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Zhejiang Southeast Electric Power Company Limited

Annual Results 2008

1. About the Company

B Share Name Abbreviation	ZSEPC B
Code of B Share	900949
Listing Place of B Shares	Shanghai Stock Exchange
Abbreviation of Global Depository Receipt	ZHEJIANG GDR S
Code of GDR	0949QLT
Listing Place of GDR	London Stock Exchange
Registered Address of the Company	Floor 22-23, Biao Li Tower, 528 Yanan Road,  Hangzhou, Zhejiang Province, P.R. China
Office Location of the Company	Floor 8-10, Zheneng Tower, 152 Tianmushan Road, Hangzhou, China (310007)
Website of the Company	http://www.zsepc.com/

2. Main Accounting Figures

  Unit: RMB yuan

	Year 2008	Year 2007	Increase/decrease in current year as against prior year (%)	Year 2006
Operating income	7,170,397,363.54	6,275,377,315.81	14.26	6,457,820,984.99
Total profit	-175,819,126.23	941,216,375.53	-118.68	1,138,610,366.18
Net profit belonging to shareholders of the Company	27,046,056.67	663,214,614.34	-95.92	752,968,108.72
Net profit belonging to shareholders of the Company after deducting non-recurring gains and losses	-429,148,393.00	676,658,144.42	-163.42	773,180,823.76
Net cash flow generated from operating activities	164,525,801.72	1,606,432,786.17	-89.76	1,265,921,421.38
	End of 2008	End of 2007	Increase/decrease at end of current year as against prior year (%)	End of 2006
Total assets	15,637,758,966.04	20,099,914,230.64	-22.20	13,023,318,085.09
Owner's equity (or shareholders' equity)	7,463,832,556.96	11,440,066,867.81	-34.76	7,226,682,761.28

3. Main Financial Indicators

   Unit: RMB yuan

	Year 2008	Year 2007	Increase/decrease in current year as against prior year (%)	Year 2006
Basic Earnings per share (yuan/share)	0.0135	0.3300	-95.91	0.3746
Diluted earnings per share (yuan/share)	0.0135	0.3300	-95.91	0.3746
Basic Earnings per share after deducting non-recurring gains and losses (yuan/share)	-0.2135	0.3366	-163.43	0.3847
Diluted yield on net assets (%)	0.3624	5.7973	Decreased by 5.4349%	10.42
Weighted average yield on net assets (%)	0.2873	7.4643	Decreased by 7.1770%	11.20
Diluted yield on net assets after deducting non-recurring gains and losses (%)	-5.7497	5.9148	Decreased by 11.6645%	10.70
Weighted average yield on net assets after deducting non-recurring gains and losses (%)	-4.5589	7.6156	Decreased by 12.1745%	11.50
Net cash flow per share generated from operating activities (yuan/share)	0.08	0.80	-90.00	0.63
	End of 2008	End of 2007	Increase/decrease at end of current year as against prior year (%)	End of 2006
Net asset value per share belonging to shareholders of the Company (yuan/share)	3.71	5.69	-34.80	3.60

4. Non-recurring Gains and Losses 

  Unit: RMB yuan

Items of Non-recurring Gains and Losses	Amount	Note
Gains and losses from disposal of non-current assets	-6,690,115.86
Government subsidies recorded as current gains and losses (except those in close connection with the Company's normal operations continuously provided in accordance with the government policy and standards)	7,256,624.96
Gains and losses from changes in fair values of transactional financial assets and liabilities, and investment returns from disposal of transactional financial assets, liabilities and available-for-sale financial assets, except the effective hedging transactions related to normal operations of the Company	516,079,296.91	[Note 1]
Other non-operating income and expenses than the above	-5,145,355.72
Other gains and losses in accordance with the definition of non-recurring gains and losses	72,600,000.00	[Note 2]
Subtotal	584,100,450.29
Less: Impact of Minority shareholders' shares	-53,757.59
Impact of corporate income tax	127,959,758.21	[Note 3]
Net value of non-recurring gains and losses belonging to shareholders of the Company	456,194,449.67

[Note 1]: The 40 million shares of Industrial Bank, 52.164422 million shares of Merchants Bank and 150 million shares of Bank of Communication previously held by the Company were listed on 5 February, 27 February and 14 May 2008 respectively. As approved in the first interim shareholders' general meeting for 2008, the board of directors authorized the management team to reduce the holding of the above shares when appropriate. In the current period, the Company reduced the shareholding of the Industrial Bank by 3.5 million shares, the Merchants Bank by 10.904422 million shares and the Bank of Communication by 3.76823 million shares, and thus obtained income amounting to RMB 547,367,071.98 yuan. The investment returns amount to RMB 511,807,014.61 yuan after deducting the cost of RMB 35,560,057.37 yuan was stated as non-recurring gains and losses.

[Note 2]: The Company received refund of tax amounting to RMB 72,600,000.00 yuan in July 2008, which offset the current income tax. As this transaction is occasional and has no direct connection with the Company's normal operations, the Company identified the gains and losses from this transaction as the non-recurring gains and losses.

[Note 3]: As the donation expenditure of RMB275,600.00 yuan and the expenditure of tax demurrages and penalty of RMB 62,982.54 yuan cannot be paid before tax, and the 'other gains and losses in accordance with the definition of non-recurring gains and losses' amounting to RMB 72,600,000.00 yuan is the refund of the corporate income tax, the impact of corporate income tax is as follows: (584,100,450.29-72,600,000.00＋338,582.54)×25%＝127,959,758.21（yuan）

5. Review of Business Operations of the Company in Current Period

2008 witnessed most complex changes in domestic and international circumstances. Confronted with the varying economic conditions, the unprecedented operating difficulties, the sudden assault of snow and ice disaster and the arduous task to meet the summer peak load, the Company put into practice the scientific outlook on development, rose to the challenges with poise, organized production with care, optimized management and overcame the difficulties arising from tight supply and soaring prices of coal, oil and transport, thereby ensuring sound and steady operations of the Company while fulfilling its social responsibility. Over the past year, the Company completed power generation of 19.279 billion kWh and energy sales of 17.816 billion kWh, achieved operating income amounting to RMB 7.17 billion yuan and net profit belonging to the shareholders of the parent company amounting to RMB 27 million yuan.

(1) Taking account of the overall situation and making an all-out effort to continue production against adversities and ensure safe power supply

  The snow and ice disaster at the year beginning wrought havoc on the 500 kV power grid in Zhejiang, causing severe power shortage in some areas. In the face of the disaster, the Company made timely adjustment to the maintenance plan of the generating units and mobilized the whole staff to stick to their posts in an effort to strengthen management of the operations and maintenance of the power generating equipment and continue power production. While 40 million kW of generating capacity went out of service nationwide due to lack of coal during the disaster-stricken period, none of the generating units in the Company's power plants was shut down or went into unplanned outage, thus playing an important role in ensuring regional power grid safety and power supply to the society.

  During the period of the summer peak load and the Beijing Olympic Games, there was an estimated power capacity gap of 3 million kW. The coal price shot up substantially, and the small fossil-fuelled power generating units were shut down successively due to losses. However, the power generating companies under the Company took the overall interest into consideration, withstood the immense pressure of coal price hike, tight supply of resources, insufficient funds, increasing losses with increasing generation and maintenance of production safety, spared no effort to make sure that the generating units run safely and reliably, and successfully accomplished the mission of ensuring coal availability and generator operation as required by the provincial government.

(2) Due to the distorted relationship between the coal price and the electricity price, the Company suffered serious policy-induced losses in its principal business of power generation in 2008. To relieve the operational pressure, the Company sought to broaden sources of income while economizing on expenses in an all-out effort to reduce and reverse the losses. The various organizations under the Company carried out such activities as technological research, repair and re-use of old goods, increasing income and saving expenses. While ensuring production safety, greater effort was put into technical renovation aimed at energy saving. At the same time, various cost and expenses were placed under strict control so as to decrease the non-productive expenses (except financial expense) in 2008 by 5% in comparison with the annual budget. In response to the fact that insufficient gas supply from East China Sea made the gas turbines in Xiaoshan Power Plant unable to go into normal production and suffer huge loss, proactive measures were taken to sell generation quota and seek power tariff subsidy, turning the loss into profit. Under the grim financing circumstance, various financial products such as trusted financial management, accepted drafts and bank loans were employed to raise finance, reduce financial cost and secure fund supply for coal purchase and maintenance of normal production in the summer peak load period. Meanwhile, part of the financial assets were disposed of at favourable moments in the security market to realize investment returns amounting to RMB 512 million yuan, which effectively supplemented the working capital. In addition, as a result of lasting effort, the Company obtained the approval of the State Taxation Bureau for pre-tax deduction of the Company's loss in long-term equity investment in China Southern Securities Co. Ltd and thus received a refund of income tax of RMB 72.60 million yuan at a tax rate of 33%. Through joint efforts of the management and the staff, the Company attained a net profit belonging to the shareholders of the parent company, maintaining sound and stable operation of the Company.

(3) Orderly and scientific development was achieved in respects of power project construction, environmental protection and energy conservation.

  Over the past year, the Company continued to expedite the progress of the power project construction. Both Taizhou Power Plant Phase V Extension Project and Xiaoshan Power Plant Natural Gas Power Generation Project were put into commercial operation. Unit 1 of Beihai Tanteng Hydropower Station in which the Company has equity investment was put into operation on schedule. As of the end of 2008, the Company's equity-owned generating capacity exceeded 5 million kW, with the clean energy generating capacity such as natural gas and hydropower accounting for about 16.6% of the Company's total equity capacity.

  The Company has invariably sought to balance development, environmental protection, energy conservation and emission reduction, implementing the 'Green Energy Plan' with great efforts. As at the end of 2008, the Company's investment in the desulfurization plant totalled RMB 942 million yuan, with the desulfurized generating capacity accounting for 84.3% of the total capacity. Based on the principle of concurrent effort in development and economization, the Company employed proven advanced techniques to renovate the in-service generating units in an attempt to save coal, electricity, oil and water, optimize the system operation and achieve low consumption, low emission and high efficiency.

6. Shares of Other Listed Companies Held

      Unit: RMB yuan

Code of Security	Name of Security	Initial Investment	Percentage of Total Shares (%)	Ending Book Value	Gains & Losses in Current Period	Changes in Shareholders' Equity in Current Period	Accounting Title	Source of Stock
601328	Bank of Communication	285,000,000.00	0.2985	693,138,589.80	26,766,398.52	1,642,701,773.20	Available-for-sale financial assets	Funded by shareholders
601166	Industrial Bank	82,400,000.00	0.7300	532,900,000.00	146,931,403.67	1,534,290,000.00	Available-for-sale financial assets	Funded by shareholders
600036	Merchants Bank	101,412,645.16	0.2806	501,770,240.00	338,109,212.42	1,544,315,383.49	Available-for-sale financial assets	Funded by shareholders
Total		468,812,645.16	/	1,727,808,829.80	511,807,014.61	4,721,307,156.69	/	/

  7. Audited Consolidated Statement of Profit

Unit: RMB Yuan

Item	Current Amount	Prior Amount
1. Total operating income	7,170,397,363.54	6,275,377,315.81
Including: operating income	7,170,397,363.54	6,275,377,315.81
Interest income
Insurance premium income
Service charges and commission income
2. Total operating cost	7,835,219,874.43	5,609,641,380.90
Including: operating cost	7,079,612,501.25	5,057,207,621.28
Interest expenditure
Service charges and commission expenditure
Refunded insurance premium
Net value of compensation expenditure
Net value of insurance contract allowance
Payment of insurance policy dividends
Reinsurance expenses
Operating tax and surcharges	43,999,415.06	59,971,793.15
Marketing expenses
Administrative expenses	339,346,917.06	342,277,771.92
Financial expenses	362,961,750.99	180,536,498.88
Asset devaluation loss	9,299,290.07	-30,352,304.33
Add: gains from changes in fair values (with loss denoted by '-')	2,268,000.00	-2,268,000.00
Return on investment (with loss denoted by '-')	499,501,261.57	290,843,304.65
Including: returns on investment in affiliated enterprises and joint ventures	-75,531,897.84	248,876,832.01
Foreign exchange income (with loss denoted by '-')
3. Operating profit (with loss denoted by '-')	-163,053,249.32	954,311,239.56
Add: non-operating income	8,544,311.36	7,200,739.12
Less: non-operating expenses	21,310,188.27	20,295,603.15
Including: loss on disposal of non-current assets	7,818,601.53	7,518,937.93
4. Total profit (with loss denoted by '-')	-175,819,126.23	941,216,375.53
Less: income tax expenditure	-110,424,002.04	226,251,464.85
5. Net profit (with net loss denoted by '-')	-65,395,124.19	714,964,910.68
Net profit belonging to owners of the parent company	27,046,056.67	663,214,614.34
Minority shareholders' equity	-92,441,180.86	51,750,296.34
6. Earnings per Share
(1) Basic earnings per share	0.0135	0.3300
(2) Diluted earnings per share	0.0135	0.3300

   

                                                                                                   Board of Directors

                                                                        Zhejiang Southeast Electric Power Company Limited

                                                                                                    19 March 2009

ENDFR IIFFEVEILFIA