Interim Results

The Group's turnover for the six months ended 30 June 1998 increased by 49.2% to HK$224.5 million, compared with HK$150.5 million for the previous corresponding period. The Group's profit attributable to shareholders decreased by 4.3% to HK$27.2 million, compared with HK$28.4 million for the previous corresponding period. As a result of the lower earnings as well as the dilution effect arising from the increase of 315,000,000 issued shares of the Company on 14 April 1998, earnings per share decreased by 25.0% from the previous 5.6 cents to 4.2 cents.

Interim Dividend

The Directors had declared an interim dividend of 1.5 cents (1997: 1.5 cents) per share for the six months ended 30 June 1998 payable on or about 30 October 1998 to shareholders whose names appear on the Register of Members on 15 October 1998.

Closure of Register of Members

The Register of Members of the Company will be closed from 12 October 1998 to 15 October 1998, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the interim dividend, all duly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company's Registrars, Central Registration Hong Kong Limited, at Shops 1712-6, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration not later than 4:00 p.m. on 9 October 1998.

Business Review

On 14 April 1998, the Group completed the acquisition (the "Acquisition') of Foshan Shakou Power Plant Co., Ltd. ("Shakou JV") and, as part of the Acquisition's consideration, the disposal of Foshan City Power Supply Factory Co. Ltd. and Foshan Changxi Power Station Co., Ltd. ("Changxi JV"). Since then, Shakou JV was integrated into the Group and the Group has become the dominant local power producer in Foshan City District with an installed capacity of 300,000 kilowatts (prior to the Acquisition: 174,735 kilowatts). During the period, the Group increased its electricity sales by 48.6% from the previous 313 million kilowatt-hours ("kwh") to 465 million kwh, of which 404 million kwh were contributed by Shakou JV during the Post-Acquisition period from 14 April 1998 to 30 June 1998. Out of the Group's total electricity sold, approximately 80 million kwh were provided by Foshan Shiwan Power Station Co., Ltd. ("Shiwan JV") pursuant to a standby power supply agreement dated 29 December 1997 between Shakou JV and Shiwan JV. Prices of heavy oil and other major production materials remained relatively stable. The Group's gross profit margin was stable. However, the Group's net profit was trimmed mainly by the increased interest expenses of HK$22.5 million (1997: HK$3.7 million), increased depreciation of HK$23.2 million (1997: HK$15.7 million) and amortisation of goodwill of HK$5.6 million (1997: Nil).

Prospects

Although operating environment is expected to remain challenging as a result of the Asian financial turmoil, the Directors are confident of the Group's long-term business prospects.

Year 2000 Computer Problem

The Directors fully understand the urgency and importance of the Year 2000 Problem and its potential impacts. The Group has commenced the testing of all the computer systems to ensure they are Year 2000 compliant and the assessment of the possible impact of the Year 2000 Problem on the Group's business operation. According to preliminary review, the Year 2000 Problem would not pose any significant impact on the Group's major production and operating facilities. The total estimated cost to modify existing systems to avoid the potential exposure to the Year 2000 Problem would not be significant The Group's overall objective is to ensure all necessary modifications and enhancement of the computer systems would be completed by the first half of 1999 and there will be no disruption to its business operation during and after the turn of the millennium.

Code of Best Practice

None of the Directors of the Company is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the period, in compliance with the Code of Best Practice as set out by The Stock Exchange of Hong Kong Limited in Appendix 14 to the Listing Rules.

Summary of Results

The unaudited consolidated interim results of the Group for the six months ended 30 June 1998 together with comparative figures for the previous corresponding period are as follows:- Notes: 1. Change of accounting policy The Group has changed its accounting policy with regard to the accounting treatment of goodwill arising on the acquisition of subsidiaries which is now amortised on a straight-line basis to the profit and loss account over its estimated useful life. In previous years, such goodwill on acquisition would be written off to the reserves in the year in which it arises. During the period, goodwill on acquisition was approximately HK$790.5 million and HK$6.6 million was amortised and charged to the profit and loss account. This change in accounting policy has been made to provide a better presentation of the financial position and the results. No adjustment was required for restatement for the previous years. 2. Exceptional item 3. Taxation No provision has been made for Hong Kong profits tax as the Group sustained losses for taxation purposes during the period. The tax charge represents provision for the People's Republic of China income tax at 15.0% and 7.5% on the estimated assessable profits of Changxi JV and Shakou JV for the period respectively. 4. Earnings per share The calculation of earnings per share is based on the profit after taxation and minority interests of HK$27,211,000 (1997: HK$28,431,000) and on the weighted average number of 648,023,769 (1997: 507,068,244) shares in issue during the period. No figure for diluted earnings per share is presented as there was no outstanding share option at 30 June 1998. No figure for diluted earnings per share was presented for the six months ended 30 June 1997 as the diluting effect was anti-dilutive.

Directors' Interests

As at 30 June 1997, the interest of each director and chief executive of the Company in the issued capital of the Company or its associated corporations, as recorded in the register required to be kept under Section 29 of Securities (Disclosure of Interests) Ordinance ("SDI Ordinance"), were as follows:-

Note: Held by Main Fortune International Limited which is 50% owned by Mr. Du Richeng.

Save as disclosed herein, none of the Directors and chief executives had any other beneficial interests in the share capital of the Company or its associated corporations. Furthermore, neither any of them nor their spouses or children under the age of 18 years were granted any rights or options to subscribe for shares in the Company or its associated corporations.

Substantial Interests in the Share Capital of the Company

As at 30 June 1998, according to the register of interests kept by the Company under Section 16(1) of the SDI Ordinance, the Company had been notified of the following persons (other than a director or chief executive of the Company) with interests representing 10% or more of the issued share capital of the Company:-

Note: By virtue of its interests in Hensil Investments Group Limited, Foshan Development Company Limited is deemed to be interested in the 315,000,000 shares held by Hensil Investments Group Limited

Save as disclosed above, there was no other person (other than a director or chief executive of the Company) who directly or indirectly interested in 10% or more of the issued share capital of the Company.

Purchase, Sale or Redemption of Company's Listed Securities

During the period, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.

By Order of the Board
Yip Siu Chun
Chairman

Hong Kong, 10 September 1998

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