Annual Report
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(A joint stock limited company incorporated in the People’s Republic of China with limited liability) Stock Code: 00916 2018 ANNUAL REPORT * For identification purpose only CONTENTS Chairman’s Statement ..................... 2 President’s Statement...................... 4 Key Operating and Financial Data............ 8 Corporate Profile ......................... 14 Honours and Awards ...................... 22 Corporate Milestones in 2018 ............... 24 Management Discussion and Analysis ........ 26 Directors’ Report ......................... 71 Connected Transactions ................... 91 Biographies of Directors, Supervisors and Senior Management ..................... 98 Environmental, Social, and Governance Report . 114 Corporate Governance Report............... 157 Supervisory Board’s Report ................. 183 Independent Auditor’s Report ............... 187 Consolidated Statement of Profit or Loss and Other Comprehensive Income ............. 195 Consolidated Statement of Financial Position ... 197 Consolidated Statement of Changes in Equity... 199 Consolidated Statement of Cash Flows ........ 201 Notes to the Financial Statements ............ 204 Glossary of Terms ........................ 378 Corporate Information ..................... 383 CHAIRMAN’S STATEMENT Dear Shareholders, The year 2018 witnessed the formation of China Energy Investment Corporation. In the year, we deepened supply-side structural reform, strived to promote energy revolution and safeguard China’s energy security, played the role of stabilizing and securing energy supply, and achieved significant results in restructuring. Currently, the development of the energy sector is undergoing significant changes, with a noticeable slowdown in consumption growth, quickening transition towards green and low-carbon development, and rapid emergence of a new wave of technological and industrial revolution in the world. At the 2018 Central Economic Work Conference, the CPC Central Committee came to the conclusion that China is still and will be in an important period of strategic opportunity for development for a long time to come, and pointed out that the world is experiencing significant changes unseen in a century that will bring about both challenges and opportunities, presenting a major opportunity for the rejuvenation of the Chinese nation. As for the energy industry, the adjustment of energy structure brings new opportunities, green development and clean and efficient utilisation of traditional energy sources are becoming general trends, and the proportion of clean and renewable energy keeps increasing. In 2018, as an important part of the new energy division of China Energy Investment Corporation, Longyuan Power, under the leadership of the Board, put into action the “One, One, Six and Nine” strategies (“一一六九” 戰略), upheld the underlying principle of pursuing progress while ensuring stability, remained committed to the new development philosophy, and made solid efforts to improve quality and efficiency, thus achieving remarkable results in all its work. As at the end of 2018, the consolidated installed capacity of Longyuan Power reached 21,044 MW, among which, the consolidated installed capacity of wind power reached 18,919 MW, making the Company the world’s largest wind power operator. In 2018, wind power output reached 39.542 billion kWh, representing a year-on-year increase of 5.094 billion kWh. The Company recorded a profit before taxation of RMB5,897 million, representing a year-on-year increase of 7.9%. Net profit attributable to equity holders of the Company amounted to RMB4,166 million, representing a year-on-year increase of 8.3%. Longyuan Power obtained approvals for wind power projects with aggregate installed capacity of 1,710 MW in 2018, including new wind power projects with installed capacity of 523.5 MW. 2 China Longyuan Power Group Corporation Limited 2018 Annual Report CHAIRMAN’S STATEMENT The year 2019, which marks the 70th anniversary of the founding of the People’s Republic of China, is a key year for securing a decisive victory in building a moderately prosperous society in all respects and achieving the first centenary goal of our country. Longyuan Power, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, shall put into practice the appeal that “socialism can only be achieved through hard work”, adhere to the principle of putting quality first and giving priority to efficiency, and vigorously develop clean energy, thereby making greater contribution to building a beautiful China. Chairman of the Board Qiao Baoping CHAIRMAN'S STATEMENT 3 PRESIDENT’S STATEMENT Dear Shareholders, The “Four Revolutions, One Cooperation" strategic thoughts on energy development put forth by Mr. Xi Jinping, the General Secretary of the Central Committee of the CPC specified the general guideline for China’s energy strategies and charted the direction for the development of the country’s energy industry. As set out in the report of the 19th CPC National Congress, China will promote a revolution in energy production and consumption, and build an energy sector that is clean, low-carbon, safe, and efficient. Currently, a new round of energy revolution featuring large-scale development of clean energy is booming, and the global energy industry is developing to become a more efficient, cleaner, safer and more sustainable industry. As China’s energy industry is now in the process of replacing traditional growth engines with new ones, the new energy industry, driven by a raft of new development strategies launched by the government, is embracing new development opportunities. In 2018, under the leadership of the Board, the Group earnestly implemented the guidelines adopted at the working meetings held at the beginning and in the middle of the year, adhered to the underlying principle of pursuing progress while ensuring stability and the new development philosophy, and made solid progress in improving quality and efficiency, thus maintaining a good momentum of business development. 4 China Longyuan Power Group Corporation Limited 2018 Annual Report PRESIDENT’S STATEMENT PROFITABILITY FURTHER ENHANCED In 2018, the Group pursued an active management strategy and strengthened its asset management, thus achieving a new high in profitability. On a consolidated basis, the Group’s operating revenue for the year amounted to RMB26,388 million, representing a year-on-year increase of 7.3%; net profit attributable to equity holders of the Company amounted to RMB4,166 million, representing a year-on-year increase of 8.3%; and the earnings per share amounted to RMB48.83 cents. As at the end of 2018, the Group’s total assets and net assets amounted to RMB146,504 million and RMB56,566 million, respectively, with a net gearing ratio of 56.18%. LEADING IN UTILISATION HOURS OF WIND POWER In 2018, in response to high grid curtailment rates in certain provinces and regions, the Group optimised and refined benchmarking management, strengthened power generation assessment and incentive mechanism, proactively developed fault-free wind farms, optimised the management and control of economic operation and carried out centralized management and elimination of hidden hazards of equipment, sparing no effort to cope with grid curtailment. Aggregate wind power generated in the year amounted to 39,542 million kWh, representing a year-on-year increase of 14.78%, and the utilisation hours of wind power reached 2,209 hours, 114 hours higher than the industry average. DEVELOPMENT LAYOUT FURTHER OPTIMISED In 2018, the Group strengthened the overall planning of its preliminary work, focusing on developing high-quality wind resources in the mid-eastern, southern and southeastern coastal regions of China. During the year, wind power projects with an aggregate capacity of 1,710 MW were approved, all of which are located in areas equipped with good power transmission lines and boasting quality wind resources. PRESIDENT’S STATEMENT 5 PRESIDENT’S STATEMENT We would like to express our sincere gratitude to our shareholders for their strong support. Looking forward to the new year, we will adhere to the new development philosophy, implement the innovation-driven development strategy and grow our Company into a world-class renewable energy giant with global competitiveness. To this end, we shall focus our efforts on the following aspects: (i) we will uphold overall Party leadership, give top priority to the political work of the Party, ensure and deepen full and strict governance over the Party and give full play to the leading role of Party committees in charting development course, crafting overall plans and ensuring implementation of plans and polices; (ii) we will unswervingly promote high-quality development, scientifically optimise our business layout, persist in strengthening and optimising our main business of wind power, and shift our development focus from speed and scale to quality and efficiency; (iii) 6 China Longyuan Power Group Corporation Limited 2018 Annual Report PRESIDENT’S STATEMENT we will continue to deepen reform in all areas, scientifically grasp the new opportunities brought by the reform of state-owned enterprises, focus more energy on key and difficult issues, and remove institutional barriers that restrict the development of the Company; (iv) we shall pursue innovation-driven development, focus on the development direction of the new energy industry, achieve new breakthroughs in key technologies, cultivate high- value core patents, proactively