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In , the Company had approximately , hectares of land in total, occupying more than double from due to investment in Centennial Coal Company Limited in Australia. In , only approximately 14, hectares were being used for mine activities, representing 10 per cent of the total area which was lower than 19 per cent in To ensure the biodiversity, in Australia, the Company has def ined Biodiversity Master Plan for Awaba Mine, which has been ready to be used as a guideline for mine biodiversity management since October In Indonesia, it has conducted a survey and in-depth study of biodiversity at Bharinto Mine before mining started, which can be effectively used as guidelines for mine rehabilitation and community development programs.

The study can also be extended to other mines as well. To prevent emission of greenhouse gases into the atmosphere, the Company has def ined in its Sustainable Policy that it will collect the database and provide greenhouse gas emissions report to the public. At the same time, the Company has implemented energy conservation program at all mine sites and off ices. It is also under a study of alternative energy to be used as fuels for coal transport.

The goal was to create a safety culture within an organization. In , it initiated Health, Safety, Environment and Community Summit HSEC Summit among all of its top executives to def ine directions and guidelines to implement its policies of health, safety, environment, in every operation. In addition, the Company continues implementing the Business Continuity Management at all mines, power plants, Bangkok and other offices to alleviate impacts from emergency and crisis that may occur such as f ire accidents, floods, earthquakes, epidemics, protests or riots.

It has formulated a risk management plan to mitigate these impacts as follows: 8. The clear guidelines allow our community development officers at all sites to work effectively under the same set of standards. The information system CDMIS has been adopted to track the effectiveness of community development programs in various communities. Perception Surveys have been conducted to assess attitudes and satisfaction of the community towards community development programs and the Company. Environmental and Safety Risks in Power Generation 9.

Banpu also established an environmental management system and was certified under the ISO assurance standard in for its power plants in Thailand and China. The BLCP power plant has been certified of meeting the OHSAS occupational health and safety standards since where an emergency plan has been conducted every year.

In , the Board of Directors convened 14 times, all of which were attended by the Audit Committee to express. The Audit Committee reported the internal audit summary for year to the Board of Directors on 21 January In , the Audit Committee convened 9 times. These meetings were held with the management, auditors and the. Internal Audit Department. The Audit Committee performed its duties in compliance with the laws and to an extent entrusted.

This refers to f inancial statement review, risk management supervision, auditor appointment and internal auditing supervision. This was carried out through risk-based auditing and internal control assessment to ensure that the system was adequate and appropriate for the business while the operation, use. The Board of Directors had the same opinions as that of the Audit Committee which can be summarized as follows:.

Banpu encouraged a healthy internal control environment where the Board of Directors supervised the management by. A process was enhanced to allow the firm to improve business goals and to formulate a strategic plan on an ongoing basis, leading to an appropriate vision and plan suitable for the business.

Banpu also emphasized the integrity and honesty. The Code of Conduct was distributed to all. The CG. In addition, an appropriate organization structure was put in place to ensure the. A clear chain of command and a delegation of authority were defined.

This applied to f inance and accounting,. Moreover, the Company focused at a systematic human resources management where job description, duties. Staff was recruited to suit relevant positions and the Banpu Spirit corporate culture.

Human resources development and training, promotions and remunerations were carried out. Finally, incentives or staff remunerations were also analyzed to see if they were reasonable. Banpu emphasized the importance of compliance with risk management policy and process. An extent of risk appetite. All units were required to assess risk factors, impacts, likelihood and to formulate mitigation guidelines to minimize possible damage from such risks. At the same time, the management and all units constantly monitored risk assessment and risk management plan to ensure that they were.

All of this was reported to the Risk Management Committee following a review by the Audit Committee on a quarterly basis. The same was also reported to the Board of Directors. In , the risk management unit updated the risk management manual to suit evolving risk management.

Besides, a risk management training was organized and communication was. The three sub-committees performed well within their scopes. Banpu also reviewed and. This was. We started introducing the concept of control self assessment CSA , an internationally accepted framework allowing all units the f lexibility to improve and adjust their internal control that is most suitable to cope with existing risks in a timely manner. Banpu realizes the importance of information technology and communications, both internally and externally.

This refers. To make sure that business decisions can be made on the basis of adequate, accurate and reliable information, in , Banpu introduced a sophisticated and effective IT systems, ranging from data collection, processing, monitoring, and decision support system. Banpu also modernized its. Banpu has a system that covers both operational and management levels.

The Board and the management constantly. A clear guideline was set to provide guidance in case a result differs from the target. The three sub-committees regularly monitor the performance and report it to the Board. If there is.

In addition, all units have set up a system to control their own operation which was constantly adjusted to the situation. Auditing was also carried out to ensure balance and transparency. The Internal Audit Off ice formulated an audit plan that. The Internal Audit. Off ice also made sure that the plan was effectively implemented and the resources were effectively utilized.

Auditing and monitoring results were regularly reported to the Audit Committee, the CEO and the management for development of appropriate measures, directions and implementation guidelines. For Banpu, sustainability means long-term existence, not just by form but by substance resulted from our business performance, people and corporate culture. It is our ambition not to just exist in a long run but to pose a sustainable growth and development to the society, environment and our stakeholders.

Besides, to become a dynamic regional player in the energy industry as we aim to become, proactiveness, quality excellence, internationally-accepted framework and flexibility are fundamental to our sustainable growth. To realize corporate sustainability, the Sustainable Development SD Committee was set up in and is chaired by the CEO, having senior executives and heads of business units as members.

The areas of focus for Sustainable Development Committee include leadership and governance, strategic planning, efficiency and quality, customers, human resources, finance, environment, occupational health and safety, community and government relations. The committee meeting convenes four times a year.

Moreover, a sustainable development report will soon be released to disclose our activities in this domain to the public. Banpu places a great emphasis on employee engagement as researches and surveys from various human resources. This is conducted via competency-based interview to identify the right competencies for the job. This way,. This, in turn leads to highest productivity, career happiness and high level of employee engagement. Managers not.

Hence, in , Banpu conducted a degree feedback survey amongst its senior management. The information obtained is also used to design group and individual development plans for our senior executives to ensure that the Company will continue to grow in a sustainable manner.

Management from all levels are important in improving employee engagement. Therefore, was another year. We will keep our focus on this matter for the years to come. Work-life balance is also a topic of interest at Banpu. In , on top of Work Home program introduced in ,. In all, Banpu is committed to managing and developing its employees to achieve higher level of capabilities, be content.

The Board of Directors is committed to a systematic management and Corporate Governance. It has formulated the. Corporate Governance Policy and the Code of Conduct in writing since The current Corporate Governance Policy and the Code of Conduct are the second edition revised in and announced in They have been distributed to directors, executives and staff as a reference and a practice guideline.

Banpu has assessed an effectiveness of its Corporate Governance Policy implementation by using the Key Performance. The evaluation result, classified by staff levels and operational locations, has revealed a satisfactory outcome. In , Banpu developed a plan to promote corporate culture and corporate governance awareness to encourage the best.

This was communicated to Banpu staff at all levels through the following activities:. An orientation session on corporate governance as part of the orientation program for new Banpu staff. CG information and news were posted on the internal CG news bulletin and can be accessed through the. Staff could participate by answering quizzes.

The activity was found satisfactory according to a survey conducted. In addition, the CG Call Center was set up, allowing staff to submit stories describing their good. At the same time, they were encouraged to comply with the CG policy and the Code of Conduct in order for the Company to achieve its business goal while remaining ethical. The ranking was based on analysis of business information of the top listed companies in the Stock Exchange of Thailand SET as of end of Banpu was also lauded as one of the 47 listed companies for its excellent CG scoring in the CG survey of listed.

The Board of Directors pays attention to the rights and equality of shareholders. They also have rights to elect and remove directors, to approve the appointment of auditors and to receive their share of profits. It encourages shareholders to attend and vote at the meeting or appoint a proxy or an independent director to.

In addition, shareholders are equally allowed to express their views, request an explanation or ask a question. Wireless Road, Lumpini, Pathumwan, Bangkok. The meeting was attended by twelve directors. Banpu had designated. Thailand Securities Depository Co. The letter was. The Minutes of the AGM were posted at the website 14 days after the meeting. For minority. No shareholder however proposed a meeting agenda for the AGM.

Rights of All Stakeholders. Banpu commits to equally treat all stakeholders. Collaboration between the Company and stakeholders, who are referred to as staff, customers, suppliers, creditors, government agencies, communities, and the society in general has been stated in the Code of Conduct which was developed. Important principles include those related to conf licts of interest; responsibility to shareholders; policy and treatment of staff, customers, suppliers, creditors, business.

Directors, executives and staff are to understand and strictly comply with the guidelines so that. This has led to a policy in. Banpu strictly complies with appropriate safety, environment and occupational health measures to prevent casualties from accidents, injuries and job-related illness.

Banpu has announced the Human Resources Philosophy based mainly on three principles; namely, equitability,. Banpu commits to fair compensation in a form of salary, welfare and other fringe benef its by closely relating it to long-. Banpu promotes a fair human resources management and allows staff to enhance their capability.

Its Code of. Conduct has included a policy and practices on how Banpu should treat its customers. Banpu will honor a promise made to customers by delivering quality products and services at a fair price; offering accurate and appropriate information to. Banpu will do everything to avoid a situation that may lead to a conf lict of interest and will honor any commitment it has made. Regarding business competitors, in its Code of Conduct, Banpu commits to treating competitors according to universal.

Banpu has run its business with a fair manner and strictly complied with its Code of Conduct. During the past year, it had no dispute with competitors. Regarding communities and the society, Banpu has a policy to do a business that benefits the economy and the society.

The Company aims to safeguard local customs at locations where it operates and be a good corporate citizen by complying with rules and regulations. Banpu has implemented its. Sustainable Development Policy by benchmarking with the international standards. This includes, for example, when it. In addition, Banpu has formulated effective Quality,. Safety, Environment QSE practices, covering risk identification and management of risk resulted from its operation that may affect staff, business partners, the environment and surrounding communities.

Throughout its nearly three decades of business, Banpu has constantly supported the CSR activities. In addition, attempts were made to raise CSR awareness among staff of at all levels to maintain their commitment to social responsibility. The ultimate goal is to promote the sustainable. Each agenda contained Board of. Banpu also allowed senior executives, auditors, independent observers from a law firm to attend the meeting.

Leadership and Vision. The Board will then fully expresses its opinion and discuss the issues with the management to seek a mutual approval before approving. In , the management led by the CEO reviewed the - strategic plan and business direction to ensure that.

The Board of Directors expressed its opinions to review the - strategic plan and business direction before approving it at the 13th Board Meeting in November Conflicts of Interest. Banpu considers it is very important to prevent its directors, executives and staff from exploiting their status to gain. The Code of Conduct booklet clearly states that directors, executives and staff should avoid a connected transaction that may lead to a conflict of interest with Banpu. If it is necessary, the transaction must be carried out as if it is done with the third party and a director or staff with such interest must not be involved in an approval process.

If a transaction. In addition, the Board of Directors also prohibits directors, executives, and staff from using an opportunity or information. This includes a ban. If an executive or a staff is involved in a special operation that has not yet been disclosed to the. In such case, the executive or staff involved is required to sign a confidentiality agreement with the Company which will be effective until the information is disclosed to the Stock Exchange of Thailand SET and the Securities and Exchange Commission SEC.

Banpu requires directors, executives and staff to understand and strictly comply with policies and practices stated in the. Code of Conduct. All department heads must make sure that their supervisees know, understand and comply with the Code. In this regard, staff at all levels must be a good role model. At present,. Three of them are executive directors and the remaining nine are non-executive directors, of whom six are independent.

During the past year, the Corporate Governance and Nomination Committee reviewed the proportion between. Their roles and responsibility,. The current Chairman of the Board is an independent director. Remunerations of Directors and Executives. The Board of Directors has assigned the Compensation Committee to review compensation structure as well as. For each executive, remunerations must be performance-based taken into consideration his duties and responsibilities, and must be competitive with the market and the industry while encouraging effective performance.

The Board of Directors convenes at least once a month on the last Wednesday of each month. An additional meeting may. At the meeting, there are clear meeting agendas. A complete set of supporting documents is sent to the. Board of Directors at least seven days in advance so that the Board has enough time to review before the meeting. Each meeting lasts approximately 3. During the meeting, all directors can openly voice their opinions where Chairman of the Board will summarize what the meeting agrees.

If a director has. Minutes of meeting are subsequently made in writing and, after seconded by the meeting, will be certified true and. Documents to be kept include minutes of meeting,. Meeting documents of the past-five years are also kept in an electronic format for reference. They are safeguarded from possible document manipulation and disaster risk.

In , the Board of Directors convened 14 times. Each director attended the meeting as follows:. Rutt Phanijphand 8. In , the Audit Committee convened nine times, each of which was attended by all Audit Committee members. All members of the Committee were non-executive directors. In , the Corporate Governance and Nomination Committee convened four times, all of which were attended by. The Compensation Committee consists of three members and was chaired by an independent director while all its.

In , the Compensation Committee convened five times, all of which were attended by all members. The Board makes sure that there is sufficient and. The Board has also ensured. This is to make sure that the internal control and audit system remains an effective mechanism to drive Banpu to grow in a sustainable.

The Department gives advice on the internal control risk. The financial statements are prepared under the Generally-Accepted Accounting Principles GAAP in Thailand where an appropriate accounting policy has been selected and implemented on a regular basis. The Audit. Committee and auditors jointly review the accounting policy to see if it remains practical. While preparing the financial. The Board of Directors is of the opinion that the financial statements of both Banpu and its subsidiaries as of.

In addition, the information must reflect. In , Banpu organized three international road shows and three domestic road shows, four analyst meetings to report. Banpu regularly distributed its press release when there was an important investment or business activity.

Banpu also discloses information through its website at www. Banpu is aware of the importance of information disclosure and transparency. The Company has formulated a policy. The Board of Directors commits to compliance with related rules and. To supervise the use of internal information, Banpu has formulated measures to protect internal information in its Code. Regarding directors, there are practices stated in the Practice Guidelines for the Board of Directors The following practices are stated in the Code of Conduct:.

Directors, executives and staff must not use information they receive from their directorship or employment for. Directors, executives and staff in possession of Company information which is not generally known and which may.

This information shall not be given to any third party for the purpose of their dealing in the shares of the Company. No business secrets shall be disclosed to the third party especially to competitors even after a director, executive or. Banpu also stated in its Corporate Governance Policy that the Company will not allow directors, executives and staff to. Transactions that may lead to a conflict of interest with the Company shall be avoided. If such a transaction is unavoidable, the Board of Directors will ensure that the transaction is carried out with transparency and fairness similar to transactions carried out with unrelated.

Directors, executives or staff having an interest in any transaction must not take part in its approval process. If a transaction is considered a connected transaction according to the Announcement of the SET, the Board of Directors. Banpu has introduced an Information Technology IT to control the use of its internal information. For example, it has. If an executive or staff is involved in a special task where the release.

The Company consistently supports the CSR activities, allocating the budget from its net income for CSR activities both at the local and corporate-levels including projects in countries Banpu has its presence, namely Indonesia and China.

Attempts were also made to raise CSR awareness to staff at all levels to maintain their strong commitment to social responsibility, hoping to tightly weaving it into our corporate culture with the ultimate goal to create a sustainable growth of communities and the society. Thailand During the past years, we continued working on many CSR programs at a corporate level which emphasized on three major areas, namely educational, environmental and youth capabilities development. Banpu arranged a research presentation and review event for lead teachers from the six sponsored schools and one network school.

This was organized regularly through training camps that prepared students for their independent career path via trainings of entrepreneurial skills and small business planning. Moreover, Banpu also gave financial supports in forms of career training grants and fund for interest-free loans that students could borrow to start up their independent career. In all, the objective of this program is to create an opportunity for students to learn how to provide for themselves in the future.

In , the program developed 15 lead teachers to provide valuable counsel to participating students who are currently doing 16 career projects involving the field of agriculture, food, handicraft and service. Throughout the 8 years of this program, Banpu has contributed approximately over THB 24 million. The program helps students to develop their academic and ethical standards. Students from these schools have received several recognitions from academic competitions and known for their moral promotion activities at both regional and national levels.

Moreover, a network was formed among teachers to allow for the exchange of experience within the group. In terms of school Annual Report Some schools have become the learning center for surrounding communities.

Some have become the role model or pilot school in several important education projects. The funding was to help students in the affected areas to continue honing their capabilities despite the upheavals, and to boost morale among teachers and students in the areas. Banpu has already supported a total of about THB 7 million to 57 southern schools. Ten geology and mining engineering senior students from four universities; namely Chulalongkorn University, Khon Kaen University, Chiang Mai University and Prince of Songkhla University, were given a scholarship each year.

Throughout 6 years of the program, there were about participating students. Moreover, the Power Green Camp has developed a group of youth leaders who had an opportunity to exercise their leadership by help support the Power Green campers. The network is being expanded with a total of about 80 youth leaders at present. Its aim is to connect business with society and environment through management tools as well as ethical practices in order to drive social enterprises forward. Funding was originally given to ten teams of aspiring youths for a three-month long experiment.

Then, four teams with outstanding performance were selected for the second phase of monetary support for another six months. So far, participants of this program have proven their abilities in operating their social enterprises. In addition, we strove on developing our table tennis standards and managing system as well as creating an individual development plan for our athletes. Currently, the Banpu Table Tennis Club has over 70 members nationwide.

BTTC has developed skills of athletes and many were given an opportunity to enter university with their table tennis skills while many others won competitions both locally and internationally. By joining forces with various organizations from government, independent and private sectors, Banpu together with our employees successfully provided aids to those affected by the flood.

The amount may only be a small portion of the total contributions coming from every sector of the country. It, however, demonstrated our strong intention and cooperation as a good corporate citizen that wishes for all Thais and our country to quickly get through the difficult time and get back to normalcy the soonest. The trucks were also used to transport the mobile medical units for 67 times, providing people in affected area an access to the much needed medical service.

In addition, the Company also provided necessities such as waterproof overalls, T-shirts and underwear for soldiers on their mission to help flood victims. Lamphun Mine also granted 88 scholarships to students both in and outside of Li district. Meanwhile, Lampang Mine bestowed 44 scholarships to elementary school students and two college funds to students from the area, totaling THB , Moreover, Banpu also supported a series of activities in various schools within vicinities of its mines.

Religion and Local Tradition: Lamphun Mine sponsored the yellow robes presenting ceremony at the end of the Buddhist Lent and the robes offering to Buddhist monks ceremony at four temples in the Li district, Lamphun province.

The aims were to preserve local tradition and to nurture a good relationship between Banpu and local communities. Economic Development: Lamphun Mine sponsored career trainings on fabric decoration and fresh flower arrangement for Thai ceremony for residents of Hong village in Li district, Lamphun province. The objective was to create additional income for the community. Economic Development: Vocational training activities were organized to generate incomes to the community.

This included agriculture, mushroom farming, livestock feeding, marine algae growing, coastline fishing, aquaculture, food processing, tailoring, batik-making, and handicraft. Trainings on technical skills such as truck driving, mechanic, and welding were also provided.

In addition, the Company supported the setting up of community bank which started in Indominco and Jorong Mines with an aim to create a funding source for long-term and sustainable investment and promote savings among people in the community. Education Development: Banpu Indonesia continued to give away scholarships to students, allow teachers to attend skill-enhancing training, donate books and teaching equipment to schools and provide transportation to carry students to and from schools.

A drug-free project aimed at children and youth was also introduced at schools in Jakarta and schools around the mines. Public Health: Mobile medical units were dispatched to provide healthcare services to students in various schools and communities around the mines.

Health check-up was offered to senior citizens. Children of less than five years old were given supplementary food. Medical equipment was given to healthcare centers and their staff was also given training. In addition, village water supply and clean water purification systems were installed for the community. Environmental Conservation: Local communities and the public were encouraged to participate in the reforestation activity, to keep their home clean and to manage community waste efficiently.

Community Development: Each community was urged to set up the Community Consultative Committee CCC to devise a work plan and to monitor project management in order to effectively work together with the Company. Community Relations: The Company supported activities that helped maintaining religion, tradition, culture and way of life of people in the community as well as provided assistance to those suffered from natural disaster.

Database System Development and Monitoring and Evaluation: By introducing a database for community development and by creating an evaluation tool to assess and monitor the progress of each project, the Company helps making community development management and CSR activities more efficient and transparent with maximum benefits to the society while in compliance with international standards. China Banpu Investment China Ltd. BIC , a Chinese subsidiary of Banpu, supported activities related to cultural and traditional conservation.

It also regularly involved in investment promotion activities in provinces where Banpu operated to stimulate long-lasting relationship between Thailand and China. The school with 30 teachers provides education for 76 children with hearing impairment, speech impairment, as well as other physical and mental disabilitities.

In addition, Beijing office also held tree-planting activity to instill environmental awareness among its employees. Hence, our power plants were recognized by local governments as a role model and a learning center for other organizations in terms of environmental management and natural resources conservation. Vitoon Vongkusolkit University of Missouri, Columbia, U.

Akaraphong Dayananda Krirk-Krai Jirapaet. Ongart Auapinyakul Director. Rawi Corsiri, Ms. Somruedee Chaimongkol, Mr. Sathidpong Wattananuchit, Mr. Akaraphong Dayananda and Ms. Somyot Ruchirawat, Ms. Somruedee Chaimongkol,. The Limited of Foreign Shareholders The foreign shareholders are able to hold not more than 40 per cent of its paid-up capital.

As of 31 December , the foreign shareholders have held around Mitr Phol Sugar Corp. Vitoon Vongkusolkit 2. Chanin Vongkusolkit 3. Vitoon Vongkusolkit Mr. Isara Vongkusolkit Mr. Chanin Vongkusolkit Mr. Banthoeng Vongkusolkit Mr. Choosak Vongkusolkit Mr. Klanarong Sriroth Mr. Taweewat Thaweepiyamaporn Wg.

Laksami Putpongsiriporn Mr. Kritsada Monthienvichienchay Mr. Verajet Vongkusolkit Assoc. Jeeradej Usawat. Soonthorn Vongkusolkit Mr. Metee Auapinyakul Mr. Ongart Auapinyakul Mr. Sawatdiparp Kantatham Mr. Prachuab Trinikorn Mr. Verajet Vongkusolkit Ms. Jintana Karnchanakamnerd Mr. Banchoet Vongkusolkit. Being one of the major shareholders of Banpu Plc. There are 6 joint directors as follows: 1.

Metee Auapinyakul 4. Ongart Auapinyakul 5. Sawatdiparp Kantatham 6. As of 31 December , The Vongkusolkit Family Being one of the shareholders of Banpu Plc. There are 2 joint directors as follows: 1. Banthoeng Vongkusolkit Ms. Chayawadee Chaianan Mr. Taweewat Taweepiyamaporn Ms. Sukkan Wattanawekin Mr. There is no joint director. Jirasak Vongkusolkit Mr. Kanong Sakpet. Isara Vongkusolkit Banthoeng Vongkusolkit 3. Kritsada Monthienvichienchay. Pacific Sugar Corporation 1 Co.

Import and export of sugar 2 3 5. Being one of the shareholders of As of 31 December , Banpu Plc. Mitr Kalasin Sugar Co. There is 1 joint director namely: Mr. Vitoon Vongkusolkit. Sukkan Wattanawekin Ms. Kritsada Monthienvichienchay Mrs. Amporn Kanjanakumnerd Mr. Attaphol Vongkusolkit. Banpu Plc. Banpu Minerals Co. Coal mining 40,, 40,, 40, 1, Mining, construction, 1,,,, ,,, 1,,, Indominco Mandiri Coal mining 20,,, 12,,, 12, 1,, Kartini No.

Jorong Barutama Coal mining 4,,, 4,,, 15,, Trubaindo Coal mining ,,, 63,,, 63, 1,, Kitadin Mining, contractor 1,,,, ,,, , 2,, Bharinto Ekatama Coal mining 68,,, 17,,, 17, 1,, Banpu International Ltd. Investment ,, ,, 25,, 10 Silamani Corp. Coal trading 75,, 75,, 7,, 10 Silamani Marble Co. Coal trading 50,, 50,, , Chiang Muan Mining Coal mining ,, ,, 10,, 10 Mandalong Pastoral Dormant 2,, 2,, 10,, 2 Ivanhoe Coal Pty Ltd.

Coal Mining Preston Coal Pty Ltd. Banpu Power Ltd. Investment in power 6,,, 6,,, ,, 10 Banpu Coal Power Ltd. Investment in power 5,,, 5,,, ,, 10 Shijiazhuang Chengfeng Power and heat 15,, 14,, 1,, NA Zouping Peak Pte. Banpu Investment Investment in 30,, 30,, 0 NA Pan-Western Energy Investment in power , , 10,, 0. Power and heat ,, ,, 0 NA Banpu New Energy Investment in 60,, 37,, 6,, 10 Biofuel Development Investment in 30,, 30,, 3,, 10 Prachuab Wind Energy Investment in 10,, 2,, 1,, 10 Mittraphap Wind Energy Investment in 10,, 2,, 1,, 10 Petchkasem Wind Energy Investment in 10,, 2,, 1,, 10 Borganchan LLC Foreign trade 1,, 1,, 1, 1, Business consulting, 1 ,, 1,, 10, Foreign trade, 1 55,, ,, , 1, Hongsa Power Co.

Power production , , 10, 10 Phu Fai Mining Co. Investment in 50, 50, 5, 10 Surin Green Energy Investment in ,, ,, 10,, 10 Port Kembla Coal Terminal Limited. Its duty is also to make sure that the f inancial statements are in line with the generally-accepted accounting principles practiced in Thailand where an appropriate accounting policy is being chosen and carefully pursued on a regular basis.

Somkiat Charoenkul as the Chairman, Mr. Montri Mongkolswat and Mr. Anothai Techamontrikul as the members of the Committee. In , the Audit Committee held nine meetings with all members attending all meetings. The meetings were held with executives, Senior Vice President of Internal Audit Department and the auditors in relevant agendas.

The information was adequately and completely disclosed in a reliable manner, and was approved by the auditors without conditions. The meetings were held with auditors, without members of management present, to discuss about the independence of the Committee, opinion of auditors, their observations, and improvement guidelines to benefit the Company. Check and balance mechanisms were introduced and monitoring was performed by independent Internal Audit Department to ensure that the interest of shareholders and relevant parties are effectively protected.

The Audit Committee was confident that the Company had an efficient process to achieve its goal and support overseas investment. The Company carried them out according to a good corporate governance policy without any conflict of interest. Risk assessment criteria and report format were standardized. The Audit Committee expressed its opinion that the Company was actively committed to the corporate governance policy. This, in turn, resulted in an effective and adequate internal control system that corresponded with both internal and external changes.

Appropriate internal control system was in place. All related laws and regulations were fully complied with. The financial statements for an accounting period ending on 31 December were duly prepared and adequate and reliable information was adequately disclosed. Details of financial statements are set out in the attached note stated in the consolidated statements as of 31 December The Consolidated Profit and Loss for the fiscal year ending 31 December in comparison with the Consolidated Profit and Loss for the fiscal year ending 31 December 1.

The increase was mainly due to higher coal sale volume with higher selling price of Indonesian and Australia mines. This represents an increase of THB 47, million or 79 per cent. In addition, the cost of sales of Australian subsidiaries is recorded full year in , while the cost of sales in previous year was recorded only 1 quarter. Gross profit margin is calculated at 44 per cent in this period. The gross profit margin of coal and power businesses are at 46 per cent and 10 per cent, respectively.

The increase in rainfall affected the mining production not achieve as plan. Moreover, the selling expenses of Australian subsidiaries were recorded full year in compared to the previous year which was recorded only 1 quarter. Net gain on oil hedging and interest rate swap were THB 1, million.

Net equity income recognized in this year decrease of THB 4, million from last year was mainly due to the decreasing in operating income of BLCP of THB 1, million and equity gain from a joint venture in China of THB 2, million as it was sold during the year. While operating income of Thailand decreased from last year, resulting in lower corporate income tax by THB million.

As of 31 December , the ratio was 1. This represents a decline by 19 per cent from due largely to a smaller gain from divestment. In March , the Company divested its 56 per cent holding in Chinese coal mine Daning and realized after-tax gain of THB 6, million. This is lower than the net divestment gain of THB 15, million booked in as a result of partial sale of 8. By excluding divestment profit, the earnings in is amounted to THB 13, million and increases by 42 per cent with detail as following.

Coal operation in Indonesia is the key driver for group performance. Coal sale records an 11 per cent increase to Coal sale from Indominco increased slightly 2 per cent to At Trubaindo, production from new pits enabled the mine to achieve 26 per cent higher sale to the record 6. The re-opening of Kitadin-Tandung Mayang contributed 0.

The other medium-sized mines, Jorong and Kitadin-Embalut, also recorded higher sale of 1. Average coal selling price from Indonesian mines increased remarkably by 30 per cent to USD The advantage of having higher proportion of premium coal sale in the product mix also paid off during the year. The increased selling price led to higher profitability despite rising diesel cost by 36 per cent. The gross profit margin for Indonesia improved from 44 per cent to 50 per cent in Australia coal operation made the first full-year contribution to Banpu Group with coal sale on equity basis of The biggest mine, Mandalong, achieved the record coal sale of 5.

Of the total coal sale, 61 per cent of tonnage was sold in domestic market with the other 39 per cent in export market with the average gross profit margin of 36 per cent. Daning mine was later divested in March.

Lastly, the China power business realized a net profit of THB million. My responsibility is to express an opinion on these f inancial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards.

Those standards require that I plan and perform an audit to obtain reasonable assurance about whether the f i nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall f inancial statement presentation.

I believe that my audits provide a reasonable basis for my opinion. In my opinion, the consolidated and company f inancial statements referred to above present fairly, in all material respects, the consolidated and company f inancial position as at 31 December and , and the consolidated and company results of operations and cash flows for the years then ended of Banpu Public Company Limited and its subsidiaries and of Banpu Public Company Limited in accordance with generally accepted accounting principles.

The notes to the consolidated and company financial statements on pages to are an integral part of these financial statements. Annual Report Opening balance of 2,, 5,, 1,, 29,, 7,, 4,, 2,, 9,, 7,, 55,, Retrospective adjustments from. Cash flows from operating activities Net profit for the year before income taxes Adjustment to reconcile net profit for cash receipts payments from operations Depreciation and amortisation Write-off projects under development 15 Write-off property, plant and equipment 12 Reversal of impairment of property, plant and equipment 12 Reversal of allowance for doubtful accounts 6 Allowance for slow-moving of coal 7 Interest expenses Interest income Financial expenses Interests in joint ventures Dividend income from subsidiaries Dividend income from other companies Gain on disposal of investment property Gain on disposal of property, plant and equipment Gain on disposal of investment in a subsidiary and interest in a joint ventures Gain on liquidation of subsidiaries Gain loss on disposal of investment in available-for-sale securities Net unrealised gain loss on exchange rate.

Cash flow before changes in working capital Changes in working capital exclude effect from acquisitions and disposal of subsidiaries Trade accounts receivable Amounts due from related parties Inventories Spare parts and machinery supplies Other current assets Deferred exploration and development expenditures and deferred overburden expenditures Other non-current assets Trade accounts payable Trade accounts payable - a subsidiary Accrued overburden and coal transportation costs Accrued royalty fee Employee retirement benefits obligation Other current liabilities Other liabilities Cash generated payments from operating activities Interest paid Income tax paid Net cash receipts payments from operating activities.

Net increase decrease in cash and cash equivalents Exchange gain loss from cash and cash equivalents Cash from acquisition of investments in a subsidiary Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year. Non cash transactions Significant non-cash transactions as at 31 December are as follow: Other accounts payable for purchase of property, plant and equipment , - - Non-receipts from disposal of investment in a subsidiary and interests in joint ventures 2,, - - Additional investment in a subsidiary - - 1,, Decreased of dividend from a subsidiary - - 1,, -.

The Company is listed on the Stock Exchange of Thailand. For reporting purpose, the Company and its subsidiaries are. These consolidated and company f inancial statements were authorised by Board of Directors on 22 February The principal accounting policies adopted in the preparation of these consolidated and company financial statements are. The consolidated and company f inancial statements have been prepared in accordance with Thai generally.

The consolidated and company financial statements have been prepared under the historical cost convention except. The preparation of financial statements in conformity with Thai generally accepted accounting principles requires. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. An English version of the consolidated and company f inancial statements has been prepared from the consolidated.

In the event of a conflict or a difference in interpretation between the two languages, the Thai language consolidated and company f inancial statements shall prevail. The Group has applied the aforementioned accounting standards from 1 January The application of those. The impact of the changes on the consolidated and company statements of financial position as at 31 December and the consolidated and.

However, the restatement does not have impact to tax. However, the significant changes in accounting standards to the Group are summarised as below. TAS 12 prescribed the accounting treatment for income taxes, comprising current tax and deferred tax. Current tax. Deferred taxes are measured based on the temporary difference between the tax base of an asset or liability and its carrying amount in. The Group will apply this standard retrospectively with effect from 1 January TAS 21 revised requires each individual entity to determine its functional currency which is the currency of.

Foreign currency transactions are required to be translated. Foreign exchange gains and losses resulting from the settlement of such transactions and from translation at year-end exchange rate of monetary items denominated in foreign currency are recognised in profit or loss.

The results and financial positions of all the Group. Subsidiaries are all entities including special purpose entities over which the Group has the power to. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration. The consideration transferred includes the fair value of any asset or liability resulting from. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

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Unlike other Asean countries, Laos uses hydroelectricity as its main source of power. As the aspiring "Battery of Asia", Laos has total hydropower potential estimated at 26, megawatts MW. While Laos is fortunate to have an electricity surplus, he urged regional policymakers to speed up work on the Asean Power Grid -- the interconnection of physical infrastructure to ensure regional energy security, along with improved efficiency and resource sharing.

Together we can improve efficiency that will match supply with seasonal demand, while expanding markets and reducing costs to consumers," Mr Viraphonh said. Karnchang, will bring the total to 7, MW by According to Bloomberg Intelligence BI , clean energy growth in Asia has outpaced that of other regions, even though environmental concerns rarely appear to be at the top of the region's agenda. China leads the advance, driven by attempts to curb hazardous and unsightly pollution rather than worries about climate change, with Japan and Thailand also making major strides.

Asia's investments in clean energy, which sharply cuts CO2 emissions compared with coal, oil and other fossil fuels, have surged since Based on government forecasts, wind power should more than double from levels to between and gigawatts GW by , while solar capacity will triple to at least GW, said the report.

Southeast Asia, meanwhile, may expand its renewable energy industry a faster rate than any market in Asia except China. Renewable-power generation will grow at an average annual rate of 7. Government policies are absolutely crucial to attracting foreign investors to renewables, as is the availability of domestic and international bank lending, he said. Nonetheless, Mr Jacobelli said clean energy in Asia faces two big challenges. Many Asian economies are highly sensitive to energy costs, making wind and solar less appealing relative to coal and liquefied natural gas LNG.

Lenders may also be worried about weak incentives in countries such as the Philippines and policy U-turns such as in Australia. Funding may start to improve as multilateral lenders get on board. The Asian Development Bank has promised to increase funding for renewables, and the new Asian Infrastructure Investment Bank has said green projects are a priority.

Germany-based BayWa, one of the world's leading players in renewables, is optimistic about the trend in Asean. BayWa has set up a regional office in Thailand, where small solar rooftop projects are the main focus of its new solar business. While solar is shining, bio-energy projects have struggled to secure financing.

Other key hurdles in the renewable field are grid management and capacity issues. Banpu Plc, the leading coal miner in Asean, has already started to invest in solar power projects with Japan being its first market. Coal-fired generation will continue to grow but at lower rate than renewables. We do not generate the electricity power that we sell. We supply electricity to Kowloon, the New Territories and a number of outlying islands, including Lantau Island and Cheung Chau, which are collectively referred to as our supply area in this annual report.

In , China Light established its first power station in Kowloon. The joint venture relationship between us and ExxonMobil is governed by an agreement initially signed in and subsequently amended and supplemented by several contracts which, collectively, are referred to as the Basic Agreement in this annual report.

However, if ExxonMobil declines to participate in any such further expansion, their right to participate in succeeding expansions of generating capacity is deemed to be waived. Electricity Purchases. Table of Contents If CAPCO requires additional financing, we and ExxonMobil may at our discretion provide such financing in proportion to our respective participations and, if either declines, the other has the right, but not the obligation, to provide all or any part of the required financing.

In addition, if so requested by CAPCO, we are obliged to provide financing in the form of special advances, provided that the cumulative amount of such special advances does not exceed the balance of the Development Fund. Scheme of Control. The current Scheme of Control became effective on October 1, and is for a term of 15 years until September 30, Our sales of electricity to the Chinese mainland are governed by a separate contract, the terms of which do not form part of the Scheme of Control.

In accordance with the Scheme of Control, we are obliged to contribute to the development of Hong Kong by providing sufficient facilities to meet the demand for electricity at the lowest reasonable cost. In return, we, CAPCO and any future companies formed by us, alone or together with ExxonMobil or others, these companies being collectively referred to as the SoC Companies, are entitled to receive tariff revenue sufficient for a reasonable return on our investments.

Costs are forecasted by means of a financial review process described below and the rate of return is determined by means of a formula established by the Scheme of Control. Table of Contents The results of a financial review, including basic tariff rates, are subject to the approval of the Executive Council of Hong Kong.

Once the financial review has been approved by the Executive Council of Hong Kong, the basic tariff rates cannot be unilaterally reduced by the Hong Kong Government. Our existing financial plan that outlined our projected capital investments and tariff rates was approved by the Executive Council of Hong Kong in May for the period from October to December A tariff review is conducted in October of each year to agree on the implementation of tariff adjustments for the next year.

The auditing review contains an analysis of the prior-year actual results and current-year projections of sales, capital and operating expenditures and other financial and operating data. An interim review is conducted every five years during the year term of the current Scheme of Control. During an interim review, the Hong Kong Government and the SoC Companies can request modifications to the Scheme of Control, subject to mutual agreement. The second five-year interim review of the current Scheme of Control took place in Changes to the Scheme of Control made as a result of this interim review included lengthening of depreciation periods for certain assets, providing for depreciation of land, the introduction of an upper limit to the Development Fund which is now set at The other key terms of the Scheme of Control remain unchanged.

Table of Contents Tariffs. The net tariff consists of three components: i the basic tariff rate, ii a fuel clause recovery rebate or charge, and iii the Scheme of Control rebate. Net and Permitted Returns. Rate-Making Procedures. The revenue requirements of the SoC Companies, which are theoretically equal to the cost of supply of electricity, are computed in a financial model based on load forecast, projected operating expenses and return to shareholders.

The overall cost of electricity supply is allocated to each class of customer based on consumption profiles, which are determined by load research. We use the cost of service to each class of customer to determine the revenue required and the unit rate. We then propose basic tariff rates to the Hong Kong Government for approval in accordance with the provisions of the Scheme of Control.

Table of Contents Demand Side Management. We undertake activities to encourage the efficient use of electricity. The DSM agreement allowed us to recover all programme costs from customers. The implementation of the DSM Programme included an educational programme and a rebate programme for energy efficient equipment. The DSM agreement expired on June 30, Power Generation.

We do not directly own any generating facilities. All of our sources of power supply provide us with a total installed capacity of 8,MW. We met all demands for power during the year ended December 31, without any shortages. The amount of electricity supplied to the system for the year ended December 31, was 32, million kWh, an increase of 3.

Table of Contents The table below sets forth for the years ended December 31, and , the amount of electricity purchased by us, as generated by CAPCO and other generating facilities, and the amount of power used or lost in connection with transmission and distribution:. CAPCO facilities:. Castle Peak. Black Point. Gas turbines. Auxiliary use 1. Other power purchased:. Hongkong Electric. Landfill gas generation. Total other power purchase. Pumped Storage operation:.

Energy transferred. Energy consumed for pumping. Net loss in pumped storage operation. Total net generation. Transmission and distribution losses 2. The table below sets forth for the years ended December 31, and , total capacity, total CAPCO capacity and peak load for power generated for our sale. Peak load:. Local Hong Kong. System Total. Smaller capacity gas turbines are used as supplementary facilities to meet demand at peak periods and for emergency back-up because of their quick-start capability.

Black Point Power Station. Black Point Power Station commenced commercial operation in Units 1 and 2 and is located at the western tip of the New Territories, approximately four kilometers north of the Castle Peak Power Station. It currently consists of six combined cycle units with a total capacity of 1,MW.

The commissioning and installation of Units 7 and 8 is expected to occur in and , respectively. Black Point Power Station, when completed, will be one of the largest combined cycle power plants in the world with an expected total capacity of 2,MW. Castle Peak Power Station is one of the largest coal-fired power station complexes in the world.

Its first phase commenced operations in and it now consists of eight coal-fired generating units with a total capacity of 4,MW. Its second phase, with four MW units, was completed in Castle Peak Power Station burns coal as its primary energy source, resulting in significantly lower electricity prices than burning oil.

The coal-fired generating units achieved an overall availability of We believe this rate corresponds to the highest world standards and reflects the high quality of the plant and its operation. The design of the Castle Peak Power Station also enables it to burn, as alternatives, oil or natural gas, should this be required. The Castle Peak Power Station has achieved consistently high levels of compliance with air quality control standards.

An energy saving programme has been in operation in each of the Black Point and Castle Peak Power Stations since to explore opportunities for auxiliary power reduction and resources conservation. As a consequence, energy savings of about 2.

After the commissioning of the six natural gas-fired generating units at Black Point Power Station and the purchases from Guangdong Daya Bay Nuclear Power Station, our energy sources consist of a mix of fuel comprising natural gas, coal, oil and nuclear.

For the year ended December 31, , the fuel mix consisted of the following: natural gas As a result of market factors affecting the cost and availability of fuel as well as the unexpectedly high demand for power in Guangdong province, we used more coal in than Our fuel costs are recovered through the basic tariff rates and the fuel clause recovery rebate or charge.

Table of Contents Natural Gas. The base price under the contract was established when the contract was signed in December Changes in the contract price are determined annually by reference to certain market and economic indices. CAPCO consumed approximately 39, tonnes of fuel oil and industrial diesel oil for the year ended December 31, The oil supplies are imported and sourced principally by ExxonMobil Hong Kong Limited from overseas sources. CAPCO maintains strategic fuel stocks to cover contingencies.

CAPCO has phased out oil as a fuel for base and intermediate power generation and now uses oil only for peak and standby generation. We are allowed to treat all our payments for nuclear electricity generated by Guangdong Daya Bay Nuclear Power Station as part of our operating expenses permitted under the Scheme of Control. The design, construction, operation and maintenance of nuclear power plants involve significant safety measures because of the hazardous nature of radioactive materials.

The use and disposal of nuclear fuels have the potential, albeit very low, to create substantial risks of liability arising from exposure to or release of radioactive materials. We believe that Guangdong Daya Bay Nuclear Power Station complies in all material respects with international safety standards.

The operating staff of the two nuclear power stations now perform their duties as employees of DNMC. The benefits of establishing DNMC include a pooling of resources, sharing of expertise and benefits of economy of scale. As electricity cannot be stored in large quantities, Guangzhou Pumped Storage Power Station indirectly stores electricity by way of pumping water to a high-level reservoir during periods of low demand such as at night.

The water can then be released generating hydro-electric power at times of peak demand. Some energy is lost in this process, but the loss is more than offset by the savings from the reduction in use of high production cost plants during the day and the efficiency gains of running plants at a constant output level. Power from Hongkong Electric and Guangdong Grid. The interconnection of our systems with those of Hongkong Electric the only other electricity supplier in Hong Kong to the south and Guangdong Province to the north allows us to access other generating capacities to further enhance the reliability of our own supply system.

The interconnection with Guangdong Province allows us to sell our excess capacity to customers in the Chinese mainland. We have an interconnection agreement with Hongkong Electric under which the two companies sell each other electricity to meet marginal demand when doing so is more economical than utilizing other sources. Power Systems. The Network. We transmit electricity to load centers through an advanced transmission network owned and operated by us. As at December 31, , our transmission and distribution network comprised 11, kilometers with primary substations and 11, secondary substations.

Our system is interconnected with the transmission system of Hongkong Electric and the power system of neighboring Guangdong Province of the Chinese mainland. The kV network consists of two double-circuit kV transmission lines arranged in a ring encircling the New Territories together with cross-connection, and six kV underground cable circuits reaching into the densely populated Kowloon Peninsula. Continuity of supply is safeguarded even if one double-circuit power line is lost. We continue to expand our distribution network to supply new customers, the number of whom increased by 61, for the year ended December 31, , and to reinforce and upgrade supply to our 2.

We are making additional investments to expand and reinforce our transmission network in order to maintain our high reliability standards as well as to accommodate the increasing demand for electricity especially in new development areas. Security and Reliability. We utilize two independent protection systems to isolate any faulty equipment to safeguard the smooth operation of the network.

The overall supply reliability for our transmission and distribution system was above The interconnection of our system with those of Hongkong Electric to the south and Guangdong Province to the north allows us to access other generating capacities to further improve the reliability of our own supply system. In case of a sudden loss of generation, the interconnectors allow emergency power transfers from Hongkong Electric and Guangdong systems, enabling us to avoid disruption of supply to our customers.

Table of Contents The table below sets forth our sales categorized by end user sector:. Annual Sales Change over. Infrastructure and Public Services. Subtotal local Hong Kong. Sales to the Chinese mainland. Total Sales. Hong Kong Customer Base. Electricity demand varies within each year for a variety of reasons other than general growth in demand. Electricity demand tends to be highest during daylight hours due to commercial and industrial activities and electric appliance use during such periods.

Due to air conditioner use, electricity demand is higher during the summer than during the other seasons. Variations in weather conditions may also cause significant variations in electricity demand. Table of Contents Commercial. Demand from the commercial sector in the past five years has shown moderate growth, owing to the expansion of the service sector of the Hong Kong economy and the urbanization of Kowloon resulting in increased office building construction, office automation and use of air conditioners.

We expect the demand from this customer sector including infrastructure projects supported by the Hong Kong Government to remain steady. Sales to the Chinese Mainland. This agreement was renewed in for a term of 20 years. Table of Contents Customer Service. We have committed to provide quality service and value to our customers. The needs and expectations of our customers, as the major driver of customer service, are identified through communications with them in customer service centers, focus groups, customer consultative groups and local advisory committees.

For our major commercial and industrial customers, a one-stop customized service and technical advice on energy solutions is provided, which includes energy audits, technical seminars and safety workshops. Tariff Rates. We normally implement changes in basic tariff rates, the fuel clause rebate or charge and the Scheme of Control rebate on January 1 of each year. The table below sets out our average net tariffs in Hong Kong for the years ended December 31, , and Basic Tariff.

Fuel Clause Charge. Scheme of Control Rebate. Special Rebate. Net Tariff. Published basic tariff rates did not change over the years ended December 31, , and and the change in the basic tariff reported was due to changes in consumption patterns. For , we have announced a further freeze in basic tariffs, meaning that the basic tariff rates will remain at levels.

These two rebates effectively reduced the average electricity tariff by 3. Table of Contents Competition. On the subject of alternative market structures, those consultants concluded that no major reforms were advisable until at the earliest. They also acknowledged that much would depend on whether the power industry in Southern China has been sufficiently restructured to enable power producers located on the Chinese mainland to participate in some form of power pooling arrangements.

Subsequent to the consultancy study, the Hong Kong Government appointed another consultant to evaluate and establish a feasible route, if any, to install new additional interconnectors between us and Hongkong Electric. However, there are important and complicated issues which are beyond the technical considerations, to be addressed. These include legal, business, investment, financial, liability and regulatory issues. Table of Contents In the commercial market, electricity is the dominant energy source for lighting, office equipment and air conditioning.

Due to stringent environmental pollution regulations, we expect some existing diesel oil applications to be gradually phased out, which presents good opportunities for their replacement by electricity or gas. Efficient electric cooking appliances now being produced for the commercial sector provide an alternative to a market previously dominated by gas.

In the industrial market, currently there is no practical substitute for electricity in a number of applications including lighting and power for many types of industrial machinery and processes. Investments in the Chinese Mainland. We were one of the first power companies from outside the Chinese mainland to invest in the electricity industry in the Chinese mainland and are currently one of the largest external investor in the Chinese mainland electricity industry.

Our successful track record of developing projects in the Chinese mainland started in with our investment in Guangdong Nuclear Power Joint Venture Company, Limited. We currently own 3, equity MW generating capacity in the Chinese mainland, of which 2, equity MW are operational and equity MW are under construction. Our focus in the Chinese mainland is to build up a competitive presence in provincial and regional electricity markets, particularly i the South China Region, including Guangdong Province and investments in the western provinces for eastward supply to Guangdong; ii the North China area, including Beijing-Tianjin area and Shandong Province where we have already established a strong presence; and iii renewable energy, including hydropower and wind farms.

In pursuit of this goal, we plan to continue to work with reputable Chinese mainland parties to pursue opportunities. The power station is the first large-scale commercial nuclear power installation on the Chinese mainland. The majority of the key equipment was imported from France and the United Kingdom.

Unit 1 and Unit 2 commenced commercial operation in February and May respectively. The station continues to operate safely and reliably and received accreditation to ISO It was also the first power station to attain ISO accreditation in the electric power industry in China. There were over 2, unit starts during the year to fulfill our system requirements, mainly during peak lopping and back up operations. Shandong Zhonghua Power Company Limited. We own a Shandong Zhonghua Power Company Limited was formed in to develop, own and operate four coal-fired power stations with a total generating capacity of 3,MW in Shandong Province.

The operation of the plants is outsourced to Shandong Electric Power Corporation through an operation and offtake contract. The construction was contracted to Shandong Electric Power Corporation through a consortium formed by the four project sponsors.

Table of Contents As for the new stations, Unit 1 and Unit 2 of Heze II have passed the performance test and entered into commercial operation in February and August , respectively. Liaocheng Unit 1 and Unit 2 have completed hour reliability tests and are undergoing performance testing. All construction works progressed well, meeting the quality requirements, proceeding within budget and ahead of schedule.

It is expected that the remaining units will come on stream in turn in Unlike Shiheng where the major equipment was locally manufactured, the two new stations use equipment manufactured overseas, reflecting the need for large boilers capable of using low volatile anthracite from the local mines. Huaiji Hydroelectric Power Project. This project is located in Huaiji County in northwestern Guangdong Province and involves building, owning and operating nine small-scale hydro power stations with a total installed capacity of 98MW.

They are cascading hydropower stations installed along two river streams. Eight of the power stations are operational and one is under construction. The power is sold to the power grids of Huaiji County and Guangdong Province. The collection of electricity charges from the offtaker continues to be slow and requires our intensive monitoring.

This project extends our geographical presence into the North China market. It began operation in and has been operating with high availability and reliability. The station owns two MW coal-fired units and began operation in It formed part of an economic cooperation scheme between China and the former Soviet Union which supplied the major equipment, including the turbines and boilers.

They are also committed to continuous environmental improvement and have obtained full accreditation to ISO As part of the water resources conservation programme, both Beijing Yire and Panshan Power Stations have separately completed a waste water-recycling scheme which significantly reduces discharges as well as improves the station economics. Beijing Yire has also embarked on a NOx reduction program aimed at meeting the stringent NOx emission requirement imposed by the Beijing authorities.

All three stations sell their power to the North China power grid. The total electricity sold by the three power stations in was 11,GWh. Heat sales totaled 9. Regular tariffs have been approved and implemented in all three power stations. The power station is located in northern Shaanxi, adjacent to Inner Mongolia and is a mine-mouth power station supplying electricity to the Shaanxi power grid. It entered into commercial operation in In late , the station obtained ISO accreditation.

The station achieved availability of The station operated under a temporary tariff until December and has implemented regular tariff since January This is the first power project in the Chinese mainland in which we hold a majority share. Under the joint venture agreement, however, none of the partners has unilateral control over the economic activity of Guizhou CLP Power. Anshun II Power Station is now under construction and progressing on schedule.

Unit 1 started commercial operation in April whereas Unit 2 is scheduled in November Both units are fitted with flue gas desulfurization systems and the overall construction contract is being undertaken by Guizhou Electric Power Corporation. The power station represents the expansion phase of Anshun I also 2xMW and is developed as an integral part of the whole Anshun power station.

A joint operation representative committee will be set up by us and other parties to monitor the operation and maintenance activities, make decisions on major operational matters and ensure smooth coordination between the two phases and enhance performance. We will assign senior staff to the station to ensure that our rights and interests will be duly protected. Guizhou Electric Power Corporation will be the electricity offtaker for Anshun II Power Station, as it is currently the sole wholesale electricity offtaker of the Guizhou power grid.

Competitive Environment and Regulatory Issues. The economy and the electricity market in the Chinese mainland grew strongly during Electricity demand increased by A structural reform is being gradually implemented in the Chinese mainland power industry, involving corporatization by separating government functions from business activities, separating grid assets from generation assets and breaking up of the State Power Corporation to form five national generating companies and two grid companies and with a view to eventual deregulation.

As part of the power sector reform, the State Council of China established a power industry regulatory body, the China Electricity Regulatory Commission, or CERC to better regulate the power industry following the break-up of the State Power Corporation.

Table of Contents The power sector reform in the Chinese mainland has created increased risks and uncertainties for private investors in China. The break-up of the State Power Corporation has led to increasing competition between the newly created five national generating companies and other independent power producers such as us. There has also been considerable downward pressure on electricity tariffs paid to generating companies, and it is likely that some form of more transparent pricing will gradually replace the current tariff setting mechanism.

The regulatory environment in the Chinese mainland will gradually become more open and transparent to create a level playing field for all market participants, both local and foreign. We will closely monitor the progress of the reform and the changing market conditions in the Chinese mainland. We have established a significant presence in the private sector power industry in a number of countries in the Asia-Pacific region, notably Australia, India, Taiwan and Thailand.

As of December 31, , we own 3, equity MW generating capacity in the Asia-Pacific region outside Hong Kong and the Chinese mainland, of which 3, equity MW are operational and equity MW are under construction. We aim to become a leading international private sector power company in the Asia-Pacific region. This will be done through i developing effective investment partnerships and establishing a meaningful presence in each of our target markets; and ii building a balanced portfolio across our selected Asia-Pacific countries, with a suitable mix of plant and fuels and a combination of operating assets, projects under construction and a pipeline of development projects.

Table of Contents Yallourn Energy has four generating units. The first two units, each initially rated at MW, commenced operation in and , whilst the second two units, each initially rated at MW, commenced operation in and In , each of the units was re-rated as a result of technical improvements and the power station is now registered as a 1,MW facility, up from 1,MW. The captive brown coal mine is within the Yallourn Energy site and its operations are integrated with the power station.

In , Yallourn Energy completed the process of contracting out its mine operations and maintenance activities, which has been a strategic objective aimed at improving the performance of the asset. In , new mining technology was successfully introduced and plans to extend the life of the mine are ahead of schedule. The original control and instrumentation equipment of the power plant is also being replaced and upgraded.

Yallourn Energy operates as a merchant plant in the NEM and bids its output into the pool. In order to provide volume and price stability, Yallourn Energy sells the following range of electricity products:. Yallourn Energy also maintains some direct exposure to the pool to provide potential upside during price peaks, reducing the cost of availability risk management and as an additional source of market intelligence. Owing to continuing low pool prices and accelerated capital expenditure, Yallourn Energy forecasts that in order to meet the debt service cover ratios as stipulated in the loan agreements, it may require contingent equity support to be provided by its shareholder.

However, we forecast that prices will continue to soften due to an oversupply in Victoria and South Australia, an excess of new generation in Queensland and additional volumes available between regions through interconnection projects. Yallourn Energy has implemented a cultural change programme with the aim to creating an alignment of interest between Yallourn Energy and its employees; nevertheless, Yallourn Energy is still exposed to some risks of industrial dispute.

Management at Yallourn Energy is also committed to the highest standards of safety and environmental protection and the Board of AusPower Holdings Pty Limited, the immediate holding company of Yallourn Energy, has established a sub-committee to supervise these activities. The plant was commissioned in open cycle in October and combined cycle in December It is dual-fuel fired using natural gas or naphtha.

Despite this arrangement, GPEC aims to deliver electricity to GEB at a reasonable price through maximum usage of natural gas and reductions in pass-through costs. The sales in decreased as compared to as only naphtha was available for most of the time, which made our electricity very expensive and as a result the plant was run only when required. Their aim was to bring GPEC into a dialogue that would lead to a lower cost of power.

Since the Regulator has the power to amend PPAs, we decided to enter into such a dialogue with GEB, rather than risk an outcome being imposed by the Regulator over which we had little control. The resulting negotiations with GEB were concluded at the end of and are viewed as satisfactory by both sides. We have been able to reduce some of the operating costs that are passed through to GEB and we have made some limited concessions on other terms.

The cost of power to GEB is now at an affordable level and the effect on our investment returns is modest and acceptable. As part of the agreement, GEB reversed its position on a substantial amount of billings under the original PPA that they had previously disputed. We believe that this agreement puts GPEC on to a more sustainable basis for continued operation. Our other challenge in GPEC is to manage receivables.

GEB continues to have difficulty in making timely payment to GPEC for electricity due to the inadequacy in its own collections from retail consumers. This position is improving through initiatives that GEB is taking to reduce theft and cross subsidies, but will continue for some time yet. GPEC receives some cash payments from GEB but has also obtained part of its payments through bill discounting with recourse. There is no recourse to us beyond GPEC from these arrangements.

The balance of overdue receivables was reduced significantly in by a Rs. We expect that future collections from GEB will be through a combination of cash, bill discounting and further bond issues, and we have made prudent provisions in our accounts for the risks involved in this process. Ho-Ping achieved commercial operation of the power station on schedule and within budget, with Unit 1 and Unit 2 commencing operation in June and September , respectively.

Coal is procured internationally from Australia, Indonesia, South Africa and China, largely through long-term coal supply contracts. The station has established a Safety, Health and Environmental Protection Committee comprising management and staff representatives at various levels to devise and implement the various initiatives in relation to safety, health and environment.

Table of Contents The plant has been tested to comply with the emission limits. The reliability of the monitoring equipment needs to be improved but there is presently no major problem with controlling the plant emissions. In , we achieved a full year of operation of the two units. There were a number of technical issues that emerged, as is common for the early stage of a coal fired plant, but most have been resolved successfully.

The number of unit trips was higher than we would expect for a mature plant but the overall economic performance was satisfactory and exceeded our financial projections. There was one incident where a fragment of a low pressure turbine blade detached and caused significant damage to a condenser.

The unit had to be shutdown for several weeks for repairs, but subsequently returned to service and has since operated satisfactorily. The company is Its principal activity is the generation of electricity for supply to EGAT under long-term power purchase agreements. It has also invested in a number of small power projects in Thailand and the Philippines, totaling MW.

The company also has another 1, MW of capacity in development. We also nominate one person to the senior management team of EGCO. In , we reviewed the carrying value of EGCO again and, based on our value in use, we concluded that no additional impairment is required for this investment. Commencement of commercial operation of the two units is expected to occur in and respectively, and all power generated will be supplied to EGAT under a year power purchase agreement.

YTL Power International Berhad, or YTL Power, is a listed company in Malaysia and its principal activity is the generation of electricity for supply to Tenaga Nasional Berhad, the government-owned utility of Malaysia, under a year power purchase agreement commencing in YTL Power owns and operates two gas-fired combined cycle power stations in Malaysia with a total generating capacity of 1,MW.

Table of Contents Property Development. The objective of CLP Property is to redevelop sites in Hong Kong which are no longer required for electricity purposes. We do not acquire land and buildings for redevelopment. Our major project is the residential redevelopment of the former power station site at Hok Un, Kowloon.

Public Lighting and Engineering Services. Through our wholly owned subsidiary, CLP Engineering Limited, we offer contracting and consultancy services in power engineering, telecommunications, building services, energy services and road lighting and facility management for customers in Hong Kong and neighboring areas.

Our four railway-related projects were completed successfully in , with a further four projects underway towards target completion dates in or after Our contracting business has been further extended to electrical installations and control systems associated with major road systems and other infrastructure projects. Our activities include a number of successful contracts in hotels, hospitals and institutes with the application of heat pump technology.

We have also secured a project with a business customer to replace diesel generators with electricity supply. This will not only generate additional sales of 4. Vanda in exchange for the issue of The share sale and purchase agreement was completed on March 12, and 35 million of Vanda shares were placed to a financial institution on the same day. Management will review the possibility of selling the remaining shares upon the expiry of the three month lock-up period as stipulated in the agreement.

Table of Contents Information Technology. We hold a small strategic investment 5. This investment is closely monitored to verify that operational synergies can be obtained. CLP RI also monitors current industry issues, and conducts knowledge-sharing activities through the company intranet, an electronic newsletter, internal and external briefings, and presentations by experts from the international community.

Topics included technological advances in clean coal, solar photovoltaic technology, and energy storage as well as renewable energy policy and the health effects of electromagnetic fields. Table of Contents C. Year of. Place of. Our Percentage. CLP Engineering Limited. CLP Properties Limited. CLP Telecommunications Limited. Yallourn Energy Pty Limited.

As at December 31, , land comprised leasehold land held in Hong Kong and leasehold and freehold land held outside Hong Kong. Leasehold land in Hong Kong is held under lease from the Hong Kong Government and many of our land leases are either long-term or contain an automatic right to renew for a specified fixed term. Our investments, principally the electricity business in the Chinese mainland and other Asia-Pacific countries as well as in CAPCO, are accounted for as our interests in the jointly controlled entities, associated companies, investment securities and other investments in Table of Contents Capital Investment Programme.

Scheme of Control Business. We reached an agreement with the Hong Kong Government in December to defer the installation and commissioning of Units 7 and 8 of the Black Point Power Station by five years, and hence the commissioning dates for those units are expected to be and respectively. The deferral premium is a contractual obligation that corresponds to additional costs incurred by the vendors for delayed delivery of the two generator units.

The purpose of these investments is to address the demand created by new towns and rail and infrastructure development projects in our supply area, as well as to upgrade our existing network to further enhance supply quality and reliability.

In addition, two kV cable circuits are planned for year to reinforce the kV system. Also, design and engineering activities are underway regarding approximately 60 transmission development projects due for commissioning over the next several years. The contribution of contingent equity depends on certain minimum requirements regarding the availability of cash flows for debt service within five years from February 27, With higher than expected capital expenditure requirements over the next few years, Yallourn Energy forecasts that in order to meet the debt service cover ratios as stipulated in the loan agreements, it may require contingent equity support to be provided by its shareholders.

Environmental Matters. We and CAPCO have maintained full compliance with environmental license requirements in all material respects. Our major operating business groups, including generation, power systems and marketing and customer services, continue to be accredited with ISO certification. Our fuel diversification strategy, featured by the use of a natural gas combined cycle generation and the purchase of nuclear electricity in addition to coal fired generation, has resulted in significant reductions in air emissions over the past decade.

To align with international best practices, our subsidiaries, Yallourn Energy and GPEC, together with many of our joint venture power stations have been accredited with ISO certification. Overall environmental performance in was good with only a small number of minor applicable standards being exceeded.

We maintain property and casualty insurance against risks of our business to the extent we consider appropriate. Our Insurance and Claims Branch, which arranges insurance for our business in Hong Kong, assesses prudent levels of risk retention in consultation with professional external insurance advisors.

Insurance coverage for risk above our retention level is obtained in the market. In respect of our investments outside Hong Kong, suitable insurance coverage is in place to ensure risks are appropriately transferred. Unless stated otherwise, the discussion and analysis of our financial condition and results of operations in this section apply to our financial information as prepared according to Hong Kong GAAP, which differs from U.

GAAP in certain material aspects. Our Scheme of Control business has accounted for approximately Excluding the property redevelopment profit and disposal gain and unallocated expenses, our operating earnings were In addition, towards the end of , the uncertainties posed by terrorist threats and military actions in Afghanistan and Iraq began to subside.

The rebound of the U. With a steady and strong economic growth in the Chinese mainland, the re-export business in Hong Kong continued to maintain a robust growth. In , the commercial sector is expected to have more robust growth supported by the continuous development of the tourist industry. The growth of electricity consumption in the residential sector is expected to be supported by the steady housing supply and will remain moderate. The infrastructure and public services sector is expected to benefit mainly from the infrastructure projects such as the railway network, telecommunication facilities and property developments in urban areas.

The process of transformation of Hong Kong into a services-oriented economy will continue and the relocation of labor-intensive manufacturing industry from Hong Kong to the Chinese mainland and other regions is unavoidable. Therefore, a declining demand for electricity from the manufacturing sector is expected. The Scheme of Control interim review took place in This is a regular review every five years between us, CAPCO and the Hong Kong Government whereby either party may request modifications to the Scheme of Control, subject to mutual agreement.

The changes to the Scheme of Control made as a result of the Scheme of Control interim review included revised depreciation periods for certain assets, an upper limit of the Development Fund set at The key terms of the Scheme of Control remain unchanged.

Following the completion of the Scheme of Control interim review in , we do not expect there to be any changes to the regulatory regime applying to our Hong Kong electricity business before the expiry of the current Scheme of Control Agreement on September 30, During the intervening period, there will be increasing discussions between us and the Hong Kong Government regarding the post electricity regulatory regime. The Hong Kong Government has indicated that it will conduct a review of the electricity market with a view of drawing up a broad framework for the development of the electricity supply sector to succeed the current Scheme of Control Agreement.

In preparation for the future, we have been devoting considerable management resources to a thorough understanding of the implications of different regulatory systems for our Hong Kong electricity business. We will continue to contribute our knowledge and expertise to the discussion of the future of our industry and we expect that the legitimate interests of the CLP Group, our shareholders, our employees and the community we serve will be given balanced consideration. As a result of general cost savings and productivity improvement, we have been able to freeze our tariff levels again in , maintaining them at the levels.

Electricity Businesses in the Chinese Mainland. The increasing maturity of our Hong Kong electricity business, evidenced by the slowdown of the growth in electricity demand in recent years, coupled with a degree of regulatory uncertainty post, has led us to diversify our activities. We are doing so through the application of our skills and competencies to investments and projects in the electricity sector in the Chinese mainland and other Asia-Pacific countries.

Table of Contents Economic growth and electricity demand remain strong in the Chinese mainland. However, the ongoing reform of the power industry in the Chinese mainland and the establishment of five national generating companies have created an environment where Chinese owners of generating assets are primarily focused on expanding their businesses and leveraging value from their assets by direct access to domestic and international capital markets.

Our focus in was therefore on the management of our existing joint ventures to add value, deliver satisfactory returns on investment and meet safety, health and environmental objectives. We will remain extremely selective in our choice of new investments in the Chinese mainland. In the short to medium term, we are prepared to slow the pace of investments.

Over a longer period, we expect that the market will become clearer and more settled, and it will be possible to assess with greater confidence the long-term value of assets in relation to their prices in the market. We now have a significant presence in Australia, India, Taiwan and Thailand.

We will concentrate on improving the quality and returns of our existing businesses in the countries where we have already established a significant presence. We will be alert for opportunities in other countries in the region which meet our investment criteria. The challenges to electricity business in the Asia-Pacific region outside Hong Kong and the Chinese mainland come largely from political, economic and regulatory uncertainty, much of which occurs and must be managed and assessed on a country-by-country basis.

Table of Contents We have undertaken share repurchases on an opportunistic basis to optimize our capital structure and enhance earnings per share. We did not undertake any share repurchases in Critical Accounting Policies. Accounting under the Scheme of Control. The annual permitted return is determined as Any difference between the permitted return and the profit for Scheme of Control operations is transferred to or from the Development Fund. This carrying amount reflects the application of our fixed assets accounting policy which complies with Hong Kong GAAP.

Table of Contents The Scheme of Control stipulates the methodology in calculating the return of our electricity business in Hong Kong. Whilst the current Scheme of Control Agreement will expire on September 30, , the accounts are prepared on the basis that there will be no material changes to the current regulatory framework in the foreseeable future. Any modifications to the existing Scheme of Control following its expiry in may have an effect on our financial performance as it may affect the way we calculate our earnings from this business.

Turnover and Trade Receivables. Our turnover primarily consists of sales of electricity by CLP Power Hong Kong which is recognized based on actual and accrued consumption derived from meter readings during the period. Non-residential customers are billed on a monthly basis based on actual meter readings while residential customers, are billed bi-monthly with the unbilled sales being estimated by taking into account the past trend of consumption as if their meters were read monthly.

Revenues earned outside Hong Kong are billed in accordance with the terms of the contractual agreements where applicable during the period. Our credit policy in respect of electricity sales in Hong Kong is to allow customers to settle their electricity bills within 15 to 17 days after issue.

For electricity sales outside Hong Kong, the credit term ranges from 30 to 60 days. We continually assess the collectibility of our receivables and in the event a receivable is determined to be uncollectible, we write it off as bad debt. Changes in the assumptions on the collectibility of our receivables may change the amount of bad debt written-off. We use the equity method to recognize our pro rata share of the net income or loss of our unconsolidated investments.

Accordingly, revenues from our joint ventures or associated companies are not consolidated in our turnover. We nevertheless review the collectibility of receivables of these business ventures and, in , our management considered that it was prudent to make additional provisions against our share of the receivables in some joint ventures. Retirement Benefits.

Prior to , under Hong Kong GAAP, the periodic charge to our financial statements for costs arising from a defined benefit retirement scheme was represented by our contributions to the scheme in a given period, determined with reference to independent actuarial valuations. We are of the opinion that the surplus is not subject to taxation in Hong Kong.

The surplus upon initial adoption of the new Hong Kong accounting standard has been recognized as a prior year adjustment against retained profits. Table of Contents Under U. GAAP, the retirement scheme asset at January 1, differs from this surplus due to the existence of unrecognized actuarial gains and losses; under U. GAAP such actuarial gains and losses are amortized over the average remaining active employee service period. These include assumptions about the discount rate, long-term expected return on plan assets and rate of future base compensation increases.

In selecting the assumed discount rate, we make reference to market yields on high quality corporate bonds which have a similar term as the related liabilities. The expected rate of return on plan assets was derived based upon the asset model used by our actuarial consultants, Watson Wyatt Hong Kong Limited, which takes into account inflation, short and long-term interest rates, equity risk premium and changes to bond prices relating to changes in interest rates.

Base compensation escalation took scale increments, promotions and cost of living increases into consideration. On December 31, , the remaining members in our defined benefit programmes were transferred to our defined contribution programmes. At the same time, we obtained the relevant approvals in principle to enable the winding up of the trusts governing our existing programmes.

This represented a curtailment and settlement of the retirement benefit programmes. Accordingly, all previously unrecognized gains and losses were credited to the profit and loss account in under U. Our retirement benefit programmes were consolidated under a new trust in June The retirement fund under the new trust is a defined contribution scheme which provides benefits linked to contributions and investment returns made on the scheme.

Contributions under the new scheme are recognized in the year to which the contributions relate. Table of Contents We review the carrying amounts of our long-lived assets, equity investments, goodwill and marketable debt and equity securities for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable or whenever it is required in accordance with relevant accounting standards.

The interpretation of such triggering events requires judgment from management with respect to the circumstances as to whether the events have occurred and whether assessment of the value of the assets is required. Judgment is also exercised to estimate the future cash flows and the useful lives of these assets as well as the discount rates to be used. In view of the expiration of the current Scheme of Control Agreement on September 30, , increasing discussions between us and the Hong Kong Government regarding the post electricity regulatory regime is expected, the outcome of the discussion is unable to predict.

Should there be any modification to the Scheme of Control following its expiration in in a manner which would be unfavorable to CLP Power Hong Kong, our Scheme of Control assets may be impaired. Management will continue to review the carrying amounts of the Scheme of Control assets for impairment should there be events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Table of Contents Deferred Taxation.

Prior to , for the purposes of our Hong Kong consolidated financial statements, we have made full provision for deferred taxation for our Scheme of Control business using the deferral method which is computed using the tax rate enacted at the time the relevant provision was established. For our non-Scheme of Control business, Hong Kong GAAP has historically required a partial provision approach to deferred taxation such that timing differences are accounted for only to the extent that it is probable that a liability or asset will crystallize in the foreseeable future.

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Deferred taxation is provided on temporary differences arising on investments in subsidiary companies, jointly controlled entities and associated companies, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. We have recognized deferred tax assets arising from tax losses and assets revaluations on acquisition of some of our joint ventures. Our current financial models indicate that the tax losses can be utilized in the future, but any changes in assumptions and estimates and in tax regulations can affect the recoverability of the deferred tax assets.

Derivative Instruments and Hedging Activities. We engage in forward foreign exchange transactions, cross currency swaps and options and interest rate swaps transactions to hedge the impact of foreign currency exposures and fluctuations in interest rates.

Our subsidiary, Yallourn Energy in Australia, also uses energy-related derivative instruments to hedge the price risk of sales of electricity and the price risk of purchasing energy to satisfy retail sales contract obligations. We do not recognize such derivatives at fair value, nor do we account for the gains or losses relating to the fair value changes in these derivatives as this is not required under Hong Kong GAAP.

Under U. The fair value of our forward foreign currency contracts is the present value of expected future cash flows related to the difference between the contract rates and the market forward rates. In measuring the swap transactions, the fair value is the net present value of each cash flow discounted at the market quoted swap rates.

Table of Contents We determine the fair value of derivative instruments under U. GAAP based on externally verifiable model inputs and quoted prices, and use market interest rates in determining discount rates. For certain derivative transactions which provide economic hedges but do not qualify for hedge accounting under SFAS No. New Accounting Pronouncements. SFAS No. Interim period disclosures are effective for interim periods beginning after December 15, The adoption of the disclosure provisions does not have an impact on our financial position and results of operations.

Such financial instruments may include mandatory redeemable shares, financial instruments which embody an obligation to repurchase shares or require an issuer to settle the obligation by transferring assets, or financial instruments that embody an unconditional obligation, or, in certain circumstances, an unconditional obligation. We do not have any financial instruments with characteristics of both liabilities and equity as of December 31, FIN 46R requires the consolidation of these entities, known as variable interest entities, or VIEs, by the primary beneficiary of the entity.

Among other changes, the revisions of FIN 46R a clarified some requirements of the original FIN 46, which had been issued in January , b eased some implementation problems, and c added new scope exceptions. We are still in the process of analyzing and interpreting FIN 46R and assessing the impact on our financial position and results of operations.

In analyzing the facts and circumstances, Issue No. Issue No. We believe the adoption of Issue No. It was further provided that the determination of whether an arrangement contains a lease to be made at inception of the arrangement based on all the facts and circumstances and a reassessment is required only if there are certain specific modifications made to the agreement.

Based on the consensus guidance, the power purchase arrangements in place within the Group will need to be evaluated if there is any modification to the existing arrangement to determine whether lease accounting is applicable. GAAP, we would have to record the related power plants as leased fixed assets in our accounts for U.

GAAP purposes with an offsetting liability due to the counterparty. If lease accounting is applied to the other power purchase arrangements within the Group, and we are required to account for the fixed assets already included in our accounts for U. GAAP as a lessor under a capital lease, we would be required to replace the fixed assets with a long term finance receivable.

Table of Contents Results of Operations. Total operating earnings of the Group increased by This was a result of our ongoing investment in our transmission and distribution network to expand and improve services to customers. Earnings from the non-SoC activities increased by Earnings from our SoC business grew 7.

The decrease was mainly due to the reduction from property sales. Changes in the financial statement line items from year to year are described below. The total export sales of 3,GWh in represented our highest sales to the Chinese mainland in any one year since The high growth was the result of the strong economic growth and hot weather in Guangdong Province during The decrease was mainly attributable to the decline in our telecommunications business.

The main reasons for this increase were:. Operating profit as a percentage of turnover decreased from While there was an increase in total interest and finance charges in , a similar capitalization amount was allowed, resulting in a net increase in operating finance costs in The contributions of our major investments were as follows:. Our effective tax rate for was These transfers comprised:. As a result of the consolidation of Yallourn Energy and GPEC, partly offset by lower profit from property sales, our earnings increased by 8.

Our earnings per share of common stock, increased by 8. The increase was mainly due to increased demand for electricity as a result of the continued housing and infrastructure developments undertaken by the Hong Kong Government. Unit sales in Hong Kong grew by 2. The growth in total export sales to 2,GWh in reflected the strong economic growth in Guangdong Province.

Main reasons for this increase were:. While there was an increase in total interest and finance charges in , a higher amount was allowed for capitalization. As a result, the operating finance costs in remained at the level. We repurchased 13 million shares from the open market and 76 million shares in and , respectively. Table of Contents U. GAAP Reconciliation. This accounting practice differs in certain material respects from U.

Net Income in accordance with. Sources of Liquidity. We have financed our operations and business expansions, in particular the capital expenditure programmes of CLP Power Hong Kong and CAPCO and strategic investments in the Chinese mainland and other Asia-Pacific countries, from cash flow generated from operations, short-term borrowings, long-term borrowings and the issuance of debt securities.

Our cash flow generated from operations has been and is expected to continue to be our principal source of liquidity. In our opinion, our working capital is sufficient for present requirements. We expect that customer demand for our electricity will remain stable and may increase as the economy grows.

We do not believe our customer demand in the near future is likely to be negatively affected by rapid technological changes. We have not relied, and we do not plan to rely in the foreseeable future, on off-balance sheet financing arrangements as our source of financing.

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