Netjoy Holdings Limited — Earnings Release 2001

Mar 13, 2002

(a Sino-foreign joint stock limited company incorporated in the People’s Republic of China)

Announcement of Results for 2001

Summary of Operating Results

The Board of Directors of Huaneng Power International, Inc. (the “Company”) is pleased to announce the audited operating results of the Company and its subsidiaries for the year ended 31st December 2001 (the “Accounting Year” or the “Year”).

For the twelve months ended 31st December 2001, the Company and its subsidiaries recorded a net profit of Rmb3.451 billion, and net operating revenue of Rmb15.791 billion, representing increases of 37.16% and 25.79% respectively over 2000. Basic earnings per share were Rmb0.61, representing an increase of Rmb0.16 over the preceding year. The Board of Directors was satisfied with the operating results of the Year.

Details of the operating results are set out in the financial information below.

BUSINESS REVIEW for 2001

Year 2001 is a landmark year in the development process of the Company. During the Year, with the aim of optimizing the interests and benefits of the shareholders, the base of safety operation and the emphasis on economic efficiency, the Company has carried out certain measures to strengthen its management, develop the market, adopt cost controls and enhance efficiency. With the solidarity among the management and staff of the Company and its subsidiaries and with their determination and hard work, the Company was able to overcome various negative factors coming from both the power sector and the coal market, and completed all its work objectives for the Year.

1. Operating Results

For the twelve months ended 31st December, 2001, the Company and its subsidiaries recorded a net profit of Rmb3.451 billion and net operating revenue of Rmb15.791 billion, representing increases of 37.16% and 25.79% respectively over the same period of 2000. Basic earnings per share were Rmb0.61, representing an increase of Rmb0.16 over 2000.

The successful acquisition of Shandong Huaneng Power Development Co., Ltd. (“Shandong Huaneng”) has enlarged the Company’s operation scale, strengthened the Company’s market presence and enhanced its competitiveness which significantly contributed to the substantial growth in the operating results of the Company in 2001. On the other hand, despite the unfavourable factors including increasingly keen competition in the power market, and the continuous increase in fuel prices, the Company and its subsidiaries have still strived to explore the power market and reinforce its marketing efforts, as well as strengthen internal management and cost controls to improve efficiency. Although the unit fuel cost for the year increased 2.81%, average unit cost of output decreased 3.22% as compared to the previous year.

At the end of 2001, the net asset value per share of the Company was Rmb4.72, representing a 12.11% increase over 2000.

1. Power Generation

In 2001, the total power generation of the Company’s and its subsidiaries’ power plants, on equity basis, reached 55.86 billion kWh, 3.8% above the annual target and 26.5% more than that of 2000.

The growth of the power generation was , on the one hand, attributable to the acquisition of Shandong Huaneng which increased the generation capacity of the Company. On the other hand, the Company and its power plants continued to strengthen their operating management, strive to expand the power market and enhance sales, which enabled them to achieve an excess amount of generation beyond the planned generation. Accordingly, the Company completed its generation plan beyond targets under unfavourable conditions including the addition of newly commissioned generating units and increase in power input from other grids as well as increased generation of hydropower supply within the power grids where the Company's power plants operated.

In 2001, the average availability factor of the power plants of the Company together with its subsidiaries was 92.18% and the average capacity factor was 58.97%; the weighted average coal consumption rates for power sold and power generated were 333 gram/kWh and 317 gram/kWh respectively; and the weighted average plant consumption rate was 4.97%. The Company’s technical and economic indices remained to be in the forefront among power companies in the PRC.

In 2001, five power plants of the Company in Shanghai, Liaoning, and Jiangsu participated in the trial run of power sale by competitive bidding (“power pooling”) in the regions where they are located. The total volume of electricity sold by power pooling was 2.795 billion kWh, representing 5.17%of the Company's total power sales of the whole year. The successful sale of such electricity volume by power pooling not only increased the total market share of the Company but also increased the profit margin of the Company.

The growth in power generation of the Company in 2001 laid the foundation for the good operating results.

1. Issuance and Listing of A Shares

On 15th and 16th November 2001, the Company issued successfully a total of 350,000,000 A shares in the PRC, of which 250,000,000 public shares were issued to strategic investors and securities investment funds subscribed offline and to public investors subscribed online, both through the book building process. Meanwhile, the 100,000,000 stated-owned legal shares were placed to Huaneng International Power Development Corporation (“HIPDC”) at the same price. The issue price of A shares was fixed at RMB7.95 per A share and the proceeds of A shares issue was RMB2.78 billion. On 6th December 2001, the Company’s A shares listed on Shanghai Stock Exchange successfully and the trading of the shares commenced. The stock abbreviation is “Huaneng Power”, with stock code 600011. The Company’s target of listing in New York, Hong Kong and Shanghai has been realised.

The listing of A shares further improved the capital structure of the Company and opened up a new financing channel in the domestic capital market, thereby creating favourable conditions for the future development of the Company.

At present, the total share capital of the Company is 6,000,000,000 shares.

1. Other Achievements

During the Year, the Company and its subsidiaries had other achievements as follows:

(1) Significant Results in Asset Acquisition

The success of the acquisition of Shandong Huaneng caused Shandong Branch Company, Dezhou Power Plant and the Company to implement unified taxation policies, thus implementing the tax exemption policies for the import of equipment in relation to the construction work of Dezhou Power Plant Phase III. In 2001, Shandong power plants made further improvements on various production and operation fronts on the basis of maintaining their previous excellent management standards, thereby making greater contributions to the gradual increase in the economic efficiency of the Company.

(2) Strengthening Cash Flow Management and Improving Economic Efficiency

In view of the continuous and drastic interest rate cuts of the US dollars and the capital adequacy of the Company, the Company actively commenced debt restructuring, including using loans at lower interest rates to repay those loans of higher interest rates as to foreign debts and repaying domestic debts in advance, resulting in remarkable economic efficiency. Standard & Poor's gave the Company a foreign currency corporate credit rating which is equivalent to that of the State for three consecutive years.

(3) Infrastructure

The projects of Dalian Power Plant Phase II and Dandong Power Plant of the Company obtained the 2001 Luban Award (State quality works), the highest quality award in the PRC construction industry; construction works of Dezhou Phase III proceeded with progress as scheduled.

(4) Human Resources Management

In 2001, the Company and its subsidiaries strengthened the planning and standardisation of human resources management and enhanced its work in training. It organised training courses covering new corporate accounting systems and information management, and provided planned training on business administration to the departmental managers of the Company.

(5) Sustainable Development

The project proposal of Huaneng Shanghai Combined Cycle Gas Turbine Power Plant has been submitted to the State Development Planning Commission. The development process of this project will be concurrent with the “West-to-East Gas Pipeline Project”. In addition, the Company seized favourable opportunities and with its endeavour, obtained the expansion project of Jining Power Plant and its approval.

PROSPECTS FOR 2002

Year 2002 is the first year after PRC’s accession into the World Trade Organisation. The steady growth of the PRC economy beneficial for the development of the power industry. At the same time, with the further deepening of the power industry’s reform, a good operating environment will be conducive to the Company to bring its advantages into full play vis-a-vis competition and to seize opportunities to expand its operation scale. However, at the same time, the Company is also aware of the potential challenges it may encounter. For example, certain issues relating to the power industry’s reforms may affect the profitability of the Company to a certain extent at certain stage. Moreover, the Company will face pressure of rising generating costs due to the rising trend of coal prices. The Company has full confidence and strength to seize opportunities and meet the new challenges. The main tasks of the Company in 2002 are as follows:

1. to ensure the safety and operating stability of the power plants and the achievement of their annual plans of power generation;

2. to ensure the first unit of Dezhou Power Plant Phase III to be put into commercial operation;

3. to strengthen fuel management and to continue to control costs in all aspects;

4. to enhance the analysis, research and forecast on the power market and the power pooling process, in order to strengthen market sales and increase competitiveness;

5. to push ahead the preparatory work of proposed projects, and to seek new opportunities for the Company's development;

6. to further enhance corporate governance, reinforce the modernised management and set up effective staff incentive mechanisms; and

7. to be well prepared for the ground work for power asset acquisition and seize opportunities to expand the operation scale of the Company and enhance the strength of the Company.

The Company is confident about its future development. On the principle of “emphasizing both development and acquisition, emphasizing both greenfield and expansion, emphasizing both coal-fuel and other feasible types of fuel and emphasizing both domestic and overseas funds”, the Company will continue to enhance operating efficiency, increase shareholders’ interests and maintain the long-term steady development of the Company.

SHARE CAPITAL STRUCTURE

As at 31st December, 2001, the total issued share capital of the Company, excluding the shares which might be converted from the convertible notes, was 6,000,000,000 shares, of which 4,500,000,000 shares were domestic shares, representing 75% of the total issued share capital, and 1,500,000,000 shares were foreign shares, representing 25% of the total issued share capital. For domestic shares, HIPDC owns a total of 2,554,840,000 shares, representing 42.58% of the total issued share capital of the Company. Other domestic shareholders hold a total of 1,945,160,000 shares, representing 32.42% of the total issued share capital.

The US$230 million convertible notes issued by the Company are convertible into foreign shares of the Company at a price of US$29.2 for each American Depositary Share on or before 21st May, 2004. Assuming the convertible notes were fully converted into foreign shares of the Company, the total issued share of the Company would be increased by 315,068,493 shares.

The Company is not aware of any conversion of the convertible notes into shares of the Company as at 31st December, 2001.

Dividends

The Board of Directors proposed to distribute a dividend of Rmb0.30 per share for year 2001 to all the shareholders.

Dividends will be denominated and declared in Renminbi. Dividends on domestic shares will be paid in Renminbi. Save and except for the dividends on foreign shares traded on the Hong Kong Stock Exchange which will be paid in Hong Kong dollars, dividends on foreign shares will be paid in United States dollars.

All the dividends will be paid before 30th June, 2002, subject to the approval of the Annual General Meeting of the Company.

The Board of Directors of the Company anticipated that the dividend policy of the Company for 2002 is as follows:

1. The Company would declare dividends once in 2002;

2. About 50% of the Company’s net profit for the year ended 31st December, 2002 would be distributed as dividends;

3. The undistributed profit as at 31st December, 2001 would be retained;

4. The dividends may be distributed by way of cash or bonus shares, subject to the approval of shareholders on the proposal made by the then Board of Directors.

Subsidiaries and Associated Companies

As regards the subsidiaries and associated companies of the Company, please refer to Note 2 of the financial statements.

Pre-emptive Rights

According to the Articles of Association of the Company and the laws of the PRC, there are no provisions for pre-emptive rights requiring the Company to offer new shares to the existing shareholders of the Company in proportion to their shareholdings.

MAJOR SUPPLIERS AND CUSTOMERS

The five major suppliers of the Company for year 2001 were coal suppliers, namely Datong Mineral Group, Shenhua Group, Shanxi Coal Transportation Sales Company (Datong Branch Company), Yanquan Minerals Bureau and Xishan Minerals Bureau.

As an independent power producer, the Company sold the electricity generated by its power plants through local power companies and did not have other customers.

None of the directors, supervisors or their respective associates (as defined in the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited) had any interests in the five largest suppliers or customers mentioned above of the Company in 2001.

Purchase, Sale or Redemption of Shares

The Company and its subsidiaries did not sell any other types of securities and did not purchase or redeem its own shares or other securities in 2001.

Directors’ and Supervisors’ Right to Purchase Shares

For the year ended 31st December, 2001, none of the directors, senior executives, supervisors or other associates had any beneficial interests in the securities or debt instruments of the Company which were required to be recorded in the register pursuant to Section 29 of the Securities (Disclosure of Interests) Ordinance or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Companies. The Company did not have any arrangement during 2001 whereby the above persons would acquire benefits by means of the acquisition of shares in, or debentures of the Company or other corporate body.

Shareholding of Major Shareholders

The following table sets forth the shareholding position of the Company's shares as at 31st December, 2001:

		No. of Shares outstanding		Percentage of Shareholding
	(in thousands)		(%)
Domestic Shares
HIPDC	2,554,840		42.58
Hebei Provincial Construction Investment Company	452,250		7.54
Fujian International Trust & Investment Company	334,850		5.58
Jiangsu Province International Trust & Investment Company	312,375		5.20
Liaoning Energy Corporation	229,685		3.83
Dalian Municipal Construction Investment Company	226,125		3.77
Nantong Investment Management Centre	67,875		1.13
Shantou Electric Power Development Company	46,500		0.77
Shantou Power Development Joint Stock Company Limited	19,000		0.32
Dandong Energy Investment Development Centre	6,500		0.11
Domestic public shares	250,000		4.17
Sub-total	4,500,000		75.00
Foreign Shares	1,500,000		25.00
TOTAL	6,000,000		100.00

Save as aforesaid, the Company had no notice of any interest required to be recorded under section 16(1) of the Securities (Disclosure of Interests) Ordinance.

Directors’ and Supervisors’ Interest in Contracts and Service Contracts

Save for the service contracts mentioned below, as at the end of 2001, the Directors and supervisors of the Company did not have any material interests in any contracts entered into by the Company.

No Director or supervisor has entered into any service contract which is not terminable by the Company within one year without payment of compensation (other than statutory compensation).

Each and every Director and supervisor of the Company had entered into a service contract with the Company for a term of three years commencing from the signing of the contract.

Staff Housing

The Company made allocation to the housing common reserve fund for its employees in accordance with the relevant PRC regulations.

Major Events

(1) The Company convened the annual general meeting for 2000 on 23rd May 2001 at which the resignation of Mr. Liu Ming as the Company’s Director and the appointment of Mr. Hu Jianmin and Mr. Liu Shuyuan as the Company’s Directors were approved. Their appointments took immediate effect and will expire on the expiration of this session of Directors.

(2) The Company convened a Board of Directors’ meeting on 19th September 2001. It was resolved that the resignations of Mr. Feng Dawei, Mr. Bao Qianyuan, Ms. Li Zhongshu and Mr. Lin Jianxin as the Company’s Directors were approved, and the Board further expressed its appreciation to their contribution. It was also resolved to appoint Mr Wu Dawei and Mr Liu Guoyue as Vice Presidents of the Company and to nominate them, together with Mr Shen Zongmin as candidates for Directors of the Company.

Pursuant to the resolution passed in the Board meeting on 5th December 2001, Mr. Qian Zhongwei would be nominated as Director of the Company.

According to the resolution passed by the Board on 12th March 2002, Mr. Miao Kai’s resignation as the Company’s Director was accepted and his work was appreciated by the Board. Further, Mr. Shen Weibing was nominated as candidate for Director of the Company.

The above mentioned resignations and appointments of Directors will be tabled before the shareholders’ annual meeting for year 2001 for approval.

(3) With the aim of perfecting the corporate goverence, reinforcing the duties of the Directors, and protecting the interest of investors more effectively, the Board passed a resolution in the Board meeting on 23rd May, 2001 to establish special committees of the Board of Directors. The three special committees were Financial Committee, Technology Committee and Management Committee. The members of the Committees are mainly external Directors and independent directors, and the chief officers of such committees are external directors. The establishment of these special committees can assist the Directors to supervise and monitor the management and operation of the Company.

Code of Best Practice

The Company has not established an audit committee (the “Audit Committee”) with the majority of its members being the independent non-executive Directors to review and supervise the Company’s financial reporting process and internal controls pursuant to paragraph 14 of the Code of Best Practice (the “Code of Best Practice”) set out in Appendix 14 to the Listing Rules. However, since the establishment of the Company, its organisational structure has in lieu a Supervisory Committee which carries out functions similar to that of an Audit Committee. The member of the Company’s Supervisory Committee are elected by and can be removed by the shareholders of the Company in general meeting. The Supervisory Committee reports to the general meeting of shareholders instead of the Board of Directors, whereas an Audit Committee is appointed amongst the non-executive directors of a company. Apart from this, none of the Directors is aware of any information that would reasonably indicate that the Company is not or was not for any part of the year in compliance with the Code of Best Practice.

Designated Deposit

As at 31st December, 2001, the Company and its subsidiaries did not have any designated deposit with any financial institutions within the PRC nor any overdue fixed deposit which could not be recovered.

Legal Proceedings

As at 31st December, 2001, the Company and its subsidiaries were not involved in any material litigation or arbitration and no material litigation or claim was pending or threatened or made against the Company and its subsidiaries.

Annual General Meeting and Closure of Register

The Company will, in accordance with its articles of association, convene the annual general meeting for year 2001 before 30th June 2002. Further announcement will be made by the Company once the arrangement for convening the annual general meeting and for closure of register are determined by the Board.

inspection of documents

The Company’s annual reports will be published in April, 2002 in Hong Kong and Beijing respectively. The Company will file an annual report in Form 20-F with the Securities and Exchange Commission. Copies of annual reports as well as the Form 20-F, once filed, will be available at:

Beijing:	Huaneng Power International, Inc. Tianyin Mansion 2C Fuxingmennan Street Xicheng District Beijing The People’s Republic of China Tel: (8610) 6649 1999 Fax: (8610) 6649 1860
Hong Kong:	Rikes Communications Limited Room 701, Wanchai Central Building 89 Lockhart Road Wanchai Hong Kong Tel: (852) 2520 2201 Fax: (852) 2520 2241

By Order of the Board
Li XiaopengChairman

Beijing, the PRC

12th March, 2002

Prepared in accordance with International Financial Reporting Standards (“IFRS”)

INCOME STATEMENT
FOR THE YEAR ENDED 31st DECEMBER, 2001

(Amounts expressed in thousands of Rmb, except per share data)

			The Company and its Subsidiaries		The Company
	Note		2001		2000
Operating revenue, net	3	15,791,362		12,553,254
Operating expenses
Fuel		(5,147,364)		(3,840,690)
Maintenance		(765,712)		(670,994)
Depreciation		(3,261,001)		(2,654,413)
Labor		(807,136)		(669,916)
Transmission fees		(36,925)		(17,094)
Service fees to HIPDC		(307,322)		(310,742)
Others		(451,868)		(482,507)
Total operating expenses		(10,777,328)		(8,646,356)
Profit from operations		5,014,034		3,906,898
Interest income		113,081		79,723
Interest expense		(867,538)		(1,024,653)
Exchange losses, net		(41,758)		(34,936)
Total financial expenses		(796,215)		(979,866)
Gain from disposal of investment		24,671		--
Share of loss of an associate		(5,381)		--
Profit before taxation		4,237,109		2,927,032
Taxation	4	(715,220)		(411,202)
Profit after taxation		3,521,889		2,515,830
Minority interests		(71,231)		--
Net profit		3,450,658		2,515,830
Proposed dividend	5	1,800,000		1,243,000
Proposed dividend per share (Rmb)	5	0.30		0.22
Basic earnings per share (Rmb)	6	0.61		0.45
Fully diluted earnings per share (Rmb)	6	0.60		0.44

Notes

1. Basis of presentation

The Company and its subsidiaries adopt International Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board, in preparing the above income statement.

1. Investment in subsidiaries and an associate

Details of the Company’s subsidiaries as of 31st December, 2001 were as follows:

Name of the subsidiaries		Country and date of incorporation		Percentage of equity interest held		Issued and fully paid capital		Principal activities
Weihai Power Plant	PRC 22nd November, 1993		60%		Rmb761,832,800		Power generation
Jining Power Plant	PRC 19th February, 1990		75%		Rmb383,010,000		Power generation

Details of the Company’s associate as of 31st December, 2001 were as follows:

Name		Country and date of incorporation		Percentage of equity interest held		Issued and fully paid capital		Principal activities
Rizhao Power Plant	PRC 20th March, 1996		25.5%		USD150,000,000		Power generation

1. Operating revenue, net

Net operating revenue represents amounts earned for electricity generated and transmitted to the respective regional or provincial power companies (net of Value Added Tax). Revenues are earned and recognized upon transmission of electricity to the power grid controlled and owned by the respective power companies.

1. Taxation

Certain of the power plants, being located in specially designated regions or cities, are subject to preferential income tax rates. In addition, all power plants (except for Dezhou Power Plant, expansion projects other than Shangan Power Plant Phase II and the subsidiaries of the Company) are exempted from PRC income tax for two years starting from the first profit-making year (after covering any accumulated deficits) followed by a 50% reduction of the applicable tax rate for the next three years (“tax holiday”). For the year ended 31st December, 2001, the weighted average effective tax rate applicable to the Company and its subsidiaries is 17% (2000: 14%).

1. Profit appropriations

Dividends

On 14th March, 2001, the Board of Directors proposed a dividend of Rmb0.22 per share, totaling Rmb1,243 million for the year ended 31st December, 2000. The proposed dividend distribution was approved by the shareholders in the general meeting dated 23rd May, 2001.

On 12th March, 2002, the Board of Directors proposed a dividend of Rmb0.30 per share, totaling approximately Rmb1,800 million for the year ended 31st December, 2001. The proposed dividend distribution is subject to shareholders' approval in their next meeting.

Statutory surplus reserve fund and statutory public welfare fund

For the year ended 31st December, 2001, the Board of Directors resolved the following on 12th March, 2002:

(i) to appropriate 10% and 7.5% (2000: 10% and 7.5%), respectively, of the profit after taxation as determined under the PRC accounting standards and regulations to the statutory surplus reserve fund and the statutory public welfare fund, amounting to approximately Rmb636 million (2000: Rmb463 million) in total;

(ii) to make no appropriation to the discretionary surplus reserve fund;

1. Earnings per share

The calculation of earnings per share is based on the net profit of approximately Rmb3,451 million (2000: Rmb2,516 million) and the weighted average number of 5,694 million (2000: 5,650 million) ordinary shares in issue during the year.

The calculation of diluted earnings per share is based on the adjusted net profit of Rmb3,580 million (2000: Rmb2,638 million) and the adjusted weighted average number of 6,009 million (2000: 5,965 million) ordinary shares in issue during the year. The calculation assumes that the 1.75% convertible notes had been fully converted at the beginning of the year.

1. Public Offering in the PRC

On 15th and 16th November, 2001, 250,000,000 new ordinary shares par value Rmb1.00 each, in the form of A shares, were issued to the public in a public offering on the Shanghai Stock Exchange at Rmb7.95 per A share. The 250,000,000 A shares were listed on the Shanghai Stock Exchange on 6th December, 2001. Net issuing cost of Rmb12.4 million were incurred to sell the A shares and reduced the proceeds. In addition, on 15th November, 2001, 100,000,000 new Domestic Shares of Rmb1.00 each were issued to HIPDC at Rmb7.95 each.

Prepared in accordance with PRC accounting standards

1. Profit for the Year Ended 31st December, 2001

(Amounts Expressed In Rmb)

	The Company and its subsidiaries
	2001
Profit before taxation and minority interests	4,422,515,755
Net profit	3,636,064,244
Profit before non-recurring items	3,667,944,212
Profit from principal activities	5,457,432,415
Loss from other operations	(529,020)
Profit from operation	4,438,289,778
Investment income	19,290,314
Non-operating expenses, net	(35,064,337)
Net cash inflow from operating activities	7,114,149,193
Net increase in cash and cash equivalent	184,763,633
Note: Non-recurring items deducted:
Non-operating expenses, net	(35,064,337)
Related tax effect	3,184,369
Total	(31,879,968)

2. Financial Highlights and Financial Ratios

		The Company and its subsidiaries				The Company
		2001				2000		1999
Operating revenue (Rmb)		15,816,656,338			12,558,386,117		10,493,406,451
Net profit (Rmb)		3,636,064,244			2,644,226,947		2,014,114,442
Total assets (Rmb)		47,229,708,718			42,411,333,851		40,608,819,141
Shareholders' equity (Rmb)		27,125,564,005			22,519,441,432		21,118,214,485
Earnings per share (fully diluted) (Rmb/shares)		0.61			0.47		0.36
Earnings per share (weighted average) (Rmb/shares)		0.64			0.47		0.36
Earnings per share after deducting the impact of non-recurring items (fully diluted) (Rmb/shares)		0.61			0.49		0.36
Earnings per share after deducting the impact of non-recurring items (weighted average) (Rmb/shares)		0.65			0.49		0.36
Net assets per share (fully diluted) (Rmb/shares)		4.52			3.99		3.74
Net assets per share (weighted average) (Rmb/shares)		4.78			3.99		3.74
Net cash inflow from operating activities per share (fully diluted) (Rmb/shares)		1.19			1.21		0.83
Net cash inflow from operating activities per share (weighted average) (Rmb/shares)		1.25			1.21		0.83
Return on net assets (fully diluted) (%)		13.40			11.74		9.50
Return on net assets (weighted average) (%)		14.80			11.80		9.80
Note:	Formula of key financial ratios
	Earnings per share (fully diluted)		=	Net profit / Total number of ordinary shares as at year end
	Return on net assets (fully diluted)		=	Net profit / Shareholders' equity as at year end x100%
	Net assets per share (fully diluted)		=	Shareholders' equity as at year end / Total number of ordinary shares as of year end

1. Profit and Loss Account
   For the year ended 31st December, 2001

(Amounts expressed in Rmb)

	2001				2000
	The Company and its subsidiaries		The Company		The Company
Operating revenue	15,816,656,338	14,047,671,476		12,558,386,117
Less: Operating expenses	(10,333,929,258)	(9,032,497,748)		(8,067,208,844)
Sales taxes and surcharges	(25,294,665)	(4,618,868)		(5,132,510)
Profit from principal activities	5,457,432,415	5,010,554,860		4,486,044,763
(Loss)/profit from other operations	(529,020)	(749,903)		8,900,306
Less: General and administrative expenses	(175,836,006)	(125,305,716)		(330,722,484)
Financial costs, net	(842,777,611)	(778,765,740)		(979,866,598)
Operating profit	4,438,289,778	4,105,733,501		3,184,355,987
Add: Investment income	19,290,314	183,277,931		--
Non-operating income	30,799,078	30,698,092		27,882,117
Less: Non-operating expenses	(65,863,415)	(65,328,999)		(156,809,512)
Profit before taxation and minority interests	4,422,515,755	4,254,380,525		3,055,428,592
Less: Taxation	(715,220,304)	(618,316,281)		(411,201,645)
Minority interests	(71,231,207)	--		--
Net profit	3,636,064,244	3,636,064,244		2,644,226,947
Add: Unappropriated profit brought forward	6,961,104,819	6,961,104,819		6,022,617,588
Unappropriated profit	10,597,169,063	10,597,169,063		8,666,844,535
Less: Transfer to statutory surplus reserve	(363,606,424)	(363,606,424)		(264,422,695)
Transfer to statutory public welfare fund	(272,704,818)	(272,704,818)		(198,317,021)
Profit distributable to shareholders	9,960,857,821	9,960,857,821		8,204,104,819
Less: Dividends	(1,800,000,000)	(1,800,000,000)		(1,243,000,000)
Unappropriated profit carried forward	8,160,857,821	8,160,857,821		6,961,104,819
Earnings per share (weighted average)	0.64	0.64		0.47
Earnings per share (fully diluted)	0.61	0.61		0.47

1. Accounting Policies

(1) Accounting standards

The Company and its subsidiaries adopt the “Accounting Regulations for Business Enterprises” and “Accounting Standards for Business Enterprises” of the PRC and other relevant policies and regulations in the PRC (“PRC GAAP”).

(2) Accounting year

The financial year runs from 1st January to 31st December of each calendar year.

(3) Reporting currency

The reporting currency is Chinese Renminbi (“Rmb”).

(4) Basis of recording and measurement

The Company and its subsidiaries maintain their accounting records on accrual basis. Assets are recorded at actual cost.

(5) Consolidation of financial statements

The subsidiaries, in which the Company holds more than 50%, are included in the consolidated financial statements. The consolidated financial statements are prepared in accordance with the “Regulations for Consolidated Financial Statements” as follows:

(i) Differences arising from the adoption of different accounting policies by the holding company and subsidiaries are adjusted;

(ii) Major intercompany transactions between the holding company and subsidiaries or among subsidiaries are eliminated; and

(iii) Equity investments, intercompany balances and unrealized profits are fully eliminated.

1. Related Party Transactions

(1) Basic information and nature of relationship of related parties of the Company

Related party includes:

(i) Enterprises that, directly or indirectly, control, or are controlled by, the reporting enterprise; and two or more enterprises subject to control from the same enterprise;

(ii) Joint ventures;

(iii) Associated enterprises;

(iv) Principal individual investors, key management personnel, or the close family members of such individuals;

(v) Other enterprises directly controlled by principal individual investors or key management personnel, or the close family members of such individuals.

Huaneng International Power Development Corporation (“HIPDC”) is the Parent of the Company.

Other related parties, which have no control but have transactions with the Company and its subsidiaries, are as follows:

Name of related parties		Nature of relationship
China Huaneng Group Corporation (“China Huaneng Group”)		Ultimate parent
China Huaneng Finance Company (“Huaneng Finance”)		A subsidiary of China Huaneng Group
Shandong Electricity Power Group Corporation (“SEPCO”)		Minority shareholder of Jining Power Plant
Weihai International Trust and Investment Corporation (“WITIC”)		Minority shareholder of Weihai Power Plant
China Huaneng International Trade Economics Corporation (“CHITEC”)		A subsidiary of China Huaneng Group

(2) Related party transactions

a. Pursuant to the relevant service agreements, HIPDC provides transmission and transformer facilities to some of the power plants of the Company and receives service fees. Such service fees represent recoverable costs for rate setting purposes. For the Shangan Power Plant, the Fuzhou Power Plant and the Shantou Oil-Fired Power Plant, such service fees include various costs of transmission incurred by HIPDC plus a profit margin of 10% of the average net book value of HIPDC's transmission facilities. For the Shantou Power Plant, the Shangan Power Plant Phase II and the Shanghai Power Plant, the annual service fees were fixed and equal to 12% of the original book value of HIPDC's transmission and transformer facilities. The total service fees paid to HIPDC for the year ended 31st December, 2001 was approximately Rmb307 million (2000: Rmb311 million).

b. At the time of the formation of the Company, the Company should pay land use rights fee for the land use rights obtained, regardless whether the operating plants obtained the land use rights previously or not. Thus, HIPDC paid approximately Rmb148 million to obtain the land use rights pertaining to existing sites occupied by the five original operating plants and transferred such land use rights to the Company at the same amount. Payments to HIPDC for the land use rights are being made in 10 equal, non-interest bearing, annual installments starting in 1994. Such land use rights are recorded as intangible assets in the balance sheets and amortized in 50 years according to the land use rights terms.

c. In accordance with the leasing agreement entered into between the Company and HIPDC, the land use rights of the Shanghai Power Plant is leased to the Company for a period of 50 years at an annual rental payment of Rmb6 million. In 2001, the Company paid rental amounting to Rmb6 million to HIPDC (2000: Rmb6 million).

d. Pursuant to a leasing agreement entered into amongst the Company, HIPDC and Nanjing Investment, the land use right of the Nanjing Power Plant is leased to the Company for 50 years with an annual rental payment of approximately Rmb1.334 million.

e. As at 31st December, 2001, current deposits of approximately Rmb64 million (2000: Rmb166 million) and fixed deposits of approximately Rmb3,689 million (2000: Rmb100 million) were placed with Huaneng Finance. There's no material difference between the interest rate of the current and fixed deposits placed with Huaneng Finance and prevailing market interest rate.

f. Pursuant to the leasing agreement between the Company and HIPDC signed on 13th February, 2000, HIPDC agreed to rent out its building to the Company as office for 5 years at an annual rental of Rmb25 million effective from 1st January, 2000.

g. As at 31st December, 2001, bank loans amounting to approximately Rmb793 million were on-lent from HIPDC and loans amounting to approximately Rmb216 million were drawn from WITIC to the Company and its subsidiaries.

h. As at 31st December, 2001, short-term loans amounting to Rmb40 million were borrowed by Weihai Power Plant from Huaneng Finance. The interest rates of such loans have no material difference with the prevailing market interest rate.

i. The balance due from/to related parties are as follows:

	31st December, 2001				31st December, 2000
	The Company and its subsidiaries				The Company
	Amount (Rmb)		Percentage		Amount (Rmb)		Percentage
Accounts receivable
Due from SEPCO	241,982,300	19.28%		--		--
Other receivables
Deposit interest due from Huaneng Finance	3,523,282	2.56%		420,000		0.01%
Accounts payable
Due to SEPCO	3,224,716	0.88%		--		--
Other payable
Due to HIPDC	36,584,373	2.67%		130,158,102		6.96%

The balances with HIPDC and SEPCO are unsecured, non-interest bearing and repayable within one year.

j. As at 31st December, 2001, long-term bank loans of approximately Rmb8,868 million, Rmb1,666 million and Rmb300 million were guaranteed by HIPDC, China Huaneng Group and WITIC, respectively.

k. As at 31st December, 2001, current deposit of Rmb5.5 million was placed with the financing center of SEPCO. There's no material difference between the interest rate of the current deposits placed with the financing center of SEPCO and prevailing market interest rate.

l. On 18th July, 2000, the Company and Shandong Huaneng Power Development Co., Ltd (“Shandong Huaneng”) entered into an agreement under which the Company acquired the net assets of Shandong Huaneng in which China Huaneng Group held 33.09% equity interest. The shareholders of Shandong Huaneng were entitled to Rmb 1.34 per ordinary A share or US$0.1618 per ordinary N share (the “Acquisition”). The total consideration of the Acquisition paid in 2000 is approximately Rmb5,768 million, among which, approximately Rmb1,909 million was paid to China Huaneng Group.

m. Sales of the Company and its subsidiaries to a related party:

	2001
	Amount (Rmb)		Percentage
Sales of electricity power to SEPCO	3,654,725,876	23.11%

n. In accordance with an equipment import agency service agreement entered into between Shandong Huaneng and CHITEC, the Company is required to pay an agency fee at 0.5% of the value of imported equipment in return for the agency service provided by CHITEC. No such agency fee is paid in 2001. In addition, in 2001, the Company paid an agency fee to CHITEC amounted to US$3.865 million for equipment transportation and insurance service received (2000: nil).

1. Net Profit Reconciliation between PRC GAAP, IFRS and US GAAP

The financial statements, which are prepared by the Company and its subsidiaries in conformity with PRC GAAP, differ in certain respects from IFRS and generally accepted accounting principles in the United States of America (“US GAAP”). Major differences between PRC GAAP, IFRS and US GAAP which affect the net income of the Company and its subsidiaries are summarized below:

		Net Income (Rmb)
		2001		2000
Net income under US GAAP	3,337,414,726		2,489,677,613
Impact of US GAAP adjustments:
Reversal of housing benefits provided by HIPDC (c)	26,152,570		26,152,570
Effect of the difference in negative goodwill between IFRS and US GAAP (e)	87,090,760		--
Net income under IFRS	3,450,658,056		2,515,830,183
Impact of IFRS adjustments:
Reversal of the effect of recording repair and maintenance cost based on rate making process (a)	177,982,374		210,099,277
Difference in the basis of determining the amount of materials and supplies charged to operating expenses upon usage (b)	(2,180,035)		(3,446,990)
Difference in the recognition policy on housing benefits to the employees of the company (c)	(5,271,603)		(78,255,523)
Difference in the recognition of financial liabilities (d)	14,875,452		--
Net income under PRC GAAP	3,636,064,244		2,644,226,947

(a) Under the rate making process applicable to the Company (except for Dezhou Power Plant), major repair and maintenance expenses determined on the basis of 1% of the fixed asset cost is allowed as an expense recoverable through power rates. The Company estimates that, over the useful life of its power plants, this basis would approximate the total expenses for major repair and maintenance expenses actually incurred. In a particular year, to the extent that the actual repair and maintenance expenses incurred is less than the amount determined on the above basis, the difference represents revenue collected in excess of actual expenses incurred. Such difference is recorded as a liability under IFRS and US GAAP. For PRC statutory financial reporting purposes, in accordance with the requirement of PRC GAAP, no such amount is recorded and revenue is determined and recognized based on the actual amount of electricity transmitted to the grid and the prevailing approved power rates.

(b) Under IFRS and US GAAP, materials and supplies are charged to operating expenses at cost based on actual utilization. Under PRC GAAP, materials and supplies have been restated to the appraised value determined by independent valuer during the reorganization of the five original operating plants in 1994 and the appraised value has been used as the basis in determining the amount charged to operating expenses upon actual utilization.

(c) The Company and HIPDC provided housing benefits to certain qualified employees of the Company whereby the living quarters owned by the Company and HIPDC were sold to these employees at preferential prices. The housing benefits represent the difference between the cost of the staff quarters sold to and the net proceeds collected from the employees, which are born by the Company and HIPDC respectively.

For PRC statutory reporting purposes, in accordance with the relevant regulations issued by the Ministry of Finance, the total housing benefits provided by the Company are charged to non-operating expenses. Under IFRS, the housing benefits provided by the Company are recognized on a straight-line basis over the estimated remaining average service life of the employees. Under US GAAP, in addition to the recognition of the housing benefits provided by the Company on the above basis, the amount of housing benefits provided by HIPDC to the employees of the Company are also reflected as the Company's operating expenses using the same amortization policy. The corresponding amount is recorded as an addition of capital contribution.

(d) Under IFRS and US GAAP, derivative instruments are recorded as either assets or liabilities in the balance sheet at fair value, which is determined based on market conditions at each balance sheet date. Changes in the fair value of derivatives are recorded each period in current earnings or recognized directly in equity through the statement of changes in shareholder's equity, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. As at 31st December, 2001, there was a loss amounted to approximately Rmb14.88 million arising from changes in the fair value of the interest rate swaps. Since the hedging relationship does not meet all of the conditions required for special hedge accounting as set out in IFRS 39 and SFAS 133, such loss was charged to earnings in current year. Under PRC GAAP, such interest swap contracts are considered as off balance sheet items.

(e) China Huaneng Group is the controlling parent company of HIPDC, which in turn is the controlling parent of the Company. China Huaneng Group used to be one of the substantial shareholders of Shandong Huaneng, holding 33.09% equity interest in it before the Acquisition. Under US GAAP, upon completion of the Acquisition, China Huaneng Group's proportionate share in the net assets of Shandong Huaneng being transferred to the Company is recorded at the historical carrying value. The excess of the proportionate share in the book value of the net assets acquired over the relevant portion of the cash consideration is recorded as capital contribution to the Company. After the Acquisition, the book value of the power plants of Shandong Huaneng continue to be the recoverable rate base under the cost recovery formula of the tariff setting mechanism. Accordingly, in accordance with US regulatory accounting requirements, the book value of the remaining 66.91% of the net assets is effectively equal to fair value. The difference between these net asset values and the cash consideration is recorded as a negative goodwill and not taken into consideration when determining rate base in the tariff setting procedures. Under PRC GAAP and IFRS, upon the completion of the Acquisition, the entire net assets of Shandong Huaneng are recorded at fair value. The excess of the fair value of the entire net assets acquired over the total cost of the Acquisition is recorded as negative goodwill.

Please also refer to the published version of this announcement in the South China Morning Post.