(a joint stock limited company incorporated in the People's Republic of China with limited liability)
Stock Code: 01088
2020
Interim Report
Cultivatinga new prospect in crisis
Startinga new chapter through changes
Important Notice
- The board of directors, supervisory committee and directors, supervisors and senior management of the Company warrant that this interim report does not contain any misrepresentations, misleading statements or material omissions, and are jointly and severally liable for the authenticity, accuracy and completeness of the information contained in this report.
- This report was approved at the third meeting of the fifth session of the board of directors of the Company.
- The interim financial statements in this report is unaudited. KPMG has issued a report on the review of the interim financial statements for 2020 prepared under International Accounting Standard 34, interim financial reporting .
IV. | Wang Xiangxi (Chairman of the Company), Xu Shancheng (Chief Financial Officer) and Ban Jun (person-in-charge of the |
accounting department) warrant the authenticity, accuracy and completeness of the financial report contained in this | |
interim report. |
- Profit distribution plan or reserve funds capitalisation plan for the reporting period considered by the board of directors: not applicable
VI. | Disclaimer of forward-looking statements: The forward-looking statements in this report made on the basis of subjective |
assumptions and judgments on future policies and economic conditions, which are subject to risks, uncertainties and | |
assumptions, may differ materially from the actual outcome. Such statements do not constitute actual commitments to | |
investors. Investors should be aware that undue reliance on or use of such information may lead to risks of investment. | |
VII. | Are there any situations of non-operating appropriation of funds by controlling shareholder(s) and its related parties? No |
VIII. | Are there any situations of violation of decision-making procedures for external guarantee provision? No |
IX. | Warning on Major Risks: Investors please note that the Company has disclosed the risks it faced in connection with |
safety, environmental protection, and internationalised operation, etc. in the section headed "Discussion and Analysis on | |
Operation Results". |
Contents | ||
Section I | Definitions | 2 |
Section II | Company Profile and Major Financial Indicators | 5 |
Section III | Business Overview | 8 |
Section IV | Chairman's Statement | 9 |
Section V | Discussion and Analysis on Operation Results | 18 |
Section VI | Significant Events | 56 |
Section VII | Changes in Share Capital and Shareholders | 85 |
Section VIII | Directors, Supervisors, Senior Management and Employees | 89 |
Section IX | Investor Relations | 94 |
Section X | Report on Review of Condensed Consolidated Financial | 95 |
Statements | ||
Section XI | Documents Available for Inspection | 138 |
2 China Shenhua Energy Company Limited
Section I Definitions
In this report, unless the context otherwise requires, the following terms used in this report have the following meanings:
China Shenhua/the Company
The Group
China Energy
China Energy Group
Shendong Coal
Shendong Power
Zhunge'er Energy
Shuohuang Railway
Xinshuo Railway
Railway Equipment
Trading Group
Huanghua Harbour Administration
Baoshen Railway
Baotou Coal Chemical
Shenbao Energy
Tianjin Coal Dock
Zhuhai Coal Dock
Sichuan Energy
Fujian Energy
Shenhua Finance Company
EMM Indonesia
Jawa Power
2020 Interim Report 3
Section I Definitions (Continued)
Zhunge'er Power | Power-generating division controlled and operated by Zhunge'er |
Energy | |
Shenmu Power | CLP Guohua Shenmu Power Co., Ltd. |
Taishan Power | Guangdong Guohua Yudean Taishan Power Co., Ltd. |
Cangdong Power | Hebei Guohua Cangdong Power Co., Ltd. |
Jinjie Energy | Shaanxi Guohua Jinjie Energy Co., Ltd. |
Dingzhou Power | Hebei Guohua Dingzhou Power Generation Co., Ltd. |
Mengjin Power | Shenhua Guohua Mengjin Power Generation Co., Ltd. |
Jiujiang Power | Shenhua Guohua Jiujiang Power Co., Ltd. |
Huizhou Thermal | Guohua Huizhou Thermal Power Branch of the Company |
Beijing Gas-fired Power | Shenhua Guohua (Beijing) Gas-fired Power Co., Ltd. |
Shouguang Power | Shenhua Guohua Shouguang Power Generation Company Limited |
Liuzhou Power | Shenhua Guohua Guangtou (Liuzhou) Power Generation Co., Ltd. |
Fuping Thermal Power | Fuping Thermal Power Plant of Shenhua Shendong Power Co., Ltd. |
Shenhua Lease Company | Shenhua (Tianjin) Finance Lease Co., Ltd. |
JORC | Australasian Code for Reporting of Mineral Resources and Ore |
Reserves | |
Beijing GD Power | The joint venture company co-established by the Company and |
GD Power Development Co., Ltd. with their respective holding | |
of equities and assets of the relevant coal-fired power generation | |
companies, i.e. Beijing GD Power Co., Ltd | |
BOOT Scheme | The "Build-Own-Operate-Transfer" scheme adopted by the Group |
in the Indonesia Java power project | |
SSE | Shanghai Stock Exchange |
HKEx | The Stock Exchange of Hong Kong Limited |
Shanghai Listing Rules | Rules Governing the Listing of Stocks on SSE |
Hong Kong Listing Rules | Rules Governing the Listing of Securities on HKEx |
4 China Shenhua Energy Company Limited
Section I Definitions (Continued)
China Accounting Standards for | The latest Accounting Standards for Business Enterprises issued |
Business Enterprises | by the Ministry of Finance of the People's Republic of China and |
the related application guidance, interpretations and other related | |
requirements | |
International Financial Reporting | International Financial Reporting Standards issued by the |
Standards | International Accounting Standards Committee |
Articles of Association | Articles of Association of China Shenhua Energy Company Limited |
EBITDA | Profit for the period + net finance cost + income tax + depreciation |
and amortisation - share of results of associates | |
Gearing ratio | Total liabilities/total assets |
Total debt to total equity ratio | [Long-term interest bearing debts + short-term interest bearing |
debts (including bills payable)]/[Long-term interest bearing debts | |
+ short-term interest bearing debts (including bills payable) + total | |
equity of shareholders] | |
RMB | Renminbi, unless otherwise specified |
2020 Interim Report 5
Section II Company Profile and Major Financial Indicators
I. | INFORMATION OF THE COMPANY | |||
Chinese Name of the Company | 中國神華能源股份有限公司 | |||
Abbreviation of Chinese Name of the Company | 中國神華 | |||
English Name of the Company | China Shenhua Energy Company Limited | |||
Abbreviation of English Name of the Company | CSEC/China Shenhua | |||
Legal Representative of the Company | Wang Xiangxi | |||
Authorised Representatives of the Company under the | ||||
Hong Kong Listing Rules | Wang Xiangxi, Huang Qing | |||
II. | CONTACTS AND CONTACT DETAILS | |||
Secretary to the Board | Representative of Securities Affairs | |||
Name | Huang Qing | Sun Xiaoling | ||
Address | 22 Andingmen Xibinhe Road, | 22 Andingmen Xibinhe Road, | ||
Dongcheng District, Beijing (Postal | Dongcheng District, Beijing (Postal | |||
Code: 100011) | Code: 100011) | |||
Tel | (8610) 5813 3399 | (8610) 5813 3355 | ||
Fax | (8610) 5813 1814/1804 | (8610) 5813 1814/1804 | ||
1088@shenhua.cc | ir@shenhua.cc | |||
Board Office of the Company | Hong Kong Office of the Company | |||
Address | 22 Andingmen Xibinhe Road, | Room B, 60th Floor, Bank of China | ||
Dongcheng District, Beijing (Postal | Tower, 1 Garden Road, Central, Hong | |||
Code: 100011) | Kong | |||
Tel | (8610) 5813 1088/3399/3355 | (852) 2578 1635 | ||
Fax | (8610) 5813 1814/1804 | (852) 2915 0638 | ||
III. | PARTICULARS | |||
Registered Address of the | 22 Andingmen Xibinhe Road, Dongcheng District, Beijing | |||
Company | ||||
Postal Code of Registered | 100011 | |||
Address of the Company | ||||
Office Address of the Company | 22 Andingmen Xibinhe Road, Dongcheng District, Beijing | |||
Postal Code of Office Address of | 100011 | |||
the Company | ||||
Company Website | http://www.csec.com or http://www.shenhuachina.com | |||
ir@shenhua.cc | ||||
IV. INFORMATION DISCLOSURE AND PLACE FOR DOCUMENT INSPECTION | ||||
Designated newspaper for | China Securities Journal, Shanghai Securities News, | |||
information disclosure | Securities Times and Securities Daily | |||
Internet website for publishing | http://www.sse.com.cn and http://www.hkex.com.hk | |||
interim report | ||||
Interim report is available at | SSE, Board Office of the Company and Hong Kong Office of | |||
the Company |
6 China Shenhua Energy Company Limited
Section II Company Profile and Major Financial Indicators (Continued)
- BASIC INFORMATION ON SHARES
Type | Stock Exchange | Abbreviation | Stock Code |
A Share | SSE | China Shenhua | 601088 |
H Share | HKEx | China Shenhua | 01088 |
VI. OTHER INFORMATION
Accountant engaged by | Name | KPMG Huazhen LLP | |||
the Company | Office Address | 8th Floor, Tower E2, Oriental Plaza, 1 East Chang | |||
(A Share) | An Avenue, Beijing | ||||
Signing Accountants | Zhang Nan, Wang Xia | ||||
Accountant engaged by | Name | KPMG | |||
the Company | (Public Interest Entity Auditor registered in | ||||
(H Share) | accordance with the Financial Reporting Council | ||||
Ordinance) | |||||
Office Address | 8th Floor, Prince's Building, 10 Chater Road, | ||||
Central, Hong Kong | |||||
Share Registrar and | Name | China Securities Depository and Clearing | |||
Transfer Office | Corporation Limited Shanghai Branch | ||||
of the Company | Office Address | 3rd Floor, China Insurance Building, 166 Lujiazui | |||
(A Share) | East Road, Pudong New Area, Shanghai | ||||
Share Registrar and | Name | Computershare Hong Kong Investor Services | |||
Transfer Office | Limited | ||||
of the Company | Office Address | Rooms 1712-1716, 17th Floor, Hopewell Centre, | |||
(H Share) | 183 Queen's Road East, Wanchai, Hong Kong | ||||
VII. MAJOR ACCOUNTING DATA OF THE COMPANY | |||||
The first half | The first half | ||||
Major Accounting Data | Unit | of 2020 | of 2019 | Change | |
% | |||||
Revenue | RMB million | 105,016 | 116,365 | (9.8) | |
Profit for the period | RMB million | 24,784 | 28,996 | (14.5) | |
Profit for the period attributable RMB million | 20,370 | 24,240 | (16.0) | ||
to equity holders of the | |||||
Company | |||||
Basic earnings per share | RMB/share | 1.024 | 1.219 | (16.0) | |
Net cash generated from | RMB million | 53,720 | 41,043 | 30.9 | |
operating activities | |||||
Net cash generated from | RMB million | 32,175 | 34,203 | (5.9) |
operating activities excluding the effect of Shenhua Finance Company
2020 Interim Report 7
Section II Company Profile and Major Financial Indicators (Continued)
As at | As at | |||
30 June | 31 December | |||
Unit | 2020 | 2019 | Change | |
% | ||||
Total assets | RMB million | 580,277 | 563,083 | 3.1 |
Total liabilities | RMB million | 161,020 | 142,865 | 12.7 |
Total equity | RMB million | 419,257 | 420,218 | (0.2) |
Equity attributable to equity | RMB million | 351,380 | 356,077 | (1.3) |
holders of the Company | ||||
Total share capital | RMB million | 19,890 | 19,890 | 0.0 |
VIII. DIFFERENCES IN ACCOUNTING DATA UNDER DOMESTIC AND OVERSEAS ACCOUNTING STANDARDS
Unit: RMB million | ||||
Net profit attributable | Net assets attributable | |||
to equity holders of the | to equity holders of the | |||
Company | Company | |||
As at | As at | |||
The first half | The first half | 30 June | 31 December | |
of 2020 | of 2019 | 2020 | 2019 | |
Under China Accounting Standards | 20,658 | 24,243 | 347,433 | 351,928 |
for Business Enterprises | ||||
Adjustment: | ||||
Simple production maintenance, | (288) | (3) | 3,947 | 4,149 |
production safety and other | ||||
related expenditures | ||||
Under International Financial | 20,370 | 24,240 | 351,380 | 356,077 |
Reporting Standards | ||||
Explanation on differences in domestic and overseas accounting standards:
Pursuant to the relevant regulations of the related government authorities in the PRC, the Group accrued provisions for simple production maintenance, production safety and other related expenditures, recognised as expenses in profit or loss and separately recorded as a specific reserve in shareholders' equity under China Accounting Standards for Business Enterprises. On utilisation of the specific reserve as fixed assets within the stipulated scope, the full amount of accumulated depreciation is recognised at the same time when the cost of the relevant assets is recorded. Under International Financial Reporting Standards, these expenses are recognised in profit or loss as and when incurred. Relevant capital expenditure is recognised as property, plant and equipment and depreciated according to the relevant depreciation method. The effect on deferred tax arising from such difference is also reflected.
8 China Shenhua Energy Company Limited
Section III Business Overview
- EXPLANATION ON PRINCIPAL BUSINESSES AND OPERATION MODEL OF THE COMPANY AND INDUSTRY CONDITIONS DURING THE REPORTING PERIOD
China Shenhua Energy Company Limited was established in Beijing in November 2004 and was listed on HKEx and SSE in June 2005 and October 2007, respectively.
The Group is principally engaged in the production and sale of coal and electricity, railway, port and shipping transportation, and coal-to-olefins businesses. The integration of coal, power, railway, port, shipping and coal chemical into one unified operation chain is the Group's unique operation and profitability model.
During the reporting period, the Group made no significant change in the scope of its principal businesses.
For conditions of the industry in which the Group operates, please refer to the section "Discussion and Analysis on Operation Results" in the report.
- EXPLANATION ON MATERIAL CHANGES IN MAJOR ASSETS OF THE COMPANY DURING THE REPORTING PERIOD
As of 30 June 2020, the Group's total assets amounted to RMB580,277 million, representing an increase of 3.1% as compared with that at the end of the previous year, and the equity attributable to equity holders of the Company amounted to RMB351,380 million, representing a decrease of 1.3% as compared with that at the end of the previous year. The total offshore assets of the Group (including Hong Kong, Macau and Taiwan) amounted to RMB14,923 million, representing 2.6% to total assets, which are mainly composed of the assets from USD bonds issued in Hong Kong, PRC, and power generation and coal mine assets in countries like Indonesia and Australia.
- ANALYSIS ON CORE COMPETITIVENESS DURING THE REPORTING PERIOD
There were no substantial changes in the core competitiveness of the Group during the reporting period.
The core competitiveness of the Group mainly includes: (1) the vertical integration operation model of coal, power, railway, port, shipping and coal chemical operations; (2) premium and abundant coal resources; (3) a management team with the dedication to the principal businesses of the Company and an advanced operation philosophy; (4) leading industrial technologies and technological innovation capabilities in the PRC and overseas in areas including coal mining, production safety, heavy-loaded railway transportation, clean coal-fired power generation and coal-to-olefins.
2020 Interim Report 9
Section IV Chairman's Statement
Dear Shareholders,
On behalf of the Board, I am delighted to present the interim report of China Shenhua for the first half of 2020 and the results during the period.
The first half of 2020 was an extremely unusual six-month.The globally rampant and spreading COVID-19pandemic worsened the global economy and caused unprecedented pressure and challenges to the development of China. Striving to maintain overall stability in its production operations while using all endeavours to make up for its losses due to the pandemic, China Shenhua insisted upon being guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, resolutely implemented measures proposed by the government for "Six Stabilities" and "Six Guarantees", and made efforts to achieve the requirements of "Three Stabilities, Four Guarantees and One Enhancement", as well as uniting all of its employees against difficulties. In the first half of this year, the Company achieved RMB20,370 million in profit for the period attributable to equity holders of the Company and basic earnings per share of RMB1.024, representing a year-on-yeardecrease of 16.0%. As of 30 June 2020, the market capitalisation of China Shenhua reached USD38.8 billion.
We strictly guard and are resolute to win the fight against the pandemic. In the face of the sudden pandemic, we resolutely implement the essence of the series of important speeches delivered by Xi Jinping on coordinated efforts for epidemic prevention and control and socio-economicdevelopment by fully motivating our staff to plan for and realise "One Prevention and Three Guarantees" (prevention from the spreading of COVID-19and guarantees for safe production, employee health and energy supply), whereby giving rise to powerful collaboration. To strengthen basic guarantee, we immediately established a leading group for pandemic prevention and control and a work mechanism for regularised joint prevention and control, as well as making relevant detailed plans for various industries. There have been no confirmed COVID-19cases in our 24 coal mines; therefore, all of them resumed production before 10 February, leading to gradually restored operations month by month, stabilising and recovering economic benefits, and fully guaranteed stable energy supply during the special period. We endeavoured to erect the line of defense to prevent imported and cluster cases and ramped up caring for its overseas workers, which led to "zero infections" among its overseas workers and "zero imported cases" during the pandemic, passing the significant test arising from this massive battle against COVID-19.
We maintained a clear-cut stand, and always upheld and strengthened party building. We firmly develop still greater consciousness of the need to maintain political integrity, think in big-pictureterms, follow the leadership core, and keep in alignment, foster stronger confidence in the path, theory, system, and culture of socialism with Chinese characteristics, uphold the strong leadership of the Party Central Committee and Party Committee with General Secretary Xi Jinping as its core, as well as the authority and centralised, unified leadership of the Central Committee, thoroughly bear in mind the clarion call that "socialism is realised by earnest work", insist on simultaneous pandemic prevention and control and Party building, strengthen the promotion of political ideology, and fulfill our party building responsibilities. We also organised a series of activities such as those featuring the concepts of "being a pioneer in the fight against COVID-19and being brave in times of crisis", and "being a pioneer during battles to strive for win-win".Taking full advantage of online instruments such as audio and videos, the Company actively provided trainings to cultivate knowledgeable, skilled, innovative, loyal and responsible staff team, in order to offer solid guarantee for the realisation of the Company's strategies.
10 China Shenhua Energy Company Limited
Section IV Chairman's Statement (Continued)
The Company maintained its highly effective synergy and core competitiveness as a united entity. The Company attaches high importance to resources sharing, in-depthcollaboration, synergy effects and low-costoperations to continuously enhance its integrated operational model, while increasing industrial consolidation and its products' added value to solidify and boost its core competitiveness. Also, the Company integrated its production, operations and marketing to establish a comprehensive internal sub-marketand complete internal industrial chain; integrated the value-addedprocesses of its coal, power and polyolefin products to increase resource utilisation rates and reduce integrated costs; integrated its mines, roads and port facility platforms to achieve highly effective scheduling and overall coordination to ensure the balance and stability of freight organisations, and integrated the management of its employees, finance, goods, technology and value to coordinate the arrangements for its employees, finance, goods and information and their coordinated relationships, bringing forth the overall advantages to the full extent. In terms of its coal segment, the Company worked hard in our production and operations and achieved 145.6 million tonnes of commercial coal production, exceeding its coal production and supply targets. Concerning its transportation segment, the Company developed its potential, improved its effectiveness and carried out refined management to further bolster its transportation organisations, thereby achieving 133.3 billion tonne kilometres in aggregate for transportation turnover of self-ownedrailways, 0.1152 billion tonnes loading volume at Huanghua Port and Tianjin Coal Dock, and 42.9 billion tonne nautical miles for shipment turnover. In regard to its power segment, the Company comprehensively strengthened its management of its equipment reliability and the marketing, generating 62.82 billion kWh of power and average utilisation of 2,031 hours for its coal-firedunits, 37 hours higher than the national average. Twelve of the Company's coal- fired units were awarded at a national benchmarking contest for coal-firedpower efficiency, four at a national benchmarking contest for coal-firedoperation reliability. In relation to coal chemical segment, the Company coordinated its production load and adjusted its product structure in a timely manner, realising polyolefin product sales of approximately 346,200 tonnes. In the first half of 2020, some of the Company's operational data recorded year-on-yeardecreases; nevertheless, given the daunting environments both at home and abroad, its results were, in fact, both precious and hard earned.
The Company worked hard and comprehensively promoted high-quality development. The Company resolutely implemented the new energy safety strategy of "four reforms and one cooperation", paid close attention to the formulation of its development strategy, planned for the 14th Five-YearPlan, in order to accelerate its advancement as the world's first-classlisted energy company and other tasks. The Company actively pushed for the preliminary work of the coal mine project in Xinjie. 79% of the main track of Huangda Railway has been laid, and the coal-firedprojects such as Jinjie Phase III have been implemented orderly. It also accelerated our technological input and improved our innovation capabilities. The Company achieved active technological progress in its coal, transportation and power segments, with smart coal mining, intelligent working surfaces, mining robots, and smart coal collection plants for its coal segment; moving blocks, driverless driving, and 5G-basedintelligent scheduling for its transportation segment; and smart power generation, clean and efficient power generation, big data analysis and artificial intelligence applications for its power segment. In the first half of this year, the Company obtained 653 authorised patents, 136 of which were invention patents. As of 30 June 2020, the Company had accumulated 4,999 valid authorised patents, including 1,101 invention patents.
2020 Interim Report 11
Section IV Chairman's Statement (Continued)
We acted responsibly and actively fulfilled our social responsibilities. We comprehensively strengthened our ESG (environment, social responsibilities and corporate governance) governance and established a comprehensive management structure to promote the standardised construction of our ESG governance structure. Apart from that, we insisted on people-orientedstandpoints for safe production, paid close attention to risk prevention and control, eliminating pitfalls and carrying out innovative reforms to ensure risks are controllable in various production systems. The fatality rate per million tonnes of raw coal output was nil, maintaining its internationally leading level in safe production. Solidifying the concept of "lucid waters and lush mountains are invaluable assets", we vigorously carried out pollution prevention and ecological governance, and created green mines, with 11 of our mines listed as national green mines; we developed green coal power and achieved desulfurisation, denitrification and ultra-lowemissions for all of our coal-firedunits, with multiple industry-leadinggreen technologies. Insisting on giving back to the community, we, in the first half of this year, invested RMB111 million in targeted poverty alleviation funds and executed 33 related projects, with smooth progress in the key ones, and obtained noticeable results in poverty alleviation work; many of our on- spot leaders were named excellent poverty alleviation workers by the local governments.
We united and made joint efforts to bravely embrace future challenges. In the second half of 2020, as the pandemic situation is still complicated and severe, its spread abroad was still not under effective control, and there were still cluster cases in certain regions of the PRC. Facing considerable pressure on the domestic and international economies, the Company will be determined, confident and calm in overcoming difficulties, implement regularised measures for epidemic prevention and control, capitalise on its integrated strengths and strong anti-riskcapabilities, in an effort to repay investors and society by achieving high-qualitydevelopment and resolutely realising its yearly targets. The Company will persistently insist on new development concepts and concentrate on its major businesses by grasping opportunities from "new infrastructure, new urbanisation initiatives and major projects (兩新一重)" to vigorously expand its effective investment and actively cater for regional investment needs, in an attempt to secure a number of premium projects. Also, the Company will accelerate the construction of such projects as coal-firedprojects and Huangda Railway; step up technological innovation, perfect its scientific research system and carry out key technological tasks in a high quality manner; enhance mining mechanisation and automation construction, promote technologies such as the application of unmanned driving in open-pitmines, and lift the operational levels of smart mines, smart power stations and smart transportation; fulfil its social responsibilities, resolutely accomplish its poverty alleviation mission, and effectively manage work in such areas as green mines, dust control and "three wastes" treatment, so as to reinforce the protection for the environmental ecosystem.
"Life is like a long road of hurdles and we simply have to fight albeit dangerous." During the fight against COVID-19, China's national spirits are once again severely tested. However, with high self-confidence and strong spirit, we will soon realise the "first centenary goal", whose strategic achievement is our historic responsibility and great honour. This is an exceptionally unusual year, when we bear significant responsibilities. As the path ahead is lengthy, we have even greater needs to make plans and efforts. With the concerted efforts by its board of directors, management and all employees, and under the staunch support of its shareholders and people from all walks of life, China Shenhua will fully fulfil its due responsibilities and forge ahead with extra caution, in order to realise high-quality development and create greater value.
Wang Xiangxi
Chairman
28 August 2020
Overview of China Shenhua's Operating Results for the First Half of 2020
Table 1 Operation Targets and Status of Completion
Percentage of | ||||
Completed in | completion in | |||
Target for | the first half of | the first half | ||
2020 | 2020 | of 2020 % | ||
Commercial coal production | 100 million tonnes | 2.68 | 1.456 | 54.3 |
Coal sales | 100 million tonnes | 4.03 | 2.053 | 50.9 |
Power generation | 100 million kWh | 1,451 | 628.2 | 43.3 |
Revenue | RMB100 million | 2,163 | 1,050.16 | 48.6 |
Cost of sales | RMB100 million | 1,484 | 699.57 | 47.1 |
Selling, general and | RMB100 million | 143 | 44.24 | 30.9 |
administrative expenses | ||||
(including R&D) and net | ||||
finance costs |
Table 2 | Financial Indicators | ||||
The first half | The first half | Change | |||
of 2020 | of 2019 | % | |||
Revenue | RMB million | 105,016 | 116,365 | (9.8) | |
Profit for the period | RMB million | 24,784 | 28,996 | (14.5) | |
EBITDA | RMB million | 41,142 | 47,622 | (13.6) | |
Profit for the period | RMB million | 20,370 | 24,240 | (16.0) | |
attributable to equity | |||||
holders of the Company | |||||
Basic earnings per share | RMB/share | 1.024 | 1.219 | (16.0) | |
Net cash generated from | RMB million | 53,720 | 41,043 | 30.9 | |
operating activities | |||||
Net cash generated from | RMB million | 32,175 | 34,203 | (5.9) | |
operating activities |
Table 3 | Segment Results | ||||||||||||||||||||||
Coal | Power | Railway | Port | Shipping | Coal chemical | Unallocated items | Eliminations | Total | |||||||||||||||
The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | The first half of 2020 | The first half of 2019 | ||||||
RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | ||||||
Revenue from external | 75,288 | 81,996 | 22,568 | 26,178 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 764 | 646 | - | - | 105,016 | 116,365 | |||||
customers | |||||||||||||||||||||||
Inter-segment revenue | 8,913 | 11,642 | 36 | 43 | 15,452 | 16,857 | 2,466 | 2,643 | 523 | 753 | - | - | 530 | 554 | (27,920) | (32,492) | - | - | |||||
Subtotal of segment revenue | 84,201 | 93,638 | 22,604 | 26,221 | 18,188 | 20,174 | 2,934 | 2,952 | 1,306 | 1,588 | 2,409 | 3,084 | 1,294 | 1,200 | (27,920) | (32,492) | 105,016 | 116,365 | |||||
Segment cost of sales | (66,104) | (72,205) | (16,970) | (20,562) | (8,843) | (10,043) | (1,512) | (1,471) | (1,201) | (1,420) | (2,407) | (2,653) | (17) | (12) | 27,097 | 31,634 | (69,957) | (76,732) | |||||
Segment profit/(loss) from | 15,569 | 19,211 | 4,831 | 4,672 | 8,857 | 9,608 | 1,293 | 1,349 | 28 | 94 | (75) | 356 | 1,014 | 1,193 | (823) | (858) | 30,694 | 35,625 | |||||
operations | |||||||||||||||||||||||
As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | As at | ||||||
30 June 2020 | 31 December 2019 | 30 June 2020 | 31 December 2019 | 30 June 2020 | 31 December 2019 | 30 June 2020 | 31 December 2019 | 30 June 2020 31 December 2019 | 30 June 2020 31 December 2019 | 30 June 2020 31 December 2019 | 30 June 2020 31 December 2019 | 30 June 2020 31 December 2019 | |||||||||||
RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | ||||||
Segment total assets | 234,789 | 224,344 | 150,068 | 148,754 | 130,705 | 128,578 | 22,580 | 22,197 | 6,678 | 6,516 | 8,932 | 9,202 | 468,727 | 449,806 | (442,202) | (426,314) | 580,277 | 563,083 | |||||
Segment total liabilities | (111,197) | (108,449) | (107,617) | (109,730) | (53,915) | (56,774) | (7,786) | (8,285) | (547) | (397) | (3,103) | (3,346) | (228,258) | (188,866) | 351,403 | 332,982 | (161,020) | (142,865) |
Change in unit production cost | Increased | Increased by |
of self-produced coal | by about 8% | 5.5% year-on- |
year-on-year | year |
excluding the effect of Shenhua Finance Company
Table 6 Power Business | |
Standard | |
coal | Increase/ |
Table 7 Cost of Sales of Coal Segment
The first half of | The first half of | Change |
2020 | 2019 |
Table 8 Cost of Sales of Power Segment
The first half of 2020 | The first half of 2019 | ||
Power | Unit | Power | Change in |
output | output | ||
Cost dispatch | cost | Cost dispatch Unit cost | unit cost |
Table 4 | Operation Data | ||||
The first half | The first half | Change | |||
of 2020 | of 2019 | % | |||
Commercial coal production | million tonnes | 145.6 | 145.4 | 0.1 | |
Coal sales | million tonnes | 205.3 | 217.1 | (5.4) | |
Transportation turnover of self- | billion tonne km | 133.3 | 142.9 | (6.7) | |
owned railways | |||||
Loading volume at Huanghua | million tonnes | 93.7 | 100.6 | (6.9) | |
Port | |||||
Loading volume at Tianjin Coal | million tonnes | 21.5 | 22.1 | (2.7) | |
Dock | |||||
Shipping volume | million tonnes | 51.3 | 54.8 | (6.4) |
Table 5 Commercial Coal Production Volume
The first half of | The first half of | ||
2020 | 2019 | Change | |
million tonnes | million tonnes | % | |
Total production | 145.6 | 145.4 | 0.1 |
By mines | |||
Shendong Mines | 93.2 | 94.9 | (1.8) |
Zhunge'er Mines | 31.0 | 25.4 | 22.0 |
Shengli Mines | 9.4 | 9.8 | (4.1) |
Baorixile Mines | 11.2 | 14.2 | (21.1) |
Baotou Mines | 0.8 | 1.1 | (27.3) |
Total | consumption | (decrease) | |||||||||
Gross | for power | Total installed | in installed | Equity | |||||||
power | Average | outpour | capacity as at | capacity for | Total installed | installed | |||||
Power plants | Power grid | Location | power | output | utilisation | dispatch | 31 December | the first half | capacity as at | capacity as at | |
generation | dispatch | hours | Power tariff | 2019 | of 2020 | 30 June 2020 | 30 June 2020 | ||||
100 million kWh | 100 million kWh | hours | g/kWh | RMB/mWh | MW | MW | MW | MW | |||
Zhunge'er Power | North China Power Grid | Inner | 16.5 | 15.1 | 2,503 | 349 | 239 | 660 | - | 660 | 381 |
Mongolia | |||||||||||
Shendong Power | Northwest/North China/ | Inner | 113.6 | 105.1 | 1,989 | 324 | 290 | 5,814 | (100) | 5,714 | 5,228 |
Shaanxi Provincial | Mongolia | ||||||||||
Local Power Grid | |||||||||||
Cangdong Power | North China Power Grid | Hebei | 52.6 | 50.1 | 2,086 | 299 | 320 | 2,520 | - | 2,520 | 1,285 |
Dingzhou Power | North China Power Grid | Hebei | 50.7 | 46.9 | 2,012 | 307 | 320 | 2,520 | - | 2,520 | 1,021 |
Taishan Power | South China Power Grid | Guangdong | 72.2 | 67.5 | 1,417 | 315 | 389 | 5,090 | - | 5,090 | 4,072 |
RMB million | RMB million | % | |
Cost of coal purchased | 19,111 | 24,073 | (20.6) |
Raw materials, fuel and power | 3,743 | 3,571 | 4.8 |
Personnel expenses | 3,346 | 3,206 | 4.4 |
Repairs and maintenance | 1,359 | 1,214 | 11.9 |
Depreciation and amortisation | 2,642 | 2,629 | 0.5 |
Cost of transportation | 23,587 | 25,598 | (7.9) |
Tax and surcharges | 4,452 | 4,235 | 5.1 |
Other costs | 7,864 | 7,679 | 2.4 |
Total cost of sales | 66,104 | 72,205 | (8.4) |
RMB | 100 | RMB/ | RMB | 100 | RMB/ | |||
million | million | % | ||||||
million | kWh | mWh | million | kWh | mWh | |||
Cost of power output dispatch | 15,815 | 587.6 | 269.1 | 20,120 | 749.6 | 268.4 | 0.3 | |
Raw materials, fuel and | 11,186 | 587.6 | 190.4 | 14,887 | 749.6 | 198.6 | (4.1) | |
power | 820 | 587.6 | 14.0 | 974 | 749.6 | 13.0 | 7.7 | |
Personnel expenses | ||||||||
Repairs and maintenance | 789 | 587.6 | 13.4 | 743 | 749.6 | 9.9 | 35.4 | |
Depreciation and | 2,477 | 587.6 | 42.2 | 2,873 | 749.6 | 38.3 | 10.2 | |
amortisation | 543 | 587.6 | 9.1 | 643 | 749.6 | 8.6 | 5.8 | |
Others | ||||||||
Tax and surcharges | 298 | 393 | ||||||
Other operating costs | 857 | 49 | ||||||
Total cost of sales | 16,970 | 20,562 |
Shipment turnover | billion tonne nm | 42.9 | 44.7 | (4.0) |
Gross power generation | billion kWh | 62.82 | 79.90 | (21.4) |
Total power output dispatch | billion kWh | 58.76 | 74.96 | (21.6) |
Sales of polyethylene | thousand tonnes | 182.0 | 186.5 | (2.4) |
Sales of polypropylene | thousand tonnes | 164.2 | 170.6 | (3.8) |
By regions | |||
Inner Mongolia | 97.3 | 98.4 | (1.1) |
Shaanxi | 46.7 | 45.0 | 3.8 |
Shanxi | 1.6 | 2.0 | (20.0) |
Huizhou Thermal | South China Power Grid | Guangdong | 19.7 | 17.9 | 2,988 | 310 | 333 | 660 | - | 660 | 660 |
Fujian Energy | East China Power Grid | Fujian | 62.1 | 59.5 | 2,211 | 291 | 350 | 2,810 | - | 2,810 | 1,459 |
Jinjie Energy | North China Power Grid | Shaanxi | 68.4 | 62.7 | 2,849 | 321 | 271 | 2,400 | - | 2,400 | 1,680 |
Shouguang Power | North China Power Grid | Shandong | 40.2 | 38.2 | 1,988 | 280 | 349 | 2,020 | - | 2,020 | 1,212 |
Jiujiang Power | Central China Power | Jiangxi | 42.9 | 41.0 | 2,146 | 279 | 364 | 2,000 | - | 2,000 | 2,000 |
Grid |
Table 11 Cost of Sales of
Transportation and Coal
Chemical Segments | Railway | Port | Shipping | Coal Chemical | |||
The first | The first | The first | The first | The first | The first | The first | The first |
half of | half of | half of | half of | half of | half of | half of | half of |
Table 9 Domestic Coal Sales Volume
The first half | Proportion | The first half | |||
of 2020 | of domestic sales | of 2019 | Change | ||
million tonnes | % | million tonnes | % | ||
Domestic sales | 204.0 | 100.0 | 214.5 | (4.9) | |
By regions | Northern China | 61.3 | 30.0 | 69.1 | (11.3) |
Eastern China | 81.9 | 40.2 | 84.9 | (3.5) | |
Central China and | 35.3 | 17.3 | 39.5 | (10.6) | |
Southern China | |||||
Northeast China | 18.6 | 9.1 | 16.4 | 13.4 | |
Others | 6.9 | 3.4 | 4.6 | 50.0 | |
By usage | Thermal coal | 162.2 | 79.6 | 171.4 | (5.4) |
Metallurgy | 12.5 | 6.1 | 12.4 | 0.8 | |
Chemical (including | 26.2 | 12.8 | 28.3 | (7.4) | |
coal slurry) |
Table 10 Status of Completion of Capital Expenditure
Completion in the first | ||
Plan for 2020 | half of 2020 | |
RMB100 million | RMB100 million | |
Coal segment | 56.1 | 18.01 |
Power segment | 121.5 | 15.46 |
Transportation segment | 114.5 | 6.91 |
Including: Railways | 99.4 | 6.56 |
Ports | 15.0 | 0.35 |
Shipping | 0.1 | - |
Coal chemical segment | 16.1 | 0.60 |
Others | 10.1 | - |
Sichuan Energy (coal-fired | Sichuan Power Grid | Sichuan | 25.8 | 23.7 | 2,051 | 333 | 379 | 1,260 | - | 1,260 | 604 |
power) | |||||||||||
Mengjin Power | Central China Power | Henan | 19.2 | 17.9 | 1,601 | 310 | 323 | 1,200 | - | 1,200 | 612 |
Grid | |||||||||||
Liuzhou Power | Guangxi Power Grid | Guangxi | 14.9 | 14.1 | 2,128 | 317 | 344 | 700 | - | 700 | 490 |
EMM Indonesia | PLN | Indonesia | 7.5 | 6.5 | 2,506 | 366 | 551 | 300 | - | 300 | 210 |
Total of coal-fired power plants/weighted average | 606.3 | 566.2 | 2,031 | 310 | 330 | 29,954 | (100) | 29,854 | 20,914 | ||
Other power plants | |||||||||||
Beijing Gas-fired Power | North China Power Grid | Beijing | 19.3 | 18.8 | 2,028 | 186 | 561 | 950 | - | 950 | 950 |
Sichuan Energy | Sichuan Provincial Local | Sichuan | 2.6 | 2.6 | 2,095 | - | 254 | 125 | - | 125 | 48 |
(hydropower) | Power Grid |
Table 13 Coal Resources Reserve |
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||
RMB | RMB | Change | RMB | RMB | Change | RMB | RMB | Change | RMB | RMB | Change | |
million | million | % | million | million | % | million | million | % | million | million | % | |
Cost of internal transportation business | 6,814 | 7,682 | (11.3) | 1,128 | 1,204 | (6.3) | 458 | 663 | (30.9) | / | / | / |
Raw materials, fuel and power | 1,016 | 1,177 | (13.7) | 140 | 170 | (17.6) | 124 | 137 | (9.5) | 1,304 | 1,376 | (5.2) |
Personnel expenses | 1,787 | 1,624 | 10.0 | 134 | 151 | (11.3) | 1 | 1 | - | 152 | 168 | (9.5) |
Repairs and maintenance | 1,651 | 2,081 | (20.7) | 162 | 194 | (16.5) | 7 | 21 | (66.7) | 140 | 205 | (31.7) |
Depreciation and amortization | 1,915 | 1,881 | 1.8 | 365 | 395 | (7.6) | 54 | 59 | (8.5) | 406 | 422 | (3.8) |
External transportation charges | 264 | 588 | (55.1) | / | / | / | 212 | 377 | (43.8) | / | / | / |
Others | 181 | 331 | (45.3) | 327 | 294 | 11.2 | 60 | 68 | (11.8) | 64 | 112 | (42.9) |
Cost of external transportation business | 1,346 | 1,531 | (12.1) | 140 | 142 | (1.4) | 742 | 755 | (1.7) | / | / | / |
Cost of prime business | 8,160 | 9,213 | (11.4) | 1,268 | 1,346 | (5.8) | 1,200 | 1,418 | (15.4) | 2,066 | 2,283 | (9.5) |
Tax and surcharges | 193 | 201 | (4.0) | 71 | 89 | (20.2) | 1 | 2 | (50.0) | 56 | 92 | (39.1) |
Cost of other business | 490 | 629 | (22.1) | 173 | 36 | 380.6 | / | / | / | 285 | 278 | 2.5 |
Total cost of sales | 8,843 | 10,043 | (11.9) | 1,512 | 1,471 | 2.8 | 1,201 | 1,420 | (15.4) | 2,407 | 2,653 | (9.3) |
Others | 3.1 | 1.5 | 2.4 | 29.2 |
Total | 318.3 | 40.98 |
Coal resources (under PRC standard) | Recoverable reserve (under PRC standard) | Marketable reserve (under JORC standard) |
Table 14 Seaborne Coal Sales
Table15 Railway Transportation Turnover |
Table 12 | Coal Sales Price | ||||||||||||
The first half of 2020 | The first half of 2019 | Change | |||||||||||
Percentage to | Price | Percentage to | Price | Price | |||||||||
Sales volume | total sales volume | (excluding tax) | Sales volume | total sales volume | (excluding tax) | Sales volume | (excluding tax) | ||||||
million tonnes | % | RMB/tonne | million tonnes | % | RMB/tonne | % | % | ||||||
Total sales/average price (excluding tax) | 205.3 | 100.0 | 398 | 217.1 | 100.0 | 420 | (5.4) | (5.2) | |||||
I. By contract pricing mechanisms | |||||||||||||
(I) | Sales through Trading Group | 197.7 | 96.3 | 407 | 209.0 | 96.3 | 429 | (5.4) | (5.1) | ||||
1. | Annual long-term agreement | 88.3 | 43.0 | 382 | 99.1 | 45.6 | 381 | (10.9) | 0.3 | ||||
2. | Monthly long-term agreement | 73.7 | 35.9 | 441 | 85.9 | 39.6 | 481 | (14.2) | (8.3) | ||||
3. | Spot commodity | 35.7 | 17.4 | 397 | 24.0 | 11.1 | 442 | 48.8 | (10.2) | ||||
(II) | Direct sales of coal mines | 7.6 | 3.7 | 179 | 8.1 | 3.7 | 191 | (6.2) | (6.3) | ||||
II. By internal and external customers | |||||||||||||
(I) | Sales to external customers | 181.9 | 88.6 | 403 | 188.0 | 86.6 | 427 | (3.2) | (5.6) | ||||
(II) | Sales to internal power segment | 21.1 | 10.3 | 364 | 26.7 | 12.3 | 377 | (21.0) | (3.4) | ||||
(III) Sales to internal coal chemical segment | 2.3 | 1.1 | 354 | 2.4 | 1.1 | 361 | (4.2) | (1.9) | |||||
As at | As at 31 | As at | As at 31 | As at | As at 31 | ||||
Mines | 30 June 2020 | December 2019 | Change | 30 June 2020 | December 2019 | Change | 30 June 2020 | December 2019 | Change |
100 million tonnes | 100 million tonnes | % | 100 million tonnes | 100 million tonnes | % | 100 million tonnes | 100 million tonnes | % | |
Shendong Mines | 157.0 | 158.1 | (0.7) | 89.8 | 90.5 | (0.8) | 45.4 | 46.3 | (1.9) |
Zhunge'er Mines | 38.2 | 38.5 | (0.8) | 30.5 | 30.8 | (1.0) | 19.8 | 20.1 | (1.5) |
Shengli Mines | 20.0 | 20.1 | (0.5) | 13.6 | 13.7 | (0.7) | 1.9 | 2.0 | (5.0) |
Baorixile Mines | 13.6 | 13.7 | (0.7) | 11.4 | 11.5 | (0.9) | 11.7 | 11.8 | (0.8) |
Baotou Mines | 0.5 | 0.5 | - | 0.3 | 0.3 | - | - | - | / |
Xinjie Mines (under exploration rights permit | 64.2 | 64.2 | - | / | / | / | / | / | / |
to Taigemiao North Area) | |||||||||
Watermark Mines (under exploration rights | 4.8 | 4.8 | - | / | / | / | / | / | / |
permit) | |||||||||
Total | 298.3 | 299.9 | (0.5) | 145.6 | 146.8 | (0.8) | 78.8 | 80.2 | (1.7) |
The first half | The first half | ||
of 2020 | of 2019 | Change | |
million tonnes | million tonnes | % | |
Through self-owned ports | 106.4 | 112.8 | (5.7) |
Huanghua Port | 85.4 | 91.7 | (6.9) |
Tianjin Coal Dock | 21.0 | 21.1 | (0.5) |
Zhuahai Coal Dock | - | - | / |
Through third-party ports | 13.5 | 16.7 | (19.2) |
Total seaborne coal sales | 119.9 | 129.5 | (7.4) |
Table 16 Shipping Volume
The first half | The first half | ||
of 2020 | of 2019 | Change | |
million tonnes | million tonnes | % | |
The Group's internal customers | 18.4 | 24.0 | (23.3) |
External customers | 32.9 | 30.8 | 6.8 |
Total shipping volume | 51.3 | 54.8 | (6.4) |
The first half | The first half | ||||
of 2020 | of 2019 | ||||
billion | billion | Change | |||
tonne km | tonne km | % | |||
Self-owned railways | 133.3 | 142.9 | (6.7) | ||
Shenshuo railway | 25.7 | 25.6 | 0.4 | ||
Shuohuang-Huangwan Railway | 85.1 | 87.7 | (3.0) | ||
Dazhun Railway | 12.8 | 16.1 | (20.5) | ||
Baoshen Railway | 4.2 | 4.7 | (10.6) | ||
Ganquan Railway | 0.4 | 0.7 | (42.9) | ||
Bazhun Railway | 0.5 | 2.2 | (77.3) | ||
Zhunchi Railway | 4.6 | 5.9 | (22.0) | ||
Tahan Railway | - | - | / | ||
State-owned railways | 16.3 | 20.1 | (18.9) | ||
Total railway turnover | 149.6 | 163.0 | (8.2) | ||
Self-owned railways under | Planned annual | ||||
transportation | Commencement | Estimated | |||
construction | Length | capacity | year | completion year | |
Huangda Railway | 216.8km | 40 million tonnes | 2015 | 2020 |
豐寧 | 承德 | 2020 | |||||||||||||||||||||||
Fengning | |||||||||||||||||||||||||
Chengde | 主要資產分佈圖 Assets Distribution Map | ||||||||||||||||||||||||
Ganqimaodu | |||||||||||||||||||||||||
甘其毛都 | |||||||||||||||||||||||||
內蒙古自治區 | 張家口 | ||||||||||||||||||||||||
INNER MONGOLIA AUTONOMOUS REGION | Zhangjiakou | ||||||||||||||||||||||||
北京 | |||||||||||||||||||||||||
BEIJING | |||||||||||||||||||||||||
C7 | 大秦鐵路 | B5 | 呼倫貝爾 | ||||||||||||||||||||||
包頭 | 外西溝 | ||||||||||||||||||||||||
Daqin Railway | Hulunbeier | ||||||||||||||||||||||||
Baotou | Waixigou | ||||||||||||||||||||||||
大同東 | 秦皇島港 | A4 | 黑龍江 | ||||||||||||||||||||||
C4 | Datong East | Qinhuangdao Port | Heilongjiang | ||||||||||||||||||||||
A5 | 唐山 | ||||||||||||||||||||||||
Tangshan | |||||||||||||||||||||||||
F1 | A2 | 點岱溝 | 天津市 | ||||||||||||||||||||||
塔然高勒 | Diandaigou | ||||||||||||||||||||||||
韓家村 | TIANJIN | ||||||||||||||||||||||||
Tarangaole | C5 | Hanjiacun | C8 | D2 | 內蒙古自治區 | 吉林 | |||||||||||||||||||
C6 | B3 | Jilin | |||||||||||||||||||||||
塔本陶勒蓋 | Inner Mongolia Autonomous Region | ||||||||||||||||||||||||
C10 巴圖塔 | 東勝 | 準格爾 | 曹妃甸港 | ||||||||||||||||||||||
Dongsheng | 河北省 | Tavan Tolgoi | A3 | ||||||||||||||||||||||
浩勒報吉 | Batuta | Zhunge'er | Caofeidian Port | ||||||||||||||||||||||
HEBEI | |||||||||||||||||||||||||
Haolebaoji | 新疆 | ||||||||||||||||||||||||
朔州西 | C3 | ||||||||||||||||||||||||
Xinjiang | |||||||||||||||||||||||||
神東站 | Shuozhou West | 遼寧 | |||||||||||||||||||||||
Liaoning | |||||||||||||||||||||||||
A7 | A1 | Shendong | B1 | ||||||||||||||||||||||
北京 | |||||||||||||||||||||||||
D1 | |||||||||||||||||||||||||
Beijing | |||||||||||||||||||||||||
神池 | 神池南 | B2 | 黃驊 | 天津 | |||||||||||||||||||||
B4 | Shenchi | Shenchi South | 定州西 | C2 | Huanghua | Tianjin | |||||||||||||||||||
B6 | 肅寧北 | 東營 | |||||||||||||||||||||||
神木北站 | C1 | 瓦塘 | Dingzhou West | Suning North | Dongying | ||||||||||||||||||||
Shenmu North | 河北 | ||||||||||||||||||||||||
Watang | |||||||||||||||||||||||||
C9 | Hebei | ||||||||||||||||||||||||
山西省 | |||||||||||||||||||||||||
寧夏 | 山東 | ||||||||||||||||||||||||
SHANXI | 青海 | Ningxia | 山西 | ||||||||||||||||||||||
Shandong | |||||||||||||||||||||||||
陝西省 | Qinghai | Shanxi | |||||||||||||||||||||||
B9 | |||||||||||||||||||||||||
SHAANXI | |||||||||||||||||||||||||
黃河 | B13 | 大家洼 | |||||||||||||||||||||||
Dajiawa | |||||||||||||||||||||||||
YELLOW RIVER | 甘肅 | 江蘇 | |||||||||||||||||||||||
吳堡 | Gansu | 陝西 | 河南 | Jiangsu | |||||||||||||||||||||
靖邊 | Shaanxi | ||||||||||||||||||||||||
Henan | |||||||||||||||||||||||||
Wubu | |||||||||||||||||||||||||
Jingbian | |||||||||||||||||||||||||
安徽 | E1 | ||||||||||||||||||||||||
Anhui | 上海 | ||||||||||||||||||||||||
Shanghai | |||||||||||||||||||||||||
西藏 | 湖北 | ||||||||||||||||||||||||
Tibet | |||||||||||||||||||||||||
煤礦 COAL MINE | 電廠 POWER | Hubei | |||||||||||||||||||||||
四川 B10 | |||||||||||||||||||||||||
A1. | A2. | A3. 勝利礦區 | B2. | B3. | B4. | Sichuan | 浙江 | ||||||||||||||||||
神東礦區 | 准格爾礦區 | B1. | 滄東電力 | 定州電力 | 准能電力 | 神東電力 | |||||||||||||||||||
B15 | Zhejiang | ||||||||||||||||||||||||
Shendong Mines | Zhunge'er Mines | Shengli Mines | Cangdong Power | Dingzhou Power | Zhunge'er Power | Shendong Power | 重慶 | ||||||||||||||||||
A4. | 寶日希勒礦區 | A5. | 包頭礦區 | B5. | 北京燃氣 | B6. | 錦界能源 | B7. | 台山電力 | B8. | 惠州熱電 | Chongqing | |||||||||||||
Baorixile Mines | Baotou Mines | Beijing Gas Power | Jinjie Energy | Taishan Power | Huizhou Thermal | 中國 CHINA | 江西 | ||||||||||||||||||
湖南 | |||||||||||||||||||||||||
A6. | 澳大利亞沃特馬克煤礦項目(前期工作階段) | B9. | 孟津電力 | B10. 四川能源 | B11. 福建能源 | B12. | 南蘇EMM | 長江 | |||||||||||||||||
Jiangxi | |||||||||||||||||||||||||
Hunan | |||||||||||||||||||||||||
Watermark Coal Project in Australia | Mengjin Power | Sichuan Energy | Fujian Energy | EMM Indonesia | Yangtze River | B11 | 釣魚島 | ||||||||||||||||||
(preliminary work in progress) | Diaoyu Islands | ||||||||||||||||||||||||
B13. 壽光電力 | B14. 柳州電力 | B15. 九江電力 | B16. | 福建 | |||||||||||||||||||||
A7. | 新街台格廟勘查區(前期工作階段) | 爪哇電力 | 貴州 | ||||||||||||||||||||||
Xinjie Taigemiao Exploration Area | Shouguang Power | Liuzhou Power | Jiujiang Power | Jawa Power | Guizhou | Fujian | |||||||||||||||||||
(preliminary work in progress) | |||||||||||||||||||||||||
圖例 Legend | |||||||||||||||||||||||||
省界線 | 台灣 | ||||||||||||||||||||||||
Taiwan | |||||||||||||||||||||||||
B12 | Provincial Boundary | 雲南 | B14 | ||||||||||||||||||||||
鐵路 RAILWAY | 港口 PORT | 航運 SHIPPING | 廣東 | ||||||||||||||||||||||
Yunnan | |||||||||||||||||||||||||
B16 | 國有或地方鐵路線 | 廣西 | Guangdong | B8 | |||||||||||||||||||||
C1. | 神朔鐵路 | C2. | 朔黃鐵路 | C3. | 黃萬鐵路 | D1. | 黃驊港 | E1. | 神華中海航運 | State-owned or Local Railway | |||||||||||||||
Guangxi | |||||||||||||||||||||||||
Shenshuo Railway | Shuohuang Railway | Huangwan Railway | Huanghua Port | Shenhua Zhonghai Shipping Company | |||||||||||||||||||||
自有運營鐵路 | B7 | ||||||||||||||||||||||||
C4. | 大准鐵路 | C5. | 包神鐵路 | C6. | 巴准鐵路 | D2. | 天津煤碼頭 | ||||||||||||||||||
Self-owned Railway (in operation) | |||||||||||||||||||||||||
Dazhun Railway | Baoshen Railway | Bazhun Railway | Tianjin Coal Dock | ||||||||||||||||||||||
香港 | |||||||||||||||||||||||||
D3. | 自有在建鐵路 | ||||||||||||||||||||||||
C7. | 甘泉鐵路 | C8. | 准池鐵路 | 珠海煤碼頭 | D3 | 澳門 | Hongkong | ||||||||||||||||||
Zhuhai Coal Dock | 煤化工 COAL CHEMICAL | Self-owned Railway (under construction) | |||||||||||||||||||||||
Ganquan Railway | Zhunchi Railway | ||||||||||||||||||||||||
Macau | |||||||||||||||||||||||||
C9. | C10. 塔韓鐵路 | 自有礦區 | |||||||||||||||||||||||
黃大鐵路(在建) | 註: ① 於2020年6月30日之分佈圖,僅做示意 | F1. | 包頭煤化工 | A6 | Self-owned mines | ||||||||||||||||||||
Huangda Railway (under construction) | Tahan Railway | ② 以審圖號GS(2016)2887號地圖為基礎編製 | 準班輪航線 | ||||||||||||||||||||||
Note: ① This map as at 30 June 2020 is for illustrative purpose only. | Baotou Coal Chemical | ||||||||||||||||||||||||
Quasi-liner Shipping Route | 海南 | ||||||||||||||||||||||||
② Prepared on the basis of the map with the approval number of "GS(2016)2887. | |||||||||||||||||||||||||
Hainan | |||||||||||||||||||||||||
18 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results
- DISCUSSION AND ANALYSIS ON OPERATION RESULTS
In the first half of the year, the Group actively responded to the impacts on the market demand and production and operation caused by the COVID-19 pandemic, focused efforts in quality improvement and efficiency increase, enhancing the integrated operation capability and the refined management level to strive for the achievement of annual operation targets.
The Group recorded a revenue of RMB105,016 million in the first half of 2020 (the first half of 2019: RMB116,365 million), achieving 48.6% of the business target for 2020, representing
- year-on-yeardecrease of 9.8%; a profit for the period of RMB24,784 million (the first half of 2019: RMB28,996 million), representing a year-on-year decrease of 14.5%; a profit for the period attributable to equity holders of the Company of RMB20,370 million (the first half of 2019: RMB24,240 million); and basic earnings RMB1.024/share (the first half of 2019: RMB1.219/share), representing a year-on-year decrease of 16.0%.
Major financial indicators of the Group for the first half of 2020 are as follows:
The first half | The first half | |||
Unit | of 2020 | of 2019 | Change | |
Return on total assets as | % | 4.3 | 5.1 | Decreased by |
at the end of the period | 0.8 percentage | |||
point | ||||
Return on net assets as | % | 5.8 | 7.2 | Decreased by |
at the end of the period | 1.4 percentage | |||
points | ||||
EBITDA | RMB million | 41,142 | 47,622 | Decreased by |
13.6% | ||||
As at | As at | |||
30 June | 31 December | |||
Unit | 2020 | 2019 | Change | |
Equity of shareholders | RMB/share | 17.67 | 17.90 | Decreased by |
per share | 1.3% | |||
Gearing ratio | % | 27.7 | 25.4 | Increased by |
2.3 percentage | ||||
points | ||||
Total debt to total equity | % | 9.6 | 10.6 | Decreased by |
ratio | 1.0 percentage | |||
point |
Note: Please refer to the section headed "Definitions" of this report for the calculations of the above indicators.
2020 Interim Report 19
Section V Discussion and Analysis on Operation Results (Continued)
- MAJOR OPERATION RESULTS DURING THE REPORTING PERIOD
-
Analysis on principal business
1. Analysis on Changes in the Major Items in the Consolidated Statement of Profit or Loss and Other Comprehensive Income and Consolidated Statement of Cash Flows
-
Analysis on principal business
Unit: RMB million | |||
The first half | The first half | ||
of 2020 | of 2019 | Change | |
% | |||
Revenue | 105,016 | 116,365 | (9.8) |
Operating costs | (69,957) | (76,732) | (8.8) |
Other gains and losses | 236 | 1,867 | (87.4) |
Loss allowances | (273) | 232 | (217.7) |
Other revenue | 297 | 362 | (18.0) |
Finance costs | (1,004) | (1,594) | (37.0) |
Share of results of associates | 484 | 192 | 152.1 |
Income tax | (6,507) | (7,937) | (18.0) |
Net cash generated from operating | 53,720 | 41,043 | 30.9 |
activities | |||
Of which: Net cash generated | 21,545 | 6,840 | 215.0 |
from operating | |||
activities of Shenhua | |||
Finance Company Note | |||
Net cash generated from operating | 32,175 | 34,203 | (5.9) |
activities excluding the effect of | |||
Shenhua Finance Company | |||
Net cash generated from investing | 41,940 | 26,468 | 58.5 |
activities | |||
Net cash used in financing activities | (29,489) | (9,314) | 216.6 |
Note: Except for the provision of services to the Group internally, as Shenhua Finance Company provides financial services including deposits and loans for entities other than the Group, the item represents the cash flows of deposits and loans and interest, fees and commission generated from this business.
- Explanations on the reasons for the changes in revenue
The revenue of the Group in the first half of 2020 recorded a year-on-year decrease. The main reasons for such change are:
- Influenced by downstream demand and coal source organisations, the Group recorded a year-on-year decrease of 5.4% and 5.2% in coal sales and average coal sales price, respectively;
20 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- The year-on-year decrease of 21.6% in power output dispatch was mainly attributable to: firstly, the power output dispatch for the same period of the previous year included the power output dispatch of the power plant as at January 2019 invested by the Company in the transaction of investing and establishing Beijing GD Power; secondly, the decrease in power demand in secondary and tertiary industry for the first half of 2020 resulted in the year-on-year decrease in the power output dispatch of the Group;
- Influenced by factors such as decrease in the price of international oil, the Group recorded year-on-year decreases in sales price and sales of polyolefin products;
- Decrease in transportation turnover of railways resulted in the decrease in revenue from railway transportation business of the Company;
- Decreases in maritime coal transportation charges and shipment turnover resulted in the decrease in revenue from shipping business.
The first half | The first half | |||
Major operating indicator | Unit | of 2020 | of 2019 | Change |
% |
- Coal
1. | Commercial coal production | Million tonnes | 145.6 | 145.4 | 0.1 | |
2. | Coal sales | Million tonnes | 205.3 | 217.1 | (5.4) | |
Of which: Self-produced | Million tonnes | 141.9 | 142.1 | (0.1) | ||
coal | ||||||
Purchased coal | Million tonnes | 63.4 | 75.0 | (15.5) | ||
(II) | Transportation | |||||
1. | Turnover of self-owned | Billion tonne | 133.3 | 142.9 | (6.7) | |
railways | kilometres | |||||
2. | Loading volume at | Million tonnes | 93.7 | 100.6 | (6.9) | |
Huanghua Port | ||||||
3. | Loading volume at Tianjin | Million tonnes | 21.5 | 22.1 | (2.7) | |
Coal Dock | ||||||
4. | Shipping volume | Million tonnes | 51.3 | 54.8 | (6.4) | |
Billion tonne | 42.9 | 44.7 | (4.0) | |||
5. | Shipment turnover | nautical miles | ||||
(III) | Power generation | |||||
1. | Gross power generation | Billion kWh | 62.82 | 79.90 | (21.4) | |
2. | Total power output dispatch | Billion kWh | 58.76 | 74.96 | (21.6) | |
(IV) | Coal chemicals | |||||
1. | Sales of polyethylene | Thousand tonnes | 182.0 | 186.5 | (2.4) | |
2. | Sales of polypropylene | Thousand tonnes | 164.2 | 170.6 | (3.8) |
Note: According to the comparative basis, the power generation and power output dispatch of the Group in the first half of 2019 were 66.13 billion kWh and 61.95 billion kWh, respectively.
2020 Interim Report 21
Section V Discussion and Analysis on Operation Results (Continued)
- Explanations on the reasons for the changes in cost of sales
The first half of 2020 | The first half of 2019 | ||||||
Breakdown of | Change of the | ||||||
cost of sales | Amount | Percentage | Amount | Percentage | amount | ||
RMB million | % | RMB million | % | % | |||
Cost of coal purchased | 19,111 | 27.3 | 24,073 | 31.4 | (20.6) | ||
Raw materials, fuel | 9,440 | 13.5 | 10,565 | 13.8 | (10.6) | ||
and power | |||||||
Personnel expenses | 6,608 | 9.4 | 6,487 | 8.5 | 1.9 | ||
Depreciation and | 8,350 | 11.9 | 8,733 | 11.4 | (4.4) | ||
amortisation | |||||||
Repairs and | 4,328 | 6.2 | 4,842 | 6.3 | (10.6) | ||
maintenance | |||||||
Transportation charges | 6,753 | 9.7 | 7,552 | 9.8 | (10.6) | ||
Tax and surcharge | 5,088 | 7.3 | 5,024 | 6.5 | 1.3 | ||
Other operating costs | 10,279 | 14.7 | 9,456 | 12.3 | 8.7 | ||
Total cost of sales | 69,957 | 100.0 | 76,732 | 100.0 | (8.8) | ||
The cost of sales of the Group in the first half of 2020 represented a year-on- year decrease, of which:
- The year-on-year decrease in the cost of coal purchased was mainly attributable to the decreases in sales volume of coal purchased and unit purchase cost of the Group;
- The year-on-year decrease in the cost of raw materials, fuel and power was mainly attributable to the decrease in coal consumption caused by the decrease in power generation, as well as the decrease in unit coal purchase cost;
- The year-on-year decrease in the cost of repairs and maintenance was mainly attributable to delay in start date of maintenance projects of railways impacted by the COVID-19 pandemic, and the year-on-year decrease in the maintenance charges included in the reporting period;
- The year-on-year decrease in the transportation charges was mainly attributable to the decreases in railway transportation turnover and multimodal transportation charges under the impact of decrease in coal sales, as well as the decrease in shipment volume by chartering.
22 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Other items of profit and loss statement
- The year-on-year decrease in other gains and losses was mainly attributable to a one-off investment income of RMB1.121 billion by the Group on the completion date of the investment of the transaction of establishing Beijing GD Power on 31 January 2019.
- The Group recorded loss allowances of RMB273 million in the first half of the year, which was mainly attributable to the loss allowance in provision for coal sales receivables.
- The year-on-year decrease in other revenue was mainly attributable to the revenue generated from the disposal of fixed assets of Zhuhai Wing Energy, which was shut down, during the same period of the previous year.
- The year-on-year decrease in finance costs was mainly attributable to the repayment of partial long-term borrowings by the Company and the corresponding decrease in interest expenses.
- The year-on-year increase in share of results of associates was mainly attributable to the increase in investment income recognised in Beijing GD Power, by the Company compared with the same period of the previous year.
- The year-on-year decrease in income tax was mainly attributable to the decrease in profit before tax during this reporting period. The average income tax rate of the Group for the first half of the year was 20.8% (the first half of 2019: 21.5%), representing a year-on-year decrease of 0.7 percentage point.
- Items of cash flow statement
The Group formulated capital management policies that aimed to achieve maximised interests for the shareholders and maintained a sound capital structure as well as reduced the costs of capital under the premise of safeguarding the operation on an on-going basis. In accordance with the policy of the Company, the capital was invested in infrastructure, mergers and acquisitions and other projects.
- Reasons for year-on-year increase in net cash generated from operating activities: net cash increased by 30.9% in the first half of 2020 on a year- on-year basis, of which, net cash generated from operating activities of Shenhua Finance Company was RMB21,545 million (the first half of 2019: RMB6,840 million), representing a year-on-year increase of 215.0%, which was mainly attributable to the increases in deposits and inter-bank deposits during the reporting period and the corresponding increase in net cash inflow. Excluding the effect of Shenhua Finance Company, net cash generated from operating activities of the Group represented a year- on-year decrease of 5.9%, which was mainly attributable to the decrease in cash flows due to decreased operating income during the reporting period.
- Reasons for year-on-year increase in net cash generated from investing activities: all bank wealth management products held by the Company during the reporting period were at maturity and recovered.
- Reasons for year-on-year increase in net cash used in financing activities: the distribution of final dividend (A Shares) for the year 2019, as well as the increase in the amount of debt repayment during the reporting period compared to the same period of last year.
2020 Interim Report 23
Section V Discussion and Analysis on Operation Results (Continued)
(5) Research and development expenses
Expensed research and development expenditure in the period | 245 |
(RMB million) | |
Capitalised research and development expenditure in the | 61 |
period (RMB million) | |
Total research and development expenditure (RMB million) | 306 |
Ratio of capitalised research and development expenditure (%) | 19.9 |
Percentage of total research and development expenditure to | 0.3 |
revenue (%) | |
Number of research and development personnel in the | 2,799 |
Company (number of person) | |
Ratio of research and development personnel to the total | 3.7 |
number of persons in the Company (%) | |
In the first half of 2020, the investment in research and development of the Group represented a year-on-year increase of 67.2% (the first half of 2019: RMB183 million), which was mainly used for the development of special equipment on the 8.8m-high working face and the development of specialised equipment on the 8.8m-high working surface, the development of the advanced support applicable to ultra-high roadway and ultra-high pressures, the researches and service charges of the safety assurance technology concerning the mine fire, gas prevention and hydrological geology, the operation, transformation and maintenance of 4,000 tonnes/year alumina pilot facilities, the researches on the full-chin demonstration project of capture and storage of CO2 and high position layout technology of ultra-supercriticalair-cooled turbo- generator unit, etc.
2. Explanation on material changes in the composition of profit or source of profit of the Company
During the reporting period, there were no material changes in the composition of profit or source of profit of the Group. Except for the negative operating profits in coal chemical segment, based on the profit from operations of all business segments before elimination on consolidation under the International Financial Reporting Standards, the percentages of profits from operations of coal, transportation, power, and coal chemical segments accounted for 51%, 33% and 16%, respectively.
24 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Explanation on the material changes in profit incurred from non-principal business
Applicable ✓ Not Applicable
-
Analysis on Assets and Liabilities
1. Analysis on Changes in the Major Items in the Consolidated Statement of Financial Position
As at 30 June 2020 | As at 31 December 2019 | |||||||
Percentage of | Percentage of | Change of | Main reasons for | |||||
Amount | total assets | Amount | total assets | the amount | changes | |||
RMB million | % | RMB million | % | % | ||||
Other non-current assets | 62,568 | 10.8 | 54,006 | 9.6 | 15.9 | Due to the increase | ||
in concession | ||||||||
receivables of | ||||||||
BOOT project in | ||||||||
Java, Indonesia | ||||||||
Inventories | 14,122 | 2.4 | 12,053 | 2.1 | 17.2 | Increase in coal | ||
inventory and spare | ||||||||
parts | ||||||||
Accounts and bills | 12,852 | 2.2 | 10,436 | 1.9 | 23.2 | Due to the increase | ||
receivables | in the collection of | |||||||
accounts receivable | ||||||||
by the Group at the | ||||||||
end of last year, | ||||||||
the relatively low | ||||||||
base of accounts | ||||||||
receivable, and the | ||||||||
increase in power | ||||||||
tariff receivables | ||||||||
and coal sales | ||||||||
receivables during | ||||||||
the reporting period | ||||||||
Prepaid expenses and other | 29,772 | 5.1 | 86,524 | 15.4 | (65.6) Due to the maturity | |||
current assets | of its interbank | |||||||
certificates of | ||||||||
deposit and | ||||||||
recovery of partial | ||||||||
loans by Shenhua | ||||||||
Finance Company | ||||||||
Restricted bank deposits | 8,217 | 1.4 | 7,664 | 1.4 | 7.2 | Due to the increase | ||
in statutory deposit | ||||||||
reserve deposited | ||||||||
in the People's | ||||||||
Bank of China by | ||||||||
Shenhua Finance | ||||||||
Company |
2020 Interim Report 25
Section V Discussion and Analysis on Operation Results (Continued)
As at 30 June 2020 | As at 31 December 2019 | |||||||
Percentage of | Percentage of | Change of | Main reasons for | |||||
Amount | total assets | Amount | total assets | the amount | changes | |||
RMB million | % | RMB million | % | % | ||||
Cash and cash equivalents | 108,030 | 18.6 | 41,827 | 7.4 | 158.3 | Maturity of the wealth | ||
management | ||||||||
products of | ||||||||
the Company | ||||||||
and interbank | ||||||||
certificates of | ||||||||
deposit of Shenhua | ||||||||
Finance Company | ||||||||
Accrued expenses and other | 81,243 | 14.0 | 53,578 | 9.5 | 51.6 | Due to the increase | ||
payables | in deposits in | |||||||
Shenhua Finance | ||||||||
Company, | ||||||||
and employee | ||||||||
remuneration | ||||||||
payable | ||||||||
Bonds due within 1 year | 0 | 0.0 | 3,488 | 0.6 | (100.0) | USD bonds due | ||
in January 2020 | ||||||||
reclassified to | ||||||||
bonds due within | ||||||||
1 year in 2019 | ||||||||
Long-term payables due | 440 | 0.1 | 1,493 | 0.3 | (70.5) | Settlement of issues | ||
within 1 year | associated with | |||||||
partial estimated | ||||||||
liabilities during the | ||||||||
reporting period | ||||||||
and decrease in | ||||||||
corresponding | ||||||||
payable | ||||||||
Long-term borrowings | 32,790 | 5.7 | 36,943 | 6.6 | (11.2) | Repayment of a | ||
portion of long- | ||||||||
term borrowings | ||||||||
during the reporting | ||||||||
period | ||||||||
Long-term payables | 2,519 | 0.4 | 2,201 | 0.4 | 14.4 | Increase in payables | ||
for acquisition of | ||||||||
mining rights |
2. Restrictions on main assets as at the reporting period
As at the end of the reporting period, the balance of the restricted assets of the Group was RMB9,962 million, among which the statutory deposit reserve deposited in the People's Bank of China by Shenhua Finance Company amounted to RMB7,442 million. Other restricted assets mainly consisted of intangible assets, fixed assets and various deposits secured and guaranteed for acquiring bank borrowings.
26 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
(IV) Operation results by business segment
1. Coal segment
- Production and operations
In the first half of 2020, faced with the adverse impact on coal production and downstream demand due to the COVID-19 pandemic, the Group advanced various works concerning the prevention and control of COVID-19 as well as the production and operation to ensure stable supply of coal to meet the market demand with all efforts. As a result, the commercial coal output achieved 145.6 million tonnes (the first half of 2019: 145.4 million tonnes), achieving 54.3% of the operation target for 2020, representing a year-on-year increase of 0.1%. In the first half of this year, the total footage of advancing tunnels at underground mines was 202 thousand metres (the first half of 2019: 211 thousand metres), representing a year-on-year decrease of 4.3%, among which Shendong Mines recorded footage of advancing tunnels of 194 thousand metres, while the Ha'erwusu Open-pit Mine realised an output of commercial coal of 12.5 million tonnes (the first half of 2019: 6.6 million tonnes), representing a year-on-year increase of 89.4%.
Based on the existing "digitised mines", the Group actively advanced the intelligent construction of coal mines. In the first half of 2020, construction of demonstration projects began on five intelligent coal mines, such as the Bulianta Coal Mine and Shangwan Coal Mine. The Group actively researched and developed the construction of intelligent working surface, among which Shendong Coal has constructed 10 intelligent and fully-mechanised mining surfaces and the average automation rate had reached 86.7%. The 8.8-metreultra-large mining working surface set the world record of producing 65,500 tonnes of raw coal per day. Yujialiang Mines, the first intelligent and fully- mechanised mining surface in the thin coal seams in China was completed with
- recovery rate of 95%. Driverless open-pit mine trucks began on-site tests. The Group successfully conducted research and development of an intelligent truck collision avoidance system terminal based on the Beidou positioning system, greatly improving the safety management level. Intelligent dry separation technology of coal blocks has been promoted in Ha'erwusu coal preparation plants.
Progress has been made in land use approval and continuous mining rights. Ha'erwusu and Heidaigou Open-pit Mines had obtained the planned area of land totalling 606 hectares. The work of application for approval of forest grass land in two mines was carried forward in an orderly manner. Baorixile Open-pit Mines received approval of land pre-approval of 325 hectares of land. We are actively promoting the relevant application procedures for the exploration rights of Taigemiao South Area of Xinjie Mining Area.
2020 Interim Report 27
Section V Discussion and Analysis on Operation Results (Continued)
In the first half of 2020, the Group's coal exploration expenses (which were incurred before the conclusion of feasibility study and represented the expenses related to exploration and evaluation of coal resources) amounted to approximately RMB14 million (the first half of 2019: RMB11 million), which was mainly attributable to the relevant expenses of Watermark Coal Project in Australia. The Company's relevant capital expenditure of mining development and exploration amounted to approximately RMB741 million (the first half of 2019: RMB469 million), which was mainly attributable to purchase of fixed assets required for coal mining, the construction of Beidian Shengli No. 1 open- pit mine, land requisition compensation of Zhunge'er mining area and land use rights expenditure of Shenbao mining area.
The Group has independently operated railway collection and distribution channels. These channels are centralised and distributed in the rim of self-owned core mines, and can satisfy the transportation needs in the core mines. Please see "Railway segment" in this section and Overview of Operating Results in this report for details of operation of self-owned railways of the Group.
- Sales of coal
The coal sold by the Group is mainly produced in its self-owned mines. In order to fulfill the needs of customers and adequately make use of railways transportation, the Group also purchased the coal from third parties in the surrounding areas of the self-owned mines and railways and produced different kinds and levels of coal products and sold them to external customers. The Group implemented specialised division management. Production enterprises are responsible for production of coal, and Trading Group is mainly responsible for sales of coal. Customers are involved in different industries, such as power, metallurgy, chemical and construction materials.
In the first half of 2020, in response to the periodic and regional imbalance in coal resources caused by COVID-19, the Group strengthened organisation and coordination of coal transportation and production, and effectively guaranteed the coal demand of internal and external customers. Thus, the sales volume of coal of the Group amounted to 205.3 million tonnes (the first half of 2019: 217.1 million tonnes), achieving 50.9% of the business target for 2020, representing
- year-on-yeardecrease of 5.4%, among which the domestic sales volume of three-year(2019-2021)long-term contracts amounted to 57.3 million tonnes, accounting for 27.9% of the total sales volume of coal. The Company adopted unified pricing policies in the sales of coal, which led to an average sales price of coal amounting to RMB398 per tonne (exclusive of tax, same below) (the first half of 2019: RMB420 per tonne), representing a year-on-year decrease of 5.2%.
In the first half of 2020, the sales volume of the Group to the top five domestic customers of coal was 73.2 million tonnes, which accounted for 35.9% of the domestic sales volume. In particular, the sales volume to China Energy Group, the largest customer, was 63.0 million tonnes, which accounted for 30.9% of the domestic sales volume. The top five domestic customers of coal were primarily power and coal trading companies.
28 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- By contract pricing mechanisms
The first half of 2020 | The first half of 2019 | Changes | |||||||||||
Proportion | Price | Proportion | Price | Price | |||||||||
Sales | of total | (exclusive | Sales | of total | (exclusive | Sales | (exclusive | ||||||
volume | sales | of tax) | volume | sales | of tax) | volume | of tax) | ||||||
Million | RMB/ | Million | RMB/ | ||||||||||
tonnes | % | tonne | tonnes | % | tonne | % | % | ||||||
I. | Sales by sales group | 197.7 | 96.3 | 407 | 209.0 | 96.3 | 429 | (5.4) | (5.1) | ||||
1. | Annual long-term | 88.3 | 43.0 | 382 | 99.1 | 45.6 | 381 | (10.9) | 0.3 | ||||
contracts | |||||||||||||
2. | Monthly long- | 73.7 | 35.9 | 441 | 85.9 | 39.6 | 481 | (14.2) | (8.3) | ||||
term contracts | |||||||||||||
3. | Spot commodity | 35.7 | 17.4 | 397 | 24.0 | 11.1 | 442 | 48.8 | (10.2) | ||||
II. | Direct sales by mine | 7.6 | 3.7 | 179 | 8.1 | 3.7 | 191 | (6.2) | (6.3) | ||||
pits | |||||||||||||
Total sales volume/ | 205.3 | 100.0 | 398 | 217.1 | 100.0 | 420 | (5.4) | (5.2) | |||||
average price | |||||||||||||
(exclusive of tax) | |||||||||||||
Note: 1. Sales prices of coal of the Group in this report are all exclusive of tax.
2. In the first half of 2020, the proportion of lower calorific value coal sales in the annual long-term contracts declined, resulting in a structural slight increase in the annual average sales price of the long-term contracts.
- By internal and external customers
The first half of 2020 | The first half of 2019 | Changes | ||||||||||
Proportion | Price | Proportion | Price | Price | ||||||||
Sales | of total | (exclusive | Sales | of total | (exclusive | Sales | (exclusive | |||||
volume | sales | of tax) | volume | sales | of tax) | volume | of tax) | |||||
Million | RMB/ | Million | RMB/ | |||||||||
tonnes | % | tonne | tonnes | % | tonne | % | % | |||||
1. | Sales to external | 181.9 | 88.6 | 403 | 188.0 | 86.6 | 427 | (3.2) | (5.6) | |||
customers | ||||||||||||
2. | Sales to internal | 21.1 | 10.3 | 364 | 26.7 | 12.3 | 377 | (21.0) | (3.4) | |||
power segment | ||||||||||||
3. Sales to internal coal | 2.3 | 1.1 | 354 | 2.4 | 1.1 | 361 | (4.2) | (1.9) | ||||
chemical segment | ||||||||||||
Total sales volume/ | 205.3 | 100.0 | 398 | 217.1 | 100.0 | 420 | (5.4) | (5.2) | ||||
average price | ||||||||||||
(exclusive of tax) | ||||||||||||
Note: In January 2019, the transaction of establishing Beijing GD Power was completed. Customers of power plant involved in the contributed asset of the Company have changed to external customers from internal customer, resulting in the increase in the percentage of sales to external customers and the decrease in the percentage of sales to internal power segment during the reporting period.
2020 Interim Report 29
Section V Discussion and Analysis on Operation Results (Continued)
- By sales regions
The first half of 2020 | The first half of 2019 | Changes | ||||||||||||
Proportion | Price | Proportion | Price | Price | ||||||||||
Sales | of total | (exclusive | Sales | of total | (exclusive | Sales | (exclusive | |||||||
volume | sales | of tax) | volume | sales | of tax) | volume | of tax) | |||||||
Million | RMB/ | Million | RMB/ | |||||||||||
tonnes | % | tonne | tonnes | % | tonne | % | % | |||||||
I. | Domestic sales | 204.0 | 99.4 | 397 | 214.5 | 98.8 | 419 | (4.9) | (5.3) | |||||
(I) | Self-produced | 195.6 | 95.3 | 399 | 210.0 | 96.7 | 420 | (6.9) | (5.0) | |||||
coal and | ||||||||||||||
purchased coal | ||||||||||||||
1. | Direct | 76.1 | 37.1 | 317 | 81.5 | 37.5 | 321 | (6.6) | (1.2) | |||||
arrival | ||||||||||||||
2. | Seaborne | 119.5 | 58.2 | 451 | 128.5 | 59.2 | 483 | (7.0) | (6.6) | |||||
(II) | Sales of | 4.9 | 2.4 | 314 | 3.5 | 1.6 | 320 | 40.0 | (1.9) | |||||
domestic | ||||||||||||||
trading coal | ||||||||||||||
(III) | Sales of | 3.5 | 1.7 | 441 | 1.0 | 0.5 | 451 | 250.0 | (2.2) | |||||
imported coal | ||||||||||||||
II. | Export sales | 0.4 | 0.2 | 577 | 1.0 | 0.5 | 631 | (60.0) | (8.6) | |||||
III. | Overseas coal sales | 0.9 | 0.4 | 493 | 1.6 | 0.7 | 462 | (43.8) | (6.7) | |||||
Total sales volume/ | 205.3 | 100.0 | 398 | 217.1 | 100.0 | 420 | (5.4) | (5.2) | ||||||
average price | ||||||||||||||
(exclusive of tax) | ||||||||||||||
- Production safety
In the first half of 2020, the Group has taken multiple measures to ensure coal mine safety. The Group implemented the annual safe production plan and followed up the progress on a monthly basis. The Group implemented the responsibility system for safety, carried out the leader-led shift system, and improved the safety management system for all employees. The Group carried out detection and consultation of potential safety issues and organised the "Safe Production Month" activities. The Group also made great efforts to prevent and control the spring and summer water disasters in coal mines, and sorted out the risks of slope and landslide in open-pit mines. In the first half of the year, there was no major or more serious safety accident occurred and the fatality rate per million tonnes of raw coal production mines of the Group was zero, enabling the Company to maintain its internationally leading position.
30 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Environmental protection
In the first half of 2020, the Group systematically promoted the detection and rectification of ecological environment issues. We vigorously carried out the reclamation and afforestation, completed ecological control as well as soil and water conservation monitoring in key coal mines. We continued to push forward green mine construction and strengthened the treatment of dust, noise, waste water and solid waste discharge in mining areas. There was no major or more serious environmental safety incident occurred in the first half of the year.
As of 30 June 2020, the balance of the "accrued reclamation obligations" of the Group amounted to RMB3.480 billion, serving as strong financial guarantee for ecological construction.
- Coal resources
As at 30 June 2020, under the PRC Standard, the Group had coal resources amounting to 29.83 billion tonnes, representing a decrease of 160 million tonnes as compared with that of the end of 2019; and recoverable coal reserve amounting to 14.56 billion tonnes, representing a decrease of 120 million tonnes as compared with that of the end of 2019. The Group's marketable coal reserve amounted to 7.88 billion tonnes under the JORC Standard, representing a decrease of 140 million tonnes as compared with that of the end of 2019.
Unit: 100 million tonnes | |||
Recoverable | Marketable coal | ||
Coal resources | coal reserve | reserve (under | |
(under the PRC | (under the PRC | the JORC | |
Mines | Standard) | Standard) | Standard) |
Shendong Mines | 157.0 | 89.8 | 45.4 |
Zhunge'er Mines | 38.2 | 30.5 | 19.8 |
Shengli Mines | 20.0 | 13.6 | 1.9 |
Baorixile Mines | 13.6 | 11.4 | 11.7 |
Baotou Mines | 0.5 | 0.3 | 0.0 |
Xinjie Mines (under | 64.2 | ╱ | ╱ |
exploration rights | |||
permit to Taigemiao | |||
North Area) | |||
Watermark Mines | 4.8 | ╱ | ╱ |
(under exploration | |||
rights permit) | |||
Total | 298.3 | 145.6 | 78.8 |
Note: As at 30 June 2020, the marketable coal reserve at Baotou Mines is 1.577 million tonnes under the JORC Standard.
2020 Interim Report 31
Section V Discussion and Analysis on Operation Results (Continued)
Characteristics of the commercial coal produced in the Company's major mines are as follows:
Calorific | ||||
value of | ||||
major | ||||
commercial | ||||
Major types of | coal | Sulphur | Ash | |
Mines | coal | products | content | content |
average, | average, | |||
kcal/kg | % | % | ||
Shendong Mines | Long flame coal/ | 5,000-5,800 | 0.2-0.6 | 5-18 |
noncaking coal | ||||
Zhunge'er Mines | Long flame coal | 4,700-5,300 | 0.4-0.6 | 18-26 |
Shengli Mines | Lognite | 2,900-3,100 | 0.7-0.8 | 18-22 |
Baorixile Mines | Lognite | 3,500-3,700 | 0.15-0.3 | 12-15 |
Baotou Mines | Long flame coal/ | 4,300-4,800 | 0.5-1.0 | 10-15 |
noncaking coal | ||||
Note: The above calorific value, sulphur content and ash content of major commercial coal products produced by each mine may be inconsistent with the characteristics of the commercial coal products produced by individual mine and those of the commercial coal products sold by the Company due to geological conditions and production process.
- Operation results
- The operation results of the coal segment of the Group before elimination on consolidation
The first | The first | |||
half of | half of | |||
2020 | 2019 | Change Main reasons for changes | ||
% | ||||
Revenue | RMB | 84,201 | 93,638 | (10.1) Decrease in sales volume and average |
million | price of coal | |||
Cost of | RMB | (66,104) | (72,205) | (8.4) Decrease in the sales volume of |
operations | million | purchased coal and unit purchase | ||
cost | ||||
Gross profit | % | 21.5 | 22.9 | Decreased |
margin | by 1.4 | |||
percentage | ||||
points | ||||
Profit from | RMB | 15,569 | 19,211 | (19.0) |
operations | million | |||
Profit margin | % | 18.5 | 20.5 | Decreased |
from | by 2.0 | |||
operations | percentage | |||
points |
32 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- The gross profit of the coal of the Group before elimination on consolidation
The first half of 2020 | The first half of 2019 | |||||||||
Gross | Gross | |||||||||
Gross | profit | Gross | profit | |||||||
Revenue | Costs | profit | margin | Revenue | Costs | profit | margin | |||
RMB | RMB | RMB | RMB | RMB | RMB | |||||
million | million | million | % | million | million | million | % | |||
Domestic | 81,064 | (59,977) | 21,087 | 26.0 | 89,812 | (65,728) | 24,084 | 26.8 | ||
Export and overseas | 686 | (570) | 116 | 16.9 | 1,341 | (1,044) | 297 | 22.1 | ||
Total | 81,750 | (60,547) | 21,203 | 25.9 | 91,153 | (66,772) | 24,381 | 26.7 | ||
- Unit production cost of self-produced coal
Unit: RMB/tonne | ||||
The first | The first | |||
half of | half of | |||
2020 | 2019 | Change | Main reasons for changes | |
% | ||||
Unit production cost of self- | 126.9 | 120.3 | 5.5 | |
produced coal | ||||
Raw materials, fuel and | 25.7 | 25.0 | 2.8 | |
power | ||||
Personnel expenses | 23.0 | 22.4 | 2.7 | |
Repairs and maintenance | 9.1 | 8.5 | 7.1 | Aging of some of our mining and |
excavating equipment, shortening | ||||
their overhaul cycles, resulting in | ||||
Depreciation and | 18.4 | (1.1) | the increase in maintenance costs | |
18.2 | ||||
amortisation | ||||
Other costs | 50.9 | 46.0 | 10.7 | The year-on-year increase of |
compensation for relocation | ||||
Other costs consist of the following three components: (1) expenses directly related to production, including expenses for coal washing, selecting and processing expenses, and mining engineering expenses, etc., accounting for 58%; (2) auxiliary production expenses, accounting for 22%; (3) land requisition and surface subsidence compensation, environmental protection expenses, tax, etc., accounting for 20%.
2020 Interim Report 33
Section V Discussion and Analysis on Operation Results (Continued)
- Cost of coal purchased from third parties
The coal purchased from third parties by the Company includes coal purchased from the surrounding areas of the self-owned mines and railways, domestic trading coal, imported and re-exported coal. In the first half of the year, cost of coal purchased from third parties was RMB19,111 million (the first half of 2019: RMB24,073 million), representing a year-on-year decrease of 20.6%, which was mainly due to year-on-year decreases in the sales volume of purchased coal and unit purchase cost.
2. Power segment
- Production and operations
In the first half of 2020, the Group actively took measures to grab power generation to minimise the impact of the epidemic. Power generation in the first half of this year amounted to 62.82 billion kWh (the first half of 2019: 79.90 billion kWh), achieving 43.3% of the business target for 2020, representing
- year-on-yeardecrease of 21.4% (representing a proportional year-on-year decrease of 5.0%); and total power output dispatch of 58.76 billion kWh (the first half of 2019: 74.96 billion kWh), representing a year-on-year decrease of 21.6% (representing a proportional year-on-year decrease of 5.1%).
We promoted the construction of key power generation projects in an orderly manner. Phase III of Jinjie Coal and Power Integration Project (2 x 660 MW) and Jawa Power (2 x 1,050 MW) #2 are scheduled to be put into production by the end of 2020. The Construction of Hunan Yongzhou Power Plant of Shenhua Guohua (2 x 1,000 MW) is progressing steadily as planned. The Construction of Guangtuo Beihai Power Plant of Shenhua Guohua (2 x 1,000 MW) has been approved by NDRC to be removed from the list of postponed projects and is scheduled to resume work within this year.
The construction of intelligent power systems continued to move forward. A four-in-one industrial Internet system integrating "unified development, unified operation and maintenance, big data analysis and processing and cloud edge collaboration" had been preliminarily formed. It innovated to realise big data comparative analysis of functional optimisation across units and equipment state diagnosis combined with mechanism model and big data analysis, providing a brand new technical method for improving unit economy.
34 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Power output dispatch and power tariffs
Gross power generation | Total power output dispatch | Power tariff | ||||||||
(billion kWh) | (billion kWh) | (RMB/mWh) | ||||||||
The first | The first | The first | The first | The first | The first | |||||
Power type/ | half of | half of | half of | half of | half of | half of | ||||
Location | 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |
% | % | % | ||||||||
(I) | Coal-fired | 60.63 | 63.87 | (5.1) | 56.62 | 59.74 | (5.2) | 330 | 329 | 0.3 |
power | ||||||||||
Shaanxi | 13.31 | 13.40 | (0.7) | 12.18 | 12.35 | (1.4) | 273 | 274 | (0.4) | |
Hebei | 10.33 | 13.02 | (20.7) | 9.71 | 12.25 | (20.7) | 320 | 317 | 0.9 | |
Guangdong | 9.19 | 9.43 | (2.5) | 8.55 | 8.74 | (2.2) | 377 | 399 | (5.5) | |
Fujian | 6.21 | 6.26 | (0.8) | 5.95 | 5.99 | (0.7) | 350 | 347 | 0.9 | |
Jiangxi | 4.29 | 4.18 | 2.6 | 4.10 | 3.99 | 2.8 | 364 | 363 | 0.3 | |
Shandong | 4.02 | 4.67 | (13.9) | 3.82 | 4.45 | (14.2) | 349 | 344 | 1.5 | |
Inner Mongolia | 3.78 | 3.73 | 1.3 | 3.45 | 3.41 | 1.2 | 232 | 230 | 0.9 | |
Chongqing | 2.77 | 2.89 | (4.2) | 2.64 | 2.76 | (4.3) | 369 | 354 | 4.2 | |
Sichuan | 2.57 | 2.27 | 13.2 | 2.37 | 2.07 | 14.5 | 379 | 375 | 1.1 | |
Henan | 1.92 | 2.40 | (20.0) | 1.79 | 2.26 | (20.8) | 323 | 306 | 5.6 | |
Guangxi | 1.49 | 0.92 | 62.0 | 1.41 | 0.87 | 62.1 | 344 | 349 | (1.4) | |
Indonesia | 0.75 | 0.70 | 7.1 | 0.65 | 0.60 | 8.3 | 551 | 548 | 0.5 | |
(overseas) | ||||||||||
(II) | Gas-fired | 1.93 | 1.97 | (2.0) | 1.88 | 1.93 | (2.6) | 561 | 568 | (1.2) |
power | ||||||||||
Beijing | 1.93 | 1.97 | (2.0) | 1.88 | 1.93 | (2.6) | 561 | 568 | (1.2) | |
(III) | Hydropower | 0.26 | 0.29 | (10.3) | 0.26 | 0.28 | (7.1) | 254 | 251 | 1.2 |
Sichuan | 0.26 | 0.29 | (10.3) | 0.26 | 0.28 | (7.1) | 254 | 251 | 1.2 | |
Subtotal | 62.82 | 66.13 | (5.0) | 58.76 | 61.95 | (5.1) | 337 | 336 | 0.3 | |
Others | - | 13.77 | - | - | 13.01 | - | - | - | - | |
Total | 62.82 | 79.90 | (21.4) | 58.76 | 74.96 | (21.6) | - | - | - | |
Note: In the above table, "others" refers to the power generation and power output dispatch in
January 2019 of power plants contributed by the Company when establishing Beijing GD
Power.
2020 Interim Report 35
Section V Discussion and Analysis on Operation Results (Continued)
- Installed capacity
At the end of the reporting period, the total installed capacity of power generation of the Group reached 30,929 MW, among which, the total installed capacity of the coal-fired power generators is 29,854 MW, which is 96.5% of the total installed capacity of the Group.
Unit: MW | |||
Installed capacity | |||
increased/ | |||
Gross installed | (decreased) | Gross installed | |
capacity as at 31 | during the | capacity as at | |
Power type | December 2019 | reporting period | 30 June 2020 |
Coal-fired power | 29,954 | (100) | 29,854 |
Gas-fired power | 950 | - | 950 |
Hydropower | 125 | - | 125 |
Total | 31,029 | (100) | 30,929 |
In the first half of the year, Shenhua Shendong Power Chongqing Wanzhou Port and Power Co., Ltd., the subsidiary of the Company, has reduced the 100 MW installed capacity of coal-fired power generators.
- Utilisation rate of power generation equipment
In the first half of 2020, average utilisation hours of coal-fired generators of the Group reached 2,031 hours, representing a decrease of 185 hours as compared to 2,216 hours of the same period of last year, which was 37 hours higher than the national average utilisation hours of 1,994 hours for coal-fired generating equipment.
Average utilisation hours | Power consumption ratio of power plant | ||||||
Hour | % | ||||||
The first half | The first half | The first half | The first half | ||||
Power type | of 2020 | of 2019 | Change | of 2020 | of 2019 | Change | |
% | |||||||
Coal-fired power | 2,031 | 2,216 | (8.3) | 5.85 | 5.62 | Increased by 0.23 | |
percentage point | |||||||
Gas-fired power | 2,028 | 2,059 | (1.5) | 1.61 | 1.65 | Decreased by 0.04 | |
percentage point | |||||||
Hydropower | 2,095 | 2,343 | (10.6) | 0.35 | 0.31 | Increased by 0.04 | |
percentage point | |||||||
Weighted average | 2,031 | 2,212 | (8.2) | 5.70 | 5.49 | Increased by 0.21 | |
percentage point | |||||||
36 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Environmental protection
In the first half of this year, the Group's power plants reached emission standards for all pollutants and the ultra-low emissions of coal-fired units maintained good performance. The average standard coal consumption for power sold of coal-fired power generators of the Group for the first half of the year was 309.6 g/kWh, basically remaining stable on a year-on-year basis.
- Market Transaction of Power
In the first half of 2020, the volume of power in market-based transactions of the Group was 29.58 billion kWh, representing 50.3% of the total power output dispatch.
- Operation results of the power sales business
The Group currently owns three power sales companies located in Shandong, Jiangsu and Guangdong, respectively, which are principally engaged in procurement and sales of power, incremental distribution grid business, distributed energy, power equipment management and comprehensive energy utilisation and other value-added services. In the first half of 2020, the agent power output dispatch from non-self-owned power plants of the Group was approximately 2.17 billion kWh.
- Capitalised expenses
In the first half of 2020, the completed capital expenditure of the power segment of the Group was RMB1,546 million, primarily used in the construction of power generation projects including Construction of Coal-fired Units of Shenhua Bashu Jiangyou (2 x 1,000 MW), Phase III of Jinjie Coal and Power Integration Project (2 x 660 MW), Construction of Hunan Yongzhou Power Plant of Shenhua Guohua (2 x 1,000 MW) and Phase I of Power Plant Construction of Shengli Energy Branch (2 x 660 MW).
2020 Interim Report 37
Section V Discussion and Analysis on Operation Results (Continued)
- Operation results
- The operation results of the power segment of the Group before elimination on consolidation
The first half | The first half | ||||
of 2020 | of 2019 | Change | Main reasons for changes | ||
% | |||||
Revenue | RMB million | 22,604 | 26,221 | (13.8) The power output dispatch of the | |
Group in the first half of 2019 | |||||
included the power output | |||||
dispatch in January 2019 of | |||||
power plants contributed by the | |||||
Company to the establishment | |||||
of Beijing GD Power; decrease | |||||
in the power output dispatch of | |||||
the Company due to the power | |||||
demand of the whole society | |||||
affected by the COVID-19 in | |||||
the first half of this year | |||||
Cost of | RMB million | (16,970) | (20,562) | (17.5) The impact of the completion of | |
operations | the transaction of investment in | ||||
establishing Beijing GD Power | |||||
in the same period last year on | |||||
its high cost base in the same | |||||
period last year; decrease | |||||
in power generation leads | |||||
to a reduction in coal-fired | |||||
consumption; and decease in | |||||
Gross profit | % | 21.6 | Increased | unit purchase cost of fire coal | |
24.9 | |||||
margin | by 3.3 | ||||
percentage | |||||
points | |||||
Profit from | RMB million | 4,831 | 4,672 | 3.4 | |
operations | |||||
Profit margin | % | 21.4 | 17.8 | Increased | |
from | by 3.6 | ||||
operations | percentage | ||||
points | |||||
38 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Revenue and cost from the power output dispatch of the Group before elimination on consolidation
Unit: RMB million | |||||||||
Revenue from power output dispatch | Cost of power output dispatch | ||||||||
Percentage | |||||||||
Percentage | to total | ||||||||
to total | costs of | Change in | |||||||
costs of | power | the first | |||||||
power | output | half of | |||||||
output | dispatch | 2020 over | |||||||
The first | The first | The first | dispatch | The first | of the first | the first | |||
half of | half of | half of | of the first | half of | half of | half of | |||
Power type | 2020 | 2019 | Change | 2020 | half of 2020 | 2019 | 2019 | 2019 | |
% | % | % | % | ||||||
Coal-fired power | 19,596 | 24,439 | (19.8) | 14,776 | 93.4 | 18,860 | 93.7 | (21.7) | |
Gas-fired power | 1,055 | 1,249 | (15.5) | 1,006 | 6.4 | 1,222 | 6.1 | (17.7) | |
Hydropower | 65 | 72 | (9.7) | 33 | 0.2 | 36 | 0.2 | (8.3) | |
Wind power | 0 | 0 | / | 0 | 0.0 | 2 | 0.0 | (100.0) | |
Total | 20,716 | 25,760 | (19.6) | 15,815 | 100.0 | 20,120 | 100.0 | (21.4) | |
The Group's cost of power output dispatch mainly comprised such costs as raw materials, fuel and power, personnel expenses, repairs and maintenance, depreciation and amortisation and other costs. The unit cost of power output dispatch of the Group in the first half of 2020 was RMB269.1/mWh (the first half of 2019: RMB268.4/mWh), representing a year-on-year increase of 0.3%.
- Cost of sale of power of coal-fired power plant of the Group before elimination on consolidation
The first half of 2020 | The first half of 2019 | Change in | |||||
Costs | Percentage | Costs | Percentage | costs | |||
RMB | RMB | ||||||
million | % | million | % | % | |||
Raw material, fuel and | 10,324 | 69.9 | 13,820 | 73.3 | (25.3) | ||
power | |||||||
Personnel expenses | 803 | 5.4 | 955 | 5.1 | (15.9) | ||
Repairs and maintenance | 760 | 5.1 | 701 | 3.7 | 8.4 | ||
Depreciation and | 2,393 | 16.2 | 2,773 | 14.7 | (13.7) | ||
amortisation | |||||||
Others | 496 | 3.4 | 611 | 3.2 | (19.0) | ||
Total cost of power | 14,776 | 100.0 | 18,860 | 100.0 | (21.7) | ||
output dispatch of | |||||||
coal-fired power plant | |||||||
2020 Interim Report 39
Section V Discussion and Analysis on Operation Results (Continued)
The power segment consumed a total of 21.8 million tonnes of the China Shenhua's coal, accounting for 76.5% of the 28.5 million tonnes of the thermal coal consumption of the power segment of the Group in the first half of 2020 (the first half of 2019: 88.2%).
3. Railway segment
- Production and operations
In the first half of 2020, the Group made great efforts to explore potential and improve efficiency, promoted refined management, optimised equipment maintenance arrangements. Railway transportation gradually resumed full chart operation, and Baoshen line and Shenshuo line hit a new high record of daily traffic volume. The Group opened up the connection of special railway lines, increased the organisation of reverse railway transportation, implemented special rewards for large-scale logistics transportation, explored the railway container transportation business and increased the non-coal transportation work. Transportation turnover of self-owned railways reached 133.3 billion tonne km (the first half of 2019: 142.9 billion tonne km), representing a year-on-year decrease of 6.7%. Among them, the turnover of providing railway transportation services to external customers amounted to 12.1 billion tonne km (the first half of 2019: 15.9 billion tonne km), representing a year-on-year decrease of 23.9%.
- Progress of projects
During the reporting period, the construction work of Huangda Railway Shandong section has been progressing steadily, and the laying and erection works have been carried out at Hebei section. It was expected to be completed by the end of 2020. The expansion renovation of 300 million tonnes capacity of Shenshuo Railway has been progressing steadily and it is expected to complete in the second half of 2021.
The intelligent driving technology of AC drive freight electric locomotive of "Shenhua" is becoming more and more mature, evidenced by the testing of whole scene intelligent driving of the "3+0" ten-thousand-tonne heavy- load train at Shenshuo Line, which included 23 operating scenarios such as auto-awakening,auto-shunting, automatic wireless reconnection marshalling, interval auto-operation and automatic picking aiming to further reduce the working intensity of drivers and passengers and optimise operation speed and efficiency. In the first half of this year, the Group completed the compiling of the construction plan for the intelligent railway system and initiated the establishment of the Shenhua Railway Dispatching Information System; the promotion and implementation of key projects such as the state repair of railway freight cars and mobile blocking; the first successful operation of 16,000-tonneheavy-load test train; the carrying out of smart substations transformation by applying drone monitoring, which effectively reduced the workload of walking inspections of power equipment by nearly 60%. On 29 July 2020, the "Shen 24" Electric Locomotive, jointly developed by the Company and CRRC Corporation Limited with the world's biggest power capacity (with a single power capacity of 28,800 KW and a single power traction of 2,280 kilonewtons), rolled off the production line, hitting another world record in the railway transportation equipment.
40 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Operation results
The operation results of the railway segment of the Group before elimination on consolidation are as follows:
The first | The first | Main reasons for | |||
half of 2020 | half of 2019 | Change | changes | ||
% | |||||
Revenue | RMB million | 18,188 | 20,174 | (9.8) | A year-on-year |
decrease in | |||||
transportation | |||||
turnover of | |||||
Cost of sales | RMB million | (10,043) | (11.9) | railways | |
(8,843) | |||||
Gross profit margin | % | 51.4 | 50.2 | Increased | |
by 1.2 | |||||
percentage | |||||
points | |||||
Profit from operations RMB million | 8,857 | 9,608 | (7.8) | ||
Profit margin from | % | 48.7 | 47.6 | Increased | |
operations | by 1.1 | ||||
percentage | |||||
points | |||||
In the first half of 2020, the unit transportation cost in the railway segment was
RMB0.061/tonne km (the first half of 2019: RMB0.064/tonne km), representing
- year-on-yeardecrease of 4.7%, mainly due to delay of railway maintenance projects, resulting in a decrease in maintenance costs included in the reporting period.
4. Port segment
- Production and operations
In the first half of 2020, the production and operation of the port segment of the Group was stable, and new progress had been made in technological innovation and management improvement.
Huanghua Port achieved 93.7 million tonnes of coal shipments (the first half of 2019: 100.6 million tonnes), representing a year-on-year decrease of 6.9%; 325,000 tonnes of bulk cargo shipments, representing a year-on-year increase of 5.5%; 2.821 million tonnes of oil shipments, representing a year-on-year increase of 8.9%. It has accelerated the construction of energy efficiency projects, increasing the unloading capacity to 220 million tonnes, and further enhanced the ability to guarantee the integrated industrial chain. Tianjin Coal Dock has rationally allocated arrival resources to improve the turnover efficiency of vehicles and ships. In the first half of this year, it has realised 21.5 million tonnes of coal shipment (the first half of 2019: 22.1 million tonnes), representing a year-on-year decrease of 2.7%; 1.758 million tonnes of non-coal transportation, representing a year-on-year double.
Significant achievements have been made in the construction of smart ports. It has made breakthroughs in the whole-process intelligent shipping at Huanghua Port and realised intelligent management and control of each step of turning-stacking-fetching-loading process, filling the technical gap of intelligent shipping operations in bulk ports around the world.
2020 Interim Report 41
Section V Discussion and Analysis on Operation Results (Continued)
- Operation results
The operation results of the port segment of the Group before elimination on consolidation are as follows:
The first | The first | Main reasons for | |||
half of 2020 | half of 2019 | Change | changes | ||
% | |||||
Revenue | RMB million | 2,934 | 2,952 | (0.6) | |
Cost of sales | RMB million | (1,512) | (1,471) | 2.8 | The increase in |
the provision of | |||||
dredging services | |||||
to external | |||||
customers, | |||||
resulting in related | |||||
business costs | |||||
Gross profit margin | % | 50.2 | Decreased | increased | |
48.5 | |||||
by 1.7 | |||||
percentage | |||||
points | |||||
Profit from operations RMB million | 1,293 | 1,349 | (4.2) | ||
Profit margin from | % | 44.1 | 45.7 | Decreased | |
operations | by 1.6 | ||||
percentage | |||||
points | |||||
5. Shipping segment
- Production and operations
In the first half of this year, affected by the epidemic, the domestic coastal bulk cargo transportation market was in a downturn as a whole. The shipping segment of the Group has taken effective measures to minimise the impact of the epidemic, such as prioritising to guarantee power supply for internal power plants of the Group, actively exploring external users, and significantly improving the efficiency of shipment turnover. In the first half of 2020, shipping volume amounted to 51.3 million tonnes (the first half of 2019: 54.8 million tonnes), representing a year-on-year decrease of 6.4%; shipment turnover amounted to 42.9 billion tonne nautical miles (the first half of 2019: 44.7 billion tonne nautical miles), representing a year-on-year decrease of 4.0%.
The shipping segment has continued to promote the establishment of smart shipping information, adopt the "integrated information platform + customised ship intelligent application" model to develop and apply the ship operation management and controlling systems, improve ship navigation safety and management efficiency, and reduce operation and maintenance costs. It has actively promoted the use of shore power and combined frequency conversion technology with shore power technology. The emissions of diesel particulars, nitrogen oxide, and sulfur oxide from docking ships decreased by approximately 95%.
42 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Operation results
The operation results of the shipping segment of the Group before elimination on consolidation are as follows:
The first | The first | Main reasons for | |||
half of 2020 | half of 2019 | Change | changes | ||
% | |||||
Revenue | RMB million | 1,306 | 1,588 | (17.8) | Decrease in |
shipment turnover | |||||
and shipping | |||||
prices | |||||
Cost of sales | RMB million | (1,201) | (1,420) | (15.4) | Decrease in volume |
and price for | |||||
shipping by | |||||
Gross profit margin | % | 10.6 | Decreased | chartering | |
8.0 | |||||
by 2.6 | |||||
percentage | |||||
points | |||||
Profit from operations RMB million | 28 | 94 | (70.2) | ||
Profit margin from | % | 2.1 | 5.9 | Decreased | |
operations | by 3.8 | ||||
percentage | |||||
points | |||||
In the first half of 2020, the unit transportation cost of the shipping segment was RMB0.028/tonne nautical mile (the first half of 2019: RMB0.032/tonne nautical mile), representing a year-on-year decrease of 12.5%.
6. Coal chemical segment
- Production and operations
The coal chemical segment of the Group comprises the coal-to-olefins project (Phase I) of Baotou Coal Chemical. Its main products consist of polyethylene (with production capacity of approximately 300,000 tonnes/year) and polypropylene (with production capacity of approximately 300,000 tonnes/year) and minor by-products including industrial sulfur, mixed C5, industrial propane, mixed C4, industrial methanol, etc. The methanol-to-olefins (MTO) equipment of the coal-to-olefins project is the first large-scale MTO facilities in China.
2020 Interim Report 43
Section V Discussion and Analysis on Operation Results (Continued)
In the first half of this year, Baotou Coal Chemical made great efforts to overcome the impact of adverse factors such as the international crude oil price plunge and COVID-19, coordinated production load, timely adjusted product structure and cleared sales channels, in order to ensure the safe and high-load operation of production facilities. In response to the changes in market demand, Baotou Coal Chemical launched new polyolefin products in a timely manner. Among them, polypropylene facilities were turned to produce polypropylene S2040 high melt index spinning material, a kind of raw materials to produce medical protective materials such as masks and protective clothing. The product achieved 100% superiority rate and successfully passed the US Food and Drug Administration test, the national standard test and the EU RoHS test. Polyethylene was developed to produce injection molding products, which effectively promoted the diversification of polyolefin products, increased the production ratio of special materials, and improved the added value of polyolefin products.
The project of coal chemical safety management information application and electronic inspection in Baotou is progressing as planned.
The sales of polyethylene and polypropylene products of the Group in the first half of 2020 is as follows:
Unit: thousand tonnes | |||
The first half of | The first half of | ||
2020 | 2019 | Change% | |
Sales of polyethylene | 182.0 | 186.5 | (2.4) |
Sales of polypropylene | 164.2 | 170.6 | (3.8) |
All the coals consumed by the coal chemical segment were the China Shenhua's coals. The coals consumed in the first half of 2020 were 2.3 million tonnes, representing a decrease of 4.2% as compared with 2.4 million tonnes for the same period last year.
Baotou Coal Chemical has firmly established the goal in environmental protection of "controlling total volume, meeting discharge standards, and zero accidents", to ensure the smooth and efficient operation of environmental protection facilities and standard pollutant discharge.
- Project progress
The environmental impact report of Baotou coal-to-olefins upgrading demonstrative project has been approved by the Ministry of Ecology and Environment. The project is currently in the preparation stage.
44 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Operation results
The operation results of the coal chemical segment of the Group before elimination on consolidation are as follows:
The first | The first | Change | Main reasons for | ||
half of 2020 | half of 2019 | % | changes | ||
Revenue | RMB million | 2,409 | 3,084 | (21.9) | Decreases in |
sales price and | |||||
volume of olefins | |||||
products | |||||
Cost of sales | RMB million | (2,407) | (2,653) | (9.3) | Decrease in sales |
volume of olefins | |||||
Gross profit margin | % | 14.0 | Decreased | products | |
0.1 | |||||
by 13.9 | |||||
percentage | |||||
points | |||||
Profit from operations RMB million | (75) | 356 | (121.1) | Significant decrease | |
Profit margin from | % | 11.5 | Decreased | in gross profit | |
(3.1) | |||||
operations | by 14.6 | ||||
percentage | |||||
points | |||||
2020 Interim Report 45
Section V Discussion and Analysis on Operation Results (Continued)
(V) Regional operation analysis
Unit: RMB million | |||
The first half of | The first half of | ||
2020 | 2019 | Change | |
% | |||
Revenue from external transactions | 102,612 | 114,911 | (10.7) |
in domestic markets | |||
Revenue from external transactions | 2,404 | 1,454 | 65.3 |
in overseas markets | |||
Total | 105,016 | 116,365 | (9.8) |
Note: Revenue from external transactions was classified based on the location of the customers receiving the services or purchasing the products.
The Group is mainly engaged in the production and sales of coal and power, railway, port and shipping transportation as well as coal-to-olefins businesses in the PRC. In the first half of 2020, the revenue from external transactions in domestic markets was RMB102,612 million, accounting for 97.7% of the Group's revenue. Revenue from external transactions in overseas markets was RMB2,404 million, representing a year-on-year increase of 65.3%, which was mainly because the Indonesia No. 1 unit of Jawa Power (BOOT Project) was put into production in December 2019 and the revenue incurred was approximately RMB1,500 million during the reporting period.
In the first half of 2020, the Company prudently carried out international operations and carried forward the construction and operation of overseas projects. The epidemic prevention and control work at overseas projects was synchronised with that in China, realising normalised epidemic prevention and control to ensure safe production and construction work. The operation of Guohua Indonesia Sumsel EMM Project (Phase I) (2 x 150MW) was running continuously with two units, and No. 1 unit has been running continuously for over 1,100 days. The No. 1 unit of Jawa Power has also been running continuously for over 200 days, achieving good economic results. 29 wells in the shale gas project in Pennsylvania of the United States were under normal operation, although it was in a state of loss for the current period affected by the drop of international oil price, the epidemic COVID-19 and the unusual warm winter. However, the total investment in the shale gas project could be fully recovered from the calculation of the whole project life and the risk was under control. The Watermark Open-pit Coal Mine Project in Australia stepped up the preliminary work with adherence to relevant laws and regulations, and maintained good communication with local communities and indigenous organisations; we have submitted an application for an open-pit mining lease of Watermark project to the New South Wales Government. The environmental management plans such as the Heritage Management Plan and Koala Temporary Habitat Plan approved by the New South Wales Government is available on the website of Shenhua Australia Holdings PTY Limited (http:// www.shenhuawatermark.com/). Other overseas projects were carried out in a prudent way.
46 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
(VI) Analysis on investments
-
Overall analysis of external equity investments
The equity investments of the Company in the first half of 2020 amounted to RMB1,875 million (the first half of 2019: RMB30,659 million). The significant year-on-year decrease is mainly due to the recognised long-term equity investment of RMB27,213 million in Beijing GD Power. - Material investment in equity interest
Applicable | ✓ N/A |
3. Material investment in non-equity interest
Applicable | ✓ N/A |
4. Financial assets/liabilities at fair value
As at the end of the reporting period, the liabilities at fair value through profit or loss of the Group were the thermal coal futures of RMB14 million held by Trading Group. As at the end of the reporting period, the financial assets at fair value through other comprehensive revenue of the Group were the non-tradable equity investments amounting to RMB1,815 million held by the Group that have no significant impact on the investee and RMB292 million corporate bonds publicly issued by China Energy.
Details regarding the items and changes at fair value of the Group:
Unit: RMB million | ||||
Opening | ||||
balance | Closing | Change of | ||
at the | balance at | Change for | profit for | |
beginning of | the end of | the current | the current | |
Name of items | the period | the period | period | period |
Bank's wealth | 33,334 | 0 | (33,334) | 323 |
management products | ||||
Forward exchange | 31 | 0 | (31) | (1) |
contracts | ||||
Futures transactions | 70 | (14) | (84) | (13) |
Other investments in | 1,789 | 1,815 | 26 | 0 |
equity instruments | ||||
Corporate bonds | 0 | 292 | 292 | 0 |
Total | 35,224 | 2,093 | (33,131) | 309 |
2020 Interim Report 47
Section V Discussion and Analysis on Operation Results (Continued)
5. Derivatives investment
- U.S. dollar debt hedging
To avoid the risk of US dollar debts, the Group hedged a debt of USD150 million by way of financial derivatives. As of 30 June 2020, the above financial derivatives have all been delivered, with an impact on the profit before tax during the reporting period of RMB-0.7 million.
The exchange rate hedging carried out by the Group is aimed to manage risks rather than profit from it. The specific schemes adopted are in line with the nature of hedging.
- Thermal coal futures
During the reporting period, the Group completed the delivery of thermal coal futures amounting to 540,000 tonnes, liquidated thermal coal futures of 2,000 tonnes, and the profit before tax incurred from relevant futures transactions was RMB1 million (excluding the profit incurred from physical delivery). As of 30 June 2020, the Group held 797,000 tonnes of thermal coal futures, and the relevant fair value loss during the reporting period was RMB14 million.
(VII) Disposal of material assets and equity interest
Applicable | ✓ N/A |
The Group had no material acquisition or disposal in relation to subsidiaries, associates or joint ventures during the reporting period.
(VIII) Analysis on major holding and associated companies
1. Major subsidiaries
Unit: RMB million | ||||||||
Registered | Total | Net | Net profit attributable to the equity holders of the | |||||
capital | assets | assets | parent company | |||||
The first | The first | |||||||
half of | half of | Reasons | ||||||
No. | Company | As at 30 June 2020 | 2020 | 2019 | Change | for changes | ||
% | ||||||||
1 | Shendong Coal | 4,989 | 32,976 | 29,798 | 5,613 | 7,615 | (26.3) | Decrease |
2 | Shuohuang Railway | 5,880 | 45,533 | 37,760 | 3,984 | 3,985 | (0.0) | in coal sales |
3 | Jinjie Energy | 2,278 | 12,338 | 10,897 | 1,422 | 1,726 | (17.6) | |
4 | Trading Group | 1,889 | 27,707 | 7,012 | 976 | 1,466 | (33.4) | Decrease |
in coal sales | ||||||||
5 | Zhunge'er Energy | 7,102 | 42,534 | 34,264 | 960 | 1,480 | (35.1) | Decrease in |
commercial coal | ||||||||
production, and | ||||||||
more investment | ||||||||
revenue for the | ||||||||
same period last | ||||||||
6 | Huanghua Harbour | 6,790 | 14,516 | 11,385 | 704 | 722 | (2.5) | year |
Administration | ||||||||
7 | Shenhua Finance | 5,000 | 170,271 | 8,861 | 678 | 606 | 11.9 | |
Company | ||||||||
8 | Shenbao Energy | 1,169 | 7,108 | 5,504 | 498 | 533 | (6.6) | |
9 | Railway | 5,003 | 22,310 | 8,094 | 412 | 496 | (16.9) | |
Transportation | ||||||||
10 | Baotou Energy | 2,633 | 7,521 | 6,463 | 403 | 811 | 50.3 | Decrease in |
commercial coal | ||||||||
production |
48 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
Notes: 1. The financial information of the major subsidiaries disclosed in the above table (unassessed and unadjusted before consolidation) was prepared in accordance with the China Accounting Standards for Business Enterprises. The data has not been audited or reviewed.
- Shendong Coal recorded a revenue of RMB25,052 million and a profit from operations of RMB6,628 million in the first half of 2020.
- Shuohuang Railway recorded a revenue of RMB9,464 million and a profit from operations of RMB5,307 million in the first half of 2020.
2. Shenhua Finance Company
As of the end of the reporting period, the Company directly and indirectly held 100% equity interest in Shenhua Finance Company.
Percentage of | ||
equity interest | ||
No. | Name of Shareholder | held |
% | ||
1 | China Shenhua Energy Company Limited | 81.43 |
2 | Shuohuang Railway Development Co., Ltd. | 7.14 |
3 | Shenhua Zhunge'er Energy Co., Ltd. | 7.14 |
4 | Shenhua Baoshen Railway Co., Ltd. | 4.29 |
Total | 100.00 | |
During the reporting period, Shenhua Finance Company strictly implemented the following resolutions passed at the 12th meeting of the second session of the Board of China Shenhua held on 25 March 2011: (1) China Shenhua currently had no intention or plan to change the existing operation policies and strategies of Shenhua Finance Company; (2) the deposits placed by China Shenhua and its subsidiaries and branches with Shenhua Finance Company would be used solely for the credit business of China Shenhua and its subsidiaries and branches, and would be deposited in the People's Bank of China and the five major commercial banks (namely, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications), and would not be invested in the public market/private equity market and real estate, etc.
For the unaudited balance sheet and income statement of Shenhua Finance Company for the first half of 2020, please refer to the H-shares announcement of the Company dated 17 July 2020 and the A-shares announcement of the Company dated 18 July 2020.
On 29 May 2020, the resolution relating to the capital increase of Shenhua Finance Company and waiver of the preemptive subscription right by the Company was considered and approved at the general meeting of the Company. As at the date of this report, such transaction has not been completed.
(IX) Structured Entities Controlled by the Company
Applicable | ✓ N/A |
2020 Interim Report 49
Section V Discussion and Analysis on Operation Results (Continued)
- DISCUSSION AND ANALYSIS ON FUTURE DEVELOPMENT OF THE COMPANY2
-
Competition and Development Trend in the Industry
1. Macroeconomic Environment
In the first half of 2020, in the face of the severe impact of the COVID-19 pandemic, the PRC government insisted upon putting the lives, safety and health of people at the first place and accelerated its response to macro-policies, achieving major results from coordinated epidemic prevention and control and socio-economic development work. As the economy steadily improved and work resumption progressed month by month, gross domestic product (GDP) declined 1.6% year on year in the first half of this year, and recorded 3.2% growth in the second quarter.
At present, China's economic circumstances are still complicated and severe, with relatively considerable instability and uncertainties. The Chinese government will expedite the establishment of a new development system focusing on the major domestic cycle and mutually facilitated by both domestic and international cycles, as well as building a long-term coordination mechanism for pandemic prevention and control and socio-economic development. In the second half of 2020, in addition to seeking steady progress, China will insist on new development concepts to better coordinate epidemic prevention and control and socio-economic development tasks and deepening reforms and opening up through reliance upon supply-side structural reforms, concentrating on the strategy of stimulating domestic demand, and vigorously protecting and stimulating the vitality of market players, and implement measures for the "Six Stabilities" and "Six Guarantees" campaigns, in a bid to complete the socio-economic development objectives for the full year through the promotion of high quality economic development and maintenance of social stability.
-
Competition and Development Trend in the Industry
2 This section is for reference only and does not constitute any investment advice. The Company has used its best endeavours to ensure the accuracy and reliability of information in this section, but does not assume any liability or provide any form of guarantee for the accuracy, completeness or validity of all or part of its content. If there is any error or omission, the Company does not assume any liability. The content in this section may contain certain forward-looking statements based on subjective assumptions and judgments of future political and economic developments; therefore there may exist uncertainties in these statements. The Company does not undertake any responsibility for updating the information or correcting any subsequent error that may appear. The opinions, estimates and other data set out herein can be amended or withdrawn without further notice. The data contained in this section are mainly derived from sources such as the National Bureau of Statistics, China Coal Market Network, China Coal Resources Network, China Electricity Council and China Coal Transportation & Sales Society etc.
50 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
2. Coal Market Environment
- China's Thermal Coal Market Review of the first half of 2020
In the first half of this year, impacted by the pandemic, China's domestic coal market observed a year-on-year decrease in consumption, phased mismatch of power demand and supply, and fluctuating coal prices. As of 30 June, the price index of Bohai Bay thermal coal (5,500 kcal) was RMB533/tonne, decreasing by RMB19/tonne compared with the beginning of the year (RMB552/tonne). In the first half of 2020, the average value of Bohai Bay thermal coal (5,500 kcal) price index was RMB543/tonne, a year-on-year decrease of RMB33/tonne (the first half of 2019: RMB576/tonne).
January to | Change | |
June 2020 | ||
% | ||
Raw coal output (million tonnes) | 1,805 | 0.6 |
Coal import (million tonnes) | 174 | 12.7 |
Coal transportation by railways (million | 1,130 | (6.2) |
tonnes) | ||
Under the effects of the pandemic in the first half of this year, China's coal market observed a year-on-year decrease of approximately 1.9% in consumption. The coal consumption saw an approximately 1.7% year-on-year decrease in power industry, a 6.3% drop in the construction materials industry, and basically no change in steel and chemical industries.
While coal production resumption was swift and generally stable, coal supply was subject to factors including safety and environmental inspections for coal production sites and resources rectification issues, which caused phased effects to it. From January to June, China's national coal production reached 1,810 million tonnes, rising 0.6% from last year, and coal imports reached 174 million tonnes, up 12.7% year on year.
Outlook for the second half of the year
In the second half of the year, under the general tone of seeking progress while maintaining stability, China's economic development will continue to improve, and social demand will be fully restored, which will drive the recovery of coal demand. Although hydropower generation increased during summer, stocking up with coal for winter and other factors will bring phased fluctuations to coal demand for the second half of the year. In regard to the supply side, high quality production capacity will continue to increase; the transportation structure will continue to be adjusted and coal supply will remain adequate; yet, factors including safety, environmental and resource inspection will continue causing certain effects to coal supply. It is expected that in the second half of this year, coal demand and supply will remain balanced overall, whereas coal prices will continue fluctuating within the green range.
2020 Interim Report 51
Section V Discussion and Analysis on Operation Results (Continued)
- Thermal Coal Market in Asia Pacific Region Review of the first half of 2020
Affected by the pandemic, the demand from major coal consumption countries in Asia-Pacific weakened in the first half of 2020, which, coupled with factors such as pandemic measures, resulted in the slow growth or slight decrease in the coal supply, leading to the downward fluctuations in coal prices. In the first half of the year, coal production in India decreased by 1.5% to 406 million tonnes, Indonesia by 4.6% to 272 million tonnes, the US by 26.9% to 238 million tonnes, and Russia by 8.4% to 195 million tonnes; in the first quarter of the year, coal production of Australia decreased by 3.5% to 137 million tonnes.
Under decreased coal demand, and cooling in global trade, major state importers of coal, in the first half of this year, recorded coal imports year-on- year contraction. Specifically, India witnessed a year-on-year drop of 27.1% in its coal imports to 73.29 million tonnes; the figures were 1.3% to 88.63 million tonnes for Japan, 11.0% to 59.24 million tonnes for South Korea.
As of 30 June, the spot price of Newcastle NEWC thermal coal amounted to USD50.19 per tonne, representing a decrease of 22.5% as compared to the start of the year (USD64.73 per tonne), and a decrease of 27.1% as compared to the end of June 2019 (USD68.81 per tonne).
Outlook for the second half of the year
In the second half of 2020, with relatively great uncertainties looming for the global economic recovery, coal demand remained weak; coal supply stayed abundant, and coal prices lacked growth momentum.
3. Power Market Environment
Review of the first half of 2020
In the first half of 2020, with declined electricity demand, China's national power consumption reached 3,354.7 billion kWh, down 1.3% year on year. As a major power source, coal-fired electricity supply was subject to most of the demand decrease. Power demand recovered in the second quarter as work resumption was implemented in an orderly manner, which resulted in 3.9% year-on-year growth in national power consumption, with the growth rate increasing by 10.4 percentage points as compared with the first quarter.
In terms of industries, the power consumption in the secondary and tertiary industries was down 2.5% and 4.2% in the first half of this year, with the growth rates 5.6 and
13.6 percentage points down in the same period last year; the figures were a 6.6% increase and a drop by 3.0 percentage points for the use of power by urban and rural residents, and an 8.2% increase and a climb by 3.2 percentage points for primary industries.
In the first half of this year, power generation by national and international power plants in China totalled 3,364.5 billion kWh, representing a year-on-year decrease of 1.4%. Among them, the coal-fired power totaled 2,434.3 billion kWh, representing
- year-on-yeardecrease of 1.6%, with utilisation hours decreasing by 119 hours to 1,947 hours (coal-fired power decreasing by 133 hours to 1,994 hours); the statistics were 476.9 billion kWh for hydropower, representing a year-on-year decrease of
52 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
7.3%, with utilisation hours decreasing by 146 hours to 1,528 hours; 237.9 billion kWh for grid-connected wind power, representing a year-on-year increase of 10.9%;
171.6 billion kWh for nuclear power, representing a year-on-year increase of 7.2%, and 127.8 billion kWh for photovoltaic power, representing a year-on-year increase of 20.0%. In the second quarter, power generation recorded a year-on-year increase of 3.9%, with a growth rate up by 10.7 percentage points as compared with the first quarter.
The scale of newly installed capacity decreased year on year. As of the end of June 2020, the national full-calibre power generation installed capacity reached 2.05 billion kilowatts, of which non-fossil energy power generation installed capacity accounted for 42.4%, an increase of 0.4 percentage point over the end of the previous year. The power system reforms continued to move forward. In the first half of the year, the national inter-regional power transmission amounted to 245.4 billion kWh, an increase of 9.4% year on year, whilst the national inter-provincial power transmission was 647 billion kWh, edging up 0.7% year on year. The medium and long-term direct transaction volume of power was 960.2 billion kWh, with an 8.5% growth from previous year, constituting 28.6% of total power consumption, with an increase of 2.6 percentage points year on year.
Outlook for the second half of the year
In the second half of the year, power consumption will continue rising under an improving economy. It is expected that in the second half of the year, the growth rate for power consumption will recover from the first half, reaching a 1.5%-3% jump in total power consumption for the entire year. With a continuous growth in the installed capacity, a slight decline in the growth rate, and a loose balance between the power supply and demand, it is estimated that utilisation hours for power generation equipment in 2020 will see a year-on-year decrease.
- Status of Completion of 2020 Business Targets
Completion | Percentage of | |||
inthefirst | ||||
Item | Unit | Targets of 2020 | halfof2020 | completion |
% | ||||
Commercial coal production | 100 million | 2.68 | 1.456 | 54.3 |
tonnes | ||||
Coal sales | 100 million | 4.03 | 2.053 | 50.9 |
tonnes | ||||
Power output dispatch | 100 million kWh | 1,451 | 628.2 | 43.3 |
Revenue | RMB100 million | 2,163 | 1,050.16 | 48.6 |
Operating cost | RMB100 million | 1,484 | 699.57 | 47.1 |
Selling, general and | RMB100 million | 143 | 44.24 | 30.9 |
administrative expenses | ||||
(including research and | ||||
development expenses) and | ||||
net financial costs | ||||
Change in unit production cost | / | Year-on-year | Year-on-year | / |
of self-produced coal | increase of | increase of | ||
approximately | 5.5% | |||
8% |
2020 Interim Report 53
Section V Discussion and Analysis on Operation Results (Continued)
The above business targets are subject to the progress of procedures for the use of coal mine lands, risks, uncertainties and assumptions. The actual outcome may differ materially from these statements. Such statements do not constitute substantial commitments to investors. Investors should be aware that undue reliance on or use of such information may lead to investment risks.
- Completion of Capital Expenditures Plans for 2020
Unit: RMB100 million | |||
Plan for 2020 | Completion in the | ||
first half of 2020 | |||
1. | Coal segment | 56.1 | 18.01 |
2. | Power generation segment | 121.5 | 15.46 |
3. | Transportation segments | 114.5 | 6.91 |
including: railways | 99.4 | 6.56 | |
ports | 15.0 | 0.35 | |
shipping | 0.1 | 0 | |
4. | Coal chemical segment | 16.1 | 0.60 |
5. | Others | 10.1 | 0 |
Total | 318.3 | 40.98 | |
In the first half of 2020, total amount of capital expenditure of the Group was RMB4.098 billion, primarily used for the National Coal Emergency Reserve base of Shenhua Bashu Jiangyou, the second panel project in Guojiawan coal mine and the purchase of coal ming equipment; the construction of power projects such as the new engineering project of Shenhua Bashu Jiangyou coal-fired unit (2 x 1,000 MW), Phase III of Jinjie Coal and Power Integration Project (2 x 660 MW); the construction of Huangda Railway, the railway capacity expansion and reconstruction project, etc.
The capital expenditure plans of the Group in 2020 are subject to the development of business plans (including potential acquisitions), progress of capital projects, market conditions, outlook for future operation environment and the obtaining of the requisite permissions and approval documents. Unless required by laws, the Company shall not assume any responsibilities for updating the data of its capital expenditure plans. The Company intends to finance its capital expenditures by cash generated from operating activities, short-term and long-term borrowings, and other debt and equity financing.
IV. OTHER DISCLOSURES
- Caution and explanation as to the possibility of anticipated accumulated net profits being losses from the beginning of the year to the end of next reporting period or significant changes over the same period of the preceding year
Applicable | ✓ Not applicable |
54 China Shenhua Energy Company Limited
Section V Discussion and Analysis on Operation Results (Continued)
- Potential risks
The Company has established a closed-loop risk management system: it will perform risk identification and determine the major risks upon assessment at the beginning of each year, then monitor such risks on a daily basis by way of monitoring of major risks on a quarterly basis, specialised inspection, internal audit and other methods, and assess its major risk management at the end of the year. This facilitates and improves the decision-making process, refines the internal control system, and continues to enhance the risk management standard. The Board and the Audit Committee of the Company is of the view that such mechanism is able to assess the effectiveness of the operation of the risk management of the Company.
Investors should be aware that although the Company has assessed the major risks, and adopted relevant countermeasures, there is no absolute guarantee that all adverse impact could be eliminated due to the limitation of various factors.
The Company encountered major risks, primarily including: risk of safety production and environmental protection, policy risk, risk of international business, risk of market competition and risk of engineering project management.
The Company will further strengthen the research on the development trend of relevant industries, and enhance the development quality constantly by optimising the industrial structure and implementing the clean energy strategy. (1) In safe production and environmental protection, the Company will focus on the development direction of clean energy, constantly build the brand of "ultra-low emission" of coal power and comprehensively promote ecological progress, with a core of the efficient development, utilisation and conversion of clean coal. The Company will be in compliance with laws and regulations and prioritise the protection, strictly defend the ecological red line, vigorously promote green mine construction, accelerate environmental governance in water, gas, noise and slag, and continue to strengthen environmental monitoring. The Company will further improve the production safety management and control system, strengthen the works of safety training, hidden danger detection and control and emergency management, implement the 2020 Shenhua coal mine major disaster prevention and control plan, give full play to the advantages of informatisation, and effectively improve the level of safety management and control. (2) In international operation, the Company further strengthen the collection, analysis and research of information before the decision-making of investment in overseas projects to ensure the economic and technical feasibility of projects. Actively responding to the impact of COVID-19 on overseas business, the Company will strengthen overseas risk screening and take multiple measures to prevent and defuse risks for the promotion of international business in an orderly manner, and strengthen the cultivation and introduction of compound talents to provide a strong guarantee for "going out". (3) In marketing and sales, the Company will fully and accurately grasp market conditions and formulate the reasonable marketing policies; the Company will also optimise the structure of coal products for further enhancing the brand advantages, increase the development of new market and the maintenance of old market as well as balancing arrangements for transportation and sales, further improve the quality and efficiency of power business development, and participate in power market transactions in accordance with laws and regulation. We will improve the collection, distribution and transportation networks,
2020 Interim Report 55
Section V Discussion and Analysis on Operation Results (Continued)
promote the construction of special lines in coal core areas, accelerate the expansion and upgrading of railway lines, and improve the transportation capacity of trunk railway lines. (4) In policy risks, the Company will comprehensively track policy trends for accelerating the policy changes and solving the problems left over from history; the Company will focus on organising breakthroughs in related problems affecting production and operation; further standardise the order in which coal-power projects begin construction, and actively promote industrial upgrading and structural adjustment. (5) In project management, the Company will strengthen the awareness of project risk management, strengthen standardised site construction, strengthen project construction organisation and site management, and ensure the progress of the project.
In the face of COVID-19, the Company has made unified deployment of "one prevention and three guarantees" to prevent and control the spread of COVID-19, and ensure safe production, health of employees and energy supply, and coordinated epidemic prevention and control as well as production and operation. The epidemic prevention and control are orderly, and the production and operation are basically stable.
56 China Shenhua Energy Company Limited
Section VI Significant Events
- GENERAL MEETINGS
Date of | ||||
Inquiry index of the | disclosure of | |||
designated website | the publication | |||
for publishing the | of the voting | |||
Meetings | Date | voting results | results | |
2019 | Annual General Meeting | 29 May 2020 | Website of SSE | 30 May 2020 |
2020 | First Class Meeting of the | 29 May 2020 | website of HKEx | 29 May 2020 |
Holders of A Shares | ||||
2020 | First Class Meeting of the | 29 May 2020 | ||
Holders of H Shares |
On 29 May 2020, the Company convened the 2019 Annual General Meeting, the 2020 First Class Meeting of the Holders of A Shares and 2020 First Class Meeting of the Holders of H Shares, at which all the resolutions considered were approved. The voting results were disclosed on the website of HKEx on 29 May 2020 and the website of SSE on 30 May 2020.
The Company accepted registration of shareholders' attendance, and arranged a special session for shareholders for effective consideration of proposals in meeting. Shareholders actively participated in such meetings and were entitled to exercise their various rights, such as the right to know, the right of speech, the right to question and the right to vote. Directors, supervisors and senior management of the Company attended the meeting. Arranging special Q&A session in the meeting enabled interactions and communications between shareholders and the management.
The shareholders' representative, supervisors' representative, witness lawyers and the representative of Computershare Hong Kong Investor Services Limited acted as scrutineers at the 2019 Annual General Meeting. The PRC legal advisor of the Company issued the legal opinions.
- PROPOSALS FOR PROFIT DISTRIBUTION OR CONVERSION OF CAPITAL RESERVE TO SHARE CAPITAL
-
Proposals for profit distribution or conversion of capital reserve to share capital formulated for the half year
Whether to be distributed or converted: No
-
Proposals for profit distribution or conversion of capital reserve to share capital formulated for the half year
Relevant description of proposals for profit distribution or conversion of capital reserve to share capital: The Company has no plan to declare or pay interim dividends (including cash dividends).
-
Implementation of or adjustment to the profit distribution plan carried out during the reporting period
On 29 May 2020, it was approved at the 2019 Annual General Meeting of the Company to distribute the 2019 final dividends of RMB1.26 per share (inclusive of tax), amounting to RMB25.061 billion in aggregate (inclusive of tax), to all shareholders. As of the date of disclosure of this report, the distribution of the aforesaid dividends has been completed. The distribution of the 2019 final dividends complied with the requirements of the resolutions passed at the general meeting.
2020 Interim Report 57
Section VI Significant Events (Continued)
- PERFORMANCE OF COMMITMENTS
Commitments made by relevant parties such as de facto controller, shareholders, related parties and acquirers of the Company as well as the Company during the reporting period or subsisting to the reporting period are as follows:
Detailed | Further steps | |||||||
Timely | reasons shall | shall be | ||||||
and Strict | be specified if | specified if | ||||||
Date and | Any Time | Performance | commitment is commitment | |||||
Background of | Type of | Duration of | Limit for | of | not fulfilled in | is not fulfilled | ||
Commitment | Commitment | Covenantor | Commitment | Commitment | Commitment | Commitment | time | in time |
Undertaking | Non- | China Energy | The two parties entered into the "Non- | 24 May 2005, | Yes | Yes, in | N/A | N/A |
made in | competition | competition Agreement" on 24 May | long-term | progress | ||||
connection | undertaking | 2005 and a "Supplemental Agreement | ||||||
with initial | to the Existing Non-Competition | |||||||
public | Agreement" on 1 March 2018. As the | |||||||
offering | Company is an integrated platform | |||||||
which is responsible for the coal |
business and affiliated to China Energy, China Energy has committed not to compete with the Company in respect of the Company's principal businesses (coal exploration, mining, processing, sales; production and sales of comprehensive utilisation of coal products; development and management of coal products; railway transportation; port transportation; the industry and ancillary service related to the business aforementioned) whether inside or outside of the PRC, and granted the Company options and preemptive rights to acquire and be transferred from China Energy any business opportunities and assets which may pose potential competition.
The Resolution on the Performance of Non-competition Undertaking was approved at the 45th meeting of the second session of the Board on 27 June 2014 and the Announcement in relation to the Performance of Non-competition Undertaking was disclosed to the public. The Company will commence the acquisition of 14 assets of legacy of Shenhua Group Corporation Limited and its subsidiaries ("Original Undertaking Assets") step by step as planned. For details, please refer to the H-shares announcement dated 27 June 2014 and the A-shares announcement of the Company dated 28 June 2014. The Company completed acquisitions of 100% equity of Ningdong Power, 100% equity of Xuzhou Power and 51% equity of Zhoushan Power in 2015.
Being the parent company subsequent to the restructuring, China Energy merged with China Guodian Limited by way of merger by absorption. As approved in the 2018 first extraordinary general meeting of the Company, the Company entered into the Supplemental Agreement to the Existing Non-Competition Agreement with China Energy. It is agreed by both parties that other than the amendments in the Supplemental Agreement to the Existing Non-Competition Agreement, the clauses of the Existing Non-competition Agreement will not be changed.
58 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
Pursuant to the Supplemental Agreement to the Existing Non-competition Agreement, within five years after the completion of China Energy merging with China Guodian Limited by way of merger by absorption, the Company will discretionally exercise the options and the pre-emptive rights to acquire the assets within the retained businesses, and will no longer implement the 2014 non-competition undertakings. The retained businesses refer to (1) Original Undertaking Assets (excluding the completed acquisition of three equity assets by the Company in 2015) other than the assets of conventional power generation business and (2) the unlisted businesses originally held by China Guodian Limited which directly or indirectly compete with the core businesses of the Company (excluding the relevant assets that China Guodian Limited undertook to inject into its subsidiary, Inner Mongolia Pingzhuang Energy Co., Ltd., in 2007). For details, please refer to the H-shares announcement of the Company dated 1 March 2018 and the A-shares announcement of the Company dated 2 March 2018.
IV. APPOINTMENT AND REMOVAL OF AUDITORS
-
Description of appointment and removal of auditors
On 29 May 2020, KPMG Huazhen LLP and KPMG were appointed as the A-shares and H-shares auditors of the Company respectively for 2020 at the Company's 2019 Annual General Meeting.
- Change in appointment of auditors during the audit period
Applicable ✓ Not applicable
- Explanation of the Company on the "non-standard audit report" issued by Auditors
Applicable ✓ Not applicable
(IV) Explanation of the Company on the "non-standard audit report" issued by the certified public accountant in respect of the financial report contained in the annual report for the previous year
Applicable ✓ Not applicable
- INSOLVENCY OR RESTRUCTURING RELATED MATTERS
Applicable ✓ Not applicable
VI. MATERIAL LITIGATION AND ARBITRATION
As at the end of the reporting period, the Group was not involved in any material litigation or arbitration. As far as the Group was aware, the Group did not have any material litigation or claim which was pending or threatened against the Group.
As at 30 June 2020, the Group was the plaintiff, the defendant or the party of certain non-material litigations and arbitrations. The management of the Group believes that any possible legal liability which may be incurred from the aforesaid cases will not have any material impact on the financial position of the Group.
VII. SANCTIONS AND RECTIFICATIONS IMPOSED ON THE LISTED COMPANY, DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, DE FACTO CONTROLLERS AND OFFEROR
Applicable ✓ Not applicable
2020 Interim Report 59
Section VI Significant Events (Continued)
VIII. INTEGRITY OF THE COMPANY AND ITS CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLERS DURING THE REPORTING PERIOD
After enquiring National Enterprise Credit Information Publicity System, during the reporting period, neither the Company nor China Energy, the controlling shareholder of the Company, was included in the list of enterprises with serious illegal and dishonest acts.
IX. PARTICULARS AND IMPACT OF THE SHARE OPTIONS INCENTIVE PLAN, EMPLOYEE STOCK OWNERSHIP SCHEME OR OTHER EMPLOYEE INCENTIVE MEASURES
Applicable ✓ Not applicable
- MATERIAL RELATED/CONNECTED TRANSACTIONS
-
Related/Connected transactions during the daily operation
Pursuant to the requirements under the Guidelines of SSE on Related Transactions of Listed Companies, the Audit Committee of the Board of the Company shall perform the duties of control and daily management of related/connected transactions of the Company. The Company has a related/connected transaction team under the direct supervision of the Chief Financial Officer, which is responsible for the management of related/connected transactions; and has established a business process, which properly delineates the responsibilities of the Company, its subsidiaries and branches in the management of related/ connected transactions. The team has also established routine examinations, reporting systems and accountability systems in the subsidiaries and branches of the Company, to ensure that related/connected transactions are to be implemented in accordance with the terms and conditions of framework agreement.
1. Annual caps for the daily connected/related transactions in 2020
On 21 June 2019, as approved at the 2018 annual general meeting, the Company and China Energy renewed the Mutual Coal Supply Agreement, Mutual Supplies and Services Agreement, and the Financial Services Agreement for 2020-2022 (the "Existing Financial Services Agreement") and determined the annual caps of transactions contemplated under the daily connected/related party transactions mentioned above for each year from 2020 to 2022 on 22 March 2019. Please refer to the 2019 annual report of the Company for the purposes of entering into major continuing related/connected transactions.
The Resolution on the Capital Increase in Shenhua Finance Co., Ltd and on the Company's Waiver of Preemptive Subscription Right and the Resolution in Relation to the Entering into of the Financial Services Agreement with Shenhua Finance Co., Ltd in 2020 were approved at the 2019 annual general meeting of the Company (Please refer to the H-shares announcement of the Company dated 27 March 2020 and the A-shares announcement of the Company dated 28 March 2020). The new financial services agreement in 2020 entered into by the Company and Shenhua Finance Company on 28 March 2020 and the caps of its transactions in 2020 shall take effect from the date of completion of the capital increase in Shenhua Finance Company by China Energy (the "Capital Increase"). At the same time, the Existing Financial Services Agreement entered into between the Company and China Energy shall be terminated as of the date of completion of the Capital Increase. As of the date of this report, the Capital Increase has not yet been completed.
-
Related/Connected transactions during the daily operation
60 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
2. Implementation of agreements during the reporting period
The following are the annual caps for major discloseable continuing related/connected transactions during the reporting period and their implementations. The related/ connected transactions regarding the provision of products and labour services by the Group to China Energy Group amounted to a total of RMB28,357 million during the reporting period, accounting for 27.0% of the Group's revenue during the reporting period.
Provision of products and services by | Purchase of products and services from | ||||||
the Group to related/connected persons and | related/connected persons by | ||||||
Name of the agreement | other inflows | the Group and other outflows | |||||
Prevailing | Transaction | Proportion in | Prevailing | Transaction | Proportion in | ||
amount during | amount during | ||||||
transaction | the reporting | the same type | transaction | the reporting | the same type | ||
cap | period | of transactions | cap | period | of transactions | ||
RMB million | RMB million | % | RMB million | RMB million | % | ||
1. | Mutual Coal Supply | 65,500 | 24,814 | 33.9 | 16,000 | 3,315 | 17.3 |
Agreement entered into | |||||||
between the Company and | |||||||
China Energy | |||||||
2. | Mutual Supplies and Services | 13,000 | 3,543 | - | 9,000 | 969 | - |
Agreement entered into | |||||||
between the Company and | |||||||
China Energy | |||||||
Including: (1) Products | 2,821 | 11.9 | 517 | 2.0 | |||
(2) Services | 722 | 9.9 | 452 | 4.1 | |||
3. | Continuing Connected | 7,300 | 655 | 0.8 | 19,800 | 3,996 | 7.2 |
Transactions Framework | |||||||
Agreement entered into | |||||||
between the Company and | |||||||
China State Railway Group | |||||||
Co., Ltd. | |||||||
2020 Interim Report 61
Section VI Significant Events (Continued)
Transaction | ||||
Prevailing | amount during | |||
the reporting | ||||
Name of Agreement | Transaction item | transaction cap | period | |
RMB million | RMB million | |||
Financial Services | (1) | Total amount of providing financial | 3,500 | 0 |
Agreement | services of guarantee (including | |||
entered into | guarantee business within the | |||
between the | b u s i n e s s s c o p e o f f i n a n c i a l | |||
Company and | enterprises, such as performance | |||
China Energy | guarantee and quotation sharing) to | |||
members of China Energy Group | ||||
(2) | Annual total transaction amount of bill | 10,000 | 32 | |
acceptance and discount services | ||||
(3) | Daily balance (including relevant | 65,000 | 50,783 | |
interests accrued thereon) of | ||||
deposits placed by members of | ||||
China Energy Group | ||||
(4) | Daily balance of loans, consumption | 30,000 | 25,481 | |
credit, buyer's credit and finance | ||||
leasing (including relevant accrued | ||||
interests thereon) granted to | ||||
members of China Energy Group | ||||
(5) | Daily balance (including interests | 10,000 | 893 | |
accrued thereon) of entrusted loans | ||||
granted by China Energy to the | ||||
Company through Shenhua Finance | ||||
Company | ||||
(6) | Annual total fees, including agency | 200 | 10 | |
fee, handling fee or other services | ||||
expenses, charged for providing | ||||
members of China Energy Group | ||||
with financial services (including but | ||||
not limited to consultation, agency, | ||||
settlement, transfer, investment, | ||||
finance and lease, letter of credit, |
online banking, entrusted loan, guarantee, bill acceptance)
Aforementioned continuing related/connected transactions were made within the normal business scope of the Company, and approval and disclosure procedures of independent directors and independent shareholders were performed strictly.
62 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
- Connected transactions in relation to acquisition of assets or acquisition or disposal of equity
Applicable ✓ Not applicable
- Material connected transactions regarding joint external investments
1. Events disclosed in interim announcements without subsequent development or changes during implementation
Applicable ✓ Not applicable
2. Events disclosed in interim announcements with subsequent development or changes during implementation
Overview of Event | Index |
The Resolution on the Capital Increase in Shenhua Finance Co., Ltd and on the Company's Waiver of Preemptive Subscription Right was approved at the 2019 annual general meeting of the Company, it is agreed that the new registered capital of Shenhua Finance Company shall be paid in cash by China Energy, the controlling shareholder of the Company.
H-shares announcement of the Company dated 29 May 2020 and the A-shares announcement of the Company dated 30 May 2020
3. Events not disclosed in interim announcements
Applicable ✓ Not applicable
2020 Interim Report 63 | |||||||||
Section VI Significant Events (Continued) | |||||||||
(IV) Debts and liabilities between related parties | |||||||||
Unit: RMB million | |||||||||
Funds provided to | Funds offered by related parties | ||||||||
related parties | to the listed company | ||||||||
Opening | Amount | Closing | Opening | Amount | Closing | ||||
Related parties | Relationship | balance | incurred | balance | balance | incurred | balance | ||
China Energy and its | Controlling | 175.84 | 289.86 | 465.70 | 873.85 | - | 873.85 | ||
subsidiaries | shareholders and | ||||||||
its subsidiaries | |||||||||
Other related parties | Others | 483.82 | (1.50) | 482.32 | - | - | - | ||
Total | 659.66 | 288.36 | 948.02 | 873.85 | - | 873.85 | |||
Reasons for debts and liabilities between related parties
The above related debts and liabilities incurred were mainly due to the fact that the Group provided entrusted loans to an associated company of a subsidiary of the Company through a bank, and the Company, throughout its subsidiaries, provided finance leasing to subsidiaries of China Energy (the finance lease represents the financial lease services provided by Shenhua Lease Company to the power plants the Company contributed prior to the transaction for establishing Beijing GD Power. Upon approval by the Company's general meeting, the finance lease was gradually repaid in accordance with the original contractual arrangement), the Group's operating accounts receivable from the China Energy Group, and the long-term and short-term borrowings from China Energy Group to the Group, performed internal decision procedures in accordance with relevant requirements.
Impacts of debts and liabilities between related parties on the operating results and financial position of the Company
The above entrusted loans and borrowings are beneficial to the normal commencement of relevant projects' construction and production operation of the Company and have no material impact on the operating results and financial position of the Company.
- Other material related transactions
Applicable ✓ Not applicable
64 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
XI. MATERIAL CONTRACTS AND THEIR PERFORMANCE
1. Trust, contracting and leasing
Applicable ✓ Not applicable
2. Guarantees
Unit: RMB million
Guarantees provided by the Company to external parties (excluding guarantee granted to its subsidiaries) | |||||||||||||
Date of | Whether | ||||||||||||
provision of | Whether | guarantee | |||||||||||
Relationship | guarantee | Whether | counter | is for the | |||||||||
between the | (execution | Beginning | Expiry | performance Whether | Amount of | guarantee | benefit of | ||||||
guarantor and the | Amount | date of | date of | date of | Type of | has been | guarantee | guarantee | is | related | |||
Guarantor | listed company | Guarantee | guaranteed | agreement) | guarantee | guarantee | guarantee | completed | is overdue | overdue | provided | parties | Relationship |
Shenbao Energy | Controlling | Hulunbei'er | 85.32 | 2008.08.30 | 2008.08.30 | 2029.08.29 | Joint and | No | No | 0 | No | No | N/A |
subsidiary | Liangyi Railway | several | |||||||||||
Company | liability | ||||||||||||
Limited | guarantee | ||||||||||||
Zhuhai Coal | Controlling | Zhuhai Port Co., | 46.6 | 2018.06.13 | 2018.06.13 | 2027.09.30 Joint and | No | No | 0 | Yes | No | N/A | |
Dock | subsidiary | Ltd. | several | ||||||||||
liability | |||||||||||||
guarantee | |||||||||||||
Zhuhai Coal | Controlling | Guangdong | 46.6 | 2018.12.21 | 2018.12.21 | 2027.09.30 Joint and | No | No | 0 | Yes | No | N/A | |
Dock | subsidiary | Yudean Farnon | several | ||||||||||
Investment | liability | ||||||||||||
Co., Ltd. | guarantee | ||||||||||||
Total amount of guarantee provided during the reporting period (excluding guarantee provided to its | (24.47) |
subsidiaries) | |
Total balance of guarantee at the end of the reporting period (A) (excluding guarantee provided to its | 178.52 |
subsidiaries) | |
Guarantee provided by the Company and its subsidiaries to its subsidiaries | |
Total amount of guarantee provided to its subsidiaries during the reporting period | (3,486.45) |
Total balance of guarantee provided to its subsidiaries at the end of the reporting period (B) | 3,539.75 |
Aggregated amount of guarantee (including guarantee provided to its subsidiaries) | |
Total amount of guarantee (A+B) | 3,718.27 |
Proportion of total amount of guarantee to the net assets attributable to shareholders of the Company | 1.1 |
under China Accounting Standards for Business Enterprises at the end of the reporting period (%) | |
Including: Amount of guarantee provided to its shareholders, de facto controller and their related parties (C) | 0 |
Amount of guarantee directly or indirectly provided to its parties with a gearing ratio in excess of | 3,625.07 |
70% (D) | |
Portion of the total amount of guarantee in excess of 50% of net assets (E) | 0 |
Aggregated amount of the above three amounts of guarantee (C+D+E) | 3,625.07 |
Description of the potential joint and several repayment liability for unmatured guarantee | See below |
Description of guarantee | See below |
Note: The balance of guarantee provided by the subsidiary to external parties of the total amount of guarantee at the end of the reporting period equals to the amount of external guarantee of the subsidiary multiplies by the shareholding of the Company in the subsidiary.
2020 Interim Report 65
Section VI Significant Events (Continued)
As at the end of the reporting period, the total balance of the amount of guarantee provided by the Group amounted to RMB3,718.27 million, including:
-
As at the end of the reporting period, the guarantee provided by Shenbao Energy, a subsidiary of which the Company owns 56.61% of the shares, to external parties was as follows: prior to the acquisition of Shenbao Energy by the Company in 2011 and pursuant to the Guarantee Agreement on the Syndicated Renminbi Loan for the Cooperative Railway Project Connecting Yimin and Yiershi Newly Constructed by Hulunbei'er Liangyi Railway Company Limited, in 2008, Shenbao Energy, as one of the guarantors, provided joint and several liability guarantee to Hulunbei'er Liangyi Railway Company Limited (hereinafter referred to as the "Liangyi Railway Company", of which Shenbao Energy owns 14.22% of the shares) for the syndicated loans. The major liability guaranteed was the debts due to the lender with a maximum balance of RMB207.47 million from 2008 to 2027, regardless of whether the debt is due when the above period expires. The above syndicated loans will fall due by tranches between 2011 and 2026. The guarantee agreement provides that the guarantee period of the debts borne by the guarantor shall be calculated from the due date of each tranche to two years after the due date of the last tranche, i.e. 2029.
Given that Liangyi Railway Company failed to pay the loan interest on time due to its deteriorating business operation, as resolved by the shareholders' general meeting of Liangyi Railway Company, additional capital was injected into Liangyi Railway Company by its shareholders (including Shenbao Energy). Shenbao Energy has injected an accumulated amount of RMB11.82 million into Liangyi Railway Company.
As of the end of the reporting period, Shenbao Energy, in proportion to its shareholding, repaid the principal on the loans on behalf of Liangyi Railway Company Limited amounting to a total of RMB50.48 million. Shenbao Energy already made full provision for impairment on its 14.22% equity interest in Liangyi Railway Company and the repayment amount paid on its behalf. Together with other shareholders, Shenbao Energy will continue to call for improvement of business operation of Liangyi Railway Company. As at 30 June 2020, Liangyi Railway Company had a gearing ratio of 154%.
66 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
- As at the end of the reporting period, the external joint and several liability counter guarantee provided by Zhuhai Coal Dock, a controlling subsidiary held as to 40% by the Company is as follows:
Each of Guangdong Yudean Farnon Investment Co., Ltd. ("Yudean Farnon") and Zhuhai Port Co., Ltd. ("Zhuhai Port") held 30% equity interests in Zhuhai Coal Dock, respectively.
Zhuhai Coal Dock entered into a loan contract with Zhuhai branch of Shanghai Pudong Development Bank for a term of 10 years (from 30 September 2017 to 30 September 2027) with an amount of RMB336.0 million, pursuant to which, Yudean Farnon and Zhuhai Port provided joint and several liabilities guarantee for such loan with an amount of RMB168 million, respectively. The guarantee periods are both two years from the expiry of term of debt performance by the debtor in the loan contract. Zhuhai Coal Dock provided counter guarantee of joint and several liabilities to Yudean Farnon and Zhuhai Port with the caps of counter guarantee amount of RMB168 million, respectively. The above counter guarantee was approved at the eleventh meeting of the fourth session of the Board of the Company.
As at the end of the reporting period, Zhuhai Coal Dock has entered into a counter guarantee contract for joint and several liabilities counter guarantee ("Counter Guarantee Contract") with Zhuhai Port and Yudean Farnon respectively, with the caps of counter guarantee amount of RMB168 million. The counter guarantee period would be from the effective date of the Counter Guarantee Contract to the settlement of all payment by Zhuhai Coal Dock.
As of 30 June 2020, Zhuhai branch of Shanghai Pudong Development Bank granted a loan of RMB233 million to Zhuhai Coal Dock, the principal and interest of which being repaid on a regular basis.
The Resolution on the Counter Guarantee Provided by Shenhua Yudean Zhuhai Port Coal Dock Co., Ltd. to Shareholders of Two Other Parties was considered and approved at the 24th meeting of the fourth session of the board of directors of the Company (Please refer to the A-shares announcement of the Company dated 31 December 2019 for details). As the general meeting of the Zhuhai Coal Dock has not approved the replacement of the Shanghai Pudong Development Bank loan with the entrusted loan provided by the Company to Zhuhai Coal Dock, related counter guarantee was not implemented.
2020 Interim Report 67
Section VI Significant Events (Continued)
- As of the end of the reporting period, the amount of guarantee between subsidiaries in consolidated reports of the Company, in proportion to its shareholding, amounted to approximately RMB3,539.75 million, which was mainly due to the fact that Shenhua Hong Kong Limited, the wholly-owned subsidiary of the Company, provided guarantees for the issuance of USD0.5 billion bonds by China Shenhua Overseas Capital Co., Ltd., its wholly-owned subsidiary. The loan guarantee liability of Shenhua Funeng Power Co., Ltd., 51% indirectly owned by the Company, for its controlled subsidiaries has been lifted.
- Other Material Contracts
1. Entrusted wealth management
- General status of entrusted wealth management
Unit: RMB million | |||||
Closing | |||||
Amount | balance | ||||
incurred | of undue | ||||
during the | principal of | Unrecovered | |||
Source of | reporting the reporting | amount | |||
Type of product | fund | period | period | overdue | |
Banks' wealth | Own fund | 33,200 | 0 | 0 | |
management | |||||
products | |||||
Note: Amount incurred during the reporting period refers to the daily maximum balance of the entrusted wealth management of such type of the Group in the first half of 2020.
68 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
- Individual entrusted wealth management
Unit: RMB million
Type of | Amount of | Whether | |||||||||||
entrusted | Amount of | Initial date | Expiry date | Actual profit | principal | it has been | |||||||
wealth | entrusted | of entrusted | of entrusted | gained in the | redeemed | through | |||||||
management | wealth | wealth | wealth | Source of | Investment of | Determination of | Annualised | first half of | in the first | legal | |||
No. | Trustor | Trustee | products | management | management management fund | fund | compensation | rate of return | 2020 | half of 2020 | procedures | ||
1 | China | Industrial and | Banks' wealth | 5,000 | 26 September | 2 April 2020 | Own fund | High-liquidity | One-off payment | 3.50% | 89.4 | 5,000 | Yes |
Shenhua | Commercial | management | 2019 | assets | of principal with | ||||||||
Bank of China | products | including bonds | accrued interest | ||||||||||
and deposits | upon expiry | ||||||||||||
2 | China | Agricultural Bank | Banks' wealth | 5,000 | 29 September | 30 March | Own fund | High-liquidity | One-off payment | 3.15% | 79.0 | 5,000 | Yes |
Shenhua | of China | management | 2019 | 2020 | assets | of principal with | |||||||
products | including bonds | accrued interest | |||||||||||
and deposits | upon expiry | ||||||||||||
3 | China | Industrial and | Banks' wealth | 500 | 24 October | 23 January | Own fund | Bonds and | One-off payment | 3.70% | 5.2 | 500 | Yes |
Shenhua | Commercial | management | 2019 | 2020 | money market | of principal with | |||||||
Bank of China | products | instrument | accrued interest | ||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
4 | China | China | Banks' wealth | 2,000 | 22 November | 20 May | Own fund | High-liquidity | One-off payment | 3.00% | 29.6 | 2,000 | Yes |
Shenhua | Construction | management | 2019 | 2020 | assets | of principal with | |||||||
Bank | products | including bonds | accrued interest | ||||||||||
and deposits | upon expiry | ||||||||||||
5 | China | China | Banks' wealth | 1,000 | 22 November | 21 February | Own fund | Bonds and | One-off payment | 3.80% | 9.5 | 1,000 | Yes |
Shenhua | Merchants | management | 2019 | 2020 | money market | of principal with | |||||||
Bank | products | instrument | accrued interest | ||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
2020 Interim Report 69
Section VI Significant Events (Continued)
Type of | Amount of | Whether | |||||||||||
entrusted | Amount of | Initial date | Expiry date | Actual profit | principal | it has been | |||||||
wealth | entrusted | of entrusted | of entrusted | gained in the | redeemed | through | |||||||
management | wealth | wealth | wealth | Source of | Investment of | Determination of | Annualised | first half of | in the first | legal | |||
No. | Trustor | Trustee | products | management | management management fund | fund | compensation | rate of return | 2020 | half of 2020 | procedures | ||
6 | China | Industrial and | Banks' wealth | 200 | 22 November | 21 February | Own fund | Bonds and | One-off payment | 3.70% | 1.9 | 200 | Yes |
Shenhua | Commercial | management | 2019 | 2020 | money market | of principal with | |||||||
Bank of China | products | instrument | accrued interest | ||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
7 | China | Industrial Bank | Banks' wealth | 8,000 | 29 November | 29 May | Own fund | High-liquidity | One-off payment | 3.05% | 121.7 | 8,000 | Yes |
Shenhua | management | 2019 | 2020 | assets | of principal with | ||||||||
products | including bonds | accrued interest | |||||||||||
and deposits | upon expiry | ||||||||||||
8 | China | Industrial and | Banks' wealth | 500 | 2 December | 1 March | Own fund | Bonds and | One-off payment | 3.70% | 4.7 | 500 | Yes |
Shenhua | Commercial | management | 2019 | 2020 | money market | of principal with | |||||||
Bank of China | products | instrument | accrued interest | ||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
9 | China | Postal Savings | Banks' wealth | 1,000 | 17 December | 17 March | Own fund | Bonds and | One-off payment | 3.60% | 8.9 | 1,000 | Yes |
Shenhua | Bank of China | management | 2019 | 2020 | money market | of principal with | |||||||
products | instrument | accrued interest | |||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
10 | China | Industrial and | Banks' wealth | 1,000 | 18 December | 22 June | Own fund | High-liquidity | One-off payment | 3.15% | 16.2 | 1,000 | Yes |
Shenhua | Commercial | management | 2019 | 2020 | assets | of principal with | |||||||
Bank of China | products | including bonds | accrued interest | ||||||||||
and deposits | upon expiry | ||||||||||||
11 | China | Industrial and | Banks' wealth | 1,000 | 18 December | 23 June | Own fund | High-liquidity | One-off payment | 3.15% | 16.3 | 1,000 | Yes |
Shenhua | Commercial | management | 2019 | 2020 | assets | of principal with | |||||||
Bank of China | products | including bonds | accrued interest | ||||||||||
and deposits | upon expiry | ||||||||||||
12 | China | China Everbright | Banks' wealth | 1,000 | 20 December | 19 March | Own fund | Bonds and | One-off payment | 3.80% | 9.4 | 1,000 | Yes |
Shenhua | Bank | management | 2019 | 2020 | money market | of principal with | |||||||
products | instrument | accrued interest | |||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
70 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
Type of | Amount of | Whether | |||||||||||
entrusted | Amount of | Initial date | Expiry date | Actual profit | principal | it has been | |||||||
wealth | entrusted | of entrusted | of entrusted | gained in the | redeemed | through | |||||||
management | wealth | wealth | wealth | Source of | Investment of | Determination of | Annualised | first half of | in the first | legal | |||
No. | Trustor | Trustee | products | management | management management fund | fund | compensation | rate of return | 2020 | half of 2020 | procedures | ||
13 | China | Bank of China | Banks' wealth | 1,000 | 24 December | 24 March | Own fund | Bonds and | One-off payment | 3.55% | 8.9 | 1,000 | Yes |
Shenhua | management | 2019 | 2020 | money market | of principal with | ||||||||
products | instrument | accrued interest | |||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
14 | China | China | Banks' wealth | 1,000 | 24 December | 24 March | Own fund | Bonds and | One-off payment | 3.55% | 8.9 | 1,000 | Yes |
Shenhua | Construction | management | 2019 | 2020 | money market | of principal with | |||||||
Bank | products | instrument | accrued interest | ||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
15 | China | China | Banks' wealth | 4,000 | 25 December | 23 June | Own fund | High-liquidity | One-off payment | 3.10% | 61.2 | 4,000 | Yes |
Shenhua | Construction | management | 2019 | 2020 | assets | of principal with | |||||||
Bank | products | including bonds | accrued interest | ||||||||||
and deposits | upon expiry | ||||||||||||
16 | China | China CITIC | Banks' wealth | 1,000 | 26 December | 26 March | Own fund | Bonds and | One-off payment | 3.85% | 9.6 | 1,000 | Yes |
Shenhua | Bank | management | 2019 | 2020 | money market | of principal with | |||||||
products | instrument | accrued interest | |||||||||||
assets, non- | upon expiry | ||||||||||||
standardised | |||||||||||||
credit assets | |||||||||||||
and equity | |||||||||||||
assets | |||||||||||||
As of 30 June 2020, all entrusted wealth management of the Group had been fully recovered, and there was no default or failure to recover the principal amount due. The Group has not made any provision for impairment of the aforementioned wealth management products.
2020 Interim Report 71
Section VI Significant Events (Continued)
2. Entrusted loans
- General status of entrusted loans
Unit: RMB million | ||||
Amount | Closing | |||
incurred | balance | |||
during the | undue of the | Unrecovered | ||
Source of | reporting | reporting | amount | |
Type of product | fund | period | period | overdue |
Entrusted loans | Own fund | 457.4 | 420.0 | 37.4 |
Note: Amount incurred during the reporting period refers to the daily maximum principal balance of such entrusted loans of the Group in the first half of 2020.
- Individual entrusted loans
Unit: RMB million
Actual | Principal | Whether it | |||||||||||
Relationship | Amount | return | recovered | has been | |||||||||
between the | of | for the | for the | through | |||||||||
Name of | borrower and | entrusted | Initial date | Expiry date | Duration | Source of | Investment | Determination of | Interest | reporting | reporting | legal | |
borrower | the Group | Trustee | loans | of loans | of loans | of loans | fund | of fund | compensation | rate | period | period | procedures |
Sanxin Railway | Joint stock | Bank of | 37.4 | 13 February | 13 February | 1 year | Own fund | Working | One-off payment | 6% | 0 | 0 | Yes |
Company | company | Beijing | 2014 | 2015 | capital | of principal with | |||||||
accrued interest | |||||||||||||
upon expiry | |||||||||||||
Yili Chemical | Joint stock | Bank of | 420.0 | 29 December | 29 December | 3 years | Own fund | Replacement | Interest to be paid | 4.75% | 9 | 0 | Yes |
Company | China | 2017 | 2020 | of loans | quarterly | ||||||||
Notes: | 1. | The entrusted loan provided by the Company to Inner Mongolia Sanxin Railway | |||||||||||
Co., Ltd. ("Sanxin Railway Company") was not repaid when it was due in February | |||||||||||||
2015, and both parties are under negotiation in respect of the subsequent relevant | |||||||||||||
matters. |
2. In December 2017, Shendong Power, being the wholly-owned subsidiary of the Company, entered into entrusted loan agreements with amounts of RMB420 million and RMB200 million with Inner Mongolia Yili Chemical Industry Co., Ltd. ("Yili Chemical"), respectively, of which the entrusted loan agreement with RMB420 million has been performed on 29 December 2017, while the entrusted loan agreement with RMB200 million has not been performed.
As of 30 June 2020, the Group did not grant entrusted loans with an amount exceeding 5% of the Group's latest audited net assets attributable to equity holders of the Company to any individual party. The Company did not utilise the proceeds raised to grant entrusted loans, and there was no entrusted loan that was involved in litigations. No provision for impairment for the above entrusted loans has been made by the Group.
Under centralised capital management of the Group, the entrusted loans among the Company and its subsidiaries were used for meeting operating and development needs. Such entrusted loans have been eliminated in the consolidated financial statements of the Group.
72 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
XII. POVERTY ALLEVIATION EFFORTS OF LISTED COMPANY
-
Targeted poverty alleviation plan
The Group has intensified the implementation of the Opinions of the State Council on Three-year Plan of Winning the Tough Battle against Poverty and China Energy Group Working Plan on Poverty Alleviation 2018-2020, followed basic strategy of targeted poverty alleviation and targeted poverty relief, and effectively combined targeted assistance with overall regional development, extensive input with leadership, as well as poverty alleviation through development with ecological conservation. Focusing on "Three Prefecture and Three Provinces", which are extremely poverty-stricken areas and aged revolutionary areas, the Company was committed to improving public services, including education, culture and health, in extremely poverty-stricken areas, and took various assistance measures in terms of livelihood, intellectuality and industry, based on local conditions, improved infrastructure and production facilities, implemented a number of targeted poverty alleviation projects, helped all assisted poverty-stricken counties shake off poverty as scheduled, explored the establishment of a stable and long-lasting mechanism for poverty alleviation, consolidate the achievements of poverty alleviation, and strengthened the strategic connection between poverty alleviation and rural revitalisation.
In 2020, the Group plans to invest RMB81 million in poverty alleviation in targeted counties, introduce RMB1.1 million in support funds, and deploy 1,180 grassroots cadres and 1,130 technicians; the Group also plans to purchase agricultural products totaled RMB35.92 million from impoverished counties and help sell RMB2.5 million of agricultural products from impoverished areas. - Summary of the targeted poverty alleviation during the reporting period
The Group has undertaken the targeted poverty alleviation work in three counties - Wubu county and Mizhi county in Shaanxi province, and Butuo county in Sichuan province. In the first half of 2020, the Group has contributed approximately RMB111.2689 million in targeted poverty alleviation in the above mentioned three counties and has implemented 33 targeted poverty alleviation projects. The Group principally implemented the following projects for targeted poverty alleviation: (1) poverty alleviation through industrial development, such as the Walnut forest enhancement project in Guanjiazui Village, Mizhi County and alpine free- range chicken breeding project in Juesa Village, Butuo County; (2) poverty alleviation by ecological protection, such as the construction of a new ecological forest of approximately 400 mu in Yanhuang Highway in Wubu County, a new ecological economic forest of approximately 160 mu in Jiangxingzhuang Village of Mizhi County, and an ecological forest of approximately 300 mu in Guanjiazui Village in Mizhi County; (3) education poverty alleviation. A nine-year integrated curriculum school in the Mixi District of Mizhi County (九年一貫制學校) and Zeluo Town No. 2 Primary School of Butuo County (布拖縣則洛鄉第二小學) were newly established, and supplementary materials were purchased for 43,957 primary and middle school students in the Butuo County;(4) poverty alleviation through improvement in health, such as the Butuo County Red Heart Ribbon project; (5) infrastructure construction, such as construction project of rural drinking water safety work in Wubu County and the new tourist road project in Suomahua Scenic Area of Wuke Town, Butuo County; (6) offering trainings to grass-root cadres and skill training.
2020 Interim Report 73
Section VI Significant Events (Continued)
3. Targeted poverty alleviation results1
Index | Number and status |
- General
In which: 1. Capital (RMB 0'000) | 11,126.89 | ||
II. | Contribution By Category | ||
1. | Industry Development Support | Agriculture and forestry | |
In which: 1.1 Category of industry support | |||
project | support project | ||
1.2 Number of industry support | 2 | ||
project (unit) | |||
1.3 Amount of industry support | 143.64 | ||
project (RMB0'000) | |||
2. Employment transfer for poverty elimination | |||
Including: 2.1 Amount of subsidy for | 200 | ||
vocational skill training | |||
(RMB0'000) | |||
2.2 Number of people received | 883 | ||
vocational skill training (person | |||
per time) | |||
2.3 Number of registered poor | 1 | ||
households who were helped | |||
to be employed (person) | |||
3. Poverty elimination through education | 6,613.25 | ||
Including: 3.1 Invested amount to improve | |||
the educational resources in | |||
impoverished areas (RMB0'000) | |||
4. Poverty alleviation through improvement in | |||
health | |||
Including: 4.1 Invested amount of medical | 330 | ||
resources in impoverished | |||
areas (RMB0'000) | |||
5. Poverty alleviation by ecological protection | |||
Including: 5.1Name of Project | Carry out ecological | ||
conservation and maintenance | |||
5.2 Investment amount (RMB0'000) | 590 | ||
6. | Other projects | ||
Including: 6.1. Number of projects (unit) | 9 | ||
6.2. Invested amount (RMB0'000) | 3,250 | ||
6.3. Other details of the projects | Construction of drinking water | ||
safety works in rural areas of | |||
Wubu county, construction of | |||
Bozuo Village Road, establishment | |||
of "Poverty Alleviation Fund for | |||
Emergency and Difficulty" for | |||
Mizhi County, training programmes | |||
for grass-root cadres and training of | |||
electronic commerce skills, etc. |
1 The above statistical table is based on the Notice of the State Council on the Publication of Poverty Alleviation Plan for the "13th Five-Year" Plan Period (Guo Fa [2016] No. 64).
74 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
Index | Number and status | |
III. | Awards received (details and levels) | Luo Hong, temporary cadre of |
Butuo County has been elected | ||
by the Provincial Party Committee | ||
of Sichuan Provincial Government | ||
as an outstanding in-village worker | ||
(provincial and ministerial level) | ||
in 2019 |
4. Stage progress in fulfilling the social responsibility of targeted poverty alleviation
The Group has unswervingly followed the decisions and arrangements of the Central Committee of the Party, further increased financial input, kept optimising work mechanism, made steady progress in key assistance projects, obtained significant results from poverty alleviation and assistance work, and successfully helped two counties of Mizhi and Wubu in Yulin City, Shaanxi Province to shake off poverty in 2019. In the first half of 2020, all the poverty alleviation funds in the counties have been allocated; 9 new alleviation projects were organised in Butuo County, with an additional RMB29.0889 million in alleviation funds. External support funds of RMB1.18 million have been introduced and the project was completed and has been put into operation. The training of 541 members of the administrative village team, the first secretary and the resident team members has also been completed, and 690 special skill trainings for the deprived workforce were organised.
As of the end of the reporting period, the Group adhered to "Developing Education to Facilitate Medical Development, Industry assistance, Party Branch Building and Developing Both Ambition and Wisdom" (興教助醫,產業幫扶,支部共建,志智雙扶). The cumulative funds that have been put into poverty alleviation in Butuo County, Sichuan Province amounted to RMB166.5847 million; 41 poverty alleviation projects such as "One Village, One Road and Two Funds, Three Schools, Five Kindergarten and Four Industries, Joint Construction by Pairs and Change the Customs, Red Ribbons of Love and Medicine" have been implemented. Among them, a total investment of RMB104.2425 million was put into education poverty alleviation. Abuzelu Primary School (阿布澤魯小學), Diluo Town Second Primary School (地洛鄉第二小學), Zeluo Second Primary School (則洛二小) were newly constructed; 5 kindergartens were newly constructed and renovated; the Butuo County Education Incentive Fund and Abuzelu Primary School Teachers and Students Motivation Fund were established to purchase school and daily supplies, 20 "Loving Care Libraries" were established with the donation. A total of RMB22.65 million was invested in health and poverty alleviation, and more than 40 sets of MRI equipment were purchased for county hospitals and CDCs. A mother-infant AIDS prevention and control project was established, and premature heart disease screening and treatment were carried out in the county. A total of RMB6.2 million was invested in the "Developing Both Ambition and Wisdom" project; 13 grassroots cadres, skilled personnel, Yi regional cadres and e-commerce training sessions were organised, more than 150 training sessions, including evening school for farmers and "Party Branch Construction" trainings were conducted and 6,034 persons have received training. In terms of poverty alleviation through infrastructure, a total of RMB27.46 million was invested to construct Bozuo Village Road (博作通村公路) and the Bozuo Happy
2020 Interim Report 75
Section VI Significant Events (Continued)
New Village in Juesa Xiang (覺撒鄉博作幸福美麗新村). We have invested a total amount of RMB2.9564 million in industrial poverty alleviation, supported the development of 300 mu Yinhongli Plantation Project (茵紅李種植項目) and a cattle farm project, and implemented the ecological economic-forest project of Duoluo Village in Hejing Town and the alpine free- range chicken breeding project in Juesa Village, Butuo County. A total of RMB1.41 million was invested in the Party-building poverty alleviation work, the maintenance project of the county Party School and the renovation project of three village-level Party activity centers were implemented to assist in the establishment of the "Model Party Committee" of Juesa Xiang and the "Red Flag Branch" of Bozuo Village. Activities that aims to change the customs were proactively implemented.
In addition to the above three counties, the Group was also committed to poverty alleviation work in forms of education support and medical care through the platform of China Energy Group Public Welfare Foundation. In the first half of the year, the Group contributed approximately RMB28.9504 million1 for treatment to children with leukemia, congenital heart disease and screening for congenital heart disease and provision of funds for education throughout the country. Donation of RMB81.33 million was made in the first half of the year, for the one-on-one supporting scheme in deprived villages near nine subsidiaries, including Guohua Power, with the implementation of 31 projects.
5. Subsequent targeted poverty alleviation plan
2020 is the last year for the PRC to win its battle against poverty, the Group will continue to adhere to our targeted poverty alleviation strategy, strengthen the responsibility for tackling the difficulties, resolutely engage in the war to eradicate poverty, consolidate poverty alleviation results and ensure poverty alleviation tasks are comprehensively performed on schedule.
To strengthen the support and efforts to further improve the two counties of Mizhi and Wubu, which have shaken off poverty, we will adhere to the requirements of "responsibilities, policies, assistance, and supervision in poverty-alleviation". We will take the helm of the campaign against poverty, assist Butuo county in getting rid of poverty as planned. First, we will continue to put in place polices, measures and requirements for poverty eradication. Second, we will continue to implement the principle of "One Position, Two Responsibilities" in poverty alleviation and fulfill the principal responsibilities of cadre assigned to their respective positions, and ensure the completion of poverty alleviation tasks and indicators throughout the year. Third, we will focus on the key assistance projects in 2020, and strengthen safety and quality supervision of the projects within the construction period. At the same time, we will seek further breakthroughs in industrial poverty alleviation, which will enable the deprived population to increase their incomes. Fourth, we will continue to improve the ability of cadres performing their poverty alleviation duties. We will manage poverty alleviation projects and funds strictly, strengthen supervision over the use of poverty alleviation funds, proactively carry out special inspections, strengthen our supervision of discipline and accountability, and effectively improve the efficiency and effectiveness of the utilisation of funds.
1Financial input is calculated based on capital expenditure of China Energy Group Public Welfare Foundation for poverty alleviation on education and health care× the proportion of donation made by China Shenhua to China Energy Group Public Welfare Foundation. The proportion of donation made by China Shenhua has been 78.62% since the establishment of China Energy Group Public Welfare Foundation.
76 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
XIII. CONVERTIBLE CORPORATE BONDS
Applicable ✓ Not applicable
XIV. ENVIRONMENTAL INFORMATION
-
Environmental issues of listed companies and their significant subsidiaries classified as the key pollutant discharging units as published by the competent environmental protection authorities of the PRC
1. Information on pollutant discharge
During the reporting period, total emissions of major pollutants of enterprises whose pollution sources were under key supervision and control of the state and enterprises whose pollution sources were under key supervision and control of pollution sources of the Company are as follows: sulfur dioxide of 4.6 thousand tonnes, nitrogen oxides of 8.4 thousand tonnes, soot of 0.7 thousand tonnes and chemical oxygen demand (COD) of 372.27 tonnes. In particular, total emissions of major air pollutants produced by the enterprises categorised as national major pollution sources under supervision are as follows: sulfur dioxide of 4.2 thousand tonnes, nitrogen oxides of 8.3 thousand tonnes, soot of 0.7 thousand tonnes and chemical oxygen demand (COD) of 280.86 tonnes.
As at 30 June 2019, 25 subsidiaries of the Group were categorised as national major pollution sources under supervision (among which 23 were waste gas exhausting enterprises, 5 were wastewater discharging enterprises (inclusive of two waste gas exhausting enterprise concurrently and a waste gas and hazardous solid waste enterprise concurrently) and 1 was hazardous solid waste discharging enterprise (a waste gas exhausting and wastewater discharging enterprise)), mainly are coal-fired power plants, coal chemical plants and coal preparation plants, etc, which are located in places including Inner Mongolia, Shaanxi, Hebei, Fujian and Guangdong.
The main pollutants emitted by waste gas exhausting enterprises are sulfur dioxide, nitrogen oxides and soot, which are emitted to the atmosphere through the chimneys. Waste gas exhausting enterprises are mainly public thermal power plants, coal-to- chemical captive power plants, heating boilers for mines and coking plants. Emission standards implemented include Emission Standards for Air Pollutants Produced by Thermal Plants (GB13223-2011), Emission Standards for Air Pollutants Produced by Boilers (GB13271-2014) and Emission Standards for Pollutants Produced by Coking Chemical Industry (GB16171-2012).
The main pollutants discharged by wastewater discharging enterprises are chemical oxygen demand (COD), which are discharged to the surface water through the sewage outfall of the enterprises. Wastewater enterprises are mainly coal mining and coal-to-chemical enterprises and wastewater treatment plants. The emission standards implemented were the Comprehensive Emission Standards for Sewage (GB8978-1996), Emission Standards for Pollutants from Coal Industry (GB20426-2006) and Emission Standards for Pollutants Produced by Municipal Sewage Treatment Plants (GB18918-2002).
2020 Interim Report 77
Section VI Significant Events (Continued)
In the first half of 2020, the emissions from enterprises under the state's key supervision and control of pollution sources (waste gas) under the Group are as follows:
Operation | |||||||||
Number | rate of | ||||||||
Average | Total | of | Distribution | pollution | |||||
Major | Total | emission | verified | discharge | of discharge | Discharge | Excessive | prevention | |
Unit name | pollutant | emissions | concentration | emissions | ports | ports | method | emissions | facilities |
tonne | mg/Nm³ | tonne/year | % | ||||||
Power Plant of | SO2 | 540 | 75.22 | 3,200 | 4 | One discharge port | Organised | 2 hours | 100 |
Shenhua Yili | NOX | 1,181 | 164.45 | 3,200 | per unit | continuous | 6 hours | 100 | |
Energy Co., Ltd.Soot | 98 | 13.61 | 480 | discharge | 2 hours | 100 | |||
Jinjie Energy | SO2 | 492 | 17.72 | 1,535 | 2 | Units 1 and 2 share | Organised | Within limit | 100 |
NOX | 902 | 32.24 | 4,910.97 | one discharge port; | continuous | Within limit | 100 | ||
Soot | 119 | 4.22 | 1,314.35 | Units 3 and 4 share | discharge | Within limit | 100 | ||
one discharge port. | |||||||||
Taishan Power | SO2 | 495 | 18.29 | 4,780 | 6 | Units 1-2 share one | Organised | Within limit | 100 |
NOX | 797 | 29.46 | 9,560 | discharge port; | continuous | Within limit | 100 | ||
Soot | 48 | 1.77 | 20mg/Nm³ | Units 3-7 each | discharge | Within limit | 100 | ||
have one discharge | |||||||||
port. | |||||||||
Shenhua Funeng | SO2 | 318 | 18.05 | 3,675 | 2 | One discharge port | Organised | Within limit | 100 |
NOX | 698 | 41.12 | 3,675 | per unit | continuous | Within limit | 100 | ||
Soot | 48 | 2.74 | 309 | discharge | Within limit | 100 | |||
Baotou Coal | SO2 | 249 | Thermal power: | 2,674 | 3 | The flue gas of the | Organised | Within limit | 100 |
Chemical | 34.48; | thermoelectric | continuous | ||||||
Sulfur | boiler system | or | |||||||
recovery: | shares a discharge | intermittent | |||||||
199.22 | port, and a | discharge | |||||||
NOX | 453 | 75.75 | 1,337 | separate discharge | Within limit | 100 | |||
Soot | 77 | 11.71 | 401 | port for the tail | Within limit | 100 | |||
gas of the sulfur | |||||||||
recovery device. | |||||||||
Cangdong Power | SO2 | 245 | 11.50 | 1,842.65 | 2 | Units 1 and 2 share | Organised | Within limit | 100 |
NOX | 288 | 22.91 | 2,632.36 | one discharge port; | continuous | Within limit | 100 | ||
Soot | 41 | 1.90 | 292.06 | Units 3 and 4 share | discharge | Within limit | 100 | ||
one discharge port. | |||||||||
Dingzhou Power | SO2 | 227 | 11.14 | 1,814.31 | 2 | Units 1 and 2 share | Organised | Within limit | 100 |
NOX | 401 | 21.20 | 2,591.87 | one discharge port; | continuous | Within limit | 100 | ||
Soot | 21 | 1.09 | 521.86 | Units 3 and 4 share | discharge | Within limit | 100 |
one discharge port.
78 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
Operation | |||||||||
Number | rate of | ||||||||
Average | Total | of | Distribution | pollution | |||||
Major | Total | emission | verified | discharge | of discharge | Discharge | Excessive | prevention | |
Unit name | pollutant | emissions | concentration | emissions | ports | ports | method | emissions | facilities |
tonne | mg/Nm³ | tonne/year | % | ||||||
Sichuan Energy | SO2 | 224 | 57.42 | 2,427 | 1 | The units share a | Organised | Within limit | 100 |
Jiangyou Power | discharge port. | continuous | |||||||
Plant | discharge | ||||||||
NOX | 357 | 95.85 | 1,320 | 17 hours | 99.53 | ||||
Soot | 43 | 11.34 | 383 | Within limit | 100 | ||||
Shendong Power | SO2 | 187 | 34.60 | 1,000 | 2 | One discharge port | Organised | Within limit | 100 |
Chongqing | NOX | 387 | 16.85 | 1,500 | per unit | continuous | Within limit | 99.89 | |
Wanzhou Port | Soot | 32 | 2.93 | 200 | discharge | Within limit | 100 | ||
Power Co., Ltd. | |||||||||
Huizhou Thermal | SO2 | 205 | 24.68 | 883.63 | 1 | The units share a | Organised | Within limit | 100 |
NOX | 317 | 38.06 | 1,767.27 | discharge port. | continuous | Within limit | 100 | ||
Soot | 9 | 1.11 | 353.45 | discharge | Within limit | 100 | |||
Mengjin Power | SO2 | 162 | 21.62 | 1,079 | 2 | One discharge port | Organised | Within limit | 100 |
NOX | 255 | 37.89 | 1,542 | per unit | continuous | Within limit | 100 | ||
Soot | 21 | 2.76 | 308 | discharge | Within limit | 100 | |||
Shendong Power | SO2 | 95 | 10.06 | 1,031.81 | 1 | The units share a | Organised | Within limit | 100 |
Dianta CompanyNOX | 340 | 35.90 | 1,474.02 | discharge port. | continuous | 3 hours | 100 | ||
Soot | 21 | 2.40 | 294.80 | discharge | Within limit | 100 | |||
Shouguang Power SO2 | 78 | 6.90 | 1,347.50 | 2 | One discharge port | Organised | Within limit | 100 | |
NOX | 305 | 25.09 | 1,925 | per unit | continuous | Within limit | 100 | ||
Soot | 6 | 0.53 | 192.50 | discharge | Within limit | 100 | |||
Jiujiang Power | SO2 | 80 | 4.86 | 2,805 | 2 | One discharge port | Organised | Within limit | 100 |
NOX | 302 | 19.40 | 3,014 | per unit | continuous | Within limit | 100 | ||
Soot | 16 | 0.87 | 1,050 | discharge | Within limit | 100 |
2020 Interim Report 79
Section VI Significant Events (Continued)
Operation | |||||||||
Number | rate of | ||||||||
Average | Total | of | Distribution | pollution | |||||
Major | Total | emission | verified | discharge | of discharge | Discharge | Excessive | prevention | |
Unit name | pollutant | emissions | concentration | emissions | ports | ports | method | emissions | facilities |
tonne | mg/Nm³ | tonne/year | % | ||||||
Zhunge'er Power | SO2 | 138 | 21.41 | 3,840 | 2 | One discharge port | Organised | Within limit | 100 |
NOX | 189 | 30.34 | 3,840 | each for Phase I | continuous | Within limit | 100 | ||
Soot | 17 | 2.94 | 576 | and Phase II | discharge | Within limit | 100 | ||
Fujian Jinjiang | SO2 | 119 | 69.71 | 831.77 | 1 | The units share a | Organised | Within limit | 100 |
Thermal Power | NOX | 169 | 99.82 | 831.11 | discharge port. | continuous | Within limit | 100 | |
Co., Ltd. | Soot | 21 | 12.44 | 124.77 | discharge | Within limit | 100 | ||
Sichuan Bashu | SO2 | 50 | 9.52 | 2,400 | 1 | The units share a | Organised | Within limit | 100 |
Jiangyou Coal- | NOX | 161 | 30.58 | 1,200 | discharge port. | continuous | 10 hours | 99.81 | |
fired Power | Soot | 34 | 6.50 | 343 | discharge | Within limit | 100 | ||
Generation Co., | |||||||||
Ltd. | |||||||||
Liuzhou Power | SO2 | 46 | 8.49 | 3,727.20 | 1 | The units share a | Organised | Within limit | 100 |
NOX | 161 | 33.73 | 1,863.60 | discharge port. | continuous | Within limit | 100 | ||
Soot | 15 | 2.85 | 559 | discharge | Within limit | 100 | |||
Shenhua Funeng | SO2 | 58 | 21.78 | 2,092 | 1 | The units share a | Organised | Hourly | 100 |
(Fujian Yanshi) | discharge port. | continuous | average | ||||||
Power Co., Ltd. | discharge | emission | |||||||
concentration | |||||||||
exceeded the | |||||||||
limit by two | |||||||||
times | |||||||||
NOX | 117 | 44.05 | 2,090 | Hourly | 100 | ||||
average | |||||||||
emission | |||||||||
concentration | |||||||||
exceeded the | |||||||||
limit by one | |||||||||
time | |||||||||
Soot | 7 | 2.48 | 440 | Within limit | 100 | ||||
Daliuta Power PlantSO2 | 56 | 72 | 290.90 | 1 | The units share a | Organised | 3 hours | 100 | |
of Shendong | NOX | 119 | 150 | 290.90 | discharge port. | continuous | 2 hours | 100 | |
Power CompanySoot | 9 | 11 | 43.63 | discharge | 1 hour | 100 |
80 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
Operation | |||||||||
Number | rate of | ||||||||
Average | Total | of | Distribution | pollution | |||||
Major | Total | emission | verified | discharge | of discharge | Discharge | Excessive | prevention | |
Unit name | pollutant | emissions | concentration | emissions | ports | ports | method | emissions | facilities |
tonne | mg/Nm³ | tonne/year | % | ||||||
Guojiawan | SO2 | 12 | 2.55 | 420 | 1 | The units share a | Organised | Within limit | 100 |
Power Plant | NOX | 150 | 33.18 | 600 | discharge port. | continuous | 2 hours | 100 | |
of Shendong | Soot | 1 | 0.31 | 120 | discharge | Within limit | 100 | ||
Power | |||||||||
Fuping Thermal | SO2 | 38 | 7.77 | 609.88 | 2 | One discharge port | Organised | Within limit | 100 |
Power | NOX | 107 | 22.18 | 871.26 | per unit | continuous | Within limit | 100 | |
Soot | 5 | 1.08 | 174.25 | discharge | Within limit | 100 | |||
Shenmu Power | SO2 | 36 | 6.96 | 1,276.74 | 1 | The units share a | Organised | 1 hour | 100 |
NOX | 89 | 21.05 | 1,276.74 | discharge port. | continuous | Within limit | 100 | ||
Soot | 6 | 1.46 | 191.52 | discharge | Within limit | 100 | |||
Shenhua | SO2 | 12 | 17.14 | 75 | 1 | One discharge port | Organised | Within limit | 100 |
Bayannaoer | for the coke oven | continuous | |||||||
Energy | chimney | discharge | |||||||
NOX | 104 | 148.78 | 750 | Within limit | 100 | ||||
Soot | 4 | 6.425 | 45 | Within limit | 100 |
Note: Taishan Power (soot) was subject to verification standard on emission concentration other than total emission.
The table below sets forth the emissions from enterprises under the state's key supervision and control of pollution sources (COD) under the Group in the first half of 2020:
2020 Interim Report 81
Section VI Significant Events (Continued)
Operation | ||||||||
Total | Number | rate of | ||||||
Average | Verified | of | pollution | |||||
Total | Emission | Emissions | discharge | Distribution of | Discharge | Excessive | prevention | |
Unit Name | Emissions | Concentration | ports | discharge ports | method | Emissions | facilities | |
tonne | mg/L | tonne/year | % | |||||
Baotou Coal Chemical | 61.25 | 47.95 | 150 | 1 | One total sewage outlet Continuous or | Within limit | 100 | |
intermittent | ||||||||
discharge | ||||||||
Jinjie Energy (Coal) | 186.92 | 16 | N/A | 3 | Discharge outlet for | Continuous or | Within limit | 100 |
well water treatment | intermittent | |||||||
plant in the main | discharge | |||||||
shaft; Zaoshaogou | ||||||||
large discharge | ||||||||
outlet; Hezegou large | ||||||||
discharge outlet | ||||||||
Daliuta Well, Daliuta | 30.02 | 16 | N/A | 1 | Discharge outlet for | Continuous or | Within limit | 100 |
Coal Mine from | well water treatment | intermittent | ||||||
Shendong Coal | plant in the main | discharge | ||||||
Group | shaft | |||||||
Sichuan Energy | 1.06 | 6.07 | 100mg/L | 1 | Fujiang | Continuous or | Within limit | 100 |
Jiangyou Power | intermittent | |||||||
Plant | discharge | |||||||
Sichuan Bashu | 1.61 | 6.07 | 100mg/L | 1 | Fujiang | Continuous or | Within limit | 100 |
Jiangyou Coal-fired | intermittent | |||||||
Power Generation | discharge | |||||||
Co., Ltd. | ||||||||
82 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
Notes: (1) Currently, local environmental protection administration does not issue sewage and waste water license to coal enterprises and accordingly total emission was not verified.
- Sichuan Energy Jiangyou Power Plant and Sichuan Bashu Jiangyou Coal-fired Power Generation Co., Ltd. use the emission concentration as the standard for verification and do not specify the amount of total emissions.
In the first half of 2020, the total emission of major enterprises under the state's key supervision and control of pollution sources (solid and hazardous waste) of the Group is as follows: 121.02 tonnes from Baotou Coal Chemical, all of which are disposed and transferred in compliance with the laws and regulations with no external discharge.
With regard to the provisions under the existing laws, the management believes that there is no contingent risk in relation to environmental protection that may bring material and adverse effect to the financial position and operating results of the Group. Contingent liabilities which may arise in the future cannot be accurately predicted.
Investors should be aware that the above data are from self-monitoring of the Company, which are not confirmed by the local environmental protection regulatory authorities and may be different from the final data determined by the local environmental protection regulatory authorities.
-
Construction and operation of pollution prevention and control facilities
During the reporting period, all subsidiaries of China Shenhua were well-equipped with pollution prevention and control facilities that were under stable operation. In terms of waste water prevention and control, China Shenhua built distributed underground reservoirs. Mine water was used for production, living and ecological engineering after natural purification by gangue in goaf areas. All enterprises were equipped with sewage treatment plants or facilities, in order to achieve comprehensive treatment and utilisation of production and domestic sewage. In terms of waste gas prevention and control, limestone gypsum wet desulfuration was employed by coal-fired power plants and boilers; low nitrogen burners and SCR equipment were applied for denitration; electrostatic precipitator and wet dust collectors were applied for removing soot. Hydrogen sulfide gas generated from chemicals was emitted after treatment by two-stage Claus + exhaust gas hydrogenation technology. In terms of coal dust prevention and control, coal yard was fully closed or was equipped with wind-proof and dust suppressing wall and spraying facility. Coals were solidified before shipment. In terms of solid waste, general solid wastes such as coal gangue, furnace ash and desulphurization gypsum, were utilised for power generation, brickmaking, etc. All hazardous solid wastes were stored at temporary warehouse, and were disposed of and transferred in compliance with the relevant requirements. Soundproof door, soundproof window and efficient composite sound barrier and other facilities were installed for reducing noise. - Environmental effect appraisal of construction project and other administrative approvals on environmental protection
In terms of construction project, the Group carried out simultaneously three management measures, being environmental effect appraisal and energy conservation appraisal, soil conservation inspection and acceptance, as well as environmental protection inspection and acceptance. The environmental impact appraisal, as well as environmental protection inspection and acceptance construction completion, water environmental protection inspection and acceptance and other relevant tasks have been conducted, respectively, on all construction projects in accordance with the law.
2020 Interim Report 83
Section VI Significant Events (Continued)
- Emergency plan for unexpected environmental incidents
During the reporting period, all subsidiaries of the Group have formulated their emergency plans for unexpected environmental incidents and conducted regular drills. - Environment self-monitoring plan
The Group standardised the management of the online environmental protection monitoring system, and formulated the Administration Measures for the Online Environmental Protection Monitoring System (Trial) (《環保在線監測系統管理辦 法(試行)》) in accordance with the relevant national standards and administrative regulations for online monitoring of pollution sources. All subsidiaries of the Company have completed the preparation of their self-monitoring plans. All the data in relation to wastewater and exhaust gas from automatic monitoring and entrusted monitoring were uploaded to the monitoring platform of the local environmental protection department according to the relevant requirements. During the reporting period, facilities were under normal operation in general. - Other environmental information that should be disclosed
Fines at an amount of RMB50,000 and above imposed by environmental protection administration against subsidiaries of the Group in the first half of 2020 are as follows:
Unit Name | Date | Penalty No. | Fine Amount Reason for Penalty | Rectification Progress |
RMB0'000 | ||||
Shouguang Power | 20 February | Weihuan Penalty | 10 Online monitoring data on 24 |
2020 | No. [2020] | March 2019 showed that | |
SG028 | the average daily nitrogen | ||
oxide emission concentration |
exceeded the standard by 0.64 time.
In order to avoid using the nitrogen oxide emission data during the unit start-up period as effective data to be counted within the daily average value, at present, when the unit starts, the data has been reported in accordance with the requirements of the environmental protection department.
Note: "Technical Specification for Application and Issuance of Pollution Discharge Permits for Thermal Power Industry" provides that: "The stable operation compliance period of NOX starts when the output of the unit reaches 50% of the rated power after the unit is started and until the output of the unit drops to 50% of the rated power before the unit is decommissioned. The emission data during the startup and shutdown periods outside this period may not be used as the basis for determining the stable operation compliance of NOX discharge for thermal power unit.
84 China Shenhua Energy Company Limited
Section VI Significant Events (Continued)
- Environmental issues of companies other than those classified as the key pollutant discharging units
In line with the principles of prevention from the source, control in the process and treatment at the end, the Group conducted clean production, as well as pollution prevention and control to minimise the impact of production on environment. It also strengthened comprehensive treatment and reuse of wastewater to improve its comprehensive utilisation efficiency. Coal-fired generating units implemented dust prevention and control, as well as technical transformation of boilers to reduce air pollutant emissions. By further exploiting the values of such solid wastes as coal gangue, coal ash and boiler slag, the Group increased their comprehensive utilisation, and make sure that all solid wastes are safely disposed. The Group also conducted such works as soil conservation, windbreaks and sand fixation, land subsidence treatment, land reclamation and afforestation, as well as ecological construction, so as to preserve and improve the local ecological environment.
- Explanation of reasons for non-disclosure of environmental information by companies other than those classified as the key pollutant discharging units
Applicable ✓ Not applicable
(IV) Explanation of the follow-up progress or changes in the disclosure of environmental information during the reporting period
Applicable ✓ Not applicable
XV. OTHER MATERIAL MATTERS
-
The situation, reasons and impact of the changes regarding accounting policies, accounting estimates and accounting methods as compared with the previous accounting period
The amendments to the China Accounting Standards for Business Enterprises and International Financial Reporting Standards effective from 1 January 2020 do not have a significant impact on the Group's financial position and operating results.
In order to meet the needs of the Company's business development, further strengthen fixed assets management, and more fairly reflect the impact of the Company's fixed assets on its financial position and operating results, with approval at the 26th meeting of the fourth session of the Board of the Company, from 1 January 2020, the Group has changed the accounting estimates relevant to the depreciation of certain fixed assets in accordance with the relevant provisions of "Accounting Standards for Enterprises No. 4 - Fixed Assets". Please refer to the Company's H-shares announcement and A-shares announcement dated 24 April 2020 and 25 April 2020, respectively, for details. The change of accounting estimate does not have a significant impact on the Group's financial position and operating results.
- The situation, amount of corrections, reasons and impact of corrections of material accounting mistakes requiring retrospective restatements during the reporting period.
Applicable ✓ Not applicable
2020 Interim Report 85
Section VII Changes in Share Capital and Shareholders
- CHANGES IN SHARE CAPITAL
-
Changes in shares
1. Changes in shares
During the reporting period, there were no changes in the total number of ordinary shares and shareholding structure. The Company did not issue any preference shares.
-
Changes in shares
As at 30 June 2020 | |||
Number | Percentage | ||
% | |||
I. Shares with selling restrictions | 0 | 0.00 | |
II. Shares without selling restrictions | 19,889,620,455 | 100.00 | |
1. | RMB ordinary shares | 16,491,037,955 | 82.91 |
2. | Overseas listed foreign shares | 3,398,582,500 | 17.09 |
III. Total number of shares | 19,889,620,455 | 100.00 | |
During the six months ended 30 June 2020, the Group did not purchase, sell or redeem any of the Company's securities as defined under the Hong Kong Listing Rules.
As at the disclosure date of this report, to the best knowledge of the Directors, the Company has satisfied the minimum public float provisions under Rule 8.08 of the Hong Kong Listing Rules.
2. Details of changes in shares:
Applicable | ✓ Not applicable |
3. Impacts of changes in shares on earnings per share, net assets per share and other financial indicators from the reporting period to the disclosure date of interim reports (if any):
Applicable | ✓ Not applicable |
4. Other contents to be disclosed as deemed necessary by the Company or required by securities regulatory authorities:
Applicable | ✓ Not applicable |
- Changes in shares with selling restrictions:
Applicable | ✓ Not applicable |
86 China Shenhua Energy Company Limited
Section VII Changes in Share Capital and Shareholders (Continued)
II. | SHAREHOLDERS | ||||||||
(I) | Total number of shareholders | ||||||||
Total number of shareholders of ordinary shares as at the end of | 208,655 | ||||||||
the reporting period (accounts) | |||||||||
Of which: Holders of A shares (including China Energy) | 206,549 | ||||||||
Registered holders of H shares | 2,106 | ||||||||
(II) Shareholdings of top ten shareholders and top ten holders of tradable shares | |||||||||
(or shareholders without selling restrictions) as at the end of the reporting | |||||||||
period | |||||||||
Unit: share | |||||||||
Shareholdings of top ten shareholders | |||||||||
Increase/ | Number of shares | Number of | |||||||
decrease during | held at the end | shares held | Shares subject to | ||||||
the reporting | of the reporting | with selling | pledge or lock-up | Nature of | |||||
Full name of shareholders | period | period | Percentage | restrictions | Status | Number | shareholders | ||
% | |||||||||
China Energy Investment | 0 | 13,812,709,196 | 69.45 | 0 | Nil | N/A | State-owned | ||
Corporation Limited | corporation | ||||||||
HKSCC NOMINEES LIMITED | -701,500 | 3,389,729,722 | 17.04 | 0 | Unknown | N/A | Overseas | ||
corporation | |||||||||
China Securities Finance | 0 | 594,718,049 | 2.99 | 0 | Nil | N/A | Others | ||
Corporation Limited | |||||||||
Central Huijin Asset Management | 0 | 110,027,300 | 0.55 | 0 | Nil | N/A | State-owned | ||
Ltd. | corporation | ||||||||
Hong Kong Securities Clearing | +3,526,368 | 101,115,057 | 0.51 | 0 | Nil | N/A | Overseas | ||
Company Limited | corporation | ||||||||
Industrial Bank Co., Ltd.- Aegon- | +35,337,607 | 50,406,151 | 0.25 | 0 | Nil | N/A | Others | ||
industrial New Vision Flexible | |||||||||
Allocation of Regularly Open | |||||||||
Hybrid Initiating Securities | |||||||||
Investment Fund | |||||||||
Beijing Chengtong Financial Control | +28,477,449 | 37,014,678 | 0.19 | 0 | Nil | N/A | State-owned | ||
Investment Co., Ltd. | corporation | ||||||||
Industrial and Commercial Bank of | -3,045,222 | 22,371,969 | 0.11 | 0 | Nil | N/A | Others | ||
China - SSE 50 Exchange Traded | |||||||||
Open-end Index Securities | |||||||||
Investment Fund | |||||||||
Guotai Junan Securities Co., Ltd. | +13,898,254 | 14,920,000 | 0.08 | 0 | Nil | N/A | Others | ||
Agricultural Bank of China | -6,525,342 | 14,773,320 | 0.07 | 0 | Nil | N/A | Others | ||
Limited - Huaxia CSI State- | |||||||||
Owned Enterprises Structural | |||||||||
Adjustment Index ETF Securities | |||||||||
Investment Fund | |||||||||
2020 Interim Report 87
Section VII Changes in Share Capital and Shareholders (Continued)
Shareholdings of top ten shareholders without selling restrictions | |||
Number of shares | |||
without selling | Type and number of shares | ||
Name of shareholders | restrictions | Type | Number |
China Energy Investment Corporation Limited | 13,812,709,196 | RMB ordinary shares | 13,812,709,196 |
HKSCC NOMINEES LIMITED | 3,389,729,722 | Overseas-listed | 3,389,729,722 |
foreign shares | |||
China Securities Finance Corporation Limited | 594,718,049 | RMB ordinary shares | 594,718,049 |
Central Huijin Asset Management Ltd. | 110,027,300 | RMB ordinary shares | 110,027,300 |
Hong Kong Securities Clearing Company | 101,115,057 | RMB ordinary shares | 101,115,057 |
Limited | |||
Industrial Bank Co., Ltd. - Aegon-industrial | 50,406,151 | RMB ordinary shares | 50,406,151 |
New Vision Flexible Allocation of Regular | |||
Open Hybrid Initiating Securities Investment | |||
Fund | |||
Beijing Chengtong Financial Control | 37,014,678 | RMB ordinary shares | 37,014,678 |
Investment Co., Ltd. | |||
Industrial and Commercial Bank of China - | 22,371,969 | RMB ordinary shares | 22,371,969 |
SSE 50 Exchange Traded Open-end Index | |||
Securities Investment Fund | |||
Guotai Jun-an Securities Co., Ltd. | 14,920,000 | RMB ordinary shares | 14,920,000 |
Agricultural Bank of China Limited - Huaxia | 14,773,320 | RMB ordinary shares | 14,773,320 |
CSI State-Owned Enterprises Structural | |||
Adjustment Exchange Traded Open-end | |||
Index Securities Investment Fund |
Details regarding the connected relationships among the above shareholders or whether they are parties acting in concert
Details regarding the holders of preference shares with voting rights restored and the number of shares held
HKSCC NOMINEES LIMITED and Hong Kong Securities Clearing Company Limited are both wholly-owned subsidiaries of Hong Kong Exchanges and Clearing Limited. Save as disclosed above, the Company is not aware of any connected relationships between the top ten shareholders without selling restrictions and the top ten shareholders and whether they are parties acting in concert as defined in the Measures for Administration of Acquisition of Listed Companies.
N/A
Note: H shares held by HKSCC Nominees Limited are held on behalf of a number of its clients; A shares held by Hong Kong Securities Clearing Company Limited are held on behalf of a number of its clients.
Number of top ten shareholders with selling restrictions and their selling restrictions:
Applicable | ✓ Not applicable |
88 China Shenhua Energy Company Limited
Section VII Changes in Share Capital and Shareholders (Continued)
- Strategic investors or general legal persons becoming top ten shareholders as a result of new share placing:
Applicable | ✓ Not applicable |
(IV) Interests and short positions in the shares of the Company held by substantial shareholders
As at 30 June 2020, the persons as disclosed in the table below had interests and/or short positions in the shares or underlying shares of the Company which are required to be recorded in the register of equity interests and/or short positions to be kept under section 336 of Part XV of the Securities and Futures Ordinance (the "SFO", Chapter 571 of Laws of Hong Kong):
Percentage | ||||||||
of H shares/ | ||||||||
A shares over | ||||||||
total issued | Percentage | |||||||
Number of | H shares/ | of total share | ||||||
Name of | H shares/ | Nature of | H shares/ | A shares | capital of the | |||
No. | shareholder | Capacity | A shares | interest | A shares held | respectively | Company | |
% | % | |||||||
1 | China Energy | Beneficial owner | A shares | N/A | 13,812,709,196 | 83.76 | 69.45 | |
2 | BlackRock, Inc. | Interest of corporation | H shares | Long position | 202,783,549 | 5.97 | 1.02 | |
controlled by the substantial | ||||||||
shareholder | ||||||||
3 | Citigroup Inc. | Person having a security | H shares | Long position | 200,276,797 | 5.89 | 1.01 | |
interest in shares, interest of | Short position | 4,497,629 | 0.13 | 0.02 | ||||
Corporation controlled by the | Lending Pool | 184,720,369 | 5.43 | 0.93 | ||||
substantial shareholder, and | ||||||||
approved lending agent | ||||||||
Notes: (1) Among 200,276,797 H shares in long position held by Citigroup Inc., 8,596,354 H shares are held in its capacity as the person having a security interest in shares, 6,960,074 H shares are held in its capacity as the interest of corporation controlled by the substantial shareholder, and 184,720,369 H shares are held in its capacity as the approved lending agent. 4,497,629 H shares in short position held by Citigroup Inc. are held in its capacity as the interest of corporation controlled by the substantial shareholder. In addition, the following H shares in both long position and short position involve derivatives, including:
-
545,224 H shares in long position and 105,500 H shares in short position: listed derivatives
- physically settled; - 152,500 H shares in short position: unlisted derivatives - cash settled
-
545,224 H shares in long position and 105,500 H shares in short position: listed derivatives
- Information disclosed above is based on information available on the website of HKEx(www.hkex. com.hk).
As at 30 June 2020, save as disclosed above, there was no other person who held interests and/or short positions in the shares or underlying shares of the Company which are required to be recorded in the register to be kept under section 336 of Part XV of the SFO, or was a substantial shareholder of the Company.
- CHANGES IN CONTROLLING SHAREHOLDER OR DE FACTO CONTROLLER:
Applicable | ✓ Not applicable |
2020 Interim Report 89
Section VIII Directors, Supervisors, Senior Management and Employees
- CHANGES IN SHAREHOLDING
-
Changes in shareholding of current directors, supervisors, and senior management and those outgoing during the reporting period
During the reporting period, there were no changes in shareholding in the Company held by the directors, supervisors and senior management of the Company that were required to be disclosed pursuant to the relevant regulatory provisions promulgated by the China Securities Regulatory Commission ("CSRC").
All the directors and supervisors of the Company have confirmed that they have fully complied with the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Hong Kong Listing Rules, which was adopted by the Company, for the six months ended 30 June 2020.
As of 30 June 2020, none of the directors, supervisors and chief executive of the Company held any share of the Company nor had any interest or short position in the shares or underlying shares of the Company or any of its associated corporations within the meaning of Part XV of the SFO (Chapter 571 of the laws of Hong Kong), as recorded in the register required to be kept under section 352 of the SFO or which was otherwise required to be notified to the Company and HKEx under the Model Code for Securities Transactions by Directors of Listed Issuers.
-
Changes in shareholding of current directors, supervisors, and senior management and those outgoing during the reporting period
As of 30 June 2020, the Company did not grant any equity securities or warrants to directors, supervisors and chief executive or their respective spouses or children under the age of 18.
- Equity incentives granted to directors, supervisors and senior management during the reporting period
Applicable | ✓ Not applicable |
90 China Shenhua Energy Company Limited
Section VIII Directors, Supervisors, Senior Management and Employees (Continued)
- CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY
Name | Position | Change |
Wang Xiangxi | Executive Director | Elected at the 2019 annual general meeting on 29 May 2020 |
Chairman | Elected at the first meeting of the fifth session of the Board on | |
29 May 2020 | ||
Yang Jiping | Executive Director | Elected at the 2019 annual general meeting on 29 May 2020 |
Xu Mingjun | Executive Director | Elected at the 2019 annual general meeting on 29 May 2020 |
Jia Jinzhong | Non-executive Director | Elected at the 2019 annual general meeting on 29 May 2020 |
Zhao Yongfeng | Non-executive Director | Elected at the 2019 annual general meeting on 29 May 2020 |
Yuen Kwok Keung | Independent non-executive | Elected at the 2019 annual general meeting on 29 May 2020 |
Director | ||
Bai Chong-En | Independent non-executive | Elected at the 2019 annual general meeting on 29 May 2020 |
Director | ||
Chen Hanwen | Independent non-executive | Elected at the 2019 annual general meeting on 29 May 2020 |
Director | ||
Wang Xingzhong | Employee Director | Democratically elected by employees of the Company on 29 |
May 2020 | ||
Luo Meijian | Supervisor | Elected at the 2019 annual general meeting on 29 May 2020 |
Chairman of the supervisory | Elected at the first meeting of the fifth session of the | |
committee | supervisory committee on 29 May 2020 | |
Zhou Dayu | Supervisor | Elected at the 2019 annual general meeting on 29 May 2020 |
Zhang Changyan | Employee Representative | Democratically elected by employees of the Company on 29 |
Supervisor | May 2020 | |
Zhao Yongfeng | Executive Vice President | Resigned from the position on 26 March 2020 due to |
adjustments to work | ||
Li Dong | Executive Director | Resigned from the position on 29 March 2020 due to |
retirement age | ||
Zhang Guangde | Executive Vice President | Resigned from the position on 28 May 2020 due to |
adjustments to work | ||
Gao Song | Executive Director | Resigned from the position on 29 May 2020 due to term |
expiration | ||
Mi Shuhua | Executive Director | Resigned from the position on 29 May 2020 due to term |
expiration | ||
Zhao Jibin | Non-executive Director | Resigned from the position on 29 May 2020 due to term |
expiration | ||
Tam Wai Chu, Maria | Independent non-executive | Resigned from the position on 29 May 2020 due to term |
Director | expiration | |
Peng Suping | Independent non-executive | Resigned from the position on 29 May 2020 due to term |
Director | expiration | |
Jiang Bo | Independent non-executive | Resigned from the position on 29 May 2020 due to term |
Director | expiration | |
Zhong Yingjie, | Independent non-executive | Resigned from the position on 29 May 2020 due to term |
Christina | Director | expiration |
Zhai Richeng | Supervisor, Chairman of the | Resigned from the position on 29 May 2020 due to term |
supervisory committee | expiration | |
2020 Interim Report 91
Section VIII Directors, Supervisors, Senior Management and Employees (Continued)
On 29 May 2020, the first and second meetings of the fifth session of the board of directors of the Company reviewed and approved the appointment:
- Bai Chong-En, Chen Hanwen and Xu Mingjun are members of the Nomination Committee, and Bai Chong-En is the chairman of the Nomination Committee;
- Wang Xiangxi, Yang Jiping and Jia Jinzhong are members of the Strategic Committee, and Wang Xiangxi is the chairman of the Strategy Committee;
- Chen Hanwen, Yuen Kwok Keung and Bai Chong-En are members of the Audit Committee, and Chen Hanwen is the chairman of the Audit Committee;
- Yuen Kwok Keung, Chen Hanwen and Xu Mingjun are members of the Remuneration Committee, and Yuen Kwok Keung is the chairman of the Remuneration Committee;
- Yang Jiping, Zhao Yongfeng and Wang Xingzhong are members of the Safety, Health and Environmental Protection Committee, and Yang Jiping is the chairman of the Safety, Health and Environmental Protection Committee.
The term of office of each member and chairman shall be from the date of approval by the board of directors to the date of expiration of the term of office of the fifth session of the board of directors.
- CORPORATE GOVERNANCE
The board of directors is responsible for the corporate governance of the Company. The Company has established its own system of corporate governance pursuant to the corporate governance policies as set out in Appendix 14 of the Hong Kong Listing Rules. The convening, voting, disclosure procedures and rules of procedure of meetings of the board of directors of the Company, and procedures for nomination and election of directors, are in compliance with regulatory requirements. The board of directors is the standing decision-making entity of the Company. The Articles of Association sets out in detail the separate responsibilities of the Chairman and the Chief Executive Officer. During the six months ended 30 June 2020, the Company has been in full compliance with the principles and code provisions and most of the recommended best practices as specified therein. For the terms of reference of the board of directors and its special committees in performing duties under the Corporate Governance Code, please refer to the Articles of Association, Rules of Procedure of Meetings of the Board of Directors and rules of procedure of its special committees.
The board of directors of the Company has formulated its board diversity policy with members coming from a variety of backgrounds, which guarantees the rationality and reasonableness of decisions made by the board of directors. Directors are individuals from various domestic and overseas industries. The number of non-executive Directors accounts for more than half of the directors. Each director's knowledge and field of expertise are professional and complementary in the overall board structure.
92 China Shenhua Energy Company Limited
Section VIII Directors, Supervisors, Senior Management and Employees (Continued)
The Company has appointed independent non-executive directors and established an Audit Committee in accordance with the Hong Kong Listing Rules. As at the end of the reporting period, the Audit Committee comprised Dr. Chen Hanwen (chairman of the Audit Committee, with professional qualifications and experience in finance-related fields such as accounting), Dr. Yuen Kwok Keung and Dr. Bai Chong-En. The principal duties of the Audit Committee include: supervising and evaluating the external audit work and proposing engagement or replacement of the external audit institutions; supervising and evaluating the internal audit work and taking charge of coordination of the internal and external audits; reviewing the financial information of the Company and its disclosure; supervising and evaluating the internal control of the Company; and other duties under laws, regulations, the Articles of Association and the authorisation of the Board.
During the reporting period, the Audit Committee performed its duties in strict compliance with the Rules of Procedures of the Audit Committee of the Board of Directors and the Work Procedures of the Audit Committee of the Board of Directors of China Shenhua. On 26 August 2020, the Audit Committee reviewed the Group's interim financial statements for the six months ended 30 June 2020 and approved the submission of the same to the board of directors for consideration and approval.
During the reporting period, China Shenhua adhered to the leadership of the Party, continuously improved the management system and process and optimised operating management mechanism, establishing the daily operation mechanism of the state-owned enterprise in line with its own characteristics. There are potential peer competitions between the coal business and other business of China Energy Group and the major business of the Company. In accordance with the resolution on entering into Supplemental Agreement to the Existing Non-Competition Agreement with China Energy (effective after conditions are satisfied) considered and approved at the 2018 first extraordinary general meeting of the Company, China Shenhua, as an integration platform of the coal business of China Energy Group, will discretionally exercise the options, the pre-emptive rights and the option to acquire pursuant to the Existing Non-Competition Agreement and the supplemental agreement entered between the two parties, thereby gradually reducing horizontal competition.
Save as disclosed above, during the reporting period, there was no material difference between the corporate governance of the Company and the relevant rules and requirements of the CSRC. China Shenhua has an independent and complete business system as well as a market-orientedself-operation capability. The Company is independent from its controlling shareholder in terms of business, personnel, assets, organisation and finance.
2020 Interim Report 93
Section VIII Directors, Supervisors, Senior Management and Employees (Continued)
IV. EMPLOYEES OF THE COMPANY
As at 30 June 2020, the total number of employees of the Group was 75,412. Number of resigned and retired employees which the Group are responsible for is 11,548. The structure of employees is as follows:
1. | By Function | |||
As of | As of | |||
30 June | 31 December | |||
Function | 2020 | 2019 | Change | |
Number of | Number of | |||
employees | employees | % | ||
Operation and maintenance | 43,786 | 44,188 | (0.9) | |
Management and administration | 12,084 | 12,208 | (1.0) | |
Finance and accounting | 1,600 | 1,556 | 2.8 | |
Research and development | 2,799 | 2,654 | 5.5 | |
Technical support | 9,857 | 9,656 | 2.1 | |
Sales and marketing | 626 | 633 | (1.1) | |
Others | 4,660 | 4,725 | (1.4) | |
Total | 75,412 | 75,620 | (0.3) | |
2. | By Educational Level | |||
As of | As of | |||
30 June | 31 December | |||
Educational Level | 2020 | 2019 | Change | |
Number of | Number of | |||
employees | employees | % | ||
Postgraduate or above | 3,353 | 3,360 | (0.2) | |
University graduate | 29,592 | 28,944 | 2.2 | |
College graduate | 19,516 | 19,524 | (0.0) | |
Specialised secondary school | ||||
graduate | 9,794 | 10,133 | (3.3) | |
Technical school graduate, high | ||||
school graduate or below | 13,157 | 13,659 | (3.7) | |
Total | 75,412 | 75,620 | (0.3) | |
The Company has formulated a competitive remuneration policy that combines basic salary and performance assessment and is oriented towards first-tiered employees.
The Company has established a multi-layered and multi-channel training system, providing employees with suitable training programs on occupational skills, work safety, group-based management and other aspects.
94 China Shenhua Energy Company Limited
Section IX Investor Relations
In the first half of the year, the directors, supervisors, senior management and relevant staff of the Company earnestly studied the new Securities Act, actively implemented the requirements of the new Securities Act, and strengthened the investor relations management to improve service quality, advocate positive investment culture, promote the sharing of development results, and continue to advance the protection of legitimate rights and interests of investors.
- Prudent decision making and mindful of shareholders
In the first half of the year, the Company convened the annual general meeting on the spot, at which the Company communicated with 34 domestic and foreign institutional investors on the content of the resolutions at the meeting, earnestly answered relevant questions, and safeguarded the investors' right to know to the largest extent, under the premise of ensuring compliance with epidemic prevention requirements. The Chairman of the Company led the senior management of the Company to have in-depth and detailed communication with the participated shareholders, especially individual shareholders, and listened to the shareholders' views and recommendations on the operation and development of the Company. One of the concerns of investors is the future development prospects of the coal power industry, the future development plan of the main business of the Company, the annual production and operation, as well as the environment, responsibilities and governance. The second concern is the reasonableness of the transaction plan of capital increase in Shenhua Finance Company, the impact on China Shenhua, the risk control and information disclosure thereof, and the future development prospects of Shenhua Finance Company.
- Integrity services and good investment relations
In the first half of the year, through the "roadshow center" platform of SSE, the Company convened the conference of annual results for 2019 and briefings on the first quarterly results for 2020, reporting the operating results and operation of the Company to investors in a timely manner. The Company communicated with domestic and overseas investment institutions and shareholders through online and offline channels, hotlines, e-mails, SMS, WeChat and other methods. In the first half of the year, the Company convened accumulated 59 communication meetings, communicating with analysts and fund managers for over 400 times. We have conducted 30 person-times of on-site survey of shareholders, answered more than 70 calls from investors, and communicated more than 300 times through emails, SMS and WeChat.
- Learning and abiding by law, together sharing the results
In the first half of the year, the Company actively launched the "Investor Protection Month" activities. The new Securities Law is closely integrated with the internal work of the Company to raise the awareness of investor protection among all employees; and the "Investor Protection" column established on the Company's official website will place emphasis on in-depth and detailed explanation on information in the industry concerned by minority investors, domestic and overseas stock market rules, the implementation of dividend distributions and other aspects in the daily information exchange. The Company actively responded to the shareholders' request to increase the proportion of cash dividend distribution for the three years from 2019 to 2021 to not less than 50% of the net profit attributable to shareholders for the year as approved at the 2019 annual general meeting, in order to actively reward shareholders and to share the results of development.
2020 Interim Report 95
Section X Report on Review of Condensed Consolidated Financial Statements
Review report to the board of directors of
China Shenhua Energy Company Limited
(Incorporated in the People's Republic of China with limited liability)
INTRODUCTION
We have reviewed the interim financial report set out on pages 96 to 137 which comprises the condensed consolidated statement of financial position of China Shenhua Energy Company Limited (the "Company") as of 30 June 2020 and the related condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six month period then ended and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of an interim financial report to be in compliance with the relevant provisions thereof and International Accounting Standard 34, interim financial reporting , issued by the International Accounting Standards Board. The directors are responsible for the preparation and presentation of the interim financial report in accordance with International Accounting Standard 34.
Our responsibility is to form a conclusion, based on our review, on the interim financial report and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
SCOPE OF REVIEW
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity , issued by the Hong Kong Institute of Certified Public Accountants. A review of the interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the interim financial report as at 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim financial reporting .
Certified Public Accountants
8th Floor, Prince's Building
10 Chater Road
Central, Hong Kong
28 August 2020
96 China Shenhua Energy Company Limited
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the six months ended 30 June 2020 - unaudited (Expressed in Renminbi ("RMB"))
Six months ended 30 June | ||||
2020 | 2019 | |||
Note | RMB million | RMB million | ||
Revenue | ||||
Goods and services | 4 | 105,016 | 116,365 | |
Cost of sales | 6 | (69,957) | (76,732) | |
Gross profit | 35,059 | 39,633 | ||
Selling expenses | (279) | (328) | ||
General and administrative expenses | (3,561) | (3,788) | ||
Research and development costs | (245) | (128) | ||
Other gains and losses | 10 | 236 | 1,867 | |
Other income | 7 | 297 | 362 | |
Loss allowances, net of reversal | 10 | (273) | 232 | |
Other expenses | (88) | (160) | ||
Interest income | 665 | 645 | ||
Finance costs | 8 | (1,004) | (1,594) | |
Share of results of associates | 484 | 192 | ||
Profit before income tax | 31,291 | 36,933 | ||
Income tax expense | 9 | (6,507) | (7,937) | |
Profit for the period | 10 | 24,784 | 28,996 | |
Other comprehensive income for the period | ||||
Items that will not be reclassified to profit or loss, net of | ||||
income tax: | ||||
Remeasurement of defined benefit obligations | - | 37 | ||
Fair value changes on investments in equity instruments | ||||
at fair value through other comprehensive income | 26 | - | ||
Share of other comprehensive income of associates | (2) | 2 | ||
Items that may be reclassified subsequently to profit or | ||||
loss, net of income tax: | ||||
Exchange differences | 68 | 6 | ||
Share of other comprehensive income of associates | 1 | (19) | ||
Fair value changes on investments in debt instruments | ||||
at fair value through other comprehensive income | (8) | 9 | ||
Other comprehensive income for the period, net of | 35 | |||
income tax | 85 | |||
Total comprehensive income for the period | 24,869 | 29,031 | ||
2020 Interim Report 97
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (Continued)
for the six months ended 30 June 2020 - unaudited (Expressed in Renminbi ("RMB"))
Six months ended 30 June | |||
2020 | 2019 | ||
Note | RMB million | RMB million | |
Profit for the period attributable to: | |||
Equity holders of the Company | 20,370 | 24,240 | |
Non-controlling interests | 4,414 | 4,756 | |
24,784 | 28,996 | ||
Total comprehensive income for the period | |||
attributable to: | |||
Equity holders of the Company | 20,440 | 24,273 | |
Non-controlling interests | 4,429 | 4,758 | |
24,869 | 29,031 | ||
Earnings per share | |||
- Basic (RMB) | 12 | 1.024 | 1.219 |
The notes on pages 107 to 137 form part of this interim financial report.
98 China Shenhua Energy Company Limited
Condensed Consolidated Statement of Financial Position
at 30 June 2020 - unaudited (Expressed in RMB)
30 June | 31 December | ||
2020 | 2019 | ||
Note | RMB million | RMB million | |
Non-current assets | |||
Property, plant and equipment | 13 | 238,687 | 245,993 |
Construction in progress | 13 | 36,276 | 34,495 |
Exploration and evaluation assets | 492 | 484 | |
Intangible assets | 3,313 | 3,648 | |
Right-of-use assets | 16 | 18,233 | 18,690 |
Interests in associates | 14 | 40,954 | 40,539 |
Equity instruments at fair value through other | |||
comprehensive income | 1,815 | 1,789 | |
Other non-current assets | 15 | 62,568 | 54,006 |
Deferred tax assets | 2,998 | 2,945 | |
Total non-current assets | 405,336 | 402,589 | |
Current assets | |||
Inventories | 17 | 14,122 | 12,053 |
Accounts and bills receivables | 18 | 12,852 | 10,436 |
Prepaid expenses and other current assets | 19 | 29,772 | 86,524 |
Restricted bank deposits | 8,217 | 7,664 | |
Time deposits with original maturity over three months | 1,948 | 1,990 | |
Cash and cash equivalents | 20 | 108,030 | 41,827 |
Total current assets | 174,941 | 160,494 |
2020 Interim Report 99
Condensed Consolidated Statement of Financial Position (Continued)
at 30 June 2020 - unaudited (Expressed in RMB)
30 June | 31 December | ||
2020 | 2019 | ||
Note | RMB million | RMB million | |
Current liabilities | |||
Borrowings | 21 | 4,442 | 4,172 |
Accounts and bills payables | 22 | 23,401 | 25,043 |
Accrued expenses and other payables | 23 | 81,243 | 53,578 |
Current portion of bonds | - | 3,488 | |
Current portion of lease liabilities | 178 | 198 | |
Current portion of long-term liabilities | 24 | 440 | 1,493 |
Income tax payable | 2,494 | 2,727 | |
Contract liabilities | 5,088 | 4,784 | |
Total current liabilities | 117,286 | 95,483 | |
Net current assets | 57,655 | 65,011 | |
Total assets less current liabilities | 462,991 | 467,600 | |
Non-current liabilities | |||
Borrowings | 21 | 32,790 | 36,943 |
Bonds | 3,514 | 3,460 | |
Long-term liabilities | 24 | 2,519 | 2,201 |
Accrued reclamation obligations | 25 | 3,454 | 3,372 |
Deferred tax liabilities | 891 | 783 | |
Lease liabilities | 566 | 623 | |
Total non-current liabilities | 43,734 | 47,382 | |
Net assets | 419,257 | 420,218 | |
100 China Shenhua Energy Company Limited
Condensed Consolidated Statement of Financial Position (Continued)
at 30 June 2020 - unaudited (Expressed in RMB)
30 June | 31 December | ||
2020 | 2019 | ||
Note | RMB million | RMB million | |
Equity | |||
Share capital | 26 | 19,890 | 19,890 |
Reserves | 331,490 | 336,187 | |
Equity attributable to equity holders of the Company | 351,380 | 356,077 | |
Non-controlling interests | 67,877 | 64,141 | |
Total equity | 419,257 | 420,218 | |
Approved and authorised for issue by the board of directors on 28 August 2020.
Wang Xiangxi | Yang Jiping |
Chairman and Executive Director | Executive Director and |
Chief Executive Officer |
The notes on pages 107 to 137 form part of this interim financial report.
2020 Interim Report 101
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2020 - unaudited (Expressed in RMB)
Equity attributable to equity holders of the Company | ||||||||||
Non- | ||||||||||
Share | Share | Capital | Exchange | Statutory | Other | Retained | controlling | Total | ||
capital | premium | reserve | reserve | reserves | reserves | earnings | Total | interests | equity | |
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |
million | million | million | million | million | million | million | million | million | million | |
(Note 26) | (Note (i)) | (Note (ii)) | (Note (iii)) | (Note (iv)) | (Note (v)) | |||||
At 1 January 2020 | 19,890 | 85,001 | 3,618 | 56 | 25,118 | (14,824) | 237,218 | 356,077 | 64,141 | 420,218 |
Profit for the period | - | - | - | - | - | - | 20,370 | 20,370 | 4,414 | 24,784 |
Other comprehensive income for the | ||||||||||
period | - | - | - | 53 | - | 17 | - | 70 | 15 | 85 |
Total comprehensive income for the | ||||||||||
period | - | - | - | 53 | - | 17 | 20,370 | 20,440 | 4,429 | 24,869 |
Dividend declared(Note 11) | - | - | - | - | - | - | (25,061) | (25,061) | - | (25,061) |
Appropriation of maintenance and | ||||||||||
production funds (Note (iii)) | - | - | - | - | 1,811 | - | (1,811) | - | - | - |
Utilisation of maintenance and | ||||||||||
production funds (Note (iii)) | - | - | - | - | (1,897) | - | 1,897 | - | - | - |
Contributions from non-controlling | ||||||||||
shareholders | - | - | - | - | - | - | - | - | 89 | 89 |
Distributions to non-controlling | ||||||||||
shareholders | - | - | - | - | - | - | - | - | (782) | (782) |
Others | - | - | - | - | - | - | (76) | (76) | - | (76) |
At 30 June 2020 | 19,890 | 85,001 | 3,618 | 109 | 25,032 | (14,807) | 232,537 | 351,380 | 67,877 | 419,257 |
102 China Shenhua Energy Company Limited
Condensed Consolidated Statement of Changes in Equity (Continued)
for the six months ended 30 June 2020 - unaudited (Expressed in RMB)
Equity attributable to equity holders of the Company | ||||||||||
Non- | ||||||||||
Share | Share | Capital | Exchange | Statutory | Other | Retained | controlling | Total | ||
capital | premium | reserve | reserve | reserves | reserves | earnings | Total | interests | equity | |
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |
million | million | million | million | million | million | million | million | million | million | |
(Note 26) | (Note (i)) | (Note (ii)) | (Note (iii)) | (Note (iv)) | (Note (v)) | |||||
At 1 January 2019 | 19,890 | 85,001 | 3,612 | 11 | 26,540 | (14,867) | 211,506 | 331,693 | 77,144 | 408,837 |
Profit for the period | - | - | - | - | - | - | 24,240 | 24,240 | 4,756 | 28,996 |
Other comprehensive income for the | ||||||||||
period | - | - | - | 6 | - | 27 | - | 33 | 2 | 35 |
Total comprehensive income for the | ||||||||||
period | - | - | - | 6 | - | 27 | 24,240 | 24,273 | 4,758 | 29,031 |
Dividend declared (Note 11) | - | - | - | - | - | - | (17,503) | (17,503) | - | (17,503) |
Appropriation of maintenance and | - | - | - | - | 2,052 | - | (2,052) | - | - | - |
production funds (Note (iii)) | ||||||||||
Utilisation of maintenance and | ||||||||||
production funds(Note (iii)) | - | - | - | - | (1,725) | - | 1,725 | - | - | - |
Contributions from non-controlling | ||||||||||
shareholders | - | - | - | - | - | - | - | - | 340 | 340 |
Distributions to non-controlling | ||||||||||
shareholders | - | - | - | - | - | - | - | - | (218) | (218) |
Disposal of subsidiaries | - | - | - | - | - | - | - | - | (14,885) | (14,885) |
Others | - | - | - | - | - | - | (76) | (76) | 27 | (49) |
At 30 June 2019 | 19,890 | 85,001 | 3,612 | 17 | 26,867 | (14,840) | 217,840 | 338,387 | 67,166 | 405,553 |
Notes:
- Share premium represents the difference between the total amount of the par value of shares issued and the amount of net proceeds received upon the global initial public offering of H shares in 2005 and the issuance of A shares in 2007.
- The capital reserve represents the difference between the total amount of the par value of shares issued and the amount of the net assets, net of other reserves, transferred from Shenhua Group Corporation Limited ("Shenhua Group"), in connection with the Restructuring (as defined in Note 1).
2020 Interim Report 103
Condensed Consolidated Statement of Changes in Equity (Continued)
for the six months ended 30 June 2020 - unaudited (Expressed in RMB)
- Statutory reserves Statutory surplus reserve
According to the PRC Company Law and the Company's Articles of Association, the Company is required to transfer 10% of its net profit as determined in accordance with the China Accounting Standards for Business Enterprises ("China Accounting Standards") to its statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of dividends to shareholders.
The statutory surplus reserve has reached 50% of the registered capital in 2009. Accordingly, no appropriation of net profit to the statutory surplus reserve has been proposed since 1 January 2010.
Statutory surplus reserve can be used to make up losses, if any, or to expand the Company's business, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital of the Company. The statutory surplus reserve is not distributable.
Specific reserve for maintenance and production funds
Pursuant to the relevant PRC regulations, the Group is required to transfer production and maintenance funds at fixed rates based on relevant bases, such as production volume, to a specific reserve account. The production and maintenance funds could be utilised when expenses or capital expenditures on production maintenance and safety measures are incurred. The amount of production and maintenance funds utilised would be transferred from the specific reserve account to retained earnings.
General reserve
Pursuant to relevant regulations issued by the Ministry of Finance, the Company's subsidiary, Shenhua Finance Co., Ltd. ("Shenhua Finance"), is required to set aside a general reserve by the end of each financial year through appropriations of profit after tax as determined in accordance with China Accounting Standards at a certain ratio of the ending balance of gross risk-bearing assets to cover potential losses against such assets.
Discretionary surplus reserve
The appropriation to the discretionary surplus reserve is subject to the shareholders' approval. The utilisation of the reserve is similar to that of the statutory surplus reserve.
The directors of the Company (the "Directors") have not proposed any appropriation to the discretionary surplus reserve for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil). - Other reserves
Other reserves mainly represent the consideration paid for acquisition of subsidiaries under common control, share of other comprehensive income of associates, and fair value changes of financial assets measured at fair value through other comprehensive income ("FVTOCI"). - Retained earnings
Included in the retained earnings of the Group were its share of the surplus reserve of its domestic subsidiaries amounting to RMB25,753 million as at 30 June 2020 (31 December 2019: RMB25,753 million).
The notes on pages 107 to 137 form part of this interim financial report.
104 China Shenhua Energy Company Limited
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2020 - unaudited (Expressed in RMB)
Six months ended 30 June | |||
2020 | 2019 | ||
Note | RMB million | RMB million | |
Operating activities | |||
Profit before income tax | 31,291 | 36,933 | |
Adjustments for: | |||
Depreciation and amortisation | 10 | 9,996 | 9,932 |
Other gains and losses | 10 | (236) | (1,867) |
Loss allowances, net of reversal | 10 | 273 | (232) |
Interest income | (665) | (645) | |
Share of results of associates | (484) | (192) | |
Interest expense | 1,008 | 1,522 | |
Exchange (gain)/loss, net | 8 | (4) | 72 |
Operating cash flows before movements in working | |||
capital | 41,179 | 45,523 | |
Increase in inventories | (2,069) | (2,944) | |
(Increase)/decrease in accounts and bills receivables | (3,785) | 778 | |
(Increase)/decrease in prepaid expenses, other | |||
receivables and service concession receivables | (525) | 7,963 | |
Increase/(decrease) in accounts and bills payables | 1,924 | (2,991) | |
Increase/(decrease) in accrued expenses and other | |||
payables | 23,377 | (320) | |
Increase in contract liabilities | 304 | 2,257 | |
Cash generated from operations | 60,405 | 50,266 | |
Income tax paid | (6,685) | (9,223) | |
Net cash generated from operating activities | 53,720 | 41,043 |
2020 Interim Report 105
Condensed Consolidated Statement of Cash Flows (Continued)
for the six months ended 30 June 2020 - unaudited (Expressed in RMB)
Six months ended 30 June | ||
2020 | 2019 | |
Note | RMB million | RMB million |
Investing activities | ||
Acquisition of property, plant and equipment, intangible | ||
assets, exploration and evaluation assets, additions | ||
to the construction in progress and other non-current | ||
assets | (7,897) | (7,611) |
Increase in right-of-use assets | (26) | (194) |
Proceeds from disposal of property, plant and equipment, | ||
intangible assets, lease prepayments and other non- | ||
current assets | 127 | 127 |
Proceeds from disposal of wealth management products | ||
included in prepaid expenses and other current assets | 33,657 | 26,395 |
Proceeds on disposal of derivative financial instruments | ||
included in prepaid expenses and other current assets | 91 | - |
Investments in associates | (62) | (1,460) |
Cash and cash equivalent disposed of to establish Beijing | ||
GD Power Co., Ltd. (the "Beijing GD") | - | (1,510) |
Repayments of net cash received for the transition period | - | (1,562) |
Dividend received from associates | 60 | 104 |
Interest received | 621 | 617 |
(Increase)/decrease in restricted bank deposits | (553) | 2,124 |
Placing of time deposits with original maturity over three | ||
months | (23) | (82) |
Maturity of time deposits with original maturity over three | ||
months | 66 | 55 |
Collection of entrusted loans | - | 9,465 |
Investments in government bonds included in other non- | ||
current assets | (790) | - |
Decrease in other current assets | 16,669 | - |
Net cash generated from investing activities | 41,940 | 26,468 |
106 China Shenhua Energy Company Limited
Condensed Consolidated Statement of Cash Flows (Continued)
for the six months ended 30 June 2020 - unaudited (Expressed in RMB)
Six months ended 30 June | ||
2020 | 2019 | |
Note | RMB million | RMB million |
Financing activities | ||
Capital element of lease rentals paid | (106) | (75) |
Interest element of lease rentals paid | (17) | (22) |
Interest paid | (1,080) | (1,761) |
Proceeds from borrowings | 3,697 | 2,177 |
Repayments of borrowings | (11,217) | (9,869) |
Contributions from non-controlling shareholders | 168 | 340 |
Distributions to non-controlling shareholders | (1,392) | (574) |
Dividend paid to equity holders of the Company | (20,768) | - |
Proceeds from bills discounted | 1,226 | 470 |
Net cash used in financing activities | (29,489) | (9,314) |
Net increase in cash and cash equivalents | 66,171 | 58,197 |
Cash and cash equivalents, at the beginning of the period | 41,827 | 61,863 |
Effect of foreign exchange rate changes | 32 | 22 |
Cash and cash equivalents, at the end of the period | 108,030 | 120,082 |
The notes on pages 107 to 137 form part of this interim financial report.
2020 Interim Report 107
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Expressed in RMB)
1 PRINCIPAL ACTIVITIES AND ORGANISATION
Principal activities
China Shenhua Energy Company Limited (the "Company") and its subsidiaries (hereinafter collectively referred to as the "Group") are principally engaged in: (i) the production and sale of coal; and (ii) the generation and sale of coal-based power to provincial/regional electric grid companies in the People's Republic of China (the "PRC"). The Group operates an integrated railway network and seaports that are primarily used to transport the Group's coal sales from its mines. The primary customers of the Group's coal sales include power plants, metallurgical and coal chemical producers in the PRC.
Organisation
The Company was established in the PRC on 8 November 2004 as a joint stock limited company as part of the Restructuring (as defined below) of Shenhua Group, a state-owned enterprise under the direct supervision of the State Council of the PRC.
Effective on 31 December 2003, the coal production and power generation operations previously operated by various entities wholly-owned or controlled by Shenhua Group were restructured and managed separately (the "Restructuring"), and those assets and liabilities related to the operations and businesses that were transferred to the Company were revalued by China Enterprise Appraisal Co., Ltd., an independent valuer registered in the PRC, as at 31 December 2003 as required by the PRC rules and regulations.
On 8 November 2004, in consideration for Shenhua Group transferring the coal mining and power generating assets and liabilities to the Company, the Company issued 15,000,000,000 domestic state-owned ordinary shares with a par value of RMB1.00 each to Shenhua Group. The shares issued to Shenhua Group represented the entire registered and paid-up share capital of the Company at that date.
In 2005, the Company issued 3,089,620,455 H shares with a par value of RMB1.00 each, at a price of Hong Kong Dollars ("HKD") 7.50 per H share by way of a global initial public offering. In addition, 308,962,045 domestic state-owned ordinary shares of RMB1.00 each owned by Shenhua Group were converted into H shares. A total of 3,398,582,500 H shares were listed on The Stock Exchange of Hong Kong Limited.
In 2007, the Company issued 1,800,000,000 A shares with a par value of RMB1.00 each, at a price of RMB36.99 per A share in the PRC. The A shares were listed on the Shanghai Stock Exchange.
Immediate parent and ultimate controlling party
On 28 August 2017, Shenhua Group received the Notice regarding the Restructuring of China Guodian Corporation and Shenhua Group Corporation Limited (Guo Zi Fa Gai Ge [2017] No. 146) from the State-ownedAssets Supervision and Administration Commission of the State Council, which approves that China Guodian Corporation (the "China Guodian") and Shenhua Group shall implement the joint restructuring, China Guodian shall be merged into Shenhua Group, and the company name of Shenhua Group shall be changed to China Energy Group. China Energy Group will be the parent company after the completion of the restructuring.
On 27 November 2017, Shenhua Group completed the industrial and commercial registration of changes in the business license. The Directors consider the immediate parent and the ultimate holding company of the Group to be China Energy Group.
108 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
2 BASIS OF PREPARATION
This interim financial report have been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including compliance with International Accounting Standard (IAS) 34, Interim financial reporting , issued by the International Accounting Standards Board (IASB). It was authorised for issue on 28 August 2020.
The interim financial report have been prepared in accordance with the same accounting policies adopted in the 2019 annual consolidated financial statements, except for the accounting policy changes that are expected to be reflected in the 2020 annual consolidated financial statements. Details of any changes in accounting policies are set out in Note 3.
The preparation of an interim financial report in conformity with IAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.
This interim financial report contain condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2019 annual consolidated financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for a full set of financial statements prepared in accordance with IFRSs.
The financial information relating to the financial year ended 31 December 2019 that is included in the interim financial report as comparative information does not constitute the Group's annual consolidated financial statements for that financial year but is derived from those financial statements. The annual consolidated financial statements for the year ended 31 December 2019 are available from the Company's registered office. The auditor has expressed an unqualified opinion on those financial statements in the report dated 27 March 2020.
2020 Interim Report 109
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
3 CHANGES IN ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
-
Changes in accounting policies
The Group has applied the following amendments to IFRSs issued by the IASB to these financial statements for the current accounting period: - Amendments to IFRS 3, Definition of a Business
- Amendments to IAS 1 and IAS 8, Definition of Material
- Amendments to IFRS 9, IAS 39 and IFRS 7, Interest Rate Benchmark Reform
- Amendments to IFRS 16, Covid-19-Related Rent Concessions
None of these developments have had a material effect on how the Group's results and financial position for the current or prior periods have been prepared or presented in this interim financial report. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period except for the amendment to IFRS 16, Covid-19-RelatedRent Concessions , which provides a practical expedient that allows lessees not to assess whether particular rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and, instead, account for those rent concessions as if they were not lease modifications.
-
Changes in accounting estimates
With effect from 1 January 2020, the Group made a change in depreciation estimates. The estimated useful lives of the following categories property, plant and equipment have been changed. The change has been applied prospectively and the impact on these consolidated financial statements was not material.
Term for | Term for | |||
deprecation | deprecation | |||
Category | before change | after change | ||
(year) | (year) | |||
Buildings | 10 | - 50 years | 10 | - 55 years |
Mining related machinery and equipment | 5 | - 20 years | 5 | - 40 years |
Generators related machinery and equipment | 5 | - 20 years | 8 | - 35 years |
Railway and port | 6 | - 45 years | 6 | - 45 years |
Vessels | 25 years | 25 years | ||
Coal chemical related machinery and equipment | 8 | - 20 years | 8 | - 20 years |
Furniture, fixtures, motor vehicles and other equipment | 5 | - 20 years | 5 | - 35 years |
110 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
4 REVENUE FROM GOODS AND SERVICES
Disaggregation of revenue of business lines and geographical location of customers is as follows:
For the six months ended 30 June | ||||||||||||||||
Segments | Coal | Power | Railway | Port | Shipping | Coal chemical | Others | Total | ||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |
million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | |
Types of goods or | ||||||||||||||||
services | ||||||||||||||||
Sales of goods | ||||||||||||||||
Coal | 73,262 | 80,068 | - | - | - | - | - | - | - | - | - | - | - | - | 73,262 | 80,068 |
Power | - | - | 20,685 | 25,727 | - | - | - | - | - | - | - | - | - | - | 20,685 | 25,727 |
Coal chemical | ||||||||||||||||
products | - | - | - | - | - | - | - | - | - | - | 2,125 | 2,806 | - | - | 2,125 | 2,806 |
Others | 2,026 | 1,928 | 1,883 | 451 | - | - | - | - | - | - | 284 | 278 | - | - | 4,193 | 2,657 |
75,288 | 81,996 | 22,568 | 26,178 | - | - | - | - | - | - | 2,409 | 3,084 | - | - | 100,265 | 111,258 | |
Transportation and | ||||||||||||||||
other services | ||||||||||||||||
Railway | - | - | - | - | 2,340 | 2,844 | - | - | - | - | - | - | - | - | 2,340 | 2,844 |
Port | - | - | - | - | - | - | 280 | 280 | - | - | - | - | - | - | 280 | 280 |
Shipping | - | - | - | - | - | - | - | - | 783 | 835 | - | - | - | - | 783 | 835 |
Others | - | - | - | - | 396 | 473 | 188 | 29 | - | - | - | - | 764 | 646 | 1,348 | 1,148 |
- | - | - | - | 2,736 | 3,317 | 468 | 309 | 783 | 835 | - | - | 764 | 646 | 4,751 | 5,107 | |
Total | 75,288 | 81,996 | 22,568 | 26,178 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 764 | 646 | 105,016 | 116,365 |
Geographical | ||||||||||||||||
markets | ||||||||||||||||
Domestic markets | 74,769 | 80,895 | 20,683 | 25,825 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 764 | 646 | 102,612 | 114,911 |
Overseas markets | 519 | 1,101 | 1,885 | 353 | - | - | - | - | - | - | - | - | - | - | 2,404 | 1,454 |
Total | 75,288 | 81,996 | 22,568 | 26,178 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 764 | 646 | 105,016 | 116,365 |
Timing of revenue | ||||||||||||||||
recognition | ||||||||||||||||
A point in time | 75,288 | 81,996 | 22,568 | 26,178 | - | - | - | - | - | - | 2,409 | 3,084 | - | - | 100,265 | 111,258 |
Over time | - | - | - | - | 2,736 | 3,317 | 468 | 309 | 783 | 835 | - | - | 764 | 646 | 4,751 | 5,107 |
Total | 75,288 | 81,996 | 22,568 | 26,178 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 764 | 646 | 105,016 | 116,365 |
The Group's revenue from contracts with customers is RMB103,041 million for the six months ended 30 June 2020 (six months ended 30 June 2019: RMB116,337 million).
2020 Interim Report 111
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
4 REVENUE FROM GOODS AND SERVICES (CONTINUED)
Set out below is the reconciliation of the revenue with the amounts disclosed in the segment information.
For the six months ended 30 June | ||||||||||||||||
Segments | Coal | Power | Railway | Port | Shipping | Coal chemical | Others | Total | ||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |
million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | |
Revenue disclosed | ||||||||||||||||
in segment | ||||||||||||||||
information | ||||||||||||||||
External customers | 75,288 | 81,996 | 22,568 | 26,178 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 764 | 646 | 105,016 | 116,365 |
Inter-segment | 8,913 | 11,642 | 36 | 43 | 15,452 | 16,857 | 2,466 | 2,643 | 523 | 753 | - | - | 530 | 554 | 27,920 | 32,492 |
84,201 | 93,638 | 22,604 | 26,221 | 18,188 | 20,174 | 2,934 | 2,952 | 1,306 | 1,588 | 2,409 | 3,084 | 1,294 | 1,200 | 132,936 | 148,857 | |
Adjustment and | ||||||||||||||||
eliminations | (8,913) | (11,642) | (36) | (43) | (15,452) | (16,857) | (2,466) | (2,643) | (523) | (753) | - | - | (530) | (554) | (27,920) | (32,492) |
Revenue | 75,288 | 81,996 | 22,568 | 26,178 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 764 | 646 | 105,016 | 116,365 |
The Group produces and sells coal and coal chemical products to customers at spot market. For sales of coal and coal chemical products, revenue is recognised when control of the goods has transferred, being when the goods have been shipped to the customers' specific location. According to the Group's historical experiences, there was no significant exchange or return of coal and coal chemical products occurred. There is no sales-related warranties associated with coal and coal chemical products.
For sales of power, revenue is recognised upon the transmission of electric power to the power grid companies. Power could not be returned or exchanged and there is also no warranties associated with power sales.
The Group provides railway transportation services, shipment transportation services as well as port loading and storage services to customers. Such services are recognised as a performance obligation satisfied over time as the Group rendering the services. Revenue is recognised for these services based on the stage of completion of the performance obligation using output method.
All performance obligations of sales of coal, power and coal chemical products, railway and shipment transportation services, and port loading and storage services are part of contracts with an original expected duration of one year or less. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.
112 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
5 SEGMENT AND OTHER INFORMATION
The Group manages its businesses by divisions, which are organised by business lines (products and services). In a manner consistent with the way in which information is reported internally to the Group's chief operating decision maker ("CODM"), including president, senior vice president and chief financial officer, for the purposes of resource allocation and performance assessment, the Group has presented the following six reportable segments. No operating segments have been aggregated to form the following reportable segments.
- Coal operations - which produce coal from surface and underground mines, and the sale of coal to external customers, the power operations segment and the coal chemical operations segment. The Group sells its coal under long-term supply contracts, which allow periodical price adjustments, and at spot market.
- Power operations - which use coal from the coal operations segment and external suppliers, thermal power, wind power, water power and gas power to generate electric power for the sale to coal operations segment and external customers. Electric power is sold to the power grid companies in accordance with planned power output at the tariff rates as approved by the relevant government authorities. Electric power produced in excess of the planned power output is sold at the tariff rate as agreed upon with the respective power grid companies which are generally lower than the tariff rates for planned power output.
- Railway operations - which provide railway transportation services to the coal operations segment, the power operations segment, the coal chemical operations segment and external customers. The rates of freight charges billed to the coal operations segment, the power operations segment, the coal chemical operations segment and external customers are consistent and do not exceed the maximum amounts approved by the relevant government authorities.
- Port operations - which provide loading, transportation and storage services to the coal operations segment and external customers. The Group charges service fees and other expenses, which are reviewed and approved by the relevant government authorities.
- Shipping operations - which provide shipment transportation services to the power operations segment, the coal operations segment and external customers. The rates of freight charges billed to the power operations segment, the coal operations segment and external customers are consistent.
- Coal chemical operations - which use coal from the coal operations segment to first produce methanol and further process into polyethylene and polypropylene, together with other by-products, for sale to external customers. The Group sells its polyethylene at spot market.
2020 Interim Report 113
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
5 SEGMENT AND OTHER INFORMATION (CONTINUED)
-
Segment results
For the purposes of assessing segment performance and allocating resources between segments, the Group's CODM monitors the results attributable to each reportable segment based on profit before income tax ("reportable segment profit"). Reportable segment profit represents the profit earned by each segment without allocation of head office and corporate items. Inter-segment sales are primarily charged at prevailing market rate which are the same as those charged to external customers.
Information regarding the Group's reportable segments as provided to the Group's CODM for the purposes of resource allocation and assessment of segment performance for the six months ended 30 June 2020 and 2019 is set out below:
Six months ended 30 June | ||||||||||||||
Coal | Power | Railway | Port | Shipping | Coal chemical | Total | ||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |
million | million | million | million | million | million | million | million | million | million | million | million | million | million | |
Revenue from external | 75,288 | 81,996 | 22,568 | 26,178 | 2,736 | 3,317 | 468 | 309 | 783 | 835 | 2,409 | 3,084 | 104,252 | 115,719 |
customers | ||||||||||||||
Inter-segment revenue | 8,913 | 11,642 | 36 | 43 | 15,452 | 16,857 | 2,466 | 2,643 | 523 | 753 | - | - | 27,390 | 31,938 |
Reportable segment revenue | 84,201 | 93,638 | 22,604 | 26,221 | 18,188 | 20,174 | 2,934 | 2,952 | 1,306 | 1,588 | 2,409 | 3,084 | 131,642 | 147,657 |
Reportable segment profit | 15,519 | 19,384 | 4,182 | 4,207 | 8,385 | 9,117 | 1,180 | 1,174 | 39 | 93 | (116) | 354 | 29,189 | 34,329 |
Including: | ||||||||||||||
Interest expenses | 322 | 343 | 639 | 790 | 449 | 528 | 148 | 191 | 2 | 4 | 49 | 12 | 1,609 | 1,868 |
Depreciation and amortisation | 3,689 | 3,573 | 2,653 | 2,648 | 2,513 | 2,417 | 505 | 529 | 148 | 148 | 422 | 437 | 9,930 | 9,752 |
Share of results of associates | 102 | 22 | 28 | 96 | - | - | 3 | - | - | - | - | - | 133 | 118 |
Loss allowances and | ||||||||||||||
impairment of assets | 272 | (64) | 1 | (1) | 6 | (3) | - | - | - | - | (1) | - | 278 | (68) |
114 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
5 SEGMENT AND OTHER INFORMATION (CONTINUED)
- Reconciliations of reportable segment revenue, segment profit and other items of profit or loss for the six months ended 30 June 2020 and 2019 are set out below:
Reportable segment | Unallocated head office and | Elimination of inter- | ||||||
amounts | corporate items | segment amounts | Consolidated | |||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | RMB million | |
Revenue | 131,642 | 147,657 | 1,294 | 1,200 | (27,920) | (32,492) | 105,016 | 116,365 |
Profit before income | 29,189 | 34,329 | 2,412 | 2,849 | (310) | (245) | 31,291 | 36,933 |
tax | ||||||||
Interest expenses | 1,609 | 1,868 | 415 | 557 | (1,051) | (903) | 973 | 1,522 |
Depreciation and | 9,930 | 9,752 | 66 | 180 | - | - | 9,996 | 9,932 |
amortisation | ||||||||
Share of results of | 133 | 118 | 727 | 79 | (376) | (5) | 484 | 192 |
associates | ||||||||
Loss allowances and | ||||||||
impairment of | ||||||||
assets | 278 | (68) | 2 | (164) | - | - | 280 | (232) |
5 SEGMENT AND OTHER INFORMATION (CONTINUED)
- Other information
Certain other information of the Group's segments for the six months ended 30 June 2020 and 2019 is set out below:
Coal | Power | Railway | Port | Shipping | Coal chemical | Unallocated items | Eliminations | Total | |||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | ||
million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | ||
Coal purchased | 19,111 | 24,073 | - | - | - | - | - | - | - | - | - | - | - | - | - | - | 19,111 | 24,073 | |
Cost of coal operation | 22,304 | 21,337 | - | - | - | - | - | - | - | - | - | - | - | - | (2,435) | (2,628) | 19,869 | 18,709 | |
Cost of coal transportation | 23,587 | 25,598 | - | - | 7,008 | 7,882 | 1,372 | 1,329 | 638 | 668 | - | - | - | - | (18,441) | (20,253) | 14,164 | 15,224 | |
Power cost | - | - | 16,113 | 20,513 | - | - | - | - | - | - | - | - | - | - | (5,599) | (8,053) | 10,514 | 12,460 | |
Cost of coal chemical production | - | - | - | - | - | - | - | - | - | - | 2,122 | 2,375 | - | - | (622) | (700) | 1,500 | 1,675 | |
Others | 1,102 | 1,197 | 857 | 49 | 1,835 | 2,161 | 140 | 142 | 563 | 752 | 285 | 278 | 17 | 12 | - | - | 4,799 | 4,591 | |
Total cost of sales | 66,104 | 72,205 | 16,970 | 20,562 | 8,843 | 10,043 | 1,512 | 1,471 | 1,201 | 1,420 | 2,407 | 2,653 | 17 | 12 | (27,097) | (31,634) | 69,957 | 76,732 | |
Profit from operations | 15,569 | 19,211 | 4,831 | 4,672 | 8,857 | 9,608 | 1,293 | 1,349 | 28 | 94 | (75) | 356 | 1,014 | 1,193 | (823) | (858) | 30,694 | 35,625 | |
(Note (i)) | |||||||||||||||||||
Capital expenditures (Note (ii) | 1,801 | 1,916 | 1,546 | 2,663 | 656 | 2,584 | 35 | 30 | - | 2 | 60 | 19 | - | 3 | - | - | 4,098 | 7,217 | |
Coal | Power | Railway | Port | Shipping | Coal chemical | Unallocated items | Eliminations | Total | |||||||||||
June 30 | December | June 30 | December | June 30 | December | June 30 | December | June 30 | December | June 30 | December | June 30 | December | June 30 | December | June 30 | December | ||
2020 | 31 2019 | 2020 | 31 2019 | 2020 | 31 2019 | 2020 | 31 2019 | 2020 | 31 2019 | 2020 | 31 2019 | 2020 | 31 2019 | 2020 | 31 2019 | 2020 | 31 2019 | ||
RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | ||
million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | million | ||
Total assets (Note (iii)) | 234,789 | 224,344 | 150,068 | 148,754 | 130,705 | 128,578 | 22,580 | 22,197 | 6,678 | 6,516 | 8,932 | 9,202 | 468,727 | 449,806 | (442,202) | (426,314) | 580,277 | 563,083 | |
Total liabilities (Note (iii)) | (111,197) | (108,449) | (107,617) | (109,730) | (53,915) | (56,774) | (7,786) | (8,285) | (547) | (397) | (3,103) | (3,346) | (228,258) | (188,866) | 351,403 | 332,982 | (161,020) | (142,865) | |
RMB) in (Expressed | (Continued) Statements Financial Consolidated Condensed Interim Unaudited the to Notes | Report Interim 2020 |
115
116 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
5 SEGMENT AND OTHER INFORMATION (CONTINUED)
- Other information (Continued)
Notes:
- Profit from operations is calculated as revenue minus cost of sales, selling expenses, general and administrative expenses, research and development costs, loss allowances and impairment of assets.
- Capital expenditures consist of addition in property, plant and equipment, construction in process, exploration and evaluation assets, intangible assets, long-term deferred expense and land use rights.
- Unallocated items of total assets include deferred tax assets and other unallocated corporate assets. Unallocated items of total liabilities include deferred tax liabilities and other unallocated corporate liabilities.
6 | COST OF SALES | ||
Six months ended 30 June | |||
2020 | 2019 | ||
RMB million | RMB million | ||
Coal purchased | 19,111 | 24,073 | |
Materials, fuel and power | 9,440 | 10,565 | |
Personnel expenses | 6,608 | 6,487 | |
Depreciation and amortisation | 8,350 | 8,733 | |
Repairs and maintenance | 4,328 | 4,842 | |
Transportation charges | 6,753 | 7,552 | |
Taxes and surcharges | 5,088 | 5,024 | |
Other operating costs | 10,279 | 9,456 | |
69,957 | 76,732 | ||
7 OTHER INCOME
Six months ended 30 June | ||
2020 | 2019 | |
RMB million | RMB million | |
Government grants | 219 | 169 |
Claim income | 23 | 57 |
Other | 55 | 136 |
297 | 362 | |
2020 Interim Report 117
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
8 | FINANCE COSTS | |||
Six months ended 30 June | ||||
2020 | 2019 | |||
RMB million | RMB million | |||
Interest expense | 1,126 | 1,824 | ||
Less: amount capitalised | (235) | (377) | ||
891 | 1,447 | |||
Others | 35 | - | ||
Unwinding of discount | 82 | 75 | ||
Exchange (gain)/loss, net | (4) | 72 | ||
1,004 | 1,594 | |||
9 INCOME TAX EXPENSE
Six months ended 30 June | ||
2020 | 2019 | |
RMB million | RMB million | |
Current tax, mainly PRC enterprise income tax | 6,415 | 7,103 |
Under provision in respect of prior year | 45 | 984 |
Deferred tax | 47 | (150) |
6,507 | 7,937 | |
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate applicable for PRC group entities is 25% (six months ended 30 June 2019: 25%) except for subsidiaries and branches operating in the western developing region of the PRC which are entitled to a preferential tax rate of 15% from 2011 to 2020.
On 23rd April 2020, the Ministry of Finance (the "MOF"), the State Administration of Taxation the (the "SAT") and National Development and Reform Commission (the "NDRC") jointly issued the Announcement on Continuing the Income Tax Policy for Western Development (Announcement [2020] No.23 of the MOF, the SAT and the NDRC), according to the Announcement, the corporate income tax for the enterprises engaging in the encouraged industries in the Western China Region will charged at a preferential corporate income tax rate of 15% from 1 January 2021 to 31 December 2030.
118 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
9 INCOME TAX EXPENSE (CONTINUED)
The applicable tax rates of the Group's overseas subsidiaries are as follows:
Six months ended 30 June | ||
2020 | 2019 | |
% | % | |
Australia | 30.0 | 30.0 |
Indonesia | 25.0 | 25.0 |
United States | 21.0 | 21.0 |
Russia | 20.0 | 20.0 |
Hong Kong | 8.25/16.5* | 8.25/16.5* |
During the six months ended 30 June 2020 and 2019, there was no significant assessable profit and provision for income tax for the overseas subsidiaries.
- The two-tiered profits tax rates regime is applicable from the year of assessment 2019/20 onwards. The profits tax rate for the first HKD2,000,000 of profits of corporations will be lowered to 8.25%, and profits above that amount will continue to be subject to the tax rate of 16.5%.
10 PROFIT FOR THE PERIOD
Profit for the period has been arrived at after charging/(crediting):
Six months ended 30 June | ||
2020 | 2019 | |
RMB million | RMB million | |
Personnel expenses, including | 12,194 | 11,861 |
- Contributions to defined contribution plans | 1,103 | 1,572 |
Depreciation of property, plant and equipment | 8,991 | 8,933 |
Depreciation of right-of-use assets | 336 | 303 |
Amortisation of intangible assets, included in cost of sales | 202 | 189 |
Amortisation of other non-current assets | 489 | 507 |
Depreciation and amortisation charged for period | 10,018 | 9,932 |
Less: amount capitalised | 22 | - |
Depreciation and amortisation (Note) | 9,996 | 9,932 |
2020 Interim Report 119
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
10 PROFIT FOR THE PERIOD (CONTINUED)
Six months ended 30 June | ||
2020 | 2019 | |
RMB million | RMB million | |
Loss allowances, net of reversal | ||
- Loans receivables and interbank certificate of deposits | 2 | (173) |
- Trade and other receivables | 271 | (59) |
273 | (232) | |
Other losses and (gains), represent | ||
- losses/(gains) on disposal of property, plant and | ||
equipment, exploration and evaluation assets, intangible | ||
assets and non-current assets | 55 | (110) |
- gains on disposal of subsidiaries and interest in an | ||
associate | - | (1,234) |
- gains on disposal of financial assets at FVTPL | (457) | (409) |
- gains on disposal of derivative financial instruments | (20) | - |
- losses/(gains) on changes in fair value of financial assets | 179 | (110) |
- impairment losses on construction in progress | 6 | - |
- impairment losses on intangible assets | 1 | - |
- write down of inventories | - | (4) |
(236) | (1,867) | |
Carrying amount of inventories sold | 51,201 | 57,683 |
Operating lease changes relating to short-term leases, leases | ||
of low-value assets and variable lease payments | 121 | 106 |
Exchange (gain)/loss, net | (4) | 72 |
Note:
Cost of sales included an amount of depreciation and amortisation of RMB8,350 million for the six months ended 30 June 2020 (six months ended 30 June 2019: RMB8,733 million).
120 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
11 DIVIDENDS
During the current interim period, a final dividend in respect of the year ended 31 December 2019 of RMB1.26 per ordinary share totaling RMB25,061 million (six months ended 30 June 2019: RMB0.88 per ordinary share totaling RMB17,503 million in respect of the year ended 31 December 2018) was approved at the annual general meeting held on 29 May 2020 and paid in full by August 2020.
The Directors have determined that no dividend will be paid in respect of the current interim period (six months ended 30 June 2019: Nil).
12 EARNINGS PER SHARE
The calculation of basic earnings per share for the six months ended 30 June 2020 was based on the profit attributable to ordinary equity holders of the Company of RMB20,370 million (six months ended 30 June 2019: RMB24,240 million) and the number of shares in issue during the six months ended 30 June 2020 of 19,890 million shares (six months ended 30 June 2019: 19,890 million shares).
No diluted earnings per share is presented as there were no potential ordinary shares in existence for both periods.
13 PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION IN PROGRESS
During the six months ended 30 June 2020, the additions of property, plant and equipment (excluding transferred from construction in progress) and construction in progress amounted to RMB863 million (six months ended 30 June 2019: RMB2,163 million) and RMB2,761 million (six months ended 30 June 2019: RMB4,168 million), respectively. The disposals of property, plant and equipment amounted to RMB596 million (six months ended 30 June 2019: RMB909 million).
The Group is in the process of applying for the title certificates of certain of its properties with an aggregate carrying amount of RMB4,053 million as at 30 June 2020 (31 December 2019: RMB7,896 million). The Directors are of the opinion that the Group is entitled to lawfully and validly occupy or use the above mentioned properties.
As at 30 June 2020, the Group is in the process of obtaining requisite permits for certain of its power plants and railways from the relevant government authorities. The Directors are of the opinion that the Group will be able to obtain the requisite permits in due course.
No impairment loss was recognised by the Group during the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).
As at 30 June 2020, the Group has bank loans secured by the Group's property, plant and equipment with carrying amount of RMB929 million (31 December 2019: RMB973 million).
2020 Interim Report 121
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
14 INTERESTS IN ASSOCIATES
30 June | 31 December | ||||
2020 | 2019 | ||||
RMB million | RMB million | ||||
Unlisted shares, at cost | 38,482 | 38,419 | |||
Share of post-acquisition profits and other comprehensive | |||||
income, net of dividend received | 2,472 | 2,120 | |||
40,954 | 40,539 | ||||
Proportion of ownership interest | |||||
and voting power held by | |||||
the Group | |||||
30 June | 31 December | ||||
Name of associate | 2020 | 2019 | Principal activities | ||
% | % | ||||
Beijing GD | 42.53 | 42.53 | Generation and sale of | ||
electricity | |||||
Haoji Railway Co., Ltd. (Note) | 12.50 | 12.50 | Provision of transportation | ||
service | |||||
Shendong Tianlong Group Co., | 20.39 | 20.39 | Production and sale of | ||
Ltd. | coal | ||||
Sichuan Guang'an Power Co., | 20.00 | 20.00 | Generation and sale of | ||
Ltd. | electricity | ||||
Guohua (Hebei) Renewables Co., | 25.00 | 25.00 | Generation and sale of | ||
Ltd. | electricity | ||||
Tianjin Yuanhua Shipping Co., | 43.83 | 43.83 | Provision of transportation | ||
Ltd. | service | ||||
Inner Mongolia Yili Chemical | 25.00 | 25.00 | Production and sale of | ||
Industry Co., Ltd. | chemicals | ||||
Suizhong Power Generation Co., | 15.00 | 15.00 | Generation and sale of | ||
Ltd. | electricity | ||||
Inner Mongolia Guohua | 20.00 | 20.00 | Generation and sale of | ||
Hulunbeler Power Generation | electricity | ||||
Co., Ltd. |
Note:
Mengxi-Huazhong Railway Co., Ltd. changed its name to Haoji Railway Co., Ltd. on 29 October 2019. The Group is able to exercise significant influence over Haoji Railway Co., Ltd. because it has the power to appoint one out of eleven directors of that company under the Articles of Association of that company.
122 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
15 OTHER NON-CURRENT ASSETS
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Prepayments in connection with construction work, | ||
equipment purchases and others (Note (i)) | 8,182 | 8,082 |
Prepayment for mining projects | 9,052 | 8,842 |
Deductible VAT and other tax | 774 | 675 |
Loans to China Energy Group and fellow | ||
subsidiaries (Note (ii)) | 23,700 | 16,098 |
Government bonds | 5,508 | 5,009 |
Corporate bonds | 292 | - |
Service concession receivables (Note (iii)) | 11,305 | 11,380 |
Goodwill | 253 | 253 |
Long-term deferred expenses (Note (iv)) | 3,502 | 3,667 |
62,568 | 54,006 | |
Notes:
- At 30 June 2020, the Group had prepayments to subsidiaries of China Energy Group ("fellow subsidiaries") amounting to RMB67 million (31 December 2019: RMB67 million).
- The loans to China Energy Group and fellow subsidiaries bear interest at rates ranging from 4.12% to 4.75% per annum (31 December 2019: 4.22% to 4.75% per annum) and are receivables within two to twelve years.
- Pursuant to a Power Purchase Agreement ("PPA") entered between PT Shenhua Guohua Pembangkitan JAWA Bali ("Shenhua Guohua JAWA", a power plant of the Group) and PT Perusahaan Listrik Negara (Persero) ("PLN"), Shenhua Guohua JAWA build a 2 x 1,050 Mega Watt ("MW") power plant to supply electricity to PLN for a 25- year period from the power plant's commercial operation date. The power plant's ownership shall be transferred to PLN at the expiry date of the agreement under the Build, Own, Operate and Transfer ("BOOT") scheme. Service concession receivables represents service provided in connection with the service concession arrangement for which guaranteed minimum payments have been agreed irrespective of the extent of use of the electricity. Due to the length of the payment plans, receivables are the present value of future guaranteed cash receipts discounted using effective interest rate.
- The movement of long-term deferred expenses during the period/year as follows:
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
At the beginning of the period/year | 3,667 | 3,664 |
Additions | 329 | 1,024 |
Amortisation | (489) | (1,015) |
Disposal | (5) | (6) |
At the end of the period/year | 3,502 | 3,667 |
2020 Interim Report 123
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
16 RIGHT-OF-USE ASSETS
The right-of-use assets represent land use rights paid to the PRC's government authorities and the leased assets. The Group is in the process of applying for the title certificates of certain land use rights certificates with an aggregate carrying amount of RMB1,957 million as at 30 June 2020 (31 December 2019: RMB1,938 million). The Directors are of the opinion that the Group is entitled to lawfully and validly occupy or use the above mentioned lands.
As at 30 June 2020, the Group has bank loans secured by the Group's right-of-use assets with carrying amount of RMB816 million (31 December 2019: RMB841 million).
17 INVENTORIES
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Coal | 6,221 | 5,573 |
Materials and supplies | 9,003 | 7,799 |
Others (Note) | 1,284 | 1,268 |
16,508 | 14,640 | |
Less: Write-down of inventories | (2,386) | (2,587) |
14,122 | 12,053 | |
Note: Others mainly represent properties held for sale and properties under development.
124 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
18 ACCOUNTS AND BILLS RECEIVABLES
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Accounts receivable | ||
- China Energy Group and fellow subsidiaries | 2,740 | 2,179 |
- Associates | 465 | 476 |
- Third parties | 8,629 | 6,265 |
11,834 | 8,920 | |
Less: allowance for credit losses | (1,333) | (1,073) |
10,501 | 7,847 | |
Bills receivable | ||
- China Energy Group and fellow subsidiaries | 180 | 135 |
- Associates | 1 | 3 |
- Third parties | 2,170 | 2,451 |
2,351 | 2,589 | |
12,852 | 10,436 | |
As at 30 June 2020 and 31 December 2019, accounts and bills receivables from contracts with customers amounted to RMB14,185 million and RMB11,509 million, respectively.
Bills receivable were mainly issued by PRC banks and are expiring within one year. As at 30 June 2020, no bills was pledged to secure bills payable.
As of the end of the reporting period, the ageing analysis of trade receivables, based on the invoice date and net of loss allowance, is as follows:
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Less than one year | 9,417 | 6,523 |
One to two years | 180 | 109 |
Two to three years | 63 | 105 |
More than three years | 841 | 1,110 |
10,501 | 7,847 | |
2020 Interim Report 125
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
19 PREPAID EXPENSES AND OTHER CURRENT ASSETS
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Financial assets at FVTPL | ||
- Derivative financial instruments | - | 101 |
- Wealth management products | - | 33,334 |
- | 33,435 | |
Financial assets measured at amortised cost | ||
- Interbank certificate of deposits (Note (i)) | 11,953 | 28,621 |
- Loans and advances to China Energy | ||
Group and fellow subsidiaries (Note (ii)) | 1,144 | 8,549 |
- Service concession receivables (Note 15(iii)) | 1,090 | 428 |
- Bank bonds (Note (iii)) | 100 | 100 |
- Entrusted loans (Note (iv)) | 457 | 457 |
- Other receivables due from associates | 499 | 454 |
- Other receivables | 1,900 | 2,010 |
17,143 | 40,619 | |
Prepaid expenses and deposits | 10,037 | 9,546 |
Deductible VAT and other tax | 2,592 | 2,924 |
29,772 | 86,524 | |
Notes:
- As at 30 June 2020, the Group invested RMB11,953 million in the interbank certificates of deposit, measured by amortised cost method.
- As at 30 June 2020, the Group had unsecured loans to China Energy Group and fellow subsidiaries amounting to RMB1,144 million (31 December 2019: RMB8,549 million), which bear interest at rates ranging from 3.20% to 4.35% per annum (31 December 2019: 3.87% to 4.35% per annum).
- As at 30 June 2020, the Group invested RMB100 million in bank bond which expires on 30 November 2020, with an interest rate of 4.90% per annum (31 December 2019: 4.90%).
126 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
19 PREPAID EXPENSES AND OTHER CURRENT ASSETS (CONTINUED)
- As at 30 June 2020, the Group had entrusted loans to a third party and to an associate company through PRC state-owned banks as follows:
Starting date | Due date | Interest rates | Amount | |
RMB million | ||||
Entrusted loans to a third party | 13/02/2014 | On demand | 6.00% | 37 |
Entrusted loans to an associate | ||||
company | 29/12/2017 | 29/12/2020 | 4.75% | 420 |
20 CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the condensed consolidated statement of financial position and the condensed consolidated statement of cash flows comprise cash at bank and in hand, and time deposits with original maturity within three months.
21 BORROWINGS
An analysis of the Group's borrowings is as follows: | ||
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Current borrowings | ||
- Short-term bank and other borrowings | 1,337 | 835 |
- Current portion of long-term borrowings | 3,105 | 3,337 |
4,442 | 4,172 | |
Non-current borrowings: | ||
- Long-term borrowings, less current portion | 32,790 | 36,943 |
37,232 | 41,115 | |
Secured | 11,858 | 10,635 |
Unsecured | 25,374 | 30,480 |
37,232 | 41,115 | |
2020 Interim Report 127
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
21 BORROWINGS (CONTINUED)
The exposure of the long-term borrowings and the contractual maturity dates:
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Within one year | 3,105 | 3,337 |
More than one year, but not exceeding two years | 5,313 | 6,017 |
More than two years, but not exceeding five years | 4,078 | 4,374 |
More than five years | 23,399 | 26,552 |
35,895 | 40,280 | |
As at 30 June 2020, the Group had entrusted loans from China Energy Group and fellow subsidiaries amounting to RMB874 million (31 December 2019: RMB874 million).
22 ACCOUNTS AND BILLS PAYABLES
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Accounts payable | ||
- China Energy Group, an associate of China Energy Group | ||
and fellow subsidiaries | 1,437 | 1,252 |
- Associates | 1,028 | 922 |
- Third parties | 20,659 | 22,077 |
23,124 | 24,251 | |
Bills payable | 277 | 792 |
23,401 | 25,043 | |
128 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
22 ACCOUNTS AND BILLS PAYABLES (CONTINUED)
The following is an ageing analysis of accounts and bills payables, presented based on invoice date at the end of the reporting period:
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Less than one year | 16,661 | 17,706 |
One to two years | 1,859 | 2,109 |
Two to three years | 1,136 | 1,494 |
More than three years | 3,745 | 3,734 |
23,401 | 25,043 | |
23 ACCRUED EXPENSES AND OTHER PAYABLES
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Accrued staff wages and welfare benefits | 5,303 | 4,249 |
Accrued interests | 478 | 471 |
Taxes payable other than income tax | 4,198 | 5,114 |
Dividends payable | 5,453 | 1,631 |
Deposits from China Energy Group and fellow | ||
subsidiaries (Note(i)) | 53,227 | 32,184 |
Other accrued expenses and payables (Note (ii)) | 12,584 | 9,929 |
Financial liabilities measured at amortised cost | 81,243 | 53,578 |
Notes:
- As at 30 June 2020, deposits from China Energy Group and fellow subsidiaries bear interests at 0.42% to 1.62% per annum (31 December 2019: 0.42% to 1.62% per annum).
- Other accrued expenses and payables of the Group include:
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Amounts due to China Energy Group and fellow subsidiaries | 732 | 1,137 |
Amounts due to associates | 33 | 37 |
765 | 1,174 | |
The above amounts due to related parties are unsecured, interest-free and payable on demand.
2020 Interim Report 129
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
24 LONG-TERM LIABILITIES
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Payables for acquisition of mining rights (Note (i)) | 791 | 743 |
Deferred income (Note (ii)) | 1,525 | 1,240 |
Defined benefit plans | 6 | 7 |
Others | 637 | 1,704 |
2,959 | 3,694 | |
Analysed for reporting purpose as: | ||
- Current liabilities | 440 | 1,493 |
- Non-current liabilities | 2,519 | 2,201 |
2,959 | 3,694 | |
Notes:
- The balances mainly represent the payables for acquisition of mining rights which are to be settled over the period of production set out in the contracts on an annual basis. The annual payment is determined by fixed rates on a per tonne basis with reference to the annual production volume of the acquired mines in the acquisition agreements.
- Deferred income mainly represents grants provided by several local governments in the PRC to encourage the construction of non-current assets.
25 ACCRUED RECLAMATION OBLIGATIONS
The accrual for reclamation costs has been determined based on management's best estimates. However, so far as the effect on the land from current mining activities becomes apparent in future periods, the estimate of the associated costs may be subject to change. Accordingly, the actual costs and cash flows may differ from estimates. The directors believe that the accrued reclamation obligations at 30 June 2020 are adequate and appropriate.
130 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
26 SHARE CAPITAL
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Registered, issued and fully paid: | ||
16,491,037,955 domestic listed A shares of RMB1.00 each | 16,491 | 16,491 |
3,398,582,500 H shares of RMB1.00 each | 3,399 | 3,399 |
19,890 | 19,890 | |
All A shares and H shares rank pari passu in all material aspects.
27 CAPITAL MANAGEMENT
The Group's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.
The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares to reduce debts.
The Group monitors capital using a gearing ratio which is total liabilities divided by total assets. The Group aims to maintain the gearing ratio at a reasonable level. The Group's gearing ratio as at 30 June 2020 was 28% (31 December 2019: 25%).
28 COMMITMENTS AND CONTINGENT LIABILITIES
-
Capital commitments
As at 30 June 2020, the Group had capital commitments for land and buildings and equipment as follows:
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Contracted for but not provided | ||
- Land and buildings | 22,052 | 24,670 |
- Equipment | 15,175 | 13,990 |
37,227 | 38,660 | |
2020 Interim Report 131
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
28 COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
-
Financial guarantees issued
As at 30 June 2020, the Group had issued certain guarantees in respect of certain banking facilities granted to an entity of which the Group held less than 20% equity interest and accounted for as equity instruments at FVTOCI. The maximum amount guaranteed is RMB151 million (31 December 2019: RMB158 million). - Legal contingencies
The Group is the defendant in certain lawsuits as well as the plaintiff in other proceedings arising in the ordinary course of business. While the outcomes of such contingencies, lawsuits or other proceedings cannot be determined at present, management believes that any resulting liabilities will not have a material adverse effect on the financial position or operating results of the Group. - Environmental contingencies
To date, the Group has not incurred any significant expenditure for environmental remediation, is currently not involved in any environmental remediation, and apart from the provision for land reclamation costs, has not accrued any further amounts for environmental remediation relating to its operations. Under the existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial position or operating results of the Group. The regulatory bodies, however, have moved, and may move further towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable uncertainties which affect the Group's ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature and extent of the contamination at various sites including, but not limited to coal mines and land development areas, whether operating, closed or sold; (ii) the extent of required cleanup efforts; (iii) varying costs of alternative remediation strategies; (iv) changes in environmental remediation requirements; and (v) the identification of new remediation sites. The amount of such future cost is indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective actions that may be required. Accordingly, the outcome of environmental liabilities under future environmental legislation cannot reasonably be estimated at present, and could be material.
132 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
29 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
Fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis
The following table presents the fair value of the Group's financial instruments measured at the end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:
- Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
- Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.
- Level 3 valuations: Fair value measured using significant unobservable inputs.
30 June | 31 December | Fair value | Valuation technique(s) | |
2020 | 2019 | hierarchy | and key input(s) | |
RMB million | RMB million | |||
Financial assets | ||||
Steam coal futures | - | 70 | Level 1 | Quoted price in an |
active market. | ||||
Wealth management | - | 33,334 | Level 2 | Discounted cash flow. |
products | Future cash flows | |||
are estimated based | ||||
on expected rate of | ||||
return of comparable | ||||
products. | ||||
Corporate bonds | 292 | - | Level 2 | Quoted price in |
interbank market. | ||||
Equity instruments at fair | 1,815 | 1,789 | Level 3 | Market comparison |
value through other | approach. Fair value | |||
comprehensive income | is estimated based on | |||
value of comparable | ||||
listed companies, | ||||
multiples and | ||||
discounted for lack of | ||||
liquidity. | ||||
Financial liabilities | ||||
Steam coal futures | 14 | - | Level 1 | Quoted price in an |
active market. |
2020 Interim Report 133
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
29 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (CONTINUED)
Fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis (Continued)
During the year ended 31 December 2019 and the period ended 30 June 2020, there were no transfer between Level 1, Level 2 and Level 3.
The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.
30 RELATED PARTY TRANSACTIONS
-
Transactions with China Energy Group, associates of China Energy Group, fellow subsidiaries and associates of the Group
The Group is controlled by China Energy Group and has significant transactions and relationships with China Energy Group, associates of China Energy Group and fellow subsidiaries. Related parties refer to enterprises over which China Energy Group is able to exercise significant influence or control. The Group also has entered into transactions with its associates, over which the Group can exercise significant influence.
The Group had the following transactions with China Energy Group, associates of China Energy Group, fellow subsidiaries, and associates of the Group during both periods:
Six months ended 30 June | |||
2020 | 2019 | ||
Note | RMB million | RMB million | |
Interest income | (i) | 439 | 295 |
Income from entrusted loans | (ii) | 9 | 9 |
Interest expense | (iii) | 199 | 171 |
Purchases of ancillary materials and spare | |||
parts | (iv) | 506 | 496 |
Ancillary and social services | (v) | 294 | 171 |
Transportation service income | (vi) | 722 | 759 |
Transportation service expense | (vii) | 87 | - |
Sale of coal | (viii) | 24,814 | 24,824 |
Purchase of coal | (ix) | 3,606 | 6,038 |
Property leasing expense | (x) | 34 | 10 |
Repairs and maintenance services expense | (xi) | - | 1 |
Coal export agency expense | (xii) | 2 | 2 |
Purchase of equipment and construction | |||
work | (xiii) | 81 | 325 |
Sale of coal chemical product | (xiv) | 1,859 | 2,411 |
Other income | (xv) | 962 | 1,002 |
Granting of loans from Shenhua Finance | (xvi) | 12,550 | 2,731 |
Repayment of loans from Shenhua Finance | (xvii) | 12,346 | 5,266 |
Net deposits received by Shenhua Finance | (xviii) | 21,044 | 511 |
134 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
30 RELATED PARTY TRANSACTIONS (CONTINUED)
- Transactions with China Energy Group, associates of China Energy Group, fellow subsidiaries and associates of the Group (Continued)
- Interest income represents interest earned from loans to China Energy Group and fellow subsidiaries. The applicable interest rate is determined in accordance with the prevailing interest rates published by the People's Bank of China (the "PBOC").
- Income from entrusted loans represents interest earned from entrusted loans to an associate of the Group. The applicable interest rate is determined in accordance with the prevailing interest rates published by the PBOC.
- Interest expense represents interest incurred from deposits placed and loans from China Energy Group and fellow subsidiaries. The applicable interest rate is determined in accordance with the prevailing interest rates published by the PBOC.
- Purchases of ancillary materials and spare parts represent purchase of materials and utility supplies related to the Group's operations from fellow subsidiaries.
- Ancillary and social services represent expenditures for social welfare and support services such as property management, water and electricity supply, and canteen expense paid to fellow subsidiaries and an associate of China Energy Group.
- Transportation service income represents income earned from fellow subsidiaries in respect of coal transportation services.
- Transportation service expense represents expenses paid to fellow subsidiaries in respect of coal transportation services.
- Sale of coal represents income from sale of coal to fellow subsidiaries and associates of China Energy Group.
- Purchase of coal represents coal purchased from associates of the Group, an associate China Energy Group and fellow subsidiaries.
- Property leasing expense represents rental paid or payable in respect of properties leased from fellow subsidiaries.
- Repairs and maintenance services expense represents expense related to machinery repairs and maintenance services.
- Coal export agency expense represents expense related to coal export agency services provided by a fellow subsidiary.
- Purchase of equipment and construction work represents expenditure related to equipment and construction service provided by fellow subsidiaries.
- Sale of coal chemical product represents income from sale of coal chemical product to fellow subsidiaries.
- Other income includes agency income, repairs and maintenance service income, sales of ancillary materials and spare parts, management fee income, sales of water and electricity, financial service income, lease income, etc. earned from China Energy Group, associate of China Energy Group and fellow subsidiaries.
- Granting of loans from Shenhua Finance represents loans granted by Shenhua Finance to China Energy Group and fellow subsidiaries.
- Repayment of loans from Shenhua Finance represents loans repaid by China Energy Group and fellow subsidiaries to Shenhua Finance.
2020 Interim Report 135
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
30 RELATED PARTY TRANSACTIONS (CONTINUED)
- Transactions with China Energy Group, associates of China Energy Group, fellow subsidiaries and associates of the Group (Continued)
- Receipt of deposits by Shenhua Finance represents net deposits received by Shenhua Finance from China Energy Group and fellow subsidiaries.
The Directors are of the opinion that the above transactions with related parties were conducted in the ordinary course of business and in accordance with the agreements governing such transactions.
Amounts due from/to China Energy Group, associates of China Energy Group, fellow subsidiaries and associates of the Group:
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Accounts and bills receivables | 3,027 | 2,696 |
Prepaid expenses and other current assets | 2,522 | 9,589 |
Other non-current assets | 25,062 | 16,347 |
Total amounts due from China Energy Group, an | ||
associate of China Energy Group, fellow subsidiaries | ||
and associates of the Group | 30,611 | 28,632 |
Borrowings | 874 | 874 |
Accounts payables | 2,465 | 2,174 |
Accrued expenses and other payables | 53,992 | 33,345 |
Contract liabilities | 718 | 708 |
Total amounts due to China Energy Group, an associate | ||
of China Energy Group, fellow subsidiaries and | ||
associates of the Group | 58,049 | 37,101 |
- Key management personnel emoluments
Key management personnel receive compensation in the form of fees, basic salaries, housing and other allowances, benefits in kind, discretionary bonuses and retirement scheme contributions.
Key management personnel compensation of the Group during the period is summarised as follows:
Six months ended 30 June | ||
2020 | 2019 | |
RMB million | RMB million | |
Short-term employee benefits | 4 | 4 |
Total remuneration is included in "personnel expenses" as disclosed in Note 10.
136 China Shenhua Energy Company Limited
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
30 RELATED PARTY TRANSACTIONS (CONTINUED)
-
Contributions to post-employment benefit plans
The Group participates in various defined contribution post-employment benefit plans organised by municipal and provincial governments and a supplemental defined contribution pension plan approved by the government for its employees. Further details of the Group's post-employment benefit plans are disclosed in Note 31. - Transactions with other government-related entities in the PRC
The Company is ultimately controlled by the PRC government and the Group operates in an economic environment currently predominated by government-related entities.
Other than those transactions with China Energy Group, an associate of China Energy Group, fellow subsidiaries and associates of the Group as disclosed above, the Group conducts business with other government-related entities which include but are not limited to the following: - Power sales;
- Sales and purchases of coal;
- Transportation services;
- Construction work;
- Purchases of ancillary materials and spare parts;
- Ancillary and social services; and
- Financial services arrangements.
These transactions are conducted in the ordinary course of the Group's business on terms comparable to those with other entities that are not government-related. The Group has established its pricing policies in respect of sale of goods and provision of services, and approval process for purchases of products and services. Such policies and approval process apply to all counterparties regardless of whether the counterparty is government-related or not.
Having considered the potential for transactions to be impacted by related party relationships, the Group's buying, pricing strategy and approval process, and what information would be necessary for an understanding of the potential effect of the relationship on the financial statements, the Directors are of the opinion that the following transactions with other government-related entities require disclosure:
2020 Interim Report 137
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Continued)
(Expressed in RMB)
30 RELATED PARTY TRANSACTIONS (CONTINUED)
- Transactions with other government-related entities in the PRC (Continued)
- Transactions with other government-related entities, including state-owned banks in the PRC
Six months ended 30 June | ||
2020 | 2019 | |
RMB million | RMB million | |
Coal revenue | 33,733 | 42,067 |
Power revenue | 20,473 | 24,899 |
Transportation costs | 4,637 | 6,659 |
Interest income | 598 | 595 |
Interest expenses (including amount capitalised) | 1,332 | 1,528 |
- Balances with other government-related entities, including state-owned banks in the PRC
30 June | 31 December | |
2020 | 2019 | |
RMB million | RMB million | |
Accounts and bills receivables | 5,687 | 10,796 |
Prepaid expenses and other current assets | 4,770 | 3,800 |
Cash and time deposits at banks | 108,097 | 43,731 |
Restricted bank deposits | 8,217 | 7,664 |
Borrowings | 35,957 | 40,001 |
Accrued expenses and other payables | 1,644 | 1,687 |
Contract liabilities | 82 | 86 |
31 EMPLOYEE BENEFITS PLAN
The Group participates, in line with the regulations of the PRC, mainly in various defined contribution retirement plans organised by municipal and provincial governments for its employees. The Group is required to make contributions to the retirement plans at 20% of the salaries, bonuses and certain allowances of the employees. In addition, as approved by the government, the Group makes contribution to a supplemental defined contribution pension plan for its employees. The fund is managed by a qualified fund manager. The Group has no other material obligation for the payment of pension benefits associated with these plans beyond the annual contributions described above. The Group's contributions for the six months ended 30 June 2020 were RMB1,103 million (six months ended 30 June 2019: RMB1,572 million).
32 NON-ADJUSTING EVENTS AFTER THE REPORTING PERIOD
On 27 March 2020, China Energy Group, Shenhua Finance, the Company and certain of its subsidiaries entered into the Shenhua Finance Capital Increase Agreement. Pursuant to the Agreement, China Energy Group proposed to subscribe additional registered capital of RMB7.5 billion in Shenhua Finance at a consideration of RMB13.274 billion in cash (the "Shenhua Finance Capital Increase"). The Shenhua Finance Capital Increase have been approved by the Company's and Shenhua Finance's shareholders in May and July 2020 respectively. Upon the completion of the Shenhua Finance Capital Increase, the registered capital of Shenhua Finance will increase from RMB5 billion to RMB12.5 billion, and the Group will hold approximately 40% of the equity interest in Shenhua Finance. As a result, Shenhua Finance will become an associate of the Company and will no longer be consolidated into the consolidated financial statements of the Company.
138 China Shenhua Energy Company Limited
Section XI Documents Available for Inspection
Documents available | The interim report for the year 2020 signed by the Chairman |
for inspection | The financial statements signed and sealed by the Chairman, the chief |
accountant and the head of the accounting institution | |
The original copy of the review report issued by the accounting firm | |
The original copies of all documents and announcements of the Company | |
publicly disclosed in the newspapers designated by the CSRC during the | |
reporting period | |
The interim report for the year 2020 published on the websites of SSE | |
and HKEx | |
Wang Xiangxi, Chairman | |
Approval date of the board of directors for submission: 28 August 2020 |
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CSEC - China Shenhua Energy Company Ltd. published this content on 30 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 August 2020 11:19:03 UTC