Netjoy Holdings Limited - Proxy Solicitation & Information Statement 2014

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.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim 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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CONTINUING CONNECTED TRANSACTIONS

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

Guotai Junan Capital Limited

A letter from the board of Directors of Huaneng Power International, Inc. is set out on pages 1 to 23 of this circular. A letter from the Independent Board Committee of Huaneng Power International, Inc. is set out on pages 24 to 25 of this circular. A letter from Guotai Junan Capital containing its advice to the Independent Board Committee and the independent shareholders of Huaneng Power International, Inc. is set out on pages 26 to 33 of this circular.

A notice convening the EGM to be held at 9 a.m. on 11 February 2014 at the headquarters of the Company at Huaneng Building, 6 Fuxingmennei Street, Xicheng District, Beijing, the PRC together with the relevant reply slip and proxy form have been issued to Shareholders separately.

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 17M 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.

20 January 2014

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
2. Huaneng Group Framework Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
3. The EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
4. Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Letter from Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34

— 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;
“ADSs”
American Depositary Shares, each representing the ownership of 40 H Shares, which are listed on the New York Stock Exchange Inc.;
“associate(s)”
has the meaning ascribed to it in the Hong Kong Listing Rules;
“Board”
the board of Directors of the Company;
“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, and its subsidiaries (as the case may be);
“connected person(s)”
has the meaning ascribed to it in the Hong Kong Listing Rules;
“Director(s)”
the director(s) (including independent non-executive directors) of the Company;
“EGM”

the 2014 first extraordinary general meeting of the Company to be held at 9 a.m. on 11 February 2014 at the headquarters of the Company at Huaneng Building, 6 Fuxingmennei Street, Xicheng District, Beijing, the PRC to consider and approve the Huaneng Group Framework Agreement (and the proposed caps);

— ii —

DEFINITIONS

“Guotai Junan Capital”, Guotai Junan Capital Limited, a licensed corporation “Independent Financial Adviser” to carry on type 6 (advising on corporate finance) regulated activity as defined under the SFO, acting as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement;
“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;
“Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited; “Huaneng Group” China Huaneng Group; “Huaneng Group Framework Agreement” the “framework agreement on the continuing connected transactions (for 2014) between Huaneng Power International, Inc. and China Huaneng Group” entered into between the Company and Huaneng Group on 27 December 2013;

“Hua Neng HK” China Hua Neng Group Hong Kong Limited;

— iii —

DEFINITIONS

“Independent Board Committee”
a committee of the Board established for the purpose of considering the terms and the transaction cap of the purchase of coal and transportation services contemplated under the Huaneng Group Framework Agreement, comprising contemplated Mr. Shao Shiwei, Mr. Wu Liansheng, Mr. Li Zhensheng, Mr. Qi Yudong and Mr. Zhang Shouwen, the independent non-executive Directors of the Company;
“Independent Shareholders” Shareholders other than Huaneng Group and HIPDC and their respective associates, and who are not involved in, or interested in the transactions contemplated by the Huaneng Group Framework Agreement;
“Latest Practicable Date”
17 January 2014, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;
“PRC”, “China”
the People’s Republic of China;
“RMB”
Renminbi, the lawful currency of the PRC;
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
“Shanghai Listing Rules” The Rules Governing the Listing of securities on the Shanghai Stock Exchange;
“Shareholders” the shareholders of the Company; and

“subsidiaries” has the meaning ascribed to it in the Hong Kong Listing Rules.

— iv —

LETTER FROM THE BOARD

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Directors: Cao Peixi Huang Long Li Shiqi Huang Jian Liu Guoyue Fan Xiaxia Shan Qunying Guo Hongbo Xu Zujian Xie Rongxing

Legal Address: Huaneng Building 6 Fuxingmennei Street Xicheng District Beijing 100031 PRC

Independent Non-executive Directors:

Shao Shiwei Wu Liansheng Li Zhensheng Qi Yudong Zhang Shouwen

20 January 2014

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

1. INTRODUCTION

On 27 December 2013, the Board made an announcement (“Announcement”) regarding (inter alia) the continuing connected transactions arising from the Huaneng Group Framework Agreement. As stated in the Announcement, the Company shall issue a circular to the Shareholders containing further information of the continuing connected transactions as contemplated by the Huaneng Group Framework Agreement.

— 1 —

LETTER FROM THE BOARD

Under the Hong Kong Listing Rules, the conduct of purchase of coal and transportation services (including the proposed cap) between the Company (and its subsidiaries) and Huaneng Group and its subsidiaries and associates contemplated under the Huaneng Group Framework Agreement shall require Independent Shareholders’ approval.

To comply with the requirements of the Hong Kong Listing Rules, the Independent Board Committee will advise the Independent Shareholders in connection with the terms of the continuing connected transaction (including the proposed cap) regarding the purchase of coal and transportation services contemplated under the Huaneng Group Framework Agreement. The letter from the Independent Board Committee to the Independent Shareholders is included in this circular. Guotai Junan Capital 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 in respect of the purchase of coal and transportation services (including the proposed cap) contemplated under the Huaneng Group Framework Agreement and whether the purchase of coal and transportation services (including the proposed cap) under the Huaneng Group Framework Agreement is in the interests of the Company and its Shareholders as a whole. The letter of advice from Guotai Junan Capital to the Independent Board Committee and the Independent Shareholders is also included in this circular.

Under the Hong Kong Listing Rules, Guotai Junan Capital is only required to opine on the continuing connected transaction relating to the purchase of coal and transportation services (including the proposed cap) contemplated under the Huaneng Group Framework Agreement and, in which case, Guotai Junan Capital will not provide opinion on the other transactions contemplated under the Huaneng Group Framework Agreement (the “Other Transactions”). Notwithstanding such arrangement, the Company still includes details of the Other Transactions in this circular so that Shareholders can have a full picture of all transactions as contemplated under the Huaneng Group Framework Agreement. The Company believes that on such basis, the Independent Shareholders have been provided with sufficient information so as to make an informed decision in the voting of the relevant proposed resolution at the EGM.

— 2 —

LETTER FROM THE BOARD

The purpose of this circular are:

(i) to provide you with further information in relation to the transactions contemplated under the Huaneng Group Framework Agreement;
(ii) to set out the letter of advice from Guotai Junan Capital to the Independent Board Committee and the Independent Shareholders and the recommendation of the Independent Board Committee as advised by Guotai Junan Capital; and
(iii) to seek your approval of the ordinary resolution in relation to the transactions contemplated by the Huaneng Group Framework Agreement (together with proposed caps), which are respectively set out in the notice of the EGM.

Independent Shareholders are advised to read this circular carefully for details of all the continuing connected transactions (including the purchase of coal and transportation services, as well as the Other Transactions) before making their decision as regards voting. Independent Shareholders should also note that, if they vote in favor of the resolution proposed at the EGM regarding the Huaneng Group Framework Agreement, they would approve all the continuing connected transactions contemplated under the Huaneng Group Framework Agreement including the purchase of coal and transportation services and the Other Transactions. In the event that the resolution proposed at the EGM as regards the Huaneng Group Framework Agreement is not approved by the Independent Shareholders, the continuing connected transactions contemplated under the Huaneng Group Framework Agreement including the purchase of coal and transportation services and the Other Transactions would not be carried out by the Company.

2. HUANENG GROUP FRAMEWORK AGREEMENT

(i) Relationship between the Company and Huaneng Group

The Company and its subsidiaries mainly develop, construct, operate and manage largescale power plants in China nationwide. It is one of the largest listed power producers in China, with a controlling capacity of 66,795 MW.

Huaneng Group is principally engaged in development, investment, 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 energy, transportation, new energy and environmental protection industries.

— 3 —

LETTER FROM THE BOARD

As of 30 November 2013, HIPDC, being the direct controlling shareholder of the Company, holds 36.05% of the total equity interests in the Company, while Huaneng Group holds a 51.98% direct equity interests and a 5% indirect equity interests in HIPDC. In addition, Huaneng Group holds a 11.06% direct equity interests in the Company, a 3.36% indirect equity interests in the Company through Hua Neng HK (a wholly-owned subsidiary of Huaneng Group), a 0.04% indirect equity interests in the Company through Huaneng Capital Services Company Limited (a wholly-owned subsidiary of Huaneng Group) and a 0.79% indirect equity interests in the Company through China Huaneng Finance Corporation Limited (a controlling subsidiary of Huaneng Group).

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

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

Huaneng Group
5% [()] 51.98%
HIPDC 15.26% [(#)]
36.05%
The Company
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Huaneng Group, through Hua Neng HK, its wholly-owned subsidiary, indirectly holds a 100% interest in Pro-Power Investment Limited while Pro-Power Investment Limited holds a 5% interest in HIPDC.
Huaneng Group holds a 11.06% direct interest in the Company. It also holds 3.36%, 0.04% and 0.79% interest in the Company through Hua Neng HK (its wholly owned subsidiary), Huaneng Capital Services Co. Ltd., (its wholly owned subsidiary) and China Huaneng Finance Corporation (its controlling subsidiary), respectively.

Under the Hong Kong Listing Rules, Huaneng Group is a connected person of the Company while the transactions between the Company and Huaneng Group (including its subsidiaries and associates) constitute connected transactions of the Company, subject to the relevant disclosures and/or Independent Shareholders’ approval requirements as stipulated in the Hong Kong Listing Rules.

— 4 —

LETTER FROM THE BOARD

(ii) Huaneng Group Framework Agreement

The Company entered into a framework agreement with Huaneng Group on 11 January 2013 (“2013 Huaneng Group Framework Agreement”) for the purpose of governing the conduct of certain continuing connected transactions between the Company and Huaneng Group (and its subsidiaries and associates) in 2013. The 2013 Huaneng Group Framework Agreement expired on 31 December 2013. Reference is made to the announcement of the Company dated 12 January 2013 and the Company’s circular dated 28 January 2013 where details of the continuing connected transactions as contemplated by Huaneng Group Framework Agreement for 2013 (including the relevant caps) were set out therein.

In order to continue such transactions, the Company, as approved by the Board, entered into the Huaneng Group Framework Agreement with Huaneng Group on 27 December 2013 for a term commencing on 1 January 2014 and expiring on 31 December 2014. Pursuant to the Shanghai Listing Rules and Rule 14A.56(9) of the Hong Kong Listing Rules, Messrs. Cao Peixi, Huang Long, Li Shiqi, Huang Jian, Liu Guoyue and Fan Xiaxia, all being directors of the Board of the Company being regarded as having a material interest in the continuing connected transactions, had abstained from voting on the board resolution relating to the entering of the Huaneng Group Framework Agreement (and each of the caps thereof). The resolution was voted by directors who are not connected to the transactions.

Pursuant to the Huaneng Group Framework Agreement, the Company will conduct the following transactions with Huaneng Group and its subsidiaries and associates on an ongoing basis:

(1) Purchase of ancillary equipment and parts

Due to operational needs, the Company and its subsidiaries has to outsource ancillary equipment and parts which include mainly the raw materials and ancillary equipment and other installation and products relevant to the production operation for the infrastructure construction work for power plants. Pursuant to the 2013 Huaneng Group Framework Agreement with respect to the purchase of ancillary equipment and parts in 2013 by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates, the annual cap of such transactions for 2013 was set at RMB2.4 billion. During the period from 1 January 2013 to 30 November 2013, the aggregate transaction amount (unaudited) in respect of the purchase of ancillary equipment and parts by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates was approximately RMB362 million. It is estimated that at the end of 2013, the actual aggregate

— 5 —

LETTER FROM THE BOARD

transaction amount will not exceed the anticipated transaction amount of 2013. For 2014, the aggregate transaction amount with respect to the purchase of ancillary equipment and parts by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates under the Huaneng Group Framework Agreement is estimated not to exceed RMB2.6 billion. Such cap is estimated on the basis of the existing overall business scale and operation of the power plants of the Company and its subsidiaries, the changes in market conditions in 2014, the anticipated development and growth of such power plants as deemed reasonable by the Company and its subsidiaries, taking into account at the same time the benefit of offering favorable prices on bulk purchases by Huaneng Group and its subsidiaries and associates.

The competitive advantage of Huaneng Group and its subsidiaries and associates in the supply of ancillary equipment and parts is that they are able to offer more favorable prices for bulk purchase of ancillary equipment and parts. Taking into consideration the ability of Huaneng Group and its subsidiaries and associates to offer more favorable prices for ancillary equipment and parts, and owing to their close relationships with the Company and its subsidiaries, Huaneng Group and its subsidiaries and associates are able to provide the Company and its subsidiaries with the ancillary equipment and parts in a timely and reliable manner, thereby minimizing the management and operational costs of the Company.

Pursuant to the Huaneng Group Framework Agreement, the terms and the prices with respect to the purchase of ancillary equipment and parts by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates are negotiated at arm’s length terms, taking into account the then prevailing market conditions; but in any event at the terms and prices no less favorable than those offered to the Company and its subsidiaries by an independent third party for the same or similar type of ancillary equipment and parts. In addition, the payment of such purchases will be settled in cash in arrears, or in accordance with the payment terms agreed by the relevant parties in the contracts to be entered into pursuant to such framework agreement.

The Board (including the independent non-executive Directors) is of the view that the transactions for the purchase of ancillary equipment and parts as contemplated by the Huaneng Group Framework Agreement were entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (on arm’s length basis or on terms no less favorable to the Company than terms available from independent third parties); and (iii) on terms and the proposed cap that are fair and reasonable and in the interest of the Company and its shareholders as a whole.

— 6 —

LETTER FROM THE BOARD

As the applicable percentage ratios relating to the scale of the transactions in question calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules do not exceed 5%, such transactions are therefore only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules but are exempt from the Independent Shareholders’ approval requirements. In addition, the Company will, with respect to the transactions in question, comply with the requirements under Rule 14A.37 to 14A.40 of the Hong Kong Listing Rules in respect of the annual review of these continuing connected transactions. If the actual aggregate amount of such transactions during the year ending 31 December 2014 exceeds the above cap (i.e. RMB2.6 billion), the Company will further comply with the requirements under Rule 14A.36 of the Hong Kong Listing Rules.

(2) Purchase of coal and transportation services

Coal is the major raw material of the Company for power generation. Pursuant to the Huaneng Group Framework Agreement, the Company and its subsidiaries will purchase coal and coal transportation services from Huaneng Group and its subsidiaries and associates at prices and charges calculated by reference to RMB/ ton and the actual weight of carriage, with arm’s length terms taking into account the then market conditions, and in any event the terms of the purchases of coal and the transportation service shall be no less favorable than those offered by independent third parties to the Company and its subsidiaries for the same or similar type of coal supply or transportation services.

Pursuant to the 2013 Huaneng Group Framework Agreement with respect to the purchase of coal and transportation services in 2013 by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates, the cap of the aggregate transaction amount for 2013 was set at RMB38.1 billion. During the period from 1 January 2013 to 30 November 2013, the aggregate transaction amount (unaudited) for purchase of coal and transportation services by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates was approximately RMB16.35 billion. It is estimated that at the end of 2013, the actual aggregate transaction amount will not exceed the anticipated transaction amount of 2013. The actual transaction amount for the period ended 30 November 2013 was lower than the proposed transaction amount of 2013, mainly because transactions in relation to the purchase of coal and coal transportation services from Huaneng Group and its subsidiaries and associates only took place in considerable scale during the second half of 2013.

— 7 —

LETTER FROM THE BOARD

The cap of the transaction amount for purchase of coal and transportation services by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates pursuant to the Huaneng Group Framework Agreement in 2014 is estimated to be RMB44.1 billion. The payment of the consideration will be settled in cash in arrears, or in accordance with the payment terms agreed by the relevant parties in the contracts to be entered into pursuant to the framework agreement. The cap of such amount is set on the basis of the existing overall business scale and operation of the power plants of the Company and its subsidiaries, the anticipated development and growth of such power plant as deemed reasonable by the Company and it subsidiaries, taking into account at the same time the ability of Huaneng Group and its subsidiaries and associates to make bulk supply of coal and transportation services to the Company and its subsidiaries at favorable prices. The aforesaid proposed transaction cap shows a relatively large increase compared with the relevant amount in 2013, mainly due to the fact that the transaction cap of 2013 was based on the Company’s estimate of the market demand and supply back then, when there were still uncertainties as to the market risks, and so such estimate was relatively conservative. However, following the marketization of coal, the price of coal dropped significantly, and therefore the actual transaction amount for the purchase of coal and coal transportation services from Huaneng Group and its subsidiaries and associates in 2013 did not reach the transaction cap of 2013. Considering that there will not be a relatively significant decrease in the price of coal in 2014, and in the expectation that several self-constructed power plants of the Company will commence operation in 2014, in order for the Company to secure a relatively stable and inexpensive source of coal supply should the supply of coal become tense, the Directors considers that the increase in the transaction cap for the purchase of coal and coal transportation services from Huaneng Group and its subsidiaries and associates in 2014 by the Company to be fair and reasonable.

The Company will, through the Huaneng Group Framework Agreement and a series of risk management arrangements in accordance with the regulatory requirements, endeavor to maintain its independency in decision-making, the fairness of the prices and terms of the transactions as well as the flexibility in purchasing coal from independent third parties other than the connected persons so as to alleviate the independence on its controlling shareholder. Such arrangements shall include without limitation the Company’s right to make independent decisions as to the price and quantity of purchase and to access and obtain market information through various means so that the terms obtained by the Company from Huaneng Group will be no less favorable than those available from independent third parties.

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LETTER FROM THE BOARD

The competitive advantage of Huaneng Group and its subsidiaries and associates in the supply of coal and transportation services is that they can offer more favorable terms for bulk purchase of coal and transportation services. Taking into consideration the ability of Huaneng Group and its subsidiaries and associates to offer more favorable terms for purchases of coal and transportation services, and owing to their close relationships with the Company and its subsidiaries, Huaneng Group and its subsidiaries and associates are able to provide the Company and its subsidiaries with coal and transportation services in a timely and reliable manner, thereby minimizing the management and operational costs of the Company and its subsidiaries.

The Board (including the independent non-executive Directors) is of the view that the transactions for the purchase of coal and transportation services from Huaneng Group and its subsidiaries and associates contemplated under the Huaneng Group Framework Agreement were entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (on arm’s length basis or on terms no less favorable to the Company than terms available from independent third parties); and (iii) on terms and the proposed cap that are fair and reasonable and in the interest of the Company and its shareholders as a whole.

As the applicable percentage ratios relating to the transaction scale for the purchase of coal and transportation services between the Company (and its subsidiaries) and Huaneng Group and its subsidiaries and associates calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules exceed 5%, such transactions shall be subject to the reporting, announcement and Independent Shareholders’ approval requirements under Rules 14A.45 to 14A.48 of the Hong Kong Listing Rules. The Company has conducted a detailed survey in respect of its short-term and longterm operational demand for coal and coal transportation services. The Company is of the view that before the convening of the extraordinary general meeting, such transaction will not (and the Company will through its internal control system ensure that such transaction will not) exceed the relevant thresholds that require Independent Shareholders’ approval under the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

(3) Leasing of facilities, land and office spaces

For operational needs, the Company and its subsidiaries has to lease facilities, land and office spaces (mainly includes power transmission and transformation assets, power plants land and office spaces, etc) from Huaneng Group and its subsidiaries and associates. Pursuant to the 2013 Huaneng Group Framework Agreement with respect to the leasing of facilities, land and office spaces in 2013 by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates, the cap of the relevant transaction amount for 2013 was set at RMB300 million. During the period from 1 January 2013 to 30 November 2013, the aggregate fee (unaudited) which has already been paid by the Company and its subsidiaries to Huaneng Group and its subsidiaries and associates for leasing of facilities, land and office spaces was RMB239 million. It is estimated that at the end of 2013, the actual aggregate transaction amount will not exceed the anticipated transaction amount of 2013. Pursuant to the Huaneng Group Framework Agreement, the transaction amount with respect to the leasing of facilities, land and office spaces by the Company from Huaneng Group and its subsidiaries and associates in 2014 is estimated not to exceed RMB300 million. The estimate of such cap amount is based on the prevailing overall business scale and operation of the power plants of the Company and its subsidiaries, the anticipated development and growth of such power plants as deemed reasonable by the Company and its subsidiaries, taking into account at the same time the benefit of favorable prices offered by Huaneng Group and its subsidiaries and associates for leasing of facilities, land and office spaces.

In respect of leasing of facilities, land and office spaces, the competitive advantage of Huaneng Group and its subsidiaries and its associates is their ability to offer more favorable prices for leasing of facilities, land and office spaces. Taking into consideration the capability of Huaneng Group, its subsidiaries and its associate in offering competitive prices for leasing of facilities, land and office spaces, and owing to their close relationships with the Company and its subsidiaries, Huaneng Group and its subsidiaries and associates are able to provide the Company with the leasing of facilities, land and office spaces in a timely and reliable manner, thereby minimizing the management and operational costs of the Company and its subsidiaries.

— 10 —

LETTER FROM THE BOARD

Pursuant to the Huaneng Group Framework Agreement, the terms and the prices with respect to the leasing of facilities, land and office spaces to the Company and its subsidiaries by Huaneng Group and its subsidiaries and associates are negotiated at arm’s length terms, taking into account the then prevailing market conditions; but in any event at the leasing terms and prices no less favourable than those offered to the Company and its subsidiaries by independent third parties for the same or similar types of facilities, land and office spaces. In addition, the payment will be settled in cash, or in accordance with the payment terms agreed by the relevant parties in the contracts to be entered into pursuant to the framework agreement.

The Board (including the independent non-executive Directors) is of the view that the transactions for the leasing of facilities, land and office spaces contemplated under the Huaneng Group Framework Agreement were entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (on arm’s length basis or on terms no less favorable to the Company than terms available from independent third parties); and (iii) on terms and the proposed cap that are fair and reasonable and in the interest of the Company and its shareholders as a whole.

As the applicable percentage ratios relating to the scale of the subject transactions calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules do not exceed 5%, such transactions are therefore only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules but are exempt from the Independent Shareholders’ approval requirements. In addition, the Company will, with respect to the transactions in question, comply with the requirements under Rule 14A.37 to 14A.40 of the Hong Kong Listing Rules in respect of conducting annual reviews of these continuing connected transactions. If the actual aggregate amount of such transactions during the year ending 31 December 2014 exceeds the above cap (i.e. RMB300 million), the Company will further comply with the requirements under Rule 14A.36 of the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

(4) Technical services, engineering contracting services and other services

The reciprocal services for technical services, engineering contracting services and other services between the Company and its subsidiaries and its subsidiaries with Huaneng Group and its subsidiaries and associates mainly include the provision of maintenance of power plants monitoring system, real-time consolidation of project data, trial run of generating units, monitoring of facilities of construction works and insurance services by Huaneng Group and its subsidiaries and its subsidiaries to the Company and its subsidiaries. At the same time, the Company and its subsidiaries provide operation/production related services to Huaneng Group and its subsidiaries and its associates. Pursuant to the 2013 Huaneng Group Framework Agreement with respect to the purchase of technical services and engineering contracting services by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates, the cap for the aggregate transaction amount for 2013 was set at RMB900 million. During the period from 1 January 2013 to 30 November 2013, the aggregate transaction amount (unaudited) for the purchase of technical services and engineering contracting services by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates was approximately RMB530 million. It is estimated that at the end of 2013, the actual aggregate transaction amount will not exceed the anticipated transaction amount of 2013. Pursuant to the Huaneng Group Framework Agreement, the transaction amount with respect to the purchase of technical services, engineering contracting services and other services by the Company and its subsidiaries from Huaneng Group and its subsidiaries and its associates in 2014 is estimated not to exceed RMB900 million. The estimate of such cap is based on the one hand on the prevailing overall business scale and operation of the power plants of the Company and its subsidiaries as well as the anticipated development and growth of such power plants as deemed reasonable by the Company and its subsidiaries, having taken into account the benefit of favorable prices for the purchase of technical services and engineering contracting services and other services offered by Huaneng Group and its subsidiaries and associates. Owing to their close relationships with the Company, Huaneng Group and its subsidiaries and associates are able to provide the Company and its subsidiaries with the technical services, engineering contracting services and other services in a timely and reliable manner,

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LETTER FROM THE BOARD

thereby minimizing the management and operational costs of the Company and its subsidiaries. In addition, certain subsidiaries and associates of Huaneng Group specialize in the research of information technology and domestic renewable energy technology, as well as the installation of thermal power facilities in the PRC. Given the ability of Huaneng Group and its subsidiaries and associates to provide reliable and efficient information technology services, and advanced and comprehensive industry-specific technology services and engineering contracting services, the operation costs of the Company and its subsidiaries can thus be reduced. On the other hand, the Company is of the view that that the provision of production related services to Huaneng Group and its subsidiaries and associates by the Company and its subsidiaries can bring about operation benefits for the Company and its subsidiaries.

Pursuant to the Huaneng Group Framework Agreement, the terms and the prices with respect to the purchase of technical services, engineering contracting services and other services by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates are negotiated at arm’s length terms, taking into account the then prevailing market conditions; but in any event at the terms and prices no less favorable than those offered to the Company and its subsidiaries by independent third parties for the same or similar types of technical services, engineering contracting services and other services. In addition, the payment of consideration will be settled in cash in arrears, or in accordance with the payment terms agreed by the relevant parties in the contracts to be entered into pursuant to the framework agreement.

The Board (including the independent non-executive Directors) is of the view that the transactions for the purchase of technical services, engineering contracting services and other services as contemplated under the Huaneng Group Framework Agreement were entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (on arm’s length basis or on terms no less favourable to the Company than terms available from independent third parties); and (iii) on terms and the proposed cap that are fair and reasonable and in the interest of the Company and its shareholders as a whole.

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LETTER FROM THE BOARD

As the applicable percentage ratios relating to the scale of the subject transactions calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules do not exceed 5%, such transactions are therefore only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules but are exempt from the Independent Shareholders’ approval requirements. In addition, the Company will, with respect to the transactions in question, comply with the requirements under Rule 14A.37 to 14A.40 of the Hong Kong Listing Rules in respect of conducting annual reviews of these continuing connected transactions. If the actual aggregate amount of such transactions during the year ending 31 December 2014 exceeds the above cap (i.e. RMB900 million), the Company will further comply with the requirements under Rule 14A.36 of the Hong Kong Listing Rules.

(5) Provision of entrusted sale services

The provision of entrusted sale services from Huaneng Group and its subsidiaries and associates to the Company and its subsidiaries involve mainly the use of power generation quota of Huaneng Group and its subsidiaries and associates for substituted power generation by the Company and its subsidiaries. Pursuant to the 2013 Huaneng Group Framework Agreement with respect to the provision of entrusted sale services to the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates, the cap of the aggregate transaction amount for 2013 was set at RMB900 million. During the period from 1 January 2013 to 30 November 2013, the aggregate transaction amount (unaudited) for the provision of entrusted sale services to the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates was approximately RMB341 million. It is estimated that at the end of 2013, the actual aggregate transaction amount will not exceed the anticipated transaction amount of 2013. For 2014, the transaction amount with respect to such services between the Company and its subsidiaries and Huaneng Group and its subsidiaries and associates is estimated to be RMB600 million. Such cap is estimated on the basis of the existing overall business scale and operation of the relevant parties, anticipated power sold, substituted tariff and development of such transaction as deemed reasonable by the Company and its subsidiaries. In order to increase output and boost efficiency, the Company and its subsidiaries have entered into substituted power generation transactions with power plants, closed or not, in places where they are located (including connected persons and non-connected persons). For the provision of substituted power generation, the marginal costs of the Company and its subsidiaries are relatively lower and hence it can produce a relatively higher marginal contribution in substituted power generation. Besides, Huaneng Group and its subsidiaries and associates maintain a relatively better relationship with the Company and its subsidiaries.

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LETTER FROM THE BOARD

Pursuant to the Huaneng Group Framework Agreement, the terms and prices with respect to the provision of aforesaid entrusted sale services between the Company and its subsidiaries and Huaneng Group and its subsidiaries and associates are negotiated at arm’s length terms, taking into account the then prevailing market conditions; but in any event at the terms and prices no less favorable than those offered to the Company and its subsidiaries by an independent third party for the same or similar type of services. Payments under such substituted power generation transactions will primarily be settled in two ways: (1) upon power generation, the Company and its subsidiaries will settle the payment with the power grid company before paying the difference to Huaneng Group and its subsidiaries and associates; (2) upon power generation, Huaneng Group and its subsidiaries and associates will settle the payment with the power grid company before paying substituted power generation costs and other relevant expenses to the Company and its subsidiaries.

The Board (including the independent non-executive Directors) is of the view that the transactions for provision of entrusted sale services pursuant to the Huaneng Group Framework Agreement were entered into (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (on arm’s length basis or on terms no less favorable than terms offered by the Company to independent third parties); and (iii) on terms and the proposed cap that are fair and reasonable and in the interest of the Company and its shareholders as a whole.

As the applicable percentage ratios relating to the scale of the subject transactions calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules do not exceed 5%, such transactions are therefore only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules but are exempt from the Independent Shareholders’ approval requirements. In addition, the Company will, with respect to the transactions in question, comply with the requirements under Rule 14A.37 to 14A.40 of the Hong Kong Listing Rules in respect of the annual review of these continuing connected transactions. If the actual aggregate amount of such transactions during the year ending 31 December 2014 exceeds the above cap (i.e. RMB600 million), the Company will further comply with the requirements under Rule 14A.36 of the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

(6) Sale of products

To be more cost-efficient in management, the Company’s subsidiary(ies) will sell products mainly sale of coal to Huaneng Group and its subsidiaries and associates. The prices and charges of coal will be calculated by reference to RMB/ton and the actual weight of carriage, with arm’s length terms taking into account the then market conditions, and in any event the terms of the purchases of coal and the related products shall be no less favourable than those offered by independent third parties to the Company for the same or similar type of coal supply and the related products services. In 2013, the aggregate transaction amount for sale of coal (unaudited) was approximately RMB130 million (please refer to the Company’s announcement dated 16 August 2013 for details). For 2014, the transaction amount with respect to the sale of products between the Company and Huaneng Group and its subsidiaries and associates is estimated to be RMB600 million. The payment of the consideration will be settled in cash in arrears, or in accordance with the payment terms agreed by the relevant parties pursuant to the Huaneng Group Framework Agreement. Such cap is based on the estimation of the coal and other related products required by certain power plants of Huaneng Group and its subsidiaries and associates for 2014. In addition, better prices can be obtained in bulk purchases. In order to leverage on the scale procurement of coal, the Company may re-sell part of the additional coal to power plants of Huaneng Group and its subsidiaries and associates.

The Board is of the view that the transactions for sale of products to Huaneng Group and its subsidiaries and associates pursuant to the Huaneng Group Framework Agreement were entered into: (i) in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (on arm’s length basis or on terms no less favorable to the Company than terms available from independent third parties); and (iii) on terms and the proposed cap that are fair and reasonable and in the interest of the Company and its shareholders as a whole.

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LETTER FROM THE BOARD

As the applicable percentage ratios relating to the scale of the subject transactions calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules do not exceed 5%, such transactions are therefore only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Hong Kong Listing Rules but are exempt from the Independent Shareholders’ approval requirements. In addition, the Company will, with respect to the transactions in question, comply with the requirements under Rule 14A.37 to 14A.40 of the Hong Kong Listing Rules in respect of conducting annual reviews of these continuing connected transactions. If the actual aggregate amount of such transactions during the year ending 31 December 2014 exceeds the above cap (i.e. RMB600 million), the Company will further comply with the requirements under Rule 14A.36 of the Hong Kong Listing Rules.

(7) Trust loans and entrusted loans

The Huaneng Group Framework Agreement has also included (i) borrowing of trust loans by the Company and its subsidiaries from Huaneng Group and its subsidiaries and associates; (ii) the provision of entrusted loans from Huaneng Group and its subsidiaries and associates to the Company and its subsidiaries. The transaction amount (i.e. interest arising from borrowing of the relevant trust loans) of the trust loans for 2014 is expected to be RMB600 million and the transaction amount (i.e. the amounts arising from the provision of entrusted loans) of the entrusted loans for 2014 is expected to be RMB2 billion.

Given that the trust loans and entrusted loans are to be granted by or through Huaneng Group and its subsidiaries and associates to the Company and its subsidiaries on normal commercial terms which are comparable to or more favourable than those offered by independent third parties for similar service in the PRC and where no security over the assets of the Company is granted in respect of such services, the trust loans and entrusted loans contemplated under the Huaneng Group Framework Agreement are exempted from reporting, announcement and Independent Shareholders’ approval requirements under Rule 14A.65(4) of the Hong Kong Listing Rules. The Company therefore makes disclosure simultaneously pursuant to the Company’s announcement disclosed on the Shanghai Stock Exchange.

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LETTER FROM THE BOARD

(iii) Measures to safeguard the interests of the Independent Shareholders

Directors and senior management of the Company will monitor closely and review regularly each continuing connected transaction of the Company. The Company will adopt a series of risk management arrangements, and endeavour to maintain, in relation to each continuing connected transaction, the independence of the Company; the fairness of the price of the transaction; the fairness of the terms of the transaction; and the right of the Company to conduct transactions with independent third parties other than Huaneng Group and its subsidiaries and associates. The relevant arrangements include:

the continuing connected transactions contemplated under the Huaneng Group Framework Agreement are conducted on a non-exclusive basis;
for transactions relating to the purchase of ancillary equipment and parts, the Company will conduct such transactions according to the Company’s procurement policy, which mainly stipulates that the Company will, from time to time, obtain quotations and/or invite tenders from multiple suppliers and/or in certain circumstances obtain the quotations through enquiries from among established suppliers of scale (including Huaneng Group and its subsidiaries and associates). According to the Company’s procurement policy, in addition to the offer of same or more favourable terms by the counterparty in a transaction, the Company will also consider other factors, including the corporate background of the counterparty; its reputation and reliability; its ability to conduct the transaction in accordance with the terms of the contract; and its understanding of the Company’s needs, in order to maximise the Company’s interest in the transaction, and at the same time reduce the Company’s time and costs of transaction;
for transactions in relation to the purchase of coal and coal transportation services, the Company has established a dedicated information exchange and mechanisms for weekly and monthly information analysis, which mainly consists of: (i) collection of price information, such as pithead prices, the listed prices at major coal production localities, inland coal transaction price indices, harbour price indices, the futures indices on the Mainland, the prices of coal globally, and price indices of imported coal; and in addition, information relating to the storage at harbours, the production, transportation and sale of coal, and price indices of freights is also collected as an aid in analysing the trend of the market price. The major information collection channels of the Company include: China Coal Market website 中國煤炭市場網 (http.//www.cctd.com.cd), China Coal Resources website 中國煤炭資源網 (http://www.sxcoal.com) , Qinhuangdao Coal website 秦皇島煤炭網 (http://www/cqcoal.com), Qinhuangdao Shipping website 秦皇島海運網

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LETTER FROM THE BOARD

(http:www.osc.org.cn), etc.; (ii) the Company has also established the Qinhuangdao distribution centre, which is charged with the monitoring of the daily, weekly, and monthly prices of coal based on harbour and water transportation and related developments; (iii) the Company’s branch companies and power plants are charged with collecting information on the market and pithead prices of their own location. In terms of pricing, the Company will issue weekly the guidance procurement price of coal for coastal power plants (based on the market information collected and generally lower than the then prevailing market price), the Company’s suppliers (including Huaneng Group and its subsidiaries and associates) will be invited to provide coal quotations within the range of the guidance procurement price. The Company will independently choose and purchase from the best offer according to the market conditions within the parameters of the Company’s procurement strategies. The Company believes that such purchaser-oriented pricing process will lead to an open and transparent market mechanism for competition on prices;

for transactions in relation to the purchase of coal and coal transportation services, the basis for determining the “market conditions” in the formulation of the Company’s procurement strategies can principally be summarized in the following manner: (i) the changes in the prices of coal; (ii) the aspects on coal transportation, including status on ship transportation at port (i.e. in circumstances where the northern ports in Qinhuangdao are stranded seriously, the Company will arrange certain coal to be imported), the status on railway transportation (e.g. substantial overhaul of Datong Qinhuangdao railway), the status on road transportation (i.e. whether the northern regions is/are affected by seasonal rain/snow); (iii) production condition (i.e. whether major cooperation partners for coal supply or regional coal enterprises experience any safety incidents which may lead to a suspension in coal production or safety checks and hence the coal mine safety inspections may affect domestic coal production or supply of coal regionally, or whether the imported coal from coal production areas like Australia, Colombia, South Africa, etc. are affected by incidents of natural disasters, storm, typhoon, strike, etc.); (iv) status on level of inventory (including whether there have been any changes in the inventory at major ports or power enterprises, or whether coal companies run out of stock; and (v) status on changes in policies. In 2013, the State has promulgated a number of environmental protection policies and coal industry policies which may have an impact on volume of coal consumption, the types and quality of coal required by power enterprises. The Company will timely follow and collect information on market condition for assessing and formulating the Company’s procurement strategies;

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LETTER FROM THE BOARD

for transaction in relation to leasing of power transmission and transformation assets, the Company and its subsidiaries will lease such facilities from Hunang Group and its subsidiaries and associates based on arm’s length terms. The leasing fee is approximately RMB141 million, principally is to offset the outlay of the supplier’s costs, interest payment, operational expenses in maintenance, etc. Such leasing fee has been adopted for use since 2004 and in the interim no adjustment on account of inflation or other factors has been made. For transactions in relation to the leasing of facilities, the Company will have regard to the then prevailing market rent for similar types of properties in the nearby locations (which is obtainable as public information), and/or consult the advice of several reputable local real estate agents for benchmarks of assessment. Such transactions will be reviewed by the Company’s legal department on the legal aspects and approved by the contract management department;
for transaction in relation to provision of technical services, engineering contracting services and other services, the Company will conduct such transactions according to the relevant procurement policy and management rules, and will from time to time obtain quotations, and/or invite tenders from multiple suppliers and/or in certain circumstances obtain the quotations through enquiries from established suppliers of scale (including Huaneng Group and its subsidiaries and connected suppliers). According to the Company’s procurement policy, in addition to the offer of same or more favourable terms by the counterparty in a transaction, the Company will also consider other factors, including the Company’s specific requirements in a transaction, the comparable advantages of the technological expertise of counterparties and the ability of counterparties in performing the contract and the follow-up services consequential to completion of a transaction, in order to maximise the Company’s interest;
provision of entrusted sale services is formulated in tandem with the “Eleventh Five Year” Plan of the State on energy conservation and emission reduction policies. Through the centralised coordination carried out by various regional government agencies or the management platform of power grid companies governing transactions in substituted power generation, the Company will conduct the transactions in accordance with the implementation rules governing substitution of power generation on the area(s) where such power plant(s) is/are located, having taken into account the status regarding the operation of generation units and the actual changes in the market;

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LETTER FROM THE BOARD

for transaction in relation to sale of products, in principle, the fuel company (which is 100% owned by the Company) will only sell coal to the Company’s power plants. The Company will strictly control the conduct relating to sale of coal transactions between the fuel company of the Company with related power plants. In circumstances where there is a severe shortage in the level of inventory and on condition that the Company’s own power plants are preserved with sufficient coal supply, the Company will sell part of the excess coal, as a temporary measure, to related power plants at prices according to the changes in market conditions. The Company will through the information collection process as mentioned in transaction regarding purchase of coal and coal transportation above, with reference to the then market conditions and in conjunction with the costs for coal purchase by fuel company to determine the then selling prices, so as to recoup the costs and to have a small profit; and
the contract management department will strictly review contracts, the contract enforcement department will timely monitor the amount of connected transactions, and the relevant functional departments will supervise the compliance monitoring in production and operation. In addition to the annual review of the performance of specific contracts by the independent non-executive Directors and the Company’s auditors, the Company’s supervisors will also monitor (inter alia) the working arrangements involved in the Company’s continuing connected transactions, and review whether the Company’s transactions are fair, and whether the transaction prices are reasonable.

3. THE EGM

Under the Hong Kong Listing Rules, the purchase of coal and transportation services (including the proposed cap) under the Huaneng Group Framework Agreement constitute continuing connected transactions to the Company. The transaction scale of the transaction exceeds 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’ approval for the conduct of the transactions of purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement. On the other hand, pursuant to the Shanghai Listing Rules, the conduct of all transactions with Huaneng Group (together with its subsidiaries and associates, all being treated as the concerted related parties of the Company under the Shanghai Listing Rules) as set out in this circular shall be approved by the Independent Shareholders of the Company. The EGM will be held for considering and approving the conduct of all the continuing connected transactions (and the respective caps) contemplated by the Huaneng Group Framework Agreement by the Independent Shareholders. Huaneng Group and HIPDC and their respective associates and Shareholders who

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LETTER FROM THE BOARD

are involved in, or interested in the transactions (including the proposed caps) contemplated by the Huaneng Group Framework Agreement (holding an aggregate of 7,211,431,502 shares in the Company, representing approximately 51.31% of the total issued shares of the Company as of 30 November 2013) will abstain from voting in the resolution with respect to the conduct of the continuing connected transactions (including the proposed caps) contemplated under the Huaneng Group Framework Agreement at the EGM, at which the proposed resolution will be passed by way of ordinary resolution and voting will be taken by way of a poll in accordance with the requirements of the Hong Kong Listing Rules.

Independent Shareholders are advised to read this circular carefully for details of all the continuing connected transactions (including the purchase of coal and transportation services, as well as the Other Transactions) before making their decision as regards voting. Independent Shareholders should also note that, if they vote in favor of the resolution proposed at the EGM regarding the Huaneng Group Framework Agreement, they would approve all the continuing connected transactions contemplated under the Huaneng Group Framework Agreement including the purchase of coal and transportation and the Other Transactions. In the event that the resolution proposed at the EGM as regards the Huaneng Group Framework Agreement is not approved by the Independent Shareholders, the continuing connected transactions contemplated under the Huaneng Group Framework Agreement including the purchase of coal and transportation services and the other Transactions would not be carried out by the Company.

Notice of the EGM, together with the relevant reply slip and proxy form, have been issued to Shareholders separately. 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. The form of proxy should be completed and returned to the Company’s H Share Registrar, Hong Kong Registrars Limited, at 17M Floor, 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.

4. RECOMMENDATIONS

Your attention is also drawn to the letter from the Independent Board Committee to the Independent Shareholders of the Company, which is set out on pages 24 to 25 of this circular, and which contains their recommendation in respect of the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement.

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LETTER FROM THE BOARD

The letter of advice from Guotai Junan Capital to the Independent Board Committee and the Independent Shareholders on the fairness and reasonableness of the terms of the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement, and whether the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement are in the interests of the Company and its Shareholders as a whole is set out on pages 26 to 33 of this circular.

The Independent Board Committee, having taken into account the advice of Guotai Junan Capital, considers that the terms of the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement are fair and reasonable so far as the Independent Shareholders are concerned and that the transactions (and the proposed cap) 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 resolution to approve the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement.

The Directors consider that the ordinary resolution in relation to the proposed continuing connected transactions (including the respective caps) contemplated under the Huaneng Framework Agreement between the Company (and its subsidiaries) and Huaneng Group and its subsidiaries and its associates are in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Shareholders vote in favour of such resolution to be proposed at the EGM as set out in the notice of the EGM.

5. OTHER INFORMATION

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

Yours faithfully By order of the Board Huaneng Power International, Inc. Du Daming

Company Secretary

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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Registered office: Huaneng Building 6 Fuxingmennei Street Xicheng District Beijing 100031 The People’s Republic of China

20 January 2014

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We, the Independent Board Committee of Huaneng Power International, Inc., are advising the Independent Shareholders in connection with the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement, details of which are set out in the letter from the Board contained in the circular (“Circular”) of the Company to the Shareholders dated 20 January 2014, 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 transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement constitutes connected transactions to the Company. Accordingly, the conduct of the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement will require the approval of the Independent Shareholders at the EGM.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to the letter of advice from Guotai Junan Capital set out on pages 26 to 33 of the Circular. We have discussed the letter and the opinion contained therein with Guotai Junan Capital.

Having considered, inter alia, the factors and reasons considered by, and the opinion of, Guotai Junan Capital, as stated in its aforementioned letter, we consider the terms of the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement to be fair and reasonable so far as the Independent Shareholders are concerned. We are of the view that the transaction relating to the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement are in the interests of the Company and its Shareholders as a whole. Accordingly, we recommend that the Independent Shareholders vote in favour of the relevant ordinary resolution in the Notice of EGM to be proposed at the EGM to be held on 11 February 2014 and thereby approve the purchase of coal and transportation services (and the proposed cap) under the Huaneng Group Framework Agreement.

Yours faithfully,

Mr. Shao Shiwei, Mr. Wu Liansheng, Mr. Li Zhensheng,

Mr. Qi Yudong and Mr. Zhang Shouwen

Independent Directors

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from Guotai Junan Capital, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, in relation to the continuing connected transaction regarding the purchase of coal and transportation services (including the proposed cap) under the Huaneng Group Framework Agreement, which has been prepared for the purpose of inclusion in this circular.

27/F, Low Block Grand Millennium Plaza 181 Queen’s Road Central Hong Kong

20 January 2014

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONTINUING CONNECTED TRANSACTION

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in connection with the purchase of coal and transportation services (including the proposed cap) from Huaneng Group and its subsidiaries and associates pursuant to the Huaneng Group Framework Agreement (the “Coal Purchase” or the “Continuing Connected Transaction”). Details of the Huaneng Group Framework Agreement and the transactions contemplated thereunder are set out in the letter from the Board (the “Letter from the Board”) contained in the circular of the Company dated 20 January 2014 (the “Circular”) of which this letter forms part. Unless the context requires otherwise, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

As set out in the Letter from the Board, the Company had been conducting certain continuing connected transactions with Huaneng Group and its subsidiaries and associates under the 2013 Huaneng Group Framework Agreement entered into with Huaneng Group for the year ended 31 December 2013. As the 2013 Huaneng Group Framework Agreement expired on 31 December 2013, on 27 December 2013, the Company and Huaneng Group have entered into the Huaneng Group Framework Agreement, which sets out, among others, the terms of the Coal Purchase.

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

As Huaneng Group is a connected person of the Company, the transactions contemplated under the Huaneng Group Framework Agreement constitute continuing connected transaction of the Company. As the proposed cap for the Coal Purchase under the Huaneng Group Framework Agreement exceeds 5% of the applicable percentage ratios as calculated pursuant to Rule 14.07 of the Hong Kong Listing Rules, such transaction is subject to, among other things, the requirement of Independent Shareholders’ approval at the EGM. As of 30 November 2013, Huaneng Group is the controlling shareholder of HIPDC, holding a 51.98% direct equity interests and a 5% indirect equity interests in HIPDC. Huaneng Group also holds a 15.26% direct and indirect equity interests through subsidiaries other than HIPDC in the issued shares of the Company as of 30 November 2013. As of 30 November 2013, HIPDC held 36.05% of the issued shares of the Company. Huaneng Group and its associates (holding an aggregate of approximately 51.31% of the total issue shares of the Company as at the Latest Practicable Date) will abstain from voting at the EGM on the resolution with respect to the Continuing Connected Transaction and the relevant proposed cap.

The Independent Board Committee comprising all of the five independent non-executive Directors, namely Mr. Shao Shiwei, Mr. Wu Liansheng, Mr. Li Zhensheng, Mr. Qi Yudong and Mr. Zhang Shouwen, has been established to consider the terms of the Continuing Connected Transaction (including the proposed cap) and to make recommendation to the Independent Shareholders as regards voting. We, Guotai Junan Capital Limited, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to (i) whether the terms (including the proposed cap) of the Continuing Connected Transaction are on normal commercial terms, in the ordinary and usual course of business of the Company, and fair and reasonable so far as the Independent Shareholders are concerned; and (ii) whether the Continuing Connected Transaction is in the interests of the Company and the Shareholders as a whole.

BASIS AND ASSUMPTIONS OF OUR OPINION

In formulating our opinion, we have relied on the statements, information, opinions and representations expressed to us by the executive Directors and management of the Company. We have assumed that all such statements, information, opinions and representations expressed to us by the executive Directors and management of the Company, for which they are solely responsible, are true, accurate and complete in all material aspects at the time they were made and up to the date of this Circular. We have also assumed that all the opinions and representations have been reasonably made by the executive Directors and the management of the Company after due and careful enquiry. We have also sought and obtained confirmation from the executive Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view and have no reason to believe that any material information have been withheld, nor doubt the truth or accuracy of the information provided. We have not, however, conducted any independent investigation into the business and affairs of the Company or any of its subsidiaries, nor have we carried out any independent verification of the information supplied.

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONCERNED

In considering whether the terms of the Continuing Connected Transaction and the proposed cap are fair and reasonable in so far as the Independent Shareholders are concerned, we have taken into account the principal factors and reasons set out below:

Background and reasons for the Coal Purchase

The Company and its subsidiaries mainly develop, construct, operate and manage large-scale power plants in China nationwide. It is one of the largest listed power producers in China, with a controlling capacity of 66,795 MW as at 31 December 2013.

As set out in the Letter from the Board, Huaneng Group has a close relationship with the Company through its direct and indirect interests in the share capital of the Company. Huaneng Group is principally engaged in, development, investment, 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 energy, transportation, new energy and environmental protection industries.

For the year ended 31 December 2013, the Company’s power plants within China achieved a total power generation of 317.481 billion kWh (2012: 302.433 billion kWh). Fuel cost represents the major component of operating expenses of the Company and coal is the major raw material of the Company for power generation. According to the 2012 annual report of the Company, for the year ended 31 December 2012, fuel cost amounted to RMB82.4 billion (2011: RMB90.5 billion), representing approximately 70.8% (2011: 72.9%) of the total operating expenses. According to the 2013 interim report of the Company, fuel cost for the six months ended 30 June 2013 amounted to RMB35.7 billion, representing approximately 69.6% of the total operating expenses. In this light, it is important for the Company to ensure stable coal supply and control fuel cost and quality at a reasonable level.

As advised by the management of the Company, the Company purchases coal from coal mines and agencies close to their power plants or major transportation network in order to save time and cost in transportation. Huaneng Group owns coal mines throughout the PRC. Some of these coal mines are located in close proximity of the Company’s inland coal-fired power plants and have competitive advantages over other third party suppliers in supply efficiency and transportation cost-saving. Longterm corporation with nearby coal mines would enable coal-fired power plants to obtain stable and economical coal supply. Besides, on 11 January 2013, the Company acquired 50% equity interest in China Huaneng Group Fuel Co., Ltd (the “Fuel Company”) from Huaneng Group and since then Fuel Company is owned as to 50% by the Company and 50% by Huaneng Group. As advised by the management of the Company, after certain internal reconstruction, Fuel Company started to supply seaborne coal to the Company and its subsidiaries on a large scale in June 2013. Fuel Company

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

sources coal supply by bulk purchase from the market and resells to relevant coal-fired power plants at a competitive price, and since June 2013 it acted as a substantial seaborne coal supply arm of the Company’s coal-fired power plants in coastal region. Bulk purchases would usually enable purchasers to bargain favorable terms and pricing from suppliers, and thus, as the substantial supply arm of the Company and Huaneng Group for coal, Fuel Company is able to take advantage of bargaining power from bulk purchasing and therefore access wider network of coal supply with competitive pricing. In light of the above, we are of the view that the Coal Purchase would enable the Company’s power plants to obtain necessary fuel at competitive price.

We also understand from the Company that Huaneng Group and its subsidiaries and associates can offer more favorable terms for bulk purchase of coal and transportation services and there has been no difficulty in materialising the coal purchase as set out in the coal purchase agreement with Huaneng Group. In this light, coal purchases from Huaneng Group would help stabilising coal supply to the Company. Besides, as the Coal Purchase from Huaneng Group has been carried out for several years in the past, each of the Company and Huaneng Group is familiar with the work flow and production condition of the relevant power plants. Therefore, Huaneng Group and its subsidiaries and associates are able to provide the Company and its subsidiaries with coal and transportation services in a timely and reliable manner, thereby minimizing the management and operational costs of the Company and its subsidiaries.

The Company and its subsidiaries, through the Huaneng Group Framework Agreement, will be able to consolidate the shipping resources owned by Huaneng Group, thus improving its coal transportation capability and ensuring the smooth transportation of the seaborne coal.

Based on the above, we concur with the Directors’ view that the Coal Purchase is in the ordinary and usual course of business of the Company and is in the interests of the Company and the Shareholders as a whole.

Principal terms of the Coal Purchase

The Coal Purchase would be conducted under the Huaneng Group Framework Agreement, for a term of one year commencing on 1 January 2014 and expiring on 31 December 2014.

As set out in the Letter from the Board, pursuant to the Huaneng Group Framework Agreement, the prices and charges of the Coal Purchase would be calculated by reference to RMB/ton and the actual weight of carriage, with arm’s length terms taking into account the then market conditions, and in any event the terms of such purchase shall be no less favorable than those offered by independent third parties to the Company and its subsidiaries for the same or similar type of coal supply or transportation services.

— 29 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

We have obtained and reviewed samples of agreements and invoices of coal purchases from Huaneng Group and those from independent coal suppliers in 2013. We noted that the terms of purchases from Huaneng Group, including payment terms and unit price of coal, have been comparable to those charged by independent coal suppliers under normal commercial terms. According to the management of the Company, the Company has relevant policies and procedures in place to ensure that the terms of the transactions entered into by the Company and its subsidiaries with Huaneng Group pursuant to the Huaneng Group Framework Agreement are no less favorable to those entered into by the Company and its subsidiaries with independent third party(ies).

We are of the view that the terms of the Coal Purchase, which allow the Company to purchase coal from Huaneng Group on terms with reference to market conditions and no less favorable than those offered by independent third parties to the Company, are on normal commercial terms and are fair and reasonable in so far as the Company and the Independent Shareholders are concerned.

Proposed cap

The Coal Purchase is subject to the proposed cap whereby the transaction value of the Coal Purchase will not exceed RMB 44.1 billion for the year ending 31 December 2014, as compared to the annual cap of RMB38.1 billion set for the year ended 31 December 2013. For the 11 months ended 30 November 2013, the actual transaction amount (unaudited) of Coal Purchase amounted to approximately RMB 16.4 billion.

We have discussed with the management of the Company the basis and assumptions underlying the determination of the proposed cap and assessed its fairness and reasonableness. As advised by the management of the Company, the increase of the proposed cap for Coal Purchase in 2014 is mainly due to (i) the anticipated development and growth of the power plants of the Company and its subsidiaries, and (ii) the seaborne coal supply arrangement with Fuel Company for full year.

It is noted from the financial statement of the Company that the Company made steady progress in generating unit development and construction during the past several years. As at 31 December 2011, 2012 and 2013, the Company had controlled generating capacity of 60,375 MW, 62,756 MW and 66,795 MW respectively, and it’s expected the Company’s controlled generating capacity will increase to more than 68,000 MW by 31 December 2014. The Company estimates that, with operation for newly constructed generating units of the Company in 2014, the total volume of the Company’s coal consumption will increase in 2014. We consider the expected increase in the Company’s coal consumption is in line with the Company’s increasing generating capacity. The coal price dropped to a severely low level in the second half of 2013 and rebounded near the end of the year. The Company expects there will not be severe fluctuation in coal market in 2014 and the Company will source sufficient coal supply and transportation services at a relatively stable price which is similar to the average coal price for 2013 whole year.

— 30 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

As advised by the management of the Company, the 2013 annual cap of RMB38.1 billion was largely under-utilized for transactions up to 30 November 2013, mainly because the transactions in relation to the purchase of coal and coal transportation services from Huaneng Group and its subsidiaries and associates only took place in considerable scale during the second half of 2013. The proposed transaction cap of 2013 was based on the Company’s estimate of the market demand and supply back then, when there were still uncertainties as to the market risks, and so much estimate was relatively conservative. However, following the marketization of coal, the price of coal dropped significantly, and therefore the actual transaction amount for the purchase of coal and coal transportation services from Huaneng Group and its subsidiaries and associates in 2013 did not reach the proposed transaction cap of 2013. We are also advised by the Company that the Company does not take historical annual cap utilization rate as a reference when estimating new annual cap for the purchase of coal and coal transportation services. The Company calculates the proposed cap by adding up the maximum transaction amount of each power plant which is likely to source coal and coal transportation services from Huaneng Group and its subsidiaries and associates. These power plants will, in practice, compare the terms offered by independent third parties with those offered by Huaneng Group, and then decide whether or not to make purchase from Huaneng Group. As such, the utilization rate is an unpredictable parameter and can only be calculated after relevant period based on actual transaction amount.

It is also advised by the management of the Company, the Fuel Company started to supply seaborne coal to the Company and its subsidiaries on a large scale in June 2013, and since then, it acted as a substantial seaborne coal supply arm of the Company’s coal-fired power plants in coastal region, which accounted for the sharp increase of the actual amount of the Continuing Connected Transactions from approximately RMB6.8 billion for the year ended 31 December 2012 to approximately RMB16.4 billion for the 11 months ended 30 November 2013. Due to internal reconstruction, Fuel Company did not play its role of substantial supply arm of the Company’s coal-fired power plants in coastal region until June 2013, and thus the utilisation rate of the annual cap for 2013 is expected to be relatively low. The transaction amount between the Company and Fuel Company amounted to approximately RMB8.0 billion for the 11 months ended 30 November 2013. Considering the seaborne coal supply arrangement with Fuel Company for full year in 2014 and the price recovered from the severe drop in the second half of 2013, the management of the Company expects the transaction volume of Coal Purchase with Fuel Company will increase from approximately 22 million tons for the year ended 31 December 2013 to approximately 51 million tons for the year ended 31 December 2014, and the transaction amount of Coal Purchase with Fuel Company will increase significantly correspondingly in 2014. It is expected that the tax-inclusive transaction amount between the Company and Fuel Company will be no more than RMB31.9 billion for the year ending 31 December 2014.

In light of the above and taking into account (i) the anticipated increase in generating capacity of the Company and corresponding increase in the demand for coal of the Company; and (ii) the full year operation of Fuel Company as substantial seaborne coal supply arm of the Company, we consider the new annual cap of RMB44.1 billion for the year ending 31 December 2014 to be fair and reasonable.

— 31 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Measures to safeguard interests of Independent Shareholders

As advised by the management of the Company, since the operation of Fuel Company as substantial seaborne coal supply arm of the Company, the Company has been playing a positive role in the operating of Fuel Company in order to closely monitor the commercial terms and pricing of the Continuing Connected Transaction with Fuel Company, and ensure such connected transaction is in the interests of the Company and the Shareholders as a whole. The Company will continue to make independent decisions as to the price and quantity of purchase and to access and obtain market information through various means so that the terms obtained by the Company from Fuel Company will be no less favourable than those available from independent third parties.

Directors and senior management of the Company will monitor closely and review regularly the Continuing Connected Transaction of the Company. The Company will adopt a series of risk management arrangements, and endeavour to maintain, in relation to the Continuing Connected Transaction, the independence of the Company; the fairness of the price of the transaction; the fairness of the terms of the transaction; and the right of the Company to conduct transactions with independent third parties other than Huaneng Group and its subsidiaries and associates. The relevant policies and procedures include:

the Continuing Connected Transaction with the Fuel Company are conducted on a non-exclusive basis;
the Company has established a dedicated information exchange and mechanisms for weekly and monthly information analysis, which mainly consists of: (1) collection of price information, such as different market prices, indicies, storage level; (2) the Company also established the Qinhuangdao distribution centre, which is charged with the monitoring of the daily, weekly, and monthly prices of coal based on harbour and water transportation and related developments; (3) the Company’s branch companies and power plants are charged with collecting information on the market and pithead prices of their own location. In terms of pricing, the Company will issue weekly the guidance procurement price of coal for coastal power plants (based on the market information collected and generally lower than the then prevailing market price), the Company’s suppliers (including Huaneng Group and its subsidiaries and associates) will be invited to provide coal quotations within the range of the guidance price. The Company will choose and purchase from the best offer according to its own need, leading to an open and transparent market mechanism for competition on prices;

— 32 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

According to the management of the Company, the relevant policies and procedures mentioned above ensure that the terms of the transactions entered into by the Company and its subsidiaries with Huaneng Group pursuant to the Huaneng Group Framework Agreement are no less favorable to those entered into by the Company and its subsidiaries with independent third party(ies). We have obtained and reviewed samples of information collected and analysis prepared by the Company. We also obtained invoices of coal purchases from Huaneng Group and compared the guidance procurement price of coal at the relevant time. We did not identify any deficiency which may be injurious to interests of the Company and the Shareholders.

We are also advised by the management of the Company that the Company understands the proposed cap is still subject to Independent Shareholders’ approval and the Company will actively monitor the transaction amount since 1 January 2014 to ensure such amount will not exceed 5% of the applicable percentage ratios as calculated pursuant to Rule 14.07 of the Hong Kong Listing Rules before obtaining the approval from the Independent Shareholders.

RECOMMENDATION

Taking into consideration of the above principal factors and reasons, we are of the opinion that the Coal Purchase is in the ordinary and usual course of business of the Company, on normal commercial terms, the terms (including the proposed cap) are fair and reasonable so far as the Company and the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favor of the resolution proposed at the EGM thereby approving the Coal Purchase. Independent Shareholders are reminded that, resolution approving the Huaneng Group Framework Agreement will be proposed at the EGM. By voting in favor of the resolution relating to the Huaneng Group Framework Agreement, the Independent Shareholders would approve all the transactions contemplated thereunder. Independent Shareholders are advised to read the Letter from the Board carefully for the details of other transactions contemplated under the Huaneng Group Framework Agreement before making their decisions as regards voting.

Yours faithfully,

For and on behalf of

Guotai Junan Capital Limited Wilson Lo

Managing Director

— 33 —

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular 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 and debentures 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, or, who is, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at the general meeting of any other member of the Company:

— 34 —

GENERAL INFORMATION

APPENDIX

				Approximate	Approximate	Approximate
				percentage of	percentage of	percentage of
				shareholding in	shareholding in	shareholding in
				the Company’s	the Company’s	the Company’s
Name of	Class of	Number of		total issued	total issued	total issued
shareholder	shares	shares held	Capacity	share capital	domestic shares	H shares
Huaneng International	Domestic	5,066,662,118(L)	Beneficial owner	36.05%(L)	48.25%(L)	—
Power Development	shares
Corporation_(Note 2)_
China Huaneng	Domestic	1,672,769,384(L)	Beneficial owner	11.90%(L)	15.93%(L)	—
Group_(Note 3)_	shares
China Huaneng	H shares	472,000,000(L)	Beneficial owner	3.36%(L)	—	13.28%(L)
Group_(Note 4)_
Hebei Provincial	Domestic	603,000,000(L)	Beneficial owner	4.29%(L)	5.74%(L)	—
Construction	shares
Investment Company
Blackrock, Inc.(Note 5)	H shares	212,547,667(L)	Interest of controlled	1.51%(L)	—	5.97%(L)
		10,128,000(S)	corporation	0.07%(S)	—	0.28%(S)
UBS_(Note 6)_	H shares	69,933,103(L)	Beneficial owner	0.49%(L)	—	1.96%(L)
		28,252,937(S)	Beneficial owner	0.20%(S)	—	0.79%(S)
		157,485,160(L)	Person having a security	1.12%(L)	—	4.42%(L)
			interest in shares
		7,274,039(L)	Interest of controlled	0.05%(L)	—	0.20%(L)
			corporation
		48,000(S)	Interest of controlled	0.0003%(S)	—	0.001%(S)
			corporation
JPMorgan Chase	H shares	49,290,383(L)	Beneficial owner	0.35%(L)	—	1.38%(L)
& Co.(Note 5)
		25,184,934(S)	Beneficial owner	0.17%(S)	—	0.70%(S)
		2,242,365(L)	Investment	0.01%(L)	—	0.06%(L)
			manager
		126,520,270(L)	Custodian	0.90%(L)	—	3.55%(L)

Notes:

(1) The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interest in a lending pool.
(2) As of the Latest Practicable Date, Huaneng Group holds 51.98% direct interests and an additional 5% indirect interests in HIPDC.
(3) Of the 1,672,769,384 domestic shares, China Huaneng Group held 6,246,664 domestic shares through its wholly-owned subsidiary, Huaneng Capital Services Co., Ltd. and 111,398,171 domestic shares through its controlling subsidiary, Huaneng Finance.

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GENERAL INFORMATION

APPENDIX

(4) China Huaneng Group held 472,000,000 H shares through its wholly owned subsidiary, China Hua Neng Group Hong Kong Limited.
(5) Long position of 1,214,000 shares and short position of 10,128,000 were held through physical settled derivatives (on exchange).
(6) Long position of 3,740,356 shares was held through physically settled derivatives (on exchange). Short position of 26,503,175 shares was held through physically settled derivatives (off exchange). Short position of 1,797,762 shares was held through cash settled derivatives (off exchange).
(7) Long position of 184,000 shares and short position of 562,000 shares were held through physically settled derivatives (on exchange). Short position of 2,514,000 shares was held through cash settled derivatives (on exchange). Long position of 210,000 shares and short position of 1,202,561 shares were held through physically settled derivatives (off exchange). Long position of 11,802,000 shares and short position of 4,280,373 shares were held through cash settled derivatives (off exchange).

Save as disclosed above, the Company is not aware of any other person (other than the directors, supervisors and senior executives of the Company) having any interests or short positions in the shares and underlying shares of the Company as at the Latest Practicable Date as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

As at the Latest Practicable Date, save as disclosed below, so far as is known to the Board, no director or supervisor is a director or employee of a company which has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under provisions of Divisions 2 and 3 of Part XV of the SFO:

Directors

(i) Mr. Cao Peixi is the president of China Huaneng Group and the chairman of Huaneng International Power Development Corporation and Huaneng Renewables Corporation Limited;
(ii) Mr. Huang Long is the vice president of China Huaneng Group and a director of Huaneng International Power Development Corporation;
(iii) Mr. Li Shiqi is the president of Huaneng International Power Development Corporation;
(iv) Mr. Huang Jian is the assistant of president of China Huaneng Group, the vice chairman of Huaneng Capital Services Company Limited, the Chairman of Huaneng Carbon Company and Chairman of Huaneng Hainan Power Ltd.;

— 36 —

GENERAL INFORMATION

APPENDIX

Supervisors

(v) Mr. Guo Junming is the chief accountant of China Huaneng Group and Chairman of Huaneng Capital Service Limited Company; and
(vi) Ms. Zhang Mengjiao is the manager of the Finance Department of Huaneng International Power Development Corporation and the Supervisor of Huaneng Anyuan Power Generation Limited Liability Company.

3. NO MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Company and its subsidiaries since 31 December 2012, being the date to which the latest published audited accounts of the Company and its subsidiaries were made up to.

4. MATERIAL LITIGATION

As at the Latest Practicable Date, none of the Company and its subsidiaries was engaged in any material litigation or arbitration 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.

5. CONSENT OF EXPERT

The following expert 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 and logo in the form and context in which they are included:

Name Qualification

Guotai Junan Capital a licensed corporation to carry on type 6 (advising on corporate finance) regulated activity as defined under the SFO, acting as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the purchase of coal and transportation services (and the proposed caps) under the Huaneng Group Framework Agreement

— 37 —

GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date, the above expert was 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 expert did not have any direct or indirect interest in any assets which had been since 31 December 2012 (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 or Supervisor of the Company had entered into any 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.

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

As at the Latest Practicable Date, none of the Directors or Supervisors of the Company had any interest in any assets which have been since 31 December 2012 (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 was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which was 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).

— 38 —

GENERAL INFORMATION

APPENDIX

9. MISCELLANEOUS

(a) Mr. Du Daming is the Company Secretary and Board Secretary of the Company.
(b) The legal address of the Company is Huaneng Building, 6 Fuxingmennei Street, Xicheng District, Beijing, PRC. The H Share registrar of the Company in Hong Kong is Hong Kong Registrars Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) In the case of any discrepancy, the English text of this circular and form of proxy shall prevail over the Chinese text.

10. DOCUMENTS FOR INSPECTION

Copy of the 2013 Huaneng Framework Agreement and the Huaneng Group Framework Agreement will be available for inspection at the office of Herbert Smith Freehills at 23/F., Gloucester Tower, 15 Queen’s Road Central, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 11 February 2014.

— 39 —

AI assistant

Netjoy Holdings Limited — Proxy Solicitation & Information Statement 2014

50390_rns_2014-01-20_9e75494a-01ac-4d04-947d-bb6d5d8f4365.pdf

CONTINUING CONNECTED TRANSACTIONS

Guotai Junan Capital Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CONTINUING CONNECTED TRANSACTIONS

1. INTRODUCTION

2. HUANENG GROUP FRAMEWORK AGREEMENT

(i) Relationship between the Company and Huaneng Group

LETTER FROM THE BOARD

(ii) Huaneng Group Framework Agreement

(1) Purchase of ancillary equipment and parts

(2) Purchase of coal and transportation services

(3) Leasing of facilities, land and office spaces

(5) Provision of entrusted sale services

(6) Sale of products

(7) Trust loans and entrusted loans

(iii) Measures to safeguard the interests of the Independent Shareholders

LETTER FROM THE BOARD

3. THE EGM

4. RECOMMENDATIONS

5. OTHER INFORMATION

CONTINUING CONNECTED TRANSACTIONS

Yours faithfully,

Mr. Shao Shiwei, Mr. Wu Liansheng, Mr. Li Zhensheng,

Mr. Qi Yudong and Mr. Zhang Shouwen

CONTINUING CONNECTED TRANSACTION

INTRODUCTION

BASIS AND ASSUMPTIONS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONCERNED

Background and reasons for the Coal Purchase

Principal terms of the Coal Purchase

Proposed cap

Measures to safeguard interests of Independent Shareholders

RECOMMENDATION

Guotai Junan Capital Limited Wilson Lo

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTEREST

(a) Directors and Supervisors of the Company

(b) Substantial Shareholders

Directors

Supervisors

3. NO MATERIAL ADVERSE CHANGE

4. MATERIAL LITIGATION

5. CONSENT OF EXPERT

Name Qualification

6. SERVICE CONTRACTS

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

8. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

9. MISCELLANEOUS

10. DOCUMENTS FOR INSPECTION

More from Netjoy Holdings Limited

Netjoy Holdings Limited Proxy Solicitation & Information Statement 2014