RESULTS PERFORMANCE
CR Power recorded a consolidated turnover of HK$60,709 million in 2011, representing an increase of 25.0% compared  to 2010. Profit attributable  to owners of the Company  was HK$4,451 million, representing a decrease of 9.2% compared  with HK$4,904 million in 2010. Basic earnings per share was HK$0.95, representing a decrease of 9.5% compared  with HK$1.05 for last year. The Board has resolved to declare a final dividend of HK$0.24 per share. Together  with the interim dividend of HK$0.06 per share paid on
3 Oc tober 2011, the total dividend for the full year is HK$0.30 per share, representing  a dividend  payout ratio still at about 31.6%
despite a decrease in dividend per share over last year.

In 2011, CR Power made further progress in each of its business segments  of coal-fired power, coal and clean energy. As at the end of 2011, the attributable operational generation capacity of CR Power increased by 2,872MW or 14.8% to 22,230MW compared to the end of 2010.

We have obtained State approvals for the following coal-fired power projects: the Haifeng project (2x1,000MW) in Shanwei, Guangdong Province; the Cangnan project (2x1,000MW) in Wenzhou, Zhejiang Province; the Jiaozuo project (2x600MW ) in Jiaozuo, Henan Province and the coal-fired heat and power co-generation project (2x300MW) in Yichang, Hubei Province.

In 2011, we newly commissioned a 600MW coal-fired heat and power co-generation unit at Nanjing Thermal Plant, a 300MW coal- fired heat and power co-generation  unit at Chemical  I ndustry Park phase  II, 2x600MW  units at Heze Plant and a 600MW unit at Dengfeng phase II, with  a total attributable newly commissioned  installed capacity of 2,460MW.

In 2011, the average utilization hours of our 30 coal-fired power  plants, which  were fully operational between  2010 and 2011 was
6,121 hours, higher than the national average by 827 hours. On the one hand, these results are attributable to CR Power’s coal-fired power business strategy of focusing on provinces with rapid economic  development and a rising power demand, and on the other hand due to our large capacity, high efficiency and lo w coal consumption  generating units, thus maintaining  certain market competitiveness.

The coal-fired power  industry suffered relatively huge losses in 2011 as a result of the rapidly deteriorating business environment. In response to this, the Chinese government raised on-grid tariffs for power  plants in cer tain provinces  firstly between  April and May 2011, and from 1 December  2011 onwards, they broadened the scope of the tariff hikes to a wider geographical region. The on- grid tariffs for coal-fired  power  plants in provinces  such  as Henan,  Hunan,  Hebei, Shandong, Hubei, Liaoning, Inner Mongolia and Anhui were raised twice  during the year, while the other power  plants only had their on-grid  tariffs raised on 1 December 2011.

Although  the on-grid  tariffs for coal-fired power  plants were finally adjusted in 2011, this could not offset against the significant increase in operating costs due to soaring coal prices throughout  the year. In 2011, the coal prices in China presented  a wavering upward  trend. During  the first quarter of the year, domestic  coal supply and demand  were balanced  and prices were relatively stable. During the second  quar ter of the year, there were high fluctuations in the supply and demand  for coal in the coastal regions due to the Daqin line maintenance, drought in the southern regions and decrease in coal imports, shortage of electricity in certain places and active replenishment  of inventories by power plants. These factors raised market expectations  and created an upward trend for coal supply, demand  as well as price. At the end of the third quarter, domestic coal consumption peak period began and coal prices continued  to rise. Coal prices only displayed a downward trend af ter mid-November.
 

In 2011, the average standard coal cost for CR Power ’s power  plants increased  by 13.7%. To deal with the significant yearly increase in coal prices and acting on our social responsibilities and objective of energy saving and emission reduction, we have always been committed to lowering energy consumption.  In 2011, the net generation standard coal consumption  rate for our consolidated power plants was 325.99g/kWh, representing a decrease of 4.60g/kWh or 1.4% as compared  to 330.59g/kWh in 2010. Thus, the increase in CR Power’s unit fuel cost was less than the average standard coal cost, but still reached 11.0%.

In response to the the sharp rise in coal prices in recent years and to stabilize CR Power ’s supply chain and production cost, we continue to str ive towards pursuing our business strategy of moving upstream. In 2011, CR Power ’s subsidiar y and associate coal mines produced a total of approximately 16.37 million tonnes  of coal, representing an increase of 43.3% as compared  to 11.42 million tonnes  of coal produced  in 2010. Throughout  the year, whilst actively developing  new high quality resources  and projects, we also carefully monitored and managed  the safety of the production and operations of our coal mines, especially in our consolidated coal mines in Lüliang and Taiyuan, Shanxi Province. We also actively pursued technological improvements and construction of coal mines to enhance and ensure a high level of safety and at the same time restore production and realize profits.

In March 2011, we successfully acquired a 56% equity interest in Daning Coal Mine located in Jincheng, Shanxi Province for a total consideration of approximately US$669 million. The Daning Coal mine has an annual designed production capacity of 4 million tonnes. Through our efforts, Daning Coal M ine restored production in September 2011.

Despite achieving a produc tion level of 16.37 million tonnes of coal in 2011, which represents an increase of 43.3% as compared  to
11.42 million tonnes in 2010, the production volume was lower than originally planned due mainly to exter nal factors such as changes in governmental  policies, granting of licenses, local relations and geological conditions, as well as other factors such as diverted focus of the coal business management team to mergers and acquisitions, construction  and production  work. As a result of this, we thoroughly assessed CR Power’s execution capabilities in the coal business and concluded  that there w ere certain deficiencies in infrastructure, marketing and operational management  as well as in team building which will need to be improved to a great extent in order to fulfill the expectations of the market and our shareholders.

Within CR Power’s renewable energy sector, we actively developed the wind power business and engaged in scientific management to effectively carry out site selections, wind measuring as well as infrastructure, operational and maintenance  works. As at the end of 2011, our attributable operational wind power generation capacity reached 1,234MW, representing an increase  of 91.0% as compared to 646MW as at the end of 2010. O ur wind farms are mainly located in Guangdong, Shandong, Hebei, Liaoning, Inner Mongolia and Gansu provinces.

In 2011, the average utilization hours for our wind farms were 2,126 hours, representing a decrease of 118 hours as compared  to
2,244 hours in 2010, mainly due to the lower volume of power generation resulting from the slight reduction in wind speed in some regions and seasonal effects on some newly commenced  operations. The utilization rate of our turbines in our wind farms was
98.9%, representing an increase of 1.6 percentage  points as compared  to 2010. As at the end of 2011, our contracted  wind power projects for future development  had a total capacity of 30,000 MW, meanwhile, 2,970 MW were granted preliminary approval.

PRODUCTION SAFETY
CR Power places great emphasis on production  safety and strives to create and maintain a culture  that “safety creates  value”. We create our safe production  sy stem by establishing a managemen t system t o improve management  measures, strengthen management and staff training, sampling  or carrying out planned  production  safety inspections  with reference  to international and domestic industrial standards.

In 2011, we focused on improving the production  safety organizational structure as well as the production  safety management system. We also further strengthened production safety supervision and management  and further implemented  production safety responsibilities. CR Power established a production safety management  committee chaired by the President and set up an office in the company  headquarters for this purpose. A production safet y management committee, chaired by the general manager, was also set up for each project to be responsible for research, planning and implementing  major safety management  matters.
 

The performance of the President, management  and project managers will be directly linked to their respective produc tion safety responsibilities,  and this will be incorporat ed into each of their per formance  contracts, thus effectiv ely delegating safety responsibilities to the people.

In 2011, we fur ther improved and pr epared  safety, health and  environmental  managemen t standards and emergenc y plans, standardized the safety award and penalty system, conducted  safety and site emergency  training, organized and carried out activities such as specialized safet y inspections and joint and mutual safet y inspections.

In 2011, our coal-fired power, coal and renewable  energy businesses completed  safety trainings with 37,000 att endees, 51,000 attendees  and 343 attendees  respectively. Production  safet y will always be our top priority.

CARE FOR STAFF
CR Power encourages the pursuits of staff growth alongside the growth of the Company  and strives to create a challenging, yet harmonious  and happy working environment  and career platform for its staff, aiming to establish a mutual relationship between staff and the organization, as well as between  the staff themselves.

As at the end of 2011, the Company and its subsidiaries had a total of approximately 36,400 employees, of which about 6,400 were female employees, accounting for 17.6%. We strongly believe that the success  of CR Power depends  largely on the energy, dedication, loyalty and competenc y of our staff in order to implement  our strategies and create values. In 2011, we further improved the staff training system and arranged staff training activities with an attendance  level of over 38,000.

Under such an adverse market environment, our staff have inevitably been increasingly more hardworking and under greater pressure. On behalf of the Board, I would like to express my sincere gratitude and full respect to all the staff members  for their contributions and dedication to CR Power in 2011.

COMMUNITY CONTRIBUTIONS
On top of achieving  high profitability, CR Power simultaneously  places great emphasis on fulfilling its social responsibilities alongside its corporate development.  CR Power actively participates in public welfare and promotes “care and responsibility” and advocates that “love and  actions  speak louder  than  words”. Our constructive actions, care for the general public, contributions to both the communities  as well as to the wider country truly reflects CR Power’s sense and fulfillment of responsibility.

To ease the increasingly serious shortage of power in Tibet, CR Power donated one 180MW gas generator unit and undertook all the required work including  the project  feasibility study, design, equipment  transport and construction  with a total investment  of approximately RMB800 million. This projec t was the world’s first ever installation of a 180MW  heavy gas generator at an elevation of more than 3,600m. Under unfavorable construction conditions in the highlands and lack of oxygen, builders voluntarily gave up their holidays to overcome  the severe altitude sickness and successfully completed  grid connection  and trial run and commenced power  generation in just 99 days. On 4 July 2011, the power plant in Lhasa passed the 100-hour combined  cycle trial run and was fully commissioned  43 days ahead of schedule. On 19 August 2011, the power plant was officially transferred to the local government to manage.

In 2011, CR Power actively participated in a project called “China Resources Hope Town”. The China Resources Hope Town in Xibaipo, Hebei Province was completed on 31 October 2011, and the Hope Towns in Shaoshan, Hunan Province and Wanning, Hainan Province commenced  construction in January 2011 and are currently in steady progress.

Since 2008, we have participated in the China Foundation for Youth Entrepreneurship and Employment  for three consecutive years. The objective of this foundation is to support and give guidance to the youth in successful entrepreneurship and employment and assisting them in starting venture projects through various effective means.

In November  2011, the fourth distribution ceremony  for 2010 Hebei Provincial China Resourc es Education Fund was held in Shijiazhuang. As planned, we awarded RMB3 million on an annual basis and plan to fund 10,000 impoverished university students from 2007 for 10 years.
 

In 2011, we organized  and prepared  the first “CR Power Sustainable Development Report”, covering corporate governance, value creation, green growth, care for staff and community contributions. We also incorporated social responsibility work into the Company’s routine agenda. Currently, the headquarters of CR Power, CR Coal and CR New  Energy have initially established  a regular system for social responsibility work. Our goal is to fur ther improve the social responsibility management  system in order to promote better corporate management, achieve sustainable development and continue to actively contribute to the community.

CORPORATE GOVERNANCE
The Board of CR Power aims to improve continuously our corporate governance practices with an objective of creating shareholder value. We endeavour to improve our transparency and accoun tability and promote  honesty and integrity and fair treatment to shareholders,  staff, customers and other stakeholders of the Company. See page 56 to 70 of this annual report for a detailed report about our corporate governance.

CHANGE OF DIRECTORS
On 29 April 2011, Mr. Wang  Shuai Ting resigned  as the Chairman of the Board and an Executive Director of CR Power and the positions held in a number of committees among the Board of Directors. His resignation is mainly due to his appointment  in another impor tant role in a large state-owned  enterprise. Meanwhile, Mr. Song Lin assumed  the role as Chairman of the Board, but resigned during the year due to numerous business commitments. On 21 October 2011, I replaced Mr. Song Lin to serve as the Chairman of the Board.

Mr. Song is the founder of CR Power. He served as the Chairman of the Board for 10 years since the establishment of CR Power and has made invaluable contributions to the development and growth of the Company. We would like to thank Mr. Song for his guidance and help throughout the years and would like to express our gratitude for his outstanding contributions to the development and growth of CR Power.

Mr. Wang  is the pioneer of CR Power. He served as the President and Chief Executive Offic er of CR Power for many years since its establishment and made invaluable contributions to its development and growth. We appreciate Mr. Wang  for his great contributions to the development and advancement of CR Power over the years and would  like to express our thanks for his leadership and guidance to the Board during his time as the Chairman of the Board of CR Power.

It gives me much  pride of being the Chairman of the Board of CR Power and I acknowledge  the important mission I take on. I will spare no efforts and will devote myself in contributing to CR Power’s future development  to ensure I gain the trust and support of our shareholders and staff.
 

CONCLUSION
We are currently undergoing and modernizing CR Power ’s business. Sustainability in business development  has become an emerging commercial  trend and will soon be the primary factor for businesses in order to gain long term competitiveness. We are currently facing drastic changes in the external market environment thus inevitably requiring CR Power to consider revisiting and rebuilding its business  model. We are repositioning ourselves from a single coal-fired power business into an integrated energy producing company. The growth  and evolution of our staff, our culture and management  also play a large par t of the reshaping of CR Power. This refinement will hopefully spread an everlasting vibrant energy within the Company.

On behalf of the Board, I would like to take this opportunity to thank our dedicated management  team and all the members  of the Board for their contributions to the Company  during the past 12 months and my gratitude also goes to all the staff of CR Power for their great efforts in the past year under this adverse market environment. It is precisely because  of this strong dedication and effort that allows me to confidently believe that CR Power is growing and building towards its emergence  as an enterprise with in-depth business intelligence, effective strategies, creative and innovative ideas to promote  business sustainability which  will enable us to cope with and overcome  future challenges  both internally and externally.

Inspired by the admirable vision of becoming  a “world class enterprise, most respected  enterprise and best employer”, we believe that CR Power will undoubtedly enjoy a bright future ahead.

Zhou Jun Qing
Chairman