KONG SUN HOLDINGS LIMITED THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action you should take, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Kong Sun Holdings Limited, you should at once hand this circular to the purchaser or the transferee or to the bank manager, licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser or the transferee.
Hong Kong Exchange and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.
KONG SUN HOLDINGS LIMITED
ϪʆછٰϞࠢʮ̡
(Incorporated in Hong Kong with limited liability)
(Stock Code: 295)
(1) VERY SUBSTANTIAL DISPOSAL
AND
(2) NOTICE OF EXTRAORDINARY GENERAL MEETING
A letter from the Board is set out on pages 6 to 15 of this circular.
A notice convening the extraordinary general meeting of the Company to be held at Unit 803-4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong on Monday, 15 March 2021 at 11:00 a.m. (the ''EGM'') is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you intend to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company's share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time fixed for holding the EGM or any adjournment thereof. Completion and return of the form(s) of proxy will not preclude you from attending and voting in person at the EGM should you so wish.
PRECAUTIONARY MEASURES AND SPECIAL ARRANGEMENTS FOR THE EGM
Please refer to page 1 of this circular for measures being implemented at the EGM to try to prevent and control the spread of the novel coronavirus (''COVID-19''), including, without limitation:
- all attendees being required to (a) undergo body temperature screening; and (b) wear surgical masks prior to admission to the EGM venue;
- all attendees who are subject to health quarantine prescribed by the Hong Kong Government not being admitted to the EGM venue;
- all attendees being required to wear surgical masks throughout the EGM;
- appropriate seating arrangement being implemented; and
- no distribution of corporate gift or refreshment.
The Company reminds attendees that they should carefully consider the risks of attending the EGM, taking into account their own personal circumstances. Furthermore, the Company would like to remind the Shareholders that physical attendance in person at the EGM is not necessary for the purpose of exercising their voting rights and strongly recommends that Shareholders appoint the chairman of the EGM as their proxy and submit their form of proxy as early as possible. Subject to the development of COVID-19, the Company may implement further changes and precautionary measures and may issue further announcement on such measures as appropriate.
26 February 2021
CONTENTS
Pages
Precautionary Measures for the EGM .......................................... 1
Definitions ..................................................................... 2
Letter from the Board .......................................................... 6
Appendix I - Financial Information of the Group .........................
I-1
Appendix II-A - Financial Information of Weixian Tianhai ................... II-A-1
Appendix II-B - Financial Information of Pingshan Tianhui .................. II-B-1
Appendix II-C - Financial Information of Shandong Xintailou ................ II-C-1
Appendix II-D - Financial Information of Qianchao Brothers ................ II-D-1
Appendix II-E - Financial Information of Yongchen .......................... II-E-1
Appendix III
- Unaudited Pro Forma Financial Information of the Remaining Group ..................................
III-1
Appendix IV | - Valuation Report ............................................ | IV-1 |
Appendix V | - General Information ........................................ | V-1 |
EGM-1 |
Notice of the EGM .............................................................
PRECAUTIONARY MEASURES FOR THE EGM
The health of our Shareholders, staff and stakeholders is of paramount importance to us. In view of the ongoing COVID-19 pandemic, the Company will implement the following precautionary measures at the EGM to protect attending Shareholders, staff and stakeholders from the risk of infection:
(i) Compulsory body temperature checks will be conducted for every Shareholder, proxy or other attendee at each entrance of the meeting venue. Any person with a body temperature of over 37.4 degrees Celsius may be denied entry into the meeting venue or be required to leave the meeting venue;
(ii) Each attendee may be asked whether (a) he/she has travelled outside of Hong Kong within the 14-day period immediately before the EGM; and (b) he/she is subject to any Hong Kong Government prescribed quarantine. Anyone who responds positively to any of these questions may be denied entry into the meeting venue or be required to leave the meeting venue;
(iii) All attendees are required to wear a surgical face mask throughout the meeting and inside the meeting venue, and to maintain a safe distance between seats; and
(iv) No refreshment will be served, and there will be no corporate gift.
Pursuant to the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Cap. 599G) (the ''Regulation''), group gatherings of more than 20 persons for shareholders' meetings are required to be accommodated in separate rooms or partitioned areas of not more than 20 persons each.
In addition, the Company reminds all Shareholders that physical attendance in person at the meeting is not necessary for the purpose of exercising voting rights. Shareholders may appoint the chairman of the meeting as their proxy to vote on the relevant resolutions at the meeting instead of attending the meeting in person, by completing and return the proxy form attached to this circular.
The Company will keep the Shareholders informed by way of further announcement if there are any material updates on the Regulation which would affect the EGM.
If any Shareholder chooses not to attend the meeting in person but has any question about any resolution or about the Company, or has any matter for communication with the Board, he/ she is welcome to send such question or matter in writing to our head office and principal place of business in Hong Kong.
If any Shareholder has any question relating to the meeting, please contact Computershare Hong Kong Investor Services Limited, the Company's share registrar in Hong Kong as follow:
Computershare Hong Kong Investor Services Limited
17M Floor, Hopewell Centre
183 Queen's Road East
Wanchai, Hong Kong
Tel: +852 28628555
In this circular, unless the context otherwise requires, the following expressions have the following meanings:
''Angli Disposal''
the disposal of the entire equity interest of 定邊縣昂立光伏 科技有限公司 (Dingbian Angli Solar Power Technology Co., Ltd.)* by Kong Sun Yongtai to Guotou, details of which can be found in the circular of the Company dated 6 January 2020
''Announcement''
the announcement of the Company dated 4 December 2020 in relation to the Disposal
''Beijing Energy International''
北京能源國際控股有限公司 (Beijing Energy International Holding Co., Ltd.*), a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange (stock code: 686) and the controlling shareholder of the Purchaser as at the Latest Practicable Date
''Board''
the board of Directors
''CDB Finance Lease''
''CDB Leasing''
the finance lease agreement dated 25 December 2018 entered into between Yongchen and CDB Leasing 國銀金融租賃股份有限公司 (China Development Bank Financial Leasing Co., Ltd.*), a company established in the PRC with limited liability, the H-shares of which are listed on the Stock Exchange (stock code: 1606)
''CNNP Disposals''
the disposal of the entire equity interests of 9 target companies by Kong Sun Yongtai to CNNP Shandong, details of which can be found in the circular of the Company dated 6 January 2020
''CNNP Shandong''
中核山東能源有限公司 (CNNP Shandong Energy Co., Ltd.*), a company established under the laws of the PRC with limited liability
''Company''
Kong Sun Holdings Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the main board of the Stock Exchange (stock code: 295)
''connected person(s)''
has the meaning ascribed to it under the Listing Rules
''Debts''
the outstanding loans, advances, interests (if any) and other sums owed by Yongchen to Jiangshan Fengrong which is the net-off amount between the Yongchen's Inter-company Debts and the Subsidiaries' Inter-company Debts
''Director(s)''
director(s) of the Company
''Disposal''
the disposal of the Sale Equity Interest
''Disposal Agreement''
the equity transfer agreement dated 4 December 2020 entered into by and among the Purchaser, Jiangshan Fengrong and Yongchen in relation to the Disposal
''EGM''
the extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approve, among other things, the Disposal and the Guarantee
''Equity Consideration''
the consideration for the Disposal
''Escrow Account''
the bank account to be jointly established and operated by Jiangshan Fengrong and the Purchaser for holding the relevant deposit pursuant to the terms of the Disposal Agreement
''Group''
the Company and its subsidiaries
''Guarantee''
''Guotou''
the guarantee provided by Jiangshan Fengrong and its related companies which are subsidiaries of the Company for securing the existing borrowings of Yongchen 國投電力控股股份有限公司 (Guotou Electric Holding Co., Ltd.*), a company established in the PRC with limited liability, the shares of which were listed on Shanghai Stock Exchange (stock code: 600886)
''Hong Kong''
''Kong Sun Yongtai''
the Hong Kong Special Administrative Region of the PRC 江山永泰投資控股有限公司 (Kong Sun Yongtai Investment Holdings Limited*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
''Jiangshan Fengrong''
江山豐融投資有限公司 (Jiangshan Fengrong Investment Company Limited*), a company established in the PRC with limited liability and is an indirect wholly-owned subsidiary of the Company
''Jinan Tianguan''
濟 南 天 冠 能 源 科 技 有 限 公 司 (Jinan Tianguan Energy Technology Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
''Latest Practicable Date''
23 February 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular
''Listing Rules''
the Rules Governing the Listing of Securities on the Stock Exchange
''Long Stop Date''
''MW''
30 April 2021 mega watts
''PRC''
the People's Republic of China
''Previous Disposals''
the disposals of the Project Companies, details of which can be found in the Company's announcement dated 22 October 2020
''Project''
a 300 MW solar power plant owned by Yongchen in Shaanxi Province, PRC
''Project Companies''
威縣天海光伏發電有限公司 (Weixian Tianhai Photovoltaic Power Generation Co., Ltd.*), 平山縣天匯能源科技有限公 司 (Pingshan Tianhui Energy Technology Co., Ltd.*), 山東 新 泰 樓 德 佳 陽 光 伏 發 電 有 限 公 司 (Shandong Xintailou Dejia Solar Power Co., Ltd.*) and 德州市陵城區乾超兄弟 能 源 科 技 有 限 公 司 (Dezhou City Lingcheng District Qianchao Brothers Energy Technology Co., Ltd.*), all of which are companies established in the PRC with limited liability
''Purchaser''
北京 聯 合 榮 邦 新 能 源 科 技 有 限 公 司 (Beijing United Rongbang New Energy Technology Co., Ltd.*), a company established in the PRC with limited liability
''Reference Date''
30 April 2020
''RMB''
''Sale Equity Interest''
Renminbi, the lawful currency of the PRC the entire equity interests of Yongchen
''SFO''
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
''Share(s)''
''Shareholders''
ordinary shares of the Company holders of the Shares
''Stock Exchange''
The Stock Exchange of Hong Kong Limited
''Subsidiaries' Inter-company
Debts''
the outstanding net amount of RMB192,767,000 due by certain subsidiaries of the Company to Yongchen as at the Reference Date
''Transition Period''
the period from (but excluding) the Reference Date to (and not including) the date of completion of the Disposal
''Transition Period Audit''
an audit to be performed by an auditor engaged by the Purchaser with respect to Yongchen for the Transition Period
''Yongchen''
榆林市江山永宸新能源有限公司 (Yulin City Jiangshan Yongchen New Energy Limited*), a company established in the PRC with limited liability and an indirect subsidiary of the Company as at the Latest Practicable Date
''Zhiguang Disposal''
''Yongchen's Inter-company
Debts''
''Yonglian Disposal''
the outstanding net amount of RMB287,747,000 due by Yongchen to Jiangshan Fengrong as at the Reference Date the disposal of the entire equity interest of 玉門市永聯科技 新 能 源 有 限 公 司 (Yumen Yonglian Technology New Energy Co., Ltd.*) by Kong Sun Yongtai to CNNP Shandong, details of which can be found in the announcement of the Company dated 14 December 2020 the disposal of the entire equity interest of 靖邊縣智光新能 源 開 發 有 限 公 司 (Jingbian Zhiguang New Energy Development Co., Ltd.*) by Kong Sun Yongtai to Guotou, details of which can be found in the announcement of the Company dated 21 September 2020
''%''
per cent.
KONG SUN HOLDINGS LIMITED
ϪʆછٰϞࠢʮ̡
(Incorporated in Hong Kong with limited liability)
(Stock Code: 295)
Executive Directors: Mr. Jin Yanbing
(Chief Executive Officer and Chairman)
Mr. Qin Hongfu
Non-Executive Director: Mr. Jiang Hengwen
Independent Non-Executive Directors: Mr. Lang Wangkai
Ms. Wang Fang Ms. Wu Wennan
To the Shareholders
Dear Sir or Madam,
Registered Office and Principal Place of Business:
Unit 803-4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong
26 February 2021
(1) VERY SUBSTANTIAL DISPOSAL
AND
(2) NOTICE OF EXTRAORDINARY GENERAL MEETING
INTRODUCTION
Reference is made to the Announcement.
The purpose of this circular is to provide you with, among other things, further details of the Disposal and the Guarantee, the financial information of the Group, the financial information and the valuation report of the Project Companies and Yongchen, the notice convening the EGM and other information as required under the Listing Rules.
- 6 -
THE DISPOSAL
On 4 December 2020, Jiangshan Fengrong, an indirect wholly-owned subsidiary of the Company, the Purchaser and Yongchen, entered into the Disposal Agreement, pursuant to which Jiangshan Fengrong conditionally agreed to sell the Sale Equity Interest to the Purchaser for a total consideration of approximately RMB1,177,829,000. The Company agreed to guarantee the obligations of Jiangshan Fengrong in favour of the Purchaser under the Disposal Agreement.
The principal terms of the Disposal Agreement are summarized as follows:
PRINCIPAL TERMS OF THE DISPOSAL AGREEMENT
Subject matter
On 4 December 2020, Jiangshan Fengrong, the Purchaser and Yongchen entered into the Disposal Agreement, pursuant to which Jiangshan Fengrong conditionally agreed to sell, and the Purchaser conditionally agreed to acquire, the Sale Equity Interest.
Consideration
The Equity Consideration is approximately RMB1,177,829,000, which shall be payable by the Purchaser in cash in accordance with the following manner:
(i) an amount of RMB36,500,000, representing approximately 3.1% of the Equity
Consideration, shall be paid to Jiangshan Fengrong within ten (10) business days upon execution of the Disposal Agreement and upon satisfaction of items (e) and (f) of the conditions precedent (the ''Earnest Money'');
(ii) an amount of approximately RMB670,197,000 (the ''First Deposit''), representing approximately 56.9% of the Equity Consideration, shall be paid into the Escrow Account before completion of the Disposal and shall be transferred to Jiangshan Fengrong within ten (10) business days after completion of the Disposal;
(iii) an amount of approximately RMB301,495,000, representing approximately 25.6% of the Equity Consideration, shall be paid to Jiangshan Fengrong within ten (10) business days after completion of the Disposal;
(iv) a total amount of up to RMB95,800,000, representing approximately 8.1% of the Equity Consideration, shall be paid to Jiangshan Fengrong within ten (10) business days upon the completion of each of certain rectification works items of the Project by Jiangshan Fengrong required by the Purchaser, which in any event, within one (1) year after completion of the Disposal. The estimated cost of such rectification works items of the Project is approximately RMB95,800,000; and
(v) an amount equal to 15% of the amount of the state renewable energy subsidies received by Yongchen from the State Grid Corporation of China, which shall be paid in batches, within ten (10) business days of each receipt, up to a total amount of approximately RMB73,837,000, representing approximately 6.3% of the Equity Consideration. By this time Jiangshan Fengrong should have already received 85% of the projected amount of such subsidies. The remaining 15% of such subsidies pending to be received by Jiangshan Fengrong would only constitute 6.3% of the Equity Consideration. Jiangshan Fengrong is able to know when Yongchen will receive each batch of subsidies as such information is available in public website.
Repayment of the Debts
As at the Reference Date, Yongchen had the outstanding Debts in the amount of approximately RMB94,980,000. The Debts, subject to adjustment for any net increase or decrease thereof during the Transition Period as determined under the Transition Period Audit, shall be settled by Yongchen within ten (10) business days after completion of the Transition Period Audit.
The Transition Period Audit report will be issued within ten (10) business days of the completion of the Disposal. In the event of any change of net assets value of Yongchen as a result of matters occurred in non-ordinary course of business during the Transition Period, such change will be considered as a consideration adjustment. The Purchaser has the right to request compensation from Jiangshan Fengrong.
Default
If the Purchaser fails to pay the Equity Consideration pursuant to the terms of the Disposal Agreement or Yongchen fails to repay the Debts pursuant to the terms of the Disposal Agreement, Jiangshan Fengrong has the right to request the Purchaser and Yongchen to pay to it a default payment, which is calculated based on the relevant unpaid amounts due and a penalty at 0.05% of the relevant amounts due on a daily basis. If the default continues for more than ninety (90) calendar days from the relevant due date, Jiangshan Fengrong will be entitled to terminate the Disposal Agreement, refund all the payments made by the Purchaser after deducting a default payment of RMB30,000,000 and request the Purchaser to compensate for all losses incurred by Jiangshan Fengrong. Jiangshan Fengrong will also be entitled to commence litigation against the Purchaser in the PRC court with competent jurisdiction and claim restitution in accordance with the PRC law. If the Purchaser refuses to perform the court decision in favour of Jiangshan Fengrong, Jiangshan Fengrong may seek enforcement by the court. Under this circumstance, the Purchaser may be added into 失信執行人名錄 (the List of Untrustworthy Executors*) (an effective enforcement machinery in the PRC), which may have a material adverse effect on the assessment of the Purchaser's credit rating and reputation. Taking into consideration of the general market practice in the solar industry as well as the background of the Purchaser, the Directors are of the view that the settlement and completion mechanism is sufficient to safeguard the Company's right to receive the full consideration and the possibility of the Purchaser would not honour its contractual commitment is relatively low.
Conditions Precedent
Completion of the Disposal is subject to the satisfaction of the following conditions precedent:
(a) each party having obtained all necessary internal approvals regarding the Disposal and the Guarantee:
(i) with respect to Yongchen, the approval from Jiangshan Fengrong as its sole shareholder;
(ii) with respect to Jiangshan Fengrong, the approval from its shareholders, the approval from the Board and the approval from the Shareholders at the EGM in accordance with the Listing Rules; and
(iii) with respect to the Purchaser, the approval from its shareholders, the approvals from the board of directors and the shareholders of Beijing Energy International in accordance with the Listing Rules; and
(b) the written consent from CDB Leasing in respect of the Disposal regarding the CDB Finance Lease;
(c) Jiangshan Fengrong, its related parties and Yongchen having agreed and completed the debt restructuring under which, the Yongchen's Inter-company Debts and the Subsidiaries' Inter-company Debts will be netted off;
(d) the Purchaser having paid the Earnest Money and deposited the First Deposit into the Escrow Account;
(e) 榆林隆源光伏電力有限公司(Yulin Longyuan Solar Energy Limited*), a limited liability company established in the PRC, having issued a written consent to confirm the sharing of the booster station with Yongchen, the granting of project use rights and the allocation of costs; and
(f) the Purchaser having confirmed in writing its acknowledgement and agreement that the photovoltaic power generation is classified as the ''encouraged'' industry under the ''Industrial Structure Adjustment Guidance Catalog (2019)'' issued by the Shaanxi Provincial Development and Reform Commission.
As at the Latest Practicable Date, save for (e) and (f), the above conditions have not been satisfied.
The parties shall use their best efforts to procure satisfaction of the above conditions precedent on or before the Long Stop Date:
(i) If Jiangshan Fengrong or Yongchen fails to fulfil its obligation under the conditions precedent on or before the Long Stop Date pursuant to the terms of the Disposal Agreement, Jiangshan Fengrong will be liable to pay to the Purchaser a default payment, to be calculated at an annual percentage rate of 8% of the Earnest Moneypaid by the Purchaser, and the Purchaser will be entitled to, among other things, terminate the Disposal Agreement and seek for damages from Jiangshan Fengrong for all fees and costs incurred by third parties arised from the Disposal; and
(ii) If the Purchaser fails to fulfil its obligation under the conditions precedent on or before the Long Stop Date pursuant to the terms of the Disposal Agreement, Jiangshan Fengrong will be entitled to terminate the Disposal Agreement and seek for damages from the Purchaser for all fees and costs incurred by Jiangshan Fengrong, Yongchen or third parties arised from this transaction. Jiangshan Fengrong shall refund all the payment made by the Purchaser.
BASIS OF THE CONSIDERATION FOR THE DISPOSAL
The consideration for the Disposal was determined upon arm's length negotiations between Jiangshan Fengrong and the Purchaser with reference to the unaudited net assets of Yongchen as at 31 October 2020 in the amount of approximately RMB1,276,547,000, and adjusted by applying a discount of approximately 7.7% and the weak financial position of Yongchen with poor refinancing ability. Without the Debts as the shareholder's loan which provide imminent funding for Yongchen, Yongchen will not have sufficient cash to maintain and operate its businesses. The Equity Consideration covers the estimated cost of the outstanding rectification works items of the Project to be paid by Jiangshan Fengrong in the amount of approximately RMB95,800,000.
In determining the discount to be applied to the net asset value of Yongchen for the determination of the consideration for the Disposal, the Directors took into consideration account the following factors:
(i) the Disposal represents an opportunity for the Group to recoup its capital investment in Yongchen given the Debts will be repaid in full to the Group within twenty (20) business days after completion of the Disposal, which will relieve the Group from its funding commitment to Yongchen in the form of shareholder's loan which is costly to maintain;
(ii) Yongchen recorded a significant amount of accounts receivables, being the state renewable energy subsidies to be received from the State Grid Corporation of China, of approximately RMB492,244,000 as at the Reference Date, the receipt of which depends on the decision of the relevant government authority;
(iii) the discount of approximately 7.7% to the net asset value of Yongchen is much lower than the average discount rate (i.e. 20.2%) to the net asset value of the project companies disposed by the Group since the end of the year 2018; and
(iv) the Group is expected to save an annual finance costs of approximately RMB101,600,000 upon completion of the Disposal.
Arrangements during the Transition Period
Any profits generated and any losses incurred and any changes to the net assets of Yongchen during the Transition Period, subject to the Transition Period Audit, shall be borne by Yongchen.
During the Transition Period, Jiangshan Fengrong shall ensure that, among other things, Yongchen will continue its normal business operations in accordance with its past practices and, save for the equity pledge over the Sale Equity Interest in favour of CDB Leasing to secure the CDB Finance Lease as permitted under the Disposal Agreement, no encumbrances or other third party rights will be created with respect to the equity interest in Yongchen without the prior written consent of the Purchaser.
Termination of the Guarantee
Pursuant to the Disposal Agreement, by no later than 90 (ninety) days after the completion of the Disposal, the Purchaser shall provide necessary financing facilities to Yongchen for its repayment of the outstanding amount under the CDB Finance Lease and procure the release of the Guarantee. In the event that the Purchaser does not procure completion of the release of the Guarantee within ninety (90) days after completion of the Disposal, Jiangshan Fengrong shall have the right to seek for damages from the Purchaser and default penalty incurred thereunder calculated at an annual percentage rate of 0.2% based on the principal of guarantee amount. If the Purchaser fails to procure completion of the release of the Guarantee within the agreed time, Jiangshan Fengrong shall have the right to rescind the Disposal Agreement, and seek for damages from the Purchaser in the maximum amount of RMB30,000,000 and the Purchaser shall bear all the costs and expenses in connection with the transactions contemplated thereunder. The Company will then make assessment on the possible implications under the Listing Rules and make further disclosure as and when appropriate to comply with it.
The continuation of the Guarantee was agreed after an arm's length negotiation between the parties and was one of the key commercial terms for the Purchaser to agree to the transactions contemplated under the Disposal Agreement. In view of the financial stress that the Group is encountering though the terms and conditions of the Guarantee may not be ideal, the Directors consider that the Disposal and the Guarantee are still the best available option under the circumstances for the Company to cut losses and streamline its operation at an appropriate timing after identifying the Purchaser which is subsidiary of another listed company in Hong Kong. The Guarantee would also facilitate CDB Leasing to provide its written consent regarding the Disposal in respect of the CDB Finance Lease, which is a condition precedent under the Disposal Agreement. In the worst scenario if the Purchaser fails to procure release of the Guarantee within an agreed time, Jiangshan Fengrong shall have the right to rescind the Disposal Agreement.
COMPLETION OF THE DISPOSAL
Completion of the Disposal shall take place on the date when the transfer of the Sale Equity Interest has been registered with the relevant administration for industry and commerce and a new business license has been issued to Yongchen.
Completion of the Disposal and the provision of the Guarantee are inter-conditional upon each other.
INFORMATION ON YONGCHEN
Yongchen is a company established in the PRC with limited liability. It is principally engaged in the development, construction and operation of the Project. The construction of the Project has been completed, and the power plant has been connected to the power grid.
The unaudited financial results of Yongchen for the two financial years immediately preceding the Latest Practicable Date are as follows:
For the year ended
31 December
2018 2019
(Unaudited) | (Unaudited) | |
RMB'000 | RMB'000 | |
Net profit before tax | 146,489 | 44,991 |
Net profit after tax | 146,489 | 44,991 |
The unaudited net asset value of Yongchen as at 31 October 2020 was approximately RMB1,276,547,000.
INFORMATION ON THE PARTIES
Jiangshan Fengrong
Jiangshan Fengrong is an indirect wholly-owned subsidiary of the Company and is principally engaged in investment holding. As at the Latest Practicable Date, Yongchen is a direct subsidiary of Jiangshan Fengrong.
The Company
The Company is principally engaged in the investment in and operation of solar power plants, provision of solar power plant operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.
The Purchaser
The Purchaser is a company established in the PRC and is principally engaged in the development and operation of clean energy such as solar energy. As at the Latest Practicable Date, the Purchaser is an indirect wholly-owned subsidiary of Beijing Energy International.
To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, each of the Purchaser and its ultimate beneficial owner is a third party independent of the Company and connected persons of the Company.
REASONS AND BENEFITS FOR THE DISPOSAL
The Directors consider that the Disposal represents a good opportunity for the Group to realise its investment in Yongchen so as to better allocate the Group's resources and optimize its operation model. The Disposal is consistent with the Group's strategy to reduce debts and interest rate exposure given it was agreed between the parties that the Debts will be repaid in full to the Group within twenty (20) business days after completion of the Disposal, which will relieve the Group's funding commitment as a shareholder to Yongchen. The net proceeds of the Disposal will be applied towards the repayment of the Company's existing indebtedness, the Company will be expected to save an annual finance cost of approximately RMB101,600,000, which is calculated from a formula of the net proceeds of the Disposal of approximately RMB1,270,000,000 multiplied by the average interest rate of the Group's existing indebtedness of approximately 8% per annum.
Based on the foregoing, the Directors are of the view that the Disposal and the terms of the Disposal Agreement were entered into on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. As at the Latest Practicable Date, none of the Directors had a material interest in the Disposal and the Guarantee and was required to abstain from the relevant Board's resolutions to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder.
FINANCIAL EFFECT OF THE DISPOSAL AND INTENDED USE OF PROCEEDS
As at the Latest Practicable Date, Yongchen is an indirect subsidiary of the Company. With effect from completion of the Disposal Agreement, Yongchen will cease to be a subsidiary of the Company and its financial statement will cease to be consolidated in the financial statements of the Company. Jiangshan Fengrong will not hold any equity interest in Yongchen after completion of the Disposal.
Subject to final audit, it is expected that the Group will realise a net loss on the Disposal of not more than approximately RMB102,000,000, which is calculated by reference to the difference between (i) the consideration for the Disposal and net asset value of Yongchen as at 31 October 2020 and (ii) the related transaction costs, taxes and expenses of the Disposal. Despite the net loss on the Disposal, having taking into consideration of the reasons for the Disposal as stated under the paragraph headed ''Reasons and Benefits for the Disposal'' above, the Company is of the view that the Disposal will be in the interests of the Company and the Shareholders as a whole as it will lower the Group's gearing ratio.
The net proceeds from the Disposal after deducting the taxation and transaction costs are estimated to be approximately RMB1,270,000,000. The Group intends to apply the net proceeds from the Disposal to repay its existing indebtedness.
LISTING RULES IMPLICATIONS
The Disposal
As one of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Disposal is 75% or more, the transaction contemplated under the Disposal Agreement constitutes a very substantial disposal for the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement and Shareholders' approval requirements under Chapter 14 of the Listing Rules.
The Guarantee
As certain of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Guarantee are 25% or more, the Guarantee constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement and Shareholders' approval requirements under Chapter 14 of the Listing Rules.
EGM
Set out on pages EGM-1 to EGM-2 of this circular is a notice of the EGM to be held at Unit 803-4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong on Monday, 15 March 2021 at 11:00 a.m., at which ordinary resolutions will be proposed to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder.
Whether or not you propose to attend the meeting, you are requested to read the notice of EGM and complete the accompanying form of proxy, which are enclosed in this circular in accordance with the instructions printed thereon and return the same to the Company's share registrar and transfer office, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Center, 183 Queen's Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding of the meeting or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending and voting at the meeting should you so wish.
Pursuant to the Listing Rules, any Shareholder who has a material interest in the Disposal and the Guarantee and his/her/its close associates is/are required to abstain from voting on the relevant resolutions at the EGM. As at the Latest Practicable Date, to the best of the Directors' knowledge after having made all reasonable enquiries, no Shareholder has a material interest in the Disposal and the Guarantee and, accordingly, no Shareholder is required to abstain from voting on the ordinary resolutions to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder at the EGM.
RECOMMENDATION
The Directors consider that the terms of the Disposal Agreement, the Guarantee and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that the Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder.
ADDITIONAL INFORMATION
Your attention is also drawn to the additional information set out in the appendices to this circular.
Yours faithfully,
For and on behalf of the Board
Kong Sun Holdings Limited
Mr. Jin Yanbing Executive Director
1. SUMMARY OF THE FINANCIAL INFORMATION OF THE GROUP
Financial information of the Group for each of the three years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020 are set out in the annual reports of the Group for the years ended 31 December 2017 (pages 73 to 180), 2018 (pages 81 to 200) and
2019 (pages 81 to 196) and the interim report of the Group for the six months ended 30 June
2020 (pages 40 to 84), respectively, which are published on both the website of the Stock Exchange (http://www.hkex.com.hk) and the website of the Company (www.kongsun.com) respectively.
2. WORKING CAPITAL
The Directors, after due and careful consideration and taking into account the proceeds from the Disposal, the timely settlement of the Group's certain renewable energy subsidy receivables from the State Grid Companies as expected, present internal resources and banking and other facilities, are of the opinion that the Group would have sufficient working capital for at least 12 months from the date of this circular.
3. STATEMENT OF INDEBTEDNESS
As at the close of business on 31 December 2020, being the latest practicable date for the purpose of this statement of indebtedness, the Group's indebtedness includes secured loans and borrowings amounted to approximately RMB8,201,511,000 and unsecured corporate bonds amounted to approximately RMB273,632,000 and lease liabilities amounted to approximately RMB193,896,000.
The Group's loans and borrowings were secured by its assets, including solar power plants, trade receivables, lease prepayments, financial assets measured at fair value through other comprehensive income and the equity interests of certain subsidiaries.
In addition, as at 31 December 2020, other than corporate guarantees from the subsidiaries of the Group, an independent third party had provided unlimited corporate guarantees to certain of the Group's other borrowings amounting to approximately RMB1,590,041,000.
As at 31 December 2020, the Group had executed a guarantee with respect to a loan of approximately RMB205,168,000 granted by independent third parties to 靖邊縣智光新能源開 發有限公司 (Jingbian Zhiguang New Energy Development Co., Ltd.) (''Zhiguang''), an indirect wholly-owned subsidiary of the Company before disposal as at 12 October 2020.
As at 31 December 2020, the Group's lease liabilities amounted to approximately RMB193,896,000 in relation to the remaining lease terms of certain lease contracts, which is unsecured and unguaranteed.
The Directors confirm that, as of 31 December 2020, being the latest practicable date for the purpose of this statement of indebtedness, save as disclosed above, the Group did not have any issued and outstanding, or authorised or otherwise created but unissued debt securities, term loans, other borrowings, indebtedness, mortgages and charges, contingent liabilities and guarantees.
The Directors confirm that, save as disclosed above, there have been no material changes in the indebtedness or contingent liabilities of the Group as at the Latest Practicable Date.
4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP
The Group is mainly engaged in investment in and the operation of solar power plants, provision of solar power plant operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.
In the long run, by focusing on clean energy and green finance, the Group will continue to develop its solar power generation business, optimise its operation mode and enhance the efficiency of equipment in solar power plants. Through integration of industry and finance, it will also improve its operational efficiency, so as to drive the development of green and low-carbon energy in China and make positive contributions to environmental protection.
It is expected that by transferring the controlling interests of solar power plant projects, the Group will be able to recycle capital, reduce its debts and finance costs and mitigate the pressure on project financing, while further improve the return on capital and receive stable fees annually by providing solar power plant operation and maintenance services.
Solar power generating business is a capital intensive industry, which highly relies on external financing in order to fund for the construction of solar power plant while the recovery of capital investment takes a long period of time. To cope with the gearing risk, the Group will pay close attention to the market dynamics, and to avoid any unfavorable changes to the Group.
Given the Group highly relies on external financing in order to obtain investment capital for new solar power plants development, any interest rate changes will have impact on the Group's capital expenditure and finance costs, hence, affecting the Group's operating results.
5. MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, save as disclosed in the profit warning announcement of the Company dated 31 July 2020, there has been no material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest audited consolidated financial statements of the Company were made up.
6. MATERIAL ACQUISITION OR DISPOSAL
Save for the CNNP Disposals, the Angli Disposal, the Zhiguang Disposal, the Yonglian Disposal, the Previous Disposals and the Disposal, the Group had not carried out any material acquisition or disposal after 31 December 2019, being the date to which the latest published audited accounts of the Company have been made up, and up to the Latest Practicable Date.
7. SIGNIFICANT INVESTMENTS
Save as disclosed above in this circular, the Group did not have any other significant investments after 31 December 2019, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the Latest Practicable Date.
8. MANAGEMENT DISCUSSION AND ANALYSIS ON THE REMAINING GROUP
Upon completion of the Disposal, the Remaining Group will continue to be principally engaged in investment in and the operation of solar power plants, provision of solar power plants operation and maintenance services, provision of financial services, trading of liquefied nature gas and asset management. Set out below is the management discussion and analysis on the Remaining Group for each of the three financial years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020. The financial data in respect of the Remaining Group, for the purpose of this circular, is derived from the consolidated financial statements of the Company for each of the three years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020.
For the year ended 31 December 2017
Business review
The Remaining Group was mainly engaged in investment in and operation of solar power plants, provision of solar power plants operation and maintenance services, provision of financial services and asset management.
Revenue
The revenue of the Remaining Group increased by approximately 113.6% from approximately RMB507,309,000 for the year ended 31 December 2016 to approximately RMB1,083,597,000 for the year ended 31 December 2017. The increase was primarily due to the increase in revenue from sales of electricity.
Revenue from sales of electricity and provision of solar power plant operation and maintenance services
The Remaining Group's revenue from sales of electricity increased significantly by approximately 111.4% from approximately RMB501,154,000 for the year ended 31 December 2016 to approximately RMB1,059,594,000 for the year ended 31 December 2017 due to the increased installed capacity of grid-connected solar power plants. As at
31 December 2017, the Remaining Group had a total of 1,429.3 MW installed capacity of solar power plants, comparing to 800.3 MW installed capacity of solar power plants as at 31 December 2016.
The Remaining Group had, for the first time, generated revenue from provision of solar power plant operation and maintenance services of approximately RMB6,482,000 (2016: Nil) for the year ended 31 December 2017.
Revenue from provision of financial services
The Remaining Groups' revenue arising from the provision of financial services increased significantly by approximately 2,132.5% from approximately RMB612,000 for the year ended 31 December 2016 to approximately RMB13,663,000 for the year ended 31 December 2017 due to the scale expansion in provision of microfinance services.
Gross profit and gross profit margin
The gross profit of the Remaining Group increased significantly by approximately 167.5% from approximately RMB264,459,000 for the year ended 31 December 2016 to approximately RMB707,459,000 for the year ended 31 December 2017. The gross profit margin of the Remaining Group increased from approximately 52.1% for the year ended 31 December 2016 to approximately 65.3% for the year ended 31 December 2017.
Other gains and losses
Other gains and losses of the Remaining Group decreased significantly by approximately 83.3% from approximately RMB182,765,000 for the year ended 31 December 2016 to approximately RMB30,504,000 for the year ended 31 December 2017. The decrease is mainly due to (i) a decrease in interest income of approximately RMB37,692,000 as a result of a decrease in bank and other deposits; (ii) loss on fair value changes of financial assets held for trading of approximately RMB31,619,000 (2016: net gain of approximately RMB271,000); and (iii) impairment loss recognised in respect of other receivables of approximately RMB12,385,000 (2016: Nil).
Administrative expenses
Administrative expenses of the Remaining Group increased by approximately 56.6% from approximately RMB204,165,000 for the year ended 31 December 2016 to approximately RMB319,625,000 for the year ended 31 December 2017. The increase was mainly attributable to an increase in total employee benefit expenses of approximately RMB114,313,000 due to an increase in head count and an increase in office rental expenses of approximately RMB15,932,000.
Gain on bargain purchase on acquisition of subsidiaries
Gain on bargain purchase on acquisition of subsidiaries represents the excess of fair value of consideration transferred at acquisition over the fair value of the identifiable assets acquired and liabilities assumed for the acquisition. The gain on bargain purchaseduring the year ended 31 December 2017 amounted to approximately RMB53,260,000 (2016: Nil) as a result of acquisition of certain subsidiaries during the year. For details, please refer to note 45 to the financial statements of the 2017 Annual Report.
Gain on disposal/deregistration of subsidiaries, net
During the year ended 31 December 2017, the Remaining Group disposed/ deregistered certain subsidiaries and recorded net gain on disposal/deregistration of subsidiaries of approximately RMB12,031,000 (2016: RMB45,591,000). For details, please refer to note 46 to the financial statements of the 2017 Annual Report.
Finance costs
Finance costs of the Remaining Group increased by approximately 85.1% from approximately RMB236,660,000 for the year ended 31 December 2016 to approximately RMB438,067,000 for the year ended 31 December 2017. As the number of and the total installed capacity of the solar power plants held by the Remaining Group increased during the year, the finance costs related to the borrowings of the respective solar power plants also increased.
Solar power plants
As at 31 December 2017, the Remaining Group had a net carrying value of approximately RMB8,844,305,000 (2016: RMB6,475,404,000) and approximately RMB1,572,080,000 (2016: RMB1,878,729,000) in completed solar power plants and solar power plants under construction, respectively. During the year ended 31 December 2017, the Remaining Group capitalised on the implementation of the favourable policies by actively investing in and developing solar power plants in the PRC. For details, please refer to note 18 to the financial statements of the 2017 Annual Report. As at 31 December 2017, the Remaining Group had a total of 1,429.3 MW installed capacity of completed solar power plants, comparing to the 800.3 MW installed capacity of solar power plants as at 31 December 2016.
Interest in a joint venture
As at 31 December 2017, the net carrying value of the joint venture was approximately RMB321,421,000 (2016: RMB295,402,000).
Goodwill
As at 31 December 2017, the Remaining Group had a total amount of approximately RMB148,451,000 (2016: RMB146,657,000) in respect of goodwill on the acquisition of subsidiaries.
Available-for-sale investments
Available-for-sale investments increased by approximately 346.9% from approximately RMB352,730,000 as at 31 December 2016 to approximately RMB1,576,206,000 as at 31 December 2017. The increase is mainly due to (i) the acquisition of unlisted equity investment in Bank of Jinzhou Co., Ltd.; (ii) the increase in unlisted equity investment in 內蒙古呼和浩特金谷農村商業銀行股份有限公司 (Inner Mongolia Hohhot Jingu Rural Commercial Bank Limited Company*); and (iii) the investment in 19.99% of the total capital contribution in 台州久安股權投資合夥企業(有 限合夥) (Taizhou Jiuan Equity Investment Partnership (Limited Partnership)*) (''Taizhou Jiuan''). The investments are for long-term investment purpose and hence are classified as available-for-sale investments in the consolidated statement of financial position. For details, please refer to note 24 to the financial statements of the 2017 Annual Report.
Financial assets held for trading
As at 31 December 2017, the Remaining Group had financial assets held for trading with market value of approximately RMB200,281,000 (2016: RMB236,629,000), representing approximately 1.0% (2016: 1.5%) of the total assets of the Remaining Group as at 31 December 2017. The portfolio of investments managed by the Remaining Group consists of investment in two listed equities in Hong Kong and the PRC (2016: two). The Remaining Group held approximately 1.3% (2016: 1.3%) and 1.7% (2016: 1.7%) shareholdings in the equity listed in Hong Kong and the PRC respectively as at 31 December 2017. During the year ended 31 December 2017, the Remaining Group had recorded a net unrealised loss on fair value changes through profit or loss which amounted to approximately RMB31,619,000 (2016: net unrealised gain of approximately RMB271,000).
Trade, bills and other receivables
Trade, bills and other receivables increased by approximately 9.3% from approximately RMB3,103,967,000 as at 31 December 2016 to approximately RMB3,392,338,000 as at 31 December 2017. The increase was mainly due to an increase in trade and bills receivables from approximately RMB858,921,000 as at 31 December 2016 to approximately RMB1,712,094,000 as at 31 December 2017 which arose from the increase in sales of electricity.
Structured bank deposits
As at 31 December 2016, the Remaining Group placed RMB1,125,000,000 structured bank deposits with a bank in the PRC to earn a guaranteed and capital-protected return by making good use of the idle cash of the Remaining Group. The deposits were withdrawn in January 2017.
Trade and Other Payables
Trade and other payables decreased by approximately 14.4% from approximately RMB2,709,625,000 as at 31 December 2016 to approximately RMB2,319,859,000 as at 31 December 2017. The balance mainly comprised payables to suppliers of solar modules and equipment and Engineering Procurement Construction (''EPC'') contractors for purchase of solar modules and equipment and construction costs of solar power plants.
Liquidity and Capital Resources
As at 31 December 2017, cash and cash equivalents of the Remaining Group was approximately RMB420,812,000 (2016: RMB565,905,000), which included an amount of bank balances of approximately RMB401,583,000 (2016: RMB450,785,000) denominated in RMB placed with banks in the PRC. As at 31 December 2016, structured bank deposits of approximately RMB1,125,000,000 was denominated in RMB and placed with banks in the PRC. The remaining balance of the Remaining Group's cash and cash equivalents consisted primarily of cash on hand and bank balances which were primarily denominated in Hong Kong dollar and placed with banks in Hong Kong.
As at 31 December 2017, the Remaining Group's net debt ratio, which was calculated by the total loans and borrowings and corporate bonds minus total cash and cash equivalents and structured bank deposits, over total equity, was approximately 1.73 (2016: 0.84).
Loans and Borrowings
As at 31 December 2017, the Remaining Group's total loans and borrowings was approximately RMB8,874,397,000, representing an increase of approximately RMB3,272,629,000, compared to approximately RMB5,601,768,000 as at 31 December 2016. The increase in the Remaining Group's total loans and borrowings was mainly due to an increase in the Remaining Group's investments in solar power plants which lead to an increase in loans and borrowings to finance such investments. All the loans and borrowings of the Remaining Group, except for an equivalent amount of approximately RMB8,359,000 (2016: RMB8,945,000) which were denominated in Hong Kong dollar, were denominated in RMB, the functional currency of the Company's major subsidiaries in the PRC. As at 31 December 2017, loans and borrowings of approximately RMB3,652,000,000 (2016: RMB222,000,000) and approximately RMB5,222,397,000 (2016: RMB5,379,768,000) bear fixed interest rate and floating interest rate, respectively.
As at 31 December 2017, out of the total borrowings, approximately RMB523,855,000 (2016: RMB1,008,968,000) was repayable within one year and approximately RMB8,350,542,000 (2016: RMB4,592,800,000) was repayable after one year.
Corporate bonds
As at 31 December 2017 and 2016, corporate bonds denominated in Hong Kong dollar amounting to HK$423,500,000 (equivalent to approximately RMB354,800,000) in aggregate principal amount due in 2018 and HK$53,500,000 (equivalent to approximately RMB47,856,000) in aggregate principal amount due in 2019 remained outstanding with certain independent third parties (the ''Corporate Bonds''). The Corporate Bonds bear an interest of 6% per annum, and will mature on the date immediately following 36 months after the issuance of the Corporate Bonds.
The Corporate Bonds are measured at amortised cost using effective interest method by applying an effective interest rate of 10.24% per annum. Imputed interest of approximately HK$43,523,000 (equivalent to approximately RMB37,710,000) (2016: HK$43,455,000 (equivalent to approximately RMB37,188,000)) (note 13 to the financial statements of the 2017 Annual Report) was recognised in profit or loss during the year ended 31 December 2017.
Foreign Exchange Risk
The Remaining Group primarily operates its business in the PRC and during the year ended 31 December 2017, the Remaining Group's revenue were primarily denominated in RMB, being the functional currency of the Remaining Group's major operating subsidiaries. Accordingly, the Directors expect any future exchange rate fluctuation will not have any material effect on the Remaining Group's business. The Remaining Group did not use any financial instruments for hedging purpose, but will continue to monitor foreign exchange changes to best preserve the Remaining Group's cash value.
Charge on Assets
As at 31 December 2017, the Remaining Group had charged solar power plants, trade receivables, property, plant and equipment, lease prepayments and unlisted equity investments with net book value of approximately RMB6,927,113,000 (2016: RMB4,875,693,000), approximately RMB879,253,000 (2016: RMB476,809,000), approximately RMB688,000 (2016: RMB1,219,000), approximately RMB821,000 (2016: RMB867,000) and approximately RMB830,269,000 (2016: Nil), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.
Contingent Liabilities
The Remaining Group acquired equity interests of certain subsidiaries principally engaged in the development of solar power plant projects and the applications for the development of these solar power plant projects were actually made by their former shareholders. According to certain notices (''the Notices'') issued by the NEA, the Notices prohibit the original applicants who have obtained the approval documents from the government authorities for the solar power plants projects from transferring the equity interests of solar power plant projects before such solar power plants were connected to the power grid. Taking into consideration the legal opinion obtained from the Company's legal adviser as to PRC law, and given that the Remaining Group has obtained thepreliminary approval from respective relevant government authorities to continue with the development of the solar power plants, the Company's legal adviser as to PRC law is of the view that the possibility for these subsidiaries to be fined or to face other adverse consequences imposed by the relevant government authorities is remote. Accordingly, the Directors consider there is no significant impact on the Remaining Group's control over these subsidiaries and the development of these solar power plants.
The Remaining Group executed a guarantee with respect to a loan of approximately RMB138,211,000 (2016: Nil) granted by independent third parties to 江山寶源國際融資 租賃有限公司 (Kong Sun Baoyuan International Financial Leasing Limited*) (''Kong Sun Baoyuan'') as at 31 December 2017, under which the Remaining Group is liable to pay the proportionate share if the independent third parties are unable to recover the loan from Kong Sun Baoyuan. As at the reporting date of the 2017 Annual Report, no provision for the Remaining Group's proportionate obligation under the guarantee contracts has been made as the Directors consider that it is not probable that the repayment of the loan will be in default.
Employees and Remuneration Policy
As at 31 December 2017, the Remaining Group had approximately 722 employees (2016: 460) in Hong Kong and the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the year ended 31 December 2017, the total employee benefit expenses (including directors' emoluments) were approximately RMB210,454,000 (2016: RMB96,219,000). The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary, short-term bonuses and long-term rewards such as share options, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires.
The Company has also adopted a share option scheme on 22 July 2009 (the ''Share Option Scheme'') for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Remaining Group's operations. Pursuant to the Share Option Scheme, 730,350,000 share options were granted to Directors, selected employees and consultants of the Remaining Group in April 2017.
Connected Transaction
During the year ended 31 December 2017, the Remaining Group entered into the following connected transactions, details of which are disclosed in compliance with the requirements of Chapter 14 and Chapter 14A of the Listing Rules.
On 13 December 2017, a wholly-owned subsidiary of the Company (the ''Baoqian Purchaser''), entered into the acquisition agreement (the ''Baoqian Acquisition Agreement'') with Zhongke Hengyuan, a company established in the PRC, pursuant to which the Baoqian Purchaser agreed to acquire, and Zhongke Hengyuan agreed to sell 30% of the equity interests in 廣州寶乾小額貸款有限公司 (Guangzhou Baoqian Microfinance Limited*) (''Guangzhou Baoqian'') at a consideration of RMB35,000,000, which shall be settled in full by the Baoqian Purchaser by way of one-off payment withinthirty (30) days from the date of transfer of 30% of the equity interests in Guangzhou Baoqian to the name of the Baoqian Purchaser. Immediately before the above acquisition, the equity interests in Guangzhou Baoqian was held as to 65% by the Baoqian Purchaser, 30% by Zhongke Hengyuan and 5% by an independent third party. Upon completion of the above acquisition, Guangzhou Baoqian will continue to be a non-wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the consolidated financial statements of the Remaining Group. As at 31 December 2017, the above acquisition has not been completed.
As at the date of the Baoqian Acquisition Agreement, Zhongke Hengyuan was interested in 30% of the equity interests in Guangzhou Baoqian, a non-wholly-owned subsidiary of the Company. Therefore, Zhongke Hengyuan is a substantial shareholder of Guangzhou Baoqian, and is a connected person of the Company at the subsidiary level under Rule 14A.06(9) of the Listing Rules. Accordingly, the Baoqian Acquisition Agreement and the transactions contemplated thereunder constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.
The Company intends to hold the equity interests in Guangzhou Baoqian as longterm investment with an objective to improve the capital usage efficiency and earn reasonable investment return. Based on the above, the Directors (including the independent non-executive Directors) consider that the Baoqian Acquisition Agreement has been entered into on normal commercial terms and is fair and reasonable, and in the interests of the Company and its shareholders as a whole.
After further negotiation and discussion, the Baoqian Purchaser and Zhongke Hengyuan decided not to proceed with the Baoqian Acquisition Agreement and entered into a termination agreement to terminate the Baoqian Acquisition Agreement on 24 January 2019.
For details, please refer to the announcements of the Company dated 13 December 2017 and 24 January 2019.
Significant Investments And Material Acquisition And Disposal
Save as disclosed in the 2017 Annual Report, the Remaining Group did not have any other significant investments, other material acquisition or disposal during the year ended 31 December 2017, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2017 Annual Report.
For the year ended 31 December 2018
Business review
The Remaining Group was mainly engaged in investment in and operation of solar power plants, provision of solar power plants operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.
Revenue
The revenue of the Remaining Group increased by approximately 42.8% from approximately RMB1,083,597,000 for the year ended 31 December 2017 to approximately RMB1,547,749,000 for the year ended 31 December 2018. The increase was primarily due to the increase in revenue from sales of electricity.
Revenue from sales of electricity and provision of solar power plant operation and maintenance services
The Remaining Group's revenue from sales of electricity increased by approximately 32.2% from approximately RMB1,059,594,000 for the year ended 31 December 2017 to approximately RMB1,400,932,000 for the year ended 31 December 2018 due to the increased in aggregate volume of electricity generated by the Remaining Group's grid connected solar power plants during the year. The solar power plants owned by the Remaining Group have generated electricity in an aggregate volume of approximately 1,712,534 megawatt-hour (''MWh'') for the year ended 31 December 2018, representing a substantial increase of approximately 29.4% as compared to approximately 1,323,621 MWh for year ended 31 December 2017.
The Remaining Group's revenue from provision of solar power plant operation and maintenance services decreased by approximately 70.0% from approximately RMB6,482,000 for the year ended 31 December 2017 to approximately RMB1,943,000 for the year ended 31 December 2018 mainly due to the expiry of certain solar power plant operation and maintenance services contracts.
Revenue from provision of financial services
The Remaining Group's revenue arising from the provision of financial services decreased by approximately 5.7% from approximately RMB13,663,000 for the year ended 31 December 2017 to approximately RMB12,891,000 for the year ended 31 December 2018.
Revenue from trading of liquefied natural gas
The Remaining Group had, for the first time, generated revenue from trading of liquefied natural gas of approximately RMB131,659,000 (2017: Nil) for the year ended 31 December 2018.
Gross profit and gross profit margin
The gross profit of the Remaining Group increased significantly by approximately 30.8% from approximately RMB707,459,000 for the year ended 31 December 2017 to approximately RMB925,542,000 for the year ended 31 December 2018. The gross profit margin of the Remaining Group decreased from approximately 65.3% for the year ended 31 December 2017 to approximately 59.8% for the year ended 31 December 2018 mainly due to the business segment of trading of liquefied natural gas in which has a lower gross profit margin than the business segment of solar power plants.
Other gains and losses
Other gains of the Remaining Group increased by approximately 18.3% from approximately RMB30,504,000 for the year ended 31 December 2017 to approximately RMB36,094,000 for the year ended 31 December 2018. The increase is mainly due to (i) the increase in dividend income amounted to approximately RMB21,232,000; (ii) the net unrealised gain on fair values changes on financial assets measured at fair value through profit or loss of approximately RMB5,864,000 (2017: Net unrealised loss of approximately RMB31,619,000)); and (iii) the office sublease income of approximately RMB33,782,000 (2017: Nil). The increase in other gains of the Remaining Group is partially netted off by the net realised loss on disposal on financial assets measured at fair value through profit or loss amounted to approximately RMB53,613,000 as a result of the disposal of the listed equity investment in the PRC during the year ended 31 December 2018.
Administrative expenses
Administrative expenses of the Remaining Group increased by approximately 27.3% from approximately RMB319,625,000 for the year ended 31 December 2017 to approximately RMB407,016,000 for the year ended 31 December 2018. The increase was mainly attributable to (i) an increase in total employee benefit expenses of approximately RMB42,944,000 due to salary increment of top management with effect from 1 January 2018 and an increase in head count; and (ii) an increase in office rental expenses of approximately RMB22,891,000.
Gain on bargain purchase on acquisition of subsidiaries
Gain on bargain purchase on acquisition of subsidiaries represents the excess of the fair value of the identifiable assets acquired and liabilities assumed for the acquisition over fair value of consideration transferred at acquisition. The gain on bargain purchase during the year ended 31 December 2018 amounted to approximately RMB2,504,000 (2017: RMB53,260,000) as a result of acquisition of certain subsidiaries during the year. For details, please refer to note 46 to the financial statements of the 2018 Annual Report.
Gain on disposal/deregistration of subsidiaries, net
During the year ended 31 December 2018, the Remaining Group disposed/ deregistered certain subsidiaries and recorded net gain on disposal/deregistration of subsidiaries of approximately RMB2,693,000 (2017: RMB12,031,000). For details, please refer to note 47 to the financial statements of the 2018 Annual Report.
Finance costs
Finance costs of the Remaining Group increased by approximately 63.4% from approximately RMB438,067,000 for the year ended 31 December 2017 to approximately RMB715,750,000 for the year ended 31 December 2018. As the average number of andthe average total installed capacity of the solar power plants held by the Remaining Group increased during the year, the finance costs related to the borrowings of the respective solar power plants also increased.
Solar power plants
As at 31 December 2018, the Remaining Group had a net carrying amount of approximately RMB9,452,169,000 (2017: RMB8,844,305,000) and approximately RMB433,798,000 (2017: RMB1,572,080,000) in completed solar power plants and solar power plants under construction, respectively. As at 31 December 2018, the Remaining Group had a total of 1,399.3 MW installed capacity of completed solar power plants, comparing to the 1,429.3 MW installed capacity of solar power plants as at 31 December 2017.
Interest in a joint venture
As at 31 December 2018, the net carrying amount of the joint venture was approximately RMB331,922,000 (2017: RMB321,421,000).
The Remaining Group executes a guarantee with respect to a loan of approximately RMB92,873,000 (2017: RMB138,211,000) granted by independent third parties to Kong Sun Baoyuan as at 31 December 2018, under which the Remaining Group is liable to pay the proportionate share if the independent third parties are unable to recover the loan from Kong Sun Baoyuan. As at the reporting date of the 2018 Annual Report, no provision for the Remaining Group's proportionate obligation under the guarantee contracts has been made as the Directors consider that it is not probable that the repayment of the loan will be in default.
Goodwill
As at 31 December 2018, the Remaining Group had a total amount of approximately RMB149,197,000 (2017: RMB148,451,000) in respect of goodwill on the acquisition of subsidiaries.
Financial assets measured at fair value through other comprehensive income/Available-for-sale investments
Financial assets measured at fair value through other comprehensive income/ Available-for-sale investments increased by approximately 12.8% from approximately RMB1,576,206,000 as at 31 December 2017 to approximately RMB1,777,434,000 as at 31 December 2018. The increase is mainly due to (i) the capital contribution paid in 蘇州君 盛晶石股權投資合夥企業(有限合夥) (Suzhou Junsheng Jingshi Equity Investment Partnership (Limited Partnership)*) amounted to RMB130,000,000; (ii) the additional capital contribution paid in Taizhou Jiuan amounted to RMB100,000,000; and (iii) the additional capital contribution paid in 霍爾果斯鑫和優美股權投資合夥企業(有限合夥) (Huoerguosi Xinheyoumei Equity Investment Limited Partnership*) amounted to approximately RMB59,227,000. The increase is partially netted off by the fair value loss on financial assets measured at fair value through other comprehensive income amountedto approximately RMB71,452,000. The investments are held for long-term investment purpose and hence are classified as financial assets measured at fair value through other comprehensive income in the consolidated statement of financial position. For details, please refer to note 24 to the financial statements of the 2018 Annual Report.
Financial assets measured at fair value through profit or loss/Financial assets held for trading
As at 31 December 2018, the Remaining Group had financial assets measured at fair value through profit or loss/financial assets held for trading with market value of approximately RMB81,143,000 (2017: RMB200,281,000), representing approximately 0.4% (2017: 1.0%) of the total assets of the Remaining Group as at 31 December 2018. The portfolio of investments managed by the Remaining Group consists of investment in one listed equity in Hong Kong (2017: two listed equities in Hong Kong and in the PRC). The Remaining Group held approximately 1.3% (2017: 1.3%) shareholding in the equity listed in Hong Kong as at 31 December 2018. During the year ended 31 December 2018, the Remaining Group had recorded a net unrealised gain on fair value changes of financial assets measured at fair value through profit or loss which amounted to approximately RMB5,864,000 (2017: net unrealised loss of approximately RMB31,619,000). During the year ended 31 December 2018, the Remaining Group disposed of all of its listed equity investment in the PRC at a cash consideration of approximately RMB75,062,000 and resulting in a net realised loss on disposal of financial assets measured at fair value through profit or loss amounted to approximately RMB53,613,000 (2017: Nil).
Trade, bills and other receivables
Trade, bills and other receivables increased by approximately 12.4% from approximately RMB3,392,338,000 as at 31 December 2017 to approximately RMB3,812,887,000 as at 31 December 2018. The increase was mainly due to an increase in trade and bills receivables from approximately RMB1,712,094,000 as at 31 December 2017 to approximately RMB2,130,581,000 as at 31 December 2018 which mainly arose from the increase in sales of electricity.
Structured bank deposits
As at 31 December 2018, the Remaining Group placed approximately RMB9,230,000 structured bank deposits with a bank in the PRC to earn a guaranteed and capital-protected return by making good use of the idle cash of the Remaining Group. The deposits were withdrawn in January 2019.
Trade and Other Payables
Trade and other payables decreased by approximately 25.5% from approximately RMB2,319,859,000 as at 31 December 2017 to approximately RMB1,727,353,000 as at 31 December 2018. The balance mainly comprised payables to suppliers of solar modules and EPC contractors for purchase of solar modules and equipment and construction costs of solar power plants. Due to the settlement of construction costs after the completion ofsubstantial solar power plants construction work during the year ended 31 December 2018, trade payables, which was mainly related to construction costs of solar power plants, have decreased by approximately 31.8% from approximately RMB1,939,020,000 as at 31 December 2017 to approximately RMB1,322,854,000 as at 31 December 2018.
Liquidity and Capital Resources
As at 31 December 2018, cash and cash equivalents of the Remaining Group was approximately RMB166,291,000 (2017: RMB420,812,000), which included an amount of bank balances of approximately RMB155,771,000 (2017: RMB401,583,000) denominated in RMB placed with banks in the PRC. The balance of the Remaining Group's cash and cash equivalents consisted primarily of cash on hand and bank balances which were primarily denominated in Hong Kong dollar and placed with banks in Hong Kong.
As at 31 December 2018, the Remaining Group's net debt ratio, which was calculated by the total loans and borrowings and corporate bonds minus total cash and cash equivalents and structured bank deposits, over total equity, was approximately 1.93 (2017: 1.73).
Loans and Borrowings
As at 31 December 2018, the Remaining Group's total loans and borrowings was approximately RMB9,649,151,000, representing an increase of approximately RMB774,754,000, compared to approximately RMB8,874,397,000 as at 31 December 2017. The increase in the Remaining Group's total loans and borrowings was mainly due to an increase in the Remaining Group's investments in solar power plants which lead to an increase in loans and borrowings to finance such investments. All the loans and borrowings of the Remaining Group, except for an equivalent amount of approximately RMB5,283,000 (2017: RMB8,359,000) which were denominated in Hong Kong dollar, were denominated in RMB, the functional currency of the Company's major subsidiaries in the PRC. As at 31 December 2018, loans and borrowings of approximately RMB4,918,000,000 (2017: RMB3,652,000,000) and approximately RMB4,731,151,000 (2017: RMB5,222,397,000) bear fixed interest rate and floating interest rate, respectively.
As at 31 December 2018, out of the total borrowings, approximately RMB798,961,000 (2017: RMB523,855,000) was repayable within one year and approximately RMB8,850,190,000 (2017: RMB8,350,542,000) was repayable after one year.
Corporate bonds
As at 31 December 2018, corporate bonds denominated in Hong Kong dollar with an aggregate principal amount of HK$344,000,000 (equivalent to approximately RMB301,413,000) (2017: HK$477,000,000 (equivalent to approximately RMB402,656,000)) remained outstanding with certain independent third parties. The corporate bonds bear interest rates ranging from 3% to 9% (2017: 6%) per annum, and will mature on the date immediately following 3 to 96 months (2017: 36 months) after their issuance.
During the year ended 31 December 2018, the Remaining Group issued corporate bonds with an aggregate principal amount of HK$290,500,000 (equivalent to approximately RMB254,536,000) (2017: Nil) to certain independent third parties, the net proceeds of the issued corporate bonds received by the Company were approximately HK$257,727,000 (equivalent to approximately RMB225,820,000) (2017: Nil), with total issue cost amounting to approximately HK$32,773,000 (equivalent to approximately RMB28,716,000) (2017: Nil).
During the year ended 31 December 2018, the Remaining Group repaid HK$423,500,000 (equivalent to approximately RMB371,071,000) (2017: Nil) in aggregate principal amount of the corporate bonds.
The corporate bonds are measured at amortised cost using effective interest method by applying an effective interest rate ranging from 10.24% to 12.00% (2017: 10.24%) per annum. Imputed interest of approximately HK$44,200,000 (equivalent to approximately RMB37,318,000) (2017: HK$43,523,000 (equivalent to approximately RMB37,710,000)) (note 13 to the financial statements of the 2018 Annual Report) in respect of the corporate bonds was recognised in profit or loss during the year ended 31 December 2018.
Foreign Exchange Risk
The Remaining Group primarily operates its business in the PRC and during the year ended 31 December 2018, the Remaining Group's revenue were primarily denominated in RMB, being the functional currency of the Remaining Group's major operating subsidiaries. Accordingly, the Directors expect any future exchange rate fluctuation will not have any material effect on the Remaining Group's business. The Remaining Group did not use any financial instruments for hedging purpose, but will continue to monitor foreign exchange changes to best preserve the Remaining Group's cash value.
Charge on Assets
As at 31 December 2018, the Remaining Group had charged solar power plants, trade receivables, lease prepayments and unlisted equity investments with net book value of approximately RMB7,303,687,000 (2017: RMB6,927,113,000), approximately RMB1,613,923,000 (2017: RMB879,253,000), approximately RMB774,000 (2017: RMB821,000) and approximately RMB813,158,000 (2017: RMB830,269,000), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.
Contingent Liabilities
The Remaining Group acquired equity interests of certain subsidiaries principally engaged in the development of solar power plant projects and the applications for the development of these solar power plant projects were actually made by their former shareholders. According to the Notices issued by the NEA, the Notices prohibit the original applicants who have obtained the approval documents from the government authorities for the solar power plants projects from transferring the equity interests of solar power plant projects before such solar power plants were connected to the powergrid. Taking into consideration the legal opinion obtained from the Company's legal adviser as to PRC law, and given that the Remaining Group has obtained the preliminary approval from respective relevant government authorities to continue with the development of the solar power plants, the Company's legal adviser as to PRC law is of the view that the possibility for these subsidiaries to be fined or to face other adverse consequences imposed by the relevant government authorities is remote. Accordingly, the Directors consider there is no significant impact on the Remaining Group's control over these subsidiaries and the development of these solar power plants.
Employees and Remuneration Policy
As at 31 December 2018, the Remaining Group had approximately 756 employees (2017: 722) in Hong Kong and the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the year ended 31 December 2018, the total employee benefit expenses (including directors' emoluments) were approximately RMB252,432,000 (2017: RMB210,454,000). The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary, short-term bonuses and long-term rewards such as share options, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires.
The Company has also adopted the Share Option Scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Remaining Group's operations.
Connected Transaction
During the year ended 31 December 2017, the Remaining Group entered into the following connected transactions, details of which are disclosed in compliance with the requirements of Chapter 14 and Chapter 14A of the Listing Rules.
On 13 December 2017, the Baoqian Purchaser, entered into the Baoqian Acquisition Agreement with Zhongke Hengyuan, a company established in the PRC, pursuant to which the Baoqian Purchaser agreed to acquire, and Zhongke Hengyuan agreed to sell 30% of the equity interests in Guangzhou Baoqian at a consideration of RMB35,000,000, which shall be settled in full by the Baoqian Purchaser by way of one-off payment within thirty (30) days from the date of transfer of 30% of the equity interests in Guangzhou Baoqian to the name of the Baoqian Purchaser. Immediately before the above acquisition, the equity interests in Guangzhou Baoqian was held as to 65% by the Baoqian Purchaser, 30% by Zhongke Hengyuan and 5% by an independent third party to the Remaining Group. Upon completion of the above acquisition, Guangzhou Baoqian will continue to be a non-wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the consolidated financial statements of the Remaining Group. As at 31 December 2018 and 2017, the above acquisition has not been completed.
As at the date of the Baoqian Acquisition Agreement, Zhongke Hengyuan was interested in 30% of the equity interests in Guangzhou Baoqian, a non-wholly-owned subsidiary of the Company. Therefore, Zhongke Hengyuan is a substantial shareholder ofGuangzhou Baoqian, and is a connected person of the Company at the subsidiary level under Rule 14A.06(9) of the Listing Rules. Accordingly, the Baoqian Acquisition Agreement and the transactions contemplated thereunder constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.
The Company intends to hold the equity interests in Guangzhou Baoqian as longterm investment with an objective to improve the capital usage efficiency and earn reasonable investment return. Based on the above, the Directors (including the independent non-executive Directors) consider that the Baoqian Acquisition Agreement has been entered into on normal commercial terms and is fair and reasonable, and in the interests of the Company and its shareholders as a whole.
After further negotiation and discussion, the Baoqian Purchaser and Zhongke Hengyuan decided not to proceed with the Baoqian Acquisition Agreement and entered into a termination agreement to terminate the Baoqian Acquisition Agreement on 24 January 2019.
For details, please refer to the announcements of the Company dated 13 December 2017 and 24 January 2019.
Significant Investments And Material Acquisition And Disposal
Save as disclosed in the 2018 Annual Report, the Remaining Group did not have any other significant investments, other material acquisition or disposal during the year ended 31 December 2018, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2018 Annual Report.
For the year ended 31 December 2019
Business review
The Remaining Group was mainly engaged in investment in and the operation of solar power plants, provision of solar power plant operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.
Revenue
The revenue of the Remaining Group increased by approximately 9.9% from approximately RMB1,547,749,000 for the year ended 31 December 2018 to approximately RMB1,700,579,000 for the year ended 31 December 2019. The increase was primarily due to the increase in revenue from trading of liquefied natural gas.
Revenue from sales of electricity and provision of solar power plant operation and maintenance services
The Remaining Group's revenue from sales of electricity decreased slightly by approximately 6.1% from approximately RMB1,400,932,000 for the year ended 31 December 2018 to approximately RMB1,314,791,000 for the year ended 31 December
2019 due to the increased in aggregate volume of electricity generated by the Remaining Group's grid-connected solar power plants with lower selling price during the year. The solar power plants owned by the Remaining Group have generated electricity in an aggregate volume of approximately 1,668,259 MWh for the year ended 31 December 2019, representing a slight decrease of approximately 2.6% as compared to approximately 1,712,534 MWh for year ended 31 December 2018.
The Remaining Group's revenue from provision of solar power plant operation and maintenance services increased by approximately 932.9% from approximately RMB1,943,000 for the year ended 31 December 2018 to approximately RMB20,070,000 for the year ended 31 December 2019 mainly due to the start of certain solar power plant operation and maintenance services contracts.
Revenue from provision of financial services
The Remaining Groups' revenue arising from the provision of financial services increased by approximately 205.5% from approximately RMB12,891,000 for the year ended 31 December 2018 to approximately RMB39,385,000 for the year ended 31 December 2019.
Revenue from trading of liquefied natural gas
The Remaining Group's revenue arising from trading of liquefied natural gas increased by approximately 147.9% from approximately RMB131,659,000 for the year ended 31 December 2018 to approximately RMB326,333,000 for the year ended 31 December 2019.
Gross profit and gross profit margin
The gross profit of the Remaining Group decreased by approximately 15.7% from approximately RMB925,542,000 for the year ended 31 December 2018 to approximately RMB780,145,000 for the year ended 31 December 2019. The gross profit margin of the Remaining Group decreased from approximately 59.8% for the year ended 31 December 2018 to approximately 45.9% for the year ended 31 December 2019 mainly due to increase in revenue from trading of liquefied natural gas, which has a lower gross profit margin than the business segment of solar power plants.
Other gains and losses
The Remaining Group recorded other losses of approximately RMB72,024,000 for the year ended 31 December 2019 compared with other gains of approximately RMB36,094,000 for the year ended 31 December 2018. The losses are mainly due to (i) the recognition of impairment loss in respect of trade and other receivables amounted to approximately RMB77,113,000 (2018: reversal of RMB963,000); (ii) the decrease of office sublease income of approximately RMB33,782,000; (iii) the decrease in dividend income of approximately RMB12,522,000; and (iv) the net unrealised loss on fair values changes on financial assets measured at fair value through profit or loss of approximately RMB9,239,000 (2018: gain of RMB5,864,000). The other losses of the Remaining Groupis partially netted off by the (i) decrease in net realised loss on disposal on financial assets measured at fair value through profit or loss amounted to approximately RMB52,060,000 as a result of the disposal of the listed equity investment during the year ended 31 December 2019; and (ii) decrease in write off of solar power plant of approximately RMB16,103,000.
Administrative expenses
Administrative expenses of the Remaining Group decreased by approximately 2.0% from approximately RMB407,016,000 for the year ended 31 December 2018 to approximately RMB398,967,000 for the year ended 31 December 2019. The decrease was mainly attributable to a decrease in total employee benefit expenses of approximately RMB31,254,000 as a result of the decrease in number of head count for the year ended 31 December 2019.
Gain on bargain purchase on acquisition of subsidiaries
Gain on bargain purchase on acquisition of subsidiaries represents the excess of the fair value of the identifiable assets acquired and liabilities assumed for the acquisition over fair value of consideration transferred at acquisition. There was no gain on bargain purchase on acquisition of subsidiaries during the year ended 31 December 2019 (2018: RMB2,504,000) For details, please refer to note 45 to the financial statements of the 2019 Annual Report.
Loss/gain on disposal/deregistration of subsidiaries, net
During the year ended 31 December 2019, the Remaining Group disposed/ deregistered certain subsidiaries and recorded net loss on disposal/deregistration of subsidiaries of approximately RMB66,618,000 (2018: gain of RMB2,693,000). For details, please refer to note 46 to the financial statements of the 2019 Annual Report.
Impairment loss on a disposal group classified as held for sale
On 15 November 2019, the Remaining Group entered into sale and purchase agreements with an independent third party to dispose the entire equity interests in 千陽縣 寶源光伏電力開發有限公司 Qianyang Baoyuan Photovoltaic Power Development Limited, 阿圖什市華光能源有限公司 Artux Huaguang Energy Limited, 巨鹿縣明暉太陽 能發電有限公司Julu Minghui Photovoltaic Power Limited, 蘭州太科光伏電力有限公司 Lanzhou Taike Photovoltaic Power Limited, 阿圖什市興光能源有限公司 Artux Xingguang Energy Limited, 溧陽新暉光伏發電有限公司 Liyang Xinhui Photovoltaic Power Generation Limited, 和靜旭雙太陽能科技有限公司 Hejing Xushuang Photovoltaic Technology Limited, 宿州市雲陽新能源發電有限公司 Suzhou Yunyang New Energy Electricity Co., Ltd. and 哈密朝翔新能源科技有限公司 Hami Zhaoxiang New Energy Technology Limited (together the ''Nine Project Companies'') for a total equity consideration of approximately RMB760,314,000. On 5 December 2019, the Remaining Group entered into a sale and purchase agreement with an independent third party to dispose the entire equity interest in 定邊縣昂立光伏科技有限公司 (Dingbian Angli Solar Power Technology Co., Limited*) (''Angli'') for an equity consideration of approximatelyRMB59,000,000. An impairment loss of approximately RMB327,729,000, representing the sale proceeds less the carrying amount of the net assets of the Nine Project Companies and Angli as at 31 December 2019, was charged to profit or loss during the year ended 31 December 2019.
Impairment loss on solar power plants
During the year ended 31 December 2019, the Remaining Group has made an impairment loss of certain solar power plants of approximately RMB43,735,000 (2018: Nil).
Finance costs
Finance costs of the Remaining Group decreased by approximately 18.8% from approximately RMB715,750,000 for the year ended 31 December 2018 to approximately RMB581,091,000 for the year ended 31 December 2019. As the Remaining Group's average total loans and borrowings decreased as compared to the corresponding period of last year, the finance costs related to the borrowings also decreased.
Solar power plants
As at 31 December 2019, the Remaining Group had a net carrying amount of approximately RMB6,047,389,000 (2018: RMB9,542,169,000) and approximately RMB433,798,000 (2018: RMB433,798,000) in completed solar power plants and solar power plants under construction, respectively. As at 31 December 2019, the Remaining Group had a total of 1,239.3 MW installed capacity of completed solar power plants, comparing to the 1,399.3 MW installed capacity of solar power plants as at 31 December 2018.
Interest in associates
As at 31 December 2019, the net carrying amount of associates was approximately RMB226,691,000 (2018: RMB13,290,000). The increase was mainly due to the reclassification of Kong Sun Baoyuan from interest in a joint venture to interest in associates upon the disposal of 17.4% of its equity interest.
During the year ended 31 December 2019, the Remaining Group disposed of 17.4% equity interests in Kong Sun Baoyuan for a consideration of RMB105,000,000 to a connected person of the Company at the subsidiary level. Upon completion, the Remaining Group's equity interest in Kong Sun Baoyuan decreased from 55% to 37.6%, Kong Sun Baoyuan ceased to be a joint venture of the Company and become an associate of the Company under HKAS 28. For details, please refer to the announcement of the Company dated 21 March 2019.
The Remaining Group executes a guarantee with respect to a loan of approximately RMB44,621,000 (2018: RMB92,873,000) granted by independent third parties to Kong Sun Baoyuan as at 31 December 2019, under which the Remaining Group is liable to pay the proportionate share if the independent third parties are unable to recover the loan from Kong Sun Baoyuan. As at the reporting date, no provision for the Remaining Group's proportionate obligation under the guarantee contracts has been made as the Directors consider that it is not probable that the repayment of the loan will be in default.
Goodwill
As at 31 December 2019, the Remaining Group had a total amount of approximately RMB96,930,000 (2018: RMB149,197,000) in respect of goodwill on the acquisition of subsidiaries. The decrease is mainly contributed by the reclassification of an amount of approximately RMB52,221,000 to disposal group classified as held for sale upon the entering into the sale and purchase agreements with an independent third party for the disposal of the Nine Project Companies on 15 November 2019.
Right-of-use Assets and Lease Liabilities
The Remaining Group has applied HKFRS 16 and recognised right-of-use assets and lease liabilities since 1 January 2019. As at 31 December 2019, the right-of-use assets and lease liabilities amounted to approximately RMB273,524,000 (2018: Nil) and approximately RMB199,005,000 (2018: Nil).
Financial assets measured of fair value through other comprehensive income
Financial assets measured of fair value through other comprehensive income decreased by approximately 15.5% from approximately RMB2,047,434,000 as at 31 December 2018 to approximately RMB1,729,091,000 as at 31 December 2019. The decrease is mainly due to the fair value loss on financial assets measured at fair value through other comprehensive income amounted to approximately RMB422,893,000 during the year ended 31 December 2019. The decrease is partially netted off by (i) the capital contribution paid in 蘇州君盛晶石股權投資合夥企業(有限合夥) (Suzhou Junsheng Jingshi Equity Investment Partnership (Limited Partnership)*) amounted to RMB92,500,000; and (ii) the capital contribution paid in 霍爾果斯鑫和優美股權投資合 夥企業(有限合夥) (Huoerguosi Xinheyoumei Equity Investment Limited Partnership*) amounted to approximately RMB12,050,000 during the year ended 31 December 2019. The investments are held for long-term investment purpose and hence are classified as financial assets measured at fair value through other comprehensive income in the consolidated statement of financial position. For details, please refer to note 23 to the financial statements of the 2019 Annual Report.
Financial assets measured of fair value through profit or loss
As at 31 December 2019, the Remaining Group had financial assets measured at fair value through profit or loss with market value of approximately RMB28,198,000 (2018: RMB81,143,000), representing approximately 0.2% (2018: 0.4%) of the total assets of the Remaining Group as at 31 December 2019. The portfolio of investments managed by the Remaining Group consists of investment in one (2018: one) listed equity in Hong Kong. The Remaining Group held approximately 0.8% (2018: 1.3%) shareholding in the listed equity as at 31 December 2019. During the year ended 31 December 2019, the Remaining Group had recorded an unrealised loss on fair value changes of financial assets measured at fair value through profit or loss which amounted to approximately RMB9,239,000 (2018: gain of RMB5,864,000). During the year ended 31 December 2019, the Remaining Group disposed of approximately 54.7% of its listed equity investment at a cash consideration of approximately RMB43,034,000 and resulting in a net realised loss on disposal of financial assets measured at fair value through profit or loss amounted to approximately RMB1,553,000 (2018: RMB53,613,000).
Trade, bills and other receivables
Trade, bills and other receivables decreased by approximately 14.3% from approximately RMB3,812,887,000 as at 31 December 2018 to approximately RMB3,268,817,000 as at 31 December 2019. The decrease was mainly due to the reclassification of approximately RMB798,264,000 to disposal group classified as held for sale upon the entering into the sale and purchase agreements with independent third parties for the disposals of the Nine Project Companies and Angli on 15 November 2019 and 5 December 2019, respectively.
Structured bank deposits
As at 31 December 2019, the Remaining Group placed approximately RMB4,230,000 (2018: RMB9,230,000) structured bank deposits with a bank in the PRC to earn a guaranteed and capital-protected return by making good use of the idle cash of the Remaining Group.
Trade and Other Payables
Trade and other payables increased by approximately 3.8% from approximately RMB1,727,353,000 as at 31 December 2018 to approximately RMB1,792,449,000 as at 31 December 2019. The balance mainly comprised payables to suppliers of solar modules and equipment and EPC contractors for purchase of solar modules and equipment and construction costs of solar power plants.
Liquidity and Capital Resources
As at 31 December 2019, cash and cash equivalents of the Remaining Group was approximately RMB102,106,000 (2018: RMB166,291,000), which included an amount of bank balances of approximately RMB98,909,000 (2018: RMB155,771,000) denominated in RMB placed with banks in the PRC. The remaining balance of the Remaining Group's cash and cash equivalents consisted primarily of cash on hand and bank balances which were primarily denominated in Hong Kong dollar and placed with banks in Hong Kong.
As at 31 December 2019, the Remaining Group's net debt ratio, which was calculated by the total loans and borrowings and corporate bonds minus total cash and cash equivalents and structured bank deposits, over total equity, was approximately 2.01 (2018: 1.93).
Capital Expenditure
During the year ended 31 December 2019, the Remaining Group's total expenditure in respect of property, plant and equipment and solar power plants amounted to approximately RMB19,333,000 (2018: RMB7,192,000) and approximately RMB67,807,000 (2018: RMB222,743,000), respectively.
Loans and Borrowings
As at 31 December 2019, the Remaining Group's total loans and borrowings was approximately RMB7,648,326,000, representing a decrease of approximately 20.7% compared to approximately RMB9,649,151,000 as at 31 December 2018. The decrease in the Remaining Group's total loans and borrowings was mainly due to a decrease in the Remaining Group's investments in solar power plants upon the entering into the sale and purchase agreements with independent third parties for the disposals of the Nine Project Companies and Angli on 15 November 2019 and 5 December 2019, respectively, which lead to a decrease in loans and borrowings to finance such investments. All the loans and borrowings of the Remaining Group were denominated in RMB, the functional currency of the Company's major subsidiaries in the PRC. As at 31 December 2019, loans and borrowings of approximately RMB5,033,500,000 (2018: RMB4,918,000,000) and approximately RMB2,614,826,000 (2018: RMB4,731,151,000) bear fixed interest rate and floating interest rate, respectively.
As at 31 December 2019, out of the total borrowings, approximately RMB1,272,732,000 (2018: RMB798,961,000) was repayable within one year and approximately RMB5,907,382,000 (2018: RMB8,850,190,000) was repayable after one year. For details, please refer to note 32 to the financial statements of the 2019 Annual Report.
Corporate bonds
As at 31 December 2019, corporate bonds denominated in Hong Kong dollar with an aggregate principal amount of HK$343,500,000 (equivalent to approximately RMB307,700,000) (2018: HK$344,000,000 (equivalent to approximately RMB301,413,000)) remained outstanding with certain independent third parties. The corporate bonds bear interest rates ranging from 3% to 7% (2018: 3% to 9%) per annum, and will mature on the date immediately following 6 to 96 months (2018: 3 to 96 months) after their issuance.
During the year ended 31 December 2019, the Remaining Group issued corporate bonds with an aggregate principal amount of HK$64,000,000 (equivalent to approximately RMB56,353,000) (2018: HK$290,500,000 (equivalent to approximately RMB254,536,000)) to certain independent third parties, the net proceeds of the issued corporate bonds received by the Company were approximately HK$57,761,000 (equivalent to approximately RMB50,860,000) (2018: HK$257,727,000 (equivalent to approximately RMB225,820,000)), with total issue cost amounting to approximately HK$6,239,000 (equivalent to approximately RMB5,493,000) (2018: HK$32,773,000 (equivalent to approximately RMB28,716,000)).
During the year ended 31 December 2019, the Remaining Group repaid HK$64,500,000 (equivalent to approximately RMB56,794,000) (2018: HK$423,500,000 (equivalent to approximately RMB371,071,000)) in aggregate principal amount of the corporate bonds.
The corporate bonds are measured at amortised cost using effective interest method by applying an effective interest rate ranging from 10.40% to 14.56% (2018: 10.24% to 12.00%) per annum. Imputed interest of approximately HK$31,013,000 (equivalent to approximately RMB27,308,000) (2018: HK$44,200,000 (equivalent to approximately RMB37,318,000)) (note 13 to the financial statements of the 2019 Annual Report) in respect of the corporate bonds was recognised in profit or loss during the year ended 31 December 2019.
Foreign Exchange Risk
The Remaining Group primarily operates its business in the PRC and during the year ended 31 December 2019, the Remaining Group's revenue were primarily denominated in RMB, being the functional currency of the Remaining Group's major operating subsidiaries. Accordingly, the Directors expect any future exchange rate fluctuation will not have any material effect on the Remaining Group's business. The Remaining Group did not use any financial instruments for hedging purpose, but will continue to monitor foreign exchange changes to best preserve the Remaining Group's cash value.
Charge on Assets
As at 31 December 2019, the Remaining Group had charged solar power plants, trade receivables, right-of-use assets/lease prepayments and unlisted equity investments with net book value of approximately RMB5,813,165,000 (2018: RMB7,303,687,000), approximately RMB1,490,891,000 (2018: RMB1,613,923,000), approximately RMB756,000 (2018: RMB774,000) and approximately RMB438,840,000 (2018: RMB813,158,000), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.
Save as disclosed above and in note 32 to the financial statements of the 2019 Annual Report, during the year ended 31 December 2019, the Remaining Group has no other charges on assets.
Contingent Liabilities
The Remaining Group acquired equity interests of certain subsidiaries principally engaged in the development of solar power plant projects and the applications for the development of these solar power plant projects were actually made by their former shareholders. According to the Notices issued by the State Energy Administration (國家能 源局), the Notices prohibit the original applicants who have obtained the approval documents from the government authorities for the solar power plants projects from transferring the equity interests of solar power plant projects before such solar power plants were connected to the power grid. Taking into consideration the legal opinion obtained from the Company's legal adviser as to PRC law, and given that the Remaining Group has obtained the preliminary approval from respective relevant government authorities to continue with the development of the solar power plants, the Company's legal adviser as to PRC law is of the view that the possibility for these subsidiaries to be fined or to face other adverse consequences imposed by the relevant government authorities is remote. Accordingly, the Directors consider there is no significant impact on the Remaining Group's control over these subsidiaries and the development of these solar power plants.
Save as disclosed above, during the year ended 31 December 2019, the Group has no other significant contingent liabilities.
Employees and Remuneration Policy
As at 31 December 2019, the Remaining Group had approximately 614 employees (2018: 849) in Hong Kong and the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the year ended 31 December 2019, the total employee benefit expenses (including directors' emoluments) were approximately RMB183,208,000 (2018: RMB252,432,000). For details, please refer to note 10 to the financial statements of the 2019 Annual Report. The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary and short-term bonuses, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires.
The Company has also adopted the Share Option Scheme on 22 July 2009 for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Remaining Group's operations. The Share Option Scheme expired on 21 July 2019 and no further options could thereafter be granted. Notwithstanding the expiry of the Share Option Scheme, the share options which had been granted during the life of the scheme shall continue to be valid and exercisable in accordance with their terms of issue and in all other respects its provisions shall remain in full force and effect.
Connected Transaction
During the year ended 31 December 2017, the Remaining Group entered into the following connected transactions, details of which are disclosed in compliance with the requirements of Chapter 14 and Chapter 14A of the Listing Rules.
On 13 December 2017, the Baoqian Purchaser, entered into the Baoqian Acquisition Agreement with the Vendor, pursuant to which the Baoqian Purchaser agreed to acquire, and the Vendor agreed to sell 30% of the equity interests in Guangzhou Baoqian at a consideration of RMB35,000,000, which shall be settled in full by the Baoqian Purchaser by way of one-off payment within thirty (30) days from the date of transfer of 30% of the equity interests in Guangzhou Baoqian to the name of the Baoqian Purchaser. Immediately before the above acquisition, the equity interests in Guangzhou Baoqian was held as to 65% by the Baoqian Purchaser, 30% by the Vendor and 5% by an independent third party to the Remaining Group. Upon completion of the above acquisition, Guangzhou Baoqian will continue to be a non-wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the consolidated financial statements of the Remaining Group. As at 31 December 2018 and 2017, the above acquisition has not been completed.
As at the date of the Baoqian Acquisition Agreement, the Vendor was interested in 30% of the equity interests in Guangzhou Baoqian, a non-wholly-owned subsidiary of the Company. Therefore, the Vendor is a substantial shareholder of Guangzhou Baoqian, and is a connected person of the Company at the subsidiary level under Rule 14A.06(9) of the Listing Rules. Accordingly, the Baoqian Acquisition Agreement and the transactions contemplated thereunder constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.
The Company intends to hold the equity interests in Guangzhou Baoqian as long-term investment with an objective to improve the capital usage efficiency and earn reasonable investment return. Based on the above, the Directors (including the independent non-executive Directors) consider that the Baoqian Acquisition Agreement has been entered into on normal commercial terms and is fair and reasonable, and in the interests of the Company and its shareholders as a whole.
After further negotiation and discussion, the Baoqian Purchaser and the Vendor decided not to proceed with the Baoqian Acquisition Agreement and entered into a termination agreement to terminate the Baoqian Acquisition Agreement on 24 January 2019.
For details, please refer to the announcements of the Company dated 13 December 2017 and 24 January 2019.
On 21 March 2019, BD Technology Limited (''BD Technology''), an indirect wholly-owned subsidiary of the Company, entered into a sale and purchase agreement as vendor with 深 圳 市 雄 韜 電 源 科 技 股 份 有 限 公 司 (Shenzhen Xiongtao Electronic Technology Company Limited*) (''Shenzhen Xiongtao'') as purchaser pursuant to which BD Technology agreed to sell and Shenzhen Xiongtao agreed to acquire 17.4% equity interest in Kong Sun Baoyuan for a total consideration of RMB105,000,000. As at the date of the transaction, Kong Sun Baoyuan was owned as to 55% by BD Technology, and as to 45% by Shenzhen Xiongtao. Accordingly, Shenzhen Xiongtao is a connected person of the Company at the subsidiary level under Rule 14A.06(9) of the Listing Rules and the transaction constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Upon completion, the Remaining Group's equity interest in Kong Sun Baoyuan decreased from 55% to 37.6%, Kong Sun Baoyuan ceased to be a joint venture of the Company and become an associate of the Company. For details, please refer to the announcement of the Company dated 21 March 2019.
Significant Investments and Material Acquisition and Disposal
Save as disclosed in the 2019 Annual Report, the Remaining Group did not have any other significant investments, did not hold any significant investments in an investee company with a value of 5% more of the Company's total assets, other material acquisition or disposal during the year ended 31 December 2019, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2019 Annual Report.
For the six months ended 30 June 2020
Business review
The Remaining Group was mainly engaged in investment in and the operation of solar power plants, provision of solar power plant operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.
Revenue
The revenue of the Remaining Group decreased by approximately 39.4% from approximately RMB969,781,000 for the six months ended 30 June 2019 to approximately RMB587,710,000 for the six months ended 30 June 2020. The decrease was due to the decrease in revenue from sales of electricity and trading of liquefied natural gas during the period.
Revenue from Sales of Electricity and Provision of Solar Power Plant Operation and Maintenance Services
The Remaining Group's revenue from sales of electricity decreased by approximately 22.3% from approximately RMB722,111,000 for the six months ended 30 June 2019 to approximately RMB561,419,000 for the six months ended 30 June 2020. As at 30 June 2020, the Remaining Group had a total of 888.8 MW (31 December 2019: 1,239.3 MW) installed capacity of solar power plants. The solar power plants owned by the Remaining Group have generated electricity in an aggregate volume of approximately 679,408 MWh for the six months ended 30 June 2020, representing a decrease of approximately 2.0% as compared to approximately 693,128 MWh for the six months ended 30 June 2019.
The Remaining Group's revenue from provision of solar power plant operation and maintenance services increased by approximately 2,293.4% from approximately RMB545,000 for the six months ended 30 June 2019 to approximately RMB13,044,000 for the six months ended 30 June 2020.
Revenue from Provision of Financial Services
The Remaining Group's revenue arising from the provision of financial services decreased by approximately 22.4% from approximately RMB17,650,000 for the six months ended 30 June 2019 to approximately RMB13,701,000 for the six months ended 30 June 2020.
Revenue from Trading of Liquefied Natural Gas
The Remaining Group's revenue arising from the trading of liquefied natural gas decreased significantly by approximately 94.5% from approximately RMB230,020,000 for the six months ended 30 June 2019 to approximately RMB12,590,000 for the six months ended 30 June 2020. The decrease is mainly due to city lockdowns and suspension of work, production and transportation in most regions in the PRC due to the outbreak of the novel coronavirus pneumonia starting in late January 2020.
Gross Profit and Gross Profit Margin
The gross profit of the Remaining Group decreased by approximately 18.0% from approximately RMB539,857,000 for the six months ended 30 June 2019 to approximately RMB442,470,000 for the six months ended 30 June 2020. The gross profit margin of the Remaining Group increased from approximately 55.7% for the six months ended 30 June 2019 to approximately 75.3% for the six months ended 30 June 2020 mainly due to decrease in revenue from trading of liquefied natural gas, which has a lower gross profit margin than the business segment of solar power plants.
Other Gains and Losses
The Remaining Group recorded other gains of approximately RMB19,218,000 (six months ended 30 June 2019: other losses of approximately RMB5,362,000) for the six months ended 30 June 2020. The change was mainly due to (i) the decrease in office sublease income of approximately RMB13,656,000; and (ii) the decrease in government allowances of approximately RMB3,576,000.
Administrative Expenses
Administrative expenses of the Remaining Group decreased by approximately 37.8% from approximately RMB172,477,000 for the six months ended 30 June 2019 to approximately RMB107,209,000 for the six months ended 30 June 2020. The decrease was mainly attributable to (i) the decrease in employee benefit expenses (including directors' emoluments) amounted to approximately RMB37,945,000 as a result of the decrease in number of head count of high grade employee of the Remaining Group during the six months ended 30 June 2020; and (ii) the decrease in operating lease expenses in respect of short-term leases of approximately RMB8,621,000.
(Loss)/Gain on Disposal of Subsidiaries, Net
During the six months ended 30 June 2020, the Remaining Group disposed of ten subsidiaries, and recorded net loss on such disposals of approximately RMB4,613,000 (six months ended 30 June 2019: gain of approximately RMB37,488,000). For details, please refer to note 21 to the ''Notes to the Condensed Consolidated Interim Financial Statements'' of the 2020 Interim Report.
Impairment loss on a disposal group classified as held for sale
On 29 April 2019, the Remaining Group entered into a sale and purchase agreement with an independent third party to dispose the entire equity interest in 湖州祥暉光伏發電 有限公司 (Huzhou Xianghui Solar Power Co., Ltd.*) (''Huzhou Xianghui'') for a total consideration of approximately RMB413,213,000. An impairment loss of approximately RMB98,388,000, representing the sale proceeds less the carrying amount of the net assets of Huzhou Xianghui as at 30 June 2019, was charged to profit or loss during the six months ended 30 June 2019. No such amount was recorded for the six months ended 30 June 2020.
Finance Costs
Finance costs of the Remaining Group decreased by approximately 16.7% from approximately RMB363,905,000 for the six months ended 30 June 2019 to approximately RMB303,203,000 for the six months ended 30 June 2020. As the Remaining Group's total loans and borrowings decreased as compared to the corresponding period last year, the finance costs related to these borrowings also decreased.
Solar Power Plants
As at 30 June 2020, the Remaining Group had a net carrying value of approximately RMB5,783,496,000 (31 December 2019: RMB6,047,389,000) and approximately RMB105,927,000 (31 December 2019: RMB433,798,000) in completed solar power plants and solar power plants under construction, respectively. For details, please refer to note 10 to the ''Notes to the Condensed Consolidated Interim Financial Statements'' of the 2020 Interim Report. During the six months ended 30 June 2020, the Remaining Group successfully completed the disposals of solar power plants in ten subsidiaries with total installed capacity of 350.5 MW. As at 30 June 2020, the Remaining Group had a total of 888.8 MW (31 December 2019: 1,239.3 MW) installed capacity of completed solar power plants.
Interest in associates
As at 30 June 2020, the net carrying amount of associates was approximately RMB229,325,000 (31 December 2019: RMB226,691,000).
The Remaining Group executed a guarantee with respect to a loan of approximately RMB12,947,000 (31 December 2019: RMB44,621,000) granted by independent third parties to Kong Sun Baoyuan as at 30 June 2020, under which the Remaining Group is liable to pay the proportionate share if the independent third parties are unable to recover the loan from Kong Sun Baoyuan.
Goodwill
As at 30 June 2020, the Remaining Group had a total amount of approximately RMB96,930,000 (31 December 2019: RMB96,930,000) in respect of goodwill on the previous acquisitions of subsidiaries.
Right-of-use Assets and Lease Liabilities
As at 30 June 2020, the right-of-use assets and lease liabilities amounted to approximately RMB266,300,000 (31 December 2019: RMB273,524,000) and approximately RMB226,341,000 (31 December 2019: RMB199,005,000).
Financial Assets Measured at Fair Value through Other Comprehensive Income
Financial assets measured at fair value through other comprehensive income decreased by approximately 23.3% from approximately RMB1,729,091,000 as at 31 December 2019 to approximately RMB1,327,070,000 as at 30 June 2020. The decrease is mainly due to (i) fair value loss on the unlisted equity investments of approximately RMB132,450,000; and (ii) the decrease in investment of 蘇州君盛晶石股權投資合夥企 業(有限合夥) (Suzhou Junsheng Jingshi Equity Investment Partnership (Limited Partnership)*) amounted to RMB270,000,000. The investments are held for long-term investment purpose and hence are classified as financial assets measured at fair valuethrough other comprehensive income in the condensed consolidated statement of financial position. For details, please refer to note 12 to the ''Notes to the Condensed Consolidated Interim Financial Statements'' of the 2020 Interim Report.
Financial Assets Measured at Fair Value through Profit or Loss
As at 30 June 2020, the Remaining Group had financial assets measured at fair value through profit or loss with market value of approximately RMB19,936,000 (31 December 2019: RMB28,198,000), representing approximately 0.1% (31 December 2019: 0.2%) of the total assets of the Remaining Group as at 30 June 2020. As at 30 June 2020 and 31 December 2019, the portfolio of investments managed by the Remaining Group consists of investment in one listed equity in Hong Kong. The Remaining Group held approximately 0.8% (31 December 2019: 0.8%) shareholding in the equity listed in Hong Kong as at 30 June 2020. During the six months ended 30 June 2020, the Remaining Group had recorded an unrealised loss on fair value changes of financial assets measured at fair value through profit or loss which amounted to approximately RMB8,746,000 (six months ended 30 June 2019: RMB6,011,000). During the six months ended 30 June 2020, the Remaining Group did not dispose any of its listed equity investment. During the six months ended 30 June 2019, the Remaining Group disposed of approximately 49.0% of its listed equity investment in Hong Kong at a cash consideration of approximately RMB38,838,000 and resulting in a net realised loss on disposal on financial assets measured at fair value through profit or loss amounted to approximately RMB1,154,000.
Trade, Bills and Other Receivables
Trade, bills and other receivables increased by approximately 30.8% from approximately RMB3,268,817,000 as at 31 December 2019 to approximately RMB4,276,612,000 as at 30 June 2020. The increase was mainly due to an increase in trade and bills receivables by approximately 8.2% from approximately RMB2,144,855,000 as at 31 December 2019 to approximately RMB2,321,575,000 as at 30 June 2020 and increase in other receivables upon the disposals of ten subsidiaries during the six months ended 30 June 2020.
Structured bank deposits
As at 30 June 2020, the Remaining Group placed approximately RMB24,230,000 (31 December 2019: RMB4,230,000) structured bank deposits with a bank in the PRC to earn a guaranteed and capital-protected return by making good use of the idle cash of the Remaining Group.
Trade and Other Payables
Trade and other payables decreased by approximately 57.7% from approximately RMB1,792,449,000 as at 31 December 2019 to approximately RMB757,945,000 as at 30 June 2020. The balance mainly comprised payables to suppliers of solar modules and equipment and EPC contractors for purchase of solar modules and equipment and construction costs of solar power plants. Due to settlement of construction costs after the completion of substantial solar power plants construction work during the six months ended 30 June 2020, trade payables, which was mainly related to construction costs of solar power plants, have decreased by approximately 32.6% from approximately RMB1,390,599,000 as at 31 December 2019 to approximately RMB702,081,000 as at 30 June 2020.
Liquidity and Capital Resources
As at 30 June 2020, cash and cash equivalents of the Remaining Group was approximately RMB94,499,000 (31 December 2019: RMB102,106,000), which included an amount of bank balances of approximately RMB90,451,000 (31 December 2019: RMB98,909,000) denominated in RMB placed with banks in the PRC. The remaining balance of the Remaining Group's cash and cash equivalents consisted primarily of cash on hand and bank balances which were primarily denominated in Hong Kong dollar and placed with banks in Hong Kong.
As at 30 June 2020, the Remaining Group's net debt ratio, which was calculated by the total loans and other borrowings and corporate bonds minus total cash and cash equivalents and structured bank deposits, over total equity, was approximately 1.86 (31 December 2019: 2.01).
Capital Expenditure
During the six months ended 30 June 2020, the Remaining Group's total expenditure in respect of property, plant and equipment and solar power plants amounted to approximately RMB3,221,000 (six months ended 30 June 2019: RMB3,516,000) and approximately RMB5,671,000 (six months ended 30 June 2019: RMB30,794,000), respectively.
Loans and Borrowings
As at 30 June 2020, the Remaining Group's total loans and borrowings was approximately RMB6,822,873,000, representing a decrease of approximately 10.8% as compared to approximately RMB7,648,326,000 as at 31 December 2019. All loans and borrowings of the Remaining Group were denominated in RMB, the functional currency of the Company's major subsidiaries in the PRC. As at 30 June 2020, loans and borrowings of approximately RMB4,516,577,000 (31 December 2019: RMB5,033,500,000) and approximately RMB2,306,296,000 (31 December 2019: RMB2,614,826,000) bear fixed interest rate and floating interest rate, respectively.
As at 30 June 2020, out of the total borrowings, approximately RMB915,490,000 (31 December 2019: RMB1,272,732,000) was repayable within one year and approximately RMB5,907,382,000 (31 December 2019: RMB6,375,594,000) was repayable after one year. For details, please refer to note 18 to the ''Notes to the Condensed Consolidated Interim Financial Statements'' of the 2020 Interim Report.
Corporate Bonds
As at 30 June 2020, corporate bonds denominated in Hong Kong dollar with an aggregate principal amount of HK$338,500,000 (equivalent to approximately RMB309,199,000) (31 December 2019: HK$343,500,000 (equivalent to approximately RMB307,700,000)) remained outstanding with certain independent third parties. The corporate bonds bear interest rates ranging from 3% to 7% (31 December 2019: 3% to 7%) per annum, and will mature on the date immediately following 6 to 96 months (31 December 2019: 6 to 96 months) after their issuance.
During the six months ended 30 June 2020, the Remaining Group did not issue any corporate bonds.
During the six months ended 30 June 2019, the Remaining Group issued corporate bonds with an aggregate principal amount of HK$44,000,000 (equivalent to approximately RMB38,705,000) to certain independent third parties, the net proceeds of the issued corporate bonds received by the Company were approximately HK$38,909,000 (equivalent to approximately RMB34,227,000), with total issue cost amounting to approximately HK$5,091,000 (equivalent to approximately RMB4,478,000).
During the six months ended 30 June 2020, the Remaining Group repaid HK$5,000,000 (equivalent to approximately RMB4,567,000) (six months ended 30 June 2019: HK$61,500,000 (equivalent to approximately RMB54,099,000)) in aggregate principal amount of the corporate bonds.
The corporate bonds are measured at amortised cost using effective interest method by applying an effective interest rate ranging from 10.40% to 14.56% (six months ended 30 June 2019: 10.24% to 14.56%) per annum. Imputed interest of approximately HK$16,558,000 (equivalent to approximately RMB15,002,000) (six months ended 30 June 2019: HK$14,710,000 (equivalent to approximately RMB12,607,000)) (note 5 to the ''Notes to the Condensed Consolidated Interim Financial Statements'' of the 2020 Interim Report) in respect of the corporate bonds was recognised in profit or loss during the six months ended 30 June 2020.
Foreign Exchange Rate Risk
The Remaining Group primarily operates its business in the PRC and during the six months ended 30 June 2020, the Remaining Group's revenue were primarily denominated in RMB, being the functional currency of the Remaining Group's major operating subsidiaries. Accordingly, the Directors expect that any future exchange rate fluctuationwill not have any material effect on the Remaining Group's business. The Remaining Group did not use any financial instruments for hedging purposes, but will continue to monitor foreign exchange changes to best preserve the Remaining Group's cash value.
Charge on Assets
As at 30 June 2020, the Remaining Group had charged solar power plants, trade receivables, right-of-use assets and unlisted equity investments with net book value of approximately RMB4,006,070,000 (31 December 2019: RMB5,813,165,000), approximately RMB2,223,620,000 (31 December 2019: RMB1,490,891,000), approximately RMB2,738,000 (31 December 2019: RMB756,000) and approximately RMB356,000,000 (31 December 2019: RMB438,840,000), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.
Save as disclosed above and in note 18 to the ''Notes to the Condensed Consolidated Interim Financial Statements'' of the 2020 Interim Report, during the six months ended 30 June 2020, the Remaining Group has no other charges on assets.
Litigation
On 21 April 2020, Kong Sun Yongtai, a wholly-owned subsidiary of the Company, received a notice to respond to action* (應訴通知書) from Beijing No. 1 Intermediated People's Court* (北京市第一中級人民法院) (the ''Court'') regarding the dispute (the ''Dispute'') among Beijing Sifang Jibao Projects Technology Co., Ltd.* (北京四方繼保工 程技術有限公司 )( ''Beijing Sifang'') as plaintiff and Zhongke Hengyuan Technology Co., Ltd.* (中科恒源科技股份有限公司 )( ''Zhongke''), Inner Mongolia Zhongke Hengyuan Energy Technology Co., Ltd.* (內蒙古中科恒源能源科技有限公司) (the ''Inner Mongolia Zhongke'') and Kong Sun Yongtai as defendants. Beijing Sifang filed claims to the Court for demanding Zhongke to repay the outstanding equipment purchase price in the amount of approximately RMB52,900,000 and the aggregate liquidated damages in the amount of approximately RMB20,900,000, Inner Mongolia Zhongke to sell its land under the land mortgage agreement dated in April 2019 entered into by and among Beijing Sifang, Zhongke and Inner Mongolia Zhongke (the ''Land Mortgage Agreement'') for the repayment of the aforesaid amount and Kong Sun Yongtai to undertake the joint liabilities under the guarantee agreements dated in August 2016 entered into by and among Beijing Sifang, Zhongke and Kong Sun Yongtai (the
''Guarantee Agreements'').
The Dispute was related to the performance of certain agreements dated in August 2016 entered into between Zhongke and Beijing Sifang in relation to the purchase of the solar cell module of 31.8MW at the consideration of approximately RMB104,843,000. The land mortgage value of approximately RMB53,700,000 as indicated in the Land Mortgage Agreement was higher than the outstanding equipment purchase price due to Beijing Sifang in the amount of approximately RMB52,900,000. In March 2020, Beijing Sifang obtained the Court order to freeze the account receivables of Zhongke for up to approximately RMB74,036,000, which exceeded the outstanding equipment purchase price in the amount of approximately RMB52,900,000 and the aggregate liquidated damages in the amount of approximately RMB20,900,000 claimed by Beijing Sifang.
The Guarantee Agreements were approved by the management of Kong Sun Yongtai. In the event that the Court decides that Kong Sun Yongtai should be liable for the guarantee obligation under the Guarantee Agreements, Kong Sun Yongtai is entitled to recover its losses from Zhongke and Inner Mongolia Zhongke. As Beijing Sifang did not agree to terminate the Guarantee Agreements, Kong Sun Yongtai has urged Zhongke to perform its payment obligation and actively discuss with Inner Mongolia Zhongke and Beijing Sifang to resolve the Dispute. A hearing of the Dispute took place on 11 August 2020 whereby the parties exchanged the evidence. The Court considered the evidence adduced by the parties and approved the withdrawal of the claim against Kong Sun Yongtai by Beijing Sifang on 27 August 2020. Accordingly, Kong Sun Yongtai has no liability under the Dispute and the Guarantee Agreements. Details of the Dispute can be referenced to the announcements of the Company dated 29 April 2020, 21 May 2020 and 2 September 2020.
Contingent Liabilities
The Remaining Group acquired equity interests of certain subsidiaries principally engaged in the development of solar power plant projects and the applications for the development of these solar power plant projects were actually made by their former shareholders. According to the Notices issued by the State Energy Administration (國家能 源局), the Notices prohibit the original applicants who have obtained the approval documents from the government authorities for the solar power plant projects from transferring the equity interests of solar power plant projects before such solar power plants were connected to the power grid. Given that the Remaining Group has obtained the preliminary approval from respective relevant government authorities to continue with the development of the solar power plants, the possibility for these subsidiaries to be fined or to face other adverse consequences imposed by the relevant government authorities is remote. Accordingly, the Directors consider there is no significant impact on the Remaining Group's control over these subsidiaries and the development of these solar power plants.
In August 2016, Kong Sun Yongtai entered into the Guarantee Agreements for an amount of approximately RMB210,017,000 in favour of Beijing Sifang with respect to the obligations of Zhongke under certain purchase agreements. In the event that Zhongke failed to perform its payment obligations under the equipment purchase agreements and the Remaining Group was held liable for the guarantee obligations, the Remaining Group was entitled to recover its loss in full from Zhongke and Inner Mongolia Zhongke. As at 30 June 2020, the trial of the Dispute has not yet commenced and no judgement has been made on the part of Kong Sun Yongtai in relation to its obligations under the Guarantee Agreements. The Directors considered that the guarantee amount did not have any material impact on the Remaining Group's financial position and it was not probable that actual loss would be incurred in view of the undertakings and counter guarantee agreement provided by Zhongke and Inner Mongolia Zhongke in favour of Kong Sun Yongtai.
The Court considered the evidence adduced by the parties and held that Kong Sun Yongtai is not liable to Beijing Sifang and accordingly approved the withdrawal of the claim against Kong Sun Yongtai on 27 August 2020. For further details, please refer to the paragraph headed ''Litigation'' of the 2020 Interim Report.
Save as disclosed above, during the six months ended 30 June 2020, the Remaining Group has no other significant contingent liabilities.
Employees and Remuneration Policy
As at 30 June 2020, the Remaining Group had approximately 654 employees (31 December 2019: 614) in Hong Kong and in the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the six months ended 30 June 2020, the total employee benefit expenses (including directors' emoluments) were approximately RMB80,752,000 (six months ended 30 June 2019: RMB108,755,000). For details, please refer to note 6(a) to the ''Notes to the Condensed Consolidated Interim Financial Statements'' of the 2020 Interim Report. The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary, short-term bonuses and long-term rewards, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires.
The Company has also adopted the Share Option Scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Remaining Group's operations. The Share Option Scheme expired on 21 July 2019 and no further options could thereafter be granted. Notwithstanding the expiry of the Share Option Scheme, the share options which had been granted during the life of the scheme shall continue to be valid and exercisable in accordance with their terms of issue and in all other respects its provisions shall remain in full force and effect.
Significant Investments and Material Acquisition and Disposal
Save as disclosed above, the Remaining Group did not have any other significant investments, other material acquisition or disposal during the six months ended 30 June 2020, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2020 Interim Report.
REPORT ON REVIEW OF FINANCIAL INFORMATION OF WEIXIAN TIHEIN PHOTOVOLTAIC ENERGY LIMITED
TO THE BOARD OF DIRECTORS OF KONG SUN HOLDINGS LIMITED
Introduction
We have reviewed the unaudited financial information set out on pages II-A-3 to II-A-16 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Weixian Tianhai Photovoltaic Energy Limited (''Weixian Tianhai'') and the statements of profit or loss and other comprehensive income, the statements of cash flows and the statements of changes in equity for each of the years ended 31 December 2017, 2018 and 2019 and 30 September 2019 and 2020 and explanatory notes (the ''Financial Information''). The Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by Kong Sun Holdings Limited (the ''Company'' ) in connection with the proposed disposal of entire share of Weixian Tianhai in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ''Listing Rules'').
The directors of the Company are responsible for the preparation and presentation of the Financial Information of the Disposal Company in accordance with the basis of preparation set out in note 2 to the Financial Information and paragraph 14.68(2)(a)(i) of the Listing Rules. The directors are also responsible for such internal control as management determines is necessary to enable the preparation of Financial Information that is free from material misstatement, whether due to fraud or error. The Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) ''Presentation of Financial Statements'' or an interim financial report as defined in Hong Kong Accounting Standard 34 ''Interim Financial Reporting'' issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA''). Our responsibility is to express a conclusion on this Financial Information based on our review. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'' and with reference to Practice Note 750 ''Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal'' issued by the HKICPA. A review of the financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Financial Information is not prepared, in all material respects, in accordance with the basis of preparation set out in note 2 to the Financial Information.
BDO Limited
Certified Public Accountants
Hong Kong, 26 February 2021
Set out below is the unaudited financial information of Weixian Tianhai which comprises the unaudited statements of financial position of Weixian Tianhai as at 31 December 2017, 2018 and 2019 and 30 September 2020 and the unaudited statements of profit or loss and other comprehensive income, unaudited statements of cash flows and unaudited statements of changes in equity for the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 and certain explanatory notes (altogether referred to as ''Unaudited Financial Information'').
The Unaudited Financial Information has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules and the basis of preparation as set out in note 2 to the Unaudited Financial Information.
The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the proposed disposal of the entire equity interest in the Weixian Tianhai. The Company's auditor, BDO Limited, has reviewed the Unaudited Financial Information of Weixian Tianhai in accordance with Hong Kong Standard on Review Engagements 2410 ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'' and with reference to Practice Note 750 ''Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal'' issued by the Hong Kong Institute of Certified Public Accountants.
A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the Company's auditor to obtain assurance that the Company's auditor would become aware of all significant matters that might be identified in an audit. Accordingly, the Company's auditor does not express an audit opinion. The Company's auditor has issued an unmodified review report.
UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF WEIXIAN TIANHAI
For the year ended 31 December 2017 2018 2019
For the nine monthsended 30 September 2019 2020
Notes | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||
Revenue | 4 | 37,062 | 38,365 | 34,175 | 27,675 | 27,316 |
Cost of sales | (10,644) | (14,409) | (11,709) | (8,972) | (8,907) | |
Gross profit | 26,418 | 23,956 | 22,466 | 18,703 | 18,409 | |
Other income | 7 | 5 | 46 | 15 | 14 | |
Administrative expenses | (2,923) | (1,172) | (2,335) | (821) | (601) | |
Finance costs | (8,892) | (8,779) | (8,651) | (6,363) | (6,479) | |
Profit before income tax | 14,610 | 14,010 | 11,526 | 11,534 | 11,343 | |
Income tax expense | 5 | - | (1,886) | (1,603) | (201) | (185) |
Profit for the year/period | 14,610 | 12,124 | 9,923 | 11,333 | 11,158 |
UNAUDITED STATEMENTS OF FINANCIAL POSITION OF WEIXIAN TIANHAI
As at | ||||
30 September | ||||
2017 | 2020 | |||
Notes | RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | (Unaudited) | ||
ASSETS AND LIABILITIES | ||||
Non-current assets | ||||
Property, plant and equipment | 89 | 62 | 1 | |
Solar power plants | 6 | 214,900 | 205,774 | 190,538 |
Right-of-use assets | - | - | 11,288 | |
Lease prepayments | - | 626 | - | |
214,989 | 206,462 | 201,827 | ||
Current assets | ||||
Trade and other receivables | 7 | 80,658 | 66,258 | 73,961 |
Amounts due from intermediate holding | ||||
company | 9 | - | 24,897 | - |
Amounts due from fellow subsidiaries | 9 | - | - | 13,698 |
Cash and cash equivalents | 3,145 | 2,378 | 6,967 | |
Total current assets | 83,803 | 93,533 | 94,626 | |
Current liabilities | ||||
Trade and other payables | 39,166 | 41,160 | 13,245 | |
Tax payable | - | 39 | - | |
Loans and borrowings | 8 | 47,616 | 13,492 | 16,004 |
Amounts due to intermediate holding | ||||
company | 9 | - | - | 9,744 |
Amounts due to immediate holding | ||||
company | 9 | 55,055 | 89,533 | 145,269 |
Amounts due to fellow subsidiaries | 9 | - | - | 1,475 |
Total current liabilities | 141,837 | 144,224 | 185,737 | |
Net current liabilities | (58,034) | (50,691) | (91,111) | |
Total assets less current liabilities | 156,955 | 155,771 | 110,716 | |
- II-A-5 - |
As at 31 December 2018
2019
RMB'000
RMB'000 (Unaudited)
36 197,210 11,736 -
208,982
67,703
-
- 10,409
78,112
15,009 1,383 10,918
7,164 95,855 326 130,655
(52,543)
156,439
As at
2017
As at 31 December 2018
2019
30 September 2020
Notes
RMB'000 (Unaudited)RMB'000 (Unaudited)RMB'000 (Unaudited)
RMB'000 (Unaudited)
Non-current liabilities Lease liabilities
Loans and borrowingsTotal non-current liabilities
Net assets
8
- 123,249 123,249 33,706
- 109,941 109,941 45,830
8,192 8,498
92,494 84,125
100,686 92,623
55,753 18,093
Equity Registered capital Reserves
Total equity
1,000 32,706 33,706
1,000 44,830 45,830
1,000 1,000
54,753 17,093
55,753 18,093
UNAUDITED STATEMENTS OF CASH FLOWS OF WEIXIAN TIANHAI
For the nine months
For the year ended 31 December ended 30 September 2017 2018 2019 2019 2020
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities
Profit before income tax Adjustments for:
14,610
14,010
11,526
11,534
11,343
Depreciation of property, plant and equipment
Depreciation of solar power plants
23 9,126
27 9,126
26 9,126
20 10
6,845 6,672
Depreciation of right-of-use assets
Amortization of lease prepayments
Write-off of property, plant and equipment
Interest expense Interest income
- - - 8,892
-
583
431 448
582
- 8,779
- - 8,651
- -
-
25
6,363 6,479
(7)
(5)
(46)
(15) (14)Operating profit before working capital changes (Increase)/Decrease in trade and other receivables (Decrease)/Increase in trade and other payables
32,644
(19,294)
(836)
32,519 14,400 1,994
29,866
25,178 24,963
(1,445)
(4,995) (6,258)
(26,151)
(29,338) (1,764)
Cash generated from/(used in)
operating activities
Tax paid
12,514 -
48,913 (1,847)
2,270 (259)
(9,155) 16,941
(195)
(1,568)
Net cash generated from/(used in)
operating activities
12,514
47,066
2,011
(9,350)
15,373
For the nine monthsFor the year ended 31 December 2017 2018 2019
RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Unaudited)
Cash flows from investing activities
Purchase of property, plant and equipment
Payments for construction cost of in respect of solar power plants Payments purchase of right-of-use assets
Payments for purchase of lease prepayments
Interests received
ended 30 September 2019 2020
RMB'000 RMB'000 (Unaudited) (Unaudited)
(17)
- - - 7
(1,208)
- - -
5
(562)
-
(471)
- 46
(69)
- -
- 15
- - - - 14
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from loans and borrowings Repayments of loans and borrowings
Interest paid
Payments of lease liabilities Dividend paid to immediate holding company
Advances from intermediate holding company
Advances from immediate holding company
Advances from fellow subsidiaries Repayments to intermediate holding company
Repayments to immediate holding company
Repayments to fellow subsidiaries
(10)
(1,203)
(987)
(54)
14
1,921
-
-
-
-
- (8,892)
(47,432) (8,779)
(20,021) (8,140) (3,541)
(18,336) (3,283)
(5,954) (6,173)
- - - - - -
- - -
(3,541)
-
-
- (48,818)
32,061 6,322 326
41,021 2,580
34,478 -
634 49,414
5,464
(6,645)
(24,897)
-
- -
- -
- - -
- - - - (12,549)
Net cash (used in)/generated from financing activities
(13,616)
(46,630)
7,007
19,288 (18,829)
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year/period
(1,112)
4,257
(767)
3,145
8,031 2,378
9,884 (3,442)
2,378 10,409
Cash and cash equivalents at end of year/period
3,145
2,378
10,409
12,262 6,967
UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF WEIXIAN TIANHAI
Registered | Statutory | Retained | ||
capital | reserves | profits | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Balance at 1 January 2017 | 1,000 | 1,488 | 16,608 | 19,096 |
Profit for the year | - | - | 14,610 | 14,610 |
Appropriation to statutory reserves | - | 1,461 | (1,461) | - |
Balance at 31 December 2017 and | ||||
1 January 2018 | 1,000 | 2,949 | 29,757 | 33,706 |
Profit for the year | - | - | 12,124 | 12,124 |
Appropriation to statutory reserves | - | 1,212 | (1,212) | - |
Balance at 31 December 2018 and | ||||
1 January 2019 | 1,000 | 4,161 | 40,669 | 45,830 |
Profit for the year | - | - | 9,923 | 9,923 |
Appropriation to statutory reserves | - | 992 | (992) | - |
Balance at 31 December 2019 and | ||||
1 January 2020 | 1,000 | 5,153 | 49,600 | 55,753 |
Profit for the period | - | - | 11,158 | 11,158 |
Appropriation to statutory reserves | - | 1,116 | (1,116) | - |
Proposed dividend | - | - | (48,818) | (48,818) |
Balance at 30 September 2020 | 1,000 | 6,269 | 10,824 | 18,093 |
Balance at 31 December 2018 and | ||||
1 January 2019 | 1,000 | 4,161 | 40,669 | 45,830 |
Profit for the period | - | - | 11,333 | 11,333 |
Appropriation to statutory reserves | - | 1,133 | (1,133) | - |
Balance at 30 September 2019 | 1,000 | 5,294 | 50,869 | 57,163 |
- II-A-9 - |
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
1. General Information
Weixian Tianhai is a limited liability company incorporated in PRC. The principal activity of Weixian Tianhai is operation of solar power plants.
On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Weixian Tianhai entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Weixian Tianhai at a total consideration of approximately RMB22,393,000. Upon completion of the Disposal, Weixian Tianhai will cease to be the subsidiary of the Company.
2. Basis of Preparation of the Unaudited Financial Information
The Unaudited Financial Information of, Weixian Tianhai for the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and solely for the purposes of inclusion in this circular issued by the Company in connection with the Disposal.
The Unaudited Financial Information has been prepared in accordance with the same accounting policies as those adopted by the Group in preparation of the consolidated financial statements of the Group for those respective year, which conform with Hong Kong Financial Reporting Standards (''HKFRSs'') (which include all HKFRSs, Hong Kong Accounting Standards (''HKASs'') and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA'') and accounting principles generally accepted in Hong Kong. The Unaudited Financial Information has been prepared under the historical cost convention. The Unaudited Financial Information is presented in RMB and all values are rounded to the nearest thousand (RMB'000) except when otherwise indicated.
The Unaudited Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in HKAS 1 (Revised) ''Presentation of Financial Statements'' nor a set of condensed financial statements as defined in HKAS 34 ''Interim Financial Reporting'' issued by the HKICPA and that it should be read in conjunction with the relevant published annual reports of the Company.
The Unaudited Financial Information of Weixian Tianhai has been prepared on the going concern basis which assumes the realisation of assets and satisfaction of liabilities in the ordinary course of business notwithstanding Weixian Tianhai had net current liabilities of RMB58,034,000, RMB50,691,000, RMB52,543,000 and RMB91,111,000 as at 31 December 2017, 2018 and 2019 and 30 September 2020 respectively. The directors are of the opinion that the Group will have sufficient cash resources to satisfy its future working capital and other financing requirements in the next twelve months after taking into account the followings:
(i) having reviewed the cash flow projection of Weixian Tianhai for the next twelve months from the reporting date, the directors are of the opinion that Weixian Tianhai is able to generate positive cash flows from its operation. In preparing the cash flow projection by the management, it was assumed that proceeds of renewable energy subsidy receivables in respect of sale of electricity will be received with reference to prevalent payment trend after successfully enlisted in the renewable energy tariff subsidy catalogue;
(ii) the Company has confirmed not to demand repayment of debt due from Weixian Tianhai till the completion date of disposal until such time when the repayment will not affect Weixian Tianhai's ability to repay other creditors in the normal course of business.
3. Changes in accounting policies
The HKICPA has issued a number of new or revised HKFRSs which are relevant to the Group and became effective during the respective year. The impact of these new or revised HKFRSs in respective year is summarised as follows:
HKFRS 9 - Financial Instruments
HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (''HKAS 39''). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ''incurred loss'' model in HKAS 39 with an expected credit loss (''ECL'') model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Weixian Tianhai's trade and other receivables amounting to RMB80,658,000 as at 1 January 2018 was reclassified from ''loans and receivables'' as ''amortised cost financial assets''. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.
As at 1 January 2018, the Company's amounts due from intermediate holding company, amounts due from fellow subsidiaries and cash and cash equivalents were reclassified from the original classification of ''Loan and receivables'' under HKAS 39 to the new classification of ''Amortised cost'' under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.
HKFRS 15 - Revenue from Contracts with Customers
HKFRS 15 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 15 establishes a comprehensive framework for recognising revenue and some costs from contracts with customers. HKFRS 15 replaces HKAS 18, Revenue, which covered revenue arising from sale of goods and rendering of services, and HKAS 11, Construction Contracts, which specified the accounting for construction contracts, and related interpretations.
Weixian Tianhai has adopted HKFRS 15 using cumulative effect method without practical expedients. Weixian Tianhai has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.
Weixian Tianhai sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Weixian Tianhai has elected the practical expedient to recognise revenue in the amount to which Weixian Tianhai has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Weixian Tianhai has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Weixian Tianhai's accounting policies on revenue.
HKFRS 16 - Lease
HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Weixian Tianhai's accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Weixian Tianhai as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.
Weixian Tianhai has applied HKFRS 16 using the modified retrospective approach with a date of initial application of 1 January 2019, under which the cumulative effect of initial application is recognised as at 1 January 2019. As a result, the comparative information presented in 2018 and 2017 has not been restated and continues to be reported under HKAS 17, as permitted under the simplified transition approach in the standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Weixian Tianhai's ''Lease prepayments'' as ''Right-of-use assets'' and did not have significant impact on Weixian Tianhai's net assets and net profits when compared with those that would have been presented under HKAS 17.
4. Revenue
Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to RMB19,890,000, RMB21,536,000, RMB21,669,000, RMB17,597,000 and RMB17,453,000 respectively.
5. Income tax expense
Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠 目錄 有關問題的通知), Weixian Tianhai has been approved to entitle a tax holiday of a 3-year full exemption followed by a 3-year 50% exemption commencing from their respective years in which their first operating income is derived.
6. | Solar power plants |
Solar power | |
plants | |
RMB'000 | |
(Unaudited) | |
Cost | |
At 1 January 2017 | 244,057 |
Written off | (6,659) |
At 31 December 2017 and 2018 and 1 January 2019 | 237,398 |
Additions | 562 |
At 31 December 2019 and 30 September 2020 | 237,960 |
Accumulated depreciation | |
At 1 January 2017 | (13,372) |
Charge for the year | (9,126) |
At 31 December 2017 and 1 January 2018 | (22,498) |
Charge for the year | (9,126) |
At 31 December 2018 and 1 January 2019 | (31,624) |
Charge for the year | (9,126) |
At 31 December 2019 and 1 January 2020 | (40,750) |
Charge for the period | (6,672) |
At 30 September 2020 | (47,422) |
Net carrying amount
Solar power plants
RMB'000 (Unaudited)
At 31 December 2017 214,900
At 31 December 2018 205,774
At 31 December 2019 197,210
At September 2020 190,538
As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Weixian Tianhai's loans and borrowings (note 8).
7.
Trade and other receivables
2017
As at 31 December
2018
2019
As at 30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Trade receivables
Other receivables, prepayments and deposits
53,586 27,072 80,658
44,380 21,878 66,258
Ageing analysis of trade receivables, based on invoice dates, are as follows:
67,703 73,961
As at 31 December
49,562 58,527
18,141 15,434
2017
2018
2019
As at 30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Less than 3 months
Over 3 months but less than 6 months Over 6 months but less than 12 months Over 12 months but less than 24 months More than 24 months
6,601
4,796
12,436
22,111
7,642
6,585
6,776
12,582
17,647
790
5,557 7,953
6,797 7,855
13,229 10,088
23,189 25,720
790 6,911
53,586
44,380
49,562 58,527
Ageing analysis of trade receivables, based on due dates, are as follows:
As at | ||||
30 September | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Neither past due nor impaired | 3,272 | 2,480 | 2,096 | 3,756 |
Less than 3 months past due | 3,991 | 6,352 | 5,656 | 6,457 |
Over 3 months but less than | ||||
6 months past due | 6,618 | 7,001 | 7,126 | 8,316 |
Over 6 months but less than | ||||
12 months past due | 12,088 | 10,110 | 12,296 | 9,561 |
Over 12 months but less than | ||||
24 months past due | 19,975 | 17,647 | 21,598 | 25,773 |
More than 24 months past due | 7,642 | 790 | 790 | 4,664 |
53,586 | 44,380 | 49,562 | 58,527 |
As at 31 December
Weixian Tianhai's trade receivables are mainly receivables from sales of electricity. Generally, the receivables are due within 30 to 180 days from the date of billing, except for the renewable energy subsidy.
Renewable energy subsidy receivables represent PRC government subsidies on solar power plants to be received from the State Grid Company based on the respective electricity sale and purchase agreements for each of the solar power plants and the prevailing nationwide government policies. As at 31 December 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to RMB11,640,000, RMB24,774,000, RMB38,874,000 and RMB49,600,000 respectively.
Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Weixian Tianhai are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.
8. Loans and borrowings
As atAs at 31 December
2017
2018
2019
30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Current Secured - other borrowings
47,616
13,492
10,918 16,004
Non-current Secured - other borrowingsTotal loans and borrowings
123,249 170,865
109,941 123,433
92,494 84,125
103,412 100,129
Weixian Tianhai's loans and borrowings are repayable as follows:
As at | ||||
30 September | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Within 1 year | 47,616 | 13,492 | 10,918 | 16,004 |
After 1 year but within 2 years | 13,308 | 14,325 | 15,446 | 16,312 |
After 2 years but within 5 years | 46,384 | 49,907 | 42,691 | 56,527 |
Over 5 years | 63,557 | 45,709 | 34,357 | 11,286 |
170,865 | 123,433 | 103,412 | 100,129 | |
Effective Interest rates | 5.73% | 5.73% | 5.73% | 5.73% |
As at 31 December
As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings bear interest at 117% of the People's Bank of China RMB benchmark loan interest rates annum for 5-year loans.
Loans and borrowings were all secured by solar power plants.
As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings were pledged by 100% equity interests of Weixian Tianhai's immediate holding company, Kong Sun Yongtai.
9. Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries
Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries are interest-free, unsecured and repayable on demand.
10. Related party transactions
In addition to the transactions detailed elsewhere in the Unaudited Financial Information, Weixian Tianhai entered into the following transactions with related parties:
Name of related party
Related party
For the nine months | ||
relationship Type of transaction | For the year ended 31 December | ended 30 September |
2017 2018 2019 | 2019 2020 | |
RMB'000 RMB'000 RMB'000 | RMB'000 RMB'000 | |
(Unaudited) (Unaudited) (Unaudited) | (Unaudited) (Unaudited) |
Kong Sun Yongtai
Immediate holding companyOperation and maintenance fee
377
755
794
596 596
北京鑫泰綠 能科技有限公司 (BeijingFellow subsidiary
Xintai Green Energy Technology Co., Ltd.)
Operation and maintenance fee
472
-
94
- 849
11. The impact of COVID-19 in the current reporting period
The outbreak of COVID-19 has developed rapidly in 2020 and impacted entities and economic activities in varying scales in the PRC. While there have been more immediate and pronounced disruptions in certain industries, its impact on the energy industry in the PRC has been rather modest during the current reporting period.
Nevertheless, as the outbreak of COVID-19 continues to evolve, it is challenging at this juncture to predict the full extent and duration of its impact to the business and the economy. The management of Weixian Tianhai has assessed the impact of COVID-19, and up to the date of approval of this Unaudited Financial Information, the management has not identified any areas that could have a material impact on the financial performance or position of Weixian Tianhai as at 30 September 2020.
REPORT ON REVIEW OF FINANCIAL INFORMATION OF PINGSHAN TIANHUI ENERGY TECHNOLOGY LIMITED
TO THE BOARD OF DIRECTORS OF KONG SUN HOLDINGS LIMITED
Introduction
We have reviewed the unaudited financial information set out on pages II-B-3 to II-B-16 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Pingshan Tianhui Energy Technology Limited. (''Pingshan Tianhui'') and the statements of profit or loss and other comprehensive income, the statements of cash flows and the statements of changes in equity for each of the years ended 31 December 2017, 2018 and 2019 and 30 September 2019 and 2020 and explanatory notes (the ''Financial Information''). The Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by Kong Sun Holdings Limited (the ''Company'' ) in connection with the proposed disposal of entire share of PingShan Tianhui in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ''Listing Rules'').
The directors of the Company are responsible for the preparation and presentation of the Financial Information of the Disposal Company in accordance with the basis of preparation set out in note 2 to the Financial Information and paragraph 14.68(2)(a)(i) of the Listing Rules. The directors are also responsible for such internal control as management determines is necessary to enable the preparation of Financial Information that is free from material misstatement, whether due to fraud or error. The Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) ''Presentation of Financial Statements'' or an interim financial report as defined in Hong Kong Accounting Standard 34 ''Interim Financial Reporting'' issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA''). Our responsibility is to express a conclusion on this Financial Information based on our review. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'' and with reference to Practice Note 750 ''Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal'' issued by the HKICPA. A review of the financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Financial Information is not prepared, in all material respects, in accordance with the basis of preparation set out in note 2 to the Financial Information.
BDO Limited
Certified Public Accountants
Hong Kong, 26 February 2021
Set out below is the unaudited financial information of Pingshan Tianhui which comprises the unaudited statements of financial position of Pingshan Tianhui as at 31 December 2017, 2018 and 2019 and 30 September 2020 and the unaudited statements of profit or loss and other comprehensive income, unaudited statements of cash flows and unaudited statements of changes in equity for the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 and certain explanatory notes (altogether referred to as ''Unaudited Financial Information'').
The Unaudited Financial Information has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules and the basis of preparation as set out in note 2 to the Unaudited Financial Information.
The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the proposed disposal of the entire equity interest in Pingshan Tianhui. The Company's auditor, BDO Limited, has reviewed the Unaudited Financial Information of Pingshan Tianhui in accordance with Hong Kong Standard on Review Engagements 2410 ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'' and with reference to Practice Note 750 ''Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal'' issued by the Hong Kong Institute of Certified Public Accountants.
A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the Company's auditor to obtain assurance that the Company's auditor would become aware of all significant matters that might be identified in an audit. Accordingly, the Company's auditor does not express an audit opinion. The Company's auditor has issued an unmodified review report.
UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF PINGSHAN TIANHUI
For the year ended 31 December 2017 2018 2019
For the nine monthsended 30 September 2019 2020
Notes | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||
Revenue | 4 | 17,990 | 21,191 | 23,276 | 18,213 | 16,285 |
Cost of sales | (6,719) | (8,018) | (9,281) | (7,387) | (5,558) | |
Gross profit | 11,271 | 13,173 | 13,995 | 10,826 | 10,727 | |
Other income | - | 1 | 4 | 3 | 5 | |
Administrative expenses | (128) | (191) | (1,000) | (688) | (506) | |
Finance costs | (3,474) | (7,423) | (8,300) | (5,626) | (5,408) | |
Profit before income tax | 7,669 | 5,560 | 4,699 | 4,515 | 4,818 | |
Income tax expense | 5 | - | - | - | - | (238) |
Profit for the year/period | 7,669 | 5,560 | 4,699 | 4,515 | 4,580 |
UNAUDITED STATEMENTS OF FINANCIAL POSITION OF PINGSHAN TIANHUI
As at
2017 | |||||
Notes | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||
ASSETS AND LIABILITIES | |||||
Non-current assets | |||||
Property, plant and equipment | 99 | 80 | 61 | - | |
Solar power plants | 6 | 139,819 | 133,610 | 128,797 | 125,100 |
Right-of-use assets | - | - | 14,640 | 14,100 | |
Lease prepayments | 16,080 | 15,360 | - | - | |
155,998 | 149,050 | 143,498 | 139,200 | ||
Current assets | |||||
Trade and other receivables | 7 | 26,521 | 37,054 | 47,453 | 50,931 |
Amounts due from intermediate holding | |||||
company | 9 | - | 3,808 | - | - |
Amounts due from immediate holding | |||||
company | 9 | 4,689 | - | - | - |
Amounts due from fellow subsidiaries | 9 | 20 | 5 | - | 268 |
Cash and cash equivalents | 1,472 | 827 | 3,309 | 1,299 | |
Total current assets | 32,702 | 41,694 | 50,762 | 52,498 | |
Current liabilities | |||||
Trade and other payables | 26,766 | 24,447 | 15,714 | 15,293 | |
Loans and borrowings | 8 | - | 10,326 | 14,735 | 15,247 |
Amounts due to intermediate holding | |||||
company | 9 | - | 180 | 5,640 | 20,180 |
Amounts due to immediate holding | |||||
company | 9 | - | - | 908 | 9,294 |
Amounts due to fellow subsidiaries | 9 | - | - | 345 | 1,112 |
Total current liabilities | 26,766 | 34,953 | 37,342 | 61,126 | |
Net current assets/(liabilities) | 5,936 | 6,741 | 13,420 | (8,628) | |
Total assets less current liabilities | 161,934 | 155,791 | 156,918 | 130,572 | |
- II-B-5 - |
As at 31 December 30 September 2018 2019 2020
As at
2017
As at 31 December 2018
2019
30 September 2020
Notes
RMB'000 (Unaudited)RMB'000 (Unaudited)RMB'000 (Unaudited)
RMB'000 (Unaudited)
Non-current liabilities Loans and borrowings
Total non-current liabilities
8
111,265 111,265
Net assets
50,669
99,562 99,562 56,229
95,990 81,545
95,990 81,545
60,928 49,027
Equity Registered capital Reserves
43,000 7,669
43,000 13,229
43,000 43,000
17,928 6,027
Total equity
50,669
56,229
60,928 49,027
UNAUDITED STATEMENTS OF CASH FLOWS OF PINGSHAN TIANHUI
For the nine months
For the year ended 31 December ended 30 September 2017 2018 2019 2019 2020
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities
Profit before income tax Adjustments for:
7,669
5,560
4,699
4,515
4,818
Depreciation of property, plant and equipment
-
Depreciation of solar power plants
3,104
19 5,514
19 5,512
14 4,133
6 3,997
Depreciation of right-of-use assets
-
-
720
540
540
Amortization of lease prepayments
360
720
Write-off of property, plant and equipment
Write-off of solar power plants Interest expense
Interest income
- - 3,474 -
- 695 7,423
- - - 8,300
- - -
-
55 -
5,626 5,408
(1)
(4)
(3) (5)Operating profit before working capital changes
14,607
19,930
19,246
14,825 14,819
Increase in trade and other receivables Increase/(Decrease) in trade and other payables
(26,521)
(10,533)
(10,399)
(9,065) (3,478)
26,766
(2,319)
(8,733)
(3,332) (421)
Cash generated from operating activities
Tax paid
14,852 -
7,078 -
114 -
2,428 10,920 - (238)
Net cash generated from operating activities
14,852
7,078
114
2,428 10,682
For the nine monthsFor the year ended 31 December 2017 2018 2019
RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Unaudited)
Cash flows from investing activities
Purchase of property, plant and equipment
Payments for construction cost of in respect of solar power plants Payments for purchase of lease prepayments
Interests received
ended 30 September 2019 2020
RMB'000 RMB'000 (Unaudited) (Unaudited)
(99)
(142,923)
(16,440)
-
- -
- 1
-
(699)
- 4
-
(300)
- 3
-
(300)
- 5
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceed from capital injection Proceed from loans and borrowings Repayment of loans and borrowings Interest paid
Dividend paid to immediate holding company
Advances from intermediate holding company
Advances from immediate holding company
Advances from fellow subsidiaries Repayments to intermediate holding company
Repayments to immediate holding company
Repayments to fellow subsidiaries
Net cash generated from/(used in)
financing activities
(159,462)
43,000 111,265 - (3,474)
- - - - -
(4,689)
(20)
1
(695)
- - (1,377)
- 837 -
(7,423) (8,300)
- -
4,689 15
(3,628)
- -
(297)
(295)
- -
- -
(698) (12,283)
(5,626) (7,058)
-
- (16,481)
9,268
8,468 14,540
908 - 8,386
350 1 499
- - -
-
(3,277)
-
-
-
146,082
(7,724)
3,063
(1,132) (12,397)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year/period
1,472
-
(645)
1,472
2,482
827
999 (2,010)
827 3,309
Cash and cash equivalents at end of year/period
1,472
827
3,309
1,826 1,299
UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF PINGSHAN TIANHUI
Registered | Statutory | Retained | ||
capital | reserves | profits | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Balance at 1 January 2017 | 200 | - | - | 200 |
Issue of shares | 42,800 | - | - | 42,800 |
Profit for the year | - | - | 7,669 | 7,669 |
Appropriation to statutory reserves | - | 767 | (767) | - |
Balance at 31 December 2017 and | ||||
1 January 2018 | 43,000 | 767 | 6,902 | 50,669 |
Profit for the year | - | - | 5,560 | 5,560 |
Appropriation to statutory reserves | - | 556 | (556) | - |
Balance at 31 December 2018 and | ||||
1 January 2019 | 43,000 | 1,323 | 11,906 | 56,229 |
Profit for the year | - | - | 4,699 | 4,699 |
Appropriation to statutory reserves | - | 470 | (470) | - |
Balance at 31 December 2019 and | ||||
1 January 2020 | 43,000 | 1,793 | 16,135 | 60,928 |
Profit for the period | - | - | 4,580 | 4,580 |
Appropriation to statutory reserves | - | 458 | (458) | - |
Proposed dividend | - | - | (16,481) | (16,481) |
Balance at 30 September 2020 | 43,000 | 2,251 | 3,776 | 49,027 |
Balance at 31 December 2018 and | ||||
1 January 2019 | 43,000 | 1,323 | 11,906 | 56,229 |
Profit for the period | - | - | 4,515 | 4,515 |
Appropriation to statutory reserves | - | 452 | (452) | - |
Balance at 30 September 2019 | 43,000 | 1,775 | 15,969 | 60,744 |
- II-B-9 - |
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
1. General Information
Pingshan Tianhui is a limited liability company incorporated in PRC. The principal activity of Pingshan Tianhui is operation of solar power plants.
On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Pingshan Tianhui entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Pingshan Tianhui at a total consideration of approximately RMB34,229,000. Upon completion of the Disposal, Pingshan Tianhui will cease to be the subsidiary of the Company.
2. Basis of Preparation of the Unaudited Financial Information
The Unaudited Financial Information of, Pingshan Tianhui for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and solely for the purposes of inclusion in this circular issued by the Company in connection with the Disposal.
The Unaudited Financial Information has been prepared in accordance with the same accounting policies as those adopted by the Group in preparation of the consolidated financial statements of the Group for those respective year, which conform with Hong Kong Financial Reporting Standards (''HKFRSs'') (which include all HKFRSs, Hong Kong Accounting Standards (''HKASs'') and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA'') and accounting principles generally accepted in Hong Kong. The Unaudited Financial Information has been prepared under the historical cost convention. The Unaudited Financial Information is presented in RMB and all values are rounded to the nearest thousand (RMB'000) except when otherwise indicated.
The Unaudited Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in HKAS 1 (Revised) ''Presentation of Financial Statements'' nor a set of condensed financial statements as defined in HKAS 34 ''Interim Financial Reporting'' issued by the HKICPA and that it should be read in conjunction with the relevant published annual reports of the Company.
The Unaudited Financial Information of Pingshan Tianhui has been prepared on the going concern basis which assumes the realisation of assets and satisfaction of liabilities in the ordinary course of business notwithstanding Pingshan Tianhui had net current liabilities of RMB8,628,000 as at 30 September 2020 respectively. The directors are of the opinion that the Group will have sufficient cash resources to satisfy its future working capital and other financing requirements in the next twelve months after taking into account the followings:
(i) having reviewed the cash flow projection of Pingshan Tianhui for the next twelve months from the reporting date, the directors are of the opinion that Pingshan Tianhui is able to generate positive cash flows from its operation. In preparing the cash flow projection by the management, it was assumed that proceeds of renewable energy subsidy receivables in respect of sale of electricity will be received with reference to prevalent payment trend after successfully enlisted in the renewable energy tariff subsidy catalogue;
(ii) the Company has confirmed not to demand repayment of debt due from Pingshan Tianhui till the completion date of disposal until such time when the repayment will not affect Pingshan Tianhui's ability to repay other creditors in the normal course of business.
3. Changes in accounting policies
The HKICPA has issued a number of new or revised HKFRSs which are relevant to the Group and became effective during the respective year. The impact of these new or revised HKFRSs in respective year is summarised as follows:
HKFRS 9 - Financial Instruments
HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (''HKAS 39''). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ''incurred loss'' model in HKAS 39 with an expected credit loss (''ECL'') model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Pingshan Tianhui's trade and other receivables amounting to RMB26,521,000 as at 1 January 2018 was reclassified from ''loans and receivables'' as ''amortised cost financial assets''. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.
As at 1 January 2018, the Company's amounts due from intermediate holding company, amounts due from immediate holding company, amounts due from fellow subsidiaries and cash and cash equivalents were reclassified from the original classification of ''Loan and receivables'' under HKAS 39 to the new classification of ''Amortised cost'' under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.
HKFRS 15 - Revenue from Contracts with Customers
HKFRS 15 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 15 establishes a comprehensive framework for recognising revenue and some costs from contracts with customers. HKFRS 15 replaces HKAS 18, Revenue, which covered revenue arising from sale of goods and rendering of services, and HKAS 11, Construction Contracts, which specified the accounting for construction contracts, and related interpretations.
Pingshan Tianhui has adopted HKFRS 15 using cumulative effect method without practical expedients. Pingshan Tianhui has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.
Pingshan Tianhui sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Pingshan Tianhui has elected the practical expedient to recognise revenue in the amount to which Pingshan Tianhui has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Pingshan Tianhui has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Pingshan Tianhui's accounting policies on revenue.
HKFRS 16 - Lease
HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Pingshan Tianhui's accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Pingshan Tianhui as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.
Pingshan Tianhui has applied HKFRS 16 using the modified retrospective approach with a date of initial application of 1 January 2019, under which the cumulative effect of initial application is recognised as at 1 January 2019. As a result, the comparative information presented in 2018 and 2017 has not been restatedand continues to be reported under HKAS 17, as permitted under the simplified transition approach in the standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Pingshan Tianhui's ''Lease prepayments'' as ''Right-of-use assets'' and did not have significant impact on Pingshan Tianhui's net assets and net profits when compared with those that would have been presented under HKAS 17.
4. Revenue
Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to RMB9,716,000, RMB11,291,000, RMB12,405,000, RMB9,708,000 and RMB9,645,000 respectively.
5. Income tax expense
Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠 目錄 有關問題的通知), Pingshan Tianhui has been approved to entitle a tax holiday of a 3-year full exemption followed by a 3-year 50% exemption commencing from their respective years in which their first operating income is derived.
6. | Solar power plants |
Solar power | |
plants | |
RMB'000 | |
(Unaudited) | |
Cost | |
At 1 January 2017 | 142,415 |
Additions | 508 |
At 31 December 2017 and 1 January 2018 | 142,923 |
Written off | (695) |
At 31 December 2018 and 1 January 2019 | 142,228 |
Additions | 699 |
At 31 December 2019 and 1 January 2020 | 142,927 |
Additions | 300 |
At 30 September 2020 | 143,227 |
Accumulated depreciation | |
At 1 January 2017 | - |
Charge for the year | (3,104) |
At 31 December 2017 and 1 January 2018 | (3,104) |
Charge for the year | (5,514) |
At 31 December 2018 and 1 January 2019 | (8,618) |
Charge for the year | (5,512) |
At 31 December 2019 and 1 January 2020 | (14,130) |
Charge for the period | (3,997) |
At 30 September 2020 | (18,127) |
Net carrying amount
Solar power plants
RMB'000 (Unaudited)
At 31 December 2017 139,819
At 31 December 2018 133,610
At 31 December 2019 128,797
At 30 September 2020 125,100
As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Pingshan Tianhui's loans and borrowings (note 8).
7.
Trade and other receivables
2017
As at 31 December
2018
2019
As at 30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Trade receivables
Other receivables, prepayments and deposits
12,505 14,016 26,521
25,567 11,487 37,054
Ageing analysis of trade receivables, based on invoice dates, are as follows:
47,453 50,931
As at 31 December
39,818 44,124
7,635 6,807
2017
RMB'000 (Unaudited)
2018
2019
As at 30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Less than 3 months
Over 3 months but less than 6 months Over 6 months but less than 12 months Over 12 months but less than 24 months More than 24 months
3,619 2,924 5,962 - -
3,926 3,155 6,846 11,640 -
3,992 4,187
3,785 4,205
7,267 6,406
13,134 14,185
11,640 15,141
12,505
25,567
39,818 44,124
Ageing analysis of trade receivables, based on due dates, are as follows:
As at | ||||
30 September | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Neither past due nor impaired | 1,848 | 1,691 | 2,018 | 2,050 |
Less than 3 months past due | 2,828 | 3,412 | 3,275 | 3,413 |
Over 3 months but less than | ||||
6 months past due | 3,059 | 3,230 | 3,778 | 4,458 |
Over 6 months but less than | ||||
12 months past due | 4,770 | 5,595 | 6,874 | 6,178 |
Over 12 months but less than | ||||
24 months past due | - | 11,639 | 13,218 | 14,060 |
More than 24 months past due | - | - | 10,655 | 13,965 |
12,505 | 25,567 | 39,818 | 44,124 |
As at 31 December
Pingshan Tianhui's trade receivables are mainly receivables from sales of electricity. Generally, the receivables are due within 30 to 180 days from the date of billing, except for the renewable energy subsidy.
Renewable energy subsidy receivables represent PRC government subsidies on solar power plants to be received from the State Grid Company based on the respective electricity sale and purchase agreements for each of the solar power plants and the prevailing nationwide government policies. As at 31 December 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to RMB11,639,000, RMB24,774,000, RMB38,874,000 and RMB43,100,000 respectively.
Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Pingshan Tianhui are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.
As at 31 December 2017, 2018 and 2019 and 30 September 2020, trade receivables arising from the sales of electricity including renewable energy subsidies amounting to RMB12,505,000, RMB25,567,000, RMB39,818,000 and RMB44,124,000 respectively were pledged as securities for Pingshan Tianhui's loans and borrowings (note 8).
8. Loans and borrowings
As atAs at 31 December
2017
2018
2019
30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Current Secured - other borrowings
-
10,326
14,735 15,247
Non-current Secured - other borrowingsTotal loans and borrowings
111,265 111,265
99,562 109,888
95,990 81,545
110,725 96,792
Pingshan Tianhui's loans and borrowings are repayable as follows:
As at | ||||
30 September | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Within 1 year | - | 10,326 | 14,735 | 15,247 |
After 1 year but within 2 years | 11,610 | 14,641 | 26,298 | 16,318 |
After 2 years but within 5 years | 47,388 | 50,704 | 54,225 | 56,066 |
Over 5 years | 52,267 | 34,217 | 15,467 | 9,161 |
111,265 | 109,888 | 110,725 | 96,792 | |
Effective Interest rates | 6.03% | 6.03% | 6.03% | 6.03% |
As at 31 December
As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings bear interest at 123% of the People's Bank of China RMB benchmark loan interest rates per annum for 5-year loans.
Loans and borrowings were secured by the following assets:
As at | ||||
30 September | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Solar power plants (note 6) | 139,819 | 133,610 | 128,797 | 125,100 |
Trade receivables* (note 7) | 12,505 | 25,567 | 39,818 | 44,124 |
152,324 | 159,177 | 168,615 | 169,224 |
As at 31 December
* As at 31 December 2017, 2018 and 2019 and 30 September 2020, the amount of trade receivables pledged for loans and borrowings included the outstanding renewable energy subsidies.
As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings were pledged by 100% equity interests of Pingshan Tianhui's immediate holding company, 江山永泰投資控股有限公司 (Kong Sun Yongtai Investment Holdings Limited).
9. Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries
Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries are interest-free, unsecured and repayable on demand.
10. Related party transactions
In addition to the transactions detailed elsewhere in the Unaudited Financial Information, Pingshan Tianhui entered into the following transactions with related parties:
Name of related party
For the nine months | ||
relationship Type of transaction | For the year ended 31 December | ended 30 September |
2017 2018 2019 | 2019 2020 | |
RMB'000 RMB'000 RMB'000 | RMB'000 RMB'000 | |
(Unaudited) (Unaudited) (Unaudited) | (Unaudited) (Unaudited) |
Related party
Kong Sun Yongtai
Immediate holding companyOperation and maintenance fee
252
503
670
502 502
北京鑫泰綠 能科技有限公司 (Beijing
Fellow subsidiary
Xintai Green Energy Technology Co., Ltd.)
Operation and maintenance fee
314
-
63
- 566
11. The impact of COVID-19 in the current reporting period
The outbreak of COVID-19 has developed rapidly in 2020 and impacted entities and economic activities in varying scales in the PRC. While there have been more immediate and pronounced disruptions in certain industries, its impact on the energy industry in the PRC has been rather modest during the current reporting period. Nevertheless, as the outbreak of COVID-19 continues to evolve, it is challenging at this juncture to predict the full extent and duration of its impact to the business and the economy. The management of Pingshan Tianhui has assessed the impact of COVID-19, and up to the date of approval of this Unaudited Financial Information, the management has not identified any areas that could have a material impact on the financial performance or position of Pingshan Tianhui as at 30 September 2020.
REPORT ON REVIEW OF FINANCIAL INFORMATION OF SHANDONG XINTAILOU DEJIA SOLAR POWER CO., LTD.
TO THE BOARD OF DIRECTORS OF KONG SUN HOLDINGS LIMITED
Introduction
We have reviewed the unaudited financial information set out on pages II-C-3 to II-C-16 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Shandong Xintailou Dejia Solar Power Co., Ltd. (''Shandong Xintailou'') and the statements of profit or loss and other comprehensive income, the statements of cash flows and the statements of changes in equity for each of the years ended 31 December 2017, 2018 and 2019 and 30 September 2019 and 2020 and explanatory notes (the ''Financial Information''). The Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by Kong Sun Holdings Limited (the ''Company'') in connection with the proposed disposal of entire share of Shandong Xintailou in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ''Listing Rules'').
The directors of the Company are responsible for the preparation and presentation of the Financial Information of the Disposal Company in accordance with the basis of preparation set out in note 2 to the Financial Information and paragraph 14.68(2)(a)(i) of the Listing Rules. The directors are also responsible for such internal control as management determines is necessary to enable the preparation of Financial Information that is free from material misstatement, whether due to fraud or error. The Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) ''Presentation of Financial Statements'' or an interim financial report as defined in Hong Kong Accounting Standard 34 ''Interim Financial Reporting'' issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA''). Our responsibility is to express a conclusion on this Financial Information based on our review. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'' and with reference to Practice Note 750 ''Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal'' issued by the HKICPA. A review of the financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Financial Information is not prepared, in all material respects, in accordance with the basis of preparation set out in note 2 to the Financial Information.
BDO Limited
Certified Public Accountants
Hong Kong, 26 February 2021
Set out below is the unaudited financial information of Shandong Xintailou which comprises the unaudited statements of financial position of Shandong Xintailou as at 31 December 2017, 2018 and 2019 and 30 September 2020 and the unaudited statements of profit or loss and other comprehensive income, unaudited statements of cash flows and unaudited statements of changes in equity for the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 and certain explanatory notes (altogether
referred to as ''Unaudited Financial Information'').
The Unaudited Financial Information has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules and the basis of preparation as set out in note 2 to the Unaudited Financial Information.
The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the proposed disposal of the entire equity interest in Shandong Xintailou. The Company's auditor, BDO Limited, has reviewed the Unaudited Financial Information of Shandong Xintailou in accordance with Hong Kong Standard on Review Engagements 2410 ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'' and with reference to Practice Note 750 ''Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal'' issued by the Hong Kong Institute of Certified Public Accountants.
A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the Company's auditor to obtain assurance that the Company's auditor would become aware of all significant matters that might be identified in an audit. Accordingly, the Company's auditor does not express an audit opinion. The Company's auditor has issued an unmodified review report.
UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF SHANDONG XINTAILOU
For the year ended 31 December 2017 2018 2019
For the nine monthsended 30 September 2019 2020
Notes | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||
Revenue | 4 | 27,409 | 21,722 | 22,536 | 17,876 | 17,599 |
Cost of sales | (8,423) | (8,804) | (9,177) | (6,390) | (7,580) | |
Gross profit | 18,986 | 12,918 | 13,359 | 11,486 | 10,019 | |
Other income | - | 3 | 35 | 4 | 10 | |
Administrative expenses | (117) | (759) | (1,122) | (821) | (838) | |
Finance costs | (7,091) | (5,253) | (10,343) | (9,777) | (6,568) | |
Profit before income tax | 11,778 | 6,909 | 1,929 | 892 | 2,623 | |
Income tax expense | 5 | - | - | (168) | (111) | (322) |
Profit for the year/period | 11,778 | 6,909 | 1,761 | 781 | 2,301 |
UNAUDITED STATEMENTS OF FINANCIAL POSITION OF SHANDONG XINTAILOU
As at | ||||
30 September | ||||
2017 | 2020 | |||
Notes | RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | (Unaudited) | ||
ASSETS AND LIABILITIES | ||||
Non-current assets | ||||
Property, plant and equipment | 137 | 107 | 28 | |
Solar power plants | 6 | 167,628 | 164,170 | 145,213 |
Right-of-use assets | - | - | 5,687 | |
Lease prepayments | 6,459 | 6,173 | - | |
174,224 | 170,450 | 150,928 | ||
Current assets | ||||
Trade and other receivables | 7 | 47,983 | 40,607 | 51,532 |
Amounts due from intermediate holding | ||||
companies | 9 | - | 6,110 | - |
Amounts due from immediate holding | ||||
company | 9 | - | - | 4,605 |
Amounts due from fellow subsidiaries | 9 | - | - | 5 |
Cash and cash equivalents | 347 | 137 | 5,004 | |
Total current assets | 48,330 | 46,854 | 61,146 | |
Current liabilities | ||||
Trade and other payables | 20,617 | 20,409 | 11,291 | |
Tax payable | - | - | 102 | |
Loans and borrowings | 8 | 24,000 | 24,000 | 9,941 |
Amounts due to intermediate holding | ||||
companies | 9 | - | 1,869 | 46,754 |
Amounts due to immediate holding | ||||
company | 9 | 82,493 | 90,964 | - |
Amounts due to fellow subsidiaries | 9 | - | 6 | 1,264 |
Total current liabilities | 127,110 | 137,248 | 69,352 | |
Net current (liabilities)/assets | (78,780) | (90,394) | (8,206) | |
Total assets less current liabilities | 95,444 | 80,056 | 142,722 | |
- II-C-5 - |
As at 31 December 2018
2019
RMB'000
RMB'000 (Unaudited)
70 149,757 5,901 -
155,728
49,497
-
20,441 - 7,677
77,615
7,502 56 9,128 48,634
- 469 65,789 11,826 167,554
As at
2017
Notes
As at 31 December 2018
2019
30 September 2020
RMB'000 (Unaudited)RMB'000 (Unaudited)RMB'000 (Unaudited)
RMB'000 (Unaudited)
Non-current liabilities Loans and borrowings
Total non-current liabilities
Net assets
8
43,235 43,235 52,209
20,938 20,938 59,118
106,675 98,699
106,675 98,699
60,879 44,023
Equity Registered capital Reserves
36,000 16,209
36,000 23,118
36,000 36,000
24,879 8,023
Total equity
52,209
59,118
60,879 44,023
UNAUDITED STATEMENTS OF CASH FLOWS OF SHANDONG XINTAILOU
For the nine months
For the year ended 31 December ended 30 September 2017 2018 2019 2019 2020
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities
Profit before income tax Adjustments for:
11,778
6,909
1,929
892 2,623
Depreciation of property, plant and equipment
Depreciation of solar power plants
35 6,718
34 6,743
37 6,525
26 35
5,058 4,891
Depreciation of right-of-use assets
-
-
272
204 214
Amortization of lease prepayments
272
286
Loss on disposal of property, plant and equipment Interest expense Interest income
- 7,091 -
- 5,253
- - 10,343
- -
-
7
9,777 6,568
(3)
(35)
(4) (10)Operating profit before working capital changes (Increase)/Decrease in trade and other receivables (Decrease)/Increase in trade and other payables
25,894
(15,553)
19,222 7,376
19,071
15,953 14,328
(8,890)
(10,730) (2,035)
(7,030)
(208)
(4,294)
1,011 3,789
Cash generated from operating activities
Tax paid
3,311 -
26,390 -
5,887 (112)
6,234 16,082
(64) (276)
Net cash generated from operating activities
3,311
26,390
5,775
6,170 15,806
For the nine monthsFor the year ended 31 December 2017 2018 2019
RMB'000 RMB'000 RMB'000 (Unaudited) (Unaudited) (Unaudited)
ended 30 September 2019 2020
RMB'000 RMB'000 (Unaudited) (Unaudited)
Cash flows from investing activities
Purchase of property, plant and
Payments for construction cost of in respect of solar power plants Payments for purchase of lease prepayments
equipment | (64) | (4) | - | - | - |
(453) | (3,285) | (725) | (533) | (347) | |
(65) | - | - | - | - | |
- | 3 | 35 | 4 | 10 | |
(582) | (3,286) | (690) | (529) | (337) | |
- | - | 70,865 | 72,712 | - | |
(23,008) | (22,297) | - | - | (7,163) | |
(7,091) | (5,253) | (10,343) | (9,777) | (6,568) | |
- | - | - | - | (19,157) | |
- | - | 52,875 | 51,735 | - | |
25,892 | 8,471 | - | - | 15,836 | |
- | 6 | 463 | - | 790 | |
- | (4,241) | - | - | (1,880) | |
- | - | (111,405) | (115,510) | - | |
- | - | - | - | - | |
(4,207) | (23,314) | 2,455 | (840) | (18,142) | |
(1,478) | (210) | 7,540 | 4,801 | (2,673) | |
1,825 | 347 | 137 | 137 | 7,677 | |
347 | 137 | 7,677 | 4,938 | 5,004 |
Interests received
Net cash used in investing activities
Cash flows from financing activities
Proceed from loans and borrowings Repayment of loans and borrowings Interest paid
Dividend paid to immediate holding company
Advances from intermediate holding companies
Advances from immediate holding company
Advances from fellow subsidiaries Repayments to intermediate holding companies
Repayments to immediate holding company
Repayments to fellow subsidiaries
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year/periodCash and cash equivalents at end of year/period
UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF SHANDONG XINTAILOU
Registered | Statutory | Retained | ||
capital | reserves | profits | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Balance at 1 January 2017 | 36,000 | 443 | 3,988 | 40,431 |
Profit for the year | - | - | 11,778 | 11,778 |
Appropriation to statutory reserves | - | 1,178 | (1,178) | - |
Balance at 31 December 2017 and | ||||
1 January 2018 | 36,000 | 1,621 | 14,588 | 52,209 |
Profit for the year | - | - | 6,909 | 6,909 |
Appropriation to statutory reserves | - | 691 | (691) | - |
Balance at 31 December 2018 and | ||||
1 January 2019 | 36,000 | 2,312 | 20,806 | 59,118 |
Profit for the year | - | - | 1,761 | 1,761 |
Appropriation to statutory reserves | - | 176 | (176) | - |
Balance at 31 December 2019 and | ||||
1 January 2020 | 36,000 | 2,488 | 22,391 | 60,879 |
Profit for the period | - | - | 2,301 | 2,301 |
Appropriation to statutory reserves | - | 230 | (230) | - |
Proposed dividend | - | - | (19,157) | (19,157) |
Balance at 30 September 2020 | 36,000 | 2,718 | 5,305 | 44,023 |
Balance at 31 December 2018 and | ||||
1 January 2019 | 36,000 | 2,312 | 20,806 | 59,118 |
Profit for the period | - | - | 781 | 781 |
Appropriation to statutory reserves | - | 78 | (78) | - |
Balance at 30 September 2019 | 36,000 | 2,390 | 21,509 | 59,899 |
- II-C-9 - |
NOTES TO THE UNAUDITED FINANCIAL INFORMATION
1. General Information
Shandong Xintailou is a limited liability company incorporated in PRC. The principal activity of Shandong Xintailou is operation of solar power plants.
On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Shandong Xintailou entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Shandong Xintailou at a total consideration of approximately RMB17,641,000. Upon completion of the Disposal, Shandong Xintailou will cease to be the subsidiary of the Company.
2. Basis of Preparation of the Unaudited Financial Information
The Unaudited Financial Information of, Shandong Xintailou for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and solely for the purposes of inclusion in this circular issued by the Company in connection with the Disposal.
The Unaudited Financial Information has been prepared in accordance with the same accounting policies as those adopted by the Group in preparation of the consolidated financial statements of the Group for those respective year, which conform with Hong Kong Financial Reporting Standards (''HKFRSs'') (which include all HKFRSs, Hong Kong Accounting Standards (''HKASs'') and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA'') and accounting principles generally accepted in Hong Kong. The Unaudited Financial Information has been prepared under the historical cost convention. The Unaudited Financial Information is presented in RMB and all values are rounded to the nearest thousand (RMB'000) except when otherwise indicated.
The Unaudited Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in HKAS 1 (Revised) ''Presentation of Financial Statements'' nor a set of condensed financial statements as defined in HKAS 34 ''Interim Financial Reporting'' issued by the HKICPA and that it should be read in conjunction with the relevant published annual reports of the Company.
The Unaudited Financial Information of Shandong Xintailou has been prepared on the going concern basis which assumes the realisation of assets and satisfaction of liabilities in the ordinary course of business notwithstanding Shandong Xintailou had net current liabilities of RMB78,780,000, RMB90,394,000 and RMB8,206,000 as at 31 December 2017 and 2018 and 30 September 2020 respectively. The directors are of the opinion that the Group will have sufficient cash resources to satisfy its future working capital and other financing requirements in the next twelve months after taking into account the followings:
(i) having reviewed the cash flow projection of Shandong Xintailou for the next twelve months from the reporting date, the directors are of the opinion that Shandong Xintailou is able to generate positive cash flows from its operation. In preparing the cash flow projection by the management, it was assumed that proceeds of renewable energy subsidy receivables in respect of sale of electricity will be received with reference to prevalent payment trend after successfully enlisted in the renewable energy tariff subsidy catalogue;
(ii) the Company has confirmed not to demand repayment of debt due from Shandong Xintailou till the completion date of disposal until such time when the repayment will not affect Shandong Xintailou's ability to repay other creditors in the normal course of business.
3. Changes in accounting policies
The HKICPA has issued a number of new or revised HKFRSs which are relevant to the Group and became effective during the respective year. The impact of these new or revised HKFRSs in respective year is summarised as follows:
HKFRS 9 - Financial Instruments
HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (''HKAS 39''). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ''incurred loss'' model in HKAS 39 with an expected credit loss (''ECL'') model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Shandong Xintailou's trade and other receivables amounting to RMB47,983,000 as at 1 January 2018 was reclassified from ''loans and receivables'' as ''amortised cost financial assets''. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.
As at 1 January 2018, the Company's amounts due from intermediate holding companies, amounts due from immediate holding company, amounts due from fellow subsidiaries and cash and cash equivalents were reclassified from the original classification of ''Loan and receivables'' under HKAS 39 to the new classification of ''Amortised cost'' under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.
HKFRS 15 - Revenue from Contracts with Customers
HKFRS 15 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 15 establishes a comprehensive framework for recognising revenue and some costs from contracts with customers. HKFRS 15 replaces HKAS 18, Revenue, which covered revenue arising from sale of goods and rendering of services, and HKAS 11, Construction Contracts, which specified the accounting for construction contracts, and related interpretations.
Shandong Xintailou has adopted HKFRS 15 using cumulative effect method without practical expedients. Shandong Xintailou has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.
Shandong Xintailou sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Shandong Xintailou has elected the practical expedient to recognise revenue in the amount to which Shandong Xintailou has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Shandong Xintailou has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Shandong Xintailou's accounting policies on revenue.
HKFRS 16 - Lease
HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Shandong Xintailou's accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Shandong Xintailou as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.
Shandong Xintailou has applied HKFRS 16 using the modified retrospective approach with a date of initial application of 1 January 2019, under which the cumulative effect of initial application is recognised as at 1 January 2019. As a result, the comparative information presented in 2018 and 2017 has not been restated and continues to be reported under HKAS 17, as permitted under the simplified transition approach in the standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Shandong Xintailou's ''Lease prepayments'' as ''Right-of-use assets'' and did not have significant impact on Shandong Xintailou's net assets and net profits when compared with those that would have been presented under HKAS 17.
4. Revenue
Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to RMB19,291,000, RMB13,144,000, RMB13,682,000, RMB10,837,000 and RMB10,760,000 respectively.
5. Income tax expense
Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠 目錄 有關問題的通知), Shandong Xintailou has been approved to entitled a tax holiday of a 3-year full exemption followed by a 3-year 50% exemption commencing from their respective years in which their first operating income is derived.
6. | Solar power plants |
Solar power | |
plants | |
RMB'000 | |
(Unaudited) | |
Cost | |
At 1 January 2017 | 178,787 |
Additions | 453 |
At 31 December 2017 and 1 January 2018 | 179,240 |
Additions | 3,285 |
At 31 December 2018 and 1 January 2019 | 182,525 |
Additions | 725 |
Written off | (8,613) |
At 31 December 2019 and 1 January 2020 | 174,637 |
Additions | 347 |
At 30 September 2020 | 174,984 |
Accumulated depreciation | |
At 1 January 2017 | (4,894) |
Charge for the year | (6,718) |
At 31 December 2017 and 1 January 2018 | (11,612) |
Charge for the year | (6,743) |
At 31 December 2018 and 1 January 2019 | (18,355) |
Charge for the year | (6,525) |
Solar power plants
RMB'000 (Unaudited)
At 31 December 2019 and 1 January 2020 | (24,880) |
Charge for the period | (4,891) |
At 30 September 2020 | (29,771) |
Net carrying amount | |
At 31 December 2017 | 167,628 |
At 31 December 2018 | 164,170 |
At 31 December 2019 | 149,757 |
At 30 September 2020 | 145,213 |
As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Shandong Xintailou's loans and borrowings (note 8).
7.
Trade and other receivables
2017
As at 31 December
2018
2019
As at 30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Trade receivables
Other receivables, prepayments and deposits
29,425 18,558 47,983
24,729 15,878 40,607
Ageing analysis of trade receivables, based on invoice dates, are as follows:
49,497 51,532
As at 31 December
31,808 36,174
17,689 15,358
2017
2018
2019
As at 30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Less than 3 months
Over 3 months but less than 6 months Over 6 months but less than 12 months Over 12 months but less than 24 months More than 24 months
5,515 3,905 8,242 11,763 -
3,558 4,174 8,035 8,962 -
3,738 4,939
4,218 5,696
8,108 5,656
15,744 15,404
- 4,479
29,425
24,729
31,808 36,174
Ageing analysis of trade receivables, based on due dates, are as follows:
As at | ||||
30 September | ||||
2017 | 2018 | 2019 | 2020 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
Neither past due nor impaired | 3,360 | 1,213 | 1,379 | 2,340 |
Less than 3 months past due | 3,401 | 3,689 | 3,683 | 3,990 |
Over 3 months but less than | ||||
6 months past due | 4,463 | 4,541 | 4,635 | 5,439 |
Over 6 months but less than | ||||
12 months past due | 6,439 | 6,324 | 7,101 | 5,846 |
Over 12 months but less than | ||||
24 months past due | 11,762 | 8,962 | 15,010 | 15,425 |
More than 24 months past due | - | - | - | 3,134 |
29,425 | 24,729 | 31,808 | 36,174 |
As at 31 December
Shandong Xintailou's trade receivables are mainly receivables from sales of electricity. Generally, the receivables are due within 30 to 180 days from the date of billing, except for the renewable energy subsidy.
Renewable energy subsidy receivables represent PRC government subsidies on solar power plants to be received from the State Grid Company based on the respective electricity sale and purchase agreements for each of the solar power plants and the prevailing nationwide government policies. As at 31 December 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to RMB29,425,000, RMB24,729,000, RMB31,808,000 and RMB36,174,000 respectively.
Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Shandong Xintailou are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.
As at 31 December 2017, 2018 and 2019 and 30 September 2020, trade receivables arising from the sales of electricity including renewable energy subsidies amounting to RMB29,425,000, RMB24,729,000, RMB31,808,000 and RMB36,174,000 respectively were pledged as securities for Shandong Xintailou's loans and borrowings (note 8).
8. Loans and borrowings
As atAs at 31 December
2017
2018
2019
30 September 2020
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
RMB'000 (Unaudited)
Current Secured - other borrowings
24,000
24,000
9,128 9,941
Non-current Secured - other borrowingsTotal loans and borrowings
43,235 67,235
20,938 44,938
106,675 98,699
115,803 108,640
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original document
- Permalink
Disclaimer
Kong Sun Holdings Limited published this content on 26 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 February 2021 11:34:49 UTC.
