Interim Report
2007
中期報告
Interim Report 2007
中期報告
Ener
china
CORPORATE INFORMATION
Board of Directors
Executive Directors
Ou Yaping (Chairman)
Chen Wei (Chief Executive Officer)
Tang Yui Man Francis
Xiang Ya Bo
Non-executive Director
Sun Qiang Chang
(Non-executive Vice Chairman)
Independent Non-executive Directors
Lu Yungang
Davin A. Mackenzie
Xin Luo Lin
Authorised Representatives
Tang Yui Man Francis
Xiang Ya Bo
Audit Committee
Lu Yungang
Davin A. Mackenzie
Xin Luo Lin (Chairman)
Remuneration Committee
Lu Yungang
Davin A. Mackenzie
Ou Yaping
Xiang Ya Bo
Xin Luo Lin (Chairman)
Qualified Accountant
Yue Ming Wai, Bonaventure
Company Secretary
Lo Tai On
Registered Office
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Principal Place of Business
28th Floor, Vicwood Plaza
199 Des Voeux Road Central
Hong Kong
Telephone : (852) 2521 1181
Fascimile : (852) 2851 0970
Stock Code : 622
Website : http://www.enerchina.com.hk
http://www.irasia.com/listco/
hk/enerchina
Auditors
Deloitte Touche Tohmatsu
Certified Public Accountants
35th Floor, One Pacific Place
88 Queensway
Hong Kong
Principal Share Registrar and
Transfer Office
Butterfield Fund Services (Bermuda) Limited
Rosebank Centre
11 Bermudiana Road
Pembroke, HM 08
Bermuda
Hong Kong Branch Share Registrar
Computershare Hong Kong Investor
Services Limited
46th Floor, Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Hong Kong Branch Share
Transfer Office
Computershare Hong Kong Investor
Services Limited
Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Legal Advisors
(As to Hong Kong law)
Woo, Kwan, Lee & Lo
Norton Rose
(As to Bermuda law)
Conyers Dill & Pearman
(As to the PRC law)
Haiwen & Partners
Principal Bankers
Bank of China (Hong Kong) Limited
China Construction Bank
Hang Seng Bank Limited
Industrial and Commercial Bank of
China (Asia) Ltd.
Shenzhen Development Bank Co., Ltd
CONTENTS
Page(s)
Financial Highlights 2
Management Discussion and Analysis 2
Other Information 9
Report on Review of Interim Financial Information 17
Condensed Consolidated Income Statement 18
Condensed Consolidated Balance Sheet 19
Condensed Consolidated Statement of Changes in Equity 21
Condensed Consolidated Cash Flow Statement 24
Notes to the Condensed Consolidated Financial Statements 25
Enerchina Holdings Limited Interim Report 2007
02
FINANCIAL HIGHLIGHTS
For the six months ended 30 June 2007
• Group’s turnover from continuing operation decreased by 15.2% to
HK$617.2 million
• Group’s gross profit from continuing operation decreased by 34.5% to
HK$58.1 million
• Net loss attributable to the equity holders of the Company amounted to
HK$42.5 million
• Loss per share of HK0.89 cents
MANAGEMENT DISCUSSION AND ANALYSIS
The Group is principally engaged in electricity generation and the sale of
electricity, and through Towngas China Company Limited (stock code: 1083,
“Towngas China”) (previously known as Panva Gas Holdings Limited), the sale and
distribution of Liquefied Petroleum Gas (“LP Gas”) and piped gas, and gas
pipelines construction. The gas fuel business operation was discontinued on 28
February 2007 upon the completion of the agreement entered into between the
Company, Towngas China and Hong Kong & China Gas (China) Limited (“HKCG”)
announced on 4 December 2006. Details of the transaction is set out in the section
headed “Major Associate”.
For the six months ended 30 June 2007, the Group recorded a turnover from
continuing operation of HK$617.2 million, representing a decrease of 15.2% as
compared to the same period last year. Gross profit from continuing operation
decreased to HK$58.1 million for the six months ended 30 June 2007, a decrease
of 34.5% as compared to the same period last year. The decrease in gross profit
was mainly caused by the decrease in the Group’s electricity generation and the
reduced fuel subsidy amount received from the Shenzhen Government for the
period.
Net loss attributable to the equity holders of the Company amounted to HK$42.5
million. The loss is due to (i) the decrease in the Group’s electricity generation; (ii)
the reduced fuel subsidy amount received from the Shenzhen Government as
compared to the same period last year; and (iii) the HK$77.2 million loss on
disposal and deemed disposal of Towngas China during the period which is partly
offset by the improved operations of the gas fuel business.
Interim Report 2007 Enerchina Holdings Limited
03
MANAGEMENT DISCUSSION AND ANALYSIS (Cont’d)
Overview on electricity generation business
During the period, the Group’s on-grid electricity generation amounted to 991.9
million kwh, representing a decrease of 20.3% as compared to 1,244.7 million kwh
over the same period last year. As a result, the turnover of on-grid electricity
decreased by 15.2% to HK$617.2 million. This decrease was mainly caused by the
repaired power generating unit, which was shut down from July to December 2006,
having to undergo test runs in the first quarter of 2007 before operating at
capacity. We have commenced the claims procedures with both our insurance
provider and the manufacturer to recover the losses incurred for the shut down in
2006. As the final claims are still in discussions and are not finalized yet, we have
not included the claims amount in the results for the six month ended 30 June
2007.
Direct operating expenses attributable to electricity supplies decreased by 12.5%
to HK$559.1 million due to the decrease in electricity generation and also the
decrease in fuel cost per tonne of 7.7%. During the period, the Group incurred a
total fuel cost of HK$487.0 million.
The high world crude oil price had significantly affected the price of heavy oil
which put the Group’s power generation business under enormous pressure.
Despite management’s efforts in improving productivity, strengthening fuel
procurement and inventory control, the gross profit margin of the power generation
business for the period decreased by 2.8% as compared to the same period last
year.
During the period, the Group was granted and received an amount of HK$81.7
million, in compensation for the high fuel cost, by the Shenzhen Government for
the period from November 2006 to May 2007, compared to HK$164 million granted
and received over the same period last year for the period from September 2005
to June 2006.
Currently, the Group’s power plants are undergoing conversion from using heavy
oil to natural gas, a more economical and environmentally friendly fuel source.
Management plans to modify the two 180 MW power generator units so that these
can use natural gas as an additional energy source, making them unique with dual-
fuel firing capabilities by the second half of 2007. When completed, this will
provide greater flexibility for the Group to select the most economical source of
fuel. The proximity of the Group’s power plant to the Guangdong Liquefied Natural
Gas Terminal, which was completed in June 2006, ensures that the Group is well
positioned for the change from heavy oil to natural gas.
Enerchina Holdings Limited Interim Report 2007
04
MANAGEMENT DISCUSSION AND ANALYSIS (Cont’d)
Major Associate
On 4 December 2006, the Company, Towngas China and HKCG announced that
the Towngas China has agreed to acquire the entire issued share capital of each
of the eight companies held by HKCG (collectively the “Target Companies”), which
hold equity interests in ten PRC companies that are engaged in piped gas fuel
businesses. Towngas China also agreed that it will take assignment of the
outstanding loans due from the Target Companies to HKCG or its associates,
being approximately HK$568.1 million, together with all interest accrued thereon,
if any. In consideration of the acquisition (which includes taking assignment of the
shareholder loans), Towngas China agreed to issue approximately 773 million new
shares to HKCG, which represented 43.97% of the enlarged issued share capital
of Towngas China. The resolutions related to the agreement were approved at the
extraordinary general meeting of both Towngas China and Enerchina and the
completion of the agreement took place on 1 March 2007, upon which HKCG
became the single largest shareholder of Towngas China and Enerchina’s
shareholding in Towngas China was reduced from 57.94% to 32.47%.
In order to maintain the public float of Towngas China at the minimum level of
25%, on the same date, Enerchina placed down 33,918,400 shares in Towngas
China at the placing price of HK$3.77, raising HK$126.1 million for the Group. The
placement further reduced our shareholding in Towngas China to 30.54%.
Upon the integration of Towngas China with HKCG on 1 March 2007, Towngas
China become the major associate of the Company.
For the six months ended 30 June 2007, Towngas China recorded a turnover of
HK$1,400.3 million, an increase of 12.6% over 2006. The gas fuel business was
further divided into the sale of piped gas, gas pipeline construction and sale of LP
gas. Turnover contribution from each of these activities amounted to HK$281.1
million, HK$113.4 million, and HK$577.1 million, accounting for 20.1%, 8.1%, and
41.2%, respectively, of Towngas China’s turnover. The rapid growth of the piped
gas business underlines Towngas China’s shift towards a utility business model
with the sale of piped gas becoming a significant source of income.
Its gross profit increased by 16.8% to HK$251.5 million and the profit attributable
to equity holders amounted to HK$50.5 million. The increase in gross profit was
due to increases in the gross profit margins in all segments of the Towngas China’s
businesses.
Interim Report 2007 Enerchina Holdings Limited
05
MANAGEMENT DISCUSSION AND ANALYSIS (Cont’d)
Major Associate (Cont’d)
Profit attributable to equity holders of Towngas China of approximately HK$50.5
million, represents a significant increase from the loss of HK$221.1 million
recorded for the same period last year. The turn around from a loss making
position to a profitable one is mainly due to the loss in fair value of derivatives of
HK$181.6 million and the net interest expense incurred on the interest rate swaps
of HK$46.1 million recorded during the same period last year versus none
recorded this year. A significant increase in contribution from associated
companies from HK$4.2 million in 2006 to HK$49.9 million in 2007, and the
additional contribution of HK$30.3 million in 2007 from the six jointly controlled
entities acquired from HKCG are all contributing factors for recording a profit in the
first half of 2007.
SHARE BUY BACK
From 2 January 2007 to 16 March 2007, the Company repurchased a total of
40,983,000 of its own shares worth approximately HK$26,850,000 in the market,
in an effort to further enhance the value in the Company to its shareholders.
If market conditions allow, the Company will consider restarting the share buy
back programme.
FINANCIAL POSITION
The Group’s total borrowings decreased from HK$3,103.1 million as at 31
December 2006 to HK$897.6 million as at 30 June 2007. The net decrease is
mainly due to the de-consolidation of the gas fuel business since 1 March 2007.
The total borrowings were mainly comprised of bank and other loans amounting to
HK$897.6 million. The bank borrowings were mainly used to finance the expansion
of the power plant in Shenzhen. The Group’s net debt to equity as at 30 June 2007
was 14.45%.
Total assets pledged in securing these loans have a net book value of HK$753.6
million as at 30 June 2007. All the bank borrowings of the Group are at floating
rates and denominated in both Renminbi and United States dollars. The Group’s
operation is mainly carried out in the PRC and substantial receipts and payments
in relation to the operations are denominated in Renminbi. No financial instruments
were used for hedging purpose. The Board will continue to evaluate and monitor
the potential impact of the appreciation of Renminbi to the Group’s business and
manage the risks of using different financial instruments.
The Group’s cash and cash equivalents amounted to HK$373.5 million as at 30
June 2007 and are mostly denominated in Renminbi, Hong Kong dollars and
United States dollars.
Enerchina Holdings Limited Interim Report 2007
06
FINANCIAL POSITION (Cont’d)
Capital Commitments
As at 30 June 2007, the Group had capital commitments in respect of the
acquisition of property, plant and equipment not provided in the financial
statements amounting to HK$12.2million.
OUTLOOK
The Group expects the growth in power consumption in the Guangdong province
to continue in the second half of 2007. Looking ahead, the second half of 2007 still
pose a challenging period for the Group’s power generation business as the price
of heavy oil is still a major determinant in the Group’s power sector profitability.
The Group considers that heavy oil price may not come down significantly in the
near future and under the current electricity supply regime of the PRC, the Group
cannot transfer the additional fuel costs to its customers and can only rely on
partial compensation from the government for such rising fuel costs.
In view of this, in the second half of 2007, we will continue our efforts in improving
productivity and closely monitor the conversion of our power plants from using oil
fuel to natural gas. The Group will also continue our discussions in securing the
supply of natural gas to coincide with the completion of the conversion of the
power plants, which is expected to be completed and will undergo a trial run in
using natural gas in the last quarter of 2007.
The expansion plans to increase the power generation capacity, from the Group’s
existing total installed capacity of 665,000 kilowatts to 1,450,000 kilowatts would
also be expedited once discussions on the long term supply of natural gas have
reached the final stage.
Looking ahead, Towngas China’s integration with HKCG has shown results with
improved interim results reported as compared to the same period last year. The
main focus will still be on improving the management and cost efficiency of its
existing projects by capitalising on operational synergies with HKCG, focusing on
the development of piped gas projects with an emphasis in operational and safety
management for long-term results and consolidating its existing LP Gas operation
while allocating resources to the development of new LP Gas projects on a
selective basis.
With the integration of Towngas China into HKCG from 1 March 2007 onwards, the
Group will remain as a major strategic investor in Towngas China. We are confident
and optimistic about its prospects and if the opportunity arises, will capitalize on
its value and enhance returns to our shareholders.
In view of the continued growth in China’s economy and the unrelenting demand
for energy and natural resources, the Group will continue to pursue opportunities
in these businesses. We are currently holding various preliminary discussions on
such possible investment opportunities in the energy and related sector.
Interim Report 2007 Enerchina Holdings Limited
07
INTERIM DIVIDEND
In order to retain resources for the Group’s business development, the Board does
not declare an interim dividend for the six months ended 30 June 2007 (2006: Nil).
EMPLOYEES AND REMUNERATION POLICIES
As at 30 June 2007, the Group employed approximately 193 full time employees.
The Group recognizes the importance of high caliber and competent staff and
continues to provide remuneration packages to employees with reference to
prevailing market practices and individual performance. In addition, share options
may be granted to certain eligible directors and employees of the Group in
accordance with the terms of the approved share option scheme adopted by the
Group.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED
SHARES
During the six months ended 30 June 2007, the Company repurchased 40,983,000
shares on the Stock Exchange at an aggregate consideration of HK$26,850,223.
All of the shares were subsequently cancelled. The nominal value of the cancelled
shares of HK$409,830 during the period was credited to capital redemption
reserve and the relevant aggregate consideration of HK$26,850,223 was paid out
from the Company’s retained earnings. Details of the shares repurchased are as
follows:
Aggregate
Month of Number of shares Price per share consideration
repurchases repurchased Highest Lowest Paid
HK$ HK$ HK$
January 2007 40,935,000 0.67 0.63 26,823,823
March 2007 48,000 0.55 0.55 26,400
40,983,000 26,850,223
The reason for the repurchases of shares was for the enhancement of shareholder
value in the long term.
Enerchina Holdings Limited Interim Report 2007
08
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED
SHARES (Cont’d)
Save as disclosed above, neither the Company nor any of its subsidiaries
purchased, sold or redeemed any of the Company’s listed securities during the six
months ended 30 June 2007.
CORPORATE GOVERNANCE
During the period, the Company has complied with the code provisions as set out
in the Code on Corporate Governance Practices in Appendix 14 to the Rule
Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”).
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted the Model Code set out in Appendix 10 to the Listing
Rules as the code of conduct regarding securities transactions by the Directors.
Having made specific enquiry of all Directors, the Company confirmed that in
respect of the six months ended 30 June 2007, all Directors have complied with
the required standard set out in the Model Code.
AUDIT COMMITTEE
The Company has an audit committee (“Audit Committee”) which was established
in accordance with the requirements of the Listing Rules for the purposes of
reviewing and providing supervision over the Groups financial reporting process
and internal controls. The Audit Committee comprises three independent non-
executive directors. The members of the Audit Committee are Messrs. Lu Yungang,
Davin A. Mackenzie and Xin Luo Lin. The Audit Committee meets regularly with the
Companys senior management and the Companys auditors to consider the
Companys financial reporting process, the effectiveness of internal controls, the
audit process and risk management.
The interim report of the Group for the six months ended 30 June 2007 had not
been audited, but had been reviewed by the Company’s auditors, Deloitte Touche
Tohmatsu and the Audit Committee.
APPRECIATION
On behalf of the Board, I would like to take this opportunity to express our
gratitude to all staff for their devoted efforts and hard work.
By Order of the Board
Tang Yui Man Francis
Executive Director
Hong Kong, 13 September 2007
Interim Report 2007 Enerchina Holdings Limited
09
OTHER INFORMATION
Directors’ Interests or Short Positions in Shares and in underlying Shares
At 30 June 2007, the interests or short positions of the Directors and chief
executive of the Company in the shares of the Company (the “Shares”), underlying
Shares and debentures of the Company or any of its associated corporation (within
the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)) which
were required: (a) divisions 7 to 9 of Part XV of the SFO, to be notified to the
Company and the Stock Exchange; (b) section 352 of Part XV of the SFO, to be
entered in the register referred to therein; or (c) the Model Code for Securities
Transactions by Directors of Listed Issuers, to be notified to the Company and the
Stock Exchange, were as follows:
(a) Long positions in Shares and underlying Shares
Approximate
Interest in percentage of
underlying the Company’s
Interest in Shares
Total Shares issued share
Name of Family Corporate interest pursuant to Aggregate capital as
Directors Capacity interest interest in Shares share options interest at 30.6.2007
Lu Yungang Beneficial owner ———2,288,000 2,288,000 0.05%
Davin A. Mackenzie Beneficial owner ———2,288,000 2,288,000 0.05%
Ou Yaping Beneficial 3,237,960 2,882,792,295 2,886,030,255 2,288,000 2,888,318,255 60.28%
owner, interest in (Note)
controlled
corporations and
joint interest
Sun Qiang Chang Beneficial owner ———15,000,000 15,000,000 0.31%
Tang Yui Man Francis Beneficial owner ———22,880,000 22,880,000 0.48%
Xiang Ya Bo Beneficial owner ———22,880,000 22,880,000 0.48%
Xin Luo Lin Beneficial owner ———2,288,000 2,288,000 0.05%
Note: The 2,882,792,295 Shares represent the aggregate of: (i) the 1,971,690,942
Shares held by Sinolink Worldwide Holdings Limited (“Sinolink”); (ii) the
223,990,353 Shares held by Smart Orient Investments Limited (“Smart Orient”),
which is a wholly-owned subsidiary of Sinolink; and (iii) 687,111,000 shares held
by Asia Pacific Promotion Limited (“Asia Pacific”) directly. Mr. Ou Yaping through
his wholly-owned company, Asia Pacific holds 48.19% of the existing issued
share capital of Sinolink and is therefore deemed to be interested in all these
2,882,792,295 Shares under the SFO.
Details of the Directors’ interests in share options granted by the Company
are set out under the heading “Directors’ rights to acquire Shares”.
Enerchina Holdings Limited Interim Report 2007
010
(b) Directors’ interests or short positions in shares and underlying shares in
associated corporation
Approximate
percentage of
the issued
Interest in share capital
underlying of the
Name of
Interest in shares
Total shares associated
Name of associated Personal Corporate Family interest pursuant to Aggregate corporation as
Directors corporation Capacity interest interest interest in shares share options interest at 30.6.2007
Ou Yaping Towngas Beneficial — 590,487,245 — 590,487,245 3,618,000 594,105,245 30.67%
China Owner and (Note 4)
interest in
controlled
corporation
Asia Pacific Beneficial 2 —— 2 — 2 100%
owner
Chen Wei Towngas Beneficial 3,600,000 ——3,600,000 6,633,000 10,233,000 0.53%
China owner
Tang Yui Man Towngas Beneficial 4,400,000 ——4,400,000 3,015,000 7,415,000 0.38%
Francis China owner
Notes:
1. The name of Panva Gas Holdings Limited was changed to Towngas China
Company Limited (“Towngas China”) on 23 May 2007.
2. The number of share options was adjusted to reflect the effect of open offer with
an assured allotment of one offer share for every ten existing shares of Towngas
China on 25 June 2007.
3. Mr. Chen Wei was appointed as the executive director and chief executive officer
of the Company on 23 May 2007.
4. The 590,487,245 shares in Towngas China represent the aggregate of 404,046,568
shares of Towngas China held by Kenson Investment Limited (“Kenson”) and
186,440,677 shares of Towngas China held by Supreme All Investments Limited
(“Supreme All”). Kenson and Supreme All are wholly-owned subsidiaries of the
Company. 45.82% interests of the Company are held by Sinolink and 48.41%
interests of Sinolink are held by Asia Pacific. 14.34% interests of the Company are
held by Asia Pacific. As Asia Pacific is owned by Mr. Ou Yaping, he is deemed
under the SFO to be interested in such 590,487,245 shares of Towngas China.
Details of the Directors’ interests in share options granted by the associated
corporation are set out under the heading “Directors’ rights to acquire Shares”.
Interim Report 2007 Enerchina Holdings Limited
011
Directors’ Rights to Acquire Shares
(a) Interest in options to subscribe for Shares
Pursuant to the Company’s share option scheme, the Company has granted
to certain Directors of the Company options to subscribe the Share, details of
which as at 30 June 2007 were as follows:
Number of Number of
Shares Shares Percentage of
subject to subject to the issued
outstanding outstanding share capital
Name of Date of Exercise option as option as of the
Directors grant Exercise period price at 1.1.2007 at 30.6.2007 Company
HK$
Lu Yungang 09.06.2004 09.06.2005 - 08.06.2014 0.44 2,288,000 2,288,000 0.05%
Davin A. 20.10.2004 20.10.2005 - 19.10.2015 0.50 2,288,000 2,288,000 0.05%
Mackenzie
Ou Yaping 09.06.2004 09.06.2004 - 08.06.2014 0.44 2,288,000 2,288,000 0.05%
Sun Qiang 08.12.2005 08.12.2005 - 07.12.2015 0.83 15,000,000 15,000,000 0.31%
Chang
Tang Yui 09.06.2004 09.06.2004 - 08.06.2014 0.44 22,880,000 22,880,000 0.48%
Man Francis
Xiang Ya Bo 09.06.2004 09.06.2004 - 08.06.2014 0.44 22,880,000 22,880,000 0.48%
Xin Luo Lin 09.06.2004 09.06.2004 - 08.06.2014 0.44 2,288,000 2,288,000 0.05%
Notes:
1. The vesting period of the share options is from the date of grant until the
commencement of the exercise period.
2. During the period, no options was granted to or exercised by the Directors of the
Company and no options held by the Directors was cancelled or lapsed under the
share option scheme.
3. These options represent personal interest held by the Directors as beneficial
owners.
Enerchina Holdings Limited Interim Report 2007
012
(b) Interest in options to subscribe for Shares of associated corporation
Approximate
percentage
Number of the
Number Number Adjusted Adjusted of shares issued share
of shares of shares exercise number of subject to capital of
subject to subject to price shares outstanding associated
Name of outstanding outstanding after after options corporation
Name of associated Date of Exercise Exercise options as options as open open as at as at
Directors corporation grant period Price at 1.1.2007 at 23.5.2007 offer offer 30.6.2007 30.6.2007
HK$ HK$
Ou Yaping Towngas 04.04.2001 01.01.2003- 0.475 1,800,000 N/A 0.473 1,809,000 1,809,000 0.09%
China 03.04.2011
04.04.2001 01.01.2004- 0.475 1,800,000 N/A 0.473 1,809,000 1,809,000 0.09%
03.04.2011
Chen Wei Towngas 04.04.2001 01.01.2003- 0.475 — 1,800,000 0.473 1,809,000 1,809,000 0.09%
China 03.04.2011
04.04.2001 01.01.2004- 0.475 — 1,800,000 0.473 1,809,000 1,809,000 0.09%
03.04.2011
19.11.2004 31.12.2005- 3.500 — 900,000 3.483 904,500 904,500 0.05%
30.03.2011
19.11.2004 31.12.2006- 3.500 — 900,000 3.483 904,500 904,500 0.05%
30.03.2011
19.11.2004 31.12.2007- 3.500 — 1,200,000 3.483 1,206,000 1,206,000 0.06%
30.03.2011
Tang Yui Towngas 19.11.2004 31.12.2005- 3.500 900,000 N/A 3.483 904,500 904,500 0.05%
Man China 30.03.2011
Francis 19.11.2004 31.12.2006- 3.500 900,000 N/A 3.483 904,500 904,500 0.05%
30.03.2011
19.11.2004 31.12.2007- 3.500 1,200,000 N/A 3.483 1,206,000 1,206,000 0.06%
30.03.2011
Notes:
1. The vesting period of the share options is from the date of the grant until the
commencement of the exercise period.
2. These options represent personal interest held by the Directors as beneficial
owners.
3. The name of Panva Gas Holdings Limited was changed to Towngas China
Company Limited (“Towngas China”) on 23 May 2007.
4. The number of share options was adjusted to reflect the effect of open offer with
an assured allotment of one offer share for every ten existing shares of Towngas
China on 25 June 2007.
5. Mr. Chen Wei was appointed as the executive director and chief executive officer
of the Company on 23 May 2007.
Interim Report 2007 Enerchina Holdings Limited
013
Save as disclosed above, at no time during the period, the Directors, chief
executives (including their spouse and children under 18 years of age) had any
interest in, or had been granted, or exercised, any rights to subscribe for Shares
(warrants or debentures of the Company, if applicable) or any of its associated
corporation required to be disclosed pursuant to the SFO.
Arrangements to Purchase Shares or Debentures
Other than the share option schemes as disclosed herein, at no time the period
was the Company, its holdings company, or any or its subsidiaries or fellow
subsidiaries, party to any arrangements to enable the Directors of the Company to
acquire benefits by means of the acquisition of share in, or debenture of, the
Company or any other body corporate, and neither the Directors nor the chief
executive, nor any of their spouses or children under the age of 18, had any right
to subscribe for the securities of the Company, or had exercised any such right.
Share Option Scheme of the Company
The Company operates a share option scheme, the 2002 Share Option Scheme
under which the Board may, at its discretion, offer any employee (including any
executive director) of the Company or its subsidiaries options to subscribe for
Shares subject to the terms and conditions stipulated in the scheme. The 2002
Share Option Scheme was approved by the shareholders on 24 May 2002 and
have a life of 10 years.
Details of specific categories options are as follows:
Option type Date of grant Exercise period Exercise price
HK$
2004A Option 09.06.2004 09.06.2004 - 08.06.2014 0.440
09.06.2004 09.06.2005 - 08.06.2014 0.440
09.06.2004 09.06.2006 - 08.06.2014 0.440
09.06.2004 09.12.2006 - 08.06.2014 0.440
2004B Option 20.10.2004 20.10.2005 - 19.10.2015 0.500
2005 Option 08.12.2005 08.12.2005 - 07.12.2015 0.830
2006A Option 24.01.2006 31.01.2007 - 24.05.2012 0.822
24.01.2006 31.01.2008 - 24.05.2012 0.822
24.01.2006 30.06.2008 - 24.05.2012 0.822
2006B Option 30.06.2006 30.06.2007 - 24.05.2012 0.460
30.06.2006 30.06.2008 - 24.05.2012 0.460
30.06.2006 31.12.2008 - 24.05.2012 0.460
Enerchina Holdings Limited Interim Report 2007
014
The following table discloses movements in the Company’s share options during
the period:
Outstanding Granted Exercised Lapsed Outstanding
at during the during the during the at
Option types 1.1.2007 period period period 30.6.2007
Category 1: Directors
Lu Yungang 2004A Option 2,288,000 ———2,288,000
Davin A. 2004B Option 2,288,000 ———2,288,000
Mackenzie
Ou Yaping 2004A Option 2,288,000 ———2,288,000
Sun Qiang 2005 Option 15,000,000 ———15,000,000
Chang
Tang Yui Man 2004A Option 22,880,000 ———22,880,000
Francis
Xiang Ya Bo 2004A Option 22,880,000 ———22,880,000
Xin Luo Lin 2004A Option 2,288,000 ———2,288,000
Total for Directors 69,912,000 ———69,912,000
Category 2: Employees
Total for 2004A Option 13,733,339 — (2,899,997) — 10,833,342
employees 2006B Option 3,000,000 —— 3,000,000
16,733,339 — (2,899,997) — 13,833,342
All categories 86,645,339 — (2,899,997) — 83,745,342
Notes:
1. The vesting period of the share options is from the date of grant until the
commencement of the exercise period.
2. During the period, 2,899,997 options were exercised, no option was granted, cancelled
or lapsed under the share option scheme.
3. The weighted average closing share price immediately before the date of exercise of
share options was HK$0.621.
Interim Report 2007 Enerchina Holdings Limited
015
Substantial Shareholders
At 30 June 2007, the register of substantial shareholders maintained by the
Company pursuant to Section 336 of the SFO shows that other than the interests
disclosed above in respect of the Directors, the following shareholders had notified
the Company of relevant interests and short positions in the issued share capital
of the Company:
Long positions in Shares
Approximate
percentage
of the issued
share capital
Name Capacity Aggregate interest as at 30.6.2007
Asia Pacific Beneficial owner and 2,882,792,295 60.16%
interest of controlled (Note 1)
corporations
Sinolink Beneficial owner and 2,195,681,295 45.82%
interest of controlled (Note 2)
corporation
Smart Orient Beneficial owner 223,990,353 4.67%
Warburg Pincus & Co. Interest of controlled 477,524,377 9.97%
corporation (Note 3)
Warburg Pincus Equity Interest of controlled 404,548,779 8.44%
Partners, L.P. corporation (Note 3)
Warburg Pincus Ventures Interest of controlled 404,548,779 8.44%
International, L.P. corporation (Note 3)
Atlantic Cay Beneficial owner 404,548,779 8.44%
International Limited (Note 3)
Enerchina Holdings Limited Interim Report 2007
016
Notes:
1. These Shares represent the aggregate of: (i) 687,111,000 Shares held directly by Asia
Pacific; and (ii) 2,195,681,295 Shares held by Sinolink and its wholly owned subsidiary,
Smart Orient, Asia Pacific is interested in approximately 48.41% interest in Sinolink and
it is deemed to be interested in all the Shares interested by Sinolink.
2. These Shares represents the aggregate of: (i) 1,971,690,942 Shares held directly by
Sinolink; and (ii) the number of Shares in which Smart Orient is interested as disclosed
above.
3. Warburg Pincus & Co. (“WP”) is the general partner of the limited partnerships Warburg
Pincus Equity Partners, L.P. (“WPE”) and Warburg Pincus Ventures International, L.P.
(“WPV”), and is deemed to have an interest in all the Shares held by these companies.
These Shares represent the aggregate of the Shares held by the funds managed by WP
and all the Shares held by Atlantic Cay International Limited (“Atlantic Cay”).
WPE is interested in 50% of the issued share capital of Atlantic Cay and is deemed to
be interested in all the Shares held by Atlantic Cay.
WPV is interested in 50% of issued share capital of Atlantic Cay and it is deemed to
be interested in all the Shares held by Atlantic Cay.
Save as disclosed above, as at 30 June 2007, the Company has not been notified
of any other interests or short positions in the shares or underlying shares of the
Company which had been recorded in the register to be kept under Section 336
of the SFO.
017
Interim Report 2007 Enerchina Holdings Limited
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
TO THE BOARD OF DIRECTORS OF ENERCHINA HOLDINGS LIMITED
(incorporated in Bermuda with limited liability)
INTRODUCTION
We have reviewed the interim financial information set out on pages 18 to 38,
which comprises the condensed consolidated balance sheet of Enerchina Holdings
Limited as of 30 June 2007 and the related condensed consolidated income
statement, statement of changes in equity and cash flow statement for the six-
month period then ended and certain explanatory notes. The Main Board Listing
Rules Governing the Listing of Securities on
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 interim financial information 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 information is not prepared, in all material respects, in
accordance with HKAS 34.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
13 September 2007
Enerchina Holdings Limited Interim Report 2007
018
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Six months ended
30.6.2007 30.6.2006
HK$’000 HK$’000
NOTES (Unaudited) (Unaudited
and
re-presented)
Continuing operation
Turnover 617,177 727,600
Cost of sales (559,081) (638,873)
Gross profit 58,096 88,727
Other income 4 33,534 22,592
Administrative expenses (24,876) (25,313)
Other expenses (1,996) (151)
Finance costs 6 (31,225) (34,025)
Share of results of associates 23,927 —
Profit before taxation 57,460 51,830
Taxation 7 (90) (481)
Profit for the period from
continuing operation 57,370 51,349
Discontinued operation 8
Loss for the period from
discontinued operation (108,571) (196,546)
Loss for the period (51,201) (145,197)
Attributable to:
Equity holders of the Company (42,481) (88,256)
Minority interests (8,720) (56,941)
(51,201) (145,197)
Dividends 9 — 48,376
HK cents HK cents
(Loss) earnings per share 10
From continuing and
discontinued operations
Basic (0.89) (1.82)
Diluted (0.88) (1.81)
From continuing operation
Basic 1.18 1.06
Diluted 1.18 1.06
Interim Report 2007 Enerchina Holdings Limited
019
CONDENSED CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2007
30.6.2007 31.12.2006
HK$’000 HK$’000
NOTES (Unaudited) (Audited)
Non-current assets
Property, plant and equipment 11 1,396,128 3,732,306
Prepaid lease payments 40,932 189,730
Intangible assets — 136,527
Goodwill 316,580 1,914,164
Interest in associates 12 2,404,369 644,940
Available-for-sale investments 1,486 172,014
4,159,495 6,789,681
Current assets
Inventories 164,568 232,599
Prepaid lease payments 1,693 5,605
Trade and other receivables,
deposits and prepayments 13 311,361 698,444
Amount due from minority shareholders
of a subsidiary — 4,421
Investments held for trading 19,150 94,954
Pledged bank deposits — 20,038
Bank balances and cash 373,473 957,395
870,245 2,013,456
Current liabilities
Trade, notes and other payables 14 495,354 737,766
Loans from minority
shareholders of a subsidiary — 25,352
Taxation payable 8,922 90,768
Borrowings - amount due within
one year 15 506,708 602,042
1,010,984 1,455,928
Net current (liabilities) assets (140,739) 557,528
Total assets less current liabilities 4,018,756 7,347,209
Non-current liabilities
Borrowings - amount due after one year 15 390,912 2,501,099
Deferred taxation — 43,140
390,912 2,544,239
Net assets 3,627,844 4,802,970
Enerchina Holdings Limited Interim Report 2007
020
CONDENSED CONSOLIDATED BALANCE SHEET (Cont’d)
AT 30 JUNE 2007
30.6.2007 31.12.2006
HK$’000 HK$’000
NOTE (Unaudited) (Audited)
Capital and reserves
Share capital 16 47,918 48,299
Reserves 3,579,353 3,640,464
Equity attributable to equity holders of the
Company 3,627,271 3,688,763
Equity component of share option reserve of
a listed subsidiary — 14,002
Minority interests 573 1,100,205
Total equity 3,627,844 4,802,970
Interim Report 2007 Enerchina Holdings Limited
021
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Attributable to equity holders of the Company
Equity
component of
share option
Share reserve
Share Share Translation Capital General Contributed option Retained of a listed Minority
capital premium reserve reserve reserve surplus reserve earnings Total subsidiary interests Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2006 48,376 3,024,504 41,266 81,525 3,646 370,544 1,047 169,326 3,740,234 6,090 1,011,046 4,757,370
Exchange difference
arising on translation of
foreign operations
recognised directly
in equity ——80,081 —————80,081 — 58,865 138,946
Realised on deemed
disposal of interest in
subsidiaries ——(949 ) —————(949 ) ——(949)
Loss for the year ———————(79,621 ) (79,621 ) — (87,824 ) (167,445 )
Total recognised income
(expense) for the year ——79,132 ————(79,621 ) (489 ) — (28,959 ) (29,448 )
Issue of shares 14 669 ————(96 ) — 587 ——587
Repurchase of shares (91) (5,982) ——————(6,073 ) ——(6,073 )
Transfer ————2,981 ——(2,981) ————
Recognition of equity-settled
share-based payments ——————2,880 — 2,880 9,288 — 12,168
Share options lapsed ——————(431 ) 431 ————
Exercise of share options
of a listed subsidiary —————————(1,376) — (1,376 )
Dividend paid ———————(48,376 ) (48,376 ) ——(48,376 )
Acquired on acquisition
of subsidiaries ——————————94,027 94,027
Capital contributions from
minority shareholders ——————————5,758 5,758
Change in minority interests
on deemed disposal
of interest in subsidiaries ——————————33,597 33,597
Dividends paid to minority
shareholders of
subsidiaries ——————————(10,764 ) (10,764 )
Reduction in minority interests
on acquisition of additional
interest in a subsidiary ——————————(4,500) (4,500 )
At 31 December 2006 48,299 3,019,191 120,398 81,525 6,627 370,544 3,400 38,779 3,688,763 14,002 1,100,205 4,802,970
Enerchina Holdings Limited Interim Report 2007
022
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Cont’d)
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Attributable to equity holders of the Company
Equity
component of
share option
Share reserve
Share Share Translation Capital General Contributed option Retained of a listed Minority
capital premium reserve reserve reserve surplus reserve earnings Total subsidiary interests Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2007 48,299 3,019,191 120,398 81,525 6,627 370,544 3,400 38,779 3,688,763 14,002 1,100,205 4,802,970
Exchange differences arising
on translation of foreign
operations ——28,032 —————28,032 — 20,104 48,136
Share of reserve of associates ——32,802 —————32,802 ——32,802
Net income recognised
directly in equity ——60,834 —————60,834 — 20,104 80,938
Realised on deemed disposal
of interest in subsidiaries ——(3,020 ) —————(3,020) ——(3,020 )
Realised on disposal and
deemed disposal
of subsidiaries ——(51,360 ) —————(51,360 ) ——(51,360 )
Loss for the period ———————(42,481 ) (42,481 ) — (8,720) (51,201 )
Total recognised expense
for the period ——(54,380 ) ————(42,481 ) (96,861 ) — (8,720) (105,581 )
Issue of shares 29 1,455 ————(208) — 1,276 ——1,276
Repurchase of shares (410) (26,440 ) ——————(26,850 ) ——(26,850 )
Transfer ————(2,990) ——2,990 ————
Recognition of equity-settled
share-based payments ——————109 — 109 ——109
Reduction of contribution
surplus (note) —————(370,000 ) — 370,000 ————
Released on disposal and
deemed disposal
of subsidiaries —————————(14,002 ) (1,175,476) (1,189,478 )
Change in minority interests
on deemed disposal of
interest in subsidiaries ——————————64,460 64,460
At 30 June 2007 47,918 2,994,206 126,852 81,525 3,637 544 3,301 369,288 3,627,271 — 573 3,627,844
Interim Report 2007 Enerchina Holdings Limited
023
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Cont’d)
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Attributable to equity holders of the Company
Equity
component of
share option
Share reserve
Share Share Translation Capital General Contributed option Retained of a listed Minority
capital premium reserve reserve reserve surplus reserve earnings Total subsidiary interests Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2006 48,376 3,024,504 41,266 81,525 3,646 370,544 1,047 169,326 3,740,234 6,090 1,011,046 4,757,370
Exchange differences
arising on translation
of foreign
operations recognised
directly in equity ——(250 ) —————(250) — (49) (299)
Realised on deemed disposal
of interest in subsidiaries ——(79 ) —————(79) ——(79)
Loss for the period ———————(88,256 ) (88,256 ) — (56,941 ) (145,197 )
Total recognised expense
for the period ——(329 ) ————(88,256 ) (88,585 ) — (56,990 ) (145,575 )
Transfer ————1,264 ——(1,264) ————
Recognition of equity-settled
share-based payments ——————2,727 — 2,727 4,238 — 6,965
Share options lapsed ——————(396) 396 ————
Dividend paid ———————(48,376 ) (48,376 ) ——(48,376 )
Acquired on acquisition
of subsidiaries ——————————70,658 70,658
Capital contributions from
minority shareholders ——————————5,758 5,758
Change in minority interests
on deemed disposal
of interest in subsidiaries ——————————4,470 4,470
Dividends paid to minority
shareholders of subsidiaries ——————————(10,109 ) (10,109 )
Reduction in minority interests
on acquisition of additional
interest in a subsidiary ——————————(4,500) (4,500 )
At 30 June 2006 48,376 3,024,504 40,937 81,525 4,910 370,544 3,378 31,826 3,606,000 10,328 1,020,333 4,636,661
Note: Pursuant to the ordinary resolution passed at the Annual General Meeting held on 23
May 2007 and in compliance to Bye-law 137 of the Company’s bye-laws, the
contribution surplus of the Company was cancelled by an amount of HK$370 million
and transferred to retained earnings.
Enerchina Holdings Limited Interim Report 2007
024
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Six months ended
30.6.2007 30.6.2006
HK$’000 HK$’000
NOTE (Unaudited) (Unaudited
and
re-presented)
Net cash generated by
operating activities 145,146 617,976
Net cash used in investing activities
Disposal of subsidiaries
(net of cash and cash
equivalents disposed of) 19 (439,145) —
Investments in associates (214,723) (184,261)
Purchase of property,
plant and equipment (55,445) (189,707)
Decrease in pledged bank deposits 20,038 63,125
Other investing cash flows 5,851 22,766
Acquisition of subsidiaries
(net of cash and cash
equivalents acquired) — (189,722)
(683,424) (477,799)
Net cash used in financing activities
Repayments of bank and other loans (189,395) (438,072)
Other financing cash flows (25,574) (45,533)
New bank and other loans raised 155,031 245,441
Proceeds from exercise of
share options of a listed
subsidiary 5,958 2,460
Capital contribution from
minority shareholders — 5,758
(53,980) (229,946)
Net decrease in cash and
cash equivalents (592,258) (89,769)
Cash and cash equivalents
at beginning of the period 957,395 1,337,052
Effect of foreign exchange rate changes 8,336 (315)
Cash and cash equivalents at end
of the period, representing bank
balances and cash 373,473 1,246,968
025
Interim Report 2007 Enerchina Holdings Limited
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2007
1. BASIS OF PREPARATION
The Company is incorporated in Bermuda as an exempted company with limited liability
and its shares are listed on
The principal activity of the Group is supply of electricity. The Group was also engaged
in sale and distribution of liquefied petroleum gas and natural gas (“Gas Fuel”) and
construction of gas pipelines, which were discontinued in the current period (see note
8).
The condensed consolidated financial statements have been prepared in accordance
with the applicable disclosure requirements of Appendix 16 to the Rules Governing the
Listing of Securities on the Stock Exchange and with Hong Kong Accounting Standard
34 Interim Financial Reporting.
At 30 June 2007, the Group had net current liabilities of HK$141 million and reported
a net decrease in cash and cash equivalents of HK$592 million for the six months then
ended. The net decrease is mainly due to the de-consolidation of the gas fuel business
since 1 March 2007. The Group’s current liabilities as at 30 June 2007 included its
interest-bearing bank loans of HK$507 million that are repayable within twelve months
from the balance sheet date. The Group has started discussion with the relevant banks
for refinancing of such loans and the relevant banks have expressed their intention to
provide refinancing of the outstanding loans. The directors of the Company are
confident that the Group will be able to meet its financial obligations when they fall due
in the foreseeable future and be able to operate as a going concern. Accordingly, the
directors are satisfied that it is appropriate to prepare the Group’s condensed
consolidated financial statements on a going concern basis.
Enerchina Holdings Limited Interim Report 2007
026
2. PRINCIPAL ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared on the historical
cost basis except for certain financial instruments which are measured at fair values.
The accounting policies used in the condensed consolidated financial statements are
consistent with those followed in the preparation of the Group’s annual financial
statements for the year ended 31 December 2006.
In the current interim period, the Group has applied, for the first time, the following new
standard, amendment and interpretations (“new HKFRSs”) issued by the Hong Kong
Institute of Certified Public Accountants (“HKICPA”), which are effective for the Group’s
financial year beginning on 1 January 2007.
HKAS 1 (Amendment) Capital disclosures
1
HKFRS 7 Financial instruments: Disclosures
1
HK(IFRIC) - INT 7 Applying the restatement approach under HKAS 29
Financial Reporting in Hyperinflationary Economies
2
HK(IFRIC) - INT 8 Scope of HKFRS 2
3
HK(IFRIC) - INT 9 Reassessment of embedded derivatives
4
HK(IFRIC) - INT 10 Interim financial reporting and impairment
5
1
Effective for annual periods beginning on or after 1 January 2007
2
Effective for annual periods beginning on or after 1 March 2006
3
Effective for annual periods beginning on or after 1 May 2006
4
Effective for annual periods beginning on or after 1 June 2006
5
Effective for annual periods beginning on or after 1 November 2006
The adoption of these new HKFRSs had no material effect on the results or financial
position of the Group for the current or prior accounting periods. Accordingly, no prior
period adjustment has been recognised.
The Group has not early applied the following new standards or interpretations that
have been issued but are not yet effective.
HKAS 23 (Revised) Borrowing costs
1
HKFRS 8 Operating segments
1
HK(IFRIC) - INT 11 HKFRS 2: Group and treasury share transactions
2
HK(IFRIC) - INT 12 Service concession arrangements
3
1
Effective for annual periods beginning on or after 1 January 2009
2
Effective for annual periods beginning on or after 1 March 2007
3
Effective for annual periods beginning on or after 1 January 2008
The directors of the Company anticipate that the application of these standards or
interpretations will have no material impact on the results and the financial position of
the Group.
027
Interim Report 2007 Enerchina Holdings Limited
3. SEGMENT INFORMATION
The Group is primarily engaged in the supply of electricity. The Group was also involved
in gas fuel business which was discontinued on 28 February 2007 (see note 8).
Segment information about these businesses is presented below:
Business segments
Six months ended 30 June 2007
Discontinued
Continuing operation operation
Electricity Gas fuel
supplies Total business Consolidated
HK$’000 HK$’000 HK$’000 HK$’000
TURNOVER 617,177 617,177 421,459 1,038,636
RESULT
Segment result 48,004 48,004 (5,046) 42,958
Other income 33,534 1,804 35,338
Corporate expenses (14,935) — (14,935 )
Finance costs (31,225) (24,609) (55,834)
Loss on deemed disposal arising from
dilution of interest in associates (1,845) — (1,845)
Loss on disposal and deemed disposal
of subsidiaries — (77,201) (77,201 )
Loss on deemed disposal arising from
dilution of interest in subsidiaries — (6,212) (6,212)
Share of results of associates 23,927 3,155 27,082
Profit (loss) before taxation 57,460 (108,109) (50,649)
Taxation (90) (462) (552)
Profit (loss) for the period 57,370 (108,571) (51,201)
Enerchina Holdings Limited Interim Report 2007
028
3. SEGMENT INFORMATION (Cont’d)
Six months ended 30 June 2006
Discontinued
Continuing operation operation
Electricity Gas fuel
supplies Total business Consolidated
HK$’000 HK$’000 HK$’000 HK$’000
TURNOVER 727,600 727,600 1,243,931 1,971,531
RESULT
Segment result 77,749 77,749 100,605 178,354
Other income 22,592 46,495 69,087
Corporate expenses (14,486) (26,675) (41,161 )
Loss on deemed disposal arising from
dilution of interest in subsidiaries — (5,913) (5,913)
Finance costs (34,025) (126,765) (160,790)
Changes in fair value of derivative
financial instruments — (181,608) (181,608)
Share of results of associates — 4,225 4,225
Profit (loss) before taxation 51,830 (189,636) (137,806)
Taxation (481) (6,910) (7,391)
Profit (loss) for the period 51,349 (196,546) (145,197)
029
Interim Report 2007 Enerchina Holdings Limited
4. OTHER INCOME
Other income mainly comprised of:
Continuing operation Discontinued operation Consolidated
Six months ended Six months ended Six months ended
30.6.2007 30.6.2006 30.6.2007 30.6.2006 30.6.2007 30.6.2006
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Interest income on bank deposits 6,755 7,473 1,042 15,441 7,797 22,914
Dividend income
- listed — — — 189 — 189
- unlisted — — 149 11,083 149 11,083
— — 149 11,272 149 11,272
Discount on acquisition of interest
in subsidiaries — — — 12,998 — 12,998
Gain on fair value change on
investments held for trading 14,937 12,833 — — 14,937 12,833
Gain on disposal of properties,
plant and equipment, net — — — 454 — 454
5. DEPRECIATION
During the period, depreciation charge in respect of the Group’s property, plant and
equipment from continuing operation and discontinued operation amounting to
HK$50,473,000 (1.1.2006 to 30.6.2006: HK$54,701,000 ) and HK$17,299,000 (1.1.2006
to 30.6.2006: HK$49,575,000) respectively.
Enerchina Holdings Limited Interim Report 2007
030
6. FINANCE COSTS
Continuing operation Discontinued operation Consolidated
Six months ended Six months ended Six months ended
30.6.2007 30.6.2006 30.6.2007 30.6.2006 30.6.2007 30.6.2006
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Interest on bank and other
borrowings wholly repayable within
five years 31,225 34,025 1,459 1,345 32,684 35,370
Interest on bank and other
borrowings not wholly repayable
within five years — — — 1,384 — 1,384
Interest on convertible bonds — — 2,453 11,875 2,453 11,875
Interest on guaranteed senior notes — — 20,515 65,903 20,515 65,903
31,225 34,025 24,427 80,507 55,652 114,532
Net interest expense on interest
rate swaps — — — 46,118 — 46,118
31,225 34,025 24,427 126,625 55,652 160,650
Bank charges — — 182 140 182 140
31,225 34,025 24,609 126,765 55,834 160,790
7. TAXATION
Continuing operation Discontinued operation Consolidated
Six months ended Six months ended Six months ended
30.6.2007 30.6.2006 30.6.2007 30.6.2006 30.6.2007 30.6.2006
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Current tax:
PRC Enterprise Income Tax 90 481 462 6,910 552 7,391
No provision for Hong Kong Profits Tax has been made in the condensed consolidated
financial statements as the relevant entities incurred tax losses in both periods. The tax
rate applicable for all People’s Republic of China (“PRC”) subsidiaries ranges from 15%
to 33%.
Pursuant to relevant laws and regulations in the PRC, certain of the Company’s
subsidiaries are entitled to exemption from Enterprise Income Tax under tax holidays
and concessions. Enterprise Income Tax was calculated at rates given under the
concessions.
On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax
(the “New Tax Law”) by Order No. 63 of the President of the PRC, which will change
the tax rate from 33% to 25% for certain subsidiaries from 1 January 2008. However,
for the Company’s subsidiaries which are entitled to the preferential tax treatment, the
detailed implementation rules regarding the New Tax Law have not been issued and
therefore the Group is not in a position to determine whether the Company’s
subsidiaries will still be entitled to the preferential tax treatment mentioned above.
031
Interim Report 2007 Enerchina Holdings Limited
8. DISCONTINUED OPERATION
On 4 December 2006, Towngas China Company Limited (“Towngas China”) (formerly
known as “Panva Gas Holdings Limited”), a subsidiary of the Company then, entered
into a sale and purchase agreement (the “Agreement”) with Hong Kong and China Gas
(China) Company Limited (“HK&CG (China)”), a wholly-owned subsidiary of The Hong
Kong and China Gas Company Limited (“HKCG”), and HKCG. Pursuant to the
Agreement, Towngas China had conditionally agreed to purchase from HK&CG (China)
the entire issued share capital of certain companies which hold, collectively, equity
interests varying from 27% to 100% in certain PRC companies engaging in the
operation of piped gas assets and related business in the PRC and to purchase and
take assignment of the outstanding loans due from these to be acquired companies to
HK&CG (China) or its associates as at the completion subject to the terms and
conditions of the Agreement (the “Transaction”). In consideration for the Transaction,
Towngas China has agreed to allot and issue 772,911,729 ordinary shares of HK$0.10
each in the capital of Towngas China, each credited as fully paid, to HK&CG (China).
Upon the completion of the above transactions, the shareholding of the Company in
Towngas China was diluted and Towngas China ceased to be a subsidiary and became
an associate of the Company with effect from 1 March 2007. Pursuant to an undertaking
by the Company to the Stock Exchange that it would place down the shares held by it
in Towngas China, to independent third parties, on or before the completion of the
above transactions solely for the purpose of maintaining the public float of Towngas
China (if necessary). In this connection, the Company disposed of 33,918,400 shares of
Towngas China to independent third parties for an aggregate consideration of
approximately HK$126,064,000. Immediately after the above transactions, the Company
holds 30.54% interests in Towngas China. Certain comparative figures were re-
presented so as to reflect the results for the discontinued operation.
The loss for the period from the discontinued operation is analysed as follows:
1.1.2007 1.1.2006
to to
28.2.2007 30.6.2006
HK$’000 HK$’000
Loss of gas fuel business operation for the period (25,158) (190,633)
Loss on disposal and deemed disposal of subsidiaries (77,201) —
Loss on deemed disposal arising from dilution of
interest in subsidiaries (6,212) (5,913)
(108,571) (196,546)
Enerchina Holdings Limited Interim Report 2007
032
8. DISCONTINUED OPERATION (Cont’d)
The results of the gas fuel business were as follows:
1.1.2007 1.1.2006
to to
28.2.2007 30.6.2006
HK$’000 HK$’000
Turnover 421,459 1,243,931
Cost of sales (370,458) (1,028,686)
Gross profit 51,001 215,245
Other income 1,804 46,495
Distribution and selling expenses (16,682) (40,269)
Administrative expenses (39,334) (99,345)
Other expenses (31) (1,701)
Finance costs (24,609) (126,765)
Changes in fair value of derivative financial instruments — (181,608)
Share of results of associates 3,155 4,225
Loss before taxation (24,696) (183,723)
Taxation (462) (6,910)
Loss for the period (25,158) (190,633)
Loss on disposal and deemed disposal of subsidiaries (77,201) —
Loss on deemed disposal arising from dilution of
interest in subsidiaries (6,212) (5,913)
Loss for the period from discontinued operation (108,571) (196,546)
Attributable to:
Equity holders of the Company (99,200) (139,719)
Minority interests (9,371) (56,827)
(108,571) (196,546)
During the period, Towngas China paid HK$23 million (1.1.2006 to 30.6.2006: HK$184
million) to the Group’s net operating cash flows, paid HK$17 million (1.1.2006 to
30.6.2006: HK$318 million) in respect of investing activities and contributed HK$5
million (1.1.2006 to 30.6.2006: paid HK$79 million) in respect of financing activities.
The carrying amounts of the assets and liabilities of Towngas China at the date of
disposal are disclosed in note 19.
033
Interim Report 2007 Enerchina Holdings Limited
9. DIVIDENDS
Six months ended
30.6.2007 30.6.2006
HK$’000 HK$’000
Dividend recognised as distribution during the period:
2005 final of HK1.0 cent per share — 48,376
The directors have resolved not to declare an interim dividend in respect of six months
ended 30 June 2007.
10. (LOSS) EARNINGS PER SHARE
From continuing and discontinued operations
The calculation of the basic and diluted loss per share attributable to the ordinary equity
holders of the Company is based on the following data:
Six months ended
30.6.2007 30.6.2006
HK$’000 HK$’000
Loss for the purpose of basic loss for the period
attributable to equity holders of the Company (42,481) (88,256)
Six months ended
30.6.2007 30.6.2006
Number of shares
Weighted average number of ordinary shares for
the purpose of basic loss per share 4,792,934,807 4,837,583,112
Effect of dilutive share options 16,103,800 25,542,778
Weighted average number of ordinary shares for
the purpose of diluted earnings per share 4,809,038,607 4,863,125,890
Enerchina Holdings Limited Interim Report 2007
034
10. (LOSS) EARNINGS PER SHARE (Cont’d)
From continuing operation
The calculation of basic and diluted earnings per share from continuing operation
attributable to the ordinary equity holders of the Company is based on the following
data:
Six months ended
30.6.2007 30.6.2006
HK$’000 HK$’000
Loss for the period attributable to equity holders
of the Company (42,481) (88,256)
Less: Loss for the period from discontinued operation 99,200 139,719
Earnings for the purposes of basic and diluted
earnings per share from continuing operation 56,719 51,463
The denominators used are the same as those detailed above for basic and diluted loss
per share.
From discontinued operation
Basic loss per share from discontinued operation is HK2.07 cents per share (2006:
HK2.89 cents loss per share) and diluted loss per share for the discontinued operation
is HK2.06 cents per share (2006: HK2.87 cents loss per share), based on the loss for
the period from the discontinued operation of HK$99 million (2006: HK$140 million) and
the denominators detailed above for basic and diluted loss per share.
11. MOVEMENT IN PROPERTY, PLANT AND EQUIPMENT
During the period, the Group spent approximately HK$55,445,000 (1.1.2006 to
30.6.2006: HK$189,707,000) on acquisition of property, plant and equipment.
12. INTEREST IN ASSOCIATES
30.6.2007 31.12.2006
HK$’000 HK$’000
Share of net assets 1,607,987 555,371
Goodwill 796,382 89,569
2,404,369 644,940
035
Interim Report 2007 Enerchina Holdings Limited
13. TRADE AND OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
The Group allows an average credit period ranging from 0-90 days to its customers.
Included in trade and other receivables, deposits and prepayments are trade
receivables totalling HK$258,059,000 (31.12.2006: HK$218,769,000), the aged analysis
of which is as follows:
30.6.2007 31.12.2006
HK$’000 HK$’000
Aged:
0 - 90 days 235,887 152,029
91 - 180 days 22,084 62,970
181 - 360 days — 3,682
Over 360 days 88 88
258,059 218,769
14. TRADE, NOTES AND OTHER PAYABLES
Included in trade, notes and other payables are trade and notes payables of
HK$350,523,000 (31.12.2006: HK$258,019,000), the aged analysis of which is as
follows:
30.6.2007 31.12.2006
HK$’000 HK$’000
Aged:
0 - 90 days 347,713 184,242
91 - 180 days 2,762 33,199
181 - 360 days — 13,954
Over 360 days 48 26,624
350,523 258,019
15. BORROWINGS
30.6.2007 31.12.2006
HK$’000 HK$’000
Bank loans - secured 404,807 507,042
Bank loans - unsecured 492,813 520,050
Other loans - unsecured — 119,823
Convertible bonds — 349,506
Guaranteed senior notes — 1,606,720
897,620 3,103,141
Enerchina Holdings Limited Interim Report 2007
036
15. BORROWINGS (Cont’d)
The maturity of the above borrowings is as follows:
30.6.2007 31.12.2006
HK$’000 HK$’000
On demand or within one year 506,708 602,042
More than one year but not more than two years 188,433 567,795
More than two years but not more than three years 157,318 191,573
More than three years but not more than four years 45,161 107,908
More than four years but not more than five years — 17,281
More than five years — 1,616,542
897,620 3,103,141
Less: Amount due within one year shown under
current liabilities (506,708) (602,042)
Amount due after one year 390,912 2,501,099
At 30 June 2007, buildings in PRC and plant and machinery with an aggregate carrying
amount of HK$753,582,000 (31.12.2006: HK$750,579,000) and bank deposits of nil
(31.12.2006: HK$20,038,000) were pledged to banks to secure general banking facilities
granted to the Group.
The bank and other loans carry interests at 6 month London Interbank Offered Rate and
PRC bank interest at a range of 5% - 7.5% (31.12.2006: 2% - 8%) per annum.
16. SHARE CAPITAL
30.6.2007 &
31.12.2006
HK$’000
Ordinary shares of HK$0.01 each
Authorised:
7,500,000,000 shares of HK$0.01 each 75,000
Share
No. of shares capital
HK$’000
Issued and fully paid:
At 1 January 2007 4,829,853,445 48,299
Exercise of share options (note a) 2,899,997 29
Repurchase of shares (note b) (40,983,000) (410)
At 30 June 2007 4,791,770,442 47,918
037
Interim Report 2007 Enerchina Holdings Limited
16. SHARE CAPITAL (Cont’d)
Notes:
(a) During the period, the Company allotted and issued 1,000,000 and 1,899,997
shares of HK$0.01 each for cash at the exercise price of HK$0.44 per share as a
result of exercise of share options.
All the shares which were issued during the period rank pari passu with the then
existing shares in all respects.
(b) During the period, the Company repurchased its own shares through the Stock
Exchange as follows:
Number of Aggregate
ordinary shares Price consideration
Month of repurchase of HK$0.01 each per share paid
HK$ HK$’000
January 2007 40,935,000 0.63 - 0.67 26,824
March 2007 48,000 0.55 26
The above shares were cancelled upon repurchase. None of the Company’s
subsidiaries purchased, sold or redeemed any of the Company’s listed securities
during the period.
17. RELATED PARTY TRANSACTION
During the period, the Group paid office expenses of HK$636,000 (1.1.2006 to
30.6.2006: HK$962,000) to Sinolink Worldwide Holdings Limited, the substantial
shareholder of the Company. The office expense is determined with reference to actual
costs incurred.
18. CAPITAL COMMITMENTS
30.6.2007 31.12.2006
HK$’000 HK$’000
Capital expenditure contracted for but not
provided in the condensed consolidated financial
statements in respect of acquisition of property,
plant and equipment 12,175 44,529
Enerchina Holdings Limited Interim Report 2007
038
19. DISPOSAL OF SUBSIDIARIES
The Company’s shareholding in Towngas China sub-group has been diluted following
the completion of the series of transactions as referred to in note 8. Towngas China
became an associate of the Company with effect from 1 March 2007. The net assets of
Towngas China immediately before the completion of the transactions were as follows:
28.2.2007
HK$’000
Property, plant and equipment 2,402,711
Prepaid lease payments 155,376
Intangible assets 137,844
Goodwill 68,805
Interests in associates 658,736
Available-for-sale investments 170,678
Inventories 110,159
Trade and other receivables, deposits and prepayments 591,321
Bank balances and cash 565,209
Trade, notes and other payables (488,973)
Loans from minority shareholders of a subsidiary (20,864)
Taxation (80,992)
Deferred taxation (43,561)
Borrowings (2,124,502)
Net assets 2,101,947
Equity component of share option reserve of a listed subsidiary (14,002)
Minority interests (1,175,476)
Attributable goodwill 1,487,559
Release of translation reserve (51,360)
2,348,668
Initial carrying amount of interest in associates (2,145,403)
Loss on disposal and deemed disposal of subsidiaries (77,201)
Consideration received under the transactions 126,064
Satisfied by:
Cash 126,064
Net cash outflow arising on disposal:
Cash consideration 126,064
Bank balances and cash disposed of (565,209)
Net outflow of cash and cash equivalents in respect of
disposal of subsidiaries (439,145)
The impact of Towngas China on the Group’s results and cash flows in the current and
prior periods is disclosed in note 8.
