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-__________. )
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.