Netjoy Holdings Limited — Proxy Solicitation & Information Statement 2006

Oct 19, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should obtain independent professional advice.

If you have sold or transferred all your shares in Huaneng Power International, Inc., you should at once hand this circular and where applicable, the form of proxy and reply slip to the purchaser or transferee or to the bank, or a licensed securities dealer 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 TRANSACTIONS

Financial Adviser to Huaneng Power International, Inc.

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Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the board of Directors of Huaneng Power International, Inc. is set out on pages 5 to 19 of this circular. A letter from the independent board committee of Huaneng Power International, Inc. is set out on page 20 of this circular. A letter from DBS containing its advice to the Independent Board Committee and the independent shareholders of Huaneng Power International, Inc. is set out on pages 21 to 34 of this circular.

A notice convening the EGM to be held at 9:00 a.m. on 5th December 2006 at Holiday Inn Central Plaza Beijing, 1 Caiyuanjie, Xuanwuqu, Beijing, the People’s Republic of China is set out on pages 71 to 73 of this circular.

If you intend to attend the EGM, you should complete and return the reply slip in accordance with the instructions printed thereon as soon as possible.

Whether or not you are able to attend, you should complete and return the form of proxy in accordance with the instructions printed thereon and return it to Hong Kong Registrars Limited at 19th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event by not later than 24 hours before the time appointed for holding such meeting or any adjournment thereof.

Completion and return of the form of proxy will not preclude you from attending and voting at the EGM should you so wish.

18th October 2006

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
3. Transfer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
4. Capital Increase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
5. Reasons for the Acquisition and the Capital Increase, and Pricing Factors . . . . . . .	10
6. Information regarding the Power Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
7. The EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
8. Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
9. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Letter from DBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix I — Property Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Appendix II — Plant and Machinery Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
Appendix III — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	66
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71

— i —

DEFINITIONS

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

“A Shares”	domestic tradable shares in the ordinary share capital of the
	Company with a nominal value of RMB1.00 each, which are
	listed on the Shanghai Stock Exchange;
“Acquisition”	the purchase by the Company of the Qinbei Power Plant
	Interest;
“ADSs”	American Depositary Shares, each representing the ownership
	of 40 H Shares, which are listed on the New York Stock
	Exchange Inc.;
“associates”	has the meaning ascribed to it in the Hong Kong Listing
	Rules;
“Baoxinghe Company”	Sichuan Huaneng Baoxinghe Power Limited Liability
	Company;
“Board”	the board of Directors of the Company;
“Capital Increase”	the arrangement for the increase of the registered capital of
	Sichuan Hydro Power pursuant to the Capital Increase
	Agreement;
“Capital Increase Agreement”	the agreement entered into among Huaneng Group, the
	Company and Sichuan Hydro Power on 28th September 2006
	in respect of the increase of registered capital of Sichuan
	Hydro Power;
“Closing”	the closing of the Acquisition;
“Company”, “HPI”	Huaneng Power International, Inc., a Sino foreign joint stock
	limited company incorporated in the PRC and the H Shares,
	ADSs and A Shares of which are listed on the Hong Kong
	Stock Exchange, the New York Stock Exchange Inc. and the
	Shanghai Stock Exchange, respectively;
“connected persons”	has the meaning ascribed to it in the Hong Kong Listing
	Rules;

— 1 —

DEFINITIONS

“DBS”	DBS Asia Capital Limited, being the independent financial
	adviser to the Independent Board Committee and the
	Independent Shareholders in respect of the Acquisition and
	the Capital Increase, and a licensed corporation for Type 1
	(dealing in securities), 4 (advising on securities) and 6
	(advising on corporate finance) regulated activities under the
	SFO;
“Deutsche Bank”	Deutsche Bank AG, Hong Kong Branch, being the financial
	adviser of the Company in respect of the Acquisition and the
	Capital Increase, and a deemed registered institution under
	the SFO registered for Type 1 (dealing in securities), 4
	(advising on securities), 6 (advising on corporate finance), 7
	(providing automated trading services) and 9 (asset
	management) regulated activities and a licensed bank under
	the Banking Ordinance (Chapter 155 of the Laws of Hong
	Kong);
“Director(s)”	the director(s) (including independent non-executive
	directors) of the Company;
“Dongxiguan Company”	Sichuan Huaneng Dongxiguan Hydropower Limited Liability
	Company;
“EGM”	an extraordinary general meeting of the Company to be held
	for shareholders of the Company on 5th December 2006 to
	consider and approve the Acquisition and the Capital
	Increase;
“Fujiang Company”	Sichuan Huaneng Fujiang Hydropower Limited Liability
	Company;
“H Shares”	overseas listed foreign shares in the ordinary share capital of
	the Company with a nominal value of RMB1.00 each, which
	are listed on the Hong Kong Stock Exchange;
“HIPDC”	Huaneng International Power Development Corporation;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;
“Hong Kong Listing Rules”	the Rules Governing the Listing of Securities on the Hong
	Kong Stock Exchange;
“Huaneng Group”	China Huaneng Group;

— 2 —

DEFINITIONS

“Independent Board Committee”	a committee of the Board established for the purpose of
	considering the terms of the Acquisition and the Capital
	Increase, comprising independent non-executive Directors
	who are independent in respect of the Acquisition and the
	Capital Increase;
“Independent Shareholders”	Shareholders other than Huaneng Group, HIPDC and their
	respective associates, and who are not involved in, or
	interested in the Acquisition and Capital Increase;
“Jialingjiang Company”	Sichuan Huaneng Jialingjiang Hydropower Limited Liability
	Company;
“Kangding Company”	Sichuan Huaneng Kangding Hydropower Limited Liability
	Company;
“Latest Practicable Date”	13th October 2006, being the latest practicable date prior to
	the printing of this circular for ascertaining certain
	information contained herein;
“Mingtai Company”	Huaneng Mingtai Power Limited Liability Company;
“PRC”	the People’s Republic of China;
“Qinbei Power Plant”	Henan Huaneng Qinbei Power Limited Company, a limited
	liabilities company incorporated in the PRC with a registered
	capital of RMB10 million;
“Qinbei Power Plant Interest”	the 5% equity interest in Qinbei Power Plant which is owned
	by Huaneng Group;
“RMB”	Renminbi, the lawful currency of the PRC;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Shareholders”	the shareholders of the Company;
“Sichuan Hydro Power”	Huaneng Sichuan Hydropower Co., Ltd., a limited liability
	company incorporated in the PRC with an existing registered
	capital of RMB800 million, in which Huaneng Group and the
	Company holds 40% and 60% equity interest respectively;

— 3 —

DEFINITIONS

“Sichuan Hydro Power Transfer	the agreement relating to the transfer of Huaneng Group’s
Agreement”	interest in Sichuan Huaneng Hydro Power Development
	Limited Liability Company (currently named as Huaneng
	Sichuan Hydropower Co., Ltd.), entered into between the
	Company and Huaneng Group on 26th October 2004. For
	details, please refer to the circular issued by the Company on
	3rd November 2004;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“subsidiaries”	has the meaning ascribed to it in the Hong Kong Listing
	Rules;
“Taipingyi Company”	Sichuan Huaneng Taipingyi Hydropower Limited Liability
	Company;
“Transfer Agreement”	the transfer agreement dated 28th September 2006 entered
	into between the Company and Huaneng Group in respect of
	the transfer of Qinbei Power Plant Interest.

— 4 —

LETTER FROM THE BOARD

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(a sino foreign joint stock limited company incorporated in the People’s Republic of China) (Stock Code: 902)

Directors:

Li Xiaopeng Huang Yongda Na Xizhi Huang Long Wu Dawei Shan Qunying Ding Shida Xu Zujian Liu Shuyuan

Legal Address:

West Wing, Building C Tianyin Mansion No. 2C Fuxingmennan Street Xicheng District Beijing 100031 PRC

Independent Non-executive Directors:

Qian Zhongwei Xia Donglin Liu Jipeng Wu Yusheng Yu Ning

18th October 2006

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS

1. INTRODUCTION

On 28th September 2006, the Board made an announcement (“Announcement”) regarding the acquisition of 5% interest in Qinbei Power Plant and the increase of registered capital of Sichuan Hydro Power. As stated in the Announcement, the Company shall issue a circular to its shareholders containing information of the Acquisition and the Capital Increase and will convene a general meeting for obtaining the Independent Shareholders’ approvals for the conduct of the Acquisition and the Capital Increase.

Deutsche Bank has been appointed as financial adviser to the Company in respect of the Acquisition and the Capital Increase.

— 5 —

LETTER FROM THE BOARD

The letter from the Independent Board Committee to the Independent Shareholders is included in this circular. DBS has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the fairness and reasonableness of the terms of the Acquisition and the Capital Increase. The letter of advice from DBS to the Independent Board Committee and the Independent Shareholders is included in this circular.

The purposes of this circular are:

• (i) to provide you with further information in relation to the Acquisition and the Capital Increase;

• (ii) to set out the letter of advice from DBS to the Independent Board Committee and the Independent Shareholders and the recommendation of the Independent Board Committee as advised by DBS; and

• (iii) to seek your approval of the ordinary resolutions in relation to the Acquisition and the Capital Increase, which are set out in the notice of the EGM.

2. BACKGROUND

The Company and its subsidiaries develop, construct, operate and manage power plants in China nationwide, with a total generation capacity of 25,267MW on an equity basis. The Company wholly owns sixteen operating power plants, and has controlling interests in thirteen operating power companies and minority interests in four operating power companies. To date, it is the largest listed power producer in China.

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

The relationships among the Company, Huaneng Group and HIPDC are as follows:

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

Huaneng Group
5% [(] * [)] 51.98%
HIPDC 8.75%
42.03%
The Company
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• Huaneng Group, through China Hua Neng Group Hong Kong Limited, its wholly-owned subsidiary, indirectly holds a 50% interest in Pro-Power Investment Limited while Pro-Power Investment Limited holds a 10% interest in HIPDC. Therefore, Huaneng Group holds a 5% indirect interest in HIPDC.

— 6 —

LETTER FROM THE BOARD

Huaneng Group is the controlling shareholder of HIPDC, holding a 51.98% direct interest in HIPDC. In addition, Huaneng Group also holds a 5% indirect interest in HIPDC and directly holds 8.75% of the total issued share capital of the Company. As of the Latest Practicable Date, HIPDC held approximately 42.03% of the total issued share capital of the Company.

The transactions as contemplated by the Transfer Agreement and the Capital Increase Agreement constitute connected transactions to the Company. In addition, as the Company’s interest in Sichuan Hydro Power will be diluted upon the completion of the Capital Increase, the Capital Increase is regarded as a deemed disposal of the Company’s shareholding interest in Sichuan Hydro Power under Rule 14.29 of the Hong Kong Listing Rules.

Taking the above two transactions as a whole in accordance with Rules 14.22 and 14A.25 of the Hong Kong Listing Rules, the aggregate of the transaction amount involved is RMB680.75 million. As the transaction scale of such transactions in aggregate exceeds 2.5% of the applicable percentage ratios as calculated pursuant to Rule 14.07 of the Hong Kong Listing Rules, the Acquisition and the Capital Increase are connected transactions of the Company, which shall be subject to the Independent Shareholders’ approvals according to Rule 14A.18 of the Hong Kong Listing Rules. Huaneng Group, HIPDC and their respective associates will abstain from voting at the EGM in respect of the ordinary resolutions to approve the Acquisition (including the Transfer Agreement) and the Capital Increase (including the Capital Increase Agreement).

The transactions as contemplated by the Acquisition and the Capital Increase also constitute discloseable transactions to the Company.

3. TRANSFER AGREEMENT

The Transfer Agreement was approved by the Directors at the board meeting on 28th September 2006 and signed by Huaneng Group and the Company on the same day.

Date:	28th September 2006
Parties:	Seller: Huaneng Group
	Purchaser: the Company
Interest to be acquired:	Equity interest representing 5% of the registered capital of
	Qinbei Power Plant. There is no restriction on the subsequent
	sale of such interest.
Consideration:	The consideration for the purchase of the Qinbei Power Plant
	Interest is RMB65.75 million, payable in cash on the Closing
	date. The purchase price was determined on the basis of
	normal commercial terms and arm’s length negotiations
	between the parties thereto.

— 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: ● DBS (the independent financial adviser to the Independent Board Committee and the Independent Shareholders) has advised the Independent Board Committee that the terms and conditions of the transaction contemplated by the Transfer Agreement are fair and reasonable so far as the Independent Shareholders are concerned;

• ● the Independent Board Committee recommended that the Independent Shareholders vote in favour of the Acquisition and the Transfer Agreement;

• ● the Transfer Agreement and the Acquisition have been approved and adopted by the Independent Shareholders; and

• ● the Company has obtained all necessary approvals for the Transfer Agreement and the Acquisition.

• (2) Conditions which the Company may waive: ● representations and warranties of Huaneng Group in the Transfer Agreement are true and complete in all material respects; and

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

• (3) Conditions which Huaneng Group may waive:

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

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

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

— 8 —

LETTER FROM THE BOARD

Closing: Closing shall take place on, whichever is later, (i) the first business day of 2007; or (ii) the day agreed upon by both parties after the conditions have been satisfied or waived.

4. CAPITAL INCREASE AGREEMENT

The Capital Increase Agreement was approved by the Directors at the board meeting on 28th September 2006 and signed by Huaneng Group, the Company and Sichuan Hydro Power on the same day.

Date: 28th September 2006 Parties: Huaneng Group, the Company and Sichuan Hydro Power Amount of The parties to the Capital Increase Agreement agreed to increase the Capital Increase: registered capital of Sichuan Hydro Power by way of capital injection of RMB615 million to be made solely by Huaneng Group. Upon the completion of the Capital Increase, the registered capital of Sichuan Hydro Power will increase from the existing RMB800 million to RMB979.6 million. The difference between the amount of the Capital Increase (i.e. RMB615 million) and the increase of the registered capital (i.e. RMB179.6 million), being RMB435.4 million, represents a share premium which will be recorded as capital reserve of Sichuan Hydro Power. Upon completion of the Capital Increase, the shareholding interest of Huaneng Group in Sichuan Hydro Power will increase from 40% to 51% while HPI’s shareholding interest will decrease from 60% to 49% Conditions: The Capital Increase is subject to the satisfaction or waiver of the following conditions:

• DBS (the independent financial adviser to the Independent Board Committee and the Independent Shareholders) has advised the Independent Board Committee that the terms and conditions of the transaction contemplated by the Capital Increase Agreement are fair and reasonable so far as the Independent Shareholders are concerned;

• the Independent Board Committee recommended that the shareholders vote in favour of the Capital Increase and the Capital Increase Agreement;

• the Capital Increase Agreement and the Capital Increase have been approved and adopted by the Independent Shareholders; and

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LETTER FROM THE BOARD

• all necessary approvals for the Capital Increase Agreement and the Capital Increase have been obtained.

Payment and time for Huaneng Group shall pay up the increased capital to Sichuan Hydro completion: Power by way of cash on, whichever is later, (i) the first business day of 2007; or (ii) the above conditions have been satisfied or waived.

5. REASONS FOR THE ACQUISITION AND THE CAPITAL INCREASE, AND PRICING FACTORS

The Acquisition reflects the Company’s continued implementation of its development strategy which focuses on both green-field development and acquisition. In view of the increasing power demand driven by steady growth of the PRC national economy, growing market share by way of acquisition of power assets will be instrumental in enhancing the Company’s competitive strengths and increasing shareholders’ value. The Acquisition will further increase the Company’s market share in Henan Province, an inland province with rich resources and attractive development prospects. At the same time, the Acquisition will help simplify the shareholding structure of Qinbei Power Plant, thus enabling the Company to manage its interest in Qinbei Power Plant in a more effective manner. Upon Closing, the Company’s operating installed generation capacity on an equity basis will increase by 60MW. The proposed Acquisition has demonstrated Huaneng Group’s continuing support to the Company.

In terms of financial impact, it is anticipated that the completion of the Acquisition will bring about a profit growth for the Company next year. The unaudited profit after tax of Qinbei Power Plant in 2005 under the International Financial Reporting Standards (“IFRS”) amounted to RMB214.95 million. For the six month period ended 30th June 2006, the unaudited profit after tax of Qinbei Power Plant under IFRS amounted to RMB98.82 million, of which the interest attributable to Huaneng Group accounted for RMB4.94 million. Before and after the Acquisition, the financial statements of Qinbei Power Plant were and will be consolidated into the consolidated financial statements of the Company.

The Capital Increase will enhance the financial strengths of Sichuan Hydro Power and ease the pressure for funding required by Sichuan Hydro Power’s projects under development. In view of heightened competition in hydropower project development in recent years, there is a need for Sichuan Hydro Power to undertake large-scale hydropower projects in order to maintain and enhance its market position. Taking into consideration the increasing challenges in the development of hydropower projects, such as stricter environmental protection policies and rising unit construction costs, and in order to mitigate the risks arising from the preparatory stage of project development, the Company, after negotiations with Huaneng Group, agreed that the increase of registered capital would be made solely by Huaneng Group. Upon completion of the Capital Increase, Huaneng Group will become the controlling shareholder of Sichuan Hydro Power. Since Huaneng Group has extensive experience and management expertise in the development of large-scale hydropower projects and is also able to provide necessary resources for hydropower projects under development, better results can be expected in the development of Sichuan Hydro Power’s projects. The funds raised through the Capital Increase will be mainly used as equity capital for the projects under construction and under

— 10 —

LETTER FROM THE BOARD

development. After the Capital Increase, the operating installed generation capacity of the Company on an equity basis will reduce by approximately 103MW while the installed generation capacity under construction on an equity basis will decrease by approximately 50MW. The proposed Capital Increase has also demonstrated the continuing support of Huaneng Group to the Company.

In terms of financial impact, before the Capital Increase, the financial statements of Sichuan Hydro Power were consolidated into the consolidated financial statements of the Company while after the Capital Increase, the financial statements of Sichuan Hydro Power will not be consolidated into the consolidated financial statements of the Company and will be equity accounted for. It is expected that, before considering any extra earnings to be brought about by the Capital Increase, the profit of Sichuan Hydro Power attributable to the Company will decrease slightly in 2007 after the completion of the Capital Increase. The unaudited profit attributable to the equity holders of Sichuan Hydro Power after tax in 2005 under IFRS amounted to RMB243.59 million. For the six month period ended 30th June 2006, the unaudited profit attributable to the equity holders of Sichuan Hydro Power after tax under IFRS amounted to RMB174.27 million.

The pricing for the Acquisition and the Capital Increase was determined through arm’s length negotiations between Huaneng Group and the Company with the assistance of their respective financial advisers, taking into account various factors of Qinbei Power Plant and Sichuan Hydro Power, including their respective market environments, operating conditions, earnings potentials and abilities to generate cash flow.

According to the unaudited financial statements of Qinbei Power Plant for the six months ended 30th June 2006 prepared under IFRS, the book value of Qinbei Power Plant’s net asset amounted to approximately RMB1,000.43 million, indicating the value of Qinbei Power Plant Interest being approximately RMB50.02 million. After negotiations between Huaneng Group and the Company, it was agreed that for the purpose determining the acquisition price, the entire equity interest of Qinbei Power Plant was priced at approximately RMB1,315 million. As such, the acquisition price of the Qinbei Power Plant Interest was set at RMB65.75 million, representing a premium of 31.45% over the book value of the net asset. The pricing level of the Acquisition has reflected the latest valuation of the asset of Qinbei Power Plant and the value as viewed by the market that Qinbei Power Plant may create in its operation, which differ from the book value of the net asset.

According to the unaudited consolidated financial statements of Sichuan Hydro Power for the six months ended 30th June 2006 prepared under IFRS, the book value of consolidated net asset attributable to the equity holders of Sichuan Hydro Power before the Capital Increase amounted to approximately RMB2,250.07 million. After negotiations between Huaneng Group and the Company, it was agreed that the equity interest of Sichuan Hydro Power before the Capital Increase was priced at RMB2,740 million, which represents a premium of 21.77% over the book value of consolidated net asset attributable to equity holders of Sichuan Hydro Power. The pricing level of the Capital Increase has reflected the latest valuation of the asset of Sichuan Hydro Power and the value as viewed by the market that Sichuan Hydro Power may create in its operation, which differ from the book value of consolidated net asset attributable to equity holders of Sichuan Hydro Power. Upon completion of the Capital Increase in the amount of RMB615 million, Huaneng Group and the Company will each hold 51% and 49% of the registered capital of Sichuan Hydro Power, respectively. As the Company’s interest in Sichuan Hydro Power will be diluted upon the completion of the Capital Increase, the Capital Increase is regarded as a deemed disposal of the Company’s shareholding interest in Sichuan

— 11 —

LETTER FROM THE BOARD

Hydro Power. It is expected that a gain of approximately RMB30 million will be resulted from such deemed disposal based on the Company’s investment cost in Sichuan Hydro Power as at 30th June 2006. The gain from the disposal represents the sum of the difference between the Company’s share of the net asset of Sichuan Hydro Power before and after the Capital Increase, and the portion of goodwill disposed upon the Capital Increase.

The board of Directors believes that the price and the terms of the Acquisition and the Capital Increase are fair and reasonable to the Company and its shareholders. These transactions are on normal commercial terms and in line with the Company’s long-term business strategy. The board of Directors is of the view that the Acquisition and the Capital Increase are in the interests of the Company and its shareholders as a whole.

6. INFORMATION REGARDING THE POWER PLANTS

(1) Qinbei Power Plant

Qinbei Power Plant is located in Jiyuan Municipality of Henan Province. Its planned installed capacity is 3,600MW, the first phase of which comprises two 600MW supercritical coal-fired generation units. Qinbei Power Plant was the first coal-fired power plant with stand-alone 600MW generation unit in the Central China region. In December 1998, the former State Power Corporation confirmed this project as the Exemplary Power Plant with Coal Optimization Design of the 21st Century. In July 1999, the former State Development and Planning Commission confirmed this project as the Supporting Project for the Domestic Production of 600MW Supercritical Coal-fired Generation Units. The two generation units of first phase of Qinbei Power Plant commenced operation in 2004.

Currently, HPI is the major shareholder of Qinbei Power Plant, holding a 55% interest in the registered capital of Qinbei Power Plant. Other shareholders include Huaneng Group, Henan Provincial Construction Investment Corporation and Henan Jiyuan Municipality Construction Investment Company, holding 5%, 35% and 5% interests in the registered capital of Qinbei Power Plant, respectively. Huaneng Group obtained the 5% interest in registered capital of Qinbei Power Plant at a consideration of RMB41 million in March 2006 from China Guodian Corporation, a third party independent of the Company and connected persons of the Company. Upon Closing, the Company will hold a 60% interest in the registered capital of Qinbei Power Plant. Henan Provincial Construction Investment Corporation and Henan Jiyuan Municipality Construction Investment Company are third parties independent of the Company and connected persons of the Company. Neither of them holds any shares in the Company and they have agreed to waive their pre-emptive rights to acquire the Qinbei Power Plant Interest in the Acquisition.

No asset of Qinbei Power Plant is subject to any significant mortgage, charge, lien or third party rights. Huaneng Group has warranted that its 5% interest in Qinbei Power Plant is not subject to any mortgage, charge, lien or third party rights.

A valuation report, prepared by Knight Frank Petty Limited, with regard to the plant and machinery held by Qinbei Power Plant is set out in Appendix II of this circular. No valuation report is prepared with regard to the properties held by Qinbei Power Plant as such properties do not form a significant part of Qinbei Power Plant’s asset.

— 12 —

LETTER FROM THE BOARD

Operating Data of Qinbei Power Plant

The following table sets out certain operating data of Qinbei Power Plant for 2005:

	2005
Installed capacity (MW)	1,200
Power generation (billion kWh)	7.448
Utilization hours (hours)	6,207
House consumption tariff (%)	5.22
Average on-grid power rate (RMB/MWh)	299.77
Coal consumption rate for power sold (grams/kWh)	316.38
Unit fuel cost for power sold (RMB/MWh)	147.72

Selected Financial Information of Qinbei Power Plant

The following is a summary of unaudited financial information of Qinbei Power Plant as at 31st December 2004, 31st December 2005 and 30th June 2006 and for the years/period then ended 31st December 2004, 31st December 2005 and 30th June 2006, prepared in accordance with IFRS.

	Qinbei Power Plant	Qinbei Power Plant	Qinbei Power Plant
	As at 31st	As at 31st		As at 30th
	December	December		June
	2004	2005		2006
	_(RMB in _	_thousands, except _		percentage)
Total asset	4,080,843	4,496,900		4,606,107
Total liabilities	3,533,104	3,632,051		3,605,677
Receivables	121,633	235,171		455,485
Net asset	547,739	864,849		1,000,430
Contingent liabilities	—	—		—
Interest attributable to Huaneng Group	0%	0%		5%
Net asset attributable to Huaneng Group
according to the above ratio	—	—		50,022
				For the
	For the year	For the year		six month
	ended 31st	ended 31st	period ended
	December	December		30th June
	2004	2005		2006
	_(RMB in _	_thousands, except _		percentage)
Revenue from principal operations	29,225	1,808,898		911,195
Operating profit from principal operations	8,070	404,306		226,127
(Loss)/Profit before taxation	(4,371)	265,605		147,501
Effective tax rate	15%	19%		33%
Net (loss)/profit after taxation	(3,730)	214,948		98,821

Qinbei Power Plant is a subsidiary of the Company. The Acquisition will not cause any significant impact on the assets and liabilities of the Company.

— 13 —

LETTER FROM THE BOARD

(2) 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 (collectively known as the “Sichuan Hydro Power Subsidiaries”) to Sichuan Hydro Power. The registration for the change of shareholder of the Sichuan Hydro Power Subsidiaries from Huaneng Group to Sichuan Hydro Power was completed in July 2004. Since then, Sichuan Hydro Power became the controlling shareholder of the Sichuan Hydro Power Subsidiaries. Pursuant to the Sichuan Hydro Power Transfer Agreement entered into between the Company and Huaneng Group on 26th October 2004, Huaneng Group transferred its 60% interest in the registered capital of Sichuan Hydro Power to the Company for a consideration of RMB1,219 million. As at the date hereof, the Company is the major shareholder of Sichuan Hydro Power holding a 60% interest in the registered capital thereof. The remaining 40% interest in Sichuan Hydro Power is held by Huaneng Group. Under the Capital Increase Agreement the parties thereto agreed that the registered capital of Sichuan Hydro Power would be increased by way of capital injection made solely by Huaneng Group. Upon completion of the Capital Increase, the Company’s interest in Sichuan Hydro Power will be diluted where Huaneng Group and the Company will each hold 51% and 49% interest in the enlarged registered capital of Sichuan Hydro Power, respectively. Sichuan Hydro Power will cease to be a subsidiary of the Company. As at August 2006, the power plants under Sichuan Hydro Power own an aggregate operating installed generation capacity of 1,471MW, or 941MW on an equity basis. In addition, the power plants under Sichuan Hydro Power have an aggregate installed generation capacity under construction of 605MW, or 457MW on an equity basis. Details of the power plants under Sichuan Hydro Power are set out below:

		Equity held
		by Sichuan
Sichuan Hydro	Registered	Hydro
Power Subsidiaries	Capital	**Power **	Other Shareholders
	(RMB)
Baoxinghe Company	516,100,000	68%	Changjiang Hydro Power
			Development Co., Ltd.: 8%
			Sichuan Province Power
			Development Corporation: 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%

— 14 —

LETTER FROM THE BOARD

		Equity held
		by Sichuan
Sichuan Hydro	Registered	Hydro
Power Subsidiaries	Capital	**Power **	Other Shareholders
	(RMB)
Dongxiguan	156,725,000	59.33%	Sichuan Province Power
Company			Development Corporation: 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%
			Daying Electricity Supply Bureau
			under Mianyang Electricity
			Bureau: 3.8%
			Several individuals: 4.29% in
			aggregate
Fujiang Company	150,000,000 (paid	95%	Sichuan Province Pingwu Power
	up as at 30th June		(Group) Co., Ltd.: 5%
	2006: 147,240,000
	where out of which,
	142,500,000 was
	paid by Sichuan
	Hydro Power)
Kangding Company	194,000,000	60%	Ganzi Region Hydro Power
			Development Co., Ltd.: 40%
Mingtai Company	97,700,000	52.20%	Sichuan Yongan Hydro Power Joint-
			stock Limited Company: 42.99%
			Mianyang City Power Co., Ltd:
			3.28%
			Mianyang Qimingxing Group Co.,
			Ltd: 1.53%
Jialingjiang Company	193,080,000 (paid	55%	Sichuan Province Port and
	up as at 30th June		Navigation Development Co.,
	2006: 176,093,800		Ltd.: 30%
	where out of which,		Nanchong City Power Development
	106,194,000 was		Co., Ltd.: 15%
	paid by Sichuan
	Hydro Power)

The valuation reports, prepared by Knight Frank Petty Limited, with regard to the properties, plant and machinery of Sichuan Hydro Power are respectively set out in Appendices I and II of this circular.

— 15 —

LETTER FROM THE BOARD

Operating Data of Sichuan Hydro Power

The following table sets out certain operating data of the Sichuan Hydro Power Subsidiaries in 2005:

	Name of Sichuan Hydro Power Subsidiaries	Name of Sichuan Hydro Power Subsidiaries
	Baoxinghe Company	Yucheng 60 0.266 4,431 2.51 263 86.69 Tongtou 80 0.479 5,984 Xiaoguanzi 160 0.751 4,691 Qiaoqi (under construction) 240 — — Baoxing (under construction) 195 — —
	Taipingyi Company	Taipingyi 260 1.642 6,314 1.04 234 62.45
	Dongxiguan Company	Dongxiguan 180 0.867 4,817 0.90 303 109.89
	Fujiang Company	Ziyili 130 0.537 4,855 3.25 259 80.23 Shuiniujia (under construction) 70 — — Muzuo (under construction) 100 — —
	Kangding Company	Lengzhuguan 180 0.89 4,942 2.45 262 88.14 Xiaotiandu (under construction) 240 0.042 520
	Mingtai Company	Mingtai 45 0.199 4,417 1.35 296 138.87
	Jialingjiang Company

— 16 —

LETTER FROM THE BOARD

Selected Financial Information of Sichuan Hydro Power

The following is a summary of unaudited consolidated financial information of Sichuan Hydro Power and its subsidiaries as at 31st December 2004, 31st December 2005 and 30th June 2006 and for the periods/year then ended 31st December 2004, 31st December 2005 and 30th June 2006, prepared in accordance with IFRS.

	**Sichuan Hydro Power and its **	**Sichuan Hydro Power and its **	subsidiaries
	31st December	31st December	30th June
	2004	2005	2006
	_(RMB in thousands, except _		percentage)
Total asset	8,134,594	10,327,839	10,872,625
Total liabilities	6,129,988	7,314,148	7,466,241
Receivables	307,744	227,254	292,720
Contingent liabilities	47,240	4,520	—
Net asset attributable to equity holders of
Sichuan Hydro Power	1,307,219	2,075,798	2,250,067
Direct interest attributable to Huaneng
Group	100%	—(1)	40%(2)
Net asset attributable to Huaneng Group
according to the above ratio	1,307,219	—	900,027
	From
	12th July 2004
	(the date of
	incorporation		For the
	of Sichuan	For the	six month
	Hydro Power) to	year ended	period ended
	31st December	31st December	30th June
	2004	2005	2006
	_(RMB in thousands, except _		percentage)
Revenue from principal operations	511,212	1,321,002	733,128
Profit from principal operations	216,317	653,618	418,868
Profit before taxation	130,565	460,997	324,798
Effective tax rate	14%	16%	15%
Profit attributable to equity holders of
Sichuan Hydro Power	63,636	243,594	174,269

Note (1) Excluding the 40% interest held by Huaneng Renewable Energy Industrial Holdings Ltd., a wholly owned subsidiary of Huaneng Group.

• (2) The 40% interest was transferred back to Huaneng Group by Huaneng Renewable Energy Industrial Holdings Ltd., a wholly owned subsidiary of Huaneng Group, in 2006 at nil consideration.

As Sichuan Hydropower will be accounted for using equity method upon completion of the Capital Increase, based on the unaudited consolidated financial information of Sichuan Hydro Power

— 17 —

LETTER FROM THE BOARD

under IFRS as at 30th June 2006, it is expected there will be a decrease in the consolidated total assets, consolidated total liabilities and minority interests of the Company and its subsidiaries by approximately RMB9,500 million, RMB7,500 million and RMB2,000 million, respectively.

7. THE EGM

The transactions as contemplated by the Transfer Agreement and the Capital Increase Agreement constitute discloseable and connected transactions to the Company. The aggregate of the transaction scale of the Acquisition and the Capital Increase exceeds 2.5% of the applicable percentage ratios as calculated pursuant to Rule 14.07 of the Hong Kong Listing Rules. Pursuant to Rule 14A.18 of the Hong Kong Listing Rules, the Company shall obtain the Independent Shareholders’ approvals for the conduct of the Acquisition and the Capital Increase. The EGM will be held for considering and approving the Acquisition and the Capital Increase by the Independent Shareholders by separate resolutions in respect thereof. Huaneng Group, HIPDC and their respective associates will abstain from voting at the EGM, at which the proposed resolutions will be passed by way of ordinary resolutions and voting will be taken by way of a poll in accordance with the requirements of the Hong Kong Listing Rules. The Notice of EGM is set out on pages 71 to 73 of this circular.

A reply slip and a form of proxy for use by the Independent Shareholders at the EGM 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, Xicheng District, Beijing, PRC as soon as possible but in any event not later than 16th November 2006. 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.

8. RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee to the Independent Shareholders of the Company, which is set out on page 20 of this circular, and which contains their recommendation in respect of the Acquisition and the Capital Increase.

The letter of advice from DBS to the Independent Board Committee and the Independent Shareholders on the fairness and reasonableness of the terms of the Acquisition and the Capital Increase is set out on pages 21 to 34 of this circular.

The Independent Board Committee, having taken into account the advice of DBS, considers that the terms of the Acquisition and the Capital Increase are fair and reasonable so far as the Independent Shareholders are concerned and that the Acquisition and the Capital Increase are in the interests of the Company and its shareholders as a whole. Accordingly, it recommends that the Independent Shareholders vote in favour of the resolutions to approve the Acquisition and the Capital Increase.

— 18 —

LETTER FROM THE BOARD

9. OTHER INFORMATION

Your attention is drawn to the general information set out in the appendices to this circular.

Yours faithfully

By order of the Board

Huaneng Power International, Inc. Huang Long

Vice Chairman

— 19 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [291 x 45] intentionally omitted <==

(a sino foreign joint stock limited company incorporated in the People’s Republic of China) (Stock Code: 902)

Registered office: West Wing, Building C Tianyin Mansion 2C Fuxingmennan Street Xicheng District Beijing 100031 The People’s Republic of China 18th October, 2006

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS

We, the Independent Directors of Huaneng Power International, Inc., are advising the Independent Shareholders in connection with the Acquisition and the Capital Increase, details of which are set out in the letter from the Board contained in the circular (“Circular”) of the Company to the Shareholders dated 18th October, 2006, 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 and the Capital Increase constitute connected transactions to the Company. Accordingly, the Acquisition and the Capital Increase will require the approval of the Independent Shareholders at the EGM.

We wish to draw your attention to the letter of advice from DBS set out on pages 21 to 34 of the Circular. We have discussed the letter and the opinion contained therein with DBS.

Having considered, inter alia, the factors and reasons considered by, and the opinion of, DBS, as stated in its aforementioned letter, we consider the terms of the Acquisition and the Capital Increase to be fair and reasonable so far as the Independent Shareholders are concerned. We are of the view that the Acquisition and the Capital Increase are in the interest of the Company and its shareholders as a whole. 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 5th December, 2006 and thereby approve the Acquisition (including the Transfer Agreement) and the Capital Increase (including the Capital Increase Agreement).

Yours faithfully,

Qian Zhongwei Xia Donglin Liu Jipeng Wu Yusheng Yu Ning Independent Directors

— 20 —

LETTER FROM DBS

The following text is the text of the letter of advice dated 18 October 2006 from DBS to the Independent Board Committee and Independent Shareholders for the purpose of incorporate into this circular.

18 October 2006

To the Independent Board Committee and Independent Shareholders

Dear Sir or Madam,

DISCLOSABLE AND CONNECTED TRANSACTION

We refer to our engagement to advise the Independent Board Committee and Independent Shareholders of Huaneng Power International, Inc. (including, as the context requires, its subsidiaries) (the “Company”) in relation to the Acquisition and Capital Increase. Details of the Acquisition and Capital Increase are set out in the circular of the Company dated 18 October 2006 to its Shareholders (the “Circular”) of which this letter forms part. DBS has been appointed the independent financial adviser to advise the Independent Board Committee and Independent Shareholders as to: (a) whether or not the Transfer Agreement and Capital Increase Agreement are on normal commercial terms (as defined under the Hong Kong Listing Rules) and the terms of the Transfer Agreement and Capital Increase Agreement are fair and reasonable so far as the Independent Shareholders are concerned; (b) whether or not entering into the Transfer Agreement and Capital Increase Agreement is in the interests 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 and Capital Increase. The terms used in this letter shall have the same meanings as defined elsewhere in the Circular unless the context otherwise requires.

Huaneng Group is the controlling shareholder of HIPDC, holding a 51.98% direct interest in HIPDC. In addition, Huaneng Group also holds a 5% indirect interest in HIPDC and directly holds 8.75% of the total issued share capital of the Company. As of the Latest Practicable Date, HIPDC held approximately 42.03% of the total issued share capital of the Company. The transactions as contemplated by the Transfer Agreement and Capital Increase Agreement constitute connected transactions to the Company. In addition, as the Company’s interests in Sichuan Hydro Power will be diluted upon the completion of the Capital Increase, the Capital Increase is regarded as a deemed disposal of the Company’s shareholding interest in Sichuan Hydro Power under Rule 14.29 of the Hong Kong Listing Rules.

Taking the Acquisition and Capital Increase as a whole in accordance with Rules 14.22 and 14A.25 of the Hong Kong Listing Rules, the aggregate of the transaction amount involved is RMB680.75 million. As the transaction scale of such transactions in aggregate exceeds 2.5% of the applicable percentage ratios as calculated pursuant to Rule 14.07 of the Hong Kong Listing Rules, the Acquisition and Capital Increase are connected transactions of the Company, which shall be subject to Independent Shareholders’ approvals according to Rule 14A.18 of the Hong Kong Listing Rules.

— 21 —

LETTER FROM DBS

Huaneng Group, HIPDC and their respective associates will abstain from voting at the EGM in respect of the ordinary resolutions to approve the Acquisition (including the Transfer Agreement) and Capital Increase (including the Capital Increase Agreement). In addition, the transactions as contemplated by the Acquisition and Capital Increase also constitute discloseable transactions to the Company.

In formulating our recommendation, we have relied on 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 Latest Practicable Date. We have also assumed that all data, representations and opinions contained or referred to in the Circular are fair and reasonable and have been relied upon. 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 data provided and the representations made to us untrue, inaccurate or misleading. We have no reason to doubt the truth, accuracy and completeness of the data 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, Qinbei Power Plant, Sichuan Hydro Power 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

• i. Background of the Company

The Company and its subsidiaries develop, construct, operate and manage power plants in China nationwide, with a total generation capacity of 25,267MW on an equity basis. The Company wholly-owns 16 operating power plants, and has controlling interests in 13 operating power companies and minority interests in 4 operating power companies. To-date, it is the largest listed power producer in China.

• ii. Overview of the energy and hydropower generation industries in China

Various provinces in China frequently experience seasonal energy shortages. According to data from the State Electricity Regulatory Commission, since June 2002, with the rapid development of the economy, China has been suffering from insufficient electricity supply. The state adopted a series of measures to speed up the construction of power plants. As at the end of 2004, the installed capacity in China reached 440 million kWh, an increase by 51 million kWh over 2003, while installed capacity

— 22 —

LETTER FROM DBS

further increased to over 500 million kWh in 2005. As at June 2006, China has recorded double-digit growth rates in average power generation for over 40 consecutive months, while the growth in electricity generation exceeded the growth of gross domestic product (“GDP”). The demand for power consumption also experienced rapid growth with an increase of 13.5% in 2005. Power consumption is still dominated by industrial use, which accounted for 73.8% in 2005. However, rural residents experienced the most rapid growth in power consumption in 2005, with a growth of 16.2% over the previous year. According to the “Briefing on the power industry in China from January to July 2006” published by China Electricity Council, electricity consumption nationwide from January to July 2006 represented an increase of 13.3% as compared with the previous year. Hydropower generation also developed rapidly. According to forecasts by the Chinese Academy of Engineering, hydropower generation’s installed capacity will reach 147 million kWh by 2010 and 258 million kWh by 2020.

Although hydropower generation is developing rapidly, China Institute of Water Resources and Hydropower Research issued an article entitled “Development of hydropower generation of the world and understanding of the development of hydropower generation in China” which noted that construction of hydropower generation facilities could be very costly, as it may lead to significant changes to the ecological environment and fluvial process, impact to cultural relics and special species as well as the issue of migration. As there is an extensive list of issues, an in-depth study requires long-term commitment as well as participation of experts from various fields. The building of reservoirs and dams could also pose potential safety concerns to the relevant districts due to the risk of flooding. Therefore, the construction and management of large scale hydropower generation facilities have to face various risks and resolve many such important issues.

iii. Reasons for the acquisition of Qinbei Power Plant

Henan Province has an area of approximately 167,000km[2] , and ranks the seventeenth largest province in China with approximately 1.7% of the total area of the country. The population of Henan Province is approximately 96,670,000, which makes it the most populated province in China. According to data from National Bureau of Statistics, the preliminary audited 2005 GDP of Henan Province amounted to approximately RMB1,059 billion, representing an increase of 14.2% over the previous year which is the fifth highest growth rate among the 31 provinces and districts in China.

The board of Directors believe the Acquisition reflects the Company’s continued implementation of its development strategy which focuses on both green-field development and acquisition. In view of the increasing power demand driven by steady growth of the PRC national economy, growing market share by way of acquisition of power assets will be instrumental in enhancing the Company’s competitive strengths and increasing shareholders’ value. The Acquisition will further increase the Company’s market share in Henan Province, an inland province with rich resources and attractive development prospects. At the same time, the Acquisition will help simplify the shareholding structure of Qinbei Power Plant, thus enabling the Company to manage its interest in Qinbei Power Plant in a more effective manner. Upon Closing, the Company’s operating installed generation capacity on an equity basis will increase by 60MW.

— 23 —

LETTER FROM DBS

iv. Reasons for the capital increase of Sichuan Hydro Power

Sichuan is the province with the strongest economic strength in the western part of China. According to data issued by the Sichuan Provincial Government, in the first half of 2006, the growth in Sichuan’s industrial output ranked third in China. Among them, hydropower generation is one of the cornerstone industries of the province, as there are more than 1,300 rivers in the province and its hydropower reserves account for one fifth of the country’s total reserves, of which approximately 92 million KW is developable, making it the largest developable reserve in China.

The board of Directors believes the Capital Increase will enhance the financial strengths of Sichuan Hydro Power and ease the pressure for funding required by Sichuan Hydro Power’s projects under development. In view of heightened competition in hydropower project development in recent years, there is a need for Sichuan Hydro Power to undertake large-scale hydropower projects in order to maintain and enhance its market position. Taking into consideration the increasing challenges in the development of hydropower projects, such as stricter environmental protection policies and rising unit construction costs, and in order to mitigate the risks arising from the preparatory stage of project development, the Company, after negotiations with Huaneng Group, agreed that the increase of registered capital would be made solely by Huaneng Group. Upon completion of the Capital Increase, Huaneng Group will become the controlling shareholder of Sichuan Hydro Power. Since Huaneng Group has extensive experience and management expertise in the development of large-scale hydropower projects and is also able to provide necessary resources for hydropower projects under development, better results can be expected in the development of Sichuan Hydro Power’s projects. The funds raised through the Capital Increase will be mainly used as equity capital for the projects under construction and under development. After the Capital Increase, the operating installed generation capacity of the Company on an equity basis will reduce by approximately 103MW, while the installed generation capacity under construction on an equity basis will decrease by approximately 50MW.

2. The Acquisition and Capital Increase

• i. Assets to be acquired and assets subject to the Capital Increase

Qinbei Power Plant is located in Jiyuan Municipality of Henan Province. Its planned installed capacity is 3,600MW, the first phase of which comprises two 600 MW supercritical generation units which commenced operation in 2004. Currently, the Company is the major shareholder of Qinbei Power Plant, holding a 55% interest in the registered capital of Qinbei Power Plant. Other shareholders include Huaneng Group, Henan Provincial Construction Investment Corporation and Henan Jiyuan Municipality Construction Investment Company, holding 5%, 35% and 5% interests in the registered capital of Qinbei Power Plant, respectively. Huaneng Group obtained the 5% interest in the registered capital of Qinbei Power Plant at a consideration of RMB41 million in March 2006 from China Guodian Corporation, a third party independent of the Company and connected persons of the Company. Upon Closing, the Company will hold a 60% interest in the registered capital of Qinbei Power Plant. No asset of Qinbei Power Plant is subject to any significant mortgage, charge, lien or third party rights. Huaneng Group has warranted that its 5% interest in Qinbei Power Plant is not subject to any mortgage, charge, lien or third party rights.

— 24 —

LETTER FROM DBS

Sichuan Hydro Power was established on 12 July 2004 as a state-owned limited liability company wholly owned by Huaneng Group. Pursuant to the Sichuan Hydro Power Transfer Agreement entered into between the Company and Huaneng Group on 26 October 2004, Huaneng Group transferred its 60% interest in the registered capital of Sichuan Hydro Power to the Company for a consideration of RMB1,219 million. As at the date hereof, the Company is the major shareholder of Sichuan Hydro Power holding a 60% interest in the registered capital thereof. The remaining 40% interest in Sichuan Hydro Power is held by Huaneng Group. Under the Capital Increase Agreement the parties thereto agreed that the registered capital of Sichuan Hydro Power would be increased by way of capital injection made solely by Huaneng Group. Upon completion of the Capital Increase, the Company’s interest in Sichuan Hydro Power will be diluted where Huaneng Group and the Company will each hold 51% and 49% interest in the enlarged registered capital of Sichuan Hydro Power, respectively. Sichuan Hydro Power will cease to be a subsidiary of the Company. As at August 2006, the power plants under Sichuan Hydro Power own an aggregate operating installed generation capacity of 1,471MW, or 941MW on an equity basis. In addition, the power plants under Sichuan Hydro Power have an aggregate installed generation capacity under construction of 605MW, or 457MW on an equity basis.

The following is a summary of the financial and operational information of Qinbei Power Plant and Sichuan Hydro Power prepared in accordance with IFRS. The financial information was extracted from the section titled “Letter from the Board” of the Circular.

		Revenue from
		principal	Net (loss)/
		operations for	profit1 for
		financial	financial year
	Installed	year ended	ended	Net asset2
	capacity	31 December	31 December	as at 30 June
	in 2005	2004 2005	2004 2005	2006
	(MW)	(RMB million)	(RMB million)	(RMB million)
Qinbei Power Plant	1,200	29.2 1,808.9	(3.7) 214.9	1,000.4
Sichuan Hydro Power	1,471	511.2 1,321.0	63.6 243.6	2,250.1

Note:

• (1) Net (loss)/profit refers to the net (loss)/profit after taxation of Qinbei Power Plant (which does not have any subsidiaries) and the profit attributable to equity holders of Sichuan Hydro Power (which holds interests in the Sichuan Hydro Power Subsidiaries) as per the unaudited financial statements of the relevant company prepared in accordance with IFRS.

(2) Net asset refers to Qinbei Power Plant and Sichuan Hydro Power’s net asset value and consolidated net asset value attributable to equity holders respectively as per the unaudited financial statements of the relevant company prepared in accordance with IFRS.

— 25 —

LETTER FROM DBS

ii. Basis of the consideration for the Acquisition and Capital Increase

The pricing for the Acquisition and the Capital Increase was determined through arm’s length negotiations between Huaneng Group, the Company and their respective financial advisers, taking into account various factors of Qinbei Power Plant and Sichuan Hydro Power, including their respective market environment, operating conditions, earnings potentials and abilities to generate cash flow. The board of Directors believes that the price and terms of the Acquisition and Capital Increase are fair and reasonable to the Company and its Shareholders. These transactions are on normal commercial terms and in line with the Company’s long-term business strategy. The board of Directors is of the view that the Acquisition and Capital Increase are in the interests of the Company and its Shareholders as a whole.

iii. The valuation of the Acquisition and Capital Increase

As stated in the Circular under the section titled “Letter from the Board”, the equity value of Qinbei Power Plant is priced at approximately RMB1,315 million and the equity value of Sichuan Hydro Power before the Capital Increase is priced at approximately RMB2,740 million. Qinbei Power Plant (which does not have any subsidiaries) has an enterprise value of approximately RMB4,437 million, which is the sum of its equity value of approximately RMB1,315 million and net debt of approximately RMB3,122 million as per the unaudited financial statements prepared in accordance with IFRS as at 30 June 2006. Sichuan Hydro Power (which holds interests in the Sichuan Hydro Power Subsidiaries) has an enterprise value of approximately RMB10,098 million, which is the sum of its equity value of approximately RMB2,740 million, net debt of approximately RMB6,202 million and minority interests of approximately RMB1,156 million as per the unaudited financial statements prepared in accordance with IFRS as at 30 June 2006.

We list below the valuation multiples of the Acquisition based on the consideration under the Transfer Agreement:

• based on Qinbei Power Plant’s enterprise value of approximately RMB4,437 million and total installed capacity of 1,200MW in 2005, the enterprise value/MW is approximately RMB3,698,000;

• based on Qinbei Power Plant’s equity value of approximately RMB1,315 million and net profit of RMB214.95 million for the financial year ended 31 December 2005, the price to earnings multiple is approximately 6.1 times; and

• based on Qinbei Power Plant’s equity value of approximately RMB1,315 million and book value of Qinbei Power Plant’s net asset of approximately RMB1,000.43 million as at 30 June 2006, the price to net asset multiple is approximately 1.3 times.

— 26 —

LETTER FROM DBS

We list below the valuation multiples of the Capital Increase based on the consideration under the Capital Increase Agreement:

• based on Sichuan Hydro Power’s enterprise value of approximately RMB10,098 million and aggregate operating installed generation capacity of 1,471MW in 2005, the enterprise value/MW before the Capital Increase is approximately RMB6,865,000;

• based on Sichuan Hydro Power’s equity value of approximately RMB2,740 million and profit attributable to equity holders of approximately RMB243.59 million for the financial year ended 31 December 2005, the price to earnings multiple is approximately 11.2 times; and

• based on Sichuan Hydro Power’s equity value of approximately RMB2,740 million and book value of Sichuan Hydro Power’s consolidated net asset attributable to equity holders of approximately RMB2,250.07 million as at 30 June 2006, the price to consolidated net asset attributable to equity holders ratio is approximately 1.2 times.

We have analysed the consideration for the Acquisition and Capital Increase by reviewing (a) the trading multiples of comparable listed companies in Hong Kong (“Comparable Companies”); and (b) the acquisition multiples of recent acquisitions carried out by power companies in China which are listed in Hong Kong (“Comparable Transactions”). In assessing the fairness of the consideration for the Acquisition and Capital Increase, we have referred to standard valuation references commonly used by the power industry (such as enterprise value, generation capacity, price, earnings and net asset value), and we are of the view that enterprise value/MW, price to earnings and price to net asset multiples are suitable valuation benchmarks on which we have made comparisons and conducted analysis with Comparable Companies and Comparable Transactions.

3. Analysis of Comparable Companies

As Qinbei Power Plant and Sichuan Hydro Power generate their revenue from their power generation operations in China, the Comparable Companies we select are power companies which are engaged in power generation in China and listed on the Stock Exchange. Accordingly, we set out in the following table the relevant rates calculated based on the respective share prices of the Comparable Companies as at the Latest Practicable Date and their latest published financial statements. However, we have to point out that although the analysis of Comparable Companies can reflect current market conditions in the industry and provide a guideline for valuation, it does not include differences in accounting policies and standards as well as differences in local regulations, operating environment, business model, taxation and other unique characteristics of different companies. Although no adjustment has been made in respect of the above differences, we believe the following Comparable Companies analysis still provides a meaningful benchmark to measure the valuation of the Acquisition and Capital Increase.

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LETTER FROM DBS

Our findings are set out in the following table:

Company Name Enterprise value1/MW4 Price to earnings2 Price to net asset3 (RMB million) Datang International Power Generation Co. Ltd. 5.1 13.8 1.8 Huadian Power International Corp. Ltd. 4.6 14.0 1.2 China Resources Power Holdings Co. Ltd. 8.1 18.7 2.5 China Power International Development Ltd. 2.6 15.8 1.5 The Company n.a5 13.6 1.7 Minimum 2.6 13.6 1.2 Average 5.1 15.2 1.7 Maximum 8.1 18.7 2.5 Acquisition 3.7 6.1 1.3 Capital Increase 6.9 11.2 1.2	Company Name Enterprise value1/MW4 Price to earnings2 Price to net asset3 (RMB million) Datang International Power Generation Co. Ltd. 5.1 13.8 1.8 Huadian Power International Corp. Ltd. 4.6 14.0 1.2 China Resources Power Holdings Co. Ltd. 8.1 18.7 2.5 China Power International Development Ltd. 2.6 15.8 1.5 The Company n.a5 13.6 1.7 Minimum 2.6 13.6 1.2 Average 5.1 15.2 1.7 Maximum 8.1 18.7 2.5 Acquisition 3.7 6.1 1.3 Capital Increase 6.9 11.2 1.2	Company Name Enterprise value1/MW4 Price to earnings2 Price to net asset3 (RMB million) Datang International Power Generation Co. Ltd. 5.1 13.8 1.8 Huadian Power International Corp. Ltd. 4.6 14.0 1.2 China Resources Power Holdings Co. Ltd. 8.1 18.7 2.5 China Power International Development Ltd. 2.6 15.8 1.5 The Company n.a5 13.6 1.7 Minimum 2.6 13.6 1.2 Average 5.1 15.2 1.7 Maximum 8.1 18.7 2.5 Acquisition 3.7 6.1 1.3 Capital Increase 6.9 11.2 1.2	Company Name Enterprise value1/MW4 Price to earnings2 Price to net asset3 (RMB million) Datang International Power Generation Co. Ltd. 5.1 13.8 1.8 Huadian Power International Corp. Ltd. 4.6 14.0 1.2 China Resources Power Holdings Co. Ltd. 8.1 18.7 2.5 China Power International Development Ltd. 2.6 15.8 1.5 The Company n.a5 13.6 1.7 Minimum 2.6 13.6 1.2 Average 5.1 15.2 1.7 Maximum 8.1 18.7 2.5 Acquisition 3.7 6.1 1.3 Capital Increase 6.9 11.2 1.2
	4.6 8.1 2.6 n.a5	14.0 18.7 15.8 13.6	1.2
			2.5
			1.5
			1.7
	2.6 5.1 8.1 3.7 6.9	13.6 15.2 18.7 6.1 11.2	1.2 1.7 2.5 1.3 1.2

Source: Bloomberg and the latest published financial statements of relevant companies as at the Latest Practicable Date.

Notes:

• (1) The enterprise value of a company refers to the sum of its market value on the Latest Practicable Date and net debt and minority interests as per the latest published financial statements of the relevant company on the Latest Practicable Date.

• (2) The price to earnings ratio refers to a comparison of the market value on the Latest Practicable Date with the net profit as per the latest published audited annual financial statements (excluding extraordinary items) of the relevant company on the Latest Practicable Date.

• (3) The price to net asset ratio refers to a comparison of the market value on the Latest Practicable Date with the shareholders’ equity as per the latest published financial statements of the relevant company available on the Latest Practicable Date.

• (4) MW refers to the total generation capacity as per the data of the relevant company on the Latest Practicable Date.

• (5) As the Company only has generation capacity on an equity basis data available in the public domain, as opposed to total generation capacity data of the Comparable Companies, the Company’s enterprise value/MW multiple is “not applicable”.

The enterprise value/MW and price to net asset multiples for the Acquisition consideration are both within the range and below the average of Comparable Companies. The price to earnings multiple for the Acquisition consideration falls below the range for the Comparable Companies.

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LETTER FROM DBS

The price to earnings and price to net asset multiples for the Capital Increase consideration of Sichuan Hydro Power are below the average of the Comparable Companies. The enterprise value/MW multiple for the Capital Increase consideration, however, is higher than the average of the Comparable Companies. This is because most generation assets of Comparable Companies are coal-fired power plants, and their enterprise value/MW multiples are generally lower than that of hydropower plants due to differences in operating environment such as fuel cost, equipment cost and regulations.

4. Analysis of Comparable Transactions

Our analysis also includes research into transactions in the electric power generation sector in China since the recent power industry reform started in early 2002. In selecting the Comparable Transactions, we have focused on substantial transactions and have taken into account the availability of reliable transaction information and comparability of the power plants acquired with Qinbei Power Plant and Sichuan Hydro Power. However, we have to point out that although the analysis of Comparable Transactions can reflect transaction benchmark in the industry and provides a guideline for valuation, it does not include differences in accounting policies and standards as well as differences in local regulations, operating environment, business model, taxation and other unique characteristics of different target companies. Although no adjustment has been made in respect of the above differences, in particular in relation to the enterprise value/generation capacity of the Comparable Transactions for which only generation capacity on an equity basis data are available as per the publicly filed information (such as shareholder’s circulars and public announcements) while we have used enterprise value/total generation capacity data for Capital Increase, we believe the following Comparable Transactions analysis still provides a meaningful benchmark to measure the Acquisition and Capital Increase.

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LETTER FROM DBS

Our findings are set out in the following table:

				Generation
				capacity
				on an	Enterprise
				equity		value1	Price to	Price to
Date	Assets	Province	Purchaser	basis	Fuel	/MW4	earnings2	net asset3
						(RMB
				(MW)		Million)
27 July 2006	Fuyang	Anhui	China Resources	704	Coal	3.1	n.a.	1.0
			Power
27 July 2006	Honghe	Yunnan	China Resources	137	Coal	5.5	n.a.	1.0
			Power
14 June 2005	Huadian Suzhou	Anhui	Huadian Power	0	Coal	n.a.	n.a.	1.0
			International
14 June 2005	Huadian Xinxiang	Henan	Huadian Power	0	Coal	n.a.	n.a.	1.0
			International
1 June 2005	Shentou Power Plant	Shanxi	China Power	1,200	Coal	0.8	4.9	1.3
			International
26 October 2004	Sichuan Hydro Power	Sichuan	The Company	366	Hydro	6.8	10.9	1.8
26 October 2004	Pingliang Power Plant	Gansu	The Company	780	Coal	3.8	10.8	2.2
19 April 2004	Hanfeng/Jinggangshan/	Hebei/Jiangxi/Hunan/	The Company	3,036	Coal	3.8	8.7	1.7
	Yueyang/Luohuang/	Chongqng/Liaoning
	Yingke
1 June 2003	Xindian/Yushe/Qinbei	Shandong/Shanxi/Henan	The Company	570	Coal	2.9	9.7	4.8
13 May 2003	Guangan	Sichuan	Shandong	480	Coal	4.3	18.4	1.0
			International
			Power
			Development
15 November 2002	Shidongkou Factory	Shanghai	The Company	390	Coal	1.8	7.2	3.2
	One
Minimum						0.8	4.9	1.0
Average						3.6	10.1	1.8
Maximum						6.8	18.4	4.8
Acquisition						3.7	6.1	1.3
Capital Increase						6.9	11.2	1.2

Source: Publicly filed information such as shareholder’s circulars and/or announcements of the respective transactions available as at the Latest Practicable Date.

Notes:

• (1) The enterprise value refers to the sum of the equity purchase consideration paid in an acquisition and the proportional net debt of the target power plant(s) as per publicly filed information of the relevant transaction available on the Latest Practicable Date, except for the enterprise value of Sichuan Hydro Power under Capacity Increase which refers to the sum of its equity value, net debt and minority interests.

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LETTER FROM DBS

• (2) The price to earnings multiple refers to a comparison of the total consideration paid in an acquisition with the net profit of the target power plant(s) as per publicly filed information of the relevant transaction available on the Latest Practicable Date.

• (3) The price to net asset multiple refers to a comparison of the equity purchase consideration paid in an acquisition with the attributable net asset on an equity basis as per publicly filed information of the relevant transaction available on the Latest Practicable Date.

• (4) MW refers to the generation capacity on an equity basis as per publicly filed information of the relevant transaction available on the Latest Practicable Date, except for the generation capacity of Sichuan Hydro Power which is on total basis.

The enterprise value/MW of the Acquisition consideration is within the range and slightly higher than the average value of Comparable Transactions. However, based on the price to earnings and price to net asset multiples, the Acquisition falls within range and is lower than the average multiples as compared with Comparable Transactions.

Similarly, based on the price to net asset multiple for the Capital Increase of Sichuan Hydro Power, the Capital Increase has a lower multiple as compared with the average of the Comparable Transactions in the past. However, the enterprise value/MW multiple is higher than the respective range of the Comparable Transactions. We believe, as mentioned above, the major reason for a higher enterprise value/MW multiple is that most generation assets of Comparable Transactions are coal-fired power plants and their enterprise value/MW multiples are generally lower than that of hydropower plants. The price to earnings multiple for the Capital Increase is also above the average but falls within the range of that of the Comparable Transactions.

Based on the above analysis with respect to Comparable Companies and Comparable Transactions, we believe that the consideration for Qinbei Power Plant under the Transfer Agreement and the consideration for Sichuan Hydro Power under the Capital Increase Agreement are fair and reasonable so far as Independent Shareholders are concerned.

5. Conditions for Acquisition and Capital Increase

The completion of the Transfer Agreement and Capital Increase Agreement are subject to the fulfillment of all conditions, including, inter alia, approvals granted by Independent Shareholders at the EGM. Further details concerning other conditions precedent of the Acquisition and Capital Increase are set out in the section titled “Letter from the Board” of the Circular.

6. Potential financial impact on the Company

This section sets out various analyses on the potential financial impact of the Transfer Agreement and Capital Increase Agreement on the Company, which were prepared based on the audited financial information and accountant’s report of the Company for the financial year ended 31 December 2005, and the unaudited financial statements of the Company as at 30 June 2006. It should be noted that the figures and financial impact shown in this section are for illustrative purposes only.

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LETTER FROM DBS

i. Consolidation of financial statements

Before and after the Acquisition, the financial statements of Qinbei Power Plant were and will be consolidated into the consolidated financial statements of the Company.

Before the Capital Increase, the financial statements of Sichuan Hydro Power were consolidated into the consolidated financial statements of the Company while after the Capital Increase, the financial statements of Sichuan Hydro Power will not be consolidated into the consolidated financial statements of the Company and will be equity accounted for.

ii. Net Profit

Based on the unaudited financial statements of Qinbei Power Plant prepared in accordance with IFRS, the net profit after tax for the financial year ended 31 December 2005 was approximately RMB214.95 million. Meanwhile, the Company is acquiring a 5% interest in Qinbei Power Plant, and thus the contribution of Qinbei Power Plant to the Company’s net profit will accordingly increase upon completion of the Acquisition.

Based on the unaudited financial statements of Sichuan Hydro Power prepared in accordance with IFRS, profit attributable to equity holders for the financial year ended 31 December 2005 was approximately RMB243.59 million. As stated on the Circular in the section titled “Letter from the Board”, the Directors expected that, before considering any extra earnings to be brought about by the Capital Increase, the profit of Sichuan Hydro Power attributable to the Company will decrease slightly in 2007 after completion of the Capital Increase. In addition, the Capital Increase is regarded as a deemed disposal of the Company’s shareholding interest in Sichuan Hydro Power. It is expected that a gain of approximately RMB30 million will be resulted from such deemed disposal based on the Company’s investment cost in Sichuan Hydro Power as at 30 June 2006. The gain from the disposal represents the sum of the difference between the Company’s share of net asset of Sichuan Hydro Power before and after the Capital Increase, and the portion of goodwill disposed upon the Capital Increase.

The Company, according to audited financial statements prepared in accordance with IFRS for the year ended 31 December 2005, recorded profit attributable to shareholders of approximately RMB4,872 million. Thus, it is not expected that the completion of the Acquisition and Capital Increase will result in a significant impact on the Company’s future net profit.

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LETTER FROM DBS

iii. Net Asset

Based on the unaudited financial statements of Qinbei Power Plant prepared in accordance with IFRS, the book value of Qinbei Power Plant’s net asset as of 30 June 2006 was approximately RMB1,000.43 million. Meanwhile, the Company is acquiring a 5% interest in Qinbei Power Plant, and thus the portion of the Company’s net asset value attributable to Qinbei Power Plant will accordingly increase upon completion of the Acquisition. As stated on the Circular in the section titled “Letter from the Board”, currently Qinbei Power Plant is a subsidiary of the Company. The Acquisition will not cause any significant impact on the assets and liabilities of the Company.

Based on the unaudited consolidated financial statements of Sichuan Hydro Power prepared in accordance with IFRS, the book value of consolidated net asset attributable to equity holders of Sichuan Hydro Power as of 30 June 2006 was approximately RMB2,250.07 million. As the Company’s interest in Sichuan Hydro Power will be diluted upon completion of the Capital Increase, the Company’s interest in Sichuan Hydro will decrease by 11%, and thus the portion of the Company’s net asset value attributable to Sichuan Hydro Power will accordingly decrease upon completion of the Capital Increase. As stated in the Circular in the section titled “Letter from the Board”, Sichuan Hydro Power will be accounted for using equity method upon completion of the Capital Increase. As such, based on the unaudited financial information of Sichuan Hydro Power under IFRS as at 30 June 2006, it is expected that there will be a decrease in the consolidated total assets, consolidated total liabilities and minority interests of the Company and its subsidiaries by approximately RMB9,500 million, RMB7,500 million and RMB2,000 million, respectively.

According to unaudited financial statements prepared in accordance with IFRS, the Company as at 30 June 2006 had net asset attributable to equity holders of approximately RMB39,185 million. As such, the management of the Company anticipated that there will not be significant changes in net asset attributable to equity holders of the Company upon completion of the Acquisition and Capital Increase.

iv. Cash

The consideration of approximately RMB65.75 million for the acquisition of Qinbei Power Plant will be settled in cash on the Closing date. According to unaudited financial statements prepared in accordance with IFRS, the Company as at 30 June 2006 recorded cash and cash equivalents of approximately RMB2,411.27 million, of which the Acquisition consideration represented approximately 2.7%. Therefore, the Acquisition is not expected to have a significant impact on cash holdings of the Company.

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LETTER FROM DBS

Summary

We have reached our conclusion by considering the above major factors and reasons and we would like to draw your attention in particular to the following:

• The Acquisition will further increase the Company’s market share in Henan Province, an inland province with rich resources and attractive development prospects. It can also help simplify the shareholding structure of Qinbei Power Plant, enabling the Company to manage its interests in Qinbei Power Plant in a more effective manner;

• The Capital Increase will enhance the financial strength of Sichuan Hydro Power and ease the pressure for funding required by Sichuan Hydro Power’s projects under development. Meanwhile, it will enable the Company to mitigate the risks arising from the preparatory stage of project development;

• After considering the different nature of generation assets and specific operating factors of power plants, the Acquisition and Capital Increase multiples are reasonable as compared with the trading multiples of Comparable Companies;

• After considering the economic environment and conditions of various transactions and specific operating factors of power plants, the Acquisition and Capital Increase multiples are reasonable as compared with the past transaction multiples of Comparable Transactions; and

• The Acquisition and Capital Increase do not have significant potential financial impact on the Company.

Recommendations

After considering all of the above major factors and reasons, we consider: (a) the Transfer Agreement and Capital Increase Agreement have been entered into on normal commercial terms (as defined in the Hong Kong Listing Rules) and are fair and reasonable so far as Independent Shareholders are concerned; and (b) the entering into of the Transfer Agreement and Capital Increase Agreement is in the interest of the Company and its Shareholders as a whole. Therefore, we advise the Independent Board Committee to recommend Independent Shareholders to vote in favour of the ordinary resolutions approving the Acquisition and Capital Increase contained in the notice of the EGM as set out from p.71 to p.73 of the Circular.

On behalf of

DBS Asia Capital Limited George Hongchoy Liu Xiao Feng Managing Director Managing Director

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PROPERTY VALUATION REPORT

APPENDIX I

==> picture [153 x 45] intentionally omitted <==

==> picture [118 x 77] intentionally omitted <==

18 October 2006

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

Dear Sirs

In accordance with your instructions for us to value the property interests of Huaneng Sichuan Hydropower Co., Ltd. (hereinafter referred to as the “Sichuan Hydro Power”) and its subsidiaries (Sichuan Huaneng Baoxinghe Power Limited Liability Company, Sichuan Huaneng Taipingyi Hydropower Limited Liability Company, Sichuan Huaneng Dongxiguan Hydropower Limited Liability Company, Sichuan Huaneng Fujiang Hydropower Limited Liability Company, Sichuan Huaneng Kangding Hydropower Limited Liability Company, Huaneng Mingtai Power Limited Liability Company and Sichuan Huaneng Jialingjiang Hydropower Limited Liability 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 market values of such property interests as at 31 July 2006.

Our valuation is our opinion of the market value of the property which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

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APPENDIX I

PROPERTY VALUATION REPORT

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

We have valued a portion of the property interests by using ‘‘Direct Comparison Approach’’ whenever market comparable transactions are available and assumed sale of the property interests with the benefit of vacant possession. However, for the rest of the property interests, due to the fact that specific uses for these properties have been restricted, there is no readily identifiable market comparable, and the buildings and structures of these properties cannot be valued on the basis of direct comparison, they have therefore been valued on the basis of their depreciated replacement costs. We would define ‘‘Depreciated Replacement Cost’’ for these purposes to be our opinion of the land value in its existing use and an estimate of the new replacement costs of the buildings, including fees and finance charges, from which deductions are then made to allow for age, condition and functional obsolescence. The depreciated replacement cost approach generally provides the most reliable indication of value for property in the absence of a known market based on comparable sales.

Our valuation based on the Depreciated Replacement Cost approach shall be subject to the adequate potential profitability of the business. We must state that cessation of the existing business (if any) may have significant impact on the market value of the property interests as derived by the Depreciated Replacement Cost.

In preparing our valuation report, we have complied with the “First Edition of The HKIS Valuation Standards on Properties” published by the Hong Kong Institutes of Surveyors and all the requirements contained in the provisions of Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited.

We have been provided with copies of extracts of title documents relating to the properties. However, we have not inspected the original documents to verify ownership or to verify any amendments which may not appear on the copies handed to us. In our valuation, we have relied on the information given by Sichuan Hydro Power and its subsidiaries and have also made reference to the information given by the PRC legal adviser, Haiwen & Partners, on the PRC laws, regarding the title and other legal mattes relating to the properties.

We have relied to a considerable extent on the information given by Sichuan Hydro Power and its subsidiaries and the legal opinion of the PRC legal adviser. We have no reason to doubt the truth and accuracy of the information provided to us by Sichuan Hydro Power and its subsidiaries and/or the PRC legal adviser which is material to the valuation. We have accepted advice given by Sichuan Hydro Power and its subsidiaries on such matters as planning approvals or statutory notices, easements, tenure, ownership, completion dates of buildings, particulars of occupancy, construction costs, floor and site areas and all other relevant matters. Dimensions, measurements and areas included in the valuation report are based on information contained in the documents provided to us and are therefore only approximations. We have not been able to carry out on-site measurements to

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PROPERTY VALUATION REPORT

APPENDIX I

verify the correctness of the site and floor areas of the property interests and we have assumed that the site and the floor areas shown on the documents handed to us are correct. We were also advised by Sichuan Hydro Power and its subsidiaries that no material facts have been omitted from the information provided.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out site investigations to determine the suitability of ground conditions and services, etc for any future developments. Our valuations are prepared on the assumption that these aspects are satisfactory. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any 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, restriction and outgoings of an onerous nature which could affect their values.

All money amounts stated are in Renminbi.

Our summary of values and valuation report are attached.

Yours faithfully For and on behalf of

Knight Frank Petty Limited Alex S L Ng MRICS MHKIS RPS (GP) Executive Director

Note: Alex S L Ng, M.R.I.C.S., M.H.K.I.S., R.P.S. (G.P.), has been a qualified valuer with Knight Frank Petty Limited since November 1995 and has 20 years’ experience in the valuation of properties in Hong Kong and has been involved in the valuation of properties in the People’s Republic of China and Asia Pacific regions since 1988.

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PROPERTY VALUATION REPORT

APPENDIX I

SUMMARY OF VALUES

Property

1 Various properties of Sichuan Hydro Power in Renmin South Road and Xiyanxian of Chengdu City, Sichuan Province, the PRC 2 Various properties of Sichuan Huaneng Baoxinghe Power Limited Liability Company (the “Baoxinghe Company”) in Yanjiang Road, Guoyuan Road, Qiaoqi Village and Muping Town of Baoxing County, Siyan Village of Lushan County and Duoying Town of Yaan City and Renmin South Road, Dacisi Road of Chengdu City, Sichuan Province, the PRC 3 Various properties of Sichuan Huaneng Taipingyi Hydropower Limited Liability Company (the “Taipingyi Company”) in Yingxiu Town and Yinxing Village of Wenchuan County of Abazhou, Renmin South Road, Lingshiguan Road, Xinguang Road of Chengdu City, Gongyuan Road, Guanjing Road of Dujiangyan City and Luling Road of Sanya City, Sichuan Province, the PRC 4 Various properties of Sichuan Huaneng Dongxiguan Hydropower Limited Liability Company (the “Dongxiguan Company”) in Liulin Road, Li’an Town of Wusheng County of Nanchong City and Renmin South Road, Dacisi Road of Chengdu City, Sichuan Province, the PRC

Market value in existing state as at 31 July 2006 RMB No commercial value

RMB30,500,000

RMB65,000,000

RMB30,500,000

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PROPERTY VALUATION REPORT

APPENDIX I

Market value in existing state as at 31 July 2006 RMB No commercial value

Property

5 Various properties of Sichuan Huaneng Fujiang Hydropower Limited Liability Company (the “Fujiang Company”) in Baima Village, Muzuo Village of Pingwu County of Mianyang City and Renmin South Road, Longjiang Road of Chengdu City, Sichuan Province, the PRC 6 Various properties of Sichuan Huaneng Kangding Hydropower Limited Liability Company (the “Kangding Company”) in Guza Town and Lucheng Town of Kangding County, Pengba Village of Luding County, Linqiong Town of Qionglai City and Renmin South Road, Dacisi Road of Chengdu City, Sichuan Province, the PRC 7 Various properties of Huaneng Mingtai Power Limited Liability Company (the “Mingtai Company”) in Beiba Town and Tongchuan Town of Santai County of Mianyang City, Sichuan Province, the PRC 8 Various properties of Sichuan Huaneng Jialingjiang Hydropower Limited Liability Company (the “Jialingjiang Company”) in Qingju Town of Nanchong City, Sichuan Province, the PRC Total:

No commercial value RMB69,200,000 RMB285,500,000 No commercial value

RMB480,700,000

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PROPERTY VALUATION REPORT

APPENDIX I

VALUATION REPORT

					Market value in
				Particulars of	existing state as at 31
	Property	Description and tenure		occupancy	July 2006
1	Various properties of	The properties comprise	various portions of	The properties	No commercial value
	Sichuan Hydro Power	an office building and a	residential building	are currently
	in Renmin South Road	completed in 2000 and 1997 respectively.		occupied by
	and Xiyanxian of	The gross floor area details are as follows:		Sichuan Hydro
	Chengdu City,	Use	Gross Floor Area	Power as office
	Sichuan Province, the PRC		(sq m) (sq ft)	and dormitory uses.
		Office	9,946.62 107,065
		Residential	136.00 1,464
		Total 10,082.62 108,529

Note: We have not been provided with the title documents of the properties as at the date of our valuation. In the course of our valuation, we have assigned no commercial value to the properties.

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PROPERTY VALUATION REPORT

APPENDIX I

Property

• 2 Various properties of Baoxinghe Company in Yanjiang Road, Guoyuan Road, Qiaoqi Village and Muping Town of Baoxing County, Siyan Village of Lushan County and Duoying Town of Yaan City and Renmin South Road, Dacisi Road of Chengdu City, Sichuan Province, the PRC

		Market value in
	Particulars of	existing state as at 31
Description and tenure	occupancy	July 2006
The properties comprise thirty-two parcels of	The properties	RMB30,500,000
land with a total site area of approximately	are currently	(please see note 5)
6,606,655.21 sq m (71,114,037 sq ft) and	occupied by
various buildings and structures completed	Baoxinghe
between 1996 and 2005.	Company as
	power plant,
Details of the gross floor areas are listed as	office and
follows:	residential uses.
Use Gross Floor Area
(sq m) (sq ft)
Office 1,105.18 11,896
Residential 6,550.61 70,511
Ancillary buildings 27,650.85 297,634 Total 35,306.64 380,041

The properties also comprise other ancillary buildings and structures which are under construction.

Notes:

1. Pursuant to thirty State-owned Land Use Right Certificates Nos. Ya Guo Yong (2004) Zi Di 5294, Ya Guo Yong (96) Zi Di 263, Ya Guo Yong (94) Zi Di 949, Ya Guo Yong (99) Zi Di 1954, Ya Di Guo Yong (1999) Zi Di Lu Shan 004 to 006, 008 to 010, 012, 013, Ya Di Guo Yong (1999) Zi Di Tian Quan 005, Bao Guo Yong (2000) Zi Di 0427, 0428, Bao Guo Yong (2001) Zi Di 0461 to 0464, 0466 to 0469, 0471 to 0474, 0476, Bao Guo Yong (2004) Zi Di 21 and Lu Guo Yong (2000) Zi Di 166, land use rights of the properties with a total site area of 672,326.21 sq m have been allocated to Baoxinghe Company for an indefinite term for production use.

2. Pursuant to twenty-one Building Ownership Certificate Nos. Ya Fang Quan Zheng Shi Zi Di 0045527, 0045529 to 0045533, 0045441, 0045352, 0045357, 0045359, 0045360, Lu Fang Quan Zheng Gong Zi Di 620 to 622, Bao Fang Zi Di 2421 to 2423, 14040, 14041 and Rong Fang Quan Zheng Cheng Fang Jian Zheng Zi Di 1097682, 1097683, the titles to various buildings of the properties with a total gross floor area of 32,045.46 sq m are held by Baoxinghe Company.

3. Thirty parcels of land with a total site area of approximately 672,326.21 sq m of the properties are granted by way of allocation. As these lands cannot be freely transferred in the market, we have assigned no commercial value to these lands and the buildings and structures erected thereon.

4. We have not been provided with the title documents of two parcels of land and office portion of the properties as at the date of our valuation. In the course of our valuation, we have assigned no commercial value to the aforesaid portions of the properties.

5. In the course of our valuation, we have assumed that the residential portion of the properties with a total gross floor area of 6,550.61 sq m has proper legal title and can be freely transferred in the market.

6. As advised by Sichuan Hydro Power and its subsidiaries, the construction cost incurred for the portion of “construction in progress” of the properties as at 31 July 2006 is approximately RMB1,079,520,000.

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PROPERTY VALUATION REPORT

APPENDIX I

Property

3 Various properties of Taipingyi Company in Yingxiu Town and Yinxing Village of Wenchuan County of Abazhou, Renmin South Road, Lingshiguan Road, Xinguang Road of Chengdu City, Gongyuan Road, Guanjing Road of Dujiangyan City and Luling Road of Sanya City, Sichuan Province, the PRC

Description and tenure

The properties comprise twelve parcels of land with a total site area of approximately 67,392 sq m (725,407 sq ft) and various buildings and structures completed between 1991 and 2003.

Details of the gross floor areas are listed as follows:

Use Office Residential Composite Ancillary buildings Total	Gross Floor Area (sq m) (sq ft) 1,746.59 18,800 8,294.70 89,284 17,325.62 186,493 10,002.00 107,662 37,368.91 402,239	Gross Floor Area (sq m) (sq ft) 1,746.59 18,800 8,294.70 89,284 17,325.62 186,493 10,002.00 107,662 37,368.91 402,239
		402,239

Market value in Particulars of existing state as at 31 occupancy July 2006 The properties RMB65,000,000 are currently (please see note 5) occupied by Taipingyi Company as power plant, office and residential uses.

Notes:

1. Pursuant to twelve State-owned Land Use Right Certificates Nos. A Zhou Guo Yong (2004) 464 to 475, land use rights of the properties with a total site area of 67,392 sq m have been allocated to Taipingyi Company for an indefinite term for industrial, residential, office and public facilities uses.

2. Pursuant to twenty two Building Ownership Certificate Nos. Rong Fang Quan Zheng Cheng Fang Jian Zheng Zi Di 0875250, 0875251, 0875253, 0875254, 0879710, 0879712, 0879714, 0879717, Du Quan Chan Zi Di 1812, Wen Fang Quan Zheng Ying Fang Zi Di 440 to 444, Du Fang Quan Zheng Dou Fang Jian Zheng Zi Di 0072650 to 0072654 and San Tu Fang (2004) Zi Di 3569 to 3571, the titles to various buildings of the properties with a total gross floor area of 25,620.32 sq m are held by Taipingyi Company.

3. Twelve parcels of land of the properties with a total site area of approximately 67,392 sq m are granted by way of allocation. As these lands cannot be freely transferred in the market, we have assigned no commercial value to these lands and the buildings and structures erected thereon.

4. We have not been provided with the title documents of the office portion of the properties as at the date of our valuation. In the course of our valuation, we have assigned no commercial value to the aforesaid portion of the properties.

5. In the course of our valuation, we have assumed that the residential and composite portions of the properties with a total gross floor area of 8,294.70 sq m and 17,326.62 sq m respectively have proper legal title and can be freely transferred in the market.

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PROPERTY VALUATION REPORT

APPENDIX I

Property

• 4 Various properties of Dongxiguan Company in Liulin Road, Li’an Town of Wusheng County of Nanchong City and Renmin South Road, Dacisi Road of Chendgu City, Sichuan Province, the PRC

Description and tenure

• The properties comprise seven parcels of land with a total site area of approximately 872,214.37 sq m (9,388,515 sq ft) and various buildings and structures completed between 1992 and 2006.

• Details of the gross floor areas are listed as follows:

Use Office Residential Ancillary buildings Total	Gross Floor Area (sq m) (sq ft) 1,105.00 11,894 6,550.61 70,511 34,099.15 367,043 41,754.76 449,448	Gross Floor Area (sq m) (sq ft) 1,105.00 11,894 6,550.61 70,511 34,099.15 367,043 41,754.76 449,448
		449,448

Market value in Particulars of existing state as at 31 occupancy July 2006 The properties RMB30,500,000 are currently (please see note 5) occupied by Dongxiguan Company as power plant, office and residential uses.

Notes:

1. Pursuant to six State-owned Land Use Right Certificates Nos. Nan Chong Shi Guo Yong (2004) Di 0011114, Wu Sheng Guo Yong (2004) Zi Di 1451 to 1453, Yue Guo Yong (Ping) Di 3330 and Lie Mian Guo Yong (95) Zi 7327, land use rights of the properties with a total site area of 793,214.37 sq m have been allocated to Dongxiguan Company for an indefinite term for production, office and living uses.

2. Pursuant to nineteen Building Ownership Certificate Nos. Wu Fang Quan Zheng (2004) Di 001-1 6# to 7#, 001 8#, 001-2 1# to 5#, 001-3 9# to 12#, Nan Fang Quan Zheng Nan Jian Zi Di 00168966 to 00168970 and Rong Fang Quan Zheng Cheng Fang Jian Zheng Zi Di 1097679, 1097680, the titles to various buildings of the properties with a total gross floor area of 40,649.76 sq m are held by Dongxiguan Company.

3. Six parcels of land with a total site area of approximately 793,214.37 sq m of the properties are granted by way of allocation. As these lands cannot be freely transferred in the market, we have assigned no commercial value to these lands and the buildings and structures erected thereon.

4. We have not been provided with the title documents of a parcel of land and the office portion of the properties as at the date of our valuation. In the course of our valuation, we have assigned no commercial value to the aforesaid portions of the properties.

5. In the course of our valuation, we have assumed that the residential portion of the properties with a total gross floor area of 6,550.61 sq m has proper legal title and can be freely transferred in the market.

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PROPERTY VALUATION REPORT

APPENDIX I

Property

Description and tenure

Market value in Particulars of existing state as at 31 occupancy July 2006

• 5 Various properties of Fujiang Company in Baima Village, Muzuo Village of Pingwu County of Mianyang City and Renmin South Road, Longjiang Road of Chengdu City, Sichuan Province, the PRC

• The properties comprise ten parcels of land with a total site area of approximately 7,003,000 sq m (75,380,292 sq ft) and various buildings and structures completed about 2004.

Details of the gross floor areas of the properties are listed as follows:

Use Office Residential Ancillary buildings Total	Gross Floor Area (sq m) (sq ft) 1,105.18 11,896 10,000.00 107,640 4,800.00 51,667 15,905.18 171,203	Gross Floor Area (sq m) (sq ft) 1,105.18 11,896 10,000.00 107,640 4,800.00 51,667 15,905.18 171,203
		171,203

The properties No commercial value are currently occupied by Fujiang Company as power plant, office and residential uses.

The properties also comprise other ancillary buildings and structures which are under construction.

Notes:

1. We have not been provided with the title documents of the properties as at the date of our valuation. In the course of our valuation, we have assigned no commercial value to the properties.

2. As advised by Sichuan Hydro Power and its subsidiaries, the construction cost incurred for the portion of “construction in progress” of the properties as at 31 July 2006 is approximately RMB716,140,000.

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PROPERTY VALUATION REPORT

APPENDIX I

Property

• 6 Various properties of Kangding Company in Guza Town and Lucheng Town of Kangding County, Pengba Village of Luding County, Linqiong Town of Qionglai City and Renmin South Road, Dacisi Road of Chengdu City, Sichuan Province, the PRC

Market value in Particulars of existing state as at 31 Description and tenure occupancy July 2006 The properties comprise thirteen parcels of The properties RMB69,200,000 land with a total site area of approximately are currently (please see note 6) 216,898.76 sq m (2,334,698 sq ft) and occupied by various buildings and structures completed Kangding between 2000 and 2006. Company as power plant, Details of the gross floor areas are listed as office and follows: residential uses.

Description and tenure

Details of the gross floor areas are listed as follows:

follows:
Use Office Residential Ancillary buildings Total	Gross Floor Area (sq m) (sq ft) 2,713.78 29,211 14,764.47 158,925 9,134.62 98,325 26,612.87 286,461
		286,461

The properties also comprise other ancillary buildings and structures which are under construction.

Notes:

1. Pursuant to the State-owned Land Use Right Certificate No. Kang Guo Yang (2004) Zi Di 384, land use rights of the properties with a site area of 3,620.50 sq m have been granted to Kangding Company for 50 years for industrial use.

2. Pursuant to ten State-owned Land Use Right Certificate Nos. Kang Guo Yong (2002) Zi Di 033 to 036, 048, Gan Guo Yong (98) Zi Di A00165, Lu Guo Yong (2000) Zi Di 1226, 1227, Lu Guo Yong (2004) Zi Di 189 and Qiong Guo Yong (2002) Zi Di 020, land use rights of the properties with a total site area of 205,978.26 sq m have been allocated to Kangding Company for an indefinite term for industrial use.

3. Pursuant to seven Building Ownership Certificate Nos. Fang Quan Zheng Lu Zi Di 02693, Kang Fang Jian Zheng Zi Di 0002315 and Rong Fang Quan Zheng Cheng Fang Jian Zheng Zi Di 1098309, 1098312, 1098316, 1098319 and 1098321, the titles to various buildings of the properties with a total gross floor area of 18,910.24 sq m are held by Kangding Company.

4. Ten parcels of land of the properties with a total site area of approximately 205,978.26 sq m are granted by way of allocation. As these lands cannot be freely transferred in the market, we have assigned no commercial value to these lands and the buildings and structures erected thereon.

5. We have not been provided with the title documents of a parcel of land and the office portion of the properties as at the date of our valuation. In the course of our valuation, we have assigned no commercial value to the aforesaid portions of the properties.

6. In the course of our valuation, we have assumed that the residential portion of the properties with a total gross floor area of 14,764.47 sq m and a parcel of land with a site area of 3,620.50 sq m have proper legal title and can be freely transferred in the market.

7. As advised by Sichuan Hydro Power and its subsidiaries, the construction cost incurred for the portion of “construction in progress” of the properties as at 31 July 2006 is approximately RMB36,780,000.

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PROPERTY VALUATION REPORT

APPENDIX I

Property

• 7 Various properties of Mingtai Company in Beiba Town and Tongchuan Town of Santai County of Mianyang City, Sichuan Province, the PRC

Description and tenure

The properties comprise seventeen parcels of land with a total site area of approximately 91,032.94 sq m (979,879 sq ft) and various buildings and structures completed between 1995 and 2001.

Details of the gross floor areas are listed as follows:

Market value in Particulars of existing state as at 31 occupancy July 2006 The properties RMB285,500,000 are currently (please see note 5) occupied by Mingtai Company as power plant use.

Use Ancillary buildings Total	Gross Floor Area (sq m) (sq ft) 9,609.24 103,434 9,609.24 103,434	Gross Floor Area (sq m) (sq ft) 9,609.24 103,434 9,609.24 103,434
		103,434

Notes:

1. Pursuant to three State-owned Land Use Right Certificates Nos. San Cheng Qu Guo Yong (2004) Di 145708 to 145710, land use rights of the properties with a total site area of 90,378.17 sq m have been granted to Mingtai Company for 50 years for industrial, office and residential uses.

2. Pursuant to fourteen State-owned Land Use Right Certificates Nos. San Cheng Qu Guo Yong (1995) Di 08217, San Cheng Qu Guo Yong (2004) Di 145891 to 145898 and San Guang Hua Guo Yang (2004) Di 010 to 014, land use rights of the properties with a total site area of 654.77 sq m have been allocated to Mingtai Company for an indefinite term for residential and energy use.

3. Pursuant to three Building Ownership Certificate Nos. San Tai County Fang Quan Zheng Fang Jian Zi Di 0000014818, 0000014823 and Tai Quan Zi Di 301001, the titles to various buildings of the properties with a total gross floor area of 9,609.24 sq m are held by Mingtai Company.

4. Fourteen parcels of land of the properties with a total site area of approximately 654.77 sq m are granted by way of allocation. As these lands cannot be freely transferred in the market, we have assigned no commercial value to these lands and the buildings and structures erected thereon.

5. In the course of our valuation, we have assumed that the three parcels of lands with total site area of 90,378.17 sq m and the ancillary buildings erected thereon with total gross floor area of 8,943.24 sq m have proper legal title and can be freely transferred in the market.

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PROPERTY VALUATION REPORT

APPENDIX I

Description and tenure

Property

The properties comprise a parcel of land with a site area of approximately 324,016.20 sq m (3,487,710 sq ft) and various buildings and structures completed about 2005.

• 8 Various properties of The properties comprise a parcel of land Jialingjiang Company a site area of approximately 324,016.20 sq in Qingju Town of (3,487,710 sq ft) and various buildings and Nanchong City, structures completed about 2005. Sichuan Province, the PRC Details of the gross floor areas are listed as follows:

Market value in Particulars of existing state as at 31 occupancy July 2006 The properties No commercial value are currently occupied by Jialingjiang Company as power plant use.

Use Ancillary buildings Total	Gross Floor Area (sq m) (sq ft) 6,597.00 71,010 6,597.00 71,010	Gross Floor Area (sq m) (sq ft) 6,597.00 71,010 6,597.00 71,010
		71,010

The properties also comprise other ancillary buildings and structures which are under construction.

Notes:

1. We have not been provided with the title documents of the properties as at the date of our valuation. In the course of our valuation, we have assigned no commercial value to the properties.

2. As advised by Sichuan Hydro Power and its subsidiaries, the construction cost incurred for the portion of “construction in progress” of the properties as at 31 July 2006 is approximately RMB52,610,000.

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PLANT AND MACHINERY VALUATION

APPENDIX II

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==> picture [118 x 77] intentionally omitted <==

18 October 2006

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

Dear Sirs

YOUR INSTRUCTIONS

In accordance with your instructions for us to prepare a valuation report on the market value of the plant and machinery, office equipment and vehicles (the “Assets”) of Henan Huaneng Qinbei Power Limited Company (the “Qinbei Power Plant”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out an inspection, made relevant inquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the Assets as of 31 July 2006.

This valuation report and the valuation and opinions contained herein have been prepared in accordance with the Practice Statements and Guidance Notes set out in the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors (5th Edition) and The HKIS Valuation Standards on Trade-Related Business Assets and Business Enterprises (1st Edition) published by the Hong Kong Institutes of Surveyors.

DEFINITION OF VALUE

It is assumed that the Qinbei Power Plant is to continue to operate the Assets at its current location and we have valued the assets as a whole in its working place.

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PLANT AND MACHINERY VALUATION

APPENDIX II

Market value is defined as the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Market value of plant and machinery as a whole in its working place is further defined as the market value of the assets based on continuation of its existing use, assuming the assets could be sold in the market as a whole for its existing use, and otherwise in keeping with the market value definition regardless of whether or not the existing use represents the highest and best use of the assets.

Market value of plant and machinery as a whole in its working place does not represent the amount that might be realised in the event of piecemeal disposition of the assets in the market or from any alternative use to which they may be put.

Unless specifically identified in our schedule of the Assets attached to this report, items that form part of the building services installations are normally included in the valuation of the land and buildings.

DESCRIPTION OF THE ASSETS

The Qinbei Power Plant commenced construction in September 2002, and began operation in September 2004. The major machinery in the Qinbei Power Plant consists of 2 sets of 1,900 ton/hour steam boiler, 2 sets of 600MW turbines and 2 sets of 600MW generators, with detail descriptions as follows:

Steam Boiler (2 sets)

Model Number : KG-1900/25.4II Manufacturer : Dongfang Boiler Group Co., Ltd. Superheated Steam Generating Capacity : 1,900 ton/hr Superheated Steam Temperature : 571˚C Recycle Steam Flow rate : 1,607.6 ton/hr Recycle Steam pressure at inlet/outlet : 4.71/4.52 MPa Recycle Steam temperature at inlet/outlet : 322/569˚C Turbine (2 sets) Model Number : CLN600-24/566/566 Manufacturer : Harbin Turbine Co., Ltd. Output : 600MW RPM : 3,000 Inlet Steam Temperature : 566˚C Inlet Steam Pressure : 24.2MPa Inlet Steam Flow Rate : 1,662.63 ton/hr Recycle Steam Temperature : 566˚C Recycle Steam Pressure : 3.81MPa Recycle Steam Flow Rate : 1,415.73 ton/hr

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PLANT AND MACHINERY VALUATION

APPENDIX II

Generator (2 sets) Model Number : QFSM-600-2YHG Manufacturer : Harbin Electric Machinery Co., Ltd. Output : 600MW Efficiency : 98.9% Rated Power Output : 666.667MVA Voltage : 20 KV

Other auxiliary equipment supporting the above major equipment includes: heat exchanging system, coal refining system, pumping system, exhaust treatment system, supply water/waste water treatment system, electrical distribution system and central control system.

Other associated equipment valued includes office/other equipment and motor vehicles.

At the time of our inspection, the machinery and equipment was observed to be generally in good condition and well maintained.

GENERAL CONDITIONS

We have inspected the exterior of the Assets considered in this report. However, no mechanical or electrical or other testing survey has been made on the Assets and unless noted they have assumed to be operational and in a condition commensurate with their age and usage. In the course of our inspection, we did not note any serious defects. We are not able to report that the Assets are free of defects.

BASIS OF VALUATION

There are three generally accepted approaches to value, namely:

The Cost Approach

The cost approach considers the cost to reproduce or replace in new condition the Assets in accordance with current market prices for similar assets including costs of transport, installation, commissioning and consultants’ fees. Adjustment is then made for accrued depreciation, which encompasses condition, utility, age, wear and tear, functional and economic obsolescence.

The Transaction Approach

The transaction approach considers prices recently paid for similar assets, with adjustments made to the indicated market prices to reflect condition and utility of the Assets relative to the market comparative.

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PLANT AND MACHINERY VALUATION

APPENDIX II

The Income Approach

The income approach is the present worth of the future economic benefits of ownership. This approach is generally applied to an aggregation of assets which consists of all assets of a business enterprise including working capital and tangible and intangible assets.

General

In most valuations, all approaches to value must be considered, as one or more may be applicable to the subject assets. In some situations, elements of the three approaches may be combined to reach a value conclusion.

In addition, we have prepared our valuation on the following assumptions:

• i. No deduction has been made in respect of any grant either available or received, neither has any adjustment been made for any outstanding amounts owed under financing agreements.

• ii. Market value of plant and machinery as a whole in its working place is based on the assumption that the Assets will continue in its existing use in the business of the Qinbei Power Plant.

• iii. The valuation has been prepared on the assumption that the Assets therein are, or are capable of, being utilised as the Assets of a profitable undertaking with the benefit of continuity of tenure of the land and buildings during the foreseeable future.

• iv. We have not carried out an environmental audit. We have made no allowance in our valuation for any costs associated with the disposal or handling of materials to comply with current or pending environmental legislation.

• v. We have assumed that the Qinbei Power Plant have clear title of ownership over all Assets included in this assessment.

• vi. We have assumed that the Assets comply with current and pending legislation and regulations including those concerning health & safety and environmental issues.

• vii. The values reported have not been adjusted to reflect any expected sales and marketing costs associated with any transfer of ownership in the Assets.

Valuation Approach

In developing our opinion of the market value of the plant and machinery as a whole in its working place, the income approach was considered and was excluded because no relevant financial information relating to the individual subject items is available. We have also excluded

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APPENDIX II

PLANT AND MACHINERY VALUATION

the transaction approach due to there being insufficient comparable transactions in the market in the PRC of such a collection of assets upon which to base an opinion. The most reliable approach in arriving at an opinion of value of the machinery and equipment is therefore by using the depreciated cost approach.

In arriving at our assessment using the cost approach, we have firstly developed the replacement cost new. In arriving at replacement cost new we have conducted an inspection of the site, perused records, conducted interviews with senior engineering and accounting staff and obtained and reviewed detailed drawings and specifications relating to the plant and machinery.

Replacement costs were developed by reference to and indexing of historical cost information and by discussion with original suppliers regarding current costs for comparable equipment. We have made allowances for freight, installation and commissioning, finance charges, taxes and other fees.

Having developed replacement cost new, we then deducted for the various elements of depreciation to arrive at a depreciated replacement cost, which we take as to be market value for existing use. Physical deterioration, functional obsolescence and economic obsolescence were included in our assessment of the depreciation allowance.

VALUATION

Market Value of plant and machinery as a whole in its working place

We are of the opinion that the market value of the plant and machinery as a whole in its working place as at 31 July 2006 of the Assets in the Qinbei Power Plant was in the sum of RMB 2,861,100,000 (RENMINBI TWO BILLION EIGHT HUNDRED SIXTY ONE MILLION AND ONE HUNDRED THOUSAND ONLY) subject to the above basis of valuation and its title being free of all material encumbrances.

REMARKS

We did not investigate any financial data pertaining to the present or prospective earning capacity of the operation in which the assets are used. It was assumed that prospective earnings would provide a reasonable return on the appraised value of the Assets, plus the value of any assets not included in the valuation, and adequate net working capital.

We have relied to a very considerable extent on information given by the Qinbei Power Plant and have accepted advice given to us on such matters as approvals or statutory notices, tenure, unaudited accounts, costs expended, site and floor areas and all other relevant matters. Dimensions, equipment specifications, measurements and areas included in the valuation are based on information contained in the documents provided to us and are therefore only approximations.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Qinbei Power Plant. We were also advised that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

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PLANT AND MACHINERY VALUATION

APPENDIX II

We confirm that we have no present or contemplated future interest in the subject property or any other interest that may prevent our having arrived at a fair and unbiased assessment of value.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any asset nor for any expenses or taxation which may be incurred in effecting a sale or lease. It is assumed that the assets are free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

We were not instructed to undertake or commission an environmental assessment to establish whether contamination exists or may exist, nor are we aware of any such assessment having been prepared by a specialist adviser in respect of the Assets and their environs. For the purposes of this valuation, we have assumed that no contamination exists in relation to the Assets sufficient to affect value. However, we would stress that should this assumption prove to be incorrect the values reported herein might be reduced.

Yours faithfully For and on behalf of Knight Frank Petty Limited Andrew W Slevin BSc BEng FRICS MHKIS Executive Director

Note: Andrew W. Slevin has 17 years’ experience in performing valuation for plant and machinery in the Asia Pacific Area.

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PLANT AND MACHINERY VALUATION

APPENDIX II

	SUMMARY OF VALUES
		Market Value for
		existing use as at
Description		31 July 2006
		(RMB)
The Qinbei Power Plant
Equipment and Machinery in	Production Process	2,842,212,215
Office and Other Equipment		10,836,764
Motor Vehicles		8,099,101
	Total :	2,861,148,080
	Rounded to :	2,861,100,000

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PLANT AND MACHINERY VALUATION

APPENDIX II

==> picture [153 x 45] intentionally omitted <==

==> picture [118 x 77] intentionally omitted <==

18 October 2006

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

Dear Sirs

YOUR INSTRUCTIONS

In accordance with your instructions for us to prepare a valuation report on the market value of the plant and machinery, office equipment, and vehicles (the “Assets”) of Huaneng Sichuan Hydropower Co., Ltd. (hereafter referred to as the “Sichuan Hydro Power”) and its subsidiaries in the People’s Republic of China (the “PRC”). We confirm that we have carried out an inspection, made relevant inquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the Assets as of 31 July 2006.

This valuation report and the valuation and opinions contained herein have been prepared in accordance with the Practice Statements and Guidance Notes set out in the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors (5th Edition) and The HKIS Valuation Standards on Trade-Related Business Assets and Business Enterprises (1st Edition) published by the Hong Kong Institutes of Surveyors.

DEFINITION OF VALUE

It is assumed that the Sichuan Hydro Power and its subsidiaries are to continue to operate the Assets at its current location and we have valued the Assets as a whole in its working place.

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PLANT AND MACHINERY VALUATION

APPENDIX II

Market value is defined as the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Market value of plant and machinery as a whole in its working place is further defined as the market value of the assets based on continuation of its existing use, assuming the assets could be sold in the market as a whole for its existing use, and otherwise in keeping with the market value definition regardless of whether or not the existing use represents the highest and best use of the assets.

Market value of plant and machinery as a whole in its working place does not represent the amount that might be realised in the event of piecemeal disposition of the assets in the market or from any alternative use to which they may be put.

Unless specifically identified in our schedule of assets attached to this report, items that form part of the building services installations are normally included in the valuation of the land and buildings.

DESCRIPTION OF THE ASSETS

The Sichuan Hydro Power and its seven subsidiaries hold a number of hydro-electric power plants and office equipment and motor vehicles. The seven subsidiaries are:

Sichuan Huaneng Baoxinghe Power Limited Liability Company (the “Baoxinghe Company”), Sichuan Huaneng Taipingyi Hydropower Limited Liability Company (the “Taipingyi Company”), Sichuan Huaneng Dongxiguan Hydropower Limited Liability Company (the “Dongxiguan Company”), Sichuan Huaneng Fujiang Hydropower Limited Liability Company (the “Fujiang Company”), Sichuan Huaneng Kangding Hydropower Limited Liability Company (the “Kangding Company”), Huaneng Mingtai Power Limited Liability Company (the “Mingtai Company”) and Sichuan Huaneng Jialingjiang Hydropower Limited Liability Company (the “Jialingjiang Company”).

Baoxinghe Company

Baoxinghe Company currently has three operational plants: (“Yucheng Station”), (“Tongtou Station”), and (“Xiaoguanzi Station”)

Yucheng Station commenced operation in 1996. It has a design output of 60MW by using 3 sets of 20MW water turbines and 3 sets of 20MW generators, with specifications as follows:

Water Turbine (3 sets)

Model Number : ZZ569-LH-500 Manufacturer : Chongqing Water Turbine Generator Manufacturing Co., Ltd. Output : 20,725KW Head (design) : 15.5m Max. Head : 17.4m Flowrate (design) : 149.61m[3] /sec Specific Speed : 115.4 rpm Runaway Speed : 310 rpm

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PLANT AND MACHINERY VALUATION

APPENDIX II

Generator (3 sets)
Model Number	:	SF-20-52/7250
Manufacturer	:	Chongqing	Water	Turbine	Generator
		Manufacturing Co.,		Ltd.
Rated Power	:	25,000 KVA
Rated Voltage	:	10.5 KV
Rated Current	:	1,375 amp
Power Factor	:	0.80
Frequency	:	50 Hz

Tongtou Station commenced operation in 1996. It has a design output of 80MW by using 4 sets of 20MW water turbines and 4 sets of 20MW generators, with specifications as follows:

Water Turbine (4 sets)

Water Turbine (4 sets)
Model Number	:	HLA153-LJ-180
Manufacturer	:	Chongqing	Water	Turbine	Generator
		Manufacturing Co.,		Ltd.
Output	:	20,555KW
Head (design)	:	50m
Max. Head	:	90m
Flowrate (design)	:	28.5m3/sec
Specific Speed	:	333.3 rpm
Runaway Speed	:	714 rpm
Generator (4 sets)
Model Number	:	SF20-18/4000
Manufacturer	:	Chongqing	Water	Turbine	Generator
		Manufacturing Co.,		Ltd.
Rated Power	:	25,000 KVA
Rated Voltage	:	10.5 KV
Rated Current	:	1,300 amp
Power Factor	:	0.80
Frequency	:	50 Hz

Xiaoguanzi Station has a design output of 160MW, the operation was fully commenced in 2001. It consists of 4 sets of 40MW water turbines and and 4 sets of 40MW generators with details below:

Water Turbine (4 sets)

Model Number : HLD242-LJ-205 Manufacturer : Dongfang Electrical Machinery Co. Ltd. Output : 40MW Head (design) : 136.5m Max. Head : 152.3m Flowrate (design) : 32.5m[3] /sec Specific Speed : 375 rpm Runaway Speed : 770 rpm

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PLANT AND MACHINERY VALUATION

APPENDIX II

Generator (4 sets)
Model Number	:	SF40-16/4250
Manufacturer	:	Dongfang Electrical Machinery Co. Ltd.
Rated Power	:	40MW
Rated Voltage	:	10.5 KV
Rated Current	:	2,588 amp
Power Factor	:	0.80
Frequency	:	50 Hz

Baoxinghe Company also have two power stations currently being constructed, (“Qiaoqi Station”) and (“Baoxing Station”), their design capacities are 240MW and 195MW, respectively.

Taipingyi Company

Taipingyi Company has one power station with a design output of 260MW. The plant commenced operation in 1996. The major machinery in the plant consists of 4 sets of 65MW water turbines and 4 sets of 65MW generators, with detail descriptions as follows:

Water Turbine (4 sets)

Model Number : HLTF13-LJ-292 Manufacturer : Tianjin Power Equipment Manufactory Co. Ltd. Output : 65MW Head (design) : 108m Flowrate (design) : 66.2m[3] /sec Specific Speed : 250 rpm Runaway Speed : 490 rpm Generator (4 sets) Model Number : SF65-24/6440 Manufacturer : Tianjin Power Equipment Manufactory Co. Ltd. Rated Power : 65MW Rated Voltage : 10.5 KV Rated Current : 4,205 amp Power Factor : 0.85 Frequency : 50 Hz

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PLANT AND MACHINERY VALUATION

APPENDIX II

Dongxiguan Company

Dongxiguan Company has one power station with a design output of 180MW. The plant commenced operation in 1996. The major machinery in the plant consists of 4 sets of 45MW water turbines and 4 sets of 45MW generators, with detail descriptions as follows:

Water Turbine (4 sets)

Model Number : ZZ500-LH-640 Manufacturer : Chongqing Water Turbine Generator Manufacturing Co., Ltd. Output : 45MW Head (design) : 17m Max. Head : 24.3m Flowrate (design) : 312m[3] /sec Specific Speed : 93.75 rpm Runaway Speed : 190/270 rpm Generator (4 sets) Model Number : SF45-64/9200 Manufacturer : Chongqing Water Turbine Generator Manufacturing Co., Ltd. Rated Power : 45MW Rated Voltage : 10.5 KV Rated Current : 2,911 amp Power Factor : 0.85 Frequency : 50 Hz

Fujiang Company

Fujiang Company currently has one power station in operation, (“Ziyili Station”). Ziyili Station has a design capacity of 130MW. It commenced operation in 2004. It consists of 2 sets of 65MW water turbines and generators with details below:

Water Turbine (2 sets)

Model Number : HL(E)-LJ-215 Manufacturer : Kvaerner (Hangzhou) Power Equipment Co., Ltd. Output : 66.7MW Head (design) : 445m Max. Head : 474.14m Flowrate (design) : 16.22m[3] /sec Specific Speed : 600 rpm Runaway Speed : 930 rpm

— 59 —

PLANT AND MACHINERY VALUATION

APPENDIX II

Generator (2 sets)
Model Number	:	SF-J65-10/4050
Manufacturer	:	Kvaerner	(Hangzhou)	Power	Equipment
		Co., Ltd.
Rated Power	:	65MW
Rated Voltage	:	10.5 KV
Rated Current	:	4,085 amp
Power Factor	:	0.875
Frequency	:	50 Hz

Three other power stations have also been in construction as of the appraisal date, (“Shuiniujia Station”), (“Muzuo Station”) and (“Yinping Station”), their design capacities are 70MW, 100MW and 100MW, respectively.

Kangding Company

Kangding Company currently has two power stations in operation: (“Lengzhuguan Station”) and (“Xiaotiandu Station”).

Lengzhuguan Station has a design capacity of 180MW, the plant commenced operation in 2000 and has 3 sets of 60MW water turbines and 3 sets of 60MW generators with details shown below:

Water Turbine (4 sets)
Model Number	:	HL(E)-LJ-234
Manufacturer	:	GE Hydro Asia Co. Ltd.
Output	:	60MW
Head (design)	:	362m
Flowrate (design)	:	59m3/sec
Specific Speed	:	500 rpm
Runaway Speed	:	782 rpm
Generator (4 sets)
Model Number	:	SF-J60-12/4100
Manufacturer	:	GE Hydro Asia Co. Ltd.
Rated Power	:	60MW
Rated Voltage	:	10.5 KV
Rated Current	:	3,666 amp
Power Factor	:	0.90
Frequency	:	50 Hz

Xiaotiandu Station has a design capacity of 240MW using three sets of 80MW water turbines and 3 sets of 80MW generators. At the time of our inspection, two sets have just recently begun operation.

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PLANT AND MACHINERY VALUATION

APPENDIX II

Mingtai Company

Mingtai Company has a power station with a design output of 45MW. The plant commenced operation in 1997. The major machinery in the plant consists of 3 sets of 15MW water turbines and 3 sets of 15MW generators, with specifications as follows:

Water Turbine (3 sets)

Model Number : ZZ560-LH-430 Manufacturer : Dongfang Electrical Machinery Co. Ltd. Output : 15MW Head (design) : 13.3m Flowrate (design) : 136.3m[3] /sec Specific Speed : 125 rpm Runaway Speed : 265 rpm Generator (3 sets) Model Number : SF15-48/6400 Manufacturer : Dongfang Electrical Machinery Co. Ltd. Rated Power : 15MW Rated Voltage : 10.5 KV Rated Current : 1,032 amp Power Factor : 0.80 Frequency : 50 Hz

Jialingjiang Company

Jialingjiang Company has one 136MW power station, (“Qingju Station”), which commenced operation in 2005. It consists of 4 sets of 34MW water turbines and 4 sets of 34MW generators, with specifications as follows:

Water Turbine (4 sets)

Model Number : GZ-WP-615 Manufacturer : Fuchunjiang Fuji Hydropower Equipment Co., Ltd. Output : 34MW Head (design) : 11m Max. Head : 12.84m Flowrate (design) : 347.72m[3] /sec Specific Speed : 93.75 rpm Runaway Speed : 220/290 rpm

Generator (4 sets)

Model Number : SFWG34-64/6700 Manufacturer : Fuchunjiang Fuji Hydropower Equipment Co., Ltd.

— 61 —

APPENDIX II

PLANT AND MACHINERY VALUATION

Rated Power	:	34MW
Rated Voltage	:	10.5 KV
Rated Current	:	2,032 amp
Power Factor	:	0.92
Frequency	:	50 Hz

Other auxiliary equipment supporting the above major equipment includes: switching and insulation system, control and monitoring system, electrostatic precipitators, blowers, water treatment system, filtering system, major valves, transformers, cables, piping network and fire protection system.

Other associated equipment valued includes office/other equipment and motor vehicles.

At the time of our inspection, the machinery and equipment was observed to be generally in good condition and well maintained.

GENERAL CONDITIONS

We have inspected the exterior of the Assets considered in this report. However, no mechanical or electrical or other testing survey has been made on the assets and unless noted they have assumed to be operational and in a condition commensurate with their age and usage. In the course of our inspection, we did not note any serious defects. We are not able to report that the Assets are free of defects.

BASIS OF VALUATION

There are three generally accepted approaches to value, namely:

The Cost Approach

The cost approach considers the cost to reproduce or replace in new condition the Assets appraised in accordance with current market prices for similar assets including costs of transport, installation, commissioning and consultants’ fees. Adjustment is then made for accrued depreciation, which encompasses condition, utility, age, wear and tear, functional and economic obsolescence.

The Transaction Approach

The transaction approach considers prices recently paid for similar assets, with adjustments made to the indicated market prices to reflect condition and utility of the Assets relative to the market comparative.

The Income Approach

The income approach is the present worth of the future economic benefits of ownership. This approach is generally applied to an aggregation of assets which consists of all assets of a business enterprise including working capital and tangible and intangible assets.

— 62 —

PLANT AND MACHINERY VALUATION

APPENDIX II

General

In most valuations, all approaches to value must be considered, as one or more may be applicable to the subject assets. In some situations, elements of the three approaches may be combined to reach a value conclusion.

In addition, we have prepared our valuation on the following assumptions:

• i. No deduction has been made in respect of any grant either available or received, neither has any adjustment been made for any outstanding amounts owed under financing agreements.

• ii. Market value of plant and machinery as a whole in its working place is based on the assumption that the Assets will continue in its existing use in the business of the Sichuan Hydro Power and its subsidiaries.

• iii. The valuation has been prepared on the assumption that the Assets therein are, or are capable of, being utilised as the Assets of a profitable undertaking with the benefit of continuity of tenure of the land and buildings during the foreseeable future.

• iv. We have not carried out an environmental audit. We have made no allowance in our valuation for any costs associated with the disposal or handling of materials to comply with current or pending environmental legislation.

• v. We have assumed that the Sichuan Hydro Power and its subsidiaries have clear title of ownership over all Assets included in this assessment.

• vi. We have assumed that the Assets comply with current and pending legislation and regulations including those concerning health & safety and environmental issues.

• vii. The values reported have not been adjusted to reflect any expected sales and marketing costs associated with any transfer of ownership in the Assets.

Valuation Approach

In developing our opinion of the market value of the plant and machinery as a whole in its working place, the income approach was considered and was excluded because no relevant financial information relating to the individual subject items is available. We have also excluded the transaction approach due to there being insufficient comparable transactions in the market in the PRC of such a collection of assets upon which to base an opinion. The most reliable approach in arriving at an opinion of value of the machinery and equipment is therefore by using the depreciated cost approach.

— 63 —

APPENDIX II

PLANT AND MACHINERY VALUATION

In arriving at our assessment using the cost approach, we have firstly developed the replacement cost new. In arriving at replacement cost new we have conducted an inspection of the site, perused records, conducted interviews with senior engineering and accounting staff and obtained and reviewed detailed drawings and specifications relating to the plant and machinery.

Replacement costs were developed by reference to and indexing of historical cost information and by discussion with original suppliers regarding current costs for comparable equipment. We have made allowances for freight, installation and commissioning, finance charges, taxes and other fees.

Having developed replacement cost new, we then deducted for the various elements of depreciation to arrive at a depreciated replacement cost, which we take as to be market value for existing use. Physical deterioration, functional obsolescence and economic obsolescence were included in our assessment of the depreciation allowance.

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.

VALUATION

Market Value of plant and machinery as a whole in its working place

We are of the opinion that the market value of the plant and machinery as a whole in its working place as at 31 July 2006 of the Assets in the Sichuan Hydro Power and its subsidiaries was in the sum of RMB 2,374,900,000 (RENMINBI TWO BILLION THREE HUNDRED SEVENTY FOUR MILLION AND NINE HUNDRED THOUSAND ONLY) subject to the above basis of valuation and its title being free of all material encumbrances. The breakdown by company is as follows:

		Market Value of Plant
		and Machinery as a
		Whole in its Working
		Place, RMB
Sichuan Hydro Power		2,631,672
Baoxinghe Company		698,116,392
Taipingyi Company		261,138,681
Dongxiguan Company		308,500,725
Fujiang Company		197,794,682
Kangding Company		439,706,433
Mingtai Company		159,315,242
Jialingjiang Company		307,677,369
	Grand Total	2,374,881,196
	Rounded to:	2,374,900,000

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PLANT AND MACHINERY VALUATION

APPENDIX II

REMARKS

We did not investigate any financial data pertaining to the present or prospective earning capacity of the operation in which the Assets are used. It was assumed that prospective earnings would provide a reasonable return on the appraised value of the Assets, plus the value of any assets not included in the valuation, and adequate net working capital.

We have relied to a very considerable extent on information given by Sichuan Hydro Power and its subsidiaries have accepted advice given to us on such matters as approvals or statutory notices, tenure, unaudited accounts, costs expended, site and floor areas and all other relevant matters. Dimensions, equipment specifications, measurements and areas included in the valuation are based on information contained in the documents provided to us and are therefore only approximations.

We have had no reason to doubt the truth and accuracy of the information provided to us by Sichuan Hydro Power and its subsidiaries. We were also advised that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

We confirm that we have no present or contemplated future interest in the subject property or any other interest that may prevent our having arrived at a fair and unbiased assessment of value.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any asset nor for any expenses or taxation which may be incurred in effecting a sale or lease. It is assumed that the assets are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their value.

We were not instructed to undertake or commission an environmental assessment to establish whether contamination exists or may exist, nor are we aware of any such assessment having been prepared by a specialist adviser in respect of the Assets and their environs. For the purposes of this valuation, we have assumed that no contamination exists in relation to the Assets sufficient to affect value. However, we would stress that should this assumption prove to be incorrect the values reported herein might be reduced.

Yours faithfully For and on behalf of Knight Frank Petty Limited Andrew W Slevin BSc BEng FRICS MHKIS Executive Director

Note: Andrew W. Slevin has 17 years’ experience in performing valuation for plant and machinery in the Asia Pacific Area.

— 65 —

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 INTEREST

(a) Directors and Supervisors of the Company

As at the Latest Practicable Date, none of the Directors, chief executive or Supervisors of the Company has interests or short positions in the shares and underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which are 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 interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Hong Kong Stock Exchange.

(b) Substantial Shareholders

As at the Latest Practicable Date, save as disclosed below, so far as is known to the Board, no persons (not being a Director, chief executive or Supervisor of the Company) had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

					Approximate
				Approximate	percentage of	Approximate
				percentage of	shareholding	percentage of
				shareholding	in the	shareholding
				in the	Company’s	in the
				Company’s	total issued	Company’s
	Class of	Number of		total issued	domestic	total issued
Name of shareholder	shares	shares held	Capacity	share capital	shares	H shares
Huaneng International	Domestic	5,066,662,118(L)	Beneficial	42.03%(L)	56.30%(L)	—
Power Development	shares		owner
Corporation#
China Huaneng Group#	Domestic	1,055,124,549(L)	Beneficial	8.75%(L)	11.72%(L)	—
	shares		owner
Hebei Provincial	Domestic	603,000,000(L)	Beneficial	5.00%(L)	6.7%(L)	—
Construction	shares		owner
Investment Company

— 66 —

GENERAL INFORMATION

APPENDIX III

					Approximate
				Approximate	percentage of	Approximate
				percentage of	shareholding	percentage of
				shareholding	in the	shareholding
				in the	Company’s	in the
				Company’s	total issued	Company’s
	Class of	Number of		total issued	domestic	total issued
Name of shareholder	shares	shares held	Capacity	share capital	shares	H shares
Credit Suisse Group	H shares	244,413,880(L)	Interest of	2.03%(L)	—	8.00%(L)
		208,187,312(S)	controlled	1.73%(S)	—	6.81%(S)
		5,000(P)	corporation/	0.00%(P)	—	0.00%(P)
			Approved
			lending
			agent
JP Morgan Chase Bank	H shares	108,190,980(L)	Investment	0.90%(L)	—	3.54%(L)
			manager
			and
			custodian
Citigroup Inc.	H shares	212,232,345(L)	Interest of	1.76%(L)	—	6.95%(L)
		180,357,078(S)	controlled	1.50%(S)	—	5.90%(S)
		7,553,100(P)	corporation/	0.06%(P)	—	0.25%(P)
			Holder of
			security
			interest in
			shares
J.P. Morgan Fleming	H shares	83,918,000(L)	Investment	0.70%(L)	—	2.75%(L)
Asset Management			manager
(Asia) Inc.
J.P. Morgan Fleming	H shares	83,198,000(L)	Investment	0.69%(L)	—	2.72%(L)
Asset Management			manager
Holdings Inc.
UBS AG	H shares	170,309,367(L)	Beneficial	1.41%(L)	—	5.57%(L)
		82,311,000(S)	owner/	0.68%(S)	—	2.69%(S)
			Interest of
			controlled
			corporation/
			Holder of
			security
			interest in
			shares
JF Asset Management	H shares	80,298,000(L)	Investment	0.67%(L)	—	2.63%(L)
Limited			manager
KBC Group N.V.	H shares	152,867,692(L)	Interest of	1.27%(L)	—	5.00%(L)
		11,355,000(S)	controlled	0.09%(S)		0.37%(S)
			corporation

Note: The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interest in a lending pool.

• As of date of this circular, Huaneng Group holds 51.98% direct interests and an additional 5% indirect interests in HIPDC.

— 67 —

GENERAL INFORMATION

APPENDIX III

3. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Company and its subsidiaries since 31st December 2005, being the date to which the latest published audited accounts of the Company and its subsidiaries were made up to.

4. LITIGATION

None of the Company and its subsidiaries was at present engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company and its subsidiaries as at the Latest Practicable Date.

5. CONSENTS OF EXPERTS

Each of the following experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or statements and references to its name in the form and context in which they appear:

Names		Qualifications
DBS		Licensed corporation under the SFO to engage in Type 1
		(dealing securities), 4 (advising on securities) and 6 (advising
		on corporate finance) regulated activities
Haiwen	& Partners	Registered law firm in the PRC
Knight	Frank Petty Limited	Member of The Hong Kong Institute of Surveyors and The
		Royal Institution of Chartered Surveyors

As at the Latest Practicable Date, the above experts were not beneficially interested in the share capital of the Company and its subsidiaries nor did it have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in the Company and its subsidiaries.

As at the Latest Practicable Date, the above experts did not have any direct or indirect interest in any assets which have been since 31st December 2005 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to the Company and its subsidiaries, or were proposed to be acquired or disposed of by or leased to the Company and its subsidiaries.

6. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into, or proposed to enter into, a service contract with the Company or its subsidiaries which does not expire or is not terminable by the Company and its subsidiaries within one year without payment of compensation, other than statutory compensation.

— 68 —

GENERAL INFORMATION

APPENDIX III

7. DIRECTORS’ INTERESTS IN THE COMPANY AND ITS SUBSIDIARIES’ ASSETS OR CONTRACTS

As at the Latest Practicable Date, none of the Directors, Supervisors, proposed Directors or proposed Supervisors of the Company had any interest in any assets which have been since 31st December 2005 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to the Company and its subsidiaries, or were proposed to be acquired or disposed of by or leased to the Company and its subsidiaries.

As at the Latest Practicable Date, none of the Directors or Supervisors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Company.

8. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors or their respective associates has interests in the businesses, other than being a Director, which compete or are likely to compete, either directly or indirectly, with the businesses of the Company (as would be required to be disclosed under Rule 8.10 of the Hong Kong Listing Rules if each of them were a controlling shareholder).

9. PROCEDURE FOR DEMANDING A POLL BY SHAREHOLDERS

Pursuant to Article 66 of the articles of association of the Company, at any shareholders’ general meeting, a resolution shall be decided on a show of hands unless a poll is demanded:

• (a) by the chairman of the meeting;

• (b) by at least two (2) shareholders present in person or by proxy entitled to vote thereat; or

• (c) by one (1) or more shareholders present in person or by proxy and representing 10% or more of all shares carrying the right to vote at the meeting,

before or after a vote is carried out by a show of hands.

The demand for a poll may be withdrawn by the person who demands the same.

10. MISCELLANEOUS

• (a) Mr. Huang Jian is the Company Secretary and Board Secretary of the Company. Mr. Huang Jian is a PRC qualified accountant. Pursuant to a waiver granted by the Hong Kong Stock Exchange to the Company from strict compliance with Rules 8.17 and 19A.16 of the Hong Kong Listing Rules in relation to the appointment of Mr. Huang Jian as the Company secretary of the Company dated 18th September 2006, the Company has arranged Mr. Zhang Xinmin, a fellow member of the Association of Chartered Certified Accountants, to provide assistance to Mr. Huang Jian in the discharge of his duties as the Company Secretary under the Hong Kong Listing Rules.

— 69 —

GENERAL INFORMATION

APPENDIX III

• (b) Ms. Zhou Hui is the Qualified Accountant of the Company. Ms. Zhou Hui is a PRC qualified accountant. Pursuant to a waiver granted by the Hong Kong Stock Exchange to the Company from strict compliance with Rule 3.24 of the Hong Kong Listing Rules in relation to the appointment of a qualified accountant to of the Company dated 7th July 2006, the Company has arranged Mr. Zhang Xinmin, a fellow member of the Association of Chartered Certified Accountants, to provide assistance to Ms. Zhou Hui in the discharge of her duties as a qualified accountant under the Hong Kong Listing Rules.

• (c) The head office and legal address of the Company is West Wing, Building C, Tianyin Mansion, No. 2C, Fuxingmennan Street, Xicheng District, Beijing, PRC. The H Share registrar of the Company in Hong Kong is Hong Kong Registrars Limited at 19/F Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (d) In the case of any discrepancy, the English text of this circular and form of proxy shall prevail over the Chinese text.

11. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Herbert Smith at 23/F., Gloucester Tower, 11 Pedder Street, Central, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 3rd November, 2006:

• (a) the Articles of Association of the Company;

• (b) the letter from the Independent Board Committee, as set out in this circular;

• (c) the letter from DBS, the independent financial adviser, as set out in this circular;

• (d) the property valuation report prepared by Knight Frank Petty Limtied as set out in Appendix I to this circular;

• (e) the valuation report prepared by Knight Frank Petty Limited as set out in Appendix II to this circular;

• (f) the written consent of DBS referred to in this appendix;

• (g) the written consent of Haiwen & Partners referred to in this appendix;

• (h) the written consent of Knight Frank Petty Limited referred to in this appendix;

• (i) the Transfer Agreement; and

• (j) the Capital Increase Agreement.

— 70 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [291 x 45] intentionally omitted <==

(a sino foreign joint stock limited company incorporated in the People’s Republic of China) (Stock Code: 902)

Notice is hereby given that an extraordinary general meeting of Huaneng Power International, Inc. (the “Company”) will be held at 9:00 a.m. on 5th December, 2006 (Tuesday) at Holiday Inn Central Plaza Beijing, 1 Caiyuanjie, Xuanwuqu, Beijing, the People’s Republic of China for the purpose of considering and, if thought fit, passing the following ordinary resolutions:

Ordinary resolutions:

1. To consider and approve the Acquisition (including the Transfer Agreement). [(Note][1)]

2. To consider and approve the Capital Increase (including the Capital Increase Agreement). [(Note][1)]

By Order of the Board Huang Jian Company Secretary

18th October, 2006

Registered address of the Company:

West Wing, Building C, Tianyin Mansion,

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

— 71 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. For definitions and details, please refer to the circular dated 18th October, 2006 issued by the Company.

2. 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 3rd November, 2006 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 provide 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 16th November, 2006.

— 72 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

• (iii) Shareholders may send the above reply slip to the Company in person, by post or by fax (Attn: The Securities Department).

• Closure of Register of Members

The register of members of the Company will be closed from 6th November, 2006 to 5th December, 2006 (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

— 73 —