,190,000 yuan. The
Company made cumulative capital injection amounting to RMB 133,250,000 yuan, accounting for 24% of ZJPGC's total
registered capital.) Each shareholder will inject the additional amount in proportion to his equity investment ratio
and in conformity with ZJPGC's Equity Capital Injection Plan 2003 in 4 installments in 2003. Based on the above
resolution, the Company will inject additional equity capital amounting to RMB 240 million yuan to ZJPGC, and paid
RMB 60 million yuan on 17 Mar. 2003.
(2) Important Investment Not Using Raised Proceeds
Project Amount Project Progress Project Income
Zhejiang Changxing ZCPGC's registered capital: Unit 1 of ZCPGC went ZCPGC made a net profit of
Power Generation Co. RMB610,000,000.00yuan into commercial RMB-57,479,548.72 yuan in
Ltd (ZCPGC) (Zhejiang The Company holds 65% of its operation on 15 Dec. this reporting period, of
Changxing Power Plant equity and has made equity 2002 after passing 168 which the Company shared RMB
Phase IV) injection of RMB396,500,000.00yuan. hours full-load trial -37,361,706.66 yuan as per
operation. Unit 2 is its investment ratio.
expected to go into
commercial operation
in the 2nd quarter of
2003.
Total RMB396,500,000.00yuan - RMB-37,361,706.66 yuan
(Note): The main factor leading to ZCPGC's loss in 2002 is that its organization cost of RMB 53,225,601.22 yuan was
accounted for as the current gains & losses in accordance with the accounting standards as Unit 1 of this company was
put into operation after completing 168 hours of trial operation at zero o'clock on 15 Dec.2002.
3. Analysis of Financial Position, Operating Results and Cash Flow
(1) Analysis of Financial Position
a. Total asset: The total asset of the Company in the current reporting period stands at RMB 8,602,419,267.42 yuan,
representing an increase of RMB 786,105,491.17 yuan in comparison with that of the preceding year. This is mainly due
to an increase in fixed assets of RMB 747,831,268.36 yuan, which resulted from the entry of the estimated actual cost
of Unit 1 of ZCPGC brought into commercial operation.
b. Shareholders' equity: The increase in the shareholders' equity resulted from the increase in the net profit
realized by the Company in the current reporting period.
(2) Analysis of Operating Results
In 2002, the Company realized a net profit of RMB 545,515,105.11 yuan, decreasing by RMB 162,430,622.90 yuan in
comparison with the net profit of RMB 707,945,727.20 yuan in 2001.
a. The principal operating income decreased by RMB 49.33 million yuan in the current reporting period compared with
that of the preceding year, due to the decrease in the amount of electricity sale. In 2002, the electricity sale of
the Company amounted to 9,904 million kwh (including 53 million kwh from Zhejiang Changxing Power Generation Co.
Ltd); in 2001, the electricity sale of the Company amounted to 10,116 million kwh.
b. The generation cost increased by RMB 34.18 million yuan because the price of standard coal bought by the Company
in 2002 rose by 9.68 yuan/ton compared with that of 2001.
c. The administrative expenses increased, mainly because
(a) the lump-sum housing subsidy and the service length subsidy totaling RMB 50.44 million yuan were recorded as the
current administrative expenses.
(b) Zhejiang Changxing Power Generation Company's organization cost of RMB 53.22 million yuan was recorded as the
current administrative expenses.
d. The non-operating cost increased by RMB 22.37 million yuan in the current reporting period compared with that of
the preceding year, which is mainly attributable to the net losses on retirement and transfer of fixed assets.
e. The increase in income tax payment is due to the fact that from 2002 onwards, the Company no longer enjoys the
preferential treatment of the local income tax refund in accordance with the relevant stipulations of Ministry of
Finance.
(3) Analysis of Cash Flow
Net increase in cash and cash equivalents:
The net increase in cash and cash equivalents amounted to RMB -142,807,870.93 yuan, of which the net cash flow
generated from the operating activities was RMB 1,040,154,528.73 yuan, the net cash flow generated from the
investment activities was RMB -1,038,748,935.94 yuan, and the net cash flow generated from the financing activities
was RMB -143,957,124.28 yuan.
Correction of Significant Accounting Errors
Pursuant to Document Ji Bian Han No. (2002)11 Notice about Self-examination of Tax Payment by Province-owned
Enterprises issued by the Inspection Office of the State Taxation Bureau Zhejiang Branch, the Company made a
self-examination of its tax payment for 2001.
(1) It is not permitted to account for the overhaul cost of RMB 47,310,582.22 yuan for Unit 1 of Taizhou Power Plant
under the Company as a lump-sum cost before tax because it belongs to the asset renovation cost, hence the additional
payment for corporate income tax of RMB 15,612,492.13 yuan. With the consent of the taxation authorities, the
overhaul cost will be written off before tax over 5 years from 2002; it is not permitted by the tax law to account
for the Company's payment for the supplementary pension for 2001 and the pre-construction cost for Xiaoshan Power
Plant Phase II totaling RMB 15,650,345.95 yuan before tax, hence the additional payment for corporate income tax of
RMB 5,164,614.17 yuan; the Company made over-allocation of RMB 3,725,853.19 yuan for unemployment insurance premium
and retiree management expense, which was reversed upon self-examination, hence the additional payment for corporate
income tax of RMB 1,229,531.55 yuan. To sum up, the above 3 adjustments ended up with the Company making additional
payment for the corporate income tax for 2001 totaling RMB 22,006,637.85 yuan.
(2) The input tax on special equipment of RMB 340,699.82 yuan stated as overhaul cost by the Company was transferred
out, hence the additional payment for VAT amounting to RMB 340,699.82 yuan.
In addition, pursuant to Document Ji Chu Zi No. (2002)0057 Notice about Taxation Treatment Decision issued by the
Inspection Office under the State Taxation Bureau Zhejiang Branch, the input tax amounting to RMB 7,490,632.69 yuan
was offset by the material delivery for overhaul of Unit 1 of Taizhou Power Plant under the Company and other
non-taxable purchases, hence the Company's additional payment for VAT of RMB 7,490,632.69 yuan.
Treated as significant accounting errors, the above have been corrected by making retroactive deduction of RMB
26,112,117.17 yuan in the net profit for 2001, a corresponding deduction of RMB 5,222,423.44 yuan in surplus reserve
and a corresponding deduction of RMB 20,889,693.73 in beginning undistributed profit of 2002 in addition to other
corresponding adjustment in the beginning amount of the balance sheet and the entries in the income statement for the
preceding year.
5. Impact of Changes in Operational Environment, Policies and Regulations on Financial Position and Operating Results
of the Company
(1) As approved by the State Council, the Chinese power sector was restructured into 11 new companies, which were
officially announced on 19 Dec. 2002. As an important result of the power sector reform in China, this was a move to
separate the power plant from the power grid and introduce a competitive mechanism. The general objective of the
power sector reform was to break down monopoly, introduce competition, increase efficiency, reduce cost, ameliorate
tariff structure, optimize resource allocation, promote power development, advance nationwide grid integration, and
create an independent, fair, open, orderly and healthy power market system under the government regulation. The
progressive power sector restructuring will definitely produce a profound long-term impact on the development of the
Company. Based on the generation assets reorganization plan, the 514,036,800 state-owned legal person shares of the
Company held by ZPEPC will be transferred to China Huaneng Group Corp. free of charge through an administrative
decree. After the stock transfer, China Huaneng Group will hold 514,036,800 shares of state-owned legal person
shares, accounting for 25.57% of the total shares as the second largest shareholder of ZSEPC. ZPEPC no longer hold
any shares of ZSEPC.
(2) In accordance with Notice about Power Tariff Management and Notice to Accelerate Implementation of Uniform Tariff
for Same Power Across Town and Country issued by the State Planning Commission, it was approved in Document Zhe Jia
Shang (2003)36 of Zhejiang Provincial Commodity Pricing Bureau that the contractual tariff rate of Taizhou Power Plant
under the Company was adjusted to RMB 352.42 yuan/MWh (exclusive of tax) as from 1 Jan. 2003, going down by 5
yuan/MWh compared with that in 2002. The contractual tariff rate of Xiaoshan Power Plant remained unchanged.
(3) Unit 1 of the Company's controlled subsidiary Zhejiang Changxing Power Generation Co. Ltd (ZCPGC) was synchronized
for generation on 15 Dec. 2002 after finishing 168 hours trial operation. It was approved in Document Zhe Jia Shang
(2003)15 issued by Zhejiang Provincial Commodity Pricing Bureau that the contractual tariff rate applicable to ZCPGC
was RMB 324.78 yuan/MWh (exclusive of tax).
(4) Pursuant to the relevant policies and regulations regarding the adoption of monetarized house allotment in the
house allotment reform issued by the central and provincial governments, Document Zhe Dian Xing (2002)1364 Notice about
Methods for Implementation of Monetarized House Allotment in Organizations in Hangzhou Under ZPEPB issued by Zhejiang
Provincial Electric Power Bureau (ZPEPB) and Document Tai Fang Gai (2001)47 Approval of House Subsidization Plan of
Taizhou Power Plant issued by Taizhou Municipal Housing Committee, the Company allocated lump-sum housing subsidy and
service length subsidy totaling RMB 76,742,750.69 yuan in the current reporting period. As stipulated in relevant
documents, the employee should have a service length of 20 years to qualify for application for the lump-sum housing
subsidy. The subsidy for those whose service length fall short of 20 years will be allocated based on their actual
number of years of service. The subsidy for the service years shortfall can be withdrawn in advance as provisional
borrowing after entering into Agreement on Borrowing of Housing Subsidy with the Company. After calculation was done,
the lump-sum housing subsidy for the service length short of 20 years amounting to RMB 26,302,005.38 yuan was treated
as employees' provisional borrowing and stated as "other receivables". The other amount of RMB 50,440,745.31 yuan was
stated as the current gains and losses.
6. The financial statements 2002 of the Company were audited by Zhejiang Pan-China Certified Public Accountants and
PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd. The Chinese certified accountants Wang Yuehao, Chen Shu and Huang
Yuanxi produced Auditor's Report No. Zhe Tian Kuai Shen (2003)383 in its standard form without reservations.
7. Day-to-day Work of Board of Directors
(1) Board Meetings and Resolutions
Eight board meetings were held in 2002.
a. The 16th meeting of the 2nd board of directors of the Company was held through telecommunication on 22 Feb. 2002
to discuss the plan of establishing the primary American Depository Receipts (ADR). In view of the ADR's role in
promoting the currency of the Company's shares, the plan was endorsed. Now the plan is pending the approval of China
Securities Regulatory Commission.
b. The 17th meeting of the 2nd board of directors of the Company was held on 14 Mar. 2002. The meeting discussed and
approved
(a) the Work Report of the Board of Directors 2001
(b) the General Manager's Work Report 2001
(c) the Final Accounting Statement 2001
(d) the Profit Distribution Proposal for 2001 and Profit Distribution Policy for 2002
(e) the Annual Report 2001 and its summary
(f) the proposal to allocate four reserves
(g) the Financial Budget for 2002
(h) the proposal to institute independent director system and to establish ad hoc committees under the board of
directors
(i) the proposal to adjust appointment of directors and to appoint independent directors
(j) the proposal to amend the Articles of Association of the Company
(k) the proposal to renew appointment of the accounting firms
(l) the proposal to hold the Shareholders' General Meeting 2001
The resolutions formed in the board meeting were announced on Shanghai Securities, China Securities, Wen Hui Bao
(Hongkong) and South China Morning Post (Hongkong) dated 18 Mar. 2002
c. The 18th board meeting of the Company was held through telecommunication on 18 April 2002. The meeting discussed
and approved the Quarterly Report for the first quarter of 2002, which was published on Shanghai Securities, China
Securities, Wen Hui Bao (Hongkong) and South China Morning Post (Hongkong) dated 20 Apr. 2002.
d. The 19th board meeting of the Company was held on 30 Apr. 2002. In compliance with Document Zhe Ji Ji Chu
(2002)124 Notice about Preparatory Work and Financial Plan 2002 for Gas Turbine Generation Projects of Banshan Power
Plant and others, the Company agreed
(a) to make a payment of RMB 4.3 million yuan for the preparatory work of Xiaoshan Power Plant Gas Turbine Generation
Project in 2002 (the actual expenditure in 2002 amounting to RMB 1.688 million yuan);
(b) to make preparation for the requisition of 186 mu of land for Xiaoshan Power Plant Gas Turbine Generation
Project. After the project feasibility study report is approved, the formalities in connection with the land
requisition will be processed. Now the preparatory work is yet to be started.
e. The 20th board meeting was held through telecommunication on 26 June 2002. The meeting discussed and approved
(a) the plan for the Company to make full investment in Xiaoshan Power Plant Gas Turbine Generation for purpose of
submission of the project proposal, which is now pending approval.
(b) the Company's self-examination report on the establishment of the modern corporate system.
f. The 21st board meeting was held through telecommunication on 29 July 2002. The meeting formed the following
resolutions:
(a) The Company will not make profit distribution or conversion of capital reserve into bonus shares for the first
half of 2002.
(b) The Company approved the Interim Report 2002 for release to the public.
The Interim Report 2002 was published on Shanghai Securities, China Securities, Wen Hui Bao (Hongkong) and South
China Morning Post (Hongkong) dated 31 July 2002.
g. The 22nd board meeting was held through telecommunication on 24 Oct. 2002. The meeting discussed and approved the
Quarterly Report of the Company for the 3rd quarter of 2002 for release to the public.
The 3rd Quarterly Report 2002 was published on Shanghai Securities, China Securities, Wen Hui Bao (Hongkong) and
South China Morning Post (Hongkong) dated 25 Oct. 2002.
h. The 23rd board meeting was held through telecommunication on 31 Dec.2002. In line with Document Zhe Dian Xing
(2002)1364 Notice about Methods for Implementation of Monetarized House Allotment in Organizations in Hangzhou Under
ZPEPB issued by Zhejiang Provincial Electric Power Bureau (ZPEPB) and Document Tai Fang Gai (2001)47 Approval of
House Subsidization Plan of Taizhou Power Plant issued by Taizhou Municipal Housing Committee, the Company agreed to
allocate fund for the subsidy for monetarized house allotment.
(2) Board's Implementation of Resolutions of Shareholders' General Meeting
In accordance with the Company Law, the Securities Law and the Articles of Association of the Company, the board of
directors of the Company carried out the various resolutions formed in the shareholders' general meeting in earnest,
insofar as authorized and dictated by the resolutions. In 2002, the Company fulfilled the various targets laid down
in the shareholders' general meeting at year beginning.
8. Profit Distribution Proposal
According to whichever is lower of the financial statements 2002 audited by the domestic or the international
accounting firms, based on the after-tax profit of the Parent Company as audited by the domestic amounting firm
amounting to RMB 545,474,480.11 yuan less allocation of 10% statutory surplus reserve and 10% statutory common
welfare reserve totaling RMB 109,094,896.02 yuan, plus the Parent Company's beginning undistributed profit amounting
to RMB 812,457,756.14 yuan, then the distributable profit of the Company in 2002 is equal to RMB 1,248,837,340.23
yuan. Taking 2.01 billion shares at the end of 2002 as a base figure, the Company proposed to distribute cash
dividends of RMB 2.48 yuan per 10 shares (including tax), totaling RMB 498,480,000.00 yuan.
VIII. Report of Supervisory Committee
(1) Meetings of Supervisory Committee
Two supervisory committee meetings were convened in the current reporting period, as follows:
The 6th meeting of the 2nd supervisory committee was held on 14 Mar. 2002, which discussed and approved:
a. The supervisory committee's Work Report for 2001
b. The proposal to adjust appointment of supervisors
c. The Annual Report 2001 and its summary
The supervisory committee deems that the Annual Report 2001 and its summary are true, accurate and complete, free of
false statement, material omissions or serious misleading. Both the domestic and the international accounting firms
produced Auditor's Reports without reservations and agreed to its disclosure to the public.
d. The proposal to allocate four reserves
(2) The 7th meeting of the 2nd supervisory committee was held through communication on 29 July 2002. The meeting
discussed and came to agreement on the following:
a. The Company will not make profit distribution or conversion of capital reserve into bonus shares for the first
half of 2002.
b. As a true, accurate and complete account of the Company's production and operational activities in the first half
of 2002, the Interim Report 2002 is approved for disclosure to the public.
2. Independent Opinion of Supervisory Committee
(1) Supervision over the Company's Operation Within the Law
In 2002, with the power bestowed by the Company Law and the Articles of Association, the supervisory committee
exercised supervision over the proceeding of the board meetings, the resolutions, the board's execution of the
resolutions of the shareholders' general meeting and the performance of the senior management, and formed the opinion
that the Company carried out its operations in strict accordance with the Company Law, the Securities Law, the Rules
for Listed Companies, the Articles of Association of the Company and other relevant laws and regulations, made
rational operating decisions, and further improved internal management and internal control in 2002; and that no
actions against laws/regulations and the Articles of Association, nor actions to the detriment of the interest of the
Company and the its investors were found on the part of the directors and managers of the Company in the performance
of their duties.
(2) Supervision over Important Operating Activities of the Company
The supervisory committee listened to the special reports made by General Manager and other senior managers and kept
fully informed of the operating activities of the Company with ongoing supervision. The committee is of the opinion
that the management team of the Company worked hard to fulfill their duties, that they struck a balance between
restructuring, development and stability at the critical juncture of the power sector reform to maintain the
production safety and workforce stability, and that they had fulfilled the various targets set forth in the
shareholders' general meeting with efforts.
(3) Supervision over Financial Position of the Company
The supervisory committee scrutinized the financial statements of the Company and gained a full timely knowledge of
its financial information. The committee is of the opinion that the Company was in good financial position with good
fund application, sound financial management and stringent internal control, which paved the way for smooth operation
of the Company.
The supervisory committee noted that, pursuant to Document Ji Bian Han No. (2002)11 Notice about Self-examination of
Tax Payment by Province-owned Enterprises issued by the Inspection Office of the State Taxation Bureau Zhejiang
Branch, the Company made a self-examination of its tax payment for 2001. After self-examination, the Company made up
for payment of corporate income tax amounting to RMB 22,006,637.85 yuan, and VAT amounting to RMB 340,699.82 yuan for
2001. In addition, based on the conclusion made by the Inspection Office under the State Taxation Bureau Zhejiang
Branch, the Company made up for payment of VAT amounting to RMB 7,490,632.69 yuan. Treated as significant accounting
errors, the above have been corrected by making retroactive deduction of RMB26,112,117.17 yuan in the net profit for
2001, a corresponding deduction of RMB 5,222,423.44 yuan in surplus reserve, and a corresponding deduction of RMB
20,889,693.73 yuan in the beginning undistributed profit for 2002.
The supervisory committee is of the opinion that the Financial Statements 2002 of the Company truly reflect the
financial position and operating results of the Company. The Auditor's Reports with no reservations and the comments
produced by Zhejiang Pan-China Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd are
objective and fair.
(4) Supervision over Application of Raised Proceeds
The supervisory committee conducted whole-process supervision over the project investment using the proceeds raised
from issuance of shares to ensure that the raised proceeds are invested in projects in consistency with the
commitment. In accordance with the resolution adopted in the extraordinary shareholders' meeting 2001, part of the
remaining proceeds raised by the Company was invested in Zhejiang Jiahua Power Generation Co. Ltd (Jiaxing Power
Plant Project Phase II). In 2002, the project construction went ahead on all fronts following the approval of the
project given by State Planning Commission in Document Ji Ji Chu (2002)2349. Aiming to achieve world-class management
and best equipment in China, the project had fulfilled the various targets for 2002 smoothly.
(5) Supervision over Asset Purchase/Sale and Related Party Transaction
The Company conducted no purchase in the current reporting period. To liquidate the non-operating assets operational,
the Company transferred the buildings of the employee dormitory, the employee training center and their annexes
together with their land use rights located in the living quarters of Xiaoshan Power Plant to Hangzhou Xiaoshan
Linjiang Industrial & Trade Co. Ltd at a price valuated by Zhjiang Pan-China Certified Public Accountants. The
supervisory committee is of the opinion that the related party transactions conducted by the Company in the past year
were fair and open, with related information disclosed per the relevant stipulations; and that the transactions were
priced at either the government-determined price, the market price or the valuation price to no detriment of the
interest of the Company or the medium/small shareholders, with no inside transactions.
(6) Supervision over Implementation of Resolutions Adopted in Shareholders' General Meeting
The supervisors attended the board meetings and the shareholders' general meeting of the Company as observers. They
had no objection to the reports and proposals submitted by the board to the shareholders' general meeting. The
supervisory committee exercised supervision over implementation of the resolutions adopted in the shareholders'
general meeting, and formed the view that the board of directors carried out the resolutions of the shareholders'
general meeting seriously.
(7) Supervision over Execution of Monetarized House Allotment Policy
The supervisory committee is of the opinion that the Company's action to allocate the lump-sum housing subsidy and
the service length subsidy pursuant to Document Zhe Dian Xing (2002)1364 Notice about Methods for Implementation of
Monetarized House Allotment in Organizations in Hangzhou Under ZPEPB issued by Zhejiang Provincial Electric Power
Bureau (ZPEPB) and Document Tai Fang Gai (2001)47 Approval of House Subsidization Plan of Taizhou Power Plant issued
by Taizhou Municipal Housing Committee conformed to the state and provincial governmental policies pertaining to the
housing reform featuring monetarized house allotment.
IX. Important Events
(1) Major Events of Litigation or Arbitration
The Company was not subjected to any major events of litigation or arbitration during the current reporting period.
2. Acquisition and Sale of Assets
(1) The Company carried out no acquisition of assets in the current reporting period.
(2) Sale of Assets
To achieve liquidity of the non-operating assets, the Company transferred the buildings of the employee dormitory,
the employee training center and their annexes together with their land use rights located in the living quarters of
Xiaoshan Power Plant to Hangzhou Xiaoshan Linjiang Industrial & Trade Co. Ltd in the current reporting period. The
book value of the above assets amounts to RMB 11,867,500 yuan. The transfer was made at a price as valuated by
Zhjiang Pan-China Certified Public Accountants and indicated in Document Zhe Tian Ping Jian Zi (2002)42, viz. RMB
5,478,200 yuan. The asset sale had no effect on the operating continuity of the Company and the stability of the
management.
3. Important Related Party Transactions
(1) Purchase/Sale of Goods
a. Electricity Sale
All the electricity generated by the Company is sold to ZPEPC, the grid operator and single buyer in Zhejiang power
grid. The transaction between the Company and ZPEPC has its peculiarity and necessity in the power sector. As at the
end of the current reporting period, ZPEPC is the second largest shareholder of the Company.
Related Party Transaction Pricing Principle Amount Settlement Method Percentage out of
(RMB Yuan) Total
ZPEPC Electricity Sale (Note) 3,320,944,888.62 Settlement by 10 100%
days every month
(Note): Based on Document Zhe Dian Ji No. (2002) 150 "Notice about Power Generation Plan of ZPEPC for 2002" issued by
Zhejiang ZPEPC, the Company continued to participate in the competitive bidding in the power market for sale of
electricity, with the bidding quantity accounting for 20% and the contractual quantity 80% of the total generation.
With regard to the price of electricity sale, the bidding quantity was settled at the market price on real time
basis, while the contractual quantity was settled at prices approved by Zhejiang Provincial Commodity Pricing Bureau
(ZPCPB) in Document Zhe Jia Gong No.(2000) 39 dated 28 Jan. 2000, i.e. RMB 357.415 yuan/MWh (excluding tax) for Units
1-8 of Taizhou Power Plant and RMB 320 yuan/MWh for Units 1-2 of Xiaoshan Power Plant (excluding tax) in 2002. In
addition, based on ZPCPB Document Zhe Jia Shang No.(2002)342 "Notice about Tariff of Excess Generation in 2002", the
excess generation generated from 80% of the annual mean utilization hours of a power plant over and above the
contractual base quantity of 4,800 hours was settled at the excess generation tariff, i.e. RMB 200 yuan/MWh
(excluding tax) for Taizhou Power Plant and RMB 197 yuan/MWh (excluding tax) for Xiaoshan Power Plant in 2002. Based
on ZPCPB Document Zhe Jia Shang No.(2003)15 "Approval of Electricity Sale Tariff Applicable to ZCPGC", the tariff
applicable to Zhejiang Changxing Power Generation Co. Ltd (ZCPGC) from the start date of generation to the end of
2003 will be 380 yuan/MWh (including tax).
b. Purchase of Coal
Related Party Transaction Pricing Principle Amount Settlement Method Percentage out of
(RMB Yuan) Total
Zhejiang Fuxing Purchase of coal (Note) 428,731,263.86 Based on the 31.89%
Electric Fuel Co. actual volume of
Ltd purchase
throughout the year
Ningbo Fuxing 915,622,685.53 68.11%
Electric Fuel Co.
Ltd
(Note): The fuel needed by the Company for power generation is supplied by ZPEPC's subsidiary Zhejiang Fuxing
Electric Power Fuel Company Limited and its subsidiary Ningbo Fuxing Electric Fuel Co. Ltd, who entered into the Fuel
Supply Agreement with the Company in May 1997. The Agreement is valid for 20 years. Pursuant to the Agreement, both
parties shall set down an Annual Coal Supply Contract every year to determine the quality, specifications, quantity
and price of the coal supply for the current year. Zhejiang Fuxing Electric Fuel Co. and Ningbo Fuxing Electric Fuel
Co. shall supply fuel to the Company at a price neither higher than the price at which it charges other power plants
for the same type of fuel, nor higher than the price at which the Company can purchase the same type of fuel in the
open market at the time of the price negotiation between both sides. Otherwise, the Company shall have the right to
purchase fuel at its own discretion.
(2) Purchase and Sale of Assets
The Company conducted no significant related party transactions of asset purchase or sale in the current reporting
period.
(3) Credits and Debts
a. Repayment of Long-term Liabilities
The Company signed a Liabilities Contract with two creditors, namely, ZPEPC and ZPEPDC in 1997, whereby the Company
borrowed a loan for construction of the Phase IV Project (Units 7 and 8) for 10 years. It is specified in the
Contract that the Company shall repay the principal and interest in installments to the above two companies after
completion of the trial production of the new generating units. Then the Company and two creditors amended some terms
and conditions of Liabilities Contract in March 1999. And they signed Supplementary Agreement to Liabilities Contract
subsequently on 22nd March 1999, which re-adjusted and confirmed the actual investment, liabilities and liability
ratio of two creditors. In December 1999, the Company, ZPEPC and East China Electric Power Group Finance Co. Ltd
entered in Trust Loan Contract, by which the debt owing to ZPEPC was transformed to trust borrowings totaling RMB
1,706,380,000 yuan. On 29 Dec. 2000, the Company, ZPEPDC and Shanghai Pudong Development Bank Hangzhou Branch entered
into Trust Loan Contract, by which the remaining debt owing to ZPEPDC up to the end of 2000 was transformed to
4-year-term trust borrowing totaling RMB 317,892,000 yuan. After repayment, the amount of this long term liability as
at the end of 2001 was RMB 978,180,000.00 yuan. Based on Agreement on Liabilities Repayment in 2001 and Thereafter
signed by the 3 partis on 28 Feb. 2001, the amount of the repayment in 2002 and the changes are as follows:
Creditor (Accounting Shanghai Pudong Development Bank East China Electric Power Group Total
Title) Hangzhou Branch Finance Co. Ltd
(Long-term borrowings) (long-term borrowings)
Item
Total debt amount at end of 238,419,000.00 739,761,000.00 978,180,000.00
2001
Amount repaid in 2002 79,473,000.00 246,587,000.00 326,060,000.00
Transferred to long-term 79,473,000.00 246,587,000.00 326,060,000.00
liabilities due within 1 year
Amount of long-term 79,473,000.00 246,587,000.00 326,060,000.00
liabilities as at end of 2002
b. Trust loans
In order to raise the efficiency of capital use, the Company entrusted Industrial & Commercial Bank of China,
Hangzhou Qingchunlu Branch to provide trust loans to Zhejiang Changxing Power Generation Co. Ltd.
Time Loan Amount Due Date Repayment Time Annual Interest Rate Annual Service Charge
(RMB million yuan)
16/12/2001 50 25/12/2002 25/12/2002 5.85% 0.03%
30/01/2002 50 29/01/2003 29/01/2003 5.85% 0.03%
25/09/2002 50 24/09/2003 Not yet due 5.31% 0.03%
25/10/2002 50 24/10/2003 Not yet due 5.31% 0.03%
25/12/2002 50 24/12/2003 Not yet due 5.31% 0.03%
27/01/2003 50 26/01/2004 Not yet due 5.31% 0.03%
29/01/2003 50 28/01/2004 Not yet due 5.31% 0.03%
04/03/2003 50 03/03/2004 Not yet due 5.31% 0.03%
(4) Guarantees
a. To meet the needs for construction of 2 x 300 MW generating units of Zhejiang Changxing Power Generation Co. Ltd
(ZCPGC), the shareholders of ZCPGC severally provided shareholders' guarantees proportional to their respective
equity investment for the loan to ZCPGC without joint accountability. The provision of the guarantee was approved in
the 15th board meeting of the Company. In December 2001, ZCPGC applied to China Construction Bank Changxing County
Branch for a loan in amount of RMB 1.5 billion yuan. In proportion to its equity investment, the Company provided a
guarantee for part of the loan amounting to RMB 1.07 billion yuan with its duration from 18 Dec. 2001 to 17 June
2019. Up to the end of 2002, the balance of ZCPGC's borrowings stood at RMB 450 million, of which RMB 329 million was
on a guarantee provided by the Company. As at the end of the current reporting period, there existed no signs of
anticipated liabilities.
b. To meet the needs for construction of 4 x 600 MW generating units of Zhejiang Jiahua Power Generation Co. Ltd
(ZJPGC), the shareholders of ZJPGC severally provided shareholders' guarantees proportional to their respective
investment for the loan to ZJPGC without joint accountability. This guarantee was approved in the extraordinary
shareholders' meeting of the Company in 2001. In December 2001, ZJPGC applied to Industrial and Commercial Bank of
China Zhejiang Branch and China Construction Bank Zhejiang Branch for loans in amount of RMB 4,500 million yuan and
RMB 3,200 million yuan respectively. The Company provided a guarantee with its duration from 17 Dec. 2001 to 16 Dec.
2026. Up to the end of 2002, the balance of ZJPGC's borrowings stood at RMB 100 million. In proportion to its equity
investment, the Company provided a guarantee for RMB 24 million of the loan balance. As at the end of the current
reporting period, there existed no signs of anticipated liabilities.
ZCPGC produced accepted bank draft amounting to RMB 56,963,000.00 yuan not yet due in the current reporting period,
of which RMB 39,696,000.00 yuan was on a guarantee with a duration from 6 Aug. 2002 to 28 Apr. 2003 provided by the
Company. As at the end of the current reporting period, there existed no signs of anticipated liabilities.
(5) Other Related Party Transactions
a. In the current reporting period, the Company signed Labor Borrowing Agreement, Transportation Service Contract and
Contract on Boiler Ash and Pyrite Transportation with Taizhou Power Plant Industrial Co. and paid the latter for
labor borrowing, commuting buses to/from work and waste ash disposal totaling RMB 16,978,526.88 yuan. Taizhou Power
Plant is involved in the daily management of Taizhou Power Plant Industrial Co.
b. In the current reporting period, the Company signed Vehicle Transport Contract and Logistic Service Contract with
Hangzhou Xiaoshan Linjiang Industrial & Trade Co. Ltd and paid the latter for rental and logistic service charges
totaling RMB 10,435,238.00 yuan. In addition, the Company transferred the buildings of the employee dormitory, the
employee training center and their annexes together with their land use rights located in the living quarters of
Xiaoshan Power Plant to Hangzhou Xiaoshan Linjiang Industrial & Trade Co. Ltd. Refer to "Acquisition and Sale of
Assets" in this section for details. Xiaoshan Power Plant is involved in the daily management of Hangzhou Xiaoshan
Linjiang Industrial & Trade Co. Ltd.
c. In the current reporting period, Zhejiang Changxing Power Generation Co. Ltd (ZCPGC) paid Changxing Changfeng
Energy Co. Ltd at agreed prices for goods purchase amounting to RMB 32,165,270.62 yuan. ZCPGC is involved in the
daily management of the latter.
d. Based on the Agreement on Lease of Divested Asset signed between the Company and ZPEPC, ZPEPDC on 8 Nov.2000, the
Company rented the non-operating assets divested from Taizhou Power Plant at the time of restructuring. The rental
paid by the Company in the current reporting period amounted to RMB 1,738,800.00 yuan.
4. Important Contracts and Implementation
(1) Trust Management, Contracting and Renting
In the current reporting period, the Company made no trust management, contracting or renting of other companies'
assets, nor did other companies make any trust management, contracting or renting of the Company's assets.
(2) Important Guarantees
Refer to "Important Related Party Transactions" herein.
(3) Trust fund Management
In line with the resolution in which the Board authorized the management team to invest in state treasury bonds and
other securities up to a ceiling of RMB 300 million yuan, the Company entered into three agreements on trust fund
management with Zhejiang International Trust Investment Corp. (ZITIC) in the current reporting period as follows:
Trustee Trust Amount Trust Term Contracted Yield Earning Recovered Amount
(in RMB yuan) (RMB yuan) (RMB yuan)
ZITIC 100,000,000.00 04/01/2002-04/01/2003 Nil 16,363,090.00 The agreements have all
be terminated ahead of
time, with the principal
of RMB 200 million yuan
recovered on 20 Dec.
2002, the principal of
RMB 100 million yuan
recovered on 24 Dec.
2002 and the recovery of
trust loan management
income amounting to RMB
16.3631 million.
ZITIC 100,000,000.00 22/04/2002-22/04/2003 Nil
ZITIC 100,000,000.00 23/06/2002-23/06/2003 Nil
Total 300,000,000.00 16,363,090.00 316,363,090.00
Based on Agreement on Trust fund Management signed between the Company and ZITIC on 22 Jan. 2003, the Company will
continue to entrust ZITIC to engage in capitalistic operations.
Trustee Trust Amount Trust Term Contracted Yield Earning
(in RMB yuan) (RMB yuan)
ZITIC 100,000,000.00 From the date of the trust fund arriving at the Nil Not yet generated
account designated by ZITIC to 21 Jan. 2004
ZITIC 50,000,000.00 Nil Not yet generated
(4) Trust loan
Refer to "Important Related Party Transactions" herein.
(5) The Company entered into no other important contracts.
5. Commitment
Based on the Resolution on Increasing Registered Capital adopted in shareholders' general meeting 2001 of ZJPGC held
on 28 Nov. 2002, all the shareholders unanimously agreed to increase the registered capital of ZJPGC to RMB
1,555,190,000 yuan. (Up to 31 Dec. 2002, the registered capital of ZJPGC amounted to RMB 555,190,000 yuan. The
Company made cumulative capital injection amounting to RMB 133,250,000 yuan, accounting for 24% of ZJPGC's total
registered capital.) Each shareholder will inject the additional amount in proportion to his equity investment ratio
and in conformity with ZJPGC's Equity Capital Injection Plan 2003 in 4 installments in 2003. Based on the above
resolution, the Company will inject additional equity capital amounting to RMB 240 million yuan to ZJPGC, and paid
RMB 60 million yuan on 17 Mar. 2003.
6. Appointment of Accountants
In this reporting period, the Company renewed appointment of Zhejiang Pan-China Certified Public Accountants as its
domestic auditor and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. as its international auditor. Up to the end of
this reporting period, Zhejiang Pan-China Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co.
Ltd had provided their auditing service for the Company for 6 consecutive years. The remuneration to the accounting
firms in the past two years were as follows:
Name of Accounting Firms Year 2002 Year 2001 Note
Zhejiang Pan-China Certified Public RMB RMB The Company borne no traveling
Accountants 900,000.00 yuan 900,000.00 expenses
yuan
PricewaterhouseCoopers Zhong Tian CPAs Co., RMB RMB The Company borne no traveling
Ltd. 1,050,000.00 yuan 1,050,000.00 expenses
yuan
7. The Company was free from any scrutiny, administrative punishment or open criticism of China Securities Regulatory
Commission, or open accusation of the stock exchanges in the reporting period. In June 2002, China Securities
Regulatory Commission Hangzhou Office re-visited the Company and formed the opinion that the problems found in the
last visit had been rectified, and that the operations of Company conformed to laws and regulations.
8. Other Important Matters
In line with Document Zhe Cai Qi Yi (2002)49 Reply about Refund of Income Tax to ZSEPC issued by Zhejiang Provincial
Finance Bureau, the Company received the refund of the local income tax on 26 July 2002 amounting to RMB 16,525,600
yuan, i.e. 18% of the income tax of RMB 30,297,000 yuan paid in October-December 2001. It offset the current income
tax accordingly.
X. Financial Statements 1
(based on the Chinese Enterprise Accounting System)
1. Auditor's Report
Zhe Kuai Tian Shen (2003) 383
To: The Shareholders of Zhejiang Southeast Electric Power Company Limited
We have accepted the appointment to audit the Balance Sheet and the Consolidated Balance Sheet as at 31 December
2002, the Profit & Profit Distribution Statement and the Consolidated Profit & Profit Distribution Statement, and the
Cash Flow Statement and the Consolidated Cash Flow Statement of the Company for 2002. These accounting statements are
prepared by the Company. It is our responsibility to form audit opinion on these accounting statements. We conducted
our audit in accordance with Independent Auditing Standards of the Certified Public Accountant in the People's
Republic of China (PRC). In the course of audit, we have reviewed practical situations of the Company and conducted
audit procedures which we considered necessary including random examination of accounting records.
In our opinion, the above accounting statements have complied with the Accounting Standards of Enterprises and the
relevant provisions of the Accounting System Enterprises. The statements give fair view, in all material respects, of
the state of financial affairs of the Company as at 31st December 2002 and of the operating results and cash flows of
the Company for 2002. The accounting policies are applied consistently.
Zhejiang Pan-China Certified Public Accountants
PRC Certified Public Accountant Wang Yuehao
PRC Certified Public Accountant Chen Shu
PRC Certified Public Accountant Huang Yuanxi
Dated: 20 February 2003
2. Financial Statements
(1) Balance Sheet (attached hereafter)
(2) Statement of Profit and Profit Distribution (attached hereafter)
(3) Statement of Cash Flow (attached hereafter)
Balance Sheet
As at 31st December 2002
Prepared by: Zhejiang Southeast Electric Power Company Limited Unit: RMB Yuan
Assets Ending Amount
Parent Company Consolidated
Current assets
Monetary assets 1,275,444,909.15 1,316,602,765.12
Short term investments 245,339,100.00 45,066,100.00
Bills receivable
Share dividends receivable
Interests receivable
Accounts receivable 101,911,910.02 189,310,963.44
Other receivables 34,336,919.77 34,892,310.31
Prepayments 12,461,180.00 12,461,180.00
Subsidy receivable
Inventories 89,186,432.87 109,881,758.45
Deferred expenses
Long term investments in bond due within 1 year
Other current assets
Total current assets 1,758,680,451.81 1,708,215,077.32
Long term investments:
Long term equity investments 1,567,688,293.33 1,208,550,000.00
Long term debt investments
Total long term investments 1,567,688,293.33 1,208,550,000.00
Including: consolidated price differences
Including: equity investments differences
Fixed assets:
Costs of fixed assets 6,663,381,995.97 8,262,163,609.22
Less: Accumulated depreciation 3,313,017,453.44 3,315,214,904.61
Net value of fixed assets 3,350,364,542.53 4,946,948,704.61
Less: Reserve for fixed assets devaluation
Net value of fixed assets 3,350,364,542.53 4,946,948,704.61
Project material 21,012,643.90 68,530,433.90
Construction in progress 80,280,204.67 421,810,826.40
Disposal of fixed assets
Total fixed assets 3,451,657,391.10 5,437,289,964.91
Intangible assets and other assets:
Intangible assets 221,098,737.29 221,098,737.29
Long term deferred expenses 24,564,741.71 27,265,487.90
Other long term assets
Total intangible and other assets 245,663,479.00 248,364,225.19
Deferred tax:
Deferred tax debit
Total assets 7,023,689,615.24 8,602,419,267.42
Liabilities and shareholders' equity
Current liabilities:
Short term borrowings 3,390,000.00 553,390,000.00
Bills payable 56,963,000.00
Accounts payable 144,452,442.30 456,384,684.26
Accounts received in advance
Wages payable 86,879,011.39 86,668,618.65
Welfare expenses payable 26,056,228.71 26,425,375.38
Dividends payable 498,480,000.00 498,480,000.00
Tax payable 108,140,485.09 115,737,409.03
Other payments due 1,320,983.85 1,584,804.17
Other payables 115,765,674.65 122,560,178.74
Accruals 934,800.00
Anticipated liabilities
Long term liabilities due within one year 326,060,000.00 326,060,000.00
Other current liabilities
Total current liabilities 1,310,847,888.24 2,245,491,932.48
Long term liabilities:
Long term borrowings 326,060,000.00 776,763,450.00
Bonds payable
Long term payables
Special payables
Other long term liabilities
Total long term liabilities 326,060,000.00 776,763,450.00
Deferred tax:
Deferred tax credit
Total liabilities 1,636,907,888.24 3,022,255,382.48
Minority shareholders' equity 193,382,157.94
Shareholders' equity
Share capital 2,010,000,000.00 2,010,000,000.00
Less: investments paid back
Net value of share capital 2,010,000,000.00 2,010,000,000.00
Capital reserve 1,863,272,079.51 1,863,272,079.51
Surplus reserve 763,235,621.56 763,235,621.56
Including: statutory common welfare reserve 381,617,810.78 381,617,810.78
Undistributed profits 750,357,340.23 750,357,340.23
Foreign currency statement conversion difference
Total shareholders' equity 5,386,781,727.00 5,386,781,727.00
Total liabilities and owners' equity 7,023,689,615.24 8,602,419,267.42
Assets Beginning Amount
After Adjustment Before Adjustment
Parent Company Consolidated Parent Company Consolidated
Current assets
Monetary assets 1,430,831,373.27 1,459,410,636.05 1,430,831,373.27 1,459,410,636.05
Short term investments 50,523,515.00 482,890.00 50,523,515.00 482,890.00
Bills receivable
Share dividends receivable
Interests receivable
Accounts receivable 88,563,205.11 88,563,205.11 88,563,205.11 88,563,205.11
Other receivables 21,675,119.65 22,210,487.95 21,675,119.65 22,210,487.95
Prepayments 4,296,885.57 10,146,885.57 4,296,885.57 10,146,885.57
Subsidy receivable
Inventories 106,429,581.19 106,429,581.19 106,429,581.19 106,429,581.19
Deferred expenses
Long term investments in bond due
within 1 year
Other current assets
Total current assets 1,702,319,679.79 1,687,243,685.87 1,702,319,679.79 1,687,243,685.87
Long term investments:
Long term equity investments 1,605,050,000.00 1,208,550,000.00 1,605,050,000.00 1,208,550,000.00
Long term debt investments
Total long term investments 1,605,050,000.00 1,208,550,000.00 1,605,050,000.00 1,208,550,000.00
Including: consolidated price
differences
Including: equity investments
differences
Fixed assets:
Costs of fixed assets 6,637,486,567.77 6,644,095,956.77 6,637,486,567.77 6,644,095,956.77
Less: Accumulated depreciation 2,966,147,451.48 2,966,765,248.60 2,966,147,451.48 2,966,765,248.60
Net value of fixed assets 3,671,339,116.29 3,677,330,708.17 3,671,339,116.29 3,677,330,708.17
Less: Reserve for fixed
assets devaluation
Net value of fixed assets 3,671,339,116.29 3,677,330,708.17 3,671,339,116.29 3,677,330,708.17
Project material 13,075,066.00 41,556,517.00 13,075,066.00 41,556,517.00
Construction in progress 52,417,570.37 970,571,471.38 52,417,570.37 970,571,471.38
Disposal of fixed assets
Total fixed assets 3,736,831,752.66 4,689,458,696.55 3,736,831,752.66 4,689,458,696.55
Intangible assets and other
assets:
Intangible assets 227,502,198.31 227,502,198.31 227,502,198.31 227,502,198.31
Long term deferred expenses 444,637.46 3,559,195.52 444,637.46 3,559,195.52
Other long term assets
Total intangible and other assets 227,946,835.77 231,061,393.83 227,946,835.77 231,061,393.83
Deferred tax:
Deferred tax debit
Total assets 7,272,148,268.22 7,816,313,776.25 7,272,148,268.22 7,816,313,776.25
Liabilities and shareholders'
equity
Current liabilities:
Short term borrowings 200,000,000.00 200,000,000.00
Bills payable
Accounts payable 125,644,647.62 233,465,102.22 125,644,647.62 233,465,102.22
Accounts received in advance
Wages payable 111,255,157.17 110,963,634.40 111,255,157.17 110,963,634.40
Welfare expenses payable 22,987,005.40 23,778,207.49 24,156,928.09 24,948,130.18
Dividends payable 502,500,000.00 502,500,000.00 502,500,000.00 502,500,000.00
Tax payable 136,946,046.60 136,964,189.92 107,108,076.24 107,126,219.56
Other payments due 4,851,621.04 4,863,247.04 4,851,621.04 4,863,247.04
Other payables 42,917,250.41 44,941,580.20 45,473,180.91 47,497,510.70
Accruals 7,079,293.09 7,404,293.09 7,079,293.09 7,404,293.09
Anticipated liabilities
Long term liabilities due within 326,060,000.00 326,060,000.00 326,060,000.00 326,060,000.00
one year
Other current liabilities
Total current liabilities 1,280,241,021.33 1,590,940,254.36 1,254,128,904.16 1,564,828,137.19
Long term liabilities:
Long term borrowings 652,120,000.00 672,126,900.00 652,120,000.00 672,126,900.00
Bonds payable
Long term payables
Special payables
Other long term liabilities
Total long term liabilities 652,120,000.00 672,126,900.00 652,120,000.00 672,126,900.00
Deferred tax:
Deferred tax credit
Total liabilities 1,932,361,021.33 2,263,067,154.36 1,906,248,904.16 2,236,955,037.19
Minority shareholders' equity 213,500,000.00 213,500,000.00
Shareholders' equity
Share capital 2,010,000,000.00 2,010,000,000.00 2,010,000,000.00 2,010,000,000.00
Less: investments paid back
Net value of share capital 2,010,000,000.00 2,010,000,000.00 2,010,000,000.00 2,010,000,000.00
Capital reserve 1,863,272,079.51 1,863,272,079.51 1,863,272,079.51 1,863,272,079.51
Surplus reserve 654,057,411.24 654,057,411.24 659,279,834.68 659,279,834.68
Including: statutory common 327,028,705.62 327,028,705.62 329,639,917.34 329,639,917.34
welfare reserve
Undistributed profits 812,457,756.14 812,417,131.14 833,347,449.87 833,306,824.87
Foreign currency statement
conversion difference
Total shareholders' equity 5,339,787,246.89 5,339,746,621.89 5,365,899,364.06 5,365,858,739.06
Total liabilities and owners' 7,272,148,268.22 7,816,313,776.25 7,272,148,268.22 7,816,313,776.25
equity
Statement of Profit and Profit Distribution
Year 2002
Prepared by: Zhejiang Southeast Electric Power Company Limited Unit: RMB Yuan
Item Current Amount
Parent Company Consolidated
1. Income from principal operating activities 3,303,121,784.34 3,320,944,888.62
Less: Principal operating costs 2,197,760,669.91 2,208,191,596.44
Principal operating tax and surtax 29,518,549.61 29,631,064.15
2. Profit from principal operating activities (loss indicated by "-") 1,075,842,564.82 1,083,122,228.03
Add: Profit from other activities 489,090.01 489,090.01
(loss indicated by "-")
Less: Operating expenses
Administrative expenses 173,026,072.79 229,175,442.48
Financial expenses 40,081,923.83 41,228,922.57
3.Operating profit (loss indicated by "-") 863,223,658.21 813,206,952.99
Add: Investment income 2,552,849.05 33,459,111.29
(loss indicated by "-")
Subsidy income
Non-operating income 399,756.67 399,756.67
Less: Non-operating expenses 34,295,269.99 34,312,683.64
4.Gross profit (loss indicated by "-") 831,880,993.94 812,753,137.31
Less: Income tax 285,989,942.37 286,939,302.80
Less: Minority shareholders' gains and losses -20,117,842.06
5.Net profit (loss indicated by "-") 545,474,480.11 545,515,105.11
Add: Undistributed profit at beginning of year 812,457,756.14 812,417,131.14
Profit transferred from others
6.Distributable profit 1,357,932,236.25 1,357,932,236.25
Less: Allocation of statutory surplus reserve 54,547,448.01 54,547,448.01
Allocation of statutory common welfare reserve 54,547,448.01 54,547,448.01
Allocation of employee bonus and welfare fund
Allocation of reserve fund
Allocation of corporate development fund
Profit payback to investments
7.Profit Distributable to shareholders 1,248,837,340.23 1,248,837,340.23
Less: Preference share dividends payable
Allocation of discretionary surplus reserve
Ordinary share dividends payable 498,480,000.00 498,480,000.00
Dividends of ordinary shares transferred to share capital
8.Undistributed profit 750,357,340.23 750,357,340.23
Supplementary information
Income from sales, disposal or investment in other organizations
Loss caused by natural calamities
In/de-crease in total profit caused by accounting policy changes
In/de-crease in total profit caused by accounting assumption changes
Loss on debt restructuring
Others
Item Amount in Preceding Year
After Adjustment Before Adjustment
Parent Company Consolidated Parent Company Consolidated
1. Income from principal 3,370,277,286.61 3,370,277,286.61 3,370,277,286.61 3,370,277,286.61
operating activities
Less: Principal operating 2,192,944,444.73 2,192,944,444.73 2,188,838,965.41 2,188,838,965.41
costs
Principal operating 41,567,109.68 41,567,109.68 41,567,109.68 41,567,109.68
tax and surtax
2. Profit from principal 1,135,765,732.20 1,135,765,732.20 1,139,871,211.52 1,139,871,211.52
operating activities (loss
indicated by "-")
Add: Profit from other 1,667,567.06 1,667,567.06 1,667,567.06 1,667,567.06
activities
(loss indicated by "-")
Less: Operating expenses
Administrative 157,078,901.50 157,078,901.50 157,078,901.50 157,078,901.50
expenses
Financial expenses 30,624,012.03 30,624,012.03 30,624,012.03 30,624,012.03
3.Operating profit (loss 949,730,385.73 958,949,587.73 953,835,865.05 953,835,865.05
indicated by "-")
Add: Investment income 21,118,780.44 21,078,155.44 21,118,780.44 21,078,155.44
(loss indicated by "-")
Subsidy income
Non-operating income 87,637.90 87,637.90 87,637.90 87,637.90
Less: Non-operating 11,946,591.34 11,946,591.34 11,946,591.34 11,946,591.34
expenses
4.Gross profit (loss 958,990,212.73 958,949,587.73 963,095,692.05 963,055,067.05
indicated by "-")
Less: Income tax 251,003,860.53 251,003,860.53 228,997,222.68 228,997,222.68
Less: Minority
shareholders' gains and
losses
5.Net profit (loss 707,986,352.20 707,945,727.20 734,098,469.37 734,057,844.37
indicated by "-")
Add: Undistributed profit 748,568,674.38 748,568,674.38 748,568,674.38 748,568,674.38
at beginning of year
Profit transferred
from others
6.Distributable profit 1,456,555,026.58 1,456,555,026.58 1,482,667,143.75 1,482,626,518.75
Less: Allocation of 70,798,635.22 70,798,635.22 73,409,846.94 73,409,846.94
statutory surplus reserve
Allocation of statutory 70,798,635.22 70,798,635.22 73,409,846.94 73,409,846.94
common welfare reserve
Allocation of employee
bonus and welfare fund
Allocation of reserve fund
Allocation of corporate
development fund
Profit payback to
investments
7.Profit Distributable to 1,314,957,756.14 1,314,917,131.14 1,335,847,449.87 1,335,806,824.87
shareholders
Less: Preference share
dividends payable
Allocation of
discretionary surplus
reserve
Ordinary share 502,500,000.00 502,500,000.00 502,500,000.00 502,500,000.00
dividends payable
Dividends of
ordinary shares
transferred to share
capital
8.Undistributed profit 812,457,756.14 812,417,131.14 833,347,449.87 833,306,824.87
Supplementary information
Income from sales,
disposal or investment in
other organizations
Loss caused by natural
calamities
In/de-crease in total
profit caused by
accounting policy changes
In/de-crease in total
profit caused by
accounting assumption
changes
Loss on debt restructuring
Others
Statement of Cash Flow
Year 2002
Prepared by: Zhejiang Southeast Electric Power Company Limited Unit: RMB Yuan
Item Parent company Consolidated
1.Cash flow generated from operating activities
Cash received from sale of goods, supply of labor service 3,850,736,874.32 3,850,736,874.32
Cash received from refund of taxes 16,525,600.00 16,525,600.00
Other cash received relating to operating activities 1,804,473.06 2,252,053.13
Sub-total of cash inflow 3,869,066,947.38 3,869,514,527.45
Cash paid for purchase of goods and labor services 1,707,813,925.82 1,713,618,023.73
Cash paid to and for the employee 304,851,485.17 308,765,573.72
Taxes paid 777,827,538.64 780,280,600.36
Other cash paid relating to operating activities 26,272,825.23 26,695,800.91
Sub-total of cash outflow 2,816,765,774.86 2,829,359,998.72
Net cash flow generated from operating activities 1,052,301,172.52 1,040,154,528.73
2.Cash flow generated from investment activities
Cash received from investment recovery 350,382,378.23 300,382,378.23
Cash received from investment income 39,718,792.49 33,303,973.06
Net cash received from disposal of fixed assets, intangible assets and 7,154,728.51 7,154,728.51
other long-term assets
Other cash received relating to investment activities 24,185,433.65 27,207,276.12
Sub-total of cash inflow 421,441,332.88 368,048,355.92
Cash paid for purchase/building of fixed assets, intangible assets and 197,706,587.10 1,061,795,091.86
other long-term assets
Cash paid for investment 545,002,200.00 345,002,200.00
Other cash paid relating to investment activities
Sub-total of cash outflow 742,708,787.10 1,406,797,291.86
Net cash flow generated from investment activities -321,267,454.22 -1,038,748,935.94
3. Cash flow from financing activities
Cash received by absorbing investment
Including: cash received by subsidiaries absorbing minority shareholders'
equity investment
Cash received from borrowing 3,390,000.00 1,133,390,000.00
Other cash received in relation to financing activities 425,365.60
Sub-total of cash inflow 3,390,000.00 1,133,815,365.60
Cash paid for debt service 326,060,000.00 676,060,000.00
Cash paid for distribution of dividend or profit or payment of interest 563,493,842.98 601,712,489.88
Including: distribution of dividend from subsidiaries to minority
shareholders
Other cash paid in relation to financing activities
Sub-total of cash outflow 889,553,842.98 1,277,772,489.88
Net cash flow generated from financing activities -886,163,842.98 -143,957,124.28
4. Impact of foreign exchange fluctuation on cash -256,339.44 -256,339.44
5. Net increase in cash and cash equivalents -155,386,464.12 -142,807,870.93
Supplementary Information
1. Net profit converted to operating cash flow
Net profit 545,474,480.11 545,515,105.11
Add: Minority shareholders' gains and losses -20,117,842.06
Allocated reserve for assets devaluation 1,897,845.00 7,477,786.00
Depreciation of fixed assets 441,449,424.81 443,084,034.52
Amortization of intangible assets 6,168,859.68 6,168,859.68
Amortization of long term deferred expenses 790,619.74 54,016,220.96
Decrease in deferred expenses (less: increase)
Increase in pre-allocated expenses (less: decrease) -7,079,293.09 -7,079,293.09
Loss on disposal of fixed assets, intangible assets and other long-term 28,656,540.39 28,656,540.39
assets
(less: income)
Loss on retirement of fixed assets
Financial expenses 38,450,115.74 39,596,708.94
Loss on investment (less: income) -2,790,449.05 -33,696,711.29
Deferred tax credit (less: debit)
Decrease in inventory (less: increase) 17,243,148.32 -3,452,177.26
Decrease in operational receivables (less: increase) -37,595,444.46 -136,232,151.11
Increase in operational payables (less: decrease) 19,635,325.33 116,217,447.94
Others
Net cash flow generated from operating activities 1,052,301,172.52 1,040,154,528.73
2. Investment and financing activities not involving cash income and
expenditure
Debt transferred to capital
Convertible corporate bonds due within 1 year
Fixed assets leased in by financing lease
3. Net increase in cash and cash equivalents:
Ending balance of cash 1,275,444,909.15 1,316,602,765.12
Less: Beginning balance of cash 1,430,831,373.27 1,459,410,636.05
Add: Ending balance of cash equivalents
Less: Beginning balance of cash equivalents
Net increase in cash and cash equivalents -155,386,464.12 -142,807,870.93
3. Notes to Financial Statements 2002
Unit: RMB yuan
(1) Company Profile
Zhejiang Southeast Electric Power Company Limited (the Company) is a joint stock limited company established by way
of promotion by ZPEPC, ZPEPDC, Zhejiang Bada Company Limited, Zhejiang Electric Power Equipment and Materials Supply
Company and Zhejiang Electric Power Real Estate Development Company Limited as the promoters in accordance with
Document Zhe Zheng Wei (1997) 49 entitled Approval on Establishment of Zhejiang Southeast Electric Power Company
Limited released by the Securities Regulatory Commission of Zhejiang Provincial Government and Document (1997) 4
entitled Reply to the Proposal of Zhejiang Southeast Electric Power Company Limited (Preparation Office) to Issue New
Shares Right After Establishment released by Division of International Affairs of China Securities Regulatory
Commission. The aggregate promoters' share capital amounts to RMB 1,320 million yuan, as was verified in Capital
Verification Report Zhe Kuai Yan (1997) 75 by Zhejiang Accounting Firm. The registration of the Company with the
industrial and commercial administration authority was made, and the Business License No. 14294345-0 (1/1) of the
Company was obtained on 15th May 1997. After being approved by the Securities Committee of the State Council with
Document. Zheng Wei Fa (1997)44, the Company issued 690 million domestically-listed foreign investment shares (B
shares) including an over-allotment of 90 million shares at a par value of RMB 1 yuan/share. The Company's shares
went public on Shanghai Stock Exchange on 23 Sept. 1997. After issuance of the shares, the aggregate share capital of
the Company amounts to RMB 2,010 million yuan. Thus the Company was re-registered with the industrial and commercial
administration, with its business license No. unchanged.
The Company was transformed to a stock limited company with foreign investment on 23 May 2000 upon the approval by
the Ministry of Foreign Trade & Economic Cooperation with Document Wai Jing Mao Zi (2000)373. The procedure relating
to the re-registration with the industrial and commercial administration was then completed, and the altered Business
License Qi Gu Zhe Zong No.002189 obtained, with the total registered capital and the scope of the business of the
Company remaining unchanged.
The Company belongs to the power sector, with its business scope encompassing investment in, development and
operation of the electric power projects.
Under the administration of the Company, in addition to its head office, there are Taizhou Power Plant, Xiaoshan
Power Plant, a subsidiary namely Zhejiang Changxing Power Generation Co. Ltd (also known as "Changxing Power Plant
Phase IV) and an affiliated company namely Zhejiang Jiaxhua Power Generation Co. Ltd.
(2) Principal Accounting Policies, Assumptions and Method for Preparation of Consolidated Financial Statements Adopted
by the Company
a. Accounting System
Enterprise Accounting Standards and Enterprise Accounting System and the supplementary regulations relating thereto
are followed.
b. Accounting Year
The accounting year starts from 1 January and ends on 31 December of the Gregorian calendar year.
c. Bookkeeping Base Currency
RMB is adopted as the bookkeeping base currency.
d. Bookkeeping Basis and Valuation Principle
The bookkeeping is made on accrual basis. And the valuation is based on historical cost.
e. Accounting of Foreign Currency Transaction
The accounting of the foreign currency transaction is based on RMB, converted as per the market exchange rate (the
median rate) published by the People's Bank of China on the first day of the transaction month. The ending balances
of the various foreign currency accounts are adjusted per the exchange rate (the median rate) prevailing at the end
of the same month. With regard to the differences arising therefrom, those in relation to the formation of fixed
assets but before their acquisition for use are charged to the cost of acquisition of fixed assets; those irrelevant
to the acquisition of fixed assets but occurring during the formation period are charged to the long-term deferred
expenses, and those occurring during the operating period are charged to the current financial expenses.
f. Identification of Cash Equivalents
Cash equivalents refer to the investment made by the Company with a short maturity (generally mature within 3 months
after the date of purchase), strong liquidity, ready convertibility to cash of known amount and low volatility.
g. Accounting of Short-term Investment
1. The accounting of short-term investment is made based on the actual cost paid deducting the cash dividends or
interest declared to be distributed but not yet collected. The dividends or interest gained during the term of the
investment is not recognized as investment income but as offset against investment cost. The difference obtained from
the short-term investment sale income deducting the book value of the short-term investment and the accrued
receivables of dividends or interest will be recognized as investment income & loss and recorded as the current gains
& losses.
2. At the end of the period, the short-term investment is accounted for based on the lower of cost or market price
method; and the reserve for devaluation is allocated for various investment projects.
h. Accounting of Bad Debt
1. Adopting allowance method for accounting of bad debt
The accounting of bad debt is based on allocation of allowance. The allowance for bad debt is allocated as per 6% of
the ending balance of accounts receivable (including account receivables and other receivables).
2. The bad debt is determined as such when
(1)The debtor is bankrupt or dead, and the proceeds from the bankrupt's estates or the legacy of the deceased is unable
to cover the debt;
(2) The debtor fails to repay the overdue debt with plain evidences indicating his inability to do so.
The confirmed irrecoverable accounts receivable are treated as loss on bad debt after approval, which will be written
off from the allowance for bad debt.
i. Accounting of Inventories
1. The inventories include the fuel, auxiliary materials, spare parts for repair, low-cost consumables, etc. stored
for the purposes of sale or consumption in the process of production and operation.
2. The inventories are accounted for at the actual cost. The fuel bought and checked into the warehouse is stated at
the actual cost; the cost of outgoing fuel is stated based on weighted average cost method. The spare parts for
repair and auxiliary materials such as cement, steel and wood are stated at planned cost, with the difference between
the planned cost and the actual cost shared and written off per a composite differential rate at the end of a month.
The low-cost consumables are stated based on lump-sum write-off method.
3. The inventories are taken using the perpetual inventory method.
4. For the irrecoverable portion of the inventory cost due to physical damages, obsolescence in full or in part and
the selling price of the inventory item lower than the cost, the reserve for devaluation is allocated at the end of
the period based on the difference by which the cost of a single inventory item is more than its net realizable
value. However, for the inventories of the production material, if the net realizable value of the finished product
made from the production material is higher than its cost, it is accounted for at its actual cost; if the opposite is
true, it is accounted for at its net realizable value.
j. Accounting of Long-term Investment
1. The accounting of the long-term equity investment is stated based on the cost paid or value determined at the time
of investment. If the investment in other companies constitutes less than 20% of the total capital with voting right in
the companies, or constitutes 20% or above but without significant influence, it is accounted for by the cost method;
if the investment in other companies constitutes 20% or above of the total capital with voting right in the
companies, or less than 20% but with significant influence, it is accounted for by the equity method; if the
investment in other companies constitutes more than 50% (exclusive) of the total capital with voting right in the
companies, it is accounted for by the equity method and incorporated in the consolidated financial statements.
2. The difference of equity investment is amortized over the investment period specified in the contract. If no
specific investment period is stated in the contract, the credit difference is amortized in not more than 10 years
whereas the debit difference is amortized over the period not less than 10 years.
3. The long-term debt investment is stated based on the balance of the cost actually paid deducting such various
surcharges as tax, service charges, and the interest payable accrued from the date of bond issuance up to the date of
bond purchase. The bond premium or discount will be amortized on straight-line basis within the bond-holding period.
4. At the end of the accounting period, the reserve for long-term investment devaluation is allocated based on the
difference of the recoverable amount less than the book value of the long term investment due to its declining market
value or the worsening business operations of the investment recipient company.
k. Accounting of Trust loan
1. The loan trusted to the financial institution for lending is recorded as per the actual amount of the trust loan.
2. The interest accruing on the trust loan is recorded over the period; those recorded but unable to be recovered upon
maturity will not be recorded any longer, but will be offset against the interest recorded before.
3. At the period end, the principal of the trust loan or its recoverable value is measured, which is lower. For the
difference of the recoverable value lower than the trust loan principal, the trust loan devaluation reserve will be
allocated.
l. Accounting of Fixed Assets and Depreciation
1. The fixed assets refer to the tangible assets (1) held for purposes of goods production, labor service provision,
lease or management; (2) with their useful life exceeding 1 year; (3) with high unit values.
2. The fixed assets are accounted for at actual cost. The fixed assets acquired by financial leasing are stated as per
the original book value of the leased assets on the lease commencement date or the present value of the minimum
payment for the lease cost, whichever is lower. (If the assets on financial leasing account for 30% or less of the
total assets, such assets are stated as per the minimum payment for the lease cost on the lease commencement date.)
3. The depreciation of the fixed assets is on straight-line basis. When allowing for no reserve for devaluation, the
rates and periods of depreciation are determined based on the classification, estimated economic useful life and
estimated residual value (as per 0-3% of the original cost except for the land use right; if the expected life of the
land use right is longer than the expected life of the housing and building, the margin is allowed for in the
residual value of the housing and building) of fixed assets as follows:
Classification of Fixed Assets Period of Depreciation Annual Depreciation Rate (%)
Housing and Buildings 8-35 12.50-2.86
General Equipment 4-18 25.00-5.56
Special Equipment 7-18 14.29-5.56
Vehicles 6 16.67
Other Equipment 5-9 20.00-11.11
4. At the end of the accounting period, the recoverable amount of the fixed assets may be lower than its book value due
to its declining market price, technical obsolescence, damages, long-time disuse, etc. The reserve for fixed assets
devaluation is allocated based on the difference of the recoverable value of a single asset less its the book value.
m. Accounting of Construction in Progress
1. The estimated value of the construction in progress is transferred into the fixed assets per its actual cost upon
completion and delivery for use.
2. At the period end, if one or more of the following cases take place, the reserve for construction-in-progress
devaluation is allocated based on the difference of the recoverable value of a single item of construction in
progress less its book value.
(1) the construction in progress is suspended for a long time and will not be resumed presumably in 3 years;
(2) the project is outdated in terms of technicality and functions, and uncertain in terms of profitability for the
enterprise;
(3) other cases of devaluation of the construction in progress with sufficient evidences.
n. Accounting of Borrowing Expenses
1. Borrowing Expenses Recognition Principle
The interest, discount/premium amortization and exchange difference arising from the special borrowing for purchase
of fixed assets are capitalized and stated as the cost of the asset if meeting capitalization conditions during the
capitalization period. The other interest on borrowing, discount/premium amortization and exchange difference are
recognized as expenses in the period. The auxiliary expenses for arrangement of special borrowings occurring before
the purchased fixed assets are ready for use are capitalized at the time of its occurrence. The other auxiliary
expenses are recognized as expenses in the occurring period. The auxiliary expenses of small value are recognized as
expenses in the occurring period.
2. Capitalization of Borrowing Expenses
(1) Inception of capitalization
When the following 3 conditions are met at the same time, the capitalization of the interest, discount/premium
amortization and exchange difference arising from the special borrowing begins: (a) the expenditure has occurred; (b)
the borrowing expenses have occurred; (c) the activities to bring the fixed assets to readiness for use.
(2) Suspension of capitalization
In case the purchase/building of fixed assets is interrupted for more than 3 consecutive months, the capitalization
of borrowing expenses will be suspended with the borrowing expenses being recognized as current expenses until the
asset purchase/building activities are resumed.
(3) Termination of capitalization
When the purchased fixed assets reach readiness for use, the capitalization terminates.
3. Amount of Capitalization of Borrowing Expenses
In each accounting period subject to capitalization, the amount of interest capitalization is equal to the product of
cumulative expenditures for the purchase of fixed assets up to the end of the period end and the rate of
capitalization.
o. Accounting of Intangible Assets
1. The intangible assets are stated at the actual cost.
2. The intangible assets are amortized in equal installments over its expected useful life and recorded in gains &
losses.
If its expected useful life exceeds the service term specified in the contract or the valid term provided by the law,
the amortization period of this intangible asset is determined on the following principles:
(1) If there is a service term specified by the contract but no valid term provided by the law, the term specified by
the contract will apply;
(2) If there is no term specified by the contract but there is a valid term provided by the law, the legal term will
apply;
(3) If there are both a term specified by the contract and a valid term provided by the law, the shorter of two terms
will apply.
In the event that there is neither a term specified by the contract nor a valid term provided by the law, the
amortization period will be not more than 10 years. In the event that a certain intangible asset cannot presumably
bring future benefit to the enterprise, all the book value of this intangible asset will be transferred to the
current administrative expenses.
3. At the period end, the anticipated economic benefit that the intangible asset can bring to the company is measured.
Based on the difference of the recoverable value of a single intangible asset less than its book value, the reserve
for devaluation of the intangible asset is allocated.
p. Accounting of Long-term Deferred Expenses
1. The long-term deferred expenses are stated as actually expended and are amortized in equal installment over the
beneficiary period of the project.
2. The expenses incurred during the construction period (except for the purchase of fixed assets) are firstly gathered
in the long-term deferred expenses, and then are transferred at once to gains & losses in the month of operation
commencement.
q. Income Recognition Principle
1. The sales income is calculated and recognized by multiplying the actual quantity of electricity delivered in this
year by the approved contractual tariff (including the base quantity and excess quantity) or the market price as
applicable.
Based on Document Zhe Dian Ji No. (2002) 150 "Notice about Power Generation Plan of ZPEPC for 2002" issued by
Zhejiang Provincial Electric Power Co. (ZPEPC), the Company continued to participate in the competitive bidding in
the power market for sale of electricity, with the bidding quantity accounting for 20% and the contractual quantity
80% of the total generation. With regard to the price of electricity sale, the bidding quantity was settled at the
market price on real time basis, while the contractual quantity was settled at prices approved by Zhejiang Provincial
Commodity Pricing Bureau (ZPCPB) in Document Zhe Jia Gong No.(2000) 39 dated 28 Jan. 2000, i.e. RMB 357.415 yuan/MWh
(excluding tax) for Units 1-8 of Taizhou Power Plant and RMB 320 yuan/MWh for Units 1-2 of Xiaoshan Power Plant
(excluding tax) in 2002. In addition, based on ZPCPB Document Zhe Jia Shang No.(2002)342 "Notice about Tariff of
Excess Generation in 2002", the excess generation generated from 80% of the annual mean utilization hours of a power
plant over and above the contractual base quantity of 4,800 hours was settled at the excess generation tariff, i.e.
RMB 200 yuan/MWh (excluding tax) for Taizhou Power Plant and RMB 197 yuan/MWh (excluding tax) for Xiaoshan Power
Plant in 2002. Based on ZPCPB Document Zhe Jia Shang No.(2003)15 "Approval of Electricity Sale Tariff Applicable to
ZCPGC", the tariff applicable to Zhejiang Changxing Power Generation Co. Ltd (ZCPGC) from the start date of
generation to the end of 2003 will be 380 yuan/MWh (including tax).
For the sale of commodity, the business income is recognized when all of the followings have taken place (a) the
significant risk in connection with the ownership of the commodity and the payment have transferred to the buyer so
that the Company no longer has custody and control of the commodity; (b) the income from the sale or the voucher of
the payment has been received; and (c) the cost in relation to the commodity sale can be measured accurately.
2. Supply of Labor Service
(1) For the labor service started and completed in the same year, the income from labor service is recognized when the
service has been rendered, and the payment or the voucher of payment has been received.
(2) For the labor service started and completed in different years, the income from labor service is recognized per
the percentage of completion if the total income from the labor service and the percentage of completion can be reliably
determined, the corresponding revenue can flow in and the cost of the labor service incurred and to be incurred can
be reliably measure.
r. Accounting of Income Tax
The accounting of the corporate income tax is based on tax payable method.
s. Method for Preparation of Consolidated Financial Statement
Consolidated financial statement is prepared based on the financial statements and other related information of the
parent company and its subsidiaries subject to consolidation in accordance with the Interim Provisions for the
Consolidated Financial Statement. The principal accounting policies of the subsidiaries shall conform to the
accounting policies of their parent companies. The major transactions and payment in current accounts between parent
companies and their subsidiaries offset each other during the consolidation.
t. Changes in Accounting Policies and Assumptions
Previously, no depreciation was allocated for the fixed assets that the Company did not use or had not used. Pursuant
to Enterprise Accounting Standards-Fixed Assets and Document Cai Kuai No.(2002)18 issued from Ministry of Finance,
the new accounting policy will be followed to allocate depreciation for the above fixed assets. Upon analysis, it was
found that the Company held no fixed assets as mentioned above, hence no need to make any retroactive adjustment.
u. Correction of Significant Accounting Errors
Pursuant to Document Ji Bian Han No. (2002)11 Notice about Self-examination of Tax Payment by Province-owned
Enterprises issued by the Inspection Office of the State Taxation Bureau Zhejiang Branch, the Company made a
self-examination of its tax payment for 2001.
(a) It is not permitted to account for the overhaul cost of RMB 47,310,582.22 yuan for Unit 1 of Taizhou Power Plant
under the Company as a lump-sum cost before tax in 2001 because it belongs to the asset renovation cost, hence the
additional payment for corporate income tax of RMB 15,612,492.13 yuan. With the consent of the taxation authorities,
the overhaul cost will be written off before tax over 5 years from 2002; it is not permitted by the tax law to
account for the Company's payment for the supplementary pension for 2001 and the pre-construction cost for Xiaoshan
Power Plant Phase II totaling RMB 15,650,345.95 yuan before tax, hence the additional payment for corporate income
tax of RMB 5,164,614.17 yuan; the Company made over-allocation of RMB 3,725,853.19 yuan for unemployment insurance
premium and retiree management expense, which was reversed upon self-examination, hence the additional payment for
corporate income tax of RMB 1,229,531.55 yuan. To sum up, the above 3 adjustments ended up with the Company making
additional payment for the corporate income tax for 2001 totaling RMB 22,006,637.85 yuan.
(b) The input tax on special equipment of RMB 340,699.82 yuan stated as overhaul cost by the Company was transferred
out, hence the additional payment for VAT amounting to RMB 340,699.82 yuan.
In addition, pursuant to Document Ji Chu Zi No. (2002)0057 Notice about Taxation Treatment Decision issued by the
Inspection Office under the State Taxation Bureau Zhejiang Branch, the input tax amounting to RMB 7,490,632.69 yuan
was offset by the material delivery for overhaul of Unit 1 of Taizhou Power Plant under the Company and other
non-taxable purchases, hence the Company's additional payment for VAT of RMB 7,490,632.69 yuan.
Treated as significant accounting errors, the above have been corrected by making retroactive deduction of RMB
26,112,117.17 yuan in the net profit for 2001, a corresponding deduction of RMB 5,222,423.44 yuan in surplus reserve
and a corresponding deduction of RMB 20,889,693.73 in beginning undistributed profit of 2002 in addition to other
corresponding adjustment in the beginning amount of the balance sheet and the entries in the income statement for the
preceding year.
(3) Taxation
a. Value-added tax: at a rate of 17%
b. Operating tax: at a rate of 5%
c. Urban maintenance & construction tax: at a rate equal to 7% or 5% of the turn-over tax payable. The head office of
the Company and Xiaoshan Power Plant were exempted from this tax as agreed by International Division of Zhejiang
Local Taxation Bureau and Hangzhou Xiaoshan Local Taxation Bureau Linpu Branch; Taizhou Power Plant was taxed at 7%
and the subsidiary Zhejiang Changxing Power Generation Co. Ltd at 5%.
d. Education surtax: at a rate equal to 4% of the turn-over tax payable. The head office of the Company was exempted
from this tax as agreed by International Division of Zhejiang Local Taxation Bureau; Xiaoshan Power Plant was taxed
per the domestic investment ratio of the Company as agreed by Hangzhou Xiaoshan Local Taxation Bureau Linpu Branch,
and Taizhou Power Plant and the subsidiary Zhejiang Changxing Power Generation Co. Ldt at 4%.
e. Income tax: at a rate of 33%
(4) Holding Subsidiaries and Joint Ventures
Name of Type of business Registered capital Scope of Actual investment Shareholding
Enterprise business percentage
Zhejiang Coal-fired power RMB 610,000,000.00 Production and RMB 396,500,000.00 65%
Changxing Power generation yuan sale of yuan
Generation electricity
Company Ltd
(5) Distribution of Profit
As per the Profit Distribution Proposal for 2002 formed in the 24th meeting of the Company's second Board of
Directors on 26 Mar. 2003, according to whichever is lower of the financial statements 2002 audited by the domestic
or the international accounting firms, based on the after-tax profit of the Parent Company as audited by the domestic
amounting firm amounting to RMB 545,474,480.11 yuan less allocation of 10% statutory surplus reserve and 10%
statutory common welfare reserve totaling RMB 109,094,896.02 yuan, plus the Parent Company's beginning undistributed
profit amounting to RMB 812,457,756.14 yuan, then the distributable profit of the Company in 2002 is equal to RMB
1,248,837,340.23 yuan. Taking 2.01 billion shares at the end of 2002 as a base figure, the Company proposed to
distribute cash dividends of RMB 2.48 yuan per 10 shares (including tax), totaling RMB 498,480,000.00 yuan.
(6) Notes to the Consolidated Financial Statements
a. Notes to the Consolidated Balance Sheet
(a) Monetary Assets Ending balance: 1,316,602,765.12
i. Details
Item Ending Amount Beginning Amount
Cash 11,165.21 6,752.72
Bank deposits 1,309,891,245.39 1,458,913,910.03
Other monetary assets 6,700,354.52 489,973.30
Total 1,316,602,765.12 1,459,410,636.05
ii. Monetary assets-in foreign currency
Item Ending Amount Beginning Amount
Original Exchange Equivalent Original Exchange Equivalent
currency rate to currency (USD) rate to
(USD) RMB yuan RMB yuan
Bank 90,317,894.76 8.2773 747,588,310.30 144,086,600.56 8.2766 1,192,547,158.19
deposits
Subtotal 747,588,310.30 1,192,547,158.19
(b) Short-term investment Ending Balance: 45,066,100.00
i. Details
Item Ending Amount Beginning Amount
Book balance Reserve for Book value Book balance Reserve for Book value
devaluation devaluation
Stock Investment 373,000.00 99,900.00 273,100.00 552,190.00 69,300.00 482,890.00
Bond Investment 45,000,000.00 207,000.00 44,793,000.00
Total 45,373,000.00 306,900.00 45,066,100.00 552,190.00 69,300.00 482,890.00
ii; Short-term investment - stock investment
Name of Stock Number of Shares Ending Amount Market Price at End
Sinopec (A share) 90,000 270,900.00 270,900.00
Wantong Highway 1,000 2,200.00 (Note)
Subtotal 273,100.00
(Note): This stock had no market price on 31 Dec. 2002. It went public on Shanghai Stock Exchange on 7 Jan. 2003 with
a closing price of RMB 4.33 yuan.
(b) Short-term investment - bond investment
Name of Bond Par Value Ending Amount Market Price at End
02 Treasury bonds (13 ) 45,000,000.00 44,793,000.00 44,793,000.00
Subtotal 45,000,000.00 44,793,000.00 44,793,000.00
iv. Reserve for devaluation of short-term investment
i) Increase and decrease
Item Beginning Amount Increase in the Period Decrease in the Period Ending Amount
Stock Investment 69,300.00 30,600.00 99,900.00
Bond Investment 207,000.00 207,000.00
Subtotal 69,300.00 237,600.00 306,900.00
ii) Explanation of the source of the market price at period end for allocating reserve for devaluation of
short-term investment
According to the closing price at Shanghai Stock Exchange on 31st December 2002, an amount of RMB 306,900.00 yuan was
allocated for reserve for devaluation of short-term investment following the principle of lower of short-term
investment or the market price.
v. There was no significant limitation to realization of short-term investment of the Company.
(c) Accounts receivable Ending balance: 189,310,963.44
i. Classified by account age
Account Ending Amount Beginning Amount
age
Book Percentage Allowance Book Book Percentage Allowance Book
balance (%) for value balance (%) for value
bad bad
debt debt
Within 201,394,641.95 100.00 12,083,678.51 189,310,963.44 94,216,175.64 100.00 5,652,970.53 88,563,205.11
1 year
Total 201,394,641.95 100.00 12,083,678.51 189,310,963.44 94,216,175.64 100.00 5,652,970.53 88,563,205.11
ii. The book balances were the amount receivable from ZPEPC for sale of electricity in December, representing 100% of
the accounts receivables.
iii. Due from major shareholders holding 5% or more of the Company's share capital with voting right
Name of Organization Ending Amount Beginning Amount
ZPEPC 201,394,641.95 94,216,175.64
Subtotal 201,394,641.95 94,216,175.64
(d) Other receivables Ending balance 34,892,310.31
i. Classified by account age
Account age Ending Amount
Book balance Percentage Allowance for Book value
bad debt
(%)
Within 1 year 33,940,044.97 91.43 2,036,402.70 31,903,642.27
1-2 years 6,000.00 0.02 360.00 5,640.00
2-3 years 360,573.50 0.97 21,634.41 338,939.09
More than 3 years 2,812,860.58 7.58 168,771.63 2,644,088.95
Total 37,119,479.05 100.00 2,227,168.74 34,892,310.31
Account age Beginning Amount
Book Percentage Allowance for Book value
balance (%) bad debt
Within 1 year 19,974,877.88 84.54 1,198,492.68 18,776,385.20
1-2 years 754,081.44 3.19 45,244.88 708,836.56
2-3 years 2,607,667.58 11.04 156,460.05 2,451,207.53
More than 3 years 291,551.77 1.23 17,493.11 274,058.66
Total 23,628,178.67 100.00 1,417,690.72 22,210,487.95
ii. Other large-amount receivables
Name of Organization Ending Amount Type of Cost
Subsidy for employee housing 26,302,005.38 Subsidy prepaid for employees with their service
(Note) length less than 20 years
Interest on time deposit at bank 3,436,846.28 Accruals, not yet settled on maturity
PICC Life Insurance Company Taizhou Branch 2,700,000.00 Insurance deposits, not yet settled
Subtotal 32,438,851.66
(Note): Refer to Item (12)-d-(a) of the Notes to Financial Statements herein
iii. The amount of receivables due from the top 5 debtors totals RMB 33,857,802.47 yuan, accounting for 91.21% of
the ending balance of other receivables.
iv. There were no accounts due from main shareholders holding 5% or more of the Company's share capital with
voting right.
v. Other receivables written off during this period and explanations
Name of organization Amount Account Description and Explanations
Taizhou Municipal People's Intermediate Court 29,549.77 Advanced legal cost with its account age more than 5
years, which confirmed irrecoverable.
Mou Jiamin 1,800.00 Advanced legal cost with its account age more than 5
years, which was confirmed irrecoverable.
Subtotal 31,349.77
vi. Other receivables - foreign currency receivables
Ending Amount Beginning Amount
Account Original Exchange Equivalent to Original Exchange Equivalent
Age currency rate RMB yuan currency (USD) rate to RMB
(USD) yuan
Within 1 year 388,724.76 8.2773 3,217,591.46 2,088,580.23 8.2766 17,286,343.14
Subtotal 3,217,591.46 17,286,343.14
(e) Prepayments Ending balance: 12,461,180.00
i. Classified by account age
Account age Ending Amount Beginning Amount
Amount Percentage (%) Amount Percentage (%)
Within 1 year 12,425,180.00 99.71 7,646,885.57 75.36
1-2 years 36,000.00 0.29 2,500,000.00 24.64
Total 12,461,180.00 100.00 10,146,885.57 100.00
ii. There were no accounts due from main shareholders holding 5% or more of the Company's share capital with voting
right.
iii. Explanation about the unsettled prepayment more than 1 year
This is the petty prepayment for Xiaoshan Power Plant, not yet settled.
(f) Inventories Ending balance: 109,881,758.45
i. Details
Ending Amount Beginning Amount
Item Book Devalua- Book Book Devalua- Book
Balance tion Value Balance tion Value
Reserve Reserve
Materials in 303,401.08 303,401.08 471,665.73 471,665.73
transit
Raw materials 48,077,406.33 48,077,406.33 48,204,496.57 48,204,496.57
Fuel 60,672,020.13 60,672,020.13 57,089,637.89 57,089,637.89
Low-cost 828,930.91 828,930.91 663,781.00 663,781.00
consumables
Total 109,881,758.45 109,881,758.45 106,429,581.19 106,429,581.19
ii. The acquisition of inventories in the current period included inventory-taking gains amounting to RMB
7,794,522.56 yuan, the others being self-made or externally purchased.
iii. The above inventories were not subjected to any debt guarantees.
iv. The ending fair value of the inventory is determined as per the net realizable value of a single inventory item.
The reserve for devaluation was allocated based on the principle of the lower of the cost or the market. As the
analysis indicated that no ending inventories were higher than their realizable values, no reserve for devaluation
was allocated.
This information is provided by RNS
The company news service from the London Stock Exchange
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