HNP Huaneng Power International Inc

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

SUMMARY OF OPERATING RESULTS

The Board of Directors (the “Board”) of Huaneng Power International, Inc. (the “Company” or “Huaneng International”) hereby announces the audited operating results of the Company and its subsidiaries for the year ended 31 December 2021.

For the twelve months ended 31 December 2021, the Company realized consolidated operating revenue of RMB204,605 million, representing an increase of 20.75% compared to the same period last year, and net loss attributable to equity holders of the Company amounted to RMB10,636 million, representing a decrease of 547.27% as compared with the same period last year. Losses per share amounted to RMB0.81.

The Board proposed to declare no cash dividend for each ordinary share of the Company held by shareholders.

Details of the operating results are set out in the financial information.

BUSINESS REVIEW OF YEAR 2021

In 2021, facing up to the impacts and test of epidemic and the market environment of significant price increase in the coal market, the Company made all-out efforts to coordinate the work of epidemic prevention and control, production and operation, and transformation and development, thus the safety production and supply of electric power and thermal power maintained stable, the pace of transformation and upgrading accelerated, and innovation made a new progress. We completed the major objectives of the year and continued to fulfill the responsibility of providing sufficient, reliable and eco-friendly energy to the community.

For the twelve months ended 31 December 2021, the Company realized operating revenue of RMB204,605 million, representing an increase of 20.75% as compared with the same period last year. Net loss attributable to equity holders of the Company amounted to RMB10,636 million, representing a decrease of 547.27% as compared with the same period last year. Losses per share amounted to RMB0.81.

As at the end of 2021, net assets per share of the Company amounted to RMB4.12, representing a decrease of 20.62% as compared with the same period last year.

The Audit Committee of the Company convened a meeting on 21 March 2022 and reviewed the 2021 annual results of the Company.

In 2021, with the principal of maximization of the overall interests, the Company strengthened the market analysis, adhered to the coordination of the volume and price, made best efforts on the market trading, strived to increase effective power generation, took advantage of the opportunities from the policy of expanding the floating range of electricity price to optimize the marketing strategy in a timely manner and both of volume and price raised in electricity and heat supply fields. Total power generated by the Company’s domestic operating power plants on consolidated statements basis amounted to 457.336 billion KWh, representing a year-on-year increase of 13.20%. The electricity sold amounted to 430.165 billion KWh, representing a year-on-year increase of 13.23%. The annual average utilization hours of the Company’s domestic power plants reached 4,058 hours, representing a year-on-year increase of 314 hours. The utilization hours of coal-fired power generating units was 4,488 hours, representing a year-on- year increase of 429 hours. The utilization hours of most of the Company’s coal- fired power plants were leading in its corresponding area respectively. Total heat supplied by the Company amounted to 297 million GJ, representing a year-on- year increase of 12.64%.

In 2021, the Company procured an aggregate of 203 million tons of coal. In the context of the tense situation of coal supply and demand market, the Company paid close attention to the real time market trend, took full advantage in the policy support, proactively seized the market opportunity, optimized procurement strategy and regional supply structure, strengthened the cooperation with major coal mines, identified high-quality low-cost resources on an advanced basis, so as to control the procurement cost of fuel coal. However, affected by the significant increase in the coal price, the fuel cost for sales of power of the Company was RMB316.36/MWh throughout the year, representing a year-on-year increase of 51.32%.

The Company maintained the leading position among major domestic power enterprises in terms of safety production, technical and economic and energy consumption indicators throughout the year. In 2021, the average equivalent availability ratio of the domestic thermal generating units of the Company was 93.26%, coal consumption of power supply of 290.69g/kWh and the house consumption rate of plants was 4.34%. With respect to air pollution emissions, the power generation companies affiliated to the Company have carried out ultra- low-emissions transformation as planned with marked results. All of them have met or outperformed the national emission standards. With respect to treatment of wastewater discharge and coal yards and ash yards, the Company has allocated funds to carry out environmental technological transformation projects such as wastewater treatment, coal yard closure, and ash yard transformation in power plants in key regions. All power plants have accelerated environmental protection transformation projects to ensure that pollutant emissions meet the requirements under pollution discharge permits and other ecological and environmental protection policies.

During the year, the controlled generation capacity of the newly commissioned thermal generating units, wind generating units, solar power units and biomass units was 2,000 MW, 2,403.45 MW, 799 MW and 30 MW, respectively. As of 31 December 2021, the Company’s controlled and equity-based generation capacity was 118,695 MW and 103,875 MW, respectively.

Tuas Power Ltd., a wholly-owned subsidiary of the Company in Singapore, maintained safe and stable operation of the generation units throughout the year. The total market share of Tuas Power in the power generation market for the whole year was 19.2%. The Business in Singapore in 2021 recorded a pre- tax profit of RMB163 million, representing an increase of RMB32 million as compared with the same period of last year.

Sahiwal coal-fired power plant is the first large-scale coal-fired power plant put into operation in the China-Pakistan Economic Corridor. It greatly eased the power shortage in Pakistan. The Business in Pakistan recorded a pre-tax profit of RMB776 million for 2021, representing an increase of RMB38 million as compared with the same period of last year.

PROSPECTS FOR 2022

In 2022, the Company will continue to promote the implementation of the development strategy, actively respond to changes in the electricity, coal and capital markets, and strive to complete the annual production and operation tasks.

In terms of electric power construction, adhering to the green development concept, the Company will spend much effort to develop clean energy, optimize thermal power structure and speed up transformation and upgrading to achieve high-quality development by centering efficiency by means of modern management, under the support of science and technology innovation and on the basis of safe development.

In terms of electric power generation, the Company earnestly implements the regulations and policies in the field of safety production, and constantly optimizes management to prevent safety accidents. The Company conducts appraisal for the generator sets to comprehensively improve the lean level of facility management. While operating and maintaining the clean energy power generation system, the Company attaches importance to the basic and adjusting roles of existing thermal power generating unit in the energy safety system of the society, actively conducts life extension appraisal and transformation, and maintains the health level of standby set for emergency. The Company always focuses on the economy and flexibility of the power generation assembly and meet the new market demands through technical transformation; actively develops the heat supply industry to upgrade integrated energy services; deeply studies the application prospect of biomass coupled power generation and grasps the market opportunities; and earnestly governs the environment protection well as demanded by the ecological civilization construction of various regions.

In terms of electric power marketing, the Company will take the principle of maximizing the overall benefit, strengthen market analysis, insist on quantity and price coordination, make every effort to conduct market transactions, and strive to generate more and more efficient power. The Company will actively respond to the market reform of electricity, promote the construction of institutional mechanism and strengthen the training of market trading talents. The Company will fully develop the electricity sales market, improve the operation level of the energy sales company, and further promote the optimization of carbon market transactions, striving to achieve an annual domestic power generation of 465 billion kWh approximately.

In terms of fuel, the Company will closely track the changes in policies and domestic and international coal markets, and strive to promote the signing of medium and long-term coal contracts to ensure strict compliance. The Company will continue to optimize the supply structure and achieve the best procurement cost by taking into account factors such as resource origin, transportation mode and coal type matching. The Company will strengthen inventory management, play the role of light storage and high consumption, buy low and use high, and strive to reduce procurement costs.

In terms of capital, the Company will keep an eye on changes in the international and domestic capital markets and give full play to its credit and management advantages, seize opportunities brought by the green finance policy, ensure the smooth main credit financing channel, increase the issuance in the interbank market, actively explore innovative financing tools in the capital market, broaden financing channels, and strive to reduce capital costs while ensuring capital security.

The Company will further enhance the awareness of opportunities and risks, seize the development opportunities, effectively deal with challenges, maintain strategic determination, make concerted efforts to overcome difficulties, coordinate safety and security, quality and efficiency improvement, transformation and upgrading, reform and innovation, and accelerate the pace of creating an international first-class listed power generation company by.

OPERATING AND FINANCIAL REVIEWS AND PROSPECTS

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Prepared under International Financial Reporting Standards (“IFRS”))

General

The principal activities of the Company are construction, operation and management of large power plants within China. As of 31 December 2021, the Company had a controlled installed capacity of 118,695 MW and an equity-based installed capacity of 103,875 MW, of which approximately 22.39% was from clean energy sources (gas turbine, hydro, wind and photovoltaic power generation). The Company located its power plants in 26 provinces, autonomous region and municipalities within China; the Company also owns a wholly owned power enterprise located in Singapore and invests in a power enterprise located in Pakistan. The Company is among the biggest listed power companies in China.

For the year ended 31 December 2021, the operating revenue of the Company amounted to RMB204,605 million, representing an increase of 20.75% over the same period of last year. The net loss attributable to equity holders of the Company was RMB10.636 billion, representing a decrease of 547.27% over the same period of last year; the losses per share was RMB0.81.

The electricity sold by the Company’s domestic power plants for the year ended 31 December 2021 is as listed below (in billion kWh):

The increase in the Company’s electricity sold was mainly attributable to the following factors: (1) the electricity consumption of the whole society in the year 2021 stayed at a high level, which led to a sharp increase in the power generation on the supply side, among which the power generation by our plants in Chongqing, Guangdong, Zhejiang, Shanghai, Fujian, Hunan, Jiangsu, Gansu and Hubei experienced a significant increase, (2) given the hydro-power generation was lower than expected, coal-fired power generation, which accounted for a substantial portion of the Company’s power generation capacity, maintained a high rate increase; meanwhile, the Company’s coal-fired power plants operated at high load during the winter peak hours, which further led to the increase of our power generation, and (3) the Company has been making further efforts on promoting green and low carbon operation, and the Company’s new energy power generation increased significantly.

For the year ended 31 December 2021, the accumulated power generation of Tuas Power Ltd., the Company’s wholly owned subsidiary in Singapore, accounted for a market share of 19.2%, representing a decrease of 2.2 percentage points from the same period last year.

In respect of tariff, the Company’s domestic average tariff (inclusive of taxes) for the year ended 31 December 2021 was RMB431.88 per MWh, increased by 4.41% from last year (while average tariff (exclusive of taxes) for the same period increased by 4.41% to RMB382.19 per MWh). Sinosing Power Pte Ltd (“Sinosing Power”)’s average tariff for 2021 was RMB594.46 per MWh, representing an increase by 12.03% from last year.

In respect of fuel costs, due to the sharp increase in thermal coal prices, the Company’s fuel cost per unit of power sold by domestic coal-fired power plants increased by 51.32% to RMB316.36 per MWh from last year.

Influenced by the forgoing factors, for the year ended 31 December 2021, the Company recorded an operating revenue of RMB204.605 billion, representing an increase of 20.75% from RMB169.446 billion of last year, and the operating costs and expenses of RMB210.286 billion, representing an increase of 35.03% from RMB155.734 billion of last year, and the net loss before income tax expense was RMB15.121 billion, representing a decrease of 416.74% from the net profit before income tax of RMB4.774 billion of last year.

Operating revenue mainly consists of revenue from electricity sold. For the year ended 31 December 2021, the consolidated operating revenue of the Company and its subsidiaries amounted to RMB204.605 billion, representing an increase of 20.75% from RMB169.446 billion for the year ended 31 December 2020. The operating revenue from domestic operations of the Company increased by RMB28.679 billion over the same period of last year, while the operating revenue generated from newly acquired entities and newly operated generating units was RMB7.7 billion. The increase of operating revenue from the domestic operations of our existing generating units of RMB20.979 billion was mainly due to the simultaneous increase of our electricity sold within China and domestic average tariff.

The operating revenue from the operations of the Company in Singapore increased by RMB5.368 billion over the same period of last year, representing a 48.94% increase, which was mainly attributed to the increase in the tariff. The operating revenue from the operations of the Company in Pakistan increase by RMB1.112 billion, representing an increase of 26.93% compared to the same period last year, mainly due to the increase in the power generation by 24.92% led by the increase in the domestic electricity demand in Pakistan.

Tax and levies on operations mainly consist of surcharges of value- added tax. According to relevant administrative regulations, these surcharges include City Construction Tax and Education Surcharges calculated at prescribed percentages on the amounts of the value-added tax paid. For the year ended 31 December 2021, the tax and levies on operations of the Company and its subsidiaries were RMB1.686 billion, representing a decrease of RMB108 million from RMB1.794 billion for the same period of last year, of which the tax and levies on operations attributable to newly acquired entities and new generating units accounted for RMB18 million.

For the year ended 31 December 2021, the total operating expenses of the Company and its subsidiaries was RMB210.286 billion, representing an increase of 35.03% from the same period last year. The operating expenses in domestic operations of the Company increased by RMB47.988 billion, or 33.72%, from the same period last year, of which the newly acquired entities and the new generating units accounted for RMB4.407 billion; the costs attributable to the existing entities increased by RMB43.581 billion, which was primarily attributable to the increase in the fuel cost led by the sharp increase in thermal coal purchase price.

The operating expenses from the operations in Singapore increased by RMB5.215 billion, or 48.66%, from the same period last year, which was mainly due to the increase in the tariff in Singapore, which in turn increase the operating cost of purchasing electricity. The operating expenses from the operations in Pakistan increased by RMB1.349 billion, which was mainly due to increase in fuel costs led by the increase in coal purchase price.

Fuel costs account for the majority of the operating expenses for the Company and its subsidiaries. For the year ended 31 December 2021, fuel costs of the Company and its subsidiaries increased by 64.71% to RMB146.539 billion from RMB88.966 billion for the year ended 31 December 2020. The fuel costs from domestic operations of the Company and its subsidiaries increased by RMB57.197 billion, which was primarily attributable to the sharp increase in thermal coal purchase price. The fuel costs of the newly acquired entities and new generating units were RMB2.740 billion and the fuel costs of the existing generating units increased by RMB54.457 billion from same period last year. Fuel costs in Singapore increased by RMB0.367 billion from the same period last year, mainly due to increased fuel costs as a result of increased natural gas price. The fuel cost per unit of power sold by the Company’s domestic power plants increased by 51.32% to RMB316.36/MWh from RMB209.07/MWh in 2020.

For the year ended 31 December 2021, the maintenance expenses of the Company and its subsidiaries amounted to RMB4.504 billion, representing a decrease of RMB498 million from RMB5.002 billion for the year ended 31 December 2020. The maintenance expenses of the Company’s domestic operations decreased by RMB481 million compared to the same period last year. The maintenance expenses of operations in Singapore decreased by RMB17 million compared to the same period last year.

For the year ended 31 December 2021, depreciation expenses of the Company and its subsidiaries stayed stably at RMB22.270 billion, compared to RMB22.146 billion in the year ended 31 December 2020. The depreciation expenses of domestic operations increased by RMB283 million compared to the same period last year, of which the depreciation costs incurred by the newly acquired entities and new generating units was RMB1.326 billion. The depreciation expenses of the operations in Singapore decreased by RMB159 million compared to the same time last year, mainly due to the maturity of certain assets in the year of 2021.

Labor costs consist of salaries to employees and contributions payable for employees’ housing funds, medical insurance, pension and unemployment insurance, as well as training costs. For the year ended 31 December 2021, the labor costs of the Company and its subsidiaries amounted to RMB16.107 billion, representing an increase of RMB1.604 billion from RMB14.503 billion for the year ended 31 December 2020. This is mainly attributable to the implementation of social security fee reduction in various regions in 2020 due to the COVID-19, and the increase of average social wage and social security contribution base in 2021, which resulted in a year-on-year increase in social security related expenses in 2021. Labor costs for Singapore operations increased by RMB14 million compared to the same time last year.

Other operating expenses include environmental protection expenses, insurance premiums, office expenses, amortization, Tuas Power’s electricity power purchase costs, impairment losses, government subsidies and net losses on disposal of properties, plant and equipment. For the year ended 31 December 2021, other operating expenses of the Company and its subsidiaries was RMB20.866 billion, representing a decrease of RMB4.251 billion from RMB25.117 billion for the year ended 31 December 2020. The other operating expenses from the Company’s domestic operations decreased by RMB10.601 billion mainly due to the decreased impairment recorded for the period, detailed information for which can be found in Note 12 to the financial statements prepared in accordance with IFRS of this announcement. Other operating expenses of the operations in Singapore increased by RMB5.001 billion compared to the same period last year. Other operating expenses of the operations in Pakistan increased by RMB1.349 billion compared to the same period last year, mainly due to the increased fuel costs led by the increase in coal price.

Financial expenses consist of interest expense, bank charges and net exchange differences.

For the year ended 31 December 2021, the interest expenses of the Company and its subsidiaries were RMB8.798 billion, representing a decrease of 4.38% from RMB9.201 billion for the year ended 31 December 2020. The interest expenses from the Company’s domestic operations decreased by RMB186 million. The interest expenses from the newly acquired entities and new generating units were RMB836 million and those incurred by the existing entities in China decreased by RMB1,022 million, which is largely attributable to lower funding costs.

The interest expenses of Singapore operations decreased by RMB88 million compared to the same period last year.

For the year ended 31 December 2021, the Company and its subsidiaries recorded a net loss of RMB40 million from net exchange difference and bank charges, representing an increase of RMB141 million in loss compared with the net gain of RMB101 million for the year ended 31 December 2020.

The operations in Singapore recorded net loss of RMB88 million in exchange changes and bank charges, representing an increase of RMB277 million in loss from the net gain of RMB189 million for the year ended 31 December 2020, mainly due to increase in US dollar-to-Singapore dollar exchange rates. The operations in Pakistan recorded net gain of RMB51 million in exchange losses and bank charges in 2021, representing an increase in net gain of RMB140 million as compared to a net loss of RMB89 million in 2020.

For the year ended 31 December 2021, the share of profits less losses of associates and joint ventures was RMB0.804 billion, representing a decrease of RMB970 million from RMB1.774 billion of last year, mainly due to the decreased profits of one of our associates, Shenzhen Energy Group Co., Ltd.

For the year ended 31 December 2021, the Company and its subsidiaries recognized income tax expenses of minus RMB1.930 billion, representing an decrease of RMB4,093 million from RMB2.163 billion for the year ended 31 December 2020. Our income tax expenses for our domestic operation decreased by RMB4.133 billion due to the loss incurred for our domestic operations. The income tax expenses for the operations in Singapore increased by RMB43 million.

For the year ended 31 December 2021, the Company and its subsidiaries achieved a net loss of RMB13.191 billion, representing a decrease of RMB15.802 billion, or 605.21%, from a net profit of RMB2.611 billion for the year ended 31 December 2020; the net loss attributable to equity holders of the Company was RMB10.636 billion, representing a decrease of RMB13.014 billion from the net profit attributable to equity holders of the Company of RMB2.378 billion for the year ended 31 December 2020.

The profit attributable to equity holders of the Company from its domestic operations decreased by RMB13,014 million, mainly due to the sharp increase in the thermal coal purchase price. The net profit attributable to equity holders of the Company from its operations in Singapore was RMB123 million, representing a decrease of RMB15 million as compared to the same period last year. The net profit attributable to equity holders of the Company from its operations in Pakistan was RMB305 million, representing an increase of RMB17 million.

The Company’s recorded profit from its non-controlling interests decreased to a loss of RMB2,555 million for the year ended 31 December 2021 as compared to the profit of RMB233 million for the year ended 31 December 2020, mainly attributable to the decline in net profit and increase in net loss of the Company’s non-wholly owned subsidiaries.

As of 31 December 2021, consolidated total assets of the Company and its subsidiaries was RMB500.771 billion, increased by 11.31% from RMB449.905 billion as of 31 December 2020; total assets of the domestic operations increased by RMB50.498 billion to RMB460.280 billion, including a net increase of RMB20.952 billion in non-current assets, which is mainly attributable to new construction outweighing the depreciation and leading to an increase in assets, a net increase in inventory of RMB9.993 billion, which is mainly attributable to the increased coal price and the increased replenished coal inventory of some power plants controlled by the Company, aiming to guarantee coal supply during seasons and to meet the demand of stable energy supply as instructed by NDRC policy, and a net increase in account receivables of RMB4.721 billion, which was mainly attributable to increases in revenues and receivables of renewable energy subsidies.

As of 31 December 2021 total assets of the operations in Singapore were RMB27.088 billion, representing an increase of RMB222 million from the same period last year. Non-current assets decreased by RMB1.239 billion to RMB22.567 billion.

As of 31 December 2021, total assets of the operations in Pakistan were RMB13.403 billion, representing an increase of RMB146 million from the same period last year. Non-current assets decreased by RMB755 million from last year to RMB8.298 billion.

As of 31 December 2021, consolidated total liabilities of the Company and its subsidiaries were RMB367.213 billion, representing an increase of 23.11% from RMB298.288 billion as of 31 December 2020.

As of 31 December 2021, interest-bearing debts of the Company and its subsidiaries totaled RMB297.703 billion. The interest- bearing debts consist of long-term loans (including those maturing within a year), long-term bonds (including those maturing within a year), short-term loans, short-term bonds and lease liabilities (including those maturing within a year).

As of 31 December 2021, the total liabilities of the operations in Singapore were RMB15.200 billion, representing an increase of 0.72% from RMB15.092 billion as of 31 December 2020. As of 31 December 2021, the total liabilities of the operations in Pakistan were RMB9.596 billion, representing a decrease of 1.40% from RMB9.732 billion as of 31 December 2020.

Excluding the impact of profit and profit appropriations, total equity attributable to the equity holders of the Company decreased by RMB16.798 billion as of 31 December 2021 as compared to 1 January 2021, resulting from a decrease of RMB10.934 billion arising from comprehensive net loss, a decrease of RMB2.826 billion arising from dividends, a decrease of RMB2.139 billion arising from the payments of interests for other equity instruments and a decrease of RMB899 million due to other reasons. Non- controlling interests decreased by RMB1,260 million in 2021.

Formula of the financial ratios:

The current ratio and quick ration as of 31 December 2021 increased due to the increase of current assets as of the year end outweighing the increase of current liabilities, and the increase of current assets resulted from the increase in the operating revenue and accounts receivable led by the increase in the receivables of new energy subsidies, as well as the increased coal price and the increased replenished coal inventory of some power plants controlled by the Company, aiming to guarantee coal supply during seasons and to meet the demand of stable energy supply as instructed by NDRC policy. The ratio of liabilities to shareholder’s equity as of 31 December 2021 increased due to the outflow of cash used in operating activities and increase in debts for the purpose of our operation and construction activities in the ordinary course of our business. The multiples of interest earned was negative mainly attributable to the increased coal price, thus leading to the operating loss of domestic market.

For the year ended 31 December 2021, net cash provided by operating activities of the Company and its subsidiaries was RMB6.033 billion, representing a decrease of 85.63% from last year, mainly attributable to the increased coal price, thus leading to the operating loss of domestic market, which in turn led to a substantial decrease in cash inflow provided by operation activities. The net cash provided by operating activities in Singapore was RMB1,751 million. The net cash provided by operating activities in Pakistan was RMB605 million. The net cash used in investing activities was RMB42.276 billion for the year ended 31 December 2021, representing an increase of 0.09% from last year, mainly due to the increase in the construction investments, including purchase of non-current assets, construction expenditure and construction material procurement. The net cash provided by financing activities was RMB39.386 billion for the year ended 31 December 2021, representing an increase of RMB2,083.26% billion from the last year, which was mainly due to the increase of net financing amounts of the Company for the year. As of 31 December 2021, the cash and cash equivalents of the Company and its subsidiaries denominated in RMB, Singapore dollar, U.S. dollar and other currencies were RMB13.879 billion, RMB699 million, RMB822 million, and RMB155 million, respectively.

As of 31 December 2021, net current liabilities of the Company and its subsidiaries were approximately RMB93.927 billion. Based on the Company’s proven financing record, readily available banking facilities and sound credibility, the Company believes it is able to duly repay outstanding debts, obtain long-term financing and secure funding necessary for its operations. The Company has also capitalized on its good credit record to make short-term loans at relatively lower interest rates, thus reducing its interest expenses.

The actual capital expenditure of the Company in 2021 was RMB43.874 billion, which was mainly used for capital construction and renovation expenditures, including RMB3.788 billion for Zhuanghe Wind-power, RMB3.363 billion for Yantai New Energy, RMB3.288 for Clean Energy Tongyu, RMB2.018 billion for Pinghu Offshore, RMB1.651 billion for Ruijin Power, RMB1.402 billion for Jiutai Power, RMB1.284 billion for Shidongkou I, RMB1.233 billion for Qingdao Co-generation, RMB1.165 billion for Daqing Ranghulu, RMB1.078 for Dalian Co- generation, RMB1.070 billion for Da’an Clean Energy, RMB921 million for Zhejiang Cangnan Offshore, RMB851 million for Yangpu Co-generation, RMB821 million for Jiuquan Wind-power, RMB791 million for Poyang Luohong, RMB761 million for Shengdong Rudong Offshore, RMB644 million for Dalian Chuanbo, RMB572 million for Anhui Mengcheng Wind-power, RMB569 million for Yuhuan Power, RMB498 million for Fengcheng New Energy, RMB467 million for Diandong Kuangye, RMB462 million for Dezhou New Energy, RMB451 million for Diandong Energy, RMB446 million for Luobei Wind-power, and RMB435 million for Jiangxi Clean Energy. Capital construction and renovation expenditures for other projects were RMB13.845 billion.

The above capital expenditures are sourced mainly from internal capital, cash flows provided by operating activities, and debt and equity financing. In the next few years, the Company will further accelerate development and construction of renewable energy infrastructure and promote structural adjustment, and therefore expects to have significant capital expenditures. The Company expects to finance the above capital expenditures through internal capital, cash flows provided by operating activities, and debt and equity financing.

The cash requirements, usage plans and cash resources of the Company are as following:

(Unit: RMB100 million)

Good operating results and sound credit status provide the Company with strong financing capabilities. As of 31 December 2021, the undrawn banking facilities available to the Company and its subsidiaries amount more than RMB300.0 billion, which are granted by commercial banks such as Bank of China, China Construction Bank and Industrial and Commercial Bank of China.

The Company completed issuances of unsecured super short-term bonds in 18 installments on January 20, January 25, February 25, April 26,   April 29, July 9, July 16, July 22, August 6, August 30, September 3, September 10, October 15, October 22, October 27, November 4, December 13, and December 29, at principal amount of RMB2 billion, 3 billion, 3 billion, 2 billion, 3 billion, 2 billion, 3 billion, 2.5 billion, 1.5 billion, 2 billion, 3 billion, 1.5 billion, 1.5 billion, 3 billion, 2 billion, 5 billion, 3 billion and 200 million, with nominal annual interest rates of 2.2%, 2.3%, 2.4%, 2.1%, 2.1%, 2.1%, 2.1%, 2.0%, 2.0%, 2.1%, 2.1%, 2.0%, 2.1%, 2.2%, 2.1%, 2.4%, 2.2% and 2.6%, respectively. Each installment of the notes was denominated in RMB, issued at par value, and would successively mature in 37 days, 30 days, 41 days, 37 days, 36 days, 29 days, 29 days, 36 days, 54 days, 54 days, 54 days, 54 days, 29 days, 29 days, 36 days, 98 days, 29 days and 270 days from the value date.

The Company, through its subsidiary SinoSing Power, issued two tranches of secured corporate bonds of RMB300 million and RMB300 million on February 20, 2020 with coupon rate of 2.25% and 2.63%. The instrument was denominated in US dollars and issued at 99.653% and 99.277% of the par value with maturity of five years and ten years from the value date, respectively. The bonds are guaranteed by Huaneng Group.

As of 31 December 2021, short-term loans of the Company and its subsidiaries were RMB91.897 billion (2020: RMB66.311 billion). Loans from banks were charged at interest rates ranging from 2.00% to 11.35% per annum (2020: 2.15% to 4.90%).

As of 31 December 2021, short-term bonds payable by the Company and its subsidiaries were RMB8.223 billion (2020: RMB5.003 billion).

As of 31 December 2021, the Company and its subsidiaries’ long-term loans (including long-term loans due within one year) totaled RMB154.072 billion (2020: RMB131.886 billion), including RMB loans of RMB138.436 billion (2020: 114.350 billion), USD loans of USD1.376 billion (2020: USD1.480 billion), EUR loans of EUR7 million (2020: EUR11 million), SGD loans of SGD1.456 billion (2020: SGD1.551 billion), JPY loans of 2.151 billion yen (2020: 2.266 billion yen). Among them, US dollar loans and Singapore dollar loans are floating rate loans, and other foreign currency loans are fixed rate loans. For the fiscal year ended 31 December 2021, the annual interest rate of long-term loans is 0.75% to 4.98% (2020: 0.75% to 6.55%).

The Company and its subsidiaries will closely monitor any change in the exchange rate and interest rate markets and cautiously assess the currency rate and interest rate risks.

Combining the current development of the power generation industry and the growth of the Company, the Company will make continuous efforts to not only meet cash requirements of daily operations, constructions and acquisitions, but also establish an optimal capital structure to minimize the cost of capital and manage financial risks through effective financial management activities, thus maintaining sustainable and stable returns to the shareholders.

Pursuant to the memorandum and articles of the Company, given the negative realized net profit attributable to the equity holders of the Company and considering the need for future investments in accordance with the Company’s transformational development plans and the increased debt-asset ratio of the Company’s in year 2021, the board of directors proposed that the Company pay no dividends in year 2021. The proposal has been reviewed and approved by the board of directors and the board of supervisors of the Company, subject to the approval at annual general meeting for year 2021.

The Company fully implements the new development philosophy of “innovation, coordination, green, openness and sharing,” adheres to the idea of systemisation, follows the requirements of establishing a clean, low-carbon, safe and efficient modern energy regime, adheres to the principle of treating quality and efficiency as the key focus, reform and innovation as the driving force, institutional mechanism as the safeguard, and deepening the supply-side structural reforms as the cardinal line, coordinates the energy safety and “green development,” comprehensively promotes the high-quality developments, and aims to further develop the Company into a proper managed, leading in technology, energy saving and environmental friendly, reasonable structured, excellently operated world-class listed power generation company with outstanding corporate governance and market value.

The Company adheres to the new energy safety strategy of “Four Revolutions and One Cooperation,” promotes the green and low-carbon transformation of energy with the aims of peak carbon emission and carbon neutrality, prioritizes the quality and efficiency, insists on principles of “centralized and distributed construction of equal importance, and independent construction of priority”. Making full use of the favorable conditions for centralized development of new energy power in “Three-North Area,” coastal region, Southwest China region and certain areas in Central China region, the Company further develops large- scale clean energy production base, with the idea of “Three-types and Three- isations” namely “base-type, clean-type and complementary-type, together with intensification, digitalisation and standardization”, promotes the leap- forward development of new energy production, accelerates the optimization and upgrading of coal-power structure, prioritizes the gas power and other clean energy power, and provides more competitive and finer comprehensive energy services. The Company proactively adapts to the national structural reform of energy supply, persists on accelerating digitalized transformation, actively develops strategic emerging industries, and carries out transformation of diversified supply and energy service around core industries. Adhering to the new development pattern of integrating domestic and international dual circulations, the Company will strength international cooperation with the principles of clean being primary, profitability being first and prudence being essential, to reinforce the efficient operation of oversea assets and to enhance the anti-risk ability and profitability. The Company aims to actively implement innovative development strategy, focuses on high-quality development led by technological innovation mechanisms, continues to serve the nationwide strategy, and adhere to the facing towards the Company’s major demands. The Company adheres to digital & intelligent development, deepens and enhances the ability of independent innovation, implements scientific and technological demonstration projects, and strengthens basic and forward-looking technical research. The Company aims to vigorously implement the excellent operation strategy, adhere to the strategies of increasing profitability, improving efficiency and creating value, reinforce its operational management, improve its management efficiency, optimize its asset structure, comprehensively improve its modern operating and management level, vigorously promote the improvement of quality and efficiency, improve corporate governance, enhance the Company’s brand value and conscientiously perform its social responsibilities.

Focusing on the general trend of national economic development and based on the principle of “priority on stabilization, and advancement from stabilization,” the Central Economic Work Conference proposed several key goals as the fundamental principles and action guidance to follow for the national economy development in year 2022 and longer terms thereafter, such as to implement stable and effective macroeconomic policies, continue to stimulate the vitality of market entities, smoothen the national economic cycle, solidly implement science and technology policies, and stimulate developments by implementing reform and opening-up policies, and enhance the balance and coordination of the regional developments and securing the basic goals for residents’ livelihood. The Conference also proposed that correct understanding of the essence of the carbon peak and carbon neutralization should be established, and the gradual withdrawal of traditional energy should be based on the safe and reliable substitution of new energy. Based on the basic national conditions of coal, we should pay attention to the clean and efficient utilization of coal, increase the consumption capacity of new energy, and promote the optimal combination of coal and new energy. At the same time, the Conference proposed that renewable energy and raw material energy consumption should not be calculated into the total energy consumption control.

In terms of the electricity supply and demand, according to the analysis and forecast of the China Electricity Council, with the considerations such as the domestic and international economic situation, the steady increasement of electrification driven by electric power replacement, statistic comparison base of last year, as well as the uncertainty resulting from the epidemic and other the external events, it is estimated that the electricity consumption of the whole society will have a year-on-year increase of 5%-6% in year 2022, a growth rate that is four percentage points lower as compared to that in year 2021. It is estimated that in year 2022, the newly installed power generation capacity nationwide will be about 230 million kilowatts, a record high over the years, while the utilization hours for thermal units will decrease slightly on a year-on-year basis.

In terms of electricity market, on January 18, 2022, the NDRC and the National Energy Administration jointly issued “Guidance on accelerating the construction of a national unified power market system”, aiming to realize the sharing, mutual assistance and optimal allocation of power resources across the country, and accelerate the formation of a unified, open, orderly, safe and efficient power market system with efficient governance. As all coal-fired electricity shall totally enter into trade within the electricity grid market as stipulated by principle, the transaction ratio of the total amount of electricity generated demonstrate an upward growth. And considering the combined effects of the fluctuations of coal market prices, the inter-provincial negotiation over electrovalence for outbound transactions, the spot electrovalence fluctuating with coal prices, and the electrovalence of pumped-hydroelectricity being set by the government, the rising range of the price of coal-fired electricity is expected to be less than 20%. Affected by the increase in the number of new energy parity projects putting into operation, the prices of wind and photovoltaics have decreased compared with year 2021, while the price of hydropower electricity remains the same as that of year 2021. In respect of carbon market, China Carbon Emission Trade Exchange (CCETE) was officially launched in year 2021, with the first fulfilment cycle during year 2019 to year 2020 closed smoothly. Carbon emission quota is expected to be tightened under the background of relevant national policy switching from “dual energy consumption control” to” dual control of carbon emission amount and emission intensity”.

In terms of the coal market, the CPC Central Committee currently attaches great importance to the safe supply of coal production, and the relevant governmental authorities issued multiple industry policies to stabilize the supply and demand of coal market. On February 24, 2022, the NDRC issued the “Notice on Further Improving the Coal Market Price Formation Mechanism,” specifying that mid- and long-term coal supply contracts should adopt the reasonable price range between RMB570 to RMB770 per ton (tax inclusive) and making it clear that pricing adjustment measures regarding coal price will be made pursuant to the Pricing Law. Such measures are expected to facilitate the normalization of thermal coal price. On the coal consumption side, given the establishment of the policy on controlling the increase of coal consumption during the “Fourteenth Five-Year” period and the scale development of the renewable energy section, it is expected that the increase of the coal demand shall slowdown in year 2022. While on the supply side, the advanced production capability has been gradually released domestically, which, together with the fact that coal exportation by Indonesia restored at a normal level, shall improve the supply situation of the thermal coal market. With the supply-demand situation significantly improved as compared to 2021, it is expected that the coal price will fall into a more reasonable range.

In terms of the capital market, the monetary policy in 2022 is expected to be prudent with proper flexibilities, which will increase the intensity of cross- cycle adjustment, give full play to the dual functions of the total amount and structure of monetary policy tools, and focus on sufficient effectuation, precise effectuation, and forward effectuation, aiming to meet the reasonable and effective financing needs of the real economy without having “flooding irrigation” effects, and focus on increasing financial support for key areas and weak links of the economy, so as to achieve a better goal combining the stabilized total volume with an optimized structure and maintain a reasonably abundant liquidity.

The Company acquired 25% equity interest in Shenzhen Energy Group for RMB2.39 billion on April 22, 2003. In 2011, Shenzhen Energy Group divided into a remainder company of the same name and a new company Shenzhen Energy Management Company (“SE Management”), and the Company holds 25% equity interests in each of the two successors. The Company acquired 200 million shares from Shenzhen Energy Corporation (“Shenzhen Energy”), a subsidiary of Shenzhen Energy Group in December 2007. Shenzhen Energy allotted shares with its capital surplus in 2011. In February 2013, Shenzhen Energy merged SE Management through the combination of directional seasoned offering and cash payment to shareholders of SE management, Shenzhen State-owned Assets Administration Commission and the Company. After the merger, the Company held 661 million shares of Shenzhen Energy, representing 25.02% of its equity interests. In 2021, Shenzhen Energy distributed RMB0.50 of cash dividend and a two-share share dividend out of every 10 shares to its shareholders, and the Company held 1,190 million shares of Shenzhen Energy by 31 December 2021. These investments brought a net profit attributable to the equity holders of the Company of RMB331 million for the year ended 31 December 2021 under IFRS. This investment is expected to provide steady returns to the Company.

The Company held 60% direct equity interest in Huaneng Sichuan Energy Development Co., Ltd (“Sichuan Energy Development”) as of 31 December 2006. In January 2007, Huaneng Group increased its capital investment in Sichuan Energy Development by RMB615 million, thus reducing the Company’s equity interest in Sichuan Hydropower to 49% and making Huaneng Group the controlling shareholder of Sichuan Energy Development. This investment brought a net profit attributable to the equity holders of the Company of RMB201 million for the year ended 31 December 2021 under IFRS.

This investment is expected to provide steady returns to the Company.

As of 31 December 2021, the Company and its subsidiaries had 57,513 employees within and outside the PRC. The Company and its subsidiaries provide employees with competitive remuneration and linked such remuneration to operating results to provide incentives for the employees. Currently, the Company and its subsidiaries do not have any stock or option based incentive plan.

Based on the development plans of the Company and its subsidiaries and the requirements of individual positions, together with consideration of specific characteristics of individual employees, the Company and its subsidiaries tailored various training programs for their employees on management, technology and the skills. These programs enhanced the comprehensive skills of the employees.

As of 31 December 2021, the Company provides guarantee to long-term bank loans of Tuas Power Ltd of RMB6.257 billion (2020: RMB7.053 billion).

As of 31 December 2021, the details of secured loans of the Company and its subsidiaries were as follows:

As of 31 December 2021, pledge and mortgage loans of the Company were RMB12.333 billion (2020: RMB11.105 billion).

As of 31 December 2021, short-term loans of RMB829 million (2020: RMB1,317 million) represented the notes receivable that were discounted with recourse. As these notes receivable had not yet matured, the proceeds received were recorded as short-term loans.

As of 31 December 2021, long-term loans of RMB4.595 billion (2020: RMB3.322 billion) of the Company and its subsidiaries were secured by certain property, plant and equipment with net book value of approximately RMB5.025 billion (2020: RMB3.400 billion).

As of 31 December 2021, long-term loans of approximately RMB4.516 billion (2020: RMB7.435 billion) were secured by future electricity revenue of the Company and its subsidiaries. Long-term loans of approximately RMB2.814 billion (31 December 2020: nil) were secured by equity interests of a subsidiary of the Company. Long-term loans of approximately RMB20 million were secured by carbon emission trading rights (31 December 2020: nil).

As at 31 December 2021, certain land use right with net book value of RMB17 million (31December 2020: nil) was in a state of seizure due to pre-litigation preservation.

As of 31 December 2021, the restricted bank deposits of the Company and its subsidiaries were RMB796 million (2020: RMB614 million).

For the accounting standards that have a material impact on the Company’s financial statements, please refer to the Note 2 to the financial statements prepared in accordance with IFRS.

Although the COVID-19 epidemic has been effectively controlled, there is still the risk of localized and seasonal outbreaks, which may impact the macro economy, electricity demand, project construction, coal production, and transportation to certain extent.

The Company will strictly implement regular COVID-19 prevention and control measures, and strictly implement emergency plans to ensure that risks in relation to personnel safety, power generation, new units construction, material supply, and fuel supply are controllable and under control.

Firstly, with the introduction of carbon peak and carbon neutral targets, and related policies in China and other countries around the world, the planning and commissioning of a large number of new energy projects in the future will have a direct impact on the traditional thermal power business. Unit utilization hours may continue to decline, and we may be forced to shut down some small units as results of policy requirements and actual operation conditions. Other related policies restricting thermal power may also have a negative impact on the Company’s domestic and overseas thermal power business.

Secondly, the “dual energy consumption control” policy applicable to the coal-fired power plants in China has been gradually shifting to the “dual control of carbon emission amount and emission intensity” policy. Given factors such as the power generation capacity and cost recycle regime and ancillary service market are yet to develop, and the market mechanism on the coordination of electrovalence and coal price is yet to be established, the choices for power generation enterprises to optimize their expenses and costs for power generation are still limited, which in return increased the operating risks for coal-fired power generation business. Some high-energy- consuming users will be limited in power consumption and the total amount of regional coal consumption will be also limited. Under such background, the demand for coal-fired power will be compressed and there exists a risk of the decline in the utilization hours for the coal-fired power units.

Thirdly, as the reform process of China’s power market is further accelerated, the scale of direct transactions continues to expand, spot market pilots are fully promoted, and new energy power transactions have begun. In 2022, the power and coal supply situation is still unclear, and it is expected that the market competition shall be fiercer, with uncertainties increased. Meanwhile, the demand for coal-fired power has been decreasing, and the utilization hours for coal-fired power units is expected to decline in a long term and a risk of the declining of transaction price of the generated electricity.

Fourthly, with new energy units commissioned, in 2022, the non-fossil energy units are expected to account for 50% of all units nationwide. Due to the production characteristics of new energy units, it is expected that during summer and winter peaks, the power supply in certain regions may witness tight-in-supply periods, which poses higher requirements in respect of the ancillary services capacity of the coal-fired power units.

Fifthly, with new energy units commissioned, in 2022, the non-fossil energy units are expected to account for 50% of all units nationwide. Due to the production characteristics of new energy units, it is expected that during summer and winter peaks in 2022, the power supply in certain regions may witness a short tight-in-supply period during peaking hours, presenting challenges to both the flexibility43 in the workload adjustment of coal-fired units and the rationalized construction of ancillary service markets.

The Company will actively promote the “green” transformation and accelerate the increase in the proportion of clean energy. Through alternative development, transformation and upgrading, decommission and storing for backup, and capital operation, the Company aims to achieve the structural optimization and upgrading of its coal-fired power units, and shall make coordinated arrangements on the energy saving and emission reduction upgrading and transformation, flexibility upgrading and transformation, heating upgrading and transformation, biomass coupling upgrading and transformation for our current coal-fired units, to create a new competing edge. The Company shall also strengthen policy research, actively adapt to the development of the electricity market under the “dual carbon” goal, continue to promote the standardized operation of the market, adjust pricing strategies in a timely manner, and make every effort to prevent and control electricity price risks.

Firstly, China’s control over the coal market has been strengthened. With the coal market showing an obvious “policy-driven market” characteristic, the future uncertainty with respect to coal price shall continue to increase.

Secondly, although the ban on exportation of coal by Indonesia has been lifted, the market order still takes time to restore. Meanwhile, considering uncertainty resulting from the worsen situation of geopolitical conflicts, and the high level of international energy price, the supplement function of imported coal might be weakened.

Thirdly, the national environmental protection and safety inspectors maintains a normalized high pressure, and the release of coal production capacity in the main production areas will be affected to a certain extent.

Fourthly, in 2022, most international economies choose to coexist with the epidemic, and the pace of economic recovery will accelerate. China’s “stabilizing growth” economic strategy continues to exert its force with the policy of dual control of energy consumption being more flexible, the production of industrial products will remain strong, and the consumption of coal may continue to increase, which will impact the supply of thermal coal to certain extent.

The Company will closely follow the changes in national policies and the coal market, strive to enter into medium and long-term coal contracts with suppliers, strengthen cooperation with competitive large mines, and ensure the strict performance of contracts and the safe and stable supply of coal. The Company shall comprehensively consider factors such as resource origin, transportation mode, coal type matching, etc., to continue to optimize the supply structure and achieve optimal procurement costs, strengthen inventory management, have the off-season coal storage management play a meaningful role, increase the intensity of economic coal blending, and take multiple measures to reduce the cost of coal procurement.

The national carbon emission quota trading market has been launched. Units with higher carbon emission intensity will bear increased cost of carbon transaction performance, while units with lower carbon emission intensity can obtain emission reduction benefits. The Company maintains industry- leading overall energy utilization level. In the years of 2019 and 2020, the overall carbon trading performance cost of the Company is considered at a better level compared with other industry peers. However, since the quota allocation plan for 2021 and subsequent years has not yet been issued, and the allocation of quotas will gradually tighten, the risk of increased power generation costs exists. In addition, at the initial stage of the carbon market, the transactions between institutions and individuals have not been included, and if, at a later stage, institutions and individuals can enter into the market for transactions, there is a risk of increased performance costs for power generation companies. Besides, the Singapore government recently announced that it planned to further increase the level of carbon tax during year 2024 and year 2025. Such policy is expected to affect the profitability of Tuas Power, if the carbon tax cannot be transmitted to end users through market.

The Company will pay close attention to both domestic and foreign carbon market policies, continue to strengthen carbon trading management, formulate carbon trading strategies, closely monitor to the progress of the restart of voluntary emission reduction projects, make full use of offset policies, and strive to complete the national carbon market trading performance work on schedule at a lower cost.

The newly built units of the coal-fired power plants of the Company are all equipped with technological advanced and powerful flue gas purification systems. Other units have also completed ultra-low emission transformation pursuant to the requirements of the Chinese authorities, affording such units good adaptability to the fluctuations of internal and external factors such as weather conditions, fuel quality and electric heat load. Such units have also passed the inspection procedure conducted by the local environmental protection authorities and been recognized by the energy regulatory agency.

Based on the current status and the needs of ecological civilization construction, the Chinese government is constantly improving and deepening environmental protection policies in key regions including but not limited to Beijing-Tianjin-Hebei, Yangtze River Economic Belt, Pearl River Delta, etc., which may lead to more new and stringent requirements with respect to issues such as water body protection and flue and dust treatment etc.

The Company closely monitor the areas of concern of the environmental protection authorities, by carefully selecting advanced and applicable technical solutions, and making achievements in improving the wastewater treatment system, building closed facilities for coal yard, and improving the comprehensive utilization of ash and slag, so as to ensure that various environmental risks are responded to in a timely manner and effective resolution.

In 2021, the Company’s expenditure on the procurement of fuel increased significantly, leading to a significant decrease in operating cash flow. Good operating results and sound credit status provide the Company with strong financing capabilities, making it accessible and convenient for the Company to raise fund to ensure the overall capital operation, meanwhile, leading to the significant increase of debt financing scale. It is expected that the Company’s overall debt ratio, debt risks, and financial costs will increase apparently.

According to the Work Report of the State Council and Monetary Policy Implementation Report of the People’s Bank of China, the monetary policy in 2022 is expected to be prudent with appropriate flexibilities, which will increase the intensity of cross-cycle adjustment, give full play to the dual functions of the total amount and structure of monetary policy tools, and focus on sufficient effectuation, precise effectuation, and forward effectuation, aiming to meet the reasonable and effective financing needs of the real economy without having “flooding irrigation” effects, and focus on increasing financial support for key areas and weak links of the economy, so as to achieve a better goal combining the stabilized total volume with an optimized structure and maintain a reasonably abundant liquidity. With respect to debt denominated in foreign currencies, given the Company has only a small amount of such debts, the fluctuation in the corresponding interest rates has a less meaningful impact on the Company.

The Company will pay close attention to changes in domestic and overseas capital markets, adjust financing strategies in a timely manner on the premise of ensuring capital needs, seize the market window period, make good use of policy tools such as carbon emission reduction support tools and special re-lending tools for supporting clean and efficient use of coal, to reduce interest rates fluctuation risks and make efforts to control financing costs.

STRUCTURE OF SHARE CAPITAL

As at 31 December 2021, the entire issued share capital of the Company amounted to 15,698,093,359 shares, of which 10,997,709,919 shares were domestic shares, representing 70.06% of the total issued share capital, and 4,700,383,440 shares were foreign shares, representing 29.94% of the total issued share capital of the Company. In respect of foreign shares, Huaneng Group through its wholly-owned subsidiaries China Hua Neng Group Hong Kong Limited and China Huaneng Group Treasury Management (Hong Kong) Limited, held 472,000,000 and 131,596,000 shares, representing 3.01% and 0.84% of the total issued share capital of the Company, respectively. In respect of domestic shares, Huaneng International Power Development Corporation (“HIPDC”) owned a total of 5,066,662,118 shares, representing 32.28% of the total issued share capital of the Company, while Huaneng Group held 1,555,124,549 shares, representing 9.91% of the total issued share capital of the Company, and held 29,994,199 shares through its controlling subsidiary, China Huaneng Finance Corporation Limited, representing 0.19% of the total issued share capital of the Company. Other domestic shareholders held a total of 4,345,929,053 shares, representing 27.68% of the total issued share capital.

DIVIDENDS

Since the listing of the Company, shareholders have given great support to and cared much for the Company. The Company has also generated returns that have been growing continuously and steadily over the years. The Company has been paying dividends to shareholders every year since 1998, with an accumulated dividend of RMB62.687 billion paid.

The Company’s articles provided for its cash dividend policy that the Company may pay cash dividends in any year when its earnings and accumulated undistributed profits are positive and its cash flows are sufficient for the normal conduct of business and sustainable development of the Company, provided that the profits to be distributed by the Company in cash shall, in principle, not be less than 50% of the distributable profits realized in that year as indicated in the consolidated accounts.

In accordance with the requirements of relevant laws and regulations and the articles of association of the Company, the Company adheres to the profit distribution policy whereby the distributable profits shall be the lower of distributable profits as stated in the financial statements prepared under the PRC GAAP and the International Financial Reporting Standards.

According to the Company’s articles of association, due to the negative net profit attributable to equity holders of the Company in 2021, and having taken into account the investment needs of the Company’s transformation and development and the increase in the Company’s asset-liability ratio in 2021, the Board of Directors recommends that no dividend be distributed in 2021. The proposal has been reviewed and approved by the Company’s Board of Directors and the Supervisory Committee, and will be submitted to the Company’s annual general meeting for consideration.

PRE-EMPTIVE RIGHTS

According to the articles of the Company and the laws of the PRC, there are no provisions for pre-emptive rights requiring the Company to offer new shares to the existing shareholders of the Company in proportion to their shareholdings.

LARGEST SUPPLIERS AND CUSTOMERS

The five largest suppliers of the Company and its subsidiaries for 2021 were China Huaneng Group Fuel Co., Ltd., Huaneng Supply Chain Platform Technology Co, Ltd., Huayang New Material Technology Co., Ltd., Shanxi Coal Selling and Transportation (Group) Corporation and China Coal Energy Company Limited respectively. The total purchase from them amounted to approximately RMB90.387 billion, representing approximately 47% of the total purchase of the year. The largest supplier was China Huaneng Group Fuel Co., Ltd., the purchase from which amounted to RMB41.834 billion, representing approximately 22% of the total purchase of the year.

As a domestic power producer, the Company sells the electricity generated by its power plants mainly through local grid operators. The five largest customers of the Company and its subsidiaries for 2021 were State Grid Shandong Electric Power Company, State Grid Jiangsu Electric Power Company, State Grid Zhejiang Electric Power Company, China Southern Power Grid Guangdong Power Grid Co., Ltd. and State Grid Jiangxi Electric Power Company. The combined amount of sales of power was approximately RMB81.469 billion (exclusive of taxes), representing approximately 39.82% of the total sales of power for the year. The largest customers was State Grid Shandong Electric Power Company, and the amount of sale was RMB30.346 billion (exclusive of taxes), representing approximately 14.84% of the total sales of power for the year.

None of the directors, supervisors and their respective close associates (as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”)) had any interest in the five largest suppliers and customers of the Company mentioned above in 2021.

BUSINESS COMPETITION WITH CONTROLLING SHAREHOLDERS

The ultimate controlling shareholder of the Company, Huaneng Group and its subsidiaries, are also engaged in the power industry in China. To avoid business competition, Huaneng Group and the Company have already entrusted mutually to manage electric power assets in some regions.

To support the business development of the Company, Huaneng Group has committed to avoid business competition during its initial public offerings at home and abroad. On 17 September 2010, the Company received an undertaking from Huaneng Group regarding further avoidance of business competition. On the premises of continuing the undertaking previously provided, Huaneng Group further undertook that: (1) it should treat the Company as the only platform for integrating the conventional energy business of Huaneng Group; (2) with respect to the conventional energy business assets of Huaneng Group located in Shandong Province, Huaneng Group undertook that it would take approximately 5 years to improve the profitability of such assets and when the terms become appropriate, it would inject those assets into the Company.

The Company had a right of first refusal to acquire from Huaneng Group the newly developed, acquired or invested projects which are engaged in the conventional energy business of Huaneng Group located in Shandong Province; (3) with respect to the other non-listed conventional energy business assets of Huaneng Group located in other provincial administrative regions, Huaneng Group undertook that it would take approximately five years, and upon such assets meeting the conditions for listing, to inject such assets into the Company, with a view to supporting the Company’s continuous and stable development; and (4) Huaneng Group would continue to perform each of its undertakings to support the development of its listed subsidiaries.

On 28 June 2014, with a view to further clarify the scope of the relevant agreement and in line with the requirements under the “Regulatory Guidelines for Listed Companies No. 4 – Undertakings and performance by Listed Companies and Listed Companies’ de facto Controllers, Shareholders, Related Parties and Acquirers”, and taking into account the actual situation, Huaneng Group further enhanced the aforesaid non-compete undertaking as follows:

The items (1) and (4) above are long term undertaking and are being currently performed. The Items (2) and (3) are undertakings with terms and condition and have been currently performed.

Currently, the Company has 15 directors and only 6 of them have positions in Huaneng Group. According to the articles of association of the Company, in case a conflict of interest arises, the relevant directors shall abstain from voting in the relevant resolutions. Therefore, the operation of the Company is independent from Huaneng Group, and the operation of the Company is conducted for its own benefit.

PURCHASE, SALE OR REDEMPTION OF SHARES OF THE COMPANY

The Company and its subsidiaries did not sell, purchase or redeem any shares or other securities of the Company in 2021.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS AND SUPERVISORS

On 30 June 2021, the Company’s Board considered and approved the Amended Management Guidelines Regarding the Holding of the Company’s Shares by the Directors, Supervisors and Senior Management of Huaneng Power International, Inc. The standard of such guidelines is no less exacting than those set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules. Enquiries have been made with all Directors and Supervisors and all of them confirmed that they have complied with the code throughout 2021.

DIRECTORS’, CHIEF EXECUTIVES’ AND SUPERVISORS’ RIGHT TO PURCHASE SHARES

For the year ended 31 December 2021, none of the Directors, Chief Executives, Supervisors of the Company or their respective associates had any interests in the shares of the Company or any associated corporations (within the meaning of the Securities and Futures Ordinance (“SFO”)) which are (a) required to be notified to the Company and The Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”) pursuant to Divisions 7 and 8 of Part XV of the SFO; or (b) required to be recorded in the register kept by the Company pursuant to Section 352 of the SFO; (c) required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

For the year ended 31 December 2021, none of the Directors, Chief Executives, Supervisors, senior management of the Company or their spouses and children under the age of 18 was given the right to acquire any shares, underlying shares or debentures of the Company or any associated corporations (within the meaning of the SFO).

DIRECTORS’ AND SUPERVISORS’ INTEREST IN CONTRACTS AND SERVICE CONTRACTS

Save for the service contracts mentioned below, as at the end of 2021, the Directors and Supervisors of the Company did not have any material interests in any contracts entered into by the Company.

No Director and Supervisor has entered into any service contract which is not terminable by the Company within one year without payment of compensation (other than statutory compensation).

Each and every Director and Supervisor of the Company have entered into a service contract with the Company for a term of three years commencing from the signing of the contract.

INDEPENDENT DIRECTORS’ CONFIRMATION OF INDEPENDENCE

Each of the independent directors of the Company, namely Mr. Xu Mengzhou, Mr. Liu Jizhen, Mr. Xu Haifeng, Mr. Zhang Xianzhi and Mr. Xia Qing has signed a confirmation letter by independent non-executive directors for 2021 on 22 March 2022 and the Company considers them to be independent.

PUBLIC FLOAT

As at the date of this announcement, the Company has maintained the prescribed public float under the Listing Rules and as agreed with the Hong Kong Stock Exchange, based on the information that is publicly available to the Company and within the knowledge of the directors.

REMUNERATION POLICY

The Company unceasingly improves its remuneration and distribution system and, in accordance with the overall development strategy of the Company, has formulated a set of remuneration management rules. Employees’ salaries are determined by reference to the job positions they hold and calculated based on their job performance. Giving consideration to both efficiency and fairness, the Company creates a methodic and effective incentive mechanism by linking the employees’ remuneration with their personal performance and the business performance of the Company as well. The remuneration of the Directors, Supervisors and senior management of the Company mainly consists of the following:

The basic salary is mainly set by an evaluation of the job position and a factor analysis, and with reference to the salary level of the relevant position in the labor market. It accounts for about 20% of the total remuneration.

Discretionary bonus is based on the operating results of the Company, the performance of the Directors, Supervisors and senior management. It accounts for about 65% of the total remuneration.

Contributions for various pension schemes such as endowment insurance, corporate annuity and housing fund established by the Company for the Directors, Supervisors and senior management accounts for about 15% of the total remuneration.

According to the resolution at the general meeting, the Company paid each independent director a subsidy amounting to RMB300,000 (inclusive of tax) in 2021. The Company also reimburses the independent director for the expenses they incur in attending board meetings and general meetings and other reasonable expenses they incur while fulfilling their obligations under the Company Law and the Company’s Articles of Association (including travelling expenses and administrative expenses). Besides these, the Company does not give the independent director any other benefit.

STAFF HOUSING

According to the relevant regulations of the state and local governments, the Company established a housing fund for the employees of the subsidiaries of the Company.

STAFF MEDICAL INSURANCE SCHEME

According to the requirements as prescribed by the relevant local governments, the Company and its subsidiaries have joined medical insurance schemes for their staff, and have implemented effectively in accordance with the plan.

RETIREMENT SCHEMES

The Company and its subsidiaries have implemented specified retirement contribution schemes in accordance with relevant requirements of the state and local governments.

Pursuant to the specified retirement contribution schemes, the Company and its subsidiaries have paid contributions according to the contracted terms and obligations set out in the publicly administered retirement insurance plans. The Company has no other obligations to pay further contributions after paying the prescribed contributions. The contributions payable from time to time will be regarded as expenses for the period and capital construction expenditure during the year they are made and accounted for as labor cost.

GENERAL MEETINGS

During the reporting period, the Company convened one annual general meeting and two extraordinary general meetings.

DISCLOSURE OF MAJOR EVENTS

In order to continue to supplement and enrich our management capacity, the Company made the following adjustments to the management team:

On 22 February 2021, Mr. Duan Rui was appointed as the secretary of the Discipline & Inspection Commission.

On 22 February 2021, Mr. Liu Ranxing ceased to hold the office of Vice President of the Company due to work reasons.

On 9 June 2021, Ms. Zhang Xiaojun resigned as a staff representative supervisor of the Supervisory Committee of the Company due to age reason. Instead, Mr. Zhu Tong was elected unanimously by the Company staff as the staff representative supervisor of the Tenth Session of the Supervisory Committee of the Company.

On 22 June 2021, Mr. Ye Cai ceased to act as the supervisor of the Company due to work relocation. As resolved through the proposal of election of supervisor of the Company at the annual general meeting convened by the Company on 22 June 2021, Mr. Xia Aidong was elected as the supervisor of the Tenth Session of the Supervisory Committee of the Company.

CHANGES IN INFORMATION OF DIRECTORS AND SUPERVISORS DURING THE REPORTING PERIOD

CODE OF CORPORATE GOVERNANCE PRACTICES

During the year, the Company has complied with the Corporate Governance Code as set out in Appendix 14 of the Listing Rules. The annual report of the Company will contain a corporate governance report prepared in accordance with the requirements under the Listing Rules.

DESIGNATED DEPOSIT

As at 31 December 2021, the Company and its subsidiaries did not have any designated deposit with any financial institutions within the PRC nor any overdue fixed deposit which could not be recovered.

LEGAL PROCEEDINGS

As at 31 December 2021, the Company and its subsidiaries were not involved in any material litigation or arbitration and no material litigation or claim was pending or threatened or made against the Company and its subsidiaries.

ANNUAL GENERAL MEETING AND CLOSURE OF REGISTER

As the Company has yet to confirm the date of the 2021 annual general meeting, the record date(s) for determining the eligibility to attend and vote at the 2021 annual general meeting and the period(s) for closure of register, the Company will upon confirmation thereof announce such details in the notice of the 2021 annual general meeting. Such notice is expected to be issued to shareholders in May 2022.

AUDITORS

As approved at the 2020 annual general meeting, Ernst & Young Hua Ming LLP was appointed as the Company’s domestic and U.S. 20F Annual Report auditor for 2021, and Ernst & Young, registered public interest entity auditor, was appointed as the Hong Kong auditor of the Company for 2021.

PUBLICATION OF RESULTS ON THE WEBSITES OF THE HONG KONG STOCK EXCHANGE AND THE COMPANY

This announcement of 2021 annual results of the Company is published on the Hong Kong Stock Exchange’s website (http://www.hkex.com.hk) and the Company’s website (http://www.hpi.com.cn). The 2021 annual report of the Company containing all the information required by the Listing Rules will be despatched to the shareholders and available on the above websites in due course.

REQUIREMENTS UNDER THE ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING GUIDELINES

In 2021, in accordance with the requirements under the Environmental, Social and Governance Reporting Guide of the Hong Kong Stock Exchange, which was amended on 18 December, 2019, the Company has completed the preparation and disclosure of the Environmental, Social and Governance in due time. The Environmental, Social and Governance Report and the annual report of the Company will be published on the websites of the Company and the Hong Kong Stock Exchange.

DOCUMENTS FOR INSPECTION

The Company’s report on interim results and the annual report (A share version and H share version) was published in August 2021 and will be published in April 2022, respectively. As required by the United States securities laws, the Company will file an annual report in Form 20-F with the Securities and Exchange Commission of the U.S. before 30 April 2022. As the Company’s A shares have already been issued and listed, the Company shall, in compliance of the relevant regulations of the China Securities Regulatory Commission and the Shanghai Stock Exchange, prepare quarterly reports. Copies of the interim and annual reports as well as the Form 20-F, once filed, will be available at:

As at the date of this announcement, the directors of the Company are:

Beijing, the PRC

23 March 2022

For the year ended 31 December 2021

(Amounts expressed in thousands of RMB, except per share data)