粤电力Ｂ(200539)2007年年度报告（英文版）

广东电力发展股份有限公司 GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. 2007 ANNUAL REPORT April, 23 2008 Important Notice The Board of Directors , Supervisory Committee ,Directors, Supervisors and Senior Executives of the Company hereby guarantees that there are no misstatement, misleading representation or important omissions in this report and shall assume joint and several liability for the authenticity, accuracy and completeness of the contents hereof. Director Gao Shiqiang,Wu Bin,Wang Jun,Zhu Baohe absented of meeting of board,and Wu Bin,Wang Jun,Zhu Baohe entrusted respectively director Zhang Yao,Song Xianzhong,Cheng Xinxin to vote on their behalves. PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. (“PricewaterhouseCoopers”)have issued auditors’s report with unqualified opinion for Company. Chairman of the Board of Directors, Pan Li, General Manager, Liu Luoshou ,and Financial Deputy General Manager, Li Xiaoqing and Financial Manager ,Liu Xuemao represent and warrant the financial and accounting report in the annual report is true and complete. English translation for reference only. Should there be any inconsistency between the Chinese and English versions, the Chinese version shall prevail. -2- Contents I. Brief Introduction of the Company II. Highlights of Accounting Data and Business Data III.Particulars about Changes in Share Capital and Shareholders. IV. Directors, Supervisors, Senior Executives and Employees V. Corporate Governance Structure VI. Brief Introduction of Shareholders' General Meeting VII. Report of the Board of Directors VIII. Report of the Supervisory Committee IX. Important Events X. Financial Report Auditor's report issued by PricewaterhouseCoopers Zhongtian Certified Public Accountants Co.,Ltd. and financial statements XI. Schedule of Asset Depreciation Reserve XII.List of Documents Available for Inspection -3- I. Brief Introduction of the Company (I) Statutory Chinese name of the Company：广东电力发展股份有限公司 Statutory English name of the Company: GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. [Abbreviation of English name: GED] (II) Legal representative of the Company: Mr. Pan Li (III)General manager: Mr. Liu Luoshou (IV) Secretary to the Board of Directors: Mr. Liu Wei Contact Tel: (020)87570276 E-mail: liuw@ged.com.cn Securities affair representative: Mr.Liang Jiangyong Contact Tel: (020)87570251 Fax:(020)85138084 E-mail: ljy@ged.com.cn Contact address: 26/F, South Tower, Yuedian Plaza, No.2 Tianhe Road East, Guangzhou, Zip code:510630 (V) Registered address of Company ： 23-26/F Yuedian Plaza, No.2 Tianhe Road East , Guangzhou,Guangdong Province Business address of Company ： 23-26/F Yuedian Plaza, No.2 Tianhe Road East , Guangzhou,Guangdong Province Zip code:510630 E-mail: ged@ged.com.cn Website：www.ged.com.cn (VI) Name of newspapers selected by the Company for information disclosure: China Securities Daily, Securities Times and Hong Kong Commercial Daily (overseas newspaper for English version). Internet website for publishing the annual report of the Company: http：//www.cninfo.com.cn The place for preparing and placing the annual report of the Company: -4- Administration Dept. of the board of directors of the Company (VII) The exchange for listing the stocks of the Company, stock abbreviation and stock code The exchange for listing the stocks of the Company: Shenzhen Stock Exchange Stock abbreviation: Yue Dian Li A, Yue Dian Li B Stock code: 000539 , 200539 (VIII) Other information 1. The date of first registration of the Company: November 3, 1992 Registered address: 10/F, Baili Commercial Center, Guangfa Garden, 498 Huanshi Road East, Guangzhou 2. Date of change in registration of the Company: June 28, 2005 Registered address after change: 23-26/F, South Tower, Yuedian Plaza, No.2 Tianhe Road East, Guangzhou, Guangdong Province 3. Registration No. of Legal Entity Business License: Qi Gu Yue Zong Zi Di No. 003503 4. Tax registration number: Yue Guo Shui Zi 440102617419493 Yue Di Shui Zi 440100617419493 5. Organization Code：61741949-3 6.Certified public accountants of the Company: PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. Office Address: 11/F, PricewaterhouseCoopers Center, 202 Hubin Road , Shanghai 7. The legal adviser of the Company: Guangdong Xinyang Law Office Office address: Room 1209-1212, Daxin Building, 538 Dezheng Road North, Guangzhou -5- II. Highlights of Accounting Data and Business Data (I) Main profit indicators of the report year (consolidated financial statement) Unit: RMB Item Amount(RMB) Operation profit 1,237,023,824 Total profit 1,226,378,337 Net profit attributable to shareholders of 658,877,844 the listed company Net profit after deducting of non-recurring 666,267,196 gain/loss attributable to the shareholders of the listed company Cash flow generated by business 2,123,714,694 operation , net Note 1: Items and amount of non-recurring gains and loss deducted: The loss for disposal of non-current assets RMB 10,931,060; deferred income of government subsidy RMB 3,076,923; other operating income and expenditure net amount RMB2,791,350; loss of investment income RMB 8,138,021; fund occupying fee collected from related enterprises RMB -7, 754,684;Amount of impact on income tax concerning non-recurring gains and losses RMB -3,639,532; . Note 2: Notes to the difference between audit of net profit for the report year by domestic and foreign certified public accountants: The influences attributable to the net profit of the listed companies and the influences attributable to shareholders’ equity of the listed companies according to International Financial Reporting Standards generalized by PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. are as follows: The net profit attributable to the The net profit shareholders attributable to the of the listed shareholders of the companies listed companies RMB RMB (Audited by Chinese registered accountants) 658,877,844 9,144,451,954 The influences from the adjustment according to international financial reporting standards - Amortization of deferred housing reform loss -10,218,255 20,436,510 - Difference of land use right amortization -1,113,000 38,332,000 - The differences of value of land use rights recognized at the time of corporate merger. -630,000 24,530,401 - The differences of goodwill recognition from the corporate merger under same control. - 64,623,101 -Influences on equity of minority shareholders from the differences of above standards. 3,273,000 -2,364,966 - Other 4,318,411 - Restated after adjustment according to international financial report standards 654,508,000 9,290,009,000 Note 3：Item measured by fair value Unit：RMB -7- Item Amount at Amount at the Change in Amount of the priod -end current period influence on period-begin current period’s profit Financial assets 62,196,129 833,683,760 771,487,631 0 available for sale Total 62,196,129 833,683,760 771,487,631 0 (II) Highlights of accounting data and financial indicators in the latest three years 1.Main Accounting data: Unit：RMB’000 Changed Year 2007 Year 2006 over last Year 2005 year（％） After Before Before After After adjustment adjustmen Adjustment Adjustment adjustment t Operating profit 1,529,786.00 1,546,729.00 1,546,729.00 -1.10% 1,489,987 1,489,987 Total profit 820,257.00 870,539.00 870,539.00 -5.78% 912,353 912,353 Net profit attributable to the shareholders of the listed company 654,508.00 692,114.00 692,114.00 -5.43% 776,367 776,367 Net profit after deducting of non-recurring gain/loss attributable to the shareholders of listed company 654,508.00 692,114.00 692,114.00 -5.43% 776,367 776,367 Cash flow generated by business operation, net 2,311,833.00 3,237,805.00 3,237,805.00 -28.60% 2,621,999 2,621,999 -8- Changed End of 2007 End of 2006 over last End of 2005 year（％） After Before Before After After adjustment adjustmen Adjustment Adjustment adjustment t GROSS ASSETS 24,200,763.00 20,625,186.00 20,625,186.00 17.34% 17,192,624.00 17,192,624.00 Shareholders’ equity attributable to shareholders of the company 9,290,009.00 8,708,358.00 8,708,358.00 6.68% 8,463,648.00 8,463,648.00 2. Main Financial Indicators Unit：RMB Changed Year 2007 Year 2006 over last Year 2005 year（%） After Before Before After After adjustment adjustmen Adjustment Adjustment adjustment t Basic gains per share 0.25 0.29 0.28 -10.71% 0.27 0.30 Diluted gains per share 0.25 0.29 0.28 -10.71% 0.27 0.30 Basic earning per share after deducting of non-recurring 0.25 0.29 0.29 -13.79% 0.27 0.30 gains/losses Net income on asset, fully 7.21% 8.83% 8.71% -1.50% 8.60% 9.36% diluted Net income on asset, 7.65% 9.02% 8.16% -0.51% 8.74% 9.61% Weighted Net income on asset, fully 7.29% 8.90% 8.97% -1.68% 8.62% 9.38% -9- diluted and deducted non-recurring gain/loss Net income on asset, weighted and deducted 7.73% 9.09% 8.40% -0.67% 8.76% 9.64% non-recurring gain/loss Net cash flow per share generated by business 0.98 0.85 1.13 -13.27% 0.34 0.34 operation Changed End of 2007 End of 2006 over last End of 2005 year（％） After Before Before After After adjustment adjustmen Adjustment Adjustment adjustment t Net asset per share attributable to shareholders 3.44 3.26 3.22 6.83% 3.15 3.17 of the listed company III.Particulars about Changes in Share Capital and Shareholders (1) The changes in share capital 1.Statement of changes in shares Unit: shares Before this change Increase or decrease this time (+/-) After this change Quantity proportion Share Bonus Capitalizati other subtotal Quantity proportion allotment shares on of common reserve fund I. Share with 1,481,262 55.70% -239,670, -239,670, 1,241,591 46.69% - 10 - conditional ,375 524 524 ,851 subscription 1.State-owned shares 2.Staee-owned 1,393,852 -161,774, -161,774, 1,232,077 legal person 52.41% 46.33% ,389 442 442 ,947 shares 3.Other domestic 87,409,98 -77,896,0 -77,896,0 3.29% 9,513,904 0.36% shares 6 82 82 Of which： Non-state owned 87,377,97 -78,053,9 -78,053,9 3.29% 9,324,026 0.35% domestic legal 6 50 50 person shares Domestic natural person 32,010 0.00% 157,868 157,868 189,878 0.01% shares 4.Foreign shareholding Of which： Foreign legal person shares Foreign natural person shares II. Shares with 1,178,141 239,670,5 239,670,5 1,417,812 unconditional 44.30% 53.31% ,625 24 24 ,149 subscription 1.Common shares 512,824,6 239,664,7 239,664,7 752,489,3 19.28% 28.30% in RMB 25 74 74 99 2.Foreign shares 665,317,0 25.02% 5,750 5,750 665,322,7 25.02% - 11 - in domestic 00 50 market 3.Foregin shares in overseas market 4.Other III. Total of 2,659,404 2,659,404 100.00% 100.00% capital shares ,000 ,000 2.Changes of shares subject to moratorium Unit：shares Shares subject Shares subject to moratorium Terminated in Increase in this Conditional Date of Name of shareholder to moratorium at the this year year reason terminating at the year-end year-begin Guangdong Yudean January 1,232,077,947 0 0 1,232,077,947 Equity reform Group Co., Ltd. 19,2009 China Xinda Asset January Management 81,105,045 81,105,045 0 0 Equity reform 19,2007 Corporation Guangdong Electric January Power Development 78,639,451 78,639,451 0 0 Equity reform 19,2007 Company Guangdong January Guangkong Group 40,552,522 40,552,522 0 0 Equity reform 19,2007 Co., Ltd. Guangdong Electric Power Industrial January 3,242,044 3,242,044 0 0 Equity reform Development 19,2007 Company Guangdong Shantou 2,821,807 2,821,807 0 0 Equity reform January - 12 - Electric Power 19,2007 Industry Company Guangdong International Trust 1,790,100 0 0 1,790,100 Equity reform Investment Company Guangdong Great January Wall Construct 1,622,101 1,622,101 0 0 Equity reform 19,2007 Group Co., Ltd. Guangdong Old area January Technology Educate 1,622,101 1,622,101 0 0 Equity reform 19,2007 culture health Fund January White Swan Hotel 1,622,101 1,622,101 0 0 Equity reform 19,2007 Equity reform /Held by Other 36,167,156 28,443,352 0 7,723,804 senior management Total 1,481,262,375 239,670,524 1,241,591,851 － － 3.Share issuance and listing The Company did not issue new shares and derived securities in the previous three years by the end of the report period. At present , there are no employees’ shares in the Company. (II) Introduction to shareholders (1) As of December 31, 2007, the Company had 114,669 shareholders in total including 57,170 shareholders of A shares and 57,499 shareholders of B shares. (2) Introduction to the Company's top ten shareholders (As of December 31, 2007) Unit: shares Name of Increase or Number of Proportio Type of share Quantity of Nature of shareholder (full decrease in shares held at n (%) (Negotiable or pledged or shareholder - 13 - name) the year the end of year non-negotiable frozen ( state-owned ) shares shareholder or foreign shareholder) Negotiable Guangdong shares subject State-owned Yuedian Group 305,879 1,232,077,947 46.32% 0 to sale shareholder Co., Ltd. restriction Guangdong Electric Power State-owned 0 78,639,451 2.96%Negotiable 0 Development shareholder Company Guangdong Guangfa Electric State-owned 38,035,244 67,399,816 2.53%Negotiable 0 Power Investment shareholder Co., Ltd. China Xinda Asset State-owned Management -39,576,545 41,528,500 1.56%Negotiable 0 shareholder Company Guangdong Guangkong Group -9,852,052 30,700,470 1.15%Negotiable 0 Co., Ltd. 102 Portfolio of National Social -10,089,131 21,000,000 0.79%Negotiable 0 Security Fund 108 Portfolio of National Social -11,713,090 20,000,000 0.75%Negotiable 0 Security Fund SCHRODERS 6,242,456 18,237,656 0.69%Negotiable Unknown Foreign - 14 - KOREA shareholder LIMITED SCHRODER INTL Foreign SELECTION -3,197,347 14,403,353 0.54% Negotiable Unknown shareholder FD-GREATER CN FD GTI 25287 UBS WARBURG CUSTODY PTE Foreign 12,035,835 13,878,871 0.52% Negotiable Unknown LTD. Switzerland shareholder Bank Guangdong Electric Power Development Co., Ltd.the Second of the The relationship and consistent of top 10 shareholders, is a subsidiary of Yuedian Group, Which is the above shareholders No.1 shareholder; its is unknown whether relationship exists between other shareholders. 3.Information of holding Company Yuedian Group Co., Ltd. Holding 46.33% shares of the Company and is the major shareholder of the Company. State-owned Assets Regulatory Commission under the People's Government of Guangdong Province holds 76% equity of Guangdong Yuedian Group Co., Ltd. and is the actual controller of the Company. According to the Business License of Incorporated Enterprise verified and issued by Guangdong Administration for Industry and Commerce, Yuedian Group is a wholly Limited Liability Company. Its registered capital is RMB 20,000,000,000 and its registered address is 33-36/F Yuedian Plaza, No.2 Tianhe Road East , Guangzhou,Guangdong Province. Its legal representative is Mr. Pan Li. Its is mainly engaged in management of power plants and power generation assets; construction of power plants; sales of electricity; repair and maintenance of electricity equipments; technology service on electricity industry; electricity investment; investment planning and consulting ; information consulting service; sales of production materials(Except for gold, silver, vehicle and dangerous chemistry materials). - 15 - The following chart is the shareholding relationship between the Company and its Related control parties. State-owned Assets Regulatory Commission under the People's Government of Guangdong Province State-owned Assets Regulatory Commission under the People's Government of Guangdong Province 76% Guangdong Yudean Group Co., Ltd. 100% 46.33% Guangdong Electric Power Development Co. 2.96% Guangdong Electric Power Development Co., Ltd. 4.No other legal person shareholders who hold more than 10%(10% inclusive)of the Company’s shares. 5. Particulars about the shares held by the top ten shareholders holding shares not subject to Moratorium Unit :shares Quantity of negotiable Name of shareholder Type of share shares held Guangdong Electric Power 78,639,451A Development Company Shenzhen Guangfa Electric 67,399,816A Power Investment Co., Ltd. China Xinda Asset Management 41,528,500A Company Guangdong Guangkong Group 30,700,470A - 16 - Co., Ltd. 102 Portfolio of National Social 21,000,000A Security Fund 108 Portfolio of National Social 20,000,000A Security Fund SCHRODERS KOREA 18,237,656B LIMITED SCHRODER INTL SELECTION FD-GREATER 14,403,353B CN FD GTI 25287 UBS WARBURG CUSTODY 13,878,871B PTE LTD. Switzerland Bank Boshi Increase securities 13,814,779A Investment Fund Notes to the related relationship Unknown between the shareholders 6..The top 10 shareholders and the conditions for limit on sale Unit：Shares Shares with Date when Newly added No Name of holder conditioned trading tradable Conditions subscription allowed shares The shares of the Company held by Yuedian Group will not Guangdong Yuedian be listed, traded or assigned 1 1,232,077,947 January 29,2009 Unknown Group Co., Ltd. within 3 years from the date of obtaining the right of listing and negotiation. Guangdong The prices paid in advance 2 1,790,100 Unknown Unknown International Trust which are not repaid. - 17 - Investment Company Guangdong Rural The prices paid in advance 3 877,500 Unknown Unknown Telephone Division which are not repaid. Guangdong Education The prices paid in advance 4 702,000 Unknown Unknown Promotion which are not repaid. Shenzhen Jujian Co., The prices paid in advance 5 614,250 Unknown Unknown Ltd. which are not repaid. South China normal university Electronic The prices paid in advance 6 research Engineering 526,500 Unknown Unknown which are not repaid. computer Room Engineering Dept Gaoming Power Labour The prices paid in advance 7 487,890 Unknown Unknown union Committee which are not repaid. Huaneng International The prices paid in advance 8 Electric Power Co., 394,868 Unknown Unknown which are not repaid. Ltd.Guangdong Branch Guangdong Prison administrative The prices paid in advance 9 351,000 Unknown Unknown Bureau .Labour union which are not repaid. Committee Shanghai Haibei The prices paid in advance 10 Commerce information 300,000 Unknown Unknown which are not repaid. Consultation Co., Ltd. - 18 - IV. Directors, Supervisors, Senior Executives and Employees （I）Basic information about directors, supervisors and senior executives 1. Basic information Incentive stock option vested Remunera during the reporting period Whether tion Numb Receive Reaso Sharehol received er of Remunerat Beginning Expiration Sharehol n of Ag ding at from the shares Number Market ion from a Name Position Sex date of office date of office ding at the Exer e year-begi company availa of shares price of shareholde term term year-end chang cise nning (in ble to Exercise stock at r or other e price RMB’000 be d year-end related 0) exercis -parties ed Chairman of the April April Pan Li Male 53 Yes Board of 29,2005 29,2008 Directors Vice- chairman April April Liu Qian Male 53 Yes of the 29,2005 29,2008 Board April April Deng An Director Male 58 Yes 28,2006 29,2008 Hong April April Director Male 50 Yes Rongkun 29,2005 29,2008 Li April April Director Male 45 Yes Zhuoxia 29,2005 29,2008 - 19 - n Liu April April Director Male 56 56.82 No Luoshou 19,2005 29,2008 Gao April April Director Male 50 Yes Shiqiang 28,2006 29,2008 Zhong April April Director Male 52 Yes Weimin 28,2006 29,2008 Yang September April Xuanxin Director Male 42 Yes 28,2005 29,2008 g Yao April April Director Male 43 55.11 No Jiheng 29,2005 29,2008 April April Wu Bin Director Male 43 3,000 5,300 Buy Yes 28,2006 29,2008 Zhou April April Director Male 43 Yes Xiaoping 29,2005 29,2008 Wang Independe April April Male 49 6.4 No Jun nt director 29,2005 29,2008 Song Independe April April Xianzho Male 44 3,602 3,602 6.4 No nt director 29,2005 29,2008 ng Cheng Independe Femal April April 54 6.4 No Xinxin nt director e 28,2005 29,2008 Zhu Independe April April Male 45 6.4 No Baohe nt director 28,2005 29,2008 Sha Independe April April Male 47 6.4 No Qilin nt director 29,2005 29,2008 Zhang Independe April 28, April Male 59 6.4 No Yao nt director 2006 29,2008 - 20 - Chairman of the Qiu Superviso September April Male 43 Yes Jianyi ry 13,2006 29,2008 Committe e Li April April Supervisor Male 35 Yes Zhuoyan 28,2006 29,2008 Independen Chang April April t Male 45 4 Yes Songcai 29,2005 29,2008 Supervisor Independen Liang April April t Male 40 4 No Ruyu 29,2005 29,2008 Supervisor Lin Employee April April Male 39 3,930 3,930 22.38 No Weifeng supervisor 29,2005 29,2008 Chen Employee April April Male 48 26.37 No Chuyang supervisor 29,2005 29,2008 Luo Secretary Male 55.34 No Yongyi Xu April April Deputy GM Male 52 42.97 No Peijin 29,2005 29,2008 Li September April Deputy GM Male 36 25.34 No Xiaoqing 12, 2006 29,2008 Board October April Liu Wei Male 28 33.59 No secretary 24,2006 29,2008 Liu Finance Femal April April 52 20,000 15,000 Sale No Xuemao manager e 29,2005 29,2008 Total - - - - - 30,532 27832 - 364.32 - - - - 21 - 2. The main job experience of current directors, supervisors and senior executives and the posts or concurrent posts held by them at the units other than corporate shareholders Mr. Pan Li: Male, born in June 1954, is a CPC member ,Han nationality, from Shunde Guangdong, A bachelor's degree, Senior engineer. He had served as the technician in dispatching station of Guangzhou Power Supply Bureau, deputy section chief and Deputy president of Health and Technology Department, Deputy general manager in Guangdong Provincial Power Group Corporation and other positions, and currently, he serves as the Chairman and party secretary in Guangdong Power Group Co., Ltd. And Chairman of the Guangdong Electric Power Development Co., Ltd. Mr. Liu Qian: Male ,born in October 1954, a CPC member ,Han nationality, from Zhongshan Guangdong , A bachelor’s degree, MBA and senior economist, Senior engineer. He had served as deputy section chief of Health and Technology Department ,assistant Manager of Business Dept ,Deputy general Manager of Huaneng Guangdong Power Company and general manager of Guangdong Development Co., Ltd. He now serves as director ,Deputy general Manager and member of CCP of Guangdong Yuedian Group Co., Ltd. and vice board chairman of Guangdong Electric Power Development Co., Ltd. Mr.Deng An, Male , born in December 1949, a CPC member ,Han nationality, from Xinhui Guangdong, A bachelor’s degree, Senior Economist . He had served as deputy superintendent of Comprehensive Workshop and deputy manager of Shaoguan Power Plant, manager of Yunfu Power Plant, manager of Huangpu Power Plant He now serves as director, He now serves as director and general manager of Guangdong Yuedian Group Co., Ltd. and director of Guangdong Electric Power Development Co., Ltd. Mr. Hong Rongkun, Male, born in September 1957 , a CPC member ,Han nationality, from Zhanjiang Guangdong, A bachelor’s degree, Senior engineer. He had served as the Party Branch Secretary for boiler department and Deputy director of the Maoming Thermal Power Co., Ltd., deputy director of Health and Technology Department and Vice General engineer for the Power industry Bureau , He now serves - 22 - as director ,Deputy General manager and member of CPC of Guangdong Yuedian Group Co., Ltd. And director of the Guangdong Electric Development Co., Ltd. Mr.Li Zhuoxian, Male, born in June 1963, a CPC member ,Han nationality, from Meixian Guangdong, bachelor’s degree, Senior engineer. He had served as the technician staff of the Chemical department, Deputy-department director, director, Deputy-Section Chief of the technique and production section, Vice-General Engineer, and Vice-factory director in the Shaoguan Electric Power Plant, He now serves as director, Vice-General Manager and member of CPC of Guandong Yuedian Group Co., Ltd. And director of the Guangdong Electric Power Development Co., Ltd. Mr.Liu Luoshou, Male, born in April 1951, a CPC member ,Han nationality, from Zhanjiang Guangdong, A bachelor’s degree, is a graduate of Guangdong Academy of social sciences, Senior engineer. He had served as director of the pneumatic machine Dept of Maoming Thermal Power plant , Vice-director of the arrangement department and director of the Zhangjiang Electric Power Co., Ltd.,General Manager of the Zhanjiang Electricity Co., Ltd.General Manager of the Tian Shengqiao First Degree Water and Electricity Development Co.,Ltd. He is now taking the position of the director and General Manager of the Guangdong Electric Power Development Co., Ltd. Mr. Zhong Weimin: Male, born in August 1956, a CPC member ,Han nationality, from Huadu Guangdong,A bachelor’s degree, He had served as deputy head of Cadre Appointment, Dismissal and Transfer Division of Organization Dept. of Guangdong Provincial Party Committee, acting mayor of Sanshui City and investigator of the same division and No. 1 Cadre Division of the same department. He now serves as director ,deputy secretary of Party committee, secretary of Committee for Disciplinary inspection and Chairman of Labour union of Guangdong Yuedian Group Co., Ltd. and director of Guangdong Electric Power Development Co., Ltd. Mr. Gao Shiqiang: Male, born in December 1957, a CPC member ,Han nationality, from Dapu Guangdong, a postgraduate, A master’s degree in engineering ,Senior engineer. He had served as deputy manager and deputy director of Lianping County Power Supply Company, deputy director and director of Engineering Dept. and deputy director general of Heyuan Power Industry Bureau, director general - 23 - of Shanwei Power Industry Bureau, head of preparation team of Shanwei Power Plant and head of Cadre Division of Guangdong Electric Power Group Company. He now serves as director, deputy General manager ,member of CCP and Chief Counselor of Guangdong Yuedian Group Co., Ltd. and director of Guangdong Electric Power Development Co., Ltd. Mr.Yang Xuanxing, Male, born in November 1965, a CPC member ,Han nationality, from Shaoyang ,A bachelor’s degree, MBA and senior economist, Senior Auditors, International Registration of internal auditors, He had as Vice-Chief auditor of auditing department of Guangdong Power Bureau. He is now taking the position of the Financial Manager of the Guangdong Yuedian Group Co., Ltd and director of Guangdong Electric Power Development Co., Ltd. Mr. Yao Jiheng , Male, born in November 1965, a CPC member ,Han nationality, from Chenzhou Hunan, A master’s degree, Senior engineer.(Professors). He had as Vice-director of the of the overhauling plant , director of the pneumatic machine plant ,Vice-factory director of the Yun Fu Electric Power Plant, Assistant to factory director, Vice-factory director of the Huang Pu Electric Power Plant. he is currently taking the position as the director of the Guangdong Eclectic Power Development Co., Ltd. and the factory director of the Shajiao Power Plant A. Mr. Wu Bin: Male, born in September 1964, a CPC member ,Han nationality, from Jinxian Jiangxi, A bachelor’s degree, Lawyer, Senior Economist . He had served as vice president of Zengcheng Sub-branch of Construction Bank of China Co., Ltd., deputy director of Monitoring Office and deputy chief of Legal Division of Guangzhou Branch, He now serves as deputy manager of Guangzhou Office of China Xinda Asset Management Company, and director of Guangdong Electric Power Development Co., Ltd. Mr. Zou Xiaoping, Male, born in January 1964, a CPC member ,Han nationality, from Macheng Hubei, A master’s degree, Senior Economist engineer,. He had served as the lecturer of Wuhan Hua Zhong University and he has also taken the position as Vice-General Manager of the Guangdong Guangfa Industry Investment Group Company. He is currently taking position as Chairman of Guangdong Guangkong Group and director of Guangdong Electric Power Development Co., Ltd. - 24 - Mr. Wang Jun, Male, born in October 1958, a CPC member ,Han nationality, from Fengnan Hebei, doctor's degree, a Professor, He had as president of economic graduate school of Zhong Shan University, he is now the assistant to the president of Zhong Shan University, Vice president of Lingnan college of Zhong Shan University, he enjoys the special allowance granted by State Department of China, he is on of the independent directors of Guangdong Eclectic Power Development Co., Ltd. He is also member of the China Youth Scientist Association and Administrative Vice Chairman of the Guangdong Economics Association. Mr. Song Xianzhong, Male, born in September 1963, a CPC member ,Han nationality, from , a Professor, Mr. Song lectured at Industry economics department of Xinan Finance & Economics College, Accounting department of Politics Institute as well as Accounting department of Jinan University. He had hosted and participated in the research and development of the project of State Natural Science Fund, the project of State Social Science Fund, the project of State Education Commission Fund and other provincial and ministerial projects , and currently served as director in Development & Planning Department of Jinan University, director in Finance and Accounting Office of Management Institute, the independent director of Guangdong Electric Power Development Co., Ltd., also served as managing director and Deputy General Secretary of Guangdong Accounting Society, managing director of Guangdong Auditing Society, managing director of Guangzhou Auditing Society, managing director of China Accounting Society, a member of China Accounting Standards Advisory Panel, member of MPAcc Teaching Guidance Committee. Ms Cheng Xinxin, Female, born in April 1953, a CPC member ,Han nationality, from Shandong, A doctor's degree, Senior Accountant, Registered Accountants, Certified Public Accountant , Ms Cheng took the position at Budget Dept , Financial Dept , Foreign Dept and accounting Dept of the Guangdong Financial Bureau, she also served as Vice-General Manager of Hong Kong Fei Long Co., Ltd, Vice-General Manager of the Planning and Management department , Financial department , as well as Assets Management department Hong Kong Yue Hai Group.and Executor of Guang dong zhong nong xing Co., Guang dong representative office she is - 25 - currently taking position as director and CEO of Wan Fang Xing Tai Consultancy Co., Ltd. And independent directors of the Guangdong Electic Power Development Co., Ltd. Mr.Zhu Baohe: Male, born in April 1962, Han nationality, from Anhui, A doctor's degree, He once served as work of China Nanshan Development Group) Company, Shenzhen office of Guotai Securities,Junan Securities Co., Ltd.,Guoxin Securities designing Center. He also served as First assayer and Deputy General Manager of Guoxin Securities designing Center, president assistant of Fangzheng Securities Co., Ltd. He now serves as disquisition majordomo(vice-president grade) ,and Independent director of Guangdong Electric Power Development Co., Ltd. Mr. Sha Qilin: Male, born in October 1960, a CPC member ,Han nationality, from Honghu Hubei, A doctor's degree, Associate professor, A lawyer. He once served as associate professor of Automobile Engineering Dept. of Wuhan Engineering College (now named as Wuhan Science and Engineering University) and person in charge of Investment and Development Dept., deputy chief engineer and head of overseas listing leading team of China Huandao Group Company. He now serves as the lawyer of Nanguo Desai Lawyer Office and independent director of Guangdong Electric Power Development Co., Ltd. Mr. Zhang Yao: Male, born in April 1948, a CPC member ,Han nationality, from Lianjiang Guangdong, a Professor, a professor and doctorate tutor. He once served as director of Power Engineering Dept. of Tianjin University. He now serves as the president of Electric Power School of South China Science and Engineering University and independent director of Guangdong Electric Power Development Co., Ltd. and concurrently serves as member of Expert Team of China South Power Grid Company, vice chairman of Guangdong Electrical Engineering Society, member of Directing Committee for teaching the subject of electronic information and electrical engineering under Ministry of Education, member of directing subcommittee for teaching the subject of electrical engineering under Ministry of Education and deputy director of teaching committee for teaching electrical engineering subject for national electrical power education. Mr. Qiu Jianyi: Male, born in March 1964, a CPC member ,Han nationality, from - 26 - Xingning Guangdong,A bachelor’s degree, a engineer, He once served as chief of Appointment and Dismissal Section of Cadre Division of Guangdong Power Industry Bureau and deputy director of Human Resource Dept. of Guangdong Yuedian Group Co., Ltd. He now serves as director of Audit & Supervision Dept. and deputy secretary of discipline committee of Guangdong Yuedian Group Co.， Ltd. and chairman of the supervisory committee of Guangdong Electric Power Development Co., Ltd. Mr. Li Zhuoyan: Male, born in December 1972, Han nationality, from Guiyang Guizhou, A bachelor’s degree, Certified Public Accountant , a sponsor Representative. He started to work in 1995. He once served as deputy director of Settlement Center of Beijing Science and Technology University. He now serves as director of Securities Issue and Sales Office of China Xinda Asset Management Company and supervisor of Guangdong Electric Power Development Co., Ltd. Mr. Yang Songcai, Male, born in March 1962, Han nationality, from Hunan, A bachelor’s degree, Associate professor, a Lawyer, He once taught at Dongkou County No. 1 Middle School, Hunan, took charge of legal affairs at Hunan Material Department and Hunan Metal Material Corporation and served as lawyer and partner of Hunan Tiandiren Law Office, lecturer of Law Department of Hunan Economics and Finance College and associate professor of law school of Hunan University. He now serves as deputy director and associate research fellow of Human Rights Research Center of Guangzhou University, associate professor of law school of Guangzhou University and independent supervisor of Guangdong Electric Power Development Co., Ltd. Mr. Liang Ruyu: Male, born in May 1967, Han nationality, from Dianbai Guangdong, A master’s degree. He once served as work of Guangdong Meide Group Co., Ltd., He once served as general manager of Shunde Huayu Trade Co., Ltd. He now serves as manager of Comprehensive Dept. of Shunde Trading Branch of Guangdong Shunde Xingye Securitas and independent supervisor of Guangdong Electric Power Development Co., Ltd. Mr. Lin Weifeng: Male, born in February 1968, a member of CPC , Han, from Jiexi Guangdong, bachelor’s degree, Accountant, He once worked at Xinfengjiang - 27 - Hydroelectric Power Plant and Shanjiao Power Plant and served as audit director of Shajiao General Power Plant and director of finance department of Shajiao Power Plant A. He now serves as employee supervisor of Guangdong Electric Power Development Co., Ltd. and deputy chief economic engineer of Shajiao Power Plant A. Mr Chen Chuyang, Male, born in November 1959, Han nationality, from Hubei, a Secondary qualifications, Mr. Chen has took the position as Manager of Monetary and Securities department, He is currently taking the position as Employee supervisor and the person in charge of General Affairs of Board of Directors of Guangdong Electric Power Development Co., Ltd. And concurrently serves as director of Maoming Zhenneng Thermo Power Co., Ltd. Mr. Xu Peijin: Male, born in October 1955, a CPC member ,Han nationality, from Maoming Guangdong, A master’s degree. A Economic engineer. He once served as watch man, shift head, deputy director and director of electric workshop, deputy plant director and plant director of Maoming Thermal Power Plant. He now serves as deputy general manager of Guangdong Electric Power Development Co., Ltd. and concurrently serves as vice board chairman of Maoming Ruineng Thermal Power Co., Ltd. Ms Li Xiaoqing, Female, born in September 1971, a CPC member ,Han nationality, from Chongqing, A master’s degree, Senior Economist engineer . Ms. Li has took the position as person in charge being responsible to the General Manager of Guangdong Electric Power Development Co., Ltd, she is currently taking the position as Secretary of the Board of Directors and in charge manager for Board of Directors’ Affairs ,and she is also the director of Shenzhen Guang qian electricity Co., Ltd. Mr. Liu Wei: Male, born in April 1979, a CPC member ,Han nationality, from Wuhan Hubei,A bachelor’s degree, a Economist engineer. He once served as secretary of Supervises committee, securities affair representative and special responsible person of Board Affair Dept. of Guangdong Electric Power Development Co., Ltd. and Preparation Team of Guangdong Yuedian Finance Co., Ltd. He now serves as board secretary and manager of Board Affair Dept. of Guangdong Electric Power Development Co., Ltd. and concurrently serves as director of Maoming Electric Power and Water Supply Co., Ltd. - 28 - Ms Liu Xuemao, Female, born in August 1955, Han nationality, from Shanxi,A bachelor’s degree, Senior Accountant, Ms. Liu has worked in Shaoguan Electric Power Co, Huang Pu Electric Co, Guangdong Power Testing Institute,She is currently taking the position as the person in charge of financial affairs , in charge manage of financial department of Guangdong Electric Power Development Co., Ltd, and concurrently serves as director of Guangdong Yueding Fengneng Development Power Co., Ltd. 3. Particulars of Remunerations The salary and welfare of directors, supervisors and senior management of the Company are determined by their position in the Company and are in accordance with the Company’s principle on staff payroll and welfare. No additional salary and welfare are paid. Allowance of independent directors, independent supervisors are paid according to the standard approved by the General Shareholders’ Meeting. 4. In the reporting period, there were no staff leave, employment, and election of directors, supervisors and senior Executives. Ⅱ.Particulars of employees At the end of 2007, the Company had 1,480 employees, including 311 technicians, 925 production workers, 34 finance staffs, 210 administrative and management staffs and 314 retired staffs. Current employees consisted of 596 college graduates or above, 884 technical secondary school or high school graduates. Except for few staff working in headquarters of the Company(accounts for 3%), most of the staff work in Shajiao Power Plant A. V. Corporate Governance Structure (I) The status quo of corporate governance structure In the report period, the Company constantly improved its own corporate governance organs and further enhanced the level of its standardized operation strictly according to the requirements of laws and regulations including the Company Law, the Securities Law, Guidelines for Governance of Listed Companies and Stock Listing Rules. - 29 - On May 23, 2007, 2006 annual shareholders' general meeting of the Company examined and adopted the Proposal for Amending the Articles of Association of the Company. Made corresponding revision on Company Constitution according to the revised business scopes, The announcement of relevant resolutions was published on China Securities Daily, Securities Times ,Hong Kong Commercial Daily and www.cninfo.com.cn on May 24, 2007. During the reporting period, the Company had also improved the Constitution and Discussion Rules for the Board of Directors according to the rectification requirements issued by China Securities Regulatory Commission Guangdong Regulatory Authority when they made on-site inspection on company governance to the Company, the details are described in “(II) Description of Company governance Special Activities in 2007”. The current corporate governance structure of the Company runs effectively, all the shareholders’ meeting, board of directors’ meeting, supervisor committee’s meeting as well as the five expert subsidiary committees can be held regularly based on the Company’s Article of Associations, the Standing Orders of the Shareholders’ Convention, the Standing Orders of the Boards and the Standing Orders of the Supervisor Committee, all the above function can deliberate affairs according to their respective responsibilities, exerting decision-making and supervising function of independent directors and supervisors. (II). Notes to special activities of corporate governance in 2007 On July 24, 2007, the Company disclosed Self Inspection Report on Corporate Governance and Rectification Plan on China Securities Daily, Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn and arranged telephone and electronic mailbox to listen to the opinions and suggestions on the status of corporate governance of the Company given by investors and the public. The Company mainly carried out the following work according to the result of self inspection and the rectification plan: 1. The Company strengthened the establishment of and perfected its internal control system. The Company engaged world-famous specialized intermediaries to comprehensively - 30 - checked its original rules and regulations, analyzed and appraised its internal control system, looked up gap according to relevant requirements of Guidelines for Internal Control of Listed Companies issued by Shenzhen Stock Exchange and the standards accepted by professional organs, analyzed possible risks, established and perfected rules and regulations, formulated internal control manuals, implemented internal control system in various forms including training, education, inspection and supervision and earnestly enhanced the level and extent of standardization of corporate governance. 2. The Company strengthened the management of its subsidiaries While establishing its internal control system, the Company improved the management of its subsidiaries and relevant control measures, urged its subsidiaries to establish and perfect internal control system, implemented Regulations on Management of Information Disclosure Affairs and Regulations on Report of Internal Information, reported the matters of its subsidiaries that may have significant influence on the price of its stocks to the board of directors and shareholders' general meeting for examination and performed the obligation of information disclosure, strengthened the supervision and management of its subsidiaries in respect of production, capital construction, investment, finance and budget and controlled investment risks. 3. The Company continued to normalize the transactions between it and the controlling shareholder and its related enterprises and formulated regulations on related transactions in accordance with relevant laws and regulations, Stock Listing Rules and Articles of Association of the Company. The related transactions between the Company and the controlling shareholder and related enterprises have been formed due to the characteristics of the power industry and for historic reasons. The Company has actively safeguarded the lawful rights and interests of itself and all shareholders. It formulated special regulations on related transactions based on the original system of examination and approval of related transactions to further normalize related transactions. In September 2007, Guangdong Supervision Bureau of CSRC conducted site - 31 - inspection of the status of special activities of strengthening corporate governance carried out by the Company and then issued the Notice of Rectifying Relevant Problems within Specified Time Limit (Guangdong Zheng Jian (2007) No. 651). The Company mainly carried out the following work according to the requirements of the Notice: 1. The Company perfected its Rules of Procedure of the Board of Directors. The announcement of relevant resolutions was published on China Securities Daily, Securities Times ,Hong Kong Commercial Daily and www.cninfo.com.cn on October 27, 2007. The third provisional shareholders' general meeting of the Company in 2007 held on December 18, 2007 examined and adopted the Proposal for Amending the Articles of Association of the Company to perfect the Articles of Association of the Company. The announcement of relevant resolutions was published on China Securities Daily, Securities Times ,Hong Kong Commercial Daily and www.cninfo.com.cn on December 19,2007. 2. The Company set up independent audit room, employed full-time internal audit personnel, formulated regulations on internal audit and provided conditions for the independent and effective operation of internal audit organs. 3. The Company further attached importance to the legal compliance of fund utilization, strengthened planning arrangement of the utilization of funds for investment projects, actively promoted the initial-stage preparation and construction of projects, improved relevant accounting, made efforts to avoid long-term suspense of accounts for investment funds. Meanwhile, it strengthened the settlement of accounts for construction in progress and timely conducted accounting treatment according to relevant provisions. (III) Duty performance of independent directors and independent supervisors In the report period, the fifth board of directors of the Company held six on-the-spot meetings and eight meetings by correspondence in total. Six independent directors attended the meeting in person or entrusted other directors to attend the meeting and exercise voting right on their behalf. None of them made objection to the matters examined by the board of directors. The fifth supervisory committee held three - 32 - on-the-spot meetings and one meeting by correspondence in total. Two independent supervisors attended the meeting in person or entrusted other supervisors to attend the meeting and exercise voting right on their behalf. None of them made objection to the matters examined by the supervisory committee. The independent directors and independent supervisors of the Company earnestly performed the responsibilities and obligations assigned by laws and regulations and Articles of Association of the Company, cared for the Company's production and business and operation according to law, actively participated in the work of the board of directors, the supervisory committee and shareholders' general meeting, expressed independent opinions on the Company's operation and decision making and all related transactions, enhanced the level of corporate governance and really safeguarded the lawful rights and interests of shareholders. (IV).Separation of operation with the holding company (a) Separation of human resource: the General Manager and all his subordinates, Secretary to the Board of Directors, Financial Manager are paid by the Company and take no position in the holding company. (b) Separation of assets: the Company has independent production system, supporting system and other facilities. The Company owns its intangible assets such as intellectual property rights, trademarks and non-patent technology, except that the procedures to apply land use right certificate of Shajiao Power Plant A are still in progress. (c) Financial independence: the Company has an independent financial department and has established independent accounting system and financial management system. It opened independent bank accounts for its own operation. (d) Separation of organization: the Company has established integrated operating institution of its own. (e)Separation of operation: the Company is principally engaged in the electricity generation and sales to Guangdong Electric Power Holding Co.(“GPHC”) directly. The Company has subcontracted the subsidiary of Yudian, the holding company, to purchase the fuels, which is solely for the purpose of better utilization of large-scale - 33 - purchase and cost control. (V). Self-evaluation report on the Company's internal control 1. Summary of the Company's internal control The Company has attached great importance to the development of internal control system and formulated internal control system in accordance with laws and regulations including the Company Law, the Securities Law, Guidelines for Governance of Listed Companies, Stock Listing Rules of Shenzhen Stock Exchange, Guidelines of Shenzhen Stock Exchange for Internal Control of Listed Companies and in the light of the characteristics of its own operation and current situation. （1）The organization General Shareholders Meeting Board of Directors Committees of Supervisors Secretary of Board of Directors Mangers Special Commissions Affair Dept of Board of Work Dept of Financial Auditing Project Management Planning & Controlling and participating Subsidiaries - 34 - Annual report 2007 of Guangdong Electric Power Development Co., Ltd. (2). Construction of internal control systems The internal control systems prepared by the Company are divided into company's internal control, internal control of financial management, internal control of investment management, internal control of administrative management, internal control of personnel management, internal control of party work, internal control of information disclosure, internal control of external security, internal control of related transactions, internal control of funds raising, internal control of internal auditing, internal control of information systems, the 12 internal controls. (3). Work and staffing of internal audit department of the company. The company set up an independent audit room equipped with full-time internal audit staff. They make supervision and evaluation on the authenticity, legitimacy and effectiveness of financial income & expenditure, financial budgeting, financial accounting, asset quality, operational performance, project construction or the other related economic activities of the company and the controlling company. (4). The details of the important activities, work and effectiveness to build and improve internal control of the company in the reporting period are in “(II) Description of Company governance Special Activities in 2007”. (1). Control structure of the controlling subsidiaries of the company and share proportion. 35 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Guangdong Electric Power Development Co., Ltd. 76% 58% 65% 51% 54.85% 55% 83.66% 70% 100% Zhanjiang Electric Power Co., Ltd. Guangdong Yuedian Anxin Electric Power Overhaul & Installation Co., Ltd. G G M M G G G u u a u u u a n g d a n g d o C a o m a n g a n g d a n g d o o m i i d o o n n n o n n g g n g g Y u S h g L n g Z g Y u Y u e a d h Y e e j o u e d d i g e i i a u n d a a a R n i n n E n u a l e Y e n O i Z h c u i n n J l a t r e j g i s h n j i c i a e n T n a l i a n h g h e n P o g g e a , g w P r i D W e o m e i r w a P v n e T o e d C r l w l o h e o p . C e P r p o , o m w L . r o e e , w C n r t d L m e o t C t a r . o . d l , C o . . L . , C t L o d L t t . . d d P , . o L w t e d r 100% Zhanjiang Yuheng Power Co., Ltd. （2）The Company's internal control of controlled subsidiaries The Company formulated regulations on Management and Control of Subsidiaries, realized effective management and control through appointing directors, supervisors and important senior executives to its controlled subsidiaries, monitored their operating activities through overall budget management and supervised their internal control through the inspection conducted by the supervisory committee and audit office of the Company. The Company also formulated regulations on Report of Internal Information, specified the content, time and form of report of significant information of controlled subsidiaries so as to guarantee the timeliness and effectiveness of internal information communication. Guangdong Yuedian Zhanjiang Wind power Co., Ltd (3). The Company's internal control of related transactions The Articles of Association of the Company have specified the examination and approval 36 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. authority for related transactions, avoidance procedure and opinions of independent directors. The Company also formulated Regulations on Management of Related Transactions to further normalize related transactions. All the Company's related transactions were accepted by independent directors who expressed independent opinions in advance and were disclosed. Refer to the following "IX. Important Events" for details. (4). The Company's internal control of external guarantees The Articles of Association of the Company have required examination and approval of external guarantees by the shareholders' general meeting of the Company. The Company also formulated the Regulations on Management of External Guarantee to further control and normalize external guarantees. All the Company's external guarantees were disclosed. Refer to the following "IX. Important Events" for details. (5). The Company's internal control of use of IPO proceeds The Company formulated the Regulations on Management of IPO Proceeds and specified regulations on the deposit, use, investment, management and supervision of IPO proceeds. In the report period, the Company did not raise proceeds through IPO. (6). The Company's internal control of significant investment The Articles of Association of the Company have specified the examination and approval authority for significant investment. The Company formulated Internal Control of Significant Investment to further normalize significant investment. All the Company's significant investments were disclosed. Refer to the following "VII. Report of the Board of Directors" for details. (7). The Company's internal control of information disclosure The Company formulated the Regulations on Management of Information Disclosure Affairs, Regulations on Report of Internal Information and Regulations on Management of Relationship with Investors, specified the content, scope, form and responsible persons of information disclosure and exercised effective control of information disclosure. In the report period, the Company did not disclose information in violation of regulations. (3). Existing problems of internal control of the company and rectification plans. (1). Same industry competition may happen between the company and the controlling shareholders when electricity is fully marketized in the future. 37 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. The company will coordinate with related parties on solving the problem of same industry competition in accordance with the changes of state policies, market development and other external conditions. (2). Internal audit work needs to be improved. The company set up an independent audit room equipped with full-time internal audit staff, and developed internal audit systems. Quality and efficiency of internal audit work will be gradually improved. (3). Further standardization on signing of contracts of related transaction. Some contracts of related transactions have expired. The company is now consulting with related parties to complete signing as soon as possible. (4). Overall evaluation of internal control of the company. Internal controls of the company are in line with state laws and regulations and actual situations of the company. The company has been established internal control systems covering all sectors of the company, which are in sound and effective operation. Internal controls of the company are generally consistent with the relevant requirements of China Securities Regulatory Commission and Shenzhen Stock Exchange, the company will continue to improve internal controls in accordance with relevant requirements. (5) Views on self assessment of internal control by the board of supervisors of the company. The board of supervisors of the company issued a self-evaluation report of internal control, and confirmed that self evaluation of internal control of the company was comprehensive, true, accurate, and it reflected the actual situations of internal control of the company. (6) Views on self assessment of internal control by independent directors of the company. Independent directors of the company had made careful examination of the self-assessment report of internal control, and confirmed that the self assessment of internal control of the company was comprehensive, true, accurate, and it reflected the actual situations of internal control of the company. （VI）The implementation of the Company’s evaluation and incentive system of senior management The Company is in the process of establishing a fair, visible performance evaluation scheme and incentive system for directors, supervisors and management. The management is 38 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. appointed openly and fairly to be compliant with laws and regulations. VI. Brief Introduction of Shareholders' General Meeting In the report period, the Company held 4 shareholders' general meetings in total: the first provisional shareholders' general meeting in 2007, 2006 annual shareholders' general meeting, the Second provisional shareholders' general meeting in 2007 and the third provisional shareholders' general meeting of the Company in 2007 were held on February 28,May 23, September 17 and December 18 respectively. The resolutions of the meetings were disclosed on China Securities Daily, Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn respectively on March 1, May 24, September 18 and December 19. VII. Report of the Board of Directors (I) Operating status of the Company in the report period In 2007, the economy of Guangdong Province kept steady and rapid growth. The situation of regional, seasonal and periodic power shortage continued in the province. The widest electric power gap reached 6.2 million kw. Power shortage was still serious. The power consumption and accumulative power output of the province were 339.301 billion kwh and 269.105 billion kwh respectively, which respectively increased by 12.95% and 8.87% year on year. The power load of the province repeatedly hit new highs. The maximum load reached 54.13 million kw and adjusted maximum load was 46.96 million kw. In the good environment of supply and demand and due to favorable factor that the Company's units under construction started operation in succession, the Company accumulatively completed power output of 28.691 billion kwh in terms of consolidated statements, which increased by 16.23% over that in 2006 (i.e. 24.685 billion kwh). It completed 100.77% of the adjusted power generation plan for the report year (i.e. 28.471 billion kwh). The Company completed on-grid electricity volume of 26.579 billion kwh in terms of consolidated statements, which increased by 15.66% over that in 2006 (i.e. 22.981 39 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. billion kwh). The comparable on-grid electricity volume after deduction of the power output of the new units that started operation in the report period was 22.414 billion kwh, a year-on-year decrease of 2.47%. On equity basis (including power plants of joint stock subsidiaries), the power output and on-grid electricity volume of the Company were 25.265 billion kwh and 23.551 billion kwh respectively, a respective year-on-year increase of 26.15% and 26.05%. The growth of power output promoted the increase of operating income. In the report period, the Company earned operating income of RMB10,393 million, which increased by 19.02% year on year. However, due to continuous rise of price of fuel and transportation, increase of overhaul of existing units and non-scheduled outage of units that newly started operation, imperfection of transfer passage for some projects and increase of financial expenses caused by increase of the Company's borrowings, the growth of power output failed to set off the increase of new expenses. Therefore, the net profit for the shareholders of the parent company were RMB 689 million, which decreased by 11.58% year on year. Based on stable and continuous power generation, the Company made efforts to accelerate the start of operation of the projects under construction. Among the power plants in which the Company invested, #6 unit of Maoming Power Plant started operation in May 2007. #1 and #2 unit of Huilai Power Plant started operation in February 2007 and June 2007 respectively. #2 and #3 unit of Front Bay LNG Power Plant started operation in January 2007 and March 2007 respectively. #3 unit of Huizhou LNG Power Plant started operation in June 2007. #1 and #2 unit of Zhanjiang Orimulsion Power Plant both started operation in January 2007. Nan'ao wind power units started operation in November 2007. Meanwhile, the Company continued to expand the scale of its main business through active acquisition. In the report period, the Company respectively acquired 49% equity of Guangdong Yuedian Jinghai Power Generation Co., Ltd., 10.21% equity of Guangdong Yuedian Oil Shale Power Generation Co., Ltd., 29% equity of Yunnan Baoshan Binglangjiang Hydroelectricity Development Co., Ltd. and 1.28% equity of Shenergy Company Co., Ltd., a listed company, which contributed to quickening the Company's steps of expansion. The Company based itself on the development of key business and provided support to the development of its key business. In the report period, the board of directors approved the 40 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Company to respectively increase the capital of and provide guarantee to Weixin Yuntou Yuedian Zhaxi Energy Co., Ltd. and Yunnan Baoshan Binglangjiang Hydroelectricity Development Co., Ltd. to promote the progress of project development. Meanwhile, the Company actively expanded to upstream industries. In the report period, the board of directors approved the Company to increase the capital of Shanxi Yuedian Energy Co., Ltd., provide guarantee to Guangdong Yuedian Shipping Co., Ltd. and subscribe for new shares of Guangdong Power Industry Fuel Company, which contributed to increasing the Company's force of operational cost control in the future. In addition to basing itself on key business and expanding to upstream industries, the Company continued to enter finance industry. In the report period, the board of directors approved the Company to increase the capital of Guangdong Yuedian Finance Co., Ltd., sponsor the establishment of Sunshine Insurance Holding Co., Ltd. (now renamed as Sunshine Insurance Group Co., Ltd.) and subscribe for the shares of Sunshine Insurance Holding Co., Ltd. with the shares of Sunshine Property Insurance Co., Ltd. originally held by the Company at appraised value, which complied with the Company's strategy of related diversified development. To decrease financial expenses and optimize financial structure, the Company carried out a series of work of issuing corporate bonds of RMB 2 billion in the report period. The issuance of corporate bonds was approved by China Securities Regulatory Commission with Zhen Jian Permit (2008) No. 233 Document. The Company determined face interest rate of corporate bond to be 5.5% through inquiry. The issuance ended on March 13, 2008. The corporate bonds were listed for trading at Shenzhen Stock Exchange on March 27, 2008. To sum up, the Company continued to keep the development structure of focusing on electric power, basing on energy and steadily extending to relevant industries. 1.The scope and review of the Company’s operations The Company is a large-scale generating company that invests in, constructs, operates and manages power projects and produces and sells power. As of the end of the report period, the in-operation controllable installed generating capacity and installed capacity on equity basis were 6,740MW and 5,200MW respectively. In the report period, the Company 41 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. accumulatively completed power output of 28.691 billion in terms of consolidated statements, which increased by 16.23% year on year and accounted for 10.66% of the power output of Guangdong Province. Its market share slightly increased year on year. Its on-grid electricity volume was 26.579 billion kwh, a year-on-year increase of 15.66%. On equity basis, the power output and on-grid electricity volume of the Company were 25.265 billion kwh and 23.551 billion kwh respectively, a respective year-on-year increase of 26.15% and 26.05%. Following is the operating income of 2007: Unit:RMB’0000 Increase Gross Increase Increase /decrease Operating Operating Profit /decrease of /decrease of Industry Area of Gross Income cost Ratio(% operating operating profit ) income（％） cost（％） ratio（％） Electric Guangdong Dereased 1,039,309 821,305 20.98 19.01 25.55 Power Province 4.11% Of which : Related 9,488 606,315 --- 0.00 0.00 0.00 Transacti on In the report period，the main operation and its structure of the Company did not change much as compared with the previous report period. However, due to continuous rise of production cost, the profitability of key business declined obviously. 2.The Company's wholly-owned plant and subsidiaries Shajiao Power Plant A, the Company's wholly-owned plant, achieved electricity generation volume of 8,359 million KWH and on-grid electricity generation volume of 7,732 million KWH, increased by 0.67% and 0.01% respectively as compared to those of last year. Zhanjiang Electric Power Co., Ltd. (“Zhanjiang Electric”), a 76% held subsidiary with a registered capital of RMB 2.87544 billion, is mainly engaged in power generation and construction of power plant . For the report year, its total assets, net assets ,main business 42 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. income, main business profit and net profit were RMB 4483.47 million, RMB3839.19 ,RMB2087.65 million, RMB689.91 million and RMB347.85 million respectively. The Zhanjiang Power Plant owned by Zhanjiang Electric has achieved power generation of 7,567 million KWH and on-grid electricity of 7,124 million KWH, increased by 3.05% and 3.77% respectively compared to those of last year. Guangdong Yuejia Electric Power Co., Ltd. (“Yuejia Electric”), a 58% held subsidiary, with a registered capital of RMB 1200 million, is mainly engaged in power generation. For the report year, its total assets, net assets ,main business income, main business profit and net profit were RMB1724.27 million, RMB1442.09 ,RMB1128.82 million ,RMB236.32 million and RMB124.04 million respectively. The Meixian Power Plant B owned by Yuejia Electric has achieved power generation of 3,187 million KWH and on-grid electricity volume of 2,884 million KWH, decreased by 3.6 % and 3.679% respectively compared to those of last year. Guangdong Shaoguan Yuejiang Power Generation Co., Ltd. ("Yuejiang Electric Power") of which the Company holds 65% equity has registered capital of RMB 770 million and is mainly engaged in power generation. For the report year, its total assets, net assets and net profit were RMB2451.93 million, RMB 839.91 million and RMB 15.65 million The power output and on-grid electricity volume of #10 and #11 unit of subsidiary Shaoguan Power Plant were 3,783 million kwh and 3,447 million kwh, a respective decreased of 4.28% and 5.51 % year on year. Guangdong Maoming Ruineng Thermal Power Co., Ltd. (“Maoming Ruineng”), a 51% held subsidiary with a registered capital of RMB 21716 million, was mainly engaged in power generation. For the report year, its total assets, net assets and net profit were RMB 818.65 million, RMB 260.39 million and RMB 30.59 million The No.5 generator managed by Maoming Thermal Power Plant achieved electricity generation volume of 1,339 million KWH and on-grid electricity volume of 1,227 million KWH, increased descend by 1.52% and 1.83 % respectively as compared with those of last year. Guangdong Maoming Zhenneng Thermal Power Co., Ltd. , a 54.85% held subsidiary with a registered capital of RMB 325 million, was mainly engaged in power generation. For the report year, its total assets, net assets and net profit were RMB 1151.16 million, RMB 306.29 million and 43 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. RMB 3.08 million #6 unit of Maoming Thermal power Plant under the company started operation and power generation in May 2007 and achieved electricity generation volume of 871 million KWH and on-grid electricity volume of 807 million KWH, Guangdong Yuedian Jinghai Power Co., Ltd. , a 55% held subsidiary with a registered capital of RMB 1550 million. Was mainly engaged in power generation. For the report year, its total assets, net assets and net profit were RMB 6225.82 million, RMB 1555.54 million and RMB 29.72 million. #1 and 2# unit of Huilai Power Plant under the company started operation and power generation in February 2007 and June 2007 respectively and achieved electricity generation volume of 3585 million KWH and on-grid electricity volume of 3358 million KWH, Guangdong Yuedian Anxin Electric Power Overhaul & Installation Co., Ltd., a wholly-owned subsidiary of the Company, was established in October 2007. a registered capital of RMB 20 million. It is mainly engaged in undertaking the installation and maintenance of electric power facilities. For the report year, its total assets, net assets and net profit were RMB 44.05 million, RMB21.84 million and RMB 1.84million respectively. Guangdong Yuedian Oil Shale Power Generation Co., Ltd. of which the Company holds 83.66% equity and Guangdong Yuedian Zhanjiang Wind Power Generation Co., Ltd. of which the Company holds 70% equity are still in the initial development stage. Therefore, they did not generate operating results in the report period. 3. Performances of the participating subsidiaries. Name Net profit（’0000）\Note Guangdong west Holding Investment Co., Ltd. -351 Shenzhen Guangqian Electric power Co., Ltd. 19,000 Huizhou Natural gas Power Co., Ltd. 10,354 Zhanjiang Zhongyue Energy Co., Ltd. -21,025 Lincang Yuntou Yuedian Hydroelectricity 30 Development Co., Ltd. Yangshan Jiangkeng Hydroelectricity Co., 125 44 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Ltd. Yangshan Zhongxikeng Hydroelectricity 80 Co.,Ltd. Yunnan Baoshan Binliangjiang 1,382 Hydroelectricity Co., Ltd. Guangdong Yuedian Shibeishan Fengneng -577 Development Co., Ltd. Huaneng Shantou Fengdian Co., Ltd. 135 Shanxi Yuedian Energy Co., Ltd. -555 Guangdong Yuedian Shipping Co., Ltd. 4,309 Guangdong Yuedian Finance Co., Ltd. 1,968 Maoming Electric power Water supply Company 551 Maoming Jieneng water coal slurry Company 1619 Guangdong Honghai Bay Power Co., Ltd. -962 Weixin Yuntou Yuedian Zhaxi Energy Co., Ltd. The projects operated in the reporting period were still in the early stage of development, but no profit was produced. 4.Major suppliers and customer In 2007, the electric power products of the Company were completely sold to Guangdong Power Grid Co., Ltd. The total amount of fuel purchase from the top five suppliers accounted for about 87.3% of the total purchase amount for the year. 5. Problems and difficulties occurred in operation and their solutions In the report period, the price of fuel and transportation still rose and electricity rate did not rise. Therefore, cost pressure was still great. To deal with this problem, the Company continued to tap internal potential and make efforts to maintain profit level on the one hand. On the other, it continued to actively seek thermal power generation projects with large capacity and high parameters and other energy and power generation projects. The Company's power out in terms of consolidated statements and power output on equity 45 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. basis both obviously increased year on year mainly due to the power output contribution of the units that newly started operation. However, due to the increase of overhaul of existing units, increase of non-scheduled outage, unsteady operation of new units that were in running-in period and imperfection of transfer passage for some projects, the growth of power output did not match the growth of unit capacity. To deal with this problem, the Company will continue to reasonably arrange overhaul and make efforts to maintain continuous and steady operation of generating units. Due to policy issues of the fuel supply country, fuel supply stopped. As a result, the Company's investment income from Zhanjiang Zhongyue Energy Co., Ltd. of which the Company holds 39% equity in the report period was not ideal. The Company is now losing no time in promoting the "oil-to-coal" renovation research of this project. In the report period, the Company and its controlled subsidiaries increased bank loans according to fund demand, which resulted in obvious increase of the Company's financial expenses. To decrease financial cost and optimize financial structure, the Company carried out the work of issuing corporate bonds of RMB 2 billion. The corporate bonds were listed for trading at Shenzhen Stock Exchange on March 27, 2008. After the peak time of operation start of units in 2006 and 2007, newly constructed units have basically started operation. The projects under construction are mainly wind power and hydropower projects with limited scale. The projects now in initial stage still awaits state approval. Therefore, the growth rate of commissioning and installation in the next period of time will obviously lower. To deal with this problem, the Company will persist in scale expansion, base on the in-operation projects, guarantee the projects under construction and promote the projects planned to be constructed and continue to look for new channels for profit growth. (II) Investment of the Company in the report period In the report period, the total amount of the Company's external investment was RMB 1513.79 million, which decreased by big margin 145.62% over the previous year. Mainly due to acquisition of projects and increase of the capital of subsidiaries according to the progress of the projects of subsidiaries. 1.There is no usage of the proceeds raised during the reporting period. There are no 46 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. proceeds raised but not used up by the Company, either; 2. Investment with non-IPO proceeds and its progress and income In the report period, the Company invested RMB 68.53 million in the projects of Huilai Power Plan (2×600mw+2×1000mw) constructed and operated by Guangdong Yuedian Jinghai Power Generation Co., Ltd. held by it through acquisition of 5% equity (the Company holds 55% equity in total after acquisition). #1 and #2 unit started operation respectively in February 2007 and June 2007. #3 and #4 unit were under initial stage construction. In the report period, the Company obtained income of RMB 3.38 million from this company. In the report period, the Company invested RMB 48.80 million in #6 unit (300MW) of Maoming Thermal Power Plant constructed and operated by Maoming Zhenneng Thermal Power Co., Ltd. of which the Company holds 54.85% equity. This unit started operation in May 2007. In the report period, the Company obtained income of RMB0.7 million from this company. In the report period, the Company established Guangdong Yuedian Anxin Electric Power Overhaul & Installation Co., Ltd. by investing RMB 20 million. This company is mainly engaged in undertaking the installation and maintenance of electric power facilities. In the report period, the Company obtained income of RMB1.13 million from this company. In the report period, the Company invested RMB 32.34 million in Lincang Yuntou Yuedian Hydroelectric Development Co., Ltd. of which the Company holds 49% equity. This company is constructing Xintangfang Hydroelectricity station (18MW) in Lincang Yunnan and conducting initial stage work for the construction of Dayakou Hydroelectricity station. Xintangfang Hydroelectricity station is expected to start operation in October 2008. In the report period, the Company obtained income of RMB0.16 million from this company. In the report period, the Company invested RMB 132.944 million in Yunnan Baoshan Binglangjing Hydroelectricity Development Co., Ltd., a joint venture subsidiary, through acquiring 29% equity (the Company holds 29% equity in total after acquisition) and capital increase. Houqiao power station (48MW) constructed and operated by this company in Binglang River, Baoshan, Yunnan has started operation. It is now constructing Sujia River estuary power station (315MW) and Songshan River estuary power station (168MW) and 47 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. conducting initial stage work for the construction of Sancha River estuary power station. In the report period, the Company obtained income of RMB3.57 million from this company. In the report period, the Company invested RMB 125 million in Guangdong Yuedian Finance Co., Ltd. of which the Company holds 25% equity. At the end of the report period, the capital abundance rate, deposit amount and loan amount of this company were 12.41%, RMB 10842 million and RMB 6578 million respectively. In the report period, the Company obtained income of RMB4.92 million from this company. In the report period, the Company invested RMB 339.2343 million in Guangdong Power Industry Fuel Company through subscribing for its new shares. In the report period, the Company invested RMB 320 million in Shanxi Yuedian Energy Co., Ltd. of which the Company holds 40% equity. The coal mine projects in Huoerxinhe, Madaotou and Suancigou that the Company is now investing have not started operation and contributed no profit in the report period. In the report period, the Company invested RMB 150 million in Sunshine Insurance Holding Co., Ltd. (now renamed as Sunshine Insurance Group Co., Ltd.) through sponsoring establishment, holding 11.11% equity. The successful construction of this company group platform provided objective premise for comprehensively integrating insurance resources and realizing span-type development in real sense. In the report period, the Company invested RMB 235,837,987.5 in Shenergy Company Co., Ltd., a listed company, through competitive purchase procedure for national 920 power generation assets, holding 1.28% equity. The net profit of this company for 2007 was 1856.12 million. According to the dividend distribution preplan of this company for 2007, the Company will obtain income of RMB 12.22 million. In the report period, the Company paid initial-stage expenses of RMB 70.21 million for the projects in initial stage and obtained no income. (III) The relevant analysis of assets and financial conditions and cash flow and the impacts on the company from the changes of major operating environments, macroeconomic policies, and regulations. 1. Analysis of relevant data of asset conditions. Unit:RMB’0000 48 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. December 31,2007 December 31,2006 Causes for major changes Index Items Amount Proportion to Amount Proportion to than in the same period last total assets total assets year Account Not major changes 1,171,93 4.87% 887,81 4.34% receivables Inventories 598,55 2.49% 421,46 2.06% Not major changes Investment Not major changes 14,64 0.06% 15,27 0.07% real estates In the reporting period, the company had new investments, which resulted in Long-term an increase of proportion of equity 3,341,10 13.89% 2,203,86 10.78% the index to the total assets, investment the details are described in “(II) Company Investment Situations in the Reporting Period”. In the reporting period, part of investment projects of the company were put into operation, which resulted in an increase of proportion of Fixed assets 14,208,86 59.07% 8,079,53 39.51% the index to the total assets, the details are described in “(I) Company Operation Situations in the Reporting Period”. Projects In the reporting period, part of 244,29 1.02% 5,069,24 24.79% under investment projects of the 49 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. construction company were put into operation, which resulted in an decrease of proportion of the index to the total assets. In the reporting period, the company and the controlling subsidiary Guangdong Yuedianjinghai Electricity Short-term 2,880,00 11.97% 4,180,00 20.44% Company repaid part of borrowings short-term loans, which resulted in an decrease of proportion of the index to the total assets. In the reporting period, the controlling company Guangdong Yuedianjinghai Electricity Company and Long-term Maoming Zhineng 5,177,92 21.53% 1,749,88 8.56% borrowings Thermoelectric Company had new long-term loans, which resulted in an increase of proportion of the index to the total assets. 2. Analysis of relevant data of financial conditions Unit:RMB’0000 Index Year Year Increase & Causes for major changes than in the same period last Items 2007 2006 Decrease year. rate Manage 579,93 564,60 2.72% Not major changes 50 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. ment costs Financial 337,04 151,02 123.18% In the reporting period, the controlling company costs –- Guangdong Yuedianjinghai Electricity Company net and Maoming Zhineng Thermal Power Company amounts had new loans and interests, which resulted in a significant increase of the index. Income 398,48 448,28 -11.11% New Enterprise tax rate will be adopted since year 2008, tax and deferred tax difference casued by tax rate variance charged to current yesr’s . 3. Analysis of relevant data of Cash Flow Unit:RMB’0000 Index Items Year Year Increas Causes for major changes than in the same 2007 2006 e& period last year. Decrea se rate Net cash flow 259,733 300,614 -13.60% increased fuel fee. from operating activities Net cash flow 266,360 343,405 5.81% Not major changes from investing activities Net cash flow 114,635 142,695 -19.60% In the reporting period, the index was from financing decreased than the same period last year due activities to distribution of dividend. 4. Impacts on the company from the changes of major operating environments, macroeconomic policies, and regulations. (1) In the report period, desulfuration electricity rate applied to some additional power plants held by the Company. The concrete electricity rates (Not including tax) of the power plants under the Company are 51 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. as follows: Unit: RMB/megawatt hour Item 05.5.1-06.6.30 06.7.1-07.12.31 #1-#2 345.43 370.43 (Including desulfuration) Sha A #3-#4 345.43 370.43 (Including desulfuration) ② #5 358.25 387.52 (Including desulfuration) Zhanjiang＃1、＃3、＃ 379.13 391.28 (Not including desulfuration) Zhanjiang#2 379.13 404.10 (Not including desulfuration)③ Yuejia #3、#4 382.43 394.62 (Not including desulfuration) #5、#6 362.39 387.44(Including desulfuration) ) ④ Yuejiang #10 407.43 419.57(Not including desulfuration) #11 362.39 374.53(Not including desulfuration) ⑤ Ruineng #5 362.47 374.62 (Not including desulfuration) Xintou Units ⑥ Zhenneng #6 N/A 374.53 (Not including desulfuration) Jinghai #1、#2 N/A 374.53 (Not including desulfuration) Note① According to Yue Jia (2007) No. 69 Document, desulfuration electricity rate applied to #1 and #2 Shajiao unit from November 2006; ② According to Yue Jia (2006) No.271 Document, desulfuration electricity rate applied to #3 Shajiao unit from September 2006, desulfuration electricity rate applied to #4 Shajiao unit from July 2006; ③ Desulfuration electricity rate applied to #2 Zhanjiang unit from February 2007; ④ Desulfuration electricity rate applied to #2 Yuejian unit from August 2006,Desulfuration electricity rate applied to #6 Yuejia Unit form November 2006. ⑤ As of the end of 2007, the electricity rate not including desulfuration rate still apply to #11 unit of Yuejiang; ⑥ #6 unit of Zhenneng started operation in May 2007. #1 and #2 unit of Jinghai started operation in February 2007 and June 2007 respectively. (2) The electricity rate (not including tax) applied to Shenzhen Guangqian Electric Power Co., Ltd. and Huizhou Natural Gas Power Generation Co., Ltd. rose from RMB 452.99 per megawatt hour to RMB 488.03 megawatt hour. (IV) Prospect of 2008 It is expected that the electric power demand in the power market in which the Company is 52 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. located will still be strong in 2008. Supply and demand will still be out of balance. The gap of electric power will still exist. Meanwhile, the price of fuel and transportation closely related to the Company's operating cost will still be maintained at high level. The Company will face great operation pressure. The Company will spare no efforts, take the fulfillment of production plan as objective and try to do all work well. 1. Power generation plan: The planned power output of the Company for 2008 in terms of consolidated statements is 34.256 billion kwh, which increases by 5.565 billion kwh over the power output actually completed in 2007 in terms of consolidated statements. On equity basis, the planned power output for 2008 is 30.507 billion kwh, which increases by 5.242 billion kwh over the actual power output in the previous year. 2. Investment plan: The Company plans to make external investment of RMB 2518.90 million in 2008, including RMB 96.50 million invested in joint venture projects under construction and RMB 2422.40 million invested in the projects in initial stage. The basis of investment plan is the provisional estimate total project investment. Whether projects will be approved will affect the progress of capital input. 3. To pay close attention to production safety management of existing power plants, guarantee continuous and steady operation of units, strengthen financial management, optimize financial structure, strictly control all expenses, properly conduct economic analysis and try hard to tap potential and enhance efficiency. 4. To focus on following up the construction of Lincang hydropower project, Binlangjianghydropower and Zhanjiang wind power projects and strive for smooth start of operation of projects. To accelerate the initial stage work for the project of #3 and #4 unit of Shanwei Power Plant, Maoming oil shale project, phase-III expansion project of Shajiao Power Plant A, the project of #3 and #4 unit of Huilai Power Plant, the project of Bohe Power Plant and Weixin coal-power joint operation project and try to obtain state approval of construction as soon as possible. 5. To continue to expand to upstream industries, perfect upstream and downstream industrial chains and enhance risk-resisting ability and comprehensive competitiveness. Meanwhile, the Company will appropriately seek diversified development to provide effective support to the development of main business. 53 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. 6. To attach importance to the development of internal control system, further improve corporate governance structure in the light of the results of special activities of corporate governance and self-evaluation of internal control, earnestly safeguard investors' interests and continuously enhance the Company's intrinsic value and market image. (V) Routine work of the board of directors 1. Board meetings and resolutions in the report period In the report period, the Company held 6 board Locale meetings in total. 13th meetings (from 13th to 18th) of the fifth board of directors were held on January 12, April 18, April 27, August 9, October 26 and November 29 respectively. The resolutions of the meetings were disclosed on China Securities Daily, Securities Times, ,Hong Kong Commercial Daily and www.cninfo.com.cn respectively on January 13, April 20, April 30, August 14 , October 27 and November 30. In the report period，the Company held 8 Board Correspondence meetings. First meetings (from 1 to 8) of the fifth board of directors were held by correspondence on February 12, April 26, June 5, June 25, June 29, August 31, August 31 and November 12 . The resolutions of the meeting were disclosed on China Securities Daily, Securities Times, Hong Kong Commercial Daily and www.cninfo.co..cn respectively on February 13, April 30, June 7, June 27, July 24, September 1, September 1 and November 14. 2. Implementation by the board of directors of the resolutions of the shareholders' general meeting 2006 annual shareholders' general meeting held on May 23, 2007 examined and adopted the Company's Plan for Profit and Dividend Distribution for 2006. The resolution concerning dividend distribution plan is as follows: RMB 1.8 is to be paid for every 10 A shares (After tax deduction, RMB 1.62 is actually to be paid to Unconditional Negotiable shareholders holding A shares for every 10 shares). RMB 1.8 is to be paid for every 10 B shares (No tax deduction for B shares). The said dividend distribution was completed in August 2007 except that part of original shareholders holding non-negotiable shares did not receive dividends. The stock right registration date for dividend distribution for A shares is July 3, 2007. The last trading day for B shares is July 3, 2007. Ex-dividend date is July 6, 2007. The second provisional shareholders' general meeting in 2007 held on September 17, 2007 examined and adopted the Proposal for Issuing Corporate Bonds, approved the Company to 54 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. issue corporate bonds amounting to RMB 2 billion and authorized the board of directors to determine relevant matters. The issuance of corporate bonds was approved by China Securities Regulatory Commission with Zhen Jian Permit (2008) No. 233 Document. The Company determined face interest rate of corporate bond to be 5.5% through inquiry. The issuance ended on March 13, 2008. The corporate bonds were listed for trading at Shenzhen Stock Exchange on March 27, 2008. Refer to the foregoing (II) The Company's investment in the report period for the details of the status of implementation by the board of directors of the resolutions of the shareholders' general meeting concerning investment. 3. Summary report of duty performance of audit commission. On January 30, 2008, the audit commission of the fifth Board of Directors held its sixth meeting, heard the Report on Time Arrangements for the Financial Report Auditory Work in 2007, examined the Financial Accounting Statements in 2007 which were not audited, and communicated with operating staff and registered accountants on problems which may exist in annual audit. Upon discussion, the audit commission had formed the following auditing views on time arrangement for the Financial Report Auditory Work in 2007 and financial accounting statements in 2007 which were not audited: agreed to the time arrangement for the financial report auditory work in 2007, and at the same time, confirmed that the financial accounting statements prepared by the company reflected financial conditions and operating results of the company in all major respects. audit commission would strengthen communication with the accounting firm, and urge the accounting firm to submit audit report within agreed deadline. On March 21, 2008, the audit commission of the fifth board of directors held its seventh meeting, examined the company's financial accounting statements with preliminary audit views issued by registered accountants, and formed the following audit views: the financial accounting statements of the company in 2007 had been prepared in accordance with the new Enterprise Accounting Standards and the relevant regulations in financial systems of the company, and they fairly reflected the company’s financial status and operating results in 2007 in all significant respects; the financial accounting statements of the company were true and accurate. On March 25, 2008, the audit commission of the fifth board of directors held its eighth 55 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. meeting, and in view of the company’s financial accounting statements, the summary report of the audit work in this year by accounting firm, the continual employment of accounting firm, and other events, it provided the following audit views: (1). Confirmed the company’s financial accounting statements in 2007 and the financial report in 2007, and believed that the preparation of company accounting statements was true, accurate and consistent with regulatory requirements, and the financial report accurately reflected the company's financial status and operating results in 2007, and no major mistakes were found. And agreed to submit them to the company's board of directors for approval. (2) The registered accountants have strictly implemented their audit work in accordance with the regulations in Independent Audit Standards for Chinese Registered Accountant, the time for audit was adequate, the allocation of audit staff was reasonable, and competent to practice. The audit report issued reflected the company’s financial status and operating results in 2007, the audit conclusion issued was consistent with the company’s actual situation. (3). Agreed to recommend PricewaterhouseCoopers Zhongtian Certified Public Accountants Co.,Ltd. to undertake the audit work in 2008. 4. Summary report of the performance of Salary and Examination Commission. Salary and Examination Commission examined the salary situations of directors, supervisors and senior managers disclosed in the report, and believed that the salary situations of directors, supervisors and senior managers were truly reflected. (VI) The preplan for profit distribution and capitalization of capital surplus for 2007 In accordance with the audit result obtained by PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. according to Chinese accounting standards and international accounting standards, the principle of distributing dividends based on the lower of two results of net profit and the commitment of the controlling shareholder of the Company in the share holding structure reform, the suggested profit distribution plan is as follows: The net profit for the shareholders of the parent company audited according to Chinese accounting standards is RMB 663.8248 million. 10% of net profit, i.e., RMB 66.3825 million, is to be allocated for statutory common reserve fund. With the undistributed profit 56 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. of RMB 0 million carried forward from the previous year being added, the total profit available for distribution to shareholders for the year is RMB 597.4423 million. The preplan for dividend distribution suggested by the board of directors is as follows: Dividend of RMB 1.2 (including tax) is to be distributed for every 10 A shares. RMB 1.2 is to be distributed for every 10 B shares. (VII). Other reported events 1. The situations of company accumulation and external guarantee in the current period of the independent directors and the implementation of company has secured external current situation and the special description and independent views for implementation of the Notice on Regulating Capital Exchanges between the Company and Related Parties and Issues on External Guarantee of Listed Company (Zhengjianfa [2003] 56). According to the spirit of the Notice on Regulating Capital Exchanges between the Company and Related Parties and Issues on External Guarantee of Listed Company (Zhengjianfa [2003]56), the independent directors made verification on the capital exchanges between the company and the related parties and the situation of external guarantee, and believed that: By the end of the reporting period, the company did not illegally provide capital to the related parties, the company did not provide guarantee for the controlling shareholders, and other related parties Pan Li Chairman of the board of directors: Pan Li VIII. Report of the Supervisory Committee (I) Work of the supervisory committee in 2007 In 2007, the members of the supervisory committee attended 6 board meetings as non-voting delegates, Obtained the relevant data of eight communication meeting of the board of directors, attended 4 shareholders' general meetings and held 3 locale meetings of the supervisory committee, and one communication meeting of the committees of supervisors.，Main 57 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. situations of each meeting of the committees of supervisors are as follows: The 1st meeting was held in Dongguan on Aprul 18, 2007. The meeting examined and adopted Business Report of the General Manager for 2006, Financial Report, Preplan for Profit and Dividend Distribution, Work Report of the Supervisory Committee, Annual Report and Summary of Annual Report, The meeting examined and approved System for Disclosure of Company Information. The 2nd meeting was held in Shantou on August 9, 2007. The meeting examined and adopted the Work Report of the General Manager of the Company for the interim Report for 2007 , Financial Report The interim Report for 2007 and Summary of interim Report for 2007. The 3rd meeting was held in Guangzhou on October 26, 2007. The meeting examined and adopted the work Report of the General Manager of the Company for the third Quarter of 2007, Financial Report ,Report for the Third Quarter (Full text) and Report for the Third Quarter(Text). The Resolution on Company Governance and Rectification was examined and approved in the communication meeting of the Committees of directors on November 12, 2007. In addition, the supervisory committee combined supervision with internal audit, strengthened daily supervision and management, improved internal control system and promoted the further improvement of financial work. (II) The independent opinions of the supervisory committee on the following matters 1. The supervisory committee effectively supervised the holding procedure and resolutions of board meetings and shareholders' general meetings, the status of implementation of the resolutions of shareholders' general meetings by the board of directors, the duty performance of senior executives of the Company and the management system of the Company according to relevant laws and regulations and Articles of Association of the Company. In its opinion, the Company followed the principle of honest and standardized operation, operated according to law, made decisions according to legal procedure and established sound internal control system in the report period. No act of directors and managers of the Company that violated laws and regulations and the Articles of Association of the Company or harmed the interests of the Company and shareholders was found when they performed their duties. 2. In the opinion of the supervisory committee, the financial affairs of the Company 58 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. were handled strictly according to the financial management and internal control system of the Company. The standard unqualified audit opinions on the Company issued by PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. were objective and fair and the financial report truly reflected the Company's financial position and operating results. 3. In the three years by the end of 2007, the Company did not raise funds through issuing shares or derivative securities. 4. The Board of Supervisors believed that the transaction price of assets acquisition in 2007 was reasonable, no insider transactions were found and it did not damage the interests of shareholders and it was good for the company's continuous development. 5. In the opinion of the supervisory committee, the related transactions occurred in 2007 were fair and reasonable, the decision making and information disclosure procedure was standardized and no act harmed the interests of the Company. Chairman of the Supervisory Qiu Jianyi Committee ： IX. Important Events I.The Company has no significant lawsuits or arbitrations during the reporting period. II. Shareholdings of other listed companies Unit：RMB Profit & Change of Proportion Stock Investment Book Value loss in owner’s Subject of of Resource of Stock Code abbreviation amount at the at the end of the equity in accounting shareholdin share : beginning report report the report calculation g period period Financial Shen Energy 181,735,145. 119,539,01 Initiated 000027 16,949,674.00 0.34% 48 0.00 assets available A 7.22 establishment for sale 600642 SHENERGY 235,837,987.5 1.28% 651,948,615 0.00 416,110,62 Financial Transferee 59 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. 0 7.5 assets available for sale 252,787,661.5 833,683,760. 535,649,64 Total - - 0 48 4.72 III Equity of non-listed financial enterprises and companies to be listed held by the Company Unit：RMB Changes Profits of Proportion or Amount of owners’ Subject of Name of Amount of in equity of Book value at losses Resource initial equity in accounting object shares held the period-end in the of share investment the calculation Company report report period period Sun Long-term Initiated Property 206,000,000.00 200,000,000 18.18% 206,000,000.00 0.00 0.00 investment establishm Insurance on stocks ent Co., Ltd. Sun Long-term Initiated Insurance 150,000,000.00 150,000,000 11.11% 150,000,000.00 0.00 0.00 investment establishm Holding on stocks ent Co., Ltd. Total 356,000,000.00 350,000,000 - 356,000,000.00 0.00 0.00 - - IV. Trading the stocks of other listed companies Unit：RMB Number of Number of Name of Number of shares sold in the Amount of Investment Item shares at the shares at the stock reporting period capital used income year-begin year-end Energy Sell-out 114,114 114,114 0 90,000 2,311,533.18 electric 60 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. power V. Matters related to purchasing assets, selling assets, acquisition or merging during the reporting period Unit：RMB’0000 Whe ther Net profit Whethe the contributed r to be own Wheth to company a ershi er all Net profit from the relatd-p p of of the contributed year-beginni arty the liabilit Transaction to the ng to transact asset ies or party or the Assets to Purchasing Purchasing company year-end Pricing ion(if s debts ultimate purchased date price from the (applicable principle is, invol involv controller purchasing for a explain ved ed has date to the business the has been year-end combination pricing been transfe not under principl fully rred common e) trans control) ferre d 29% of the investors’ Yunnan Calculatedon equity of Machinery the capital Yunnan May 18, Equipment 10,250.00 357.00 No inputted by Yes Yes Baoshan 2007 Imp & Exp the other Binlangjiang Co., Ltd. party Hydroelectric ity Co., Ltd. 61 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Arithmetic Shanghai average of Electric the A share 1.28% of the power closing shares of Company, June 11, prices of Shenneng 24,688.00 0.00 No Yes Yes East China 2007 Shenneng Holdings Co., Power In 30 days Ltd. Network before the Co., Ltd. specified date. The assessment 4% of the value RMB shares of Guangdong 171,326.03 Guangdong Yuedian August 29, on Yuedian 6,853.00 13.52 Ye Yes Yes Group Co., 2007 September Jinghai Ltd. 30, 2006 as Power Co., the Ltd. assessment date The company published a notice on acquisition of 29% equity of Yunnan Baoshan Binglangjiang Hydroelectricity Development Co., Ltd. The company had paid the transfer price RMB 102.50 million, and the procedures of property transaction had completed. The acquisition did not affect continuity of company business, and stability of management. The company published a notice on receiving 1.28% equity of Shenneng Co., Ltd. on June 7, 2007. The company had paid the transfer price RMB 246.88 million, and the procedures of property transaction had completed. The acquisition did not affect continuity of company business, and stability of management. The company published a notice on receiving 4% equity of Guangdong Yuedian Jinghai Power Co., Ltd. on August 14, 2007. The company had paid the transfer price RMB 68.53 62 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. million, and the procedures of property transaction had completed. The acquisition did not affect continuity of company business, and stability of management. (VI). Major related transactions 1. At the end of the reporting period, the company borrowed RMB 300million from Guangdong Yuedian Group Co., Ltd., and paid RMB 29.039 million for the interest. 2. In the reporting period, according to capital demand, the company borrowed money and cashed from the controlling shareholder of the company Guangdong Yuedian Finance Co., Ltd. controlled by Guangdong Yuedian Group Co., Ltd., respectively RMB1350 million and RMB1166.42 million, the balance respectively RMB 850 million and RMB146.43 million, and paid RMB14.1831 million for the loan interest and RMB11.158 million for the cashing interest. 3. In the reporting period, the controlling subsidiaries of the company Guangdong Yuejia Electric Power Co., Ltd, Guangdong Shaoguan Yuejiang Power Co., Ltd., Maoming Ruineng Thermal power Co., Ltd., Guangdong Yuedian Jinghai Power Co., Ltd., borrowed money from the controlling shareholder of the company Guangdong Yuedian Finance Co., Ltd. controlled by Guangdong Yuedian Group Co., Ltd., the amounts respectively RMB 80 million, RMB 400million ,RMB 100 million and RMB 2840 million, the balance respectively RMB 80 million , RMB 200million, RMB 100 million and RMB 1450 million, the loan interest respectively RMB0.5573 million ,RMB9.2736 million, RMB0.3098 million, RMB32.5668 million. 4. In the reporting period, the company increased capital to Shanxi Yuedian Energy Co., Ltd. with the controlling company of the company Guangdong Yuedian Group Co., Ltd. according to the 40% equity proportion, with increased capital amount RMB 320 million. The business scopes of Shanxi Yuedian Energy Co., Ltd. were in “coal and transportation; storage and loading of coal at the ports; commodity logistics services, information consultation services”. At the end of the reporting period, the registered capital was RMB 1000 million, total assets was RMB 999.73 million, net assets was RMB 995.58 million It is now investing the coal projects in Heerxinhe, Madaotou and Suanchigou. In the reporting period, the projects invested by this company have not been in operation and no profit produced. 63 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. 5. In the reporting period, the company increased capital to Guangdong Yuedian Finance Co., Ltd. with the controlling company of the company Guangdong Yuedian Group Co., Ltd. according to the 25% equity proportion, with the increased capital amount RMB 125 million. The business scope of Guangdong Yuedian Finance Co., Ltd. was “providing finance and financing consultant, credit verification and other related consultation and agent business; and assisting member units to achieve the receipt and payment of transactional funds; providing security for member units; processing note acceptance and discount for member units; handling internal transfer and clearing between the member units and the corresponding settlement and clearing plan design; absorbing deposits from member units; handling loans and financing lease for member units; and engaging in industry lending”. At the end of the reporting period, the registered capital was RMB 800 million, total assets RMB 11701.28 million, net assets RMB 812.59 million and net profit RMB 19.68 million , and at the end of 2007, absorbed deposits RMB 10842.00 million and loans RMB 6578 million. 6. In the reporting period, the company transferred 4% equity of Guangdong Yuedian Jinghai Power Co., Ltd. held by the controlling shareholder of the company Guangdong Yuedian Group Co., Ltd., the transfer price RMB 685304.12 million(the assessment value RMB 171,326.03 on September 30, 2006 as the assessment date). In addition, the interest payment period income was accounted according to equity transfer price and the days and year interest. The company’s transferring of 4% equity of Guangdong Yuedian Jinghai Power Co., Ltd. will further strengthen the controlling status of the company, and increase the equity capacity of the company, to achieve better economic benefits. 7. In the reporting period, the company provided guarantee for the fund for ship building for Guangdong Yuedian Shipping Co., Ltd. controlled by the controlling shareholder of company Guangdong Yuedian Group Co., Ltd., according to the proportion of 35%, the guarantee amount RMB 210 million. The above guarantee acts of the company were beneficial for the in-time building and delivering of ships and promoting the scale of transportation of Guangdong Yuedian Shipping Co., Ltd., and guaranteeing the transportation of electricity and coal. 8. In the reporting period, the company and Guangdong Yuedian Group Co., Ltd. jointly 64 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. invested Guangdong Power Industrial Fuel Co., Ltd. according to the proportion of 35%, the fund invested by the Company was no more than RMB 340 million for the investment, of which the capital RMB 220.50 million. The operating scopes of Guangdong Electric Power Industry fuel company were "coal, coke, fuel oil, naphtha, oil shale, coal processing, warehousing", at the end of the reporting period, the registered capital was RMB 630 million, total assets RMB 2151.75 million, net assets RMB 753.6 million and net profits RMB 84.73 million . 9. In the reporting period, according to the agreement on labor service signed with Shajiao C Power Plant of Guangdong Yuedian Group Co., Ltd., Guangdong Yuedian Anxing Power Inspection Installation Co., Ltd. wholly owned by the company charged respectively RMB 5,543,675 and RMB 1,642,201 from Shajiao Plant C and Shenshen Guangqian Power Co., Ltd. 10. In the reporting period, according to the agreement signed with Guangdong Yuedian Shipping Co., Ltd. of Guangdong Yuedian Group Co., Ltd., Guangdong Yuedian Jinghai Power Co., Ltd. holding 55 % equity paid RMB 12,741,667 to Guangdong Yuedian Shipping Co., Ltd. 11. At the end of the reporting period, according to equity proportions, the company invested RMB 135.02 million to Guangdong Yuedian Holding Western Investment Co., Ltd. of Guangdoang Yuedian Group Co., Ltd. 12. In the reporting period, Maoming Ruineng Thermo power Co., Ltd. controlled by the company of 51% equity and Maoming Thermal Power Plant of Guangdong Yuedian Group Co., Ltd. agreed to supply heat to Maoming Thermoelectric Plant and charge RMB 13,277.01 million, accounting for2.41% of the similar transaction amounts, and is expected to charge about RMB 1.33 million in 2008. 13. In the reporting period, Shajiao A Power Plant of the company, Zhanjiang Power Co., Ltd. holding 76% equity, Maoming Ruineng Thermal Power Co., Ltd. holding 51% equity, and Guangdong Yuedian Jinhai Power Co., Ltd. purchased fuel RMB 5,100,540,71 from Guangdong Yuedian Group Co., Ltd. according the Fuel Procurement Agreement signed with Guangdong Yuedian Group Co., Ltd., accounting for 76.29% of the similar transaction amounts. The procurement amount in 2008 is expected to be RMB 5300 million. 65 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. 14. In the reporting period, according to the agreement signed with Shaoguan Power Plant of Guangdong Yuedian Group Co., Ltd., Guangdong Shaoguan Yuejiang Power Co., Ltd. holding 65% equity purchased fuels, materials, and supplies RMB 907,453,477 from Shaoguan Power Plant, accounting for 13.57% of the similar transactional amounts, and the procurement amount in 2008 is expected to be RMB 950 million. 15. In the reporting period, according to the agreement on material procurement signed with Guangdong Tianneng Investment Co., Ltd. of Guangdong Yuedian Group Co., Ltd., Shajiao A Power Plant of the company purchased limestone powder RMB 15,928,515 from Guangdong Tianneng Investment Co., Ltd. accounting for 0.24% of the similar transactional amount, and the procurement amount in 2008 is expected to be RMB16 million. 16. In the reporting period, according to the agreement on land lease signed with Maoming Thermo power Plant of Guangdong Yuedian Group Co., Ltd., Maoming Ruineng Thermal power Co., Ltd. holding 51% equity and Maoming Zhineng Thermal power Co., Ltd. paid RMB 520,266 to Maoming Thermal power Plant for rent, accounting for 6.51% of the similar transactional amount, and the rent in 2008 is expected to be RMB 0.53 million. 17. In the reporting period, according to the agreement on lease of coal yard and powder yard signed with Shaoguan Power D Plant Co., Ltd. of Guangdong Yuedian Group Co., Ltd., Guangdong Shaoguan Yuejian Power Co., Ltd. holding 65% equity paid RMB 3,299,641 to Shaoguang Power Plant D for rent, accounting for 41.28% of the similar transactional amount, and the rent in 2008 is expected to be RMB 3.3 million. 18. In the reporting period, according to the agreement on office lease signed with Guangdong Yuedian Property Investment Co., Ltd. of Guangdong Yuedian Group Co., Ltd., the Company paid RMB 4,173,000 to Guangdong Yuedian Property Investment Co., Ltd. for rent, accounting for 52.21 % of the similar transactional amount, and the rent in 2008 is expected to be RMB 4.18 million. 19. In the reporting period, according to the agreement on service signed with Maoming Thermo Power Plant of Guangdong Yuedian Group Co., Ltd., Maoming Ruineng Thermo power Co., Ltd. holding 51% equity paid RMB 26,492,627 to Maoming Thermo power Plant for management service fee, accounting for 1.93% of the similar transactional amount, and the payment in 2008 is expected to be RMB 26.5 million. . 66 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. 20. In the reporting period, Guangdong Shaoguan Yuejiang Power Co., Ltd. holding 65% equity and Shaoguan Power Plant of Guangdong Yuedian Group Co., Ltd. shared part of management fee according to unit capacity, the amount RMB 149,556,435, accounting for 96.23 % of the similar transactional amount, and the amount in 2008 is expected to be RMB150 million. 21. In the reporting period, Shajiao Power Plant A of the company and Shajiao Power Plant C of Guangdong Yuedian Group Co., Ltd. shared part of public costs according to the proportion agreed by both sides. the amount RMB 5,664,646, accounting for 3.64 % of the similar transactional amount, and the amount in 2008 is expected to be accounting for 3.64 % of the similar transactional amount, and the amount in 2008 is expected to be RMB5.7 million 22. In the reporting period, the company and the controlling shareholder of the Company Guangdong Yuedian Finance Co., Ltd. (hereinafter referred to as "Finance Company") controlled by Guangdong Yuedian Group Co., Ltd. signed electric settlement accounts management agreement, and opened a capital settlement account in Finance Company and entrusted Finance Company to transfer funds from the bank account of the company and other bank accounts to this account, and dealt with settlement business. At the period end, the company deposited RMB19,291,008.84 in Finance Company, and the Finance Company paid RMB 2,116,930.36 for the interest. 23 In the reporting period, the controlling subsidiaries of the company Zhanjiang Power Co., Ltd., Guangdong Yuejia Electric Power Co., Ltd, Guangdong Shaoguan Yuejiang Power Co., Ltd., Maoming Ruineng Thermal Power Co., Ltd., Guangdong Yuedian Jinghai Power Co., Ltd., Maoming Zhineng Thermal Power Co., Ltd., Guangdong Yuedian Oil Shale Power Co., Ltd., and Guangdong Yuedian Zhanjiang Wind Power Co., Ltd., signed electronic settlement accounts management agreement with the controlling shareholders of the company Guangdong Yuedian Finance Co., Ltd. (hereinafter referred to "Finance Company") controlled by Guangdong Yuedian Group Holdings Co., Ltd., and opened a capital settlement accounts in Finance Company. At the end of the reporting period, the deposit of the above subsidiaries of the Company in Finance Company was RMB 67 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. 1,083,997,875 , the Finance Company paid RMB 8,584,194.92 to the above subsidiaries of the Company as interest for the deposit. The related transactions mentioned in item 12 to item 23 are daily related transactions between the Company and related parties. Due to the characteristics of power industry and historic reasons, the power plants of the Company have close connection with related parties in production and operating activities. It is hard to avoid the said related transactions and they satisfy the actual demand of operation and management of the Company and are necessary daily transactions. The said transactions have occurred continuously for a long time, which guarantee the Company's normal production and operating activities. This kind of transactions are expected to continue. As Guangdong Yuedian Group Co., Ltd. has great advantage in respect of fuel purchase, production technology and management of power plants and relationship with related parties has been formed by objective factors, the occurrence of the said related transactions meets the actual conditions of the Company and helps the Company utilize advantageous resources, save cost and enhance efficiency. The said related transactions were agreed upon and followed the principle of fairness, openness and impartiality. Related parties enjoyed rights and performed obligations as agreed and did not harm the interests of the Company. This kind of related transactions have no adverse influence on the Company's financial position and operating results in current period and in the future. The Company is much dependent on the controlling shareholder in respect of fuel purchasing. However, the said related transactions have no significant adverse influence on the independence of the Company's key business. The company relies on the controlling shareholders in fuel procurement, it can take the advantage of the scale of group procurement, but the related transactions stated above constitute no major influences on main business of the company. (VII).Significant contracts and implementation (1) The Company is not involved in trustee, sub-contract or lease with other companies in the reporting period. (2) Significant guarantee: Unit RMB’0000 68 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. External Guarantee (Exclude controlled subsidiaries) Amount Type Completed Name Date of contract Term Related party or not guaranteed guaranteed or not Lincang YuntouYuedian Guaranteein Hydroelectricity December 25,2006 3,430.00 g of joint 15 years No No Development liabilities. Co., Ltd. Yunnan Baoshan Binlangjiang Guaranteeing Hydroelectricit November 30,2007 2,900.00 14 years No No of joint y Development liabilities. Co., Ltd. Yunnan Baoshan Binlangjiang Guaranteeing Hydroelectricity November 30,2007 1,305.00 of joint 11 years No No Development liabilities. Co., Ltd. Yunnan Baoshan Binlangjiang Guaranteein Hydroelectricity November 30,2007 1,450.00 8 years No No g of joint Development liabilities. Co., Ltd. Yunnan Baoshan Binlangjiang Guaranteein Hydroelectricity December 19,2007 4,350.00 17 years No No g of joint Development liabilities. Co., Ltd. Yunnan Baoshan December 25,2007 4,350.00 15 years No No 69 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Binlangjiang Guaranteein Hydroelectricity g of joint Development liabilities. Co., Ltd. Guangdong Guaranteein Yuedian Ship September 26,2007 21,000.00 6 years No No g of joint Co., Ltd. liabilities. Total occurred in the report term 38,785.00 Total of balance of guarantee at the end 38,785.00 of report term Guarantee provided to controlled subsidiaries Total of guarantee provide to controlled subsidiaries in the report 0.00 term Total of balance of guarantee provide to controlled subsidiaries in the 0.00 report term Total of guarantee (Including provided to controlled subsidiaries) Total Guarantees 38,785.00 Proportion of the total guarantee in the 3.23% net assets of the Company Including： Guarantee provided to shareholders, substantial controller and their related 21,000.00 parties Amount of guarantee provided to objects with over 70% of liability 35,355.00 /assets ratio, directly or indirectly 70 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Amount of guarantee exceeded the 0.00 50% party of the net assets Total amount of the three types of 35,355.00 guarantee above (3) In the reporting period, there were no events of entrusting others to conduct cash management and no events happened in previous reporting period and extended to this reporting period. (VIII) Compared with the most recent annual report, specific description of changes in the consolidation scope The newly established whole capital subsidiary of the company, Guangdong Yuedian Anxing Power Inspection Overhaul & Installation Co., Ltd. was consolidated in 2007 annual consolidation scope. (VI) Progress of repayment of the funds occupied at the end of 2006 Balance of the funds of the Company Total amount occupied by the controlling shareholder of debt repaid Amount of Time of debt and its affiliated enterprises not for in the report Debt repayment mode debt repayment operation(RMB million) period (RMB repayment (Month) January 1,2007 December 31,2007 million) 6.6666 0.00 6.6666 Repayment in cash 6.6666 2007-04 The controlling subsidiary of the company Zanjiang Power Co., Ltd. Detailed notes to the occupation of funds paid annual payment to Guangdong Yuedian Group Co., Ltd. and paid of the Company its affiliated enterprises extra amount RMB 6.6666 million which formed the other receivable not for operation and the status of debt RMB 6.6666 million at the end of 2006. The money was returned in repayment April 2007. (X) The commitments of the Company or shareholders holding over 5% equity of the Company in the report period 1. Maoming Ruineng Thermal Power Co., Ltd., a controlled subsidiary of the Company, signed the agreement for medium or long term loan in total amount of RMB 650,000,000.00 with Shanghai Pudong Development Bank Guangzhou Branch on March 1, 2002. The Company issued the letter of support to 71 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Shanghai Pudong Development Bank Guangzhou Branch in respect of this loan agreement and made the following commitments: 1) Unless the lender separately gives written consent, the Company shall keep holding 51% equity of Maoming Ruineng Thermal Power Co., Ltd. Before the day of cancellation, relevant assignment shall first obtain the lender's written permission. 2) The Company shall not create, allow creation of or cause any mortgage, pledge, lien or other security interest in respect of the shareholders' equity of Maoming Ruineng Thermal Power Co., Ltd. directly or indirectly held. 3) Unless compelled by the law, the Company, as one of project investors, shall not change the borrower's articles of association with other project investors without the written consent of the lender. As of December 31, 2007, the balance of the said loan was RMB 243 million. 2. The commitment of Guangdong Yuedian Group Co., Ltd., the controlling shareholder of the Company, in the Company's Plan for Share Holding Structure Reform and the status of fulfillment: Status of fulfillment of Name of shareholder Commitment Remarks commitment The shares of the The shares of the Company held by Yuedian Company held by Group will not be listed, traded or assigned Yuedian Group have within 3 years from the date of obtaining the Guangdong Yuedian been frozen, which right of listing and negotiation. The shares Under fulfillment Group Co., Ltd. will be unfrozen and purchased by Yuedian Group when can be traded and implementing the plan for share purchase will transferred from not be restricted by this commitment. January 19, 2009. The Company held To make the following proposal for dividend 2006 shareholders' distribution to the shareholders' general meeting general meeting on of the Company: Not lower than 50% of the May 23, 2007, at Guangdong Yuedian distributable profit for the current year will be which the Plan for Under fulfillment Group Co., Ltd. distributed as cash dividends in 2005 - 2007. It Profit Distribution and also guarantees to cast affirmative vote to this Dividend Distribution proposal at the time of voting at the for 2005 was examined shareholders' general meeting. and adopted. The cash dividend mentioned in 72 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. this plan is more than the distributable profit made in 2006 by 50%. Besides, Yuedian Group cast affirmative vote on this plan at the shareholders' general meeting. Under the premise of obtaining the exemption of tender offer obligation given by CSRC, if the P/E of the Company (market price divided by the audited earnings per share for the previous From the date of year) is not higher than 13 times, it will have the implementation of the right to purchase the A shares of the Company Company's plan for with the cash dividends distributed by the dividend distribution to Company to Yuedian Group in 2005 to 2007 The conditions the end of this report, Guangdong Yuedian within 3 months after cash dividends are for agreement the P/E (market price Group Co., Ltd. available for use each year (the balance of funds performance are divided by the audited after purchase will be carried forward for use). not satisfied earnings per share for The total quantity of A shares thus purchased the previous year) of will not exceed 10% of the total shares of the Yue Dian Li was Company. Within 6 months after the completion higher than 13 times. of share purchase plan each time, Yuedian Group will not sell the shares purchased and will perform relevant information disclosure obligation. Yuedian Group has Guangdong Yuedian To bear all expenses relating to this share borne all expenses of Fulfilled Group Co., Ltd. holding structure reform. the Company's share 73 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. holding structure reform as promised. Yuedian Group has, as promised, advanced the consideration to be paid for obtaining the right of listing and negotiation of the non-negotiable shares held by the To advance the consideration to be paid for shareholders holding obtaining the right of listing and negotiation of non-negotiable shares the non-negotiable shares held by the who do not expressly shareholders holding non-negotiable shares who agree to participate in do not expressly agree to participate in this Guangdong Yuedian this share holding share holding structure reform one day before Fulfilled Group Co., Ltd. structure reform one the holding of relevant shareholders' meeting for day before the holding this share holding structure reform and those of relevant who are unable to make the arrangement of shareholders' meeting consideration payment due to dispute over title, for this share holding pledge or freezing of equity. structure reform and those who are unable to make the arrangement of consideration payment due to dispute over title, pledge or freezing of equity. Guangdong Yuedian To actively promote equity stimulation to the Yuedian Group has Under fulfillment 74 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Group Co., Ltd. management according to relevant policies and actively promoted the regulations and subject to the approval by research of equity relevant department after the completion of this stimulation to the share holding structure reform. management of the Company. (XI) The Company's acceptance of investigation and research and interview 1. In the report period, the Company received 22 institutional investors for investigation and research, held 7 telephone conference and attended one communication meeting organized by a third party mainly for the purpose of communication in respect of the Company's production and operation status in current period and future development plan. The Company did not provide written materials to the visitors. The Company and relevant information disclosure obligors strictly followed the principle of fair information disclosure, neither implemented discriminatory policy, nor disclosed or divulged non-public significant information to specific objects selectively and privately. They disclosed information according to the principle of timeliness and did not intentionally choose the time point of disclosure or lighten the effect of information disclosure so as to cause actual unfairness. 2. The registration form of acceptance of investigation, communication and interview in the report period for future reference Content of discussion and materials Date Place Mode Visitor provided Office of Onsite Current operation and progress of March 9,2007 the Zhongjin Co. investigation under construction projects Company Office of March Onsite Current operation and progress of the No.1 Shanghai 12,2007 investigation under construction projects Company Office of March Telephone Current operation and progress of the Huili Foundation 13,2007 communication under construction projects Company March Beijing Attend meeting Investors and Current operation and progress of 75 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. 15,2007 analyzers under construction projects Office of March Onsite Current operation and progress of the Clients of JP Morgan 16,2007 investigation under construction projects Company Office of March Onsite Asian Investment Current operation and progress of the 23,2007 investigation Management under construction projects Company Office of Telephone Current operation and progress of April 12,2007 the Clients of JP Morgan communication under construction projects Company Office of Telephone Guangzhou Current operation and progress of April 16,2007 the communication Securities under construction projects Company Office of Onsite Clients of Rongtong Current operation and progress of April 17,2007 the investigation Foundation under construction projects Company Office of Telephone Clients of Current operation and progress of April 27,2007 the communication ZhongjinCo. under construction projects Company Office of Telephone Current operation and progress of May 30, 2007 the Haohua Clients communication under construction projects Company Office of Onsite Current operation and progress of June 5,2007 the Haohua Clients investigation under construction projects Company Office of Onsite Current operation and progress of June 7,2007 the Xincheng Funds investigation under construction projects Company 76 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Office of Onsite Current operation and progress of June 13,2007 the Clients of JP Morgan investigation under construction projects Company Office of Onsite SYWG,Yinhua Current operation and progress of July 18,2007 the investigation Funds under construction projects Company Changjiang Office of Securities,Changxin Onsite Current operation and progress of July 192007 the Funds ,Shenwan investigation under construction projects Company PGY, Jinyuan Bilian Office of August Onsite Zhuangzhou Current operation and progress of the 27,2007 investigation Securities under construction projects Company Office of September Onsite Current operation and progress of the South Funds 21,2007 investigation under construction projects Company Changjiang Office of September Onsite Securities , Current operation and progress of the 28,2007 investigation Changxin Funds, under construction projects Company Jiashi Funds Office of October Onsite Guotou Ruiyin Current operation and progress of the 9,2007 investigation Investment Funds under construction projects Company Office of October Telephone Changjiang Current operation and progress of the 10,2007 communication Securities under construction projects Company October Office of Onsite Current operation and progress of Zhongyou Funds 15,2007 the investigation under construction projects 77 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. Company Office of October Onsite Current operation and progress of the Huatai Securities 23,2007 investigation under construction projects Company Office of China Merchants October Onsite Current operation and progress of the securities ,Guotou 23,2007 investigation under construction projects Company Ruiyin Funds Office of October Onsite Current operation and progress of the Guangfa Funds 30,2007 investigation under construction projects Company Office of November Onsite Current operation and progress of the Clients of JP Morgan 9,2007 investigation under construction projects Company Office of November Onsite Current operation and progress of the Fuda Funds 20,2007 investigation under construction projects Company Office of November Onsite Current operation and progress of the Guotiai Junan 27,2007 investigation under construction projects Company Office of November Onsite Current operation and progress of the Yecun securities 29,2007 investigation under construction projects Company Office of China Merchants December Onsite Current operation and progress of the securities,Guohai 11,2007 investigation under construction projects Company Fulankelin Funds (XII) Engagement and removal of certified public accountants' firm In the report period, the Company engaged PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. as it domestic and foreign auditing bodies. In 2007, the Company paid domestic 78 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. and foreign audit fee of RMB 1.5 million. Up to the present, Pricewaterhouse Coopers Zhongtian Certified Public Accountants has provided audit services to the Company for 7 consecutive years. X. Financial Report Auditor's report issued by PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. a nd financial statements Guangdong Electric Power Development Co., Ltd. Auditor’s report and Financial statements December 31,2007 79 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. REPORT OF THE AUDITORS AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 80 Annual report 2007 of Guangdong Electric Power Development Co., Ltd. GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. REPORT OF THE AUDITORS AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 CONTENTS PAGES Independent auditor’s report........................................................................................................................................ Consolidated balance sheet.......................................................................................................................................... Consolidated income statement................................................................................................................................... Consolidated statement of changes in equity .............................................................................................................. Consolidated cash flow statement ............................................................................................................................... Notes to the consolidated financial statements............................................................................................................ 81 PricewaterhouseCoopers Zhong Tian CPAs Limited Company 11/F PricewaterhouseCoopers Center 202 Hu Bin Road Shanghai 200021 People's Republic of China Telephone +86 (21) 6123 8888 INDEPENDENT AUDITOR’S REPORT Facsimile +86 (21) 6123 8800 2008/SH-087/CSC/HJH TO THE SHAREHOLDERS OF GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. (Incorporated as a joint stock limited company in the People's Republic of China) Report on the financial statements We have audited the consolidated financial statements of Guangdong Electric Power Development Co., Ltd. and its subsidiaries (the “Group”), which comprise the consolidated balance sheet as of 31 December 2007 and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory related notes. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in 82 the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2007, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Zhong Tian CPAs Limited Company 18 April 2008 Shanghai 83 GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2007 Note 2007 2006 Rmb’000 Rmb’000 ASSETS (Note 30) Non-current assets Property, plant and equipment 6 14,753,705 13,624,189 Leasehold land payments 7 360,783 326,356 Intangible assets 8 196,021 228,093 Investments in associates 9 2,925,099 1,939,100 Loans and receivables 10 64,565 137,604 Available-for-sale investments 11 1,249,688 328,200 Deferred tax assets 12 103,265 115,431 Deferred staff costs 13 20,437 30,655 Long-term prepayments for coal purchases - 365,000 19,673,563 17,094,628 Current assets Materials and supplies 14 598,547 421,455 Loans and receivables 10 1,751,405 1,009,382 Short-term bank deposits - 80,000 Cash and bank 26(b) 2,177,248 2,019,721 4,527,200 3,530,558 Total assets 24,200,763 20,625,186 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 15 2,659,404 2,659,404 Other reserves 16 5,628,727 5,135,547 Retained earnings 1,001,878 913,407 9,290,009 8,708,358 Minority interest 2,873,059 2,888,480 Total equity 12,163,068 11,596,838 LIABILITIES Non-current liabilities Borrowings 17 5,171,620 1,749,880 Early retirement obligation 18 56,275 73,982 - 84 - Deferred tax liabilities 12 154,758 33,030 Deferred revenue 19 33,846 36,923 5,416,499 1,893,815 Current liabilities Trade payables 1,676,760 948,749 Taxes payable 368,679 327,332 Other payables and accruals 1,467,497 1,439,392 Borrowings 17 3,108,260 4,419,060 6,621,196 7,134,533 Total liabilities 12,037,695 9,028,348 Total equity and liabilities 24,200,763 20,625,186 The accompanying notes form an integral part of the consolidated financial statements. Director: Director: - 85 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Note 2007 2006 Rmb’000 Rmb’000 Operating revenue 20 10,315,322 8,620,629 Operating costs Fuel (5,961,967) (4,772,030) Repair and maintenance (383,061) (349,910) Depreciation and amortisation (1,162,338) (921,702) Staff costs 21 (791,664) (732,171) Reversal of/(provisions) for doubtful receivables 847 (1,181) Administrative expenses (207,119) (209,805) Others (293,484) (99,140) Total operating costs (8,798,786) (7,085,939) Other income, net 13,250 12,039 Operating profit 1,529,786 1,546,729 Finance costs - net 22 (356,220) (178,441) Share of results of associates 9 46,535 (46,144) Profit before income tax 1,220,101 1,322,144 Income tax expense 23 (399,844) (451,605) Profit for the year 820,257 870,539 Attributable to: Equity holders of the Company 654,508 692,114 Minority interest 165,749 178,425 820,257 870,539 Earnings per share for profit attributable to the equity holders of the Company during the year - Basic and Diluted 24 Rmb0.25 Rmb0.26 The accompanying notes form an integral part of the consolidated financial statements. Director: Director: - 86 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007 Attributable to equity holders of the Minority Total Company interest equity Share Retained Note capital Other reserves earnings Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Note 15) (Note 16) Balances at 1 January 2006 2,659,404 4,849,107 955,138 2,083,629 10,547,278 Dividends relating to 2005 - - (478,693) (124,524) (603,217) Fair value gains of available-for-sale financial assets (net of tax) 16 - 31,288 - - 31,288 Contribution from minority interest - - - 750,950 750,950 Profit for the year - - 692,114 178,425 870,539 Appropriation from retained earnings 16 - 255,152 (255,152) - - Balances at 31 December 2006 2,659,404 5,135,547 913,407 2,888,480 11,596,838 Balances at 1 January 2007 2,659,404 5,135,547 913,407 2,888,480 11,596,838 Dividends relating to 2006 25 - - (478,693) (164,870) (643,563) Fair value gains of available-for-sale financial assets (net of tax) 16 - 405,836 - - 405,836 Withdrawal by minority interest - - - (16,300) (16,300) Profit for the year - - 654,508 165,749 820,257 Appropriation from retained earnings 16 - 187,740 (187,740) - - Reversal of appropriation 16 - (100,396) 100,396 - - Balances at 31 December 2007 2,659,404 5,628,727 1,001,878 2,873,059 12,163,068 The accompanying notes form an integral part of the consolidated financial statements. Director: Director: - 87 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Note 2007 2006 Rmb’000 Rmb’000 Cash flows from operating activities Cash generated from operations 26(a) 3,050,730 3,897,033 Interest paid (343,133) (173,366) Income tax paid (395,764) (485,862) Net cash generated from operating activities 2,311,833 3,237,805 Cash flows from investing activities Proceeds from disposal of property, plant and equipment 95,569 1,091 Purchase of property, plant and equipment (2,360,290) (3,246,582) Additional leasehold land payments (47,728) (73,021) Acquisition of subsidiaries (16,300) - Purchase of intangible assets (5,618) (1,103) Additional investments in associates (940,273) (233,792) Additional available-for-sale financial assets (385,838) (1,451) Interest received 29,661 6,336 Dividends received from associates 809 731 Dividends received from available-for-sale financial assets 3,918 9,004 Loans granted to associates (73,039) (57,200) Loan repayments received - 860 Net cash used in investing activities (3,699,129) (3,595,127) Cash flows from financing activities Proceeds from borrowings 2,110,940 2,431,200 Dividends paid to equity holders (478,693) (478,693) Dividends paid to minority interest (164,870) (124,524) Capital contribution from minority shareholders - 750,950 Loan repayments to related party - (1,073,040) Net cash generated from financing activities 1,467,377 1,505,893 Exchange rate effect to cash and cash equvelant (2,354) - Net increase in cash and cash equivalents 77,727 1,148,571 Cash and cash equivalents at beginning of year 2,099,521 870,950 Cash and cash equivalents at end of year 26(b) 2,177,248 2,019,521 The accompanying notes form an integral part of the consolidated financial statements. Director: Director: - 88 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 1 General Information Guangdong Electric Power Development Co., Ltd. (the “Company”) is a joint stock limited company incorporated in the People’s Republic of China (the “PRC”) on 3 November 1992. The Company’s Renminbi (“Rmb”) Denominated Domestic Shares (“A Shares”) and Domestically Listed Foreign Shares (“B Shares”) were listed on the Shenzhen Stock Exchange on 26 November 1993 and 28 June 1995 respectively. In 2001, pursuant to the Approval on the Implementation Plan of Guangdong Province’s Reform of Power Industry Structure Relating to Restructuring of Generation and Transmission Assets, a document issued by Guangdong Provincial Government and referred to as Yue Fu Han 2001 No. 252, Guangdong Electric Power Holding Co. (“GPHC”), the former major shareholder of the Company, was split into two separate companies, namely, Guangdong Power Grid Corporation (“GPGC”, formerly Guangdong Guangdian Group Co., Ltd.) and Guangdong Yudean Group Co., Ltd. (“Yudean”, formerly Guangdong Yuedian Assets Management Co., Ltd.). After restructuring, the electricity transmission and distribution in Guangdong Province, the PRC, were controlled and managed by GPGC, while Yudean concentrated in the investment and management of power plants. According to the Reply to Issues in the Restructuring of Provincial Power Companies Assets with a document number of Yue Cai Qi [2001] No. 247, the Company’s 50.15% equity interest formerly held by GPHC was transferred to Yudean on 1 August 2001. As such, the directors of the Company considered Yudean (the “Parent Company”) as the immediate and ultimate parent company. On 18 January 2006, the Company’s equity interest held by GPHC was decreased from 50.15% to 46.32% pursuant to the share reform scheme of the Company approved by the shareholders on 9 December 2005 (Note 15). The Company and its subsidiaries (the “Group”) are principally engaged in the business of developing electric power plants in Guangdong Province, the PRC. The Company’s registered address is 23th to 26th floor, Yuedian Plaza , 2 Tianhe East Road, Guangzhou City, Guangdong Province, the PRC. The consolidated financial statements have been approved for issue by the Board of Directors on 18 April 2008. As of 31 December 2007, the Company had the following subsidiaries, which were incorporated in the PRC as limited liability companies: - 89 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 1 General Information (continued) Attributable equity interest to the Date of Company Paid-in capital Principal Name of entity incorporation 2007 2006 (Rmb) activities Zhanjiang Electric Power Co., Ltd. 21 November 1995 76% 76% 2,875,440,000 Electricity generation (“Zhanjiang Electric”) Guangdong Yuejia Electric Power Co., 25 January 1996 58% 58% 1,200,000,000 Electricity generation Ltd. (“Yuejia Electric”) Guangdong Shaoguan Yuejiang Electric 16 September 1997 65% 65% 770,000,000 Electricity generation Power Co., Ltd. (“Yuejiang Electric”) Maoming Ruineng Thermal Power Co. 1 January 2001 51% 51% 217,157,500 Electricity generation Ltd. (“Maoming Ruineng”) Maoming Zhenneng Thermoelectric 27 August 2004 54.85% 52.84% 325,000,000 Electricity generation Power Co., Ltd. (“Maoming Zhenneng”) (c) Guangdong Yudean Jinghai Electric 25 March 2005 55% 51% 1,550,000,000 Electricity generation Power Development Co., Ltd. (“Jinghai Electric”) (d) Guangdong Oil Shale Power Generation 27 January 2006 83.66% 73.45% 235,000,000 Electricity generation Co., Ltd. (“Oil Shale Power”) (d) Guangdong Yudean Zhanjiang Wind 12 October 2006 70% 70% 160,000,000 Electricity generation Power Co., Ltd. (“Zhanjiang Wind (under construction) Power”) Zhanjiang Yuheng Power Repair Co., 2 June 2006 76% 76% 20,000,000 Providing repair and Ltd. (“Zhanjiang Yuheng”) (b) maintenance service Guangdong Yudean Anxin electric 26 July 2007 100% 100% 20,000,000 Providing repair and power maintenance and installation maintenance service co., Ltd. (Yudean Anxin) (a) The English names of all companies listed above are direct translations of their registered name in Chinese. (a) The subsidiary was newly established in 2007. (b) Zhanjiang Yuheng was wholly owned by Zhanjiang Electric. As to the other subsidiaries, they were all held by the Company directly. (c) In June 2007, the Company acquired 2.01% equity interest of Maoming Zhenneng from Maoming Tianrun Investment Co. Ltd. and Maoming Power Development Co., Ltd. at a consideration of approximately Rmb6,528,000. After the acquisition, the Group’s equity interest in Maoming Zhenneng increased to 54.85%. (d) In August 2007, the Company acquired 4% equity interest of Jinhai Electric from Yudean at a consideration of approximately Rmb68,530,400. After the acquisition, the Group’s equity interest in Jinghai Electric increased to 55%. (e) In January 2007, the Company acquired 10.21% equity interest of Oil Shale Power from Guangzhou Tianneng Investment Co., Ltd., Guangzhou Evergrande Real Estate Group, and Maoming Power Development Co., Ltd. at a consideration of approximately Rmb23,997,500. After the acquisition, the Group’s equity interest in Oil Shale Power increased to 83.66%. - 90 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation The Group had net current liabilities of approximately Rmb2,093,996,000 as at 31 December 2007 (2006: Rmb3,603,975,000). It is mainly due to the fact that certain portion of capital expenditures like property, plant and equipment are financed by short-term borrowings. The director of the Company have given due consideration to the liquidity of the Group and have adopted the going concern basis in preparing the consolidated financial statements for the year ended 31 December 2007 on the basis that the Group has profitable operations and that it will succeed in obtaining financing through issue of long-term debts and roll-over of the outstanding bank loans. As of 31 December 2007, the Group had unutilised balance of approximately Rmb3,517,000,000 out of the available banking facilities granted from certain banks (Note 17). In addition, as described in Note 30, subsequent to the balance sheet date, net proceeds from the debts offering of approximately Rmb2,000,000,000 were received by the Company. On this basis the directors are of the opinion that the Group will have sufficient working capital to finance its operation. Accordingly, the directors are satisfied that it is appropriate to prepare the consolidated financial statements on a going concern basis. The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, which are carried at fair value. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. (a) Standards, amendment and interpretations effective in 2007 • IFRS 7, 'Financial instruments: Disclosures', and the complementary amendment to IAS 1, 'Presentation of financial statements - Capital disclosures', introduces new disclosures relating to financial instruments and does not have any impact on the classification and valuation of the Group’s financial instruments, or the disclosures relating to taxation and trade and other payables. • IFRIC - Int 10, 'Interim financial reporting and impairment', prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. This standard does not have any impact on the Group’s financial statements. 2 Summary of significant accounting policies (continued) - 91 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2.1 Basis of preparation (continued) (b) Standards, amendments and interpretations effective in 2007 but not relevant for the Group’s operations. The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1 January 2007 but are not relevant to the Group’s operations: • IFRS 4, ‘Insureance contracts’; • IFRIC - Int 7, 'Applying the restatement approach under IAS 29, Financial reporting in hyper-inflationary economies'; • IFRIC - Int 8, 'Scope of IFRS 2'; and • IFRIC - Int 9, 'Re-assessment of embedded derivatives'. (c) Standard and interpretation to existing standard that are not yet effective and have not been early adopted by the Group The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2008 or later periods, but the Group has not early adopted them: z IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). The amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The Group will apply IAS 23 (Amended) from 1 January 2009 but is currently not applicable to the Group as there are no qualifying assets; and z IFRS 8, 'Operating segments ' (effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply IFRS 8 from 1 January 2009. The expected impact is still being assessed in detail by management, but it is not expected to have material impact on the Group’s consolidated financial statements. (d) Interpretations to existing standards that are not yet effective and not relevant for the Group’s operations The following interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2008 or later periods but are not relevant for the Group’s operations: z IFRIC - Int 11, 'IFRS 2 - Group and treasury share transactions' (effective for annual period beginning on or after 1 March 2007); z IFRIC - Int 12, 'Service concession arrangements' (effective from 1 January 2008); z IFRIC - Int 13, 'Customer loyalty programmes' (effective from 1 July 2008); and z IFRIC - Int 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' (effective from 1 January 2008). - 92 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies (continued) 2.2 Consolidation (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement (see Note 2.7). Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. (b) Transactions and minority interests The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. (c) Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition (see Note 2.7). - 93 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. - 94 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies (continued) 2.2 Consolidation (continued) (c) Associates (continued) Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses in associates are recognised in the consolidated income statement. 2.3 Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. 2.4 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Renminbi (“Rmb”), which is the Company’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the - 95 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) carrying amount are recognised in equity. Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the available-for-sale reserve in equity. - 96 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies (continued) 2.5 Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is calculated with the straight-line method to write off the cost of each asset to their residual values over their estimated useful lives. During the year, management changed parts of assets’ residual values and useful lives after considering the established industry practices as well as the historical cost of repair and maintenance incurred by the Group (Note 4(a)). Estimated useful lives and residual values are as follows: Estimated useful lives Residual values Buildings 22 to 30 years 5% Electric utility plants in service 8 to 18 years 5% Motor vehicles and equipments 10-13 years 5% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.8). Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are recognised in the income statement. 2.6 Leasehold land payments Leasehold land payments are up-front payments to acquire a long-term interest in land. These payments are stated at cost and amortised over their respective lease terms on a straight-line basis, net of accumulated impairment charge. - 97 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies (continued) 2.7 Intangible assets (a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisition of subsidiaries is included in “intangible assets”. Goodwill on acquisitions of associates is included in “investments in associates”. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. (b) Other intangible assets Other intangible assets are measured initially at cost and are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise, and the cost of the asset can be measured reliably. After initial recognition, other intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Other intangible assets are amortised on a straight-line basis over their estimated useful lives (5 to 18 years). The amortisation period and the amortisation method are reviewed annually at each balance sheet date. 2.8 Impairment of non-financial assets Assets that have an indefinite useful life or have not yet available for use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. 2.9 Financial assets The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. During 2006 and 2007, other than loans and receivables and available-for-sale financial assets, the Group did not hold any financial assets in other categories. 2 Summary of significant accounting policies (continued) - 98 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2.9 Financial assets (continued) (a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. (b) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in equity. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities. Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of other income when the Group’s right to receive payments is established. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group established fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets in impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment testing of receivables is described in Note 2.11. 2 Summary of significant accounting policies (continued) 2.10 Materials and supplies - 99 - GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) Materials and supplies are stated at the lower of cost or net realisable value. Cost is determined using the weighted average method. Materials and supplies are expensed to fuel cost and repair and maintenance when used, or capitalised to fixed assets when installed, as appropriate. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. 2.11 Loans and receivables Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within ‘operating costs’. When a receivable is uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited against ‘operating costs’ in the income statement. 2.12 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. 2.13 Trade payables Trade payables are recognised initially at fair value and subsequent measured at amortised cost using the effective interest method. 2.14 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. -100- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies (continued) 2.15 Current and deferred income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. 2.16 Employee benefits (a) Defined contribution plan The Group pays contributions to defined contribution schemes (the “Schemes”) operated by the local government for employee benefits in respect of pension and housing, etc. The Group has no further payment obligations once the contributions have been paid. The contributions to the Schemes are recognised as staff costs when they are due. (b) Early retirement benefits Early retirement benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises early retirement benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide early retirement benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value. -101- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies (continued) 2.17 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (a) Operating revenue Operating revenue mainly represents amounts billed for electricity generated and sold, net of value added tax. It is recognised upon transmission of electricity. (b) Interest income Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. (c) Dividend income Dividend income is recognised when the right to receive payment is established. 2.18 Government grant Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to the purchase of property, plant and equipment are included in noncurrent liabilities as deferred government grants and are credited to the income statement on a straight line basis over the expected lives of the related assets. 2.19 Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. -102- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 2 Summary of significant accounting policies (continued) 2.20 Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. 3 Financial risk management 3.1 Financial risk factors The Group’s activities expose it to a variety of financial risks: foreign currency risk, price risk, interest rate risk, credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. (a) Foreign currency risk The Group operates in the PRC with almost all of the transactions settled in Rmb. In the opinion of the directors, the Group does not have significant currency risk. (b) Price risk The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet as available-for-sale. In the opinion of directors, the Group is not exposed to significant price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group. Most of the Group’s equity investments are publicly traded and are included in one of the following equity indexes: Shenzhen stock exchange component Index and Shanghai stock exchange component Index. (c) Cash flow and fair value Interest rate risk Other than deposits held in banks, the Group does not have significant interest-bearing assets. The average rate of deposits held in banks in the PRC throughout the year was approximately 0.72%. Any change in the interest rate promulgated by the People’s Bank of China from time to time is not considered to have significant impact to the Group. The Group’s interest rate risk which affects its income and operating cash flows mainly arises from bank borrowings. Approximately 67% of the Group’s bank borrowings were at fixed rates (Note 17). Bank borrowings at floating rates expose the Group to cash flow interest rate risk. Bank borrowings at fixed rates expose the Group to fair value interest rate risk. As of 31 December 2007, if interest rates on bank borrowings had been 10 basis points higher with all other variables held constant, post-tax profit for the year would have been approximately Rmb1,841,000 lower, mainly as a result of higher interest expense. -103- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) -104- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 3 Financial risk management (continued) 3.1 Financial risk factors (continued) (d) Credit risk The carrying amount of cash and cash equivalents and loans and receivables, represent the Group’s maximum exposure to credit risk in relation to financial assets. Bank balances of the Group are deposited with reputable banks in the PRC. The majority of the Group’s trade receivables relate to sales of electricity to GPGC. Due to the monopoly position of GPGC and its strong financial position, the directors are of the opinion that the related credit risk is minimal. No other financial assets carry a significant exposure to credit risk. (e) Liquidity risk Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group treasury maintains flexibility in funding by efficient cash management and by maintaining availability under committed credit lines. The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. Less than Between 1 Between 2 1 year and 2 years and 5 years Over 5 years At 31 December 2007 Borrowings 3,628,236 580,072 1,456,328 4,933,772 Trade and other payables 3,144,257 - - - At 31 December 2006 Borrowings 4,787,346 413,528 864,222 886,162 Trade and other payables 2,388,141 - - - As disclosed in Note 2, the Group reported net current liabilities of approximately Rmb2,093,996,000 as of 31 December 2007. On the basis that the Group has profitable operations and that it will succeed in obtaining financing through issue of long-term debts and roll-over of the outstanding bank loans, the directors are of the opinion that liquidity risk is manageable. -105- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 3 Financial risk management (continued) 3.2 Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’, as shown in the consolidated balance sheet plus net debt. 2007 2006 Total borrowings (Note 17) 8,279,880 6,168,940 Less: cash and cash equivalents (Note 26(b)) (2,177,248) (2,019,521) Net debt 6,102,632 4,149,419 Total equity 12,163,068 11,596,838 Total capital 18,265,700 15,746,257 Gearing ratio 33% 26% The increase in the gearing ratio during 2007 resulted primarily from the increase of borrowings. 3.3 Fair value estimation The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price. The carrying value less impairment provision of trade receivables and payables are a reasonable approximation of their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. -106- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 4 Critical accounting estimates and assumption Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Residual value and useful lives of property, plant and equipment The estimate of residual value and useful lives of property, plant and equipment was made by the directors with reference to the established industry practices, technical assessments made on the durability of the asset, as well as the historical magnitude and trend of repair and maintenance expenses incurred by the Group. The residual value and useful lives are reviewed and adjusted if appropriate, at each balance sheet date. Based on the above assessment, the Group changed the assets’ residual value from 0% or 3% to 5% in 2007, and changed the useful lives of assets as follows: Useful lives (new) Useful lives (old) Buildings 22 to 30 years 30 to 50 years Electric utility plants in service 8 to 18 years 8 to 50 years Motor vehicles and equipments 10-13 years 5 to 20 years As a result, the depreciation charge of the Group for the year end 31 December 2007 decreased approximately Rmb48,000,000 and the net profit attributable to equity holders of the Company increased approximately Rmb25,763,000. (b) Impairment of goodwill The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in Note 2.7(a). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (Note 8(a)). (c) Estimated impairment of non-financial assets (other than goodwill) In determining whether an asset is impaired or the event previously causing the impairment no longer exists, management has to exercise judgement, particularly in assessing: (1) whether an event has occurred that may affect the asset value or such event affecting the asset value has not been in existence; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset or derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test. -107- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 4 Critical accounting estimates and assumption (continued) (c) Estimated impairment of non-financial assets (other than goodwill) (continued) Zhanjiang Zhongyue Energy Co., Ltd. (“Zhongyue Energy”) is one of associates of the Group. The Group owns 39% equity interest in Zhongyue Energy, and the investment cost is Rmb390,000,000. Zhongyue Energy is a power station using Oriulsion Oil, of which the supplier is Venezuela government. Because of the change of Venezuela government’s policy, Venezuela has stopped the supply of Oriulsion Oil to China. As a result, Zhongyue Energy has to suspend its production since August 2007. The negotiation with Venezuela government for the loss compensation is in progress and the management of Zhongyue Energy plans to reconstruct its current production facilities and become a coal power plant. Considering 1) the operating loss of Zhongyue Energy has been equity picked up by the Group; 2) Venezuela government has agreed to compensate the loss of Zhongyue Energy although the amount has not fixed yet; 3) the impairment risk of investment is low according to the profit forecast of Zhongyue Energy, the management considered no impairment provision is made for the investment in Zhongyue Energy. (d) Fair value of financial instruments The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. Available-for-sale financial assets that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. 5 Segment information No segment information is presented as the Group operates substantially in the business of developing electric power plants in the PRC, which accounted for substantially all of the consolidated revenue and results of the Group. No geographical segment information is presented as its revenues are all generated in the Guangdong Province, the PRC, and its assets are located in the Guangdong Province, the PRC. -108- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 6 Property, plant and equipment Electric utilities Motor vehicles Construction-in Buildings in service and equipments -progress Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 At 1 January 2006 Cost 325,193 12,402,951 176,080 3,281,672 16,185,896 Accumulated depreciation (64,568) (5,134,662) (83,182) - (5,282,412) Net book amount 260,625 7,268,289 92,898 3,281,672 10,903,484 Year ended 31 December 2006 Opening net book amount 260,625 7,268,289 92,898 3,281,672 10,903,484 Additions 2,377 72,953 11,011 3,521,319 3,607,660 Transfer 7,394 1,279,479 15,400 (1,302,273) - Disposals (320) (4,297) (235) - (4,852) Assets Impairment - (7,014) - - (7,014) Depreciation charge (8,325) (849,598) (17,166) - (875,089) Closing net book amount 261,751 7,759,812 101,908 5,500,718 13,624,189 At 31 December 2006 Cost 334,644 13,751,086 202,256 5,500,718 19,788,704 Accumulated depreciation (72,893) (5,984,260) (100,348) - (6,157,501) Assets Impairment - (7,014) - - (7,014) Net book amount 261,751 7,759,812 101,908 5,500,718 13,624,189 Year ended 31 December 2007 Opening net book amount 261,751 7,759,812 101,908 5,500,718 13,624,189 Reclassification 2,156,221 (2,178,608) 22,387 - - Additions 2,958 58,399 30,349 2,258,546 2,350,252 Transfer 2,127,381 4,945,436 141,227 (7,214,044) - Disposals (72,169) (31,162) (2,797) (372) (106,500) Depreciation charge (179,284) (880,044) (54,908) - (1,114,236) Closing net book amount 4,296,858 9,673,833 238,166 544,848 14,753,705 At 31 December 2007 Cost 4,549,035 16,545,151 393,422 544,848 22,032,456 Accumulated depreciation and impairment (252,177) (6,864,304) (155,256) - (7,271,737) Assets Impairment - (7,014) - - (7,014) Net book amount 4,296,858 9,673,833 238,166 544,848 14,753,705 Electric utility plants in service with net book amount of approximately Rmb384,794,000 (2006: Rmb346,488,000) have been pledged to secure certain bank borrowings of the Group (Note 17). For the year ended 31 December 2007, borrowing costs of approximately Rmb62,459,000 (2006: Rmb102,469,000) were capitalised as construction-in-progress (Note 22). A capitalisation rate of 6.20% (2005: 4.97%) per annum was used to determine the amount of borrowing costs eligible for capitalisation. -109- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 7 Leasehold land payments 2007 2006 Rmb’000 Rmb’000 At 1 January Cost 408,307 335,286 Accumulated amortisation (81,951) (72,808) Net book amount 326,356 262,478 Year ended 31 December Opening net book amount 326,356 262,478 Additions 47,728 73,021 Amortisation charge (13,301) (9,143) Closing net book amount 360,783 326,356 At 31 December Cost 456,035 408,307 Accumulated amortisation (95,252) (81,951) Net book amount 360,783 326,356 Leasehold land payments with net book amount of approximately Rmb16,958,000 have been pledged to secure certain bank borrowings of Yuejia Electric as of 31 December 2006 (Note 17). 8 Intangible assets Other Goodwill intangible assets Total Rmb’000 Rmb’000 Rmb’000 At 1 January 2006 Cost 64,623 466,950 531,573 Accumulated amortisation - (267,111) (267,111) Net book amount 64,623 199,839 264,462 Year ended 31 December 2006 Opening net book amount 64,623 199,839 264,462 Additions - 1,101 1,101 Amortisation charge - (37,470) (37,470) Closing net book amount 64,623 163,470 228,093 At 31 December 2006 Cost 64,623 468,051 532,674 Accumulated amortisation - (304,581) (304,581) Net book amount 64,623 163,470 228,093 Year ended 31 December 2007 Opening net book amount 64,623 163,470 228,093 Additions - 5,618 5,618 Amortisation charge - (37,690) (37,690) Closing net book amount 64,623 131,398 196,021 At 31 December 2007 Cost 64,623 473,671 538,294 Accumulated amortisation - (342,273) (342,273) Net book amount 64,623 131,398 196,021 -110- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 8 Intangible assets (continued) (a) Goodwill On 5 July 2000, the Company acquired 65% of the equity interest of Yuejiang Electric from GPHC at a cash consideration of Rmb365,285,000. The excess of the purchase price over the Company’s share of the fair value of net identifiable assets acquired of approximately Rmb72,785,000 has been recorded as goodwill. On 1 January 2002, the Company acquired additional 9% and 16% equity interests of Zhanjiang Electric from Yudean and Guangdong Electric Power Development Company (“GEPD”), the third largest shareholder of the Company, for cash considerations of Rmb316,456,000 and Rmb562,588,000 respectively. The excess of the purchase price over the Company’s share of the fair value of net identifiable assets acquired of approximately Rmb31,526,000 has been recorded as goodwill. In accordance with the new IFRS 3, the Group ceased the amortisation of goodwill from 1 January 2005, and accumulated amortisation of approximately Rmb39,688,000 as at 31 December 2004 has been eliminated with a corresponding decrease in the cost of goodwill. The directors of the Company performed impairment test for goodwill in accordance with the accounting policy and estimate disclosed in Note 2.7(a) and 4(b), and considered that the goodwill as of 31 December 2007 was not impaired. The impairment test uses cash flow projections based on financial budgets approved by management based on existing production capacity. Key assumptions applied in the impairment test included the demands of electricity in specific region where these power plants are located and fuel cost. Management determined these key assumptions based on past performance and its expectation on market development. Management believed that any reasonably possible change in any of key assumptions on which recoverable amounts of individual cash generated units are based may or may not cause carrying amounts to exceed their recoverable amounts. (b) Other intangible assets According to the respective joint venture contracts of Zhanjiang Electric and Yuejia Electric and with reference to prevailing government regulations and practices, certain electricity transmission facilities constructed by Zhanjiang Electric and Yuejia Electric were transferred to GPHC upon the completion in 1999 at no cost. The costs of constructing these facilities incurred by Zhanjiang Electric and Yuejia Electric, amounting to approximately Rmb246,349,000 and Rmb183,756,000 respectively, were capitalised as intangible assets and amortizsed on straight line basis starting from 1999 over their expected useful lives of 10 years and 18 years respectively. The directors of the Company consider it is probable that the future economic benefits attributable to the above intangible assets will flow to the Group over their respective expected useful lives. -111- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 9 Investments in associates 2007 2006 Rmb’000 Rmb’000 Beginning of year 1,939,100 1,752,183 Additions in investment costs 940,273 233,792 Share of loss 46,535 (46,144) Dividends received (809) (731) End of year 2,925,099 1,939,100 Investments in associates at 31 December 2007 include goodwill of Rmb31,782,000 (2006: Rmb16,782,000) resulting from the acquisition of Shenzhen Guang Qian Power Limited Company (“Shenzhen Guang Qian”), Guangdong Yuedean Finance Co., Ltd. (“Yudean Finance”) and Yunnan Baoshan Binglang River Hydroeletric Power Co., Ltd. (“Binglang River”). The principal associates, all of which are unlisted, are as below: Percentage of Country of equity interest held Name incorporation Principal activities 2007 2006 Yangshan Jiangkeng Hydroelectric Station (“Jiangkeng”) PRC Electricity generation 25% 25% Yangshan Zhongxinkeng Electric Power Co., Ltd. PRC Electricity generation 40% 40% (“Zhongxinkeng”) Guangdong Yudean Holding Western Investment Co., Ltd. PRC Investment in electricity power 26% 26% (“Yudean Western”) plant Shenzhen Guang Qian PRC Electricity generation 40% 40% Zhongyue Energy PRC Electricity generation 39% 39% Guangdong Huizhou LNG Power Co., Ltd. PRC Electricity generation 32% 32% (“Huizhou LNG”) Guangdong Yudean Shibeishan Wind Power Co., Ltd. PRC Electricity generation 30% 30% (“Shibeishan”) Guangdong Red Gulf Electric Power Co., Ltd. PRC Electricity generation 25% 25% (“Red Gulf”) Lincang Yuntou Yudean Water Power Co., Ltd. (“Lincang PRC Electricity generation 49% 49% Yuntou”) Guangdong Yudean Shipping Co., Ltd. PRC Transportation 35% 35% (“Yudean Shipping”) Weixin Yuntou Yudean Zhaxi Energy Co., Ltd. (“Weixin PRC Electricity generation 40% 40% Yuntou”) Huaneng Shantou Wind Power Co., Ltd. (“Shantou Wind PRC Electricity generation 25% 25% Power”) Shanxi Yudean Energy Co., Ltd. (“Shanxi Energy”) PRC Investment in energy industry 40% 40% Yudean Finance PRC Financing service 25% 25% Guangdong Electric Fuel Supply Co., Ltd. (“Fuel PRC Fuel supply 35% - Supply”) * Binglang River* PRC Electricity generation 29% - (The English names of all companies listed above are direct translation of their registered names in Chinese.) * These associates were newly acquired in year 2007. -112- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 9 Investments in associates (continued) The Group’s share of the results of its associates in operation, and its share of the assets (including goodwill and liabilities) are as follows: Assets Liabilities Revenues Net profit / (Loss) Rmb’000 Rmb’000 Rmb’000 Rmb’000 2006 Jiangkeng 7,696 1,987 1,646 442 Zhongxinkeng 14,819 7,627 2,493 430 Yudean Western 1,937,368 1,866,858 191,898 8,334 Huizhou LNG 1,043,888 732,257 48,294 3,471 Shenzhen Guang Qian 1,304,777 918,061 2,725 (25,401) Red Gulf 1,190,242 822,385 - (19,581) Shibeishan 189,589 119,028 7,335 714 Zhongyue Energy 1,396,132 1,022,115 - (15,983) Lincang Yuntou 44,237 19,115 1,791 87 Yudean Shipping 91,507 18,769 38,399 3,067 Shanxi Energy 80,106 49 - 56 Yudean Finance 73,932 712 1,926 (1,780) 7,374,293 5,528,963 296,507 (46,144) 2007 Jiangkeng 31,478 8,639 6,196 1,254 Zhongxinkeng 34,656 16,955 5,435 797 Yudean Western 9,241,858 8,328,743 1,582,288 (3,513) Shenzhen Guang Qian 3,557,598 2,400,813 1,353,080 189,995 Zhongyue Energy 3,733,414 2,984,650 749,960 (210,254) Huizhou LNG 3,993,097 2,915,713 1,266,766 103,538 Shibeishan 627,435 397,998 60,209 (5,768) Red Gulf 5,812,249 4,350,445 - (9,623) Lincang Yuntou 136,470 78,306 5,395 296 Yudean Shipping 1,890,162 1,639,333 289,916 43,091 Weixin Yuntou 446,978 294,578 - - Shantou Wind Power 472,711 327,059 5,006 1,352 Shanxi Energy 999,735 149 - (555) Yudean Finance 11,701,282 10,888,687 205,100 19,685 Fuel Supply 2,151,753 1,398,157 15,161,568 84,732 Binglang River 1,360,930 945,821 42,459 13,822 46,191,806 36,976,046 20,733,378 228,849 10 Loans and receivables 2007 2006 Rmb’000 Rmb’000 Current portion Trade receivables 1,175,816 892,272 Less: provision for impairment of receivables (3,889) (4,461) Trade receivables – net 1,171,927 887,811 Other receivables 97,089 105,221 Less: provision for impairment of receivables (5,635) (5,892) Other receivables – net 91,454 99,329 Prepayments 397,600 9,735 Deferred expenses - 1,105 Loans to associates (Note 28(c)) 90,424 11,402 1,751,405 1,009,382 Non-current portion Loans to associates (Note 28(c)) 64,565 137,604 Total 1,815,970 1,146,986 -113- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 11 Available-for-sale investments 2007 2006 Rmb’000 Rmb’000 Beginning of year 328,200 281,502 Additions 385,838 - Gains transferred to equity (Note 16) 535,650 46,698 End of year 1,249,688 328,200 Available-for-sale investments comprise the following: 2007 2006 Rmb’000 Rmb’000 Investments in unlisted companies (Note A) 416,004 266,004 Investment in Shenzhen Energy Investment Co., Ltd. ("Shenzhen Energy") (Note B) 181,735 62,196 Investment in Shenergy Co. Ltd. (“Shenergy”) (Note C) 651,949 - 1,249,688 328,200 Note A The directors of the Company are of the opinion that no quoted market price in an active market is available for such investments. In addition, fair value cannot be reliably measured by alternative valuation methods. They are carried at costs subject to impairment review. Note B The Company originally held 8,220,061 shares of legal person shares of Shenzhen Energy, with investment cost of approximately Rmb16,950,000. Pursuant to the share reform scheme approved by the shareholders' meeting of Shenzhen Energy on 27 April 2006, the legal person shares of Shenzhen Energy held by the Company were converted to A shares. As a result of the above arrangement, the Company’s investment in Shenzhen Energy was converted into 7,466,522 A shares (subject to sale restrictions). As of 31 December 2007, this investment was stated at fair value determined by reference to the quoted price in an active market. A fair value gain of approximately Rmb119,539,000 (2006: Rmb46,698,000) was recognised in equity. Note C The Company newly purchased 37,021,500 shares of Shenergy on 11 June 2007, with the investment cost of approximately Rmb235,838,000. As of 31 December 2007, this investment was stated at fair value determined by reference to the quoted price in an active market. A fair value gain of approximately Rmb416,111,000 was recognised in equity. -114- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 12 Deferred income tax 2007 2006 Rmb’000 Rmb’000 Deferred tax assets: - Deferred tax asset to be recovered after more than 12 months 81,833 99,967 - Deferred tax asset to be recovered within 12 months 21,432 15,464 103,265 115,431 Deferred tax liabilities: - Deferred tax liability to be recovered after more than 12 months (149,757) (32,058) - Deferred tax liability to be recovered within 12 months (5,001) (972) (154,758) (33,030) The movements in deferred tax assets and liabilities during the year are as follows: Provision for Recognition early Difference in Difference in Timing of retirement amortisation recognition of difference in pre-operating Provision obligation and of leasehold government accrued expenses for assets payroll land payments grants expense Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Deferred tax assets: At 1 January 2006 11,874 6,708 33,580 3,267 13,227 - 68,656 Credited /(charged) to the income statement 12,513 783 34,677 (156) (1,042) - 46,775 At 31 December 2006 24,387 7,491 68,257 3,111 12,185 - 115,431 At 1 January 2007 24,387 7,491 68,257 3,111 12,185 - 115,431 (Charged)/credited to the income statement (7,149) (3,754) (1,107) (1,066) (3,723) 4,633 (12,166) At 31 December 2007 17,238 3,737 67,150 2,045 8,462 4,633 103,265 Capitalisation Tax rate Available-for-sale of interest difference for an s investments expenses associate Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Deferred tax liabilities: At 1 January 2006 (8,190) (1,532) - (9,722) Charged to the income statement (2,358) (5,540) - (7,898) Charged directly to equity (Note 16) - - (15,410) (15,410) At 31 December 2006 (10,548) (7,072) (15,410) (33,030) -115- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) At 1 January 2007 (10,548) (7,072) (15,410) (33,030) Credited to the income statement 6,015 2,071 - 8,086 Charged directly to equity (Note 16) - - (129,814) (129,814) At 31 December 2007 (4,533) (5,001) (145,224) (154,758) -116- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 13 Deferred staff costs 2007 2006 Rmb’000 Rmb’000 At 1 January Cost 97,274 97,274 Accumulated amortisation (66,619) (56,401) Net book amount 30,655 40,873 Year ended 31 December Opening net book amount 30,655 40,873 Amortisation (10,218) (10,218) Closing net book amount 20,437 30,655 At 31 December Cost 97,274 97,274 Accumulated amortisation (76,837) (66,619) Net book amount 20,437 30,655 Deferred staff costs represent housing losses incurred as a result of selling staff quarters to employees at preferential prices. The losses are recorded as deferred staff costs and are amortised over the estimated remaining service life of each employee. At each balance sheet date, the Group assesses whether there is any indication of impairment, considering the remaining service lives of the employees and other qualitative factors. If such indication exists, an analysis is performed to assess whether the carrying amount of the deferred staff costs are recoverable. Deferred staff costs are written down to recoverable amount if the carrying amount exceeds the recoverable amount. 14 Materials and supplies 2007 2006 Rmb’000 Rmb’000 Coal and oil 383,779 259,377 Spare parts and chemicals 213,969 162,069 Others 799 9 598,547 421,455 The cost of inventories recognised as expense and included in operating costs amounted to Rmb6,073,148,000 (2006: Rmb4,913,283,000). As of 31 December 2007, there were no inventories stated at net realisable value. -117- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 15 Share capital As of 31 December 2007, the authorised share capital of the Company was 2,659,404,000 (2006: 2,659,404,000) at Rmb1 per share and included both A Shares and B Shares. The B Shares ranked pari passu in all respects with the A Shares except that A Shares can only be owned and traded by investors in the Mainland China; while B Shares can be owned and traded in foreign currency by both domestic and foreign investors. 1 January 31 December 2007 Transfers 2007 Registered, issued and fully paid Rmb’000 Rmb’000 Rmb’000 2,659,404,000 shares of Rmb1 each A shares subject to sale restrictions: - Shares held by the Parent Company 1,393,852 (161,774) 1,232,078 - Shares held by legal persons 87,378 (78,054) 9,324 - Shares held by individual persons 32 158 190 1,481,262 (239,670) 1,241,592 Listed shares: - A Shares 512,825 239,664 752,489 - B Shares 665,317 6 665,323 1,178,142 239,670 1,417,812 Total 2,659,404 - 2,659,404 The share reform scheme of the Company was approved by the shareholders meeting on 9 December 2005. Pursuant to the resolution, all the holders of legal person shares of the Company undertook to transfer to the existing A share shareholders of the Company 3.1 shares for each 10 A shares held in return for the conversion of legal person shares to A shares which could be marketable in the A share market of the PRC. The transfer of shares was completed on 17 January 2006. Right after the implementation of the share reform scheme, the formerly legal person shares were converted into A shares but subject to certain restrictions in their sales. During the year, approximately 239,828,000 shares became marketable without any restrictions. -118- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 16 Other reserves According to the provisions of the articles of association of the Company, the Company shall first set aside 10% of its profit attributable to shareholders after tax as indicated in the Company’s statutory Financial Statements for the statutory surplus reserve (except where the reserve has reached 50% of the Company’s registered share capital) in each year. The Company may also make appropriations from its profit attributable to shareholders to a discretionary surplus reserve provided it is approved by a resolution passed in a shareholders’ general meeting. These reserves cannot be used for purposes other than those for which they are created and are not distributable as cash dividends without the prior approval obtained from the shareholders in a shareholders’ general meeting under specific circumstances. When the statutory surplus reserve is not sufficient to make good for any losses of the Company from previous years, the current year profit attributable to shareholders shall be used to make good the losses before any allocations are set aside for the statutory surplus reserve. The movement of other reserve in current year is as below: Statutory Statutory Discretionary Capital surplus public surplus Available-for- reserve reserve welfare fund reserve sales reserve Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (Note a) (Note b) Balances at 1 January 2006 1,383,187 1,022,976 432,161 2,010,783 - 4,849,107 Available-for-sale financial assets - Fair value gains in current year (Note 11) - - - - 46,698 46,698 - Tax on fair value gains (Note 12) - - - - (15,410) (15,410) Transfer (Note b) - 432,161 (432,161) - - - Appropriation from retained earnings - 75,096 - 180,056 - 255,152 Balances at 31 December 2006 1,383,187 1,530,233 - 2,190,839 31,288 5,135,547 Balances at 1 January 2007 1,383,187 1,530,233 - 2,190,839 31,288 5,135,547 Available-for-sale financial assets - - - - - - - Fair value gains in current year (Note 11) 535,650 535,650 - Tax on fair value gains (Note 12) - - - - (129,814) (129,814) Appropriation from retained earnings - - - 187,740 - 187,740 Reversal of appropriation (Note c) - (100,396) - - - (100,396) Balances at 31 December 2007 1,383,187 1,429,837 - 2,378,579 437,124 5,628,727 Note a: Capital reserve includes share premium on the issuance of A Shares and B Shares. Note b: Pursuant to Company Law (revised in 2006) in the PRC, the Company is no longer required to appropriate for the statutory public welfare fund. The remaining balance of statutory public welfare fund was transferred to the statutory surplus reserve. Note c: With the first-time adoption of new accounting standards in the PRC (new “PRC GAAP”) effective from 1 January 2007, the Group retrospectively adjusted the profit of prior years in the financial statements prepared in accordance with new PRC GAAP (“statutory financial statements”). As a result, the amount of statutory surplus reserve provided on the profit of prior years in the statutory financial statements was changed accordingly. Such adjustment was reflected as “reversal of appropriation” in the consolidated statement of changes in equity of 2007. -119- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 17 Borrowings 2007 2006 Rmb’000 Rmb’000 Bank borrowings - Current 3,108,260 4,419,060 - Non-current 5,171,620 1,749,880 8,279,880 6,168,940 The borrowings consist of following: 2007 2006 Rmb’000 Rmb’000 Secured bank borrowings (i) 1,279,880 1,448,940 Unsecured bank borrowings 7,000,000 4,720,000 8,279,880 6,168,940 (i) Details of the secured bank borrowings are as follows: 2007 2006 Rmb’000 Rmb’000 Secured over the future revenue from power generation and trade receivables of Yuejiang Electric 961,880 1,075,940 Secured over certain electric utility plants of Maoming Riuneng (Note a) 318,000 323,000 Secured over certain electric utility plants and leasehold land payments of Yuejia Electric (Note 7) - 50,000 1,279,880 1,448,940 (a) The Company issued a letter of undertaking to a bank in relation of this bank borrowing of Maoming Ruineng, pursuant to which: (1) the Company should maintain 51% equity interest in Maoming Ruineng. All transfer of the relevant equity interest should obtain a written consent by the bank; (2) the Company was prohibited from any mortgage, pledge or other guarantee on its equity interest in Maoming Ruineng directly or indirectly held; (3) the Company and other investors are prohibited from modifying the articles of association of Maoming Ruineng unless it is required by laws or with a written consent by the bank. At of 31 December 2007, related bank borrowing of Rmb318,000,000 (2006: Rmb323,000,000), are also secured by certain electric utility plants with net book value of approximately Rmb384,794,000 (2006: Rmb346,488,000 ) (Note 6). The maturity of the non-current borrowings is as follows: 2007 2006 Rmb’000 Rmb’000 Between 1 and 2 years 218,260 309,060 Between 2 and 5 years 611,780 649,180 Over 5 years 4,341,580 791,640 5,171,620 1,749,880 -120- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 17 Borrowings (continued) The interest rate exposure of the borrowings of the Group is as follows: 2007 2006 Rmb’000 Rmb’000 At fixed rates 5,531,880 4,553,000 At floating rates 2,748,000 1,615,940 8,279,880 6,168,940 The effective interest rates of the bank borrowings as of 31 December 2007 were 6.07% (2006: 5.1%). The carrying amounts of the Group’s borrowings approximate their fair values. The Group has the following undrawn committed borrowing facilities: 2007 2006 Rmb’000 Rmb’000 Floating rate - Expiring within 1 year 250,000 7,805,000 - Expiring beyond 1 year 3,267,000 450,000 3,517,000 8,255,000 18 Early retirement obligation 2007 2006 Rmb’000 Rmb’000 At 1 January 96,559 65,066 Addition 7,669 56,314 Utilisation (25,596) (24,821) At 31 December 78,632 96,559 2007 2006 Rmb’000 Rmb’000 Early retirement obligation 78,632 96,559 Less: current portion included in other payables and accruals (22,357) (22,577) 56,275 73,982 Certain employees of the Group were directed to retire early. Employee early retirement benefits are recognised in the income statement when the Group entered into an agreement specifying the terms of redundancy, or after the individual employee has been advised of the specific terms. These specific terms varied among the early retired employees depending on various factors including position, length of service and district of the employee concerned. Where the obligation does not fall due within twelve months, the obligation payable was discounted using a rate that reflects current market assessment of the time value of money and risk specific to the obligation (the discount rate determined with reference to market yields at the balance sheet date on high quality investments). -121- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 19 Deferred revenue 2007 2006 Rmb’000 Rmb’000 Beginning of year 36,923 40,081 Amortisation (3,077) (3,158) End of year 33,846 36,923 Deferred revenue represented the government subsidy granted for the desulfurization project of the Company amounting to Rmb40,081,000 in 2005, which is amortised over the useful lives of related assets. 20 Operating revenue 2007 2006 Rmb’000 Rmb’000 Sales of electricity 10,151,966 8,589,291 Sales of steam 62,086 31,316 Maintenance and fixture 85,555 - Others 15,715 22 10,315,322 8,620,629 The electricity transmission and distribution in Guangdong Province, the PRC, were controlled and managed by GPGC. GPGC has the monopoly over distribution of electricity to end users in the Guangdong Province. GPGC is the solitary customer of the electricity generated by the Group and the Group companies entered into power purchase agreements with GPGC. The electricity prices of individual the power plant or generator of the Group companies were reviewed and approved by the Price Bureau of Guangdong Province. For the year ended 31 December 2007, the volume of electricity purchased by GPGC and the corresponding unit selling prices were summarised as follows: Electricity volume Million KWH Unit electricity prices Rmb per MWH Before After 2007 2006 2007 1 July 2006 1 July 2006 The Company - Shajiao Power Plant A - No. 1 to No. 2 Generators 2,499 2,576 370.43 345.43 357.60 - No. 3 to No. 4 Generators 3,241 3,166 370.43 345.43 370.42 - No. 5 Generator 1,993 1,989 387.52 358.25 387.52 Zhanjiang Electric - No. 1, No. 3 and No. 4 Generators 5,556 5,521 391.28 379.13 391.28 - No. 2 Generator 1,568 1,882 404.10 379.13 391.28 Yuejia Electric - No. 3 and No. 4 Generators 1,579 1,716 394.87 382.43 394.61 - No. 5 and No. 6 Generators 1,305 1,254 387.18 362.39 387.43 Yuejiang Electric - No. 10 Generator 419.57 1,755 1,864 419.57 407.43 - No. 11 Generator 374.53 1,692 1,785 374.53 362.39 Maoming Ruineng 1,227 1,205 374.62 362.47 374.62 Maoming Zhenneng 807 In process 374.53 - - -122- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) Jinhai Electric 3,358 In process 374.53 - - 21 Staff costs 2007 2006 Rmb’000 Rmb’000 Wages and salaries 596,277 542,212 Contribution to defined contribution pension scheme (a) 84,029 81,566 Contribution to the housing scheme (b) 64,968 63,063 Amortisation of deferred staff costs (Note 13) 10,218 10,218 Other social security costs 36,172 35,112 791,664 732,171 The average number of employees in 2007 was approximately 5,100 (2006: 4,300). (a) Pension scheme All staffs of the Group are entitled to pension equal to their basic salaries beginning at their retirement dates until death from a statutory pension scheme. A government agent is responsible for the pension liabilities relating to such retired staff. The Group’s responsibility is limited to the monthly contributions to the statutory pension scheme computed at 18% of the standard salary set by the provincial government. The Group has no further legal or constructive obligation to the pension costs beyond its monthly contribution. (b) Housing scheme In accordance with the PRC housing reform regulations, the Company and its subsidiaries are required to make contributions to the State-sponsored Housing Fund at 8% to 20% of the specific salaries of the employees. At the same time, the employees are also required to make a contribution at 8% to 20% of the specific salaries out of their payroll. The employees are entitled to claim the entire sum of the fund under certain specified withdrawal circumstances. The Company and its subsidiaries have no further legal or constructive obligation for housing benefits beyond the above contributions made. 22 Finance costs - net 2007 2006 Rmb’000 Rmb’000 -123- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) Interest expenses on discounted bills 11,158 - Interest expenses on borrowings 407,521 280,910 Less: interest capitalised in construction-in-progress (Note 6) (62,459) (102,469) 356,220 178,441 23 Income tax expense The income tax rates applicable to the Group companies are as follows: 2007 2006 The Company 33% 33% Yuejia Electric, and Zhanjiang Wind Power 15% 15% Zhanjiang Electric, Maoming Zhenneng, Maoming Ruineng, Yuejiang Electric, Jinghai Electric, Oil Shale Power, Zhanjiang Yuheng, and Anxin Maintenance 33% 33% An analysis of the current year taxation charges is as follows: 2007 2006 Rmb’000 Rmb’000 Current tax 395,764 490,482 Deferred tax (Note 12) 4,080 (38,877) 399,844 451,605 The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows: 2007 2006 Rmb’000 Rmb’000 Profit before tax 1,220,101 1,322,144 Tax calculated at a statutory rate of 33% (2006: 33%) 402,633 436,308 Effect of change of tax rate 19,261 - Effect of different tax rates of certain subsidiaries (18,125) (9,696) Income not subject to tax (9,816) (5,172) Expenses not deductible for tax purposes 2,856 19,601 Tax losses that no deferred tax asset was recognised - 17,930 Utilisation of tax losses that no deferred tax asset was recognised (5,274) (7,366) Recognition of tax losses for which incurred in prior years but no deferred tax asset was recognised 8,309 - Tax charge 399,844 451,605 On 16 March 2007, the National People’s Congress approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT Law”). The new CIT Law reduces (increases) the corporate income tax rate -124- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) for domestic enterprises from 33% (15%) to 25% with effect from 1 January 2008. As a result of the new CIT Law, the additional deferred tax assets/liabilities recognized by the Group in the income statement for the period ended 31 December 2007 amounted to approximately Rmb19,261,000. 24 Earnings per share The calculation of basic earnings per share is based on the net profit for the year attributable to equity holders of approximately Rmb654,508,000(2006: Rmb692,114,000), divided by the weighted average number of ordinary shares in issue during the year of 2,659,404,000 shares (2005: 2,659,404,000 shares). No diluted earnings per share were presented as there were no dilutive potential ordinary shares as of year end. 25 Profit distribution The dividends paid by the Company in 2006 and 2007 were Rmb478,692,720 (Rmb0.18 per share) for each year. In a board meeting held on 18 April 2008, a reversal of discretionary surplus reserve of Rmb663,824,763 was proposed to offset accumulated losses from prior years, which resulted from the first-time adoption of new accounting standards in the PRC effective from 1 January 2007. Meanwhile, a dividend of Rmb319,128,480 (Rmb0.12 per share) in respect of the year ended 31 December 2007 were proposed after appropriating 10% (2006: 10%) of net profit Rmb663,824,763 for the year ended 31 December 2007 to the statutory surplus reserve. These financial statements do not reflect this appropriation and dividend declaration, which will be reflected in consolidated financial statements for the year ending 31 December 2008. Pursuant to the relevant PRC regulation, profit available for distribution to shareholders shall be the lower of the accumulated distributable profits as stated in the PRC statutory financial statements and the accumulated distributable profits adjusted according to IFRS. As of 31 December 2007, the profit of the Company available for distribution determined in accordance with PRC accounting standards and IFRS were approximately Rmb663,825,000 and Rmb1,001,878,000 (2006: Rmb950,034,000 and Rmb913,407,000), respectively. -125- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 26 Cash generated from operations (a) Reconciliation from profit for the year to cash generated from operations: 2007 2006 Rmb’000 Rmb’000 Profit before income tax 1,220,101 1,322,144 Adjustments for: Depreciation of property, plant and equipment (Note 6) 1,114,236 875,089 Amortisation for leasehold land payments (Note 7) 13,301 9,143 Amortisation of intangible assets (Note 8) 37,690 37,470 Amortisation of deferred staff costs (Note 13) 10,218 10,218 Loss on disposal of property, plant and equipment 10,931 3,761 Loss on disposal of available-for-sale investments - 1,451 (Reversal of)/provision for doubtful receivables (847) 1,181 Impairment for property, plant and equipment - 7,014 Interest income (29,661) (12,134) Dividend income (4,727) (9,004) Interest expenses (Note 22) 356,220 178,441 Share of results of associates (Note 9) (46,535) 46,144 Changes in working capital: Decrease in long-term prepayments for coal purchases 365,000 - (Increase)/decrease in materials and supplies (177,092) 180,796 (Decrease)/increase in loans and receivables (594,784) 614,561 Increase in trade payables 728,011 136,444 Increase/(decrease) in taxes payable 41,347 (14,467) Increase in other payables and accruals 28,105 480,446 (Decrease)/increase in early retirement obligation (17,707) 31,493 Decrease in deferred revenue (3,077) (3,158) Cash generated from operations 3,050,730 3,897,033 In the cash flow statement, proceeds from disposal of property, plant and equipment comprise: 2007 2006 Rmb’000 Rmb’000 Net book amount (Note 6) 106,500 4,852 Loss on disposal of property, plant and equipment (10,931) (3,761) Proceeds from disposal of property, plant and equipment 95,569 1,091 (b) Analysis of the balance of cash and cash equivalents: 2007 2006 Rmb’000 Rmb’000 Cash at bank and in hand 2,177,248 2,019,721 Less: Pledged deposits - (200) 2,177,248 2,019,521 -126- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) Pledged deposits of Rmb200,000 was placed to a bank as security deposits for the issuance of the Group’s bank acceptance as of 31 December 2006. 27 Commitments (a) Capital commitments Capital expenditures contracted for at the balance sheet date but not recognised in the consolidated financial statements are as follows: 2007 2006 Rmb’000 Rmb’000 Acquisition of property, plant and equipment 1,320,703 1,365,749 1,320,703 1,365,749 (b) Operating lease commitments As at 31 December 2007, the Group had future aggregate minimum lease payments under non-cancellable operating leases for factories and office premises as follows: 2007 2006 Rmb’000 Rmb’000 Within 1 year 1,351 944 1 to 2 years 1,438 896 2 to 3 years 548 848 Over 3 years 2,863 2,185 6,200 4,873 28 Related party transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. The Company is controlled by Yudean, and is ultimate controlled by the PRC government, which also controls a significant portion of the productive assets and entities in the PRC. In accordance with IAS 24, stated-owned enterprises and their subsidiaries (“other state-owned companies”), other than the Parent Company and its fellow subsidiaries and associates, are also defined as related parties of the Company. -127- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 28 Related party transactions (continued) (a) The Group had the following material related parties: I. Parent Company and fellow subsidiaries Name of related parties Relationship with the Company Guangdong Yudean Group Co., Ltd. (“Yudean”) Parent Company Maoming Thermal Power Plant Controlled by the parent company Shaoguan Electric Power Plant Controlled by the parent company Shaoguan Power Plant D Co., Ltd. Controlled by the parent company Shajiao Power Plant C Controlled by the parent company Meizhou Jiacheng Power Co., Ltd. Controlled by the parent company Guangdong Tianneng Investment Co., Ltd. Controlled by the parent company Guangdong Yudean Real Estate Investment Co., Ltd. Controlled by the parent company Guangdong Yudean Property Management Co., Ltd. Controlled by the parent company Yudean Investment Co., Ltd. Controlled by the parent company II. Associates The associates of the Group are listed in Note 9 to the consolidated financial statements. III. Other state-owned companies For the purpose of related party transactions disclosure, the Group has identified, to the extent practicable, those corporate customers and suppliers which are state-owned enterprises based on their immediate ownership structure. It should be noted, however, that substantially all of the Group’s business activities are conducted in the PRC and the influence of the PRC government in the Chinese economy is pervasive. In this regard, the PRC government indirectly holds interests in many companies. Many state-owned enterprises have multi-layered corporate structure and the ownership structures change over time as a result of transfers and privatization programs. Some of these interests may, in themselves or when combined with other indirect interest, be controlling interests. Such interests, however, would not be known to the Group and are not reflected in the disclosures below. The Group believes that meaningful information relating to related party disclosures has been adequately disclosed. (b) Other than the information as disclosed elsewhere in the notes to the consolidated financial statements, the Group had carried out the following material related party transactions: (i) Sales to related parties 2007 2006 Rmb’000 Rmb’000 Sales of electricity to GPGC 10,151,966 8,589,291 Sales of steam to Maoming Thermal Power Plant 1,328 2,557 Sales of steam to other state-owned companies 26,355 28,778 -128- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 28 Related party transactions (continued) (b) The Group had carried out the following material related party transactions (continued): (ii) Purchases of coal, oil and other raw materials from related parties 2007 2006 Rmb’000 Rmb’000 Fuel Supply (a) 5,100,541 3,206,987 Shaoguan Electric Power Plant (b) 907,453 835,484 Guangdong Tianneng Investment Co., Ltd. (c) 15,929 4,508 (a) The Company, Zhanjiang Electric, Maoming Ruineng and Jinghai Electric purchase coal and oil from Fuel Supply. (b) Yuejiang Electric purchases coal, fuel and other materials from Shaoguan Electric Power Plant. (c) Shajiao Power Plant A of the Company purchases limestone from Guangdong Tianneng Investment Co., Ltd. (iii) Rental expenses Ruineng Electric, Zhengneng Electric, Yuejiang Electric and the Company paid rental expense to the following related parties: 2007 2006 Rmb’000 Rmb’000 Maoming Thermal Power Plant 520 328 Shaoguan Power Plant D Co., Ltd. 3,300 3,209 Guangdong Yudean Real Estate Investment Co., Ltd. 4,173 4,173 (iv) Purchases and construction of property, plant and equipment During the year, the Group had the following transactions with other state-owned companies: 2007 2006 Rmb’000 Rmb’000 Purchases of electricity generation equipment 279,919 1,902,752 Construction of power plant and other equipment 50,016 1,028,304 Provision of power plant design services - 2,380 Repair and maintenance expense 7,959 1,258 -129- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 28 Related party transactions (continued) (b) The Group had carried out the following material related party transactions (continued): (v) Service income 2007 2006 Rmb’000 Rmb’000 Meizhou Jiacheng Power Co., Ltd. (a) 4,920 4,223 Zhongyue Energy (b) 81,452 - Shajiao Power Plant C (c) 5,544 - Shenzhen Guang Qian (c) 1,642 - (a) Yuejia Electric provided repair and maintenance service and staff support to Meizhou Jiacheng Power Co., Ltd. (b) Zhongyue Energy granted operating right of its two set of generators to Zhanjiang Electric beginning from 2007. (c) Anxin Maintenance provided repair and maintenance service to Shajiao Power Plant C and Shenzhen Guang Qian. (vi) Generator management fee According to a written agreement, the management of No. 5 Generator in Maoming Ruineng was conducted by Maoming Thermal Power Plant. The management fee charged was agreed as a fixed sum of approximately Rmb20,360,000 plus other variable charges calculated at Rmb5 per MWH based on the on-grid electricity volume. For the year ended 31 December 2007, the total management fee charged amounted to approximately Rmb26,493,000 (2006: Rmb26,383,000). (vii) Shipping charges According to a written agreement, Yudean Shipping provided the transportation service to Jinghai Electric. For the year ended 31 December 2007, the total shipping charges amounted to approximately Rmb12,742,000 (2006: Nil). (viii) Common expense allocation According to a mutual agreement, Yuejiang Electric and Shaoguan Electric Power Plant agreed to allocate certain administrative expenses based on the proportion of their respective generators’ capacity. For the year ended 31 December 2007, the expenses paid to Shaoguan Electric Power Plant amounted to approximately Rmb149,556,435 (2006: Rmb55,745,000). Shaojiao Power Plant A of the Company and Shajiao Power Plant C agreed to allocate certain common expenses according to agreed allocation basis. For the year ended 31 December 2007, the expense reimbursement received from Shaojiao Power Plant C amounted to approximately Rmb5,665,000 (2006: Rmb1,841,000). According to a mutual agreement, Yuejia Electric and Meizhou Jiacheng Power Co., Ltd. agreed to allocate certain administrative expenses based on the proportion of the number of employees and their respective generators’ capacity. For the year ended 31 December 2007, the expense reimbursement paid to Meizhou Jiacheng Power Co., Ltd. amounted to approximately Rmb194,000 (2006: Rmb33,000). -130- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) 28 Related party transactions (continued) (b) The Group had carried out the following material related party transactions (continued): (ix) Interest expense 2007 2006 Rmb’000 Rmb’000 Interest expenses paid by the Company on entrusted loans granted by Yudean (a) 29,039 34,717 Interest expenses reversed by Jinghai Electric on amount due to Yudean - (33,033) Interest expenses paid to Yudean Finance on discounted bills 11,158 - Interest expenses paid by the Company to Yudean Finance (b) 56,891 - (a) The Company borrowed an entrusted loan from Yudean amounting to Rmb300,000,000 in 2007 (2006: Rmb800,000,000). Interest rate for the entrusted loan was 5.51% (2006: 5.27%) per annum. (b) The total loans borrowed by the Company from Yudean Finance in 2007 amounting to Rmb4,770,000,000 (2006: Ni). Interest rate for the loans was 6.04% (2006: Nil) per annum. (x) Interest income 2007 2006 Rmb’000 Rmb’000 Zhongxinkeng (Note 28(c)) 85 - Yudean Western (Note 28(c)) 7,669 6,016 Yudean Finance (a) 10,814 - (a) As of 31 December 2007, the amount of approximately Rmb1,103,289,000 (2006: Nil) was deposited with Yudean Finance at an annual interest rate of 0.72% (2006: Nil), which is commensurate with the prevailing interest rates offered by banks in the PRC. (xi) Investments made by Yudean As of 31 December 2007, Yudean is one of the investors of the following subsidiaries and associates of the Group: Attributable equity interest owned by the Company Parent Company (%) Yudean Finance 65% Shanxi Energy 60% Shenzhen Guang Qian 60% Jinghai Electric 10% Shibeishan 40% Red Gulf 40% Yudean Western 35% Yudean Shipping 35% Huizhou LNG 33% 28 Related party transactions (continued) -131- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) (b) The Group had carried out the following material related party transactions (continued): (xii) Directors’ remuneration In 2007, the total remuneration of directors was approximately Rmb4,425,000 (2006: Rmb1,225,000). (xiii) Provision of guarantee 2007 2006 Rmb’000 Rmb’000 Yudean Shipping 210,000 - Binglang River 143,550 - Lincang Yuntou 34,300 - (c) As of 31 December 2007, the Group had the following material balances with related parties: 2007 2006 Rmb’000 Rmb’000 Due from related companies Included in loan and receivables – Non-current - Loan to Zhongxinkeng (a) - 2,581 - Loan to Yudean Western (b) 64,565 135,023 64,565 137,604 Included in long-term prepayments for coal purchases - Prepayment to Fuel Supply (c) - 365,000 Included in cash and bank – Current - Yudean Finance 1,103,289 - Included in loan and receivables – Current - Loan to Zhongxinkeng (a) 2,581 - - Loan to Yudean Western (b) 87,843 11,402 - Prepayment to Fuel Supply 365,000 - - Due from Yudean - 6,667 - Due from subsidiaries of Yudean 10,385 5,078 - Due from Zhongyue Energy 381 - - Due from GPGC 1,152,099 884,897 - Due from other state-owned companies 4,553 6,555 1,622,842 914,599 (a) Loan to Zhongxinkeng is unsecured, bears interest at 7.56% (2006: 7.56%) per annum and will mature in 2008. (b) Loans to Yudean Western are unsecured, bear interest from 4.94% to 5.83% (2006: from 4.94% to 5.83%) per annum and over Rmb87,843,000 will mature by 2008, the remaining amount will mature by 2009. Except for (a) - (b) as disclosed above, the balances with other related parties are unsecured, interest-free and have no fixed terms of repayment. 28 Related party transactions (continued) -132- GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 (All amounts in Rmb unless otherwise stated) (c) As of 31 December 2007, the Group had the following material balances with related parties: 2007 2006 Rmb’000 Rmb’000 Due to related companies Included in borrowings – Non-current - Yudean Finance 1,000,000 - Included in borrowings – Current - Yudean 300,000 800,000 - Yudean Finance 1,680,000 - 1,980,000 800,000 Included in trade payable - Due to Fuel Supply 1,007,411 674,206 - Maoming Thermal Power Plant 8,022 1,260 1,015,433 675,466 Included in other payables and accruals - Due to Yudean 1,534 7,525 - Due to subsidiaries of Yudean 305,066 311,071 - Due to Zhongyue Energy 20,000 - - Due to Jiangkeng 1,439 1,096 - Due to other state-owned companies 116,004 276,911 444,043 596,603 29 Contingencies As stated in Note 28(b)(xiii), the Group has provided guarantee of Rmb387,850,000 in favor of the associates of the Group. 30 Subsequent events Save as disclosed in other notes to the financial statements, the Group had the following significant subsequent events: (a) As approved by China Securities Regulatory Commission, the Company has issued long-term debts in March 2008. Net proceeds from the debt offering were approximately Rmb2,000,000,000. (b) In the board meeting held on 18 April 2008, the profit appropriation for year 2007 is proposed as disclosed in Note 25. 31 Comparative The comparative figure of certain property, which was included in “leasehold land payments”, has been reclassified to “property, plant and equipment” to conform with the current year’s presentation. -133- XI. Schedule of Asset Depreciation Reserve Withdrawal Decrease in this period Book balance Book balance Items amount in this in year-begin Transfer-in Transfer-out in period-end period I. Provision for bad debts 10,352,938.00 1,274,333.00 2,103,405.00 9,523,866.00 II. Provision for falling price of inventory III.Provision for devaluation of financial asset available for sales IV. Provision for devaluation of held-to maturity investment V.Provision for devaluation of Long-term equity investment VI.Provision for devaluation of investing property VII.Provision for devaluation of 7,014,359.00 7,014,359.00 fixed assets VIII.Provision for devaluation of engineering materials IX.Provision for devaluation of 372,247.00 372,247.00 construction in progress X. Provision for devaluation of productive biological assets Including：Provision for devaluation of mature productive biological assets XI.Provision for devaluation of oil assets XII.Provision for devaluation of intangible assets XIII. Provision for devaluation of goodwill XIV. Other Total 17,739,544.00 1,274,333.00 2,475,652.00 16,538,225.00 XII. List of Documents Available for Inspection 1.Financial statements bearing the seal and signature of legal representative, financial controller and the person in charge of the accounting organ. 2. Original of the Auditors Report carrying the seal of Certified Public Accountants and the personal signatures of the CPA. 3.All original copies of official documents and notices, which were disclosed in Securities Times, China Securities and Hong Kong Commercial Daily (overseas newspaper for English version). 4.Annual reports in English and Chinese version. The documents mentioned above are kept in office, and are ready for reference at any time (except public holidays, Saturday and Sunday). The Board of Directors of Guangdong Electric Power Development Co., Ltd. Chairman of the board of directors: Pan Li April 23,2008