WASHINGTON, D.C. 20549
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934. )
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-__________.
)
Huaneng Power International, Inc.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of
Hong Kong Limited take no responsibility for the contents of this
announcement, make no representation as to its accuracy or
completeness and expressly disclaim any liability whatsoever for
any loss howsoever arising from or in reliance upon the whole or
any part of the contents of this announcement.
CONNECTED TRANSACTION
Financial Adviser to the Company
On 29 June 2020, Shandong Company and Taishan Power signed the
Transfer Agreement, pursuant to which Shandong Company proposes to
acquire Taifeng Renewable Energy Interest held by Taishan Power at
consideration of RMB228.42 million. Shandong Company will settle
the consideration by way of cash with its own funds.
The Company and its subsidiaries mainly develop, construct, operate
and manage large-scale power plants in China nationwide. It is one
of the largest listed power producers in China. As at the date of
publication of this announcement, the controlled generation
capacity is 107,049 MW and the equity-based generation capacity is
93,821 MW.
Huaneng Group is principally engaged in the operation and
management of enterprise investments, development, investment,
construction, operation and management of power plants; organising
the generation and sale of power (and heat); and the development,
investment, construction, production and sale of products in
relation to energy, transportation, new energy and environmental
protection industries.
Shandong Company is a holding subsidiary of the Company. Shandong
Company is mainly engaged in the development, investment,
construction, management of power (heat) projects, investment in
coal, transportation and related industries; purchase and sale of
electricity; thermal power technology consulting services.
Taishan Power is a holding subsidiary
of Huaneng E&C, a wholly-owned subsidiary of Huaneng Group.
Currently, it is mainly engaged in the development, investment and
management of power and thermal projects through its subsidiaries;
investment, development, construction and management of
photovoltaic power generation projects; research and development, manufacturing and
sales of optical fiber prefabrication and optical fibers;
maintenance of houses and living facilities, cleaning, road freight
transportation and other businesses.
As at the date of publication of this announcement, the Company
holds an 80% equity interest in Shandong Company. Through its
wholly owned subsidiary, Huaneng E&C, Huaneng Group indirectly
holds a 56.53% equity interest in Taishan Power, and 43.47% equity
interest is held by Tai’an Gotai Minan Investment Group (a third
party independent of the Company and its connected persons).
Huaneng Group holds a 75% direct equity interest and a 25% indirect
equity interest in HIPDC, whilst HIPDC, being the direct
controlling shareholder of the Company, holds a 32.28% equity
interest in the Company. Huaneng Group also holds a 9.91% direct
equity interest in the Company, a 3.01% indirect equity interest in
the Company through Hua Neng HK (a wholly-owned subsidiary of
Huaneng Group), a 0.59% indirect equity interest in the Company
through China Huaneng Group Treasury Management (Hong Kong) Limited
(an indirect wholly-owned subsidiary of Huaneng Group) and a 0.39%
indirect equity interest in the Company through China Huaneng
Finance Corporation Limited (a controlling subsidiary of Huaneng
Group).
As at the date of the publication of this announcement, the
relationship among the Company, Huaneng Group and Taishan Power is
as follows:
Therefore, under the Hong Kong Listing Rules, Huaneng Group is a
connected person of the Company and Taishan Power is an associate
of Huaneng Group. Pursuant to the relevant requirements of the Hong
Kong Listing Rules, the Transaction constitutes a connected
transaction of the Company, subject to the relevant disclosure
and/or obtain approval from independent shareholders under the Hong
Kong Listing Rules.
The Transfer Agreement was approved at the meeting of the Board of
the Company held on 29 June 2020. Major terms of the Transfer
Agreement are as follows:
Buyer: Shandong Company
Taifeng Renewable Energy, which was established with industrial and
commercial registration on 6 November 2016, is a controlling
subsidiary of Taishan Power. Currently, Taifeng Renewable Energy’s
shareholding ratio is 82.23% held by Taishan Power, Shandong
Taifeng Holdings Group Co., Ltd. holds 13.33%, and Tai’an Zhengye
Environmental Protection Technology Co., Ltd. holds 4.44%. The
Transaction has obtained written consents from Shandong Taifeng
Holdings Group Co., Ltd. and Tai’an Zhengye Environmental
Protection Technology Co., Ltd. and at the same time Shandong
Taifeng Holdings Group Co., Ltd. and Tai’an Zhengye Environmental
Protection Technology Co., Ltd. have waived their pre-emptive
rights.
The subject of the Transaction is Taifeng Renewable Energy Interest
owned by Taishan Power. Taishan Power guarantees that Taifeng
Renewable Energy’s rights and interests are clear, free from any
mortgage, pledge, right of retention, third-party rights or other
rights that hinder the transfer of ownership. Moreover, Taifeng
Renewable Energy Interest does not involve any disputes,
litigation, arbitration or other judicial procedures.
After the completion of the Transaction, Taifeng Renewable Energy
will become a controlling subsidiary of Shandong Company, and its
financial information will be consolidated into the Company’s
consolidated financial statements. There does not exist any
guarantee on the part of the Company for Taifeng Renewable Energy,
and entrusted financial management of Taifeng New Energy, nor has
Taifeng Renewable Energy occupied the Company’s funds.
Extract of the major financial information of Taifeng Renewable
Energy, which was prepared in accordance with the PRC Generally
Accepted Accounting Principles, is as follows:
Unit: RMB
The unaudited financial information of Taifeng Renewable Energy as
of 31 March 2020 is as follows: Taifeng Renewable Energy’s total
assets are RMB928,295,716.43, total liabilities are
RMB689,928,477.64, and the total owner’s equity is
RMB238,367,238.79. From January to March 2020, Taifeng Renewable
Energy's operating income was RMB18,391,315.56, total profit was
RMB1,860,435.32, and net profit was RMB1,860,435.32.
(1) Evaluation
method and evaluation results
In accordance with the Asset Valuation Report Zhong Luen Ping Bao
Zi (2019) No.1951 issued by China United Assets Appraisal Group
Co., Ltd., which is qualified to practise securities and futures
related businesses, with 30 September 2019 as the Valuation
Benchmark Date, the detailed valuation approach and results of
Taifeng Renewable Energy are as follows:
Unit: RMB Ten Thousand
According to the provisions of applicable laws, the above-mentioned
asset valuation report has fulfilled the state-owned assets
valuation filing procedures.
(i) General
assumptions
The trading hypothesis is to assume that all assets to be evaluated
are already in the process of trading, and the valuer evaluates the
market based on the simulated market conditions of the assets to be
evaluated. Assumption of the transaction is the most basic
assumption for asset evaluation to be carried out.
The open market assumption is the assumption that assets traded on
the market, or assets to be traded on the market, are equal to each
other in the asset transaction, and each has the opportunity and
time to obtain sufficient market information in order to facilitate
the function, use and make reasonable judgments about the
transaction price. The open market assumption is based on the fact
that assets can be bought and sold in the market.
The assumption for continuing operation of assets refers to the
need to continue to use the assets under evaluation in accordance
with the current use and usage mode, scale, frequency, environment,
etc., or use them on the basis of changes, and determine the
evaluation method, parameters and basis accordingly.
(ii) Special
assumptions
project after the completion of the bid shall be at the settlement
rate of RMB0.83/kWh (including tax), that is, the on-grid
electricity price from 2017 to 2036 is RMB0.83/kWh (including tax),
and from 2037 to 2042 is RMB0.3949/kWh (including tax), and all
prices can be paid and obtained within a reasonable period of
time.
Having agreed by all parties, Shandong Company (as the transferee
of the equity interest) shall pay the consideration of the equity
interest to the transferor in the sum of RMB228.42 million.
The consideration of the Transaction was determined based on the
asset evaluation results of Taifeng Renewable Energy as of 30
September 2019, with the evaluation results using the income
approach as the evaluation conclusions and the pricing basis of the
Transaction. The Board (including the independent non-executive
Directors) of the Company is of the view that according to the
evaluation report and the description of the evaluation method
provided by the evaluation institution, the analysis principle for
evaluating the value, calculation model and expected income, profit
period, discount rate and other important evaluations based on the
evaluation institution, the selection of parameters and basis is
correct, and the evaluation method and evaluation conclusion are
reasonable.
The Transaction accords with the needs for Shandong Company to
increase the proportion of clean energy and optimise its industrial
structure. After the completion of the Transaction, Taifeng
Renewable Energy will become a controlling subsidiary of Shandong
Company, and its financial information will be consolidated into
the Company’s consolidated financial statements. There does not
exist any guarantee on the part of the Company for Taifeng
Renewable Energy and entrusted financial management of Taifeng New
Energy, nor has Taifeng Renewable Energy occupied the Company’s
funds. The total assets of the target company of the Transaction
accounted for approximately 0.22% of the Company, which will not
impose any material impact on the operation and financial
conditions of the Company.
With respect to the Transaction, given the scale of the transaction
amount does not exceed 5% of the applicable percentage ratios as
calculated pursuant to Rule 14.07 of the Hong Kong Listing Rules,
the Transaction does not constitute a notifiable transaction under
Chapter 14 of the Hong Kong Listing Rules. The Transaction also
constitutes a connected transaction under Chapter 14A of the Hong
Kong Listing Rules. As the scale of the transaction amount exceeds
0.1% but does not exceed 5% of the applicable percentage ratios as
calculated pursuant to Rule
14.07 of the Hong Kong Listing Rules, therefore, the Company is
only required to comply with the reporting and announcement
requirements under Rules 14A.71 and 14A.35 of the Hong Kong Listing
Rules but is exempt from independent shareholders’ approval
requirement.
The Board of the Company has approved the resolution regarding the
Transaction. Zhao Keyu, Zhao Ping, Huang Jian, Wang Kui, Lu Fei,
Teng Yu, all being Directors having connected relationship,
abstained from voting on the board resolution relating to the
Transaction. The resolution was voted by Directors who are not
connected to the Transaction. The Directors (including independent
non-executive Directors) are of the view that the Transfer
Agreement was entered into: (i) on normal commercial terms (on
arm’s length basis or on terms no less favourable to the Company
than terms available from independent third parties); (ii) on terms
that are fair and reasonable and are in the interests of the
Company and its shareholders as a whole and (iii) in the ordinary
and usual course of business of the Company.
As disclosed in this announcement, the valuation of Taifeng
Renewable Energy was prepared based on income approach (the
“Profit Forecast of the Relevant
Subsidiary”) and therefore constitutes a profit forecast
under Rule 14.61 of the Hong Kong Listing Rules. As such, the
requirements under Rules 14A.68(7) and 14.62 of the Hong Kong
Listing Rules are applicable.
Pursuant to Rule 14.62(2) of the Hong Kong Listing Rules, the
Company engaged Ernst & Young (“Ernst & Young”) to report on the
calculation of discounted future cash flows on the Profit Forecast
of Relevant Subsidiary. Ernst & Young has reviewed the
calculation of discounted future cash flows used in the
assessment.
Ernest & Young reported to the Directors that in terms of the
arithmetical accuracy of the calculation of the discounted future
estimated cash flows on which the valuation is based, the
discounted future estimated cash flows have been properly prepared
in all significant aspects based on assumptions. Ernst &
Young’s work has not reviewed and considered whether the discounted
future estimated cash flows and the basis and assumptions on which
the valuation is based are appropriate and effective. No work has
been done on this, and it will not express any opinion on whether
the basis and assumptions are appropriate and effective.
Also, in accordance with Rules 14.62(3) of the Hong Kong Listing
Rules, the Company has engaged Fortune Financial Capital Limited
(the “Financial Adviser”)
to review the procedures undertaken by the Directors in preparing
the forecast underlying the valuation prepared by the valuer of the
Profit Forecast of the Relevant Subsidiary. The Financial Adviser
is satisfied that the Profit Forecast of the Relevant Subsidiary
has been made by the Board after due and careful enquiry.
To the best of the Directors’ knowledge, information and belief,
having made all reasonable enquiries, the valuer of Shandong Power,
China United Assets Appraisal Group Co., Ltd. is a third party
independent of the Company and its connected persons.
The report from Ernest & Young for the purpose of Rule 14.62(2)
of the Hong Kong Listing Rules on the Profit Forecast of the
Relevant Subsidiary is set out in Appendix I of this announcement.
The letter from the Financial Adviser for the purpose of Rule
14.62(3) of the Hong Kong Listing Rules on the Profit Forecast of
Relevant Subsidiary is set out in Appendix II to this
announcement.
The following are the qualifications of the experts who have given
their opinion and advice included in this announcement.
To the best knowledge, information and belief of the Directors, as
at the date of this announcement, each of the above mentioned
experts was not beneficially interested in the share capital of the
Company and its subsidiaries nor did it have any right, whether
legally enforceable or not, to subscribe for or to nominate persons
to subscribe for securities in the Company and its
subsidiaries.
As at the date of this announcement, each of the above mentioned
experts did not have any direct or indirect interest in any assets
which had been since 31 December 2019 (being the date to which the
latest published audited accounts of the Company were made up)
acquired or disposed of by or leased to the Company and its
subsidiaries, or were proposed to be acquired or disposed of by or
leased to the Company and its subsidiaries.
Each of the experts mentioned above has given and has not withdrawn
its consent to the publication of this announcement with inclusion
of its letter, report or statement(s) and all references to its
name and logo in the form and context in which it appears.
As at the date of this announcement, the Directors of the Company
are:
Beijing, the PRC
29
June 2020
29 June 2020
The Directors
Huaneng Power International, Inc.
Huaneng Building
No.6 Fuxingmennei Street
Xicheng District, Beijing, China
REPORT FROM REPORTING ACCOUNTANTS ON THE DISCOUNTED CASH FLOW
FORECAST IN CONNECTION WITH THE VALUATION OF EQUITY INTEREST IN
HUANENG SHANDONG TAIFENG RENEWABLE ENERGY CO., LTD.
We have been engaged to report on the arithmetical accuracy of the
calculations of the discounted cash flow forecast (the
“Forecast”) on which the
valuation dated 18 November 2019 prepared by China United Assets
Appraisal Group Co., Ltd. in respect of Huaneng Shandong Taifeng
Renewable Energy Co., Ltd. (the “Target”) as at 30 September 2019 is
based. The valuation is set out in the announcement of Huaneng
Power International, Inc. (the “Company”) dated 29 June 2020 (the
“Announcement”) in
connection with the acquisition of the Target. The valuation based
on the Forecast is regarded by The Stock Exchange of Hong Kong
Limited as a profit forecast under paragraph 14.61 of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the “Listing
Rules”).
Directors’ responsibilities
The directors of the Company (the “Directors”) are solely responsible for
the Forecast. The Forecast has been prepared using a set of bases
and assumptions (the “Assumptions”), the completeness,
reasonableness and validity of which are the sole responsibility of
the Directors. The Assumptions are set out in the section headed
“Valuation assumptions” of the Announcement.
Our Independence and Quality Control
We have complied with the independence and other ethical
requirements of the Code of Ethics for Professional Accountants
issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”), which is
founded on fundamental principles of integrity, objectivity,
professional competence and due care, confidentiality and
professional behavior.
Our firm applies Hong Kong Standard on Quality Control 1 Quality
Control for Firms that Perform Audits and Reviews of Financial
Statements, and Other Assurance and Related Services Engagements,
and accordingly maintains a comprehensive system of quality control
including documented policies and procedures regarding compliance
with ethical requirements, professional standards and applicable
legal and regulatory requirements.
Reporting Accountants’ responsibilities
Our responsibility is to express an opinion on the arithmetical
accuracy of the calculations of the Forecast based on our work. The
Forecast does not involve the adoption of accounting
policies.
We conducted our engagement in accordance with Hong Kong Standard
on Assurance Engagements 3000 (Revised) Assurance Engagements Other
Than Audits or Reviews of Historical Financial Information issued
by the HKICPA. This standard requires that we plan and perform our
work to obtain reasonable assurance as to whether, so far as the
arithmetical accuracy of the calculations are concerned, the
Directors have properly compiled the Forecast in accordance with
the Assumptions adopted by the Directors. Our work consisted
primarily of checking the arithmetical accuracy of the calculations
of the Forecast prepared based on the Assumptions made by the
Directors. Our work is substantially less in scope than an audit
conducted in accordance with Hong Kong Standards on Auditing issued
by the HKICPA. Accordingly, we do not express an audit
opinion.
We are not reporting on the appropriateness and validity of the
Assumptions on which the Forecast are based and thus express no
opinion whatsoever thereon. Our work does not constitute any
valuation of the Target. The Assumptions used in the preparation of
the Forecast include hypothetical assumptions about future events
and management actions that may or may not occur. Even if the
events and actions anticipated do occur, actual results are still
likely to be different from the Forecast and the variation may be
material. Our work has been undertaken for the purpose of reporting
solely to you under paragraph 14.62(2) of the Listing Rules and for
no other purpose. We accept no responsibility to any other person
in respect of our work, or arising out of or in connection with our
work.
Opinion
Based on the foregoing, in our opinion, so far as the arithmetical
accuracy of the calculations of the Forecast is concerned, the
Forecast has been properly compiled in all material respects in
accordance with the Assumptions adopted by the Directors.
Yours faithfully
Ernst & Young
Certified Public Accountants
Hong Kong
APPENDIX II
Financial Advisor to the Company
29 June 2020
The Board of Directors
Huaneng Power International, Inc.
Huaneng Building
No.6 Fuxingmennei Street
Xicheng District
Beijing, China
Dear Sir/Madam,
We refer to the valuation report (the “Valuation Report”) dated 18 November
2019 and prepared by China United Assets Appraisal Group Co., Ltd.
(the “Valuer”) in relation
to the valuation on Huaneng Shandong Taifeng Renewable Energy Co.,
Ltd. (華能山東泰豐新能源有限公司) as at 30
September 2019 (the “Valuation”). The Valuation was
considered as part of consideration in the announcement expected to
be issued on 29 June 2020 of Huaneng Power International, Inc. (the
“Announcement”).
Capitalised terms used herein shall have the same meanings as those
defined in the Announcement unless the context requires
otherwise.
According to the Valuation Report, the Valuer considered the
adoption of the income approach in arriving at the Valuation. Under
the income approach, the Valuer adopted the discounted cash flow
method. We note that the Valuation, which has been arrived based on
discounted cash flow method, is regarded as profit forecast (the
“Profit Forecast”) under
Rule 14.61 of the Listing Rules.
We have discussed with the management of the Company and the Valuer
regarding the bases and assumptions (the “Assumptions”) of the Valuation Report,
and have reviewed the letter dated 29 June 2020 issued by Ernst
& Young, the auditor of the Company. Ernst & Young is of
the opinion that, so far as the arithmetical accuracy of the
calculations of the discounted cash flow forecast is concerned, the
discounted cash flow forecast has been properly compiled in all
material respects in accordance with the Assumptions adopted by the
Directors.
On the basis of the foregoing and the calculations reviewed by
Ernst & Young, we are of the opinion that the Profit Forecast
underlying the Valuation, for which the Directors are jointly and
severally responsible, has been made after due care and
enquiry.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the under-signed, thereunto duly authorized.
