Rego Interactive Co., Ltd — Interim / Quarterly Report 2021

Sep 16, 2021

Interim Report for the six months ended 30th June 2021

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Important

• I. The board of directors (the “ Board ”), the supervisory committee (the “ Supervisory Committee ”) of Tianjin Capital Environmental Protection Group Company Limited (the “ Company ”) and its directors (the “ Directors ”), supervisors (the “ Supervisors ”) and senior management guarantee that information in this 2021 interim report (the “ Interim Report ”) does not contain any false information, misleading statements or material omissions, and accept several and joint responsibilities for the truthfulness, accuracy and completeness of its contents.

• II. The Interim Report of the Company for the six months ended 30 June 2021 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 non-operating purposes

No

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

• VIII. Whether more than half of the Directors cannot guarantee the truthfulness, accuracy and completeness of the Interim Report disclosed by the Company

No

• IX. Significant risks warning No

• X. Other matters

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

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

1. Definitions

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

“Bayannur Company”	Inner Mongolia Bayannur Capital Water Co., Ltd.
“Caring Company”	Tianjin Caring Technology Development Co., Ltd.
“Company”	Tianjin Capital Environmental Protection Group Company Limited
“Fuyang Company”	Fuyang Capital Water Co., Ltd.
“Gaoyou Compro”	Gaoyou Compro Environmental Resources Co., Ltd.
“Group”	the Company and its subsidiaries
“Hangzhou Company”	Hangzhou Tianchuang Capital Water Co., Ltd.
“Hexi Court”	the People’s Court of Hexi District, Tianjin
“Jiangsu Yonghui”	Jiangsu Yonghui Resources Utilization Co., Ltd.
“Jiayuanxing”	Tianjin Jiayuanxing Innovative Energy Technology Company Limited
“Jieshou Company”	Jieshou Capital Water Co., Ltd.
“Qudong Company”	Tianjin Qudong Media Co., Ltd.
“Shandong Company”	Shandong Capital Environmental Protection Technology Development Co., Ltd.
“Subsidiaries”	Subsidiaries of the Company
“Tianjin Investment Group”	Tianjin City Infrastructure Construction and Investment Group Company Limited
“Water Recycling Company”	Tianjin Water Recycling Co., Ltd.
“Xi’an Company”	Xi’an Capital Water Co., Ltd.

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Interim Report 2021 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 in Hong Kong Affairs Representative Ms. Mona Y.Y. Cho 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

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

300381

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

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

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

2. Company Profile and Major Financial Indicators

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

Name of the newspaper designated by the Company

Shanghai Securities News

for the disclosure of information

Website designated by China Securities Regulatory

www.sse.com.cn

Commission (“ CSRC ”) for the disclosure of Interim Report

Place where the Interim Report of the Company is available for inspection

Corporate Governance Center, 18/F, TCEP Building, 76 Weijin South Road, Nankai District, Tianjin, the PRC

V. PROFILE OF THE SHARES OF THE COMPANY

Stock Exchange Stock short name Shares for listing shares Stock 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 Tianjin Capital 01065 Tianjin Bohai Hong Kong Limited (the “ Stock Exchange ”)

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

2. Company Profile and Major Financial Indicators

VI. MAJOR ACCOUNTING DATA AND FINANCIAL INDICATORS OF THE COMPANY

(I) Major accounting data

Unit: 0’000 Currency: RMB

			Increase/decrease
			for the current
			reporting period
	During the		as compared to
	reporting period	During the same	the same period
Major accounting data	(from January to June)	period last year	last year (%)
Operating income	190,395.4	152,139.0	25.15
Net profit attributable to the shareholders of the Company	30,448.9	25,694.8	18.50
Net profit attributable to the shareholders of the Company after
deduction of extraordinary items	26,435.2	22,655.0	16.69
Net cash flow from operating activities	66,228.4	25,509.3	159.62
			Increase/decrease
			as at the end of
			the current reporting
	As at the end of		period as compared
	the current	As of the end	to the end of
	reporting period	of last year	last year (%)
Net assets attributable to the shareholders of the Company	672,457.3	659,135.1	2.02
Total assets	2,009,604.7	1,880,296.9	6.88

(II) Major financial indicators

			Increase/decrease for
			the current reporting
	During the reporting		period as compared
	period (from	During the same	to the same period
Major financial indicators	January to June)	period last year	last year (%)
Basic earnings per share (RMB/share)	0.21	0.18	18.33
Diluted earnings per share (RMB/share)	0.21	0.18	18.33
Basic earnings per share after deduction of extraordinary items
(RMB/share)	0.19	0.16	18.75
Weighted average return on net assets ratio (%)	4.57	4.13	0.44
Weighted average return on net assets ratio after deduction
of extraordinary items (%)	3.97	3.64	0.33

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Gain or loss on 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 -0.3 4,678.4 -75.7 230.9 -819.6

4,013.7

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

3. Management Discussion and Analysis

• I. EXPLANATION OF THE INDUSTRY AND PRINCIPAL BUSINESS OF THE COMPANY DURING THE REPORTING PERIOD

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

In line with its strategic objective of being a comprehensive environmental service provider, during the reporting period, the principal business of the Company includes basic business and strategic new business. There was no material change in the business scope and business model of the Company’s principal business as compared with the previous year.

1. Basic business, which refers to the business of municipal sewage treatment, water supply and water recycling, is the main business of the Company, and the main source of revenue and profit.

During the reporting period, for the basic business, the Company mainly focused on strengthening and improving the operation quality of the existing water utilities projects. The new equity-type sewage treatment capacity was 84,500 m[3] per day, and new pipe network length was 183 km. There was no significant change in the scale of other water utilities business as compared to the beginning of the reporting period. As of the end of the reporting period, the total capacity of the equity-type water utilities business of the Company amounted to approximately 5.6046 million m[3] per day, among which the sewage treatment capacity, water supply capacity (including tap water and industrial water supply capacity) and recycled water capacity under the PPP model was approximately 4.8696 million m[3] per day, 315,000 m[3] per day and 420,000 m[3] per day, respectively, and the pipe network length under the integrated plant network was 1,190 km. The above projects are distributed in 15 provinces, municipalities and autonomous regions in China and the sewage treatment capacity under the entrusted operation model was approximately 512,100 m[3] per day.

Based on BOT, TOT and PPP models in sewage treatment and water supply, the Company mainly obtained sales revenue from the production and sale of recycled water and the income from provision of recycled water pipeline connection services on recycled water business, with no significant change as compared with the beginning of the reporting period.

1. Strategic new business includes new energy heating and cooling, solid waste treatment, sludge treatment, photovoltaic power generation, technological achievements transformation, etc. In respect of profitability, economic added value, and payback period, it can form a good complement with the basic business and optimize the overall business structure.

During the reporting period, the business scales and operation models of new energy heating and cooling supply business, hazardous waste business and photovoltaic power generation business have not changed significantly as compared with the beginning of the reporting period. As of the end of the reporting period:

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

3. Management Discussion and Analysis

• (1) The service areas of new energy cooling and heating supply business amounted to 2 million m[2] , which was mainly operated in Tianjin;

• (2) The hazardous wastes business included four projects with the disposal capacity of 128,000 tons/year, and a storage and transit project with the capacity of 20,000 tons/year and a waste landfill project with the aggregate storage of 600,000 m[3] with the comprehensive waste utilization capacity of 73,000 tons/year, which were mainly distributed in Shandong Province and Jiangsu Province;

• (3) For the distributed photovoltaic power generation project, the planned annual electricity generation amounted to 2.9216 million kWh, which was mainly distributed in Tianjin and Dalian;

• (4) The total capacity of sludge treatment was 1,560 tons/day, which was mainly distributed in Tianjin and Jiuquan of Gansu.

During the reporting period, the technological achievements transformation business included one new project with the contract value of RMB825,000. There is no significant change to the business promotion model and technical optimization route as compared with the beginning of the reporting period.

(II) Explanation of Industry Situation

With the rising demands on systematized environmental governance and the slowdown in growth of the market size of water utilities industry, sewage treatment enterprises are gradually elevating from sewage treatment to water environmental treatment, and then to ecological management. During the elevation process from water environmental treatment to ecological management, enterprises often take their primary businesses as the starting point to expand business step by step through resources, markets or business relations. Many enterprises accomplish cross-border development through merger and acquisition. In the existing field of solid waste, hazardous waste treatment, coprocessing and disposal for organic material (sludge, food waste, kitchen waste, livestock and poultry waste) have a great market demand, which have become the main venue for new business strategic transition of many water environmental enterprises. In addition, in the context of systematic treatment, enterprises focus more on the synergy among industrial chains and the excavating of added value in high-margin segments, therefore, the vertical expansion on high-end devices, technical services and other industrial chains has also become the direction for the strategic layout and optimization of asset-heavy water utilities enterprises.

The Company will continue to leverage its advantages in project operation capability in the future. On the one hand, the Company will solidify its existing businesses, whilst on the other hand, proactively pay attention to market opportunities, expand the scale of water utilities business, speed up the layout of strategic new business and enhance the capability of the comprehensive environmental governance services.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

3. Management Discussion and Analysis

II. Analysis of Core Competitiveness During the Reporting Period

The Group’s core competitiveness is 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, systematic 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.

After the development in 2021, the Company further consolidated its strengths and enhanced its overall competitiveness.

In respect of basic business, the Company funded to establish Honghu Tianchuang Environmental Protection Co., Ltd.（洪 湖市天創環保有限公司） and Tianjin Xiqing Tianchuang Environmental Protection Co., Ltd.（天津西青天創環保有限公 司）, and at the same time increased its capital contributions in the Company’s two subsidiaries, Fuyang Company and Jieshou Company in order to consolidate and upgrade its main water business.

In respect of new environmental protection business, the Company completed the industrial and commercial registration changes of the acquisition of the two companies (Gaoyou Compro and Jiangsu Yonghui), which were acquired at the end of 2020, in order to further promote the development of the Company’s new business in hazardous waste, which was conducive to the improvement of its comprehensive environmental service capabilities.

In respect of technical R&D, the Company optimized its technical R&D system. On the one hand, the Company continued to explore smart water services and pay attention to the impacts of “carbon peak and neutrality” on the environmental protection industry. On the other hand, the Company carried out R&D innovation and technological achievements transformation in various forms.

In respect of system reform, the Company fully leveraged the country’s regional development strategy during the “14[th] FiveYear Plan” period to further integrate different resources, adjust its authorization, and strive to build a regional management and business development team.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

3. Management Discussion and Analysis

III. Operation Discussion and Analysis

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

During the reporting period, the Company carried out its work according to the operational plans and strategies for 2021 as formulated by the Board by improving economic efficiency as the core, strengthening the operation and the construction strength as the foundation, enhancing the operation management and maximizing efforts in market exploration and innovation on management, thereby accelerating the development of the Company’s overall strength and completing various tasks in an orderly manner.

• (1) Vigorously develop strategic new business while consolidating the basic water utilities business. The Company invested RMB780 million to acquire Gaoyou Compro and Jiangsu Yonghui, thereby realizing the implementation of its first merger and acquisition project and also enabling the Company to achieve a new pattern of north-south coordination in the field of hazardous wastes treatment. The Company successfully won the bids for the Xiqing Dasi（西青大寺） project, Honghu Phase II（洪湖二期） project, and Jieshou project*（界首項目）, thereby consolidating its basic water utilities business.

• (2) Leverage our advantages in operation and construction to ensure the operation quality and revenue of projects while meeting the requirements for improving water quality standards. The Company made full use of its operational and technical advantages while increasing its investment to ensure that all projects are operating in a stable and compliant manner according to corresponding standards. The Company also instructed all operating and engineering projects to earnestly implement the requirements of the Ministry of Ecology and Environment and the local governments on pandemic prevention and control, so as to strictly ensure the safety in production and daily life and fully guarantee the safety of operation and construction projects. At the same time, the Company successfully maintained the concession agreement of each project, ensuring that the projects achieve their expected revenues.

• (3) Promote the effective implementation of the reforms while further optimizing the organizational structure. During the reporting period, based on the effectiveness of market-oriented reforms, the Company reintegrated the foreign Companies and regional companies, optimized its market layout, and achieved regional integration and development. At the same time, the Company improved the long-term control and high-quality development mechanism of its foreign subsidiaries to further improve the market competitiveness and risk management and control capabilities of the foreign subsidiaries.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

3. Management Discussion and Analysis

• (4) Strengthen basic management work and further improve management standards and management efficiency. Recently, the State-owned Assets Supervision and Administration Commission of the State Council (the “ SASAC ”) announced the list of benchmarking enterprises, benchmarking projects and benchmarking models in the Management Benchmarking Action of Key State-owned Enterprises * (國有重點企業管理標杆創建行動標杆 企業、標杆項目和標杆模式名單). After enterprise declaration, expert review and consultation, the Company was selected as a “benchmarking enterprise” (標杆企業) and was the only selected enterprise in Tianjin. In the future, the Company will continue to improve basic management and further consolidate the foundation for development.

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

During the reporting period, the Group recorded operating revenue of RMB1,903.954 million, representing an increase of 25.15% as compared to that in the same period last year. The operating costs were RMB1,267.803 million, representing an increase of 21.53% as compared to that in the same period last year. The net profit attributable to the Company was RMB304.489 million, representing an increase of 18.50% as compared to that in the same period last year. The changes in the above results were mainly due to the increased volume of the sewage treatment business.

(1) Analysis of the principal businesses

During the reporting period, the Group’s principal business segments did not change significantly and was still the sewage treatment business, recycled water business, tap water supply, new energy heating and cooling supply business, toll collection business, technological achievements transformation business and hazardous wastes business. It recorded an income from principal business of RMB1,805.527 million, representing 94.83% of operating income of the Group.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

3. Management Discussion and Analysis

• ① Sewage treatment business recorded an income of RMB1,381.489 million, representing an increase of 26.36% as compared to the same period last year, which was mainly attributable to the increased volume of sewage treatment and the upraised sewage treatment service fees of partial sewage treatment plant. During the reporting period, the Group processed a total of 740.16 million m[3] of sewage water, representing an increase of 5.01% 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 newly-developed sewage treatment projects were put into operation.

• ② Recycled water business recorded an income of RMB168.224 million, representing an increase of 23.03% as compared to the same period last year. On the one hand, the income from the pipe connection business increased as compared to the same period last year. On the other hand, the water consumption volume of users increased; therefore, the sales income from recycled water increased as compared to the same period last year. During the reporting period, the sales volume of recycled water was 36.59 million m[3] , representing an increase of 14.93% as compared to the same period last year.

• ③ Tap water supply business recorded an income of RMB57.178 million, representing an increase of 21.85% as compared to the same period last year, which was mainly attributable to the increased water consumption volume by users. The water sales volume was 30.81 million m[3] , representing an increase of 19.94% as compared to the same period last year.

• ④ New energy heating and cooling supply business recorded an income of RMB39.779 million, representing a decrease of 13.63% as compared to the same period last year, which was mainly attributable to the decreased area of heating supply.

• ⑤ Technological achievements transformation business recorded an income of RMB17.460 million, representing an increase of 28.66% as compared to the same period last year, which was mainly attributable to the increased work quantity of the deodorization business.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

3. Management Discussion and Analysis

• ⑥ Toll collection business recorded an income of RMB31.249 million, which remained more or less the same as the same period last year.

• ⑦ The hazardous wastes business recorded an income of RMB109.958 million, representing an increase of 232.91% as compared to the same period last year, which was mainly attributable to the increased volume of hazardous wastes treatment of two additional hazardous wastes treatment projects (Gaoyou Compro and Jiangsu Yonghui).

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.

3. 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 realized an income of RMB98.427 million, representing a decrease of 5.69% as compared to that in the same period last year. The decrease was mainly due to the fact that the recognition of debugging fee income from the sewage treatment plant relocation project in the same period last year is not available in the current period.

Significant changes in the Company’s operations during the reporting period, as well as matters that have a significant impact on the Company’s operations during the reporting period and are expected to have a significant impact on the Company’s operations in the future

Not applicable

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

3. Management Discussion and Analysis

• IV. The principal business during the reporting period

• (I) Analysis of principal businesses

1 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	190,395.4	152,139.0	25.15
Costs of operations	126,780.3	104,322.9	21.53
Distribution costs	1,267.9	792.2	60.05
Administrative expenses	8,285.2	7,025.3	17.93
Impairment losses on financial assets	-207.6	–	-100.00
Other losses – net	-93.3	-258.5	63.91
Financial expenses – net	16,170.2	11,298.7	43.12
Non-controlling interests	3,225.8	2,009.3	60.54
Net cash flows from operating activities	66,228.4	25,509.3	159.63
Net cash flows from investing activities	-118,386.3	-75,781.5	-56.22
Net cash flows from financing activities	71,179.6	22,824.5	211.86

Explanation of changes in income from operations: It was mainly due to the increase in treatment volume of sewage and hazardous wastes business, thus the income increased accordingly.

Explanation of changes in costs of operations: It was mainly due to the increased business and higher effluent quality standards, resulting in increased costs of operations.

Explanation of changes in distribution expenses: It was mainly due to the increased hazardous wastes business, resulting in increased distribution expenses.

Explanation of changes in administrative expenses: It was mainly due to new projects and the commencement of operation of projects, resulting in increased administrative expenses.

Explanation of changes in financial expenses: It was mainly due to the increase in loan principal and the expensed interest expenses after commencement of operation of projects, resulting in increased financial costs.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

3. Management Discussion and Analysis

Explanation of changes in net cash flows from operating activities: It was mainly due to the increase of sewage treatment service fee and other operation-related fees charged in this period as compared to the same period last year and the lower various taxes and other operation-related payments as compared to the same period last year.

Explanation of changes in net cash flows from investing activities: It was mainly due to the payment for the acquisition of Gaoyou Compro and Jiangsu Yonghui in the current period, while there was no such event in the same period of last year.

Explanation of changes in net cash flows from financing activities: It was mainly due to the increase in new debt financing during the period as compared with the corresponding period of last year.

Explanation of changes in non-controlling interests: It was mainly because the net profit of non-wholly owned subsidiaries for the current period was higher than that of the corresponding period of last year, and therefore the non-controlling interests based on equity ratio increased accordingly.

• 2 Details of material changes in business type, profit composition or profit source of the Company during the period

Not applicable

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

Not applicable

• (III) Analysis of assets and liabilities

Not applicable

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

3. Management Discussion and Analysis

1. Assets and liabilities

Unit: 0’000 Currency: RMB

					Percentage of
					change in
					amount as of
		Percentage of		Percentage of	the end of the
		the amount as		the amount as	current period
		of the end of	Amount as of	of the end of	as compared
	Amount as of	the current	the end of the	the same period	to the end of
	the end of the	period to the	same period	last year to the	same period
Items	current period	total assets(%)	last year	total assets(%)	last year(%)	Explanation
Construction in progress	1,716.6	0.09	985.9	0.05	74.12	Mainly due to the increase in
						investment in construction of
						projects such as cooling and
						heating supply and hazardous
						waste.
Advances to suppliers	9,404.6	0.47	2,622.0	0.14	258.68	Mainly due to the prepaid
						sludge disposal expenses during
						the period.
Other current assets	11,918.90	0.59	8,222.80	0.44	44.95	Mainly due to the increase in
						input VAT to be deducted.
Goodwill	49,876.6	2.48	0	0	Not applicable	Mainly due to the recognition
						o f g o o d w i l l u p o n t h e
						acquisition of hazardous waste
						projects during the period.
Long term borrowings	639,499.2	31.82	422,789.4	22.49	51.26	Mainly due to the new long-
						term borrowings during the
						period.
Accrued payroll	2,386.9	0.12	8,562.0	0.46	–72.12	Mainly due to the year-end
						bonus accrued at the end of
						2020.
Debentures payable	0.0	0.00	109,884.8	5.84	–100.00	Mainly due to the repayment
						of Corporate bonds 18津創
						(phare I) during the period.

Other explanation Nil

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

3. Management Discussion and Analysis

2. Overseas assets

Not applicable

3. Major restricted assets as at the end of the reporting period

For details, please refer to Note 1. Monetary funds, 43. Non-current liabilities due within one year, 45. Long-term loans and 81. Assets with restricted ownership or right of use in item VII of the consolidated financial statements in “Section X Financial Report” of this report.

4. Other explanations

Not applicable

(IV) Analysis of investment

1. Overall analysis of equity investment

During the reporting period, the total amount of equity investment of the Company amounted to RMB181.2862 million, representing a decrease of RMB34.8717 million as compared to the same period last year, which was mainly because there were fewer new projects secured by the Company in the first half of the year compared to that in the same period last year.

• (1) Major equity investment

• (1) On 24 June 2020, the Board of the Company approved to make an additional investment of RMB142.17 million to Xi’an Company for implementing the upgrade and renovation and covering and deodorization project of the sewage treatment plant and the sewage treatment center in Xi’an. Upon the capital increase, the registered capital of Xi’an Company was increased from RMB334 million to RMB476.17 million. During the reporting period, the change of industrial and commercial registration in relation to such capital increase was not yet completed.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

3. Management Discussion and Analysis

• (2) On 24 December 2020, the Board of the Company approved to acquire the entire equity interest of Gaoyou Compro to make up for the shortcomings of the hazardous waste business segment of the Company, enhance market competitiveness through regional layout and increase of hazardous waste disposal capacity, and build a full industry chain and regional comprehensive service capacity. Gaoyou Compro was established on 31 March 2016, with a registered capital of RMB100 million and an asset value of RMB405 million as appraised and filed by the SASAC. After negotiation with the shareholders of Gaoyou Compro, the base consideration for the acquisition of Gaoyou Compro Company was RMB382.91 million, which was funded by the Company’s own funds and merger and acquisition loans. The actual payment shall be determined after deducting the outstanding debts of Gaoyou Compro as of the date of completion of the equity transfer. During the reporting period, the change of industrial and commercial registration in relation to the transfer of the equity interest has been completed.

• (3) On 24 December 2020, the Board of the Company approved to acquire the entire equity interest of Jiangsu Yonghui to make up for the shortcomings of the hazardous waste business segment of the Company, enhance market competitiveness through regional layout and increase of hazardous waste disposal capacity, and build a full industry chain and regional comprehensive service capacity. Jiangsu Yonghui was established on 9 January 2018 with a registered capital of RMB50 million and an asset value of RMB420 million as appraised and filed by the SASAC. After negotiation with the shareholders of Jiangsu Yonghui, the base consideration for the transfer was RMB397.09 million, which was funded by the Company’s own funds and loans for mergers and acquisitions. The actual payment shall be determined after deducting the outstanding debts of Jiangsu Yonghui as of the date of completion of the equity transfer. During the reporting period, the change of industrial and commercial registration in relation to the transfer of the equity interest has been completed.

• (4) On 21 January 2021, the Board of the Company approved to jointly establish Honghu Tianchuang Environmental Protection Co., Ltd.（洪湖市天創環保有限公司） with CCCC Tianjin Dredging Co., Ltd.（中交天津航道局有限公司） (“ CCCC Tianjin Dredging ”) and Honghu Water Pollution Control Center for the investment, financing, construction, operation and maintenance of newlybuilt and upgrade and supporting pipeline network (phase II) PPP project of Honghu township sewage water processing plant. The registered capital was RMB60 million, which was contributed in cash by the shareholders of the project company in proportion to their shareholdings, of which RMB53.4 million was contributed by the Company, accounting for 89%; RMB600,000 was contributed by CCCC Tianjin Dredging, accounting for 1%; and RMB6 million was contributed by the government on behalf of Honghu Water Pollution Control Centre, accounting for 10%. During the reporting period, the business registration of Honghu Tianchuang Environmental Protection Co. has been completed.

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3. Management Discussion and Analysis

• (5) On 30 April 2021, the Board of the Company approved to establish Tianjin Xiqing Tianchuang Environmental Protection Co., Ltd.* (天津西青天創環保有限公司) by capital contribution for the purpose of investment and financing, operation and maintenance of the TOT project of Dasi Sewage Treatment Plant of Xiqing District, Tianjin. The registered capital of the project company was RMB62.1060 million, of which RMB62.1060 million was contributed by the Company, representing 100% of its equity interest; during the reporting period, the business registration of Tianjin Xiqing Tianchuang Environmental Protection Co., Ltd. has been completed.

• (6) On 30 April 2021, the Board of the Company approved to increase the capital of Fuyang Company by RMB65.7802 million for the investment and financing, construction, operation and maintenance of the PPP Project (Third Batch) of Sewage Treatment in Jieshou City. According to the capital increase arrangement, after the Company first made capital contribution to Fuyang Company, Fuyang Company then made a capital contribution of RMB65.7802 million to Jieshou Company. Upon completion of the capital increase, the registered capital of Fuyang Company will increase from RMB389.9085 million to RMB455.6887 million, and the registered capital of Jieshou Company will change from RMB235.1822 million to RMB300.9624 million. During the reporting period, the capital increase of Fuyang Company has not yet been completed.

• (2) Significant non-equity investment

Not applicable

• (3) Financial assets measured at fair value

Not applicable

• (V) Disposal of major assets and equity interest

Not applicable

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

3. Management Discussion and Analysis

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

Unit: 0’000 Currency: RMB

	Principal Place		Registered	Type of	Percentage
Subsidiaries	of Business	Major Products or Services	Capital	Legal Person	of Interest	Asset Size	Net Asset	Net Profit
Water Recycling	Tianjin	Production and sales of recycled	10,000	Limited	100%	114,212.46	25,536.53	4,511.53
Company		water; development and construction		company
		of water recycling facilities; and
		m a n u f a c t u r i n g , i n s t a l l a t i o n ,
		debugging, and operation of water
		recycling facilities, etc.
Hangzhou Company	Hangzhou, Zhejiang	Operation and maintenance of	37,744.50	Limited	70%	75,176.80	61,364.04	3,346.91
		facilities for sewage treatment and		company
		recycled water usage, and supporting
		services such as its technical services
		and technical training
Xi’an Company	Xi’an, Shaanxi	D e v e l o p m e n t , c o n s t r u c t i o n ,	33,400	Limited	100%	78,380.26	59,143.84	1,809.21
		operation, and management of		company
		municipal sewage treatment plants,
		and tap water and its supporting
		facilities; and R&D and promotion of
		environment protection technology
Jiayuanxing	Tianjin	Development, consulting, service, and	19,195.052	Limited	100%	115,888.77	33,736.32	790.51
		transfer of energy conservation and		company
		new energy technologies; property
		management services; heating supply
		service; and cooling supply service
Caring Company	Tianjin	E n v i r o n m e n t a l e n g i n e e r i n g	3,333.3333	Stock Limited	60%	16,182.36	12,835.33	963.50
		management and technical advice,		Company
		etc.
Bayannur Company	Bayannur, Inner	P r o c e s s i n g o f s e w a g e w a t e r ,	106,757.79	Limited	70%	113,988.23	111,797.61	728.83
	Mongolia	production and sales of recycled water		company
		and supply of tap water
Shandong Company	Shandong	Disposal of solid wastes, industrial	19,200	Limited	55%	56,551.92	19,287.58	376.16
		wastes, hazardous wastes, sludge,		company
		kitchen wastes, etc.
Fuyang Company	Fuyang, Anhui	Development, construction and	38,990.85	Limited	100%	115,888.77	57,583.89	5,803.97
		management of municipal sewage		company
		treatment plants, tap water and
		their supporting facilities and solid
		waste treatment facilities; research
		and development and promotion of
		environmental protection technology

Water Recycling Company recorded revenue of RMB160.7803 million from principal operations and an operating profit of RMB62.2961 million in the first half of 2021.

Hangzhou Company recorded revenue of RMB127.7119 million from principal operations and an operating profit of RMB46.0241 million in the first half of 2021.

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3. Management Discussion and Analysis

(VII) Structured entities controlled by the Company

Not applicable

V. OTHER DISCLOSURE

• (I) 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 fees 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. Most of the PPP package projects currently promoted included the investment and construction of infrastructures such as pipeline networks with huge investments from social capital sources, the investment return relies on the payment of sewage treatment service fees from the governments. Therefore, the exclusiveness 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 fiscal revenue of the government and the level of its credibility. In case the risk related to government credibility occurs, the project companies will face cash flow problems, which may generate capital risks such as financial risks and financing risks.

• (2) Risk of change in policy

Currently, the PRC is at the special stage of comprehensive deepening of reform. For a long period in the future, there will be transformative changes in policies related to economy, finance, prices, financial taxation and government functions, etc. The policy changes in prices and taxes will directly influence the adjustment of water price. During the licensed operation period lasting for 30 years, as a social investor, one needs to focus on the risk of policy changes. In addition, after the end of the licensed operation period, whether it is possible to continue to obtain the right to operate the project will also constitute a potential risk.

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3. Management Discussion and Analysis

• (3) Risk of operation and management

The government’s increasingly stricter requirements on environmental governance will gradually spur the increase of the demands for upgrading sewage treatment plants in order to meet the new standards. In this context, on the one hand, the sewage treatment plant is facing the risk of transformation and operation, and on the other hand, the enterprise is also facing the risk of the adjustment of the original franchise agreement. In addition, whether the sludge disposal after sewage treatment can form a more complete business model is also worthy of attention. Moreover, after the beginning of summer, the operation of water plants also needs to meet flood control requirements and strengthen quality and safety management.

2. Risk control measures

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

Strengthen the concept of corporate governance in accordance with the law and protects its lawful interests by making full use of its overall legal advisory system. Meanwhile, the Company calls for the further assurance of equality of the contracting parties under the licensed operation and PPP projects, tightens up the performance assessment and profit distribution mechanisms, and provides 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 potential 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. Moreover, from a higher level, promoting the structural transformation of enterprises is in fact a fundamental strategy to reduce operation risks.

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3. Management 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 the careful operation and the best environmental performance of the Company under force majeure conditions. Moreover, it is also very important to maintain smooth contact and strengthen Communication with local governments and regulatory authorities.

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4. Corporate Governance

I. SHAREHOLDERS’ GENERAL MEETINGS

		Date of disclosure
Session of meeting	Date of meeting	of the resolutions
2021 First Extraordinary	26 January 2021	27 January 2021
General Meeting
2020 Annual General Meeting	27 May 2021	28 May 2021

Resolutions

To consider and approve the resolution in relation to the change of non-competition undertakings by indirect controlling shareholder of the Company.

To consider and approve the resolution in relation to the consideration and approval of the 2020 annual report of the Company and the summary of the report announced within the PRC and overseas, the resolution in relation to the consideration and approval of the work report of the Board of Directors of the Company for the year 2020 and the operating strategy of the Company for the year 2021, the resolution in relation to the consideration and approval of the final financial accounts of the Company for the year 2020 and the financial budget for the year 2021, the resolution in relation to the consideration and approval of the profit appropriation plan of the Company for the year 2020, the resolution in relation to the consideration and approval of the work report of the supervisory committee of the Company for the year 2020, the resolution in relation to the consideration and approval of the work report of independent Directors of the Company for the year 2020, the resolution in relation to the reappointment of PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers as the external auditors of the Company, and to authorize the Board to decide their remunerations, and the resolution in relation to the consideration and approval of the additional Guarantees of the Company for the financing granted to its subsidiaries not exceeding the amount of RMB3.637 billion and the matters relating to the authorization to the Board of the Company.

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

Name	Position held	Changes
Tang Fusheng	General Manager	Resignation
Li Yang	General Manager	Appointment
Zhao Mingwei	Deputy General Manager	Appointment

III. 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

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4. Corporate Governance

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

• (I). Related Equity Option Incentive Matters Which Have Been Disclosed in Announcements, but without Subsequent Progress or Changes to Their Implementation

Matters related to the 2020 A share option incentive scheme of the Company (“ Share Option Incentive Scheme ”) were considered and approved at the 38th meeting of the eighth session of the Board of the Company held on 27 November 2020 and the 2020 second extraordinary general meeting, 2020 second A shareholder’s class meeting and 2020 second H shareholder’s class meeting of the Company held on 23 December 2020. On 21 January 2021, the grant conditions under the Share Option Incentive Scheme were met. The Board approved the grant of an aggregate of 12,170,000 share options (the “ First Grant ”) to 155 participants (the “ Participants ”) who have fulfilled the grant conditions pursuant to the authorization by the shareholders. The closing price of the A shares of the Company immediately before the date of the First Grant (i.e. 20 January 2021) was RMB6.28/A share. On 29 January 2021, the Company completed the registration for the First Grant of share options under the 2020 share option incentive scheme.

For details of the above Share Option Incentive Scheme, please refer to the relevant announcements and overseas regulatory announcements published on the website of the Stock Exchange on 27 November 2020, 23 December 2020, 21 January 2021 and 29 January 2021, and the relevant circular published on the website of the Stock Exchange on 8 December 2020.

(1) Purpose of the Implementation of the Share Incentive Scheme

The Share Option Incentive Scheme is formulated in accordance with the relevant provisions of the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China, the Trial Measures on Implementation of Share Incentive Schemes by State-Owned Listed Companies (Domestic) (Guo Zi Fa Fen Pei [2006] No. 175) (《國有控股上市公司(境內)實施股權激勵試行辦法》(國資發分配[2006]175 號)), the Notice on Issues concerning Regulating the Implementation of the Share Incentive Schemes by State-Owned Listed Companies (Guo Zi Fa Fen Pei [2008] No. 171) (《關於規範國有控股上市公司實施股權激勵制度 有關問題的通知》(國資發分配[2008]171 號)) and the Administrative Measures on Share Incentives of Listed Companies* (《上市公司股權激勵管理辦法》), and based on the current compensation system, performance appraisal system and other management systems implemented in the Company, in order to further improve the corporate governance structure of the Company, promote the establishment and improvement of the incentive and constraints mechanism, fully mobilize the initiative, responsibility and sense of mission of the directors, senior management, other members of the leadership team, the core management staff, core technical personnel, and business backbone staff of the Company and its holding subsidiaries, effectively align the interests of shareholders, the Company and the operators, and attract common attention and joint efforts to the long-term development of the Company

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

4. Corporate Governance

(2) Determination and Distribution on Participants under Share Option Incentive Scheme

There are not more than 155 Participants for the Share Option Incentive Scheme, including the directors, senior management (excluding the independent directors, external directors and supervisors), other members of the leadership team and core technology, management, business and skill backbones of the Company. The Participants of the Share Option Incentive Scheme do not include supervisors, independent directors, and shareholders or actual controllers who hold more than 5% of the Company’s issued shares (including A Shares and H Shares) individually or in aggregate, as well as their spouses, parents and children.

The distribution details of the share options of each of the Participants are set out in the following table:

			Percentage to
			the total number	Percentage to
			of share options	the total share
		Number of	granted under	capital as at
		share options	the Share Option	the end of
		granted (In	Incentive Scheme	reporting period
Name	Title	10,000 options)	(%)	(%)
Liu Yujun	Executive Director, Chairman	30.00	2.10	0.0210
Tang Fusheng	General Manager	30.00	2.10	0.0210
Wang Jing	Executive Director	25.00	1.75	0.0175
Zhao Yi	Deputy General Manager	25.00	1.75	0.0175
Zhang Jian	Deputy General Manager	25.00	1.75	0.0175
Li Yang	Deputy General Manager	25.00	1.75	0.0175
Li Jinhe	Deputy General Manager,	25.00	1.75	0.0175
	Chief Engineer
Peng Yilin	Chief Accountant	25.00	1.75	0.0175
Niu Bo	Executive Director, Secretary to	18.00	1.26	0.0126
	the Board
Reserved options		210.00	14.72	0.1472
Other Participants		989.00	69.31	0.6931
(not more than 146 Participants)
Total		1,427.00	100.00	1.0000

Note: If there are any differences between the total number and the sum of the details in the above table, they are caused by rounding off the results.

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4. Corporate Governance

(3) Number of Share Options Proposed to Be Granted under the Share Option Incentive Scheme

The number of share options proposed to be granted under the Share Option Incentive Scheme is 14,270,000 and the corresponding number of underlying shares is 14,270,000 A Shares, representing not more than 1.0% of the Company’s total issued share capital of 1,427,228,430 shares as at the end of the reporting period; where 12,170,000 options will be granted for the first time (the “ Share Options Granted for the First Time ”), representing approximately 0.85% of the total issued capital (1,427,228,430 Shares) of the Company as at the end of the reporting period, and approximately 85.28% of the total number of the current share options granted; and 2,100,000 options will be reserved (the “ Reserved Share Options ”), representing approximately 0.15% of the total issued capital (1,427,228,430 Shares) of the Company as at the end of the reporting period, and approximately 14.72% of the total number of the current share options granted.

The nature of the underlying shares is of ordinary A Shares in RMB. The source of the underlying shares is the issuance of new shares by the Company to the Participants. The cumulative number of the underlying shares of the Company involved in the Share Option Incentive Scheme during the Validity Period shall not exceed 10.00% of the total issued share capital of the Company as at the end of reporting period and the date on which the Share Option Incentive Scheme is approved by the shareholders.

(4) Maximum Number Granted for Each Participant

None of the Participants of the Share Option Incentive Scheme shall be granted more than 1.00% of the total issued share capital of the Company as at the end of reporting period and the date on which the Share Option Incentive Scheme is approved by the shareholders through the Share Option Incentive Scheme during the validity period.

(5) Vesting Period

The vesting period is the interval between the date of grant and the first exercise date. The vesting period of the share options granted to the Participants under the Share Option Incentive Scheme is 24 months, and the exercise of options is not allowed during the vesting period.

(6) Exercise Period and Exercisable Date

The Participants of the Share Option Incentive Scheme shall not exercise the share options until the expiration of the vesting period. The exercisable date shall be a trading day within the validity period of the Share Option Incentive Scheme, provided that exercise is not allowed in the following periods:

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

4. Corporate Governance

• (i) the period from the date of 30 days prior to the announcements of the periodic reports of the Company to 2 trading days after the announcement, provided that if the announcement date of the periodic report is delayed due to special reasons, it shall be calculated from 30 days prior to the pre-determined announcement date;

• (ii) the period from the date of 10 days prior to the announcement of the results forecast and preliminary results of the Company to 2 trading days after the announcement;

• (iii) the period from the date of the major transaction or major event decision process to 2 trading days after the announcement of the event;

• (iv) the period from the date of occurrence of other material events that may affect the stock price to 2 trading days after the announcement.

The aforementioned “major transaction”, “major event” and “material events that may affect the stock price” are transactions or other major events that should be disclosed by the Company in accordance with the Listing Rules of the Shanghai Stock Exchange.

During the exercise period, if the exercise conditions stipulated in the Share Option Incentive Scheme are met, the Participants shall exercise the options in three phases in the next 36 months after the expiration of 24 months from the date of grant (including the Share Options Granted for the First Time and Reserved Share Options). The exercise arrangement is as follows:

		Percentage
Exercise period	Exercise time	of exercise
First exercise period	From the first trading day after 24 months has passed since the date of grant to the	1/3
	last trading day within 36 months from the date of grant
Second exercise period	From the first trading day after 36 months has passed since the date of grant to the	1/3
	last trading day within 48 months from the date of grant
Third exercise period	From the first trading day after 48 months has passed since the date of grant to the	1/3
	last trading day within 60 months from the date of grant

The Participants shall exercise within the exercise period. Where the exercise conditions cannot be fulfilled, the current share options shall not be exercised. Where the exercise conditions are fulfilled, such part of the share options that are not fully exercised during the aforementioned exercise period will be cancelled by the Company.

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4. Corporate Governance

(7) Exercise Price and Determination Method

The exercise price of the share option granted under the Share Option Incentive Scheme is RMB6.98 per share, that is, each share option granted to the Participant carries the right to purchase one A Share of the Company at RMB6.98 per share during the validity period, subject to the fulfillment of the exercise conditions. The exercise price of Reserved Share Options is RMB6.98 per Share. The exercise price of share options granted under the Share Option Incentive Scheme shall not be lower than the par value of A Share and shall not be lower than the higher of:

• (i) The average trading price of the A shares of the Company on the trading day immediately before the date of the announcement on the Share Option Incentive Scheme on 27 November 2020, being approximately RMB6.98 per A share;

• (ii) The average trading price of the A shares of the Company for the 20 trading days immediately before the date of the announcement on the Share Option Incentive Scheme on 27 November 2020, being approximately RMB6.98 per A share.

The method for determining the exercise price of Reserved Share Options is consistent with that for determining the exercise price of the Share Options Granted for the First Time.

During the period from the date of the announcement on the Share Option Incentive Scheme on 27 November 2020 to the completion of the exercise of share options by the Participants, the exercise price of the share options shall be adjusted accordingly in the event of any capitalization issue, bonus issue, share subdivision or share consolidation, rights issue, issuance of new shares, dividend distribution, etc.

(8) Validity Period

The validity period of the Share Option Incentive Scheme shall commence from the date of grant of the share options, and end on the date on which all the share options granted under the Share Option Incentive Scheme have been exercised or cancelled, and shall not be longer than 60 months.

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4. Corporate Governance

(9) Value and Relevant Accounting Policies of Share Options

As of the date of this report, the fair value assessment of the share options on the grant date is still in progress. The Company will determine the value of the share options after the assessment is completed.

Pursuant to the “Accounting Standards for Business Enterprises” and their application guidelines, the Company’s main accounting principles for granting share options to the Participants are as follows:

• (i) if the equity-settled share-based payment is exchanged for the Participants to provide services, it shall be measured by the fair value of the equity instruments granted to the Participants;

• (ii) for equity-settled share-based payment in exchange for Participants’ services after completing the services within the vesting period or meeting the prescribed performance conditions, on each balance sheet date within the vesting period, based on the best estimate of the number of the feasible equity instruments, the services obtained in the current period are included in the relevant asset costs or current expenses according to the fair value of the equity instruments on the date of grant, which are charged in the recurring profit and loss and included in the capital reserve at the same time.

Accounting treatment on the date of grant: since share options cannot be exercised on the date of grant, there is no need to carry out relevant accounting treatment;

Accounting treatment during the vesting period: on each balance sheet date during the vesting period, based on the best estimate of the number of the exercisable share options, according to the fair value of the share options on the date of grant, the services obtained in the current period are included in the relevant asset costs or current expenses, and also included in the capital reserve;

Accounting treatment after the exercise date: the confirmed cost and total owner’s equity will not be adjusted. On each balance sheet date, the option cost that should be borne in the current period will be amortized;

Accounting treatment for the exercise: share capital and share premium shall be recognized with reference to the actual exercise of the share options, and carry forward the capital reserve confirmed during the vesting period.

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5. Environmental and Social Responsibility

I. Environment Information

• (I) Explanation on environmental protection of the company and its important subsidiaries classified as key pollutant discharging entities as published by environmental protection authorities

1. Pollutant Discharging

The Company is mainly engaged in the sewage treatment which is to collect and treat 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 discharge 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 quantities of pollutants, mainly comprising chemical oxygen demand (COD), biochemical oxygen demand (BOD), suspended solids (SS), total nitrogen, ammonia nitrogen, total phosphorus, etc. Given that most of the sewage treatment projects have a designed capacity 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 47 sewage treatment projects, each of which has 1 or 2 effluent outfall(s) confirmed by competent industry authorities and experts upon examination and verification. According to the relevant agreements, currently the effluent water quality carried out by most sewage treatment plants is first-grade A under the Pollutant Discharge Standards for Urban Wastewater Treatment Plants (GB18918-2002), and the other sewage treatment plants implement the local standard or agreement standard. 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 indices requiring national standard first-grade A.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

5. Environmental and Social Responsibility

No.	Pollutant indexes requiring basic control	Pollutant indexes requiring basic control	National standard – first-grade A
1	Chemical oxygen demand (COD)		50
2	Biochemical oxygen demand (BOD)		10
3	Suspended solids (SS)		10
4	Animal andplant oil		1
5	Petroleum		1
6	Anion surfactant		0.5
7	Total nitrogen (calculated byN)		15
8	Ammonia nitrogen (calculated byN)		5(8)
9	Total phosphorus (calculated by P)	Constructed before 31 December 2005	1
		Constructed after 1 January2006	0.5
10	Chroma (dilution multiple)		30
11	PH		6~9
12	Fecal coliform count/(pcs/L)		1000

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, total nitrogen, ammonia nitrogen, and total phosphorus discharged by the Company during the reporting period were approximately 12,600 tonnes, 5,809 tonnes, 434 tonnes, and 112 tonnes, respectively. In aggregate, environmental pollutants, namely, the COD, total nitrogen, ammonia nitrogen, and total phosphorus, were eliminated by approximately 234,000 tonnes, 27,000 tonnes, 25,000 tonnes, and 3,100 tonnes, respectively, representing a significant contribution to water environmental governance.

2. 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 meeting the standard, and odor, noise and solid waste indicators complied with the relevant standards as well. The projects’ operation was also on track. The construction of the sewage treatment facilities followed the relevant construction procedures and quality standards and proceeded as scheduled.

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5. Environmental and Social Responsibility

3. 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.

4. Emergency Plans for Sudden Environmental Incidents

During the reporting period, all 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.

5. Environmental Self-monitoring Program

During the reporting period, all 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, 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.

6. Administrative penalties due to environmental issues during the reporting period

Not applicable

7. Other environmental information that should be disclosed

Not applicable

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

5. Environmental and Social Responsibility

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

Not applicable

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

Not applicable

• (IV) Relevant information that is conducive to protecting ecology, preventing pollution, and fulfilling environmental responsibilities

In aggregate, environmental pollutants, namely, the COD, total nitrogen, ammonia nitrogen and total phosphorus, were eliminated by approximately 234,000 tonnes, 27,000 tonnes, 25,000 tonnes, 3,100 tonnes in terms of the Company’s sewage treatment business during the reporting period, respectively, representing a significant contribution to water environmental governance.

• (V) Measures and effects taken to reduce carbon emissions during the reporting period

During the reporting period, the Company’s new energy cooling and heating supply business and distributed photovoltaic power generation project had certain effects on and made contributions to reducing carbon emissions.

• II. Consolidate and expand the results of poverty alleviation, rural revitalization and other specific work

Not applicable

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

6. Major Events

I. PERFORMANCE OF COMMITMENT

• (I) Commitment of the Company’s Ultimate Controller, Shareholders, Related Parties, Purchaser, the Company, and Other Related Parties During or Subsisted in the Reporting Period

Not applicable

• II. Misappropriation of the Company’s funds for non-operating purposes by controlling shareholders and other related parties during the reporting period

Not applicable

III. Non-compliance guarantees

Not applicable

IV. MATTERS RELATING TO BANKRUPTCY AND RESTRUCTURING

Not applicable

V. MATTERS RELATING TO MATERIAL LITIGATION AND ARBITRATION

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

Not applicable

• (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
						(or arbitration)		Ruling results
				Particulars of	Amount involved	forms predicated	Progress of	of litigation	Enforcement of
Plaintiff	Defendant		Type of litigation	litigation	in litigation	liability and	litigation	(or arbitration)	award of litigation
(or applicant)	(or respondent)	Jointly liable party	or arbitration	(or arbitration)	(or arbitration)	its amount	(or arbitration)	and its effect	(or arbitration)
									Termination of
Jiayuanxing	Qudong Company	None	Litigation	Note 1	12,030,003	None	Execution	Note 2	execution (note 2)

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

6. Major Events

• Note 1: From 2012 to 2016, Jiayuanxing and Qudong Company signed the “Tianjin Non-residential Building 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》)”, stipulating 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 lawful rights and interests of Jiayuanxing, on 3 November 2017, Jiayuanxing filed a civil lawsuit with the Hexi Court. 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 first-instance 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 maintain 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 failed to perform any installment, the implementation based on the original legal documents would be resumed. On 11 January 2019, RMB3.1635 million repaid by Qudong Company in advance was 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 had not been completed for the fulfillment, the court made a ruling to end the implementation of (2017) Jin 0103 Minchu No. 12411 civil judgment issued by the Tianjin Hexi District People’s Court. Qudong Company repaid the first and second installments according to the settlement agreement before 31 December 2019. At present, Qudong Company has paid a total of RMB7.4013 million. It was scheduled that the third installment would be paid by 30 June 2020. However, due to the epidemic, the Company had no performance activities and no operating income in the first half of 2020, so it applied for an extension to Jiayuanxing. On 28 July 2020, Qudong Company provided a situation report, stating that it would act according to the schedule set out in the report, that is, to repay approximately RMB1.5 million by the end of 2021, approximately RMB2 million by the end of 2022, and approximately RMB1.1 million by June 2023. However, because Qudong Company has not been able to re-sign the relevant agreement with Jiayuanxing, Jiayuanxing has sent a letter to Qudong Company, asking Qudong Company to sign the relevant agreement as soon as possible. If the agreement could not be signed by 28 February 2021, Jiayuanxing would apply to the Hexi Court for resumption of enforcement. On 1 March 2021, Jiayuanxing received a reply from Qudong Company, which said that Qudong Company had filed for bankruptcy and could not sign the relevant agreement again. At present, Jiayuanxing is communicating and coordinating with the execution court and the court is handling the bankruptcy case of Qudong Company.

• VI. SUSPECTED VIOLATIONS OF LAWS AND REGULATIONS OF, PUNISHMENTS TO AND RECTIFICATION OF THE COMPANY AND ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, AND ULTIMATE CONTROLLERS Not applicable

• VII. EXPLANATION ON THE INTEGRITY OF THE COMPANY, ITS CONTROLLING SHAREHOLDERS, AND ULTIMATE CONTROLLERS DURING THE REPORTING PERIOD Not applicable

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

6. Major Events

VIII. MATERIAL CONNECTED TRANSACTIONS

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

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

On 26 April 2021, the Company signed the Sludge Disposal Contract (《污泥處置合同》) with Tianjin Investment Group, in which the Company entrusted Tianjin Investment Group to dispose of sludge at the Jinnan Sludge Treatment Plant invested and constructed by it. On the same day, Tianjin Investment Group, Caring Company and the Company signed the Entrusted Operation Agreement of Jinnan Sludge Treatment Plant (《津南污泥處理 廠委托運營協議》), pursuant to which Tianjin Investment Group entrusted Caring Company to be responsible for the operation of Jinnan Sludge Treatment Plant, and entrusted the Company to supervise and manage the operation of the project. For details of the above connected transactions, please refer to the Company’s announcement on the Sludge Disposal Contract and the Entrusted Operation Agreement of Jinnan Sludge Treatment Plant published on the website of the Hong Kong Stock Exchange on 26 April 2021.

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

Not applicable

3. Connected transactions which have not been disclosed in the Company’s announcements

Not applicable

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

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

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

6. Major Events

(V) Others

Non-public Issuance of A Shares

On 13 July 2020, the Board has approved the proposed issuance of 323,741,007 new A shares inclusive to 3 specific target investors (i.e. TMICL, Yangtze Ecological Environmental Protection Group. Co., Ltd. (長江生態環保集 團有限公司) (“ Yangtze Ecology ”) and Three Gorges Capital Holdings Co., Ltd. (三峽資本控股有限責任公司) (“ Three Gorges Capital ”)) (“ Non-public Issuance of A Shares ”). The issue price of Non-public Issuance of A Shares is RMB5.56/share (“ Issue Price ”). It is expected that the gross proceeds to be raised from the Non-public Issuance of A Shares will not exceed RMB1.8 billion (inclusive), which will be used to repay interest-bearing liabilities and supplement the Company’s working capital after deducting the offering expenses.

As part of the Non-public Issuance of A Shares, the Company entered into the subscription agreement with TMICL on 13 July 2020, pursuant to which TMICL conditionally agreed to contribute RMB200 million in cash to subscribe for 35,971,223 A Shares to be issued based on the Non-public Issuance of A Shares according to the Issue Price, accounting for approximately 11.11% of the total number of A Shares to be issued under the Non-public Issuance of A Shares (“ TMICL Subscription Agreement ”). Immediately after the completion of the Non-public Issuance of A Shares (assuming that (i) a total of 323,741,007 new A Shares will be issued to TMICL, Yangtze Ecology and Three Gorges Capital under the Non-public Issuance of A Shares, respectively and (ii) there is no other change to the shareholding structure of the Company since 13 July 2020 save for the issuance of the A Shares pursuant to the Non-public issuance of A Shares), TMICL will hold approximately 42.92% of the total issued shares of the Company.

On 28 August 2020, the State-owned Assets Supervision and Administration Commission of the Tianjin Municipal People’s Government agreed with the proposal of the Non-public Issuance of A Shares of the Company in 2020 in principle. On 7 September 2020, the resolutions relating to the Non-public Issuance of A Shares were considered and approved by the 2020 first extraordinary general meeting, the 2020 first H shareholders’ class meeting and the 2020 first A shareholders’ class meeting of the Company. The Non-public Issuance of A Shares remains subject to the approval from the CSRC.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

6. Major Events

On 30 March 2021, the Board considered and approved the relevant resolutions in relation to the adjustments to the proposed Non-public Issuance of A Shares and the adjustments to the Proposed Introduction of the Strategic Investor Subscription, pursuant to which, the Three Gorges Capital will no longer subscribe for the shares to be issued under the Non-public Issuance of A Shares. Therefore, the adjusted Non-public Issuance of A Shares is intended for 2 target subscribers: Yangtze Ecology and TMICL, and the gross proceeds to be raised by this adjusted Non-public Issuance of A Shares will not exceed RMB1.2 billion (inclusive). There is no amendment or adjustment to any terms or conditions under the TMICL Subscription Agreement. Immediately after the completion of the adjusted Non-public Issuance of A Shares (assuming that (i) a total of 215,827,338 new A Shares will be issued to TMICL and Yangtze Ecology under the adjusted Non-public Issuance of A Shares, respectively and (ii) there is no other change to the shareholding structure of the Company since 30 March 2021 save for the issuance of the A Shares pursuant to the adjusted Non-public issuance of A Shares), TMICL will hold approximately 45.74% of the total issued shares of the Company.

At the 2020 Annual General Meeting of the Company held on 27 May 2021, the Shareholders considered and approved the resolution in relation to the 2020 profit distribution plan of the Company, pursuant to which the Company shall distribute a final dividend of RMB1.20 (tax inclusive) in cash for every 10 Shares (the “ 2020 Equity Distribution ”) to all Shareholders calculated based on the total number of 1,427,228,430 shares of the Company, which amounted to RMB171,267,411.60. The 2020 Equity Distribution of the Company was conducted on 30 June 2021. As at the date of this Interim Report, the 2020 Equity Distribution of the Company has been completed. As disclosed in the circular dated 21 August 2020, the issue price and the number of Shares to be issued under the Non-public Issuance of A Shares shall be adjusted accordingly in the event of ex-rights or ex-dividends matters such as distribution of dividend, bonus issuance and conversion of capital reserve into the share capital of the Company during the period from the Price Determination Date to the date of the issuance. As the implementation of the 2020 Equity Distribution of the Company has been completed, the issue price and quantity of A Shares under the Non-public Issuance of A Shares will be adjusted as follows: the issue price of the Non-public Issuance of A Shares is adjusted from RMB5.56 per share to RMB5.44 per share; and the number of shares to be issued under the Non-public Issuance of A Shares is adjusted from not more than 215,827,338 shares to not more than 220,588,234 shares. Immediately after the completion of the aforementioned adjusted Non-public Issuance of A Shares (assuming that (i) a total of 220,588,234 new A Shares will be issued to TMICL and Yangtze Ecology under the adjusted Non-public Issuance of A Shares, respectively and (ii) there is no other change to the shareholding structure of the Company save for the issuance of the A Shares pursuant to the aforementioned adjusted Non-public Issuance of A Shares), TMICL will hold approximately 45.66% of the total issued shares of the Company.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

6. Major Events

For transaction details of the Non-public Issuance of A Shares, please refer to the announcement and overseas regulatory announcement of the Company dated 13 July 2020, the circular dated 21 August 2020, the announcement on the resolutions passed at the 2020 first extraordinary general meeting, the 2020 first H shareholders’ class meeting and the 2020 first A shareholders’ class meeting dated 7 September 2020, the overseas regulatory announcements dated 28 August 2020, 29 September 2020, 30 October 2020, 17 November 2020 and 28 January 2021, and the related announcements dated 28 January 2021, 30 March 2021, 2 July 2021 and 3 September 2021.

IX. MATERIAL CONTRACTS AND THEIR IMPLEMENTATION

1 Custody, Contracting and Leasing

Not applicable

• 2 Significant guarantees performed and those performed but not yet completed during the reporting period

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 of the Company
Total amount of guarantees provided to subsidiaries during the reporting period	42,665.37
Total balance of guarantees provided to subsidiaries as at the end of the reporting period (B)	456,089.98
Total amount of guarantees provided by the Company (including guarantees provided to subsidiaries)
Total amount of guarantees (A+B)	456,089.98
Percentage of the total amount of guarantees to the net assets of the Company (%)	59.07
Of which:
Amount of guarantees provided to shareholders, ultimate controllers, and their connected parties (C)	0
Amount of guarantees provided directly or indirectly to guaranteed entities with a gearing ratio of over 70% (D)	84,835.30
Total amount of guarantees exceeding 50% of net assets (E)	70,060.24
Total of the above three classes of guarantees (C+D+E)	154,895.54
Explanation on contingent joint liability for undue guarantees	Not applicable
Explanation on guarantees	Nil

X. 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

Not applicable

• (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

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

6. Major Events

(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 2021.

3. Liquidity and Financial Resources

No seasonal changes have occurred to the borrowing needs of the Group. As of 30 June 2021, 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 2021.

According to the accounting reports prepared in accordance with the PRC’s Accounting Standards for Business Enterprises, the liquidity ratio as of 30 June 2021 was 61.58%.

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).

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

6. Major Events

As at 30 June 2021, 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 2020: RMB3 million) in the net profit of the Group. As at 30 June 2021, 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 2020: RMB9 million) in the net profit of the Group.

The interest rate risk of the Group mainly came from interest-bearing assets such as bank deposits and long-term receivables and interest-bearing debts such as bank borrowings, long-term payables and bonds payable. The assets/ liabilities at floating rates expose the Group to interest rate risk on cash flows, while the assets/liabilities at fixed rates expose the Group to interest rate risk associated with fair value. As at 30 June 2021, if the loan interest rate increases/decreases by 1%, with other factors being constant, the net profit of the Group for the current year will approximately decrease/increase by RMB30 million (30 June 2020: approximately RMB38 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 2021, the Group had 2,305 employees. During the reporting period, total remuneration paid to employees of the Group was approximately RMB238.773 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 2021.

7. Rights of Debt

As at 30 June 2021, 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 Tianjin City Construction Committee which started to perform from 1 January 2014, the total receivables of the Group from Tianjin Water Authority Bureau amounted to RMB2.501 billion, representing approximately 32.81% of the total market capital of the Group as at 30 June 2021.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

6. Major Events

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, save for the acquisition of the entire equity interest of Gaoyou Compro and Jiangsu Yonghui, 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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

7. Details of Changes in Shares and Shareholders

I. CHANGES IN SHARE CAPITAL

(I) Changes in Shares

1. Changes in Shares

During the reporting period, there were no changes in the total number of shares and the structure of share capital of the Company.

II. DETAILS OF SHAREHOLDERS

(I) Total number of shareholders:

Total number of ordinary shareholders as at the end of the reporting period 65,406

Note: As of 30 June, 2021, the total number of ordinary shareholders of the Company is 65,406, among which 63 are holders of H Shares.

(II) Shareholdings of the Top Ten Shareholders and the Top Ten Shareholders of Circulating Shares (or Shareholders of Non-Restricted Shares) at the End of the Reporting Period

	Shareholdings	of the top ten shareholders	of the top ten shareholders
	Increase/decrease	Number of		Number of
	during the	shares held at		restricted	Pledged,
	reporting period	the end of the	Percentage	shares held	marked or	Nature of the
Name of shareholder (Full name)	(shares)	period (shares)	(%)	(shares)	frozen number	Shareholder
						State-owned
TMICL	0	715,565,186	50.14	0	None	legal person
HKSCC Nominees Limited	46,000	337,938,810	23.68	0	Unknown	Other
						State-owned
Central Huijin Asset Management Co., Ltd.	0	14,169,800	0.99	0	None	legal person
Hong Kong Securities Clearing Company Limited	-1,406,509	7,299,447	0.51	0	None	Other
						Domestic non-
Zhejiang Jinxin Construction Engineering Co., Ltd.						state-owned
(浙江錦鑫建設工程有限公司)	208,000	6,417,800	0.45	0	None	legal person
						Domestic
Deng Tuquan(鄧圖全)	5,159,873	5,159,873	0.36	0	None	natural person
						Domestic
Hou Hongyan (侯紅燕)	1,350,000	3,100,000	0.22	0	None	natural person
Shenyang Railway Coal Group Co., Ltd.						State-owned
(瀋陽鐵道煤炭集團有限公司)	0	1,500,000	0.11	0	None	legal person
						Domestic
Huang Qiangsheng (黃強勝)	-225,000	1,282,100	0.09	0	None	natural person
						Domestic
Zhou Lunhui(周倫慧)	1,270,000	1,270,000	0.09	0	None	natural person

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

7. Details of Changes in Shares and Shareholders

Shareholdings of the top ten shareholders of non-restricted shares

	Number of non-
	restricted circulating	Type and number of shares
Name of shareholder	shares held(shares)	Type	Number(shares)
TMICL	715,565,186	Ordinary RMB Shares	715,565,186
HKSCC Nominees Limited	337,938,810	H Shares	337,938,810
Central Huijin Asset Management Co., Ltd.	14,169,800	Ordinary RMB Shares	14,169,800
Hong Kong Securities Clearing Company Limited	7,299,447	Ordinary RMB Shares	7,299,447
Zhejiang Jinxin Construction Engineering Co., Ltd.	6,417,800	Ordinary RMB Shares	6,417,800
Deng Tuquan(鄧圖全)	5,159,873	Ordinary RMB Shares	5,159,873
Hou Hongyan (侯紅燕)	3,100,000	Ordinary RMB Shares	3,100,000
Shenyang Railway Coal Group Co., Ltd. (瀋陽鐵道煤炭集團有限公司)	1,500,000	Ordinary RMB Shares	1,500,000
Huang Qiangsheng (黃強勝)	1,282,100	Ordinary RMB Shares	1,282,100
Zhou Lunhui(周倫慧)	1,270,000	Ordinary RMB Shares	1,270,000
Description of the repurchase of special accounts among the	Not applicable
top ten shareholders
Explanation of the above-mentioned shareholders’	Not applicable
entrusted voting rights, and waiver of voting rights
Notes on the connected relationship or parties acting in	It is not certain whether	there is any connected relationship amo
concert among the above shareholders	the top 10 shareholders. It is not certain whether there is a

It is not certain whether there is any connected relationship among the top 10 shareholders. It is not certain whether there is any connected relationship between the top 10 shareholders of nonrestricted 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. As at the end of the reporting period, Ningbo BSLS Trade Co., Ltd.(寧波百思樂斯貿易有限公司) and its concert parties Ningbo Ningdian Investment Development Co., Ltd.( 寧波寧電投資發展有限公司 ) and LVNENG Investment & Development Co., Ltd. (Hong Kong) held a total of 108,200,000 H shares of the Company, representing 7.58% of the total share capital of the Company, and none of the shares were pledged.

(2) The top ten shareholders are not strategic investors of the Company.

(III) Strategic Investors or General Legal Persons Becoming the Top Ten Shareholders Due to Placing of New Shares

Not applicable

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

7. Details of Changes in 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 2021, 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 percentage	Approximate percentage
		Number and class	in the relevant	in the total issued share
Name of shareholder	Capacity	of securities (Note 1)	class of securities	capital of the Company
TMICL	Beneficial owner	715,565,186 A Shares (L)	65.82%	50.14%
Ningbo Development Investment
Group Limited Company*	Interest of controlled
(寧波開發投資集團有限公司)(Note 2)	corporation	108,200,000 H Shares (L)	31.82%	7.58%
Ningbo Energy Group Co. Ltd.*	Interest of controlled
(寧波能源集團股份有限公司)(Note 2)	corporation	108,200,000 H Shares (L)	31.82%	7.58%
Ningbo Ningdian Investment
Development Co., Ltd.*
(寧波寧電投資發展有限公司)(Note 2)	Beneficial owner	63,154,000 H Shares (L)	18.57%	4.43%
Ningbo BSLS Trade Co., Ltd.*
(寧波百思樂斯貿易有限公司)(Note 2)	Beneficial owner	44,928,000 H Shares (L)	13.21%	3.15%
ISIS Asset Management Plc	Investment manager	17,286,000 H Shares (L)	5.08%	1.21%

Note 1: The letter “L” represents the entity’s long positions in the shares. The letter “S” represents the entity’s short positions in the shares.

Note 2: Ningbo Ningdian Investment Development Co., Ltd. (寧波寧電投資發展有限公司), Ningbo BSLS Trade Co., Ltd. (寧波百思樂斯貿易有限公司) and Lvneng Investment & Development Co., Limited are the direct wholly-owned subsidiaries of Ningbo Energy Group Co., Ltd. (寧波能源集團股份有限公司), which directly holds 63,154,000, 44,928,000 and 118,000 H shares of the Company respectively, which amount to 108,200,000 H shares of the Company in total. Ningbo Energy Group Co., Ltd. (寧波能源集團股份有限公司) is the direct non-wholly owned subsidiary of Ningbo Development Investment Group Limited Company (寧波開發投資集團有限公司). Therefore, Ningbo Energy Group Co., Ltd. (寧波能源集團股份有限公司) and Ningbo Development Investment Group Limited Company (寧波開發投資集團有限公司) are deemed to be interested in the shares held by Ningbo Ningdian Investment Development Co., Ltd. (寧波寧電投資發展有限公司), Ningbo BSLS Trade Co., Ltd.* (寧波百思樂斯貿易有限公司) and Lvneng Investment & Development Co., by virtue of Part XV of the SFO.

Save as disclosed above, there is no person (other than the Directors, Supervisors or chief executive of the Company) who, as at 30 June 2021, 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.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

7. Details of Changes in Shares and Shareholders

V. Directors, Supervisors and Senior Management

• (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 during the reporting period

Unit: Shares

		Number of	Number of
		share options	new share	Exercisable	Share options	Number of
		held at the	options granted	shares during	exercised during	share options
		beginning of	during the	the reporting	the reporting	held at the end
Name	Position held	the period	reporting period	period	period	of the period
Liu Yujun(劉玉軍)	Director	0	300,000	0	0	300,000
	Senior
Tang Fusheng(唐福生)	Management	0	300,000	0	0	300,000
	Senior
Li Yang(李楊)	Management	0	250,000	0	0	250,000
Wang Jing(王靜)	Director	0	250,000	0	0	250,000
	Senior
Zhao Yi(趙毅)	Management	0	250,000	0	0	250,000
	Senior
Zhang Jian(張健)	Management	0	250,000	0	0	250,000
	Senior
Li Jinhe(李金河)	Management	0	250,000	0	0	250,000
	Senior
Peng Yilin(彭怡琳)	Management	0	250,000	0	0	250,000
Niu Bo(牛波)	Director	0	180,000	0	0	180,000
Total	/	0	2,280,000	0	0	2,280,000

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

7. Details of Changes in Shares and Shareholders

• (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 2021, the interests and 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, including interests and short positions which were taken as or deemed to have pursuant to 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 issued share
	The Company/name of			capital of the Company/
Name	associated corporations	Capacity	Number and class of securities (Note)	associated corporations
Deputy General Manager
Zhang Jian	The Company	Beneficial owner	822 domestic shares (non-restricted circulating shares) (L)	0.000058%

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 2021, 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.

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

8. Details of the Company’s Bonds

• I. ENTERPRISE BONDS, CORPORATE BONDS AND DEBT FINANCING INSTRUMENTS OF NON-FINANCIAL ENTERPRISES

I. Basic details of corporate bonds

Unit: Yuan Currency: RMB

										Investor
										Suitability
		Code of	Issue	Value	Maturity	Balance of	Coupon			Arrangement	Trading	Risk of
Name of Bond	Abbreviation	Bond	Date	Date	Date	Bond	(%)	Debt Service	Trading Place	(If Any)	Mechanism	Delisting
Public Issue of	16津創01	136801.SH	25 October	25 October	25 October	700,000,000	3.13	Interest shall be paid	SSE	Qualified	Bidding,	No
Corporate Bonds			2016	2016	2021			annually, while the		investors in	quotation,
of Tianjin Capital								principal shall be		compliance	inquiry, transfer
Environmental								fully repaid upon		with laws and	by agreement
Protection Group								maturity. Principal		regulations
Company Limited in								will be repaid upon
2016 (Phase I)								maturity together
								with interest payable
								for the last period.
Public Issue of	18津創01	143609.SH	26 April	26 April	26 April	0	5.17	Interest shall be paid	SSE	Qualified	Bidding,	No
Corporate Bonds			2018	2018	2023			annually, while the		investors in	quotation,
of Tianjin Capital								principal shall be		compliance	inquiry, transfer
Environmental								fully repaid upon		with laws and	by agreement
Protection Group								maturity. Principal		regulations
Company Limited in								will be repaid upon
2018 (Phase I)								maturity together
								with interest payable
								for the last period.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

8. Details of the Company’s Bonds

II. Trigger and execution of the issuer or investor option terms and investor protection terms

16津創 01: No issuer or investor option terms, investor protection terms or special terms such as exchangeable terms.

18津創 01: During the reporting period, both the issuer’s option to adjust the coupon rate and investors’ put option were triggered. Details are as follows: the issuer announced the coupon rate adjustment announcement on 12 March 2021 and exercised the option to adjust the coupon rate. The period from 12 March 2021 to 16 March 2021 is the registration period for investors to sell back the bonds, and the investors who have registered to sell back the bonds on 26 April 2021 shall sell back the bonds and exercise the investors’ put option. As at the end of the Reporting Period, the investors of the bonds have sold back all the bonds, and the bonds have been delisted and cancelled. 18 津創 01 has no investor protection terms, nor special terms such as exchangeable terms.

III. Adjustment of credit rating results

On 24 May 2021, United Credit Rating Co., Ltd. completed ongoing credit rating for the Company, 16 津創 01 and 18 津創 01, maintaining long term credit of the Company as “AA+”, and the credit rating outlook as“stable”; maintaining the credit rating of the bond loans, “16 津創 01” and “18 津創 01” at “AA+”, and relevant disclosure will be made in the SSE website ((www.sse.com.cn). United Credit Rating Co., Ltd. did not adjust the credit rating of the Company and 16 津創 01 and 18 津創 01.

IV. Implementation and changes of guarantees, debt repayment plans and other debt repayment supporting measures during the reporting period and their impact

16津創 01 and 18 津創 01 were unguaranteed.

During the reporting period, both the repayment schedule and supporting measures 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 a 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.

V. Other information on corporate bonds

Not applicable

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Interim Report 2021 Tianjin Capital Environmental Protection Group Company Limited

8. Details of the Company’s Bonds

VI. Major accounting data and financial indicators

Unit: 0’000 Currency: RMB

			Increase/decrease	Increase/decrease
			as at the end
			of the current
			reporting period
	As at the end of		as compared to
	the current	As of the end		the end of
Major Indicators	reporting period		of last year	last year (%)	Reasons
Current ratio	1.19		1.08	10.29	Monetary funds and accounts receivable
					increased	as compared to the end of last
					year.
Quick ratio	1.19		1.07	10.76	Monetary funds and accounts receivable
					increased	as compared to the end of last
					year.
Gearing ratio (%)	61.58		59.68	3.19	Debts increased as compared to the end of last year.
				Increase/decrease
				in the current
				reporting period
	The current			as compared with
	reporting period		The same period	the same period
	(January-June)		last year	last year (%)		Reasons
Net profit after deducting		26,435.2	22,655.0		16.69	Profits increased as compared
non-recurring profit or loss						to the same period last year.
Debt to EBITDA ratio		0.11	0.11		0	Basically equal.
Interest protection multiples		3.34	3.66		-8.70	Interest expenditure increased
						as compared to the same period
						last year.
Cash interest protection multiples		4.16	2.59		60.61	Operational cash flow
						increased as compared to the
						same period last year.
EBITDA interest protection multiples		5.23	5.86		-10.76	Interest expenditure increased
						as compared to the same period
						last year.
Debt service ratio (%)		100	100		–	–
Interest coverage rate (%)		100	100		–	–

VII. Convertible bonds

Not applicable

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Statement of Comprehensive Income (All amounts in RMB thousand unless otherwise stated)

Notes Continuing operations Revenue 2(a) Cost of sales Tax expenses and surcharge Gross profit Distribution costs Administrative expenses Impairment loss on financial assets Other income 2(a)/3 Other losses – net Operating profit 3 Finance income Finance expenses Finance expenses – net 4 Profit before income tax Income tax expense 5 Profit for the half-year Total comprehensive income for the half-year Profit/Total comprehensive income for the half-year is attributable to: – Owners of the Company – 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 6	Unaudited Half-year 2021 2020 RMB’000 RMB’000 1,903,954 1,521,390 (1,267,830) (1,043,229) (20,498) (22,178) 615,626 455,983 (12,679) (7,922) (82,852) (70,253) (2,076) – 51,167 73,977 (933) (2,585) 568,253 449,200 10,253 12,328 (171,955) (125,315) (161,702) (112,987) 406,551 336,213 (69,804) (59,172) 336,747 277,041 336,747 277,041 304,489 256,948 32,258 20,093 336,747 277,041 0.21 0.18 0.21 0.18 – –	Unaudited Half-year 2021 2020 RMB’000 RMB’000 1,903,954 1,521,390 (1,267,830) (1,043,229) (20,498) (22,178) 615,626 455,983 (12,679) (7,922) (82,852) (70,253) (2,076) – 51,167 73,977 (933) (2,585) 568,253 449,200 10,253 12,328 (171,955) (125,315) (161,702) (112,987) 406,551 336,213 (69,804) (59,172) 336,747 277,041 336,747 277,041 304,489 256,948 32,258 20,093 336,747 277,041 0.21 0.18 0.21 0.18 – –
		455,983 (7,922) (70,253) – 73,977 (2,585)
		449,200 12,328 (125,315)
		(112,987)
		336,213 (59,172)
		277,041
		277,041
		256,948 20,093
		277,041
		0.18 0.18
		–

The notes on page 57 to 79 form an integral part of this condensed consolidated interim financial information

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Interim Report 2021 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

(All amounts in RMB thousand unless otherwise stated)

Notes ASSETS Non-current assets Property, plant and equipment 7 Intangible assets 7 Deferred income tax assets 14 Right-of-use assets 7 Investments accounted for using the equity method 8 Financial asset at fair value through other comprehensive income Long-term receivables 10 Other non-current assets Total non-current assets Current assets Inventories Trade receivables 9 Other current assets Other receivables Prepayments Cash and cash equivalents Restricted cash Total current assets Total assets	30 June 2021 Unaudited RMB’000 1,012,759 12,464,286 13,661 114,509 195,000 2,000 1,635,907 335,917 15,774,039 21,603 2,181,574 140,714 21,208 94,046 1,842,874 19,989 4,322,008 20,096,047	31 December 2020 Audited RMB’000 819,354 11,922,211 12,965 77,607 195,000 2,000 1,647,402 330,971
		15,007,510
		17,460 1,961,739 102,277 24,117 26,220 1,652,657 10,989
		3,795,459
		18,802,969

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Balance Sheet (All amounts in RMB thousand unless otherwise stated)

Notes LIABILITIES Non-current liabilities Borrowings 12 Deferred revenue 13 Deferred income tax liabilities 14 Other non-current liabilities Provisions for other liabilities and charges 15 Total non-current liabilities Current liabilities Trade payables 16 Contract liabilities 16 Salaries and Wages payables Income tax and other taxes payables 16 Dividend payable Other payables 16 Borrowings 12 Provisions for other liabilities and charges 15 Total current liabilities Total liabilities Net assets EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 11 Other reserves Retained earnings Equity attributable to owners of the Company Non-controlling interests Total equity Liu Yujun	30 June 2021 Unaudited RMB’000 6,619,496 1,974,313 104,650 34,000 14,373 8,746,832 359,753 573,057 23,869 49,590 – 971,354 1,638,920 12,078 3,628,621 12,375,453 7,720,594 1,427,228 1,050,078 4,247,267 6,724,573 996,021 7,720,594 Niu Bo	31 December 2020 Audited RMB’000 5,574,476 1,981,434 100,799 34,000 13,737
		7,704,446
		294,973 527,410 85,620 56,841 142 955,631 1,582,982 13,281
		3,516,880
		11,221,326
		7,581,643
		1,427,228 1,050,078 4,114,045
		6,591,351
		990,292
		7,581,643

The notes on page 57 to 79 form an integral part of this condensed consolidated interim financial information.

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Interim Report 2021 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 Changes in Equity

(All amounts in RMB thousand unless otherwise stated)

			Unaudited	Unaudited
	Attributable to owners		of the Company
					Non-
		Other	Retained		controlling	Total
	Share capital	Reserves	Earnings	Sub-Total	interests	Equity
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Balance at 31 December 2020	1,427,228	1,050,078	4,114,045	6,591,351	990,292	7,581,643
– Profit for the half-year	–	–	304,489	304,489	32,258	336,747
Total comprehensive income for the half-year	–	–	304,489	304,489	32,258	336,747
Transactions with owners in their capacity as owners:
– Non-controlling interest on setting up subsidiary	–	–	–	–	490	490
– Dividends provided for or paid	–	–	(171,267)	(171,267)	(27,019)	(198,286)
	–	–	(171,267)	(171,267)	(26,529)	(197,796)
Balance at 30 June 2021	1,427,228	1,050,078	4,247,267	6,724,573	996,021	7,720,594
Balance at 31 December 2019	1,427,228	989,274	3,757,523	6,174,025	968,162	7,142,187
– Profit for the half-year	–	–	256,948	256,948	20,093	277,041
Total comprehensive income for the half-year	–	–	256,948	256,948	20,093	277,041
Transactions with owners in their capacity as owners:
– Non-controlling interest on setting up subsidiary	–	–	–	–	12,706	12,706
– Dividends provided for or paid	–	–	(152,713)	(152,713)	(4,800)	(157,513)
	–	–	(152,713)	(152,713)	7,906	(144,807)
Balance at 30 June 2020	1,427,228	989,274	3,861,758	6,278,260	996,161	7,274,421

The notes on page 57 to 79 form an integral part of this condensed consolidated interim financial information.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

9. Financial Reports

I. Prepared in accordance with Hong Kong Financial Reporting Standards

Interim Condensed Consolidated Statement of Cash Flow (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 Payments for property, plant and equipment, intangible assets Payment for acquisition of subsidiary, net of cash acquired Proceeds on disposal of property, plant and equipment Decrease 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 Capital contributions by non-controlling interests Net cash inflow from financing activities Net increase/(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 2021 2020 RMB’000 RMB’000 731,981 322,717 (75,928) (83,079) 6,231 15,455 662,284 255,093 (535,036) (767,970) (676,222) – 204 49 – 3,899 27,191 6,207 (1,183,863) (757,815) (2,197,693) (1,241,626) (198,428) (7,809) (183,479) (132,590) 3,290,906 1,597,564 490 12,706 711,796 228,245 190,217 (274,477) 1,652,657 2,066,301 1,842,874 1,791,824	Unaudited Half-year 2021 2020 RMB’000 RMB’000 731,981 322,717 (75,928) (83,079) 6,231 15,455 662,284 255,093 (535,036) (767,970) (676,222) – 204 49 – 3,899 27,191 6,207 (1,183,863) (757,815) (2,197,693) (1,241,626) (198,428) (7,809) (183,479) (132,590) 3,290,906 1,597,564 490 12,706 711,796 228,245 190,217 (274,477) 1,652,657 2,066,301 1,842,874 1,791,824
		255,093
		(767,970) – 49 3,899 6,207
		(757,815)
		(1,241,626) (7,809) (132,590) 1,597,564 12,706
		228,245
		(274,477) 2,066,301
		1,791,824

The notes on page 57 to 79 form an integral part of this condensed consolidated interim financial information.

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Interim Report 2021 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

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, and supply of heating and cooling 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

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Novmber 2018	Hefei Urban – rural Construction Commission
Deqing	Zhejiang	1 January 2019	Deqing Qianyuan Municipal Government
Gaocheng	Hebei	2 April 2019	Hebei Gaocheng Economic Development Zone
			Management Committee
Jiuquan	Gansu	22 June 2019	Jiuquan Suzhou Municipal Government
Yingdong	Fuyang	26 August 2019	Fuyang Urban – rural Construction Commission
Huoqiu	Anhui	2 Jan 2020	Huoqiu Housing and Urban – rural Construction Bureau
Huize	Yunnan	24 Feb 2020	Huize Housing and Urban – rural Construction Bureau
Honghu	Hubei	18 March 2021	Honghu Housing and Urban – rural Construction Bureau
Xiqing	Tianjin	31 May 2021	Tianjin Xiqing District Water Authority Center

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) 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.

(c) 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.

(d) 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.

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Interim Report 2021 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)

(e) Waste treatment and disposal service

The Group’s waste treatment and disposal service includes hazardous wastes and general solid waste. Currently, the

Group conducts the disposal by way of incineration, landfill, and physicochemical treatment and solidify.

This condensed consolidated interim financial information was approved for issue on 25 August 2021.

This condensed consolidated financial information has not been audited.

2 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

	Unaudited Half-year
	2021	2020
	RMB’000	RMB’000
Revenue from contracts with customers (Note 2(b))	1,903,954	1,521,390
Other income	51,167	73,977
	1,955,121	1,595,367

(b) Operating segment analysis

Management has determined the operating segments based on the reports reviewed by the strategy steering committee held regularly that are used to make strategic decisions for the purpose of allocating resources and assessing performance.

The strategy steering committee meeting considers the business primarily from service perspective and for the significant business segment geographical perspectives will also be considered. From a service perspective, management assesses the performance of processing of sewage water, 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 respective segments and the physical location of assets. The liabilities are allocated based on the operations of the respective segment. Expenses indirectly attributable to each segment are allocated to the segments based on the proportion of each segment’s revenue.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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)

• 2 Revenue and segment information (Continued)

• (b) Operating segment analysis (Continued)

The strategy steering committee assesses the performance of the operating segments based on a measure of profit before income tax, which is measured in the approach consistent with that in the financial statements.

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

(i) For the half-year ended 30 June 2021 (Unaudited)

Sewage water processing Tianjin plants Hangzhou plant Other plants RMB’000 RMB’000 RMB’000 719,721 127,712 534,056 – – – 719,721 127,712 534,056 (457,119) (72,648) (395,259) 7,098,946 792,417 7,552,287 (6,605,959) (151,102) (3,665,752) 2,739 193 1,145 (95,769) (2,233) (65,040) (590) – (1,273) (84,225) (29,316) (148,880) 59,106 – 256,999	Recycled water and pipeline connection RMB’000 168,224 – 168,224 (117,230) 1,416,541 (901,621) 1,326 (393) (12,668) (3,087) 572	Heating and cooling services RMB’000 39,779 – 39,779 (26,088) 642,683 (305,320) 422 (1,318) (839) (12,382) 5,062	Tap water operations Sale of environmental protection equipment RMB’000 RMB’000 57,178 17,460 – – 57,178 17,460 (40,739) (8,625) 636,082 57,631 (98,202) (22,372) 30 189 (238) – (98) (538) (10,585) – 18,415 –	All other segments RMB’000 239,824 – 239,824 (146,416) 1,704,460 (625,125) 4,209 (8,907) (21,910) (2,445) 37,708	Group RMB’000 1,903,954 – 1,903,954 (1,264,124)
					406,551
					406,551 (69,804)
					336,747
					19,901,047
					195,000
					20,096,047
					(12,375,453)
					10,253 (173,898) (37,916) (290,920) 377,862

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Interim Report 2021 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)

• 2 Revenue and segment information (Continued)

• (b) Operating segment analysis (Continued)

(ii) For the half-year ended 30 June 2020 (Unaudited)

	Sewage processing and facility	Sewage processing and facility	Sewage processing and facility
		construction services
							Sale of
				Recycled water	Heating and		environmental
	Tianjin	Hangzhou	Other	and pipeline	cooling	Tap water	protection	All other
	plants	plant	plants	connection	services	operations	equipment	segments	Group
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Segment revenue	600,633	119,374	373,267	136,733	46,057	46,924	13,571	184,831	1,521,390
Timing of revenue recognition:
At a point in time	–	–	–	–	–	–	–	13,916	13,916
Over time	600,633	119,374	373,267	136,733	46,057	46,924	13,571	170,915	1,507,474
Segment expense	(435,728)	(83,345)	(333,340)	(79,114)	(33,461)	(40,430)	(8,312)	(171,446)	(1,185,176)
Results before share of profits
of an associate									336,213
Profit before income tax									336,213
Income tax expense									(59,172)
Profit for the period									277,041
Segment assets	6,658,384	966,138	6,907,391	1,007,088	683,714	545,339	60,874	1,298,778	18,127,706
Investment accounted for
using the equity method									195,000
Total assets									18,322,706
Total liabilities	5,867,468	224,864	3,159,769	907,021	342,097	89,974	8,567	448,525	11,048,285
Other information
– Interest income	2,307	664	1,875	2,148	256	17	201	4,860	12,328
– Interest expenses	(92,732)	(2,945)	(29,141)	–	(1,300)	(464)	–	–	(126,582)
– Depreciation	(237)	–	(688)	(15,791)	(662)	(56)	(378)	(8,140)	(25,952)
– Amortization	(87,321)	(30,480)	(108,396)	(3,116)	(12,010)	(10,095)	(1)	(1,537)	(252,956)
– Capital expenditures	1,518	–	305,179	1,070	14,104	1,479	–	46,259	369,609

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Operating profit

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

Other income Charging: Depreciation and amortisation expenses Staff costs Raw materials and consumables used Repair and maintenance expenses	Unaudited Half-year 2021 2020 RMB’000 RMB’000 51,167 73,977 328,836 278,908 195,026 155,942 143,418 167,362 65,765 49,135	Unaudited Half-year 2021 2020 RMB’000 RMB’000 51,167 73,977 328,836 278,908 195,026 155,942 143,418 167,362 65,765 49,135
		278,908 155,942 167,362 49,135

4 Finance expenses – net

Interest expenses of borrowings Less: Interest income – long-term receivables – bank deposits Others		Unaudited Half-year 2021 2020 RMB’000 RMB’000 173,898 126,582 (10,253) (12,328)	Unaudited Half-year 2021 2020 RMB’000 RMB’000 173,898 126,582 (10,253) (12,328)
		(4,022) (6,231)	3,127 (15,455)
		(1,943) 161,702	(1,267) 112,987

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Interim Report 2021 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 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 2021 (30 June

2020: 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 2021 2020 RMB’000 RMB’000 65,673 58,934 4,131 238 69,804 59,172	Unaudited Half-year 2021 2020 RMB’000 RMB’000 65,673 58,934 4,131 238 69,804 59,172
		59,172

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 2021 2020 RMB’000 RMB’000 406,551 336,213 101,638 84,053 (25,946) – (27,577) (12,871) 16,474 85 (1,571) (168) 516 4,102 6,270 (16,029) 69,804 59,172	Unaudited Half-year 2021 2020 RMB’000 RMB’000 406,551 336,213 101,638 84,053 (25,946) – (27,577) (12,871) 16,474 85 (1,571) (168) 516 4,102 6,270 (16,029) 69,804 59,172
		84,053 – (12,871) 85 (168) 4,102 (16,029)
		59,172

6 Interim dividends

No interim dividend was proposed by the Board of Directors of the Company for the half – year ended 30 June 2021 (30 June 2020: Nil).

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Property, plant and equipment, intangible assets, and right-of-use assets

Half-year ended 30 June 2021 (Unaudited) Net book amount at 31 December 2020 Additions Disposals Depreciation and amortisation Net book amount at 30 June 2021	Property, plant and equipment RMB’000 819,354 273,886 (3,618) (76,863) 1,012,759	Intangible assets (a) RMB’000 11,922,211 832,032 – (289,957) 12,464,286	Right-of-use assets RMB’000 77,607 38,661 (199) (1,560)
			114,509

• (a) Concession rights with net book value of RMB3,393 million (31 December 2020: RMB2,508 million) have been secured against loans.

• 8 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 2021 RMB’000 195,000 – – –	Audited 31 December 2020 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.

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Interim Report 2021 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)

9 Trade receivables

Details of the trade receivables are as follows:

Receivables from third parties – Trade receivables – Notes receivable Receivables from third parties Receivables from related parties Less: loss allowance for impairment of trade receivables	Unaudited 30 June 2021 RMB’000 2,193,489 2,730 2,196,219 155,960 2,352,179 (170,605) 2,181,574	Audited 31 December 2020 RMB’000 2,059,332 2,656 2,061,988 68,280
		2,130,268
		(168,529)
		1,961,739

(a) Impaired trade receivables

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

Within 1 month 1 month to 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 2021 RMB’000 355,262 1,678,764 177,426 64,256 40,451 16,935 19,085 2,352,179	Audited 31 31 December 2020 RMB’000 347,063 1,508,955 139,324 69,336 45,704 10,538 9,348
		2,130,268

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Long-term receivables

Long-term receivables
Receivables from Tianjin Water Authority Bureau (a) Receivables from toll road concession (b) Less: loss allowance for impairment of long-term receivables Less: non-current assets due within one year	Unaudited 30 June 2021 RMB’000 1,431,761 226,573 (902) 1,657,432 (21,525) 1,635,907	Audited 31 December 2020 RMB’000 1,431,761 236,592 (902)
		1,667,451 (20,049)
		1,647,402

• (a) In 2020, with the influence of Coronavirus Disease 2019 (the “COVID-19”), the actual collection of receivables from Tianjin Water Authority Bureau was significantly below expectation. Based on the historical collection experience and the expectation of future payment scheme, the Group has reclassified the present value of receivables of which collection is expected to be exceeding 12 months as long-term receivables. The expected credit loss rate for the aforesaid long-term receivables is 0.05%, which is consistent with expected credit loss rate as applied for the remaining trade receivables with Tianjin Water Authority Bureau. The balance of loss allowances is RMB1 million.

• (b) 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%.

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Interim Report 2021 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 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	Total share capital
									RMB’000	RMB’000	RMB’000	RMB’000
At	31	December	2020	(Audited) and at	30	June	2021	(Unaudited)	1,087,228	340,000	1,427,228	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 2021 and 2020.

12 Borrowings

Notes Non-current liabilities: Long-term bank borrowings (a), (b) Less: Current portion (a), (b) Debentures (c) Less: Current portion (c) Long-term payables (d) Less: Current portion (d) Total non-current borrowings Current liabilities: Current portion of long-term bank borrowings (a) Current portion of debentures (Note (b)) Current portion of interest payable for the debentures Current portion of long-term payables (d) Short-term bank borrowings (e) Other current liabilities (e) Total current borrowings Total borrowings	Unaudited 30 June 2021 RMB’000 7,249,251 (854,259) 6,394,992 698,803 (698,803) – 269,883 (45,379) 224,504 6,619,496 854,259 698,803 10,992 45,379 29,487 1,638,920 – 1,638,920 8,258,416	Audited 31 December 2020 RMB’000 5,033,225 (805,331
		4,227,894 1,798,419 (699,571
		1,098,848 282,840 (35,106
		247,734
		5,574,476
		805,331 699,571 42,974 35,106 –
		1,582,982 –
		1,582,982
		7,157,458

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Borrowings (Continued)

• (a) Long-term bank borrowings

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

Half-year ended 30 June 2021 Net book amount at 31 December 2020 Proceeds of new borrowings Repayments of borrowings Net book amount at 30 June 2021 Half-year ended 30 June 2020 Net book amount at 31 December 2019 Proceeds of new borrowings Repayments of borrowings Net book amount at 30 June 2020	Unaudited RMB’000 5,033,225 3,039,000 (822,974)
	7,249,251
	3,818,136 1,597,564 (1,012,026)
	4,403,674

These borrowings mature as follows:

Less than 1 year RMB’000 As at 30 June 2021 (Unaudited) Long-term bank borrowings 854,259 As at 31 December 2020 (Audited) Long-term bank borrowings 805,331	Between 1 and 2 years RMB’000 1,060,517 645,730	Between 2 and 5 years RMB’000 2,679,286 1,500,982	Over 5 years RMB’000 2,655,189 2,081,182	Total RMB’000 7,249,251
				5,033,225

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Interim Report 2021 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)

• 12 Borrowings (Continued)

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

Long-term bank borrowings: Secured Guaranteed Unsecured	Unaudited 30 June 2021 RMB’000 2,063,987 2,571,878 2,613,386 7,249,251	Audited 31 December 2020 RMB’000 1,522,559 2,497,386 1,013,280
		5,033,225

(c) Debentures

	Audited					Unaudited
	31 December				Due within	30 June
	2020	Amortization	Additions	Repayments	1 year	2021
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Debentures payable
– par value	1,800,000	–	–	(1,100,000)	700,000	–
– transaction cost	(1,581)	384	–	–	(1,197)	–
	1,798,419	384	–	(1,100,000)	698,803	–

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. As at end of the report, the debenture investors have all sold back, the debenture has been delisted and written-off.

69

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Borrowings (Continued)

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

	Unaudited	Unaudited	Audited
	30 June	2021	31 December 2020
	RMB’000		RMB’000
		Unrecognized	Unrecognized
	Payable	financial charges	Payable financial charges
Payable to Sewage Company for assets acquisition	390,999	(121,116)	415,275 (132,435)

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

			Effective
	Maturity date	Original balance	interest rate	Ending balance Due within 1 year
		RMB’000		RMB’000	RMB’000
Sewage Company	20 March 2041	430,314	5.94%	257,483	37,779
Tianjin Chengtou Chuangzhan
Leasing Co., Ltd.	3 September 2023	20,000	3.80%	12,400	7,600

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%.

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Interim Report 2021 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)

12 Borrowings (Continued)

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

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

JPY US dollar CNY	Unaudited 30 June 2021 RMB’000 193,435 64,048 12,400 269,883	Audited 31 December 2020 RMB’000 196,100 70,540 16,200
		282,840

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.

(e) Short-term bank borrowings

Movement of bank borrowings is analyzed as follows:

Half-year end 30 June 2021 Net book amount at 31 December 2020 Proceeds of new borrowings Repayments of borrowings Net book amount at 30 June 2021 Summary of current portion of short-term borrowings by terms: Unaudited 30 June 2021 RMB’000 Unsecured 29,487	Unaudited RMB’000 – 29,487 –
	29,487
	Audited 31 December 2020 RMB’000 –

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

71

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Borrowings (Continued)

• (f) As at 30 June 2021, the contractual maturities of the group’s non-derivative financial liabilities were as follows:

As at 30 June 2021(Unaudited) Long-term bank borrowings Long-term payables Trade payables Other payables Debentures Short-term bank borrowings As at 31 December 2020(Audited) Long-term bank borrowings Long-term payables Debentures Trade payables Other payables Dividends payable	Less than 1 year RMB’000 1,155,491 51,074 359,753 971,354 709,795 29,487 3,276,954 1,008,415 39,447 818,102 294,973 955,631 142 3,116,710	Between 1 and 2 years RMB’000 1,319,476 34,301 – – – – 1,353,777 816,994 39,064 56,870 – – – 912,928	Between 2 and 5 years RMB’000 3,208,464 95,756 – – – – 3,304,220 1,873,550 108,369 1,118,957 – – – 3,100,876	Over 5 years RMB’000 3,340,707 209,868 – – – – 3,550,575 2,664,569 228,395 – – – – 2,892,964	Total RMB’000 9,024,138 390,999 359,753 971,354 709,795 29,487 11,485,526 6,363,528 415,275 1,993,929 294,973 955,631 142 10,023,478	Carrying value RMB’000 7,249,251 269,883 359,753 971,354 709,795 29,487
						9,589,523
						5,033,225 282,840 1,841,393 294,973 955,631 142
						8,408,204

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Interim Report 2021 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)

13 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 – Chibi project – Shijiazhuang Gaocheng upgrading project Water recycling plants: – Jingu – Dongjiao – Beichen – Xianyanglu Heating and cooling supply service project Others Total	Audited 31 December 2020 RMB’000 1,155,975 149,960 82,800 54,353 38,140 16,417 8,916 9,066 7,750 – 193,934 19,731 17,062 11,903 207,419 8,008 1,981,434	Additions Recognised in Other income – net Unaudited 30 June 2021 Relating to assets/costs RMB’000 RMB’000 RMB’000 – (25,643) 1,130,332 assets – (3,260) 146,700 assets – (1,800) 81,000 assets – (1,182) 53,171 assets – (829) 37,311 assets 6,849 (465) 22,801 assets – (358) 8,558 assets – (160) 8,906 assets – – 7,750 assets 20,154 – 20,154 assets – – 193,934 assets – (337) 19,394 assets – (262) 16,800 assets – – 11,903 assets 188 – 207,607 assets – (16) 7,992 costs 27,191 (34,312) 1,974,313

73

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Deferred income tax

Unoffset deferred income tax assets

Opening balance Charged to profit or loss Closing balance	Unaudited Half-year 2021 2020 RMB’000 RMB’000 61,374 22,232 1,096 – 62,470 22,232	Unaudited Half-year 2021 2020 RMB’000 RMB’000 61,374 22,232 1,096 – 62,470 22,232
		22,232

Unoffset deferred income tax liabilities

Opening balance Charged to profit or loss Closing balance	Unaudited Half-year 2021 2020 RMB’000 RMB’000 149,208 143,610 4,251 238 153,459 143,848	Unaudited Half-year 2021 2020 RMB’000 RMB’000 149,208 143,610 4,251 238 153,459 143,848
		143,848

15 Provisions for other liabilities and charges

Major overhauls for the assets of concession right Others Analysis of total provisions: Non-current Current	Unaudited 30 June 2021 RMB’000 22,905 3,546 26,451 Unaudited 30 June 2021 RMB’000 14,373 12,078 26,451	Audited 31 December 2020 RMB’000 23,472 3,546
		27,018
		Audited 31 December 2020 RMB’000 13,737 13,281
		27,018

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Interim Report 2021 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 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 2021 RMB’000 359,753 573,057 971,354 49,590 1,953,754	Audited 31 December 2020 RMB’000 294,973 527,410 955,631 56,841
		1,834,855

• (a) As at 30 June 2021, the trade payable with aging more than 1 year are mainly source water charges payable by Qujing Company of RMB53 million (31 December 2020: RMB43 million), and the subcontract costs payable by Tianjin Water Recycling Co., Ltd of RMB47 million (31 December 2020: RMB30 million). As the Group has not yet recovered the relevant sewage treatment charges and the related projects have not yet been completed, the Group has not settled the related payable balances.

• (b) Contract liabilities

	Unaudited	Audited
	30 June	31 December
	2021	2020
	RMB’000	RMB’000
For recycled water and pipeline connection services	495,892	509,271
For toll road fee	43,995	–
For hazardous wastes	22,614	3,145
For Hangu project	4,876	4,876
For heating and cooling supply service	3,357	7,190
For equipment sales	373	2,028
Others	1,950	900
	573,057	527,410

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 Trade payables, contract liabilities, other payables and income tax and other taxes payables (Continued)

• (c) Other payables comprise:

Construction costs payable Interest payable for borrowings Payable for purchases of property, plant and equipment and concession right Others	Unaudited 30 June 2021 RMB’000 671,835 1,515 17,569 280,435 971,354	Audited 31 December 2020 RMB’000 838,871 2,097 18,930 95,733
		955,631

As at 30 June 2021, other payables of RMB564 million (31 December 2020: RMB642 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.

17 Commitments and contingent event

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

Property, plant and equipment Intangible assets	Contracted but n Unaudited 30 June 2021 RMB’ million 106 – 106	ot provided for Audited 31 December 2020 RMB’ million – 503 503	Authorised but no Unaudited 30 June 2021 RMB’ million – – –	t contracted for Audited 31 December 2020 RMB’ million – 220
				220

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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)

18 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	Unaudited Half-year 2021 2020 RMB’000 RMB’000 38,847 41,312 13,012 11,054 5,930 7,471 57,789 59,837	Unaudited Half-year 2021 2020 RMB’000 RMB’000 38,847 41,312 13,012 11,054 5,930 7,471 57,789 59,837
		59,837

• (ii) Key management compensation for the half-year ended 30 June 2021 is summarized as follows:

Key management compensation Receivables from to related parties: – City Infrastructure Construction and Investment – Tianjin Lecheng Properties Limited – Tianjin City Resource Operation Co., Ltd.	Unaudited Half -year 2021 2020 RMB’000 RMB’000 8,032 8,452 Unaudited Audited 30 June 31 December 2021 2020 RMB’000 RMB’000 151,660 46,537 3,899 21,342 401 401 155,960 68,280	Unaudited Half -year 2021 2020 RMB’000 RMB’000 8,032 8,452 Unaudited Audited 30 June 31 December 2021 2020 RMB’000 RMB’000 151,660 46,537 3,899 21,342 401 401 155,960 68,280
		Audited 31 December 2020 RMB’000 46,537 21,342 401
		68,280

(iii) Receivables from to related parties:

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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)

• 18 Related party transactions (Continued)

• (iv) 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 2021, majority of the Group’s cash and cash equivalents and borrowings are dealt with state controlled banks.

19 Fair value measurement of financial instruments

This note provides an update on the judgements and estimates made by the group in determining the fair values of the financial instruments since the last annual financial report.

Financial instruments are carried at fair value as at 30 June 2021 by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a fair value hierarchy as follows:

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.

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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 Basis of preparation of half-year report

This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2021 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 2020 and any public announcements made by the Group during the interim reporting period.

Amended standards adopted by the Group

The Group has adopted the following amended standards for the accounting period beginning on or after 1 January 2021, which do not have a material impact on the Group:

• Covid-19-related Rent Concessions – Amendments to IFRS 16

• Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.

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9. Financial Reports

II. Prepared in accordance with the PRC Accounting Standards

Consolidated and Company Balance Sheet As at 30 June 2021 (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) Fixed assets 4(11) Construction in progress 4(11) Intangible assets 4(12) Goodwill 4(13) Deferred income tax assets 4(20) Other non-current assets 4(7) Total non-current assets TOTAL ASSETS	Unaudited 30 June 2021 Consolidated 1,862,863 2,730 2,178,844 94,046 21,208 21,603 21,525 119,189 4,322,008 1,635,907 195,000 2,000 995,593 17,166 12,080,029 498,766 13,661 335,917 15,774,039 20,096,047	Audited 31 December 2020 Consolidated 1,663,646 2,656 1,959,083 26,220 24,117 17,460 20,049 82,228 3,795,459 1,647,402 195,000 2,000 809,495 9,859 11,999,818 — 12,965 330,971 15,007,510 18,802,969	Unaudited 30 June 2021 Company 807,054 — 1,200,302 67,894 43,697 6,368 21,525 277,432 2,424,272 1,635,907 5,149,173 2,000 140,817 2,457 3,781,298 — — 20,832 10,732,484 13,156,756	Audited 31 December 2020 Company 623,111 — 1,126,477 — 25,883 5,995 20,049 375,011
				2,176,526
				1,647,402 4,223,545 2,000 148,551 340 3,865,856 — — 40,832
				9,928,526
				12,105,052

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

Consolidated and Company Balance Sheet

As at 30 June 2021

(All amounts in RMB thousand unless otherwise stated)

		Unaudited	Audited	Unaudited	Audited
		30 June	31 December	30 June	31 December
		2021	2020	2021	2020
LIABILITIES AND OWNERS’ EQUITY	Note	Consolidated	Consolidated	Company	Company
Current liabilities
Short-term borrowings	4(17)	29,487	—	29,487	—
Trade payables	4(15)	359,753	294,973	78,922	43,558
Contract liabilities	4(15)	573,057	527,410	48,945	4,950
Taxes payable	4(15)	49,590	56,841	10,121	4,688
Other payables	4(15)	971,354	955,773	201,459	230,454
Accrued payroll	4(16)	23,869	85,620	10,557	43,202
Current portion of non-current liabilities	4(17)	1,621,511	1,596,263	1,305,205	1,536,886
Other current liabilities		—	—	80,000	70,000
Total current liabilities		3,628,621	3,516,880	1,764,696	1,933,738
Non-current liabilities
Long-term borrowings	4(17)	6,394,992	4,227,894	3,270,832	1,396,472
Debentures payable	4(17)	—	1,098,848	—	1,098,848
Long-term payables	4(17)	224,504	247,734	219,704	239,134
Provisions	4(18)	14,373	13,737	11,665	11,665
Deferred income	4(19)	1,974,313	1,981,434	1,491,017	1,524,402
Deferred tax liabilities	4(20)	104,650	100,799	38,551	36,085
Other non-current liabilities	4(17)	34,000	34,000	600,000	380,000
Total non-current liabilities		8,746,832	7,704,446	5,631,769	4,686,606
Total liabilities		12,375,453	11,221,326	7,396,465	6,620,344
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)	619,054	619,054	619,054	619,054
Undistributed profits	4(22)(c)	4,247,267	4,114,045	3,333,221	3,057,638
Total equity attributable to equity owners of the parent		6,724,573	6,591,351	5,760,291	5,484,708
Minority interests		996,021	990,292	—	—
Total owners’ equity		7,720,594	7,581,643	5,760,291	5,484,708
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY		20,096,047	18,802,969	13,156,756	12,105,052

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

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II. Prepared in accordance with the PRC Accounting Standards

Consolidated and Company Income Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

		Unaudited	Unaudited	Unaudited	Unaudited
		Six Months	Six Months	Six Months	Six Months
		Ended	Ended	Ended	Ended
Item	Note	30 June 2021	30 June 2020	30 June 2021	30 June 2020
		Consolidated	Consolidated	Company	Company
1. Revenue	4(23)/13(4)	1,903,954	1,521,390	806,985	707,200
Less: Cost of sales	4(23)/13(4)	(1,264,124)	(1,040,712)	(452,013)	(430,781)
Taxes and surcharges	4(24)	(20,498)	(22,178)	(9,077)	(10,174)
Selling and distribution expenses	4(25)	(12,679)	(7,922)	—	—
General and administrative expenses	4(25)	(82,852)	(70,253)	(37,670)	(39,146)
Research and development expenses	4(26)	(3,706)	(2,517)	(5)	—
Financial expenses	4(27)	(161,702)	(112,987)	(99,223)	(98,767)
Including: interest expense		(173,898)	(126,582)	(109,043)	(106,711)
interest income		10,253	12,328	7,650	6,606
Add: Other income	4(28)	51,167	73,977	33,455	63,054
Investment gains	13(5)	—	—	242,767	89,219
Including: Share of profit of associates		—	—	—	—
Credit impairment losses	4(29)	(2,076)	—	—	—
2. Operating profit		407,484	338,798	485,219	280,605
Add: Non-operating income		311	232	2	115
Less: Non-operating expenses	4(30)	(1,244)	(2,817)	(1,112)	(2,198)
3. Total profit		406,551	336,213	484,109	278,522
Less: Income tax expenses	4(31)	(69,804)	(59,172)	(37,259)	(30,234)
4. Net profit		336,747	277,041	446,850	248,288
Classified by continuity of operations
Net profit from continuing operations		336,747	277,041	446,850	248,288
Net profit from discontinued operations		—	—	—	—
Classified by ownership of the equity
Minority interests		32,258	20,093	—	—
Attributable to equity owners of the Company		304,489	256,948	446,850	248,288
5. O ther comprehensive income after deduction of
impact of income tax		—	—	—	—
6. Total comprehensive income		336,747	277,041	446,850	248,288
Attributable to equity owners of the Company		304,489	256,948	446,850	248,288
Attributable to minority shareholders		32,258	20,093	—	—
Earnings per share (in RMB Yuan)
Basic	4(32)	0.21	0.18	—	—
Diluted	4(32)	0.21	0.18	—	—

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

Person in charge of Person in charge of Company representative: accounting function: accounting department: Liu Yujun Peng Yilin Liu Tao

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

Consolidated and Company Cash Flow Statements

For the six months ended 30 June 2021

(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(33)(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(33)(d) Sub-total of cash outflows Net cash flows from operating activities 4(33)(a) 2. Cash flows from investing activities Cash received from returns on investments Net cash received from disposal of fixed assets, intangible assets and other long-term assets 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 Sub-total of cash outflows Net cash flows from investing activities	Unaudited Six Months Ended 30 June 2021 Consolidated 1,824,682 9,390 102,731 1,936,803 (772,513) (238,773) (149,061) (86,981) (1,247,328) 689,475 — 204 — 204 (535,036) (676,222) (1,211,258) (1,211,054)	Unaudited Six Months Ended 30 June 2020 Consolidated 1,236,854 56,759 82,421 1,376,034 (620,274) (198,722) (226,454) (69,285) (1,114,735) 261,299 — 49 3,900 3,949 (767,970) — (767,970) (764,021)	Unaudited Six Months Ended 30 June 2021 Company 819,812 2,380 675,660 1,497,852 (399,305) (86,628) (59,266) (610,040) (1,155,239) 342,613 216,901 — — 216,901 (68,771) (915,488) (984,259) (767,358)	Unaudited Six Months Ended 30 June 2020 Company 653,596 40,530 466,144
				1,160,270
				(334,466) (84,626) (131,553) (376,847)
				(927,492)
				232,778
				76,960 — —
				76,960
				(66,188) (76,193)
				(142,381)
				(65,421)

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9. Financial Reports

II. Prepared in accordance with the PRC Accounting Standards

Consolidated and Company Cash Flow Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

		Unaudited	Unaudited	Unaudited	Unaudited
		Six Months	Six Months	Six Months	Six Months
		Ended	Ended	Ended	Ended
Item	Note	30 June 2021	30 June 2020	30 June 2021	30 June 2020
		Consolidated	Consolidated	Company	Company
3. Cash flows from financing activities
Cash received from borrowings		3,290,906	1,597,564	2,737,947	755,140
Cash received from capital contributions		490	12,706	—	—
Including: Cash received from capital contributions by
minority shareholders of subsidiaries		490	12,706	—	—
Sub-total of cash inflows		3,291,396	1,610,270	2,737,947	755,140
Cash repayments of borrowings		(2,197,693)	(1,241,626)	(1,852,101)	(1,070,500)
Cash payments for distribution of interest expenses		(183,479)	(132,590)	(105,749)	(89,115)
Payments for distribution of dividends or profits		(198,428)	(7,809)	(171,409)	(2,617)
Including: Dividends and profits paid to minority
shareholders by subsidiaries		(27,019)	(5,192)	—	—
Sub-total of cash outflows		(2,579,600)	(1,382,025)	(2,129,259)	(1,162,232)
Net cash flows from financing activities		711,796	228,245	608,688	(407,092)
4. Effect of foreign exchange rate changes on cash		—	—	—	—
5. Net (decrease)/increase in cash		190,217	(274,477)	183,943	(239,735)
Add: Cash at beginning of period		1,652,657	2,066,301	617,960	736,182
6. Cash at end of period	4(33)(b)	1,842,874	1,791,824	801,903	496,447

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

Company representative: Liu Yujun

Person in charge of Person in charge of accounting function: accounting department: Peng Yilin Liu Tao

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Consolidated Statement of Changes in Owners’ Equity

For the six months ended 30 June 2021

(All amounts in RMB thousand unless otherwise stated)

			Attributable to owners	of the parent	of the parent
							Total
		Share	Capital	Surplus	Undistributed	Minority	shareholders’
Item	Note	capital	surplus	reserve	profits	interests	equity
Balance at 1 January 2020 (Audited)		1,427,228	431,024	558,250	3,757,523	968,162	7,142,187
Movements for the period ended 30 June 2020
Total comprehensive income
Net profit		—	—	—	256,948	20,093	277,041
Total comprehensive income for the year		—	—	—	256,948	20,093	277,041
Capital contribution by shareholders		—	—	—	—	12,706	12,706
Profit distribution
Dividend distribution to shareholders		—	—	—	(152,713)	(4,800)	(157,513)
Balance at 30 June 2020 (Unaudited)		1,427,228	431,024	558,250	3,861,758	996,161	7,274,421
Balance at 1 January 2021 (Audited)		1,427,228	431,024	619,054	4,114,045	990,292	7,581,643
Movements for the period ended 30 June 2021
Total comprehensive income
Net profit		—	—	—	304,489	32,258	336,747
Total comprehensive income for the year		—	—	—	304,489	32,258	336,747
Capital contribution by shareholders		—	—	—	—	490	490
Profit distribution
Dividend distribution to shareholders	4(22)(c)	—	—	—	(171,267)	(27,019)	(198,286)
Balance at 30 June 2021 (Unaudited)		1,427,228	431,024	619,054	4,247,267	996,021	7,720,594

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

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Company Statement of Changes in Owners’ Equity For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

					Total
				Undistributed	shareholders’
Item	Share capital	Capital surplus	Surplus reserve	profits	equity
Balance at 1 January 2020 (Audited)	1,427,228	380,788	558,250	2,663,106	5,029,372
Movements for the period ended 30 June 2020
Total comprehensive income
Net profit	—	—	—	248,288	248,288
Total comprehensive income for the year	—	—	—	248,288	248,288
Profit distribution
Dividend distribution to shareholders	—	—	—	(152,713)	(152,713)
Balance at 30 June 2020 (Unaudited)	1,427,228	380,788	558,250	2,758,681	5,124,947
Balance at 1 January 2021 (Audited)	1,427,228	380,788	619,054	3,057,638	5,484,708
Movements for the period ended 30 June 2021
Total comprehensive income
Net profit	—	—	—	446,850	446,850
Total comprehensive income for the year	—	—	—	446,850	446,850
Profit distribution
Dividend distribution to shareholders	—	—	—	(171,267)	(171,267)
Balance at 30 June 2021 (Unaudited)	1,427,228	380,788	619,054	3,333,221	5,760,291

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

Company representative: Liu Yujun

Person in charge of Person in charge of accounting function: accounting department: Peng Yilin Liu Tao

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Notes to the Financial Statements

For the six months ended 30 June 2021

(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 2021, 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, supply of tap water and recycled water, supply of heating and cooling, hazardous waste treatment 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 New Technology Industrial Park
		Tianyu Science park Management Committee
Wendeng, Shandong	19 December 2007	Wendeng Construction Bureau
Xi’an, Shaanxi	18 March 2008	Xi’an Infrastructure Investment Group
Xianning, Hubei	16 October 2008	Xianning Construction Committee
Yingdong, Anhui	10 August 2009	Fuyang Yingdong Construction Bureau
Ninghe, Tianjin	21 September 2010	Management Committee of Modern Industrial Zone of Ninghe
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

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

1 GENERAL INFORMATION (Continued)

(a) Processing of sewage water (Continued)

Location	Agreement date	Authorized by
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
Deqing, Zhejiang	1 January 2019	Deqing Qianyuan Municipal Government
Jieshou, Anhui	2 March 2019	Jieshou Urban and Rural Construction Committee
Gaocheng, Hebei	2 April 2019	Hebei Gaocheng Economic and Technological Development Zone
		Management Committee
Jiuquan, Gansu	22 June 2019	Jiuquan Suzhou Municipal Government
Yingdong, Fuyang	26 August 2019	Fuyang Urban-rural Construction Commission
Huoqiu, Anhui	2 January 2020	Huoqiu Housing and Urban Construction Bureau
Huize, Yunnan	24 February 2020	Huize Housing and Urban Construction Bureau
Honghu, Hubei	18 March 2021	Honghu Housing and Urban Construction Bureau
Xiqing, Tianjin	31 May 2021	Tianjin Xiqing District Water Affairs Center

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) 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.

(c) 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.

(d) 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.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

1 GENERAL INFORMATION (Continued)

(e) Hazardous waste treatment

Hazardous treatment include hazardous and solid waste treatment. Currently, the Group conducts the disposal by way of incineration, landfill, physicochemical and curing treatment. Adoption of treatment method tailored to the local help to realize the aim of harmless, resource and reduction.

• (f) Subsidiaries included in the scope of consolidation for the year and newly consolidated subsidiaries are set out in Note 5 and Note 6.

• (g) These financial statements were approved by the Company’s Board of Directors on 25 August 2021.

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(11) and (14)), 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 2021 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 2021 and of their financial performance, cash flows and other information for the year then ended.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 2021 to 30 June 2021.

(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.

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Interim Report 2021 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 2021 (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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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.

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Interim Report 2021 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 2021 (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 or 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:

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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)

Debt instruments (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, and long-term receivables 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.

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.

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Interim Report 2021 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 2021 (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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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. For lease receivables, the Group makes the loss provision according to the lifetime ECL as well.

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, lease receivables that are classified into above groupings and notes receivables arising from sale of goods or rendering of services,, 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. Other types of notes receivables and 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.

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Interim Report 2021 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 2021 (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 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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 and low cost consumables 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 realizable 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 realizable value. Net realizable 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.

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Interim Report 2021 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 2021 (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.

For the long-term equity investment obtained by means other than business combination, the long-term equity investment obtained by paying cash shall be regarded as the initial investment cost according to the purchase price actually paid; for the long-term equity investment obtained by issuing equity securities, it shall be recognized as the initial investment cost according to the fair value of issuing equity securities.

• (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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 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.

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)).

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (11) 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 net	Annual
	Estimated 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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (11) 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.

(12) 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)).

(13) 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.

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (13) Borrowing costs (Continued)

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.

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.

(14) 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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (14) Intangible assets (Continued)

  • (b) Concession rights

As described in Note 1(a) to (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 20 to 30 years.

• (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.

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (14) Intangible assets (Continued)

  • (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.

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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (14) Intangible assets (Continued)

  • (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)).

(15) Non-monetary asset exchange

Non-monetary asset exchange refers to the exchange of non-monetary assets, such as fixed assets, intangible assets, investment properties, and long-term equity investments. The exchange does not involve or only involves a small amount of monetary assets (i.e. premiums). The exchange of non-monetary assets without commercial substance shall be measured on the basis of book value. For the assets to be swapped in, the enterprise shall use the book value of the assets to be swapped out and the relevant taxes and fees payable as the initial measurement amount of the assets to be swapped in; for the swapped out assets, no profit or loss is recognized when the assets are derecognized. For non-monetary asset exchanges that are measured on the basis of book value, and multiple assets are exchanged in or out at the same time, for multiple assets that are exchanged at the same time, the assets will be exchanged in accordance with the relative proportion of the fair value of each asset being exchanged. The total book value (involving the premium, plus the book value of the premium paid or the fair value of the premium received) is apportioned to the assets transferred, plus the relevant taxes and fees payable, as the initial measurement amount of the asset swapped in. If the fair value of the assets to be exchanged cannot be measured reliably, the book value of the assets to be exchanged may be apportioned according to the relative proportion of the original book value of the assets to be exchanged or other reasonable proportions. For multiple assets that are swapped out at the same time, no profit or loss is recognized when the swapped out assets are derecognized.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

(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.

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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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.

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Interim Report 2021 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 2021 (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 other 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. Sewage treatment service income and cooling and heating income are a series of single obligations with the same substance and transfer mode, which can be clearly distinguished. The group issues bills to customers according to the fixed unit price, sewage treatment capacity and cooling and heating area, and the income is recognized according to the amount of bills issued.

(b) Sales of tap water and recycled water

Revenues from sales of tap water and recycled water are recognised when services are rendered. Sales of tap water and recycled water are a series of single obligations with the same substance and transfer mode, which can be clearly distinguished. The group issues bills to customers according to the fixed unit price and water supply quantity, and the income is confirmed according to the amount of bill.

• (c) 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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (20) Revenue (Continued)

(c) Sales of pipeline connection for recycled water (Continued)

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.

(d) 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.

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (20) Revenue (Continued)

  • (e) Hazardous waste processing income

The Group provides hazardous and general solid waste treatment, of which the residence time of incineration treatment in the waste kiln is 30-120 minutes, and the disposal cycle of landfill treatment waste is within one week. The Group recognises the income when service is provided according to the actual processing amount of waste and the price agreed on the contract.

• (f) Contract operation income

Revenue from contract operation is based on the service agreement. The revenue of a fixed total amount contract

is recognized during the service period evenly. For contracts with agreed unit price of services, revenue shall be

recognized during the period of service provision according to the quantity of services provided

• (g) Technical services income

Technical service revenue shall be recognized within the service provision period specified in the contract

according to the service unit price and the actual service quantity provided in the contract.

(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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 favorable interest rates, the Group records the loans at the actual amounts and calculates the interests by loan principals and the favorable 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.

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Interim Report 2021 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 2021 (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 a lessor

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

• (a) Operating leases

While the Group leases buildings and structures out, rental income under an operating lease is recognised on a straight-line basis over the period of the lease. Variable rental income that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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) Judgment of non-monetary assets exchange not having commercial essence

The exchange of non-monetary assets that meets one of the following conditions has commercial essence: (1) the future cash flow of the assets received is significantly different from that of the assets exchanged out in terms of risk, time distribution or amount; (2) the present value of the expected future cash flow generated by the use of the assets received is different from that of the assets exchanged out, and the difference is significant compared with the fair value of the assets received and the assets exchanged out.

The relocation and non-monetary assets exchange arrangements of Xianyang Road sewage treatment plant and Dongjiao sewage treatment plant of the group are carried out in accordance with the instructions of Tianjin municipal government. The assets exchanged in and out are the same kind of assets, and the group’s risks and rewards did not change significantly, so the exchange of non-monetary assets has no commercial essence.

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Interim Report 2021 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 2021 (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 Group recognises the loss provision based on expected credit losses (“ECL”) and default exposure. ECL is determined by probability of default and loss rate of default. In determining the ECL, the Group uses internal historical credit loss experience, and adjusts the historical data in combination with the current situation and forward-looking information.

In considering forward-looking information, the Group regularly monitors and reviews important macroeconomic assumptions and parameters relevant to the calculation of expected credit losses, including the risk of economic downturn, changes in gross domestic product, external market conditions and customer conditions. The Group regularly monitors and reviews assumptions relating to the calculation of expected credit losses. The key macroeconomic parameters used in each scenario are listed below. The above estimation techniques and key assumptions have not changed significantly for the six months ended 30 June 2021.

• (ii) Impairments of Goodwill

The Group determines at each balance sheet date whether there is any indication that goodwill may be impaired. The recoverable amount of the asset group and the asset group combination including goodwill is the higher of the fair value of the asset group and the asset group combination minus the net amount of disposal expenses and the present value of the expected future cash flow. The calculation requires the use of accounting estimates (Note 4(13)).

If the management revises the growth rate used in the calculation of the future cash flow of the asset group and the asset group combination, and the revised growth rate is lower than the currently adopted growth rate, the Group needs to increase the provision for impairment of goodwill.

115

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 (Continued)

  • (ii) Impairments of Goodwill (Continued)

If the management revises the gross margin used in the calculation of the future cash flow of the asset group and the asset group combination, and the revised growth rate is lower than the gross margin, the Group needs to increase the provision for impairment of goodwill.

If the management revises the pre-tax discount rate used for discounting cash flows, and the revised pre-tax discount rate is higher than the currently adopted discount rate, the Group needs to increase the provision for impairment of goodwill.

If the actual growth rate and gross profit margin are higher or the actual pre-tax discount rate is lower than management’s estimation, the Group cannot reverse the impairment loss of goodwill that has been accrued.

• (iii) Income tax and Deferred 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.

As mentioned in Note 3(2), some subsidiaries of the Group are high-tech enterprises. The qualification of high-tech enterprises are for an initial term of three years. After the termination of the qualification, it is necessary to submit a new application to the relevant government departments for the high-tech enterprises status renewal. According to historical status renewal experience and the actual situation of each subsidiaries in the past, the Group believes the subsidiaries can continue to obtain the approval for the renewal of the status of being high-tech enterprises. Hence, the Group calculates subsidiaries’ corresponding deferred income tax at the preferential rate of 15%. If some of the subsidiaries’ renewal application has not been approved after the expiry of the high-tech enterprises status, the income tax shall be calculated at the statutory tax rate of 25%. Deferred income tax assets, deferred income tax liabilities will be affected.

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Interim Report 2021 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 2021 (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 (Continued)

    • (iii) Income tax and Deferred income tax (Continued)

The Group recognizes the corresponding deferred income tax asset to the extent that it is likely to obtain the taxable income amount to offset the deductible loss in the future period. The taxable income obtained in future periods shall include the taxable income that can be realized by the Group through normal production and business activities, and the taxable income that will be increased when the taxable temporary differences arising from previous periods are reversed in future periods. The Group needs to use estimation and judgment when determining the time and amount of taxable income to be generated in the future period. Any discrepancy between the actual situation and the estimate may result in an adjustment to the carrying value of the deferred income tax assets.

(iv) Impairment of long-term assets

The Group determines at each balance sheet date whether there is any indication that assets may be impaired. When the current market price of assets decreases significantly compared with the expected significant decline due to the passage of time or normal use and the economic, technological, or legal environment in which the Group operates has undergone major adverse changes recently; market interest rates or other market investment returns increase which affects the discount rate of the present value of future cash flows and the assets are obsolete or has been damaged or has become idle, the Group considers that there are signs of asset impairment. At each balance sheet date, the Group will evaluate the recoverable amount of the long-term assets that have shown signs of impairment. The assessment of the recoverable amount requires the Group to estimate the future cash flow and other conditions. When accounting estimates change, the book value of long-term assets and the amount included in asset impairment losses will also change. Once the impairment provision is accrued, it cannot be reversed.

117

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

2 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (Continued)

• (26) Significant changes in accounting policies

The Ministry of Finance promulgated the Notice on printing and Distributing the Interpretation of Accounting Standards for Enterprises No.14 in February 2021.

The Interpretation of Accounting Standards for Enterprises No.14 stipulates “on the accounting treatment of the government and social capital cooperation (PPP) project contracts by the social capital party”. Changes in the accounting treatment of the company include the following aspects: 1. If the social capital party provides construction services (including construction and reconstruction and expansion) or subcontracts to other parties, the identity of principal or agent is determined by the Accounting Standards for Enterprises No.14. 2. If the social capital party provides multiple services according to the PPP project contract (such as asset construction service of PPP project as well as operation and maintenance service after completion), it shall identify individual performance obligations in the contract according to the accounting Standards for Enterprises No. 14, identify individual performance obligations in the contract. Apportion the transaction price to each performance obligation in proportion to the individual selling price of each performance obligation. 3. According to the PPP project contract, if the social capital party meets the conditions for receiving cash (or other financial assets) of an identifiable amount during the operation of the project, it shall be recognized as a financial asset when the social capital party has the right to receive such consideration (the right only depends on the factor of time passing). And in accordance with the accounting standards for Enterprises No. 22 – Recognition and measurement of financial instruments for accounting treatment.

Management has assessed the impact of the application of the new accounting policy on the Company’s financial statements and has determined that it will have the following effects: 1. The Company shall make reliable measurement and confirmation of the operating income and operating cost during the construction period of PPP projects this year. 2. In PPP projects, feasibility service fees that are entitled to collect a certain amount should be recognized as longterm receivables and should be recognized as interest income in the current period of collection, and feasibility service fees should no longer be recognized as operating income. 3. If a PPP project is measured by financial asset model in the future, the interest expense during construction cannot be capitalized.

As for now, the impact of financial data is still under evaluation.

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Interim Report 2021 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 2021

(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	Taxable income	0%-25%
Value added tax (“VAT”) (Note(a) Note(b))	Taxable value added amount (Tax payable is calculated using the	3%-13%
	taxable sales amount multiplied by the applicable tax rate less
	deductible VAT input of the current year)
City maintenance and construction tax	The payment amount of VAT	5%-7%
Educational surcharge	The payment amount of VAT	3%

• (a) Pursuant to the ‘2019 Circular on Deeply Reform of Adjustment of Tax Rate of Value Added Tax’ (The General Administration of Customs of the State Administration of Taxation [2019] 39) jointly issued by the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs, the applicable tax rate of revenue arising from VAT-taxable sales is 13% from 1 April 2019, while it was 16% before then. The applicable tax rate of the Group’s VAT taxable income is adjusted accordingly.

• (b) According to the announcement of the State Administration of taxation on clarifying the collection and management of VAT on second hand car distribution and other issues, if the goods are not produced after professional treatment by means of landfill, incineration, etc., and the trustee belongs to the “professional and technical services” in the “modern services” provided in the “sales services, intangible assets, real estate notes” (Cai Shui [2016] 36), and the treatment fee charged by the trustee is subject to the VAT rate of 6%.

(2) Preferential tax policies for enterprise income tax

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

	Enterprise income
	tax rate for
Name of subsidiaries	30 June 2021	Reason for the preferential tax policy
The Company	15%	According to The Corporate Income Tax Policy of Third-party Enterprises
		Engaged in Pollution Prevention and Control issued on April 13, 2019
		(Announcement No.60, 2019, issued by the Ministry of finance, the Taxation
		Administration, the National Development and Reform Commission and the
		Ministry of Ecology and Environment), corporate income tax shall be levied at
		a reduced rate of 15% from 1 January 2019 to 31 December 2021.
Fuyang Capital Water Co., Ltd.	15%	According to The Corporate Income Tax Policy of Third-party Enterprises
		Engaged in Pollution Prevention and Control issued on April 13, 2019
		(Announcement No.60, 2019, issued by the Ministry of finance, the Taxation
		Administration, the National Development and Reform Commission and the
		Ministry of Ecology and Environment), corporate income tax shall be levied at
		a reduced rate of 15% from 1 January 2019 to 31 December 2021.
Gui Zhou Capital Water Co., Ltd.	15 %	From 1 January 2021 to 31 December 2030, in accordance with the
		Announcement of the State Development and Reform Commission of the
		Taxation Administration of the Ministry of Finance on the Extension of the
		Enterprise Income Tax Policy for the Development of the Western Region
		(Announcement Of the State Development and Reform Commission of the
		Water Administration of the Ministry of Finance No. 23, 2020), the enterprise
		income tax of the encouraged industrial enterprises set up in the western
		region is levied at a reduced rate of 15%.

119

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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: (Continued)

	Enterprise income tax
Name of subsidiaries	rate for 30 June 2021	Reason for the preferential tax policy
Xi’an Capital Water Co., Ltd.	15 %	From 1 January 2021 to 31 December 2030, in accordance with the
		Announcement of the State Development and Reform Commission of the
		Taxation Administration of the Ministry of Finance on the Extension of the
		Enterprise Income Tax Policy for the Development of the Western Region
		(Announcement Of the State Development and Reform Commission of the
		Water Administration of the Ministry of Finance No. 23, 2020), the enterprise
		income tax of the encouraged industrial enterprises set up in the western
		region is levied at a reduced rate of 15%.
Hangzhou Tianchuang Capital Water	15%	According to The Corporate Income Tax Policy of Third-party Enterprises
Co., Ltd.		Engaged in Pollution Prevention and Control issued on April 13, 2019
		(Announcement No.60, 2019, issued by the Ministry of finance, the Taxation
		Administration, the National Development and Reform Commission and the
		Ministry of Ecology and Environment), corporate income tax shall be levied at
		a reduced rate of 15% from 1 January 2019 to 31 December 2021.
Tianjin Caring Technology	15 %	In 2020, Caring Company has obtained the High-tech Enterprise Certificate
Development Co., Ltd.		(Certificate No. GR201812000566) issued by Tianjin Science and Technology
		Bureau, Tianjin Finance Bureau and Tianjin Taxation Bureau of the State
		Administration of Taxation. The certificate is valid for 3 years. According
		to relevant provisions of Article 28 of the Enterprise Income Tax Law of the
		People’s Republic of China, the enterprise income tax rate applicable for the
		six months ended 30 June 2021 is 15% (2020: 15%).
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.
Karamay Tianchuang Capital Water	12.5%	Income from engagement in qualified projects of environmental protection and
Co., Ltd.		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 2019 for the first 3 years and reduction half for the next 3
		years.
Bayannur Capital Water Co., Ltd.	Sewage water: 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 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.

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Interim Report 2021 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 2021 (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: (Continued)

	Enterprise income
	tax rate for
Name of subsidiaries	30 June 2021	Reason for the preferential tax policy
Yingshang 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 2018 for the first 3 years and reduction half for the next 3
		years.
Dalian Oriental Chunliuhe Water	12.5%	Income from engagement in qualified projects of environmental protection and
Quality Purification Co., Ltd.		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.
Shandong Capital Environmental	0%	According to Cai Shui [2009] No. 166, income from engagement in qualified
Protection Technology Consultant		industrial solid waste treatment projects and hazardous waste treatment
Co., Ltd.		projects is subject to exemption from enterprise income tax commence from
		2019 for the first 3 years and reduction half for the next 3 years.
Hanshou Tianchuang Capital Water	0%	According to Cai Shui [2019] No. 67, income from rural drinking water safety
Co., Ltd.		projects is subject to exemption from enterprise income tax commence from
		2019 for the first 3 years and reduction half for the next 3 years.
Jiuquan 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 2019 for the first 3 years and reduction half for the next 3
		years.
Huize Capital Water Co., Ltd.	15%	According to The Corporate Income Tax Policy of Third-party Enterprises
		Engaged in Pollution Prevention and Control issued on April 13, 2019
		(Announcement No.60, 2019, issued by the Ministry of finance, the Taxation
		Administration, the National Development and Reform Commission and the
		Ministry of Ecology and Environment), corporate income tax shall be levied at
		a reduced rate of 15% from 1 January 2019 to 31 December 2021.
Huoqiu Capital Water Co., Ltd.	15%	According to The Corporate Income Tax Policy of Third-party Enterprises
		Engaged in Pollution Prevention and Control issued on April 13, 2019
		(Announcement No.60, 2019, issued by the Ministry of finance, the Taxation
		Administration, the National Development and Reform Commission and the
		Ministry of Ecology and Environment), corporate income tax shall be levied at
		a reduced rate of 15% from 1 January 2019 to 31 December 2021.
Wuhan Tianchuang Capital Water	15%	According to The Corporate Income Tax Policy of Third-party Enterprises
Co., Ltd.		Engaged in Pollution Prevention and Control issued on April 13, 2019
		(Announcement No.60, 2019, issued by the Ministry of finance, the Taxation
		Administration, the National Development and Reform Commission and the
		Ministry of Ecology and Environment), corporate income tax shall be levied at
		a reduced rate of 15% from 1 January 2019 to 31 December 2021.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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: (Continued)

	Enterprise income
	tax rate for
Name of subsidiaries	30 June 2021	Reason for the preferential tax policy
Honghu Tianchuang Capital Water	12.5%	Income from engagement in qualified projects of environmental protection and
Co., Ltd.		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.
Jiangsu Yonghui Resources Utilization	0%	Income from engagement in qualified projects of environmental protection and
Co., Ltd.		energy and water conservation is subject to exemption from enterprise income
		tax commence from 2019 for the first 3 years and reduction half for the next 3
		years.
Gaoyou Compro Environmental	12.5%	Income from engagement in qualified projects of environmental protection and
Resources Co., Ltd.		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.
Changsha Tianchuang Capital	12.5%	Income from engagement in qualified projects of environmental protection and
Environmental Protection Co., Ltd.		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.
Changsha Tianchuang Capital Water	0%	Income from engagement in qualified projects of environmental protection and
Co., Ltd.		energy and water conservation is subject to exemption from enterprise income
		tax commence from 2019 for the first 3 years and reduction half for the next 3
		years.
Wendeng Capital Water Co., Ltd.	15%	According to The Corporate Income Tax Policy of Third-party Enterprises
		Engaged in Pollution Prevention and Control issued on April 13, 2019
		(Announcement No.60, 2019, issued by the Ministry of finance, the Taxation
		Administration, the National Development and Reform Commission and the
		Ministry of Ecology and Environment), corporate income tax shall be levied at
		a reduced rate of 15% from 1 January 2019 to 31 December 2021.
Deqing 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 2019 for the first 3 years and reduction half for the next 3
		years.
Hebei Guojin Tianchuang Capital	0%	Income from engagement in qualified projects of environmental protection and
Water Co., Ltd.		energy and water conservation is subject to exemption from enterprise income
		tax commence from 2020 for the first 3 years and reduction half for the next 3
		years.

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 3 TAXATION (Continued)

(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. On April 15, 2019, the Ministry of Finance and the State Administration of Taxation issued the “Announcement on Continued Implementation of Tax Preferential Policies for Rural Drinking Water Safety Projects” Caishui [2019] No. 67, stipulating that from January 1, 2019 to December 31, 2020, in the tap water supply business of the Group, the tap water sales income obtained by providing rural residents with domestic water is exempt from value-added tax.

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	Unaudited 30 June 2021 38 1,842,836 19,989 1,862,863 8,475	Audited 31 December 2020 14 1,652,643 10,989
		1,663,646
		7,987

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

Cash at bank and on hand Less: Restricted bank deposits (i) Cash listed in cash flow statement (Note 4(38))	Unaudited 30 June 2021 1,862,863 (19,989) 1,842,874	Audited 31 December 2020 1,663,646 (10,989)
		1,652,657

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

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (2) Notes receivable

Bank acceptance notes Less: Provision for bad debts	Unaudited 30 June 2021 2,730 — 2,730	Audited 31 December 2020 2,656 —
		2,656

• (a) As at 30 June 2021, the Group has no pledged notes receivable.

• (b) As at 30 June 2021, the Group had no endorsements or discounted notes receivable that were not yet due.

(c) Provision for bad debts:

As at 30 June 2021, the notes receivable of the group are generated from daily business activities such as selling goods and providing services, regardless of whether there is a significant financing component. 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.

(3) Trade receivables

Trade receivables Less: Provision for bad debts	Unaudited 30 June 2021 2,349,449 (170,605) 2,178,844	Audited 31 December 2020 2,127,612 (168,529)
		1,959,083

• (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	Unaudited 30 June 2021 2,031,296 177,426 64,256 40,451 16,935 19,085 2,349,449	Audited 31 December 2020 1,853,362 139,324 69,336 45,704 10,538 9,348
		2,127,612

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (3) Trade receivables (Continued)

  • (b) As at 30 June 2021 (unaudited), 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	1,449,924	(42,296)		62%

(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.

• (i) As at 30 June 2021(unaudited), provision for bad debts by individual is analyzed as below:

Tianjin Water Authority Bureau Qujing Sewage Company Xi’an Infrastructure Investment Group Guiyang Water Authority Bureau Hangzhou City Facilities Development Center Tianjin City Appearance Sanitation Construction Development Co. Ltd. Jinghai Development Area Management Committee Urad Rear Banner Finance Bureau Tianjin Ziya Environmental Protection Industrial Park Co. Ltd. Tianjin Shuangkou Municipal Solid Waste Landfill Urad Front Banner Finance Bureau Zhejiang Xinsanyin Dyeing Co.Ltd. Tianjin Goldin International Club Co. Ltd. Tianjin City Investment Urban Resources Management Co., Ltd. Tianjin Ziya Circular Economy Industry Investment Development Co., Ltd. Tianjin Tianbao Municipal Administration Co.Ltd. Total	Carrying amount ECL rate 1,069,232 0.05% 205,443 20.26% 68,039 0.05% 67,551 0.05% 39,658 0.15% 31,753 50.20% 28,329 49.75% 21,247 48.91% 16,797 100.00% 14,208 100.00% 10,928 100.00% 5,734 65.01% 1,548 100.00% 1,200 100.00% 1,020 100.00% 152 100.00% 1,582,839	Provision Reasons (554) 1) (41,630) 2) (20) 1) (33) 1) (59) 1) (15,941) 3) (14,093) 4) (10,392) 5) (16,797) 6) (14,208) 3) (10,928) 5) (3,727) 7) (1,548) 8) (1,200) 9) (1,020) 10) (152) 6) (132,302)

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 2021(unaudited), provision for bad debts by individual is analyzed as below: (Continued)

      • 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 Group from Tianjin Water Authority Bureau, from Guiyang Water Authority Bureau, Xi’an Infrastructure Investment Group and Hanzhou City Facility Development Center, have a lower credit risk. Based on the historical experience of operation, the Group maintains continuous receipts and there is no actual bad debt loss. Therefore, the Group estimates that the lifetime ECL rate of the receivables are respectively 0.05% and 0.15%.

      • 2) Receivables of Qujing Capital Water Co., Ltd. from Qujing Sewage Company comprise regular sewage treatment fee, tap water fee. 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 20.26%.

      • 3) Receivables of the Company from Tianjin City Appearance Sanitation Construction Development Co. Ltd. And Tianjin Shuangkou Municipal Solid Waste Landfill comprise technical services fees. The repayment period of Tianjin City Appearance Sanitation Construction Development Co. Ltd. is longer than that of general government customers. There were no transactions between the Company and Tianjin Shuangkou Municipal Solid Waste Landfill during the last year. The receivables from them are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that they have defaulted and estimates that the lifetime ECL rate are respectively 50.20% and 100.00%.

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Interim Report 2021 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 2021 (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 2021(unaudited), provision for bad debts by individual is analyzed as below: (Continued)

      • 4) Receivables of Tianjin Jinghai Capital Water Co., Ltd. from Jinhai Development Area Management Committee comprise conventional sewage treatment fees, whose repayment period is longer than that of general government customers, and are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that it has defaulted and estimates that the lifetime ECL rate is 49.75%.

      • 5) Receivables from Urad Front Banner Finance Bureau and Urad Rear Banner Finance Bureau comprise conventional sewage treatment fees, whose repayment period is longer than that of general government customers, and are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that it has defaulted and estimates that the lifetime ECL rate of them are respectively 100.00% and 48.91%.

      • 6) Receivables of the Company from Tianjin Ziya Environmental Protection Industrial Park Co. Ltd. and Tianjin Tianbao Municipal Administration Co. Ltd. comprise contract operation fees. They had no transactions with the Company, and are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that they have defaulted and estimates that the lifetime ECL rate of them are 100%.

      • 7) Receivables of Tianjin Caring Technology Development Co., Ltd. from Zhejiang Xinsanyin Dyeing Co.Ltd. comprise construction of related facility and contract operation fees, whose repayment period is longer than that of general customers, and are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that it has defaulted and estimates that the lifetime ECL rate is 65.01%.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 2021(unaudited), provision for bad debts by individual is analyzed as below: (Continued)

      • 8) Receivables of the Company from Tianjin Goldin International Club Co. Ltd. comprise contract operation fees. Tianjin Goldin International Club Co. Ltd. had no transactions with Tianjin Water Recycling Co., Ltd., whose receivables are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that they have defaulted and estimates that the lifetime ECL rate of them is 100%.

      • 9) Receivables of the Company from Tianjin City Investment Urban Resources Management Co., Ltd. comprise rental fees. Tianjin City Investment Urban Resources Management Co., Ltd. had no transactions with the Company, whose receivables are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that they have defaulted and estimates that the lifetime ECL rate of them is 100%.

      • 10) Receivables of the Company from Tianjin Ziya Circular Economy Industry Investment Development Co., Ltd., comprise sales income of Environment protection equipments. Tianjin Ziya Circular Economy Industry Investment Development Co., Ltd., had no transactions with the Company, whose receivables are under high credit risk. Taking into account factors such as the debtor’s actual performance ability, historical repayment experience, and aging, the Group presumes that they have defaulted and estimates that the lifetime ECL rate of them is 100%.

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Interim Report 2021 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 2021 (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) provision for bad debts by group is analyzed as below:

Group – Government clients except those in provincial capitals and municipalities

Undue 1-180 days overdue >180 days overdue	Unaudited 30 June 2021 Carrying amount Provision Amount ECL rate Amount 93,810 0.05% (50) 295,971 3.00% (8,886) 154,280 4.26% (6,566) 544,061 (15,502)	Audited 31 December 2020 Carrying amount Provision Amount ECL rate Amount 145,974 0.05% (80) 164,318 5.41% (8,886) 76,037 8.64% (6,565) 386,329 (15,531)

Group – other clients

		Unaudited			Audited
		30 June 2021			31 December 2020
	Carrying			Carrying
	amount	Provision		amount	Provision
	Amount	ECL rate	Amount	Amount	ECL rate	Amount
Undue	61,328	5.92%	(3,633)	67,571	6.85%	(4,631)
1-90 days overdue	43,155	6.02%	(2,599)	64,180	6.85%	(4,399)
>90 days overdue	118,066	14.03%	(16,569)	82,809	14.09%	(11,666)
	222,549		(22,801)	214,560		(20,696)

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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	Unaudited 30 June 2021 Amount % of total balance 87,684 93% 5,586 6% 776 1% 94,046 100%	Audited 31 December 2020 Amount % of total balance 25,199 96% 262 1% 759 3% 26,220 100%	Audited 31 December 2020 Amount % of total balance 25,199 96% 262 1% 759 3% 26,220 100%
			100%

As at 30 June 2021, advances to suppliers of RMB6.4 million (31 December 2020: RMB1.0 million) with aging over one year were mainly for prepaid electricity deposit.

• (b) As at 31 June 2021 (unaudited), 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	71,510	76.04%

(5) Other receivables

Project deposits VAT refund Others Less: Provision for bad debts	Unaudited 30 June 2021 7,159 4,688 9,377 21,224 (16) 21,208	Audited 31 December 2020 6,846 5,007 12,280
		24,133 (16)
		24,117

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) Other receivables (Continued)

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

Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	Unaudited 30 June 2021 10,855 5,036 2,545 2,788 21,224	Audited 31 December 2020 15,344 4,353 1,599 2,837
		24,133

• (b) As at 30 June 2021 and 31 December 2020, other receivables provisioned bad debts by group were all belong to stage 1. The analysis is as below:

		Unaudited			Audited
		30 June 2021			31 December	2020
	Carrying			Carrying
	amount	Provision		amount	Provision
	Amount	Amount	%	Amount	Amount		%
Project deposit Group:
Within 1 year	2,709	(1)	0.05%	3,631		(2)	0.05%
1-2 years	1,256	(1)	0.05%	879		(0)	0.05%
2 to 3 years	917	(0)	0.05%	61		(0)	0.05%
Over 3 years	2,277	(1)	0.05%	2,275		(1)	0.05%
subtotal	7,159	(3)		6,846		(3)
Other Group:
Within 1 year	3,458	(7)	0.10%	6,706		(7)	0.10%
1-2 years	3,780	(3)	0.10%	3,474		(3)	0.10%
2 to 3 years	1,628	(2)	0.10%	1,538		(2)	0.10%
Over 3 years	511	(1)	0.10%	562		(1)	0.10%
subtotal	9,377	(13)		12,280	(13)
total	16,536	(16)		19,126	(16)

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (5) Other receivables (Continued)

  • (c) For the six months ended 30 June 2021, the changes of other receivables’ provision of the Group is not significant.

  • (d) As of 30 June 2021, the Group had no other receivables that were past due but not impaired (31 December 2020: Nil).

  • (e) As at 30 June 2021 (unaudited), other receivables from the top five debtors in respect of outstanding balance are analyzed as below:

Nature Tianjin Installation Engineering Co., Ltd. Deposits of migrant workers’ wages Tianjin State Taxation Bureau VAT receivable State Grid Tianjin electric power company Project deposits Ningxiang Economic and Technological Development Zone Management Committee Deposits of migrant workers’ wages Inner Mongolia Dunan Photovoltaic Technology Co., Ltd. Advance payment of taxation of water resources Inner Mongolia Dunan Photovoltaic Technology Co., Ltd. Advance payment of taxation of water resources	Amount Aging % of total balance Provision for bad debts 3,128 1 to 2 years 14.74% (1) 1,718 Within 1 year 8.09% (0) 1,000 Over 3 years 4.71% (1) 800 2 to 3 years 3.77% (0) 415 1 to 2 years 1.96% (0) 328 2 to 3 years 1.55% (0) 7,389 34.82% (2)	Amount Aging % of total balance Provision for bad debts 3,128 1 to 2 years 14.74% (1) 1,718 Within 1 year 8.09% (0) 1,000 Over 3 years 4.71% (1) 800 2 to 3 years 3.77% (0) 415 1 to 2 years 1.96% (0) 328 2 to 3 years 1.55% (0) 7,389 34.82% (2)
		(2)

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) Other receivables (Continued)

• (f) As at 30 June 2021 (unaudited), the Group’s analysis of government grants confirmed by the amount receivables is as follows:

Government grants program The Company VAT refund Wuhan Tianchuang Capital Water Co.,Ltd. VAT refund Baoying Capital Water Co., Ltd. VAT refund Qujing Capital Water Co., Ltd. VAT refund Hangzhou Tianchuang Capital Water Co., Ltd. VAT refund Fuyang Capital Water Co., Ltd. VAT refund Wendeng Capital Water Co., Ltd. VAT refund Guizhou Capital Water Co., Ltd. VAT refund Deqing Capital Environmental Protection Water Co.,Ltd. VAT refund Anguo Capital Water Co., Ltd. VAT refund

Amount Aging 1,718 Within 1 year 1,075 Within 1 year 713 Within 1 year 506 Within 1 year 274 Within 1 year 142 Within 1 year 112 Within 1 year 98 Within 1 year 37 Within 1 year 13 Within 1 year 4,688

Based on the previous year’s collection situation, the VAT refund is expected to be fully collected by June 2022.

(6) Inventories

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

Raw materials Finished goods Spare parts and low cost consumables	Ending balance 13,877 4,239 3,487 21,603	Unaudited 30 June 2021 Provision for decline in the value of inventories — — — —	Carrying amount 13,877 4,239 3,487 21,603	Audited 31 December 2020 Ending balance Provision for decline in the value of inventories Carrying amount 11,868 — 11,868 5,118 — 5,118 474 — 474 17,460 — 17,460	Audited 31 December 2020 Ending balance Provision for decline in the value of inventories Carrying amount 11,868 — 11,868 5,118 — 5,118 474 — 474 17,460 — 17,460
					17,460

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (7) Other current and non-current assets

	Unaudited	Audited
	30 June 2021	31 December 2020
Other current assets:
Input VAT to be deducted	115,605	76,774
Input VAT to be verified	3,584	2,970
Income tax prepaid	—	2,484
	119,189	82,228
	Unaudited	Audited
	30 June 2021	31 December 2020
Other non-current assets:
Input VAT to be deducted	187,085	193,783
Prepayments of construction	117,069	108,316
Prepayment for land use rights	21,907	20,454
Others	9,856	8,418
	335,917	330,971

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

Receivables from Tianjin Water Authority Bureau (a) Toll road concession (b) Less: Bad debt provision Less: Listed in non-current assets due within one year	Unaudited 30 June 2021 1,431,761 226,573 (902) 1,657,432 (21,525) 1,635,907	Audited 31 December 2020 1,431,761 236,592 (902)
		1,667,451 (20,049)
		1,647,402

• (a) As of the six months ended 30 June 2021, with the influence of Coronavirus Disease 2019 (the “COVID-19”), the actual collection of receivables from Tianjin Water Authority Bureau was significantly below expectation. Based on the historical collection experience and the expectation of future payment scheme, the Group has reclassified the present value of receivables of which collection is expected to be exceeding 12 months as long-term receivables. The expected credit loss rate for the aforesaid long-term receivables is 0.05%, which is consistent with expected credit loss rate as applied for the remaining trade receivables with Tianjin Water Authority Bureau. The balance of loss allowances is RMB1 million.

• (b) 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%.

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (9) Long-term equity investments

Investment in an associate (a) Less: Impairment of Long-term equity investments (b)	Unaudited 30 June 2021 217,358 (22,358) 195,000	Audited 31 December 2020 217,358 (22,358)
		195,000

(a)	Investment in associate
			Place of		Shareholding/
		Type	registration	Registered capital	Voting rights (%)
	Tianjin International Machinery Co., Ltd. (i)	Limited company	Tianjin	120,000	27.50%
	Tianjin Bihai Sponge City Co., Ltd. (ii)	Limited company	Tianjin	650,000	30.00%

• (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	31	December		Share of net	dividends	Provision for	30 June	impairment
	investment		2020	New	loss under	or profit	impairment	2021	at the end
	cost		(Audited)	investment	equity method	declared	accrued	(Unaudited)	of the period
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.

135

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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)

  • (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:

						Cash			Provision for
	Initial	31	December		Share of net	dividends	Provision for	30 June	impairment
	investment		2020	New	loss under	or profit	impairment	2021	at the end
	cost		(Audited)	investment	equity method	declared	accrued	(Unaudited)	of the period
Bihai Sponge City	195,000		195,000	—	—	—	—	195,000	—

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

		Audited			Unaudited
	31	December 2020	Additions	Disposals	30 June 2021
International Machinery		22,358	—	—	22,358

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (10) Other equity instruments investment

Equity of unlisted company – Tianjin Beifang Rencaigang Company Ltd. Tianjin Beifang Rencaigang Company Ltd. – Cost – Accumulated fair value changes	Unaudited 30 June 2021 2,000 Unaudited 30 June 2021 2,000 — 2,000	Audited 31 December 2020 2,000
		Audited 31 December 2020 2,000 —
		2,000

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.

137

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (11) Fixed assets and construction in progress

(a) Fixed assets

Cost – 31 December 2020 (Audited) Other additions in the current period Disposals in the current period 30 June 2021 (Unaudited) Accumulated depreciation – 31 December 2020 (Audited) Other additions in the current period (note (i)) Disposals in the current period 30 June 2021 (Unaudited) Carrying Amount – 30 June 2021 (Unaudited) 31 December 2020 (Audited)	Buildings and structures (note (i)) Self-use 635,156 124,850 — 760,006 (161,631) (23,568) — (185,199) 574,807 473,525	Machinery and equipment Self-use 528,136 136,246 — 664,382 (243,836) (51,638) — (295,474) 368,908 284,300	Motor vehicles & others Self-use 110,459 5,483 (3,618) 112,324 (58,789) (5,077) 3,420 (60,446) 51,878 51,670	Total 1,273,751 266,579 (3,618)
				1,536,712
				(464,256)
				(80,283) 3,420
				(541,119)
				995,593
				809,495

• (i) The Group’s depreciation expenses of RMB33 million (For the six months ended 30 June 2020: RMB21 million) have been included in cost of sales and RMB5 million (For the six months ended 30 June 2020: RMB5 million) in general and administrative expenses.

• (ii) As at 30 June 2021, the certificate of title to outsourced assets included in fixed assets, land use rights with cost of RMB172 million and carrying amount of RMB105 million (31 December 2020: cost of RMB172 million and carrying amount of RMB109 million) and non-monetary exchange assets with cost of RMB12 million and carrying amount of RMB9 million (31 December 2020: cost of RMB12 million and carrying amount of RMB9 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, the management of the Company believes that the titles will be received in due course without any legal barrier or additional significant cost.

• (iii) As at 30 June 2021, fixed assets with cost of RMB398 million (31 December 2020: RMB190 million) and a carrying amount of approximately RMB386 million (31 December 2020: RMB185 million) were used as collateral for long-term borrowings of RMB309 million (Note 4(17)(a)).

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

(b) Construction in progress

									The
							Proportion of		accumulated	Including:
		31					expenditures		balance of	borrowing
		December	Increase in		Transfer to	30 June	incurred to		capitalization	costs
	Budgeted	2020	the current	Transfer to	intangible	2021	budgeted		of requested	capitalized in	Capitalisation
Name	amount	(Audited)	period	fixed assets	assets	(Unaudited)	amount	Progress	fee	current period	rate	Source of funds
Fuyang – yindong sewage water processing												Special loan and
Plant project	175,421	—	813	—	(813)	—	90%	90%	2,557	2,079	5%	Self-raised fund
Tianjin – Jiayuan Tianchuang Heiniucheng												Special loan and
Roads energy station project	209,975	—	2,214	—	(2,214)	—	89%	100%	855	688	4%	Self-raised fund
Hefei – Heifei Taochong sewage water												Special loan and
processing plant PPP project	585,895	—	2,671	—	(2,671)	—	38%	38%	11,583	3,417	4%	Self-raised fund
Jiuquan Suzhou Sewage Treatment Plant PPP												Special loan and
Project	512,505	—	1,499	—	(1,499)	—	56%	56%	781	—	5%	Self-raised fund
Baoying – xianhe sewage water processing												Special loan and
plant project	99,806	—	27,322	—	(27,322)	—	96%	96%	4,010	2,871	5%	Self-raised fund
												Special loan and
Fuyang-Jinzhai business park BOT Project	60,999	—	—	—	—	—	100%	100%	8,429	8,141	5%	Self-raised fund
Changsha-Ningxiang sewage water processing												Special loan and
and recycling project	95,720	—	—	—	—	—	100%	100%	1,050	—	4%	Self-raised fund
Xinjiang – Karamay PPP Project of sewage												Special loan and
operation	269,980	—	3,328	—	(3,328)	—	89%	100%	4,712	742	5%	Self-raised fund
Chibi sewage water processing plant												Special loan and
upgrading project	214,680	—	1,456	—	(1,456)	—	86%	86%	6,459	4,219	5%	Self-raised fund
												Special loan and
Guizhou-Shibing PPP Project	99,500	—	3,723	—	(3,723)	—	89%	89%	1,062	331	4%	Self-raised fund
Guojin-Gaocheng district water environment												Special loan and
upgrading PPP project	724,990	—	—	—	—	—	6%	6%	998	998	4%	Self-raised fund
Hanshou – Hanshou Yuanquan water plant												Special loan and
concession project	150,000	—	18,415	—	(18,415)	—	33%	33%	2,626	515	4%	Self-raised fund
												Special loan and
Huoqiu PPP project	206,415	—	72,511	—	(72,511)	—	58%	58%	438	438	4%	Self-raised fund
Huize-Huize urban sewage water processing												Special loan and
facilities construction project	141,231	—	181	—	(181)	—	34%	34%	755	755	4%	Self-raised fund
Xi’an-Xi’an Beishiqiao Dengjiacun upgrading												Special loan and
and deodorant projects	473,910	—	96,364	—	(96,364)	—	29%	29%	1,615	1,615	5%	Self-raised fund
Shandong – Yishui&Tancheng City Solid												Special loan and
Waste Treatment project	572,986	3,964	412	—	—	4,376	71%	71%	19,610	10,654	5%	Self-raised fund
Changsha – Ningxiang Economic and
Technological Development Zone sewage												Special loan and
water emergency processing project	16,473	—	—	—	—	—	79%	79%	90	90	5%	Self-raised fund
												Special loan and
Other project		5,895	12,504	—	(5,609)	12,790			35,068	2,155		Self-raised fund
		9,859	243,413	—	(236,106)	17,166			102,698	39,708

As at 30 June 2021, the Group has no provision for construction in progress (31 December 2020: Nil).

139

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (12) Intangible assets

Unaudited 30 June 2021 Concession rights (a) 11,961,541 Land use rights (b) 114,509 Technical know-how and computer software (c) 3,979 12,080,029 (a) The movements of concession rights are as follows: Cost 31 December 2020 (Note (i)) (Audited) Transfers from construction in progress Other decrease 30 June 2021 (Note (i)) (Unaudited) Accumulated amortisation 31 December 2020 (Note (i)) (Audited) Charge for the period 30 June 2021 (Note (i)) (Unaudited) Provision for impairment 31 December 2020 (Note (i)) (Audited) and 30 June 2021 (Note (i)) (Unaudited) Net Book Value 30 June 2021 (Note (i)) (Unaudited) 31 December 2020 (Note (i)) (Audited)	Audited 31 December 2020 11,918,617 77,607 3,594
	11,999,818
	15,054,895 236,106 96,388
	15,387,389
	(3,055,644) (289,570)
	(3,345,214)
	(80,634)
	11,961,541
	11,918,617

• (i) As at 30 June 2021, certain concession rights with carrying amounts of RMB3,393 million (cost of RMB4,272 million) (31 December 2020: carrying amounts of RMB2,508 million (cost of RMB3,241 million)) have been pledged as securities for bank borrowing of RMB1,321 million (31 December 2020: RMB1,211 million) (Note 4(17)(a)).

• (ii) The amortisation period of concession rights ranges from 9 to 30 years.

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Interim Report 2021 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 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (12) Intangible assets (Continued)

  • (b) The movements of land use rights are as follows:

Cost 31 December 2020 (Audited) Increase of the Business Combination Decrease 30 June 2021 (Unaudited) Accumulated amortisation 31 December 2020 (Audited) Charge for the period Increase of the Business Combination Charge for the period Decrease 30 June 2021 (Unaudited) Net Book Value 30 June 2021 (Unaudited) 31 December 2020 (Audited)	86,994 38,661 (199) 125,456 (9,387) (1,085) (635) 160 (10,947) 114,509 77,607

• (i) As at 30 June 2021, bank borrowing of RMB309 million (31 December 2020: RMB311 million) is secured by land use right with carrying amount of RMB58 million and original cost of RMB62 million (31 December 2020: carrying amount of RMB58 million and original cost of RMB62 million) (Note 4(17)(a)).

• (ii) As at 30 June 2021, the land use right includes assets exchanged for non-monetary assets with an original cost of RMB5 million and a carrying amount of approximately RMB3 million (31 December 2020: original cost of RMB5 million and a carrying amount of approximately RMB4 million). Whose certificate of title to outsourced assets included 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, the management of the Company believes that the titles will be received in due course without any legal barrier or additional significant cost.

141

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (12) Intangible assets (Continued)

• (c) The movements of technical know-how and software are as follows:

Cost 31 December 2020 (Audited) Increase of the Business Combination Other Increase 30 June 2021 (Unaudited) Accumulated amortisation 31 December 2020 (Audited) Charge for the period Increase of the Business Combination 30 June 2021 (Unaudited) Net Book Value 30 June 2021 (Unaudited) 31 December 2020 (Audited)	12,367 490 282
	13,139
	(8,773) (265) (122)
	(9,160)
	3,979
	3,594

• (d) For the six months ended 30 June 2021, the amounts of amortization charged to cost of sales and general and administrative expenses were RMB290 million (For the six months ended 30 June 2020: RMB252 million) and RMB0.6 million (For the six months ended 30 June 2020: RMB1 million), respectively.

• (e) The Research and development expenses of the Group for the six months ended 30 June 2021 are all related to the Research and development of the production process of environmental protection equipment, which are all included in profit or loss when incurred.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(13) Goodwill

Jiangsu Yonghui Resources Utilization Co., Ltd. Gaoyou Compro Environmental Resources Co., Ltd.	Unaudited 30 June 2021 267,816 230,950 267,816	Audited 31 December 2020 — —
		—

The Group proposed acquisition of 100% equity interest in Jiangsu Yonghui Resources Utilization Company Limited (“Jiangsu Yonghui”) and Gaoyou Compro Environmental Resources Company Limited (“Gaoyou Compro”) on 26 January 2021. (“the acquisition date”) The costs of combination are RMB353 million and RMB386 million respectively. The fair value of identifiable net assets are RMB85 million and RMB155 million respectively. Therefore, the Group confirmed that the amount of goodwill was RMB268 million and RMB231 million respectively.

The Group will stay tuned the risk of goodwill impairment.

(14) Provision for asset impairment and loss

Provision for trade receivables (Notes(i))	31 December 2020 (Audited) Reclassification 168,529 —	31 December 2020 (Audited) Reclassification 168,529 —	Increase in the current period 2,076	Decrease in the current period Reversal Write-off — —	Decrease in the current period Reversal Write-off — —	30 June 2021 (Unaudited) 170,605
Including: Individual provision for bad debts Combined provision for bad debts	132,302 36,227	— —	— 2,076	— —	— —	132,302 38,303
Provision for other receivables Provision for long-term receivables (including other non-current assets due with one year) Subtotal Provision for intangible assets Provision for other current assets Provision for Long-term equity investments Subtotal	16 902 169,447 80,634 33,065 22,358 136,057	— — — — — — —	— — 2,076 — — — —	— — — — — — —	— — — — — — —	16 902 171,523 80,634 33,065 22,358 136,057

143

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 (b) Taxes payable (c) Contract liabilities (d)	Unaudited 30 June 2021 359,753 971,354 49,590 573,057 1,953,754	Audited 31 December 2020 294,973 955,773 56,841 527,410
		1,834,997

• (a) As at 30 June 2021, trade payables are mainly for inventory purchase. Trade payables aged over one year are RMB195 million (31 December 2020: RMB89 million), mainly representing payables for source water of RMB53 million (31 December 2020: RMB43 million) from the subsidiary Qujing Capital Water Co., Ltd, and the subsidiary Tianjin Zhongshui Co., Ltd.’s project payable of RMB47 million (31 December 2020: RMB30 million). Since such amount has not been received from Qujing City Water General Company and the pipeline connection project of Zhongshui Company has not been completed, so the payment has not been finalized.

• (b) Other payables comprise:

Construction costs payable and deposits Payable for purchase of fixed assets and concession rights Interests payable for debentures payable Dividends payable Others	Unaudited 30 June 2021 671,835 17,569 1,515 — 280,435 971,354	Audited 31 December 2020 838,871 18,930 2,097 142 95,733
		955,773

As at 30 June 2021, other payables of RMB564 million (31 December 2020: RMB642 million) are aged over one year, which mainly represent construction costs payable and guarantee deposits for Dalian Oriental Chunliuhe sewage processing project, Karamay Sewage processing PPP project, Yuwan Sewage processing PPP project, Taochong Sewage processing PPP project and etc. The balance is yet to be settled as the projects have not been completed.

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Interim Report 2021 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 2021 (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

		Unaudited	Audited
		30 June 2021	31 December 2020
	Unpaid VAT	30,976	24,234
	Enterprise income tax payable	6,329	18,092
	Others	12,285	14,515
		49,590	56,841
(d)	Contract Liabilities
		Unaudited	Audited
		30 June 2021	31 December 2020
	For pipeline connection service	495,892	509,271
	For toll road fee	43,995	—
	For hazard waste treatment	22,614	3,145
	Received from project of Han Gu	4,876	4,876
	For cooling and heating service	3,357	7,190
	For sale of equipment	373	2,028
	Others	1,950	900
		573,057	527,410

145

Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (16) Accrued payroll

Short-term employee benefits payable (a) Defined contribution plans payable (b)	Unaudited 30 June 2021 23,655 214 23,869	Audited 31 December 2020 85,362 258
		85,620

(a) Short-term employee benefits payable

Wages and salaries, bonuses, allowances and subsidies Staff welfare Social security contributions	Audited 31 December 2020 75,956 11 112	Increase in the current period 147,000 5,977 12,650	Decrease in the current period (208,859) (5,988) (12,691)	Unaudited 30 June 2021 14,097 — 71
Including: Medical insurance Work injury insurance Maternity insurance	112 — —	11,879 414 357	(11,920) (414) (357)	71 — —

(b) Defined contribution plans payable

	Audited	Increase in	Decrease in	Unaudited
	31 December	the current	the current	30 June
	2020	period	period	2021
Basic pensions	128	17,639	(17,556)	211
Annuity	126	5,363	(5,489)	—
Unemployment	4	540	(541)	3
	258	23,542	(23,586)	214

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Interim Report 2021 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 2021 (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 Non-current: Long-term borrowings (a) Less: Current portion due within one year (a) Debentures payable (b) Less: Current portion due within one year (b) Long-term payables (c) Less: Current portion due within one year (c) Other non-current liabilities (e) Current: Current portion of long-term borrowings (a) Current portion of debentures payable (b) Current portion of debentures payable interests (b) Current portion of long-term payables (c) Current portion of provision(Note 4(18)) Current portion of non-current liabilities Short-term borrowings (d)	Unaudited 30 June 2021 7,249,251 (854,259) 6,394,992 709,795 (709,795) — 269,883 (45,379) 224,504 34,000 854,259 698,803 10,992 45,379 12,078 1,621,511 29,487	Audited 31 December 2020 5,033,225 (805,331) 4,227,894 1,798,419 (699,571) 1,098,848 282,840 (35,106) 247,734 34,000 805,331 699,571 42,974 35,106 13,281 1,596,263 —

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 Secured (i) Guaranteed (ii) Unsecured Pledged (iii)	Unaudited 30 June 2021 29,775 251,396 466,600 106,488 854,259	Audited 31 December 2020 26,641 431,700 251,590 95,400
		805,331

Summary of non-current portion of long-term borrowings by terms:

			Unaudited	Audited
	Note	30	June 2021	31 December 2020
Secured	(iv)		278,923	284,395
Guaranteed	(v)		2,320,481	2,065,686
Unsecured			2,146,786	761,690
Pledged	(vi)		1,648,802	1,116,123
			6,394,992	4,227,894

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (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 2021, the current portion of bank borrowings of RMB22 million (31 December 2020: RMB22 million) is mortgaged by land use right (Note 4(12)(b)). As at 30 June 2021, the current portion of bank borrowings of RMB8 million (31 December 2020: RMB5 million) is mortgaged by land use right (Note 4(12)(b)), property and equipment under construction (Note 4(11)(b)) and fixed assets (Note 4(11)(a)) of Shandong Capital Environmental Protection Technology Development Co., Ltd..

    • (ii) As at 30 June 2021, the current portion of bank borrowings of RMB35 million (31 December 2020: RMB40 million) is guaranteed by Tianjin City Infrastructure Construction and Investment for Xi’an Capital Water Co., Ltd., the subsidiary of the Company (Note 8(5)(c)). The current portion of bank borrowings of RMB216 million (31 December 2020: RMB392 million) is guaranteed by the company for its subsidiaries.

    • (iii) As at 30 June 2021, the current portion of bank borrowings of RMB55 million (31 December 2020: RMB75 million) is pledged by all earnings and equity of Jingu and Beicang upgrading project under the Group’s concession right (Note 4(12)(a)). The current portion of bank borrowings of RMB20 million (31 December 2020: RMB20 million) is pledged by the account receivables of “JiuQuan Suzhou the first and the second Sewage Treatment Plant PPP Project” (Note 4(12)(a)). The current portion of bank borrowings of RMB28 million (31 December 2020: Nil) is pledged by the equity of Gaoyou Compro Environmental Resources Co., Ltd. and Jiangsu Yonghui Resources Utilization Co., Ltd. The current portion of bank borrowings of RMB3 million (31 December 2020: Nil) is pledged by the contract right to charge of “Qujing Capital Water Co., Ltd. The current portion of bank borrowings of RMB1 million (31 December 2020: Nil) is pledged by the account receivables of Hebei Gaocheng Economic and Technological Development Zone Management Committee (Note 4(12)(a)).

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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)

    • (iv) As at 30 June 2021, the non-current portion of bank borrowings of RMB139 million (31 December 2020: RMB150 million) is mortgaged by land use right (Note 4(12)(b)). The non-current portion of bank borrowings of RMB140 million (31 December 2020: RMB134 million) is mortgaged by land use right (Note 4(12)(b)), the property and equipment under construction (Note 4(11)(b)) and fixed assets (Note 4(11)(a)) of Shandong Capital Environmental Protection Technology Development Co., Ltd..

    • (v) As at 30 June 2021, the non-current portion of bank borrowings of RMB16 million (31 December 2020: RMB31 million) is guaranteed by City Infrastructure Construction and Investment for Xi’an Capital Water Co., Ltd, the subsidiary of the Company (Note 8(5)(c)), the non-current portion of bank borrowings of RMB2,304 million (31 December 2020: RMB2,035 million) is guaranteed by the company for its subsidiaries.

    • (vi) As at 30 June 2021, the non-current portion of bank borrowing of RMB718 million (31 December 2020: RMB635 million) is pledged by all earnings and equity of Jingu and Beicang upgrading project under the Group’s concession right (Note 4(12)(a)). The non-current portion of bank borrowing of RMB52 million (31 December 2020: RMB51 million) is secured by account receivables of Hebei Gaocheng Economic Development Zone Management Committee under the concession service agreement. The non-current portion of bank borrowings of RMB385 million (31 December 2020: RMB395 million) is pledged by the account receivables of “JiuQuan Suzhou the first and the second Sewage Treatment Plant PPP Project” (Note 4(12)(a)). The non-current portion of bank borrowings of RMB7 million (31 December 2020: Nil) is pledged by the contract right to charge of “Qujing Capital Water Co., Ltd. The non-current portion of bank borrowings of RMB407 million (31 December 2020: Nil) is pledged by the equity of Gaoyou Compro Environmental Resources Co., Ltd. and Jiangsu Yonghui Resources Utilization Co., Ltd. The noncurrent portion of bank borrowings of RMB80 million (31 December 2020: RMB35 million) is pledged by all earnings and equity of Huoqiu Capital Water Co., Ltd. under “PPP project contract for phase I of Chengbei No.2 sewage treatment plant in Huoqiu County, Lu’an City, Anhui Province” (Note 4(12)(a)).

    • (vii) As at 30 June 2021, these long-term borrowings bear interest rates between 3.330% and 5.150% (December 2020: between 3.330% and 5.150%).

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (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

Debentures payable – Par value – Transaction cost Less: Current portion of debentures payable	Audited 31 December 2020 1,800,000 (1,581) 1,798,419 (699,571) 1,098,848	Issue — — — — —	Payment (1,100,000) — (1,100,000) — (1,100,000)	Amortization — 384 384 768 1,152	Unaudited 30 June 2021 700,000 (1,197)
					698,803 (698,803)
					—

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	2018-04-26	5 years	1,100,000

Interests payable of debentures are analyzed as follows:

			Interest	Accrued
		Audited	Interest accrued	Interest paid	Unaudited
	31	December	in the	in the	30 June
		2020	current period	current period	2021
Corporate Debenture (note (i))		4,022	6,970	—	10,992
Corporate Debenture (note (ii))		38,952	17,918	(56,870)	—
		42,974	24,888	(56,870)	10,992

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 (Continued)

    • (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 debenture has a maturity of five years and the fixed interest rate of 3.13% has been accrued and settled per annum. The principal will be repaid on maturity. As at 30 June 2021, the interest accrued on debentures payable to be paid within one year is RMB11 million, which is listed in Current portion of non-current liabilities.

    • (ii) On 26 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. During the reporting period, the issuer was triggered to adjust the coupon rate option and the investor’s option to sell back. As of the end of the reporting period, investors in this period of bonds have all sold back, and the bonds have been delisted and cancelled.

  • (c) Long-term payables

		Unaudited			Audited
		30 June 2021			31 December 2020
		Unrecognised			Unrecognised
		financial			financial
	Payables	charges	Total	Payables	charges	Total
Payable for assets acquisition	390,999	(121,116)	269,883	415,275	(132,435)	282,840

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (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)

    • (i) Information of long-term payables is as follows:

Maturity date Effective interest rate Tianjin Sewage Company (“Sewage Company”) 20 March 2041 5.94% Tianjin City Infrastructure Construction and Investment Chuangzhan Leasing Co., Ltd. 3 September 2023 3.80%	Total 257,483 12,400 269,883	Current portion (37,779) (7,600) (45,379)	Ending balance 219,704 4,800
			224,504

As at 30 June 2021, 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 is RMB430 million, which was calculated based on discounted future cash payments and discount rate of 5.94%.

The balance of the long-term payables to Tianjin City Infrastructure Construction and Investment Chuangzhan Leasing Co., Ltd. is the amount of sale-leaseback assets of Shandong Capital Environmental Protection Technology Consultant Co., Ltd..

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 CNY	Unaudited 30 June 2021 193,435 64,048 12,400 269,883	Audited 31 December 2020 196,100 70,540 16,200
		282,840

(iii) The amounts of long-term payables (including interest) are denominated in the following currencies:

		Unaudited	Audited
	30	June 2021	31 December 2020
JPY		304,587	321,972
USD		74,012	77,103
CNY		12,400	16,200
		390,999	415,275

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.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (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)

    • (iv) The long-term payables mature as follows. As at 30 June 2021, the current portion of long-term payables of RMB45 million (31 December 2020: RMB35 million) was classified as current liabilities.

Within 1 year 1-2 years 2-5 years Over 5 years (d) Short-term borrowings China Merchants Bank Tianjin Pilot Free Trade Zone Branch Summary of short-term borrowings by terms Unsecured	Unaudited 30 June 2021 45,379 29,344 64,449 130,711 269,883 Unaudited 30 June 2021 29,487 Unaudited 30 June 2021 29,487	Audited 31 December 2020 35,106 29,188 76,901 141,645 282,840 Audited 31 December 2020 — Audited 31 December 2020 —

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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)

(e) Other liabilities

	Unaudited	Audited
	30 June 2021	31 December 2020
Non-current:
– Cooling service fee	34,000	34,000

(18) Provisions

	Audited			Unaudited
		Increase in	Decrease in
	31 December	the current	the current	30 June
	2020	period	period	2021
Maintenance cost of sewage water processing plants	23,472	—	(567)	22,905
Others	3,546	—	—	3,546
Less: Provisions expected to be paid within one year
(Note 4(17))	(13,281)	(4,116)	5,319	(12,078)
	13,737	(4,116)	4,752	14,373

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (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 project: – Jingu – Jingu upgrading project – Beichen upgrading project – Xianyang Road-upgrading project – Dongjiao upgrading project – Ningxiang upgrading project – Linxia reconstruction and extension project – Beishiqiao upgrading project – Chibi upgrading project – Sh ijiazhuang Gaocheng Zhenxing plant upgrading project Water recycling project: – Jingu – Dongjiao – Beichen – Xianyanglu Heating and cooling supply service project Others Total	Audited 31 December 2020 1,155,975 149,960 82,800 54,353 38,140 16,417 9,066 8,916 7,750 — 193,934 19,731 17,062 11,903 207,419 8,008 1,981,434	Additions — — — — — 6,849 — — — 20,154 — — — — 188 — 27,191	Recognised in other income 25,643 3,260 1,800 1,182 829 465 160 358 — — — 337 262 — — 16 34,312	Unaudited 30 June 2021 Relating to assets/costs 1,130,332 assets 146,700 assets 81,000 assets 53,171 assets 37,311 assets 22,801 assets 8,906 assets 8,558 assets 7,750 assets 20,154 assets 193,934 assets 19,394 assets 16,800 assets 11,903 assets 207,607 assets 7,992 costs 1,974,313

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 before offsetting

Provision for assets Unrecognised financing income Accrued expenses Accrued liabilities Including: Expected to be recovered within one year (inclusive) Expected to be recovered after one year	Unaudited 30 June 2021 Deductible temporary difference Deferred income tax assets 145,668 36,417 61,224 15,306 31,252 7,813 19,557 2,934 257,701 62,470 9,237 53,233 62,470	Audited 31 December 2020 Deductible temporary difference Deferred income tax assets 145,668 36,417 61,224 15,306 26,870 6,717 19,557 2,934 253,319 61,374 9,237 52,137 61,374	Audited 31 December 2020 Deductible temporary difference Deferred income tax assets 145,668 36,417 61,224 15,306 26,870 6,717 19,557 2,934 253,319 61,374 9,237 52,137 61,374
			61,374
			9,237 52,137
			61,374

• (b) Unrecognised 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 assets Deductible losses Accrued liabilities	Unaudited 30 June 2021 167,999 99,471 7,461 274,931	Audited 31 December 2020 167,999 77,775 7,461
		253,235

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

  • (b) Unrecognised deferred income tax assets (Continued)

    • (ii) Deductible losses that are not recognised as deferred tax assets will expire in the following years:

2021 2022 2023 2024 2025 2026	Unaudited 30 June 2021 — 3,466 11,061 32,774 25,350 26,820 99,471	Audited 31 December 2020 5,124 3,466 11,061 32,774 25,350 —
		77,775

• (c) Deferred income tax liabilities before offsetting

	Unaudited		Audited
	30 June 2021		31 December	2020
	Taxable	Deferred	Taxable	Deferred
	temporary	income tax	temporary	income tax
	differences	liabilities	differences	liabilities
Amortization of intangible assets	563,632	140,908	545,687	136,422
Business combination	50,204	12,551	51,146	12,786
	613,836	153,459	596,833	149,208
Including:
Expected to be recovered within one year (inclusive)		5,123		5,123
Expected to be recovered after one year		148,336		144,085
		153,459		149,208

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

• (d) The net balances of deferred income tax assets and deferred income tax liabilities after offsetting are shown below:

	Unaudited		Audited
	30 June 2021		31 December	2020
		After offsetting		After offsetting
	Set-off amount	the balance	Set-off amount	the balance
Deferred income tax assets	(48,409)	13,661	(48,409)	12,965
Deferred income tax liabilities	(48,409)	104,650	(48,409)	100,799

(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 A	Circulating
			shares	H shares	Total
At	30	June 2021 (Unaudited), 31 December 2020 (Audited) and
	31	December 2019 (Audited)	1,087,228	340,000	1,427,228

All the A-shares and H-shares rank pari passu in all respects.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (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	30 June 2021 (Unaudited), 31 December 2020 (Audited) & 31 December 2019 (Audited) 382,311 16,804 31,909
	431,024

• (b) Surplus reserve

		Audited			Unaudited
			Increase in	Decrease in
	31	December	the current	the current	30 June
		2020	period	period	2021
Statutory surplus reserve		619,054	—	—	619,054
		Audited			Audited
			Increase in	Decrease in
	31	December	the current	the current	31 December
		2019	year	year	2020
Statutory surplus reserve		558,250	60,804	—	619,054

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.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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)

(c) Undistributed profits

Undistributed profits at the beginning of the period (audited) Add: Net profit attributable to owners of the parent for the current period Less: Appropriation for statutory surplus reserve Ordinary share dividends payable (i) Undistributed profits at the end of the period (unaudited)	Unaudited For the six months ended 30 June 2021 4,114,045 304,489 — (171,267) 4,247,267	Unaudited For the six months ended 30 June 2020 3,757,523 256,948 — (152,713)
		3,861,758

• (i) As at 27 May 2021, the board of shareholders proposed a cash of RMB1.20 (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 RMB171 million.

(23) Revenue and cost of sales

	Unaudited		Unaudited
	For the six months	ended	For the six months	ended
	30 June 2021		30 June 2020
	Revenue	Cost of sales	Revenue	Cost of sales
Principal operations	1,805,527	1,202,378	1,417,026	956,061
Other operations	98,427	61,746	104,364	84,651
	1,903,954	1,264,124	1,521,390	1,040,712

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (23) Revenue and cost of sales (Continued)

  • (a) Revenue from principal operations and cost of sales

Analysis by the nature of services is as below:

	Unaudited		Unaudited
	For the six months	ended	For the six months	ended
	30 June 2021		30 June 2020
	Revenue from		Revenue from
	principal operations	Cost of sales	principal operations	Cost of sales
Processing of sewage water	1,381,489	925,026	1,093,275	766,741
Water recycling and connection project	168,224	117,230	136,733	94,261
Tap water supplying	57,178	40,739	46,924	38,238
Hazardous waste treatment	109,958	80,739	33,029	13,911
Heating and cooling supply services	39,779	26,088	46,057	31,041
Sale of environmental protection equipment	17,460	8,625	13,571	6,655
Others	31,439	3,931	47,437	5,134
	1,805,527	1,202,378	1,417,026	956,061

Analysis by locations is as follows:

	Unaudited		Unaudited
	For the six months	ended	For the six months	ended
	30 June 2021		30 June 2020
	Revenue from		Revenue from
	principal operations	Cost of sales	principal operations	Cost of sales
Tianjin	968,989	552,008	824,591	497,657
Hangzhou	127,712	72,648	119,374	75,953
Xi’an	64,868	40,496	79,521	39,728
Qujing	58,299	42,911	53,515	39,312
Others	585,659	494,315	340,025	303,411
	1,805,527	1,202,378	1,417,026	956,061

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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	Unaudited For the six months ended 30 June 2021 Revenue from other operations Cost of sales 81,051 58,166 12,992 2,298 286 — 4,098 1,282 98,427 61,746	Unaudited For the six months ended 30 June 2020 Revenue from other operations Cost of sales 77,041 55,822 23,901 23,630 392 3,903 3,030 1,296 104,364 84,651

• (i) The Group’s rental income comes from the rental of its own buildings and structures. For the six months ended 30 June 2021, there’s no variable rental income based on a certain percentage of the lessee’s sales.

• (c) The Group’s operating income listed as follows:

Revenue Of which: confirm at a point in time Confirm over time Other operating income Revenue Of which: confirm at a point in time Confirm over time Other operating income	Processing of sewage Tianjin Hangzhou 719,721 127,712 — — 719,721 127,712 — — 719,721 127,712 Processing of sewage Tianjin Hangzhou 600,633 119,374 — — 600,633 119,374 — — 600,633 119,374	For the six months ended 30 June 2021 (Unaudited) Recycled water and pipeline connection Heating and cooling supply Tap water Sale of environmental protection equipment Others 534,056 168,224 39,779 57,178 17,460 — — — — — 534,056 168,224 39,779 57,178 17,460 — — — — — 534,056 168,224 39,779 57,178 17,460 For the six months ended 30 June 2020 (Unaudited) Recycled water and pipeline connection Heating and cooling supply Tap water Sale of environmental protection equipment Others 373,268 136,733 46,057 46,924 13,571 — — — — — 373,268 136,733 46,057 46,924 13,571 — — — — — 373,268 136,733 46,057 46,924 13,571	Others 141,397 — 141,397 98,427 239,824 Others 80,466 13,916 66,550 104,364 184,830	Group 1,805,527 — 1,805,527 98,427
				1,903,954
				Group 1,417,026 13,916 1,403,110 104,364
				1,521,390

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (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 listed as follows: (Continued)

As at 30 June 2021, based on the pre-determined agreement price, and actual processing and supplying amount, the Group issues bills to customers at fixed period for its sewage operation services, supplies of recycled water and tap water. The bill can represent the value that the Group has transferred to customers. All consideration is included in the bills amount thus the Group did not disclose the transaction price allocated to the remaining performance obligations.

(24) Taxes and surcharges

Land use tax Property tax City maintenance and construction tax Educational surcharge Local educational surcharge Others	Unaudited For the six months ended 30 June 2021 8,033 7,976 1,699 757 665 1,368 20,498	Unaudited For the six months ended 30 June 2020 Tax base 6,974 RMB1.5-30 per square meter Self-use: 1.2% (deducted 30% of the original value of the property) 4,283 Rental: 12% of the rental income 5,694 7%/5% of the VAT paid 2,575 2%/3% of the VAT paid 1,647 2% of the VAT paid 1,005 22,178

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (25) Selling expenses and general and administrative expenses

Employee benefits Consulting service fees Depreciation of fixed assets General office expenses Travelling, meeting and business entertainment expenses Expenses of secretary of the board Audit fees Repair and maintenance expenses Amortisation of intangible assets Utilities expenses Other taxes Others	Unaudited For the six months ended 30 June 2021 General and administrative expenses Selling expenses 56,483 3,110 7,017 8,149 5,340 20 2,369 49 1,976 537 1,974 — 1,872 — 1,745 — 604 — 603 — 133 — 2,736 814 82,852 12,679	Unaudited For the six months ended 30 June 2020 General and administrative expenses Selling expenses 48,910 2,071 4,190 2,710 4,711 9 2,025 29 1,348 121 149 — 2,430 — 1,525 — 1,464 — 576 — 130 — 2,795 2,982 70,253 7,922	Unaudited For the six months ended 30 June 2020 General and administrative expenses Selling expenses 48,910 2,071 4,190 2,710 4,711 9 2,025 29 1,348 121 149 — 2,430 — 1,525 — 1,464 — 576 — 130 — 2,795 2,982 70,253 7,922
			7,922

(26) Research and development expenses

Employee benefits Travelling, meeting and business entertainment expenses Others	Unaudited For the six months ended 30 June 2021 3,379 2 325 3,706	Unaudited For the six months ended 30 June 2020 2,369 1 147
		2,517

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (27) Financial expenses

Loan Interest expenses Less: Amount capitalized on qualifying assets Interest expenses Less: Interest income Including: From long-term receivables From bank deposits Exchange gains Others	Unaudited For the six months ended 30 June 2021 213,606 (39,708) 173,898 (10,253) (4,022) (6,231) (2,822) 879 161,702	Unaudited For the six months ended 30 June 2020 154,131 (27,549)
		126,582 (12,328) (4,315) (8,013) (1,368) 101
		112,987

For the six months ended 30 June 2021, the exchange gains on the long-term payables denominated in JPY and US dollar were RMB2.82 million (For the six months ended 30 June 2020: the exchange gains were RMB1.37 million).

(28) Other Income

Government Grants (a) VAT refund Withholding and paying individual income tax refund	Unaudited For the six months ended 30 June 2021 46,784 4,210 173 51,167	Unaudited For the six months ended 30 June 2020 Related to assets/incomes 38,029 Assets/Incomes 35,948 Incomes — 73,977

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (28) Other Income (Continued)

(a) Details of government grants

Compensation for construction of Jingu sewage processing plant Allowance for Hanshou Yuanquan water plant concession project Allowance for Jingu-upgrading energy conservation Allowance for Beichen-upgrading energy conservation Special funds for Research and development center projects Special construction fund of Xianyanglu upgrading project Special construction fund of Dongjiao sewage water processing plant Others-Related to assets	Unaudited For the six months ended 30 June 2021 25,643 9,200 3,260 1,800 — 1,182 829 4,870 46,784	Unaudited For the six months ended 30 June 2020 Related to assets/incomes 25,643 Assets — Incomes 3,260 Assets 1,800 Assets — Incomes 1,182 Assets 829 Assets 5,315 Assets/Incomes 38,029

(29) Credit impairment losses

Trade receivables losses Non-operating expenses Losses on disposal of fixed assets Donation Others	Unaudited For the six months ended 30 June 2021 3 — 1,241 1,244	Unaudited For the six months ended 30 June 2021 2,076 Unaudited For the six months ended 30 June 2020 — 2,188 629 2,817	Unaudited For the six months ended 30 June 2020 —
			Unaudited Amount recognised in non-recurring profit or loss for the six months ended 30 June 2021 3 — 1,241
			1,244

(30) Non-operating expenses

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (31) Income tax expenses

Current income tax calculated based on tax law and related regulations Deferred income tax	Unaudited For the six months ended 30 June 2021 65,673 4,131 69,804	Unaudited For the six months ended 30 June 2020 58,934 238
		59,172

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 favorable tax rates Income not subject to tax Costs, expenses and losses not deductible for tax purposes Utilization of previously tax temporary deductible losses or which no deferred income tax asset was recognised Utilization of deductible tax losses for which no deferred income tax assets was recognised Tax temporary differences for which no deferred income tax asset was recognised Income tax expenses	Unaudited For the six months ended 30 June 2021 406,551 101,638 (25,946) (27,577) 16,474 (1,571) 6,270 516 69,804	Unaudited For the six months ended 30 June 2020 336,213
		84,053 (16,029) (12,871) 85 (168) — 4,102
		59,172

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (32) 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 RMB304 million (For the six months ended 30 June 2020: RMB257 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 2021: 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	Unaudited For the six months ended 30 June 2021 304,489 1,427,228 0.21 0.21 —	Unaudited For the six months ended 30 June 2020 256,948 1,427,228
		0.18
		0.18 —

(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 for the six months ended 30 June 2021 (For the six months ended 30 June 2020: Nil), diluted earnings per share equal to basic earnings per share.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (33) 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 gains from disposal of fixed assets Net financial expenses Increase in deferred tax liabilities Decrease/(increase) in inventories Increase 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/(decrease) in cash	Unaudited For the six months ended 30 June 2021 336,747 — (2,076) 37,916 290,920 3 171,076 3,155 (4,143) (551,976) 407,853 689,475 1,842,874 (1,652,657) 190,217	Unaudited For the six months ended 30 June 2020 277,041
		— — 25,952 252,956 — 126,582 238 594 (343,123) (78,941)
		261,299
		1,791,824 (2,066,301)
		(274,477)

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

Cash Including: Cash on hand Cash at bank Cash listed in cash flow statement	Unaudited For the six months ended 30 June 2021 38 1,842,836 1,842,874	Unaudited For the six months ended 30 June 2020 21 1,791,803
		1,791,824

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

• (33) Notes to the cash flow statements and supplementary information (Continued)

• (c) Cash received relating to other operating activities

Government grants received Interest income from bank deposits Deposit on project bids received Others	Unaudited For the six months ended 30 June 2021 39,663 6,231 4,807 52,030 102,731	Unaudited For the six months ended 30 June 2020 11,521 15,455 22,318 33,127
		82,421

• (d) Cash paid relating to other operating activities

Deposit on project bids paid Consulting service fees Travelling, meeting and business entertainment expenses Repair and maintenance expenses Expenses of secretary of the board Others	Unaudited For the six months ended 30 June 2021 4,301 13,110 1,283 65,765 1,972 550 86,981	Unaudited For the six months ended 30 June 2020 1,794 10,970 789 50,117 147 5,468
		69,285

5 CHANGE IN CONSOLIDATION SCOPE

For the six months ended 30 June 2021, the Company contributed RMB386 million to set up Gaoyou Compro Environmental Resources Co., Ltd.; RMB353 million to set up Jiangsu Yonghui Resources Utilization Co., Ltd., RMB53 million to set up Honghu Tianchuang Environmental Protection Co., Ltd. and RMB62 million to set up Tianjin Xiqing Tianchuang Environmental Protection Co., Ltd.. The shareholding ratio is 100%.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

6 EQUITY IN OTHER ENTITIES

(a) Subsidiaries

Subsidiaries
	Type of	Major business	Place of	Nature of business and
Name of subsidiaries	subsidiary	location	registration	business activity	Shareholding	(%)	Establishment
					Direct	Indirect
Qujing Capital Water Co., Ltd.	A	Qujing	Qujing	Processing of sewage water, tap water supply	87	—	Capital contribution
Guizhou Capital 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 materials	71	—	Capital contribution
Fuyang Capital Water Co., Ltd.	B	Fuyang	Fuyang	Processing of sewage water	100	—	Capital contribution
Tianjin Capital Environmental Protection	B	Hong Kong	Hong Kong	Processing of sewage water	100	—	Capital contribution
(Hong Kong) 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 consulting, etc.	48	12	Capital contribution
Anguo Capital Water Co., Ltd.	B	Anguo	Anguo	Processing of sewage	100	—	Capital contribution
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 research,	100	—	Capital contribution
Co., Ltd.				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	Collection, storage and transfer of hazardous waste	55	—	Capital contribution
Technology Development Co., Ltd.
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 Purification	A	Dalian	Dalian	Processing of sewage water	64	—	Capital contribution
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 and sailing	70	—	Business combination
				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
Hebei Guojin Tianchuang Sewage Water Processing	A	Gaocheng	Gaocheng	Processing of sewage water, producing and sailing	59		Capital contribution
Co., Ltd.				of recycled water
Hanshou Tianchuang Capital Water Co., Ltd.	A	Hanshou	Hanshou	Supplying tap water	75	—	Capital contribution
Jiuquan Capital Water Co., Ltd.	A	Jiuquan	Jiuquan	Processing of sewage water and reusing of reclaimed	89	—	Capital contribution
				water
Huize Capital Water Co., Ltd.	A	Huize	Huize	Centralized water supply, Processing of sewage	79	—	Capital contribution
				water
Huoqiu Capital Water Co., Ltd.	A	Huoqiu	Huoqiu	Processing of sewage water	90	—	Capital contribution
Dongying Tianchi Environmental Protection	A	Dongying	Dongying	Solid waste treatment	51	—	Capital contribution
Technology Consultant Co., Ltd.
Honghu Tianchuang Environmental Protection Co., Ltd.	A	Honghu	Honghu	Processing of sewage water	89	—	Capital contribution
Tianjin Xiqing Tianchuang Environmental Protection	B	Tianjin	Tianjin	Processing of sewage water	100	—	Capital contribution
Co., Ltd.
Jiangsu Yonghui Resources Utilization Co., Ltd.	B	Gaoyou	Gaoyou	Collection, storage and transfer of hazardous waste	100	—	Business combination
Gaoyou Compro Environmental Resources Co., Ltd.	B	Gaoyou	Gaoyou	Collection, storage and transfer of hazardous waste	100	—	Business combination

A: Holding subsidiary

B: Wholly-owned subsidiary

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

6 EQUITY IN OTHER ENTITIES (Continued)

(b) Subsidiaries with significant minority interests

			Declared
			distribution of
		Minority interests	cash dividends	Minority
		for the	for the	interests as at
	Minority	six months ended	six months ended	30 June 2021
Name	interests ratio	30 June 2021	30 June 2021	(Unaudited)
Hangzhou Tianchuang Capital Water Co., Ltd.
(“Hangzhou Company”)	30.00%	13,083	24,262	201,009
Bayannur Capital Water Co., Ltd. (“Bayannur Company”)	30.00%	2,186	—	335,393
Tianjin Caring Technology Development Co., Ltd.
(“Caring Company”)	40.00%	3,854	2,133	51,319
Shandong Capital Environmental Protection Technology
Development Co., Ltd. (“Shandong Company”)	45.00%	1,675	—	86,015
Hebei Guojin Tianchuang Sewage Water Processing
Co., Ltd. (“Guojin Company”)	41.00%	6,689	—	98,140

The major financial information of the significant holding subsidiaries of the Group is listed below:

Hangzhou Company Bayannur Company Caring Company Shandong Company Guojin Company Hangzhou Company Bayannur Company Caring Company Shandong Company Guojin Company	Current assets 205,065 135,739 155,408 56,079 50,781 603,072 Current assets 257,033 111,109 154,949 59,411 27,572 610,074	Non-current assets 546,703 1,004,143 6,416 509,440 267,030 2,333,732 Non-current assets 634,735 1,023,152 6,522 504,874 270,892 2,440,175	30 June 2021 (Unaudited) Total assets Current liabilities 751,768 50,833 1,139,882 16,330 161,824 33,241 565,519 88,536 317,811 5,037 2,936,804 193,977 31 December 2020 (Audited) Total assets Current liabilities 891,768 83,606 1,134,261 17,762 161,471 37,246 564,285 81,836 298,464 24,072 3,050,249 244,522	Non-current liabilities 87,295 5,576 229 284,107 73,409 450,616 Non-current liabilities 100,870 5,811 229 293,825 51,343 452,078	Total liabilities 138,128 21,906 33,470 372,643 78,446
					644,593
					Total liabilities 184,476 23,573 37,475 375,661 75,415
					696,600

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Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

6 EQUITY IN OTHER ENTITIES (Continued)

• (b) Subsidiaries with significant minority interests (Continued)

	For the	six month ended 30 June 2021 (Unaudited)	six month ended 30 June 2021 (Unaudited)
			Total	Net cash flows
			comprehensive	from operating
	Revenue	Net profit	income		activities
Hangzhou Company	127,712	33,469	33,469		123,160
Bayannur Company	41,228	7,288	7,288		6,215
Caring Company	51,666	9,635	9,635		7,480
Shandong Company	68,358	3,762	3,762		2,937
Guojin Company	31,583	16,316	16,316		18,236
	320,547	70,470	70,470		158,028
	For the	six month ended 30 June 2020 (Unaudited)
			Total	Net cash flows
			comprehensive	from operating
	Revenue	Net profit	income		activities
Hangzhou Company	119,480	40,376	40,376		(4,731)
Bayannur Company	40,989	1,739	1,739		5,731
Caring Company	42,569	7,236	7,236		9,463
Shandong Company	33,029	7,512	7,512		1,946
Guojin Company	—	(8)	(8)		—
	236,067	40,368	47,604		4,732

The information above is the amount before offsetting between the companies in the Group.

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

6 EQUITY IN OTHER ENTITIES (Continued)

• (c) Non-essential information of associates

	Unaudited	Unaudited
	For the six months	For the six months
	ended 30 June 2021	ended 30 June 2020
Joint ventures:
Total book value of investment	195,000	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.

7 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.

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

7 SEGMENT INFORMATION (Continued)

• (a) Segment information as at and for the six months ended 30 June 2021 (unaudited) is as follows:

							Sale of
				Recycled water			environ-mental
				and pipeline	Heating and		protection	All other
		Processing of sewage		connection	cooling supply	Tap water	equipment	segments	Group
	Tianjin	Hangzhou	Others
Revenue from external customers (Note 4(23))	719,721	127,712	534,056	168,224	39,779	57,178	17,460	239,824	1,903,954
Cost for operations	(457,119)	(72,648)	(395,259)	(117,230)	(26,088)	(40,739)	(8,625)	(146,416)	(1,264,124)
Interest income (Note 4(27))	2,739	193	1,145	1,326	422	30	189	4,209	10,253
Interest expenses (Note 4(27))	(95,769)	(2,233)	(65,040)	(393)	(1,318)	(238)	—	(8,907)	(173,898)
Results before share of profits of an associate	154,497	45,631	62,103	65,062	10,756	22,483	6,207	39,812	406,551
Segment total profit	154,497	45,631	62,103	65,062	10,756	22,483	6,207	39,812	406,551
Income tax expenses	(23,485)	(12,801)	(5,211)	(17,177)	(2,900)	(3,315)	(931)	(3,984)	(69,804)
Segment net profit	131,013	32,830	56,892	47,884	7,856	19,168	5,276	35,828	336,747
Net profit									336,747
Depreciation expenses	(590)	—	(1,273)	(12,668)	(839)	(98)	(538)	(21,910)	(37,916)
Amortization	(84,225)	(29,316)	(148,880)	(3,087)	(12,382)	(10,585)	—	(2,445)	(290,920)
Segment assets	7,098,946	792,417	7,552,287	1,416,541	642,683	636,082	57,631	1,704,460	19,901,047
Long-term equity investment in associate									195,000
Total assets									20,096,047
Total liabilities	6,605,959	151,102	3,665,752	901,621	305,320	98,202	22,372	625,125	12,375,453
Non-current assets addition (i)	59,106	—	256,999	572	5,062	18,415	—	37,708	377,862

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

7 SEGMENT INFORMATION (Continued)

• (b) Segment information as at and for the six months ended 30 June 2020 (unaudited) is as follows:

							Sale of
				Recycled water			environ-mental
				and pipeline	Heating and		protection	All other
		Processing of sewage		connection	cooling supply	Tap water	equipment	segments	Group
	Tianjin	Hangzhou	Others
Revenue from external customers (Note 4(23))	600,633	119,374	373,268	136,733	46,057	46,924	13,571	184,830	1,521,390
Cost for operations	(400,382)	(75,268)	(291,091)	(94,261)	(31,041)	(38,238)	(6,655)	(103,776)	(1,040,712)
Interest income (Note 4(27))	2,307	664	1,875	2,148	256	17	201	4,860	12,328
Interest expenses (Note 4(27))	(92,732)	(2,945)	(29,141)	—	(1,300)	(464)	—	—	(126,582)
Results before share of profits of an associate	131,359	36,029	76,775	57,619	12,596	6,494	5,259	10,082	336,213
Segment total profit	131,359	36,029	76,775	57,619	12,596	6,494	5,259	10,082	336,213
Income tax expenses	(19,909)	(5,404)	(9,062)	(15,875)	(3,737)	(1,910)	(789)	(2,486)	(59,172)
Segment net profit	111,451	30,625	67,713	41,744	8,858	4,584	4,470	7,596	277,041
Net profit									277,041
Depreciation expenses	(237)	—	(688)	(15,791)	(662)	(56)	(378)	(8,140)	(25,952)
Amortization	(87,321)	(30,480)	(108,396)	(3,116)	(12,010)	(10,095)	(1)	(1,537)	(252,956)
Segment assets	6,661,746	966,138	6,907,391	1,009,588	683,714	545,339	60,874	1,292,916	18,127,706
Long-term equity investment in associate									195,000
Total assets									18,322,706
Total liabilities	5,867,468	224,864	3,159,769	907,021	342,097	89,974	8,567	448,525	11,048,285
Non-current assets addition (i)	1,518	—	305,179	1,070	14,104	1,479	—	46,259	369,609

• (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.

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Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

8 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

(1) Information of the parent of the Company

• (a) General information of the parent company

			Legal	Nature of business and
	Type	Place of registration	representative	principal activities
Municipal Investment	Limited company	Tianjin, China	Gu Wenhui	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

		Audited			Unaudited
	31	December	Increase in	Decrease in	30 June
		2020	the period	the period	2021
Municipal Investment		1,820,000	—	—	1,820,000

• (c) The percentages of shareholding and voting rights in the Company held by the parent company

	Unaudited	Unaudited	Audited
	30 June	2021	31 December	2020
	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 6.

(3) Information of associates

The general information and other related information of the associates is set out in Note 4(9) (a).

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

8 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 City Infrastructure Construction and Investment Chuangzhan Leasing Co., Ltd. Controlled by the same ultimate holding company

(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:

Related Party Name Nature of Transaction City Infrastructure Construction and Investment Contracted operating expenses 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 technical services	Unaudited For the six months ended 30 June 2021 18,549 Unaudited For the six months ended 30 June 2021 38,847 13,012 5,930 57,789	Unaudited For the six months ended 30 June 2020 —
		Unaudited For the six months ended 30 June 2020 41,312 11,054 7,471
		59,837

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.

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Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 8 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (Continued)

• (5) Related party transactions (Continued)

  • (b) Sale-leaseback

==> picture [402 x 352] intentionally omitted <==

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

Rent payment
Unaudited Unaudited
For the For the
Type of six months ended six months ended
Funders leased assets 30 June 2021 30 June 2020
Tianjin City Infrastructure Construction and
Investment Chuangzhan Leasing Co., Ltd. Fixed assets 3,800 —
Guarantee:
The Group serves as guarantee.
Fully performed
Guarantor Guarantee Amount Starting date Due date or not
City Infrastructure Xi’an Capital Water 51,000 28 September 2008 27 September 2022 No
Construction and Co., Ltd.
Investment
Key management compensation
Unaudited Unaudited
For the For the
six months ended six months ended
30 June 2021 30 June 2020
Key management compensation 8,032 8,452
----- End of picture text -----

(c) Guarantee: The Group serves as guarantee.

• (d) Key management compensation

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Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 8 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 City Resource Operation Co., Ltd.	Unaudited 30 June 2021 Carrying amount Provision 87,660 2,495 3,899 146 401 401 91,960 3,042	Audited 31 December 2020 Carrying amount Provision 46,537 2,495 21,342 146 401 401 68,280 3,042	Audited 31 December 2020 Carrying amount Provision 46,537 2,495 21,342 146 401 401 68,280 3,042
			3,042

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. RMB3 million provisions are held against receivables from related parties.

Advance payment to related parities

Related party name Advances to suppliers Tianjin City Infrastructure Construction and Investment Chuangzhan Leasing Co., Ltd. Payables to related parities Related party name Non-current liabilities due within one year Tianjin City Infrastructure Construction and Investment Chuangzhan Leasing Co., Ltd. Long-term payables Tianjin City Infrastructure Construction and Investment Chuangzhan Leasing Co., Ltd.	Unaudited 30 June 2021 64,000 Unaudited 30 June 2021 7,600 4,800	Audited 31 December 2020 —
		Audited 31 December 2020 7,600
		4,800

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Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

8 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (Continued)

(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”). The company is also a state-owned entity.

During the period, 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.

9 COMMITMENTS

(1) Capital commitments

The Group’s capital commitments at the balance sheet date are as follows:

Intangible assets – Concession right – Sewage processing project – Tap water project – Heating and cooling supply project Property, plant and Equipment – Solid waste treatment project	Contracted but n Unaudited 30 June 2021 RMB million — — — 106 106	ot provided for Audited 31 December 2020 RMB million 469 31 3 — 503	Authorised but no Unaudited 30 June 2021 RMB million — — — — —	t contracted for Audited 31 December 2020 RMB million 220 — — —
				220

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Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

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 program 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)(ii)).

As at 30 June 2021, 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 2020: 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 2020: RMB9 million) higher/lower.

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Notes to the Financial Statements

For the six months ended 30 June 2021 (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 2021 and 2020, 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 2021 (Unaudited) Short-term borrowings Non-current liabilities due within one period: Current portion of long-term borrowings Current portion of Debentures payable and interest Current portion of long-term payables Long-term borrowings Long-term payables Total	Fixed 29,487 — 709,795 26,332 — 167,104 932,718	Floating — 854,259 — 19,047 6,394,992 57,400 7,325,698	Total 29,487 854,259 709,795 45,379 6,394,992 224,504
			8,258,416

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Notes to the Financial Statements For the six months ended 30 June 2021 (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 2020 (Audited) Non-current liabilities due within one year: Current portion of long-term borrowings Current portion of long-term payables Current portion of Debentures payable and interest Long-term borrowings Long-term payables Debentures payable Total	Fixed — 15,756 742,545 — 180,344 1,098,848 2,037,493	Floating 805,331 19,350 — 4,227,894 67,390 — 5,119,965	Total 805,331 35,106 742,545 4,227,894 247,734 1,098,848
			7,157,458

As at 30 June 2021, 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 RMB30 million (At 30 June 2020: RMB38 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 2021, 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.

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Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

10 FINANCIAL INSTRUMENTS AND THEIR RISKS (Continued)

• (2) Credit risk: (Continued)

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 2021, the Group has no significant collateral or other credit enhancements held as a result of the debtor’s mortgage (31 December 2020: Nil).

(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.

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Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

10 FINANCIAL INSTRUMENTS AND THEIR RISKS (Continued)

(3) Liquidity risk: (Continued)

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 2021 (Unaudited)	30 June 2021 (Unaudited)
	Within			Over		Carrying
	1 year	1-2 years	2-5 years	5 years	Total	amount
Long-term borrowings	1,155,491	1,319,476	3,208,464	3,340,707	9,024,138	7,249,251
Long-term payables	51,074	34,301	95,756	209,868	390,999	269,883
Trade payables	359,753	—	—	—	359,753	359,753
Other payables	971,354	—	—	—	971,354	971,354
Current portion of debentures payable	709,795	—	—	—	709,795	709,795
Short-term borrowings	29,487	—	—	—	29,487	29,487
	3,276,954	1,353,777	3,304,220	3,550,575	11,485,526	9,589,523
			31 December 2020 (Audited)
	Within			Over		Carrying
	1 year	1-2 years	2-5 years	5 years	Total	amount
Long-term borrowings	1,008,415	816,994	1,873,550	2,664,569	6,363,528	5,033,225
Long-term payables	39,447	39,064	108,369	228,395	415,275	282,840
Trade payables	294,973	—	—	—	294,973	294,973
Other payables	955,773	—	—	—	955,773	955,773
Debentures payable	818,102	56,870	1,118,957	—	1,993,929	1,841,393
	3,116,710	912,928	3,100,876	2,892,964	10,023,478	8,408,204

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Notes to the Financial Statements

For the six months ended 30 June 2021

(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 2021 (unaudited), 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 2020 (audited), 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

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Notes to the Financial Statements For the six months ended 30 June 2021 (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.

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Notes to the Financial Statements

For the six months ended 30 June 2021

(All amounts in RMB thousand unless otherwise stated)

12 CAPITAL MANAGEMENT (Continued)

The Group’s strategy is to maintain a gearing ratio below 50%. The gearing ratio of the Group is as follows:

Total borrowings Short-term borrowings Other current liabilities Long-term borrowings Debentures payable Long-term payables Less: Cash at bank and on hand Net debt Total equity Total capital Gearing ratio	Unaudited 30 June 2021 8,258,416 29,487 — 7,249,251 709,795 269,883 (1,842,874) 6,415,542 7,720,594 14,136,136 45%	Audited 31 December 2020 7,157,458 — — 5,033,225 1,841,393 282,840 (1,652,657)
		5,504,801 7,581,643
		13,086,444
		42%

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS

(1) Trade receivables

Trade receivables Less: Provision for bad debts	Unaudited 30 June 2021 1,257,344 (57,042) 1,200,302	Audited 31 December 2020 1,183,519 (57,042)
		1,126,477

(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	Unaudited 30 June 2021 1,208,308 20,553 10,532 14,962 1,789 1,200 1,257,344	Audited 31 December 2020 1,119,758 25,758 13,471 21,969 1,357 1,206
		1,183,519

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Notes to the Financial Statements For the six months ended 30 June 2021 (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 2021 (unaudited), the trade receivables from the top five debtors in respect of outstanding balance are analyzed as below:

		Provision for	% of
	Amount	bad debts	total balance
Trade receivables from the top five debtors	1,219,651	47,499	97%

• (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 allowance according to the expected credit loss for the entire life.

• (i) As at 30 June 2021 (unaudited), provision for bad debts by individual is analyzed as below:

Tianjin Water Authority Bureau Tianjin City Appearance Sanitation Construction Development Co. Ltd. Tianjin Ziya Environmental Protection Industrial Park Co. Ltd. Tianjin Shuangkou Municipal Solid Waste Landfill Tianjin Water Recycling Co., Ltd. Tianjin City Investment Urban Resources Management Co., Ltd. Tianjin Ziya Circular Economy Industry Investment Development Co., Ltd. Tianjin Tianbao Municipal Administration Co. Ltd. Total	Carrying amount ECL rate 1,069,232 0.05% 31,753 50.20% 16,797 100.00% 14,208 100.00% 4,738 0.05% 1,200 100.00% 1,020 100.00% 152 100.00% 1,139,100	Provision Reasons 554 Note 4 (3)(c)(i) 15,941 Note 4 (3)(c)(i) 16,797 Note 4 (3)(c)(i) 14,208 Note 4 (3)(c)(i) 2 1,200 Note 4 (3)(c)(i) 1,020 Note 4 (3)(c)(i) 152 Note 4 (3)(c)(i) 49,874

Tianjin Water Recycling Co., Ltd. is a subsidiary of the Company and has good operating conditions. The credit risk of receivables from Tianjin Water Recycling Co., Ltd. is low and the Company estimates that the lifetime ECL rate is 0.05%.

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Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

• (1) Trade receivables (Continued)

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

  • (ii) As at 30 June 2021, provision for bad debts by individual is analyzed as below:

Group – Government clients except those in provincial capitals and municipalities

Undue 1-180 days overdue >180 days overdue	Unaudited 30 June 2021 Carrying amount Provision Amount ECL rate Amount 6,843 0.05% (3) 41,665 5.41% (2,252) 39,437 5.55% (2,191) 87,945 (4,446)	Audited 31 December 2020 Carrying amount Provision Amount ECL rate Amount 7,762 0.05% (4) 39,152 5.41% (2,117) 293 22.87% (67) 47,207 (2,188)	Audited 31 December 2020 Carrying amount Provision Amount ECL rate Amount 7,762 0.05% (4) 39,152 5.41% (2,117) 293 22.87% (67) 47,207 (2,188)
			(2,188)

Group – other clients

		Unaudited			Audited
		30 June 2021			31 December 2020
	Carrying			Carrying
	amount	Provision		amount	Provision
	Amount	ECL rate	Amount	Amount	ECL rate	Amount
Undue	3,175	6.85%	(217)	5,333	6.85%	(365)
1-90 days overdue	7,504	6.85%	(514)	13,479	6.85%	(923)
>90 days overdue	19,620	10.15%	(1,991)	34,402	10.73%	(3,692)
	30,299		(2,722)	53,214		(4,980)

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Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

(2) Other receivables

Receivables from subsidiaries Dividends receivable from subsidiaries VAT refund receivable (e) Project deposits Others Less: Provision for bad debts	Unaudited 30 June 2021 19,006 18,813 1,718 1,137 3,039 43,713 (16) 43,697	Audited 31 December 2020 20,010 — 1,718 2,212 1,959
		25,899 (16)
		25,883

As at 30 June 2021, there were no other receivables overdue but unimpaired (31 December 2020: Nil).

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

	Unaudited	Audited
	30 June 2021	31 December 2020
Within 1 year	41,431	22,892
1 to 2 years	1	1,696
2 to 3 years	977	7
Over 3 years	1,304	1,304
Total	43,713	25,899

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Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

(2) Other receivables (Continued)

• (b) As at 30 June 2021 and 31 December 2020, 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:

Project Deposits Group: Within 1 year 1-2 years 2-3 years Over 3 years Subtotal Others: Within 1 year 1-2 years 2-3 years Over 3 years Subtotal Total	Carrying amount Amount 11 — — 1,126 1,137 39,702 1 977 178 40,858 41,995	Unaudited 30 June 2021 Provision Amount Percentage — 0.05% — 0.05% — 0.05% (1) 0.05% (1) (14) 0.05% (1) 0.10% — 0.10% — 0.10% (15) (16)	Audited 31 December 2020 Carrying amount Provision Amount Amount Percentage 286 — 0.05% 800 — 0.05% — — 0.05% 1,126 (1) 0.05% 2,212 (1) 20,888 (14) 0.05% 896 (1) 0.10% 7 — 0.10% 178 — 0.10% 21,969 (15) 24,181 (16)

• (c) For the six months ended 30 June 2021, the changes of other receivables’ provision of the Company is not significant.

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Notes to the Financial Statements For the six months ended 30 June 2021 (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 2021 (unaudited), other receivables from the top five debtors in respect of outstanding balance are analyzed as below:

Nature Wuhan Tianchuang Capital Water Co., Ltd. Subsidiary dividend Tianjin Water Recycling Co., Ltd. Subsidiary transactions Tianjin Capital New Materials Co., Ltd. Subsidiary transactions Tianjin State Taxation Bureau VAT refund receivable State Grid Tianjin electric power company Project deposits	Balance Aging 18,813 Within 1 year 17,511 Within 1 year 1,744 Within 1 year 1,718 Within 1 year 1,000 Over 3 years 40,786	% of total balance 43.04% 40.06% 3.99% 3.93% 2.29% 93.31%	Provision for bad debts 0 0 0 0 1
			1

• (e) As at 30 June 2021 (unaudited), government grants confirmed according to receivables are analyzed as below:

Name Amount Aging Estimated time, amount and basis of collection VAT refund 1,718 Within 1 year It’s expected to received fully in 2021 because the nature is VAT refund.

(3) Long-term equity investments

Investment in subsidiaries (a) Associate (b) Less: Impairment of Long-term equity investments (c)	Unaudited 30 June 2021 5,107,177 195,000 (153,004) 5,149,173	Audited 31 December 2020 4,181,549 195,000 (153,004)
		4,223,545

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Notes to the Financial Statements

For the six months ended 30 June 2021 (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. (note(i)) Hangzhou Tianchuang Capital Water Co., Ltd. Qujing Capital Water Co., Ltd. Guizhou Capital Water Co., Ltd Fuyang Capital Water Co., Ltd. (note(ii)) 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 Jiayuan Xingchuang Energy Technology Co., Ltd Anguo Capital Water Co., Ltd. Baoying Capital Water Co., Ltd. Tianjin Capital New Materials Co., Ltd. Tianjin Caring Technology Development Co., Ltd. Tianjin Jinning Capital Water Co., Ltd. Tianjin Jinghai Capital Water Co., Ltd. Yingshang Capital Water Co., Ltd. Shandong Capital Environmental Protection Technology Consultant Co., Ltd. Subtotal	Investment cost 424,000 264,212 154,918 114,000 390,111 100,436 197,229 62,987 61,400 191,600 41,000 58,100 26,500 16,000 22,560 37,553 53,000 105,600 2,321,206	31 December 2020 (Audited) 424,000 264,212 154,918 114,000 390,111 100,436 197,229 12,706 61,400 191,600 — 58,100 — 16,000 7,560 17,330 53,000 105,600 2,168,202	Movement for the period Additions Disposals Provision 52,170 — — — — — — — — — — — 19,000 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 71,170 — —	30 June 2021 (Unaudited) 476,170 264,212 154,918 114,000 409,111 100,436 197,229 12,706 61,400 191,600 — 58,100 — 16,000 7,560 17,330 53,000 105,600 2,239,372	Provision for impairment — — — — — — — 50,281 — — 41,000 — 26,500 — 15,000 20,223 — —
					153,004

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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)

Changsha Tianchuang Capital 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. Hebei Guojin Tianchuang Capital Water Co., Ltd. Hanshou Tianchuang Capital Water Co., Ltd. Jiuquan Capital Water Co., Ltd. Huize Capital Water Co., Ltd. Huoqiu Capital Water Co., Ltd. Dongying Tianchi Environmental Protection Technology Consultant Co., Ltd. Jiangsu Yonghui Resources Utilization Co., Ltd. (note(iii)) Gaoyou Compro Environmental Resources Co., Ltd. (note(iv)) Honghu Tianchuang Capital Environmental Protection Co., Ltd. (note(v)) Tianjin Xiqing Tianchuang Capital Environmental Protection Co., Ltd. (note(vi)) Subtotal Total	Investment cost 37,469 108,000 63,670 45,000 47,981 17,002 776,957 111,631 205,957 54,000 128,323 33,750 158,238 32,660 37,155 2,550 352,718 386,234 53,400 62,106 2,714,801 5,036,007	31 December 2020 (Audited) 37,469 108,000 63,670 45,000 47,981 17,002 776,957 111,631 205,957 54,000 128,323 33,750 158,238 32,660 37,155 2,550 — — — — 1,860,343 4,028,545	Movement for the year Additions Disposals — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 352,718 — 386,234 — 53,400 — 62,106 — 854,458 — 925,628 —	Provision — — — — — — — — — — — — — — — — — — — — — —	30 June 2021 (Unaudited) 37,469 108,000 63,670 45,000 47,981 17,002 776,957 111,631 205,957 54,000 128,323 33,750 158,238 32,660 37,155 2,550 352,718 386,234 53,400 62,106 2,714,801 4,954,173	Provision for impairment — — — — — — — — — — — — — — — — — — — — —
						153,004

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (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) For the six months ended 30 June 2021, the Company increased capital of RMB52 million to its subsidiary Xi’an Capital Water Co., Ltd., for two sewage water processing plants upgrading project and deodorization project.

  • (ii) For the six months ended 30 June 2021, the Company increased capital of RMB19 million to Fuyang Capital Water Co., Ltd., to invest Jieshou Capital Water Co., Ltd., the wholly-owned subsidiary of Fuyang Capital Water Co., Ltd..

  • (iii) For the six months ended 30 June 2021, the Company acquired Jiangsu Yonghui Resources Utilization Co., Ltd.. The shareholding ratio is 100%.

  • (iv) For the six months ended 30 June 2021, the Company acquired Gaoyou Compro Environmental Resources Co., Ltd.. The shareholding ratio is 100%.

  • (v) For the six months ended 30 June 2021, the Company contributed RMB53 million set up Honghu Tianchuang Capital Environmental Protection Co., Ltd.. The shareholding ratio is 89%.

  • (vi) For the six months ended 30 June 2021, the Company contributed RMB62 million set up Tianjin Xiqing Tianchuang Capital Environmental Protection Co., Ltd.. The shareholding ratio is 100%.

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

Notes to the Financial Statements For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

• 13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

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

(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% (Note 4(9)(a)).

(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. Tianjin Jing Hai Capital Water Co., Ltd. (i)	Audited 31 December 2020 50,281 41,000 26,500 15,000 20,223 153,004	Additions — — — — — —	Disposals — — — — — —	Unaudited 30 June 2021 50,281 41,000 26,500 15,000 20,223
				153,004

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

Notes to the Financial Statements

For the six months ended 30 June 2021 (All amounts in RMB thousand unless otherwise stated)

13 NOTES TO THE COMPANY FINANCIAL STATEMENTS (Continued)

(4) Revenue and cost of sales

Principal operations Other operations	Unaudited For the six months ended 30 June 2021 Revenue Cost of sales 744,416 402,087 62,569 49,926 806,985 452,013	Unaudited For the six months ended 30 June 2020 Revenue Cost of sales 625,988 369,739 81,212 61,042 707,200 430,781	Unaudited For the six months ended 30 June 2020 Revenue Cost of sales 625,988 369,739 81,212 61,042 707,200 430,781
			430,781

• (a) Revenue from principal operations and cost of sales

Analysis by the nature of services is as below:

	Unaudited		Unaudited
	For the six months ended	30 June 2021	For the six months ended	30 June 2020
	Revenue from		Revenue from
	principal operations	Cost of sales	principal operations	Cost of sales
Processing of sewage water	713,167	398,527	594,686	366,179
Road tolls	31,249	3,560	31,302	3,560
	744,416	402,087	625,988	369,739

• (b) Revenue from other operations and cost of sales

Contract operation income Technical service Rental (i) Others	Unaudited For the six months ended 30 June 2021 Revenue from other operations Cost of sales 53,920 44,292 7,491 498 1,135 4,796 23 340 62,569 49,926	Unaudited For the six months ended 30 June 2020 Revenue from other operations Cost of sales 59,277 46,954 17,861 6,740 3,131 7,020 943 328 81,212 61,042	Unaudited For the six months ended 30 June 2020 Revenue from other operations Cost of sales 59,277 46,954 17,861 6,740 3,131 7,020 943 328 81,212 61,042
			61,042

• (i) The company gets its rental income from renting its buildings and structures, As of 30 June 2021, there’s no rental income recognized based on a certain portion of the lessee’ sales revenue.

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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

Notes to the Financial Statements For the six months ended 30 June 2021 (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 is analyzed as follows:

	Processing of		Contract
	sewage water		operation		Technical
	Tianjin	Road tolls	income	Rental	service	Others	Total
Revenue	713,167	31,249	—	—	—	—	744,416
Of which: confirm at a point in time	—	—	—	—	—	—	—
Confirm over time	713,167	31,249	—	—	—	—	744,416
Other operating income	—	—	53,920	1,135	7,491	23	62,569
	713,167	31,249	53,920	1,135	7,491	23	806,985
	Processing of		Contract
	sewage water		operation		Technical
	Tianjin	Road tolls	income	Rental	service	Others	Total
Revenue	594,686	31,302	—	—	—	—	625,988
Of which: confirm at a point in time	—	—	—	—	—	—	—
Confirm over time	594,686	31,302	—	—	—	—	625,988
Other operating income	—	—	59,277	3,131	17,861	943	81,212
	594,686	31,302	59,277	3,131	17,861	943	707,200

As at 30 June 2021, 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

Dividend income from other equity instruments investment Interest income from entrusted loans	Unaudited For the six months ended 30 June 2021 235,714 7,053 242,767	Unaudited For the six months ended 30 June 2020 76,960 12,259
		89,219

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Interim Report 2021 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 2021

(All amounts in RMB thousand unless otherwise stated)

1 STATEMENT OF NONRECURRING PROFIT OR LOSS

STATEMENT OF NONRECURRING PROFIT OR LOSS
Government Grants Losses on disposal of non-current assets Other non-operating income and expenses – net Effect of income tax Effect of minority interests (after tax) Total	Unaudited For the six months ended 30 June 2021 46,784 (3) (757) 46,024 (8,196) 2,309 40,137	Unaudited For the six months ended 30 June 2020 38,029 — (2,585)
		35,444 (5,401) 355
		30,398

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
	Unaudited	Unaudited	Unaudited	Unaudited
	For the six	For the six	For the six	For the six
	months ended	months ended	months ended	months ended
	30 June 2021	30 June 2020	30 June 2021	30 June 2020
Net profit attributable to ordinary shareholders of the Company	4.57	4.13	0.21	0.18
Net profit attributable to ordinary shareholders of the Company
after deducting non-recurring profit or loss	3.97	3.64	0.19	0.16

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Tianjin Capital Environmental Protection Group Company Limited Interim Report 2021

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 during the reporting period.

3. The interim report released on other stock markets.

Tianjin Capital Environmental Protection Group Company Limited Chairman: Liu Yujun

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