Investor Relations

Investors’ Questions & Answers Records at 2017 Third-quarter Press Conference

Q: Compared with the second quarter, thetotal generating capacity of the company in the third quarter is better withthe increase of about 10.1 billion kilowatt-hours. In the third quarter, the benchmarkprice of the thermal power and the coal power is up-regulated, but the overall electricityprice of the company decreases. I want to know the proportion of the marketelectricity in the 56.1 kilowatt-hours, the extent of the surrender part of theprofits and which area having the larger surrender part of the profits?

A: The total signed electricity quantity directly traded by thelarge users is 17.59 billion kilowatt-hours in the company in the thirdquarter, accounting for 33.47% of the total generating capacity, which is theproportion of the signed total market electricity quantity.

In addition, in the third quarter, the knock down price is 314.32 yuanper megawatt hour, which is 44.39 yuan per megawatt hour lower than thebenchmark price.

In terms of the areas having the larger decreasing amplitude, thedecreasing amplitude in Fujian is 62.73 yuan per megawatt hour; that inGuangdong is 97 yuan per megawatt hour. That in West Inner Mongolia Power Gridreaches 218.66 yuan per megawatt hour. In addition, that in Shanxi reaches75.79 yuan per megawatt hour.

Q: Can you tell me the earnings of theindependent power source in the first three quarters, and how much is theearning of coal power, gas turbine, hydropower, wind power and photovoltaicpower respectively?

How much is the income from the investmentof the Ningde Nuclear Power Co., Ltd. in the third quarter? The electricityprice of Ningde Nuclear Power Co., Ltd. is adjusted downwards, can you tell mewhether this electricity price is tracked back?

The Ganzi Hydropower Plant is newly put intooperation this year. Can you tell me the performance of it in the first threequarters and can you estimate the performance to be contributed in a year ifthe Ganzi Hydropower Plant is put into production totally?

The collected funds decrease, so we reducethe stocks. I want to confirm whether there is the specific distribution of thestocks in A-share and Hong Kong stocks.

A: During the period from January to September, the profit from thecoal machine segment, gas turbine segment, hydropower segment, wind powersegment, solar energy segment and non-power segment respectively is about 1.8billion yuan, 0.4 billion yuan, 0.59 billion yuan, 0.54 billion yuan, 70million yuan and -20 million yuan.

Q: Does the profit (1.8 billion yuan) of thecoal machine segment include the profit from investment of Ningde Nuclear PowerCo., Ltd.

A: No, it does not.

A: In terms of the Ningde Nuclear Power Co., Ltd., it has achievedthe profit from investment of 0.684 billion yuan in the first three quarters.In terms of the electricity price of Ningde Nuclear Power Co., Ltd., accordingto the relevant document of Fujian Provincial Price Bureau (notices in thedocument started from July 2017), the grid purchase price (tax-inclusive) ofthe No. 1 and 2 machines is 0.43 yuan per kilowatt-hour and remains unchanged;settlement of the No. 3 machine is carried out as per 0.4055 yuan per kilowatt-hourand that of the No. 4 machine is carried out as per 0.3717 yuan per kilowatt-hour.

However, there is no official conclusion as to whether retrospectiveadjustment of the No. 3 and No. 4 machines is carried out or not, the specifictime mode and whether the direct-supplying electricity prices changing in themarket are linked or not. These related issues are still under furthercommunication.

A: With regard to the profits of the Ganzi Hydropower Plant, whichis newly put into operation, in the first three quarters of this year, thecumulative profit from January to September is about 0.24 billion yuan. Withregard to the forecast of the profit and loss for the whole year after all theunits are put into operation, some boundary conditions have not been determinedyet and cannot be locked so far, thus calculation cannot be achieved.

Q: What is the caliber of this profit, thepre-tax profit, or net profit, or net profit attributable to the parentcompany?

A: Pre-tax profit.

Q: Is the caliber of the profit in the coalpower segment the pre-tax profit, too?

Answer: Yes, they all are the caliber of the total pre-tax profit.

Q: For non-public offering of shares, willA-shares and H-shares be adjusted according to the same proportion because ofadjustment of our total amount of the issue?

A: No, it won’t. The resolutions of the Shareholders’ GeneralMeeting are unchanged. The amount of A-shares issued will still not be morethan 2.662 billion yuan, and the amount of H-shares will not exceed 2.794billion yuan. The use of the collected funds has been basically established,and there is no adjustment of the shares between A-shares and H-shares.

Q: October is to be over. Does the companyhave any new information or opinion on the coal and electricity linkage price?

A: On July 1 this year, the National Development and ReformCommission raised some electricity prices. According to the regulations onelectricity price adjustment per year in the linkage policy of coal andelectricity, there is no such expectation as to raise the benchmark price ofcoal machine within the year according to the current situation.

Q: In the third quarter, the company’sgenerating capacity has a relatively obvious year-on-year growth. It is normalthat other peer power generation companies usually generate more electricity inthe third quarter. However, some companies fail to generate more electricity.Our company performs well in the third quarter. What strategies are adopted toincrease the generating capacity? Or the market electricity is more?

A: The growth of generating capacity is firstly driven by the growthof the total electricity consumption of the whole society, which leads to thegrowth of some of our generating capacity, especially makes the growing rate ofthe generating capacity in our region is slightly higher than that of the wholesociety.

The second reason is that the current generating capacity of windpower and hydropower is better than the previous generating capacity. On theone hand, the hydropower inflow this year is significantly higher than that lastyear. In addition, there is also a substantial increase in the third quartercompared with the second quarter, which leads to a growth of 24.95%. And whatis more, the power rationing of wind power in the third quarter is improvedsignificantly; the power rationing degree drops drastically, and the growthrate of the wind power reaches 48%.

Next, a part of thermal power was put into operation in the secondquarter, including PV, wind power. In addition, Ganzi hydropower is put intooperation, the units newly put into operation for which make the generatingcapacity increased to 5.818 billion, and thus leading to significantyear-on-year increase of generating capacity.

The last reason is that through the market operation in the firstthree quarters, the strength of the market input is really enlarged for thecurrent market electricity. The total signing proportion of our marketelectricity is significantly higher than our capacity proportion. There is alsoan obvious increase about 5%.

Due to the integrated effect of the above-mentioned four reasons,the total generating capacity in the third quarter rises sharply.

Q: What does the management layer think ofthe electricity demand in the fourth quarter? In the fourth quarter of thisyear, some heavily polluting industries need to reduce production because of thenational environmental protection. Does the company have seen some changes sofar?

A: from the perspective of the first three quarters, the currentnational economic situation and electricity consumption situation are stillrelatively good. We forecast that the situation should be slightly better thanthat forecasted originally in the fourth quarter. In addition, according to thedata having been completed, it is better than the expectation indeed. Atpresent, the current judgment on the situation of the electricity quantityshould be said to be better than that at the beginning of the year. However,there are also such uncertainties as the production halt due to environmentalprotection in the fourth quarter, including the reduction of production due toenvironmental protection. Judging from the current operation in October, it isnormal basically.

A: As for the industrial production limit due to the seriouspollution, it was proposed a long time ago, and it is not that there are newand bigger actions in the third quarter or in the fourth quarter of this year.Normally speaking, every year, compared with the third quarter, there should bea large fluctuation in the fourth quarter. The generating capacity in thefourth quarter should be at an equal trend level with that in the previousyears, with no major fluctuations.

Q: For the coal market, the coal price inQinhuangdao has had a relatively obvious rise recently. At the same time, thethermal power enterprises have done more for the long-agreement coals and thuscontrolled the cost of coal. However, what are the judgments we now have on thecoal market in future several quarters?

A: According to the current national coal supply-side reform policy,this policy will be sure to be implemented unswervingly, affecting the supplyof coal. It is expected that there will be still a state of tight balance fromthe present to a period of time in the future.

At the same time, combined with a series of measures currentlyimplemented by National Development and Reform Commission to stabilize prices,the price trend of the coal market in the near future should be maintained atthe current price level and will be stabilized.

Q: What is the predicated value of therevenue and profit in the fourth quarter?

A: In view of the fact that some of the boundary conditions have notyet been finalized, we will provide the predicated value after the boundaryconditions have been clearly identified.

Q: How much is the unit fuel cost of thecoal machine in the first, second and third quarters respectively in the first9 month? How much is the unit price of the standard coal in the first, secondand third quarters respectively in the first 9 month?

How many contract coals are included in thetotal coals of the company in the first 9 months?

A: excluding the gas turbine, the unit fuel cost in the period from Januaryto September is about 185 yuan per megawatt hour. That in the first threequarters is basically the same with slight fluctuation. That in the firstquarter, the second quarter and the third quarter respectively is 185 yuan permegawatt hour, 183 yuan per megawatt hour and 187 yuan per megawatt hour.

The cumulative standard coal unit price is about 590 yuan in thefirst three quarters. From the beginning of the year to now, there is a gradualdownward trend. The unit price of the standard coal respectively is about 610yuan, 580 yuan and about 580 yuan in the first quarter, the second quarter andthe third quarter. Thus, that in the second quarter and in the third quarter isthe same basically.

A: in terms of the long-agreement coal, in this year, it plays arole as a stabilizer and a ballast stone in controlling the cost. In the wholeyear, the proportion of the long-agreement coals in the total purchase amountis about 40% in our company.

Q: The quantity of the contract coalsaccounts for about 40% in the first 9 months in the company. Can you tell methe price of the contract coal and the price of the market coal?

A: In the third quarter, the price of the market coal is 150 yuanper ton higher than that of the contract coal on average. In the middle of thisyear, there was not a big difference between the price of the market coal andthat of the long-agreement coal in June, which was about 10 yuan per ton. Thegap was also not large at the beginning of the year and was 20 yuan per ton.The price of the contract coal is lower than that of market coal throughout theyear.

Q: The coal and electricity linkage will notbe restarted this year. Can you tell me whether it is likely to be restarted onJanuary 1, 2018? How much is the expected rate of restart? So far, the earningin the third quarter has been very good. Does the company think that the most difficultperiod has passed and that the situation in next year will be better than thatin this year?

A: Coal and electricity linkage depends on the direction of themacroeconomic policy of the whole country. So far, the company has not receivedany news from the government regarding the coal and electricity linkage andthere has been no expectation for the coal and electricity linkage of nextyear.

A: About the business situation: we understand that the businesssituation of our company in the first three quarters of this year is relativelybetter than that originally expected, due to coal price control, grabbing generatingcapacity and financial cost control etc.

In particular, in terms of grabbing generating capacity, we are moresatisfied with the generating capacity situation in the third quarter. Relevantdepartments have just answered this question and the most important increase isbrought by growth of new hydropower machines. In addition, we have strengthenedthe marketing management, thus among the companies in the same industry, we mayhave grabbed more market electricity than others, including some policypreferences. Compared with other listed companies, we can see that we are over200 hours more than the average level of the local power grid, which is alsothe main reason why we have achieved relatively good results this year.

For the fourth quarter, compared with the first three quarters,there will be no major changes in the general trend of previous years unlessthere is a big policy. Of course, under the background of de-capacity,de-stocking, de-lever, descending cost and filling short board, the overallbusiness and the national macro-economy are still in a relatively tightenedcondition. However, we also see that the national economy, especially thegrowth rate of the power consumption of the whole society has risen from 3-3.5%estimated at the beginning of the year to 6.9% of the first three quarters and thatin the first six months was 6.3%. From the situation of the three quarters, thetrend is good.

For the next year, the company thinks that the rate of economicgrowth may continue this state. The coal price level is still in a state ofsustained high operation. At the performance press conference at the beginningof the year, this price was also mentioned because this coal price has risensince the second half of last year; it is in a steady state basically in theperiod from January to September this year; although it seemed to have declinedin the second quarter, it rises again in the third quarter, but it does notreach the level of the first quarter. This coal price is actually much higherthan the reasonable range of 535 yuan per ton for coal with 5500 large caloriesmentioned by the National Development and Reform Commission during themacro-control. Now, the price of the steam coal in Qinhuangdao is about 580yuan per ton.

It is conservatively estimated that the coal price will bemaintained at this level without large growth degree and even may decrease inthe next year, which is a good factor. However, there are also unfavorablefactors. With the deepening of the power system reform, the market electricityquantity will increase at a certain proportion, but this proportion will not betoo large. From the perspective of the change of the utilization hours, it isexpected that the utilization hours will reduce this year. But, in fact, theelectricity consumption increases in the whole society, making the utilizationhours in this year basically the same as that in last year. Thus, I think thatthere is a large possibility that the total electricity quantity in this yearand that in the next year will be the same basically.

Q: How many is the company’s capacityutilization rate (utilization hour) in the third quarter?

A: the utilization hours are 3244 hours in the first three quarters.

Q: Can you tell me whether there is a spacefor increase of profit in the fourth quarter and how large space is for theprofit increase?

A: According to the laws of the previous years, the coal price inthe fourth quarter will increase compared with that in the third quarter, dueto the demands for coal storage in winter. But this year may be special, due tocoal storage in winter and influence of the inventory. Now, in fact, theinventory level of the national coal power plants basically reaches 20 days. Probablybecause of the panics on the coal in the previous period and some policies on electricityguarantee for politics, people have the large actions on coal storage. Increaseof inventory plays a back action on the increase of coal price.

But, the national policy on de-capacity is still not sluggish atthis moment. Therefore, in the fourth quarter, the coal price will maintain atthis state basically without large fluctuation. It may slightly rise or drop.

In terms of the electricity quantity, the total quantity in thefourth quarter is slightly lower than that in the third quarter every year, thereasons of which are as follows: In July and August, there is more electricityconsumption by the air conditioners; but in winter, the heat supply loads inNovember and December are relatively high. When the peak, i.e. December, comes,the heat supply load reaches the high load in July and August in summer. However,in fact, because it is a short time after all, the heat supply period may notbegin until late November. Generally speaking, the electricity consumption inthe fourth quarter should be slightly less than that in the third quarter.

Q: the average unit price of the standardcoal is much less than that of other thermal power enterprises. Can you tell methe main reasons?

A: We have adopted three measures to control coal price:

Firstly, we enhance the strength to purchase the long-agreementcoals.

Secondly, since this year, we have enlarged the work strength ofcoal mixture burning, especially there is a certain year-on-year increase forthe quantity of the imported coals.

Thirdly, we now have the largest pithead power plant in the world, i.e.Tuoketuo Pithead Power Plant, whose role in the coal price stabilization andpressure drop is very obvious.

Answer: Tuoketuo Pithead Power Plant mentioned just now has therelatively large capacity. It has 10 units in total, including 8 units with the0.6 million capacity and 2 units with the 0.66 million capacity. Its coal pricein the Inner Mongolia region is relatively low.

Q: from the perspective of the wholesociety, the total power generation speed of the thermal power increases fasterthan that of the power consumption by the whole society, can you tell me thereasons. And, will the trend continue in the next year?

A: From the overall perspective, the growth rate of the thermalpower in this year is relatively high actually. From the current perspective,the social power consumption in this year is better than that expected. Fromthe perspective of Datang International itself, after some of our high-capacityand high-parameter units are put into operation, the unit utilization rate ofthermal power is relatively high indeed, and thermal power quantity rises moreobviously

In addition, influenced by the incoming water, hydropower isrelatively weak in the first and second quarters, which also has a catalyticeffect on our thermal power. Mainly through these two aspects, what we see nowis that the growth rate of thermal power is obviously higher than that expected.

A: I want to make a supplementary. The growth rate of our company ishigher than that of others, which is caused by three factors: Firstly, there isinconformity between the structure of the region where our company is locatedand the average structure of the whole country. The growth speed of the regionwhere our company is located is slightly higher than the average growth speedof the whole country, but the influence is not large.

There are two other factors. One is the change of our new units thatare put into operation this year, which has led to an increase in the capacityof the company’s units. The new units that are put into operation this year includethe two units with 0.66 million capacity in Ganzi Hydropower Plant and TuoketuoPithead Power Plant. Thus, the capacity increase degree of the company isslightly higher than the overall increase degree of the whole country.

The other is the marketing work. The company actually has someperformances in this aspect. In all regions, the company intensifies itsmarketing efforts for grabbing generating capacity and gets a relatively goodresult.

For the continuity of electricity quantity growth in the next year,in terms of the company’s marketing work experience, it can be sustained, butas the market competition intensifies, this continuity will face greaterchallenges.

In the ten areas where we are located, the change in the regionalgrowth rate will probably still exist next year. We can see that the growth ofnational electricity demand increases from 3% expected at the beginning of theyear to 6.9% of the first three quarters, and this change is likely to continuenext year.

Q: Previously, National Development andReform Commission and National Energy Administration mentioned that there is noplanned electricity quantity but totally market electricity quantity for thenew coal electricity units put into operation in January 2017 or after March2017. Can you tell me whether this stipulation is implemented on the unitsnewly put into operation this year?

A: Regarding this policy, there are two statements in the industry.One is that there is no planned electricity for units approved after March2015. The other is that there is no planned electricity for units put intooperation after March 2017. However, in fact, what is implemented is that thereis also no planned electricity for the new units approved in March 2015. Tillnow, we have not seen a case where such a unit is subject to this policy.

Q: Can you tell me the proportion of ourcompany’s market electricity quantity in the first three quarter, the situationcompared with that in last year and give me an expectation to the future?

A: total market electricity proportion in the first three quartersof this year reaches 25%, with an increase of about over 90% compared with lastyear. That is to say, market electricity quantity nearly doubles compared withthat of last year.

From the current view, the proportion in the fourth quarter isbasically slightly higher than that in the first three quarters. With theadvancement of the national electricity market reform policy, the proportionwill gradually increase next year. The proportion in the next year is expectedto be higher than that in this year.

Q: What is the approximate percentage ofcombined heat and power generation units in the coal power units? How much canthe benefits of the combined heat and power generation unit be increased comparedwith the non-combined heat and power generation unit, for example, how much isthe earning per year for 300,000 or 600,000?

Can you tell me the situation of the coalpower units at the group level now, or what are the areas of loss?

A: In Datang International, the installed capacity proportion of thecoal-fired thermoelectric units has reached 34.22%. According to the guidancespirit of the National Development and Reform Commission, the proportion ofcoal electricity is required to reach 28% in 2020. We have far exceeded thisproportion.

Q: can you tell me the difference betweenthe earnings of the combined heat and power generation unit and non - combinedheat and power generation unit in Datang Group?

A: Qualitatively speaking, it has several aspects. On the one hand,it makes the coal consumption of electricity supply apportioned. On the otherhand, during the heat supply season, the utilization hours of our heat supplyunits are much higher than that of non-heat supply units. So far, we have notconducted the comparison of the same unit in aspects of non-heat supply andheat supply according to the method you say.

A: we have not grasped the detailed data of the whole units of DatangGroup, thus we cannot answer your question. If you are in great need of thedata, please contact the Securities and Capital Operation Department of ourcompany after the conference.

Q: can you tell me the respective averageutilization hours in the coal power segment, hydropower segment and wind powersegment?

Can you tell me whether there are somechanges between the overall fuel cost and utilization hours in the period fromnow to the end of October and those guided at the beginning of the year, thatis, please tell me the newest guideline value of the coal price and theutilization hours.

Can you introduce the plan on the unit newlyput into operation in this year and next year?

A: For the first question, the full caliber of the utilization hoursin the company in the first three quarter is 3244 hours, and that of thethermal power is 3504 hours. That of coal power, gas turbine, hydropower, windpower and PV respectively is 3504 hours, 3621 hours, 2182 hours, 2560 hours,1551 hours and 1202 hours. This is the specific situation of hours utilized oneach segment.

Q: can you introduce the year-on-yearchange?

A: the full-caliber year-on-year increase is 202 hours, of whichthat of thermal power, coal power, gas turbine, hydropower, wind power and PVrespectively is 352 hours, 405 hours, -263hours, -314 hours, 140 hours and -81hours.

A: the accumulated total put-into-operation in the first threequarters of 2017 is 2756.5 megawatt hours. It is expected that theput-into-operation capacity in the fourth quarter of 2017 is 1020 MW. This isthe situation of 2017.

In 2018, the capacity of the planned put-into-operation powergeneration projects is 2732.4MW, of which that of thermal power and gasturbine, and wind power and PV respectively is 2564.4MW and 168MW.

A: In terms of the guideline of the whole year, the fuel price is inthe high operation and will fluctuate around the current price level.

For the utilization hours, it should be said that in the fourthquarter, utilization hours in October is relatively low according to the lawsof previous years, but with the start of the heat supply period in November andDecember, heat supply units increase, resulting in the increase of the heatsupply loads, thus the overall utilization hours will recover. As a whole, theelectricity quantity in the fourth quarter should be basically the same as orslightly lower than that of the third quarter.

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