Rego Interactive Co., Ltd — Interim / Quarterly Report 2019

Sep 6, 2019

Interim Report for the six months ended 30th June 2019

==> picture [354 x 50] intentionally omitted <==

Important

• I. The board of directors (the “ Board ”), the supervisory committee, directors (the “ Directors ”), supervisors (the “ Supervisors ”) and senior management of Tianjin Capital Environmental Protection Group Company Limited (the “ Company ”) guarantee that information in this 2019 interim report (the “ Interim Report ”) does not contain any false information, misleading statements or material omissions, and accept joint and several responsibilities for the truthfulness, accuracy and completeness of its contents.

• II. The Interim Report of the Company for the six months ended 30 June 2019 has not been audited.

• III. Mr. Liu Yujun, the officer in charge of the Company, Ms. Peng Yilin, the officer in charge of accounting operations, and Mr. Liu Tao, the officer in charge of the accounting department (the accounting management officer), have warranted the truthfulness, accuracy and completeness of the financial reports contained in this Interim Report.

• IV. The proposal on profit appropriation or transfer of capital reserve fund to share capital for the reporting period as reviewed by the Board

Not applicable

• V. Risk statements for the forward-looking statement No

• VI. Did the controlling shareholder of the Company and its connected persons misappropriate the Company’s funds for nonoperating purposes? No

• VII. Did the Company provide external guarantees in violation of any specified decision-making procedures? No

• VIII. Significant risks warning No

• IX. Other matters

Unless indicated otherwise, financial figures in this Interim Report are denominated in RMB.

1

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

1. Definitions

In this Interim Report, unless the context requires otherwise, the following terms shall have the following meanings:

“Group”	the Company and its subsidiaries
“Subsidiaries”	Subsidiaries of the Company
“Company”	Tianjin Capital Environmental Protection Group Company Limited
“Tianjin Investment Group”	Tianjin City Infrastructure Construction and Investment Group Company Limited
“TMICL”	Tianjin Municipal Investment Company Limited
“Jiayuanxing”	Tianjin Jiayuanxing Innovative Energy Technology Company Limited
“TLP”	Tianjin Lecheng Properties Company Limited
“Qudong Company”	Tianjin Qudong Media Co., Ltd.
“Anguo Company”	Anguo Capital Water Company Limited
“Fengyuan Water”	Hunan Fengyuan Water Investment Construction Co., Ltd.
“Fuyang Company”	Fuyang Capital Water Co., Ltd.
“Jieshou Company”	Jieshou Capital Water Company Limited
“Hanshou Company”	Hanshou Tianchuang Water Co., Ltd.
“Hebei Guokong”	Hebei Guokong Jincheng Environmental Control Co., Ltd.
“The Third Construction	The Third Construction Co., Ltd of China Construction Third Engineering Bureau
Company of China Construction
Third Engineering Bureau”
“Tianjin Municipal Institute”	Tianjin Municipal Engineering Design & Research Institute
“Guojin Tianchuang Company”	Hebei Guojin Tianchuang Sewage Treatment Co. Ltd.
“Jiuquan Company”	Jiuquan Capital Water Conservancy Co., Ltd.
“Water Recycling Company”	Tianjin Water Recycling Co., Ltd
“Hangzhou Company”	Hang Zhou Tianchuang Capital Water Co., Ltd.
“Xi’an Company”	Xi’an Capital Water Co., Ltd.
“Caring Company"	Tianjin Caring Technology Development Company Limited
“Bayannur Company”	Inner Mongolia Bayannur Capital Water Co., Ltd.
“Shandong Company”	Shandong Capital Environmental Protection Technology Development Co., Ltd.

2

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

2. Company Profile and Major Financial Indicators

I. INFORMATION OF THE COMPANY

Chinese name of the Company Abbreviation of the Chinese name of the Company English name of the Company Abbreviation of the English name of the Company Legal representative of the Company

天津創業環保集團股份有限公司

創業環保

Tianjin Capital Environmental Protection Group Company Limited TCEPC

Liu Yujun

II. CONTACT PERSON AND METHOD

Secretary to the Board

Name Mr. Niu Bo Correspondence TCEP Building 76 Weijin address South Road Nankai District, Tianjin, the People’s Republic of China (the “ PRC ”) Telephone number 86-22-23930128 Facsimile number 86-22-23930126 Email address niu_bo@tjcep.com

Company Secretary Securities Affairs in Hong Kong Representative Ms. Cho Yee Yung, Mona Ms. Guo Fengxian 22/F, Worldwide House, TCEP Building 76 Weijin Central, Hong Kong South Road Nankai District, Tianjin, the PRC 852-21629620 86-22-23930128 852-25010028 86-22-23930126 cosec@tjcep.com guo_fx@tjcep.com

III. BASIC INFORMATION

Registered address of the Company Postal code of the registered address of the Company Office address of the Company

Postal code of the office address of the Company Website of the Company Email address

No. 45 Guizhou Road, Heping District, Tianjin, the PRC 300051

TCEP Building, 76 Weijin South Road, Nankai District, Tianjin, the PRC

300381 http://www.tjcep.com tjcep@tjcep.com

3

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

2. Company Profile and Major Financial Indicators

• IV. PLACES WHERE THE COMPANY INFORMATION IS DISCLOSED AND AVAILABLE FOR INSPECTION

Name of the media designated by the Company for

Shanghai Securities News

the disclosure of information Website designated by China Securities Regulatory www.sse.com.cn Committee (“ CSRC ”) for the disclosure of Interim Report Place where the Interim Report of the Company is available Office of the Board, 18/F, TCEP Building, 76 Weijin South for inspection Road, Nankai District, Tianjin, the PRC

V. PROFILE OF THE SHARES OF THE COMPANY

Stock Exchange for Stock Stock short name Shares listing shares short name Stock code before its change A Shares Shanghai Stock Exchange 創業環保 600874 渤海化工 (the “ SSE ”) H Shares The Stock Exchange of Hong Tianjin Capital 01065 Tianjin Bohai Kong Limited (the “ Stock Exchange ”)

4

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

2. Company Profile and Major Financial Indicators

• VI. MAJOR ACCOUNTING DATA AND FINANCIAL INDICATORS OF THE COMPANY (PREPARED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS)

• (i) Major accounting data

Unit: 0’000 Currency: RMB

			Increase/decrease
			for the current
			reporting period
	During the	During the	as compared to
	reporting period	same period	the same period
Major accounting data	(from January to June)	last year	last year (%)
Operating income	122,471.6	110,779.8	10.55
Net profit attributable to the shareholders of the Company	21,850.3	28,256.5	-22.67
Net profit attributable to the shareholders of the Company after
deduction of extraordinary items	19,355.3	25,930.9	-25.36
Net cash flow from operating activities	72,970.7	33,799.0	115.90
			Increase/decrease
			as at the end of
			the current
	As at the end		reporting period
	of the current	As of the end	as compared to the
	reporting period	of last year	end of last year (%)
Net assets attributable to the shareholders of the Company	588,542.0	581,820.3	1.16
Total assets	1,645,616.8	1,568,744.8	4.90

(ii) Major financial indicators

Currency: RMB

			Increase/decrease
			for the current
			reporting period
	During the	During the	as compared to
	reporting period	same period	the same period
Major financial indicators	(from January to June)	last year	last year (%)
Basic earnings per share (RMB/share)	0.15	0.20	-25.00
Diluted earnings per share (RMB/share)	0.15	0.20	-25.00
Basic earnings per share after deduction of
extraordinary items (RMB/share)	0.14	0.18	-22.22
Weighted average return on net assets ratio (%)	3.73	5.28	Decreased by 1.55
			percentage points
Weighted average return on net assets ratio after	3.31	4.85	Decreased by 1.54
deduction of extraordinary items (%)			percentage points

5

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

2. Company Profile and Major Financial Indicators

VII. DIFFERENCES IN ACCOUNTING INFORMATION UNDER THE DOMESTIC AND OVERSEAS ACCOUNTING STANDARDS

Not applicable

VIII. EXTRAORDINARY PROFIT AND LOSS ITEMS AND AMOUNTS

Unit: 0’000 Currency: RMB

Extraordinary Profit and Loss Items Profit/loss from disposal of non-current assets Government grants recognized in current profit and loss, except for those closely relating to business operation of the Company, in compliance with national policy and settled in certain amount which are constantly granted by government Other non-operating income and expenses (excluding the above items) Effect on minority interests Effect on income tax Total

Amount 120.1 3,107.2 -223.0 -28.0 -481.3

2,495.0

6

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

3. Company Business Overview

• I. EXPLANATION OF PRINCIPAL BUSINESS OF THE COMPANY, ITS BUSINESS MODEL AND THE INDUSTRY SITUATION DURING THE REPORTING PERIOD

(I) Changes in Principal Business of the Company and its Business Model

During the reporting period, the principal businesses of the Company remained to be water utilities business and new energy cooling and heating supply business. There was no material change in the business scope and business model of the Company’s principal business as compared with the beginning of the reporting period.

In the first half of 2019, oriented towards the requirements of comprehensive water environment management, the Company continued to consolidate and develop its water utilities business, expanding its business into the market of sewage treatment in villages and townships and moving towards fields integrating plants and networks. The sewage treatment capacity, tap water supply capacity, recycled water capacity and sludge treatment capacity under the new projects under the PPP model was 220,000 m[3] per day, 30,000 m[3] per day, 65,000 m[3] per day and 80 tons per day, respectively. The Company has deployed supporting pipeline networks of 458 kilometers. The above are mainly distributed in Jieshou of Anhui, Hanshou of Hunan, Gaocheng of Shijiazhuang and Jiuquan of Gansu.

As of the end of the reporting period, the total capacity of equity-type water utilities business of the Company amounted to 5.425 million m[3] per day, among which the sewage treatment capacity, including tap water and industrial water supply capacity and recycled water capacity under the PPP model was 4.67 million m[3] per day, 335,000 m[3] per day, 420,000 m[3] per day respectively, and the sewage treatment capacity under the entrusted operation model was 535,500 m³ per day. The service areas of new energy business amounted to 2.00 million m[2] .

(II) Explanation of Industry Situation

Driven and guided by national policies, the PPP projects were further regulated and charging policy of sewage treatment was constantly improved. Environmental protection enterprises saw a trend of diversified development, and environmental monitoring has been continuously reinforced, which mark the water utilities industry evolving from the era of “engineering-focused” toward the era of “operation-focused”.

Based on existing capabilities, the Company will play safely to solidify existing business on one hand, and on the other hand actively seek changes and develop new businesses, enhance our service capabilities of comprehensive environmental governance and further develop our core competitiveness.

7

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

3. Company Business Overview

• II. EXPLANATION OF THE SIGNIFICANT CHANGES IN THE COMPANY’S MAJOR ASSETS DURING THE REPORTING PERIOD

Not applicable.

III. ANALYSIS OF CORE COMPETITIVENESS DURING THE REPORTING PERIOD

During the reporting period, there was no material change in Group’s core competitiveness, which is still mainly reflected in the following four aspects: (1) our ability to operate in a safe, stable, up-to-standard and efficient manner; (2) our practical, leading, flexible and sustainable research and development capabilities; (3) our professional, dedicated, cooperative and innovative staff team; (4) our corporate reputation for being trustworthy, responsible, standardized and reliable. These four core competitiveness complement one another in which corporate integrity, diligent employees and technology innovation provide an ultimate assurance to customers, thereby resulting in the Company’s positive brand influence in environmental protection.

8

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

4. Operation Discussion and Analysis

I. OPERATION DISCUSSION AND ANALYSIS

1. Analysis on the overall operation condition during the reporting period

During the reporting period, the Group commenced its work in an orderly manner according to the operational plans and strategies for 2019 as formulated by the Board:

• (1) Deepen operation management and consolidate operation advantages. Following the introduction of more stringent sewage treatment and discharge standards by local governments, the Group upgraded and transformed multiple sewage projects, and project operation became more and more complex. The Group set up a large operation management center to systematize and standardize operation management on the one hand, and refined innovation and optimized technical schemes on the other hand, striving to provide excellent operation services, control operation cost and ensure project incomes at the same time.

• (2) Expand water utilities business and increase the scale of principal business. During the reporting period, the Group has succeeded in the bids of a total of 4 water projects, including rural sewage treatment and ancillary pipeline networks, recycled water, water supply and sludge treatment distributed over places including Jieshou, Hanshou, Gaocheng and Jiuquan. The acquisition of the above projects will further enhance the Group’s comprehensive service capabilities for environmental governance while increasing the scale of the Group’s business and expanding its business scope.

• (3) Strengthen basic management and consolidate management innovation achievements. In the first half year, in order to improve overall management efficiency, on the basis of business linear management, the Group set up regional companies, marketing centers, construction management centers and operation management centers, and combined functional management authorization with business linear management to strengthen capabilities of regional comprehensive management and further optimize the organizational structure. During the reporting period, the Group revamped management systems and business processes, improved the construction of internal control systems, optimized the organizational structure and job allocation of pilot companies in central China and northwest regions, and consolidated management innovation achievements further.

• (4) The Board has agreed to issue green short-term financing bonds and green medium-term notes with a total amount of no more than RMB2 billion to support “the 13th Five-Year Plan” business development plans of the Company.

9

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

4. Operation Discussion and Analysis

2. Analysis on the overall results of operations during the reporting period

In the first half of 2019, the Group recorded an operating revenue of RMB1,224.716 million, representing an increase of 10.55% as compared to that in the same period last year. The operating costs were RMB814.36 million, representing an increase of 26.49% as compared to that in the same period last year. Net profit attributable to the Company was RMB218.503 million, representing a decrease of 22.67% as compared to that in the same period last year. The decrease in net profit was mainly due to the fact that since 1 January 2019, Tianjin Jingu and Beichen sewage treatment plants have been implemented A standard under the new local standards. During the reporting period, as the matters regarding the new sewage treatment service fee under the supplemental agreement to the licensed corporation of the four sewage water treatment plants in Tianjin central area (the “ Supplemental Agreement ”) were not put into place by both parties thereto, the new sewage treatment service fee was not yet implemented, but the cost increased as compared with the same period last year due to stricter water quality standards. The Company currently is actively communicating with the counterparty of the Supplemental Agreement and has made great progress. It is expected that the new sewage treatment service fees will be implemented in the second half of the year.

(1) Analysis of the principal businesses

During the reporting period, the Group’s principal business segments did not change significantly compared with the previous year and was still engaged in the sewage treatment and construction of sewage treatment plants business, recycled water business, tap water supply, new energy heating and cooling supply business, toll collection business and transformation of achievements in technology research. It recorded income from principal business of RMB1,148.445 million, representing 93.77% of operating income of the Group.

• ① Sewage treatment and construction of sewage treatment plants business recorded an income of RMB871.299 million, representing an increase of 16.48% as compared to the same period last year, which was mainly attributable to the increased volume of sewage water treatment. During the reporting period, the Group processed a total of 668.93 million m[3] of sewage water, representing an increase of 16.4% as compared to the same period last year. On the one hand, the volume of sewage treated by existing projects has increased; on the other hand, certain new sewage treatment projects were put into operation in the first half of this year.

• ② Recycled water business recorded an income of RMB43.002 million, representing an increase of 39.40% as compared to the same period last year, which was mainly attributable to the increase in the water sales volume. During the reporting period, the water sales volume was 27.906 million m[3] , representing an increase of 18.7% as compared to the same period last year. This was on the one hand due to the increase in the number of recycled water users of Water Recycling Company, and on the other hand, the commencement of operation of Bayannur recycled water projects in March 2018 boosted the year-on-year increase of water sales volume.

10

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

4. Operation Discussion and Analysis

• ③ Tap water supply business recorded an income of RMB49.703 million, representing an increase of 7.91% as compared to the same period last year, which was mainly attributable to the increase in the water sales volume. During the reporting period, the water sales volume was 24.573 million m[3] , representing an increase of 6.6% as compared to the same period last year. This was on the one hand due to the increase of domestic water consumption resulting from the meteorological drought in Qujing from March to May in 2019, and on the other hand, the commencement of operation of Bayannur projects in March 2018 boosted the year-on-year increase of water sales volume.

• ④ New energy heating and cooling supply business recorded an income of RMB 40.417 million, representing an increase of 10.51% as compared to the same period last year, which was mainly attributable to the increased income from heating and cooling supply on a year-on-year basis resulting from the commencement of operation of the Heiniucheng Road new energy project in November 2018.

• ⑤ Transformation of achievements in technology research business recorded an income of RMB18.493 million, representing an increase of 80.42% as compared to the same period last year, which was mainly attributable to heightened marketing efforts and the increase of sales revenue of deodorization equipment on a year-on-year basis.

• ⑥ Toll collection business recorded an income of RMB31.151 million, which remained more or less the same as the same period last year.

During the reporting period, while striving for market expansion for its principal business, the Company continued to strengthen its project operation (including cost control and agreement maintenance), decrease the operating cost as much as possible, and timely adjust the unit price of sewage treatment service fees for ensuring project income.

(2) Other business

The Group’s other business mainly includes the sewage treatment entrusted operation business under the technical service model, as well as the technical and engineering consulting business. During the reporting period, it realised an income of RMB76.271 million, representing a decrease of 11.27% as compared to that in the same period last year. The decrease was mainly due to the expiry of part of the entrusted operation and technical service projects.

11

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

4. Operation Discussion and Analysis

(I) Analysis of principal businesses

Table of analysis of changes in relevant items in the financial statements

Unit: 0’000 Currency: RMB

	Amount for the	Amount for the
Item	current period	same period last year	Percentage change (%)
Income from operations	122,471.6	110,779.8	10.55
Costs of operations	81,436.0	64,381.2	26.49
Sales costs	198.7	273.0	-27.22
Administrative expenses	6,803.2	5,563.1	22.29
Financial costs	9,312.3	7,624.9	22.13
Research and development expenses	327.0	504.5	-35.18
Credit impairment loss	-9.8	-292.3	96.65
Investment gain	0.0	20.0	-100.00
Other income	6,074.4	8,961.5	-32.22
Income from asset disposal	120.1	0.0	100.00
Non-operating income	254.9	409.9	-37.81
Non-operating expenses	238.0	98.7	141.13
Income tax expenses	5,615.4	9,222.8	-39.11
Profit or loss attributable to minority shareholders	1,259.2	1,892.2	-33.45
Net cash flows from operating activities	72,970.7	33,799.0	115.90
Net cash flows from investing activities	-127,960.6	-108,121.0	-18.35
Net cash flows from financing activities	76,564.9	112,686.6	-32.06
Net increase of cash and cash equivalent	21,575.0	38,364.6	-43.76

Explanation of changes in income from operations: It was mainly due to the increase in sewage treatment volume of existing projects and the commencement of operation of certain new sewage treatment projects and thus the income from sewage treatment increased.

Explanation of changes in operating costs: It was mainly due to the higher effluent quality standards of sewage treatment projects, the increased treatment volume and the increased operating expenses including agent cost, thus the costs of sewage treatment of the Company increased correspondingly.

Explanation of changes in sales costs: It was mainly because the expenses incurred in the same period last year included expenses incurred but not recognized in 2017.

Explanation of changes in administrative expenses: It was mainly due to official operation of certain projects of subsidiaries after completion, and the commencement of operation of Bayannur Company from March in the same period this year, thus administrative expenses in the current period are higher than that in the same period last year.

Explanation of changes in financial costs: It was mainly because debt financing increased on the one hand, and corresponding

financial expenses were converted from capitals to expenses after completion of construction projects on the other hand, and thus interest expense increased.

12

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

4. Operation Discussion and Analysis

Explanation of changes in research and development expenses: It was mainly because expenses incurred in the same period last year include expenses incurred but not recognized in 2017.

Explanation of changes in credit impairment losses: It was mainly because the collected accounts receivable for which provisions for asset impairment losses were made in the same period last year is higher than that in the current period.

Explanation of changes in investment gains: It was mainly because Tianjin Beifang Rencaigang Company Limited (天津市北 方人才港股份有限公司), the invested company of the Company, did not declare dividends this period due to loss of last year.

Explanation of changes in other incomes: It was mainly because deductible input VAT of projects under construction of the Company was higher this period, which caused less VAT, thus received VAT rebate is lower than that in the same period last year.

Explanation of changes in income from asset disposal: It was mainly because subsidiaries disposed of and sold the staff dormitory, and there were no such matters in the same period last year.

Explanation of changes in non-operating income: It was mainly because one-time government subsidy received in the same period last year is higher than that in the current period.

Explanation of changes in non-operating expenses: It was mainly because donation to Xixiaoliang Village (西小良村) is higher than that in the same period last year.

Explanation of changes in income tax expenses: It was mainly due to the decrease of total profit in the current period as compared to that in the last period, on the other hand, because the Company enjoys preferential policies on the income tax of pollution treatment enterprises for third parties according to relevant regulations, thus income tax in the current period decreased.

Explanation of changes in profit or loss attributable to minority shareholders: It was mainly due to the decrease in net profit of non-wholly-owned subsidiaries in this period as compared to the same period last year, thus the equities of minority shareholders calculated according to equity ratio decreased correspondingly.

Explanation of changes in net cash flows from operating activities: It was mainly due to the increase of sewage treatment service fee charged in this period as compared to the same period last year.

13

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

4. Operation Discussion and Analysis

Explanation of changes in net cash flows from investing activities: It was mainly because the investment expenses of various construction projects of the Company of the current reporting period were higher than those in the same period last year.

Explanation of changes in net cash flows from financing activities: It was mainly because the new debt financing is lower than that in the same period last year.

Explanation of changes in net increase of cash and cash equivalent: It was mainly due to the combined influences of cash flow from operating and financing activities.

• (II) Major changes in profits caused by non-principal businesses

Not applicable

(III) Analysis of assets and liabilities

Unit: 0’000 Currency: RMB

					Percentage
					change in
					amount as of
				Percentage of the	the end of
		Percentage of the		amount as of	the current
		amount as of		the end of the	period as
		the end of the		previous	compared to
	Amount as of	current period to	Amount as of	period to the	the end of
	the end of the	the total assets	the end of the	total assets	previous period
Items	current period	(%)	previous period	(%)	(%)	Explanation
Other receivables	5,831.7	0.35	3,616.2	0.23	61.27	Mainly due
						awarded pro
						receivable d
Other	25,698.6	1.56	15,668.8	1.00	64.01	Mainly due
current assets						credited by t
Investment	2,051.0	0.12	8,405.2	0.54	-75.60	Mainly due
property						business of t
Construction in	26,665.4	1.62	15,093.9	0.96	76.66	Mainly due
progress						projects dur
Wages payable	1,155.7	0.07	5,394.2	0.34	-78.58	Mainly due
						provided for
Non-current	77,123.0	4.69	24,337.0	1.55	216.90	Mainly due
liabilities due						due within o
within one year

Mainly due to the increase in the deposit of contract awarded projects and the refund-upon-collection tax receivable during this period.

Mainly due to increase in value-added tax to be credited by the Company Mainly due to the decrease of external leasing business of the Company’s buildings Mainly due to increased investment in non-franchise projects during this period. Mainly due to the payment of year-end bonus provided for in the end of 2018 during the period. Mainly due to the increase of long-term borrowings due within one year during this period.

14

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

4. Operation Discussion and Analysis

(IV) Analysis of investment

During the reporting period, the total amount of equity investment of the Group amounted to RMB477.7433 million, representing an increase of RMB258.1121 million as compared to the same period last year. The Company mainly invested in the new projects in principal water affairs sector.

(1) Major equity investments

• ① During the reporting period, the Company won the bid of PPP Project for sewage treatment in Jieshou City (2nd batch). After winning the bid, the Company contributed RMB146.1822 million to Fuyang Company for capital increase, which will then be used to increase the capital contribution of Fuyang Company to Jieshou Company for the investment, construction and operation of the PPP Project in Jieshou City (2nd batch). Following the capital increase, the registered capital of Fuyang Company increased from RMB191.10 million to RMB337.2822 million, and the registered capital of Jieshou Company increased from RMB89.00 million to RMB235.1822 million. During the reporting period, the above two capital increases were done and the PPP project in which the Company intends to invest proceeded well.

• ② During the reporting period, the Company and Fengyuan Water formed a consortium, which won the bid for the franchise project of Yuanquan Waterworks in Hanshou County. After winning the bid, Hanshou Company was established, in which the Company holds 75% interests as a contributor of RMB33.75 million and Fengyuan Water holds 25% as a contributor of RMB11.25 million, respectively, for investment, construction and operation of franchise project of Yuanquan Waterworks in Hanshou County. During the reporting period, Hanshou Company was established, to which capital was contributed, and Yuanquan Waterworks proceeded well.

• ③ During the reporting period, the Company, Hebei Guokong, the Third Construction Company of China Construction Third Engineering Bureau and Tianjin Municipal Institute formed a consortium, which won the PPP project for comprehensive improvement of regional water environment in Gaocheng District, Shijiazhuang. After winning the bid, Guojin Tianchuang Company was jointly founded as the project company by the aforementioned members of the consortium and the representatives of the government contributor, for investment, construction and operation of the PPP project. The registered capital of the project company was RMB217.4969 million, in which the Company holds 59% interests as a contributor of RMB128.3232 million, Hebei Guokong holds 30%, the Third Construction Company of China Construction Third Engineering Bureau holds 0.9%, the representatives of government contributors, i.e. Gaocheng District Construction & Investment Co., Ltd of Shijiazhuang City and Zhengtong Construction & Development Co., Ltd of Gaocheng Economic Development Zone, Shijiazhuang hold 10% in total, and Tianjin Municipal Institute holds 0.1%. All those capital contributions were made in cash. During the reporting period, the capital injection was done, so that the project company was founded and the PPP project proceeded well.

15

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

4. Operation Discussion and Analysis

• ④ During the reporting period, the Company won the bid of No. 1 and No. 2 sewage treatment plants in Suzhou District, Jiuquan City in PPP (Public Private Partnership) model involving the Bureau of Housing and UrbanRural Development of Suzhou District, Jiuquan City. After winning the bid, Jiuquan Company was jointly founded as the project company by the Company and the representative of government contributor, for investment, construction and operation of the PPP project. The registered capital of Jiuquan Company was RMB178.2379 million, comprising RMB158.2379 million from the Company as a holder of 88.78% and RMB20.00 million from the government representative as a holder of 11.22%. During the reporting period, the capital contribution was not done yet.

(2) Significant non-equity investment

To date, the Company’s sewage plant upgrade and transformation projects in Jingu and Beichen have been checked and accepted for environmental impact assessment, basically satisfying the conditions for performing the new sewage service fee tariffing under the Supplemental Agreement. The Company has initiated the consultation with the counterparty of the Supplemental Agreement and has made considerable progress. It is expected that the new sewage treatment service fees will be implemented in the second half of the year.

(V) Disposal of major assets and equity interest

Not applicable

16

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

4. Operation Discussion and Analysis

(VI) Analysis of major companies in which the Company has invested

Unit: 0’000 Currency: RMB

	Principal		Registered	Type of	Percentage of
Subsidiary	Place of Business	Major Products or Services	capital	Legal Person	interest	Asset Size	Net Assets	Net Profits
Water Recycling	Tianjin	Production and sales of recycled	10,000	Limited	100%	131,459.3	46,647.8	3,506.50
Company		water; development and		liability
		construction of water recycling		company
		facilities; manufacturing,
		installation, debugging and
		operation of water recycling
		facilities etc.
Hangzhou	Hangzhou,	Operation and maintenance of	37,744.50	Limited	70%	101,857.9	70,588.7	2,345.3
Company	Zhejiang	sewage treatment and recycled		liability
		water usage facilities, and		company
		supporting services such as its
		technical services and technical
		training. And its technical services,
		technical training and other
		supporting services
Xi’an Company	Xi’an, Shaanxi	Development, construction,	33,400	Limited	100%	61,437.0	42,854.8	1,601.4
		operation and management of		liability
		municipal sewage treatment plants		company
		and tap water and its supporting
		facilities; research and promotion
		of environment protection
		technology
Jiayuanxing	Tianjin	Development, consulting, service	19,195.05	Limited	100%	67,758.0	30,767.9	512.0
		and transfer of energy conservation		liability
		and new energy technology;		company
		property management services
Caring Company	Tianjin	Environmental engineering	3,333.33	Stock	60%	14,886.4	12,233.7	699.8
		management and technical advice		Limited
		etc.		Company
Bayannur	Bayannur,	Processing of sewage water,	106,757.79	Limited	70%	113,564.3	111,504.7	385.3
Company	Inner Mongolia	production and sales of recycled		liability
		water and supply of tap water		company
Shandong	Shandong	Disposal of solid wastes, industrial	19,200	Limited	55%	41,268.2	18,449.8	-256.2
Company		wastes, hazardous wastes, sludge,		liability
		kitchen wastes, etc.		company

Note 1: Water Recycling Company recorded revenue from principal operations of RMB133.470 million and operating profit of RMB43.653 million.

Note 2: Hangzhou Company recorded revenue from principal operations of RMB120.272 million and operating profit of RMB33.120 million.

Note 3: Shandong Company recorded negative net profit, because it was still in the construction period and has not been put into operation yet, thus no operating revenue was generated.

17

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

4. Operation Discussion and Analysis

II. Other Disclosure

• (I) Warning and explanation for cumulative net loss expected to be recorded for the period from the beginning of the year to the end of the next reporting period or material changes of cumulative net profit as compared to the corresponding period of the previous year

Not applicable

(II) Possible risks

1. Possible risks

• (1) Risk of government credit

Given the characteristic of licensed operation in sewage treatment projects, the capital source of sewage treatment service fee comes mainly from the special sewage-treatment fee charged by the governments through the sales of tap water; the deficient amount will be supplemented by the local governments. As for enterprises, the investment return relies mainly on the payment of sewage treatment service fee from the governments. Therefore, the singleness of capital source determines the importance and cruciality of the government credibility. Whether water utilities companies can recoup the investment as scheduled and obtain the expected rate of return depends on the level of government credibility. In case the risk related to government credibility occurs, the project companies will face cash flow problem, which may generate capital risks such as financial risks and financing risks. Since the government credibility relates to government’s financial revenue and expenditure, it is necessary to prevent and control the risk of government credit effectively, particularly in the background of economic downturn and deleveraging policies.

• (2) Risk of change in policy

During the exclusive license operation period lasting for 20-30 years, the continuity of policies is of great importance and the risk of changes in policy needs close attention from the Company. Not only changes in commodity prices, taxes and other policies will have a direct impact on the adjustment to the water price, but also adjustments to government functions may also affect corporate business development to some degree. Therefore, it is necessary to pay close attention to the policy environment and policy risks.

18

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

4. Operation Discussion and Analysis

• (3) Risk of operation and management

With the introduction of a series of energy-saving and emission reduction requirements under the national “13th Five-Year Plan”, the standards for environmental governance will become more stringent. In order to meet the new standards, the demands for upgrading sewage treatment plants will gradually increase. Under this circumstance, on one hand, sewage treatment plants will face the risk of facing restructuring and operational risk. On the other hand, enterprises will also face the risk of adjusting the original licensed operation agreement.

2. Risk management measures

• (1) Protect the Company’s lawful interests by making full use of laws and regulations

Strengthening the concept of corporate governance in accordance with the laws by making full use of its overall legal advisory system and protecting lawful interests of the Company. Meanwhile, the Company calls for and supports the prompt establishment and perfection of “Licensed Operation Law” and “PPP Law” to further assure equality of the contracting parties, tighten up the performance assessment and profit distribution mechanisms, and provide for the government obligations to pay according to contracts and the rights for investors to get reasonable returns under the laws, so as to reduce the risk related to government credibility and the financial risk of the investors.

(2) Strengthen comprehensive risk management

Determine the target for comprehensive risk management; establish the institutional framework for comprehensive risk management to identify, analyse, assess and deal with possible hidden risks in different business links; improve the risk management system and establish a sound and comprehensive risk management system for the Company; improve its timing and efficiency of the comprehensive risk management of the Company; conduct the dynamic management and effective control over risks so as to reasonably ensure the achievement of the Company’s strategic targets.

19

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

4. Operation Discussion and Analysis

• (3) Continue to raise the standards of operating management

As a listed company in the environmental protection field, the Company has control over production and operation risks in a timely manner through standardized management in accordance with relevant changes in policies. Specifically, our risk control measures include staff training, strengthening the consciousness of laws on environmental protection and improving the management and control levels of technologies; strengthening the maintenance and protection of facilities for proper preservation of asset value and stable operation; perfecting the monitoring of quality, promoting control over the whole process to ensure the end products could meet the standards of discharge; developing water environment remedy plans and safe production plans, so as to ensure careful operation and the best environmental performance of the Company under force majeure conditions.

(III) Other disclosure

Not applicable

20

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

5. Major Events

I. SHAREHOLDERS’ GENERAL MEETINGS

Session of meeting	Date of meeting	Date of disclosure of the resolutions
2018 Annual General Meeting	14 May 2019	14 May 2019

II. PROPOSAL ON PROFIT DISTRIBUTION OR TRANSFER OF CAPITAL RESERVE FUND

Proposed interim profit distribution plan or plan to transfer capital reserve fund into share capital

Profit distribution or transfer of capital reserve fund into share capital	No
Number of bonus shares per 10 shares (shares)	0
Amount of dividend per 10 shares (RMB) (inclusive of tax)	0
Number of shares converted per 10 shares (shares)	0

III. PERFORMANCE OF COMMITMENT

Commitment of the Company’s ultimate controller, shareholders, related parties, purchasers and the Company during or subsisted in the reporting period

Not applicable

IV. APPOINTMENT AND REMOVAL OF ACCOUNTING FIRM

Not applicable

V. MATTERS RELATING TO BANKRUPTCY AND RESTRUCTURING

Not applicable

VI. MATTERS RELATING TO MATERIAL LITIGATION AND ARBITRATION

• (I) Litigation and arbitration that were disclosed in the announcements without subsequent progress

Not applicable

21

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

5. Major Events

(II) Litigation and arbitration that were not disclosed in the temporary announcements or have subsequent progress

Unit: Yuan Currency: RMB

During the reporting	period:
						Whether
						litigation
					Amount	(or arbitration)		Ruling results of	Enforcement
			Type of	Particulars of	involved in	forms predicated	Progress of	litigation	of award of
Complaining	Responding	Party to bear	litigation	litigation	litigation	liability and	litigation	(or arbitration)	litigation
party	party	joint liability	or arbitration	(or arbitration)	(or arbitration)	its amount	(or arbitration)	and its effect	(or arbitration)
Jiayuanxing	Qudong Company	None	Litigation	Note 1	12,030,003	None	Execution	Note 2	Termination of
									execution (note 2)
Anguo Company	Anguo Municipal	None	Arbitration	Note 5	47,475,320.86	None	Executing	Note 3	Note 4
	Government

Note 1: From 2012 to 2016, Jiayuanxing and Qudong Company signed the “Tianjin Non-residential Buildings Cold Supply Contract (《天津市非居民住宅供用 冷合同》)” and “Tianjin Non-residential Buildings Heat Supply Contract (《天津市非居民住宅供用熱合同》)”, in which it is stipulated that Jiayuanxing would provide cold and heat supply services to the Tianjin Cultural Center Grand Theatre (天津文化中心大劇院), which was operated and managed by Qudong Company. Qudong Company did not pay cold and heat supply energy fees to Jiayuanxing on time and in full according to the contract. In order to safeguard the legal rights and interests of Jiayuanxing, on 3 November 2017, Jiayuanxing filed a civil lawsuit in the People’s Court of Hexi District (hereinafter referred to as the “Hexi Court”) in Tianjin. On 3 April 2018, the Hexi Court made a first-instance judgment, ruling that Qudong Company paid Jiayuanxing cold and heat supply energy fees of RMB12,030,003 from 2012 to 2016 within ten days from the effective date of the first-instance judgment; case acceptance fees and preservation fees totaling RMB98,980 were borne by Qudong Company. Both parties refused to accept the firstinstance judgment and appealed to the Tianjin Second Intermediate People’s Court. On 25 September 2018, the Tianjin Second Intermediate People’s Court made the final judgment, ruling to reject the appeal applications of both parties and maintained the original judgment.

Note 2: On 22 October 2018, Jiayuanxing applied to the Hexi Court for enforcement. On 19 December 2018, under the direction of the Hexi Court, both parties reached a settlement agreement in implementation. Qudong Company shall pay in advance RMB3.16 million and the remaining amounts shall be repaid by four installments by 31 December 2020. If Qudong Company fails to perform in one installment, the implementation based on the original legal documents will be resumed. On 11 January 2019, RMB3.1635 million repaid by Qudong Company in advance had been in the account. On 21 January 2019, Jiayuanxing received an execution ruling from the Hexi Court. Upon execution, both parties reached a settlement agreement. As the agreement has not been completed for fulfillment, the court made a ruling to end the implementation of the civil judgment of the Hexi Court (2017) Jin 0103 Minchu No. 12411. Prior to 30 June 2019, Qudong Company had paid off the first payment in accordance with the content of the settlement agreement. At present, Qudong Company has repaid a total of RMB5,291,300.

Note 3: On 6 April 2017, the China International Economic and Trade Arbitration Commission made its final arbitral award on the case as follows: (1) the agreement related to the water supply project and the sewage treatment plant project involved in the case was terminated on 18 April 2014, and the transfer of the projects was completed on 10 July 2014; (2) from 1 November 2012 to the date of transfer of the water supply project involved in the case, the Anguo Company should provide the breakdown of water charges payable by all of its consumers, and should provide assistance to the Anguo Municipal Government in collecting the water charges; (3) the Anguo Municipal Government should pay the Anguo Company fees payable for water supply service that became due before 1 November 2012 in the amount of RMB3.557 million by 1 July 2014; (4) the Anguo Municipal Government should reimburse the Anguo Company for all capital invested by the Anguo Company in the said projects, being RMB47,475,320.86; (5) the arbitration fee of RMB781,749 for the case should be borne by both parties on the basis of 50:50, which means each party should pay RMB390,874.5, respectively. The above (1), (2) and (3) have been satisfied, and the Anguo Municipal Government has not yet made payment of the amounts payable under (4) and (5).

The total amount of (3), (4), (5) mentioned above is RMB51.4232 million. At present, Anguo Municipal Government has returned the water supply fee of RMB3.557 million and the arbitration fee of RMB390,874.5 to Anguo Company.

22

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

5. Major Events

• Note 4: For the total investment of RMB47,475,320.86 for the project, Anguo Municipal Government issued a repayment plan on 21 March 2019, and plans to return RMB10 million as of the end of 2019. The remaining funds will be returned before the end of 2020. Anguo Company filed an enforcement action with Baoding Intermediate People’s Court on 3 April 2019. On 15 July 2019, Anguo Municipal Government transferred the refund of the project to Anguo Finance (安國財政), and the two parties are negotiating how to refund the money.

• Note 5: As Anguo Municipal Government failed to perform the relevant terms of the licensed operation agreement entered into between Anguo Company and Anguo Municipal Government, Anguo Company applied for arbitration to China International Economic and Trade Arbitration Commission in 2013, requesting for termination of the licensed operation agreement for a water supply project in Anguo; and claiming payment of service fees for water supply and compensation for investment owed to Anguo Company by Anguo Municipal Government.

• VII. PUNISHMENTS TO AND RECTIFICATION OF THE LISTED COMPANY AND ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, DE FACTO CONTROLLER AND PURCHASERS

Not applicable

• VIII. EXPLANATION ON THE INTEGRITY OF THE COMPANY, ITS CONTROLLING SHAREHOLDERS AND ULTIMATE CONTROLLERS DURING THE REPORTING PERIOD

Not applicable

• IX. THE COMPANY’S SHARE INCENTIVE SCHEME, EMPLOYEE STOCK OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVE SCHEME AND THEIR EFFECTS

Not applicable

23

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

5. Major Events

X. MATERIAL CONNECTED TRANSACTIONS

• (I) Connected Transactions in the Ordinary Course of Business

Not applicable

1. Connected Transactions which have been disclosed in the Company’s announcements, but without subsequent progress or changes to their implementation

Not applicable

1. Connected Transactions which have been disclosed in the Company’s announcements, with subsequent progress or changes to their implementation

Not applicable

• (II) Connected Transactions in respect of Acquisition of Assets or Acquisition or Disposal of Equity

Not applicable

• (III) Material Connected Transactions in respect of Joint External Investment

Not applicable

• (IV) Creditor’s Rights and Debts with Connected Parties

Not applicable

24

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

5. Major Events

XI. MATERIAL CONTRACTS AND PERFORMANCE THEREOF

1. Custody, Contracting and Leasing

Not applicable

2. Guarantees

Unit: 0’000 Currency: RMB

Guarantees provided to external parties by the Company (excluding guarantees provided to subsidiaries)
Total amount of guarantees provided during the reporting period (excluding guarantees provided to subsidiaries)	0
Total balance of guarantees as at the end of the reporting period (A) (excluding guarantees provided to subsidiaries)	0
Guarantees provided to subsidiaries by the Company
Total amount of guarantees provided to subsidiaries during the reporting period	81,000.00
Total balance of guarantees provided to subsidiaries as at the end of the reporting period (B)	278,458.67
Total amount of guarantees provided by the Company (including guarantees provided to subsidiaries)
Total amount of guarantees (A+B)	278,458.67
Percentage of the total amount of guarantees to the net assets of the Company (%)	47.86
Of which:
Amount of guarantees provided to shareholders, de facto controller and their connected parties (C)	0
Amount of debt guarantees provided directly or indirectly to guaranteed entities with a gearing ratio of over 70% (D)	22,000
The amount of total guarantees in excess of 50% of net assets (E)	0
Total of the above three classes of guarantees (C+D+E)	22,000

25

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

5. Major Events

XII. POVERTY ALLEVIATION WORK OF THE COMPANY

1. Targeted Poverty Alleviation Plan

In accordance with the overall arrangement of Tianjin’s targeted poverty alleviation work, Tianjin Investment Group and its subsidiaries have undertaken six assistance tasks and formulated a three-year plan for assistance. In order to undertake its social responsibility, the Company has been participating in the assistance work, the counterpart of which was Nancaicun Town (南蔡村鎮) government and the Xixiaoliang Village (西小良村) thereunder, and the assistance agreement was signed. According to the assistance agreement, the assistance to be provided includes the maintenance of the main road in Xixiaoliang Village, the construction of a new road leading to the village committee from Xixiaoliang Village, the dredging and renovation of ditches and ponds in Xixiaoliang Village and the construction of public facilities and others for Nancaicun Town government. The total investment capital demand for the assistance project is RMB4,167,100, RMB100,000 of which had been paid by the Company as of the end of 2017, and the remaining amount of RMB4,067,100 will be paid in three installments with RMB102,800 to be paid before 31 January 2019, RMB2,276,300 to be paid before 31 March 2019, both of which had been paid on time. And the remaining RMB1,688,000 will be paid before 31 January 2020 as scheduled. The assistance funds are subject to special account management and the “fixed sum for fixed purpose” policy, and are to be used in accordance with the principle of “special account accounting and special usage only”. Special income and expenditure account will be established individually, and the funds for each village will be accounted for separately. The resident assistance team sent out by Tianjin Investment Group will be responsible for supervising and verifying the usage of assistance funds. Up to now, the above-mentioned assistance project has been on the rails.

2. Summary of Targeted Poverty Alleviation During the Reporting Period

Not applicable

3. Achievements in Targeted Poverty Alleviation

Unit: 0’000 Currency: RMB

		Quantity and
Indicators		Implementation Details
——
I. General	situation
Including:	Capital	237.91
II. Investment breakdown
1. Other Projects
Including:	1.1. Number of projects	1
	1.2. Investment amount	237.91
III. Awards (content, level)		Nil

26

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

5. Major Events

4. Milestones in the progress of fulfilling the social responsibility of targeted poverty alleviation

Not applicable

5. Subsequent Targeted Poverty Alleviation Plan

Please refer to the above targeted poverty alleviation plan.

XIII. CONVERTIBLE BONDS

Not applicable

XIV. EXPLANATION ON ENVIRONMENTAL PROTECTION OF THE COMPANY AND ITS SUBSIDIARIES CLASSIFIED AS KEY POLLUTANT DISCHARGING ENTITIES AS PUBLISHED BY ENVIRONMENTAL PROTECTION AUTHORITIES

The Company is mainly engaged in the sewage treatment business, which involves collecting and treating domestic and municipal sewage by removing the main pollutants therein to the extent that the treated sewage meets the discharge standards stipulated by the national or local government, and then discharging the treated sewage to rivers via sewage outfalls as designated after assessment. The advanced treatment of part of the tail water is further performed for reclaimed water supply. According to the aforesaid effluent water quality standards for sewage treatment plants stipulated by the national or local government, the effluent of sewage treatment plants is allowed to contain certain types and amounts of pollutants, mainly comprising chemical oxygen demand (COD), biochemical oxygen demand (BOD), suspended solids (SS), total nitrogen, ammonia nitrogen and total phosphorus, etc. Accordingly, given the fact that most of sewage treatment projects have a designed capacity of exceeding 20,000 tonnes/day, they are classified as key pollutant discharging entities by local environmental protection authorities.

As at the end of the reporting period, the Company owned 35 sewage treatment projects, each of which has 1 or 2 discharge outfalls determined after examination and demonstration by competent authorities and experts in the industry. As per this agreement, currently the effluent water quality required is class A specified in the Pollutant Discharge Standards for Urban Wastewater Treatment Plants (DB12/599-2015) of Tianjin and First Grade A, First Grade B under the Pollutant Discharge Standards for Urban Wastewater Treatment Plants (GB18918-2002). The common pollutant indexes requiring basic control include COD, BOD, SS, total nitrogen, ammonia nitrogen, total phosphorus, etc. The following table sets out the maximum allowable discharge concentrations (daily average) of the pollutant indexes requiring basic control.

27

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

5. Major Events

No.	Pollutant index requiring basic control	Pollutant index requiring basic control	Tianjin local standard - class A	National standard - firstgrade class A	National standard - firstgrade class B
1	COD		30	50	60
2	BOD		6	10	20
3	SS		5	10	20
4	Animal &plant oil		1	1	3
5	Petroleum		0.5	1	3
6	Anion surfactant		0.3	0.5	1
7	Total nitrogen (N)		10	15	20
8	Ammonia nitrogen (N)		1.5 (3)	5 (8)	8 (15)
9	Total phosphorus (P)	Constructed before 31 December 2005	0.3	1	1.5
		Constructed after 1 January2006	0.3	0.5	1
10	Chroma (dilution multiple)		15	30	30
11	PH		6-9
12	Number of fecal coliforms/L		1000	1000	10000

During the reporting period, the discharge concentrations of the major pollutant indexes requiring basic control of the Company’s sewage treatment business were all below the above standards. In aggregate, the COD, BOD, SS, total nitrogen, ammonia nitrogen and total phosphorus discharged by the Company during the reporting period were approximately 14,300 tonnes, 2,800 tonnes, 2,900 tonnes, 6,500 tonnes, 900 tonnes and 200 tonnes, respectively. In aggregate, environmental pollutants, namely, the COD, BOD, SS, total nitrogen, ammonia nitrogen and total phosphorus, were eliminated by approximately 250,900 tonnes, 108,000 tonnes, 149,900 tonnes, 26,600 tonnes, 22,000 tonnes and 4,500 tonnes, respectively, representing a significant contribution to water environmental governance.

1. Construction and operation of pollution prevention facilities

During the reporting period, the sewage treatment projects operated by the subsidiaries of the Company strictly complied with the relevant emission standards with all the effluent water quality and odor, noise and solid emission meeting the requirements. The projects’ operation was also in normal condition. The construction of the sewage treatment facilities followed the relevant construction procedures and quality standards and made normal progress.

As for supervision and handling of Xianyang Road Sewage Treatment Plant of the Company (For details, please refer to the relevant disclosure of 2018 interim report and 2018 annual report of the Company), the newly built Xianyang Road Sewage Treatment Plant has achieved overall A standards under the local discharge standards of Tianjin by the end of July 2019, and the “supervision and handling” rectification task was fully implemented. We are currently applying for removal of such supervisory restrictions.

2. Environmental Impact Assessment of Construction Projects and Other Administrative Permissions for Environmental Protection

All the Company’s sewage treatment projects in operation have gone through the relevant EIA procedures and obtained approvals and environmental acceptance upon construction completion from the competent environmental authorities.

28

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

5. Major Events

3. Emergency Plans for Sudden Environmental Incidents

During the reporting period, all key pollutant discharge entities of the Company’s sewage treatment business prepared the “Environmental Emergency Response Plan for Sewage Treatment Plants” with reference to the “Interim Measures for the Administration of Environmental Emergency Response Plan”, and the plan was approved by and filed with the local environmental protection bureau.

4. Environmental Self-monitoring Program

During the reporting period, all key pollutant discharge entities of the Company’s sewage treatment business carried out environmental self-monitoring in accordance with the relevant requirements of the government. At the beginning of each year, each entity prepares the “Environmental Self-monitoring Program” for the year based on the actual situation. The monitoring program mainly specifies the monitoring items, monitoring points, monitoring methods, monitoring frequency and analysis methods, etc. The monitoring results are publicized on the local environmental information monitoring platform. Each entity will also file the self-monitoring program and adjustments and changes with the local environmental protection bureau in a timely manner.

5. Other environmental information that should be disclosed

Not applicable

• (1) Description of environmental information of companies other than those classified as key pollutant discharge entities

Not applicable

• (2) Explanation of Reasons for Non-disclosure of Environmental information of companies other than those classified as key pollutant discharge entities

Not applicable

• (3) Description of follow-up progress or changes in the disclosure of environmental information during the reporting period

Not applicable

XV. DETAILS OF OTHER MAJOR EVENTS

• (I) As compared with the previous accounting period, the changes made to accounting policies, accounting estimates and auditing method, the reasons for such changes and their effect

In December 2018, the Ministry of Finance of the PRC has promulgated the “Accounting Standards for Business Enterprises No. 21 - Leases” (the “ New Standard ”) and required that enterprises listed in both domestic and overseas markets and enterprises listed overseas and applying the International Financial Reporting Standards or the China Accounting Standards for Business Enterprises in preparation of financial statements shall apply the New Standard from 1 January 2019.

29

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

5. Major Events

Due to the abovementioned requirements of the Ministry of Finance of the PRC, the Company has made corresponding changes to the original accounting policies and implemented the said accounting treatments from the effective date as required by the aforesaid provisions. Save for the New Standard, other accounting policies of the Company remain unchanged.

The New Standard mainly introduces a substantial change to the accounting for lessees of assets as compared with the original provisions. Upon assessment of the implementation of the New Standard, the Company considers that, as the Company has no significant assets leases, the application of the New Standard will not have any material effect on the financial statements of the Company.

• (II) The occurrence of material accounting errors during the reporting period requiring ratification and restatement, the respective amounts, the reasons and their effect

Not applicable

(III) Other events

The following events are disclosed and explained in accordance with the relevant rules of the Stock Exchange:

1. Corporate Governance Code

None of the Directors is aware of any information that would reasonably indicate that the Company is not or was not, for any part of the reporting period, in compliance with the Corporate Governance Code as set out in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange (the “ Listing Rules ”).

2. Audit committee

On 31 July 2001, the Board approved the establishment of the Audit Committee to review and supervise the Company’s financial reporting procedure and internal controls. The Audit Committee of the current session comprises the independent non-executive Directors, Mr. Guo Yongqing, Mr. Di Xiaofeng and Mr. Wang Xiangfei. The Audit Committee, together with the management of the Company, have reviewed the accounting principles and practices adopted by the Group and discussed with the management of the Company the internal controls and financial reporting matters including the review of the unaudited interim results and the Interim Report. The Audit Committee agreed with the accounting principles, standards and methods adopted in the preparation of the Group’s unaudited interim accounts for the six months ended 30 June 2019.

3. Liquidity and financial resources

No seasonal changes have occurred to the borrowing needs of the Group. As of 30 June 2019, there were no outstanding bank borrowings or interests that were due. Details about the bank borrowings of the Group are set out in the Notes to the Condensed Consolidated Financial Statements as of 30 June 2019.

According to the accounting reports prepared in accordance with the PRC’s Accounting Standards for Business Enterprises, the liquidity ratio as of 30 June 2019 was 58.53%.

30

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

5. Major Events

4. Foreign Exchange Risk

The operations and customers of the Group’s Subsidiaries are located in the PRC. Most of the operating assets and transactions are settled in RMB, and all of the Group’s borrowings are denominated in RMB. Therefore, the Group is not exposed to significant foreign exchange risk. The sole foreign exchange exposure of the Group arises from long-term payables. Such long-term payables were resulted from the Asset Transfer Agreement signed between the Company and TSC for the purchase of assets generated from foreign bank loans, involving mainly US dollars (USD) and Japanese Yen (Yen).

As at 30 June 2019, a 5% appreciation or depreciation of RMB against USD, with other factors being constant, would result in an increase or decrease of RMB3 million (30 June 2018: RMB3 million) in the net profit of the Group. As at 30 June 2019, a 5% appreciation or depreciation of RMB against Yen, with other factors being constant, would result in an increase or decrease of RMB8 million (30 June 2018: RMB7 million) in the net profit of the Group.

The interest rate risk of the Group mainly came from interest-bearing debts such as borrowings, long-term payables and debentures. The Group has borrowings, long-term payables and debentures. Borrowings and longterm payables at floating rates expose the Group to interest rate risk on cash flows, while borrowings, long-term payables and debentures at fixed rates expose the Group to interest rate risk associated with fair value. As at 30 June 2019, if the loan interest rate increases/decreases by 1%, with other factors being constant, the net profit of the Group for the period will decrease/increase by RMB23 million (30 June 2018: RMB7 million). The Group also considers to minimize its interest rate exposure by way of refinancing, renewal of existing borrowings and alternative financing.

5. Employee and Emolument Policy

As at 30 June 2019, the Group had 1,783 employees. During the reporting period, total remuneration paid to employees of the Group was approximately RMB118.05 million. The Group adopted a wage system in accordance with post ranks. The remuneration of the Company’s employees under annual salary system is pegged with his/her post rank and the economic benefits to the Company. The remuneration of the Company’s employees under the monthly salary system is pegged with his/her post rank, length of service, education background and skills as well as the economic benefits to the Company.

6. Contingent Liabilities

The Group did not have any significant contingent liabilities as at 30 June 2019.

31

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

5. Major Events

1. Rights of Debt

As at 30 June 2019, pursuant to the “Licensed Operation Agreement in respect of the Four Sewage Water Treatment Plants of the Company including Jizhuangzi” entered into between the Group, Tianjin Water Authority Bureau and TCCC which started to perform from 1 January 2014, the total receivables of the Group from Tianjin Water Authority Bureau amounted to RMB1,393 million, representing approximately 14.28% of the total market capital of the Group as at 30 June 2019.

1. Charge on Assets

During the reporting period, the Group did not create any charges on assets.

1. Acquisition and Disposal of Subsidiaries

During the reporting period, the Group did not acquire or dispose of any of its Subsidiaries.

10. Details of Preferred Shares

The Company had no preferred shares during the reporting period.

1. Repurchase, Sale or Redemption of the Company’s Listed Securities

The Company and its subsidiaries did not repurchase, sell or redeem any of the listed securities of the Company during the reporting period.

1. Model Code for Securities Transactions by the Directors

The Company has adopted a code of conduct regarding the securities transactions carried out by the Directors and Supervisors on the terms exactly the same as the required standards as set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in the Appendix 10 to the Listing Rules. The Company, having made specific enquiries to all the Directors and Supervisors, confirmed that all the Directors and Supervisors have complied with the code of conduct regarding the securities transactions by the Directors and Supervisors during the reporting period.

32

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

6. Details of Changes in Ordinary Shares and Shareholders

I. CHANGES IN SHARE CAPITAL

There were no changes in the total number of shares and share capital structure of the Company during the reporting period.

II. DETAILS OF SHAREHOLDERS

(i) Total number of shareholders

Total number of ordinary shareholders as at the end of the reporting period

87,883

Note: As at 30 June 2019, the total number of shareholders of the Company is 87,883, among which 66 shareholders are shareholders of H shares.

• (ii) Shareholdings of the top ten shareholders and the top ten shareholders of circulating shares (or shareholders of non-restricted circulating shares) as at the end of the reporting period

		Shareholdings of the top ten shareholders	Shareholdings of the top ten shareholders
	Increase/	Number of		Number of
	decrease during	shares held as at		restricted
	the reporting	the end of the	Percentage	shares	Pledged	Nature of the
Name of shareholder (Full Name)	period (shares)	period (shares)	(%)	held (shares)	or frozen	shareholder
TMICL	0	715,565,186	50.14	0	Nil	State-owned legal person
HKSCC Nominees Limited	-90	337,854,810	23.67	0	Unknown	Other
Central Huijin Investment Co., Ltd.	0	14,169,800	0.99	0	Nil	State-owned legal
						person
Agricultural Bank of China Limited-CSI500 Index Open-ended Fund (中證500交易型開放式指數證券投 資基金)	534,944	5,148,952	0.36	0	Nil	Other
Zhejiang Jinxin Construction Engineering Co., Ltd. (浙江錦鑫建設工程有限公司)	10,900	3,340,900	0.23	0	Nil	Domestic non-state- owned legal person
An Liangzhou (安亮洲)	2,320,700	3,014,300	0.21	0	Nil	Domestic natural
						person
Hong Kong Securities Clearing Company Limited	1,386,947	2,615,311	0.18	0	Nil	Other
Wu Zuojia (吳作佳)	0	2,241,219	0.16	0	Nil	Domestic natural
						person
Bank of China Limited - Guangfa China Securities	528,300	2,065,317	0.14	0	Nil	Other
Environmental Protection Industry Index Open-ended Fund (廣發中證環保產業交易型開放式指數證券投資
基金)
Wang Zhanfu (王占府)	1,796,000	2,021,400	0.14	0	Nil	Domestic natural
						person

33

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

6. Details of Changes in Ordinary Shares and Shareholders

Shareholdings of the top ten shareholders of non-restricted circulating shares

		Type and number	of shares
	Number of non-restricted
Name of shareholder	circulating shares held (shares)	Type	Number (shares)
TMICL	715,565,186	Ordinary RMB Shares	715,565,186
HKSCC Nominees Limited	337,854,810	H Shares	337,854,810
Central Huijin Investment Co., Ltd.	14,169,800	Ordinary RMB Shares	14,169,800
Agricultural Bank of China Limited-CSI500	5,148,952	Ordinary RMB Shares	5,148,952
Index Open-ended Fund(中證500交易型開
放式指數證券投資基金)
Zhejiang Jinxin Construction Engineering Co.,	3,340,900	Ordinary RMB Shares	3,340,900
Ltd.(浙江錦鑫建設工程有限公司)
An Liangzhou(安亮洲)	3,014,300	Ordinary RMB Shares	3,014,300
Hong Kong Securities Clearing Company Limited	2,615,311	Ordinary RMB Shares	2,615,311
Wu Zuojia(吳作佳)	2,241,219	Ordinary RMB Shares	2,241,219
Bank of China Limited - Guangfa China	2,065,317	Ordinary RMB Shares	2,065,317
Securities Environmental Protection Industry
Index Open-ended Fund(廣發中證環保產
業交易型開放式指數證券投資基金)
Wang Zhanfu(王占府)	2,021,400	Ordinary RMB Shares	2,021,400
Notes on the connected relationship or	It is not certain whether there is any connected relationship among the top 10 shareholders. It
parties acting in concert among the above	is not certain whether there is any connected relationship between the top 10 shareholders of
shareholders	non-restricted circulating shares and the top 10 shareholders.

Notes: (1) According to the register of members as provided by HKSCC Nominees Limited, those H shares held by it were held on behalf of various clients. There was no single client who owned 5% or more interest in the total share capital of the Company. (2) The top ten shareholders are not strategic investors of the Company.

(iii) Strategic investors or general legal persons becoming the top ten shareholders through share placement

Not applicable

34

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

6. Details of Changes in Ordinary Shares and Shareholders

III. CHANGES IN THE CONTROLLING SHAREHOLDER OR THE ULTIMATE CONTROLLER

Not applicable

IV. SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND/OR SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 30 June 2019, the following entities, other than the Directors, Supervisors or chief executive of the Company, had interests and/or short positions in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “SFO”):

				Approximate
			Approximate	percentage in
			percentage in the	the total issued
		Number and	relevant class	share capital of
Name of Shareholder	Capacity	class of securities (Note)	of securities	the Company
TMICL	Beneficial owner	715,565,186 A Shares (L)	65.82%	50.14%
ISIS Asset Management Plc.	Investment manager	17,286,000 H Shares (L)	5.08%	1.21%
UBS Group AG	Person having security interests in shares	18,659,000H Shares (L)	5.49%	1.31%
	Interests of controlled corporation	486,502 H Shares (L)	0.14%	0.03%
	Interests of controlled corporation	18,000 H Shares (L)	0.00%	0.00%

Note: The letter “L” represents the entity’s long positions in the shares. The letter “S” represents the entity’s short positions in the shares.

Save as disclosed above, there is no person (other than the Directors, Supervisors or chief executive of the Company) who, as at 30 June 2019, had an interest and/or a short position in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO.

35

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

7. Directors, Supervisors, Senior Management

I. CHANGES IN SHAREHOLDINGS

• (i) Changes in shareholdings of the existing and resigned Directors, Supervisors and senior management during the reporting period

Not applicable

• (ii) Equity incentives granted to Directors, Supervisors and senior management of the Company during the reporting period

Not applicable

• (iii) Directors’, Supervisors’ and the Company’s chief executives’ interests and/or short positions in the shares, underlying shares and debentures of the Company or its associated corporations

As at 30 June 2019, the interests and/or short positions of the Directors, Supervisors and chief executives of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (as defined in Part XV of the SFO), which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or otherwise, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

				Approximate percentage
				in the total
			Number and class	issued share capital
	The Company/name of		of securities	of the Company/
Name	associated corporations	Capacity	(Note)	associated corporations
Deputy General Manager
Zhang Jian	The Company	Beneficial owner	822 domestic shares	0.000058%
			(non-restricted circulating shares) (L)

Note: The letter “L” represents the person’s long positions in the shares, underlying shares and debentures of the Company or its associated corporations.

Save as disclosed above, none of the Directors, Supervisors or chief executives of the Company, who, as at 30 June 2019, had any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations (as defined in Part XV of the SFO), which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or otherwise, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange.

II. CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY

Not applicable

36

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

8. Details of the Company’s Bonds

I. BASIC DETAILS OF CORPORATE BONDS

Unit: Yuan Currency: RMB

Name of Bond	Abbreviation	Code of Bond	Issue Date	Maturity Date	Balance of Bond	Coupon (%)	Debt Service	Trading Place
Public Issue of Corporate	16津創01	136801.SH	25 October	25 October	700,000,000	3.13	Interest shall be paid annually,	SSE
Bonds of Tianjin			2016	2021			while the principal shall be fully
Capital Environmental							repaid upon maturity. Principal
Protection Group							will be repaid upon maturity
Company Limited in							together with interest payable for
2016 (Phase I)							the last period.
Public Issue of Corporate	18津創01	143609.SH	25 April	26 April	1,100,000,000	5.17	Interest shall be paid annually,	SSE
Bonds of Tianjin			2018	2023			while the principal shall be fully
Capital Environmental							repaid upon maturity. Principal
Protection Group							will be repaid upon maturity
Company Limited in							together with interest payable for
2018 (Phase I)							the last period.

During the reporting period, the Company has completed interest payment of “18津創01” for the year 2019 as scheduled, while “16津創01” was not due to pay any interest nor were due to redeem.

Explanation on other circumstances of corporate bond

“16津創01” has no issuer or investor option terms nor special terms such as exchangeable terms. Issuing targets of “16津創01” are eligible investors who satisfy requirements of laws and regulations.

“18津創01” contains terms which offer the issuer’s option to adjust the coupon rate and investors’ put option but does not have other special terms such as exchangeable terms. During the reporting period, both the issuer’s option to adjust the coupon rate and investors’ put option were not triggered for “18津創01”. Issuing targets of “18津創01” are eligible investors who satisfy requirements of laws and regulations.

• II. CONTACT PERSON AND MEANS OF COMMUNICATION OF CORPORATE BOND TRUSTEE AND MEANS OF COMMUNICATION OF CREDIT RATING AGENCY

Bond trustee Name Ping An Securities Co., Ltd. Office address 16/F, North Tower, Financial Street Centre, 9 Financial Street, Xicheng Beijing Contact person Li Chuan, Jia Xuan Contact number 010-56800258 Credit rating agency Name United Credit Rating Co., Ltd. Office address 12th Floor, PICC Office Tower, No.2 Jianguomen Outer Street, Chaoyang District, Beijing

37

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

8. Details of the Company’s Bonds

III. USE OF PROCEEDS FROM BOND OFFERING

Scale of issue of “16津創01” reached RMB700 million, the proceed reached RMB697.2 million (net of underwriting fees). As at the end of the reporting period, the proceed is fully utilized as intended as mentioned in the prospectus and the remaining amount is nil.

Scale of issue of “18津創01” reached RMB1,100 million, the proceed reached RMB1,097.36 million (net of underwriting fees). As at the end of reporting period, RMB1,092,931,649.84 of the proceed was utilized as intended as mentioned in the prospectus and the remaining amount was RMB4,428,350.16.

During the reporting period, the proceed account operates well.

The Company strictly follows its capital management system and relevant laws and regulations, execute relevant procedures of use of proceed, and its use of proceeds is in line with intended use as mentioned in the prospectus, plan of use and other arrangements.

IV. BOND RATING OF THE COMPANY

On 17 May 2019, United Credit Rating Co., Ltd. completed ongoing credit rating for the Company, “16津創01” and “18 津 創01”; long term credit of the Company maintained at “AA+”, the credit rating outlook maintained at “stable”, credit rating of the bond loans, “16津創01” and “18津創01”, maintained at “AA+”. Investors should be aware that relevant disclosure will be made in the Shanghai Stock Exchange website (www.sse.com.cn).

V. BOND CREDIT ENHANCEMENT MECHANISM, DEBT REPAYMENT SCHEDULE AND OTHER RELEVANT INFORMATION OF THE COMPANY DURING THE REPORTING PERIOD

During the reporting period, both repayment schedule and repayment protection mechanism of “16津創01” and “18 津創01” were well executed and were in line with the arrangement and underlying undertakings as mentioned in the prospectus. There were no changes in that regard. The Company has set up specialized repayment account for the said corporate bond and has completed withdrawal for such specialized repayment account in accordance with the undertakings as stated in the prospectus.

VI. CONVENING OF MEETINGS OF BONDHOLDERS

Not applicable

38

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

8. Details of the Company’s Bonds

VII. PERFORMANCE OF CORPORATE BOND TRUSTEE

During the term of the corporate bonds, the corporate bond trustee strictly complies with the arrangement stated in the “Corporate Bond Trustee Agreement” and performs ongoing tracking on credit condition, management on use of proceed fund and corporate bond interest payment of the Company. It has also ensured that the Company performed obligations as stipulated in the corporate bond prospectus. The corporate bond trustee actively performed its responsibilities and protected the legal rights of bondholders.

Investors should be aware that corporate bond trustee has issued its corporate bond trustee management report of Tianjin Capital Environmental Protection Group Company Limited (2018) on 28 June 2019 and has disclosed on the Shanghai Stock Exchange website (www.sse.com.cn).

• VIII ACCOUNTING DATA AND FINANCIAL INDICATORS AS OF THE END OF THE CURRENT REPORTING PERIOD AND AS OF THE END OF LAST YEAR (OR DURING THE REPORTING PERIOD AND DURING THE SAME PERIOD LAST YEAR)

Unit: Yuan Currency: RMB

			Increase/decrease
			as at the end of the
			current reporting period
	As at the end of the	As at the end	as compared to the
Major Indicators	current reporting period	of last year	end of last year (%)	Reasons
Current ratio	1.48	1.56	-5.13%	–
Quick ratio	1.48	1.56	-5.13%	–
Assets liability ratio (%)	58.53	57.83	1.21%	–
Debt service ratio (%)	100	100	0.00	–
			Increase/decrease
			for the current reporting
	During the		period as compared to
	reporting period	During the same	the same period
	(from January to June)	period last year	last year (%)	Reasons
EBITDA interest	4.25	7.30	-41.78	The Company’s profits
protection multiples				decreased compared to
				the same period last year
Interest coverage rate (%)	100	100	0.00	–

IX. EXPLANATION ON OVERDUE DEBTS

Not applicable

X. REDEMPTION OF OTHER BONDS AND DEBT FINANCING INSTRUMENTS OF THE COMPANY

Not applicable

39

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

8. Details of the Company’s Bonds

XI. BANK CREDIT OF THE COMPANY DURING THE REPORTING PERIOD

As at the end of the reporting period, the Company has obtained, in aggregate, a credit facility of RMB11.162 billion from various banks, of which approximately RMB2.918 billion was utilized with a remaining balance of approximately RMB8.244 billion. During the reporting period, the Company has repaid each bank loan as scheduled and there is no renewal or concession for such loans.

• XII. PERFORMANCE OF RELEVANT AGREEMENT OR COMMITMENT OF THE CORPORATE BOND PROSPECTUS BY THE COMPANY DURING THE REPORTING PERIOD

During the reporting period, the Company has strictly performed the relevant agreements and commitments as set out in its bond prospectus. This is no major impact to the bondholders.

XIII. MAJOR ISSUES OF THE COMPANY OCCURRED AND THEIR EFFECT ON THE OPERATION AND SOLVENCY OF THE COMPANY

There are no major events of the Company occurring during the reporting period as prescribed under Rule 45 of the Administrative Measures for the Issuance and Trading of Corporate Bonds (《公司債券發行與交易管理辦法》).

40

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Balance Sheet

As at 30 June 2019

(All amounts in RMB thousand unless otherwise stated)

Notes ASSETS Non-current assets Property, plant and equipment 6 Investment property 6 Intangible assets 6 Land use rights 6, 22 Right-of-use assets 6, 22 Investments accounted for using the equity method 7 Financial asset at fair value through other comprehensive income Long-term receivables 9 Other non-current assets Current assets Inventories Trade receivables 8 Other current assets Other receivables Prepayments Cash and cash equivalents Restricted cash Total assets	As 30 June 2019 Unaudited RMB’000 662,484 20,510 10,717,960 — 59,276 195,000 2,000 245,067 114,322 12,016,619 13,967 2,019,240 276,992 58,317 30,356 2,024,293 16,384 4,439,549 16,456,168	at 31 December 2018 Audited RMB’000 497,580 84,052 10,314,469 60,358 — 195,000 2,000 253,686 109,181
		11,516,326
		13,991 2,091,760 179,477 36,162 23,531 1,808,543 17,658
		4,171,122
		15,687,448

41

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Balance Sheet As at 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

Notes LIABILITIES Non-current liabilities Borrowings 11 Deferred revenue 12 Deferred income tax liabilities 13 Other non-current liabilities Provisions for other liabilities and charges 14 Current liabilities Trade payables 15 Contract liabilities 15 Wages payables Income tax and other taxes payables 15 Dividend payable Other payables 15 Borrowings 11 Total liabilities Net assets EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 10 Other reserves Retained earnings Non-controlling interests Total equity	As 30 June 2019 Unaudited RMB’000 4,338,920 2,110,298 141,370 38,000 10,069 6,638,657 220,762 534,107 11,557 54,215 150,699 1,051,332 971,230 2,993,902 9,632,559 6,823,609 1,427,228 948,131 3,510,061 5,885,420 938,189 6,823,609	at 31 December 2018 Audited RMB’000 4,114,683 2,101,085 138,812 38,000 10,069
		6,402,649
		176,398 469,185 53,942 68,893 1,912 1,456,133 443,369
		2,669,832
		9,072,481
		6,614,967
		1,427,228 948,131 3,442,844
		5,818,203
		796,764
		6,614,967

Liu Yujun

Niu Bo

The notes on page 46 to 77 form an integral part of this condensed consolidated interim financial information.

42

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Statement of Comprehensive Income

For the Half-Year of 2019

(All amounts in RMB thousand unless otherwise stated)

Notes Continuing operations Revenue 4(a) Tax expenses and surcharge Cost of sales Gross profit Other income 4(a) Other gains – net Administrative expenses Distribution costs Net impairment losses on financial assets Operating profit 5 Finance income Finance expenses Finance expenses – net 16 Profit before income tax Income tax expense 17 Profit from continuing operations Total comprehensive income for the half-year Profit/Total comprehensive income for the half-years is attributable to: – Owners of the parent – Non-controlling interests Earnings per share for profit attributable to the ordinary equity holders of the Company (in RMB per share) – Basic earnings per share – Diluted earnings per share Interim dividends 18

Unaudited Half-year 2019 2018 RMB’000 RMB’000 1,224,716 1,107,798 (18,907) (26,466) (817,630) (597,640) 388,179 483,692 60,744 38,598 1,370 3,112 (68,032) (55,631) (1,987) (2,730) 98 2,923 380,372 469,964 10,980 11,246 (104,103) (87,495) (93,123) (76,249) 287,249 393,715 (56,154) (92,228) 231,095 301,487 231,095 301,487 218,503 282,565 12,592 18,922 231,095 301,487 0.15 0.20 0.15 0.20 — —

The notes on page 46 to 77 form an integral part of this condensed consolidated interim financial information.

43

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Statement of Changes in Equity For the Half-Year of 2019 (All amounts in RMB thousand unless otherwise stated)

	Unaudited
Attributable to owne			Total Equity RMB’000 6,614,967
			231,095
			231,095
			129,224 (151,677)
			(22,453)
			6,823,609
			5,581,862
			301,487
			301,487
			63,093 320,273
			383,366

The notes on page 46 to 77 form an integral part of this condensed consolidated interim financial information.

44

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Statement of Cash Flow

For the Half-Year of 2019

(All amounts in RMB thousand unless otherwise stated)

Cash flows from operating activities Cash generated from operations Income tax paid Bank deposit interest received Net cash inflow from operating activities Cash flows from investing activities Payment for acquisition of subsidiary, net of cash acquired Payments for property, plant and equipment, intangible assets Proceeds on disposal of property, plant and equipment Interest received on financial assets held as investments Increase in restricted cash Government grants received Net cash outflow from investing activities Cash flows from financing activities Repayments of bank borrowings Dividends paid to Company’s shareholders Interest paid Proceeds from bank borrowings Proceeds from debentures Capital contributions by non-controlling interests Net cash inflow from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the half-year Cash and cash equivalents at the end of the half-year

Unaudited Half-year 2019 2018 RMB’000 RMB’000 770,279 640,332 (81,360) (307,771) 6,221 6,232 695,140 338,793 — (396,957) (1,280,910) (703,353) 30 — — 200 1,274 — 34,567 18,900 (1,245,039) (1,081,210) (496,037) (1,342,192) (978) — (111,076) (81,533) 1,244,516 1,386,695 — 1,100,000 129,224 63,093 765,649 1,126,063 215,750 383,646 1,808,543 1,893,689 2,024,293 2,277,335

The notes on page 46 to 77 form an integral part of this condensed consolidated interim financial information.

45

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

1 COMPANY PROFILE AND PRINCIPAL ACTIVITIES

Tianjin Capital Environmental Protection Group Company Limited (the ‘Company’) was established on 8 June 1993 in Tianjin, the People’s Republic of China (the ‘PRC’) as a joint stock limited liability company. The holding company and the ultimate holding company of the Company are Tianjin Municipal Investment Company Limited (‘Municipal Investment’) and Tianjin City Infrastructure Construction and Investment Group Company Limited (‘City Infrastructure Construction and Investment’) respectively. The address of its registered office is No.45 Guizhou Road, Heping District, Tianjin. The Company’s H-shares are listed on The Stock Exchange of Hong Kong Limited and the A-shares are listed on The Shanghai Stock Exchange.

The principal activities of the Company and its subsidiaries (collectively the ‘Group’) include processing of sewage water, construction and management of related facility, supply of tap water and recycled water, supply of heating and cooling, and construction and management of related facility as described below:

(a) Processing of sewage water

Pursuant to relevant agreements (‘Service concession right agreements’), the Group currently provides sewage water processing services via the following plants:

Plant	Location	Agreement date	Customer
Guiyang	Guizhou	16 September 2004	Guiyang City Administration Bureau
Baoying	Jiangsu	13 June 2005	Baoying Construction Bureau
Chibi	Hubei	15 July 2005	Chibi Construction Bureau
Fuyang	Anhui	18 December 2005	Anhui Fuyang Construction Committee
Qujing	Yunnan	25 December 2005	Qujing City Water General Company
Honghu	Hubei	29 December 2005	Honghu Construction Bureau
Hangzhou	Zhejiang	20 November 2006	Hangzhou Municipal Facilities Supervision Center
Jinghai	Tianjin	12 September 2007	Tianjin Tianyu Science Technology Park
Wendeng	Shandong	19 December 2007	Wendeng Construction Bureau
Xi’an	Shanxi	18 March 2008	Xi’an Infrastructure Investment Group
Anguo	Hebei	14 October 2008	An Guo Municipal Government
Xianning	Hubei	16 October 2008	Xianning Construction Committee
Yingdong	Anhui	10 August 2009	Fuyang Yingdong Construction Bureau
Qujing	Yunnan	16 August 2011	QuJing Housing and Urban Construction Bureau
Chaohu	Anhui	25 August 2011	Hanshan Housing and Urban Construction Bureau
Jingu	Tianjin	18 February 2014	Tianjin Urban-rural Construction Commission (‘TUCC’)
			and Tianjin Water Authority Bureau (‘TWAB’)
Xianyanglu	Tianjin	18 February 2014	TUCC and TWAB
Dongjiao	Tianjin	18 February 2014	TUCC and TWAB
Beicang	Tianjin	18 February 2014	TUCC and TWAB
Yingshang	Anhui	16 June 2016	Yingshang Housing and Urban-rural Construction Bureau
Karamay	Xinjiang	4 November 2016	Karamay Construction Bureau
Linxia	Gansu	13 May 2017	Linxia Housing and Urban-rural Construction Bureau
Changsha	Hunan	5 June 2017	Ningxiang Economic and Technological Development
			Zone Management Committee

46

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

• 1 COMPANY PROFILE AND PRINCIPAL ACTIVITIES (Continued)

• (a) Processing of sewage water (Continued)

Plant	Location		Agreement date	Customer
Hefei	Anhui		16 June 2017	Hefei Urban-Rural Construction Committee
Dalian	Liaoning	1	November 2017	Dalian Construction Bureau
Bayannur	Inner Mongolia	12	December 2017	Bayannur Water Authority Bureau and
				Bayannur River Water Group Company Limited
Changsha	Hunan		27 April 2018	Ningxiang Economic and Technological
				Development Zone Management Committee
Honghu	Hubei		9 June 2018	Honghu Housing and Urban –
				Rural Construction Bureau
Shibing	Guizhou		12 July 2018	Shibing Water Authority Bureau
Hefei	Anhui	28	November 2018	Hefei Urban-rural Construction Commission
Hanshou	Hunan		11 March 2019	Hanshou Water Authority Bureau
Gaocheng	Hebei		2 April 2019	Hebei Gaocheng Economic Development
				Zone Management Committee

Based on the sewage water processing agreements and the supplemental agreements, initial prices for sewage water processing are predetermined, thereafter processing prices may be revised taking into account various factors including renovation of equipment, additional investment, power and energy and labour force, and significant changes in government policy.

(b) Construction and management of sewage water facility

The Group provides design, construction and operations of sewage processing facility and services relating to financing, construction and transfer of sewage processing facility project.

(c) Supply of tap water

Pursuant to the relevant agreements, the Group provides tap water supply service initially at pre-determined price and the prices as pre-determined may be revised subsequently taking into account various cost factors.

(d) Recycled water supply and pipeline connection

The Group’s recycled water business includes developing, constructing and operating of recycled water projects, production and sale of recycled water, and provision of related research and development and technical consultation services.

47

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

1 COMPANY PROFILE AND PRINCIPAL ACTIVITIES (Continued)

(e) Heating and cooling supply services

The heating and cooling supply services include design, construction, operations and transfer of centralised heating and cooling infrastructures; and provision of heating and cooling supply services.

The Group has signed several service concession agreements with several customers of providing heating and cooling supply services to third parties.

This condensed consolidated interim financial information was approved for issue on 26 August 2019.

This condensed consolidated financial information has not been audited.

2 SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD

In this period, the Group operated its business smoothly. With winning the bidding of four water projects, the Group set up Hebei Guojin Tianchuang Sewage Water Processing Co., Ltd. and Hanshou Tianchuang Capital Water Co., Ltd. The Group will continue to focus on process of sewage water, new energy, hazardous waste treatment and other environmental services.

The financial position and performance of the Group was particularly affected by the following events and transactions during the six months to 30 June 2019:

• an increase in revenue as the result of the increase of the processing quantity or unit price of different franchising project (note 4).

• the adoption of the new leasing standard HKFRS 16 Leases (note 22).

3 FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of market risks (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance.

The interim condensed consolidated financial statement do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2018.

There have been no changes in the risk management department since year end or in any risk management policies since the year end.

48

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

3 FINANCIAL RISK MANAGEMENT (Continued)

• (a) Market risk:

(i) Foreign currency risk:

The Group has no significant foreign currency risk as the operations and customers of the Group are located in the PRC with most of the operating assets and transactions denominated and settled in RMB. All of the Group’s borrowings are denominated in RMB. The sole foreign currency exposure of the Group arises from fluctuation of US dollar (‘USD’) and Japanese Yen (‘JPY’) pursuant to the long-term payment scheme set out in the asset transfer agreement of foreign loan financed assets from Tianjin Sewage Company (‘Sewage Company’).

As at 30 June 2019, if RMB had strengthened/weakened by 5% against the US dollar with all other variables held constant, post-tax profit for the period would have been RMB3 million (30 June 2018: RMB3 million) higher/ lower. Similarly, if RMB had strengthened/weakened by 5% against the JPY with all other variables held constant, post-tax profit for the period would have been RMB8 million (30 June 2018: RMB7 million) higher/lower.

(ii) Interest rate risk:

The Group’s interest rate risk arises mainly from borrowings and long-term payables.

Borrowings and long-term payables obtained at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash held at variable rates. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk.

The tables below set out the Group’s exposure to interest rate risks. Included in the tables are the assets and liabilities at carrying amounts, categorized by the maturity dates.

49

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

3 FINANCIAL RISK MANAGEMENT (Continued)

(a) Market risk: (Continued)

(ii) Interest rate risk: (Continued)

As at 30 June 2019 (Unaudited) Short-term borrowings Other current liabilities – Current portion of long-term bank borrowings – Current portion of long-term payables Long-term borrowings Long-term payables Long-term bonds Total As at 31 December 2018 (Audited) Short-term borrowings Other current liabilities – Current portion of long-term bank borrowings – Current portion of long-term payables Long-term borrowings Long-term payables Debentures Total	Fixed RMB’000 200,000 — 17,984 — 193,526 1,796,872 2,208,382 200,000 — 17,615 — 187,501 1,796,363 2,201,479	Floating RMB’000 — 741,534 11,713 2,283,376 77,542 — 3,114,165 — 213,952 11,802 2,051,953 78,866 — 2,356,573	Total RMB’000 200,000 741,534 29,697 2,283,376 271,068 1,796,872
			5,322,547
			200,000 213,952 29,417 2,051,953 266,367 1,796,363
			4,558,052

As at 30 June 2019, if interest rates on borrowings had been 1% risen/fallen with all other variables held constant, net profit for the period would have been decreased/increased by RMB23 million (30 June 2018: RMB7 million).

The Group analyses its interest rate exposure monthly by considering refinancing, renewal of existing positions and alternative financing.

(b) Credit risk:

Credit risk arises from deposits with banks and credit exposures to customers.

The Group manages credit risk on bank deposits by placing the majority of its cash and bank balances with state owned/ listed banks in the PRC. The Group has not had any significant loss arising from non-performance by these parties in the past and management does not expect so in the future.

The credit risk on trade receivables is concentrated on a few customers, all of which are PRC government background. Therefore, the management considers that the risk is limited.

50

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

3 FINANCIAL RISK MANAGEMENT (Continued)

(c) Liquidity risk:

Cash flow forecasting is performed in the operating entities and aggregated by Group finance. Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable, external regulatory or legal requirements.

The Group’s financial assets and liabilities (inclusive of interests) are analysed into relevant maturity Groupings based on

the remaining period at the balance sheet date to the contractual maturity date, using the contracted undiscounted cash flows, as follows:

As at 30 June 2019(Unaudited) Short-term bank borrowings Long-term bank borrowings Long-term payables Trade and other payables Long-term bonds Dividend payable As at 31 December 2018(Audited) Short-term bank borrowings Long-term bank borrowings Long-term payables Trade and other payables Other payables Debentures Dividend payable	Less than 1 year RMB’000 200,000 830,934 28,943 1,272,123 78,780 150,699 2,561,479 200,000 311,457 30,340 176,398 1,456,133 78,780 1,912 2,255,020	Between 1 and 2 years RMB’000 — 771,660 29,726 — 78,780 — 880,166 — 839,253 31,202 — — 78,780 — 949,235	Between 2 and 5 years RMB’000 — 795,652 94,891 — 2,128,170 — 3,018,713 — 1,068,843 99,878 — — 1,837,215 — 3,005,936	Over 5 years RMB’000 — 1,100,948 307,951 — — — 1,408,899 — 419,156 300,901 — — — — 720,057	Total RMB’000 200,000 3,499,194 461,511 1,272,123 2,285,730 150,699 7,869,257 — 2,638,709 462,321 176,398 1,456,133 1,994,775 1,912 6,930,248	Carrying value RMB’000 200,000 3,024,909 300,765 1,272,123 1,796,872 150,699
						6,745,368
						200,000 2,265,906 295,784 176,398 1,456,133 1,796,363 1,912
						6,192,496

51

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

3 FINANCIAL RISK MANAGEMENT (Continued)

(d) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt.

For the period ended 30 June, 2019, the Group’s strategy is to maintain a gearing ratio of 20% – 40%. The gearing ratio of the Group is as follows:

Total borrowings Less: Cash and cash equivalents Net debt Total equity Total capital Gearing ratio	Unaudited 30 June 2019 RMB’000 5,322,547 (2,024,293) 3,298,254 6,823,609 10,121,863 33%	Audited 31 December 2018 RMB’000 4,558,052 (1,808,543)
		2,749,509
		6,614,967
		9,364,476
		29%

As at 30 June 2019, the gearing ratio of the Group almost remained unchanged compared to last year.

52

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

3 FINANCIAL RISK MANAGEMENT (Continued)

(e) Fair value estimation

To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table.

The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value at 30 June 2019 and 31 December 2018 on a recurring basis:

At 30 June 2019 Financial assets Financial assets at fair value through other comprehensive income (FVOCI) Equity securities Total financial assets	Level 1 — —	Level 2 — —	Level 3 2,000 2,000	Total 2,000
				2,000

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted (unadjusted) market prices at the end of the reporting period. The quoted marked price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.

The Group also has a number of financial instruments which are not measured at fair value in the balance sheet. For all of these instruments, the fair value are not materially different from their carrying amounts, since the interest receivable/ payable is either close to current market rates or the instruments are short term in nature.

53

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

4 REVENUE AND SEGMENT INFORMATION

An analysis of sales and contributions to operating profit for the period by principal operations is as follows:

(a) Analysis of the Group’s turnover and other income

Revenue from contracts with customers (Note 4(b)) Other income	Unaudited Half-year 2019 2018 RMB’000 RMB’000 1,224,716 1,107,798 60,744 38,598 1,285,460 1,146,396	Unaudited Half-year 2019 2018 RMB’000 RMB’000 1,224,716 1,107,798 60,744 38,598 1,285,460 1,146,396
		1,146,396

(b) Operating segment analysis

Management has determined the operating segments based on the reports reviewed by the managers operating meeting that are used to make strategic decisions for the purpose of allocating resources and assessing performance.

The meeting considers the business from both service and geographical perspectives. From a service perspective, management assesses the performance of processing of sewage water and construction of related facilities, recycled water and pipeline connection, heating and cooling services, tap water operations and sale of environmental protection equipment. Processing of sewage water is further evaluated on a geographical basis (Tianjin plants, Hangzhou plant and other plants). The environmental protection equipment is mainly the achievement of technology research. The assets are allocated based on the operations of the segment and the physical location of the asset. The liabilities are allocated based on the operations of the segment. Expenses indirectly attributable to each segment are allocated to the segments based on the proportion of each segment’s revenue.

Other services include contract operation services, lease of office building or apartments and provide technical services etcetera. These are not separately presented within the reportable operating segments, but included in the ‘all other segments’ column.

The managers operating meeting assesses the performance of the operating segments based on a measure of net profit after tax, which is measured in the approach consistent with that in the financial statements.

54

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

• 4 REVENUE AND SEGMENT INFORMATION (Continued)

• (b) Operating segment analysis (Continued)

  • (i) For the half-year ended 30 June 2019 (Unaudited)

Segment revenue Timing of revenue recognition: At a point in time Over time Segment expense Results before share of profits of an associate Profit before income tax Income tax expense Profit for the period Segment assets Investment accounted for using the equity method Total assets Total liabilities Other information – Interest income – Interest expenses – Depreciation – Amortization – Capital expenditures	Sewage processing and facility construction services Tianjin plants Hangzhou plant Other plants RMB’000 RMB’000 RMB’000 458,172 120,167 292,961 — — — 458,172 120,167 292,961 (332,824) (89,973) (222,315) 5,936,592 1,055,436 5,782,445 5,631,437 291,927 2,264,608 1,459 1,004 157 (65,737) (4,936) (34,084) (109) — (837) (63,267) (26,016) (84,695) 12,742 — 515,617	Recycled water and pipeline connection RMB’000 137,078 — 137,078 (91,113) 1,221,492 596,566 7,384 (25) (17,698) (2,968) 929	Heating and cooling services RMB’000 40,417 — 40,417 (33,371) 677,580 349,901 487 (1,140) (188) (11,344) 32,613	Tap water operations Sale of environmental protection equipment RMB’000 RMB’000 49,703 18,493 — — 49,703 18,493 (37,868) (10,315) 423,103 67,951 92,867 10,047 18 376 (668) — (48) (503) (7,683) (1) 44,798 52	All other segments RMB’000 107,725 — 107,725 (119,688) 1,096,569 395,206 95 — (2,684) (1,328) 130	Group RMB’000 1,224,716 — 1,224,716 (937,467)
						287,249
						287,249 (56,154)
						231,095
						16,261,168
						195,000
						16,456,168
						9,632,559
						10,980 (106,590) (22,067) (197,302) 606,881

55

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

• 4 REVENUE AND SEGMENT INFORMATION (Continued)

• (b) Operating segment analysis (Continued)

  • (ii) For the half-year ended 30 June 2018 (Unaudited)

Segment revenue Timing of revenue recognition: At a point in time Over time Segment expense Results before share of profits of an associate Profit before income tax Income tax expense Profit for the period Segment assets Investment accounted for using the equity method Total assets Total liabilities Other information – Interest income – Interest expenses – Depreciation – Amortisation – Capital expenditures	Sewage processing and facility construction services Tianjin plants Hangzhou plant Other plants Recycle water and pipeline connection Heating and cooling RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 413,312 133,377 201,559 149,040 36,574 — — — — — 413,312 133,377 201,559 149,040 36,574 (288,494) (96,412) (152,854) (116,483) (30,851) 166,172 50,117 61,100 41,479 8,229 5,578,806 1,072,204 3,611,822 1,310,797 578,646 4,449,684 329,324 1,253,121 614,818 259,095 2,945 826 872 859 367 (73,577) (5,440) (8,044) (33) (551) (114) — (108) (17,961) (428) (62,672) (28,724) (51,601) (1,965) (8,775) 246,361 — 1,012,241 167,487 17,333	Tap water Environmental protection equipment RMB’000 RMB’000 46,059 10,250 — — 46,059 10,250 (33,819) (10,859) 14,463 (716) 407,871 43,674 99,997 4,055 14 128 (937) — — (935) (6,926) (1) 143,204 694	All other segments RMB’000 117,827 — 117,827 (76,539) 52,871 1,430,980 757,991 5,235 — (3,093) (1,522) 9,593	Group RMB’000 1,107,798 — 1,107,798 (806,311)
				393,715
				393,715 (92,228)
				301,487
				14,034,800
				—
				14,034,800
				7,768,085
				11,246 (88,582) (22,639) (162,186) 1,596,913

56

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

5 OPERATING PROFIT

Operating profit is stated after (crediting)/charging the following:

Crediting: Rental of investment properties Charging: Depreciation and amortisation expenses Staff costs Raw materials and consumables used Repair and maintenance expenses	Unaudited Half-year 2019 2018 RMB’000 RMB’000 (751) (3,908) 219,369 184,825 149,479 116,094 146,312 60,114 46,456 33,993	Unaudited Half-year 2019 2018 RMB’000 RMB’000 (751) (3,908) 219,369 184,825 149,479 116,094 146,312 60,114 46,456 33,993
		184,825 116,094 60,114 33,993

• 6 PROPERTY, PLANT AND EQUIPMENT, INVESTMENT PROPERTIES, INTANGIBLE ASSETS, LAND USE RIGHT AND RIGHTOFUSE ASSETS

	Property,			Land use	Right-of-use
	plant and	Investment	Intangible	rights	assets
Half-year ended 30 June 2019 (Unaudited)	equipment	properties	assets (a)	(Note 22)	(Note 22)
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Net book amount at 1 January 2019	497,580	84,052	10,314,469	—	60,358
Additions	273,887	—	599,711	—	—
Disposals	(297)	—	—	—	—
Depreciation and amortisation	(21,813)	(253)	(196,220)	—	(1,082)
Transfer from Investment properties	63,289	—	—	—	—
Transfer to property, plant and equipment	—	(63,289)	—	—	—
Transfer to concession rights	(150,162)	—	—	—	—
Impairment provision	—	—	—	—	—
At 30 June 2019	662,484	20,510	10,717,960	—	59,276
Half-year ended 30 June 2018 (Unaudited)
Net book amount at 1 January 2018	404,488	86,820	6,869,701	36,717	—
Additions	10,925	—	1,615,640	—	—
Disposals	(118)	—	—	—	—
Depreciation and amortisation	(20,802)	(1,837)	(161,519)	(667)	—
Impairment provision	—	—	—	—	—
At 30 June 2018	394,493	84,983	8,323,822	36,050	—

• (a) Concession rights with net book value of RMB2,722 million (31 December 2018: 2,758 million) have been secured against loans.

57

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

7 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Summarised financial information for Bihai Sponge City

Net book value of investments Attributable comprehensive income for the year: – Net loss (i) – Other comprehensive income (i) Total comprehensive income	Unaudited 30 June 2019 RMB’000 195,000 — — —	Audited 31 December 2018 RMB’000 195,000
		— —
		—

• (i) Net loss and other comprehensive income includes the fair value adjustment of the identifiable assets and liabilities upon investment, and the effect of change in accordance with the Group’s accounting policy.

8 TRADE RECEIVABLES

Details of the trade receivables are as follows:

Receivables from third parties – Trade receivables – Notes receivable Receivables from related parties Less: loss allowance for impairment of trade receivables (Note(a))	Unaudited 30 June 2019 RMB’000 2,032,694 2,025,422 7,272 36,032 2,068,726 (49,486) 2,019,240	Audited 31 December 2018 RMB’000 2,089,992 2,079,697 10,295 51,352
		2,141,344
		(49,584)
		2,091,760

58

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

8 TRADE RECEIVABLES (Continued)

• (a) Impaired trade receivables

• (i) The aging of trade receivables is analysed below:

Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years Total	Unaudited 30 June 2019 Amount % of total balance RMB’000 1,539,777 74 460,568 22 34,837 1 28,987 1 3,046 1 1,511 1 2,068,726 100	Audited 31 December 2018 Amount % of total balance RMB’000 1,468,039 68 649,268 29 15,464 1 7,024 1 1,549 1 — — 2,141,344 100	Audited 31 December 2018 Amount % of total balance RMB’000 1,468,039 68 649,268 29 15,464 1 7,024 1 1,549 1 — — 2,141,344 100
			100

• (ii) As at 30 June 2019, provision for bad debts by individual is analysed as below:

	Carrying	Expected credit	Loss
	amount	loss rate	Allowance	Reasons
	RMB’000		RMB’000
Tianjin Water Authority Bureau	1,392,638	0.05	791	i)
Qujing Sewage Company	161,461	21.28	34,357	ii)
Hangzhou Municipal Facilities Supervision Center	93,918	0.05	30	i)
Guiyang Water Authority Bureau	61,469	0.05	2	i)
Xi’an Infrastructure Investment Group	14,998	0.05	14	i)
Tianjin Qudong Culture Media Co. LTD	7,239	100.00	7,239	iii)
Total	1,731,723		42,433

59

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

8 TRADE RECEIVABLES (Continued)

• (a) Impaired trade receivables (Continued)

• (ii) As at 30 June 2019, provision for bad debts by individual is analysed as below: (Continued)

  • i) As these customers are provincial governments or their representatives, whose ability to meet their contractual cash flow obligations may not be weakened even if there are adverse changes in the economic and business situation over a long period, the receivables of the Group from Tianjin Water Authority Bureau, from Xi’an Urban Infrastructure Construction Investment Group Co., Ltd., from Hangzhou Municipal Facilities Supervision Center, and from Guiyang Water Authority Bureau have a lower credit risk, based on the analysis of historical payment records and forward-looking measurement. Therefore, the Company estimates that the lifetime expected credit loss rate of the receivables is 0.05%.

  • ii) Receivables from Qujing City Water General Company comprise regular sewage treatment fee, tap water fee and price compensation. As the receivables of regular sewage treatment fee and tap water fee have a longer collection period than ordinary government customers and they have higher credit risk, the Group estimates that the lifetime expected credit loss rate is 3%; Considering the debtor’s actual performance capacity, historical collection experience and the ageing of the receivables, the Group concludes that the receivables of price compensation have been defaulted and estimates that the lifetime expected credit loss rate is 100%. In summary, the Group expects that the expected credit loss rate of receivables from Qujing City Water General Company in the whole period is 21.28%.

  • iii) Receivables from Tianjin Qudong Culture Media Co., Ltd. has applied enforcement and got approval from the court. Thus, the Company concludes that the receivables have been defaulted and estimates that the lifetime expected credit loss is 100%.

60

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

8 TRADE RECEIVABLES (Continued)

• (a) Impaired trade receivables (Continued)

• (iii) As at 30 June 2019, provision for bad debts by respective groupings is analysed as below:

Group – banker’s acceptance

As at 30 June 2019, the Group measures bad debt provision in accordance with the lifetime expected credit loss for the entire duration, and no provision is deemed necessary. The Group considers that there is no significant credit risk in banker’s acceptance and no major loss will be caused by bank default.

Group – Non-provincial government customers

Undue 1-90 days overdue 90-180 days overdue >180 days overdue	30 June 2019 Carrying amount Loss allowance Amount Expected credit loss rate Amount RMB’000 RMB’000 47,308 0.01 4 83,471 0.05 19 32,883 0.20 52 67,506 0.50 324 231,168 399	30 June 2019 Carrying amount Loss allowance Amount Expected credit loss rate Amount RMB’000 RMB’000 47,308 0.01 4 83,471 0.05 19 32,883 0.20 52 67,506 0.50 324 231,168 399
		399

Group – others

			30 June 2019	30 June 2019
	Carrying amount			Loss allowance
			Expected credit
		Amount	loss rate		Amount
		RMB’000			RMB’000
Undue		33,759		0.10	35
1-30 days overdue		2,662		0.50	141
30-90 days overdue		18,734		2.00	405
>90 days overdue		43,408		5.00	6,073
		98,563			6,654

61

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

8 TRADE RECEIVABLES (Continued)

• (a) Impaired trade receivables (Continued)

• (iv) The accrued bad debt provision in this half-year is RMB573,000, and the bad debts provision reversed is RMB671,000. The main reversed amounts are as follow:

Significant bad debt provision reversed is illustrated below:

Reason for collected or reversed Basis and rationality of bad debts provision Tianjin Qudong Culture Media Co. LTD Trade receivables collected Long Aging	Amount of collected or reversed Method of collected of reversed RMB’000 671 Collected by cash 671

The bad debt provision of RMB671,000 for receivables from Tianjin Qudong Culture Media Co. Ltd. is reversed in this half-year, the corresponding book value of trade receivables is RMB671,000.

9 LONGTERM RECEIVABLES

Receivables from toll road concession Less: loss allowance for impairment of long-term receivables Less: non-current assets due within one year	Unaudited 30 June 2019 RMB’000 265,211 (138) 265,073 (20,006) 245,067	Audited 31 December 2018 RMB’000 276,613 (138)
		276,475 (22,789)
		253,686

The Group receives toll road fee from Tianjin Municipal and Highway Management Bureau (the ‘Bureau’) over the concession period till 2029. Receivables from toll road concession represent the amortized cost, using effective interest method, calculated with reference to a guaranteed minimum future traffic flow over the concession period.

The Bureau is a public institution of Tianjin Municipal Government. The credit risk level of the Bureau is low. Base on past experience, the receivables can be collected within agreed period. Therefore, the Company estimates that the ECL rate of this receivable item is 0.05%.

62

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

10 SHARE CAPITAL

Movement of the Company’s authorised, issued and fully paid up capital is set out below. All of the Company’s shares are ordinary shares with par value of RMB1.

									Circulating	Circulating
									A-shares	H-shares	Total
									RMB’000	RMB’000	RMB’000
At	31	December	2018	(Audited) and at	30	June	2019	(Unaudited)	1,087,228	340,000	1,427,228

A-shares represent shares listed on The Shanghai Stock Exchange and H-shares represent shares listed on the Main Board of The Stock Exchange of Hong Kong Limited. All the A-shares and H-shares rank pari passu in all respects.

There is no movement in the Group’s issue A-share and H-share during the half-year ended 30 June 2019 and 2018.

11 BORROWINGS

		Unaudited	Audited
	Notes	30 June	31 December
		2019	2018
		RMB’000	RMB’000
Non-current liabilities:
Long-term bank borrowings	(a), (b)	3,024,910	2,265,905
Less: Current portion	(a), (b)	(741,534)	(213,952)
		2,283,376	2,051,953
Debentures	(c)	1,796,872	1,796,363
Less: Current portion	(c)	—	—
		1,796,872	1,796,363
Long-term payables	(d)	288,368	295,784
Less: Current portion	(d)	(29,696)	(29,417)
		258,672	266,367
Total non-current borrowings		4,338,920	4,114,683
Current liabilities:
Current portion of long-term bank borrowings	(a)	741,534	213,952
Current portion of long-term payables	(d)	29,696	29,417
Short-term bank borrowings	(e)	200,000	200,000
		971,230	443,369
Total current borrowings		971,230	443,369

63

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

11 BORROWINGS (Continued)

• (a) Long-term bank borrowings

Movement of long-term bank borrowings is analyzed as follows:

Half-year ended 30 June 2019 Opening amount as at 1 January 2019 Proceeds of new borrowings Repayments of borrowings Closing amount as at 30 June 2019 Half-year ended 30 June 2018 Opening amount as at 1 January 2018 Proceeds of new borrowings Repayments of borrowings Closing amount as at 30 June 2018	Unaudited RMB’000 2,265,905 1,244,516 (485,511)
	3,024,910
	727,160 1,386,695 (308,028)
	1,805,827

These borrowings mature as follows:

As at 30 June 2019 (Unaudited) Long-term bank borrowings As at 31 December 2018 (Audited) Long-term bank borrowings	Less than 1 year RMB’000 741,534 213,952	Between 1 and 2 years RMB’000 706,649 763,828	Between 2 and 5 years RMB’000 670,185 959,302	Over 5 years RMB’000 906,542 328,823	Total RMB’000 3,024,910
					2,265,905

(b) Summary of terms of long-term bank borrowings:

Long-term bank borrowings: Secured Guaranteed Unsecured	Unaudited 30 June 2019 RMB’000 611,982 129,000 2,283,928 3,024,910	Audited 31 December 2018 RMB’000 400,633 147,000 1,718,272
		2,265,905

64

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

11 BORROWINGS (Continued)

(c) Debentures

Debentures payable – par value – transaction cost	Audited 31 December 2018 RMB’000 1,800,000 (3,637) 1,796,363	Amortization RMB’000 — 509 509	Additions RMB’000 — — —	Due within 1 year RMB’000 — — —	Unaudited 30 June 2019 RMB’000 1,800,000 (3,128) 1,796,872

On 25 October 2016, the Company issued a long-term bond at par value of RMB700 million on The Shanghai Stock Exchange. The fixed interest rate of 3.13% has been accrued and settled per annum. The bond will be due for repayment on 25 October 2021. The principal will be repaid on maturity.

On 25 Apr 2018, the Company issued a debenture at par value of RMB1,100 million on The Shanghai Stock Exchange. The fixed interest rate of 5.17% has been accrued and settled per annum. The debenture will be due for repayment on 25 Apr 2023. The principal will be repaid on maturity.

(d) Long-term payables and current portion of long-term payables

	Unaudited	Unaudited	Audited
	30 June	2019	31 December 2018
	RMB’000		RMB’000
		Unrecognized		Unrecognized
	Payable	financial charges	Payable	financial charges
Payable to Sewage Company for
assets acquisition	458,092	(169,887)	462,321	(166,537)

65

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

11 BORROWINGS (Continued)

• (d) Long-term payables and current portion of long-term payables (Continued)

(i) Summary of terms of long-term payable above:

		Original	Effective	Ending	Due within
	Maturity date	balance	interest rate	balance	1 year
		RMB’000		RMB’000	RMB’000
Sewage Company	20 March 2041	430,314	5.94%	266,367	29,417

The balance of the long-term payables to Sewage Company is the consideration payable in respect of the acquisition of sewage processing assets from Sewage Company, net of unrecognised financing charges.

Pursuant to the ‘Assets transfer agreement from foreign banks loans about Haihe River Tianjin sewage processing project and Beicang sewage processing project’, Sewage Company sold to the Company certain sewage processing assets. The first instalment of RMB261 million settled in cash and the remaining amount is to be settled on a quarterly basis in RMB translating at exchange rates prevailing on each repayment date over the remaining years. The fair value of the initial recognition of the payable balance was at fair value assessed based on discounted future cash payments and the discount rate of 5.94%.

• (ii) The payable amounts of long-term payables (including interest) are denominated in the following currencies.

JPY US dollar	Unaudited 30 June 2019 RMB’000 208,178 80,027 288,205	Audited 31 December 2018 RMB’000 205,116 90,668
		295,784

The balance denominated in US dollar bears an interest rate at 6 month LIBOR plus 0.6%, the balance denominated in JPY bears fixed interest rates of 1% and 1.55% per annum respectively.

66

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

11 BORROWINGS (Continued)

The carrying amounts of the Group’s borrowings are denominated in RMB.

(e) Short-term bank borrowings

Movement of bank borrowings is analyzed as follows:

Half-year end 30 June 2019 Opening amount as at 1 January 2019 Proceeds of new borrowings Repayments of borrowings Closing amount as at 30 June 2019	Unaudited RMB’000 200,000 100,000 (100,000)
	200,000

Summary of current portion of short-term borrowings by terms:

		Unaudited	Audited
	30	June 2019	31 December 2018
		RMB’000	RMB’000
Unsecured		200,000	200,000
		200,000	200,000

67

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

12 DEFERRED REVENUE

Deferred revenue represents the subsidies received from governmental authorities with respects to Group’s certain construction

and research and development projects. The details of deferred revenue are as below:

Sewage water processing plants: – Jingu – Jingu upgrading project – Beichen upgrading project – Xianyanglu-upgrading project – Dongjiao-upgrading project – Ningxiang project – Beishiqiao-upgrading project – Linxia project Water recycling plants: – Jingu – Dongjiao – Beichen – Xianyanglu Heating and cooling supply service project Others Total	Audited 31 December 2018 RMB’000 1,258,545 163,000 90,000 59,079 41,456 18,279 10,354 7,600 206,393 21,081 18,112 13,200 180,357 13,629 2,101,085	Additions RMB’000 — — — — — — — — — — — — 34,567 3,322 37,889	Demolition costs RMB’000 — — — — — — — — — — — — — 2 2	Recognised in Other gains-net RMB’000 25,643 — — 1,182 829 — 359 42 — 338 263 — 3 15 28,674	Unaudited 30 June 2019 Relating to assets/costs RMB’000 1,232,902 assets 163,000 assets 90,000 assets 57,897 assets 40,627 assets 18,279 assets 9,995 assets 7,558 assets 206,393 assets 20,743 assets 17,849 assets 13,200 assets 214,921 assets 16,934 costs 2,110,298

13 DEFERRED INCOME TAX LIABILITIES

Opening balance as at 1 January Charged to profit or loss Closing balance as at 30 June	Unaudited Half-year 2019 2018 RMB’000 RMB’000 138,812 120,259 2,558 4,423 141,370 124,682	Unaudited Half-year 2019 2018 RMB’000 RMB’000 138,812 120,259 2,558 4,423 141,370 124,682
		124,682

68

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

14 PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Balance at 31 December 2018 (Audited) and 30 June 2019 (Unaudited) Analysis of total provisions: Non-current Current	Unaudited 30 June 2019 RMB’000 10,069 — 10,069	Major overhauls for the assets of concession right Unaudited RMB’000 10,069
		Audited 31 December 2018 RMB’000 10,069 —
		10,069

• 15 TRADE PAYABLES, CONTRACT LIABILITIES, OTHER PAYABLES AND INCOME TAX AND OTHER TAXES PAYABLES

Notes Trade payables (a) Contract liabilities (b) Other payables (c) Income tax and other taxes payables	Unaudited 30 June 2019 RMB’000 220,762 534,107 1,051,332 54,215 1,860,416	Audited 31 December 2018 RMB’000 176,398 469,185 1,456,133 68,893
		2,170,609

• (a) As at 30 June 2019, the majority of trade payables are aged within one year.

69

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

• 15 TRADE PAYABLES, CONTRACT LIABILITIES, OTHER PAYABLES AND INCOME TAX AND OTHER TAXES PAYABLES (Continued)

• (b) Contract liabilities

For recycled water and pipeline connection services For toll road fee For heating and cooling supply service For Project Hangu Others	Unaudited 30 June 2019 RMB’000 470,598 46,055 5,264 4,467 7,723 534,107	Audited 31 December 2018 RMB’000 453,602 — 4,074 4,467 7,042
		469,185

• (c) Other payables comprise:

	Unaudited	Audited
	30 June	31 December
	2019	2018
	RMB’000	RMB’000
Construction costs payable	910,182	1,328,505
Interest payable for borrowings	26,271	43,768
Payable for purchases of property, plant and equipment and concession right	13,892	13,892
Others	100,987	69,968
	1,051,332	1,456,133

As at 30 June 2019, other payables of RMB160 million (31 December 2018: RMB453 million) were aged over one year, which mainly represented payables and deposits for sewage plants upgrading projects. The balances had yet to be settled as those projects and their final accounts have not been completed.

70

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

16 FINANCE EXPENSES  NET

Interest expenses of borrowings Less: Interest income – long-term receivables – bank deposits Others	Interest expenses of borrowings Less: Interest income – long-term receivables – bank deposits Others	Unaudited Half-year 2019 2018 RMB’000 RMB’000 106,590 88,582 (10,980) (11,246)	Unaudited Half-year 2019 2018 RMB’000 RMB’000 106,590 88,582 (10,980) (11,246)
		(4,759) (6,221)	(5,014) (6,232)
		(2,487) 93,123	(1,087) 76,249

17 INCOME TAX EXPENSE

No Hong Kong profits tax has been provided as the Group has no assessable profit in Hong Kong as at 30 June 2019 (30 June 2018: Nil). Taxation on overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the countries in which the Group operates.

Tax charges comprises:

Current income tax Deferred income tax	Unaudited Half-year 2019 2018 RMB’000 RMB’000 53,594 87,805 2,560 4,423 56,154 92,228	Unaudited Half-year 2019 2018 RMB’000 RMB’000 53,594 87,805 2,560 4,423 56,154 92,228
		92,228

71

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

17 INCOME TAX EXPENSE (Continued)

Reconciliation between profit before income tax and the aggregate tax at the rates applicable to profits in the respective entities concerned is set below:

Profit before tax Calculated at applicable income tax rate Effect of preferential tax rate applicable to certain subsidiaries Income not subject to tax Expenses not deductible for taxation purposes Utilisation of previously deductible tax losses for which no deferred income tax assets was recognized Current year deductible temporary differences for which no deferred income tax asset was recognised Current year tax losses for which no deferred income tax asset was recognised Income tax expense	Unaudited Half-year 2019 2018 RMB’000 RMB’000 287,249 393,715 71,812 98,429 — (3,760) (8,234) (9,747) 3,136 7,793 (249) (772) 5,612 (731) (15,923) 1,016 56,154 92,228	Unaudited Half-year 2019 2018 RMB’000 RMB’000 287,249 393,715 71,812 98,429 — (3,760) (8,234) (9,747) 3,136 7,793 (249) (772) 5,612 (731) (15,923) 1,016 56,154 92,228
		98,429 (3,760) (9,747) 7,793 (772) (731) 1,016
		92,228

18 INTERIM DIVIDENDS

No interim dividend was proposed by the Board of Directors of the Company for the half- year ended 30 June 2019 (30 June 2018: Nil).

72

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

19 COMMITMENTS AND CONTINGENT EVENT

The Group’s commitments at the balance sheet date in respect of construction projects are as follows:

Sewage Water Processing Plants Project: – Heifei Taochong Project – Honghu – Dalian Chunliuhe project – Jingu – Karamay – Jinghai project – Beichen – Ningxiang project – Hefei project – Linxia project – Ninghe project – Xianning Yongan project – Yingshang – Changsha project – Honghu project – Gaocheng Project Solid waste Project – Shandong Tancheng – Shandong Yishui Energy Station Project: – Houtai – Heiniucheng Road Tap Water: – Hanshou Project	Contracted but n Unaudited 30 June 2019 RMB’million 507 87 31 28 20 17 14 12 11 7 7 5 5 2 1 — 103 63 3 — — 923	ot provided for Audited 31 December 2018 RMB’million — 5 38 28 20 22 14 13 11 17 5 6 5 2 1 — 97 228 3 16 — 531	Authorised but no Unaudited 30 June 2019 RMB’million 43 118 — — — 49 — 5 — — — — — 67 — 525 203 30 108 — 105 1,253	t contracted for Audited 31 December 2018 RMB’million 586 258 — — — 49 — 6 — — 8 — — 67 — — 245 43 108 — —
				1,370

73

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

20 RELATED PARTY TRANSACTIONS

In addition to the related party information shown elsewhere in the financial statements, the following is a summary of significant related party transactions entered into in the ordinary course of the business between the Group and its related parties during the period.

(i) Income:

Related parties Nature of transaction City Infrastructure Construction and Investment Commission income from contract operation Tianjin Lecheng Properties Limited Income from heating and cooling supply City Infrastructure Construction and Investment Commission income from construction agent service Tianjin Machinery & Electric Equipment Imp. & Exp. Co., Ltd. Income from technical services	Unaudited Half-year 2019 2018 RMB’000 RMB’000 27,736 38,104 12,489 16,612 — 5,105 — 708 40,225 60,529	Unaudited Half-year 2019 2018 RMB’000 RMB’000 27,736 38,104 12,489 16,612 — 5,105 — 708 40,225 60,529
		60,529

(ii) Key management compensation for the half-year ended 30 June 2019 is summarized as follows:

	Unaudited
	Half -year
	2019	2018
	RMB’000	RMB’000
Key management compensation	7,308	7,015
	7,308	7,015

(iii) Receivables from to related parties:

– City Infrastructure Construction and Investment – Tianjin Lecheng Properties Limited – Tianjin City Resource Operation Co., Ltd. – Tianjin Metro Resources Investment Co., Ltd.	Unaudited 30 June 2019 RMB’000 30,703 4,803 381 — 35,887	Audited 31 December 2018 RMB’000 39,523 9,630 381 1,589
		51,123

74

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

20 RELATED PARTY TRANSACTIONS (Continued)

• (iv) Commitment

The Group’s commitments with related parties at the balance sheet date are as follows:

	Unaudited	Audited
	30 June	31 December
	2019	2018
	RMB’000	RMB’000
Guarantee received
City Infrastructure Construction and Investment	129,000	147,000

• (v) Transactions/balances with other state owned enterprises in the PRC

The Group operates in an economic environment currently predominated by enterprises directly or indirectly owned or controlled by the PRC government (hereinafter collectively referred to as ‘state-owned enterprises’).

During the half-year, the Group’s significant transactions with these state controlled entities include processing of sewage water construction and management of related facility processing of tap water and supply of heating. As at 30 June 2019, majority of the Group’s cash and cash equivalents and borrowings are dealt with state controlled banks.

21 BASIS OF PREPARATION OF HALFYEAR REPORT

This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2019 has been prepared in accordance with Accounting Standard HKAS 34 Interim Financial Reporting.

The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the period ended 31 December 2018 and any public announcements made by the Group during the interim reporting period.

The accounting policies adopted are consistent with those of the previous financial period and corresponding interim reporting period, except for the estimation of income tax and the adoption of new and amended standards as set out below.

75

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information (All amounts in RMB thousand unless otherwise stated)

21 BASIS OF PREPARATION OF HALFYEAR REPORT (Continued)

(a) New and amended standards adopted by the Group

A number of new or amended standards became applicable for the current reporting period, and the Group had to change its accounting policies and make retrospective adjustments as a result of adopting HKFRS 16 Leases.

The impact of the adoption of the standard and the new accounting policies are disclosed in note 22 below. The other standards did not have any impact on the Group’s accounting policies and did not require retrospective adjustments.

22 CHANGES IN ACCOUNTING POLICIES

This note explains the impact of the adoption of HKFRS 16 Leases on the Group’s financial statements and discloses the new accounting policies that have been applied from 1 January 2019 in note 22(a) below.

The Group has adopted HKFRS 16 retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassification and arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.

(a) Adjustments recognised on adoption of HKFRS 16

The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

The recognised right-of-use assets relate to the following types of assets:

Land use right Total right-of-use assets	Unaudited 30 June 2019 RMB’000 59,276 59,276	Unaudited 1 January 2019 RMB’000 60,358
		60,358

76

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports I. Prepared in accordance with Hong Kong Financial Reporting Standards

Notes to the Condensed Consolidated Interim Financial Information

(All amounts in RMB thousand unless otherwise stated)

22 CHANGES IN ACCOUNTING POLICIES (Continued)

• (a) Adjustments recognised on adoption of HKFRS 16 (Continued)

• (i) Practical expedients applied

In applying HKFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

• the use of a single discount rate to a portfolio of leases with reasonably similar characteristics

• reliance on previous assessments on whether leases are onerous

• the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases

• the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and

• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

(b) The Group’s leasing activities and how these are accounted for

The Group’s leasing activity only contains land use right. Rental contracts are typically made for fixed periods of 25

to 50 years with no extension option. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants.

Until the 2018 financial year, the leases were classified as land use right.

From 1 January 2019, the leases are recognised as a right-of-use asset.

77

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

II. Prepared in accordance with The PRC Accounting Standards

Consolidated and Company Balance Sheet As at at 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

ASSETS Note Current assets Cash at bank and on hand 4(1) Notes receivable 4(2) Trade receivables 4(3)/13(1) Advances to suppliers 4(4) Other receivables 4(5)/13(2) Inventories 4(6) Current portion of non-current assets 4(8) Other current assets 4(7) Total current assets Non-current assets Long-term receivables 4(8) Long-term equity investments 4(9)/13(3) Other equity instruments investment 4(10) Investment properties 4(11) Fixed assets 4(12) Construction in progress 4(12) Intangible assets 4(13) Other non-current assets 4(7) Total non-current assets TOTAL ASSETS	30 June 2019 Consolidated (Unaudited) 2,040,677 7,272 2,011,968 30,356 58,317 13,967 20,006 256,986 4,439,549 245,067 195,000 2,000 20,510 395,830 266,654 10,777,236 114,322 12,016,619 16,456,168	31 December 2018 Consolidated (Audited) 1,826,201 10,295 2,081,465 23,531 36,162 13,991 22,789 156,688 4,171,122 253,686 195,000 2,000 84,052 346,641 150,939 10,374,827 109,181 11,516,326 15,687,448	30 June 2019 Company (Unaudited) 789,728 — 1,508,357 2,880 144,134 4,496 20,006 657,826 3,127,427 245,067 3,864,160 2,000 — 163,619 3,175 4,029,296 108,832 8,416,149 11,543,576	31 December 2018 Company (Audited) 595,990 — 1,687,179 822 134,560 3,992 22,789 824,650
				3,269,982
				253,686 3,520,705 2,000 63,289 107,316 — 4,092,295 190,519
				8,229,810
				11,499,792

78

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Consolidated and Company Balance Sheet

As at at 30 June 2019

(All amounts in RMB thousand unless otherwise stated)

		30 June	31 December	30 June	31 December
		2019	2018	2019	2018
LIABILITIES AND OWNERS’ EQUITY	Note	Consolidated	Consolidated	Company	Company
		(Unaudited)	(Audited)	(Unaudited)	(Audited)
Current liabilities
Short-term borrowings	4(17)	200,000	200,000	200,000	200,000
Trade payables	4(15)	220,762	176,398	62,306	46,500
Contract liabilities	4(15)	534,107	469,185	51,021	4,541
Taxes payable	4(15)	54,215	68,893	—	250
Other payables	4(15)	1,202,031	1,458,045	962,455	961,291
Accrued payroll	4(16)	11,557	53,942	8,310	24,868
Current portion of non-current liabilities	4(17)	771,230	243,369	580,696	81,417
Total current liabilities		2,993,902	2,669,832	1,864,788	1,318,867
Non-current liabilities
Long-term borrowings	4(17)	2,283,376	2,051,953	893,782	1,318,713
Debentures payable	4(17)	1,796,872	1,796,363	1,796,872	1,796,363
Long-term payables	4(17)	258,672	266,367	258,672	266,367
Provisions	4(18)	10,069	10,069	10,069	10,069
Deferred income	4(19)	2,110,298	2,101,085	1,637,392	1,662,338
Deferred tax liabilities	4(20)	141,370	138,812	69,885	67,841
Other non-current liabilities	4(17)	38,000	38,000	290,000	290,000
Total non-current liabilities		6,638,657	6,402,649	4,956,672	5,411,691
Total liabilities		9,632,559	9,072,481	6,821,460	6,730,558
Shareholder’s equity
Share capital	4(21)	1,427,228	1,427,228	1,427,228	1,427,228
Capital surplus	4(22) (a)	431,024	431,024	380,788	380,788
Surplus reserve	4(22) (b)	517,107	517,107	517,107	517,107
Undistributed profits	4(22) (c)	3,510,061	3,442,844	2,396,993	2,444,111
Total equity attributable to equity
owners of the parent		5,885,420	5,818,203	4,722,116	4,769,234
Minority interests		938,189	796,764	—	—
Total owners’ equity		6,823,609	6,614,967	4,722,116	4,769,234
TOTAL LIABILITIES AND
SHAREHOLDER’S EQUITY		16,456,168	15,687,448	11,543,576	11,499,792

The accompanying notes form an integral part of these financial statements.

Company representative:

Liu Yujun

Person in charge of accounting function: Peng Yilin

Person in charge of accounting department:

Liu Tao

79

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Consolidated and Company Income Statements For the year ended at 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

Item Note 1. Revenue 4(23)/14(4) Less: Cost of sales 4(23)/14(4) Taxes and surcharges 4(24) Selling and distribution expenses 4(25) General and administrative expenses 4(25) Research and development expenses 4(26) Financial expenses-net 4(27) Including: interest expense interest income Add: Other income 4(28) Investment gains 4(29)/13(5) Including: Share of profit of associates Credit impairment losses 4(30) Gains on disposals of assets 4(31) 2. Operating profit Add: Non-operating income 4(32) Less: Non-operating expenses 4(33) 3. Total profit Less: Income tax expenses 4(34) 4. Net profit Classified by continuity of operations Net profit from continuing operations Net profit from discontinued operations Classified by ownership of the equity Minority interests Attributable to equity owners of the Company 5. Other comprehensive income after deduction of impact of income tax 6. Total comprehensive income Attributable to equity owners of the Company Attributable to minority shareholders Earnings per share (in RMB Yuan) Basic Diluted	Six Months Ended 30 June 2019 Consolidated (Unaudited) 1,224,716 (814,360) (18,907) (1,987) (68,032) (3,270) (93,123) (106,590) 10,980 60,744 — — 98 1,201 287,080 2,549 (2,380) 287,249 (56,154) 231,095 231,095 — 12,592 218,503 231,095 218,503 12,592 0.15 0.15	Six Months Ended 30 June 2018 Consolidated (Unaudited) 1,107,798 (643,812) (26,466) (2,730) (55,631) (5,045) (76,249) (88,582) 11,246 89,615 200 — 2,923 — 390,603 4,099 (987) 393,715 (92,228) 301,487 301,487 — 18,922 282,565 301,487 282,565 18,922 0.20 0.20	Six Months Ended 30 June 2019 Company (Unaudited) 537,958 (349,007) (5,697) — (38,019) — (74,797) (82,147) 6,085 34,098 19,301 — — — 123,837 1,092 (2,379) 122,550 (18,382) 104,168 104,168 — — 104,168 104,168 104,168 — — —	Six Months Ended 30 June 2018 Company (Unaudited) 501,691 (251,247) (11,191) — (31,205) — (70,464) (79,385) 7,910 57,549 12,076 — — —
				207,209 14 (674)
				206,549 (51,587)
				154,962 154,962 — — 154,962
				154,962
				154,962 —
				— —

The accompanying notes form an integral part of these financial statements.

Company representative:

Liu Yujun

Person in charge of accounting function: Peng Yilin

Person in charge of accounting department:

Liu Tao

80

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports

II. Prepared in accordance with the PRC Accounting Standards

Consolidated and Company Cash Flow Statements

For the year ended at 30 June 2019

(All amounts in RMB thousand unless otherwise stated)

Item Note 1. Cash flows from operating activities Cash received from sales of goods or rendering of services Refund of taxes and surcharges Cash received relating to other operating activities 4(36) (c) Sub-total of cash inflows Cash paid for goods and services Cash paid to and on behalf of employees Payments of taxes and surcharges Cash paid relating to other operating activities 4(36) (d) Sub-total of cash outflows Net cash flows from operating activities 4(36) (a) 2. Cash flows from investing activities Cash received from returns on investments Net cash received from disposal of fixed assets 4(36) (e) Cash received relating to other investing activities Sub-total of cash inflows Cash paid to acquire fixed assets, intangible assets and other long-term assets Cash paid to acquire investments Cash paid relating to other investing activities Sub-total of cash outflows Net cash flows from investing activities	Six Months Ended 30 June 2019 Consolidated (Unaudited) 1,487,655 17,864 173,011 1,678,530 (534,015) (180,613) (161,893) (72,302) (948,823) 729,707 — 30 5,174 5,204 (1,280,910) — (3,900) (1,284,810) (1,279,606)	Six Months Ended 30 June 2018 Consolidated (Unaudited) 1,030,672 54,608 195,825 1,281,105 (424,689) (156,876) (307,771) (53,779) (943,115) 337,990 200 — 18,900 19,100 (699,252) (396,957) (4,101) (1,100,310) (1,081,210)	Six Months Ended 30 June 2019 Company (Unaudited) 851,851 5,604 23,558 881,013 (272,236) (73,804) (45,583) (41,789) (433,412) 447,601 — — 756,820 756,820 (150,369) (343,455) (499,470) (993,294) (236,474)	Six Months Ended 30 June 2018 Company (Unaudited) 604,314 24,818 96,894 726,026 (158,492) (68,703) (114,565) (28,480) (370,240) 355,786 14,080 — 186,346 200,426 (185,836) (496,275) (405,601) (1,087,712) (887,286)

81

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

II. Prepared in accordance with the PRC Accounting Standards

Consolidated and Company Cash Flow Statements For the year ended at 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

		Six Months	Six Months	Six Months	Six Months
		Ended	Ended	Ended	Ended
		30 June 2019	30 June 2018	30 June 2019	30 June 2018
Item	Note	Consolidated	Consolidated	Company	Company
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
3. Cash flows from financing activities
Cash received from borrowings		1,244,516	1,386,695	474,069	1,250,000
Cash received from issuance of debentures		—	1,100,000	—	1,100,000
Cash received from capital contributions		129,224	63,896	—	—
Including: Cash received from capital contributions
by minority shareholders of subsidiaries		129,224	63,896	—	—
Sub-total of cash inflows		1,373,740	2,550,591	474,069	2,350,000
Cash repayments of borrowings		(496,037)	(1,342,192)	(400,000)	(1,199,000)
Cash payments for distribution of interest expenses		(111,076)	(81,533)	(91,458)	(68,302)
Payments for distribution of dividends or profits		(978)	—	—	—
Including: Dividends and profits paid to minority
shareholders by subsidiaries		—	—	—	—
Sub-total of cash outflows		(608,091)	(1,423,725)	(491,458)	(1,267,302)
Net cash flows from financing activities		765,649	1,126,866	(17,389)	1,082,698
4. Effect of foreign exchange rate changes on cash		—	—	—	—
5. Net (decrease)/increase in cash		215,750	383,646	193,738	551,198
Add: Cash at beginning of year		1,808,543	1,893,689	586,888	779,808
6. Cash at end of year	4(36)(b)	2,024,293	2,277,335	780,626	1,331,006

The accompanying notes form an integral part of these financial statements.

Company representative: Liu Yujun

Person in charge of accounting function: Peng Yilin

Person in charge of accounting department:

Liu Tao

82

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Consolidated Statement of Changes in Owners’ Equity

For the six months ended 30 June 2019

(All amounts in RMB thousand unless otherwise stated)

		Attributable to owners	Attributable to owners	of theparent	of theparent
							Total
			Capital	Surplus	Undistributed	Minority	shareholders’
Item	Note	Share capital	surplus	reserve	profits	interests	equity
Balance at 31 December 2017 (Audited)		1,427,228	399,115	479,907	2,810,790	296,736	5,413,776
Changes in accounting policies		—	—	—	168,086	—	168,086
Balance at 1 January 2018 (Audited)		1,427,228	399,115	479,907	2,978,876	296,736	5,581,862
Movements for the period ended
30 June 2018
Total comprehensive income
Net profit		—	—	—	282,565	18,922	301,487
Total comprehensive income for the year		—	—	—	282,565	18,922	301,487
Capital contribution by shareholders		—	16,818	—	—	366,548	383,366
Profit distribution
Appropriation to surplus reserves
Dividend distribution to shareholders		—	—	—	—	—	—
Balance at 30 June 2018 (Unaudited)		1,427,228	415,933	479,907	3,261,441	682,206	6,266,715
Balance at 31 December 2018 (Audited)		1,427,228	431,024	517,107	3,442,844	796,764	6,614,967
Changes of accounting policies		—	—	—	—	—	—
Balance at 1 January 2019 (Unaudited)		1,427,228	431,024	517,107	3,442,844	796,764	6,614,967
Movements for the period ended 30 June 2019
Total comprehensive income
Net profit		—	—	—	218,503	12,592	231,095
Total comprehensive income for the year		—	—	—	218,503	12,592	231,095
Capital contribution by shareholders		—	—	—	—	129,224	129,224
Profit distribution
Dividend distribution to shareholders	4(22)(c)	—	—	—	(151,286)	(391)	(151,677)
Balance at 30 June 2019 (Unaudited)		1,427,228	431,024	517,107	3,510,061	938,189	6,823,609

The accompanying notes form an integral part of these financial statements.

Company representative:

Liu Yujun

Person in charge of accounting function: Peng Yilin

Person in charge of accounting department:

Liu Tao

83

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports

II. Prepared in accordance with the PRC Accounting Standards

Company Statement of Changes in Owners’ Equity For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

					Total
				Undistributed	shareholders’
Item	Share capital	Capital surplus	Surplus reserve	profits	equity
Balance at 31 December 2017 (Audited)	1,427,228	380,788	479,907	2,111,266	4,399,189
Changes in accounting policies	—	—	—	(1,964)	(1,964)
Balance at 1 January 2018 (Audited)	1,427,228	380,788	479,907	2,109,302	4,397,225
Movements for the period ended 30 June 2018
Total comprehensive income
Net profit	—	—	—	154,962	154,962
Total comprehensive income for the year	—	—	—	154,962	154,962
Profit distribution
Appropriation to surplus reserves	—	—	—	—	—
Dividend distribution to shareholders	—	—	—	—	—
Balance at 30 June 2018 (Unaudited)	1,427,228	380,788	479,907	2,264,264	4,552,187
Balance at 31 December 2018 (Audited)
Changes of accounting policies	1,427,228	380,788	517,107	2,444,111	4,769,234
Balance at 1 January 2019 (Unaudited)	1,427,228	380,788	517,107	2,444,111	4,769,234
Movements for the period ended 30 June 2019
Total comprehensive income
Net profit	—	—	—	104,168	104,168
Total comprehensive income for the year	—	—	—	104,168	104,168
Profit distribution
Appropriation to surplus reserves	—	—	—	—	—
Dividend distribution to shareholders	—	—	—	(151,286)	(151,286)
Balance at 30 June 2019 (Unaudited)	1,427,228	380,788	517,107	2,396,993	4,722,116

The accompanying notes form an integral part of these financial statements.

Company representative:

Liu Yujun

Person in charge of accounting function: Peng Yilin

Person in charge of accounting department: Liu Tao

84

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

1 GENERAL INFORMATION

Tianjin Capital Environmental Protection Group Company Limited (the “Company”) was established on the basis of Tianjin Bohai chemical industry (Group) Company Limited (“Bohai Chemical Industry”). Bohai Chemical Industry was established on 8 June 1993 in Tianjin, the People’s Republic of China (the ‘PRC’), listed in Hong Kong Stock Exchange (“H share”) in May 1994 and Shanghai Stock Exchange (“A share”) in June 1995. Bohai Chemical Industry appeared significant losses in 1998 and 1999. Approved by Tianjin Government, the Company had completed the equity and assets reorganization of Bohai Chemical Industry at the end of year 2000. The address of the Company’s registered office is No. 45 Guizhou Road, Heping District, Tianjin. The parent company and ultimate holding company of the Company are Tianjin Municipal Investment Company Limited (“Municipal Investment”) and Tianjin City Infrastructure Construction and Investment Group Company Limited (“City Infrastructure Construction and Investment”), respectively. As at 30 June 2019, the Company’s total share capital is RMB1,427 million with a par value of RMB1 per share.

The principal activities of the Company and its subsidiaries (the “Group”) include processing of sewage water, construction and management of related facilities, supply of tap water and recycled water, supply of heating and cooling, and construction and management of related facilities as described below:

(a) Processing of sewage water

Pursuant to relevant agreements (“Service concession right agreements”), the Group currently provides sewage water processing services via the following plants:

Location	Agreement date	Authorized by
Guiyang, Guizhou	16 September 2004	Guiyang City Administration Bureau
Baoying, Jiangsu	13 June 2005	Baoying Construction Bureau
Chibi, Hubei	15 July 2005	Chibi Construction Bureau
Fuyang, Anhui	18 December 2005	Fuyang Construction Committee
Qujing, Yunnan	25 December 2005	Qujing Construction Bureau (Renamed Qujing Housing and
		Urban Construction Bureau)
Honghu, Hubei	29 December 2005	Honghu Construction Bureau
Hangzhou, Zhejiang	20 November 2006	Hangzhou Sewage Company (Changed to Hangzhou
		Municipal Facilities Supervision Center)
Jinghai, Tianjin	12 September 2007	Tianjin Tianyu Science Technology Park
Wendeng, Shandong	19 December 2007	Wendeng Construction Bureau
Xi’an, Shaanxi	18 March 2008	Xi’an Infrastructure Investment Group
Anguo, Hebei	14 October 2008	An Guo Municipal Government
Xianning, Hubei	16 October 2008	Xianning Construction Committee
Yingdong, Anhui	10 August 2009	Fuyang Yingdong Construction Bureau
Qujing, Yunnan	16 August 2011	QuJing Housing and Urban Construction Bureau
Chaohu, Anhui	25 August 2011	Hanshan Housing and Urban Construction Bureau
Jingu, Tianjin	18 February 2014	Tianjin Urban-rural Construction Commission (“TUCC”) and
		Tianjin Water Authority Bureau (“TWAB”)
Xianyanglu, Tianjin	18 February 2014	TUCC and TWAB

85

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

1 GENERAL INFORMATION (Continued)

• (a) Processing of sewage water (Continued)

Location	Agreement date	Authorized by
Dongjiao, Tianjin	18 February 2014	TUCC and TWAB
Beicang, Tianjin	18 February 2014	TUCC and TWAB
Yingshang, Anhui	16 June 2016	Yingshang Housing and Urban Construction Bureau
Karamay, Xinjiang	4 November 2016	Karamay Construction Bureau
Linxia, Gansu	13 May 2017	Linxia Housing and Urban Construction Bureau
Ningxiang, Changsha	5 June 2017	Ningxiang Economic and Technological Development
		Zone Management Committee
Hefei, Anhui	16 June 2017	Hefei Urban Construction Committee
Dalian, Liaoning	1 November 2017	Dalian Urban Construction Bureau
Bayannur, Inner Mongolia	12 December 2017	Bayannur Water Bureau and
		Bayannur Hetao Water Group Company, Ltd
Ningxiang, Changsha	27 April 2018	Ningxiang Economic and Technological Development
		Zone Management Committee
Honghu, Hubei	9 June 2018	Honghu Housing and Urban Construction Bureau
Shibing, Guizhou	12 July 2018	Shibing Water Bureau
Hefei, Anhui	28 November 2018	Hefei Urban Construction Committee
Hanshou, Hunan	11 March 2019	Hanshou Water Bureau
Gaocheng, Hebei	2 April 2019	Hebei Gaocheng Economic and Technological
		Development Zone Management Committee

The Group provides sewage treatment services in accordance with the Concession Agreements and is entitled to charge for the service based on a pre-determined rate.

(b) Construction and management of the sewage water processing facilities

The Group provides services including design, construction and operations of sewage water processing facility, as well as financing services, construction and transfer of sewage water processing facility projects.

(c) Supply of tap water

Pursuant to relevant agreements, the Group provides tap water supply service initially at the pre-determined rate and the price as pre-determined may be revised subsequently taking into account various cost factors.

(d) Recycled water business

The Group’s recycled water business includes developing, constructing and operating of recycled water projects, production and sale of recycled water, and provision of related research and development and technical consultation services.

86

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

1 GENERAL INFORMATION (Continued)

(e) Heating and cooling supply services

The heating and cooling supply services include design, construction, operations and transfer of centralized heating and cooling infrastructures, and provision of heating and cooling services.

• (f) Subsidiaries included in the scope of consolidation for the year are set out in Note 5.

• (g) These financial statements were approved by the Company’s Board of Directors on 26 August 2019.

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

The Group determines the specific accounting policies and accounting estimates according to the production management characteristics, which are mainly reflected in the measurement of expected credit losses of receivables and contract assets (Note 2(8)), depreciation and amortization of fixed assets and intangible assets (Note 2(12) and (15)), recognition and amortization of concession rights (Note 2(15)(b)), timing of revenue recognition (Note 2(20)) and so on.

Key assumption adopted by the Group in determining significant accounting policies are set out in Note 2(25).

(1) Basis of preparation

The financial statements are prepared in accordance with the Accounting Standard for Business Enterprises – Basic Standard, and the specific accounting standards and other relevant regulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter collectively referred to as “the Accounting Standards for Business Enterprises” or “CAS”) and Circular of the China Securities Regulatory Commission on the Issuing of the Rules for the Information Disclosure and Compilation of Companies Publicly Issuing Securities No. 15 – General Provisions on Financial Statements.

The financial statements are prepared on a going concern basis.

(2) Statement of compliance with Accounting Standard for Business Enterprise

The financial statements of the Company for the six months ended 30 June 2019 are in compliance with the Accounting Standard for Business Enterprise and truly and completely present the consolidated and the Company’s financial position of the Company as of 30 June 2019 and of their financial performance, cash flows and other information for the year then ended.

87

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

(3) Accounting year

The Company’s accounting year starts on 1 January and ends on 31 December. This financial statement is dated from 1 January 2019 to 30 June 2019.

(4) Recording currency

The Company’s recording currency is Renminbi (RMB). The recording currency of the Company’s subsidiaries is determined based on the primary economic environment in which they operate, and except the recording currency of Tianjin Capital Environmental Protection (Hong Kong) Co., Ltd. which is HK dollar, the remaining subsidiary companies’ recording currency is RMB. The financial statements are presented in RMB.

(5) Preparation of consolidated financial statements

The consolidated financial statements comprise the financial statements of the Company and all its subsidiaries.

Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases.

In preparing the consolidated financial statements, the financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries.For subsidiaries acquired from business combinations not under common control, the financial statements are adjusted based on the fair value of the identifiable net assets at the acquisition date.

88

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (5) Preparation of consolidated financial statements (Continued)

All significant intra-group balances, transactions and unrealized profits are eliminated in the consolidated financial statements. The portion of subsidiaries’ equity and the portion of a subsidiaries’ net profits and losses and comprehensive incomes for the period not attributable to Company are recognised as minority interests and presented separately in the consolidated financial statements under equity, net profits and total comprehensive income respectively. Unrealized profits and losses resulting from the sale of assets by the Company to its subsidiaries are fully eliminated against net profit attributable to owners of the parent. Unrealized profits and losses resulting from the sale of assets by a subsidiary to the Company are eliminated and allocated between net profit attributable to owners of the parent and minority interests in accordance with the allocation proportion of the parent in the subsidiary. Unrealized profits and losses resulting from the sale of assets by one subsidiary to another are eliminated and allocated between net profit attributable to owners of the parent and minority interests in accordance with the allocation proportion of the parent in the subsidiary. Unrealized profits and losses resulting from the sale of assets by one subsidiary to another are eliminated and allocated between net profit attributable to owners of the parent and minority interests in accordance with the allocation proportion of the parent in the subsidiary.

If the accounting treatment of a transaction which considers the Group as an accounting entity is different from that considers the Company or its subsidiaries as an accounting entity, it is adjusted from the perspective of the Group.

(6) Cash

Cash comprise cash on hand and deposits that can be readily drawn on demand.

89

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (7) Foreign currency translation

  • (a) Foreign currency transactions

Foreign currency transactions are translated into recording currency using the exchange rates prevailing at the dates of the transactions.

At the balance sheet date, monetary items denominated in foreign currencies are translated into recording currency using the spot exchange rates on the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current year, except for those attributable to foreign currency borrowings that have been taken out specifically for the acquisition or construction of qualifying assets, which are capitalized as part of the cost of those assets. Non-monetary items denominated in foreign currencies that are measured at historical costs are translated at the balance sheet date using the spot exchange rates at the date of the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

• (b) Translation of foreign currency financial statements

The asset and liability items in the balance sheets for overseas operations are translated at the spot exchange rates on the balance sheet date. Among the shareholders’ equity items, the items other than “undistributed profits” are translated at the spot exchange rates of the transaction dates. The income and expense items in the income statements of overseas operations are translated at the spot exchange rates of the transaction dates. The differences arising from the above translation are presented in other comprehensive income. The cash flows of overseas operations are translated at the spot exchange rates on the dates of the cash flows. The effect of exchange rate changes on cash is presented separately in the cash flow statement.

90

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

(8) Financial instruments

Financial instruments refer to the contracts that form one party’s financial assets and form other parties’ financial liabilities or equity instruments.The Group recognise financial assets or financial liabilities when become one party of the financial instruments contracts.

• (a) Financial assets

• (i) Classification and measurement

Based on the business model for financial asset management and the contractual cash flow characteristics of financial assets, the Group classifies the financial assets into: (1) financial assets measured at amortised cost; (2) financial assets measured at fair value and through other comprehensive income; (3) financial assets measured at fair value and through profit or loss.

Financial assets are initially recognised at fair value. For financial assets at fair value through profit and loss, the related transaction costs are directly recognised in profit or loss. For other financial assets, the related transaction costs are included in initially recognised amounts. Notes and trade receivables arising from sales of products or rendering of services (excluding or without regard to significant financing components) are initially recognised at the consideration that is entitled to be charged by the Group as expected.

Debt instruments

Debt instruments held by the Group are those meet the definition of a financial liability from the issuer’s perspective and are measured at the following methods:

91

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (8) Financial instruments (Continued)

  • (a) Financial assets (Continued)

    • (i) Classification and measurement (Continued)

Measured at amortised cost:

The Group’s business model for financial asset management aims to receive contractual cash flows. The contractual cash flow characteristics of such financial assets are consistent with basic loan arrangement, which means the cash flow generated at certain date is only the payment for the principal and the corresponding interest based on unpaid principal. The interest income of such financial assets is recognised using the effective interest method. The Group’s financial assets mainly include cash at bank and on hand, Notes receivable, trade receivables, other receivables, debt investments and long-term receivables. Debt investments and long-term receivables with maturities no more than one year (inclusive) at the balance sheet date are included in the current portion of non-current assets; debt investments with maturities of no more than one year (inclusive) when the investments were made are included in other current assets.

Equity instruments

The Group designates non-traded investments in equity instrument as financial assets at FVOCI, and present as other investments in equity instrument. Relevant dividend income of these financial assets are recognised in profit or loss.

92

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (8) Financial instruments (Continued)

• (a) Financial assets (Continued)

  • (ii) Impairment of financial assets

The Group recognises the loss provision based on expected credit losses (“ECL”) for financial assets and contract assets measured at amortised cost.

The Group calculates the probability weighted amount of the present value of differences between the cash flows receivable by the contract and the cash flows expected to be received, and recognises the ECL by considering the reasonable and well-founded information on past events, current conditions and forecasts of future economic conditions, taking the risk of default as a weight.

As at each balance sheet date, the Group measures the ECL of financial instruments at different stages respectively. Financial instrument that had no significant increase in credit risk since initial recognition belongs to “Stage 1”, and the Group makes loss provision based on the ECL in the following 12 months. Financial instrument that had a significant increase but with no credit impairment since initial recognition belongs to “Stage 2”, and the Group makes the loss provision based on the lifetime ECL. Financial instrument that suffered credit impairment since initial recognition belongs to “Stage 3”, and the Group makes the loss provision based on the lifetime ECL.

For the financial instrument with lower credit risk on the balance sheet date, the Group assumes that its credit risk had no significant increase since initial recognition, and makes the loss provision based on the ECL in the following 12 months.

For financial instruments belonging to “Stage 1”, “Stage 2” and those with lower credit risk, the interest income is calculated based on its carrying amount (including impairment provision) and effective interest rate. For the financial instrument belonging to “Stage 3”, the interest income is calculated based on the amortised cost (which is made after carrying amount less the impairment provision) and effective interest rate.

93

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (8) Financial instruments (Continued)

  • (a) Financial assets (Continued)

    • (ii) Impairment of financial assets (Continued)

For notes receivable, trade receivables and contract assets, regardless of existence of the significant financing component, the Group makes the loss provision according to the lifetime ECL.

When the expected credit loss cannot be assessed at a reasonable cost for an individual financial asset, the Group divides receivables into certain groupings based on credit risk characteristics, then pursuant to which, calculates the ECL. Basis for grouping is as follows:

Banker’s acceptance notes group Banker’s acceptance from bank under low risk Government clients group Government clients except those in provincial capitals and municipalities Other clients group Other clients Project deposit group Project deposits Others group Other receivables excluding VAT refund and project deposits

For trade receivables that are classified into above groupings, the Group calculates ECL by preparing crossreference between overdue days of trade receivables and lifetime ECL rate with reference to historical credit loss experience, in combination with the current situation and forecasts of future economic conditions.

For notes receivable that are classified into above groupings, the Group calculates ECL using exposure at default (“EAD”) and lifetime ECL rate with reference to historical credit loss experience, in combination with the current situation and forecasts of future economic conditions.

For other receivables that are classified into above groupings, the Group calculates ECL using EAD and lifetime ECL rate or ECL rate in the following 12 months with reference to historical loss experience, in combination with the current situation and forecasts of future economic conditions.

The Group included the provision for or reversal of loss provision into profit or loss.

94

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (8) Financial instruments (Continued)

(a) Financial assets (Continued)

(iii) Derecognition of financial assets

A financial asset is derecognised when any of the below criteria is met: (1) the contractual rights to receive the cash flows from the financial asset expire; (2) the financial asset has been transferred and the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee; (3) the financial asset has been transferred and the Group has not retained control of the financial asset, although the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset.

On derecognition of other investments in equity instrument, the difference between the carrying amount and the sum of the consideration received and the cumulative changes in fair value that had been recognised directly in other comprehensive income, is recognised in retained earnings; on derecognition of other financial assets, the difference between the carrying amount and the sum of the consideration received and the cumulative changes in fair value that had been recognised directly in other comprehensive income, is recognised in profit or loss.

(b) Financial liabilities

Financial liabilities are classified into the following categories at initial recognition: financial liabilities measured at amortised cost and financial liabilities at fair value through profit or loss.

The Group’s financial liabilities mainly refer to financial liabilities measured at amortised cost, including notes payable, trade payables, other payables, borrowings and debentures payable. Such financial liabilities are initially recognised at fair value, net of transaction costs incurred, and subsequently measured using effective interest method. Financial liabilities of which the period is within one year (inclusive) are classified as the current liabilities; the period is over one year while will be due within one year (inclusive) since the balance sheet date are classified as current portion of non-current liabilities; and the others are classified as non-current liabilities.

A financial liability is derecognised when all or part of the obligation is extinguished. The difference between the carrying amount of a financial liability extinguished and the consideration paid, shall be recognised in profit or loss.

95

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (8) Financial instruments (Continued)

  • (c) Determination of fair value of financial instruments

The fair value of a financial instrument that is traded in an active market is determined at the quoted price in the active market. The fair value of a financial instrument that is not traded in an active market is determined by using a valuation technique. In valuation, the Group adopts valuation techniques applicable in the current situation and supported by adequate available data and other information, selects inputs with the same characteristics as those of assets or liabilities considered in relevant transactions of assets or liabilities by market participants, and gives priority to the use of relevant observable inputs. When relevant observable inputs are not available or feasible, unobservable inputs are adopted.

(9) Inventories

• (a) Classification

Inventories include raw materials, finished goods, spare parts and low cost consumables, and are measured at the lower of cost and net realizable value.

• (b) Costing of inventories

Costs for raw materials, finished goods are determined using the weighted average method. The cost of finished goods comprises raw materials, direct labor and systematically allocated production overhead based on the normal production capacity.

• (c) Basis for determining net realisable values of inventories and method for making provision for decline in the value of inventories

Provision for decline in the value of inventories is determined at the excess amount of the carrying amounts of the inventories over their net realisable value. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes.

• (d) The Group adopts the perpetual inventory system.

• (e) Spare parts and low cost consumables are expensed when used.

96

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

(10) Long-term equity investments

Long-term equity investments comprise the Company’s long-term equity investments in its subsidiaries, and the Group’s long-term equity investments in its joint ventures and associates.

Subsidiaries are the investees over which the Company is able to exercise control. Associate are the investee over which the Group has significant influence on their financial and operating policy decisions.

Investments in subsidiaries are presented in the Company’s financial statements using the cost method, and are adjusted to the equity method when preparing the consolidated financial statements. Investments in joint ventures and associates are accounted for using the equity method.

• (a) Determination of investment cost

For long-term equity investment acquired from business combinations not under common control, the cost of the combination is the investment cost of the long-term equity investment.

For long-term equity investment acquired by payment in cash, the initial investment cost shall be the purchase price actually paid.

• (b) Subsequent measurement and recognition of related profit and loss

Long-term equity investments accounted for using the cost method, are measured at the initial investment costs. Cash dividends or profit distribution declared by the investees are recognised as investment income in profit or loss.

Long-term equity investments accounted for using the equity method, where the initial investment cost exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially measured at cost; where the initial investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference is included in profit or loss for the current year and the cost of the long-term equity investment is adjusted upwards accordingly.

97

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (10) Long-term equity investments (Continued)

  • (b) Subsequent measurement and recognition of related profit and loss (Continued)

Under the equity method of accounting, the Group recognises the investment income according to its share of net profit or loss of the investee. The Group does not recognise further losses when the carrying amounts of the long-term equity investment together with any long-term interests that, in substance, form part of the Group’s net investment in investees are reduced to zero. However, if the Group has obligations for additional losses and the criteria with respect to recognition of provisions under the accounting standards on contingencies are satisfied, the Group continues recognising the investment losses and the provisions at the amount it expects to undertake. The Group’s share of the changes in investee’s owner’s equity other than those arising from the net profit or loss, other comprehensive income and profit distribution is recognised in capital surplus with a corresponding adjustment to the carrying amounts of the long-term equity investment. The carrying amount of the investment is reduced by the Group’s share of the profit distribution or cash dividends declared by the investees. Unrealised gains or losses on transactions between the Group and its investees are eliminated to the extent of the Group’s equity interest in the investees, based on which the investment income or losses are recognised. Any losses resulting from transactions between the Group and its investees, which are attributable to asset impairment losses are not eliminated.

• (c) Basis for determination of control, joint control and significant influence over investees

Control is the right over the investee that entitles enjoy variable returns from their involvement in the investee and the ability to exert the right to affect those returns.

Joint control is agreed sharing of control over an arrangement, and a decision relating to any activity under the arrangement can be made only when the parties sharing the control reach the unanimous agreement.

Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

• (d) Impairment of long-term equity investments

The carrying amounts of long-term equity investments in subsidiaries, joint ventures and associates are reduced to the recoverable amounts when the recoverable amounts are below their carrying amounts (Note 2(16)).

98

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

(11) Investment properties

Investment properties, including buildings that are held for the purpose of leasing, are measured initially at cost. Subsequent expenditures incurred in relation to an investment property are included in the cost of the investment property when it is probable that the associated economic benefits will flow to the Group and their costs can be reliably measured; otherwise, the expenditures are recognised in profit or loss in the year in which they are incurred.

The Group adopts the cost model for subsequent measurement of investment properties. Buildings are depreciated or amortized to their estimated net residual values over their estimated useful lives. The estimated useful lives, the estimated net residual values that are expressed as a percentage of cost and the annual depreciation rates of investment properties are as follows:

	Estimated	Estimated net	Annual
	useful lives	residual values	depreciation rates
Buildings	40-50 years	5%	1.9%-2.4%

When an investment property is transferred to owner-occupied properties, it is reclassified as fixed asset at the date of the transfer. When an owner-occupied property is transferred out for earning rentals or for capital appreciation, the fixed asset is reclassified as investment properties at its carrying amount at the date of the transfer.

The investment property’s estimated useful life, net residual value and depreciation method applied are reviewed and adjusted as appropriate at each year-end.

An investment property is derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The net amount of proceeds from sale, transfer, retirement or damage of an investment property after its carrying amount and related taxes and expenses is recognised in profit or loss for the current year.

The carrying amount of an investment property is reduced to the recoverable amount if the recoverable amount is below the carrying amount (Note 2(16)).

99

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (12) Fixed assets

  • (a) Recognition and initial measurement of fixed assets

Fixed assets comprise buildings and structures, machinery and equipment, motor vehicles and others.

Fixed assets are recognised when it is probable that the related economic benefits will flow to the Group and the costs can be reliably measured. Fixed assets purchased or constructed by the Group are initially measured at cost at the acquisition date.

Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Group and the related cost can be reliably measured. The carrying amount of the replaced part is derecognised. All the other subsequent expenditures are recognised in profit or loss in the year in which they are incurred.

• (b) Depreciation methods of fixed assets

Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets that have been provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.

The estimated useful lives, the estimated net residual values expressed as a percentage of cost and the annual depreciation rates of fixed assets are as follows:

	Estimated	Estimated net	Annual
	useful lives	residual values	depreciation rates
Buildings and structures	10-50 years	0%-5%	1.9%-10%
Machinery and equipment	10-20 years	0%-5%	4.8%-10%
Motor vehicles and others	5-10 years	0%-5%	9.5%-20%

Plants and pipelines network are included in buildings with estimated useful lives of 25 years.

The estimated useful life and the estimated net residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at each year-end.

100

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (12) Fixed assets (Continued)

  • (c) The carrying amount of a fixed asset is reduced to the recoverable amount when the recoverable amount is below the carrying amount (Note 2(16)).

  • (d) Disposal of fixed assets

A fixed asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds from disposals on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or loss for the current year.

(13) Construction in progress

Construction in progress is measured at actual cost. Actual cost comprises construction costs, installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation begins from the following month. The carrying amount of construction in progress is reduced to the recoverable amount when the recoverable amount is below the carrying amount (Note 2(16)).

(14) Borrowing costs

The borrowing costs that are directly attributable to the acquisition and construction of an asset that needs a substantially long period of time for its intended use commence to be capitalized and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use and the borrowing costs incurred thereafter are recognised in profit or loss for the current year. Capitalisation of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.

For the specific borrowings obtained for the acquisition or construction of an asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by deducting any interest income earned from depositing the unused specific borrowings in the banks or any investment income arising on the temporary investment of those borrowings during the capitalisation period.

101

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (14) Borrowing costs (Continued)

For the general borrowings obtained for the acquisition or construction of an asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by applying the weighted average effective interest rate of general borrowings, to the weighted average of the excess amount of cumulative expenditures on the asset over the amount of specific borrowings. The effective interest rate is the rate at which the estimated future cash flows during the period of expected duration of the borrowings or applicable shorter period are discounted to the initial amount of the borrowings.

(15) Intangible assets

Intangible assets include land use rights, concession rights, technical know-how and software, and are measured at cost.

(a) Land use rights

Land use rights are amortized on the straight-line basis over their approved use period of 25-50 years. If the acquisition costs of the land use rights and the buildings and structures located thereon cannot be reasonably allocated between the land use rights and the buildings, all of the acquisition costs are recognised as fixed assets.

(b) Concession rights

As described in Note 1(a) and (e), the Group cooperates with government or its subsidiaries in the development, financing, operation and maintenance of facilities for public services (concession services) over a specified period of time (concession service period). The Group has access to operating the facilities and providing concession services in accordance with the terms specified in the arrangement, and transfers the facilities to the government at the end of the concession service period.

The Service concession right agreement sets out performance standards and price adjustment mechanism to clarify the scope of concession services of the Group. The concession service arrangement is within the scope of Interpretations of Accounting Standards for Business Enterprises No. 2, such assets under the concession arrangement can be recognised as intangible assets or financial assets. The operator shall recognise an intangible asset to the extent that it receives a right (concession) to charge users of the public service and shall recognise a financial asset to the extent that it receives unconditional payments or guarantee for minimum charge from the approving authority. Rights in relation to concession services are recognised as intangible assets- concession rights by the Group, which are amortized on a straight-line basis over the terms of operation ranging from 25 to 30 years.

102

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (15) Intangible assets (Continued)

  • (c) Technical know-how and software

Separately acquired technical know-how and software are shown at historical cost. Technical know-how and software has a finite useful life and is carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of technical know-how and software over their useful lives.

• (d) Periodical review of useful life and amortisation method

For an intangible asset with a finite useful life, review of its useful life and amortisation method is performed at each year-end, with adjustment made as appropriate.

• (e) Research and development

Expenditures for internal research and development projects are classified into research phase expenditures and development phase expenditures according to their nature and whether the intangible assets ultimately formed by research and development activities have greater uncertainty.

Expenditures for the planned investigation, evaluation and selection phases for the study of the production process are expenditures for the research phase, which are included in the current profit and loss when incurred; prior to mass production, expenditure in the relevant design and testing phases for the final application of the environmental protection equipment production process is capitalized during the development phase, while meeting the following conditions:

• The development of the environmental protection equipment production has been fully demonstrated by the technical team;

• Management has approved the budget for environmental protection equipment production development;

• Research and analysis of previous market research indicates that the products produced by the environmental protection equipment production have marketing capabilities;

• Adequate technical and financial support for the development of the environmental protection equipment production and subsequent mass production; and

• Expenditure on environmental protection equipment production development can be reliably collected.

103

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (15) Intangible assets (Continued)

  • (e) Research and development (Continued)

Expenditure in the development phase that does not meet the above conditions is recognised in profit or loss in the period in which it is incurred. Development expenditures that have been charged to profit or loss in the previous period are not reconfirmed as assets in subsequent periods. Expenditures that have been capitalized during the development phase are listed as development expenditures on the balance sheet and are converted to intangible assets from the date the project reaches its intended use.

• (f) Impairment of intangible assets

The carrying amount of intangible assets is reduced to the recoverable amount when the recoverable amount is below the carrying amount (Note 2(16)).

(16) Impairment of long-term assets

Fixed assets, construction in progress, intangible assets with finite useful lives, investment properties measured using the cost model and long-term equity investments in subsidiaries, joint ventures and associates are tested for impairment if there is any indication that the assets may be impaired at the balance sheet date; intangible assets which are not available for their intended use are tested at least annually for impairment, irrespective of whether there is any indication that it may be impaired. If the result of the impairment test indicates that the recoverable amount of an asset is less than its carrying amount, a provision for impairment and an impairment loss are recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognised on the individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.

104

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (16) Impairment of long-term assets (Continued)

Goodwill that is separately presented in the financial statements is tested at least annually for impairment, irrespective of whether there is any indication that it may be impaired. In conducting the test, the carrying value of goodwill is allocated to the related asset group or groups of asset groups which are expected to benefit from the synergies of the business combination. If the result of the test indicates that the recoverable amount of an asset group or a group of asset groups, including the allocated goodwill, is lower than its carrying amount, the corresponding impairment loss is recognised. The impairment loss is first deducted from the carrying amount of goodwill that is allocated to the asset group or group of asset groups, and then deducted from the carrying amounts of other assets within the asset group or group of asset groups in proportion to the carrying amounts of assets other than goodwill.

Once the above asset impairment loss is recognised, it will not be reversed for the value recovered in the subsequent periods.

(17) Employee benefits

Employee benefits refer to all forms of consideration or compensation given by the Group in exchange for service rendered by employees or for termination of employment relationship, which include short-term employee benefits and post-employment benefits.

• (a) Short-term employee benefits

Short-term employee benefits include wages or salaries, bonus, allowances and subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity insurance, housing funds, union running costs and employee education costs, short-term paid absences. The Short-term employee benefit liabilities are recognised in the accounting period in which the service is rendered by the employees, with a corresponding charge to the profit or loss for the current year or the cost of relevant assets. Non-monetary benefits are measured at their fair value.

105

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (17) Employee benefits (Continued)

  • (b) Post-employment benefits

The Group classifies post-employment benefit plans as either defined contribution plans or defined benefit plans. Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into a separate fund and will have no obligation to pay further contributions; and defined benefit plans are postemployment benefit plans other than defined contribution plans. During the reporting period, the Group’s postemployment benefits mainly include basic pensions and unemployment insurance, both of which belong to the defined contribution plans.

Basic pensions

The Group’s employees participate in the basic pension plan set up and administered by local authorities of Ministry of Human Resource and Social Security. Monthly payments of premiums on the basic pensions are calculated according to the bases and percentage prescribed by the relevant local authorities. When employees retire, the relevant local authorities are obliged to pay the basic pensions to them. The amounts based on the above calculations are recognised as liabilities in the accounting period in which the service has been rendered by the employees, with a corresponding charge to the profit or loss for the current year or the cost of relevant assets.

(18) Dividends distribution

Cash dividends are recognised as liabilities for the period in which the dividends are approved by the shareholders’ meeting.

(19) Provisions

Provisions for maintenance of the sewage water processing facilities are recognised when the Group has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.

A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are taken into account as a whole in reaching the best estimate of a provision. Where the effect of the time value of money is material, the best estimate is determined by discounting the related future cash outflows. The increase in the discounted amount of the provision arising from passage of time is recognised as interest expense.

106

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (19) Provisions (Continued)

The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best estimate.

The provisions expected to be settled within one year since the balance sheet date are classified as current liabilities.

(20) Revenue

The sales are recognised when control of the products or services has been transferred, and the amount is determined in accordance with the consideration received or receivables by authority. Revenue is stated net of discounts, rebates and returns.

• (a) Processing of sewage water and heating and cooling supply services

Revenues from processing of sewage water and heating and cooling supply services are recognised when services are rendered.

• (b) Construction of sewage water facilities

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised with reference to the percentage of completion of the contract activity at the balance sheet date. The percentage of completion is usually determined by the ratio of aggregate contract costs incurred to the total estimated contract costs. Variations in contract, claims and incentive payments are included in the contract revenue to the extent that they can be reliably measured.

Where the outcome of a construction contract cannot be estimated reliably, the amount of the contract cost which is most likely to be recovered is recognised as contract revenue. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

107

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (20) Revenue (Continued)

  • (c) Sales of tap water and recycled water

Revenue from sales of tap water and recycled water is recognised on the transfer of risks and rewards of ownership, which generally coincides with the time when the tap water and recycled water are delivered to customers.

• (d) Sales of pipeline connection for recycled water

The Group provides the pipeline connection for recycled water services, and recognises the income within a period of time according to the proportion of completed achievements to the total results agreed in the contract. On the balance sheet date, the Group reestimates the proportion of completed achievements to enable it to reflect changes in performance.

When the Group recognises its income in accordance with the progress of completing projects, the part of the Group’s obtained unconditional collection right is confirmed as receivables, the rest is confirmed as contract assets, and the impairment loss provision is confirmed on the basis of ECL for receivables and contract assets (Note 2(8)). If the amount received or receivable by the Group exceeds the amount of completed works, the excess shall be recognised as contract liabilities and the Group shall list the assets and liabilities under the same contract on a net basis.

Contract costs include the performance cost and acquisition cost. The cost of providing pipeline connection identified as the contract implementation costs and the cost is recognised as operating cost according to the completing schedule included in the carrying forward cost of labor when recognise income. The incremental cost incurred by the Group to obtain the contract for the connection of water pipes is recognised as the contract acquisition cost. For the cost obtained in the contract with the amortization period of less than one year, the cost obtained by the contract shall be recorded into the current profit and loss when it occurs; for the cost obtained in the contract with the amortization period of more than one year, the Group shall, in accordance with the relevant contract, recognise the same basic amortization as the income of the project connected to the recycled water pipeline into profit and loss. If the Book Value of the contract cost is higher than the residual consideration expected to be obtained by providing the project minus the estimated cost to be incurred, the Group shall prepare the impairment provision for the excess part and recognise it as the impairment loss of assets. On the balance sheet date, the Group shall list the inventory and other non-current assets respectively according to whether the amortization period of the contract performance cost exceeds one year when it is initially recognised, so as to reduce the net amount after the relevant asset impairment provision. For the contract acquisition cost whose amortization period is longer than one year when the initial recognition is made, the net amount after the relevant asset impairment provision is deducted and listed as other non-current assets.

108

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (20) Revenue (Continued)

  • (e) Sales of environmental protection equipment

If the stage of completion can be measured reliably, revenue and cost are recognised by reference to the percentage of completion of the contract activity at the balance sheet date.The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs of each contract. Variations in contract work, claims and incentive payments are included to the extent that it is probable that they will result in revenue and they are capable of being reliably measured. The environmental protection equipment is mainly the achievement of technology research.

• (f) Contract operation income

Revenue from contract operation is recognised on the accrual basis according to the service agreement.

• (g) Technical services income

For sales of technical services, the related revenue is recognised using the percentage of completion method, with the stage of completion being determined based on proportion of costs incurred to date to the estimated total costs.

(21) Government grants

Government grants refer to the monetary assets obtained by the Group from the government, including tax return, financial subsidy and etc.

Government grants are recognised when the grants can be received and the Group can comply with all attached conditions. If a government grant is a monetary asset, it will be measured at the amount received or receivable.

Government grants related to assets refer to government grants which are obtained by the Group for the purposes of purchase, construction or acquisition of the long-term assets. Government grants related to income refer to the government grants other than those related to assets.

109

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (21) Government grants (Continued)

The Group recognises government grants related to assets as deferred income and amortizes in profit or loss in a reasonable and systematic manner over the useful lives of related assets. Government grants related to income that compensate the future costs, expenses or losses are recorded as deferred income and recognised in profit or loss, or deducted against related costs, expenses or losses in reporting the related expenses; government grants related to income that compensate the incurred costs, expenses or losses are recognised in profit or loss, or deducted against related costs, expenses or losses directly in current year. The Group applies the presentation method consistently to the similar government grants in the financial statements.

Government grants that are related to ordinary activities are included in operating profit, otherwise, they are recorded in non-operating income or expenses.

For the policy loans with favourable interest rates, the Group records the loans at the actual amounts and calculates the interests by loan principals and the favourable interest rates. The interest subsidies directly received from government are recorded as a reduction of interest expenses.

(22) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognised based on the differences arising between the tax bases of assets and liabilities and their carrying amounts (temporary differences). Deferred tax asset is recognised for the deductible losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax laws. No deferred tax liability is recognised for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognised for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

Deferred tax assets are only recognised for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, deductible losses and tax credits can be utilized.

110

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (22) Deferred tax assets and deferred tax liabilities (Continued)

Deferred tax liabilities are recognised for temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the Group is able to control the timing of reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. When it is probable that the temporary differences arising from investments in subsidiaries, associates and joint ventures will be reversed in the foreseeable future and that the taxable profit will be available in the future against which the temporary differences can be utilized, the corresponding deferred tax assets are recognised.

Deferred tax assets and liabilities are offset when:

• the deferred taxes are related to the same tax payer within the Group and the same taxation authority; and,

• that tax payer within the Group has a legally enforceable right to offset current tax assets against current tax liabilities.

(23) Leases

A lease is a contract whereby the lessor assigns the right to use the asset to the lessee for consideration within a certain period of time.

The Group Acts as Lessor

A lease that transfers almost all the risks and rewards incidental to ownership of an leased asset is a finance lease. An operating lease is a lease other than a finance lease.

• (a) Operating leases

While the Group leased property, plant and equipment out, payment made under operating lease were charged to profit or loss on a straight-line basis over the period of the lease. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

111

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

(24) Segment information

The Group identifies operating segments based on the internal organisation structure, management requirements and internal reporting system, and discloses segment information of reportable segments which is determined on the basis of operating segments.

An operating segment is a component of the Group that satisfies all of the following conditions: (1) the component is able to earn revenues and incur expenses from its ordinary activities; (2) whose operating results are regularly reviewed by the Group’s management to make decisions about resources to be allocated to the segment and to assess its performance, and (3) for which the information on financial position, operating results and cash flows is available to the Group. If two or more operating segments have similar economic characteristics and satisfy certain conditions, they are aggregated into one single operating segment.

(25) Critical accounting estimates and judgements

The Group continually evaluates the critical accounting estimates and key judgements applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

• (a) Critical judgments in applying the accounting policies

• (i) Classification of financial assets

Significant judgements involved in determining the classification of financial assets include analysis of business model and contractual cash flow characteristics.

Factors considered by the Group in determining the business model for financial asset management at the level of portfolio of financial assets include how the financial asset’s performance is evaluated and reported to key management personnel, risks affect the performance of financial assets and how they are managed and how management personnel is compensated.

The following major judgments exist when assessing whether the contractual cash flow of financial assets is consistent with the basic loan arrangement: whether the principal may change in time distribution during the duration or change in amount due to reasons such as early repayment; whether interest includes only the time value of currency, credit risk, other basic loan risks and considerations for costs and profits. For example, whether the amount paid in advance reflects only the unpaid principal and interest based on unpaid principal and reasonable compensation paid for early termination of the contract.

112

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (25) Critical accounting estimates and judgements (Continued)

• (a) Critical judgments in applying the accounting policies (Continued)

  • (ii) Judgement on significant increase in credit risk

The main criteria for the Group to judge the significant increase in credit risk of government clients group is that the overdue days exceed 90 days, or one or more of the following indicators have changed significantly: business environment of the debtor, internal and external credit rating, dramatic changes in actual or expected operating results, and significantly decline in the value of collateral or credit rating of the guarantee provider.

The Group’s main criteria for determining that credit impairment of government clients group has occurred is that the overdue days exceed 180 days (i.e., a default has occurred) or one or more of the following conditions are met: the debtor is exposed to significant financial difficulties, enters other debt restructuring or bankruptcy.

The debtors of the government clients group is the local government or the functional department under its jurisdiction, whose fund allocation needs to go through the prescribed approval procedures of budget allocation. Compared with the ordinary debtors, the fund allocation cycle is relatively long, so the Group makes above judgment.

The main criteria for the Group to judge the significant increase in credit risk of groups other than government clients group is that the overdue days exceed 30 days, or one or more of the following indicators have changed significantly: business environment of the debtor, internal and external credit rating, dramatic changes in actual or expected operating results, and significantly decline in the value of collateral or credit rating of the guarantee provider.

The Group’s main criteria for determining that credit impairment of groups other than government clients group has occurred is that the overdue days exceed 90 days (i.e., a default has occurred) or one or more of the following conditions are met: the debtor is exposed to significant financial difficulties, enters other debt restructuring or bankruptcy.

113

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (25) Critical accounting estimates and judgements (Continued)

• (b) Critical accounting estimates and key assumptions

The critical accounting estimates and key judgement that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting year are outlined below:

• (i) The measurement of ECL

The ECL is calculated based on the EAD and ECL rate, and the ECL rate is determined based on probability of default (“PD”) and loss given default (“LGD”). When determining the ECL rate, the Group adjusts its historical data by referring to historical credit loss experience and combining current situation and forward-looking information. When considering the forward-looking information, indicators used by the Group include the risk of economic downturn, estimated growth of unemployment rate, external market environment and changes in customers. The assumptions relating to the ECL calculation are monitored and reviewed by the Group on a regularly basis. There have been no significant changes in forementioned estimation techniques and significant assumptions for the six months ended 2019.

• (ii) Income tax

The Group is subject to income taxes in numerous jurisdictions. There are some transactions and events for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgment is required from the Group in determining the provision for income taxes in each of these jurisdictions. Where the final identified outcome of these tax matters is different from the initially-recorded amount, such difference will impact the income tax expenses and deferred income tax in the period in which such determination is finally made.

• (iii) Estimated provision for non-current assets

The Group assesses the impairment of non-current assets based on the recoverabilities of them. An impairment is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. These assessments require the use of estimates. The carrying amount and the impairment provision will change, when the accounting estimate changes.

114

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

(26) Significant changes in accounting policies

In 2018, the Ministry of Finance promulgated the revised “Accounting Standards for Business Enterprises No. 21 – Leases” (hereinafter referred to as the “New Leases Standards”) and in 2019, the Ministry of Finance issued the ‘Circular on the A to the formats of Corporate Financial Statements for the Year of 2019’ (Cai Kuai [2019]), the Group has adopted the above standards and notices to prepare the 6 months ended 2019 financial statements, and the impacts on the Group and the Company’s statements are as follows:

• (a) General enterprise report format modification

• (i) The impact on the consolidated balance sheet and income statement is as follows (increase/(decrease)):

Content and reasons for changes
in accounting policies	Line items affected	Amount	affected
		December 31 2018	January 1 2018
The Group splited notes and trade receivables to
notes receivable and trade receivables.	Trade receivables	2,081,465	1,930,158
	Notes receivable	10,295	1,900
	Notes and	(2,091,760)	(1,932,058)
	trade receivable

• (ii) The impact on the company balance sheet and income statement is as follows (increase/(decrease)):

Content and reasons for changes
in accounting policies	Line items affected	Amount	affected
		December 31 2018	January 1 2018
The Group splited notes and trade receivables to
notes receivable and trade receivables.	Trade receivables	1,687,179	1,663,178
	Notes receivable	—	—
	Notes and	(1,687,179)	(1,663,178)
	trade receivable

• (b) Leases

According to the New Lease Standards, there were no material impact on the first execution date for the Group and the Company.

115

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

3 TAXATION

• (1) The main categories and rates of taxes applicable to the Group are set out below:

Category	Tax base	Tax rate
Enterprise income tax (Note (a))	Taxable income	0%-25%
Value added tax (“VAT”) (Note (b))	Taxable value added amount (Tax payable is calculated using
	the taxable sales amount multiplied by the applicable tax
	rate less deductible VAT input of the current year)	3%-16%
City maintenance and construction tax	The payment amount of VAT	5%-7%
Educational surcharge	The payment amount of VAT	3%

• (a) Pursuant to the ‘VAT Rates Adjustment Notice’ (Cai Shui [2018] No. 54) issued by the State Taxation Administration, during the period from January 1, 2018 solstice to December 31, 2020, the newly purchased equipment of less than RMB5 million yuan can be recorded into the current cost one-time deduction in the following month after use. It will be deducted from the taxable income amount and no longer be depreciated annually.

• (b) Pursuant to the ‘2019 Circular on Deeply Reform of Adjustment of Tax Rate of Value Added Tax’ (Shui Zong Fa Ban [2019] 34) jointly issued by the Ministry of Finance and the State Administration of Taxation, the applicable tax rate of revenue arising from painting system producing, sales, arrangement and maintenance is 13% and 9% from 1 April 2019, while it was 16% and 10% before then.

116

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 3 TAXATION (Continued)

• (2) Preferential tax policies for enterprise income tax

The information of preferential tax policies granted to the subsidiaries is as below:

	Enterprise income
Name of subsidiaries	tax rate for 2019	Reason for the preferential tax policy
The Company	15%	According to Announcement on the Corporate Income Tax Policy of
		Third-party Enterprises Engaged in Pollution Prevention and Control
		(Announcement 2019 No. 60), corporate income tax shall be levied at
		a reduced rate of 15% for qualified third-party enterprises engaged in
		pollution prevention and control.
Fuyang Capital Water Co., Ltd.	12.5%	Income from engagement in qualified projects of environmental
		protection and energy and water conservation is subject to exemption
		from enterprise income tax commence from 2014 for the first 3 years and
		reduction half for the next 3 years.
Gui Zhou Capital Water Co., Ltd.	15 %	According to Notice of Guizhou Provincial SAT on Implementation of
		Preferential Tax Policy Relating to Development of Western Regions,
		(Qian Guo shui Han [2011] No. 19) from 2011 to 2020.
Xi’an Capital Water Co., Ltd.	15 %	According to Notice of Shaanxi Provincial SAT on Issuing Measures
		for Review and Management of Preferential Tax Policy of Enterprises
		Relating to Development of Western Regions, (Notice [2010] No. 3)
		from 2011 to 2020.
Hangzhou Tianchuang Capital	0%	Income from engagement in qualified projects of environmental
Water Co., Ltd.		protection and energy and water conservation is subject to exemption
		from enterprise income tax commence from 1 July 2016 for the first 3
		years and reduction half for the next 3 years.
Tianjin Caring Technology	15 %	High-tech enterprise entitled to preferential tax policy from 2013 to
Development Co., Ltd		2018.
Tianjin Water Recycling Co., Ltd.	The taxable income	According to Cai Shui [2008] No. 47, since 1 January 2008, for revenues
	is 90% of revenue	generated from products which were in line with national or industry
		standards, the taxable income amount is 90% of the total revenue.

117

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

3 TAXATION (Continued)

• (2) Preferential tax policies for enterprise income tax (Continued)

The information of preferential tax policies granted to the subsidiaries is as below:

	Enterprise income
Name of subsidiaries	tax rate for 2019	Reason for the preferential tax policy
Karamay Tianchuang Capital	0%	Income from engagement in qualified projects of environmental
Water Co., Ltd.		protection and energy and water conservation is subject to exemption
		from enterprise income tax commence from 2017 for the first 3 years and
		reduction half for the next 3 years.
Linxia Capital Water Co., Ltd.	0%	Income from engagement in qualified projects of environmental
		protection and energy and water conservation is subject to exemption
		from enterprise income tax commence from 2018 for the first 3 years and
		reduction half for the next 3 years.
Bayannur Capital Water Co., Ltd.	Sewage water: 0%	Income from engagement in qualified projects of environmental
		protection and energy and water conservation is subject to exemption
		from enterprise income tax commence from 2018 for the first 3 years and
		reduction half for the next 3 years.
	Recycled water:	According to Cai Shui [2008] No. 47, since 1 January 2008, for revenues
	The taxable income	generated from products which were in line with national or industry
	is 90% of revenue	standards, the taxable income amount is 90% of the total revenue.
Yingshang Capital Water Co., Ltd.	0%	Income from engagement in qualified projects of environmental
		protection and energy and water conservation is subject to exemption
		from enterprise income tax commence from 2018 for the first 3 years and
		reduction half for the next 3 years.
Dalian Oriental Chunliuhe Water Quality	0%	Income from engagement in qualified projects of environmental
Purification Co., Ltd.		protection and energy and water conservation is subject to exemption
		from enterprise income tax commence from 2018 for the first 3 years and
		reduction half for the next 3 years.

(3) Preferential tax policies for value-added tax

On 12 June 2015, the Ministry of Finance and the State Administration of Taxation issued the preferential valueadded tax catalogue of products and services which comprehensively utilize resources Caishui [2015] No. 78 (hereinafter referred to as the No. 78). According to the No. 78, the sewage water processing and recycled water business are required to pay value-added tax since July 1, 2015. 70% of value-added tax paid by the sewage water processing business and 50% value-added tax paid by recycled water business will be refunded.

118

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) Cash at bank and on hand

Cash on hand Cash at bank Other cash balances Including: Bank deposits overseas (a) Cash listed in the cash flow statement comprises: Cash at bank and on hand Less: Restricted bank deposits (Note (i)) Cash listed in cash flow statement (Note 4(36))	30 June 2019 111 2,024,182 16,384 2,040,677 8,513 30 June 2019 2,040,677 (16,384) 2,024,293	31 December 2018 61 1,808,482 17,658
		1,826,201
		8,499
		31 December 2018 1,826,201 (17,658)
		1,808,543

(a) Cash listed in the cash flow statement comprises:

(i) The restricted bank deposits represent the deposit for the purpose of applying for unconditional, irrevocable bank letters of guarantee.

(2) Notes receivable

Bank acceptance notes Less: Provision for bad debts	30 June 2019 7,272 － 7,272	31 December 2018 10,295 －
		10,295

• (a) As at 30 June 2019, the Group has no pledged notes receivable.

• (b) Provision for bad debts:

As at 30 June 2019, provision for bad debts by group is analyzed as below:

As at 30 June 2019, the Group measures bad debt provision in accordance with the lifetime expected credit loss for the entire duration, and no provision is deemed necessary. The Group considers that there is no significant credit risk in banker’s acceptance and no major loss will be caused by bank default.

119

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (3) Trade receivables

		30 June 2019	31 December 2018
Trade	receivables	2,061,454	2,131,049
Less: Provision for bad debts		(49,486)	(49,584)
		2,011,968	2,081,465
(a)	The ageing analysis of trade receivable is as follows:
		30 June 2019	31 December 2018
	Within 1 year	1,532,505	1,457,744
	1 to 2 years	460,568	649,268
	2 to 3 years	34,837	15,464
	3 to 4 years	28,987	7,024
	4 to 5 years	3,046	1,549
	Over 5 years	1,511	－
	Total	2,061,454	2,131,049

• (a) The ageing analysis of trade receivable is as follows:

• (b) As at 30 June 2019, the trade receivables from the top five debtors in respect of outstanding balance are analyzed as below:

		Provision
	Amount	for bad debts	% of	total balance
Trade receivables from the top five debtors	1,740,304	(35,295)		85%

• (c) Provision for bad debts:

For the Group’s trade receivables, regardless of whether there is a significant financing component, the Group measures the loss according to the expected credit loss for the entire life.

120

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3) Trade receivables (Continued)

• (c) Provision for bad debts: (Continued)

• (i) As at 30 June 2019, provision for bad debts by individual is analyzed as below:

TWAB Qujing Sewage Company Hangzhou Municipal Facilities Supervision Center Guiyang water bureau Xi’an Infrastructure Investment Group Tianjin Qudong Culture Media Co. Ltd. Total	Carrying amount ECL rate 1,392,638 0.05% 161,461 21.28% 93,918 0.05% 61,469 0.05% 14,998 0.05% 7,239 100.00% 1,731,723	Provision Reasons (791) 1) (34,357) 2) (30) 1) (2) 1) (14) 1) (7,239) 3) (42,433)

• 1) As these clients are provincial and municipal governments or their representatives, whose ability to meet their contractual cash flow obligations may not be weakened even if there are adverse changes in the economic and business situation over a long period, the receivables of the Company from Tianjin Water Authority Bureau, Xi’an Capital Water Co., Ltd. from Xi’an Urban Infrastructure Construction Investment Group Co., Ltd., Hangzhou Tianchuang Capital Water Co., Ltd. from Hangzhou Sewage Company and Hangzhou Municipal Facilities Supervision Center, and Guizhou Capital Water Co., Ltd. from Guiyang Water Authority Bureau have a lower credit risk. Based on the historical experience of operation, the Group maintains continuous receipts. Therefore, the Group estimates that the lifetime ECL rate of the receivables is 0.05%.

• 2) Receivables of Qujing Capital Water Co., Ltd. from Qujing City Water General Company comprise regular sewage treatment fee, tap water fee and price compensation. As the receivables of regular sewage treatment fee and tap water fee have a longer collection period than ordinary government clients and they have higher credit risk, the Group estimates that the lifetime ECL rate is 3%; Considering the debtor’s actual performance capacity, historical collection experience and the ageing of the receivables, the Group concludes that the receivables of price compensation have been defaulted and estimates that the lifetime ECL rate is 100%. In summary, the Group expects that the expected credit loss rate of receivables from Qujing City Water General Company in the whole period is 21.28%.

• 3) Receivables from Tianjin Qudong Culture Media Co., Ltd. has applied enforcement and got approval from People’s court. Thus, the Company concludes that the receivables have been defaulted and estimates that the lifetime ECL is 100%.

121

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (3) Trade receivables (Continued)

  • (c) Provision for bad debts: (Continued)

    • (ii) As at 30 June 2019, provision for bad debts by group is analyzed as below:

Group – Non-provincial government customers

Undue 1-90 days overdue 90-180 days overdue >180 days overdue	30 June 2019 Carrying amount Provision Amount ECL rate Amount 47,308 0.010% (4) 83,471 0.050% (19) 32,883 0.200% (52) 67,506 0.500% (324) 231,168 (399)	30 June 2019 Carrying amount Provision Amount ECL rate Amount 47,308 0.010% (4) 83,471 0.050% (19) 32,883 0.200% (52) 67,506 0.500% (324) 231,168 (399)
		(399)

Group – others

Undue 1-30 days overdue 30-90 days overdue >90 days overdue	30 June 2019 Carrying amount Provision Amount ECL rate Amount 33,759 0.100% (35) 2,662 0.500% (141) 18,734 2.000% (405) 43,408 5.000% (6,073) 98,563 (6,654)	30 June 2019 Carrying amount Provision Amount ECL rate Amount 33,759 0.100% (35) 2,662 0.500% (141) 18,734 2.000% (405) 43,408 5.000% (6,073) 98,563 (6,654)
		(6,654)

122

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3) Trade receivables (Continued)

• (c) Provision for bad debts: (Continued)

• (iii) The bad debts provision accrued in this year is RMB573 thousand, and bad debts provision collected or reversed is RMB671 thousand and the carrying amount is RMB671 thousand. The main collected or reversed amounts are as follow:

Reason for collection or reversal Basis and rationality of bad debts provision Tianjin Qudong Culture Media Co. Ltd. Trade receivables collected Long Aging	Amount collected or reversed Method of collection or reversal 671 Collected by cash

For the six-months ended 30 June 2019, the amount of bad debt provision reversed of Tianjin Qudong Culture Media Co. Ltd. is RMB671 thousand, and the corresponding book balance is RMB671 thousand.

(4) Advances to suppliers

(a) The ageing of advances to suppliers is analyzed as follows:

Within 1 year 1 to 2 years Over 2 years	30 June Amount 27,349 2,112 895 30,356	2019 % of total balance 90% 7% 3% 100%	31 December 2018 Amount % of total balance 22,431 95% 202 1% 898 4% 23,531 100%	31 December 2018 Amount % of total balance 22,431 95% 202 1% 898 4% 23,531 100%
				100%

As at 30 June 2019, advances to suppliers of RMB3 million (31 December 2018: RMB1.1 million) with aging over one year were mainly for prepaid electricity.

• (b) As at 30 June 2019, the top five advances to suppliers in respect of outstanding balance of the Group are analyzed as follows:

Amount % of total balance Total amounts of advances to suppliers to the top five debtors in respect of outstanding balance 6,863 23%

123

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (5) Other receivables

Project deposits VAT refund Others Less: Provision for bad debts (a) The ageing analysis of other receivable is as follows: Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	30 June 2019 26,722 10,682 20,924 58,327 (10) 58,317 30 June 2019 45,521 818 8,946 3,042 58,327	31 December 2018 18,922 10,379 6,871
		36,172 (10)
		36,162
		31 December 2018 19,267 13,177 51 3,677
		36,172

• (a) The ageing analysis of other receivable is as follows:

• (b) Movement of loss provision and carrying amount

As at 30 June 2019, the Group has no other receivables belonging to stage 2 and stage 3. Provisions for bad debts of other receivables in stage 1 are analyzed as follows：

• (i) As at 30 June 2019, other receivables are all belonging to stage 1. Provision for bad debts by group is analyzed as below:

Project Deposits Group: Within 1 year Others: Within 1 year	30 June 2019 Carrying amount Provision Amount Amount 14,484 7 20,350 3 34,834	Percentage 0.05% 0.10%
		0.15%

• (c) For the six-months ended 30 June 2019, the changes of other receivables’ provision of the Group is not significant.

124

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) Other receivables (Continued)

• (d) As at 30 June 2019, other receivables from the top five debtors in respect of outstanding balance are analyzed as below:

Nature Shijiazhuang Gaocheng District Construction Investment Co. Ltd. Project deposits Linxia City Water Supply and Sewerage Company Project deposits Xi’an Hi-tech District State Taxation Bureau VAT refund Tianjin State Taxation Bureau VAT refund Fuyang State Taxation Bureau VAT refund	Amount Aging 10,000 Within 1 year 8,000 2 to 3 years 3,287 Within 1 year 2,294 Within 1 year 1,808 Within 1 year 25,389	% of total balance Provision for bad debts 17% － 14% (4) 6% － 4% － 3% － 44% (4)	% of total balance Provision for bad debts 17% － 14% (4) 6% － 4% － 3% － 44% (4)
			(4)

• (e) As at 30 June 2019, the Group’s analysis of government grants confirmed by the amount receivables is as follows:

	Government		Estimated timing,
	grants program	Amount Aging	amount and basis of collection
Xi’an Capital Water Co., Ltd.	VAT refund	3,287 Within 1 year	VAT refund receivable, fully collected in 2019
The Company	VAT refund	2,262 Within 1 year	VAT refund receivable, fully collected in 2019
Fuyang Capital Water Co., Ltd.	VAT refund	1,808 Within 1 year	VAT refund receivable, fully collected in 2019
Guizhou Capital Water Co., Ltd.	VAT refund	1,051 Within 1 year	VAT refund receivable, fully collected in 2019
Qujing Capital Water Co., Ltd.	VAT refund	578 Within 1 year	VAT refund receivable, fully collected in 2019
Baoying Capital Water Co., Ltd.	VAT refund	385 Within 1 year	VAT refund receivable, fully collected in 2019
Inner Mongolia Bayannur Capital Water Co., Ltd. VAT refund		366 Within 1 year	VAT refund receivable, fully collected in 2019
Deqing Capital Water Co., Ltd.	VAT refund	336 Within 1 year	VAT refund receivable, fully collected in 2019
Wuhan Tianchuang Capital Water Co., Ltd.	VAT refund	312 Within 1 year	VAT refund receivable, fully collected in 2019
Wendeng Capital Water Co., Ltd.	VAT refund	201 Within 1 year	VAT refund receivable, fully collected in 2019
Anguo Capital Water Co., Ltd.	VAT refund	64 Within 1 year	VAT refund receivable, fully collected in 2019
Tianjin Water Recycling Co., Ltd.	VAT refund	32 Within 1 year	VAT refund receivable, fully collected in 2019

10,682

125

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(6) Inventories

• (a) The Group’s inventory is classified as follows:

Raw materials Finished goods Spare parts and low cost consumables Other current and non-current a Other current assets: Input VAT to be deducted Assets of Anguo Income tax prepaid Input VAT to be verified Other non-current assets: Prepayments of construction Input VAT to be deducted Others	Ending balance 10,544 2,817 606 13,967 ssets	30 June 2019 Provision for decline in the value of inventories － － － －	Carrying amount 10,544 2,817 606 13,967		31 December 2018 Ending balance Provision for decline in the value of inventories Carrying amount 9,897 － 9,897 3,746 － 3,746 348 － 348 13,991 － 13,991 30 June 2019 31 December 2018 178,587 98,605 36,913 36,913 26,554 10,598 14,932 10,572 256,986 156,688 30 June 2019 31 December 2018 105,697 50,927 － 49,122 8,625 9,132 114,322 109,181	31 December 2018 Ending balance Provision for decline in the value of inventories Carrying amount 9,897 － 9,897 3,746 － 3,746 348 － 348 13,991 － 13,991 30 June 2019 31 December 2018 178,587 98,605 36,913 36,913 26,554 10,598 14,932 10,572 256,986 156,688 30 June 2019 31 December 2018 105,697 50,927 － 49,122 8,625 9,132 114,322 109,181	Carrying amount 9,897 3,746 348
							13,991
						156,688
						31 December 2018 50,927 49,122 9,132
						109,181

(7) Other current and non-current assets

126

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (8) Long-term receivables and non-current assets due within one year

Toll road concession Less: Bad debt provision Less: Listed in non-current assets due within one year	30 June 2019 265,211 (138) 265,073 (20,006) 245,067	31 December 2018 276,613 (138) 276,475 (22,789) 253,686

Receivables from toll road concession represent the amortized cost, using effective interest method, calculated with reference to a guaranteed minimum future traffic flow over the concession period.

Tianjin Municipal Transportation Commission is a public institution under the Tianjin municipal government, which has low credit risk. According to historical experience, the Company can collect the receivables within the agreed period. Therefore, the Company estimates that the ECL rate of this receivable item is 0.05%.

(9) Long-term equity investments

Investment in an associate (a) Less: Impairment of Long-term equity investments (c) (a) Investment in associate Type Place of registration Tianjin International Machinery Co., Ltd. (i) Limited company Tianjin Tianjin Bihai Sponge City Co., Ltd. (ii) Limited company Tianjin	30 June 2019 217,358 (22,358) 195,000 Registered capital 120,000 650,000	31 December 2018 217,358 (22,358) 195,000 Shareholding/ voting rights (%) 27.50% 30.00%

127

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (9) Long-term equity investments (Continued)

  • (a) Investment in associate (Continued)

    • (i) Tianjin International Machinery Co., Ltd. (“International Machinery”) is a Sino-foreign joint venture registered in the Tianjin Economics Development Area. The businesses of International Machinery include research and development, production and sale of valve and actuating device, heater exchanger and the whole set, environment protection equipment, and general mechanical equipment.

The movements of the Group’s investment in International Machinery are as follows:

						Cash			Provision for
	Initial				Share of net	dividends	Provision for		impairment
	investment	31	December	New	loss under	or profit	impairment	30 June	at the end
	cost		2018	investment	equity method	declared	accrued	2019	of the year
International Machinery	33,000		－	－	－	－	－	－	(22,358)

The Group fully provided provision of impairment of RMB22 million for long-term equity investment in International Machinery in 2016.

• (ii) Tianjin Bihai Sponge City Co., Ltd. (“Bihai Sponge City “) is a limited liability company registered in Tianjin. The businesses of Bihai Sponge City include construction and operation of water treatment projects; procurement and maintenance of water treatment equipment; ecological maintenance; tourism development; ecological management; construction, operation and management of sponge city project; construction and operation of municipal engineering. Bihai Sponge City was registered and established on 30 July 2018 and is still in the initial construction period.

The movements of the Group’s investment in Bihai Sponge City are as follows:

==> picture [381 x 59] intentionally omitted <==

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

Cash Provision for
Initial Share of net dividends Provision for impairment
investment 31 December New loss under or profit impairment 30 June at the end
cost 2018 investment equity method declared accrued 2019 of the year
Bihai Sponge City 195,000 195,000 － － － － 195,000 －
----- End of picture text -----

128

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (9) Long-term equity investments (Continued)

  • (b) Excess losses incurred by joint ventures and associated associates:

Accumulated unrecognised losses at the beginning of the period International Machinery 480 (c) Provision for impairment of long-term equity investments 31 December 2018 Additions International Machinery 22,358 － Other equity instruments investment Equity instruments Equity of unlisted company – Tianjin Beifang Rencaigang Company Ltd. Tianjin Beifang Rencaigang Company Ltd. – Cost – Accumulated fair value changes	Unrecognised income in the current period 293 Disposals － 30 June 2019 2,000 30 June 2019 2,000 － 2,000	Accumulated unrecognised losses at the end of the period 773
		30 June 2019 22,358
		31 December 2018 2,000
		31 December 2018 2,000 －
		2,000

• (c) Provision for impairment of long-term equity investments

(10) Other equity instruments investment

Other equity instruments investment is the unlisted equity investments of Tianjin Beifang Rencaigang Company Limited held by the Group and the shareholding ratio is 6.10%. The Group does not participate in or influence the financial and operational decisions of Tianjin Beifang Rencaigang Company Limited in any way. Therefore, the Group has no significant influence on the above-mentioned invested company and accounts for it as other equity instruments.

129

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (11) Investment properties

Cost 31 December 2018 Transfer to fixed assets 30 June 2019 Accumulated depreciation 31 December 2018 Charge for the period Transfer to fixed assets 30 June 2019 Net Book Value 30 June 2019 31 December 2018	Buildings 118,408 (91,682)
	26,726
	(34,356) (253) 28,393
	6,216
	20,510
	84,052

The Group’s investment properties mainly represent the apportioned cost of its property of Tianjin Water Recycling Co., Ltd. located in Tianjin held for long-term rental. Based on the management’s assessment, the fair value of leased property of Tianjin Water Recycling Co., Ltd. 30 June 2019 was approximately RMB83 million (2018: RMB94 million) and its carrying amount was approximately RMB21 million.

130

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (12) Fixed assets and construction in progress

(a) Fixed assets

Cost – 31 December 2018 Changes in accounting policy 1 January 2019 Additions in the current period Transferred from investment properties (note (ii)) Disposals in the current period 30 June 2019 Accumulated depreciation – 31 December 2018 Transferred from investment properties (note (ii)) Charge for the period (note (iii)) Disposals in the current period 30 June 2019 Carrying Amount – 31 December 2019 31 December 2018	Buildings and structures (note (i)) Self-use 312,739 － 312,739 3,150 91,682 － 407,571 (101,369) (28,392) (8,196) － (137,957) 269,614 211,370	Machinery and equipment Self-use 299,585 － 299,585 2,369 － － 301,954 (183,760) － (12,485) － (196,245) 105,709 115,825	Motor vehicles & others Self-use 69,933 － 69,933 2,491 － (1,800) 70,624 (50,487) － (1,133) 1,503 (50,117) 20,507 19,446	Total 682,257 － 682,257 8,010 91,682 (1,800) 780,149 (335,616) (28,392) (21,814) 1,503 (384,319) 395,830 346,641

• (i) All of the Group’s buildings and structures are located in the PRC.

• (ii) In 2019, the Company reclassified its office building located in Tianjin to fixed assets.

• (iii) The Group’s depreciation expenses of RMB48 million (2018: RMB19 million) have been included in cost of sales and RMB2 million (2018: RMB2 million) in general and administrative expenses.

• (iii) As at 30 June 2019, the certificate of title to outsourced assets included in fixed assets, land use rights and investment properties with cost of RMB173 million and carrying amount of RMB117 million (31 December 2018: cost of RMB173 million and carrying amount of RMB117 million) has yet to be or is in the process of being transferred to the Group. As these assets are supported by legal sale and purchase agreements, management believes that the titles will be received in due course without any legal barrier or additional significant cost to the Group.

131

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (12) Fixed assets and construction in progress (Continued)

(b) Construction in progress

Name Budgeted amount Shandong- Yishui & Tancheng City Solid Waste Treatment project 640,000 Fuyang- Jieshou PPP Project of sewage operation 402,300 Honghu-Honghu township sewage water processing plant PPP project 437,770 Anhui-Heifei Taochong sewage water processing plant PPP project 585,895 Tianjin- Heiniucheng Roads energy station project 209,975 Tianjin-Ji Zhuang Zi pipe network seven standard maintenance project 28,101 Tianjin-R&D Center comprehensive management project 7,400 Others	31 December 2018 Increase in the current period 148,954 92,176 － 30,556 － 29,877 － 25,386 － 22,795 － 21,202 － 3,175 1,985 40,710 150,939 265,877	Transfer to Intangible assets － (30,556) (29,877) (25,386) (22,795) － － (41,548) (150,162)	30 June 2019 Proportion of expenditures incurred to budgeted amount Progress 241,130 38% 38% － 100% 100% － 53% 53% － 54% 54% － 73% 73% 21,202 75% 75% 3,175 100% 100% 1,147 266,654	The accumulated balance of capitalization of requested fee 2,910 6,406 2,986 92 167 － － 23,485 36,046	Including: borrowing costs capitalized in current period Capitalisation rate Source of funds 2,281 5.15% Special loan/ Self-raised fund 1,251 4.90% Self-raised fund 1,126 4.90% Self-raised fund 92 4.13% Self-raised fund 167 4.13% Self-raised fund － － Self-raised fund － － Self-raised fund 4,449 4.48% Self-raised fund 9,366

As at 30 June 2019, bank borrowing of RMB167 million (31 December 2018: RMB80 million) is secured by property and equipment under construction with original cost of RMB197 million (31 December 2018: RMB149 million).

As at 30 June 2019, the group has no provision for construction in progress (31 December 2018: nil).

132

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (13) Intangible assets

Concession rights (a) Land use rights (b) Technical know-how and computer software (c) (a) The movements of concession rights are as follows: Cost 1 January 2018 Transfers from construction in progress (Note 4(12)(b)) Business combination Other additions 31 December 2018 Transfers from construction in progress (Note 4(12)(b)) Other additions 30 June 2019 Accumulated amortisation 1 January 2018 Charge for the year 31 December 2018 Charge for the period 30 June 2019 Provision for impairment 31 December 2018 and 30 June 2019 Net Book Value 30 June 2019 31 December 2018	30 June 2019 10,713,600 59,276 4,360 10,777,236	31 December 2018 10,309,775 60,358 4,694 10,374,827 8,649,998 2,170,036 1,124,058 495,049 12,439,141 150,162 449,426 13,038,729 (1,733,319) (343,964) (2,077,283) (195,763) (2,273,046) (52,083) 10,713,600 10,309,775

• (i) As at 30 June 2019, certain concession right with carrying amount of approximately RMB2,722 million (cost of RMB3,323 million) (31 December 2018: carrying amount of RMB2,758 million with cost of RMB3,323 million) has been used as collateral for the loan of RMB445 million (31 December 2018: RMB321 million) (Note 4(17)(a)).

• (ii) The remaining amortization period of concession rights range from 11 to 30 years.

133

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (13) Intangible assets (Continued)

• (b) The movements of land use rights are as follows:

Cost 1 January 2018 and 31 December 2018 Addition in the current period 30 June 2019 Accumulated amortisation 31 December 2018 Charge for the period 30 June 2019 Net Book Value 30 June 2019 31 December 2018	65,445 －
	65,445
	(5,087) (1,082)
	(6,169)
	59,276
	60,358

• (i) As at 30 June 2019, bank borrowing of RMB80 million (31 December 2018: RMB80 million) is secured by land use right with carrying amount of RMB27 million and original cost of RMB28 million (31 December 2018: land use right with carrying amount of RMB27 million and original cost of RMB28 million).

• (c) The movements of technical know-how and software are as follows:

Cost 31 December 2018 Increase in the current period 30 June 2019 Accumulated amortisation 31 December 2018 Charge for the period 30 June 2019 Net Book Value 30 June 2019 31 December 2018	11,946 123
	12,069
	(7,252) (457)
	(7,709)
	4,360
	4,694

134

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (13) Intangible assets (Continued)

  • (d) For the six months ended 30 June 2019, the amounts of amortization charged to cost of sales and general and administrative expenses were RMB196 million (For the six months ended 30 June 2018: RMB161 million) and RMB1 million (For the six months ended 30 June 2018: RMB1 million), respectively.

(14) Provision for asset impairment and loss

31 December 2018 Provision for trade receivables (Notes(i)) 49,584	31 December 2018 Provision for trade receivables (Notes(i)) 49,584	Changes in Accounting Policy 1 January 2019 － 649,584480	Changes in Accounting Policy 1 January 2019 － 649,584480	Increase in the current period 573	Decrease in the current period Reversal Write-off (672) －	Decrease in the current period Reversal Write-off (672) －	30 June 2019 49,485
Including: Individual provision for bad debts Combined provision for bad debts	43,104 6,480	－ －	43,104 6,480	－ 573	(672) －	－ －	42,432 7,053
Provision for other receivables Provision for long-term receivables (including other non-current assets due with one year) Provision for contract assets Subtotal Provision for intangible assets Provision for other current assets Provision for Long-term equity investments Subtotal Total	10 138 － 49,732 52,083 39,435 22,358 113,876 163,608	－ － － － － － － － －	10 138 － 49,732 52,083 39,435 22,358 113,876 163,608	－ － － 573 － － － － 573	－ － － (672) － － － － (672)	－ － － － － － － － －	10 138 － 49,633 52,083 39,435 22,358 113,876 163,509

• (i) For the six months ended 30 June 2019, the Company’s subsidiary Tianjin Capital Alternative Energy Technology Co., Ltd has collected part of the trade receivables which had been recognised bad debt provision.

135

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (15) Trade payables, other payables, taxes payable and contract liabilities

Trade payables (a) Other payables (note (b)) Taxes payable (note (c)) Contract liabilities (note (d))	30 June 2019 220,762 1,202,031 54,215 534,107 2,011,115	31 December 2018 176,398 1,458,045 68,893 469,185
		2,172,521

• (a) As at 30 June 2019, trade payables are mainly for inventory purchase. Trade payables aged over one year are RMB26 million (31 December 2018: RMB33 million), mainly representing payables for source water from the subsidiary Qujing Capital Water Co., Ltd. Since such amount has not been received from Qujing City Water General Company, it has not been finally settled.

(b) Other payables comprise:

	30 June 2019	31 December 2018
Construction costs payable and deposits	910,182	1,328,505
Interests payable for debentures payable	26,271	43,768
Payable for purchase of fixed assets and concession rights	13,892	13,892
Dividends payable	150,699	1,912
Others	100,987	69,968
	1,202,031	1,458,045

As at 30 June 2019, other payables of RMB160 million (31 December 2018: RMB453 million) are aged over one year, which mainly represent construction costs payable and guarantee deposits for Hangzhou Qige Sewage Plant Upgrading project, Jizhuangzi Relocation and construction project, Xi’an Beishiqiao Dengjiacun upgrading projects and etc. The balance is yet to be settled as the projects have not been completed.

136

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (15) Trade payables, other payables, taxes payable and contract liabilities (Continued)

(c) Balances of taxes payable Enterprise income tax payable Unpaid VAT Others (d) Contract Liabilities For pipeline connection service Road toll For cooling and heating service Received from project of Han Gu Others (16) Accrued payroll Short-term employee benefits payable (a) Defined contribution plans payable (b)	30 June 2019 21,830 22,306 10,079 54,215 30 June 2019 470,598 46,055 5,264 4,467 7,723 534,107 30 June 2019 11,483 74 11,557	31 December 2018 34,658 26,213 8,022
		68,893
		31 December 2018 453,602 － 4,074 4,467 7,042
		469,185
		31 December 2018 53,724 218
		53,942

137

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (16) Accrued payroll (Continued)

(a) Short-term employee benefits payable

Wages and salaries, bonuses, allowances and subsidies Staff welfare Social security contributions	31 December 2018 46,947 － 91	Increase in the current period 108,487 3,558 12,291	Decrease in the current period (151,008) (3,557) (12,295)	30 June 2019 4,426 1 87
Including: Medical insurance Work injury insurance Maternity insurance	82 1 8	11,316 328 647	(11,321) (327) (647)	77 2 8
Housing funds Labour union funds and employee education funds	19 6,667 53,724	31,123 4,181 159,793	(31,256) (3,765) (202,034)	(114) 7,083 11,483

(b) Defined contribution plans payable

	31 December	Increase in the	Decrease in the
	2018	current period	current period	30 June 2019
Basic pensions	211	22,724	(22,780)	155
Annuity	－	7,971	(8,060)	(89)
Unemployment	7	802	(801)	8
	218	31,497	(31,641)	74

138

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (16) Accrued payroll (Continued)

(c) Directors’ emoluments

The remuneration of every director for the six months ended 30 June 2019 is set out below:

Executive directors: Liu Yujun Wang Jing Niu Bo Non-executive directors: Wang Xiangfei Guo Yongqing Di Xiaofeng Yu Zhongpeng Han Wei Si Xiaolong	Fees － － － 110 110 110 － － － 330	Salaries and other emoluments 523 485 396 － － － － － － 1,404	Total 523 485 396 110 110 110 － － －
			1,734

The remuneration of every director for the six months ended 30 June 2018 is set out below:

		Salaries and
	Fees	other emoluments	Total
Executive directors:
Liu Yujun	－	485	485
Peng Yilin	－	430	430
Fu Yana	－	410	410
Tang Fusheng	－	480	480
Lin Wenbo	－	－	－
Non-executive directors:
Gao Zongze	110	－	110
Wang Xiangfei	110	－	110
Guo Yongqing	110	－	110
	330	1,805	2,135

139

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(17) Long-term borrowings, debentures payable, long-term payables, short-term borrowings and other liabilities

	Note	30 June 2019	31 December 2018
Non-current:
Long-term borrowings	(a)	3,024,910	2,265,905
Less: Current portion due within one year	(a)	(741,534)	(213,952)
		2,283,376	2,051,953
Debentures payable	(b)	1,796,872	1,796,363
Less: Current portion due within one year	(b)	－	－
		1,796,872	1,796,363
Long-term payables	(c)	288,368	295,784
Less: Current portion due within one year	(c)	(29,696)	(29,417)
		258,672	266,367
Other non-current liabilities	(e)	38,000	38,000
Current:
Current portion of long-term borrowings	(a)	741,534	213,952
Current portion of debentures payable	(b)	－	－
Current portion of long-term payables	(c)	29,696	29,417
Current portion of non-current liabilities		771,230	243,369
Short-term borrowings	(d)	200,000	200,000
Other current liabilities	(e)	－	－

140

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (17) Long-term borrowings, debentures payable, long-term payables, short-term borrowings and other liabilities (Continued)

  • (a) Long-term borrowings

Summary of current portion of long-term borrowings by terms:

	Note	30	June 2019	31 December 2018
Secured	(i)		14,620	2,220
Guaranteed	(ii)		38,000	37,000
Unsecured			688,914	174,732
			741,534	213,952
Summary	of non-current portion of long-term borrowings by terms:
	Note	30	June 2019	31 December 2018
Secured	(iii)		152,580	77,700
Guaranteed	(iv)		91,000	110,000
Unsecured			1,595,014	1,543,540
Pledged	(v)		444,782	320,713
			2,283,376	2,051,953

141

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (17) Long-term borrowings, debentures payable, long-term payables, short-term borrowings and other liabilities (Continued)

  • (a) Long-term borrowings (Continued)

    • (i) As at 30 June 2019, the current portion of bank borrowings of RMB15 million is mortgaged by land use right (Note 4(13)(b)) and property and equipment under construction (Note 4(12)(b)) of Shandong Capital Environmental Protection Technology Development Co., Ltd. As at 31 December 2018, the current portion of bank borrowings of RMB2 million is mortgaged by land use right (Note 4(13)(b)) and property and equipment under construction (Note 4(12)(b)) of Shandong Capital Environmental Protection Technology Development Co., Ltd.

    • (ii) As at 30 June 2019, the current portion of bank borrowings of RMB38 million (2018: RMB37 million) is guaranteed by City Infrastructure Construction and Investment for Xi’an Capital Water Co., Ltd, the subsidiary of the Company (Note 7(5)(b)).

    • (iii) As at 30 June 2019, the current portion of bank borrowings of RMB153 million (31 December 2018: RMB78 million) is mortgaged by land use right (Note 4(13)(b)) and property and equipment under construction (Note 4(12)(b)) of Shandong Capital Environmental Protection Technology Development Co., Ltd.

    • (iv) As at 30 June 2019, the non-current portion of bank borrowings of RMB91 million ((31 December 2018: RMB110 million) is guaranteed by City Infrastructure Construction and Investment for Xi’an Capital Water Co., Ltd, the subsidiary of the Company (Note 7(5)(b)).

    • (v) As at 30 June 2019, bank borrowing of RMB445 million (31 December 2018: RMB321 million) is pledged by all earnings and equity of Jingu and Beicang upgrading project under the Group’s concession right(Note 4(13)(a)).

    • (vi) As at 30 June 2019, these long-term borrowings bear interest rates between 4.275% and 5.145% (31 December 2018: between 4.275% and 5.463%).

142

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (17) Long-term borrowings, debentures payable, long-term payables, short-term borrowings and other liabilities (Continued)

  • (b) Debentures payable

31 December 2018 (including due within 1 year) Debentures payable – Par value 1,800,000 – Transaction cost (3,637) 1,796,363	Issue – – –	Payment – – –	Amortization – 509 509	30 June 2019 1,800,000 (3,128)
				1,796,872

General information of debentures payable are as follows:

	Per Value	Issuance date	Maturity	Issuance amount
Corporate Debenture (note (i))	700,000	2016-10-25	5 years	700,000
Corporate Debenture (note (ii))	1,100,000	2018-04-25	5 years	1,100,000

Interests payable of debentures are analyzed as follows:

			Interest	Accrued
			Interest accrued	Interest paid
	31	December	in the current	in the current
		2018	period	period	30 June 2019
Corporate Debenture (note (i))		4,021	10,866	–	14,887
Corporate Debenture (note (ii))		38,952	28,201	(56,870)	10,283
		42,973	39,067	(56,870)	25,170

• (i) On 25 October 2016, the Company issued a debenture at par value of RMB700 million on The Shanghai Stock Exchange as approved by the Securities Regulatory Commission of China [2016]1896. The fixed interest rate of 3.13% has been accrued and settled per annum. The debenture will be due for repayment on 25 October 2021. The principal will be repaid on maturity.

• (ii) On 25 April 2018, the Company issued a debenture at par value of RMB1,100 million on The Shanghai Stock Exchange as approved by the Securities Regulatory Commission of China [2016]1896. The fixed interest rate of 5.17% has been accrued and settled per annum. The debenture will be due for repayment on 25 April 2023. The principal will be repaid on maturity.

143

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (17) Long-term borrowings, debentures payable, long-term payables, short-term borrowings and other liabilities

(Continued)

• (c) Long-term payables

		30 June 2019			31 December 2018
		Unrecognised			Unrecognised
		financial			financial
	Payables	charges	Total	Payables	charges	Total
Payable for assets acquisition	458,092	(169,887)	288,205	462,321	(166,537)	295,784

• (i) Information of long-term payables is as follows:

		Original	Effective		Current
	Maturity date	balance	interest rate	Total	portion	Ending balance
Tianjin Sewage Company	20 March
(“Sewage Company”)	2041	430,314	5.94%	288,205	29,533	258,672

As at 30 June 2019, long-term payable to Sewage Company is the consideration payable in respect of the acquisition of sewage water processing assets from Sewage Company, net of unrecognised financing charges.

Pursuant to Assets Transfer Agreement From Foreign Banks Loans About Haihe River Tianjin Sewage Processing Project and Beicang Sewage Processing Project (the “Transfer Agreement”), Sewage Company sold to the Company certain sewage processing assets. The down payment is RMB261 million, and remaining payments will be settled in RMB translated at exchange rates prevailing on each repayment date over the remaining years. The fair value of the initial recognition of the payable balance was calculated based on discounted future cash payments and discount rate of 5.94%.

144

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (17) Long-term borrowings, debentures payable, long-term payables, short-term borrowings and other liabilities (Continued)

  • (c) Long-term payables (Continued)

    • (ii) The balance of long-term payable are denominated in the following currencies:

JPY USD	30 June 2019 208,178 80,027 288,205	31 December 2018 205,116 90,668
		295,784

• (iii) The amounts of long-term payables (including interest) are denominated in the following currencies:

	30	June 2019	31 December 2018
JPY		352,739	351,147
USD		105,353	111,174
		458,092	462,321

The balance denominated in USD bears an interest rate at 6-month LIBOR plus 0.6%, whilst the balance denominated in JPY bears fixed interest rates at 1% and 1.55% per annum respectively.

• (iv) The long-term payables mature as follows. As at 30 June 2019, the current portion of long-term payables of RMB29.5 million (31 December 2018: RMB29 million) was classified as current liabilities.

Within 1 year 1-2 years 2-5 years Over 5 years	30 June 2019 29,533 28,680 81,847 148,145 288,205	31 December 2018 29,417 28,551 81,380 156,436
		295,784

145

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (17) Long-term borrowings, debentures payable, long-term payables, short-term borrowings and other liabilities (Continued)

  • (d) short-term borrowings

Summary of short-term borrowings by terms

Unsecured (e) Other liabilities Non-current: – Cooling service fee Current: – Others Provisions Maintenance cost of sewage water processing plants Less: Provisions expected to be paid within one year	31 December 2018 10,069 － 10,069	Increase in the current period － － －		30 June 2019 200,000 30 June 2019 38,000 38,000 － － Decrease in the current period － －	31 December 2018 200,000	31 December 2018 200,000
					31 December 2018 38,000
						38,000
						92
						92
						30 June 2019 10,069 －
				－		10,069

(18) Provisions

146

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(19) Deferred income

Deferred revenue represents the subsidies received from governmental authorities with respects to Group’s certain construction and research and development projects. Details of deferred revenue are as below:

Sewage water processing plants – Jingu sewage water processing plant – Jingu sewage water processing plant upgrading project – Beichen sewage water processing plant upgrading project – Xianyang Road upgrading project – Dongjiao upgrading project – Ningxiang Economic and Technological Development Zone sewage water processing plant upgrading project – Beishiqiao plant upgrading project – Linxia sewage water processing plant reconstruction and extension project Water recycling plants – Jingu water recycling project – Dongjiao water recycling project – Beichen water recycling project – Xianyang Road water recycling project Heating and cooling supply project Others	31 December 2018 1,258,545 163,000 90,000 59,079 41,456 18,279 10,354 7,600 206,393 21,081 18,112 13,200 180,357 13,629 2,101,085	Increase in the current period － － － － － － － － － － － － 34,567 3,322 37,889	Decrease in the Recognised in other income (25,643) － － (1,182) (829) － (359) (42) － (338) (263) － (3) (15) (28,674)	current period Recognised in non-operating income － － － － － － － － － － － － － (2) (2)	30 June 2019 Related to assets/ incomes 1,232,902 Assets 163,000 Assets 90,000 Assets 57,897 Assets 40,627 Assets 18,279 Assets 9,995 Assets 7,558 Assets 206,393 Assets 20,743 Assets 17,849 Assets 13,200 Assets 214,921 Assets 16,934 Incomes 2,110,298

147

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (20) Deferred tax assets and deferred tax liabilities

• (a) Deferred income tax assets

  • (i) Deductible temporary differences and deductible losses that are not recognised as deferred tax assets are analyzed as follows:

Deductible temporary difference – provision for asset impairment (Note 4(14)) Deductible losses Maintenance cost of sewage water processing plants (Note 4(18))	30 June 2019 162,936 48,343 10,069 221,348	31 December 2018 163,608 43,950 10,069
		217,627

• (ii) Deductible losses that are not recognised as deferred tax assets will expire in the following years:

	30	June 2019	31 December 2018
2019		－	18,056
2020		6,243	6,243
2021		5,124	5,124
2022		3,466	3,466
2023		11,061	11,061
2024		22,449	－
		48,343	43,950

(b) Deferred income tax liabilities

Amortization of intangible assets Business combination Including: Expected to be recovered within one year (inclusive) Expected to be recovered after one year	30 June 2019 Deferred income tax liabilities Taxable temporary differences 127,878 511,511 13,492 53,970 141,370 565,481 471 140,899 141,370	31 December 2018 Deferred income tax liabilities Taxable temporary differences 125,082 500,328 13,730 54,920 138,812 555,248 8,296 130,516 138,812	31 December 2018 Deferred income tax liabilities Taxable temporary differences 125,082 500,328 13,730 54,920 138,812 555,248 8,296 130,516 138,812
			555,248

148

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(21) Share capital

Movement of the Company’s authorized, issued and fully paid up capital is set out below. All of the Company’s shares are ordinary shares with par value of RMB1.

								Circulating	Circulating
								A shares	H shares	Total
At	30	June	2019	and	31	December	2018	1,087,228	340,000	1,427,228

All the A-shares and H-shares rank pari passu in all respects.

• (22) Capital surplus, surplus reserve and undistributed profits

(a) Capital surplus

Share premium A subsidiary reformed as a stock limited company Capital Increase by minority shareholders Share premium A subsidiary reformed as a stock limited company Capital Increase by minority shareholders	31 December 2018 382,311 16,804 31,909 431,024 31 December 2017 382,311 16,804 － 399,115	Increase in the current period － － － － Increase in the current year － － 31,909 31,909	Decrease in the current period － － － － Decrease in the current year － － － －	30 June 2019 382,311 16,804 31,909
				431,024
				31 December 2018 382,311 16,804 31,909
				431,024

149

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (22) Capital surplus, surplus reserve and undistributed profits (Continued)

(b) Surplus reserve

Statutory surplus reserve Statutory surplus reserve	31 December 2018 517,107 31 December 2017 479,907	Increase in the current period － Increase in the current year 37,200	Decrease in the current period － Decrease in the current year －	30 June 2019 517,107
				31 December 2018 517,107

Pursuant to the PRC Companies Law and the Company’s Articles of Association, the Company is required to appropriate 10% of its net profit for the year to the statutory surplus reserve, which can be ceased till the reserve reaches 50% of the registered capital. The statutory surplus reserve can be used to make up for the loss or increase the paid in capital after approval from the appropriate authorities.

(c) Undistributed profits

Undistributed profits at the beginning of the year (before adjustment) Adjustment Undistributed profits at the beginning of the year (after adjustment) Add: Net profit attributable to owners of the parent for the current period Less: Appropriation for statutory surplus reserve Dividends distribution to shareholders (note (i)) Undistributed profits at the end of the year	For the six months ended 30 June 2019 3,442,844 － 3,442,844 218,503 － (151,286) 3,510,061	For the six months ended 30 June 2018 2,810,790 168,086
		2,978,876 282,565 － －
		3,261,441

• (i) On 14 May 2019, the board of directors proposed a cash dividend in respect of year ended 31 December 2018 of RMB1.06 (gross tax) for every 10 shares to all shareholders on the basis of 1,427 million shares issued. Cash dividends to be distributed amounted to RMB151 million.

150

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (23) Revenue and cost of sales

Principal operations Other operations	For the six months ended 30 June 2019 Revenue Cost of sales 1,148,445 749,986 76,271 64,374 1,224,716 814,360	For the six months ended 30 June 2018 Revenue Cost of sales 1,021,838 597,640 85,960 51,217 1,107,798 648,857	For the six months ended 30 June 2018 Revenue Cost of sales 1,021,838 597,640 85,960 51,217 1,107,798 648,857
			648,857

• (a) Revenue from principal operations and cost of sales

Analysis by the nature of services is as below:

	For the six months	ended	For the six months	ended
	30 June 2019		30 June 2018
	Revenue from		Revenue from
	principal		principal
	operations Cost of sales		operations Cost of sales
Processing of sewage water and construction of
related facility	871,299	580,714	748,048	419,744
Water recycling and connection project	137,078	95,676	149,040	108,777
Heating and cooling supply services	40,417	30,545	36,574	25,587
Tap water supplying	49,703	32,478	46,059	28,795
Sale of environmental protection equipment	18,493	6,885	10,250	10,740
Others	31,455	3,688	31,867	3,997
	1,148,445	749,986	1,021,838	597,640

Analysis by locations is as follows:

Tianjin Hangzhou Xi’an Qujing Others	For the six months ended 30 June 2019 Revenue from principal operations Cost of sales 681,838 420,089 120,167 86,230 62,772 42,750 55,826 37,253 227,842 163,664 1,148,445 749,986	For the six months ended 30 June 2018 Revenue from principal operations Cost of sales 639,087 360,692 133,377 80,822 60,003 40,748 52,321 35,929 137,050 79,449 1,021,838 597,640	For the six months ended 30 June 2018 Revenue from principal operations Cost of sales 639,087 360,692 133,377 80,822 60,003 40,748 52,321 35,929 137,050 79,449 1,021,838 597,640
			597,640

151

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (23) Revenue and cost of sales (Continued)

  • (b) Revenue from other operations and cost of sales

Contract operation income Technical service fee Rental income (i) Others	For the six months ended 30 June 2019 Revenue from other operations Cost of sales 65,949 51,569 7,911 9,590 751 1,850 1,660 1,365 76,271 64,374	For the six months ended 30 June 2018 Revenue from other operations Cost of sales 61,367 45,629 13,674 1,958 3,908 3,381 7,011 250 85,960 51,218	For the six months ended 30 June 2018 Revenue from other operations Cost of sales 61,367 45,629 13,674 1,958 3,908 3,381 7,011 250 85,960 51,218
			51,218

• (i) The Group’s rental income comes from the rental of its own property, plant and equipment. For the six-month period ending 30 June 2019, the variable rental income based on a certain percentage of the lessee’s sales is RMB0 yuan.

152

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (23) Revenue and cost of sales (Continued)

(c) The Group’s operating income in the six months ended 30 June 2019 listed as follows:

Revenue Of which: confirm at a certain point in time Confirm within a certain period of time Other operating income	Processing of sewage and construction of related facility Tianjin Hangzhou Others 452,450 120,167 298,682 － － － 452,450 120,167 298,682 － － － 452,450 120,167 298,682	For the six months ended 30 June 2019 Recycled Heating and Sale of environmental protection water cooling supply Tap water equipment 43,002 40,417 49,703 18,493 － － － － 43,002 40,417 49,703 18,493 － － － － 43,002 40,417 49,703 18,493	Others 125,531 － 125,531 76,271 201,802	Group 1,148,445 － 1,148,445 76,271
				1,224,716

As at 30 June 2019, the Group’s main service includes sewage water processing service, recycled water operations service and tap water operations service. Service bills are regularly issued to customers, based on contract agreed price and actual sewage water treatment capacity, tap water and recycling water supply. And the amount of bills represent the entity’s progress toward complete satisfaction of the performance obligation to transfer each distinct good or service in the series to customers. And there is no consideration amount which is not included in the transaction price, thus it’s not included in the required information to be disclosed for the transaction price allocated to the remaining performance obligation.

As at 30 June 2019, the consideration for pipeline connection services of RMB471 million of which the contracts were signed but the performance obligation is not yet fully completed, will be recognised by percentage of completion in following years.

153

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (24) Taxes and surcharges

Land use tax City maintenance and construction tax Property tax Educational surcharge Local educational surcharge Others	For the six months ended 30 June 2019 7,643 4,187 3,478 1,960 1,117 522 18,907	For the six months ended 30 June 2018 Tax base 7,182 RMB1.5-30 per square meter 7,814 7%/5% of the VAT paid 3,467 Self-use: 1.2% (deducted 30% of the original value of the property) Rental: 12% of the rental income 3,535 2%/3% of the VAT paid 2,121 2% of the VAT paid 2,347 26,466

• (25) Selling expenses and general and administrative expenses

	For the six months	ended	For the six months ended	For the six months ended
	30 June 2019		30 June 2018
	General and		General and
	administrative	Selling	administrative
	expenses	expenses (i)	expenses	Selling expenses
Employee benefits	47,730	1,674	38,193	2,467
Consulting service fees	1,519	－	3,016	－
Travelling, meeting and business entertainment expenses	2,112	265	1,864	226
Depreciation of fixed assets	2,932	9	2,344	8
Expenses of secretary of the board	1,585	－	1,991	－
General office expenses	2,227	4	1,296	6
Audit fees	2,424	－	1,986	－
Repair and maintenance expenses	1,605	－	1,073	－
Power and gas fees	703	－	764	－
Other taxes	209	－	219	－
Amortisation of intangible assets	1,434	－	946	－
Others	3,552	35	1,939	23
	68,032	1,987	55,631	2,730

(i) For the six months ended 30 June 2019, the Group incurred selling expenses of RMB2 million, mainly representing the compensation for employees whose responsibilities are development of the market of deodorization equipment.

154

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (26) Research and development expenses

	For the six months	For the six months
	ended 30 June 2019	ended 30 June 2018
Environmental protection equipment	3,270	5,045

(27) Financial expenses

	For the six months	For the six months	For the six months	For the six months
	ended 30 June 2019		ended	30 June 2018
Interest expenses		125,457		91,355
Less: Amount capitalized on qualifying assets		(18,867)		(2,773)
Interest expenses		106,590		88,582
Less: Interest income		(10,980)		(11,246)
Including: From long-term receivables		(4,702)		(5,014)
From bank deposits		(6,278)		(6,232)
Exchange losses (a)		(1,269)		(2,467)
Others		(1,218)		1,380
		93,123		76,249

• (a) For the six months ended 30 June 2019, the exchange loss on the long-term payables denominated in JPY and US dollar were RMB1.27 million (For the six months ended 30 June 2018: RMB2.5 million of the exchange gain).

155

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (28) Other Income

VAT refund Government Grants (a)	For the six months ended 30 June 2019 32,070 28,674 60,744	For the six months ended 30 June 2018 Related to assets/incomes 60,986 Incomes 28,629 Assets/Incomes 89,615

(a) Details of government grants

	For the six months	For the six months	Related to
	ended 30 June 2019	ended 30 June 2018	assets/incomes
Compensation for relocation and
Construction of Jizhuangzi sewage processing plant	25,643	25,643	Assets
Special construction fund of Xianyanglu upgrading project	1,182	1,182	Assets
Special construction fund of Dongjiao sewage water
processing plant	829	829	Assets
Compensation for heating and cooling services	3	－	Assets
Others	1,017	975	Assets/Incomes
	28,674	28,629

(29) Investment Income

Dividends income from other equity instruments investment

For the six months	For the six months
ended 30 June 2019	ended 30 June 2018
－	200

• (30) Credit impairment losses

Trade receivables losses

For the six months For the six months ended 30 June 2019 ended 30 June 2018 (98) (2,923)

156

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (31) Gains on disposals of assets

Amount recognised For the six months For the six months in non-recurring ended 30 June 2019 ended 30 June 2018 profit or loss Gains on disposals of fixed assets 1,201 － 1,201

(32) Non-operating income

Government Grants (note (a)) Others (b) Details of government grants Others	For the six months ended 30 June 2019 2,399 150 2,549 For the six months ended 30 June 2019 2,399 2,399	For the six months ended 30 June 2018 2,228 1,871 4,099 For the six months ended 30 June 2018 2,228 2,228	Amount recognised in non-recurring profit or loss 2,399 150
			2,549
			Related to assets/incomes Incomes

• (b) Details of government grants

(33) Non-operating expenses

Donation Losses on scrap of fixed assets Others

For the six months ended 30 June 2019 2,380 － － 2,380	For the six months ended 30 June 2018 － 118 869 987	Amount recognised in non-recurring profit or loss 2,380 － －
		2,380

157

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (34) Income tax expenses

Current income tax calculated based on tax law and related regulations Deferred income tax	For the six months ended 30 June 2019 53,596 2,558 56,154	For the six months ended30 June 2018 87,805 4,423
		92,228

The reconciliation from income tax calculated based on the applicable tax rates and total profits presented in the consolidated financial statements to the income tax expenses is set below:

Total profit Calculated at applicable income tax rates (25%) Effect of favourable tax rates Income not subject to tax Costs, expenses and losses not deductible for tax purposes Utilization of previously deductible tax losses for which no deferred income tax was recognised Tax temporary differences for which no deferred income tax asset was recognised Deductible losses for which no deferred income tax asset was recognised Income tax expenses	For the six months ended 30 June 2019 287,249 71,812 (15,923) (8,234) 3,136 (249) 5,612 － 56,154	For the six months ended 30 June 2018 393,715
		98,429 (3,760) (9,747) 7,793 (772) (731) 1,016
		92,228

158

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(35) Earnings per share

• (a) Basic earnings per share

Basic earnings per share is calculated based on the profit attributable to owners of the parent of RMB219 million(For the six months ended 30 June 2018: RMB283 million) and weighted average number of ordinary shares of 1,427 million shares in issue during the year (For the six months ended 30 June 2018: 1,427 million shares).

Consolidated net profit attributable to ordinary shareholders of the Company Weighted average number of ordinary shares in issue (thousand shares) Basic earnings per share (RMB Yuan) Including: – Basic earnings per share for operations on a going concern – Basic earnings per share for discontinued operations	For the six months ended 30 June 2019 218,503 1,427,228 0.15 0.15 －	For the six months ended 30 June 2018 282,565 1,427,228
		0.20
		0.20 －

(b) Diluted earnings per share

Diluted earnings per share is calculated by dividing net profit attributable to ordinary shareholders of the Company adjusted based on the dilutive potential ordinary shares by the adjusted weighted average number of ordinary shares outstanding. As there were no dilutive potential ordinary shares in the six months ended 30 June 2019 (For the six months ended 30 June 2018: nil), diluted earnings per share equal to basic earnings per share.

159

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (36) Notes to the cash flow statements and supplementary information

• (a) Reconciliation of net profit to cash flows from operating activities

Net profit Add: Provision for asset impairments Credit impairment losses Depreciation of fixed assets and investment properties Amortisation of intangible assets Net losses from disposal of fixed assets Net financial expenses Investment gains Increase/(decrease) in deferred tax liabilities Decrease in inventories Decrease in operating receivables Increase/(decrease) in operating payables Net cash flows from operating activities Net movement in cash Cash at the end of the period Less: Cash at the beginning of the period Net increase in cash	For the six months ended 30 June 2019 231,095 (98) 50,206 197,302 (1,201) 92,393 － 2,558 24 35,421 122,007 729,707 2,024,293 (1,808,543) 215,750	For the six months ended 30 June 2018 301,487
		(2,923) 22,639 162,186 118 86,115 (200) 4,423 1,913 (186,075) (51,693)
		337,990
		2,277,335 (1,893,689)
		383,646

(b) Cash listed in the cash flow statement comprises:

Cash Including: Cash on hand Cash at bank Cash listed in cash flow statement	For the six months ended 30 June 2019 111 2,024,182 2,024,293	For the six months ended 30 June 2018 61 1,808,482
		1,808,543

160

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (36) Notes to the cash flow statements and supplementary information (Continued)

(c) Cash received relating to other operating activities

Deposit on project bids received Collection of deposit on project bids Interest income from bank deposits Subsidies received Project fund on behalf of sewage mud project Others	For the six months ended 30 June 2019 7,133 97,195 6,221 37,889 451 24,122 173,011	For the six months ended 30 June 2018 64,212 54,131 6,232 27,855 10,000 33,395
		195,825

• (d) Cash paid relating to other operating activities

	For the six months	For the six months
	ended 30 June 2019	ended 30 June 2018
Deposit on Project bids paid	16,344	5,325
Consulting service fees	3,303	5,480
Travelling, meeting and business entertainment expenses	2,568	3,989
Expenses of secretary of the board	1,585	2,344
Repair and maintenance expenses	48,286	33,993
Others	216	2,648
	72,302	53,779

(e) Net cash received from disposals of fixed assets

Carrying amount of disposals of fixed assets Net losses from disposal of fixed assets Net cash received from disposals of fixed assets	For the six months ended 30 June 2019 1,231 (1,201) 30	For the six months ended 30 June 2018 118 (118)
		－

161

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

5 EQUITY IN OTHER ENTITIES

(a) Subsidiaries

	Type of	Major business	Place of	Nature of business
Name of subsidiaries	subsidiary	location	registration	and business activity	Shareholding(%)		Establishment
					Direct	Indirect
Qujing Capital Water Co., Ltd.	A	Qujing	Qujing	Processing of sewage water, tap water supply	87	—	Capital contribution
GuizhouCapital Water Co., Ltd.	A	Guizhou	Guizhou	Processing of sewage water	95	—	Capital contribution
Baoying Capital Water Co., Ltd.	A	Baoying	Baoying	Processing of sewage water	70	—	Capital contribution
Hangzhou Tianchuang Capital Water Co., Ltd.	A	Hangzhou	Hangzhou	Processing of sewage water	70	—	Capital contribution
Tianjin Capital New Materials Co., Ltd.	A	Tianjin	Tianjin	Manufacturing and sale of new building	71	—	Capital contribution
				materials
Fuyang Capital Water Co., Ltd.	B	Fuyang	Fuyang	Processing of sewage water	100	—	Capital contribution
Tianjin Capital Environmental Protection (Hong Kong)	B	Hong Kong	Hong Kong	Processing of sewage water	100	—	Capital contribution
Co., Ltd.
Wendeng Capital Water Co., Ltd.	B	Wendeng	Wendeng	Processing of sewage water	100	—	Capital contribution
Tianjin Jing Hai Capital Water Co., Ltd.	B	Tianjin	Tianjin	Processing of sewage water	100	—	Capital contribution
Tianjin Water Recycling Co., Ltd.	B	Tianjin	Tianjin	Production and sales of recycled water,	100	—	Capital contribution
				development and construction of
				water recycling facilities, and technical
				consulting for water recycling business
Xi’an Capital Water Co., Ltd.	B	Xi’an	Xi’an	Processing of sewage water	100	—	Capital contribution
Tianjin Caring Technology Development Co., Ltd	A	Tianjin	Tianjin	Environment governance, technical	48	12	Capital contribution
				consulting, etc.
Anguo Capital Water Co., Ltd.	B	Anguo	Anguo	Tap water supply and drain off for urban area	100	—	Capital contribution
				and processing of sewage
Wuhan Tianchuang Capital Water Co.,Ltd.	B	Wuhan	Wuhan	Processing of sewage water, tap water supply	100	—	Capital contribution
Tianjin Jinning Capital Water Co., Ltd.	B	Tianjin	Tianjin	Processing of sewage water	100	—	Capital contribution
Tianjin Capital Alternative Energy Technology	B	Tianjin	Tianjin	Energy saving, innovative energy	100	—	Capital contribution
Co., Ltd				research, consulting and transfer
				services, property management
Yingshang Capital Water Co., Ltd.	B	Yingshang	Yingshang	Processing of sewage water	100	—	Capital contribution
Shandong Capital Environmental Protection	A	Shandong	Shandong	Investment in and construction of	55	—	Capital contribution
Technology Development Co., Ltd.				sewage water processing facilities
Changsha Tianchuang Environmental Protection	A	Changsha	Changsha	Processing of sewage water	81	—	Capital contribution
Co., Ltd.
Karamay Tianchuang Capital Water Co., Ltd.	A	Karamay	Karamay	Processing of sewage water	90	—	Capital contribution
Anhui Tianchuang Capital Water Co., Ltd.	B	Hefei	Hefei	Processing of sewage water	100	—	Capital contribution
Linxia Capital Water Co., Ltd	B	Linxia	Linxia	Processing of sewage water	100	—	Capital contribution
Dalian Oriental Chunliuhe Water Quality	A	Dalian	Dalian	Processing of sewage water	64	—	Capital contribution
Purification Co., Ltd.
Changsha Tianchuang Capital Water Co., Ltd.	A	Changsha	Changsha	Processing of sewage water	80	—	Capital contribution
Inner Mongolia Bayannur Capital Water Co., Ltd.	A	Bayannur	Bayannur	Processing of sewage water, producing	70	—	Business combination
				and selling of recycled water,
				supplying tap water
Honghu Tianchuang Capital Water Co., Ltd.	A	Honghu	Honghu	Processing of sewage water	85	—	Capital contribution
Hefei Capital Water Co., Ltd.	B	Hefei	Hefei	Processing of sewage water	100	—	Capital contribution
Deqing Capital Water Co., Ltd.	A	Deqing	Deqing	Processing of sewage water	90	—	Capital contribution
Hanshou Tianchuang Capital Water Co., Ltd.	A	Hanshou	Hanshou	Supplying tap water	75	—	Capital contribution
Hebei Guojin Tianchuang Sewage Water	A	Gaocheng	Gaocheng	Processing of sewage water, producing	59	—	Capital contribution
Processing Co., Ltd.				and saling of recycled water

A: Holding subsidiary

B: Wholly-owned subsidiary

162

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019

(All amounts in RMB thousand unless otherwise stated)

5 EQUITY IN OTHER ENTITIES (Continued)

(b) Subsidiaries with significant minority interests

			Declared
			distribution of
		Minority interests	cash dividends
		in the	in the	Minority
	Minority	six months ended	six months ended	interests as at
Name	interests ratio	30 June 2019	30 June 2019	30 June 2019
Hangzhou Tianchuang Capital Water
Co., Ltd. (“Hangzhou Company”)	30.00%	7,036	—	211,766
Qujing Capital Water Co., Ltd. (“Qujing Company”)	13.44%	1,565	—	37,588
Dalian Oriental Chunliuhe Water
Quality Purification Co., Ltd. (“Dalian Company”)	36.12%	808	—	24,796
Bayannur Company	30.00%	1,156	—	334,514
Baoying Capital Water Co., Ltd. (“Baoying Company”)	30.00%	837	—	33,940
Tianjin Caring Technology Development Co., Ltd.
(“Caring Company”)	40.00%	2,799	—	48,935
Shandong Capital Environmental Protection Technology
Development Co., Ltd. (“Shandong Company”)	45.00%	(1,153)	—	83,024

The major financial information of the significant holding subsidiaries of the Group is listed below:

Balance Sheet

			30 June	2019
	Current	Non-current	Total	Current	Non-current	Total
	assets	assets	assets	liabilities	liabilities	liabilities
Hangzhou Company	315,613	702,966	1,018,579	150,317	162,375	312,692
Qujing Company	134,992	255,804	390,796	80,193	30,930	111,123
Dalian Company	30,924	185,550	216,474	54,581	74,626	129,207
Bayannur Company	59,254	1,076,389	1,135,643	7,104	13,492	20,596
Baoying Company	27,228	92,847	120,075	1,155	5,787	6,942
Caring Company	139,593	9,271	148,864	26,223	304	26,527
Shandong Company	127,601	285,081	412,682	75,604	152,580	228,184
	835,205	2,607,908	3,443,113	395,177	440,094	835,271

Hangzhou Company Qujing Company Dalian Company Bayannur Company Baoying Company Caring Company Shandong Company	Current assets 325,273 129,511 12,294 36,593 25,427 133,640 35,503 698,241	Non-current assets 784,561 265,004 171,341 1,095,010 81,683 10,342 207,963 2,615,904	31 December 2018 Total assets Current liabilities 1,109,834 158,784 394,515 72,858 183,635 61,879 1,131,603 6,680 107,110 2,191 143,982 28,340 243,466 42,705 3,314,145 373,437	Non-current liabilities 268,617 58,124 55,692 13,728 259 303 77,700 474,423	Total liabilities 427,401 130,982 117,571 20,408 2,450 28,643 120,405
					847,860

163

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 5 EQUITY IN OTHER ENTITIES (Continued)

• (b) Subsidiaries with significant minority interests (Continued)

Income Statement

Hangzhou Company Qujing Company Dalian Company Bayannur Company Baoying Company Caring Company Shandong Company	Revenue 120,272 57,904 13,809 35,928 10,161 48,828 47 286,949	For the six months ended 30 June 2019 Total profit Income tax expenses Net profit 31,355 (7,902) 23,453 15,591 (3,947) 11,644 2,237 — 2,237 4,043 (190) 3,853 3,217 (427) 2,790 8,132 (1,134) 6,998 (2,562) — (2,562) 62,013 (13,600) 48,413	Total comprehensive income 23,453 11,644 2,237 3,853 2,790 6,998 (2,562)
			48,413

		For the six	months ended 30 June 2018	months ended 30 June 2018
					Total
			Income tax		comprehensive
	Revenue	Total profit	expenses	Net profit	income
Hangzhou Company	133,591	50,308	(13,152)	37,156	37,156
Qujing Company	53,572	12,397	(3,522)	8,875	8,875
Dalian Company	—	—	—	—	—
Bayannur Company	26,931	9,699	—	9,699	9,699
Baoying Company	9,455	3,435	(415)	3,020	3,020
Caring Company	45,236	8,021	(1,204)	6,817	6,817
Shandong Company	47	(1,431)	—	(1,431)	(1,431)
	268,832	82,429	(18,293)	64,136	64,136

164

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

5 EQUITY IN OTHER ENTITIES (Continued)

• (b) Subsidiaries with significant minority interests (Continued)

Cash Flow Statement

Hangzhou Company Qujing Company Dalian Company Bayannur Company Baoying Company Caring Company Shandong Company	Cash flows from operating activities 14,968 1,526 270 5,780 4,189 8,970 (2,343) 33,360	For the six months ended 30 June 2019 Cash flows from investing activities Cash flows from financing activities Cash at the beginning of the year/Acquisition date (7,954) (61,582) 260,307 (1,102) (16,206) 20,499 (15,076) 16,382 6,400 (1,776) — 8,328 (10,610) 7,862 19,873 (110) — 83,023 (77,317) 151,280 26,446 (113,945) 97,736 424,876	Cash at the end of the year 205,739 4,717 7,976 12,332 21,314 91,883 98,066
			442,027

		For the six	months ended 30	June 2018
				Cash at the
	Cash flows	Cash flows	Cash flows	beginning of the
	from operating	from investing	from financing	year/Acquisition	Cash at the
	activities	activities	activities	date	end of the year
Hangzhou Company	(6,678)	(22,679)	(71,438)	255,739	154,944
Qujing Company	3,663	(324)	(13,694)	14,201	3,846
Dalian Company	(124)	(32,947)	28,301	12,144	7,374
Bayannur Company	5,210	(176)	(17)	20	5,037
Baoying Company	6,050	(22)	(5,477)	10,234	10,785
Caring Company	8,164	(2,826)	60,067	19,645	85,050
Shandong Company	(1,129)	(48,220)	—	73,116	23,767
	15,156	(107,194)	(2,258)	385,099	290,803

Information presented above is the amounts before inter-company netting off.

165

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

5 EQUITY IN OTHER ENTITIES (Continued)

• (c) Non-essential information of associates

	For the	For the
	six months ended	six months ended
	30 June 2019	30 June 2018
Joint ventures:
Total book value of investment	195,000	—
The total of the following items calculated according to the
shareholding ratio
Net profit (i)	—	—
Other comprehensive income (i)	—	—
Total comprehensive income	—	—

• (i) Both net profit and other comprehensive income have considered the fair value of identifiable assets and liabilities at the time of investment and the adjustment effect of the unified accounting policies.

6 SEGMENT INFORMATION

The reportable segments of the Group are the business units that provide different products or service, or operate in the different areas. Different businesses or areas require different technologies and marketing strategies, the Group, therefore, separately manages the production and operation of each reportable segment and evaluates their operating results respectively, in order to make decisions about resources to be allocated to these segments and to assess their performance.

The Group considers the business from both service and geographical perspective. From a service perspective, management assesses the performance of processing of sewage water, recycled water, pipeline connection, heating and cooling service, sales of tap water and sale of environmental protection equipment. Processing of sewage water is further evaluated on a geographical basis (Tianjin plants, Hangzhou plant and other plants). The environmental protection equipment sold by the Group is mainly the result of scientific research transformation of the technical know-how in the environment protection area. Other services include contract operation services, rental income and technical services etc. These are not separately presented within the reportable operating segments, but included in the ‘all other segments’ column. The assets are allocated based on the operations of the segment and the physical location of the asset. The liabilities are allocated based on the operations of the segment. Expenses indirectly attributable to each segment are allocated to the segments based on the proportion of each segment’s revenue.

166

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019

(All amounts in RMB thousand unless otherwise stated)

6 SEGMENT INFORMATION (Continued)

• (a) Segment information as at and for the six months ended 30 June 2019 is as follows:

	Processing of sewage and	Processing of sewage and
	construction of related facility
							Sale of
							environ-mental
				Recycled	Heating and		protection	All other
	Tianjin	Hangzhou	Others	water	cooling supply	Tap water	equipment	segments	Group
Revenue from external customers
(Note 4(23))	458,172	120,167	292,961	137,078	40,417	49,703	18,493	107,725	1,224,716
Cost for operations	(293,921)	(87,047)	(199,746)	(95,676)	(30,545)	(32,478)	(6,885)	(68,062)	(814,360)
Interest income (Note 4(27))	1,459	1,004	157	7,384	487	18	376	95	10,980
Interest expenses (Note 4(27))	(65,737)	(4,936)	(34,084)	(25)	(1,140)	(668)	—	—	(106,590)
Results before share of profits of
an associate	125,348	30,194	70,646	45,965	7,045	11,835	8,178	(11,962)	287,249
Segment total profit	125,348	30,194	70,646	45,965	7,045	11,835	8,178	(11,962)	287,249
Income tax expenses	(31,106)	(7,697)	(11,988)	(10,849)	(2,598)	(2,813)	(1,227)	12,124	(56,154)
Segment net profit	94,242	22,497	58,658	35,116	4,447	9,022	6,951	162	231,095
Net profit									231,095
Depreciation expenses	(109)	—	(837)	(17,698)	(188)	(48)	(503)	(2,684)	(22,067)
Amortization	(63,267)	(26,016)	(84,695)	(2,968)	(11,344)	(7,683)	(1)	(1,328)	(197,302)
Segment assets	5,936,592	1,055,436	5,782,445	1,221,492	677,580	423,103	67,951	1,096,569	16,261,168
Long-term equity investment in
associate									195,000
Total assets									16,456,168
Total liabilities	5,631,437	291,927	2,264,608	596,566	349,901	92,867	10,047	395,206	9,632,559
Non-current assets addition (i)	12,742	—	515,617	929	32,613	44,798	52	130	606,881

167

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

6 SEGMENT INFORMATION (Continued)

• (b) Segment information as at and for the six months ended 30 June 2018 is as follows:

	Processing of sewage and	Processing of sewage and
	construction of related facility
							Sale of
							environ-
					Heating		mental
				Recycled	and cooling		protection	All other
	Tianjin	Hangzhou	Others	water	supply	Tap water	equipment	segments	Group
Revenue from external customers
(Note 4(23))	413,112	133,377	201,559	149,040	36,574	46,059	10,250	117,827	1,107,798
Cost for operations	(214,061)	(80,822)	(124,862)	(108,777)	(25,587)	(28,795)	(10,739)	(55,214)	(648,857)
Interest income (Note 4(27))	2,945	826	872	859	367	14	128	5,235	11,246
Interest expenses (Note 4(27))	(73,577)	(5,440)	(8,044)	(33)	(551)	(937)	—	—	(88,582)
Results before share of profits of
an associate	166,172	50,117	61,100	41,479	8,229	14,463	(716)	52,871	393,715
Segment total profit	166,172	50,117	61,100	41,479	8,229	14,463	(716)	52,871	393,715
Income tax expenses	(41,554)	(13,152)	(12,395)	(8,922)	(2,506)	(2,223)	107	(11,583)	(92,228)
Segment net profit	124,618	36,965	48,705	32,557	5,723	12,240	(609)	41,288	301,487
Net profit									301,487
Depreciation expenses	(114)	—	(108)	(17,961)	(428)	—	(935)	(3,093)	(22,639)
Amortization	(62,672)	(28,724)	(51,601)	(1,965)	(8,775)	(6,926)	(1)	(1,522)	(162,186)
Segment assets	5,578,806	1,072,204	3,611,822	1,310,797	578,646	407,871	43,674	1,430,980	14,034,800
Long-term equity investment in
associate									—
Total assets									14,034,800
Total liabilities	4,449,684	329,324	1,253,121	614,818	259,095	99,997	4,055	757,991	7,768,085
Non-current assets addition (i)	246,361	—	1,012,241	167,487	17,333	143,204	694	9,593	1,596,913

• (i) Non-current assets do not include financial assets, long-term equity investments, or deferred tax assets.

The Group’s revenue from external customers comes from China.

The Group’s non-current assets are located within China.

The income from processing of sewage water and construction of related facility services segment of RMB452 million is derived from a single customer, accounting for 37% of the Group’s total revenue (For the six months ended 30 June 2018: RMB408 million, 37%).

168

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

7 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

(1) Information of the parent of the Company

• (a) General information of the parent company

Nature of business Type Place of registration Legal representative and principal activities Municipal Investment Limited company Tianjin, China Yu Zhongpeng Development and management of municipal infrastructures

The Company’s ultimate controlling party is City Infrastructure Construction and Investment.

• (b) Registered capital and changes in registered capital of the parent company

	31	December	Increase in	Decrease in	30 June
		2018	the period	the period	2019
Municipal Investment		1,820,000	—	—	1,820,000

• (c) The percentages of shareholding and voting rights in the Company held by the parent company

	30 June	2019	31 December	2018
	Share holding	Voting rights	Share holding	Voting rights
	(%)	(%)	(%)	(%)
Municipal Investment	50.14%	50.14%	50.14%	50.14%

(2) Information of subsidiaries

The general information and other related information of the subsidiaries is set out in Note 5.

(3) Information of associates

The general information and other related information of the associates is set out in Note 4(9)(a).

169

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 7 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (Continued)

(4) Information of other related parties

Relationship with the Group

Tianjin Lecheng Properties Co., Ltd. Controlled by the same ultimate holding company Tianjin City Resource Operation Co., Ltd. Controlled by the same ultimate holding company Tianjin Metro Resources Investment Co., Ltd. Controlled by the same ultimate holding company Tianjin Haihe Construction Developing Investment Co., Ltd. Controlled by the same ultimate holding company Tianjin Jinrongcheng Property Management Co. Ltd. Controlled by the same ultimate holding company Tianjin Ruiding Real Estate Co. Ltd. Controlled by the same ultimate holding company Tianjin Metro Construction and Development Co. Ltd. Controlled by the same ultimate holding company Tianjin Metro Group Co. Ltd. Controlled by the same ultimate holding company Tianjin City Investment Property Management Co. Ltd. Controlled by the same ultimate holding company Tianjin City Road & Network Supporting Construction Controlled by the same ultimate holding company Investment Co. Ltd Tianjin Machinery & Electric Equipment Import & Export Co., Ltd. Subsidiary of associate

(5) Related party transactions

In addition to the related party information shown elsewhere in the financial statements, the following is a summary of significant related party transactions between the Group and its related parties during the year:

• (a) Purchase or sale of goods, provide or receive of services

Purchase of goods, receive of services:

		For the	For the
		six months ended	six months ended
Related Party Name	Nature of Transaction	30 June 2019	30 June 2018
Tianjin Machinery & Electric Equipment	Purchase of equipment	27,831	7,406
Import & Export Co., Ltd.
Tianjin City Property Management Co. Ltd.	Property management services	—	2,167
		27,831	9,573

170

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 7 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (Continued)

(5) Related party transactions (Continued)

• (a) Purchase or sale of goods, provide or receive of services (Continued)

Rendering of services

Related party name Nature of transaction City Infrastructure Construction and Investment Commission income from contract operation Tianjin Lecheng Properties Co., Ltd. Income from heating and cooling supply City Infrastructure Construction and Investment Commission income from construction agent service Tianjin Machinery & Electric Equipment Import & Export Co., Ltd. Nitrogen removal technology services	For the six months ended 30 June 2019 27,736 12,489 — — 40,225	For the six months ended 30 June 2018 38,104 16,612 5,105 708
		60,529

Pricing on heating supply service with related parties is based on the reference price stipulated by government. Pricing on other services with related parties is negotiated by counter parties and referred to the market price.

• (b) Guarantee:

The Group serves as guarantee.

Fully performed Guarantor Guarantee Amount Starting date Due date or not City Infrastructure Xi’an Capital Water 129,000 28 September 2008 27 September 2022 No Construction and Co., Ltd. Investment

• (c) Key management compensation

Key management compensation

For the six months ended For the six months ended 30 June 2019 30 June 2018 7,308 7,015

171

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 7 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (Continued)

(6) Receivables from and payables to related parties

Receivables from related parties

Related party name Trade receivable City Infrastructure Construction and Investment Tianjin Lecheng Properties Co., Ltd. Tianjin Metro Resources Investment Co., Ltd. Tianjin City Resource Operation Co., Ltd.	30 June Carrying amount 30,818 4,813 — 401 36,032	2019 Provision 115 10 — 20 145	31 December 2018 Carrying amount Provision 39,638 115 9,640 10 1,673 84 401 20 51,352 229	31 December 2018 Carrying amount Provision 39,638 115 9,640 10 1,673 84 401 20 51,352 229
				229

The receivables from related parties arise mainly from daily transactions and are due within one year after the date of sales. The receivables are unsecured in nature and bear no interest. RMB145 thousand provisions are held against receivables from related parties.

Payables to related parties

	Related party name	30 June 2019	31 December 2018
Other payables	Tianjin Machinery & Electric Equipment
	Import & Export Co., Ltd.	18,505	123,775

The payables to related parties arise mainly from purchase transactions and construction of recycled water pipe which are due within one year after the date of purchase. The payables bear no interest.

(7) Transactions/balances with other state owned enterprises in the PRC

The Group operates in an economic environment currently predominated by enterprises directly or indirectly owned or controlled by the PRC government (hereinafter collectively referred to as “state-owned entities”).

During the year, the Group’s significant transactions with these state controlled entities include treatment of sewage and construction and management of related facility, supply of tap water and recycled water, and supply of heating and cooling services. At the end of the year, the majority of the Group’s cash and cash equivalents and borrowings are with state controlled banks.

172

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

8 COMMITMENTS

(1) Capital commitments

The Group’s capital commitments at the balance sheet date are as follows:

Sewage water processing plant projects: – Dalian Chunliuhe project – Tianjin Jingu upgrading project – Tianyu upgrading project – Karamy project – Linxia PPP project – Tianjin Beichen upgrading project – Ningxiang PPP project – Hefei Yuwan project – Xianning Yongan upgrading project – Honghu PPP project – Ninghe upgrading project – Yingshang project – Changsha Ningxiang project – Honghu upgrading project – Bayannur PPP project – Jieshou upgrading project – Hefei Taochong project – Hebei Shijiazhuang Gaocheng regional water environment comprehensive treatment project Solid wastes treatment projects: – Shandong Yishui project – Shandong Tancheng project Tap water supplying projects: – Hunan Hanshou Yuanquan project Energy station projects: – Heiniu Urban Roads energy station project – Houtai energy station project	Contracted but n 30 June 2019 RMB million 31 28 17 20 7 14 12 11 5 87 7 5 2 1 — — 507 — 63 103 — — 3 923	ot provided for 31 December 2018 RMB million 38 28 22 20 17 14 13 11 6 5 5 5 2 1 — — — — 228 97 — 16 3 531	Authorized but n 30 June 2019 RMB million — — 49 — — — 5 — — 118 — — 67 — — — 43 525 30 203 105 — 108 1,253	ot contracted for 31 December 2018 RMB million — — 49 — — — 6 — — 258 8 — 67 — — — 586 — 43 245 — — 108 1,370

(2) Investment commitments

According to the announcement of the 11th meeting of the 8th Board of Directors of the Company on 18 June 2019, the Company plans to set up Jiuquan Capital Water Co., Ltd. (“Jiuquan Company”). As at 30 June 2019, the addition capital contribution of RMB35 million was not paid. The registered capital of Jiuquan Company is RMB178,237.9 thousand yuan, and the Company contributes RMB158,237.9 thousand yuan, accounting for 88.78% of the share capital. The Company completed the capital injection on 19 July 2019.

173

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

9 IMPACT OF EVENTS AFTER THE BALANCE SHEET DATE

On 13 August 2019, the Company held the 16th meeting of the 8th Board of Directors. According to the resolution of the meeting, the Company will additionally invest RMB52.6 million to the Fuyang Capital Water Co.,Ltd. for Yingdong Sewage Water Processing Project (2nd batch).

10 FINANCIAL INSTRUMENTS AND THEIR RISKS

The Group’s activities expose it to a variety of financial risks: market risk (primarily including currency risk, interest rate risk and price risk), credit risk and liquidity risk. Those financial risks and the Group’s overall risk management programme which focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance are as below:

The board of directors is responsible for the planning and establishment of the risk management framework of the Group, the formulation of the risk management policies and related guidelines of the Group and the supervision of the implementation of risk management measures. The Group has developed risk management policies to identify and analyze the risks faced by the Group. These risk management policies have specified specific risks, covering many aspects such as market risk, credit risk and liquidity risk management etc. The Group regularly assesses the market environment and changes in the Group’s business activities to determine whether the risk management policies and systems are updated. The risk management of the Group shall be conducted by the risk management committee in accordance with the policy approved by the board of directors. The risk management committee identifies and assesses and avoids risks through close cooperation with other business units of the Group. The internal audit department of the Group conducts regular audits on risk management control and procedures and reports the results to the audit committee of the Group.

(1) Market risk:

(a) Foreign exchange risk:

The Group has no significant foreign exchange risk as the operations and customers of the Group are located in the PRC with most of the operating assets and transactions denominated and settled in RMB. All of the Group’s borrowings are denominated in RMB. The sole foreign exchange risk of the Group arises from fluctuation of USD and JPY pursuant to the long-term payment scheme set out in the asset transfer agreement of foreign loan financed assets from Sewage Company (Note 4(17)(c)(i)).

At 30 June 2019, if RMB had strengthened/weakened by 5% against the USD with all other variables held constant, post-tax profit for the year would have been RMB3 million (30 June 2018: RMB3 million) higher/ lower. Similarly, if RMB had strengthened/weakened by 5% against the JPY with all other variables held constant, post-tax profit for the year would have been RMB8 million (30 June 2018: RMB7 million) higher/lower.

174

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

10 FINANCIAL INSTRUMENTS AND THEIR RISKS (Continued)

• (1) Market risk: (Continued)

• (b) Interest rate risk:

The Group’s interest rate risk arises mainly from interest-bearing liabilities including borrowings, long-term payables and debentures payable.

The Group has significant borrowings, long-term payables and debentures payable. Those taken at variable rates expose the Group to cash flow interest-rate risk, whilst those taken at fixed rates expose the Group to fair value interest-rate risk.

The Group’s finance department at its headquarters continuously monitor the interest rate position of the Group. Increases in interest rates will increase the cost of new borrowing and the interest expenses with respect to the Group’s outstanding floating rate borrowings, and therefore could have a material adverse effect on the Group’s financial performance. The Group makes adjustments timely with reference to the latest market conditions and may enter into interest rate swap agreements to mitigate its exposure to interest rate risk. For the six months ended 30 June 2019 and For the six months ended 30 June 2018, the Group did not enter into any interest rate swap agreements.

The tables below set out the Group’s and the Company’s exposure to interest rate risks. Included in the tables are the liabilities at carrying amounts, categorized by the maturity dates.

At 30 June 2019 Short-term borrowings Other non-current liabilities due within one year: Current portion of long-term borrowings Current portion of long-term payables Long-term borrowings Long-term payables Debentures payable Total	Fixed 200,000 — 17,984 — 193,526 1,796,872 2,208,382	Floating — 741,534 11,713 2,283,376 77,542 — 3,114,165	Total 200,000 741,534 29,697 2,283,376 271,068 1,796,872
			5,322,547

175

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

10 FINANCIAL INSTRUMENTS AND THEIR RISKS (Continued)

• (1) Market risk: (Continued)

(b) Interest rate risk: (Continued)

At 31 December 2018 Short-term borrowings Other non-current liabilities due within one year: Current portion of long-term borrowings Current portion of long-term payables Long-term borrowings Long-term payables Debentures payable Total	Fixed 200,000 — 17,615 — 187,501 1,796,363 2,201,479	Floating — 213,952 11,802 2,051,953 78,866 — 2,356,573	Total 200,000 213,952 29,417 2,051,953 266,367 1,796,363
			4,558,052

At 30 June 2019, if interest rates on bank borrowings had been 1% higher/lower with all other variables held constant, post-tax profit for the year would have been lower/higher by RMB23 million (30 June 2018: RMB7 million).

The Group analyses its interest rate exposure by considering refinancing, renewal of existing positions and alternative financing resolution.

(2) Credit risk:

Credit risk arises from cash at bank, notes receivable, trade receivables, other receivables and contract assets. As at 30 June 2019, the book value of the Group’s financial assets represents its maximum credit exposure.

The Group manages credit risk on cash at bank by placing the majority of its cash at state owned/listed banks in the PRC. The Group has not had any significant loss arising from non-performance by these parties in the past and management does not expect so in the future.

In addition, the Group has policies to limit the credit exposure on notes receivable, trade receivables, other receivables and contract assets. The Group assesses the credit quality of and sets credit limits on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The credit history of the customers is regularly monitored by the Group. In respect of customers with a poor credit history, the Group will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Group is limited to a controllable extent.

As at 30 June 2019, the Group has no significant collateral or other credit enhancements held as a result of the debtor’s mortgage.

176

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

10 FINANCIAL INSTRUMENTS AND THEIR RISKS (Continued)

(3) Liquidity risk:

Cash flow forecasting is performed by each subsidiary of the Group and aggregated by the Group’s finance department in its headquarters. The Group monitors rolling forecasts of the Group’s short-term and long-term liquidity requirements to ensure it has sufficient cash and securities that are readily convertible to cash to meet operational needs, while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institutions so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.

The Group’s financial liabilities are analyzed at the balance sheet date to the contractual maturity date, using the contracted undiscounted cash flows, as follows:

			30 June	2019
							Carrying
	Within 1 year	1-2 years	2-5 years	Over 5	years	Total	amount
Short-term borrowings	200,000	—	—		—	200,000	200,000
Long-term borrowings	830,934	771,660	795,652	1,100,948		3,499,194	3,024,909
Long-term payables	28,943	29,726	94,891	307,951		461,511	300,765
Notes payable and trade payables	1,272,123	—	—		—	1,272,123	1,272,123
Other payables	150,699					150,699	150,699
Debentures payable	78,780	78,780	2,128,170		—	2,285,730	1,796,872
	2,561,479	880,166	3,018,713	1,408,899		7,869,257	6,745,368
			31 December 2018
							Carrying
	Within 1 year	1-2 years	2-5 years	Over 5	years	Total	amount
Short-term borrowings	200,000	—	—		—	200,000	200,000
Long-term borrowings	311,457	839,253	1,068,843	419,156		2,638,709	2,265,906
Long-term payables	30,340	31,202	99,878	300,901		462,321	295,784
Notes payable and trade payables	176,398	—	—		—	176,398	176,398
Other payables	1,458,045	—	—		—	1,458,045	1,458,045
Debentures payable	78,780	78,780	1,837,215		—	1,994,775	1,796,363
	2,255,020	949,235	3,005,936	720,057		6,930,248	6,192,496

177

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

11 FAIR VALUE ESTIMATION

The level in which fair value measurement is categorised is determined by the level of the fair value hierarchy of the lowest level input that is significant to the entire fair value measurement:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs for the asset or liability that are not based on observable market data

(1) Assets measured at fair value on a recurring basis:

As at 30 June 2019, the assets measured at fair value on a recurring basis by the above three levels are analysed below:

Other equity instruments investment – Unlisted equity instrument investments of Tianjin Beifang Rencaigang Co., Ltd Total financial assets Total assets	Level 3 2,000 2,000 2,000	Total 2,000
		2,000
		2,000

As at 31 December 2018, the assets measured at fair value on a recurring basis by the above three levels are analysed below:

Other equity instuments investment – Unlisted equity instrument investments of Tianjin Beifang Rencaigang Co., Ltd Total financial assets Total assets	Level 3 2,000 2,000 2,000	Total 2,000
		2,000
		2,000

178

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

11 FAIR VALUE ESTIMATION (Continued)

• (1) Assets measured at fair value on a recurring basis: (Continued)

The fair value of financial instruments traded in an active market is determined at the quoted market price; and the fair value of those not traded in an active market is determined by the Group using valuation technique. The valuation models used mainly comprise discounted cash flow model and market comparable corporate model. The inputs of the valuation technique mainly include illiquidity discount.

Amounts of the Group’s financial instruments not traded in an active market are of no significance.

(2) Assets and liabilities not measured at fair value but disclosed

Financial assets and liabilities of the Group measured at amortized cost mainly include notes receivable, trade receivables, other receivables, long-term receivables, payables, short-term borrowings, long-term borrowings, debenture payable and long-term payables.

The carrying amount of the financial assets and liabilities of the Group not measured at fair value is a reasonable approximation of their fair value.

12 CAPITAL MANAGEMENT

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings, debentures payable, long-term payables and government loan of the Group) less cash. Total capital is calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt.

179

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

12 CAPITAl MANAGEMENT (Continued)

The Group’s strategy is to maintain a gearing ratio below 40%. The gearing ratio of the Group is as follows:

Total borrowings Short-term borrowings Long-term borrowings Current portion of debentures payable Debentures payable Long-term payables Other non-current assets – Government loan and others Less: Cash Net debt Total equity Total capital Gearing ratio	30 June 2019 5,322,546 200,000 3,024,910 — 1,796,872 300,765 — (2,060,767) 3,261,779 6,823,609 10,085,388 32%	31 December 2018 4,558,052 200,000 2,265,905 — 1,796,363 295,784 — (1,808,543)
		2,749,509 6,614,967
		9,364,476
		29%

As at 30 June 2019, the gearing ratio of the Group is increased compared to last year, which was mainly due to the increase of borrowings for new and upgrading projects.

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS

(1) Trade receivables

Trade receivables Less: Provision for bad debts (a) The ageing analysis of trade receivable is as follows: Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years Total	30 June 2019 1,510,321 (1,964) 1,508,357 30 June 2019 1,098,697 401,978 6,263 2,001 7 1,375 1,510,321	31 December 2018 1,689,143 (1,964)
		1,687,179
		31 December 2018 1,060,286 623,795 3,620 — 1,442 —
		1,689,143

180

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (1) Trade receivables (Continued)

• (b) As at 30 June 2019, the trade receivables from the top five debtors in respect of outstanding balance are analyzed as below:

		Provision for
	Amount	bad debts	% of	total balance
Trade receivables from the top five debtors	1,472,737	(1,055)		98%

• (c) Provision for bad debts:

For the Company’s trade receivables, regardless of whether there is a significant financing component, the Company measures the loss according to the expected credit loss for the entire life.

• (i) As at 30 June 2019, provision for bad debts by individual is analyzed as below:

TWAB Tianjin Water Recycling Co., Ltd. Total	Carrying amount ECL rate 1,392,638 0.05% 21,060 0.05% 1,413,698	Provision Reasons (791) Notes 4(3(c)(i)) (25) (816)

Tianjin Water recycling Co., Ltd. is a subsidiary of the Company, which is in good business condition and has low credit risk of the receivables. Therefore, the Company estimates that the ECL rate of the receivables is 0.05%.

(2) Other receivables

Receivables from subsidiaries Project deposits VAT refund receivable Others Less: Provision for bad debts	30 June 2019 118,182 23,385 2,262 403 144,232 (98) 144,134	31 December 2018 117,906 14,385 2,037 330
		134,658 (98
		134,560

As at 30 June 2019, there were no other receivables overdue but unimpaired (31 December 2018: Nil).

181

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (2) Other receivables (Continued)

  • (a) The ageing analysis of other receivable is as follows:

Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	30 June 2019 37,503 97,132 8,071 1,522 144,232	31 December 2018 124,869 8,263 — 1,526 134,658

• (b) Movement of loss provision and carrying amount

As at 30 June 2019, the Group has no other receivables belonging to stage 2 and stage 3. Provisions for bad debts of other receivables in stage 1 are analyzed as follows:

• (i) As at 30 June 2019, other receivables are all belonging to stage 1. Provision for bad debts by group is analyzed as below:

		30 June 2019
	Carrying amount	Provision
	Amount	Amount	Percentage
Project Deposits Group:
Within 1 year	13,900	7	0.05%
Others:
Within 1 year	21,316	21	0.10%
	35,216		0.15%

• (c) For the six months ended 30 June 2019, the changes of other receivables’ provision of the Company is not significant.

182

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (2) Other receivables (Continued)

  • (d) As at 30 June 2019, other receivables from the top five debtors in respect of outstanding balance are analyzed as below:

Nature Linxia Capital Water Co., Ltd. Receivable due from subsidiaries Shijiazhuang Gaocheng District Construction Investment Co. Ltd. Project deposits Tianjin Water Recycling Co., Ltd. Receivable due from subsidiaries Linxia Water Supply and Drainage Co., Ltd. Project deposit Tianjin State Taxation Bureau VAT refund receivable	Amount Aging 97,000 1 to 2 years 10,000 Within 1 year 8,680 Within 1 year 8,000 2 to 3 years 2,262 Within 1 year 125,942	% of total balance 67.30% 6.94% 6.02% 5.55% 1.57% 87.38%	Provision for bad debts 73 — 4 — —
			77

• (e) As at 30 June 2019, government grants confirmed according to receivables are analyzed as below:

Name	Amount	Aging	Estimated time, amount and basis of collection	Estimated time, amount and basis of collection
VAT refund	2,262	Within 1 year	It’s expected to received fully in 2019 because
			the nature is VAT refund.
Long-term equity investments
			30 June 2019	31 December 2018
Investment in subsidiaries (a)			3,801,941	3,458,486
Associate (b)			195,000	195,000
Less: Impairment of Long-term equity investments (c)			(132,781)	(132,781)
			3,864,160	3,520,705

(3) Long-term equity investments

183

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (3) Long-term equity investments (Continued)

(a) Subsidiaries

Xi’an Capital Water Co., Ltd. Hangzhou Tianchuang Capital Water Co., Ltd. Qujing Capital Water Co., Ltd. Guizhou Capital Water Co., Ltd Fuyang Capital Water Co., Ltd. (note(i)) Tianjin Water Recycling Co., Ltd. Wuhan Tianchuang Capital Water Co., Ltd. Tianjin Capital Environmental Protection (Hong Kong) Co., Ltd. Wendeng Capital Water Co., Ltd. Tianjin Capital Alternative Energy Technology Co., Ltd. Anguo Capital Water Co., Ltd. Baoying Capital Water Co., Ltd. Tianjin Capital New Materials Co., Ltd. Subtotal	Investment cost 334,000 264,212 154,918 114,000 337,485 100,436 197,229 62,987 61,400 191,600 41,000 58,100 26,500 1,943,867	31 December 2018 334,000 264,212 154,918 114,000 191,302 100,436 197,229 12,706 61,400 191,600 — 58,100 — 1,679,903	Movement for the period Additions Disposals Provision — — — — — — — — — — — — 146,182 — — — — — — — — — — — — — — — — — — — — — — — — — — 146,182 — —	30 June 2019 334,000 264,212 154,918 114,000 337,484 100,436 197,229 12,706 61,400 191,600 — 58,100 — 1,826,085	Provision for impairment — — — — — — — (50,281) — — (41,000) — (26,500) (117,781)	Cash dividends declared/ Investment income in the current period — — — — — — — — — — — — —
						—

184

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (3) Long-term equity investments (Continued)

(a) Subsidiaries (Continued)

Tianjin Caring Technology Development Co., Ltd Tianjin Jinning Capital Water Co., Ltd. Tianjin Jing Hai Capital Water Co., Ltd Yingshang Capital Water Co., Ltd. Shandong Capital Environmental Protection Technology Development Co., Ltd.(note(ii)) Changsha Tianchuang Environmental Protection Co., Ltd. Karamay Tianchuang Capital Water Co., Ltd. Anhui Tianchuang Capital Water Co., Ltd. Linxia Capital Water Co., Ltd. Dalian Oriental Chunliuhe Water Quality Purification Co., Ltd. Changsha Tianchuang Capital Water Co., Ltd. Inner Mongolia Bayannur Capital Water Co.Ltd. Honghu Tianchuang Capital Water Co., Ltd. Hefei Capital Water Co., Ltd. Deqing Capital Water Co., Ltd. Hanshou Tianchuang Capital Water Co., Ltd.(note(iii)) Hebei Guojin Tianchuang Sewage Water Processing Co., Ltd. (note(iii)) Subtotal Total	Investment cost 16,000 22,560 37,553 53,000 105,600 32,775 108,000 63,670 45,000 47,981 15,318 776,957 111,631 205,957 54,000 33,750 128,323 1,858,075 3,801,942	31 December 2018 16,000 7,560 37,553 53,000 70,400 32,775 108,000 63,670 45,000 47,981 15,318 776,957 111,631 205,957 54,000 — — 1,645,802 3,325,705	Movement for the period Additions Disposals Provision — — — — — — — — — — — — 35,200 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 33,750 — — 128,323 — — 197,273 — — 343,455 — —	30 June 2019 16,000 7,560 37,553 53,000 105,600 32,775 108,000 63,670 45,000 47,981 15,318 776,957 111,631 205,957 54,000 33,750 128,323 1,843,075 3,669,160	Provision for impairment — (15,000) — — — — — — — — — — — — — — — (15,000) (132,781)	Cash dividends declared/ Investment income in the current period — — — — — — — — — — — — — — — — —
						—
						—

185

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

• 13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (3) Long-term equity investments (Continued)

  • (a) Subsidiaries (Continued)

    • (i) In 2019, the Company increased capital of RM146 million to its subsidiary Fuyang Capital Water Co., Ltd. for the construction and operation of Jieshou sewage water treatment plant phase II upgrading project.

    • (ii) In 2019, the Company invested RMB10 million yuan to Shangdong Capital Environmental Protection Technology Development Co., Ltd. (Shandong Company) for Tancheng Comprehensive Disposal Center Project of hazardous waste and future development of hazardous waste business. In 2019, the Company invested RMB25 million yuan to Shandong Company to make up the residual registered capital of Tancheng Comprehensive Disposal Center Project.

    • (iii) In 2019, the Company contributed RMB34 million to set up Hanshou Tianchuang Capital Water Co., Ltd and RMB128 million to set up Hebei Guojin Tianchuang Sewage Water Processing Co., Ltd. The shareholding ratio is 75% and 59% respectively.

(b) Associate

In 2018, the consortium formed by Bishuiyuan Technology Co., Ltd., Jiu ‘an Investment Group Co., Ltd. and the Company won the bidding for the PPP project of sponge city construction in the Jiefang Nan road of Tianjin. After winning the bid, the parties jointly set up the project company Tianjin Bihai Sponge City Co., Ltd. The Company invested 195 million yuan, and the shareholding ratio is 30%.

(c) Provision for impairment of long-term equity investments

Tianjin Capital Environmental Protection (Hong Kong) Co., Ltd. Anguo Capital Water Co., Ltd. Tianjin Capital New Materials Co., Ltd. Tianjin Jinning Capital Water Co., Ltd.	31 December 2018 50,281 41,000 26,500 15,000 132,781	Additions — — — — —	Disposals — — — — —	30 June 2019 50,281 41,000 26,500 15,000
				132,781

186

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

(4) Revenue and cost of sales

	For the six months ended 30 June 2019 For the six months ended 30 June 2018	For the six months ended 30 June 2019 For the six months ended 30 June 2018	For the six months ended 30 June 2019 For the six months ended 30 June 2018	For the six months ended 30 June 2019 For the six months ended 30 June 2018
	Revenue	Cost of sales	Revenue	Cost of sales
Principal operations	483,601	294,029	438,859	213,413
Other operations	54,357	54,978	62,832	37,834
	537,958	349,007	501,691	251,247

• (a) Revenue from principal operations and cost of sales

Analysis by the nature of services is as below:

	For the six months ended 30 June 2019 For the six months ended 30 June 2018	For the six months ended 30 June 2019 For the six months ended 30 June 2018	For the six months ended 30 June 2019 For the six months ended 30 June 2018	For the six months ended 30 June 2019 For the six months ended 30 June 2018	For the six months ended 30 June 2019 For the six months ended 30 June 2018
	Revenue from			Revenue from
	principal			principal
	operations	Cost of sales		operations	Cost of sales
Processing of sewage water
and construction of related facility	452,450		290,469	407,617	209,853
Road tolls	31,151		3,560	31,242	3,560
	483,601		294,029	438,859	213,413

• (b) Revenue from other operations and cost of sales

	For the six months ended 30 June 2019	For the six months ended 30 June 2019	For the six months ended 30 June 2018	For the six months ended 30 June 2018
	Revenue from		Revenue from
	other operations	Cost of sales	other operations	Cost of sales
Contract operation income	43,549	43,797	38,683	29,040
Rental	6,118	8,604	9,291	8,604
Construction services	—	431	5,567	190
Technical service	2,318	2,146	4,906	—
Others	2,372	—	4,385	—
	54,357	54,978	62,832	37,834

187

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

9. Financial Reports II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements For the six months ended 30 June 2019 (All amounts in RMB thousand unless otherwise stated)

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (4) Revenue and cost of sales (Continued)

• (c) The Company’s operating income for the six months ended 30 June 2019 is analyzed as follows:

Processing of sewage water and construction of related facility Revenue 452,450 Of which: confirm at a certain point in time — Confirm within a certain period of time 452,450 Other operating income — 452,450	Road tolls 31,151 — 31,151 — 31,151	For the six months ended 30 June 2019 Contract operation income Rental Construction services — — — — — — — — — 43,549 6,118 — 43,549 6,118 —	Technical service — — — 2,318 2,318	Others — — — 2,372 2,372	Total 483,601 — 483,601 54,357
					537,958

As at 30 June 2019, service bills of the Company’s sewage water processing service are regularly issued to customers, based on contract agreed price and actual sewage water treatment capacity. And the amount of bills represent the entity’s progress toward complete satisfaction of the performance obligation to transfer each distinct good or service in the series to customers. And there is no consideration amount which is not included in the transaction price, thus it’s not included in the required information to be disclosed for the transaction price allocated to the remaining performance obligation.

(5) Investment income

	For the	For the
	six months ended	six months ended
	30 June 2019	30 June 2018
Interest income from entrusted loans	19,301	11,876
Dividend income from other equity instruments investment	—	200
	19,301	12,076

188

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited

9. Financial Reports Supplement of the Financial Statements II. Prepared in accordance with the PRC Accounting Standards

Notes to the Financial Statements

For the six months ended 30 June 2019

(All amounts in RMB thousand unless otherwise stated)

1 STATEMENT OF NON-RECURRING PROFIT OR LOSS

Losses on disposal of non-current assets Government Grants Other non-operating income and expenses – net Effect of income tax Effect of minority interests (after tax) Total	For the six months ended 30 June 2019 1,201 31,072 (2,230) 30,043 (4,813) (280) 24,950	For the six months ended 30 June 2018 (118) 30,857 1,002
		31,741 (7,935) (550)
		23,256

Basis for preparation of statement of non-recurring profit or loss

Under the requirements in Explanatory Announcement No. 1 on Information Disclosure by Companies Offering Securities to the Public – Non-recurring Profit or Loss [2008] from China Security Regulatory Commission (“CSRC”), non-recurring profit or loss refers to those arises from transactions and events that are not directly relevant to ordinary activities, or that are relevant to ordinary activities, but are extraordinary and not expected to recur frequently that would have an influence on users of financial statements making economic decisions on the financial performance and profitability of an enterprise.

2 RECONCILIATION STATEMENT OF INLAND AND ABROAD FINANCIAL STATEMENT

There is no difference on inland and abroad financial statement of the Group.

3 RATE OF RETURN ON NET ASSETS AND EARNINGS PER SHARE

	Weighted average income	Weighted average income
	rate of net	assets (%)	Basic/Diluted	earnings per share
	For the six	For the six	For the six	For the six
	months ended	months ended	months ended	months ended
	30 June 2019	30 June 2018	30 June 2019	30 June 2018
Net profit attributable to ordinary shareholders of the Company	3.73	5.28	0.15	0.20
Net profit attributable to ordinary shareholders of the Company
after deducting non-recurring profit or loss	3.31	4.85	0.14	0.18

189

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2019

10. List of Documents Available for Inspection

1. The financial statements signed and sealed by the person in charge of the Company, the officer in charge of accounting operations and the officer in charge of the accounting department (the chief accountant).

2. Original copies of all documents and announcements of the Company publicly disclosed on the website designated by the CSRC during the reporting period.

3. The interim report released on other stock markets.

Tianjin Capital Environmental Protection Group Company Limited Chairman: Liu Yujun

190

Interim Report 2019 Tianjin Capital Environmental Protection Group Company Limited