Netjoy Holdings Limited — Proxy Solicitation & Information Statement 2004

Nov 18, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ACTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Huaneng Power International, Inc., you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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

(Stock Code: 902)

DISCLOSEABLE AND CONNECTED TRANSACTION

Financial Adviser to Huaneng Power International, Inc.

J.P. Morgan Securities (Asia Pacific) Limited

Independent Financial Adviser to the Independent Directors and Independent Shareholders

N M Rothschild & Sons (Hong Kong) Limited

A letter from the Board of Huaneng Power International, Inc. (the “Company”) is set out on pages 4 to 16 of this circular. A letter from the Independent Directors is set out on page 17 of this circular. A letter from N M Rothschild & Sons (Hong Kong) Limited to the Independent Directors and Independent Shareholders is set out on pages 18 to 31 of this circular.

A notice convening an Extraordinary General Meeting of the Company to be held at 9 a.m. on 17th December 2004 at Beijing International Convention Centre at No. 8 Beichen East Road, Chaoyang District, Beijing, the People’s Republic of China is set out on pages 65 to 71 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed reply slip and form of proxy in accordance with the instructions printed thereon as soon as possible and in any event the form of proxy should be returned not less than 24 hours before the time appointed for holding such meeting.

Completion and return of the form of proxy shall not preclude you from attending and voting in person at the meeting or at any adjourned meeting should you so wish.

3rd November 2004

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
2.	Transfer Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
3.	Reasons for the Acquisition and Pricing Factors . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
4.	Impact of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
5.	Information Regarding the Target Power Plants . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
6.	Selected Financial Information of the Target Power Plants . . . . . . . . . . . . . . . . . . .	13
7.	Connected Transactions under Shanghai Listing Rules . . . . . . . . . . . . . . . . . . . . . .	14
8.	The EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
9.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
10.	Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from the Independent Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
Letter from Rothschild . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		18
**Appendix **	I — Property Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
**Appendix **	II — Plant and Machinery Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
**Appendix **	III — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
**Notice of **	Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	65

— i —

DEFINITIONS

In this document, unless the context otherwise requires, the following expressions have the following meanings:

“Acquisition”	the purchase by the Company of the Sichuan Hydro Power
	Interest and Pingliang Power Plant Interest;
“Associate”	the meaning ascribed to it in the Hong Kong Listing Rules;
“Baoxinghe Company”	Sichuan Huaneng Baoxinghe Power Joint Stock Limited
	Company;
“Closing”	the closing of the Acquisition;
“Company”	Huaneng Power International, Inc.;
“Directors”	the directors of the Company;
“Dongxiguan Company”	Sichuan Huaneng Dongxiguan Hydro Power Joint Stock
	Limited Company;
“EGM”	an extraordinary general meeting of the Company to be held
	for shareholders of the Company on 17th December 2004 to
	consider and approve the Acquisition;
“Fujiang Company”	Sichuan Huaneng Fujiang Hydro Power Limited Liability
	Company;
“HIPDC”	Huaneng International Power Development Corporation;
“Hong Kong Listing Rules”	the Rules Governing the Listing of Securities on the Hong
	Kong Stock Exchange;
“Huaneng New Energy”	Huaneng New Energy Environmental Protection Holdings
	Limited Company, a wholly owned subsidiary of Huaneng
	Group;
“Huaneng Group”	China Huaneng Group;
“Independent Directors”	the independent directors of the Company, who are invited to
	advise the Independent Shareholders in connection with the
	Acquisition;
“Independent Shareholders”	shareholders of the Company other than Huaneng Group,
	HIPDC and their respective Associates;
“Jialingjiang Company”	Sichuan Huaneng Jialingjiang Hydro Power Limited Liability
	Company;

— 1 —

DEFINITIONS

“JP Morgan”	J.P. Morgan Securities (Asia Pacific) Limited, which is
	licensed by the Securities and Futures Commission for Types
	1, 4, 6 and 7 regulated activities under the SFO, being the
	financial adviser to the Company in respect of the
	Acquisition;
“Kangding Company”	Sichuan Huaneng Kangding Hydro Power Limited Liability
	Company;
“Latest Practicable Date”	29th October 2004, being the latest practicable date prior to
	the publication of this circular for ascertaining certain
	information referred to in this circular;
“Mingtai Company”	Sichuan Huaneng Mingtai Power Limited Liability Company;
“Pingliang Power Plant”	Gansu Huaneng Pingliang Power Generation Limited
	Liability Company, a limited liability company incorporated
	in the PRC with an existing registered capital of RMB623
	million, in which Huaneng Group holds 65% equity interest;
“Pingliang Power Plant Interest”	the 65% equity interest in Pingliang Power Plant (including
	the earnings of Pingliang Power Plant generated from 1st July
	2004 proportional to the 65% equity interest) which is owned
	by Huaneng Group and to be sold to the Company;
“Pingliang Power Plant Transfer	the transfer agreement dated 26th October 2004 entered into
Agreement”	between the Company and Huaneng Group relating to the
	purchase of Pingliang Power Plant Interest;
“PRC”	the People’s Republic of China;
“RMB”	the lawful currency of the PRC;
“Rothschild”	N M Rothschild & Sons (Hong Kong) Limited, an institution
	registered with the Securities and Futures Commission to
	carry out Types 1, 4, 6 and 9 regulated activities under the
	SFO, being the independent financial adviser appointed by the
	Company to make recommendation to the Company’s
	independent board committee and shareholders as to whether
	the terms of the Acquisition are fair and reasonable and
	whether the Acquisition is in the interests of the Company and
	the shareholders as a whole and to advise the Company’s
	shareholders on how to vote;
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong);
“Shanghai Listing Rules”	The Listing Rules of Shanghai Stock Exchange;

— 2 —

DEFINITIONS

“Sichuan Hydro Power”	Sichuan Huaneng Hydro Power Development Limited
	Liability Company, a limited liability company incorporated
	in the PRC with an existing registered capital of RMB800
	million, in which Huaneng Group holds 100% equity interest;
“Sichuan Hydro Power Interest”	the 60% equity interest in Sichuan Hydro Power (including
	the earnings of Sichuan Hydro Power generated from 1st
	August 2004 proportional to the 60% equity interest) which is
	owned by Huaneng Group and to be sold to the Company;
“Sichuan Hydro Power Transfer	the transfer agreement dated 26th October 2004 entered into
Agreement”	between the Company and Huaneng Group relating to the
	purchase of Sichuan Hydro Power Interest;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Taipingyi Company”	Sichuan Huaneng Taipingyi Hydro Power Limited Liability
	Company;
“Target Power Plants”	Sichuan Hydro Power and Pingliang Power Plant;
“Transfer Agreements”	Sichuan Hydro Power Transfer Agreement and Pingliang
	Power Plant Transfer Agreement;
“Zhonghua”	Beijing Zhonghua Accounting and Consultancy Limited
	Company, a assets appraisal firm in China, which is qualified
	in practising securities related matters.

For the purposes of this circular, unless otherwise indicated, Renminbi amounts have been translated into Hong Kong dollars using the rate of HK$1: RMB1.06.

— 3 —

LETTER FROM THE BOARD

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

Directors:

Li Xiaopeng Wang Xiaosong Huang Yongda Ye Daji Huang Jinkai Liu Jinlong Shan Qunying Yang Shengming Xu Zujian Liu Shuyuan

Legal Address:

West Wing, Building C, Tianyin Mansion, No. 2C Fuxingmennan Street, Xicheng District, Beijing 100031, People’s Republic of China.

Independent Directors:

Gao Zongze Zheng Jianchao Qian Zhongwei Xia Donglin Liu Jipeng

3rd November, 2004

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

1. INTRODUCTION

On 26th October 2004, the Company entered into the Sichuan Hydro Power Transfer Agreement with Huaneng Group, pursuant to which the Company agreed to acquire from Huaneng Group its 60% equity interest in Sichuan Hydro Power. On the same date, the Company entered into the Pingliang Power Plant Transfer Agreement with Huaneng Group, pursuant to which the Company agreed to acquire from Huaneng Group its 65% equity interest in Pingliang Power Plant. The total consideration for acquiring such interest amounts to RMB2,025 million, to be satisfied by the Company’s internal cash surplus.

— 4 —

LETTER FROM THE BOARD

The Company and its subsidiaries develop, construct, operate and manage large-scale coal-fired power plants throughout China. The Company is one of the largest independent power producers in China which owns a total generation capacity of 19,012 MW on an equity basis.

Huaneng Group is principally engaged in the operation and management of industrial investment; the development, investment, construction, operation and management of power sources; organising the generation and sale of (thermal) power; and the development, investment, construction, production and sale of products in relation to information, transportation, new energy and environmental protection industries.

The relationship between the Company, Huaneng Group and HIPDC is as follows:

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----- Start of picture text -----

Huaneng Group
51.98%
HIPDC
42.88%
the Company
----- End of picture text -----

Huaneng Group, PRC state-owned enterprise, is an indirect controlling shareholder of the Company, holding an approximately 51.98% interest in HIPDC. As of the Latest Practicable Date, HIPDC held approximately 42.88% of the total issued share capital of the Company. The transactions as contemplated by the Transfer Agreements constitute connected transactions to the Company, which are subject to Independent Shareholders’ approval pursuant to Rule 14A.18 respectively of the Hong Kong Listing Rules. Huaneng Group, HIPDC and their respective associate will abstain from voting in the EGM in respect of the ordinary resolutions to approve the Acquisition (including the Transfer Agreements).

Taking the acquisition of Sichuan Hydro Power Interest and the acquisition of Pingliang Power Plant as a whole in accordance with Rule 14.22 of the Hong Kong Listing Rules, the total consideration amounts to RMB2,025 million. Therefore the transactions as contemplated by the Acquisition also constitute a discloseable transaction to the Company.

The Company and the Independent Directors have reviewed the Acquisition. The Company has appointed JPMorgan as the financial adviser in connection with the Acquisition. The Company has also appointed Rothschild as the independent financial adviser to advise the Independent Directors and the Independent Shareholders as to whether the terms of the Acquisition are fair and reasonable and whether the Acquisition is in the interest of the Company and its shareholders as a whole and to advise the Company’s shareholders on how to vote in respect of the Acquisition.

The purpose of this circular is to provide you with further information in relation to the Acquisition and the Transfer Agreements, and to set out the recommendation of the Independent Directors and the Notice of the EGM.

— 5 —

LETTER FROM THE BOARD

2. TRANSFER AGREEMENTS

(1) Sichuan Hydro Power Transfer Agreement

The Sichuan Hydro Power Transfer Agreement was approved by the Directors at the board meeting on 26th October 2004 and signed by Huaneng Group and the Company on the same day. Date: 26th October 2004

Parties: Seller: Huaneng Group Purchaser: the Company

Interest to equity interest representing 60% of the registered capital of Sichuan Hydro be acquired: Power. The parties also agreed that for commercial reasons, the earnings of Sichuan Hydro Power generated from 1st August 2004 proportional to the 60% equity interest would belong to the Company.

Consideration: The consideration for the purchase of 60% equity interest in Sichuan Hydro Power is RMB1,219 million, payable in cash on the Closing date. The purchase price was determined with reference to, inter alia, the valuation report prepared by Zhonghua in relation to the net assets of Sichuan Hydro Power and on the basis of normal commercial terms and arm’s length negotiation between the parties thereto, and the agreement was entered into in the ordinary and usual course of business of the Company.

Conditions:

Closing is subject to the satisfaction or waiver of the following conditions:

• (1) Conditions which need to be satisfied:

• Rothschild has advised the Independent Directors that the terms and conditions of the transaction contemplated by the Sichuan Hydro Power Transfer Agreement are fair and reasonable so far as the Independent Shareholders are concerned;

• the Independent Directors recommended that the shareholders vote in favour of the transfer of Sichuan Hydro Power Interest and the Sichuan Hydro Power Transfer Agreement;

• the Sichuan Hydro Power Transfer Agreement and the transfer of Sichuan Hydro Power Interest have been approved and adopted by the Independent Shareholders;

• the Company has obtained all necessary government approvals for the Sichuan Hydro Power Transfer Agreement and the transfer of Sichuan Hydro Power Interest; and

• the simultaneous closing or closing of the Pingliang Power Plant Transfer Agreement.

— 6 —

LETTER FROM THE BOARD

• (2) Conditions which the Company may waive under the Sichuan Hydro Power Transfer Agreement:

• representations and warranties of Huaneng Group in the Sichuan Hydro Power Transfer Agreement are true and complete in all material respects; and

• Huaneng Group has fulfilled in all material respects its obligations under the Sichuan Hydro Power Transfer Agreement.

• (3) Conditions which Huaneng Group may waive under the Sichuan Hydro Power Transfer Agreement:

• representations and warranties of the Company in the Sichuan Hydro Power Transfer Agreement are true and complete in all material respects; and

• the Company has fulfilled in all material respects its obligations under the Sichuan Hydro Power Transfer Agreement.

In the case that any conditions for closing are waived, further announcement will be made by the Company accordingly.

Completion: Closing shall take place on the day agreed upon by both parties, within 30 days after the conditions have been satisfied or waived.

• (2) Pingliang Power Plant Transfer Agreement

The Pingliang Power Plant Transfer Agreement was approved by the Directors at the board meeting on 26th October 2004 and signed by Huaneng Group and the Company on the same day. Date: 26th October 2004

Parties: Seller: Huaneng Group Purchaser: the Company Interest to equity interest representing 65% of the registered capital of Pingliang Power be acquired: Plant. The parties also agreed that for commercial reasons, the earnings of Pingliang Power Plant generated from 1st July 2004 proportional to the 65% equity interest would belong to the Company.

Consideration: The consideration for the purchase of Pingliang Power Plant Interest is RMB806 million, payable in cash on the Closing date.

The purchase price was determined with reference to, inter alia, the valuation report prepared by Zhonghua in relation to the net assets of Pingliang Power Plant and on the basis of normal commercial terms and arm’s length negotiation between the parties thereto, and the agreement was entered into in the ordinary and usual course of business of the Company.

— 7 —

LETTER FROM THE BOARD

Conditions:

Closing is subject to the satisfaction or waiver of the following conditions:

• (1) Conditions which need to be satisfied:

• Rothschild has advised the Independent Directors that the terms and conditions of the transactions contemplated by the Pingliang Power Plant Transfer Agreement are fair and reasonable so far as the Independent Shareholders are concerned;

• the Independent Directors recommended that the shareholders vote in favour of the transfer of Pingliang Power Plant Interest and the Pingliang Power Plant Transfer Agreement;

• the Pingliang Power Plant Transfer Agreement and the transfer of Huaneng Group Interest have been approved and adopted by the Independent Shareholders;

• the Company has obtained all necessary government approvals for the Pingliang Power Plant Transfer Agreement and the transfer of Pingliang Power Plant Interest; and

• the simultaneous closing or closing of the Sichuan Hydro Power Transfer Agreement.

• (2) Conditions which the Company may waive under the Pingliang Power Plant Transfer Agreement:

• representations and warranties of Huaneng Group in the Pingliang Power Plant Transfer Agreement are true and complete in all material respects; and

• Huaneng Group has fulfilled in all material respects its obligations under the Pingliang Power Plant Transfer Agreement.

• (3) Conditions which Huaneng Group may waive under the Pingliang Power Plant Transfer Agreement:

• representations and warranties of the Company in the Pingliang Power Plant Transfer Agreement are true and complete in all material respects; and

• the Company has fulfilled in all material respects its obligations under the Pingliang Power Plant Transfer Agreement.

In the case that any conditions for closing are waived, further announcement will be made by the Company accordingly.

Completion:

Closing shall take place on the day agreed upon by both parties, within 30 days after the conditions have been satisfied or waived.

— 8 —

LETTER FROM THE BOARD

3. REASONS FOR THE ACQUISITION AND PRICING FACTORS

The Acquisition will improve the generation and fuel structure of the Company and it has also realised one of the guiding principles of the Company’s long term strategy of placing equal emphasis on both coal fuel and other types of fuel. Sichuan Hydro Power is located in Sichuan Province, the hydro power generation capacity of which ranks number one in China. The Acquisition is the first move of the Company to participate in hydro power. This indicates that the Company commences to adjust its generation structure. The fuel sources of the Company will be diversified and become much balanced. The cost control pressure due to the shortage of coal supply will be relieved effectively.

The Acquisition will enlarge the Company’s operating scale and geographical scope, thus enhancing the profitability of the Company as well as consolidating the Company’s position as China’s largest independent power company. After the completion of the Acquisition, the total generation capacity of the Company on an equity basis will increase by 1,146 MW (including Jialingjiang Company’s 34 MW generating unit which was put into operation this year) from 19,012 MW to 20,158 MW, representing an increase of 6.0%. Furthermore, the Acquisition also brings about an increase of capacity under construction on an equity basis of 389 MW, which assures the increase of capacity as well as an increase of the Company’s revenue in future years. The Acquisition provides an opportunity for the Company to enter for the first time into Sichuan Province, a rapidly growing power market, and into Gansu Province, the West China power market. This has realised the Company’s development strategy of “consolidation in the coastal area, expansion in Central China and entering into West China”.

In light of the strong increase of power demand and shortage of coal fuel in China, the acquisition of hydro power assets will rationalize the Company’s fuel structure. The acquisition of mine-mouth power plant (Pingliang Power Plant) will bring about a decrease in average fuel costs of the Company and as a result, will enhance the Company’s profitability and effectively contain the increase in fuel costs.

The Acquisition price has been determined through arm’s length negotiations between the parties and their respective financial advisers, taking into account various factors, including the market environments, the technical and operating conditions of the Power Plants, the Power Plants’ earnings potentials and their abilities to generate cash flow. The Company has also considered the appraisal report provided by Zhonghua which values the Sichuan Hydro Power Interest at RMB1,212.1 million as of 31st July 2004 and Pingliang Power Plant Interest at RMB791.73 million as of 30th June 2004 using the replacement cost approach. The board of Directors believes that the Acquisition price and terms are fair and reasonable to the Company and its shareholders.

4. IMPACT OF THE ACQUISITION

The Company believes that with the growth of the power markets in which the Target Power Plants operate and through further strengthening management, the Acquisition will bring satisfactory returns to the Company and has a positive impact on the Company’s future earnings, thus benefiting the Company and its shareholders. For reference only, according to International Financial Reporting Standards, the unaudited total net profit of the Target Power Plants in 2003 was approximately RMB264 million.

The Acquisition does not have any material impact on the net assets of the Company.

— 9 —

LETTER FROM THE BOARD

5. INFORMATION REGARDING THE TARGET POWER PLANTS

Sichuan Hydro Power

Sichuan Hydro Power was established on 12th July 2004 as a state-owned limited liability company wholly owned by Huaneng Group while on the same day, Huaneng Group transferred its owned equity in the registered capital of Baoxinghe Company, Taipingyi Company, Dongxiguan Company, Fujiang Company, Kangding Company, Mingtai Company and Jialingjiang Company to Sichuan Hydro Power. The registration for the change of shareholder of the power plants under Sichuan Hydro Power from Huaneng Group to Sichuan Hydro Power was completed in July 2004. The power plants under Sichuan Hydro Power own installed generation capacity of 999 MW. The generation capacity on equity basis is 610 MW. In addition, the power plants under Sichuan Hydro Power has a generation capacity under construction of 882 MW. The generation capacity under construction on equity basis is 648 MW. Details of the power plants under Sichuan Hydro Power are set out below:

		Equity held
	Registered	by Sichuan
Power Plants under	Capital	Hydro
Sichuan Hydro Power	(RMB)	**Power **	Other Shareholders
Baoxinghe Company	516,100,000	68%	Changjiang Hydro Power Development
			Co., Ltd.: 8%
			Sichuan Province Power Development
			Company: 12%
			Yaan City State-owned Assets
			Management Co., Ltd.: 10%
			Sichuan Yaan Power (Group) Joint-
			stock Limited Company: 2%
Taipingyi Company	100,000,000	60%	Aba Hydro Power Development Co.,
			Ltd.: 40%
Dongxiguan Company	156,725,000	55.33%	Sichuan Province Power Development
			Co., Ltd.: 8.38%
			Sichuan Province Port and Navigation
			Development Co., Ltd.: 6%
			Sichuan Wushengguangming Industrial
			Co., Ltd.: 12%
			Sichuan Province Pengxi County
			Power Co., Ltd.: 6.2%

— 10 —

LETTER FROM THE BOARD

		Equity held
	Registered	by Sichuan
Power Plants under	Capital	Hydro
Sichuan Hydro Power	(RMB)	**Power **	Other Shareholders
			Daying Electricity Supply Bureau
			under Mianyang Electricity Bureau:
			3.8%
			Sichuan Province Yuechiyintai
			Investment (Holdings) Limited: 4%
			Several individuals: 4.29% in
			aggregate
Fujiang Company	150,000,000	95%	Sichuan Province Pingwu Power
	(paid up as at		(Group) Co., Ltd.: 5%
	31st July 2004:
	97,880,000)
Kangding Company	194,000,000	60%	Ganzi Region Hydro Power
			Development Co., Ltd.: 40%
Mingtai Company	97,700,000	52.2%	Sichuan Yongan Hydro Power Joint-
			stock Limited Company: 42.98%
			Mianyang City Power Co., Ltd: 3.27%
			Mianyang Qimingxing Group Co., Ltd:
			1.53%
Jialingjiang Company	193,080,000	55%	Sichuan Province Port and Navigation
	(paid up as at		Development Co., Ltd.: 30%
	31st July 2004:		Nanchong City Power Development
	152,119,800)		Co., Ltd.: 15%

Sichuan Hydro Power is a wholly owned subsidiary of Huaneng Group. Huaneng Group will transfer its owned 60% equity interest in the registered capital of Sichuan Hydro Power to the Company where such transfer is not subject to any pre-emption right of other shareholders.

Furthermore, the Company has been given to understand that Huaneng Group is prepared to transfer its remaining 40% interest in Sichuan Hydro Power to Huaneng New Energy, its wholly owned subsidiary.

Upon completion of the acquisition of Sichuan Hydro Power Interest by the Company and the aforesaid arrangement, the equity interest in the registered capital of Sichuan Hydro Power will be held as to 60% by the Company and as to 40% by Huaneng New Energy.

Huaneng Group has warranted that its 60% interest in Sichuan Hydro Power and Sichuan Hydro Power’s interest in the power plants under Sichuan Hydro Power are not subject to any pledge, mortgage, lien or third party right, nor involved in any disputes, litigations, arbitrations or legal proceedings.

— 11 —

LETTER FROM THE BOARD

The following table set out certain operating data of the power plants under Sichuan Hydro Power in 2003:

	Baoxinghe	Taipingyi	Dongxiguan	Fujiang	Kangding	Mingtai	Jialingjiang
	Company	Company	Company	Company	Company	Company	Company
Name of power plants owned	Yucheng,	Taipingyi	Dongxiguan	Shuiniujia	Lengzhuquan,	Mingtai	Qingju (under
	Tongtou,			(under	Xiaotiandu (under		construction)
	Xiaoguanzi,			construction),	construction)
	Qiaoqi (under			Ziyili
	construction)			(under
				construction),
				Muzuo (under
				construction)
Generation capacity (MW)	Yucheng: 60	260	180	Shuiniujia: 70	Lengzhuguan: 180	45	136
	Tongtou: 80			(under	Xiaotiandu: 240
	Xiaoguanzi: 160			construction)	(under construction)
	Qiaoqi: 240			Ziyili: 130
	(under			(under
	construction)			construction)
				Muzuo: 100
				(under
				construction)
Power generation	Yucheng: 0.64	1.47	0.77	(such data is not	Lengzhuguan: 0.83	0.17	(such data is
(billion kWh)	Tongtou: 0.64			available for	(data for Xiaotiandu		not available
	Xiaoguanzi: 0.71			power plant under	is not available as it		for power
	(data for Qiaoqi			construction)	is a power plant		plant under
	is not available				under construction)		construction)
	as it is a power
	plant under
	construction)
Utilisation hours (hours)	Yucheng: 4,588	5,638	4,285	(such data is not	Lengzhuguan: 4,621	3,775	(such data is
	Tongtou: 4,588			available for	(data for Xiaotiandu		not available
Xiaoguanzi: 4,434				power plant under	is not available as it		for power
	(data for Qiaoqi			construction)	is a power plant		plant under
	is not available				under construction)		construction)
	as it is a power
	plant under
	construction)
House consumption rate	Yucheng: 1.36	4.0	1.6	(such data is not	Lengzhuguan: 2.7	1.3	(such data is
(%)	Tongtou: 1.36			available for	(data for Xiaotiandu		not available
	Xiaoguanzi: 2.86			power plant	is not available as it		for power
	(data for Qiaoqi			under	is a power plant		plant under
	is not available			construction)	under construction)		construction)
	as it is a power
	plant under
	construction)
Average on-grid power rate	Yucheng: 291	221	293	(such data is not	Lengzhuguan: 221	272	(such data is
(RMB/MWh, VAT included)	Tongtou: 291			available for	(data for Xiaotiandu		not available
	Xiaoguanzi: 195			power plant	is not available as it		for power
	(data for Qiaoqi			under	is a power plant		plant under
	is not available			construction)	under construction)		construction)
	as it is a power
	plant under
	construction)
Unit cost for power sold	85	60	90	(such data is not	Lengzhuguan: 86	124	(such data is
(RMB/MWh)				available for	(data for Xiaotiandu		not available
				power plant	is not available as it		for power
				under	is a power plant		plant under
				construction)	under construction)		construction)

— 12 —

LETTER FROM THE BOARD

Pingliang Power Plant

Pingliang Power Plant Phase I consists of four 300 MW domestic built coal-fired generating units. Generating units No. 1 and No. 2 began construction in June 1998 and commenced commercial operation in 2000 and 2001 respectively. Units No. 3 and No. 4 began in May 2001 and were put into commercial operation in June and November 2003 respectively. The estimated depreciation period of the generating units at Pingliang Power Plant is approximately 14 years. Currently, the generating units operate properly. In 2003, annual power generation by the four generating units was 5.89 billion kWh with a house consumption rate of 4.5%. Power tariffs are determined according to the rates prescribed by the relevant pricing bureau.

Huaneng Group holds 65% equity interest in Pingliang Power Plant. The remaining 35% interest is held by Gansu Provincial Power Construction Investment Development Corporation whereby it has given up its pre-emptive right in the transfer of Pingliang Power Plant Interest.

Huaneng Group has warranted that its 65% interest in Pingliang Power Plant is not subject to any mortgage, pledge, lien or other third party right, nor involved in any disputes, litigations, arbitration or other legal proceedings.

The following table sets out certain operating data of Pingliang Power Plant in 2003:

Generation capacity (MW)	1,200
Power generation (billion KWh)	5.89
Utilization hours (hours)	7,444
House consumption rate (%)	4.5
Average on-grid power rate (RMB/MWh, VAT included)	196
Coal consumption rate for power sold (grams/kWh)	340
Unit fuel cost for power sold (RMB/MWh)	53.3

6. SELECTED FINANCIAL INFORMATION OF THE TARGET POWER PLANTS

The following is a summary of unaudited consolidated financial information of Sichuan Hydro Power and its subsidiaries as at 31st December 2002, 2003 and 31st July 2004 and for the years/period then ended and the summary of unaudited financial information of Pingliang Power Plant as at 31st December 2002, 2003 and 30th June 2004 and for the years/period then ended, prepared in accordance with International Financial Reporting Standards (“IFRS”).

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LETTER FROM THE BOARD

									(RMB in thousands)	(RMB in thousands)	(RMB in thousands)	(RMB in thousands)	(RMB in thousands)
		**Sichuan Hydro **			**Power and its **				subsidiaries				Pingliang Power Plant
			31st				31st				31st		31st				31st				30th
		December			December						July		December		December						June
			2002				2003				2004		2002				2003				2004
		(consolidated)			(consolidated)				(consolidated)
Plant and machinery		1,154,894			1,081,165				1,566,913				1,762,101		2,852,155				2,732,349
Properties		1,237,272			1,253,285				2,008,948				873,477		978,721				951,517
Other assets		1,697,820			2,188,426				2,560,213				1,287,696		496,822				641,393
Total assets		4,089,986			4,522,876				6,136,074				3,923,274		4,327,698				4,325,259
Total liabilities		2,816,076			3,099,655				4,358,835				3,611,363		3,768,507				3,599,838
Receivables		300,227			242,849				217,991				130,707		187,492				265,662
Contingent items		15,690				15,500				6,500			4,416			4,416				4,416
Net assets		975,028			1,108,571				1,281,113				311,911		559,191				725,421
Interest attributable to Huaneng
Group			60%				60%				60%		65%				65%				65%
Net assets attributable to Huaneng
Group according to the above
ratio		585,017			665,143				768,668				202,742		363,474				471,524
Revenue from principal business		422,978			494,611				410,826				543,439		939,493				740,073
Operating profit/(loss)		250,588			315,103				266,503				(11,777)		274,391				280,565
Profit/(loss) before taxation		165,045			240,399				225,492				(136,454)		135,888				192,139
Effective tax rate		13.7%				12.8%				17.0%			(14.3)%			15.6%				14.9%
Net profit/(loss) after taxation		105,474			148,994				128,108				(116,901)		114,620				163,430

7. CONNECTED TRANSACTIONS UNDER SHANGHAI LISTING RULES

As the domestic public shares of the Company are listed on the Shanghai Stock Exchange, the Company is required, in addition to the Hong Kong Listing Rules, to comply with the Shanghai Listing Rules.

After Closing, certain transactions in relation to the Target Power Plants, including the guarantees to be provided by the Company to the banks in respect of the Target Power Plants’ bank loans and the loans obtained from Huaneng Group and its associate, China Huaneng Finance Company, both being connected persons of the Company, by the Target Power Plants in the ordinary and usual course of the Target Power Plants’ business, which are subject to compliance with the relevant requirements of the Hong Kong Listing Rules, will constitute connected transactions under the Shanghai Listing Rules (“Shanghai Connected Transactions”), which shall be subject to the approval of the Company’s shareholders. The connected persons (as defined under the Shanghai Listing Rules) shall abstain from voting on resolutions related to Shanghai Connected Transactions. Details of the Shanghai Connected Transactions will be set out in the notice of EGM to be issued to the Company’s shareholders.

In accordance with Rule 7.3.11(9) of the Shanghai Listing Rules, the Company has appointed Guotai Junan as the PRC independent financial adviser in respect of the Acquisition.

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LETTER FROM THE BOARD

Upon careful and necessary enquiry, Guotai Junan is of the view that the Acquisition and the Shanghai Connected Transactions met the relevant legal requirements under the Company Law of the PRC, the Securities Law of the PRC and the Shanghai Listing Rules (as amended in 2001) and the requirements of the articles of association of the Company, reflecting the principles of equality, justice and reasonableness; and that the Acquisition will not in any way affect the interests of either the Company or the non-connected shareholders.

The Independent Directors are of the view that (1) the board of Directors has met the relevant requirements of Shanghai Listing Rules and the articles of association of the Company regarding approval of the relevant resolutions of the Acquisition and the Shanghai Connected Transactions; and (2) the Acquisition and the Shanghai Connected Transactions are fair to the Company’s shareholders.

8. THE EGM

The transactions as contemplated by the Transfer Agreements constitute discloseable and connected transactions to the Company. The Company will convene an EGM on 17th December, 2004 to consider the approval of the Acquisition (including the Transfer Agreements), and Shanghai Connected Transactions. The voting at such meeting will be taken on a poll and the Company will make an announcement of the poll result. Huaneng Group, HIPDC and their respective Associates will abstain from voting in the EGM in respect of the ordinary resolutions to approve the Acquisition (including the Transfer Agreements). Notice of the EGM is set out on pages 65 to 71 in this circular.

A reply slip and a form of proxy for use by the Independent Shareholders at the Extraordinary General Meeting are enclosed with this circular. Whether or not you intend to attend the meeting in person, you are requested to complete and return the reply slip in accordance with the instructions printed thereon to the registered office of the Company at West Wing, Building C, Tianyin Mansion, 2C, Fuxingmennan Street, Xichang District, Beijing, PRC as soon as possible but in any event by 27th November, 2004. The enclosed form of proxy should be completed and returned to the Company’s H Share Registrar, Hong Kong Registrars Limited, at Room 1901-5, 19/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong or the registered office of the Company in accordance with the instructions printed thereon as soon as practicable and in any event by not later than 24 hours before the time appointed for the holding of the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting should you so wish.

9. RECOMMENDATION

According to the requirements of the Hong Kong Listing Rules, the Independent Directors will advise the Independent Shareholders in connection with the Acquisition (including the Transfer Agreements). Rothschild has been appointed as an independent financial adviser to advise the Independent Directors and the Independent Shareholders with respect to the fairness and reasonableness of the Acquisition (including the Transfer Agreements).

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LETTER FROM THE BOARD

The Independent Directors, having taken into account the advice of Rothschild, consider the terms of the Transfer Agreements to be fair and reasonable insofar as the Shareholders are concerned and consider the transaction contemplated by the Transfer Agreements to be in the interests of the Company and its Independent Shareholders. Accordingly, the Independent Directors recommend that the Independent Shareholders vote in favour of the resolutions to approve the Acquisition and the Transfer Agreements at the EGM.

10. OTHER INFORMATION

Your attention is also drawn to the letter from the Independent Directors and the letter from Rothschild, which sets out its advice to the Independent Directors, and the additional information set out in the appendices of this circular.

Yours faithfully, For and on behalf of Huaneng Power International, Inc. Wang Xiaosong Vice Chairman

— 16 —

LETTER FROM THE INDEPENDENT DIRECTORS

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

Registered office: West Wing, Building C Tianyin Mansion 2C Fuxingmennan Street Xicheng District Beijing 100031 The People’s Republic of China

3rd November, 2004

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

We, the Independent Directors of Huaneng Power International, Inc., are advising the Independent Shareholders in connection with the Acquisition, details of which are set out in the letter from the Board contained in the circular (“Circular”) of the Company to the Shareholders dated 3rd November, 2004, of which this letter forms a part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

Under the Hong Kong Listing Rules, the Acquisition constitutes both a discloseable and a connected transaction for the Company. Accordingly, the Acquisition will require the approval of the Independent Shareholders at the EGM.

We wish to draw your attention to the letter of advice from Rothschild set out on pages 18 to 31 of the Circular. We have discussed the letter and the opinion contained in it with Rothschild.

Having considered, inter alia, the factors and reasons considered by, and the opinion of, Rothschild, as stated in its aforementioned letter, we consider the Acquisition to be fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend that the Independent Shareholders vote in favour of the ordinary resolutions in the Notice of EGM set out at the end of the Circular to be proposed at the EGM to be held on 17th December, 2004 and thereby approve the Acquisition and the Transfer Agreements.

Yours faithfully,

Gao Zongze Zheng Jianchao Qian Zhongwei Xia Donglin Liu Jipeng Independent Directors

— 17 —

LETTER FROM ROTHSCHILD

3 November 2004

To the Independent Directors and Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

We refer to our engagement to advise the Independent Directors and Independent Shareholders with respect to the Acquisition, details of which are contained in the circular of the Company dated 3 November 2004 to its shareholders (the “Circular”) of which this letter forms a part. Rothschild has been appointed the independent financial adviser to advise the Independent Directors and Independent Shareholders as to: (a) whether or not the Transfer Agreements are on normal commercial terms (as defined under the Hong Kong Listing Rules) and the terms of the Transfer Agreements are fair and reasonable so far as the Independent Shareholders are concerned; (b) whether or not entering into the Transfer Agreements is in the interest of the Company and its shareholders as a whole; and (c) how the Independent Shareholders should vote at the EGM in respect of the Acquisition.

The terms used in this letter shall have the same meanings as defined elsewhere in the Circular unless the context otherwise requires.

As at the Latest Practicable Date, Huaneng Group owned approximately 51.98% of HIPDC, which in turn owned approximately 42.88% of the issued share capital of the Company. Pursuant to the Hong Kong Listing Rules, the Transfer Agreements constitute a discloseable and connected transaction for the Company, which will be subject to, inter alia , the Independent Shareholders’ approval at the EGM.

For the avoidance of doubt, we are not engaged to advise the Independent Directors in respect of the Shanghai Connected Transactions, details of which are set out in the section headed “7. Connected transactions under Shanghai Listing Rules” in the “Letter from the Board” of the Circular. The opinion of the Independent Directors thereof and the basis of their opinion are set out in the “Letter from the Independent Directors” contained in the Circular.

In formulating our recommendation, we have relied on the information and facts supplied to us by the Company and/or its advisers and have assumed that any representations made to us are true, accurate and complete in all material respects as at the date hereof and that they may be relied upon. We have also assumed that all information, representations and opinions contained or referred to in the Circular are fair and reasonable and have relied on them.

N M Rothschild & Sons (Hong Kong) Limited Telephone: (852) 2525-5333 16th Floor, Alexandra House Fax: (852) 2868-1728 16-20 Chater Road, Central (852) 2810-6997 Hong Kong SAR

— 18 —

LETTER FROM ROTHSCHILD

We have been advised by the Directors that no material facts have been omitted and we are not aware of any facts or circumstances which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company and/or its advisers. The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading. We consider that we have reviewed sufficient information to reach an informed view in order to provide a reasonable basis for our advice. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, the Target Power Plants or any of their respective subsidiaries and associated companies.

PRINCIPAL FACTORS AND REASONS

In arriving at our opinion, we have taken into consideration the following principal factors and reasons:

1. Background and rationale

The principal activities of the Company and its subsidiaries are to develop, construct, operate and manage large-scale coal-fired power plants throughout the PRC. The Board is of the view that the Acquisition follows the Company’s long-term business and development strategy of “placing equal emphasis on both coal fuel and other types of fuel”. In addition, the acquisition of Sichuan Hydro Power would enable the Company to make its first move into hydro power generation in Sichuan province, the province with the highest hydro power generation capacity in the PRC, and would allow the Company to adjust its generation structure from sole dependence on coal fired generation to having both coal fired and hydro power generation. Accordingly, the Company would to some extent diversify fuel sources for its overall generation portfolio and, through hydro power generation, reduce its reliance on coal and average fuel costs of generation. Furthermore, the acquisition of Pingliang Power Plant, which is a mine-mouth power plant, would bring about a decrease in fuel costs and enhance the Company’s profitability by effectively controlling the increase in fuel costs.

The Acquisition would enlarge the operational scale and geographical coverage of the Company as well as consolidate the Company’s position as one of the PRC’s largest independent power companies. Upon Closing, the Company’s installed generation capacity will increase by 1,146 megawatts (“MW”) on an equity basis (including Jialingjiang Company’s generation capacity of 34 MW which commenced operation in 2004), an increase in its total installed generating capacity from 19,012 MW to 20,158 MW on an equity basis, representing a percentage increase of approximately 6.0% and an increase in its capacity under construction of 389 MW on an equity basis.

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LETTER FROM ROTHSCHILD

The Acquisition would also enable the Company to enter the Sichuan and Gansu provinces for the first time, which are provinces located in the West China power market and have rapid growth in power demand. This is consistent with the Company’s marketing strategy of “consolidating in the coastal areas, expansion in Central China and entering into West China”.

2. The Acquisition

• (a) Assets to be acquired

On 26 October 2004, the Company entered into the Sichuan Hydro Power Transfer Agreement, pursuant to which the Company has conditionally agreed to acquire from Huaneng Group a 60% equity interest in Sichuan Hydro Power (including the earnings of Sichuan Hydro Power generated from 1 August 2004 proportional to 60% of its registered capital) for a consideration of RMB1,219 million (equivalent to approximately HK$1,150 million) (the “Sichuan Hydro Power Consideration”). On 26 October 2004, the Company also entered into the Pingliang Power Plant Transfer Agreement, pursuant to which the Company has conditionally agreed to acquire from Huaneng Group a 65% equity interest in Pingliang Power Plant (including the earnings of Pingliang Power Plant generated from 1 July 2004 proportional to 65% of its registered capital) for a consideration of RMB806 million (equivalent to approximately HK$760 million) (the “Pingliang Power Plant Consideration”).

In addition, we note that the Company has been informed that Huaneng Group is prepared to transfer its remaining 40% in Sichuan Hydro Power to Huaneng New Energy.

Set out below is a summary of certain financial and operational information relating to the Target Power Plants. The financial information is extracted from the section headed “6. Selected financial information of the Target Power Plants” in the “Letter from the Board” of the Circular.

		Installed
		capacity on							Net asset
		an equity							value
		basis		Sales		Net profit / (loss)			(RMB
	Location	(MW)	(RMB million)			_(RMB _	million)		million)
					For the			For the	As at
			**For the **	financial	latest	For the financial		latest	the latest
		As at	**year **	ended	available	year ended		available	available
		31 July	31 December		period in	31 December		period in	date in
		2004	2002	2003	2004*	2002	2003	2004*	2004*
Sichuan Hydro Power	Sichuan	366	423.0	494.6	410.8	105.5	149.0	128.1	1,281.1
Pingliang Power Plant	Gansu	780	543.4	939.5	740.0	(116.9)	114.6	163.4	725.4

• Seven months ended 31 July 2004 (or as at 31 July 2004) for Sichuan Hydro Power and six months ended 30 June 2004 (or as at 30 June 2004) for Pingliang Power Plant

— 20 —

LETTER FROM ROTHSCHILD

From our discussions with the management of the Company, we understand that Sichuan Hydro Power experienced a positive growth trend in sales and net profit for the two financial years ended 31 December 2003 and 7 months ended 31 July 2004 primarily as a result of increase in on-grid electricity volume, as well as the decrease in financial expense in 2004. With respect to Pingliang Power Plant, the positive growth trend in sales for the financial year ended 31 December 2003 and the six months ended 30 June 2004 was mainly attributable to a combination of increase in on-grid electricity volume and tariff. The net loss in 2002 was primarily due to the fact that only two generators were operational in 2002 as the third and fourth generators commenced operation in 2003 while the increase in sales volume for 2003 and the first half of 2004 resulted in improved efficiency and a corresponding positive growth trend in net profit.

(b) Basis of the consideration

The Transfer Agreements were entered into after arm’s length negotiation among the Company, Huaneng Group and their respective financial advisers, taking into account various factors, including the market environments, the technical and operating conditions of the Target Power Plants, the earnings potential of the Target Power Plants and their ability to generate cash flow. The Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration, which will be satisfied as to 100% by the Company’s cash-on-hand, were determined with reference to, inter alia , the asset appraisal reports prepared by Zhonghua using the replacement cost approach. However, given that Zhonghua is a qualified asset appraisal firm in the PRC which does not carry on such business in Hong Kong, we have not relied on its valuation in arriving at our opinion.

(c) Valuation of the Target Power Plants

Based on the Sichuan Hydro Power Transfer Agreement and information provided by the Company, the enterprise value (the “EV”) of Sichuan Hydro Power (only relating to the installed generation capacity but excluding Jialingjiang Company’s generation capacity of 34MW which commenced operation in 2004) attributable to the interests to be acquired by the Company would be approximately RMB2,414 million, equivalent to the sum of the Sichuan Hydro Power Consideration of RMB1,219 million (equivalent to approximately HK$1,150 million), of which an amount of RMB1,033 million of the Sichuan Hydro Power Consideration relates to the purchase price for installed generation capacity while RMB186 million relates to the purchase price for capacity under construction (determined by investment cost-to-date), and the aggregate net debt of Sichuan Hydro Power (only relating to the installed generation capacity and excluding net debt attributable to Jialingjiang Company and Fujiang Company) attributable to interests to be acquired by the Company as at 31 December 2003.

— 21 —

LETTER FROM ROTHSCHILD

We list below the multiples for the Sichuan Hydro Power Interest based on the Sichuan Hydro Power Consideration for installed generation capacity under the Sichuan Hydro Power Transfer Agreement:

• an EV/earnings before interest, tax, depreciation and amortisation (“EBITDA”) multiple of approximately 8.6 times, based on the EBITDA attributable to the Sichuan Hydro Power Interest for the financial year ended 31 December 2003 of approximately RMB282.3 million;

• an EV/MW of approximately RMB6.8 million, based on the equity installed generation capacity of 355MW (excluding Jialingjiang Company’s generation capacity of 34MW which commenced operation in 2004) attributable to the Sichuan Hydro Power Interest;

• a price to earnings multiple of approximately 10.9 times, based on the net profit of Sichuan Hydro Power attributable to the Sichuan Hydro Power Interest for the financial year ended 31 December 2003 of approximately RMB94.7 million; and

• a price to net asset value (“NAV”) ratio of approximately 1.8 times, based on the aggregate NAV of Sichuan Hydro Power attributable to the Sichuan Hydro Power Interest as at 31 December 2003 of approximately RMB572.4 million.

Based on the Pingliang Power Plant Transfer Agreement and information provided by the Company, the EV of Pingliang Power Plant attributable to Huaneng Group would be approximately RMB2,980 million, equivalent to the sum of the Pingliang Power Plant Consideration of RMB806 million (equivalent to approximately HK$760 million) and the aggregate net debt of Pingliang Power Plant attributable to Huaneng Group as at 31 December 2003.

We list below the multiples for the Pingliang Power Plant Interest based on the Pingliang Power Plant Consideration under the Pingliang Power Plant Transfer Agreement:

• an EV/EBITDA multiple of approximately 9.0 times, based on the EBITDA of Pingliang Power Plant attributable to Huaneng Group for the financial year ended 31 December 2003 of approximately RMB331.6 million;

• an EV/MW of approximately RMB3.8 million, based on the equity installed capacity of 780 MW of Pingliang Power Plant attributable to Huaneng Group;

• a price to earnings multiple of approximately 10.8 times, based on the net profit of Pingliang Power Plant attributable to Huaneng Group for the financial year ended 31 December 2003 of approximately RMB74.5 million; and

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LETTER FROM ROTHSCHILD

• a price to NAV ratio of approximately 2.2 times, based on the aggregate NAV of Pingliang Power Plant attributable to Huaneng Group as at 31 December 2003 of approximately RMB363.5 million.

We have analysed the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration by reviewing: (a) the trading multiples of listed companies comparable to the Acquisition; and (b) the transaction multiples of recent acquisitions of electricity power generation companies in the PRC.

In assessing the fairness of the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration, we are of the view that the analysis of the EV/EBITDA multiple versus those of comparable listed companies and comparable transactions is the most important and appropriate valuation benchmark. Due to its common use as a valuation benchmark in the electric power generation industry, we have also compared the EV/MW multiple of the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration with those of comparable listed companies and comparable transactions. In addition, we have reviewed the price/earnings ratio and the price/NAV ratio of the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration versus those of comparable listed companies and comparable transactions, for supplemental crosschecking purposes.

(i) Comparable company analysis

Since the revenue of the Target Power Plants is derived from their electric power generation business in the PRC, the comparable companies we have chosen are listed power companies which are primarily focused on electric power generation in the PRC. The companies which we have identified under the above selection criteria are PRC power generation companies primarily listed on the Stock Exchange, the Shanghai Stock Exchange and the Shenzhen Stock Exchange, some of which are listed on more than one stock exchange. It should be noted that the Shanghai Stock Exchange and the Shenzhen Stock Exchange are divided into the A-share and B-share markets, which are two separate markets with different regulations and restrictions. The shares traded on the A-share market can only be invested in by domestic investors and qualified foreign institutional investors (with certain trading and ownership restrictions) whereas shares traded on the B-share market are open for investment by both international and domestic investors. We consider that the trading multiples of companies traded solely on an A-share market in the PRC are not an appropriate benchmark for the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration given that trading in the PRC A-share markets is highly restricted. It should also be noted that trading in the PRC B-share markets is relatively inactive and the total market capitalisation is small. Accordingly, we consider the trading multiples of the B-share electric power generation companies less comparable for our valuation purpose.

— 23 —

LETTER FROM ROTHSCHILD

Based on the above selection criteria, we set out in the following table the relevant ratios of the selected comparable listed companies based on their respective share prices as at the Latest Practicable Date and their latest published audited full year financial statements.

	EV(1)/	EV(1)/	Price(2)/	Price(2)/
Company name	EBITDA(3)	MW(4)	earnings(5)	NAV(6)
		(RMB
	(Times)	million)	(Times)	(Times)
Primary comparables
Hong Kong listed comparable
companies(7)
Beijing Datang Power Generation
Co. Ltd.	9.6	5.9	18.7	2.2
Huadian Power International Corp.
Ltd.	6.9	3.3	13.5	1.5
The Company	7.6	5.4	13.8	2.2
China Resources Power Holdings
Co. Ltd. (“CR Power”)(8)	19.3	12.6	28.7	1.9
Average	10.8	6.8	18.7	1.9
Average (excluding CR Power)(8)	8.0	4.9	15.3	2.0
Secondary comparables
B-shares companies
Guangdong Electric Power
Development Co. Ltd	4.9	5.2	10.5	1.5
Huadian Energy Co. Ltd(9)	8.4	2.8	18.9	1.1
Shenzhen Nanshan Power Station
Co. Ltd	6.7	5.3	9.2	2.9
Zhejiang Southeast Electric Power
Co. Ltd	6.6	5.5	17.6	1.8
Average	6.6	4.7	14.0	1.8
Sichuan Hydro Power
Consideration(10)	8.6	6.8	10.9	1.8
Pingliang Power Plant
Consideration	9.0	3.8	10.8	2.2

Sources: Bloomberg and latest published audited full year financial statements of the relevant companies available on the Latest Practicable Date

Notes:

(1) EV of a company refers to the sum of its market capitalisation as at the Latest Practicable Date and its net indebtedness as per its latest published audited full year financial statements available on the Latest Practicable Date.

— 24 —

LETTER FROM ROTHSCHILD

• (2) Price refers to the market capitalisation based on the closing price of a Hong Kong listed power company with main operations in the PRC as quoted on the Stock Exchange or the closing price of the B-shares of the relevant company on the Latest Practicable Date and the total number of shares in issue as at the year-end date according to the relevant company’s latest published audited full year financial statements. For companies which also have an A-share listing, their A-share stock prices were not used in the above calculation of market capitalisations.

• (3) EBITDA refers to the earnings before interest, tax, amortisation and depreciation expenses as per the latest published audited full year financial statements of the relevant company available on the Latest Practicable Date.

• (4) MW refers to the net installed capacity in megawatts of the respective companies as at the year-end date according to the relevant company’s latest published audited full year financial statements.

• (5) Earnings refer to net profit excluding extraordinary items as per the latest published audited full year financial statements of the relevant company available on the Latest Practicable Date.

• (6) NAV refers to net asset value as per the latest published audited full year financial statements of the relevant company available on the Latest Practicable Date.

• (7) Hong Kong listed comparable companies refers to Hong Kong listed power companies with main operations in the PRC and excludes China Power International Development Limited which listed on the Stock Exchange on 15 October 2004 as it is still under price stabilisation.

• (8) CR Power is considered less comparable to the Target Power Plants than other H-share power generation companies as it is trading at significantly higher multiples, in terms of EV/EBITDA, EV/MW and price/earnings, due to the fact that CR Power has a much smaller asset base and is expected to have a much higher growth ratio after its power generation assets under construction and development have become operational in the future.

• (9) Huadian Energy Co. Ltd is formerly known as Heilongjiang Electric Power Co. Ltd.

• (10) Computation of multiples for the Sichuan Hydro Power Consideration is based on operational generation capacity only and excludes purchase price, enterprise value, EBITDA, MW, earnings and net assets respectively attributable to capacity under construction at Jialingjiang Company (including the 34MW which commenced operations in 2004) and Fujiang Company.

• (11) An exchange rate of RMB8.28 = US$1.00 has been used.

— 25 —

LETTER FROM ROTHSCHILD

As illustrated above, the EV/MW multiple of approximately RMB6.8 million/MW for the Sichuan Hydro Power Consideration is higher than the range and average trading multiples of the Hong Kong listed comparable companies (excluding CR Power) as most of the generation assets of the comparable companies are coal fired power plants which typically have lower EV/MW multiples than hydro plants. The EV/MW multiple of approximately RMB3.8 million/MW for the Pingliang Power Plant Consideration is within the range and lower than the average trading multiples of the Hong Kong listed comparable companies (excluding CR Power). The price/earnings multiple of approximately 10.9 times and 10.8 times for the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration respectively are lower than the respective ranges and average trading multiples of the Hong Kong listed comparable companies (excluding CR Power).

In terms of EV/EBITDA, the multiples for the Sichuan Hydro Power Consideration and Pingliang Power Plant Consideration of approximately 8.6 times and 9.0 times respectively and price/NAV multiple of approximately 1.8 times and 2.2 times respectively are within the respective ranges of and in line with the respective averages of the trading multiples of the Hong Kong listed comparable companies (excluding CR Power).

In addition, we have compared the aforementioned acquisition multiples under the Transfer Agreements with the trading multiples of the B-share comparable companies for supplemental comparison purposes. The EV/EBITDA and EV/MW multiples for the Sichuan Hydro Power Consideration are both higher than the ranges and averages of the respective trading multiples of the B-share comparable companies, whereas the price/earnings multiple is within the range and lower than the average trading multiples, and the price/NAV multiple is within the range and in line with the average trading multiples.

The EV/MW and price/earnings multiples for the Pingliang Power Plant Consideration are both within the ranges and lower than the averages of the respective trading multiples of the B-share comparable companies, whereas the EV/EBITDA multiple is higher than the range and the average trading multiples, and the price/NAV multiple is within the range and higher than the average trading multiples.

(ii) Comparable transaction analysis

Our analysis also includes research into acquisition transactions in the Chinese electric power generation sector which have taken place since the recent power industry reform started in the PRC in early 2002. In selecting the comparable transactions, we have focused on material transactions and have taken into account the availability of reliable transaction information and

— 26 —

LETTER FROM ROTHSCHILD

comparability of the power plants acquired with the Target Power Plants. Due to the inherent differences in the economics of hydro versus thermal plants, we have analysed the Sichuan Hydro Power Consideration and Pingliang Power Plant Consideration separately. The following table sets out our findings:

Comparable transaction analysis

			Net
			installed		EV(1)/	EV(1)/	Price(2)/	Price(2)/
Date	Seller	Buyer	capacity	Fuel	EBITDA(3)	MW	earnings(3)	NAV
						(RMB
			(MW)		(Times)	million)	(Times)	(Times)
Hydro power plants
08/08/2003(4)	China Changjiang	China Yangtze	2,800	Hydro	n.a.	6.7	n.a.	n.a.
	Sanxia	Power Co.
	Engineering
	Development Co.
Sichuan Hydro Power Consideration					8.6	6.8	10.9	1.8
Coal fired power plants
16/04/2004(5)	Huaneng Group	The Company	3,036	Coal	5.7	3.8	8.7	1.7
	& HIDPC
05/06/2003(6)	Huaneng Group	The Company	570	Coal	6.8	2.9	9.7	4.8
09/05/2003(7)	China Huadian	Shandong	480	Coal	9.1	4.3	18.4	1.0
	Corporation	International
		Power
		Development
		Co. Ltd
16/11/2002(8)	Huaneng Group	The Company	390	Coal	4.2	1.8	7.2	3.2
09/05/2002(9)	Huaneng Group	The Company	1,687	Coal	4.5	2.3	8.1	2.0
Average					6.1	3.0	10.4	2.5
Pingliang Power Plant Consideration					9.0	3.8	10.8	2.2

Source: Companies’ public filings available on the Latest Practicable Date

n.a.: not available

Notes:

• (1) EV refers to the sum of the equity purchase consideration paid in an acquisition and the proportional net indebtedness of the target power plant(s) as at the latest full year audited financial year end date prior to the acquisition.

• (2) Price refers to the equity purchase consideration paid in an acquisition.

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LETTER FROM ROTHSCHILD

• (3) EBITDA and earnings based on the latest full year audited financials of the relevant target power plants before the acquisition took place.

• (4) China Yangtze Power Company Limited acquired 100% in four hydro power generators in Hubei Province.

• (5) The Company acquired 40% of Hebei Hanfeng Power Generation Limited Liability Company in Hebei Province, 90% of Jinggangshan Huaneng Power Generation Limited Liability in Jiangxi Province, 55% of Huaneng Hunan Yueyang Power Generation Limited Liability Company in Hunan Province, 60% in Huaneng Chongqing Luohuang Power Generation Limited Liability Company in Chongqing Province and 100% of Huaneng International Power Development Corporation Yingkou Branch Company in Liaoning Province.

• (6) The Company acquired 100% of China Huaneng Group Xindian Power Plant in Shandong Province, 60% in Shanxi Huaneng Yushe Power Limited Liability Company in Shanxi Province, and 55% of Henan Huaneng Qinbei Power Generation Limited Liability Company in Henan Province.

• (7) Shandong International Power Development Company Limited acquired 80% in Sichuan Guangan Power Generation Company Limited in Sichuan Province.

• (8) The Company acquired 30% in Shanghai Shidongkou Power Limited Company in Shanghai and 5% of Suzhou Industrial Park Huaneng Power Limited Liability Company in Jiangsu Province.

• (9) The Company acquired 70% in Shanghai Shidongkou Power Limited Company in Shanghai, 70% in Suzhou Industrial Park Huaneng Power Limited Liability Company in Jiangsu Province, 44.16% in Jiangsu Huaneng Huaiyin Power Limited Company in Jiangsu Province, and 100% of China Huaneng Group Company Zhejiang Changxing Power Plant in Zhejiang Province.

Our review of the EV/MW multiple of approximately RMB6.8 million/MW for the Sichuan Hydro Power Consideration is comparable to the precedent transaction. We note that the Pingliang Power Plant Consideration multiples of approximately 9.0 times for EV/EBITDA, RMB3.8 million/MW for EV/MW and 10.8 times for price/earnings indicate that the aforementioned multiples are higher than the respective averages but are within the respective ranges of the precedent transactions. We are of the view that the higher multiples of the Pingliang Power Plant Consideration are mainly attributable to the fact that the MW weighted average age of the Pingliang Power Plant is only approximately 2.2 years as compared to the average age of approximately 3.4 to 10.0 years for the precedent transactions. Furthermore, two of the four units at Pingliang Power Plant commenced commercial operations in June 2003 and November 2003 respectively, and hence the financial results of the Pingliang Power Plant for the financial year ended 31 December 2003 did not reflect the full earnings capability of the four current operating units on which the Pingliang Power Plant Consideration was priced, resulting in higher acquisition multiples. The price/NAV multiple of approximately 2.2 times for the Pingliang Power Plant Consideration is lower than the average multiple of the precedent transactions,

— 28 —

LETTER FROM ROTHSCHILD

consistent with the fact that the Pingliang Power Plant is a younger plant than those in the precedent transactions. In addition, the Pingliang Power Plant is a mine-mouth power plant, with lower transportation cost of coal and higher reliability of coal supply than some other coal fired plants, alleviating two major financial and operational risks many coal fired plants in China are currently exposed to.

On the above basis, we consider the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration under the respective Transfer Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

(d) Conditions of the Acquisition

Completion of the Transfer Agreements is conditional upon fulfilment of various conditions including the approval of the Acquisition by the Independent Shareholders at the EGM. Further details of the other conditions precedent to the completion of the Acquisition are set out in the section headed “2. Transfer Agreements” in the “Letter from the Board” of the Circular.

3. Potential financial effects

This section sets out various analyses on the potential financial effects of the Acquisition, which were prepared based on the audited financials of the Company and its subsidiaries (the “Group”) for the financial year ended 31 December 2003 and the unaudited financials of the Group for the six months ended 30 June 2004, and the unaudited financials of Sichuan Hydro Power and its subsidiaries for the financial year ended 31 December 2003 and the seven months ended 31 July 2004, as well as the unaudited financials of Pingliang Power Plant for the financial year ended 31 December 2003 and the six months ended 30 June 2004, which were prepared based on the International Financial Reporting Standards, further details of which are summarised in the section headed “6. Selected financial information of the Target Power Plants” in the “Letter from the Board” of the Circular. Upon completion of the Acquisition, the Target Power Plants will become subsidiaries of the Company, and accordingly their financials will be consolidated into the financial statements of the Group. It should be noted that the figures and financial effects shown in this section are for illustrative purposes only.

(a) Net income

The net profit (before taking into consideration any adjustments relating to the Acquisition) of the Target Power Plants for the financial year ended 31 December 2003 was approximately RMB149.0 million and approximately RMB114.6 million for Sichuan Hydro Power and Pingliang Power Plant respectively, and the Company is acquiring a 60% equity interest and a 65% equity interest in the Sichuan Hydro Power and Pingliang Power Plant respectively.

(b) Net assets

Based on our discussion with the management of the Company, we understand that there will be no material change to the NAV of the Group as a result of the Acquisition.

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LETTER FROM ROTHSCHILD

• (c) Net gearing

The total consideration of the Acquisition of approximately RMB2,025 million will be satisfied by cash payment upon completion of the Acquisition, which would add to the Group’s net debt position of approximately RMB12,552 million as at 30 June 2004. In addition, based on the information provided by the Company, the Group is acquiring the Sichuan Hydro Power with net debt of approximately RMB3,436 million as at 31 July 2004 and the Pingliang Power Plant with net debt of approximately RMB3,079 million as at 30 June 2004.

SUMMARY

Having considered the above principal factors and reasons, we draw your attention to the following in arriving at our conclusion:

• (i) the Acquisition would enlarge the operational scale and increase the geographical coverage of the Company in the PRC and is in line with the Company’s long-term business and development strategy;

• (ii) the Acquisition would enable the Company to make its first move into hydro power generation which would allow the Company to adjust its generation structure from sole dependence on coal fired generation to both coal fired and hydro generation, and would allow the Company to diversify to some extent the fuel sources for its overall generation portfolio and reduce its reliance on coal and average fuel costs of generation;

• (iii) the acquisition multiples for the Sichuan Hydro Power Consideration and the Pingliang Power Plant Consideration are considered to be at a reasonable level comparing to the trading multiples of comparable companies, having considered the differences in nature of the generation assets, as well as plant specific operational factors;

• (iv) the EV/MW multiple for the Sichuan Hydro Power Consideration is comparable to the precedent transaction while the multiples for Pingliang Power Plant Consideration are higher than the respective averages but are within the respective ranges of precedent transactions, and considered to be at a reasonable level having considered the prevailing economic environment and conditions for each transaction, as well as plant specific operational factors; and

• (v) the Company is acquiring a 60% equity interest and a 65% equity interest in the Sichuan Hydro Power and Pingliang Power Plant respectively for which the net income for Sichuan Hydro Power and Pingliang Power Plant for the financial year ended 31 December 2003 was approximately RMB149.0 million and RMB114.6 million respectively, and the aggregate net debt was approximately RMB3,436 million and RMB3,079 million as at the respective latest available date in 2004 for the Sichuan Hydro Power and Pingliang Power Plant respectively.

— 30 —

LETTER FROM ROTHSCHILD

RECOMMENDATION

Having considered all the above principal factors and reasons, we consider that (a) the Transfer Agreements are on normal commercial terms (as defined under the Hong Kong Listing Rules) and the terms of the Transfer Agreements are fair and reasonable so far as the Independent Shareholders are concerned; and (b) entering into the Transfer Agreements is in the interest of the Company and its shareholders as a whole. Accordingly, we advise the Independent Directors to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to approve the Acquisition as detailed in the notice of the EGM which is set out at the end of the Circular.

Yours very truly, For and on behalf of N M Rothschild & Sons (Hong Kong) Limited Liu Xiaofeng

Director

— 31 —

PROPERTY VALUATION REPORT

APPENDIX I

==> picture [184 x 78] intentionally omitted <==

==> picture [73 x 73] intentionally omitted <==

3 November, 2004

The Directors

Huaneng Power International, Inc.

West Wing, Building C, Tianyin Mansion,

2C Fuxingmennan Street, Xicheng District, Beijing 100031, The People’s Republic of China

Dear Sirs,

In accordance with your instructions for us to value the property interests to be acquired by Huaneng Power International, Inc. (the “Company”) in the People’s Republic of China (“the PRC”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the open market value of such property interests as at 31 July 2004.

Our valuation is our opinion of the open market value which we would define as intended to mean - “the best price at which the sale of an interest in property might reasonably be expected to have been completed unconditionally for cash consideration on the date of valuation assuming:

• (a) a willing seller;

• (b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;

• (c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

• (d) that no account is taken of any additional bid by a special purchaser with a special interest; and

• (e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

— 32 —

APPENDIX I

PROPERTY VALUATION REPORT

In valuing the property in the PRC, we have adopted a combination of the market and depreciated replacement cost approaches in assessing the land portions of the property and the buildings and structures standing on the land respectively. Hence, the sum of the two results represents the market value of the property as a whole. In the valuation of the land portions, reference has been made to the standard land price and the sales evidence as available to us in the locality. Due to the nature of the buildings and structures cannot be valued on the basis of open market value, they have therefore been valued on the basis of their depreciated replacement cost. The depreciated replacement cost approach considers the cost to reproduce or replace in new condition the property appraised in accordance with current construction costs for similar property in the locality, with allowance for accrued depreciation as evidenced by observed condition or obsolescence present, whether arising from physical, functional or economic causes. The depreciated replacement cost approach generally furnishes the most reliable indication of value for property in the absence of a known market based on comparable sales.

Our valuation has been made on the assumption that the owner sells the property interests on the open market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property interests.

We have provided with extracts from title documents relating to such property interest. We have not, however, searched the original documents to verify ownership or to verify existence of any lease amendment which do not appear on the copies handed to us. All documents and leases have been used for reference only. All dimensions measurements and areas are approximations.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out a structural survey nor have we inspected woodwork or other parts of the structures which are covered, unexposed or inaccessible and we are therefore unable to report that any such parts of the property interests are free from defect.

We have relied to a considerable extent on information provided by you and have accepted advise given to us by you on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, site and floor areas and in the identification of those property interests in which the Group has a valid interest.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances restrictions and outgoings of an onerous nature which could affect their values.

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PROPERTY VALUATION REPORT

APPENDIX I

Unless otherwise stated, all money amounts stated are in Renminbi. The exchange rate used in valuing the property interests in the PRC on at 31 July 2004 was HK$1=RMB1.06. There has been no significant fluctuation in exchange rate between that date and the date of this letter.

We enclose herewith a summary of our valuation and the valuation certificate.

Yours faithfully,

For and on behalf of

VIGERS APPRAISAL & CONSULTING LTD Raymond Ho Kai Kwong,

Registered Professional Surveyor

MRICS, MHKIS MSc(e-com) Executive Director

Note: Raymond K.K. Ho, Chartered Surveyor, MRICS, MHKIS has extensive experience in undertaking valuations of properties in Hong Kong and Macau and has over ten years’ experience in the valuation of properties in the PRC.

— 34 —

PROPERTY VALUATION REPORT

APPENDIX I

SUMMARY OF VALUATION

Property 1. Land, various buildings and structures of Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company, Sichuan Province, The PRC. 2. Land, various buildings and structures of Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company, Sichuan Province, The PRC. 3. Land, various buildings and structures of Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company, Sichuan Province, The PRC. 4. Various structures of Sichuan Huaneng Fujiang Hydro Power Limited Liability Company, Sichuan Province, The PRC. 5. Land, various buildings and structures of Sichuan Huaneng Kangding Hydro Power Limited Liability Company, Sichuan Province, The PRC. 6. Land, various buildings and structures of Sichuan Huaneng Mingtai Power Limited Liability Company, Sichuan Province, The PRC. 7. Various structures of Sichuan Huaneng Jialingjiang Hydro Power Limited Liability Company, Sichuan Province, The PRC. 8. Land, various buildings and structures of Gansu Huaneng Pingliang Power Generation Limited Liability Company, Gansu Province, The PRC. 9. Various buildings of Sichuan Huaneng Hydro Power Development Limited Liability Company, Sichuan Province, The PRC. Total:

Capital value in existing state as at 31 July 2004 (RMB) No commercial value 57,060,000 No commercial value No commercial value 500,000 290,730,000 No commercial value 41,210,000 No commercial value

389,500,000

— 35 —

PROPERTY VALUATION REPORT

APPENDIX I

VALUATION CERTIFICATE

				Capital value in
			Particulars of	existing state as at
	Property	Description	occupancy	31 July 2004
1.	Land, various	The property comprises 28 parcels of land with	The property is	No commercial value
	buildings and	a site area of approximately 655,199 sq.m. and a	occupied as
	structures of	number buildings and structures erected thereon.	power plant.
	Sichuan Huaneng
	Baoxinghe Power	The buildings and structures of the property has
	Joint Stock Limited	a total gross floor area of approximately 37,770
	Company,	sq.m. Major buildings and structures on the site
	Sichuan Province,	include the power station building, tunnel, water
	The PRC.	gates and transformer station.
		These buildings and structures of the property
		was completed between 1996 to 2003.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate (document no.: (2004) 5294 , (96) 263 , (1999) -006 , (1999) -009 , (1999) -004 , (1999) -005 , (1999) -013 , (1999) -008 , (1999) -012 , (1999) -010 , (2000) 166 , (1999) -005 , (2000) 0427 , (2000) 0428 , (2001) 0472 , (2004) 21 , (2001) 0461 , (2001) 0467 , (2001) 0468 , (2001) 0474 , (2001) 0476 , (2001) 0469 , (2001) 0471 , (2001) 0466 , (2001) 0473 , (2001) 0462 , (2001) 0463 , (2001) 0464 ), the land use rights of the property is vested to Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company. 2. Pursuant to the Building Ownership Certificates (document nos.: 0045531 , 0045532 , 0045529 , 0045533 , 0045527 , 0045530 , 0045352 , 0045357 , 0045359 , 620 , 622 , 621 , 389 , 2422 , 2423 , 14041 , 14040 , 2421 , 0045360 ), the building ownership of the property is vested in Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company.

2. The depreciated replacement cost of the buildings and structures portion of the property as at 31 July 2004 was RMB 967,460,000 and the incurred construction cost in respect of construction in progress as at 31 July 2004 was RMB 263,300,000.

3. The land portion of the property is administratively allocated land in nature. As this portion of the property cannot be freely transferred in the open market, in valuing this portion of the property and buildings and structures thereon, we have attributed no commercial value to it.

4. Based on the assumption that the land portion of the property can be freely transferred in the open market , the capital value of the land portion of the property as at 31 July 2004 was as follows:

Nature	Capital Value
	(RMB)
Administratively allocated land	68,000,000
Granted Land	—
Total:	68,000,000

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PROPERTY VALUATION REPORT

APPENDIX I

			Capital value in
		Particulars of	existing state as at
Property	Description	occupancy	31 July 2004
Land, various	The property comprises 11 parcels of land with	The property is	RMB57,060,000
buildings and	a site area of approximately 65,763 sq.m. and a	occupied as
structures of	number buildings and structures erected thereon.	power plant.
Sichuan Huaneng
Taipingyi Hydro	The buildings and structures of the property has
Power Limited	a total gross floor area of approximately 55,044
Liability Company,	sq.m. Major buildings and structures on the site
Sichuan Province,	include the power station building, tunnel, water
The PRC.	gates and transformer station.
	These buildings and structures of the property
	was completed between 1991 to 2003.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate (document no.: (2004) 468 , (2004) 466 , (2004) 475 , (2004) 469 , (2004) 467 , (2004) 465 , (2004) 464 , (2004) 472 , (2004) 473 , (2004) 474 , (2001)

1149 ), the land use rights of the property is vested to Sichuan Huaneng Taipingyi Hydro Power Limited

Liability Company.

1. Pursuant to the Building Ownership Certificates (document nos.: 0875250, 0875253, 0875254, 0875251 , 438 , 439 , 440 , (1999) 0472 , (1999) 0486 , (1999) 0487 , (1999) 0497 , 0879714,

0879710, 0879717, 0879712 , 442 , 441 , 440 , (2000) 1169 , (1998) 1333 , (2000) 1170 , (2000) 1171 ), the building

ownership of the property is vested in Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company.

1. The depreciated replacement cost of the buildings and structures portion of the property as at 31 July 2004 was RMB 981,050,000 and the incurred construction cost in respect of construction in progress as at 31 July 2004 was RMB 1,810,000.

2. A portion of land of the property is administratively allocated land in nature. As this portion of the property cannot be freely transferred in the open market, in valuing this portion of the property and buildings and structures thereon, we have attributed no commercial value to it.

3. In valuing the granted land portion and buildings and structures erected thereon of the property, we have assumed that the aforesaid portion of the property can be freely transferred in the open market.

4. Based on the assumption that the land portion of the property can be freely transferred in the open market , the capital value of the land portion of the property as at 31 July 2004 was as follows:

Nature	Capital Value
	(RMB)
Administratively allocated land	6,200,000
Granted Land	4,400,000
Total:	10,600,000

— 37 —

PROPERTY VALUATION REPORT

APPENDIX I

Capital value in Particulars of existing state as at Property Description occupancy 31 July 2004 3. Land, various The property comprises 5 parcels of land with a The property is No commercial value buildings and site area of approximately 763,946 sq.m. and a occupied as structures of number buildings and structures erected thereon. power plant. Sichuan Huaneng Dongxiguan Hydro The buildings and structures of the property has Power Joint Stock a total gross floor area of approximately 41,755 Limited Company, sq.m. Major buildings and structures on the site Sichuan Province, include the power station building, tunnel, water The PRC. gates and transformer station. These buildings and structures of the property was completed between 1994 to 2002.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate (document no.: (2004) 0011114 , (2004) 1453 , (2004) 1452 , (2004) 1451 , 3330 ), the land

use rights of the property is vested to Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company.

1. Pursuant to the Building Ownership Certificates (document nos.: (2004) 001-2, 4#, (2004) 001-2, 5#, (2004) 001-2, 3#, (2004) 001-1, 6#, (2004) 001-1, 7#, (2004) 001-3, 11#, (2004) 001-3, 9#, (2004) 001-3, 10#, (2004) 001, 8#, (2004) 001-2, 1#, 2#, (2004) 001-3, 12#, 00168970 , 00168966 , 00168967 , 00168968 , 00168969 , 1097679

, 1097680 ), the building ownership of the property is vested in

Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company.

1. The depreciated replacement cost of the buildings and structures portion of the property as at 31 July 2004 was RMB 915,220,000.

2. The land portion of the property is administratively allocated land in nature. As this portion of the property cannot be freely transferred in the open market, in valuing this portion of the property and buildings and structures thereon, we have attributed no commercial value to it.

3. Based on the assumption that the land portion of the property can be freely transferred in the open market , the capital value of the land portion of the property as at 31 July 2004 was as follows:

Nature	Capital Value
	(RMB)
Administratively allocated land	56,720,000
Granted Land	—
Total:	56,720,000

— 38 —

PROPERTY VALUATION REPORT

APPENDIX I

Capital value in Particulars of existing state as at Property Description occupancy 31 July 2004 4. Various structures The property comprises various structures The property is No commercial value of Sichuan including tunnel, water gates and ancillary under Huaneng Fujiang facilities. construction. Hydro Power Limited Liability Company, Sichuan Province, The PRC.

Notes:

1. As advised by the Company, the structures of the property were constructed on various lots and the incurred construction cost in respect of construction in progress as at 31 July 2004 was RMB 287,660,000.

2. The land portion of the property is administratively allocated land in nature. As this portion of the property cannot be freely transferred in the open market, in valuing this portion of the property and buildings and structures thereon, we have attributed no commercial value to it.

— 39 —

PROPERTY VALUATION REPORT

APPENDIX I

			Capital value in
		Particulars of	existing state as at
Property	Description	occupancy	31 July 2004
Land, various	The property comprises 11 parcels of land with	The property is	No commercial value
buildings and	a site area of approximately 209,599 sq.m. and a	occupied as
structures of	number buildings and structures erected thereon.	power plant.
Sichuan Huaneng
Kangding Hydro	The buildings and structures of the property has
Power Limited	a total gross floor area of approximately 21,889
Liability Company,	sq.m. Major buildings and structures on the site
Sichuan Province,	include the power station building, tunnel, water
The PRC.	gates and transformer station.
	These buildings and structures of the property
	was completed in 2000.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate (document no.: (2002) 035 , (2002) 034 , (2002) 036 , (98) A00165 , (2002) 033 , (2002) 048 , (2004) 189 , (2004) 1227 , (2000) 1226 , (2002) 020 , (2004)

384 ), the land use rights of the property is vested to Sichuan Huaneng Kangding Hydro Power Limited

Liability Company.

1. Pursuant to the Building Ownership Certificates (document nos.: 02693 , 02693 , 02693 , 02693 , 02693 , 02693 ), the building ownership of

the property is vested in Sichuan Huaneng Kangding Hydro Power Limited Liability Company.

1. The depreciated replacement cost of the buildings and structures portion of the property as at 31 July 2004 was RMB 431,900,000 and the incurred construction cost in respect of construction in progress as at 31 July 2004 was RMB 98,200,000.

2. The land portion of the property is administratively allocated land in nature. As this portion of the property cannot be freely transferred in the open market, in valuing this portion of the property and buildings and structures thereon, we have attributed no commercial value to it.

3. Based on the assumption that the land portion of the property can be freely transferred in the open market , the capital value of the land portion of the property as at 31 July 2004 was as follows:

Nature	Capital Value
	(RMB)
Administratively allocated land	21,200,000
Granted Land	500,000
Total:	21,700,000

— 40 —

PROPERTY VALUATION REPORT

APPENDIX I

			Capital value in
		Particulars of	existing state as at
Property	Description	occupancy	31 July 2004
Land, various	The property comprises 3 parcels of land with a	The property is	290,730,000
buildings and	site area of approximately 90,378 sq.m. and a	occupied as
structures of	number buildings and structures erected thereon.	power plant.
Sichuan Huaneng
Mingtai Power	The buildings and structures of the property has
Limited Liability	a total gross floor area of approximately 10,696
Company,	sq.m. Major buildings and structures on the site
Sichuan Province,	include the power station building, tunnel, water
The PRC.	gates and transformer station.
	These buildings and structures of the property
	was completed between 1997 to 2001.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate (document no.: (2004) 145708 , (2004) 145709 , (2004) 145710 ), the land use rights of the property is vested to

Sichuan Huaneng Mingtai Power Limited Liability Company.

1. Pursuant to the Building Ownership Certificates (document nos.: (95) NO005839 ), the building ownership of the property is vested in Sichuan Huaneng Mingtai Power Limited Liability Company.

2. The depreciated replacement cost of the buildings and structures portion of the property as at 31 July 2004 was RMB 268,070,000.

3. In the course of valuation, we have assumed that the property the property can be freely transferable in the open market.

4. Based on the assumption that the land portion of the property can be freely transferred in the open market , the capital value of the land portion of the property as at 31 July 2004 was as follows:

Nature	Capital Value
	(RMB)
Administratively allocated land	—
Granted Land	22,660,000
Total:	22,660,000

— 41 —

PROPERTY VALUATION REPORT

APPENDIX I

Capital value in Particulars of existing state as at Property Description occupancy 31 July 2004 Various structures The property comprises various structures The property is No commercial value of Sichuan including mainly tunnel, water gate and occupied as Huaneng ancillary facilities. ancillary Jialingjiang Hydro facilities to Power Limited These structures of the property was completed power plant. Liability Company, between 2001 to 2004. Sichuan Province, The PRC.

Property

Notes:

1. The depreciated replacement cost of the structures portion of the property as at 31 July 2004 was RMB 277,790,000 and the incurred construction cost in respect of construction in progress as at 31 July 2004 was RMB 83,240,000.

2. The land portion of the property is administratively allocated land in nature. As this portion of the property cannot be freely transferred in the open market, in valuing this portion of the property and buildings and structures thereon, we have attributed no commercial value to it.

— 42 —

PROPERTY VALUATION REPORT

APPENDIX I

				Capital value in
			Particulars of	existing state as at
	Property	Description	occupancy	31 July 2004
8.	Land, various	The property comprises 27 parcels of land with	The property is	41,210,000
	buildings and	a site area of approximately 1,559,575 sq.m. and	occupied as
	structures of Gansu	a number buildings and structures erected	power plant.
	Huaneng Pingliang	thereon.
	Power Generation
	Limited Liability	The buildings and structures of the property has
	Company,	a total gross floor area of approximately
	Gansu Province,	1,313,710 sq.m. Major buildings and structures
	The PRC.	on the site include the power station building,
		chimneys, coal storage facilities and transformer
		station.
		These buildings and structures of the property
		was completed between 2001 to 2003.

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate (document no.: (2000) 1814 , (2000) 1811 , (2000) 1810 , (2000) 1809 , (2000) 1813 , (2000) 1812 , (2000) 1808 , (2000) 1807 , (2000) 1806 , (2000) 1805 , (2000)

1804 , (2000) 1803 , (2000) 1802 , (2000) 1801 , (2000) 1800 , (2000) 1799 , (2000) 1798 , (2000) 1797 , (2000) 1796 , (2000)

1795 , (2000) 1794 , (2000) 1793 , (2000) 1822 , (2000) 1821 , (2004) 0517 , (2004) 0602 , (2004) 0603 ), the land use rights of the property is

vested to Gansu Huaneng Pingliang Power Generation Limited Liability Company.

1. Pursuant to the Building Ownership Certificates (document nos.: 022567 , 022549 -022555, 022557 , 022562 -022566 , 022556 ,

8731 , 022560 , 022559 , 022558 , 022561 ), the building ownership of the property is vested in Gansu Huaneng Pingliang Power Generation Limited Liability Company.

1. The depreciated replacement cost of the buildings and structures portion of the property as at 31 July 2004 was RMB 1,040,180,000.

2. A portion of land of the property is administratively allocated land in nature. As this portion of the property cannot be freely transferred in the open market, in valuing this portion of the property and buildings and structures thereon, we have attributed no commercial value to it.

3. In valuing the granted land portion and buildings and structures erected thereon of the property, we have assumed that the aforesaid portion of the property can be freely transferred in the open market.

— 43 —

APPENDIX I

PROPERTY VALUATION REPORT

1. Based on the assumption that the land portion of the property can be freely transferred in the open market , the capital value of the land portion of the property as at 31 July 2004 was as follows:

Nature	Capital Value
	(RMB)
Administratively allocated land	192,030,000
Granted Land	1,570,000
Total:	193,600,000

— 44 —

PROPERTY VALUATION REPORT

APPENDIX I

Capital value in Particulars of existing state as at Property Description occupancy 31 July 2004 Various buildings The property comprises various buildings The property is No commercial value of Sichuan including mainly office buildings and dormitory occupied as Huaneng Hydro buildings. office and Power dormitory. Development The property has a gross floor area of Limited Liability approximately 10,083 sq.m.. Company, Sichuan Province, These buildings of the property was completed between 1997 to 2000. The PRC.

Notes:

1. Based on the assumption that the property can be freely transferred in open market, the value of the buildings of the property as at 31 July 2004 was RMB 74,600,000.

2. In the course of valuation, the building ownership certificate of these buildings of the property are being in the process of application. In this regard, we have attributed not commercial value to the property.

— 45 —

PLANT AND MACHINERY VALUATION

APPENDIX II

==> picture [184 x 78] intentionally omitted <==

==> picture [73 x 73] intentionally omitted <==

3 November, 2004

The Directors

Huaneng Power International, Inc. West Wing, Building C, Tianyin Mansion, 2C Fuxingmennan Street, Xicheng District, Beijing 100031, The People’s Republic of China

Dear Sirs,

In accordance with your instructions for us to value the plant machinery and equipment (collectively referred to as the “Machinery”) exhibited to us as being owned by various power generation plants (the “Plants”) and to be acquired by Huaneng Power International, Inc. (the “Company”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the fair market value in continued use of the Machinery as at 31 July, 2004.

Basis of Valuation

We have valued the Machinery on the basis of its fair market value in continued use which is defined as the estimated amount at which the subject assets in their continued use might be expected to be purchased and sold between a willing buyer and a willing seller, neither being under compulsion, each having a reasonable knowledge of all relevant facts and with equity to both, and contemplating the retention of the assets in their present existing use as part of an on-going business.

The opinion of fair market value is not necessarily intended to represent the amount that might be realized from piecemeal disposition of the subject Machinery in the open market or from alternative use of the Machinery.

In forming our opinion of the fair market value in continued use, we have assumed that the Machinery will continue in its present existing use in the business of the Company for which it was designed, built and erected, subject to potential profitability of the business.

Assets Appraised

The fixed assets subject of this appraisal, as per the list provided to us, consist of machinery and equipment, motor vehicles and transport equipment, and electronics equipment utilized in electric power generation and operated by eight (8) hydro-electric power plants, one (1) coal-fired power plant and one (1) hydro-electric power plant under construction.

— 46 —

APPENDIX II

PLANT AND MACHINERY VALUATION

Hydro-electric power plant is one of the cleanest producers of renewable energy source and designed to operate for decades. It converts the kinetic energy contained in falling water held in a reservoir or lake behind a dam into electricity using a water turbine. A water turbine is a rotary engine that takes energy from moving water. The force of water being released from the reservoir through the dam spins the blade of the water turbine, which rotation is transferred to a connected generator that produces electricity. The amount of electric power that can be generated is dependant on the vertical distance through which water falls, called “head” and the flow rate of water measured as volume per unit time. There are different types of hydro-electric power plants namely: high head, low head and pumped storage.

Coal-fired power plant is an energy source that produces electricity by the process of heating water in a boiler using coal as fuel. The steam that is produced is under tremendous pressure flows into a steam turbine that spins the connected generator to produce electricity.

Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company

Yucheng Downstream Plant

The hydro-electric power plant is a low head type with a total rated output of 60 MW was fully operated in 1996. It consists of 3 x 20 MW hydro-electric generating sets utilizing a vertical Kaplan type reaction water turbine. The designed head and flow rate is 15.5 m and 150 m[3] /sec, respectively. The generator is a conventional suspended shaft type. The concrete gravity type dam measures approximately 248 m L x 31 m H x 12.5 m W (top), and equipped with radial type gates for water control. Further particulars of each equipment are as follows:

Water Turbine (3-units)

Origin : China Model : ZZ569-LH-500 Output : 20,725 KW Head (design) : 15.5 m Head (max.) : 17.4 m Flow Rate (design) : 149.61 m[3] /sec Specific Speed : 115.4 rpm Runaway Speed : 310 rpm Generator (3-units) Origin : China Model : SF-20-52/7250 Rated Power : 25,000 KVA (20 MW) Rated Voltage : 10.5 KV Rated Current : 1,375 amperes Power Factor : 0.80 Frequency : 50 hz Number of Phases : 3 Speed (max) : 310 rpm

— 47 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Xiao Guanzi Upstream Plant

This low head type hydro-electric power plant, which fully operated in 2001, has a total rated output of 160 MW. The generating sets consist of 4 x 40 MW hydro-electric units. The water turbine is a vertical Francis type reaction turbine. The designed head and flow rate is 136.5 m and 32.5 m[3] /sec, respectively. The generator is a conventional suspended shaft type. The concrete gravity type dam, which diverts water into a penstock is approximately 10 kms from the turbine house, measures approximately 150 m L x 20 m H x 10 m W (top), and equipped with radial type gates for water control. A single penstock feeds water to the water turbines. Four hydraulic operated butterfly type valves control the flow of water to the turbines. Further particulars of each equipment are as follows:

Water Turbine (4-units)

Origin : China Model : HLD242-LJ-205 Output : 40 MW Head (design) : 136.5 m Head (max.) : 152.3 m Flow Rate (design) : 32.5 m[3] /sec Specific Speed : 375 rpm Runaway Speed : 770 rpm Generator (4-units) Origin : China Model : SF40-16/4250 Rated Power : 40 MW Rated Voltage : 10.5 KV Rated Current : 2,588 amperes Power Factor : 0.85 Frequency : 50 hz Number of Phases : 3 Speed (max) : 770 rpm

— 48 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Tong Tou Midstream Plant

The hydro-electric power plant is a low head type that provides 80 MW of capacity was fully operated in 1996. It consists of 4 x 20 MW hydro-electric generating sets using a vertical Francis type reaction water turbine and a conventional suspended vertical shaft generator. The designed head is 80 m and the flow rate is 28.5 m[3] /sec. The concrete gravity arch type dam, which is located approximately 3 kms from the turbine house, has a measurement of approximately 109 m L x 75 m H x 15.5 m W (top), and equipped with vertical lift sliding type gates for water control. A single penstock feeds water to the water turbines. Four hydraulic operated butterfly type valves control the flow of water to the turbines. Further particulars of each equipment are as follows:

Water Turbine (4-units)

Origin : China Model : HLA153-LJ-180 Output : 20,555 KW Head (design) : 80 m Head (max.) : 90 m Flow Rate (design) : 28.5 m[3] /sec Specific Speed : 333.3 rpm Runaway Speed : 714 rpm Generator (4-units) Origin : China Model : SF20-18/4000 Rated Power : 25,000 KVA (20 MW) Rated Voltage : 10.5 KV Rated Current : 1,300 amperes Power Factor : 0.80 Frequency : 50 hz Number of Phases : 3 Speed (max) : 714 rpm

— 49 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Sichuan Huaneng Jialingjiang Hydro Power Limited Liability Company

The hydro-electric power plant is a low head type designed to produce 136 MW of electric power from four (4) units of 34 MW hydro-electric generating sets. At the time of our inspection, the first generating set, which was operated in early 2004, was in commercial operation. The installation of the remaining three (3) generating sets was in-progress. The water turbine is a bulb (pit) type reaction turbine. The designed head and water flow is 11 m and 347.72 m[3] /sec, respectively. The main dam, which is a concrete gravity type, is located about 1 km from the turbine house measures approximately 179.5 m L x 48.3 m H x 27 m W (top), and equipped with vertical lift sliding type gates for water control. An overflow dam measuring approximately 222.6 m L x 26.25 m H x 5.92 m W (top) is also provided. Further particulars of each equipment are as follows:

Water Turbine (1-unit operational, 3-units under construction)

Origin	:	China
Model	:	GZ-WP-615
Output	:	34 MW
Head (design)	:	11 m
Head (max.)	:	12.84 m
Flow Rate (design)	:	347.72 m3/sec
Specific Speed	:	93.75 rpm
Runaway Speed	:	220/290 rpm

Generator (1-unit operational, 3-units under construction)

Origin	:	China
Model	:	SFWG34-64/6700
Rated Power	:	34 MW
Rated Voltage	:	10.5 KV
Rated Current	:	2,032 amperes
Power Factor	:	0.92
Frequency	:	50 hz
Number of Phases	:	3
Speed (max)	:	290 rpm

— 50 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company

This low head type hydro-electric power plant, with a total rated output of 180 MW, was fully put into commercial operation in 1996. It consists of 4 x 45 MW hydro-electric generating sets using a vertical Kaplan type reaction water turbine. The designed head is 17 m and designed water flow is 312 m[3] /sec. The generator is conventional suspended vertical shaft type. A concrete gravity type main dam located about 4 kms from the turbine house has a measurement of approximately 175.2 m L x 47.2 m H x 28 m W (top) and equipped with vertical lift sliding type gates for water control. An overflow dam and a controlled diversion canal for marine vessel passage are also provided. Further particulars of each equipment are as follows:

Water Turbine (4-units)

Origin : China Model : ZZ500-LH-640 Output : 45 MW Head (design) : 17 m Head (max.) : 24.3 m Flow Rate (design) : 312 m[3] /sec Specific Speed : 93.75 rpm Runaway Speed : 190/270 rpm Generator (4-units) Origin : China Model : SF45-64/9200 Rated Power : 52,941 KVA (45 MW) Rated Voltage : 10.5 KV Rated Current : 2,911 amperes Power Factor : 0.85 Frequency : 50 hz Number of Phases : 3 Speed (max) : 270 rpm

— 51 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Sichuan Huaneng Mingtai Power Limited Liability Company

The plant is a low head hydro-electric generating power plant with a rated capacity of 45 MW generated from 3 x 15 MW units. It commenced full commercial operation in 1997. The water turbine is vertical Kaplan type reaction turbine and connected to a conventional suspended vertical shaft generator. The designed head is 13.3 m and flow rate is 136.3 m[3] /sec. The concrete gravity type dam, which measures approximately 425 m L x 18 m H x 15 m W (top), is fitted with vertical lift sliding type gates for water control. Further particulars of each equipment are as follows:

Water Turbine (3-units)

Origin : China Model : ZZ560-LH-430 Output : 15 MW Head (design) : 13.3 m Flow Rate (design) : 136.3 m[3] /sec Specific Speed : 125 rpm Runaway Speed : 265 rpm Generator (3-units) Origin : China Model : SF15-48/6400 Rated Power : 15 MW Rated Voltage : 10.5 KV Rated Current : 1,032 amperes Power Factor : 0.80 Frequency : 50 hz Number of Phases : 3 Speed (max) : 265 rpm

— 52 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company

The total rated output of this low head hydro-electric generating power plant is 260 MW generated from 4 x 65 MW units. The operation of first generating unit started in 1994. Full commercial operation was in 1996. The water turbine is vertical Francis type reaction turbine and connected to a conventional suspended vertical shaft generator. The designed head is 108 m and flow rate is 66.2 m[3] /sec. The main dam located about 13 kms from the turbine house is a concrete gravity type, measuring approximately 232 m L x 29 m H x 14 m W (top), is fitted with radial type gates for water control. A penstock feeds water to the water turbines and four hydraulic controlled butterfly type valves approximately 3.4 m in diameter control the flow of water. Further particulars of each equipment are as follows:

Water Turbine (4-units)

Origin : China Model : HLTF13-LJ-292 Output : 65 MW Head (design) : 108 m Flow Rate (design) : 66.2 m[3] /sec Specific Speed : 250 rpm Runaway Speed : 490 rpm Generator (4-units) Origin : China Model : SF65-24/6440 Rated Power : 65 MW Rated Voltage : 10.5 KV Rated Current : 4,205 amperes Power Factor : 0.85 Frequency : 50 hz Number of Phases : 3 Speed (max) : 490 rpm

— 53 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Sichuan Huaneng Kangding Hydro Power Limited Liability Company

The total generating power of this hydro-electric power plant is 180 MW of electric power from 3 x 60 MW generating sets. It commenced commercial operation in 2000. The water turbine is vertical Francis reaction type with a designed head of 362 m and a flow rate of 59 m[3] /sec., connected to a conventional suspended vertical shaft generator. The concrete gravity type dam measures approximately 233.43 L x 24 H m and provided with gates for water control. Further particulars of the each equipment are as follows:

Water Turbine (3-units)

Origin : China Model : HL(E)-LJ-234 Output : 60 MW Head (design) : 362 m Flow Rate (design) : 59 m[3] /sec Specific Speed : 500 rpm Runaway Speed : 782 rpm Generator (3-units) Origin : China Model : SF-J60-12/4100 Rated Power : 60 MW Rated Voltage : 10.5 KV Rated Current : 3,666 amperes Power Factor : 0.90 Frequency : 50 hz Number of Phases : 3 Speed (max) : 500 rpm

— 54 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Gansu Huaneng Pingliang Power Generation Limited Liability Company

This coal-fired power plant has a total rated output of 1,200 MW. It consists of 4 x 300 MW generating facilities. The operation of the first generating unit commenced in 2000, while the fourth unit was operated in December 2003. Various companies from the People’s Republic of China supplied the machinery and equipment and auxiliaries. The boilers each rated at 1,025 tons per hour are outdoor type natural circulation with rain proof, wind proof, corrosion proof and lighting provisions. The steam turbines with a rating of 300 MW each are multi-stage, impulse, single reheat, condensing type with single shaft directly coupled with the generators. The generators which are rated at 300 MW each are hydrogen-cooled with a direct water cooling system for the stator winding, a direct hydrogen cooled rotor winding, with a static excitation system. Further particulars of each equipment are as follows:

Steam Boilers (4-units)

Origin : China Model : HG-1025/18.2YM11 Type : Furnace Coal Fired Steam Flow : 1,025 T/H Steam Pressure Outlet : 18.283 MPa Steam Temperature Outlet : 541˚C Reheat Steam Condition : 834 T/H Steam Turbines (4-units) Origin : China Model : N300-16.7/538/538 Rated Output : 300 MW Steam Pressure Inlet : 16.67 MPa Steam Temperature Inlet : 538˚C Reheat Steam Temperature : 538˚C Speed : 3000 rpm Generators (4-units) Origin : China Model : QFSN-300-2 Rated Power : 300 MW Rated Terminal Voltage : 20 KV Rated Phase Current : 10,190 A Power Factor : 0.85 Frequency : 50 hz Number of Phases : 3 Speed : 3000 rpm

— 55 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Sichuan Huaneng Fujiang Hydro Power Limited Liability Company

This hydro-electric power plant, which is under construction, is deigned to produce 300 MW of electric power from three generating plants consisting of 2 x 35 MW, 2 x 65 MW and 2 x 50 MW. Reportedly the plants will be equipped with Chinese manufactured water turbines, generators and auxiliary equipment. The concrete gravity type dams of the three plants measures 279 L x 108 H m, 96.5 L x 20 H m and 39.25 L x 21 H m.

Other major and ancillary equipment include SF6 switching and insulation system, ABB control and monitoring system, electrostatic precipitators, ball mills, condensing plant, coal and ash handling equipment, blowers, air pre-heaters, classifiers, coal feeders, hydrogen production system, chemical water treatment plant, water supply and discharge plant, overhead traveling cranes, compressed air system, heating and ventilating and air-conditioning system, instrumentation and controls, transformers, switchyard, electrical cables and raceway system, piping system and fire protection system.

Construction-In-Progress are assets that are not fully constructed or installed. The value indicated is based on the recorded costs as reported to us as of the appraisal date.

At the time of our inspection, the Machinery was observed to be generally in good working condition. It is our opinion that it is capable of performing the function for which it was designed, built and erected. The Machinery undergoes periodic maintenance in accordance with the manufacturer’s schedule and system.

The Machinery of the hydro-electric power plants was inspected at various locations in Sichuan Province while the coal-fired power plant was inspected at Ping Liang, Gansu Province all in the People’s Republic of China.

Valuation Methodology

In arriving at our opinion of value, we have considered the two generally accepted approaches to values; namely:

Cost Approach - considers the cost to reproduce or replace in new condition the assets appraised in accordance with current market prices for similar assets, with allowance for accrued depreciation arising from condition, utility, age, wear and tear, or obsolescence present, taking into consideration past and present maintenance policy and rebuilding history.

Physical depreciation is the loss in value due to physical deterioration resulting from wear and tear in operation and exposure to elements. Deterioration due to age and deterioration due to usage are the main factors that affect physical condition. Physical condition due to wear and tear is proportional to use rather than age. Use is the best indicator to estimate physical deterioration.

Market Data or Comparative Sales Approach - considers prices recently paid for similar assets, with adjustments made to the indicated market prices to reflect condition and utility of the appraised assets relative to the market comparative. Asset for which there is an established secondhand market comparable is best appraised by this approach.

— 56 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Scope of Investigation and Considerations

Before arriving at our opinion of value, we have personally conducted a physical inventory and inspection of the subject Machinery, investigated market condition, interviewed personnel, and examined documents and specifications provided to us.

During our inspection we observed the various Machinery. Any deferred maintenance, physical wear and tear, operating malfunctions, lack of utility, or any observable conditions distinguishing the appraised Machinery from assets of like kind in new conditions were noted and made part of our judgement in arriving at the values.

In arriving at our opinion of the defined value using the cost approach, we have considered the cost of reproduction new of the subject assets, defined as the estimated amount of money needed to acquire in like kind and in new condition an asset or group of assets, taking into consideration current prices of materials, labor, manufactured equipment, contractor’s overhead, profit and fees, and all other attendant costs associated with its acquisition and installation in place, without provision for overtime or bonuses for labor, and premiums for materials.

Consideration has been given to accrued depreciation that was based on the observed condition and present and prospective serviceability in comparison with new units of like kind.

We have assumed that the Machinery will be used in its present existing state with the benefit of continuity of the tenure of land and buildings during the foreseeable future.

We have relied to a considerable extent on information such records, listings and specifications provided to us by the Plants. We have made no investigation of and assume no responsibility for titles to or liabilities against the Machinery appraised.

We have not made any deduction in respect of any grant either available or received, neither has any adjustment been made for any outstanding amounts owing under financing agreements.

Our investigation was restricted to a detailed inventory and appraisal of the subject Machinery and does not attempt to arrive at any conclusion of values of the Plants as a total business entity.

— 57 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Opinion of Value

Based on the foregoing and as supported by the accompanying summary, we are of the opinion that as at 31 July 2004, the fair market value in continued use of the Machinery, as part of a going-concern, is fairly represented in the amount of Rmb5,174,074,000 (Renminbi Five Billion One Hundred Seventy Four Million Seventy Four Thousand), broken down as follows:

Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company Sichuan Huaneng Jialingjiang Hydro Power Limited Liability Company Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company Sichuan Huaneng Mingtai Power Limited Liability Company Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company Sichuan Huaneng Kangding Hydro Power Limited Liability Company Gansu Huaneng Pingliang Power Generation Limited Liability Company Sichuan Huaneng Hydro Power Development Limited Liability Company Sichuan Huaneng Fujiang Hydro Power Limited Liability Company Total

Rmb 669,383,000 154,329,000 301,871,000 134,422,000 231,406,000 487,541,000 3,029,549,000 722,000 164,851,000

5,174,074,000

We hereby certify that we have neither present nor prospective interest in the Plants and Company or the appraised Machinery or the value reported.

Yours faithfully, For and on behalf of VIGERS APPRAISAL & CONSULTING LIMITED

Raymond Ho Kai Kwong	Maximo I. Montes Jr.
Registered Professional Surveyor	PME BSME
MRICS MHKIS MSc(e-com)	Associate Director
Executive Director	Plant and Machinery Valuation

Note: Maximo I. Montes Jr. is a Professional Mechanical Engineer who has 34 years experience in industrial plant valuation. He has 24 years experience in the valuation of plant machinery and equipment in Hong Kong, the PRC and Asia Pacific Rim.

— 58 —

PLANT AND MACHINERY VALUATION

APPENDIX II

SUMMARY OF VALUES

		Fair Market Value in
		continued use
		as at 31 July, 2004
		Rmb
Sichuan Huaneng Baoxinghe Power Joint Stock Limited Company
Machinery and Equipment		642,651,000
Motor Vehicles & Transportation Equipment		6,021,000
Electronics Equipment		3,781,000
Construction-In-Progress		16,929,540
	Sub-total	669,382,540
	Rounded to	669,383,000
Sichuan Huaneng Jialingjiang Hydro Power Limited Liability Company
Machinery and Equipment		149,534,000
Motor Vehicles & Transportation Equipment		3,428,000
Electronics Equipment		1,005,000
Construction-In-Progress		361,603
	Sub-total	154,328,603
	Rounded to	154,329,000
Sichuan Huaneng Dongxiguan Hydro Power Joint Stock Limited Company
Machinery and Equipment		295,908,000
Motor Vehicles & Transportation Equipment		4,688,000
Electronics Equipment		1,243,000
Construction-In-Progress		32,276
	Sub-total	301,871,276
	Rounded to	301,871,000
Sichuan Huaneng Mingtai Power Limited Liability Company
Machinery and Equipment		131,254,000
Motor Vehicles & Transportation Equipment		1,117,000
Electronics Equipment		396,000
Construction-In-Progress		1,655,254
	Sub-total	134,422,254
	Rounded to	134,422,000

— 59 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Sichuan Huaneng Taipingyi Hydro Power Limited Liability Company Machinery and Equipment Motor Vehicles & Transportation Equipment Electronics Equipment Construction-In-Progress Sub-total Rounded to Sichuan Huaneng Kangding Hydro Power Limited Liability Company Machinery and Equipment Motor Vehicles & Transportation Equipment Electronics Equipment Sub-total Gansu Huaneng Pingliang Power Generation Limited Liability Company Machinery and Equipment Motor Vehicles & Transportation Equipment Electronics Equipment Construction-In-Progress Sub-total Rounded to Sichuan Huaneng Hydro Power Development Limited Liability Company Motor Vehicles & Transportation Equipment Electronics Equipment Sub-total Sichuan Huaneng Fujiang Hydro Power Limited Liability Company Construction-In-Progress Rounded to Grand total:	Fair Market Value in continued use as at 31 July, 2004 Rmb 210,569,000 5,170,000 3,865,000 11,802,379
	231,406,379 231,406,000 478,492,000 6,160,000 2,889,000
	487,541,000 2,964,717,000 11,878,000 25,838,000 27,116,048
	3,029,549,048 3,029,549,000 442,000 280,000
	722,000 164,850,474 164,851,000 5,174,074,000

— 60 —

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

• (a) As at the Latest Practicable Date, none of the Directors, chief executive officer or Supervisors of the Company had any interest or short position in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short position which any such Director, chief executive or supervisor is taken or deemed to have under such provisions of the SFO) or which was required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which was otherwise required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies as contained in Appendix 10 to the Listing Rules.

• (b) As at the Latest Practicable Date, so far as the Directors, chief executive officer and Supervisors of the Company are aware, each of the following persons, not being a Director, chief executive or Supervisor of the Company, had an interest in the Company’s shares which falls to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Shares held/Approximate shareholding percentage

						Short
Name of shareholder			Interest			position
			Approximate	Approximate	Approximate
			percentage of	percentage of	percentage of
			share holding in	shareholding in	shareholding in
			the Company’s	the Company’s	the Company’s
		Number of	total issued	total issued	total issued
	Shares	shares held	share capital	domestic shares	H shares
HIPDC (Note)	domestic	5,169,680,000	42.88%	57.44%	—	—
	shares
Hebei Provincial Construction	domestic	904,500,000	7.50%	10.05%	—	—
Investment Company	shares
Fujian International Trust &	domestic	669,700,000	5.56%	7.44%	—	—
Investment Company	shares
Jiangsu Province International	domestic	624,750,000	5.18%	6.94%	—	—
Trust & Investment Company	shares
Liaoning Energy Investment (Group)	domestic	624,750,000	3.81%	5.10%	—	—
Limited Liability Company	shares
Dalian Municipal Construction		452,250,000	3.75%	5.03%	—	—
Investment Company

• Note: As at the Latest Practicable Date, China Huaneng Group holds approximately 51.98% of the equity interest in HIPDC.

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GENERAL INFORMATION

APPENDIX III

Save as disclosed above and so far as the Directors, chief executive officer and Supervisors of the Company are aware, as at the Latest Practicable Date, no other person had an interest or short position in the Company’s shares or underlying shares (as the case may be) which would fall to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 Part XV of the SFO, or was otherwise a substantial shareholder (as such term is defined in the Listing Rules) of the Company.

• (c) None of the Directors or Supervisors is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Company.

• (d) As at the Latest Practicable Date, none of the Directors or Supervisors had entered, or proposed to enter, into a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

• (e) As at the Latest Practicable Date, none of JPMorgan, Rothschild nor Vigers had any shareholding in the Company or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Company.

• (f) As at the Latest Practicable Date, none of the Directors, Supervisors, JPMorgan, Rothschild nor Vigers had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to the Company, or was proposed to be acquired, or disposed of by, or leased to the Company, since 31st December, 2003, the date to which the latest published financial statements of the Company and its subsidiaries were made up.

• (g) As at the Latest Practicable Date, none of the Directors or Supervisors (and their respective associates) has interests competing with the Company.

3. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Company since 31st December, 2003, the date to which the latest published audited financial statements of the Company and of its subsidiaries were made up.

4. LITIGATION

None of the Company, nor its subsidiaries is engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company or its subsidiaries.

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GENERAL INFORMATION

APPENDIX III

5. QUALIFICATIONS OF EXPERTS

The following are the qualifications of the professional advisers who have given opinions or advice contained in this circular:

Names

Qualifications

JPMorgan

licensed by the Securities and Futures Commission for Types 1, 4, 6 and 7 regulated activities under the Securities and Futures Ordinance

• Rothschild

an institution registered with the Securities and Futures Commission to carry out Types 1, 4, 6 and 9 regulated activities under the Securities and Futures Ordinance

• Vigers Appraisal & Consulting Limited

• Chartered surveyor

• (“Vigers”)

6. CONSENT

Each of JPMorgan, Rothschild and Vigers has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name and letter or report (as the case may be), in the form and context in which they appear.

7. PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

Pursuant to the articles of association of the Company, all voting at shareholders meeting shall be made by poll.

8. MATERIAL CONTRACTS

The following contracts (including contracts not entered into in the ordinary course of business) have been entered into by the Company and its subsidiaries (including the Target Power Plants) within the two years immediately preceding the date of this circular, and are or may be material:

• (a) An agreement regarding the acquisition of the interest in three power plants by the Company from Huaneng Group dated 5th June, 2003, details of which were set out in the Company’s circular dated 12th June, 2003;

• (b) The agreement for the acquisition of 40% interest in Hebei Hanfeng Power Generation Limited Liability Company and 90% interest in Jinggangshan Huaneng Power Generation Limited Liability Company held by China Huaneng Group by the Company dated 16th April, 2004, details of which were set out in the Company’s circular dated 29th April, 2004;

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GENERAL INFORMATION

APPENDIX III

• (c) The agreement for the acquisition of 55% interest in Huaneng Hunan Yueyang Power Generation Limited Liability Company, 60% interest in Huaneng Chongqing Luohuang Power Generation Limited Liability Company and the entire assets and liabilities of Huaneng International Power Development Corporation Yingkou Branch Company dated 16th April, 2004, details of which were set out in the Company’s circular dated 29th April, 2004;

• (d) Sichuan Hydro Power Transfer Agreement; and

• (e) Pingliang Power Plant Transfer Agreement.

9. MISCELLANEOUS

• (1) The legal address of the Company is at West Wing, Building C, Tianyin Mansion, 2C Fuxingmennan Street, Xicheng District, Beijing, The People’s Republic of China.

• (2) The share registrar of the Company in Hong Kong is Hong Kong Registrars Limited at Room 1901-5, 19/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (3) The secretary of the Company is Mr. Huang Long. As at the date hereof, the Company has not appointed Qualified Accountant as required under the Hong Kong Listing Rules.

10. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Herbert Smith at 23rd Floor, Gloucester Tower, 11 Pedder Street, Hong Kong during normal business hours on any day (except public holidays) up to and including 17th December, 2004:

• (1) the Transfer Agreements;

• (2) the letter from the Independent Directors as set out in this circular;

• (3) the letter from Rothschild as set out in this circular;

• (4) the written consent referred to in paragraph 6 of this appendix;

• (5) the material contracts referred to in paragraph 8 of this appendix;

• (6) the annual report of the Company for the year ended 31st December, 2003;

• (7) the property valuation report and the plant and machinery valuation report set out in Appendix I and Appendix II; and

• (8) the articles of association of the Company.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [248 x 38] intentionally omitted <==

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

Notice is hereby given that an extraordinary general meeting of Huaneng Power International, Inc. (the “Company”) will be held at 9 a.m. on 17th December, 2004 (Friday) at Beijing International Convention Centre at No. 8 Beichen East Road, Chaoyang District, Beijing, The People’s Republic of China, for the purpose of considering and, if thought fit, passing the following ordinary resolutions:

Ordinary resolutions:

• 1.1 To approve the acquisition of 60% equity interest in Sichuan Huaneng Hydro Power Development Limited Liability Company by the Company from China Huaneng Group and the transfer agreement thereof.

• 1.2 To approve the acquisition of 65% equity interest in Gansu Huaneng Pingliang Power Generation Limited Liability Company by the Company from China Huaneng Group and the transfer agreement thereof.

• 2.1 To approve the guarantee arrangement and the relevant agreements between Gansu Huaneng Pingliang Power Generation Limited Liability Company, Sichuan Huaneng Hydro Power Development Limited Liability Company and the subsidiaries thereof and China Huaneng Group. (Note 1)

• 2.2 To approve to continue to implement the asset swap arrangement between Sichuan Huaneng Hydro Power Development Limited Liability Company and Sichuan Huaneng Industrial Company. (Note 2)

• 2.3 To approve the loan and deposit arrangement between Gansu Huaneng Pingliang Power Generation Limited Liability Company, Sichuan Huaneng Hydro Power Development Limited Liability Company and the subsidiaries and China Huaneng Finance Limited Liability Company. (Note 3)

By Order of the Board Huang Long

Company Secretary

3rd November, 2004

Registered address of the Company:

West Wing, Building C, Tianyin Mansion, 2C Fuxingmennan Street, Xicheng District, Beijing 100031, The People’s Republic of China

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. (Terms used hereinafter shall have the same meaning as stated in the circular of the Company dated 3rd November 2004)

2. (1) Pursuant to the Guarantee Contract signed between Gansu Provincial Power Company, Pingliang Power Plant and State Development Bank on 18th July 1998, Gansu Provincial Power Company provided guarantee for the RMB1,418,000,000 loan borrowed by Pingliang Power Plant from State Development Bank. Pursuant to the Guarantee Contract signed between Gansu Provincial Power Company and Bank of China and Bank of China Gansu Branch on 30th December 2001, Gansu Provincial Power Company provided guarantee for 65% of the RMB2,075,000,000 loan (i.e. RMB1,348,750,000) borrowed by Pingliang Power Plant from Bank of China and Bank of China Gansu Branch.

According to the spirits of the Approval Document in relation to the Proposal on the Restructuring and Allocation of the Power Generating Assets of State Power Corporation issued by the original State Development and Planning Commission and other related documents, the 65% interest in the registered capital of Pingliang Power Plant held by Gansu Provincial Power Company shall be transferred to Huaneng Group. Huaneng Group and Gansu Provincial Power Company signed the Agreement on the Transfer and Handover of the Power Generating Projects under the Power System Reforms in December 2003 pursuant to which the guarantees provided by Gansu Provincial Power Company for Pingliang Power Plant’s commercial bank loans shall all be changed to guarantees provided by Huaneng Group. As at 30th June 2004, the balance of the two guarantee transactions referred to above totalled RMB1,715,625,000.

• (2) Pursuant to the State Development Bank Loan Guarantee Contract signed between Huaneng Group and State Development Bank, Huaneng Group provided guarantee for the loan borrowed by the original China Huaneng Group Company Sichuan Branch (now Sichuan Hydro Power) from State Development Bank. As at 31st July 2004, the balance of the above guarantee transaction was RMB561,830,000.

• (3) Pursuant to the China Construction Bank (Loan) Guarantee Contract signed between Huaneng Group and China Construction Bank Sichuan Branch Jincheng Sub-branch on 13th August 1998, Huaneng Group provided guarantee for the RMB64,583,000 loan borrowed by the Baoxinghe Company from China Construction Bank Sichuan Branch Jincheng Sub-branch. As at 31 July 2004, the balance of the above guarantee transaction was RMB595,830,000.

Pursuant to the Maximum Amount Guarantee Contract signed between Huaneng Group and China Construction Bank Chengdu City Jincheng Sub-branch and China Construction Bank Yaan Sub-branch on 18th December 2002, Huaneng Group provided maximum amount guarantee for the loan borrowed by Baoxinghe Company from China Construction Bank Chengdu City Jincheng Sub-Branch during the period from 1st January 2003 to 31st December 2010 with a maximum amount of RMB1,085,000,000; Huaneng Group provided

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NOTICE OF EXTRAORDINARY GENERAL MEETING

maximum amount guarantee for the loan borrowed by Baoxinghe Company from China Construction Bank Ya’an Sub-branch during the period from 1st January 2003 to 31st December 2010 with a maximum amount of RMB500,000,000. As at 31st July 2004, the balance of the above guarantee transactions was RMB470,000,000.

• (4) Pursuant to the Maximum Amount Guarantee Contract signed between Huaneng Group and the sub-branch directly under China Construction Bank Sichuan Branch on 28th May 2002, Huaneng Group provided maximum amount guarantee for the loan borrowed by Taipingyi Company from the sub-branch directly under China Construction Bank Sichuan Branch during the period from 28th May 2002 to 27th May 2012 with a maximum amount of RMB260,000,000. As at 31st July 2004, the balance of the above guarantee transaction was RMB250,000,000.

• (5) Pursuant to the Maximum Amount Guarantee Contract signed between Huaneng Group and Agricultural Bank of China Pingwu County Sub-branch on 9th April 2002, Huaneng Group provided maximum amount guarantee for the loan borrowed by Fujiang Company from Agricultural Bank of China Pingwu County Sub-branch during the period from 10th April 2002 to 31st December 2004 with a maximum amount of RMB481,440,000. Pursuant to the Maximum Amount Guarantee Contract signed between Huaneng Group and Agricultural Bank of China Pingwu County Sub-branch, Huaneng Group provided maximum amount guarantee for the loan borrowed by Fujiang Company from Agricultural Bank of China Pingwu County Sub-branch during the period from 1st January 2004 to 31st December 2007 with a maximum amount of RMB1,351,100,000. As at 31st July 2004, the balance of the above guarantee transactions was RMB531,440,000.

• (6) Pursuant to the Guarantee Contract signed between Huaneng Group and China Construction Bank Chengdu City Xinhua Sub-branch, Huaneng Group provided guarantee for the RMB304,000,000 loan borrowed by Kangding Company from China Construction Bank Chengdu City Xinhua Sub-branch. As at 31st July 2004, the balance of the above guarantee transaction was RMB232,000,000.

Pursuant to the Guarantee Contract signed between Huaneng Group and China Construction Bank Chengdu City Xinhua Sub-branch, Huaneng Group provided guarantee for the RMB322,850,000 loan borrowed by Kangding Company from China Construction Bank Chengdu City Xinhua Sub-branch. As at 31st July 2004, the balance of the above guarantee transactions was RMB258,000,000.

Pursuant to the Guarantee Contract signed between Huaneng Group and China Construction Bank Ganzi Zang Autonomous Prefecture Branch on 9th December 2003, Huaneng Group provided guarantee for the RMB130,000,000 loan borrowed by Kangding Company from China Construction Bank Ganzi Zang Autonomous Prefecture Branch. As at 31st July 2004, the balance of the above guarantee transaction was RMB130,000,000.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

• (7) Pursuant to the Guarantee Contract signed between Huaneng Group and Agricultural Bank of China Santai County Sub-branch on 14th June 2002, Huaneng Group provided guarantee for the RMB130,000,000 loan borrowed by Mingtai Company from Agricultural Bank of China Santai County Sub-branch. As at 31st July 2004, the balance of the above guarantee transaction was RMB130,000,000.

• (8) Pursuant to the Guarantee Contract signed between Huaneng Group and the Business Division of China Construction Bank Nanchong Branch on 12th December 2001, Huaneng Group provided guarantee for the RMB30,000,000 loan borrowed by Jialingjiang Company from the Business Division of China Construction Bank Nanchong Branch. As at 31st July 2004, the balance of the above guarantee transaction was RMB30,000,000.

Pursuant to the Maximum Amount Guarantee Contract signed between Huaneng Group and the Business Division of China Construction Bank Nanchong Branch on 28 January 2002, Huaneng Group provided maximum amount guarantee for the loan borrowed by Jialingjiang Company from the Business Division of China Construction Bank Nanchong Branch during the period from 1st January 2002 to 31st December 2005 with a maximum amount of RMB589,500,000. As at 31st July 2004, the balance of the above guarantee transaction was RMB450,000,000.

1. (Terms used hereinafter shall have the same meaning as stated in the circular of the Company dated 3rd November 2004)

According to the decision of Huaneng Group to reorganise the original China Huaneng Group Company Sichuan Branch into a limited liability company (that is Sichuan Hydro Power), certain office building assets owned by Sichuan Huaneng Industrial Company shall be transferred to Sichuan Hydro Power with compensation and certain office buildings and dormitory assets owned by the original China Huaneng Group Company Sichuan Branch shall be transferred to Sichuan Huaneng Industrial Company with compensation, the difference of the mutually transferred assets (approximately RMB61,090,000) shall be indemnified by Sichuan Hydro Power to Sichuan Huaneng Industrial Company. As at the date of signing the Sichuan Hydro Power Transfer Agreement, the building ownership certificates of the properties involved in the above asset transfers are being processed, and the payment for the above asset difference has yet to be fully completed (as at 31st July 2004, the balance payable by Sichuan Hydro Power to Sichuan Huaneng Industrial Company was approximately RMB21,120,000).

1. (Terms used hereinafter shall have the same meaning as stated in the circular of the Company dated 3rd November 2004)

2. (1) Pursuant to the Renminbi Loan Contract signed between Mingtai Company and Huaneng Finance Company on 30th September 2003, Mingtai Company borrowed a RMB20,000,000 loan from Huaneng Finance Company and the loan period shall be from 30th September 2003 to 30th September 2004 and the loan interest rate shall be 3.9825% per month. The above loan interest rate does not exceed the loan interest rate stipulated by People’s Bank of China on the date of signing the above contract. As at 31st July 2004, the balance of the above loan was RMB20,000,000.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Pursuant to the Renminbi Loan Contract signed between Mingtai Company and Huaneng Finance Company on 15th December 2003, Mingtai Company borrowed a RMB10,000,000 loan from Huaneng Financial Company and the loan period shall be from 15th December 2003 to 15th December 2006 and the loan interest rate shall be 4.1175% per month. The above loan interest rate does not exceed the loan interest rate stipulated by People’s Bank of China on the date of signing the above contract. As at 31st July 2004, the balance of the above loan was RMB10,000,000.

• (2) Pursuant to the Renminbi Loan Contract signed between Dongxiguan Company and Huaneng Finance Company on 22nd December 2003, Dongxiguan Company borrowed a RMB30,000,000 loan from Huaneng Finance Company and the loan period shall be from 22nd December 2003 to 22nd December 2006 and the loan interest rate shall be 4.1175% per month. The above loan interest rate does not exceed the loan interest rate stipulated by People’s Bank of China on the date of signing the above contract. As at 31st July 2004, the balance of the above loan was RMB25,000,000.

Pursuant to the Renminbi Loan Contract signed between Dongxiguan Company and Huaneng Finance Company on 12th January 2004, Dongxiguan Company borrowed a RMB20,000,000 loan from Huaneng Financial Company and the loan period shall be from 12th January 2004 to 12th January 2007 and the loan interest rate shall be 4.1175% per month. The above loan interest rate does not exceed the loan interest rate stipulated by People’s Bank of China on the date of signing the above contract. As at 31st July 2004, the balance of the above loan was RMB20,000,000.

• (3) As at 30th June 2004, the deposit balance of Pingliang Power Plant with Huaneng Finance Company was RMB165,625,542. The above deposit interest rate is not lower than the bank deposit interest rate for the same period.

• (4) As at 31st July 2004, the deposit balance of Sichuan Hydroelectric Power with Huaneng Finance Company was RMB376,161. The above deposit interest rate is not lower than the bank deposit interest rate for the same period.

• (5) As at 31st July 2004, the deposit balance of Baoxinghe Company with Huaneng Finance Company was RMB44,347,766. The above deposit interest rate is not lower than the bank deposit interest rate for the same period.

• (6) As at 31st July 2004, the deposit balance of Taipingyi Company with Huaneng Finance Company was RMB160,217,532. The above deposit interest rate is not lower than the bank deposit interest rate for the same period.

• (7) As at 31st July 2004, the deposit balance of Dongxiguan Company with Huaneng Finance Company was RMB10,494,449. The above deposit interest rate is not lower than the bank deposit interest rate for the same period.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

1. Eligibility for attending the Extraordinary General Meeting

Holders of the Company’s foreign Shares whose names appear on the HK$ Dividend foreign Shares Register and/or the US$ Dividend foreign Shares Register maintained by Hong Kong Registrars Limited and holders of domestic shares whose names appear on the domestic shares register maintained by the Company at the close of business on 17th November, 2004 are eligible to attend the Extraordinary General Meeting.

1. Proxy

2. (i) A member eligible to attend and vote at the Extraordinary General Meeting is entitled to appoint, in written form, one or more proxies to attend and vote on behalf of him. A proxy needs not be a shareholder.

3. (ii) A proxy should be appointed by a written instrument signed by the appointor or its attorney duly authorised in writing. If the form of proxy is signed by the attorney of the appointor, the power of attorney authorising that attorney to sign or other authorisation document(s) shall be notarised.

4. (iii) To be valid, the power of attorney or other authorisation document(s) which have been notarised together with the completed form of proxy must be delivered, in the case of holders of domestic shares, to the Company and, in the case of holders of foreign Shares, to Hong Kong Registrars Limited, not less than 24 hours before the time designated for holding of the Extraordinary General Meeting.

5. (iv) A proxy may exercise the right to vote by a show of hands or by poll. However, if more than one proxy is appointed by a shareholder, such proxies shall only exercise the right to vote by poll.

6. Registration procedures for attending the Extraordinary General Meeting

7. (i) A shareholder or his proxy shall produce proof of identity when attending the meeting. If a shareholder is a legal person, its legal representative or other persons authorised by the board of directors or other governing body of such shareholder may attend the Extraordinary General Meeting by producing a copy of the resolution of the board of directors or other governing body of such shareholder appointing such persons to attend the meeting.

8. (ii) Holders of foreign Shares and domestic shares intending to attend the Extraordinary General Meeting should return the reply slip for attending the Extraordinary General Meeting to the Company on or before 27th November, 2004.

9. (iii) Shareholders may send the above reply slip to the Company in person, by post or by fax (Attn: The Secretary office of the Board).

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NOTICE OF EXTRAORDINARY GENERAL MEETING

1. Closure of Register of Members

The register of members of the Company will be closed from 17th November, 2004 to 17th December, 2004 (both days inclusive).

1. Other Businesses

2. (i) The Extraordinary General Meeting will not last for more than half day. Shareholders who attend shall bear their own travelling and accommodation expenses.

3. (ii) The address of the share registrar for Foreign Shares of the Company, Hong Kong Registrars Limited is at:

1901-5

19/F., Hopewell Centre 183 Queen’s Road East,

Hong Kong

• (iii) The registered address of the Company is at:

West Wing, Building C, Tianyin Mansion, 2C Fuxingmennan Street, Xicheng District, Beijing 100031, The People’s Republic of China

Telephone No.: (+86)-10-66491999 Facsimile No.: (+86)-10-66491860

— 71 —

==> picture [248 x 38] intentionally omitted <==

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

Number of Shares related H Shares/Domestic to the proxy form [(Note][1)] Shares Proxy Form for Extraordinary General Meeting I/(We) [(Note][2)] of Shareholders’ Account: and I.D. No.: , being the holder(s) of H Share(s)/Domestic Share(s) of Huaneng Power International, Inc. (the “Company”) now appoint [(Note][3)] , I.D. No.: (of

),

or failing him the Chairman of the meeting as my(our) proxy to attend and vote for me(us) on the following resolution in accordance with the instruction(s) below and on my(our) behalf at the Extraordinary General Meeting to be held at 9:00 a.m. on Friday, 17th December, 2004 at Beijing International Convention Centre at No. 8 Beichen East Road, Chaoyang District, Beijing, the People’s Republic of China for the purpose of considering and, if thought fit, passing the ordinary resolutions as set out in the notice convening the said meeting. In the absence of any indication, the proxy may vote for or against the resolutions at his own discretion. [(Note][6)]

	Ordinary Resolutions For (Note 4) Against (Note 4)
	1.1 To approve the acquisition of 60% equity interest in Sichuan Huaneng Hydro Power Development Limited Liability Company by the Company from China Huaneng Group and the transfer agreement thereof.
	1.2 To approve the acquisition of 65% equity interest in Gansu Huaneng Pingliang Power Generation Limited Liability Company by the Company from China Huaneng Group and the transfer agreement thereof.
	2.1 To approve the guarantee arrangement and the relevant agreements between Gansu Huaneng Pingliang Power Generation Limited Liability Company, Sichuan Huaneng Hydro Power Development Limited Liability Company and the subsidiaries thereof and China Huaneng Group.
	2.2 To approve to continue to implement the asset swap arrangement between Sichuan Huaneng Hydro Power Development Limited Liability Company and Sichuan Huaneng Industrial Company.
	2.3 To approve the loan and deposit arrangement between Gansu Huaneng Pingliang Power Generation Limited Liability Company, Sichuan Huaneng Hydro Power Development Limited Liability Company and the subsidiaries thereof and China Huaneng Finance Limited Liability Company.

Date:

2004 Signature:

(Note 5)

Notes:

1. Please insert the number of Share(s) registered in your name(s) relating to this form of proxy. If no number is inserted, this form of proxy will be deemed to relate to all of the shares in the capital of the Company registered in your name(s).

2. Please insert full name(s) and address(es) in BLOCK LETTERS.

3. Please insert the name and address of your proxy. If this is left blank, the chairman of the Extraordinary General Meeting will act as your proxy. One or more proxies, who may not be member(s) of the Company, may be appointed to attend and vote in the meeting provided that such proxies must attend the meeting in person on your behalf. Any alteration made to this proxy form must be signed by the signatory.

4. Attention: If you wish to vote FOR any resolution, please indicate with a “�” in the appropriate space under “For”. If you wish to vote AGAINST any resolution, please indicate with a “�” in the appropriate space under “Against”. In the absence of any such indication, the proxy will vote or abstain at his discretion.

5. This form of proxy must be signed underhand by you or your attorney duly authorised in that behalf. If the appointer is a corporation, this form must be signed under its common seal or under hand by any directors or agents duly appointed by such corporation.

6. This form of proxy together with the power of attorney or other authorisation document(s) which have been notarised, must be delivered, in the case of a holder of Domestic Share(s), to the Company and in the case of a holder of H Share(s), to Hong Kong Registrars Limited, at least 24 hours before the time designated for the holding of the Extraordinary General Meeting.

7. Please delete as appropriate.

==> picture [248 x 39] intentionally omitted <==

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

Reply Slip for Extraordinary General Meeting

I/(We)

of

Telephone number:

and Fax number:

,

being the holder(s) of H Share(s)/Domestic Share(s)* of Huaneng

Power International, Inc. (the “Company”) hereby reply that I/(We) wish to attend or appoint a proxy to attend (on my/(our) behalf) the extraordinary general meeting (the “EGM”) to be held at 9:00 a.m. on Friday, 17th December, 2004 at Beijing International Convention Centre at No. 8 Beichen East Road, Chaoyang District, Beijing, the People’s Republic of China.

Signature:

Date:

Note: Eligible shareholders who wish to attend the EGM are advised to complete and return this reply slip to the Company at West Wing, Building C, Tianyin Mansion, 2C, Fuxingmennan Street, Xicheng District, Beijing 100031, the PRC by post or by facsimile (Fax no.: (+86)-10-66491888). Failure to sign and return this reply slip, however, will not preclude an eligible shareholder from attending the EGM.

• Please delete as appropriate.