Table of Contents
Cayman Islands | 4911 | 20-8979735 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
S. Eugene Buttrill III, Esq. DLA Piper Hong Kong 17/F, Edinburgh Tower The Landmark, 15 Queen’s Road, Central Hong Kong (852) 2103-0808 | Jonathan Klein, Esq. Jack I. Kantrowitz, Esq. DLA Piper LLP (US) 1251 Avenue of the Americas New York, New York 10020 (212) 335-4500 | Mitchell S. Nussbaum, Esq. Loeb & Loeb LLP 345 Park Avenue New York, New York 10583 (212) 407-4000 |
Title of Each Class of | Amount to be | Proposed Maximum | Proposed Maximum | Amount of | ||||||||
Securities to be Registered(1) | Registered(1)(2) | Offering Price per unit(1) | Aggregate Offering Price(1) | Registration Fee | ||||||||
Units, each consisting of three Ordinary Shares, par value US$0.001 per share and one warrant | 3,593,750 | $16 | $57,500,000 | $4,100(5) | ||||||||
Ordinary Shares included in the Units(3) | 10,781,250 | — | — | —(4) | ||||||||
Warrants included in the Units | 3,593,750 | — | — | —(4) | ||||||||
Ordinary Shares underlying the Warrants included in the Units(3) | 10,781,250 | $5 | $53,906,250 | $3,844 | ||||||||
Total | $111,406,250 | $7,944 | ||||||||||
(1) | Estimated solely for the purposes of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended. |
(2) | Includes (a) all ordinary shares represented by units initially offered and sold outside the United States that may be resold from time to time in the United States either as part of the distribution or within 40 days after the later of the effective date of this registration statement and the date the securities are first bona fide offered to the public, and (b) 468,750 units, consisting of 1,406,250 ordinary shares and 468,750 warrants that are issuable upon the exercise of the underwriters’ option to purchase additional shares. |
(3) | American depositary shares evidenced by American depositary receipts issuable upon deposit of the ordinary shares registered hereby will be registered pursuant to a separate registration statement onForm F-6. Each American depositary share represents three ordinary shares. |
(4) | No fee pursuant to Rule 457(g). |
(5) | $3,409 previously paid; balance of $4,535 is being paid with this filing. |
Table of Contents
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
Preliminary Prospectus Dated January 11, 2010
Per Unit | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Non-accountable expense allowance | $ | $ | ||||||
Proceeds, before expenses, to China Hydroelectric | $ | $ |
Broadband Capital Management LLC | I-Bankers Securities, Inc. |
Maxim Group LLC | Morgan Joseph | Pali Capital, Inc. |
Page | ||||||||
1 | ||||||||
18 | ||||||||
45 | ||||||||
47 | ||||||||
48 | ||||||||
50 | ||||||||
53 | ||||||||
54 | ||||||||
55 | ||||||||
57 | ||||||||
61 | ||||||||
69 | ||||||||
138 | ||||||||
143 | ||||||||
150 | ||||||||
175 | ||||||||
186 | ||||||||
190 | ||||||||
194 | ||||||||
211 | ||||||||
220 | ||||||||
228 | ||||||||
230 | ||||||||
237 | ||||||||
246 | ||||||||
247 | ||||||||
247 | ||||||||
247 | ||||||||
249 | ||||||||
F-1 | ||||||||
EX-5.1 | ||||||||
EX-5.2 | ||||||||
EX-8.1 | ||||||||
EX-8.2 | ||||||||
EX-8.3 | ||||||||
EX-10.11 | ||||||||
EX-10.12 | ||||||||
EX-10.13 | ||||||||
EX-10.14 | ||||||||
EX-10.69 | ||||||||
EX-23.1 | ||||||||
EX-23.3 | ||||||||
EX-23.4 |
i
Table of Contents
1
Table of Contents
• | focused acquirer, operator and developer of small hydropower plants in a low-cost and fast-growing renewable energy market; | |
• | superior access to acquisition opportunities; | |
• | experienced management team; | |
• | geographical diversification combined with regional project clustering reduces operational risk and enhances operational efficiencies; and | |
• | ability to access and effectively deploy capital. |
• | maintaining our acquisition pace and increasing project construction; | |
• | optimizing our capital structure; | |
• | continuing our geographic diversification and consolidation of hydropower capacity in key regions; |
2
Table of Contents
• | increasing our utilization rates and revenues; and | |
• | reducing our operating costs and streamlining our operations. |
• | we have a limited operating history, which accordingly provides us with a limited frame of reference to confront unforeseen problems and to achieve our business objectives; | |
• | our results of operations for the nine months ended September 30, 2009 may not be indicative of our results for the year ending December 31, 2009; | |
• | we may be adversely affected by the slowdown of China’s economy caused in part by the recent global crisis in the financial services and credit markets; | |
• | our business is dependent upon hydrological conditions, which may from time to time result in conditions that are unfavorable to our business operations; | |
• | the operation of our hydropower plants and customer demand for our power may be vulnerable to disruptions caused by natural and man-made disasters, which may materially and adversely affect our results of operations; | |
• | we may encounter difficulties in identifying suitable acquisition opportunities, which would result in us being dependent upon a limited number of hydropower plants and having limited revenue growth potential; | |
• | greenfield projects and projects under construction present substantial development, construction, start-up and partnership risks, which could materially and adversely affect our results of operations, financial condition and growth prospects; | |
• | we derive our revenues solely from the sale of hydropower electricity and each of our plants typically has only one customer. Any prolonged disruption to the demand for hydropower or termination of a customer relationship may cause our revenues to decrease significantly; | |
• | we depend on the experience of our executive officers and our business may be severely disrupted in the event that we lose their services and are unable to find replacements with comparable experience and expertise; and | |
• | we will need substantial additional funding to accomplish our growth strategy and may be unable to raise capital on terms favorable to us or at all, which could increase our financing costs, dilute your ownership interests, affect our business operations or force us to delay, reduce or abandon our growth strategy. |
• | In November 2006, we raised $50.0 million through the sale of convertible notes in a private placement to institutional investors; |
3
Table of Contents
• | In April 2007, we established a wholly owned subsidiary, Beijing A.B.C. Investment Consulting Co., Ltd., or Beijing A.B.C. Investment, in Beijing, China, which provides management and other consulting services to our hydropower plants in China; |
• | In April 2007, we acquired Yunnan Huabang Electric Power Development Co., Ltd., or Binglangjiang, which owns and operates the Binglangjiang I hydropower plant, with an installed capacity of 21.0 MW, and which has the right to complete construction of, and operate, the Binglangjiang II hydropower plant, with a design capacity of 20.0 MW. Binglangjiang is considered our predecessor company for U.S. Securities and Exchange Commission, or SEC, reporting purposes, since our own operations prior to that acquisition were insignificant compared to the operations of Binglangjiang. Binglangjiang was established under the laws of the PRC as Yingjiang County Huafa Electric Power Development Co., Ltd. on January 13, 2004 to own and operate the Binglangjiang I hydropower plant. It subsequently changed its name to Yunnan Huabang Electric Power Development Co., Ltd. on March 31, 2005; | |
• | In May 2007, we acquired the Liyuan hydropower plant, a completed project with an installed capacity of 12.0 MW. We established at that time Sichuan Huabang Hydroelectric Development Co., Ltd. to own and operate the plant; | |
• | In December 2007, we acquired a 50.0% equity interest in Yunhe County Shapulong Hydropower Generation Co., Ltd., which owns and operates the Shapulong hydropower plant, with an installed capacity of 25.0 MW. We subsequently acquired the remaining 50.0% equity interest in August 2009; | |
• | In January 2008, we raised $150.0 million in a private placement of Series A convertible redeemable preferred shares with a group of institutional investors; | |
• | In January 2008, we acquired Zhejiang province Jingning Yingchuan Hydroelectric Development Co., Ltd., which owns and operates the Yingchuan hydropower plant, with an installed capacity of 40.0 MW; | |
• | In January 2008, we acquired Qingtian Wuliting Hydroelectric Development Co., Ltd., which owns and operates the Wuliting hydropower plant, with an installed capacity of 42.0 MW; | |
• | In January 2008, we acquired Suichang County Jiulongshan Hydroelectric Development Co., Ltd., which owns and is developing the Zhougongyuan hydropower plant, with a design capacity of 53.6 MW; | |
• | In July 2008, we raised $101.0 million in a private placement of Series B convertible redeemable preferred shares with a group of institutional investors; | |
• | In August 2008, we raised $28.0 million in a private placement of Series B convertible redeemable preferred shares with a group of institutional investors; | |
• | In October 2008, we acquired a 90.0% equity interest in Sanming Zhongyin Banzhu Hydroelectric Co., Ltd., which owns and operates the Banzhu hydropower plant, with an installed capacity of 45.0 MW. In March 2009, we acquired the remaining 10.0% equity interest in this company; | |
• | In October 2008, we acquired a 90.0% equity interest in Pingnan County Wangkeng Hydroelectric Co., Ltd., which owns and operates the Wangkeng hydropower plant, with an installed capacity of 40.0 MW; | |
• | In October 2008, we acquired Pingnan County Yuanping Hydroelectric Co., Ltd., which owns and operates the Yuanping hydropower plant, with an installed capacity of 16.0 MW; | |
• | In October 2008, we acquired Pingnan County Yuheng Hydropower Co., Ltd., which owns and operates the Yuheng hydropower plant, with an installed capacity of 30.0 MW; |
4
Table of Contents
• | In March 2009, Pingnan County Wangkeng Hydroelectric Co., Ltd signed a RMB150.0 million ($22.0 million) loan agreement with Industrial Bank Co., Ltd., Ningde Branch to refinance the Wangkeng hydropower plant; | |
• | In March 2009, Qingtian Wuliting Hydroelectric Development Co., Ltd. signed a RMB219.6 million ($32.2 million) loan agreement with the Bank of China, Lishui City Dayang Sub-branch to refinance the Wuliting hydropower plant; | |
• | In June 2009, Sanming Zhongyin Banzhu Hydroelectric Co., Ltd signed a RMB294.9 million ($43.2 million) loan agreement with the Bank of China, Fujian Branch to refinance the Banzhu hydropower plant; | |
• | In June 2009, Suichang County Jiulongshan Hydroelectric Development Co., Ltd. signed a RMB216.0 million ($31.6 million) loan agreement and a RMB9.0 million ($1.3 million) loan agreement with the Agricultural Bank of China, Lishui Branch to refinance the Zhougongyuan hydropower plant; | |
• | In July 2009, we signed a memorandum of understanding with the Bank of China, Fujian Branch pursuant to which the bank will provide 50.0% of the financing required for the acquisition or refinancing of any hydropower plants acquired by us through an investment holding company to be established by us in Fujian province; | |
• | In August 2009, we acquired Longquan Ruiyang Cascade II Hydroelectric Co., Ltd., which owns and operates the Ruiyang Hydropower plant, with an installed capacity of 32.0 MW; |
• | In September 2009, we signed a non-binding framework agreement with Sichuan Huashui Power Construction Engineering Co., Ltd. to jointly develop over 40 small hydropower plants in Sichuan province totalling approximately 1,250.0 MW of design installed capacity, for which Sichuan Huashui Power Construction Engineering Co., Ltd. has the development right. The non-binding framework agreement with Sichuan Huashui Power Construction Engineering Co., Ltd. may result in the co-development of none or only a portion of the projects covered by this agreement and we do not believe our business is substantially dependent on this agreement. The terms of development with Sichuan Huashui Power Construction Engineering Co, Ltd. will be determined on a project-by-project basis; |
• | In October 2009, we signed a capital increase agreement with Henan Lan Tian Group Co., Ltd. to subscribe for a 79.0% equity interest in Henan Wuyue Storage Power Generation Co., Ltd., which owns the right to develop a 1,000.0 MW pumped storage hydropower plant. The completion of the capital increase transaction is pending government approval; |
• | In October 2009, we raised $20.0 million in a private placement of Series C convertible redeemable preferred shares with an institutional investor; and |
• | In December 2009, we completed a spin-off of Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and established Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. |
5
Table of Contents
6
Table of Contents
7
Table of Contents
Securities offered by us | 3,125,000 units, each unit consisting of: |
• one ADS; and |
• one warrant. |
The ADSs and warrants comprising the units will begin separately trading upon the closing of this offering. |
Units: |
Number of units outstanding before this offering | 0 |
Number of units to be outstanding after this offering | 3,125,000 |
Ordinary Shares: |
Number of ordinary shares outstanding before this offering | 15,541,666 |
Number of ordinary shares to be outstanding after this offering | 144,119,181 ordinary shares, after giving effect to the conversion of our Series A, Series B and Series C convertible redeemable preferred shares and preferred share dividends accrued to January 15, 2010 immediately prior to the consummation of this offering in each case assuming a value of each ADS constituting part of the unit of $14.80 per ADS. |
Warrants: |
Number of warrants outstanding before this offering | 20,931,665 warrants each to purchase one ordinary share |
Number of warrants to be outstanding after this offering | 20,931,665 warrants each to purchase one ordinary share 3,125,000 warrants each to purchase three ordinary shares |
Exercisability | Each warrant is exercisable to purchase three ordinary shares. |
Exercise price | $15 |
Exercise period | The warrants will become exercisable on the closing date of this offering, provided that we have an effective registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to the shares is available at the time the warrant is exercised. |
The warrants will expire at 5:00 p.m., New York time, four years from the date of the final prospectus relating to this offering, or earlier upon redemption. |
Redemption | We may redeem the outstanding warrants: |
• in whole but not in part; |
• at a price of $0.01 per warrant; |
• upon a minimum of 30 days’ prior written notice of redemption; |
• if, and only if, an effective registration statement covering the ordinary shares issuable upon exercise of the warrants and a |
8
Table of Contents
current prospectus are available throughout the30-day notice of redemption period; and |
• if, and only if, the last sales price of our ADS equals or exceeds $23 each for any 20 trading days within a 30-trading day period ending three business days before we send the notice of redemption. |
Overallotment option | We have granted the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 468,750 additional units from us at the public offering price, less underwriting discounts, solely to cover overallotments. |
ADSs | Each ADS represents three ordinary shares, par value $0.001 per ordinary share. The depositary will be the holder of the ordinary shares underlying the ADSs and you will have the rights of an ADS holder as provided in the deposit agreement dated , 2010 among us, the depositary and the registered holders and other holders of ADSs from time to time. Ordinary shares issued upon exercise of the warrants may be deposited in the ADR facility. |
You may surrender your ADSs to the depositary to withdraw the ordinary shares underlying your ADSs. The depositary will charge you a fee for such surrender. | ||
We may amend or terminate the deposit agreement for any reason without your consent. Any amendment which imposes or increases fees or charges or which materially prejudices any substantial existing right you have as an ADS holder will not become effective as to outstanding ADSs until 30 days after notice of the amendment is given to ADS holders. If an amendment becomes effective, you will be bound by the deposit agreement as amended if you continue to hold ADSs. | ||
Depositary | The Bank of New York Mellon | |
Use of proceeds | We expect that we will receive net proceeds of approximately $35.1 million from this offering, after deducting the estimated underwriting discount, the non-accountable expense allowance and estimated offering expenses payable by us. We intend to use these net proceeds of this offering to acquire hydroelectric operating companies and assets and for the development of new hydropower projects in China, for working capital and for general corporate purposes. See “Use of Proceeds.” |
Risk factors | See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the securities. |
Timing and settlement for units | The ADSs and accompanying warrants are expected to be delivered against payment on , 2010. The ADSs and accompanying warrants will be deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company, or DTC, in New York, New York. |
Listing | We have applied to list the ADSs and the warrants on the New York Stock Exchange, or the NYSE. The symbols for the ADSs and warrants will be “CHC” and “CHCW”, respectively. |
9
Table of Contents
Lock-up | We, our executive officers and directors and shareholders have agreed, with certain exceptions, not to sell or transfer any ADSs, ordinary shares or securities convertible into or exercisable for ordinary shares for a period of 180 days after the date of this prospectus. See “Underwriting.” |
10
Table of Contents
Binglangjiang (predecessor) | Our Company (successor) | |||||||||||||||||||||||||||
July 10 | ||||||||||||||||||||||||||||
Year Ended | Period from | (inception) to | ||||||||||||||||||||||||||
December 31, | January 1 to | December 31, | Year Ended December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||||
2006 | April 24, 2007 | 2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||||||||
(US$ in thousands, except share | ||||||||||||||||||||||||||||
and per share data) | ||||||||||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||||||||||
Revenues | 2,075 | 571 | — | 2,434 | 14,715 | 10,261 | 30,453 | |||||||||||||||||||||
Cost of revenues | (691 | ) | (219 | ) | — | (813 | ) | (6,025 | ) | (3,539 | ) | (11,526 | ) | |||||||||||||||
Gross profit | 1,384 | 352 | — | 1,621 | 8,690 | 6,722 | 18,927 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
General and administrative expenses | (13 | ) | (23 | ) | (901 | ) | (2,560 | ) | (6,761 | ) | (4,134 | ) | (5,653 | ) | ||||||||||||||
Operating income (loss) | 1,371 | 329 | (901 | ) | (939 | ) | 1,929 | 2,588 | 13,274 | |||||||||||||||||||
Other income and expenses: | ||||||||||||||||||||||||||||
Interest income | 1 | — | 340 | 1,051 | 1,340 | 970 | 444 | |||||||||||||||||||||
Interest expenses | (914 | ) | (285 | ) | (873 | ) | (3,275 | ) | (5,847 | ) | (3,334 | ) | (10,239 | ) | ||||||||||||||
Change in fair value of derivative financial liabilities and warrant liability | — | — | — | (266 | ) | 420 | (1,521 | ) | (443 | ) | ||||||||||||||||||
Exchange loss | — | — | — | (1,095 | ) | (1,067 | ) | (1,760 | ) | (20 | ) | |||||||||||||||||
11
Table of Contents
Binglangjiang (predecessor) | Our Company (successor) | |||||||||||||||||||||||||||
July 10 | ||||||||||||||||||||||||||||
Year Ended | Period from | (inception) to | ||||||||||||||||||||||||||
December 31, | January 1 to | December 31, | Year Ended December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||||
2006 | April 24, 2007 | 2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||||||||
(US$ in thousands, except share | ||||||||||||||||||||||||||||
and per share data) | ||||||||||||||||||||||||||||
Share of losses in an equity investee | — | — | — | (27 | ) | (503 | ) | (236 | ) | (70 | ) | |||||||||||||||||
Other income, net | — | — | — | 8 | 144 | 116 | 2 | |||||||||||||||||||||
Income (loss) before income tax expenses | 458 | 44 | (1,434 | ) | (4,543 | ) | (3,584 | ) | (3,177 | ) | 2,948 | |||||||||||||||||
Income tax expenses | (19 | ) | (1 | ) | — | (17 | ) | (444 | ) | (477 | ) | (2,167 | ) | |||||||||||||||
Consolidated net income (loss) | 439 | 43 | (1,434 | ) | (4,560 | ) | (4,028 | ) | (3,654 | ) | 781 | |||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Net (loss) income attributable to noncontrolling interests | — | — | — | — | (41 | ) | — | 18 | ||||||||||||||||||||
Net income (loss) attributable to China Hydroelectric Corporation shareholders | 439 | 43 | (1,434 | ) | (4,560 | ) | (3,987 | ) | (3,654 | ) | 763 | |||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Cumulative dividends on Series A convertible redeemable preferred shares | — | — | — | — | (14,680 | ) | (10,580 | ) | (13,828 | ) | ||||||||||||||||||
Cumulative dividends on Series B convertible redeemable preferred shares | — | — | — | — | (5,531 | ) | (2,234 | ) | (10,326 | ) | ||||||||||||||||||
Changes in redemption value of Series A convertible redeemable preferred shares | — | — | — | — | (10,569 | ) | (10,569 | ) | — | |||||||||||||||||||
Changes in redemption value of Series B convertible redeemable preferred shares | — | — | — | — | (4,134 | ) | (4,134 | ) | — | |||||||||||||||||||
Loss attributable to ordinary shareholders | — | — | (1,434 | ) | (4,560 | ) | (38,901 | ) | (31,171 | ) | (23,391 | ) | ||||||||||||||||
Basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per share | — | — | (0.34 | ) | (0.33 | ) | (2.50 | ) | (2.00 | ) | (1.51 | ) | ||||||||||||||||
Basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per ADS | — | — | (1.02 | ) | (0.99 | ) | (7.50 | ) | (6.00 | ) | (4.53 | ) | ||||||||||||||||
Weighted average ordinary shares used in basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per share computation | — | — | 4,230,822 | 13,817,466 | 15,554,416 | 15,558,698 | 15,541,666 | |||||||||||||||||||||
Pro forma basic net (loss) income attributable to China Hydroelectric Corporation shareholders per share on an as converted basis | — | — | — | — | (0.07 | )(1) | — | 0.01(1 | ) | |||||||||||||||||||
Pro forma diluted net (loss) income attributable to China Hydroelectric Corporation shareholders per share on an as converted basis | — | — | — | — | (0.07 | )(1) | — | 0.01(1 | ) | |||||||||||||||||||
Shares used in pro forma basic net (loss) income attributable to China Hydroelectric Corporation shareholders per share computation | — | — | — | — | 55,415,130 | (1) | — | 116,635,592 | (1) | |||||||||||||||||||
Shares used in pro forma diluted net (loss) income attributable to China Hydroelectric Corporation shareholders per share computation | — | — | — | — | 55,415,130 | (1) | — | 116,635,592 | (1) | |||||||||||||||||||
Number of shares as adjusted to reflect changes in capital | * | * | — | — | 58,289,666 | (1) | — | 124,795,783 | (1) | |||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||
EBITDA, as adjusted(2) | * | * | (901 | ) | (320 | ) | 6,474 | 5,470 | 21,940 |
* | Not provided, as the information relates to the results of operations of Binglangjiang prior to its acquisition by us. |
(1) | This calculation of pro forma basic and diluted loss per share for the year ended December 31, 2008 and pro forma basic and diluted income per share for the nine months ended September 30, 2009 assumes that all Series A convertible redeemable preferred shares and Series B convertible redeemable preferred shares were converted into ordinary shares on January 1, 2008 and January 1, 2009, respectively. The number of shares as adjusted to reflect changes in capital for the year ended December 31, 2008 includes the outstanding ordinary shares of 15,541,666 and the 23,529,286 and 19,218,714 ordinary shares to be issued upon conversion of the Series A convertible redeemable preferred shares and the Series B convertible redeemable preferred shares, respectively, including the conversion of dividends accrued on the Series A convertible redeemable preferred shares and Series B convertible redeemable preferred shares to be paid in kind but not yet issued as of December 31, 2008. The number of shares as adjusted to reflect changes in capital for the nine months ended September 30, 2009 includes the outstanding ordinary shares of 15,541,666 and the 60,315,610 and 48,938,507 ordinary shares to be issued upon conversion of the Series A convertible redeemable preferred shares and the Series B convertible redeemable preferred shares, respectively, including the conversion of dividends accrued on the Series A convertible redeemable preferred shares and Series B convertible redeemable preferred shares to be paid in kind but not yet issued as of September 30, 2009, based on a sale price of each ADS in the offering at $14.80. |
(2) | See “Operating and Financial Review and Prospects — Results of Operations — EBITDA, as adjusted” for a reconciliation of this non-GAAP number. |
12
Table of Contents
Our Company (successor) | ||||||||||||||||||||||||
Pro Forma | ||||||||||||||||||||||||
Binglangjiang (predecessor) | As of December 31, | Balance Sheet | ||||||||||||||||||||||
As of December 31, | As of September 30, | at September 30, | ||||||||||||||||||||||
2006 | 2006 | 2007 | 2008 | 2009 | 2009 | |||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | 142 | 628 | 15,606 | 38,693 | 23,787 | 23,787 | ||||||||||||||||||
Restricted cash | — | 50,340 | — | — | — | — | ||||||||||||||||||
Accounts receivable, net | 152 | — | 329 | 3,137 | 12,230 | 12,230 | ||||||||||||||||||
Deferred tax assets | — | — | — | 1,166 | 551 | 551 | ||||||||||||||||||
Amounts due from related parties | 64 | 33 | 25 | 13 | 13 | 13 | ||||||||||||||||||
Debt issuance costs | — | — | 47 | — | — | — | ||||||||||||||||||
Amounts due from an equity investee | — | — | 287 | 4,534 | — | — | ||||||||||||||||||
Prepayments and other current assets | 206 | — | 3,269 | 9,437 | 6,621 | 6,621 | ||||||||||||||||||
Total current assets | 564 | 51,001 | 19,563 | 56,980 | 43,202 | 43,202 | ||||||||||||||||||
Debt issuance costs | — | 975 | — | — | — | — | ||||||||||||||||||
Investment in an equity investee | — | — | 4,721 | 4,295 | — | — | ||||||||||||||||||
Deferred initial public offering costs | — | — | — | 6,032 | 9,574 | — | ||||||||||||||||||
Property, plant and equipment, net | 16,752 | — | 29,046 | 365,190 | 427,941 | 427,941 | ||||||||||||||||||
Intangible assets, net | — | — | 3,008 | 3,666 | 4,556 | 4,556 | ||||||||||||||||||
Goodwill | — | — | 2,773 | 96,533 | 107,768 | 107,768 | ||||||||||||||||||
Deferred tax assets | — | — | — | — | 1,022 | 1,022 | ||||||||||||||||||
Other non-current assets | — | — | — | 872 | 777 | 777 | ||||||||||||||||||
Total non-current assets | 16,752 | 975 | 39,548 | 476,588 | 551,638 | 542,064 | ||||||||||||||||||
Total assets | 17,316 | 51,976 | 59,111 | 533,568 | 594,840 | 585,266 | ||||||||||||||||||
Total current liabilities | 2,392 | 850 | 14,436 | 77,285 | 55,576 | 55,576 | ||||||||||||||||||
Long-term loans | 13,831 | — | 10,269 | 138,133 | 217,418 | 217,418 | ||||||||||||||||||
Deferred tax liabilities | — | — | — | 13,415 | 18,761 | 18,761 | ||||||||||||||||||
Other non-current liabilities | — | — | — | 568 | 103 | 103 | ||||||||||||||||||
Long-term notes | — | 50,285 | — | — | — | — | ||||||||||||||||||
Convertible redeemable preferred shares | — | — | — | 299,236 | 323,390 | — | ||||||||||||||||||
Total China Hydroelectric Corporation shareholders’ equity (deficit) | 1,093 | 841 | 34,406 | 4,181 | (21,247 | ) | 292,569 | |||||||||||||||||
Noncontrolling interests | — | — | — | 750 | 839 | 839 | ||||||||||||||||||
Total liabilities and shareholders’ equity (deficit) | 17,316 | 51,976 | 59,111 | 533,568 | 594,840 | 585,266 | ||||||||||||||||||
Note: | The unaudited pro forma balance sheet as of September 30, 2009 has been prepared based on the assumed conversion of the Series A convertible redeemable preferred shares and the Series B convertible redeemable preferred shares. |
13
Table of Contents
Binglangjiang (predecessor) | Our Company (successor) | |||||||||||||||||||||||
As of and | As of and | For the nine | ||||||||||||||||||||||
As of and | for the period from | for the year ended | months ended | |||||||||||||||||||||
for the year ended | January 1 to | December 31, | September 30, | |||||||||||||||||||||
December 31, 2006 | April 24, 2007 | 2007 | 2008 | 2008 | 2009 | |||||||||||||||||||
Selected Operating Data:(1) | ||||||||||||||||||||||||
Installed capacity (MW) | 21.0 | 21.0 | 58.0 | (2) | 271.0 | (2) | 140.0 | (2) | 376.6 | (2) | ||||||||||||||
Electricity sold (kWh) | 106,646,530 | 23,495,595 | 108,303,945 | (3) | 333,964,005 | (3) | 227,777,504 | (3) | 667,417,349 | (3) | ||||||||||||||
Effective tariff (RMB/kWh)(4) | 0.164 | 0.200 | 0.180 | (3) | 0.330 | (3) | 0.335 | (3) | 0.344 | (3) |
(1) | For Binglangjiang, operating data given are for the periods stated. For our company, operating data given are for our period of ownership of the hydropower plants during the periods indicated. | |
(2) | Our aggregate installed capacity information presented in this prospectus includes, as of December 31, 2007 and September 30, 2008, the installed capacity of Shapulong, as of December 31, 2008, the installed capacities of Shapulong, Banzhu and Wangkeng, and as of September 30, 2009, the installed capacity of Wangkeng, although as of such respective dates, our equity interest in Shapulong, Banzhu and Wangkeng were 50.0%, 90.0% and 90.0%, respectively. We acquired the remaining 10.0% interest in Banzhu in March 2009. | |
(3) | Electricity sold and effective tariff information for the year ended December 31, 2007 does not reflect electricity sold by Shapulong. Electricity sold and effective tariff information for the year ended December 31, 2008 and September 30, 2008 does not reflect electricity sold by Shapulong or Yuanping. Our 50.0% equity interest in Shapulong is accounted for using the equity method of accounting and our proportionate share of Shapulong’s net loss is included as a share of losses in equity investees, in our consolidated statement of operations. In the years ended December 31, 2007 and 2008 and the nine months ended September 30, 2008 and 2009, Shapulong sold 43,292,057 kWh, 42,308,157 kWh, 35,448,040 kWh and 33,825,312 kWh of electricity, respectively. We acquired the remaining 50.0% equity interest in Shapulong in August 2009. Although Yuanping commenced operations in March 2007 and has transmitted electricity to the power grid controlled by the Fujian Ningde Electric Power Bureau, that transmission was made without a fixed or pre-determined tariff per kWh until late June 2009. Therefore, cash received in exchange for the transmission of electricity to the power grid before late June 2009 was recorded as customer deposits. Accordingly, no revenues were recorded by Yuanping in the year ended December 31, 2008. However, related cost of revenues was not deferred, and was charged to expense as incurred. All of the customer deposits received from the date of our acquisition of Yuanping to late June 2009 were recognized as revenue when the regional pricing bureau confirmed a minimum tariff in late June 2009. We only recognize revenue for customer deposits recorded subsequent to the acquisition of Yuanping after the per kWh tariff became fixed or determinable. In August 2009, the Ningde Pricing Bureau, the regional pricing bureau in Fujian province, approved a unit price per kWh of RMB0.29, inclusive of value-added tax, or VAT, for electricity transmitted by Yuanping to the power grid controlled and owned by the provincial grid company prior to July 8, 2009. The unit price per kWh of RMB0.29 will continue to be in effect until the regional pricing bureau approves a new unit price per kWh. In the years ended December 31, 2007 and 2008 and the nine months ended September 30, 2008 and 2009, Yuanping transmitted 30,071,595 kWh, 38,393,478 kWh, 35,115,884 kWh and 40,397,885 kWh of electricity, respectively. | |
(4) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
14
Table of Contents
Yingchuan | Wuliting | |||||||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||
2006 | 2007 | 2006 | 2007 | |||||||||||||
(RMB in thousands) | ||||||||||||||||
Statements of Operations Data: | ||||||||||||||||
Revenues | 38,925 | 42,998 | — | 27,532 | ||||||||||||
Cost of revenues | (13,204 | ) | (12,174 | ) | — | (15,244 | ) | |||||||||
Gross profit | 25,721 | 30,824 | — | 12,288 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative expenses | (1,699 | ) | (1,485 | ) | (115 | ) | (1,064 | ) | ||||||||
Operating profit (loss) | 24,022 | 29,339 | (115 | ) | 11,224 | |||||||||||
Interest income | 14 | 13 | — | 5 | ||||||||||||
Interest expenses | (8,166 | ) | (8,817 | ) | — | (28,887 | ) | |||||||||
Other income | — | 67 | — | (290 | ) | |||||||||||
Other expenses | — | — | — | — | ||||||||||||
Income (loss) before income tax expenses | 15,870 | 20,602 | (115 | ) | (17,948 | ) | ||||||||||
Income tax expenses | 85 | (7,604 | ) | (208 | ) | — | ||||||||||
Net income (loss) | 15,955 | 12,998 | (323 | ) | (17,948 | ) | ||||||||||
Selected Operating Data:(1) | ||||||||||||||||
Installed capacity (MW) | 40.0 | 40.0 | — | 42.0 | ||||||||||||
Electricity sold (kWh) | 97,116,588 | 102,700,957 | — | 65,423,294 | ||||||||||||
Effective tariff (RMB/kWh)(2) | 0.425 | 0.444 | — | 0.446 |
(1) | Operating data given are for the periods stated. | |
(2) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
15
Table of Contents
Banzhu | Wangkeng | |||||||||||||||||||||||||||||||
Nine Months | Nine Months | |||||||||||||||||||||||||||||||
Year Ended | Ended | Year Ended | Ended | |||||||||||||||||||||||||||||
December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||||||
2006 | 2007 | 2007 | 2008 | 2006 | 2007 | 2007 | 2008 | |||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||||||
(RMB in thousands) | ||||||||||||||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||||||||||||||
Revenues | 55,561 | 52,029 | 45,551 | 40,780 | 40,242 | 31,475 | 28,132 | 31,138 | ||||||||||||||||||||||||
Cost of revenues | (23,765 | ) | (23,915 | ) | (17,904 | ) | (20,061 | ) | (14,004 | ) | (13,897 | ) | (9,156 | ) | (8,235 | ) | ||||||||||||||||
Gross profit | 31,796 | 28,114 | 27,647 | 20,719 | 26,238 | 17,578 | 18,976 | 22,903 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
General and administrative expenses | (6,122 | ) | (6,748 | ) | (4,954 | ) | (5,282 | ) | (3,868 | ) | (4,355 | ) | (3,041 | ) | (3,542 | ) | ||||||||||||||||
Gain (loss) on sale of property, plant and equipment, net | 197 | 1,112 | 20 | 2,168 | — | — | — | (746 | ) | |||||||||||||||||||||||
Operating profit | 25,871 | 22,478 | 22,713 | 17,605 | 22,370 | 13,223 | 15,935 | 18,615 | ||||||||||||||||||||||||
Interest income | 71 | 24 | 20 | 14 | 233 | 34 | 22 | 6 | ||||||||||||||||||||||||
Interest expenses | (18,817 | ) | (19,626 | ) | (14,499 | ) | (15,674 | ) | (9,664 | ) | (10,758 | ) | (7,819 | ) | (8,647 | ) | ||||||||||||||||
Foreign exchange gain | 1,314 | 1,733 | 1,082 | 1,416 | — | — | — | — | ||||||||||||||||||||||||
Interest income from related parties | 1,114 | 2,240 | 1,321 | 2,801 | — | — | — | — | ||||||||||||||||||||||||
Gain on the disposal of investment in equity investee | — | — | — | — | 1,033 | — | — | — | ||||||||||||||||||||||||
Non-operating income (expenses) | 128 | (2 | ) | (5 | ) | (25 | ) | (1,178 | ) | (156 | ) | (24 | ) | (169 | ) | |||||||||||||||||
Income before income tax expenses | 9,681 | 6,847 | 10,632 | 6,137 | 12,794 | 2,343 | 8,114 | 9,805 | ||||||||||||||||||||||||
Income tax expenses | (3,234 | ) | (4,789 | ) | (7,443 | ) | (1,625 | ) | (1,052 | ) | (197 | ) | 3 | (2,755 | ) | |||||||||||||||||
Loss from operations of discontinued subsidiary, net of income tax expenses for 2007 and 2008 | — | — | — | — | — | — | — | (207 | ) | |||||||||||||||||||||||
Net income | 6,447 | 2,058 | 3,189 | 4,512 | 11,742 | 2,146 | 8,117 | 6,843 | ||||||||||||||||||||||||
Selected Operating Data:(1) | ||||||||||||||||||||||||||||||||
Installed capacity (MW) | 45.0(2 | ) | 45.0(2 | ) | 45.0(2 | ) | 45.0(2 | ) | 40.0(3 | ) | 40.0(3 | ) | 40.0(3 | ) | 40.0(3 | ) | ||||||||||||||||
Electricity sold (kWh) | 180,461,022(2 | ) | 169,092,862(2 | ) | 148,039,608(2 | ) | 132,514,006(2 | ) | 151,882,677(3 | ) | 118,792,231(3 | ) | 106,174,059(3 | ) | 116,772,194(3 | ) | ||||||||||||||||
Effective tariff (RMB/kWh)(4) | 0.360 | 0.360 | 0.360 | 0.360 | 0.310 | 0.310 | 0.310 | 0.310 |
(1) | Operating data given are for the periods stated and are given for the actual plant, rather than the portion attributable to our equity interest. | |
(2) | We have held a 100.0% equity interest in Banzhu since March 2009, but only held a 90.0% equity interest in Banzhu prior to that. On an equity interest basis, we were proportionately entitled to 162,414,920 kWh, 152,183,576 kWh, 133,235,647 kWh and 119,262,605 kWh of electricity sold for 2006, 2007, the nine months ended September 30, 2007 and the nine months ended September 30, 2008, respectively. Installed capacity information for Banzhu reflects the actual installed capacity of Banzhu. | |
(3) | We hold a 90.0% equity interest in Wangkeng. On an equity interest basis, we were proportionately entitled to 136,694,409 kWh, 106,913,008 kWh, 95,556,653 kWh and 105,094,975 kWh of electricity sold for 2006, 2007, the nine months ended September 30, 2007 and the nine months ended September 30, 2008, respectively. Installed capacity information for Wangkeng reflects the actual installed capacity of Wangkeng. | |
(4) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
16
Table of Contents
Yuanping | Yuheng | |||||||||||||||||||||||
Period from | Period from | |||||||||||||||||||||||
Nine Months | May 18 | January 1 | ||||||||||||||||||||||
Year Ended | Ended | (inception) to | to | |||||||||||||||||||||
December 31, | September 30, | December 31, | October 20, | |||||||||||||||||||||
2006 | 2007 | 2007 | 2008 | 2007 | 2008 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(RMB in thousands) | ||||||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||||||
Revenues | — | — | — | — | 12,963 | 19,547 | ||||||||||||||||||
Cost of revenues | — | (4,665 | ) | (2,980 | ) | (5,088 | ) | (5,307 | ) | (8,016 | ) | |||||||||||||
Gross profit | — | (4,665 | ) | (2,980 | ) | (5,088 | ) | 7,656 | 11,531 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
General and administrative expenses | (1,398 | ) | (2,135 | ) | (931 | ) | (493 | ) | (824 | ) | (1,011 | ) | ||||||||||||
�� | ||||||||||||||||||||||||
Operating profit (loss) | (1,398 | ) | (6,800 | ) | (3,911 | ) | (5,581 | ) | 6,832 | 10,520 | ||||||||||||||
Interest income | — | — | — | — | 742 | 530 | ||||||||||||||||||
Interest expenses | — | (4,209 | ) | (2,647 | ) | (5,199 | ) | (8,138 | ) | (10,152 | ) | |||||||||||||
Income (loss) before income tax expenses | (1,398 | ) | (11,009 | ) | (6,558 | ) | (10,780 | ) | (564 | ) | 898 | |||||||||||||
Income tax expenses | — | — | — | — | (1,585 | ) | (532 | ) | ||||||||||||||||
Net income (loss) | (1,398 | ) | (11,009 | ) | (6,558 | ) | (10,780 | ) | (2,149 | ) | 366 | |||||||||||||
Selected Operating Data:(1) | ||||||||||||||||||||||||
Installed capacity (MW) | — | 16.0 | 16.0 | 16.0 | 30.0 | 30.0 | ||||||||||||||||||
Electricity sold (kWh) | — | 30,071,595 | (2) | 23,755,804 | (2) | 35,115,884 | (2) | 54,955,750 | 82,893,211 | |||||||||||||||
Effective tariff (RMB/kWh)(4) | — | 0.221 | (2) | 0.221 | (2) | 0.221 | (2) | 0.181 | (3) | 0.181 | (3) |
(1) | Operating data given are for the periods stated. | |
(2) | While Yuanping had no revenues for the periods presented, electricity sold and effective tariff is calculated based on electricity transmitted and customer deposits received in exchange for the transmission of electricity. | |
(3) | Excludes revenues recognized from the amortization of an unfavorable contract obligation. | |
(4) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
17
Table of Contents
18
Table of Contents
19
Table of Contents
• | result in our dependence upon the performance of a limited number of operating plants; | |
• | result in our dependence upon electricity sales in limited geographical areas; | |
• | subject us to increased risks associated with drought or other natural disasters in a particular geographical area; and | |
• | limit our ability to grow our revenues and to obtain the benefits of scale that we anticipate. |
• | delays in obtaining various regulatory approvals, licenses or permits from different governmental authorities at different levels, including permission for the construction and operation of the hydropower plant itself, the environmental permits and permits to use the relevant land; | |
• | shortages or increases in the cost of equipment, materials or labor; | |
• | adverse weather conditions, which may delay the completion of hydropower plants or substations, or natural disasters, accidents or other unforeseen events; | |
• | unforeseen engineering, design, environmental or geological problems; | |
• | opposition of local interests; | |
• | strikes and labor disputes; | |
• | inability to obtain financing on satisfactory terms; and | |
• | adverse changes in the PRC regulatory environment. |
20
Table of Contents
21
Table of Contents
• | general economic and capital market conditions; | |
• | the availability of credit from banks or other lenders; | |
• | investor confidence in us; and | |
• | the continued performance of our hydropower plants. |
22
Table of Contents
• | failure of power transmission systems; | |
• | unexpected maintenance or technical problems; | |
• | human error; | |
• | failure of our mechanical, software or monitoring systems; and | |
• | industrial accidents. |
• | potential construction or engineering problems which may expose us to severe economic loss or legal liabilities and require substantial expenditure from us to remediate; | |
• | unforeseen or hidden liabilities, including exposure to legal proceedings, associated with newly acquired companies; | |
• | failure to generate sufficient revenues to offset the costs and expenses of acquisitions; |
23
Table of Contents
• | potential impairment losses and amortization expenses relating to goodwill and intangible assets arising from any of such acquisitions, which may materially reduce our net income or result in a net loss; and | |
• | possible contravention of Chinese regulations applicable to such acquisitions. |
• | expand our systems and processes effectively or efficiently or in a timely manner; | |
• | allocate our human resources optimally or reduce headcount without experiencing community protest, strike or other social unrest; | |
• | identify and hire qualified employees or retain valued employees; | |
• | incorporate effectively hydropower projects in various stages of development that we may acquire; | |
• | maintain good relationship with power grids; or | |
• | centralize and improve the efficiency of the management and operations of the power plants acquired. |
• | construction costs, which vary according to the installed capacity of the individual power plants; | |
• | operating and administrative expenses; | |
• | maintenance and repair costs of power plants; and | |
• | interest expense on outstanding debts. |
24
Table of Contents
25
Table of Contents
26
Table of Contents
27
Table of Contents
• | planning and construction of new power plants; | |
• | the granting of power generation, dispatch and supply permits; | |
• | the amount and timing of power generation; | |
• | the setting of on-grid tariffs paid to power producers and power tariffs paid by consumers of electricity; | |
• | power grid control and power dispatch, including the setting of preferential policies for the dispatch of renewable energy generated power; | |
• | allocation of water resources and control of water flows; | |
• | environmental protection and safety standards; | |
• | acquisitions by foreign investors; and | |
• | taxes, in particular Enterprise Income Tax and Value Added Tax. |
28
Table of Contents
29
Table of Contents
30
Table of Contents
• | identifying and hiring additional personnel with U.S. GAAP and SEC reporting experience; | |
• | providing training to our finance personnel to improve their knowledge of U.S. GAAP and SEC reporting requirements; | |
• | holding regular meetings of the audit committee and resuming regular communication between the committee and our independent registered public accounting firm; | |
• | establishing an internal audit function; | |
• | establishing anonymous whistleblower systems for reporting violations of our governance policies, including policies regarding internal controls; | |
• | putting in place a centralized financial reporting software system in our headquarters, management centers and operating plants; and | |
• | engaging external professional consultants to assess the entity level internal controls over financial reporting using the COSO internal control framework. We have also begun to formulate policies relating to internal control over financial reporting, including the preparation of a comprehensive accounting policies and procedures manual, containing, among other things, detailed, expanded closing checklists, to guide our financial personnel in addressing significant accounting issues and assist them in preparing financial statements in compliance with U.S. GAAP and SEC requirements. |
31
Table of Contents
• | the level of government involvement; | |
• | the level of development; | |
• | the growth rate; | |
• | the level and control of capital investment; | |
• | the control of foreign exchange; and | |
• | the allocation of resources. |
32
Table of Contents
33
Table of Contents
34
Table of Contents
35
Table of Contents
36
Table of Contents
37
Table of Contents
38
Table of Contents
39
Table of Contents
40
Table of Contents
• | to recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or | |
• | to entertain original actions brought against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
41
Table of Contents
42
Table of Contents
• | we have failed to timely provide the depositary with our notice of meeting and related voting materials; | |
• | we have instructed the depositary that we do not wish a discretionary proxy to be given; | |
• | we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; | |
• | a matter to be voted on at the meeting would have a material adverse impact on shareholders. |
43
Table of Contents
44
Table of Contents
• | our business strategies and plan of operations; | |
• | our ability to acquire productive hydroelectric companies and assets; | |
• | our capital expenditure and funding plans; | |
• | our operations and business prospects; | |
• | our dividend policy; | |
• | estimates of production of and tariffs applicable to our hydropower plants; | |
• | projects under development, construction and planning; | |
• | the regulatory environment for the power industry in general and the level of policy support for renewable energy; and | |
• | future developments in the PRC hydropower industry. |
• | supply and demand changes in the electric power markets, in particular in relation to the current economic slowdown in China as well as the global economic downturn; | |
• | changes in electricity tariffs in the regions in which we operate; | |
• | our production and transmission capabilities; | |
• | availability of sufficient and reliable transmission resources; | |
• | our relationship with, and other conditions affecting, the power grids we service; | |
• | risks inherent to hydroelectric power production, in particular hydrological conditions, as well as changes in geologic conditions and equipment failure; | |
• | weather conditions or catastrophic weather-related damage; | |
• | competition, in particular increased supply of power generated by renewable energy resources available to the power grids we service; | |
• | our plans and objectives for future operations and expansion or consolidation; | |
• | the effectiveness of our cost-control measures; | |
• | inflationary trends and interest rate changes; |
45
Table of Contents
• | the effects of changes in currency exchange rates; | |
• | environmental laws, including those directly affecting our operations, and those affecting our customers’ demand for electricity; | |
• | changes in political, economic, legal and social conditions in China, including the PRC government’s specific policies with respect to investment in the hydroelectric and power industries, economic growth, inflation, foreign exchange and the availability of credit; and | |
• | our liquidity and financial condition. |
46
Table of Contents
47
Table of Contents
• | an actual basis; and |
• | an as adjusted basis, to give effect to (1) the net proceeds to us from the sale of $20.0 million of Series C convertible redeemable preferred shares on October 27, 2009, (2) the automatic conversion of all of our outstanding Series A, Series B and Series C convertible redeemable preferred shares into ordinary shares upon closing of this offering and (3) the issuance and sale of ordinary shares in the form of ADSs offered by us hereby at an assumed initial public offering price of $16 per unit, after deducting underwriting discount, the non-accountable expense allowance and estimated offering expenses payable by us and assuming no exercise of the underwriters’ overallotment option and excluding the ordinary shares issuable upon the exercise of the warrants included in the units. |
As of September 30, 2009 | ||||||||
Actual | As Adjusted | |||||||
(unaudited) | ||||||||
(US$ in thousands, except | ||||||||
per share data) | ||||||||
Short-term bank borrowings(1) | 7,097 | 7,097 | ||||||
Current portion of long-term bank borrowings(2) | 20,545 | 20,545 | ||||||
Non-current portion of long-term bank borrowings(2) | 217,418 | 217,418 | ||||||
Mezzanine equity: | ||||||||
Series A convertible redeemable preferred shares, $0.001 par value; 2,500,000 shares authorized and 152,193 shares issued and outstanding (actual) and nil shares issued and outstanding (as adjusted) | 178,533 | — | ||||||
Series B convertible redeemable preferred shares, $0.001 par value; 2,500,000 shares authorized and 129,000 shares issued and outstanding (actual) and nil shares issued and outstanding (as adjusted) | 144,857 | — | ||||||
Series C convertible redeemable preferred shares, $0.001 par value; 1,000,000 shares authorized and 20,000 shares issued and outstanding (actual) and nil shares issued and outstanding (as adjusted) | — | — | ||||||
Shareholders’ equity: | ||||||||
Ordinary shares, $0.001 par value, 130,000,000 shares authorized (actual) and 400,000,000 shares authorized (as adjusted)(3); 15,541,666 shares issued and outstanding; and 139,961,550 outstanding on an as-adjusted basis | 16 | 140 | ||||||
Additional paid-in capital | 35,991 | 414,307 | ||||||
Accumulated other comprehensive income | 11,032 | 11,032 | ||||||
Accumulated deficit | (68,286 | ) | (69,971 | ) | ||||
Noncontrolling interests | 839 | 839 | ||||||
Total shareholders’ equity (deficit) | (20,408 | ) | 356,347 | |||||
Total capitalization | 548,042 | 601,407 | ||||||
(1) | The short-term bank borrowings outstanding as of September 30, 2009 comprised RMB denominated loans of $2.1 million, $0.6 million and $4.4 million obtained by Yuheng, Yuanping and Zhougongyuan, respectively. The short-term loan of Yuheng was obtained from the original shareholders and is unsecured, interest-free and has no fixed term of repayment. The short-term loan of Yuanping was obtained from Fujian Dachuang Hydroelectric Group, Ltd., the original entrusted management of Yuanping, and is unsecured, interest-free and has no |
48
Table of Contents
fixed term of repayment. The short-term loan of Zhougongyuan was obtained from the Agricultural Bank of China Lishui Branch and is secured with the pledge of future electricity sales of Zhougongyuan, with an interest rate of 5.84% and is due in June, 2010. | ||
(2) | The long-term bank borrowings outstanding as of September 30, 2009 comprised RMB denominated loans of $44.9 million, $18.3 million, $15.1 million, $32.9 million, $11.6 million, $43.5 million, $22.0 million, $21.7 million, $15.8 million and $12.2 million obtained by Wuliting, Yingchuan, Binglangjiang, Zhougongyuan, Yuanping, Banzhu, Wangkeng, Yuheng, Ruiyang and Shapuloug, respectively. The long-term loans are secured with the pledge of the property, plant and equipment, and future electricity sales of the respective entity or guaranteed by third parties, and are due between 2009 and 2027. |
(3) | The amended and restated memorandum of association of the Company that is to become effective upon the closing of this offering, which was approved by a special resolution adopted by the Company’s shareholders on October 20, 2009, authorizes 400,000,000 shares of a par value of $0.001 each. |
49
Table of Contents
Per Ordinary Share | Per ADS | |||||||
Initial public offering price | $ | 5.33 | $ | 16.00 | ||||
Net tangible book value as of September 30, 2009 | $ | 12.21 | $ | 36.63 | ||||
Increase in net tangible book value attributable to price paid by Series C investor | $ | 1.18 | $ | 3.54 | ||||
Decrease in net tangible book value attributable to the conversion of all our Series A, Series B and Series C convertible redeemable preferred shares, and paid-in-kind dividends accrued but not issued on our Series A, Series B and Series C convertible redeemable preferred shares, into ordinary shares | $ | 11.69 | $ | 35.07 | ||||
Increase in net tangible book value attributable to price paid by new investors | $ | 0.15 | $ | 0.45 |
50
Table of Contents
Per Ordinary Share | Per ADS | |||||||
Pro forma net tangible book value after (i) the net proceeds to us from the sale of $20.0 million of Series C convertible redeemable preferred shares on October 27, 2009, (ii) this offering, (iii) the conversion of the Series A, Series B and Series C convertible redeemable preferred shares, and paid-in-kind dividends accrued but not issued on our Series A, Series B and Series C convertible redeemable preferred shares, into ordinary shares | $ | 1.85 | $ | 5.55 | ||||
Dilution in net tangible book value to new investors in this offering | $ | 3.48 | $ | 10.45 | ||||
Increase in net tangible book value assuming conversion into ordinary shares of all outstanding warrants and options with an exercise price below our public offering price | $ | 0.43 | $ | 1.29 | ||||
Pro forma net tangible book value after (i) the net proceeds to us from the sale of $20.0 million of Series C convertible redeemable preferred shares on October 27, 2009, (ii) this offering, (iii) the conversion of the Series A, Series B and Series C convertible redeemable preferred shares, and paid-in-kind dividends accrued but not issued on our Series A, Series B and Series C convertible redeemable preferred shares, into ordinary shares, and (iv) exercise of all outstanding options and warrants with an exercise price below our public offering price | $ | 2.28 | $ | 6.84 | ||||
Dilution in net tangible book value to new investors in this offering | $ | 3.05 | $ | 9.16 | ||||
51
Table of Contents
Ordinary Shares | Average | Average | ||||||||||||||||||||||
Purchased | Total Consideration | Price per | Price per | |||||||||||||||||||||
Number | Percentage | Amount | Percentage | Share | ADS | |||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||||||
Existing shareholders | 130,586,550 | 93.3 | % | $ | 342,300 | 87.3 | % | $ | 2.62 | $ | 7.86 | |||||||||||||
New investors | 9,375,000 | 6.7 | % | $ | 50,000 | 12.7 | % | $ | 5.33 | $ | 16.00 | |||||||||||||
Total | 139,961,550 | 100 | % | $ | 392,300 | 100 | % | |||||||||||||||||
Ordinary Shares | Average | Average | ||||||||||||||||||||||
Purchased | Total Consideration | Price per | Price per | |||||||||||||||||||||
Number | Percentage | Amount | Percentage | Share | ADS | |||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||||||
Existing shareholders | 154,497,961 | 89.2 | % | $ | 453,883 | 81.9 | % | $ | 2.94 | $ | 8.81 | |||||||||||||
New investors | 18,750,000 | 10.8 | % | $ | 100,000 | 18.1 | % | $ | 5.33 | $ | 16.00 | |||||||||||||
Total | 173,247,961 | 100 | % | $ | 553,883 | 100 | % | |||||||||||||||||
52
Table of Contents
53
Table of Contents
Renminbi per U.S. Dollar Noon Buying Rate | ||||||||||||||||
Period | Period End | Average(1) | Low | High | ||||||||||||
2004 | 8.2765 | 8.2768 | 8.2774 | 8.2764 | ||||||||||||
2005 | 8.0702 | 8.1826 | 8.2765 | 8.0702 | ||||||||||||
2006 | 7.8041 | 7.9579 | 8.0702 | 7.8041 | ||||||||||||
2007 | 7.2946 | 7.5806 | 7.8127 | 7.2946 | ||||||||||||
2008 | 6.8225 | 6.9193 | 7.2946 | 6.7800 | ||||||||||||
2009 | ||||||||||||||||
nine months ended September 30 | 6.8262 | 6.8306 | 6.8470 | 6.8176 | ||||||||||||
July | 6.8319 | 6.8317 | 6.8342 | 6.8300 | ||||||||||||
August | 6.8299 | 6.8323 | 6.8358 | 6.8299 | ||||||||||||
September | 6.8262 | 6.8277 | 6.8303 | 6.8247 | ||||||||||||
October | 6.8264 | 6.8267 | 6.8292 | 6.8248 | ||||||||||||
November | 6.8265 | 6.8271 | 6.8300 | 6.8255 | ||||||||||||
December | 6.8259 | 6.8275 | 6.8299 | 6.8244 |
(1) | Averages for a period are calculated by using the average of the exchange rates at the end of each month during the period. Monthly averages are calculated by using the average of the daily rates during the relevant period. |
54
Table of Contents
• | recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or | |
• | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
55
Table of Contents
56
Table of Contents
• | in November 2006, we raised $50.0 million through the sale of convertible notes in a private placement to institutional investors; |
• | in April 2007, we established a wholly owned subsidiary, Beijing A.B.C. Investment Consulting Co., Ltd. in Beijing, China, which provides management and other consulting services to our hydropower plants in China; |
• | in April 2007, we acquired Yunnan Huabang Electric Power Development Co., Ltd., which owns and operates the Binglangjiang I hydropower plant, with an installed capacity of 21.0 MW, and which has the right to complete construction of, and operate, the Binglangjiang II hydropower plant, with a design capacity of 20.0 MW, both in Yingjiang County, Dehong Prefecture, Yunnan province, for a total consideration of RMB50.0 million ($6.5 million). In addition, we made a cash advance to the company of RMB125.0 million ($16.2 million) in April 2007 prior to the completion of the acquisition. Binglangjiang is considered our predecessor company for SEC reporting purposes, as we acquired substantially all of the business of Binglangjiang and our own operations prior to that acquisition were insignificant compared to the operations of Binglangjiang; | |
• | in May 2007, we acquired, through an asset purchase, the Liyuan hydropower plant, a completed project with an installed capacity of 12.0 MW located in Cangxi County, Guangyuan City, Sichuan province, from Cangxi County Jianghe Hydroelectric Power Development Co., Ltd., for a purchase price of RMB77.0 million ($10.0 million) in cash. We established at that time Sichuan Huabang Hydroelectric Development Co., Ltd. to own and operate the plant; | |
• | in December 2007, we acquired a 50.0% equity interest in Yunhe County Shapulong Hydropower Generation Co., Ltd., which owns and operates the Shapulong hydropower plant, with an installed capacity of 25.0 MW, located in Yunhe County, Lishui City, Zhejiang province, for a purchase price of RMB33.0 million ($4.5 million) in cash. In August 2009, we acquired a 13.0% equity interest in the company for a purchase price of RMB8.6 million ($1.3 million) and a further 37.0% equity interest in the company for a purchase price of RMB21.0 million ($3.1 million); | |
• | in January 2008, we raised $150.0 million in a private placement of Series A convertible redeemable preferred shares to institutional investors; | |
• | in January 2008, we acquired Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd., which owns and operates the Yingchuan hydropower plant, with an installed capacity of 40.0 MW, located in Jingning County, Lishui City, Zhejiang province, for a total consideration of RMB304.0 million ($42.3 million), which was comprised of a cash purchase price of RMB291.4 million ($40.6 million) and a payment of RMB12.6 million ($1.8 million) to settle all of the liabilities of the company; | |
• | in January 2008, we acquired Qingtian Wuliting Hydroelectric Development Co., Ltd., which owns and operates the Wuliting hydropower plant, with an installed capacity of 42.0 MW, located in Qingtian County, Lishui City, Zhejiang province, for a purchase price of RMB342.1 million ($47.6 million), which was comprised of a cash purchase price of |
57
Table of Contents
RMB206.9 million ($28.8 million) and a payment of RMB135.3 million ($18.8 million) to settle all of the liabilities of the company; |
• | in January 2008, we acquired Suichang County Jiulongshan Hydroelectric Development Co., Ltd., which owns the Zhougongyuan hydropower plant, with a design capacity of 53.6 MW, located in Suichang County, Lishui City, Zhejiang province, for a purchase price of RMB157.3 million ($21.9 million) in cash. We were obligated to make a cash injection into the company of RMB250.0 million ($34.8 million) to complete the construction of the project under the original agreement; | |
• | in July 2008, we raised $101.0 million in a private placement of Series B convertible redeemable preferred shares to institutional investors; | |
• | in August 2008, we raised $28.0 million in a private placement of Series B convertible redeemable preferred shares to institutional investors; | |
• | in October 2008, we acquired a 90.0% equity interest in Sanming Zhongyin Banzhu Hydroelectric Co., Ltd., which owns and operates the Banzhu hydropower plant, with an installed capacity of 45.0 MW, located in Sanming City, Fujian province, for a purchase price of RMB134.2 million ($19.6 million) in cash. We were obligated to make a capital injection of RMB104.9 million ($15.4 million) to the company to finance its future operations after the acquisition, of which RMB21.2 million ($3.1 million) was made in March 2009, and the remaining capital injection of RMB83.7 million ($12.3 million) will be made in 2010. In addition, pursuant to a supplemental agreement with the shareholders at the time, Sanming Ruifeng Hydropower Investment Co., Ltd. and Yong’an Ruifeng Hydroelectric Ltd. were entitled to receive the RMB59.2 million ($8.7 million) of current assets, including cash and cash equivalents, accounts receivable and amounts due from related parties of Banzhu as of the acquisition date. Subsequently, in January 2009, Sanming Ruifeng Hydropower Investment Co., Ltd. agreed to forego RMB7.0 million ($1.0 million) of the current assets that Sanming Ruifeng Hydropower Investment Co., Ltd. is entitled to receive. In March 2009, we acquired the remaining 10.0% equity interest in this company for a purchase price of RMB17.0 million ($2.5 million) in cash; | |
• | in October 2008, we acquired a 90.0% equity interest in Pingnan County Wangkeng Hydroelectric Co., Ltd., which owns and operates the Wangkeng hydropower plant, with an installed capacity of 40.0 MW, located in Pingnan County, Ningde City, Fujian province, for a purchase price of RMB220.5 million ($32.3 million) in cash; | |
• | in October 2008, we acquired Pingnan County Yuanping Hydroelectric Co., Ltd., which owns and operates the Yuanping hydropower plant, with an installed capacity of 16.0 MW, located in Pingnan County, Ningde City, Fujian province, for a purchase price of RMB58.0 million ($8.5 million) in cash; | |
• | in October 2008, we acquired Pingnan County Yuheng Hydropower Co., Ltd., which owns and operates the Yuheng hydropower plant, with an installed capacity of 30.0 MW, located in Pingnan County, Ningde City, Fujian province, for a purchase price of RMB121.0 million ($17.7 million) in cash; |
• | in March 2009, Pingnan County Wangkeng Hydroelectric Co., Ltd, signed a RMB150.0 million ($22.0 million) loan agreement with Industrial Bank Co., Ltd., Ningde Branch to refinance the Wangkeng hydropower plant; |
• | in March 2009, Qingtian Wuliting Hydroelectric Development Co., Ltd, signed a RMB219.6 million ($32.2 million) loan agreement with Bank of China, Lishui City Dayang Sub-branch to refinance the Wuliting hydropower plant; |
• | in June 2009, Sanming Zhongyin Banzhu Hydroelectric Co., Ltd, signed a RMB294.9 million ($43.2 million) loan agreement with the Bank of China, Fujian Branch to refinance the Banzhu hydropower plant; |
58
Table of Contents
• | in June 2009, Suichang County Jiulongshan Hydroelectric Development Co., Ltd. signed a RMB216.0 million ($31.6 million) loan agreement and a RMB9.0 million ($1.3 million) loan agreement with the Agricultural Bank of China, Lishui Branch to refinance the Zhougongyuan hydropower plant; | |
• | in July 2009, we signed a memorandum of understandings with the Bank of China, Fujian Branch, pursuant to which the bank will provide 50.0% of financing required for the acquisition or refinancing of any hydropower plants acquired by us through an Investment Holding Company to be established by us in Fujian province; | |
• | in August 2009, we acquired Longquan Ruiyang Cascade II Hydroelectric Co., Ltd., which owns and operates the Ruiyang Hydropower plant, with an installed capacity of 32.0 MW, located in Xiaomei Township, Longquan City, Zhejiang province, for a purchase price of RMB160.0 million ($23.4 million) in cash; |
• | in September 2009, we signed a non-binding framework agreement with Sichuan Huashui Power Construction Engineering Co., Ltd. to jointly develop 40 small hydropower plants in Sichuan province totalling approximately 1,250.0 MW of design installed capacity, for which Sichuan Huashui Power Construction Engineering Co., Ltd. has the development right. The non-binding framework agreement with Sichuan Huashui Power Construction Engineering Co., Ltd. may result in the co-development of none or only a portion of the projects covered by this agreement and we do not believe our business is substantially dependent on this agreement. The terms of development with Sichuan Huashui Power Construction Engineering Co, Ltd. will be determined on a project-by-project basis; |
• | in October 2009, we signed a capital increase agreement with Henan Lan Tian Group Co., Ltd. to subscribe for a 79.0% equity interest in Henan Wuyue Storage Power Generation Co., Ltd., which owns the right to develop a 1,000.0 MW pumped storage project, located in Yinpeng Township, Guangshan County, Xinyang City, Henan province, for a purchase price of RMB162.5 million ($23.8 million) in cash. The completion of the capital increase transaction is pending government approval; |
• | in October 2009, we raised $20.0 million in a private placement of Series C convertible redeemable preferred shares to an institutional investor; and |
• | in December 2009, we completed a spin-off of Suichang County Jiulongshan Hydroelectric Development Co., Ltd., and established Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. |
59
Table of Contents
60
Table of Contents
61
Table of Contents
Binglangjiang (predecessor) | Our Company (successor) | ||||||||||||||||||||||||||||
Period from | July 10 | ||||||||||||||||||||||||||||
Year Ended | January 1 to | (inception) to | Year Ended | Nine Months | |||||||||||||||||||||||||
December 31, | April 24 | December 31, | December 31, | Ended September 30, | |||||||||||||||||||||||||
2006 | 2007 | 2006 | 2007 | 2008 | 2008 | 2009 | |||||||||||||||||||||||
(US$ in thousands, except share and per share data) | |||||||||||||||||||||||||||||
Consolidated Statements of Operations Data: | |||||||||||||||||||||||||||||
Revenues | 2,075 | 571 | — | 2,434 | 14,715 | 10,261 | 30,453 | ||||||||||||||||||||||
Cost of revenues | (691 | ) | (219 | ) | — | (813 | ) | (6,025 | ) | (3,539 | ) | (11,526 | ) | ||||||||||||||||
Gross profit | 1,384 | 352 | — | 1,621 | 8,690 | 6,722 | 18,927 | ||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
General and administrative expenses | (13 | ) | (23 | ) | (901 | ) | (2,560 | ) | (6,761 | ) | (4,134 | ) | (5,653 | ) | |||||||||||||||
Operating income (loss) | 1,371 | 329 | (901 | ) | (939 | ) | 1,929 | 2,588 | 13,274 | ||||||||||||||||||||
Other income and expenses: | |||||||||||||||||||||||||||||
Interest income | 1 | — | 340 | 1,051 | 1,340 | 970 | 444 | ||||||||||||||||||||||
Interest expenses | (914 | ) | (285 | ) | (873 | ) | (3,275 | ) | (5,847 | ) | (3,334 | ) | (10,239 | ) | |||||||||||||||
Change in fair value of derivative financial liabilities and warrant liability | — | — | — | (266 | ) | 420 | (1,521 | ) | (443 | ) | |||||||||||||||||||
Exchange loss | — | — | — | (1,095 | ) | (1,067 | ) | (1,760 | ) | (20 | ) | ||||||||||||||||||
Share of losses in an equity investee | — | — | — | (27 | ) | (503 | ) | (236 | ) | (70 | ) | ||||||||||||||||||
Other income, net | — | — | — | 8 | 144 | 116 | 2 | ||||||||||||||||||||||
Income (loss) before income tax expenses | 458 | 44 | (1,434 | ) | (4,543 | ) | (3,584 | ) | (3,177 | ) | 2,948 | ||||||||||||||||||
Income tax expenses | (19 | ) | (1 | ) | — | (17 | ) | (444 | ) | (477 | ) | (2,167 | ) | ||||||||||||||||
Consolidated net income (loss) | 439 | 43 | (1,434 | ) | (4,560 | ) | (4,028 | ) | (3,654 | ) | 781 | ||||||||||||||||||
Less: | |||||||||||||||||||||||||||||
Net (loss) income attributable to noncontrolling interests | — | — | — | — | (41 | ) | — | 18 | |||||||||||||||||||||
Net income (loss) attributable to China Hydroelectric Corporation shareholders | 439 | 43 | (1,434 | ) | (4,560 | ) | (3,987 | ) | (3,654 | ) | 763 | ||||||||||||||||||
Cumulative dividends on Series A convertible redeemable preferred shares | — | — | — | — | (14,680 | ) | (10,580 | ) | (13,828 | ) | |||||||||||||||||||
Cumulative dividends on Series B convertible redeemable preferred shares | — | — | — | — | (5,531 | ) | (2,234 | ) | (10,326 | ) | |||||||||||||||||||
Changes in redemption value of Series A convertible redeemable preferred shares | — | — | — | — | (10,569 | ) | (10,569 | ) | — | ||||||||||||||||||||
Changes in redemption value of Series B convertible redeemable preferred shares | — | — | — | — | (4,134 | ) | (4,134 | ) | — | ||||||||||||||||||||
Loss attributable to ordinary shareholders | — | — | (1,434 | ) | (4,560 | ) | (38,901 | ) | (31,171 | ) | (23,391 | ) | |||||||||||||||||
Basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per share | — | — | (0.34 | ) | (0.33 | ) | (2.50 | ) | (2.00 | ) | (1.51 | ) |
62
Table of Contents
Binglangjiang (predecessor) | Our Company (successor) | ||||||||||||||||||||||||||||
Period from | July 10 | ||||||||||||||||||||||||||||
Year Ended | January 1 to | (inception) to | Year Ended | Nine Months | |||||||||||||||||||||||||
December 31, | April 24 | December 31, | December 31, | Ended September 30, | |||||||||||||||||||||||||
2006 | 2007 | 2006 | 2007 | 2008 | 2008 | 2009 | |||||||||||||||||||||||
(US$ in thousands, except share and per share data) | |||||||||||||||||||||||||||||
Basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per ADS | — | — | (1.02 | ) | (0.99 | ) | (7.50 | ) | (6.00 | ) | (4.53 | ) | |||||||||||||||||
Weighted average ordinary shares used in basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per share computation | — | — | 4,230,822 | 13,817,466 | 15,554,416 | 15,558,698 | 15,541,666 | ||||||||||||||||||||||
Pro forma basic net (loss) income attributable to China Hydroelectric Corporation shareholders per share on an as converted basis | — | — | — | — | (0.07 | )(1) | — | 0.01 | (1) | ||||||||||||||||||||
Pro forma diluted net (loss) income attributable to China Hydroelectric Corporation shareholders per share on an as converted basis | — | — | — | — | (0.07 | )(1) | — | 0.01 | (1) | ||||||||||||||||||||
Shares used in pro forma basic net (loss) income attributable to China Hydroelectric Corporation shareholders per share computation | — | — | — | — | 55,415,130 | (1) | — | 116,635,592 | (1) | ||||||||||||||||||||
Shares used in pro forma diluted net (loss) income attributable to China Hydroelectric Corporation shareholders per share computation | — | — | — | — | 55,415,130 | (1) | — | 116,635,592 | (1) | ||||||||||||||||||||
Number of shares as adjusted to reflect changes in capital | * | * | — | — | 58,289,666 | (1) | — | 124,795,783 | (1) | ||||||||||||||||||||
Other Financial Data: | |||||||||||||||||||||||||||||
EBITDA, as adjusted(2) | * | * | (901 | ) | (320 | ) | 6,474 | 5,470 | 21,940 | ||||||||||||||||||||
* | Not provided, as the information relates to the results of operations of Binglangjiang prior to its acquisition by us. |
(1) | This calculation of pro forma basic and diluted loss per share for the year ended December 31, 2008 and pro forma basic and diluted income per share for the nine months ended September 30, 2009 assumes that all Series A convertible redeemable preferred shares and Series B convertible redeemable preferred shares were converted into ordinary shares on January 1, 2008 and January 1, 2009, respectively. The number of shares as adjusted to reflect changes in capital for the year ended December 31, 2008 includes the outstanding ordinary shares of 15,541,666 and the 23,529,286 and 19,218,714 ordinary shares to be issued upon conversion the Series A convertible redeemable preferred shares and the Series B convertible redeemable preferred shares, respectively, including the conversion of the Series A convertible redeemable preferred shares and Series B convertible redeemable preferred shares to be paid in kind but not yet issued as of December 31, 2008. The number of shares as adjusted to reflect changes in capital for the nine months ended September 30, 2009 includes the outstanding ordinary shares of 15,541,666 and the 60,315,610 and 48,938,507 ordinary shares to be issued upon conversion of the Series A convertible redeemable preferred shares and the Series B convertible redeemable preferred shares, respectively, including the conversion of dividends accrued on the Series A convertible redeemable preferred shares and Series B convertible redeemable preferred shares to be paid in kind but not yet issued as of September 30, 2009, based on a sale price of each ADS in the offering at $14.8. |
(2) | See “Operating and Financial Review and Prospects — Results of Operations — EBITDA, as adjusted” for a reconciliation of this non-GAAP number. |
63
Table of Contents
Binglangjiang | Our Company (successor) | |||||||||||||||||||||||
(predecessor) | Pro Forma | |||||||||||||||||||||||
As of | Balance Sheet | |||||||||||||||||||||||
December 31, | As of December 31, | As of September 30, | at September 30, | |||||||||||||||||||||
2006 | 2006 | 2007 | 2008 | 2009 | 2009 | |||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | 142 | 628 | 15,606 | 38,693 | 23,787 | 23,787 | ||||||||||||||||||
Restricted cash | — | 50,340 | — | — | — | — | ||||||||||||||||||
Accounts receivable, net | 152 | — | 329 | 3,137 | 12,230 | 12,230 | ||||||||||||||||||
Deferred tax assets | — | — | — | 1,166 | 551 | 551 | ||||||||||||||||||
Amount due from related parties | 64 | 33 | 25 | 13 | 13 | 13 | ||||||||||||||||||
Debt issuance costs | — | — | 47 | — | — | — | ||||||||||||||||||
Amounts due from an equity investee | — | — | 287 | 4,534 | — | — | ||||||||||||||||||
Prepayments and other current assets | 206 | — | 3,269 | 9,437 | 6,621 | 6,621 | ||||||||||||||||||
Total current assets | 564 | 51,001 | 19,563 | 56,980 | 43,202 | 43,202 | ||||||||||||||||||
Debt issuance costs | — | 975 | — | — | — | — | ||||||||||||||||||
Investment in an equity investee | — | — | 4,721 | 4,295 | — | — | ||||||||||||||||||
Deferred initial public offering costs | — | — | — | 6,032 | 9,574 | — | ||||||||||||||||||
Property, plant and equipment, net | 16,752 | — | 29,046 | 365,190 | 427,941 | 427,941 | ||||||||||||||||||
Intangible assets, net | — | — | 3,008 | 3,666 | 4,556 | 4,556 | ||||||||||||||||||
Goodwill | — | — | 2,773 | 96,533 | 107,768 | 107,768 | ||||||||||||||||||
Deferred tax assets | — | — | — | — | 1,022 | 1,022 | ||||||||||||||||||
Other non-current assets | — | — | — | 872 | 777 | 777 | ||||||||||||||||||
Total non-current assets | 16,752 | 975 | 39,548 | 476,588 | 551,638 | 542,064 | ||||||||||||||||||
Total assets | 17,316 | 51,976 | 59,111 | 533,568 | 594,840 | 585,266 | ||||||||||||||||||
Total current liabilities | 2,392 | 850 | 14,436 | 77,285 | 55,576 | 55,576 | ||||||||||||||||||
Long-term loans | 13,831 | — | 10,269 | 138,133 | 217,418 | 217,418 | ||||||||||||||||||
Deferred tax liabilities | — | — | — | 13,415 | 18,761 | 18,761 | ||||||||||||||||||
Other non-current liabilities | — | — | — | 568 | 103 | 103 | ||||||||||||||||||
Long-term notes | — | 50,285 | — | — | — | — | ||||||||||||||||||
Convertible redeemable preferred shares | — | — | — | 299,236 | 323,390 | — | ||||||||||||||||||
Total China Hydroelectric Corporation shareholders’ equity (deficit) | 1,093 | 841 | 34,406 | 4,181 | (21,247 | ) | 292,569 | |||||||||||||||||
Noncontrolling interests | — | — | — | 750 | 839 | 839 | ||||||||||||||||||
Total liabilities and shareholders’ equity (deficit) | 17,316 | 51,976 | 59,111 | 533,568 | 594,840 | 585,266 | ||||||||||||||||||
Note: | The unaudited proforma Balance Sheet as of September 30, 2009 has been prepared based on the assumed conversion of the convertible redeemable preferred shares. |
Binglangjiang (predecessor) | Our Company (successor) | |||||||||||||||||||||||
As of and for | As of and | |||||||||||||||||||||||
As of and for | the period | for the year ended | For the Nine Months Ended | |||||||||||||||||||||
the year ended | from January 1 | December 31, | September 30, | |||||||||||||||||||||
December 31, 2006 | to April 24, 2007 | 2007 | 2008 | 2008 | 2009 | |||||||||||||||||||
Selected Operating Data:(1) | ||||||||||||||||||||||||
Installed capacity (MW) | 21.0 | 21.0 | 58.0 | (2) | 271.0 | (2) | 140.0 | (2) | 376.6 | (2) | ||||||||||||||
Electricity sold (kWh) | 106,646,530 | 23,495,595 | 108,303,945 | (3) | 333,964,005 | (3) | 227,777,504 | (3) | 667,417,349 | (3) | ||||||||||||||
Effective tariff (RMB/kWh)(4) | 0.164 | 0.200 | 0.180 | (3) | 0.330 | (3) | 0.335 | (3) | 0.344 | (3) |
64
Table of Contents
(1) | For Binglangjiang, operating data given are for the periods stated. For our company, operating data given are for our period of ownership of the hydropower plants during the periods indicated. | |
(2) | Our aggregate installed capacity information presented in this prospectus includes, as of December 31, 2007 and September 30, 2008, the installed capacity of Shapulong, as of December 31, 2008, the installed capacities of Shapulong, Banzhu and Wangkeng, and as of September 30, 2009, the installed capacity of Wangkeng, although as of such respective dates, our equity interest in Shapulong, Banzhu and Wangkeng were 50.0%, 90.0% and 90.0%, respectively. We acquired the remaining 10.0% interest in Banzhu in March 2009. | |
(3) | Electricity sold and effective tariff information for the year ended December 31, 2007 does not reflect electricity sold by Shapulong. Electricity sold and effective tariff information for the year ended December 31, 2008 and the nine months ended September 30, 2008 does not reflect electricity sold by Shapulong or Yuanping. Our 50.0% equity interest in Shapulong is accounted for using the equity method of accounting and our proportionate share of Shapulong’s net loss is included as a share of losses in equity investees, in our consolidated statement of operations. In the years ended December 31, 2007 and 2008 and the nine months ended September 30, 2008 and 2009, Shapulong sold 43,292,057 kWh, 42,308,157 kWh, 35,448,040 kWh and 33,825,312 kWh of electricity, respectively. We acquired the remaining 50.0% equity interest in Shapulong in August 2009. Although Yuanping commenced operations in March 2007 and has transmitted electricity to the power grid controlled by the Fujian Ningde Electric Power Bureau, that transmission was made without a fixed or pre-determined tariff per kWh until late June 2009. Therefore, cash received in exchange for the transmission of electricity to the power grid before late June 2009 was recorded as customer deposits. Accordingly, no revenues were recorded by Yuanping in the year ended December 31, 2008. However, related cost of revenues was not deferred, and was charged to expense as incurred. All of the customer deposits received from the date of our acquisition of Yuanping to late June 2009 were recognized as revenue when the regional pricing bureau confirmed a minimum tariff in late June 2009. We only recognize revenue for customer deposits recorded subsequent to the acquisition of Yuanping after the per kWh tariff became fixed or determinable. In August 2009, the Ningde Pricing Bureau, the regional pricing bureau in Fujian province, approved a unit price per kWh of RMB0.29, inclusive of VAT, for electricity transmitted by Yuanping to the power grid controlled and owned by the provincial grid company prior to July 8, 2009. The unit price per kWh of RMB0.29 will continue to be in effect until the regional pricing bureau approves a new unit price per kWh. In the years ended December 31, 2007 and 2008 and the nine months ended September 30, 2008 and 2009, Yuanping transmitted 30,071,595 kWh, 38,393,478 kWh, 35,115,884 kWh and 40,397,885 kWh of electricity, respectively. | |
(4) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
65
Table of Contents
Yingchuan | Wuliting | |||||||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||
2006 | 2007 | 2006 | 2007 | |||||||||||||||||||||||||
(RMB in thousands) | ||||||||||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||||||||||
Revenues | 38,925 | 42,998 | — | 27,532 | ||||||||||||||||||||||||
Cost of revenues | (13,204 | ) | (12,174 | ) | — | (15,244 | ) | |||||||||||||||||||||
Gross profit | 25,721 | 30,824 | — | 12,288 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
General and administrative expenses | (1,699 | ) | (1,485 | ) | (115 | ) | (1,064 | ) | ||||||||||||||||||||
Operating profit (loss) | 24,022 | 29,339 | (115 | ) | 11,224 | |||||||||||||||||||||||
Interest income | 14 | 13 | — | 5 | ||||||||||||||||||||||||
Interest expenses | (8,166 | ) | (8,817 | ) | — | (28,887 | ) | |||||||||||||||||||||
Other income | — | 67 | — | (290 | ) | |||||||||||||||||||||||
Other expenses | — | — | — | — | ||||||||||||||||||||||||
Income (loss) before income tax expenses | 15,870 | 20,602 | (115 | ) | (17,948 | ) | ||||||||||||||||||||||
Income tax expenses | 85 | (7,604 | ) | (208 | ) | — | ||||||||||||||||||||||
Net income (loss) | 15,955 | 12,998 | (323 | ) | (17,948 | ) | ||||||||||||||||||||||
Selected Operating Data:(1) | ||||||||||||||||||||||||||||
Installed capacity (MW) | 40.0 | 40.0 | — | 42.0 | ||||||||||||||||||||||||
Electricity sold (kWh) | 97,116,588 | 102,700,957 | — | 65,423,294 | ||||||||||||||||||||||||
Effective tariff (RMB/kWh)(2) | 0.425 | 0.444 | — | 0.446 |
(1) | Operating data given are for the periods stated. | |
(2) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
66
Table of Contents
Banzhu | Wangkeng | |||||||||||||||||||||||||||||||
Nine Months | Nine Months | |||||||||||||||||||||||||||||||
Year Ended | Ended | Year Ended | Ended | |||||||||||||||||||||||||||||
December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||||||
2006 | 2007 | 2007 | 2008 | 2006 | 2007 | 2007 | 2008 | |||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||||||
(RMB in thousands) | ||||||||||||||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||||||||||||||
Revenues | 55,561 | 52,029 | 45,551 | 40,780 | 40,242 | 31,475 | 28,132 | 31,138 | ||||||||||||||||||||||||
Cost of revenues | (23,765 | ) | (23,915 | ) | (17,904 | ) | (20,061 | ) | (14,004 | ) | (13,897 | ) | (9,156 | ) | (8,235 | ) | ||||||||||||||||
Gross profit | 31,796 | 28,114 | 27,647 | 20,719 | 26,238 | 17,578 | 18,976 | 22,903 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
General and administrative expenses | (6,122 | ) | (6,748 | ) | (4,954 | ) | (5,282 | ) | (3,868 | ) | (4,355 | ) | (3,041 | ) | (3,542 | ) | ||||||||||||||||
Gain (loss) on sale of property, plant and equipment, net | 197 | 1,112 | 20 | 2,168 | — | — | — | (746 | ) | |||||||||||||||||||||||
Operating profit | 25,871 | 22,478 | 22,713 | 17,605 | 22,370 | 13,223 | 15,935 | 18,615 | ||||||||||||||||||||||||
Interest income | 71 | 24 | 20 | 14 | 233 | 34 | 22 | 6 | ||||||||||||||||||||||||
Interest expenses | (18,817 | ) | (19,626 | ) | (14,499 | ) | (15,674 | ) | (9,664 | ) | (10,758 | ) | (7,819 | ) | (8,647 | ) | ||||||||||||||||
Foreign exchange gain | 1,314 | 1,733 | 1,082 | 1,416 | — | — | — | — | ||||||||||||||||||||||||
Interest income from related parties | 1,114 | 2,240 | 1,321 | 2,801 | — | — | — | — | ||||||||||||||||||||||||
Gain on the disposal of investment in equity investee | — | — | — | — | 1,033 | — | — | — | ||||||||||||||||||||||||
Non-operating income (expenses) | 128 | (2 | ) | (5 | ) | (25 | ) | (1,178 | ) | (156 | ) | (24 | ) | (169 | ) | |||||||||||||||||
Income before income tax expenses | 9,681 | 6,847 | 10,632 | 6,137 | 12,794 | 2,343 | 8,114 | 9,805 | ||||||||||||||||||||||||
Income tax expenses | (3,234 | ) | (4,789 | ) | (7,443 | ) | (1,625 | ) | (1,052 | ) | (197 | ) | 3 | (2,755 | ) | |||||||||||||||||
Loss from operations of discontinued subsidiary, net of income tax expenses for 2007 and 2008 | — | — | — | — | — | — | — | (207 | ) | |||||||||||||||||||||||
Net income | 6,447 | 2,058 | 3,189 | 4,512 | 11,742 | 2,146 | 8,117 | 6,843 | ||||||||||||||||||||||||
Selected Operating Data:(1) | ||||||||||||||||||||||||||||||||
Installed capacity (MW) | 45.0(2 | ) | 45.0(2 | ) | 45.0(2 | ) | 45.0(2 | ) | 40.0(3 | ) | 40.0(3 | ) | 40.0(3 | ) | 40.0(3 | ) | ||||||||||||||||
Electricity sold (kWh) | 180,461,022(2 | ) | 169,092,862(2 | ) | 148,039,608(2 | ) | 132,514,006(2 | ) | 151,882,677(3 | ) | 118,792,231(3 | ) | 106,174,059(3 | ) | 116,772,194(3 | ) | ||||||||||||||||
Effective tariff (RMB/kWh)(4) | 0.360 | 0.360 | 0.360 | 0.360 | 0.310 | 0.310 | 0.310 | 0.310 |
(1) | Operating data given are for the periods stated and is given for the actual plant, rather than the portion attributable to our equity interest. | |
(2) | We have held a 100.0% equity interest in Banzhu since March 2009, but only held a 90.0% equity interest in Banzhu prior to that. On an equity interest basis, we were proportionately entitled to 162,414,920 kWh, 152,183,576 kWh, 133,235,647 kWh and 119,262,605 kWh of electricity sold for 2006, 2007, the nine months ended September 30, 2007 and the nine months ended September 30, 2008, respectively. Installed capacity information for Banzhu reflects the actual installed capacity of Banzhu. | |
(3) | We hold a 90.0% equity interest in Wangkeng. On an equity interest basis, we were proportionately entitled to 136,694,409 kWh, 106,913,008 kWh, 95,556,653 kWh and 105,094,975 kWh of electricity sold for 2006, 2007, the nine months ended September 30, 2007 and the nine months ended September 30, 2008, respectively. Installed capacity information for Wangkeng reflects the actual installed capacity of Wangkeng. | |
(4) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
67
Table of Contents
Yuanping | Yuheng | |||||||||||||||||||||||
Period from | Period from | |||||||||||||||||||||||
Nine Months | May 18 | January 1 | ||||||||||||||||||||||
Year Ended | Ended | (inception) to | to | |||||||||||||||||||||
December 31, | September 30, | December 31, | October 20, | |||||||||||||||||||||
2006 | 2007 | 2007 | 2008 | 2007 | 2008 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(RMB in thousands) | ||||||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||||||
Revenues | — | — | — | — | 12,963 | 19,547 | ||||||||||||||||||
Cost of revenues | — | (4,665 | ) | (2,980 | ) | (5,088 | ) | (5,307 | ) | (8,016 | ) | |||||||||||||
Gross profit | — | (4,665 | ) | (2,980 | ) | (5,088 | ) | 7,656 | 11,531 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
General and administrative expenses | (1,398 | ) | (2,135 | ) | (931 | ) | (493 | ) | (824 | ) | (1,011 | ) | ||||||||||||
Operating profit (loss) | (1,398 | ) | (6,800 | ) | (3,911 | ) | (5,581 | ) | 6,832 | 10,520 | ||||||||||||||
Interest income | — | — | — | — | 742 | 530 | ||||||||||||||||||
Interest expenses | — | (4,209 | ) | (2,647 | ) | (5,199 | ) | (8,138 | ) | (10,152 | ) | |||||||||||||
Income (loss) before income tax expenses | (1,398 | ) | (11,009 | ) | (6,558 | ) | (10,780 | ) | (564 | ) | 898 | |||||||||||||
Income tax expenses | — | — | — | — | (1,585 | ) | (532 | ) | ||||||||||||||||
Net income (loss) | (1,398 | ) | (11,009 | ) | (6,558 | ) | (10,780 | ) | (2,149 | ) | 366 | |||||||||||||
Selected Operating Data:(1) | ||||||||||||||||||||||||
Installed capacity (MW) | — | 16.0 | 16.0 | 16.0 | 30.0 | 30.0 | ||||||||||||||||||
Electricity sold (kWh) | — | 30,071,595 | (2) | 23,755,804 | (2) | 35,115,884 | (2) | 54,955,750 | 82,893,211 | |||||||||||||||
Effective tariff (RMB/kWh)(4) | — | 0.221 | (2) | 0.221 | (2) | 0.221 | (2) | 0.181 | (3) | 0.181 | (3) |
(1) | Operating data given are for the periods stated. | |
(2) | While Yuanping had no revenues for the periods presented, electricity sold and effective tariff is calculated based on electricity transmitted and customer deposits received in exchange for the transmission of electricity. | |
(3) | Excludes revenues recognized from the amortization of an unfavorable contract obligation. | |
(4) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
68
Table of Contents
69
Table of Contents
• | the audited consolidated financial statements of China Hydroelectric Corporation, as of December 31, 2006, for the period from July 10, 2006 (inception) to December 31, 2006 and as of and for the years ended December 31, 2007 and 2008 (successor); | |
• | the unaudited interim condensed consolidated financial statements of China Hydroelectric Corporation as of September 30, 2009 and for the nine months ended September 30, 2008 and 2009; | |
• | the audited financial statements of Yunnan Huabang Electric Power Development Co., Ltd. (Binglangjiang) as of and for the year ended December 31, 2006 and the statements of operations and cash flows for the period from January 1, 2007 to April 24, 2007 (predecessor); | |
• | the audited financial statements of Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. (Yingchuan) as of and for the years ended December 31, 2006 and 2007; | |
• | the audited financial statements of Qingtian Wuliting Hydroelectric Development Co., Ltd. (Wuliting) as of and for the years ended December 31, 2006 and 2007; |
70
Table of Contents
• | the audited financial statements of Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. (Banzhu) as of and for the years ended December 31, 2006 and 2007 and the unaudited interim condensed balance sheet as of September 30, 2008 and unaudited interim condensed statements of operations and cash flows for the nine months ended September 30, 2007 and 2008; | |
• | the audited financial statements of Pingnan County Wangkeng Hydroelectric Co., Ltd. (Wangkeng) as of and for the years ended December 31, 2006 and 2007 and the unaudited interim condensed consolidated balance sheet as of September 30, 2008, unaudited interim condensed statement of operations and cash flows for the nine months ended September 30, 2007 and 2008; | |
• | the audited financial statements of Pingnan County Yuanping Hydroelectric Co., Ltd. (Yuanping) as of and for the years ended December 31, 2006 and 2007 and the unaudited interim condensed balance sheet as of September 30, 2008 and unaudited interim condensed statements of operations and cash flows for the nine months ended September 30, 2007 and 2008; and | |
• | the audited balance sheet of Pingnan County Yuheng Hydropower Co., Ltd (Yuheng) as of December 31, 2007 and October 20, 2008, and the audited statements of operations and cash flows for the period from May 18, 2007 (inception) to December 31, 2007 and the period from January 1, 2008 to October 20, 2008. |
71
Table of Contents
72
Table of Contents
• | tariffs; | |
• | hydrological conditions; | |
• | production efficiency of our hydropower plants; | |
• | expansion through strategic acquisitions; | |
• | availability and cost of debt financing; and | |
• | depreciation of property, plant and equipment and amortization of intangible assets. |
73
Table of Contents
74
Table of Contents
• | maintaining a good working relationship with the grid’s dispatch control team, with whom our hydropower plant managers communicate on a daily basis; | |
• | providing technical cooperation and support to the local grid, by sharing hydrology and operations data; and | |
• | conducting thorough and accurate forecasts of our hydropower generation capacity and management of water flows to supply power as and when required by the local grid. |
75
Table of Contents
76
Table of Contents
• | the reported amounts of our assets and liabilities; | |
• | the disclosure of our contingent assets and liabilities at the end of each reporting period; and | |
• | the reported amounts of revenue and expenses during each reporting period. |
• | our selection of critical accounting policies; | |
• | the judgment and other uncertainties affecting the application of such policies; and | |
• | the sensitivity of reported results to changes in conditions and assumptions. |
77
Table of Contents
78
Table of Contents
79
Table of Contents
• | the expected future volatility of our ordinary share prices; | |
• | the risk-free interest rate; | |
• | the expected dividend yield; and | |
• | the estimated fair value of our ordinary and preferred shares at the Warrant Issue Date. |
• | our financial and operating results; | |
• | the assumptions and basis of our financial projections; | |
• | the nature of our business since our inception; | |
• | the stage of development of our operations; | |
• | our business plan; | |
• | our business risks; |
80
Table of Contents
• | the nature and prospects of the hydroelectric power industries in China; | |
• | the global economic outlook in general and the specific economic and competitive elements affecting our business, industry and market; and | |
• | the market-derived investment returns of entities engaged in the hydroelectric power businesses. |
81
Table of Contents
• | the expected future volatility of our ordinary share price; | |
• | the risk-free interest rate; | |
• | the expected dividend yield; | |
• | the expected employee share option exercise behavior; | |
• | the expected forfeiture rate; and | |
• | the estimated fair value of our ordinary shares at the grant date. |
• | our financial and operating results; | |
• | the assumptions and basis of our financial projections; | |
• | the nature of our business since our inception; | |
• | the stage of development of our operations; | |
• | our business plan; | |
• | our business risks; | |
• | the nature and prospects of the hydroelectric power industries in China; |
82
Table of Contents
• | the global economic outlook in general and the specific economic and competitive elements affecting our business, industry and market; and | |
• | the market-derived investment returns of entities engaged in the hydroelectric power businesses. |
83
Table of Contents
• | Our increase in earning capability through continual acquisitions. Our valuation as of March 4, 2009 included hydropower plants of Binlangjiang, Liyuan, Yingchuan, Wuliting, Zhougongyuan, Shapulong, Banzhu, Yuanping, Yuheng and Wangkeng. Subsequently in August 2009, we completed the acquisition of Ruiyang. The acquisition of Ruiyang increased our valuation as of September 30, 2009. In October 2009, we entered into an agreement to subscribe for a 79% equity interest in Henan Wuyue Storage Power Generation Co., Ltd., and such project was not reflected in our valuation as of September 30, 2009. With the proceeds from this offering, we expect to continue to acquire hydroelectric operating companies and assets for the development of new hydropower projects in China and for working capital and other purposes. We expect the new projects will further strengthen our future cash flows and these cash flows have been incorporated into our estimated public offering price range, while the increase is expected to be partially offset by an increase in debt financing and dilution effect of issued preferred shares on our ordinary shares; | |
• | Overall favorable market sentiment toward China-based publicly traded shares based on NASDAQ China Index increased from 101 on March 4, 2009 to 172 on September 30, 2009 and further increased to 180 on December 4, 2009. Hang Seng China Enterprises Index increased from 6,948 on March 4, 2009 to 11,858 on September 30, 2009 and further increased to 13,462 on December 4, 2009. Also, the Shanghai Stock Exchange Composite Index has also increased from 2,198 on March 4, 2009 to 2,779 on September 30, 2009 and further increased to 3,317 on December 4, 2009; |
• | In October, 2009, we raised $20.0 million in a private placement of Series C convertible redeemable preferred shares. We expect our successful listing will allow us to have easier access to the capital markets in terms of fund raising activities, including equity financing and bank borrowing with lower cost of financing, and hence, increase our enterprise value; and |
• | The marketability of our ordinary shares after this offering will provide increased liquidity for our shares, leading to a higher equity value, which we also expect to contribute to an increase in our enterprise value. |
84
Table of Contents
85
Table of Contents
• | identifying and hiring additional personnel with U.S. GAAP and SEC reporting experience; | |
• | providing training to our finance personnel to improve their knowledge of U.S. GAAP and SEC reporting requirements; | |
• | holding regular meetings of the audit committee and ensuring regular communication between the committee and our independent registered public accounting firm; | |
• | establishing an internal audit function; | |
• | establishing anonymous whistleblower systems for reporting violations of our governance policies, including policies regarding internal controls; |
86
Table of Contents
• | putting in place a centralized financial reporting software system in our headquarters, management centers and operating plants; and | |
• | engaging external professional consultants to assess the entity level internal controls over financial reporting using the COSO internal control framework. We have also begun to formulate policies relating to internal control over financial reporting, including the preparation of a comprehensive accounting policies and procedures manual, containing, among other things, detailed, expanded closing checklists, to guide our financial personnel in addressing significant accounting issues and assist them in preparing financial statements in compliance with U.S. GAAP and SEC requirements. |
July 10 | ||||||||||||||||||||
(inception) to | Year Ended | |||||||||||||||||||
December 31, | December 31, | Nine Months Ended September 30, | ||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||
Revenues | — | 2,434 | 14,715 | 10,261 | 30,453 | |||||||||||||||
Cost of revenues | — | (813 | ) | (6,025 | ) | (3,539 | ) | (11,526 | ) | |||||||||||
Gross profit | — | 1,621 | 8,690 | 6,722 | 18,927 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
General and administrative expenses | (901 | ) | (2,560 | ) | (6,761 | ) | (4,134 | ) | (5,653 | ) | ||||||||||
Operating (loss) income | (901 | ) | (939 | ) | 1,929 | 2,588 | 13,274 | |||||||||||||
Interest income | 340 | 1,051 | 1,340 | 970 | 444 | |||||||||||||||
Interest expenses | (873 | ) | (3,275 | ) | (5,847 | ) | (3,334 | ) | (10,239 | ) | ||||||||||
Change in fair value of derivative financial liabilities and warrant liability | — | (266 | ) | 420 | (1,521 | ) | (443 | ) | ||||||||||||
Exchange loss | — | (1,095 | ) | (1,067 | ) | (1,760 | ) | (20 | ) | |||||||||||
Share of losses in an equity investee | — | (27 | ) | (503 | ) | (236 | ) | (70 | ) | |||||||||||
Other income, net | — | 8 | 144 | 116 | 2 | |||||||||||||||
(Loss) income before income tax expenses | (1,434 | ) | (4,543 | ) | (3,584 | ) | (3,177 | ) | 2,948 | |||||||||||
Income tax expenses | — | (17 | ) | (444 | ) | (477 | ) | (2,167 | ) | |||||||||||
Consolidated net (loss) income | (1,434 | ) | (4,560 | ) | (4,028 | ) | (3,654 | ) | 781 | |||||||||||
Net (loss) income attributable to noncontrolling interest | — | — | (41 | ) | — | 18 | ||||||||||||||
Net (loss) income attributable to China Hydroelectric Corporation shareholders | (1,434 | ) | (4,560 | ) | (3,987 | ) | (3,654 | ) | 763 | |||||||||||
87
Table of Contents
Year Ended | Year Ended | Nine Months | ||||||||||
December 31, | December 31, | Ended September 30, | ||||||||||
2007 | 2008 | 2009 | ||||||||||
% of Revenues | ||||||||||||
Yunnan Dehong Electric Power Co., Ltd. | 71 | 19 | 7 | |||||||||
Sichuan Cangxi Electric Power Co., Ltd. | 29 | 7 | 3 | |||||||||
Lishui Electric Power Bureau | — | 65 | 50 | |||||||||
Fujian Electric Power Co., Ltd. | — | 7 | 28 | |||||||||
Pingnan Power Supply Company | — | 2 | 12 | |||||||||
Total | 100 | 100 | 100 | |||||||||
88
Table of Contents
89
Table of Contents
90
Table of Contents
July 10 | For the Nine | |||||||||||||||||||
(inception) to | Year Ended | Months Ended | ||||||||||||||||||
December 31, | December 31, | September 30 | ||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||
Net (loss) income | (1,434 | ) | (4,560 | ) | (3,987 | ) | (3,654 | ) | 763 | |||||||||||
Interest expense, net | 533 | 2,224 | 4,507 | 2,364 | 9,795 | |||||||||||||||
Other non-cash charges including exchange loss and change in fair value of derivative financial liabilities and warrant liability | — | 1,361 | 647 | 3,281 | 463 | |||||||||||||||
Income tax expenses | — | 17 | 444 | 477 | 2,167 | |||||||||||||||
Depreciation of property, plant and equipment, net | — | 572 | 4,755 | 2,922 | 8,609 | |||||||||||||||
Amortization of intangible assets | — | 66 | 108 | 80 | 143 | |||||||||||||||
EBITDA, as adjusted | (901 | ) | (320 | ) | 6,474 | 5,470 | 21,940 | |||||||||||||
Three Months Ended | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
2009 | 2009 | 2009 | ||||||||||
(US$ in thousands) | ||||||||||||
Revenues | 4,593 | 12,853 | 13,007 | |||||||||
Cost of revenues | (2,791 | ) | (4,224 | ) | (4,511 | ) | ||||||
Gross profit | 1,802 | 8,629 | 8,496 | |||||||||
Operating expenses | ||||||||||||
General and administrative expenses | (1,735 | ) | (1,687 | ) | (2,231 | ) | ||||||
Operating income | 67 | 6,942 | 6,265 | |||||||||
Interest income | 219 | 106 | 119 | |||||||||
Interest expenses | (2,720 | ) | (3,613 | ) | (3,906 | ) | ||||||
Change in fair value of derivative financial liabilities and warrant liability | (179 | ) | (211 | ) | (53 | ) | ||||||
Exchange loss | (4 | ) | (9 | ) | (7 | ) | ||||||
Share of (losses) gains in an equity investee | (150 | ) | 75 | 5 | ||||||||
Other (expenses) income, net | — | (3 | ) | 5 | ||||||||
91
Table of Contents
Three Months Ended | ||||||||||||
March 31, | June 30, | September 30, | ||||||||||
2009 | 2009 | 2009 | ||||||||||
(US$ in thousands) | ||||||||||||
(Loss) income before income tax expenses | (2,767 | ) | 3,287 | 2,428 | ||||||||
Income tax benefits (expenses) | 427 | (1,521 | ) | (1,073 | ) | |||||||
Consolidated net (loss) income | (2,340 | ) | 1,766 | 1,355 | ||||||||
Less: | ||||||||||||
Net (loss) income attributable to noncontrolling interests | (94 | ) | 54 | 58 | ||||||||
Net (loss) income attributable to shareholders | (2,246 | ) | 1,712 | 1,297 | ||||||||
Selected Operating Data:(1) | ||||||||||||
Installed capacity (MW) | 271.0 | (1) | 324.6 | (1) | 376.6(1 | ) | ||||||
Electricity sold (kWh) | 101,771,212 | (2) | 273,963,789 | (2) | 291,682,348(2 | ) | ||||||
Effective tariff (RMB/kWh)(3) | 0.354 | (2) | 0.343 | (2) | 0.342(2 | ) |
(1) | Our aggregate installed capacity information includes, as of March 31, 2009, the installed capacity of Shapulong and Wangkeng, as of June 30, 2009, the installed capacity of Shapulong and Wangkeng, and as of September 30, 2009, the installed capacity of Wangkeng, although as of such respective dates, our equity interest in Shapulong and Wangkeng were 50.0% and 90.0%, respectively. | |
(2) | Although Yuanping commenced operations in March 2007 and has transmitted electricity to the power grid controlled by the Fujian Ningde Electric Power Bureau, that transmission was made without a fixed orpre-determined tariff per kWh until late June 2009. Therefore, cash received in exchange for the transmission of electricity to the power grid before late June 2009 was recorded as customer deposits. However, related cost of revenues was not deferred, and was charged to expense as incurred. All of the customer deposits received from the date of our acquisition of Yuanping to late June 2009 were recognized as revenue when the regional pricing bureau confirmed a minimum tariff in late June 2009. We only recognize revenue for customer deposits recorded subsequent to the acquisition of Yuanping after the per kWh tariff became fixed or determinable. In August 2009, the Ningde Pricing Bureau, the regional pricing bureau in Fujian province, approved a unit price per kWh of RMB0.29, inclusive of VAT, for electricity transmitted by Yuanping to the power grid controlled and owned by the provincial grid company prior to July 8, 2009. The unit price per kWh of RMB0.29 will continue to be in effect until the regional pricing bureau approves a new unit price per kWh. In the three months ended March 31, 2009 and June 30, 2009, Yuanping transmitted 5,789,850 kWh and 16,162,080 kWh of electricity, respectively. | |
(3) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for the detailed calculations of effective tariff. |
92
Table of Contents
93
Table of Contents
94
Table of Contents
95
Table of Contents
96
Table of Contents
97
Table of Contents
98
Table of Contents
99
Table of Contents
100
Table of Contents
Yunnan | Sichuan | Zhejiang | Fujian | |||||||||||||||||||||||||
province | province | province | province | Unallocated | Eliminations | Consolidated | ||||||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||||||||||
For the nine months ended September 30, 2008 | ||||||||||||||||||||||||||||
Revenues | 1,939 | 676 | 7,646 | — | — | — | 10,261 | |||||||||||||||||||||
Net income (loss) | 689 | (11 | ) | 1,546 | — | (5,878 | ) | — | (3,654 | ) | ||||||||||||||||||
Total assets as of September 30, 2008 | 40,195 | 17,828 | 233,412 | — | 314,346 | (193,231 | ) | 412,550 | ||||||||||||||||||||
For the nine months ended September 30, 2009 | ||||||||||||||||||||||||||||
Revenues | 2,153 | 793 | 15,260 | 12,247 | — | — | 30,453 | |||||||||||||||||||||
Net income (loss) | 940 | 241 | 2,855 | 1,091 | (4,364 | ) | — | 763 | ||||||||||||||||||||
Total assets as of September 30, 2009 | 44,987 | 14,782 | 365,952 | 215,834 | 341,254 | (387,969 | ) | 594,840 |
Yunnan | Sichuan | Zhejiang | Fujian | |||||||||||||||||||||||||
province | province | province | province | Unallocated | Eliminations | Consolidated | ||||||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||||||||||
Revenues | 2,746 | 971 | 9,635 | 1,363 | — | — | 14,715 | |||||||||||||||||||||
Cost of revenues | (1,120 | ) | (478 | ) | (4,598 | ) | (1,025 | ) | — | 1,196 | (6,025 | ) | ||||||||||||||||
General and administrative expenses | (245 | ) | (223 | ) | (567 | ) | (210 | ) | (5,516 | ) | — | (6,761 | ) | |||||||||||||||
Interest income | 359 | 84 | 18 | 5 | 877 | (3 | ) | 1,340 | ||||||||||||||||||||
Interest expenses | (361 | ) | — | (3,519 | ) | (1,514 | ) | (456 | ) | 3 | (5,847 | ) | ||||||||||||||||
Change in fair value of derivative financial liabilities and warrant liability | — | — | — | — | 420 | — | 420 | |||||||||||||||||||||
Exchange (loss) gain | (269 | ) | 172 | (165 | ) | (2 | ) | (803 | ) | — | (1,067 | ) | ||||||||||||||||
Share of losses in an equity investee | — | — | — | — | (503 | ) | — | (503 | ) | |||||||||||||||||||
Other income, net | (3 | ) | 1 | (6 | ) | (5 | ) | 1,353 | (1,196 | ) | 144 | |||||||||||||||||
Income tax (expenses) benefit | (171 | ) | 9 | (447 | ) | 165 | — | — | (444 | ) | ||||||||||||||||||
Minority interests | — | — | — | 41 | — | — | 41 | |||||||||||||||||||||
Net income (loss) | 936 | 536 | 351 | (1,182 | ) | (4,628 | ) | — | (3,987 | ) | ||||||||||||||||||
101
Table of Contents
Yunnan | Sichuan | |||||||||||||||||||
province | province | Unallocated | Eliminations | Consolidated | ||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||
Revenues | 1,719 | 715 | — | — | 2,434 | |||||||||||||||
Cost of revenues | (500 | ) | (288 | ) | (25 | ) | — | (813 | ) | |||||||||||
General and administrative expenses | (159 | ) | (110 | ) | (2,291 | ) | — | (2,560 | ) | |||||||||||
Interest income | 147 | 50 | 854 | — | 1,051 | |||||||||||||||
Interest expenses | (684 | ) | — | (2,591 | ) | — | (3,275 | ) | ||||||||||||
Change in fair value of derivative financial liabilities | — | — | (266 | ) | — | (266 | ) | |||||||||||||
Exchange loss | (714 | ) | (359 | ) | (22 | ) | — | (1,095 | ) | |||||||||||
Share of losses in equity investee | — | — | (27 | ) | — | (27 | ) | |||||||||||||
Other income | 8 | — | — | — | 8 | |||||||||||||||
Income tax expenses | — | (8 | ) | (9 | ) | — | (17 | ) | ||||||||||||
Net loss | (183 | ) | — | (4,377 | ) | — | (4,560 | ) | ||||||||||||
102
Table of Contents
103
Table of Contents
July 10, 2006 | Nine Months Ended | |||||||||||||||||||
(Inception) to | Year Ended December 31, | September 30, | ||||||||||||||||||
December 31, 2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
Net cash (used in) provided by operating activities | (515 | ) | (4,263 | ) | 2,370 | (3,007 | ) | (2,273 | ) | |||||||||||
Net cash (used in) provided by investing activities | (50,340 | ) | 26,540 | (221,408 | ) | (140,867 | ) | (45,929 | ) | |||||||||||
Net cash (used in) provided by financing activities | 51,483 | (7,426 | ) | 242,341 | 249,621 | 33,243 | ||||||||||||||
Effect of changes in exchange rate on cash | — | 127 | (216 | ) | (683 | ) | 53 | |||||||||||||
Net increase (decrease) in cash and cash equivalents | 628 | 14,978 | 23,087 | 105,064 | (14,906 | ) | ||||||||||||||
104
Table of Contents
105
Table of Contents
106
Table of Contents
Payment Due by Period | ||||||||||||||||||||
Within | 1-3 | 3-5 | More than | |||||||||||||||||
Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||
Short-term borrowings(1) | 8,781 | 8,781 | — | — | — | |||||||||||||||
Interest on short-term borrowings(1) | 248 | 248 | — | — | — | |||||||||||||||
Long-term borrowings (including current portion of long-term borrowings)(1) | 167,170 | 29,037 | 51,441 | 36,883 | 49,809 | |||||||||||||||
Interest on long-term borrowings (including interest on current portion of long-term borrowings)(1) | 49,398 | 12,363 | 18,467 | 11,337 | 7,231 | |||||||||||||||
Operating lease commitments | 805 | 403 | 402 | — | — | |||||||||||||||
Purchase obligations(2) | 7,899 | 7,888 | 11 | — | — | |||||||||||||||
Total | 234,301 | 58,720 | 70,321 | 48,220 | 57,040 | |||||||||||||||
(1) | See Note 14 to our audited consolidated financial statements, which are included elsewhere in this prospectus, for a discussion of our short-term and long-term borrowings. | |
(2) | This represents contracted but unpaid amounts for construction projects for the Binglangjiang II and the Zhougongyuan hydropower plants that were currently under construction as of December 31, 2008. |
Payment Due by Period | ||||||||||||||||||||
Period from | ||||||||||||||||||||
September 30, | 1-3 Years | 3-5 Years | More than | |||||||||||||||||
2009 to | from | from | 5 Years | |||||||||||||||||
December 31, | December 31, | December 31, | from December 31, | |||||||||||||||||
Total | 2009 | 2009 | 2009 | 2009 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(US$ in thousands) | ||||||||||||||||||||
Short-term borrowings(1) | 7,097 | — | 7,097 | — | — | |||||||||||||||
Interest on short-term borrowings(1) | 160 | 64 | 96 | — | — | |||||||||||||||
Long-term borrowings (including current portion of long-term borrowings)(1) | 237,963 | 13,106 | 82,574 | 82,911 | 59,372 | |||||||||||||||
Interest on long-term borrowings (including interest on current portion of long-term borrowings)(1) | 61,753 | 3,564 | 34,457 | 18,473 | 5,259 | |||||||||||||||
Operating lease commitments | 666 | 171 | 495 | — | — | |||||||||||||||
Purchase obligations | — | — | — | — | — | |||||||||||||||
Total | 307,639 | 16,905 | 124,719 | 101,384 | 64,631 | |||||||||||||||
(1) | See Note 17 to our unaudited interim condensed consolidated financial statements, which are included elsewhere in this prospectus, for a discussion of our short-term and long-term borrowings. |
107
Table of Contents
108
Table of Contents
Period from | ||||||||
Year Ended | January 1 to | |||||||
December 31, 2006 | April 24, 2007 | |||||||
(US$ in thousands) | ||||||||
Revenues | 2,075 | 571 | ||||||
Cost of revenues | (691 | ) | (219 | ) | ||||
Gross profit | 1,384 | 352 | ||||||
Operating expenses: | ||||||||
General and administrative expenses | (13 | ) | (23 | ) | ||||
Total operating expenses | (13 | ) | (23 | ) | ||||
Operating profit | 1,371 | 329 | ||||||
Interest income | 1 | — | ||||||
Interest expenses | (914 | ) | (285 | ) | ||||
Income before income tax expenses | 458 | 44 | ||||||
Income tax expenses | (19 | ) | (1 | ) | ||||
Net income | 439 | 43 | ||||||
109
Table of Contents
110
Table of Contents
Period from | ||||||||
Year Ended | January 1 to | |||||||
December 31, 2006 | April 24, 2007 | |||||||
(US$ in thousands) | ||||||||
Net cash provided by operating activities | 989 | 293 | ||||||
Net cash used in investing activities | (196 | ) | (306 | ) | ||||
Net cash (used in) provided by financing activities | (982 | ) | 16,042 | |||||
Effect of changes in exchange rate on cash | 7 | — | ||||||
Net (decrease) increase in cash and cash equivalents | (182 | ) | 16,029 | |||||
111
Table of Contents
112
Table of Contents
113
Table of Contents
114
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
(RMB in thousands) | ||||||||
Revenues | 38,925 | 42,998 | ||||||
Cost of revenues | (13,204 | ) | (12,174 | ) | ||||
Gross profit | 25,721 | 30,824 | ||||||
Operating expenses: | ||||||||
General and administrative expenses | (1,699 | ) | (1,485 | ) | ||||
Total operating expenses | (1,699 | ) | (1,485 | ) | ||||
Operating profit | 24,022 | 29,339 | ||||||
Interest income | 14 | 13 | ||||||
Interest expenses | (8,166 | ) | (8,817 | ) | ||||
Other income | — | 67 | ||||||
Income before income tax expenses | 15,870 | 20,602 | ||||||
Income tax benefits (expenses) | 85 | (7,604 | ) | |||||
Net income | 15,955 | 12,998 | ||||||
115
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
(RMB in thousands) | ||||||||
Net cash provided by operating activities | 27,479 | 24,134 | ||||||
Net cash used in financing activities | (27,541 | ) | (24,286 | ) | ||||
Net decrease in cash and cash equivalents | (62 | ) | (152 | ) | ||||
116
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
(RMB in thousands) | ||||||||
Revenues | — | 27,532 | ||||||
Cost of revenues | — | (15,244 | ) | |||||
Gross profit | — | 12,288 | ||||||
Operating expenses: | ||||||||
General and administrative expenses | (115 | ) | (1,064 | ) | ||||
Total operating expenses | (115 | ) | (1,064 | ) | ||||
117
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
(RMB in thousands) | ||||||||
Operating profit (loss) | (115 | ) | 11,224 | |||||
Interest income | — | 5 | ||||||
Interest expenses | — | (28,887 | ) | |||||
Other expenses | — | (290 | ) | |||||
Loss before income tax expenses | (115 | ) | (17,948 | ) | ||||
Income tax expenses | (208 | ) | — | |||||
Net loss | (323 | ) | (17,948 | ) | ||||
118
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
(RMB in thousands) | ||||||||
Net cash used in operating activities | (6,902 | ) | (611 | ) | ||||
Net cash used in investing activities | (90,763 | ) | (36,269 | ) | ||||
Net cash provided by financing activities | 96,600 | 36,700 | ||||||
Net decrease in cash and cash equivalents | (1,065 | ) | (180 | ) | ||||
119
Table of Contents
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2007 | 2007 | 2008 | |||||||||||||
(unaudited) | ||||||||||||||||
(RMB in thousands) | ||||||||||||||||
Revenues | 55,561 | 52,029 | 45,551 | 40,780 | ||||||||||||
Cost of revenues | (23,765 | ) | (23,915 | ) | (17,904 | ) | (20,061 | ) | ||||||||
Gross profit | 31,796 | 28,114 | 27,647 | 20,719 | ||||||||||||
Operating (expenses) income: | ||||||||||||||||
General and administrative expenses | (6,122 | ) | (6,748 | ) | (4,954 | ) | (5,282 | ) | ||||||||
Gain on sale of property, plant and equipment | 197 | 1,112 | 20 | 2,168 | ||||||||||||
Total operating expenses | (5,925 | ) | (5,636 | ) | (4,934 | ) | (3,114 | ) | ||||||||
Operating profit | 25,871 | 22,478 | 22,713 | 17,605 | ||||||||||||
Interest income | 71 | 24 | 20 | 14 | ||||||||||||
Interest expenses | (18,817 | ) | (19,626 | ) | (14,499 | ) | (15,674 | ) | ||||||||
Foreign exchange gain | 1,314 | 1,733 | 1,082 | 1,416 | ||||||||||||
Interest income from related parties | 1,114 | 2,240 | 1,321 | 2,801 | ||||||||||||
Non-operating income (expenses) | 128 | (2 | ) | (5 | ) | (25 | ) | |||||||||
Income before income tax expenses | 9,681 | 6,847 | 10,632 | 6,137 | ||||||||||||
Income tax expenses | (3,234 | ) | (4,789 | ) | (7,443 | ) | (1,625 | ) | ||||||||
Net income | 6,447 | 2,058 | 3,189 | 4,512 | ||||||||||||
120
Table of Contents
121
Table of Contents
122
Table of Contents
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2007 | 2007 | 2008 | |||||||||||||
(unaudited) | ||||||||||||||||
(RMB in thousands) | ||||||||||||||||
Net cash provided by (used in) operating activities | 24,872 | (18,431 | ) | (8,234 | ) | 29,239 | ||||||||||
Net cash provided by (used in) investing activities | (1,206 | ) | (506 | ) | (2,135 | ) | 2,401 | |||||||||
Net cash provided by (used in) financing activities | (28,047 | ) | 19,548 | 22,157 | (26,790 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | (4,381 | ) | 611 | 11,788 | 4,850 | |||||||||||
123
Table of Contents
124
Table of Contents
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2007 | 2007 | 2008 | |||||||||||||
(unaudited) | ||||||||||||||||
(RMB in thousands) | ||||||||||||||||
Revenues | 40,242 | 31,475 | 28,132 | 31,138 | ||||||||||||
Cost of revenues | (14,004 | ) | (13,897 | ) | (9,156 | ) | (8,235 | ) | ||||||||
Gross profit | 26,238 | 17,578 | 18,976 | 22,903 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative expenses | (3,868 | ) | (4,355 | ) | (3,041 | ) | (3,542 | ) | ||||||||
Loss on the disposal of property, plant and equipment, net | — | — | — | (746 | ) | |||||||||||
Total operating expenses | (3,868 | ) | (4,355 | ) | (3,041 | ) | (4,288 | ) | ||||||||
Operating profit | 22,370 | 13,223 | 15,935 | 18,615 | ||||||||||||
Interest income | 233 | 34 | 22 | 6 | ||||||||||||
Interest expenses | (9,664 | ) | (10,758 | ) | (7,819 | ) | (8,647 | ) | ||||||||
Gain on the disposal of investment in equity investee | 1,033 | — | — | — | ||||||||||||
Non-operating expense | (1,178 | ) | (156 | ) | (24 | ) | (169 | ) | ||||||||
Income before income tax expenses | 12,794 | 2,343 | 8,114 | 9,805 | ||||||||||||
Income tax benefit (expenses) | (1,052 | ) | (197 | ) | 3 | (2,755 | ) | |||||||||
Loss from operations of discontinued subsidiary, net of income tax expenses of nil for 2007 and 2008 | — | — | — | (207 | ) | |||||||||||
Net income | 11,742 | 2,146 | 8,117 | 6,843 | ||||||||||||
125
Table of Contents
126
Table of Contents
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2007 | 2007 | 2008 | |||||||||||||
(unaudited) | ||||||||||||||||
(RMB in thousands) | ||||||||||||||||
Net cash provided by operating activities | 6,328 | 12,494 | 4,597 | 10,103 | ||||||||||||
Net cash provided by (used in) investing activities | 619 | (4,616 | ) | (1,275 | ) | (6,657 | ) | |||||||||
Net cash provided by (used in) financing activities | 7,540 | (22,140 | ) | (3,690 | ) | 2,750 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 14,487 | (14,262 | ) | (368 | ) | 6,196 | ||||||||||
127
Table of Contents
128
Table of Contents
Year Ended | Nine Months Ended | |||||||||||||||
December 31, | September 30, | |||||||||||||||
2006 | 2007 | 2007 | 2008 | |||||||||||||
(unaudited) | ||||||||||||||||
(RMB in thousands) | ||||||||||||||||
Revenues | — | — | — | — | ||||||||||||
Cost of revenues | — | (4,665 | ) | (2,980 | ) | (5,088 | ) | |||||||||
Gross loss | — | (4,665 | ) | (2,980 | ) | (5,088 | ) | |||||||||
Operating expenses: | ||||||||||||||||
General and administrative expenses | (1,398 | ) | (2,135 | ) | (931 | ) | (493 | ) | ||||||||
Total operating expenses | (1,398 | ) | (2,135 | ) | (931 | ) | (493 | ) | ||||||||
Operating loss | (1,398 | ) | (6,800 | ) | (3,911 | ) | (5,581 | ) | ||||||||
Interest expenses | — | (4,209 | ) | (2,647 | ) | (5,199 | ) | |||||||||
Loss before income tax expenses | (1,398 | ) | (11,009 | ) | (6,558 | ) | (10,780 | ) | ||||||||
Income tax expenses | — | — | — | — | ||||||||||||
Net loss | (1,398 | ) | (11,009 | ) | (6,558 | ) | (10,780 | ) | ||||||||
129
Table of Contents
130
Table of Contents
131
Table of Contents
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2007 | 2007 | 2008 | |||||||||||||
(unaudited) | ||||||||||||||||
(RMB in thousands) | ||||||||||||||||
Net cash provided by (used in) operating activities | (8,502 | ) | 426 | 5,745 | 3,678 | |||||||||||
Net cash provided by (used in) investing activities | (95,053 | ) | (22,005 | ) | (5,020 | ) | (5,342 | ) | ||||||||
Net cash provided by (used in) financing activities | 96,800 | 20,500 | — | 800 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (6,755 | ) | (1,079 | ) | 725 | (864 | ) | |||||||||
132
Table of Contents
Period from May 18 | ||||||||
(inception) | Period from January 1 | |||||||
to December 31, 2007 | to October 20, 2008 | |||||||
(RMB in thousands) | ||||||||
Revenues | 12,963 | 19,547 | ||||||
Cost of revenues | (5,307 | ) | (8,016 | ) | ||||
Gross profit | 7,656 | 11,531 | ||||||
Operating expenses: | ||||||||
General and administrative expenses | (824 | ) | (1,011 | ) | ||||
Total operating expenses | (824 | ) | (1,011 | ) | ||||
Operating profit | 6,832 | 10,520 | ||||||
Interest income | 742 | 530 | ||||||
Interest expenses | (8,138 | ) | (10,152 | ) | ||||
Income (loss) before income tax expenses | (564 | ) | 898 | |||||
Income tax expenses | (1,585 | ) | (532 | ) | ||||
Net (loss) income | (2,149 | ) | 366 | |||||
133
Table of Contents
134
Table of Contents
135
Table of Contents
Period from May 18 | Period from | |||||||
(inception) | January 1 | |||||||
to December 31, 2007 | to October 20, 2008 | |||||||
(RMB in thousands) | ||||||||
Net cash provided by (used in) operating activities | (33,371 | ) | 9,563 | |||||
Net cash (used in) investing activities | (133,337 | ) | (38,454 | ) | ||||
Net cash provided by financing activities | 166,850 | 30,150 | ||||||
Net increase in cash and cash equivalents | 142 | 1,259 | ||||||
136
Table of Contents
137
Table of Contents
Percentage | ||||||||||||||
Principal Place | of | Date of | Purchase | |||||||||||
of Operations | Ownership | Acquisition | Consideration | |||||||||||
(US$ in thousands) | ||||||||||||||
Yingchuan | Zhejiang province | 100 | % | January 31, 2008 | 42,579 | |||||||||
Wuliting | Zhejiang province | 100 | % | January 31, 2008 | 48,387 | |||||||||
Wangkeng | Fujian province | 90 | % | October 21, 2008 | 32,394 | |||||||||
Yuheng | Fujian province | 100 | % | October 21, 2008 | 17,813 | |||||||||
Banzhu | Fujian province | 90 | % | October 22, 2008 | 19,729 | |||||||||
Yuanping | Fujian province | 100 | % | October 22, 2008 | 8,578 |
Percentage | ||||||||||||||
Principal Place | of | Date of | Purchase | |||||||||||
of Operations | Ownership | Acquisition | Consideration | |||||||||||
(US$ in thousands) | ||||||||||||||
Banzhu | Fujian province | 10 | % | March 17, 2009 | 2,490 |
138
Table of Contents
(Amounts in thousands of U.S. dollar (“US$”), except number of shares and per share data)
Zhejiang | Fujian | |||||||||||||||||||||
province | province | |||||||||||||||||||||
CHC | for the period | for the period | ||||||||||||||||||||
for the year | from January 1, | from January 1, | ||||||||||||||||||||
ended | 2008 to the | 2008 to the | ||||||||||||||||||||
December 31, | acquisition date | acquisition date | ||||||||||||||||||||
2008 | (Note 1) | (Note 1) | Adjustments | Notes | Pro Forma | |||||||||||||||||
Revenues | 14,715 | 127 | 13,376 | — | 28,218 | |||||||||||||||||
Cost of revenues | (6,025 | ) | (252 | ) | (6,491 | ) | 663 | 2(a) | (12,105 | ) | ||||||||||||
Gross profit (loss) | 8,690 | (125 | ) | 6,885 | 663 | 16,113 | ||||||||||||||||
Operating (expenses) income | ||||||||||||||||||||||
General and administrative expenses | (6,761 | ) | 64 | (5,498 | ) | — | (12,195 | ) | ||||||||||||||
Gain on deposal of property, plant and equipment | — | — | 186 | — | 186 | |||||||||||||||||
Total operating (expenses) income | (6,761 | ) | 64 | (5,312 | ) | — | (12,009 | ) | ||||||||||||||
Operating income (loss) | 1,929 | (61 | ) | 1,573 | 663 | 4,104 | ||||||||||||||||
Interest income | 1,340 | — | 502 | — | 1,842 | |||||||||||||||||
Interest expenses | (5,847 | ) | (324 | ) | (6,074 | ) | — | (12,245 | ) | |||||||||||||
Change in fair value of derivative financial liabilities and warrant liability | 420 | — | — | (382 | ) | 2(d) | 38 | |||||||||||||||
Exchange (loss) gain | (1,067 | ) | — | 194 | — | (873 | ) | |||||||||||||||
Share of losses in an equity investee | (503 | ) | — | — | — | (503 | ) | |||||||||||||||
Other income (expenses), net | 144 | (60 | ) | (42 | ) | — | 42 | |||||||||||||||
(Loss) income from continuing operations before income tax expenses and minority interests | (3,584 | ) | (445 | ) | (3,847 | ) | 281 | (7,595 | ) | |||||||||||||
Income tax (expenses) benefits | (444 | ) | — | 423 | (146 | ) | 2(b) | (167 | ) | |||||||||||||
Net income (loss) before minority interests | (4,028 | ) | (445 | ) | (3,424 | ) | 135 | (7,762 | ) | |||||||||||||
Minority interests in loss (income) of consolidated subsidiaries | 41 | — | — | (89 | ) | 2(c) | (48 | ) | ||||||||||||||
Income (loss) from continuing operations | (3,987 | ) | (445 | ) | (3,424 | ) | 46 | (7,810 | ) | |||||||||||||
Basic and diluted loss per share | (0.26 | ) | (0.50 | ) | ||||||||||||||||||
Weighted average ordinary shares used in basic and diluted loss per share computation | 15,554,416 | 15,554,416 |
139
Table of Contents
(Amounts in thousands of U.S. dollar (“$”), except number of shares and per share data)
1. | BASIS OF PRO FORMA PRESENTATION |
Zhejiang province for the period | ||||||||||||
from January 1, 2008 to the acquisition date | ||||||||||||
Yingchuan | Wuliting | Total | ||||||||||
Revenues | 9 | 118 | 127 | |||||||||
Cost of revenues | (51 | ) | (201 | ) | (252 | ) | ||||||
Gross (loss) | (42 | ) | (83 | ) | (125 | ) | ||||||
Operating income (expenses) | ||||||||||||
General and administrative expenses | 77 | (13 | ) | 64 | ||||||||
Total operating income (expenses) | 77 | (13 | ) | 64 | ||||||||
Operating income (loss) | 35 | (96 | ) | (61 | ) | |||||||
Interest expenses | (74 | ) | (250 | ) | (324 | ) | ||||||
Other expenses, net | (60 | ) | — | (60 | ) | |||||||
Loss from continuing operations before income tax expenses and minority interests | (99 | ) | (346 | ) | (445 | ) | ||||||
Income tax (expenses) benefits | — | — | — | |||||||||
Loss from continuing operations | (99 | ) | (346 | ) | (445 | ) | ||||||
140
Table of Contents
Fujian province for the period | ||||||||||||||||||||
from January 1, 2008 to the acquisition date | ||||||||||||||||||||
Wangkeng | Yuheng | Banzhu | Yuanping | Total | ||||||||||||||||
Revenues | 4,600 | 2,766 | 6,010 | — | 13,376 | |||||||||||||||
Cost of revenues | (1,277 | ) | (1,134 | ) | (3,255 | ) | (825 | ) | (6,491 | ) | ||||||||||
Gross profit (loss) | 3,323 | 1,632 | 2,755 | (825 | ) | 6,885 | ||||||||||||||
Operating (expenses) income | ||||||||||||||||||||
General and administrative expenses | (495 | ) | (143 | ) | (4,935 | ) | 75 | (5,498 | ) | |||||||||||
(Loss) Gain on disposal of property, plant, and equipment | (121 | ) | — | 307 | — | 186 | ||||||||||||||
Total operating (expenses) income | (616 | ) | (143 | ) | (4,628 | ) | 75 | (5,312 | ) | |||||||||||
Operating income (loss) | 2,707 | 1,489 | (1,873 | ) | (750 | ) | 1,573 | |||||||||||||
Interest income | 1 | 75 | 426 | — | 502 | |||||||||||||||
Interest expenses | (1,363 | ) | (1,437 | ) | (2,450 | ) | (824 | ) | (6,074 | ) | ||||||||||
Exchange gain | — | — | 194 | — | 194 | |||||||||||||||
Other expenses, net | (37 | ) | — | (5 | ) | — | (42 | ) | ||||||||||||
Income (loss) before income tax expenses and minority interests | 1,308 | 127 | (3,708 | ) | (1,574 | ) | (3,847 | ) | ||||||||||||
Income tax (expenses) benefits | (388 | ) | (75 | ) | 886 | — | 423 | |||||||||||||
Income (Loss) from continuing operations | 920 | 52 | (2,822 | ) | (1,574 | ) | (3,424 | ) | ||||||||||||
2. | PRO FORMA ADJUSTMENTS |
141
Table of Contents
142
Table of Contents
143
Table of Contents
Electricity | ||||||||||||||||
Electricity Output1 | Year-on-Year Growth2 | Consumption1 | Year-on-Year Growth2 | |||||||||||||
(TWh) | (%) | (TWh) | (%) | |||||||||||||
2000 | 1,355.6 | 9.4 | % | 1,347.1 | 9.5 | % | ||||||||||
2001 | 1,471.7 | 8.6 | % | 1,463.4 | 8.6 | % | ||||||||||
2002 | 1,640.5 | 11.5 | % | 1,633.2 | 11.6 | % | ||||||||||
2003 | 1,910.6 | 16.5 | % | 1,903.2 | 16.5 | % | ||||||||||
2004 | 2,203.3 | 15.3 | % | 2,197.1 | 15.4 | % | ||||||||||
2005 | 2,500.2 | 13.5 | % | 2,494.0 | 13.5 | % | ||||||||||
2006 | 2,865.7 | 14.6 | % | 2,858.8 | 14.6 | % | ||||||||||
2007 | 3,281.6 | 14.5 | % | 3,271.2 | 14.4 | % | ||||||||||
2008 | 3,433.43 | 5.2 | %3 | 3,426.83 | 5.2 | %3 |
Units: | MW = megawatt, GW = gigawatt, TW = terawatt, TWh = terawatts hours; 1 TW = 1,000 GW = 1,000,000 MW |
1 | Source: China Statistical Yearbooks 2002 to 2008 (presenting data for the years 2000 to 2007) |
2 | According to our calculations based on data presented in China Statistical Yearbooks 2002 to 2008 |
3 | Source: State Electricity Regulatory Commission |
144
Table of Contents
Source: | U.S. Geological Survey |
145
Table of Contents
Economically | ||||||||||||||||||||
Region | Exploitable Resources | Installed Capacity | Ratio | |||||||||||||||||
(MW) | (%) | (MW) | (%) | (%) | ||||||||||||||||
North | 72,687.5 | 18.1 | 23,759.9 | 18.1 | 32.7 | |||||||||||||||
Southwest | 256,033.6 | 63.7 | 52,548.4 | 40.1 | 20.5 | |||||||||||||||
Central and Southeast | 73,075.7 | 18.2 | 54,671.9 | 41.7 | 74.8 | |||||||||||||||
Total | 401,796.8 | 100.0 | 130,980.2 | 100.0 | 32.6 | |||||||||||||||
146
Table of Contents
• | Increasing per capita consumption of electricity. China has been one of the fastest growing major economies in the world, and such growth has significantly increased income levels and purchasing power per capita in China, which leads to increasing demand for energy, particularly electricity, according to Frost & Sullivan and Datamonitor. The increase of income levels and purchasing power per capita in China has contributed to stronger demand for electronic products such as televisions, refrigerators and air-conditioners, which in turn increases the total electricity consumption level, according to Frost & Sullivan. According to NationMaster, China’s consumption of electricity was 2,179.5 kWh per capita in 2006, compared to 7,702.0 kWh per capita for Japan, 9,593.6 kWh per capita for Taiwan and 12,343.1 kWh per capita for the United States. |
147
Table of Contents
• | Favorable government policies. The PRC government has adopted policies to promote the generation and use of clean and renewable energy, including hydropower, which are particularly favorable to small hydropower plants. Hydropower, as a renewable energy, has also been granted the highest priority for power dispatch by the PRC central government. In the dispatch sequence, hydropower comes after solar and before nuclear power, gas-fired power, coal-fired power, and oil-fired power. See “Regulation.” Local governments also promote investment in or acquisition of hydropower plants, particularly small ones. Moreover, China seeks in the long-term to have the same tariff apply to all types of electricity dispatched on the same grid. If this policy goal is achieved, the hydropower tariffs in China should reach the same levels as that of thermal power. See “Regulation”. | |
• | Ready supply of peak power and opportunities for load shifting. Hydropower plants may begin power dispatch immediately upon request from the grid, whereas thermal power plants require a start-up period of up to one day to begin generation. As a result, hydropower plants are well-suited to supply peak power, which in many provinces commands a higher tariff than off-peak power. Water pumped storage facilities provide a system for reliably storing power for use during peak demand. Furthermore, water pumped storage facilities and other hydropower plants, in combination with ultra high voltage transmission systems, allow for load shifting over great distances. | |
• | Increasing environmental concern. China is seeking to significantly reduce its carbon emissions by 2020, in part by reducing its reliance on coal-fueled power plants and factories. As the PRC gains in affluence, its people have increasingly focused on environmental issues, so that reduction of emissions now enjoys both government and public support. We believe public and government support for environmental protection will aid the expansion of hydropower and other renewable energy sources in China. | |
• | Potential to exploit hydropower resources. China has an abundance of water resources that can be utilized for hydroelectric generation. However, China was utilizing only 19% of its economically exploitable hydropower resources as of 2005, compared to 67% for Canada and 42% for Brazil, according to our calculations based on data provided by the World Energy Council. |
• | Continued availability of high quality equipment. China now has low-cost and high-quality engineering, design, equipment supply and construction capability for the hydropower industry. |
• | Potential to generate carbon trading revenue streams. Hydropower operators are able to secure benefits from their hydropower projects under the Clean Development Mechanism, or the CDM, scheme in line with the United Nations Framework Convention on Climate Change of 1994, or the Kyoto Protocol. Under the Kyoto Protocol, CDM allows industrialized countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions, including hydropower plants, in developing countries as an alternative to more expensive emission reduction in their own countries. The availability of these credits is helping to drive the establishment of new hydropower plants in China by eligible PRC-controlled companies. |
• | Lack of financing for small projects. Although government policy encourages lending to hydropower plants, independent operators without significant capital may have difficulty in obtaining financing for their projects. Financing is in general on a short-term basis in the form of bank loans, and renewal of those loans may sometimes be difficult. | |
• | Fragmented market. The hydropower market in China, and in particular the small hydropower market, is characterized by local players with a limited portfolio of assets. These operators necessarily suffer from operating inefficiencies when compared to regional, national and international power providers. We believe China’s large power providers and other consolidators |
148
Table of Contents
such as our company will increasingly respond to this opportunity by purchasing small hydropower assets. |
• | Uneven water supply. Uneven distribution of precipitation in China limits water resources in certain regions, particularly in the north. The uneven precipitation over time also can make river flow vary dramatically within one year from rainy season to dry season, as well as from year to year, or even over longer periods through continuous dry years or wet years. Large reservoirs could be built to regulate river flows but require significant investment and could involve resettlement of large populations. | |
• | Social and environmental costs. Hydropower expansion is also constrained by the issues of population resettlement and negative impact on the environment. Except where low-head run-of-the-river power plants are feasible and economical, hydropower requires the building of dams and reservoirs, which inundate land, displace residents, and affect the ecosystem. The benefits of future hydropower development in China will be weighed against the corresponding ecological and social costs. |
149
Table of Contents
150
Table of Contents
151
Table of Contents
152
Table of Contents
153
Table of Contents
154
Table of Contents
• | completed projectsrefer to projects that are built and in operation; | |
• | projects under constructionrefer to projects that are being built and are not yet in operation; | |
• | approved projectsrefer to projects that have received the approvals, permits and licenses necessary for construction to commence; and | |
• | greenfield projectsrefer to projects that lack one or more construction permits and have not begun construction. |
A | — Run-of-the-river diversion dam. The typical feature of this type of hydropower plant is that a water diversion structure (dam) spans a river and water is conveyed to a powerhouse via a water conveyance facility, which is a tunnel, pipeline, or a combination of the two. The rate of water flow to the powerhouse is equal to the natural rate of flow in the river. | |
B | — Low head run-of-the-river. The typical feature of this type of hydropower plant is that a dam spans a river, a powerhouse with low head turbine generator(s) is incorporated into the diversion structure, and water flowing through the powerhouse is released back into the river at the dam. The rate of water flow to the powerhouse is equal to the natural rate of flow in the river. | |
C | — Impoundment dam reservoir. The typical feature of this type of hydropower plant is that a water diversion structure (dam) spans a river and water is conveyed to a powerhouse via a water conveyance facility, which is a tunnel, pipeline, or a combination of the two. The rate of water flow to the powerhouse is not equal to the natural rate of flow in the river, as water is impounded |
155
Table of Contents
or stored at the dam site in a reservoir. This storage provides flexibility in energy production so that it can be dispatched in line with demand. |
D | — Pumped storage. The essential feature of this type of hydropower plant is a powerhouse with reversible pump hydraulic turbine generators connected by a water conveyance facility to an upper and a lower reservoir. The water is transferred between the two reservoirs, pumped from the lower to the upper reservoir (consuming power) during off-peak periods of surplus grid power and released from the upper to the lower reservoir (producing power) during peak periods of grid deficit. |
Electricity Sold (kWh) | Effective Utilization Rate (%)(11) | |||||||||||||||||||||||||||||||||||||
Nine | Nine | |||||||||||||||||||||||||||||||||||||
Actual or | Months | Months | ||||||||||||||||||||||||||||||||||||
Plant or | Expected | Installed | Ended | Ended | Design | |||||||||||||||||||||||||||||||||
Expansion and | Date in | Approved Tariff(1) | Capacity | September 30, | September 30, | Utilization | ||||||||||||||||||||||||||||||||
Location | Service | (RMB/kWh) | (MW) | 2007 | 2008 | 2009 | 2007 | 2008 | 2009 | (%) | Type | |||||||||||||||||||||||||||
Completed Projects | ||||||||||||||||||||||||||||||||||||||
Binglangjiang I, Yunnan | January 1988 | 0.22 January to May; 0.17 June to December | 21.0 | 112,041,197 | 117,278,061 | 87,325,470 | 60.9 | 63.6 | 59.1 | 60.0 | A | |||||||||||||||||||||||||||
Binglangjiang II, Yunnan | September 2009 | N/A | 20.0 | N/A | N/A | 6,060,120 | N/A | N/A | 48.6 | 55.0 | A | |||||||||||||||||||||||||||
Liyuan(2), Sichuan | August 2006 | 0.29 | 12.0 | 19,758,343 | 25,098,176 | 19,798,001 | 18.8 | 23.8 | 25.2 | 42.0 | B | |||||||||||||||||||||||||||
Shapulong(3), Zhejiang | June 2001 | 0.535 peak hours; 0.268 off-peak | 25.0(6) | 43,292,057(7 | ) | 42,308,157(7 | ) | 33,825,312 | 20.2 | 19.3 | 20.7 | 23.0 | C | |||||||||||||||||||||||||
Yingchuan, Zhejiang | April 2002 | 0.535 peak hours; 0.268 off-peak | 40.0 | 102,700,957 | 90,768,127 | 97,628,854 | 29.3 | 25.8 | 37.3 | 28.0 | C | |||||||||||||||||||||||||||
Wuliting, Zhejiang | October 2007 | 0.535 peak hours; 0.268 off-peak | 42.0 | 65,423,294 | 70,224,000 | 74,998,440 | 17.8 | 19.0 | 27.3 | 33.0 | B | |||||||||||||||||||||||||||
Ruiyang, Zhejiang | December 2003 | 0.535 peak hours; 0.268 off-peak | 32.0 | 68,645,855 | 51,237,120 | 55,747,560 | 24.5 | 18.2 | 26.6 | 24.0 | C | |||||||||||||||||||||||||||
Zhougongyuan, Zhejiang | March 2009 | 0.535 peak hours; 0.268 off-peak | 53.6 | N/A | N/A | 67,943,040 | N/A | N/A | 19.3 | 25.0 | C/A | (10) | ||||||||||||||||||||||||||
Banzhu, Fujian | November 1998 | 0.36 | 45.0(6) | 169,092,862(8 | ) | 155,536,410(8 | ) | 103,929,370 | 42.9 | 39.3 | 35.2 | 40.0 | B | |||||||||||||||||||||||||
Wangkeng(3), Fujian | July 2004 | 0.31 | 40.0(6) | 118,792,231(9 | ) | 129,217,917(9 | ) | 97,512,509 | 33.9 | 36.8 | 37.2 | 42.0 | C | |||||||||||||||||||||||||
Yuanping(4), Fujian | March 2007 | 0.29 | 16.0 | 30,071,595 | 38,393,478 | 40,397,885 | 21.5 | 27.3 | 38.5 | 39.0 | A | |||||||||||||||||||||||||||
Yuheng(5), Fujian | November 1999 | 0.29 | 30.0 | 54,955,750 | 90,983,456 | 61,872,654 | 33.5 | 34.6 | 31.5 | 42.0 | A | |||||||||||||||||||||||||||
Total: | 376.6 | |||||||||||||||||||||||||||||||||||||
Under Construction | ||||||||||||||||||||||||||||||||||||||
Wuyue, Henan | 2014-2015 | — | 1,000.0 | — | — | — | — | — | — | 15.0-30.0 | D | |||||||||||||||||||||||||||
Total: | 1,376.6 | |||||||||||||||||||||||||||||||||||||
(1) | We are required to withhold VAT due on our power dispatched at a rate of 6.0% or 17.0% depending on the size and location of the plant. Approved tariffs presented above are gross of VAT. Peak hours are generally from 8 a.m. to 10 p.m. | |
(2) | 2007 data for Liyuan are for the period from May 21 to December 31, 2007. | |
(3) | We acquired a 50.0% equity interest in Shapulong in December 2007. 2007 data for Shapulong are for the period from January 1, 2007 to December 24, 2007. We have owned 100.0% of the equity interest in Shapulong since August 2009. We have owned 90.0% of the equity interest in Wangkeng since October 2008. | |
(4) | In August 2009, the Ningde Pricing Bureau, the regional pricing bureau in Fujian province, approved a unit price per kWh of RMB0.29, inclusive of VAT, for electricity transmitted by Yuanping to the power grid controlled and owned by the provincial grid company prior to July 8, 2009. The unit price per kWh of RMB0.29 will continue to be in effect until the regional pricing bureau approves a new unit price per kWh. | |
(5) | Currently, Yuheng is receiving RMB0.29 per kWh for electricity supplied to Fujian Province Pingnan County Power Supply Co., Ltd., pursuant to the power purchase agreement entered into between Yuheng and Fujian Province Pingnan County Power Supply Co., Ltd. on December 28, 2008, which is valid until December 28, 2009. However, pursuant to the Interim Agreement of Conformity of Power Purchase and Supply in Rongping Supply Area entered into by Yuheng, Fujian Province Pingnan County Power Supply Co., Ltd., Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd. and Pingnan County Hengli Hydroelectric Co., Ltd. |
156
Table of Contents
on August 31, 2007, or the Interim Agreement, the tariff rate of RMB0.181 per kWh has been set for the supply of an aggregate volume of 300 million kWh of electricity by Yuheng to Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd. through Fujian Province Pingnan County Power Supply Co., Ltd. for a contractual term of forty-two months ending in October 2010. Therefore, for electricity supplied under the Interim Agreement to Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd., Yuheng is only entitled to RMB0.181 per kWh of the RMB0.29 per kWh revenue received from Fujian Province Pingnan County Power Supply Co., Ltd. and is obligated to remit the remaining RMB0.109 per kWh, to Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd. until the earlier of reaching the cumulative volume of 300 million kWh or October 2010. Pursuant to the Transfer of Yuanping Hydropower Plant and Cooperation Agreement entered into between Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd. and Fujian Province Anheng Assets Management Co., Ltd., Fujian Yuheng Power Group and Fujian Dachuang Hydro Power Co., Ltd, which were the founders of Pingnan County Yuheng Hydropower Co., Ltd., Yuheng provided a guarantee deposit of RMB30 million ($4.4 million) to Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd. to guarantee the supply of electricity of an aggregate volume of 300 million kWh over the contractual term, and is entitled to be refunded RMB0.1 of the guarantee deposit for every kWh of electricity supplied to Rongping Chemical through the power grid up to 300 million kWh over the contractual term. 2007 data for Yuheng are for the period from May 18 to December 31, 2007. | ||
(6) | Our aggregate installed capacity information presented in this prospectus includes, as of December 31, 2007, the installed capacity of Shapulong, as of December 31, 2008, the installed capacities of Shapulong, Banzhu and Wangkeng, and as of September 30, 2009, the installed capacity of Wangkeng, although as of such respective dates, our equity interest in Shapulong, Banzhu and Wangkeng were 50.0%, 90.0% and 90.0%, respectively. | |
(7) | We held a 50.0% equity interest in Shapulong in 2008. On an equity interest basis, we would be entitled to 21,646,029 kWh and 21,154,079 kWh of electricity sold for 2007 and 2008, respectively, had we owned our equity interest in Shapulong for those periods. Effective utilization rates for the plant do not reflect our equity interest in the plant, but the operation of the plant as a whole. We have owned 100.0% of the equity interest in Shapulong since August 2009. | |
(8) | We have held a 100.0% equity interest in Banzhu since March 2009, but we only held a 90.0% equity interest in Banzhu as of December 31, 2008. On an equity interest basis, we would be entitled to 152,183,576 kWh and 139,982,769 kWh of electricity sold for 2007 and 2008, respectively, had we owned our 90% equity interest in Banzhu for those periods. Effective utilization rates for the plant do not reflect our equity interest in the plant, but the operation of the plant as a whole. | |
(9) | We hold a 90.0% equity interest in Wangkeng. On an equity interest basis, we would be entitled to 106,913,008 kWh, 116,296,125 kWh and 87,761,258 kWh of electricity sold for 2007, 2008 and for the nine months ended September 30, 2009, respectively, had we owned our equity interest in Wangkeng for those periods. Effective utilization rates for the plant do not reflect our equity interest in the plant, but the operation of the plant as a whole. | |
(10) | The Zhougongyuan project consists of three separate hydropower plants in series on the same river. The upstream hydropower plant is an impoundment dam reservoir hydropower plant (type C) and the other two in series downstream are run-of-the-river diversion dam hydropower plants (type A). | |
(11) | See Exhibit 99.2 to the Registration Statement of which this prospectus forms a part for detailed calculations of effective utilization rates. |
157
Table of Contents
158
Table of Contents
159
Table of Contents
160
Table of Contents
161
Table of Contents
162
Table of Contents
163
Table of Contents
• | acquisition price, and anticipated construction cost where applicable, as compared to current and projected cash flow and the historical and projected return on investment, taking into account historical tariff levels and tariff trends; | |
• | the acquisition cost as compared to the estimated replacement value, the appraised value and our own assessment of fair value using a number of valuation methodologies; |
164
Table of Contents
• | the status of approvals, permits and licenses required for the construction and operation of the plant, including the legal status of the land occupied by the plant; | |
• | the hydrological condition of the plant site; | |
• | the ability to retain existing or obtain new local bank financing on reasonable terms; | |
• | the operating history of the target business, including actual power production and local supply and demand; | |
• | the installed capacity and design of the hydropower plant operated by the target business, including opportunities to expand or otherwise improve generation capacity taking into consideration the current installed capacity and design utilization; | |
• | the potential to diversify the regions in which we operate or to realize operational efficiencies from clustering multiple plants on a single water way; | |
• | the competency of existing management and operational personnel of the target project; and | |
• | the local government for the project, the relationship with the customer grid and the local tax rates. |
165
Table of Contents
166
Table of Contents
167
Table of Contents
168
Table of Contents
169
Table of Contents
• | construction costs, which vary according to the capacities of the individual power plants; | |
• | operating and administrative expenses, such as labor and fuel costs; |
170
Table of Contents
• | maintenance and repair costs of power plants; and | |
• | interest expenses on outstanding debts. |
171
Table of Contents
172
Table of Contents
Number of | ||||||||
Employees | (%) | |||||||
Management | 28 | 8.3 | ||||||
Finance | 29 | 8.6 | ||||||
Project Construction, Operations and Management | 233 | 69.4 | ||||||
Administrative and Human Resources | 30 | 8.9 | ||||||
Others | 16 | 4.8 | ||||||
Total: | 336 | 100.0 | ||||||
173
Table of Contents
174
Table of Contents
Name | Age | Position/Title | ||||
John D. Kuhns | 59 | Chairman, Chief Executive Officer | ||||
Dr. Yong Cao | 55 | Director | ||||
Anthony H. Dixon | 48 | Director | ||||
Richard H. Hochman | 64 | Director | ||||
Dr. You-Su Lin | 56 | Director, Chairman of Beijing A.B.C. Investment | ||||
Shadron Lee Stastney | 40 | Director | ||||
Stephen Outerbridge | 59 | Director | ||||
“James” Tie Li | 41 | Chief Financial Officer and Executive Vice President* | ||||
Mary E. Fellows | 47 | Executive Vice President and Corporate Secretary | ||||
Wu Gan | 53 | President and General Manager of Beijing A.B.C. Investment | ||||
Xinchun Lian | 51 | Chief Operating Officer of Beijing A.B.C. Investment | ||||
Fang Chen | 37 | Vice President and Controller of Beijing A.B.C. Investment | ||||
Gang Meng | 37 | Internal Controller of Beijing A.B.C. Investment | ||||
Shu Zhang | 34 | Finance Manager of Beijing A.B.C. Investment |
* | Mr. Li has been nominated but not yet elected to serve as a director of our company. |
175
Table of Contents
176
Table of Contents
177
Table of Contents
178
Table of Contents
• | selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; | |
• | reviewing with the independent auditors any audit problems or difficulties and management’s response; |
179
Table of Contents
• | reviewing and approving all proposed related party transactions, as defined in Item 404 ofRegulation S-K under the Securities Act, regardless of the dollar amount involved in such transactions; | |
• | discussing the annual audited financial statements with management and the independent auditors; | |
• | reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; | |
• | annually reviewing and reassessing the adequacy of our audit committee charter; and | |
• | meeting separately and periodically with management and the independent auditors. |
• | reviewing and approving the total compensation package for our three most senior executives; | |
• | reviewing and recommending to the board of directors with respect to the compensation of our directors; and | |
• | reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
• | identifying and recommending qualified candidates as director nominees for selection of directors, nominees for election to the board of directors, or for appointment to fill any vacancy; | |
• | reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such as independence, age, skills, experience and availability of service to us; | |
• | advising the board of directors periodically with regard to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board of directors on all matters of corporate governance and on any remedial actions to be taken; and | |
• | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
180
Table of Contents
• | convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; | |
• | declaring dividends and distributions; | |
• | appointing officers and determining the term of office of officers; | |
• �� | exercising the borrowing powers of our company and mortgaging the property of our company; and | |
• | approving the transfer of shares of our company, including the registering of such shares in our share register. |
181
Table of Contents
182
Table of Contents
Ordinary | Ordinary | |||||||||||||||||||||||||||||||
Shares | Shares | |||||||||||||||||||||||||||||||
Underlying | Exercise | Underlying | Exercise | |||||||||||||||||||||||||||||
Outstanding | Price | Expiration | Outstanding | Price | Expiration | |||||||||||||||||||||||||||
Name | Options | ($/Share) | Grant Date | Date | Options | ($/Share) | Grant Date | Date | ||||||||||||||||||||||||
John D. Kuhns | 1,095,000 | 7.70 | August 18, 2008 | August 18, 2013 | 2,500,000 | IPO price | December 3, 2009 | December 3, 2014 | ||||||||||||||||||||||||
“James” Tie Li | 500,000 | 7.70 | August 18, 2008 | August 18, 2013 | 1,050,000 | IPO price | December 3, 2009 | December 3, 2014 | ||||||||||||||||||||||||
Mary E. Fellows | 500,000 | 7.70 | August 18, 2008 | August 18, 2013 | 1,050,000 | IPO price | December 3, 2009 | December 3, 2014 | ||||||||||||||||||||||||
Dr. You-Su Lin | 805,000 | 7.70 | August 18, 2008 | August 18, 2013 | 1,660,000 | IPO price | December 3, 2009 | December 3, 2014 | ||||||||||||||||||||||||
Richard H. Hochman | 10,000 | 7.70 | August 18, 2008 | August 18, 2013 | — | — | — | — | ||||||||||||||||||||||||
Shadron Lee Stastney | 10,000 | 7.70 | August 18, 2008 | August 18, 2013 | — | — | — | — | ||||||||||||||||||||||||
Other former directors, employees and consultants as a group | 972,000 | 7.70 | August 18, 2008 | August 18, 2013 | — | — | — | — | ||||||||||||||||||||||||
Other employees and consultants as a group | 35,000 | 7.70 | January 20, 2009 | January 20, 2014 | 740,000 | IPO price | December 3, 2009 | December 3, 2014 | ||||||||||||||||||||||||
Total | 3,927,000 | 7,000,000 | ||||||||||||||||||||||||||||||
183
Table of Contents
184
Table of Contents
185
Table of Contents
• | each of our directors and executive officers; and | |
• | each person known to us to own beneficially more than 5% of our ordinary shares. |
Ordinary Shares | ||||||||||||||||
Ordinary Shares | Beneficially | |||||||||||||||
Beneficially Owned | Owned After | |||||||||||||||
Prior to this Offering(1) | this Offering(1)(2) | |||||||||||||||
Number | % | Number | % | |||||||||||||
Directors and Executive Officers: | ||||||||||||||||
John D. Kuhns(3) | 9,823,333 | 7.2 | 9,823,333 | 6.8 | ||||||||||||
Dr. Yong Cao | * | * | * | * | ||||||||||||
Anthony H. Dixon | * | * | * | * | ||||||||||||
Richard H. Hochman(3) | 9,461,666 | 7.0 | 9,461,666 | 6.5 | ||||||||||||
Dr. You-Su Lin(3) | * | * | * | * | ||||||||||||
Shadron Lee Stastney | * | * | * | * | ||||||||||||
Stephen Outerbridge | * | * | * | * | ||||||||||||
“James” Tie Li(3) | * | * | * | * | ||||||||||||
Mary E. Fellows(3) | * | * | * | * | ||||||||||||
Wu Gan | * | * | * | * | ||||||||||||
Xinchun Lian | * | * | * | * | ||||||||||||
Fang Chen | * | * | * | * | ||||||||||||
Gang Meng | * | * | * | * | ||||||||||||
Shu Zhang | * | * | * | * | ||||||||||||
All Directors and Executive Officers as a Group(4) | 10,579,999 | 7.7 | 10,579,999 | 7.3 |
186
Table of Contents
Ordinary Shares | ||||||||||||||||
Ordinary Shares | Beneficially | |||||||||||||||
Beneficially Owned | Owned After | |||||||||||||||
Prior to this Offering(1) | this Offering(1)(2) | |||||||||||||||
Number | % | Number | % | |||||||||||||
Principal Shareholders: | ||||||||||||||||
China Hydro, LLC(3) | 9,458,333 | 7.0 | 9,458,373 | 6.5 | ||||||||||||
CPI Ballpark Investments Ltd.(5) | 30,714,452 | 22.8 | 30,714,452 | 21.3 | ||||||||||||
Jennison Utility Fund(6) | 18,821,282 | 14.0 | 18,821,282 | 13.0 | ||||||||||||
Vicis Capital Master Fund(7) | 48,774,864 | 31.8 | 48,774,864 | 30.0 | ||||||||||||
Morgan Joseph & Co. Inc.(8) | 8,144,233 | 5.7 | 8,144,233 | 5.4 | ||||||||||||
Swiss Re Financial Products Corporation(9) | 10,068,995 | 7.5 | 10,068,995 | 7.0 | ||||||||||||
Blue Ridge Investments, LLC(10) | 7,852,209 | 5.8 | 7,852,209 | 5.5 | ||||||||||||
China Environment Fund III, LP(11) | 7,805,571 | 5.8 | 7,805,571 | 5.4 |
* | Upon exercise of all options and warrants exercisable within 60 days after the date of this prospectus, would beneficially own less than 1.0% of our outstanding ordinary shares. | |
(1) | Beneficial ownership is determined in accordance with the rules and regulations of the SEC. Percentage of beneficial ownership of each listed person prior to this offering is based on ordinary shares outstanding as of the date of this prospectus, including ordinary shares convertible from all outstanding preferred shares, and the ordinary shares underlying any options and warrants exercisable by such person within 60 days of the date of this prospectus. Percentage of beneficial ownership of each listed person after this offering is based on ordinary shares outstanding immediately after the closing of this offering and the ordinary shares underlying any options and warrants exercisable by such person within 60 days of the date of this prospectus. | |
(2) | Assumes the underwriters’ options to purchase additional ADSs are not exercised. | |
(3) | Pursuant to the Amended and Restated Limited Liability Company Agreement of China Hydro, LLC dated as of November 6, 2006, John D. Kuhns and Richard H. Hochman have the power to direct the voting of ordinary shares of our company held by China Hydro, LLC. All of the members, including but not limited to, John D. Kuhns, “James” Tie Li, Mary E. Fellows, Dr. You-Su Lin and Richard H. Hochman, have a right to receive certain number of our shares in proportion to their pro rata interest in China Hydro, LLC. We expect that, upon the completion of this offering, the shares of our company held by China Hydro, LLC will be distributed to its members and then John D. Kuhns will actually receive 1,722,470 shares, Richard H. Hochman will receive 988,553 shares, “James” Tie Li will receive 532,967 shares, Mary E. Fellows will receive 416,667 shares, and You-Su Lin will receive 949,634 shares. The shares held by China Hydro, LLC consist of 8,708,333 ordinary shares and 750,000 ordinary shares issuable upon the exercise of a warrant granted to China Hydro, LLC that is exercisable within 60 days of the date of this prospectus. | |
(4) | Includes ordinary shares held by all of our directors and executive officers as a group and ordinary shares issuable upon the exercise of all of the options and warrants that are exercisable within 60 days of the date of this prospectus held by all of our directors and executive officers. |
(5) | Includes 30,714,452 ordinary shares to be issued upon conversion of preferred shares held by CPI Ballpark Investments Ltd., a limited liability company organized under the laws of Mauritius. The mailing address of CPI Ballpark Investments Ltd. is 4th Floor, IBL House, Caudan, Port Louis, Republic of Mauritius. CPI Ballpark Investments Ltd. is wholly owned by Indopark Holdings Ltd., which is registered in the Republic of Mauritius. The mailing address of Indopark Holdings Limited is 4th Floor, IBL House, Caudan, Port Louis, Republic of Mauritius. The sole shareholder of Indopark Holdings Limited is Merrill Lynch L.P. Holdings Inc., a company incorporated in the State of Delaware, USA. Merrill Lynch L.P. Holdings Inc. is wholly owned by Merrill Lynch & Co., Inc., a non-bank subsidiary of Bank of America Corporation, a public company listed on the NYSE. Bank of America Corporation, through its |
187
Table of Contents
subsidiaries, beneficially owns 28.6% of our ordinary shares prior to this offering and will beneficially own 26.8% of our ordinary shares after this offering. |
(6) | Includes 18,821,282 ordinary shares to be issued upon conversion of preferred shares held by Jennison Utility Fund. Jennison Utility Fund, a series of Jennison Sector Funds, Inc., is an affiliate of Pruco Securities, LLC, Prudential Equity Group, LLC, Prudential Investment Management Services LLC, American Skandia marketing, Incorporated, Prudential Bache Securities, LLC and Prudential Bache Commodities, LLC, each a broker-dealer registered under Section 15 of the Securities Exchange Act of 1934, as amended. Jennison Utility Fund has represented to us that it is not acting as underwriter in this offering, it purchased the ordinary shares it is offering under this prospectus in the ordinary course of business, and at the time of such purchase, it had no agreement or understanding, directly or indirectly, with any person to distribute the securities. Jennison Associates LLC is the sub-advisor to Jennison Utility Fund, a series of Jennison Sector Funds, Inc., an investment company registered under the Investment Company Act of 1940. Shaun Hong, a portfolio manager of Jennison Utility Fund and a Managing Director of Jennison Associates LLC has the authority to vote the shares owned by the Jennison Utility Fund. The address of Jennison Utility Funds, Inc. isc/o Jennison Associates, LLC, 466 Lexington Avenue, New York, New York 10017. |
(7) | Includes 6,833,333 ordinary shares, 23,274,865 ordinary shares to be issued upon conversion of preferred shares and 18,666,666 ordinary shares upon the exercise of a warrant granted to Vicis Capital Master Fund that is exercisable within 60 days of the date of this prospectus. Vicis Capital Master Fund is a sub-trust of the Vicis Capital Master Series Trust, a unit trust organized under the laws of the Cayman Islands. The address of Vicis Capital Master Fund is Tower 56, Suit 700, 126 E. 56th Street, 7th Floor, New York, NY 10022. The address of Capital Master Series Trust is P. O. Box 1043GT, Caledonian House, First Floor, 69 Dr Roys Dr, George Town, Grand Cayman, Cayman Islands, BWI. Vicis Capital, LLC is the investment adviser to Vicis Capital Master Fund. John Succo, Shadron Lee Stastney and Sky Lucas have voting and investment control over the securities beneficially owned by Vicis Capital Master Fund and Victus Capital, LP. Shadron Lee Stastney in his capacity as the managing director of Vicis Capital Master Fund and Vicis Capital, LP has the voting and investment power over the shares listed. Victus Capital, LP is affiliated with a broker-dealer. |
(8) | Includes 8,134,233 ordinary shares to be issued upon the exercise of warrants granted to Morgan Joseph & Co. Inc. and 10,000 ordinary shares to be issued upon the exercise of options granted to Dennis Galgano that are exercisable within 60 days of the date of this prospectus. Morgan Joseph & Co. Inc. is a wholly owned subsidiary of Morgan Joseph Holdings Inc. Morgan Joseph Holdings Inc. is in turn owned by the employees, former employees and investors in Morgan Joseph Holdings Inc. The Board of Directors of Morgan Joseph Holdings Inc. has the power to direct the voting and disposition of our shares held by Morgan Joseph & Co. Inc. The board consists of Mary Lou Malanoski, John Sorte, Roger T. Briggs, John A. Morgan, Steven D. Blecher, and Edmund A. Hajim. The address of Morgan Joseph & Co. Inc. is 600 Fifth Avenue, 19th Floor, New York, New York 10020. |
(9) | Includes 10,068,995 ordinary shares to be issued upon conversion of preferred shares held by Swiss Re Financial Products Corporation, a limited liability company organized under the laws of Delaware. The mailing address of Swiss Re Financial Products Corporation is 55 East 52nd Street, New York, New York 10055. Swiss Re Financial Products Corporation is an indirect, wholly owned subsidiary of Swiss Reinsurance Company, a limited liability company organized under the laws of Switzerland. The mailing address of Swiss Reinsurance Company is Mythenquai 50/60, CH-8022, Zurich, Switzerland. Swiss Reinsurance Company is a publicly registered company that trades on the SIX Swiss Exchange. |
(10) | Includes 7,852,209 ordinary shares to be issued upon conversion of preferred shares held by Blue Ridge Investments, LLC, a limited liability company organized under the laws of Delaware. Blue Ridge Investments, LLC is a wholly owned, non-bank subsidiary of Bank of America Corporation, a public company listed on the NYSE. The mailing address of Blue Ridge Investments, LLC isc/o Bank of America Securities, 1633 Broadway, 27th Floor, New York, New York 10019. Bank of America Corporation, through its subsidiaries, beneficially owns 28.6% of our ordinary shares prior to this offering and will beneficially own 26.8% of our ordinary shares after this offering. |
188
Table of Contents
(11) | Includes 7,220,153 ordinary shares to be issued upon conversion of preferred shares held by China Environment Fund III, LP, a fund registered in the Cayman Islands. China Environment Fund III, LP was formed by Tsing Capital Co., Ltd. and Tsing Capital Co., Ltd. is the manager of the fund. Donald Ye exercises sole voting and dispositive power over the shares of our Company held by this shareholder. The mailing address of Tsing Capital Co., Ltd. is A2302, SP Tower, Tsinghua Science Park, Beijing 100084, PRC. Tsing Capital Co., Ltd. is the exclusive cleantech venture capital arm of Tsinghua Holdings. Tsinghua Holdings is wholly owned by Tsinghua University. |
189
Table of Contents
190
Table of Contents
191
Table of Contents
192
Table of Contents
193
Table of Contents
• | The Sino-foreign Equity Joint Venture Law (1979), as amended; | |
• | The Regulations of Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended; | |
• | The Wholly Foreign-owned Enterprise Law (1986), as amended; | |
• | The Detailed Rules of the Wholly Foreign-owned Enterprise Law (1990), as amended; | |
• | The Company Law of the PRC (1993), as amended; | |
• | The Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (2009); | |
• | The Interim Administrative Measures on Foreign Investment (2004); and | |
• | The Circular Regarding Further Strengthening and Regulating the Administration of Foreign Invested Projects issued by the National Development and Reform Commission (2008). |
194
Table of Contents
195
Table of Contents
196
Table of Contents
197
Table of Contents
198
Table of Contents
199
Table of Contents
200
Table of Contents
• | Land for use by government organs and for military use; | |
• | Land for building urban infrastructure and for public welfare undertakings; | |
• | Land for building energy, communications and water conservancy and other infrastructure projects heavily supported by the State; and | |
• | Other land as provided for by the law and administrative decrees. |
201
Table of Contents
• | water resources construction projects involving the social and public interests and public safety such as flood prevention, drainage, irrigation, hydraulic power generation, diversion (supply) of water, harnessing shoals, water conservation and protection of water resources; | |
• | water resources construction projects which are, wholly or partially, invested by the State-owned funds or funded through State financing; or | |
• | water resources construction projects using loans or aid funds from international organizations or foreign governments. |
• | the estimated price for any single construction contract exceeds RMB2,000,000; | |
• | the estimated price for any single procurement of substantial equipments and materials exceeds RMB1,000,000; |
202
Table of Contents
• | the estimated price for any of surveying and prospecting, design or supervision exceeds RMB500,000; or | |
• | the estimated prices are lower than the above standards, but the total investment of the projects exceeds RMB30,000,000. |
• | entering into monopoly agreement; | |
• | abusing the dominant market position; | |
• | conducting concentrations (as defined under the Antimonopoly Law) without first obtaining approvals from relevant authorities; | |
• | abusing administrative power; or | |
• | abusing intellectual property rights. |
203
Table of Contents
204
Table of Contents
205
Table of Contents
206
Table of Contents
• | The Sino-foreign Equity Joint Venture Law (1979), as amended; | |
• | The Regulations of Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended; | |
• | The Wholly Foreign-owned Enterprise Law (1986), as amended; | |
• | The Detailed Rules of the Wholly Foreign-owned Enterprise Law (1990), as amended; |
207
Table of Contents
• | Foreign Currency Administration Rules (1996), as amended | |
• | The Company Law of China (1993), as amended; | |
• | The Enterprise Income Tax Law of China; and | |
• | The Implementation Regulations of Enterprise Income Tax Law of China. |
208
Table of Contents
209
Table of Contents
210
Table of Contents
211
Table of Contents
212
Table of Contents
Exercise | ||||||||||||||
Date of | Number of | Price Per | ||||||||||||
Holders | Issuance | Term | Securities | Security | ||||||||||
Warrants to purchase ordinary shares(1) | ||||||||||||||
China Hydro, LLC | 11/10/2006 | until 11/10/2011 or upon redemption | 750,000 | $5.00 | ||||||||||
Vicis Master Capital Fund | 04/11/2007 | until 11/10/2011 or upon redemption | 18,666,666 | $5.00 | ||||||||||
JMG Triton Offshore Fund | 04/11/2007 | until 11/10/2011 or upon redemption | 288,933 | $5.00 | ||||||||||
JMG Capital Partners | 04/11/2007 | until 11/10/2011 or upon redemption | 377,733 | $5.00 | ||||||||||
Warrants to purchase units | ||||||||||||||
Morgan Joseph & Co. Inc.(2) | 11/10/2006 | until 11/10/2011 | 550,000 | $6.60 | ||||||||||
Morgan Joseph & Co. Inc.(3) | 11/10/2006 | until 11/10/2011 | 283,333 | $6.60 | ||||||||||
Warrant to purchase Series A convertible redeemable preferred shares | ||||||||||||||
Morgan Joseph & Co. Inc.(4) | 01/28/2008 | until 01/28/2013 | 15,000 | $1,100.00 |
(1) | Upon the closing of this offering, we will issue to Broadband Capital Management LLC a purchase warrant to purchase a number of ordinary shares equal to an aggregate of 6% of the ordinary shares sold. The exercise price of the warrants is equal to 120% of the offering price of the ordinary shares sold in this offering. |
(2) | Each unit consists of one ordinary share of the Company, and two warrants each to purchase from the Company one additional ordinary share at an exercise price of $5.00 per share. | |
(3) | Each unit consists of one ordinary share of the Company, and four warrants each to purchase from the Company one additional ordinary share at an exercise price of $5.00 per share. |
(4) | If the Series A convertible redeemable preferred shares have automatically converted into ordinary shares of the Company pursuant to their terms, the warrant holder may, in lieu of the right to purchase 15,000 Series A convertible redeemable preferred shares, purchase such number of ordinary shares as 15,000 Series A convertible redeemable preferred shares would have been converted into, at an exercise price that is 110% of the then effective conversion price of Series A convertible redeemable preferred shares. Currently the conversion price of Series A convertible redeemable preferred shares is $2.96. |
213
Table of Contents
214
Table of Contents
• | in whole but not in part; |
• | at a price of $0.01 per warrant; |
• | upon not less than 30 days’ prior written notice of redemption to each warrant holder; |
• | if, and only if, an effective registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus are available throughout the30-day redemption period; and |
• | if, and only if, the reported last sales price of the ADSs equals or exceeds $23 per ADS for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to warrant holders. |
215
Table of Contents
216
Table of Contents
• | the company is not proposing to act illegally or beyond the scope of its authority and the statutory provisions as to majority vote have been complied with; | |
• | the shareholders have been fairly represented at the meeting in question; | |
• | the arrangement is such that a businessman would reasonably approve; and | |
• | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law or that would amount to a “fraud on the minority.” |
• | a company is acting or proposing to act illegally orultra vires; | |
• | the act complained of, although notultra vires, could be effected duly if authorized by more than a simple majority vote which has not been obtained; and | |
• | those who control the company are perpetrating a “fraud on the minority.” |
217
Table of Contents
218
Table of Contents
219
Table of Contents
220
Table of Contents
• | sell such rights if practicable and distribute the net proceeds as cash; or | |
• | if it is not practicable to sell such rights, do nothing and allow such rights to lapse, in which case ADS holders will receive nothing. | |
• | We have no obligation to file a registration statement under the Securities Act in order to make any rights available to ADS holders. |
221
Table of Contents
• | temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends; | |
• | the payment of fees, taxes and similar charges; or | |
• | compliance with any U.S. or foreign laws or governmental regulations relating to the ADSs or to the withdrawal of deposited securities. |
• | to receive any distribution on or in respect of shares; |
• | to give instructions for the exercise of voting rights at a meeting of holders of shares; |
222
Table of Contents
• | for the determination of the registered holders who shall be responsible for the fee assessed by the depositary for administration of the ADS program and for any expenses as provided for in the deposit agreement; or |
• | to receive any notice or to act in respect of other matters; |
• | we do not wish to receive a discretionary proxy; | |
• | we think there is substantial shareholder opposition to the particular question; or | |
• | we think the particular question would materially affect the rights of our shareholders. |
223
Table of Contents
• | a fee of $0.02 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement; |
• | a fee of $0.02 per ADS or less per ADS (or portion thereof) per year for services performed by the depositary in administering our ADR program (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision); |
• | any other charge payable by any of the depositary, any of the depositary’s agents, including, without limitation, the custodian, or the agents of the depositary’s agents in connection with the servicing of our shares or other deposited securities (which charge shall be assessed against holders of ADSs as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions); | |
• | a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto; | |
• | stock transfer or other taxes and other governmental charges; | |
• | cable, telex and facsimile transmission and delivery charges incurred at your request; | |
• | transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; | |
• | expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars; and |
224
Table of Contents
• | amend the form of ADR; | |
• | distribute additional or amended ADRs; | |
• | distribute cash, securities or other property it has received in connection with such actions; | |
• | sell any securities or property received and distribute the proceeds as cash; or | |
• | none of the above. |
225
Table of Contents
• | payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of shares or other deposited securities upon any applicable register and (iii) any applicable fees and expenses described in the deposit agreement; | |
• | the production of proof satisfactory to the depositaryand/or its custodian of (i) the identity of any signatory and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, payment of applicable taxes or governmental charges, or legal or beneficial ownership and the nature of such interest, information relating to the registration of the shares on the books maintained by or on our behalf for the transfer and registration of shares, compliance with applicable law, regulations, provisions of or governing shares and terms of the deposit agreement and the ADSs, as it may deem necessary or proper; and | |
• | compliance with such regulations as the depositary may establish consistent with the deposit agreement. |
• | are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith; | |
• | are not liable if we are or it is prevented or delayed by law or circumstances beyond our control from performing our or its obligations under the deposit agreement; | |
• | are not liable if we or it exercises discretion permitted under the deposit agreement; | |
• | are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement; | |
• | have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person; | |
• | may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person. |
226
Table of Contents
227
Table of Contents
• | any of our ordinary shares or depositary shares representing our ordinary shares; | |
• | any shares of our subsidiaries or controlled affiliates or depositary shares representing those shares; or | |
• | any securities that are substantially similar to the ordinary shares or depositary shares referred to above, including any securities that are convertible into, exchangeable for or otherwise |
228
Table of Contents
represent the right to receive ordinary shares, other shares or depositary shares referred to above. |
• | 1.0% of the number of our ordinary shares then outstanding, which will equal approximately 1,441,192 ordinary shares immediately after this offering; or |
• | the average weekly reported trading volume of our ADSs on the NYSE during the four calendar weeks proceeding the date on which a notice of the sale on Form 144 is filed with the SEC by such person. |
229
Table of Contents
230
Table of Contents
231
Table of Contents
232
Table of Contents
233
Table of Contents
234
Table of Contents
235
Table of Contents
236
Table of Contents
Number of | ||||
Underwriter | Units | |||
Broadband Capital Management LLC | ||||
I-Bankers Securities, Inc. | ||||
Maxim Group LLC | ||||
Morgan Joseph & Co. Inc. | ||||
Pali Capital, Inc. | ||||
Total | 3,125,000 | |||
Per Unit | Total | |||||||
Public offering price | $ | |||||||
Underwriting discount | $ | |||||||
Non-accountable expense allowance(1) | $ | |||||||
Proceeds, before expenses, to us(2) | $ |
(1) | The non-accountable expense allowance of 1% of the gross proceeds of this offering is payable to Broadband Capital Management LLC with respect to the units sold on a firm commitment basis. |
(2) | We estimate that the total expense of this offering excluding the underwriters’ discount and the non-accountable expense allowance, will be approximately $10.9 million. |
237
Table of Contents
• | the information in this prospectus and otherwise available to the underwriters; | |
• | the history and the prospects for the industry in which we compete; | |
• | the ability of our management; | |
• | the prospects for our future earnings; | |
• | the present state of our development and our current financial condition; | |
• | the general condition of the economy and the securities markets in the United States at the time of this offering; |
• | the recent market prices of, and the demand for, publicly traded securities of generally comparable companies; and |
• | other factors we deemed relevant. |
238
Table of Contents
• | the market price of the underlying shares of ordinary shares is lower than the exercise price; |
• | the holder of the warrants has not confirmed in writing that the representative solicited the exercise; |
• | the warrants are held in a discretionary account; |
• | the warrants are exercised in an unsolicited transaction; or |
• | the representative has not provided to the holder of the warrants solicited for exercise a copy of the prospectus with respect to the shares of ordinary shares underlying the warrants. |
239
Table of Contents
• | Stabilizing transactions permit bids or purchases for the purpose of pegging, fixing or maintaining the price of the securities, so long as stabilizing bids do not exceed a specified maximum. |
• | Overallotment involves sales by the underwriters of securities in excess of the number of securities the underwriters are obligated to purchase, which creates a short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of securities over-allotted by the underwriters is not greater than the number of securities that they may purchase in the overallotment option. In a naked short position, the number of securities involved is greater than the number of securities in the overallotment option. The underwriters may close out any covered short position by either exercising their overallotment option or purchasing securities in the open market. |
• | Covering transactions involve the purchase of securities in the open market after the distribution has been completed in order to cover short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the overallotment option. If the underwriters sell more units than could be covered by the overallotment option, creating a naked short position, the position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in this offering. |
• | Penalty bids permit the underwriters to reclaim a selling concession from a selected dealer when the securities originally sold by the selected dealer are purchased in a stabilizing or syndicate covering transaction. |
240
Table of Contents
241
Table of Contents
242
Table of Contents
243
Table of Contents
(i) | has not made or invited, and will not make or invite, an offer of the units or ordinary shares for issue or sale in Australia, including an offer or invitation which is received by a person in Australia; and |
(ii) | has not distributed or published, and will not distribute or publish, the prospectus or any other offering material or advertisement relating to the units in Australia, unless, in either case (i) or (ii): |
(a) | the minimum aggregate consideration payable by each offeree or invitee is at least A$500,000 (or its equivalent in other currencies), disregarding moneys lent by the offeror or its associates, or the offer otherwise does not require disclosure to investors in accordance with Part 6D.2 of the Australian Corporations Act; and |
(b) | such action complies with all applicable laws and regulations. |
244
Table of Contents
• | to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
• | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; | |
• | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of Broadband Capital Management LLC for any such offer; or | |
• | in any other circumstances which do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive. |
245
Table of Contents
SEC registration fee | $ | 8,712 | ||
FINRA filing fee | 6,609 | |||
NYSE listing fee | 150,000 | |||
Legal fees and expenses | 4,050,000 | |||
Accounting fees and expenses | 5,550,000 | |||
Printing fees | 900,000 | |||
Other fees and expenses | 240,000 | |||
Total | $ | 10,905,321 | ||
246
Table of Contents
247
Table of Contents
248
Table of Contents
• | “years” are to calendar years and, where the context requires, our fiscal year; | |
• | our “hydropower plants” includes the operating company which owns the plant, where the context requires; | |
• | “we,” “us,” “our company,” “our,” “CHC” and “China Hydroelectric” refer to China Hydroelectric Corporation and its subsidiaries. For SEC reporting purposes, China Hydroelectric Corporation is the successor company to our predecessor company, Binglangjiang. Our financial statements and other financial and operating data presented in this prospectus reflect the results of operations of Binglangjiang from April 25, 2007, the date we acquired Binglangjiang; | |
• | “Binglangjiang” refers to Yunnan Huabang Electric Power Development Co. Ltd., which for SEC reporting purposes is our predecessor company. Binglangjiang’s financial statements and other financial and operating data presented in this prospectus are solely those of Binglangjiang, and do not reflect the results of operations of our company or our other subsidiaries; | |
• | “shares” or “ordinary shares” refers to our ordinary shares, par value $0.001 per share; | |
• | “ADSs” refers to our American depositary shares, each of which represents three ordinary shares, and “ADRs” refers to the American depositary receipts that evidence our ADSs; | |
• | “China” or “PRC” refers to the People’s Republic of China, excluding, for the purposes of this prospectus only, Taiwan, Hong Kong and Macau; | |
• | “RMB” or “Renminbi” refers to the legal currency of China and “US$”, “U.S. dollars” or “$” refers to the legal currency of the United States; | |
• | “effective tariff” means gross revenues, which are revenues not netted for VAT or other applicable business surcharges, if any, recorded in the relevant period, divided by the quantity of electricity sold in such period; and | |
• | “effective utilization rate” means the quantity of electricity sold in the relevant period expressed as a percentage of installed capacity for electricity generation in such period. |
249
Table of Contents
• | 468,750 units, each consisting of one ADS and one warrant, that may be issued by us upon exercise of the underwriters’ overallotment option; and |
• | 28,972,252 ordinary shares issuable pursuant to outstanding warrants at a weighted average exercise price of $5.29 per share, 646,875 ordinary shares issuable pursuant to outstanding warrants at an exercise price of 120% of the IPO price per ordinary share, 3,927,000 outstanding options at the exercise price of $7.70 per share and 7,000,000 outstanding options at the exercise price equal to the price to the public of our ordinary shares in this offering. |
• | 9,375,000 ordinary shares issuable upon the exercise of the warrants included in the units. |
• | 1,406,250 ordinary shares issuable upon the exercise of the warrants of the underwriters’ over-allotment option. |
250
Table of Contents
Page | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
F-8 | ||||
F-10 | ||||
F-11 | ||||
F-72 | ||||
F-73 | ||||
F-74 | ||||
F-75 | ||||
F-76 | ||||
YUNNAN HUABANG ELECTRIC POWER DEVELOPMENT CO., LTD. (PREDECESSOR) | ||||
F-106 | ||||
F-107 | ||||
F-108 | ||||
F-109 | ||||
F-110 | ||||
F-111 | ||||
ZHEJIANG PROVINCE JINGNING YINGCHUAN HYDROELECTRIC DEVELOPMENT CO., LTD. | ||||
F-123 | ||||
F-124 | ||||
F-125 | ||||
F-126 | ||||
F-127 | ||||
F-128 | ||||
QINGTIAN WULITING HYDROELECTRIC DEVELOPMENT CO., LTD. | ||||
F-140 | ||||
F-141 | ||||
F-142 | ||||
F-143 | ||||
F-144 | ||||
F-145 |
F-1
Table of Contents
Page | ||||
SANMING ZHONGYIN BANZHU HYDROELECTRIC CO., LTD. | ||||
F-157 | ||||
F-158 | ||||
F-159 | ||||
F-160 | ||||
F-161 | ||||
F-162 | ||||
F-174 | ||||
F-175 | ||||
F-176 | ||||
F-177 | ||||
F-178 | ||||
PINGNAN COUNTY WANGKENG HYDROELECTRIC CO., LTD. | ||||
F-187 | ||||
F-188 | ||||
F-189 | ||||
F-190 | ||||
F-191 | ||||
F-192 | ||||
F-206 | ||||
F-207 | ||||
F-208 | ||||
F-209 | ||||
F-210 | ||||
PINGNAN COUNTY YUANPING HYDROELECTRIC CO., LTD. | ||||
F-220 | ||||
F-221 | ||||
F-222 | ||||
F-223 | ||||
F-224 | ||||
F-225 | ||||
F-238 | ||||
F-239 | ||||
F-240 |
F-2
Table of Contents
Page | ||||
F-241 | ||||
F-242 | ||||
PINGNAN COUNTY YUHENG HYDROPOWER CO., LTD. | ||||
F-251 | ||||
F-252 | ||||
F-253 | ||||
F-254 | ||||
F-255 | ||||
F-256 |
F-3
Table of Contents
F-4
Table of Contents
Pro-Forma | ||||||||||||||||||||
Balance | ||||||||||||||||||||
Sheet at | ||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
Notes | 2006 | 2007 | 2008 | 2008 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Note 2(b) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash and cash equivalents | 628 | 15,606 | 38,693 | 38,693 | ||||||||||||||||
Restricted cash | 4 | 50,340 | — | — | — | |||||||||||||||
Accounts receivable (net of allowance for doubtful accounts of US$nil as of December 31, 2006, 2007 and 2008) | 5 | — | 329 | 3,137 | 3,137 | |||||||||||||||
Deferred tax assets | 13 | — | — | 1,166 | 1,166 | |||||||||||||||
Amounts due from related parties | 27 | 33 | 25 | 13 | 13 | |||||||||||||||
Amounts due from an equity investee | 2(i) | — | 287 | 4,534 | 4,534 | |||||||||||||||
Debt issuance costs | — | 47 | — | — | ||||||||||||||||
Prepayments and other current assets | 6 | — | 3,269 | 9,437 | 9,437 | |||||||||||||||
Total current assets | 51,001 | 19,563 | 56,980 | 56,980 | ||||||||||||||||
Non-current Assets: | ||||||||||||||||||||
Debt issuance costs | 975 | — | — | — | ||||||||||||||||
Investment in an equity investee | — | 4,721 | 4,295 | 4,295 | ||||||||||||||||
Deferred initial public offering costs | 7 | — | — | 6,032 | — | |||||||||||||||
Property, plant and equipment, net | 8 | — | 29,046 | 365,190 | 365,190 | |||||||||||||||
Intangible assets, net | 9 | — | 3,008 | 3,666 | 3,666 | |||||||||||||||
Goodwill | 10 | — | 2,773 | 96,533 | 96,533 | |||||||||||||||
Other non-current assets | — | — | 872 | 872 | ||||||||||||||||
Total non-current assets | 975 | 39,548 | 476,588 | 470,556 | ||||||||||||||||
TOTAL ASSETS | 51,976 | 59,111 | 533,568 | 527,536 | ||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Accounts payable | 54 | 251 | 6,259 | 6,259 | ||||||||||||||||
Short-term loans | 14 | — | — | 8,781 | 8,781 | |||||||||||||||
Current portion of long-term loans | 14 | — | 2,052 | 29,037 | 29,037 | |||||||||||||||
Current portion of long-term notes | 16 | — | 9,760 | — | — | |||||||||||||||
Warrant liability | 18 | — | — | 540 | 540 | |||||||||||||||
Amounts due to related parties | 27 | — | 23 | 242 | 242 | |||||||||||||||
Amounts due to an equity investee | 2(i) | — | — | 2 | 2 | |||||||||||||||
Accrued expenses and other current liabilities | 11 | 796 | 2,350 | 32,424 | 32,424 | |||||||||||||||
Total current liabilities | 850 | 14,436 | 77,285 | 77,285 | ||||||||||||||||
Non-current Liabilities: | ||||||||||||||||||||
Long-term loans | 14 | — | 10,269 | 138,133 | 138,133 | |||||||||||||||
Long-term notes | 16 | 50,285 | — | — | — | |||||||||||||||
Deferred tax liabilities | 13 | — | — | 13,415 | 13,415 | |||||||||||||||
Other non-current liabilities | 15 | — | — | 568 | 568 | |||||||||||||||
Total non-current liabilities | 50,285 | 10,269 | 152,116 | 152,116 | ||||||||||||||||
Total liabilities | 51,135 | 24,705 | 229,401 | 229,401 | ||||||||||||||||
Commitments and contingencies | 23 | |||||||||||||||||||
Minority interests | — | — | 750 | 750 |
F-5
Table of Contents
Pro-Forma | ||||||||||||||||||||
Balance | ||||||||||||||||||||
Sheet at | ||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
Notes | 2006 | 2007 | 2008 | 2008 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Convertible redeemable preferred shares | ||||||||||||||||||||
Series A (par value US$0.001 per share; 2,500,000 shares authorized; nil, nil and 152,193 shares issued and outstanding as of December 31, 2006, 2007 and 2008) | 17 | — | — | 164,705 | — | |||||||||||||||
Series B (par value US$0.001 per share; 2,500,000 shares authorized; nil, nil and 129,000 shares issued and outstanding as of December 31, 2006, 2007 and 2008) | 17 | — | — | 134,531 | — | |||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Ordinary shares (par value US$0.001 per share, 130,000,000 shares authorized; 8,875,000, 15,708,333 and 15,541,666 shares issued and outstanding as of December 31, 2006, 2007 and 2008) | 19 | 9 | 16 | 16 | 58 | |||||||||||||||
Additional paid-in capital | 2,266 | 38,241 | 38,241 | 331,403 | ||||||||||||||||
Accumulated other comprehensive income | — | 2,143 | 10,819 | 10,819 | ||||||||||||||||
Accumulated deficit | (1,434 | ) | (5,994 | ) | (44,895 | ) | (44,895 | ) | ||||||||||||
Total shareholders’ equity | 841 | 34,406 | 4,181 | 297,385 | ||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 51,976 | 59,111 | 533,568 | 527,536 | ||||||||||||||||
F-6
Table of Contents
For the Period | ||||||||||||||||
from July 10, | For the | For the | ||||||||||||||
2006 to | Year Ended | Year Ended | ||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||
Notes | 2006 | 2007 | 2008 | |||||||||||||
Revenues | — | 2,434 | 14,715 | |||||||||||||
Cost of revenues | — | (813 | ) | (6,025 | ) | |||||||||||
Gross profit | — | 1,621 | 8,690 | |||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative expenses | (901 | ) | (2,560 | ) | (6,761 | ) | ||||||||||
Total operating expenses | (901 | ) | (2,560 | ) | (6,761 | ) | ||||||||||
Operating (loss) income | (901 | ) | (939 | ) | 1,929 | |||||||||||
Interest income | 340 | 1,051 | 1,340 | |||||||||||||
Interest expenses | 22 | (873 | ) | (3,275 | ) | (5,847 | ) | |||||||||
Change in fair value of derivative financial liabilities and warrant liability | 16,18 | — | (266 | ) | 420 | |||||||||||
Exchange loss | — | (1,095 | ) | (1,067 | ) | |||||||||||
Share of losses in an equity investee | (27 | ) | (503 | ) | ||||||||||||
Other income, net | 24 | — | 8 | 144 | ||||||||||||
Loss before income tax expenses and minority interests | (1,434 | ) | (4,543 | ) | (3,584 | ) | ||||||||||
Income tax expenses | 12 | — | (17 | ) | (444 | ) | ||||||||||
Loss before minority interests | (1,434 | ) | (4,560 | ) | (4,028 | ) | ||||||||||
Minority interests in loss of consolidated subsidiaries | — | — | 41 | |||||||||||||
Net loss | (1,434 | ) | (4,560 | ) | (3,987 | ) | ||||||||||
Less: | ||||||||||||||||
Cumulative dividends on Series A convertible redeemable preferred shares | — | — | (14,680 | ) | ||||||||||||
Cumulative dividends on Series B convertible redeemable preferred shares | — | — | (5,531 | ) | ||||||||||||
Changes in redemption value of Series A convertible redeemable preferred shares | — | — | (10,569 | ) | ||||||||||||
Changes in redemption value of Series B convertible redeemable preferred shares | — | — | (4,134 | ) | ||||||||||||
Loss attributable to ordinary shareholders | (1,434 | ) | (4,560 | ) | (38,901 | ) | ||||||||||
Basic and diluted loss per share | 20 | (0.34 | ) | (0.33 | ) | (2.50 | ) | |||||||||
Weighted average ordinary shares used in basic and diluted loss per share computation | 20 | 4,230,822 | 13,817,466 | 15,554,416 | ||||||||||||
Pro forma basic and diluted loss per share on an as converted basis | 32 | (0.07 | ) | |||||||||||||
Shares used in pro forma basic and diluted loss per share computation | 32 | 55,415,130 |
F-7
Table of Contents
For the Period | ||||||||||||
from July 10, | For the | For the | ||||||||||
2006 to | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | (1,434 | ) | (4,560 | ) | (3,987 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation of property, plant and equipment | — | 572 | 4,755 | |||||||||
Amortization of intangible assets | — | 66 | 108 | |||||||||
Deferred income taxes | — | — | 46 | |||||||||
Share of losses in an equity investee | — | 27 | 503 | |||||||||
Amortization of long-term notes discount | 285 | 833 | 139 | |||||||||
Change in fair value of derivative financial liabilities and warrant liability | — | 266 | (420 | ) | ||||||||
Amortization of debt issuance costs | 99 | 293 | 47 | |||||||||
Accretion of guarantee fee payable | — | — | 105 | |||||||||
Accretion of unfavourable contract obligations | — | — | (3 | ) | ||||||||
Amortization of government grant | — | — | (11 | ) | ||||||||
Minority interests in loss of consolidated subsidiaries | — | — | (41 | ) | ||||||||
Exchange loss | — | 1,095 | 1,067 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | — | (172 | ) | (8 | ) | |||||||
Amounts due from related parties | — | — | 28 | |||||||||
Prepayments and other current assets | (8 | ) | (1,537 | ) | 2,166 | |||||||
Other non-current assets | — | — | 42 | |||||||||
Accounts payable | 54 | (552 | ) | (2,068 | ) | |||||||
Amounts due to related parties | — | — | 88 | |||||||||
Accrued expenses and other current liabilities | 489 | (594 | ) | (186 | ) | |||||||
Net cash (used in) provided by operating activities | (515 | ) | (4,263 | ) | 2,370 | |||||||
Cash flows from investing activities: | ||||||||||||
Acquisition of subsidiaries, net of cash acquired | — | (466 | ) | (183,268 | ) | |||||||
Acquisition of an equity investee | — | (4,612 | ) | — | ||||||||
Cash advancement to an acquired business prior to the acquisition date | — | (16,182 | ) | — | ||||||||
Acquisition of property, plant and equipment | — | (535 | ) | (32,944 | ) | |||||||
Advances to contractors for construction projects | — | (2,005 | ) | (2,394 | ) | |||||||
Loans to an equity investee | — | — | (2,802 | ) | ||||||||
Restricted cash | (50,340 | ) | 50,340 | — | ||||||||
Net cash (used in) provided by investing activities | (50,340 | ) | 26,540 | (221,408 | ) | |||||||
F-8
Table of Contents
Consolidated Statements of Cash Flows for the Period from July 10, 2006 (Inception)
to December 31, 2006 and for the Years Ended December 31, 2007 and 2008 — (Continued)
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)
For the Period | ||||||||||||
from July 10, | For the | For the | ||||||||||
2006 to | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of share capital | 2,250 | — | — | |||||||||
Proceeds from issuance of long-term notes | 50,000 | — | — | |||||||||
Proceeds from issuance of convertible redeemable preferred shares | — | — | 279,025 | |||||||||
Proceeds from long-term loans | — | — | 4,280 | |||||||||
Proceeds from government grant | — | — | �� | 115 | ||||||||
Payment of deferred initial public offering costs | — | — | (4,224 | ) | ||||||||
Payment of convertible redeemable preferred shares issuance cost | — | — | (13,804 | ) | ||||||||
Payment of debt issuance costs | ( 767 | ) | ( 2,460 | ) | ( 307 | ) | ||||||
Payment of equity issuance costs | — | — | (46 | ) | ||||||||
Payment of Business Combination Payment (Note 16) | — | ( 2,500 | ) | — | ||||||||
Repayment of short-term loans | — | — | ( 606 | ) | ||||||||
Repayment of long-term notes | — | — | (9,907 | ) | ||||||||
Repayment of long-term loans | — | (2,466 | ) | (12,185 | ) | |||||||
Net cash provided by (used in) financing activities | 51,483 | (7,426 | ) | 242,341 | ||||||||
Net increase in cash and cash equivalents | 628 | 14,851 | 23,303 | |||||||||
Effect of foreign currency exchange rate changes on cash | — | 127 | (216 | ) | ||||||||
Cash and cash equivalents at the beginning of the period | — | 628 | 15,606 | |||||||||
Cash and cash equivalents at the end of the period | 628 | 15,606 | 38,693 | |||||||||
Supplementary disclosure of cash flow information | ||||||||||||
Interest paid | — | 2,552 | 9,134 | |||||||||
Income taxes paid | — | — | 171 | |||||||||
Non-cash activities: | ||||||||||||
Debt issuance costs incurred from issuance of long-term notes | 307 | — | — | |||||||||
Conversion of long-term notes into ordinary shares | — | 39,124 | — | |||||||||
Transfer of unamortized debt issuance costs to equity upon conversion of long-term notes into ordinary shares | — | 3,096 | — | |||||||||
Non-cash portion of equity issuance costs incurred from conversion of long-term notes into ordinary shares | — | 46 | — | |||||||||
Non-cash portion of deferred initial public offering costs | — | — | 1,808 | |||||||||
Convertible redeemable preferred shares issued as dividends | — | — | 20,211 | |||||||||
Non-cash portion of acquisition of subsidiaries | — | — | 4,143 | |||||||||
Non-cash portion of acquisition of property, plant and equipment | — | — | 5,809 | |||||||||
Warrants issued in exchange for advisory services | — | — | 899 |
F-9
Table of Contents
Accumulated | ||||||||||||||||||||||||||||
Number of | Additional | other | Total | |||||||||||||||||||||||||
ordinary | Ordinary | paid-in | comprehensive | Accumulated | Shareholders’ | Comprehensive | ||||||||||||||||||||||
shares | shares | capital | income | deficit | equity | income (loss) | ||||||||||||||||||||||
Balance at July 10, 2006 (Inception) | — | — | — | — | — | — | — | |||||||||||||||||||||
Issuance of ordinary shares | 8,875,000 | 9 | 2,266 | — | — | 2,275 | — | |||||||||||||||||||||
Issuance of warrants (Note 18) | — | — | — | — | — | — | — | |||||||||||||||||||||
Net loss | — | — | — | — | (1,434 | ) | (1,434 | ) | (1,434 | ) | ||||||||||||||||||
Balance at December 31, 2006 | 8,875,000 | 9 | 2,266 | — | (1,434 | ) | 841 | (1,434 | ) | |||||||||||||||||||
Issuance of ordinary shares upon conversion of long-term convertible notes | 6,833,333 | 7 | 35,975 | — | — | 35,982 | — | |||||||||||||||||||||
Issuance of warrants (Note 18) | — | — | — | — | — | — | — | |||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 2,143 | — | 2,143 | 2,143 | |||||||||||||||||||||
Net loss | — | — | — | — | (4,560 | ) | (4,560 | ) | (4,560 | ) | ||||||||||||||||||
Balance at December 31, 2007 | 15,708,333 | 16 | 38,241 | 2,143 | (5,994 | ) | 34,406 | (2,417 | ) | |||||||||||||||||||
Repurchase of ordinary shares | (166,667 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Cumulative dividends on Series A convertible redeemable preferred shares | — | — | — | — | (14,680 | ) | (14,680 | ) | — | |||||||||||||||||||
Cumulative dividends on Series B convertible redeemable preferred shares | — | — | — | — | (5,531 | ) | (5,531 | ) | — | |||||||||||||||||||
Changes in redemption value of Series A convertible redeemable preferred shares | — | — | — | — | (10,569 | ) | (10,569 | ) | — | |||||||||||||||||||
Changes in redemption value of Series B convertible redeemable preferred shares | — | — | — | — | (4,134 | ) | (4,134 | ) | — | |||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 8,676 | — | 8,676 | 8,676 | |||||||||||||||||||||
Net loss | — | — | — | — | (3,987 | ) | (3,987 | ) | (3,987 | ) | ||||||||||||||||||
Balance at December 31, 2008 | 15,541,666 | 16 | 38,241 | 10,819 | (44,895 | ) | 4,181 | 4,689 | ||||||||||||||||||||
F-10
Table of Contents
Notes to the Consolidated Financial Statements
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares
and per share data)
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
Date of | ||||||||||
Place of | Establishment/ | Percentage of | Principal | |||||||
Incorporation | Acquisition | Ownership | Activities | |||||||
Subsidiaries | ||||||||||
Beijing A.B.C. Investment Consulting Co., Ltd. (“ABC”) | PRC | April 19, 2007 | 100% | Provision of general and administrative services to group companies | ||||||
Yunnan Huabang Electric Power Development Co., Ltd. (“Binglangjiang”) | PRC | April 25, 2007 | 100% | Operation and development of hydroelectric assets | ||||||
Sichuan Huabang Hydroelectric Development Co., Ltd. (“Donghe”) | PRC | May 21, 2007 | 100% | Operation and development of hydroelectric assets | ||||||
Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. (“Yingchuan”) | PRC | January 31, 2008 | 100% | Operation and development of hydroelectric assets | ||||||
Qingtian Wuliting Hydroelectric Development Co., Ltd. (“Wuliting”) | PRC | January 31, 2008 | 100% | Operation and development of hydroelectric assets | ||||||
Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (“Zhougongyuan”) | PRC | January 31, 2008 | 100% | Operation and development of hydroelectric assets |
F-11
Table of Contents
and per share data)
Date of | ||||||||||
Place of | Establishment/ | Percentage of | Principal | |||||||
Incorporation | Acquisition | Ownership | Activities | |||||||
Pingnan County Yuheng Hydropower Co., Ltd. (“Yuheng”) | PRC | October 21, 2008 | 100% | Operation and development of hydroelectric assets | ||||||
Pingnan County Wangkeng Hydroelectric Co., Ltd. (“Wangkeng”) | PRC | October 21, 2008 | 90% | Operation and development of hydroelectric assets | ||||||
Pingnan County Yuanping Hydroelectric Co., Ltd. (“Yuanping”) | PRC | October 22, 2008 | 100% | Operation and development of hydroelectric assets | ||||||
Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. (“Banzhu”) | PRC | October 22, 2008 | 90% | Operation and development of hydroelectric assets | ||||||
Equity Investee | ||||||||||
Yunhe County Shapulong Hydropower Generation Co., Ltd. (“Shapulong”) | PRC | December 25, 2007 | 50% | Operation and development of hydroelectric assets |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-12
Table of Contents
and per share data)
F-13
Table of Contents
and per share data)
Level 1 — | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2 — | Include other inputs that are directly or indirectly observable in the marketplace. | |
Level 3 — | Unobservable inputs which are supported by little or no market activity. |
Quoted Price in | ||||||||||||
Active Market for | Significant Other | Significant | ||||||||||
Identical Assets | Observable Inputs | Unobservable Inputs | ||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||
US$ | US$ | US$ | ||||||||||
Money market funds in cash equivalent | 32,475 | — | — | |||||||||
Morgan Joseph Preferred Shares Warrant (Note 18) | — | — | 540 | |||||||||
Total | 32,475 | — | 540 | |||||||||
F-14
Table of Contents
and per share data)
Derivative | Preferred Shares | |||||||||||
Liabilities | Warrants | |||||||||||
(Note 16) | (Note 18) | Total | ||||||||||
US$ | US$ | US$ | ||||||||||
Balance as of December 31, 2007 | 899 | — | 899 | |||||||||
Issuance during the year | — | 899 | 899 | |||||||||
Settlement during the year | (838 | ) | — | (838 | ) | |||||||
Realized or unrealized gain | (61 | ) | (359 | ) | (420 | ) | ||||||
Balance as of December 31, 2008 | — | 540 | 540 | |||||||||
The amount of total gain for the year included in earnings | (61 | ) | (359 | ) | (420 | ) | ||||||
F-15
Table of Contents
and per share data)
F-16
Table of Contents
and per share data)
December 31, | December 31, | |||||||
2007 | 2008 | |||||||
US$ | US$ | |||||||
Current assets | 349 | 447 | ||||||
Non-current assets | 19,445 | 20,004 | ||||||
Current liabilities | 4,950 | 7,265 | ||||||
Non-current liabilities | 12,061 | 11,280 |
For the Year | ||||||||
For the Period from | Ended | |||||||
December 25, 2007 | December 31, | |||||||
to December 31, 2007 | 2008 | |||||||
Revenues | 3 | 2,507 | ||||||
Gross (loss) profit | (24 | ) | 756 | |||||
Net loss | (54 | ) | (1,006 | ) |
For the Year | ||||||||
For the Period from | Ended | |||||||
December 25, 2007 | December 31, | |||||||
to December 31, 2007 | 2008 | |||||||
US$ | US$ | |||||||
Fees for supporting services provided to Shapulong | — | 229 | ||||||
Short-term loans provided to Shapulong | 287 | 4,251 |
F-17
Table of Contents
and per share data)
December 31, | December 31, | |||||||
2007 | 2008 | |||||||
US$ | US$ | |||||||
Amounts due from Shapulong | 287 | 4,534 | ||||||
Amounts due to Shapulong | — | 2 |
Dams and reservoirs | 30-49 years | |||
Buildings | 8-50 years | |||
Machinery | 1-30 years | |||
Transportation equipment | 1-11 years | |||
Electronic equipment and others | 1-15 years | |||
Land use right | 44-50 years |
F-18
Table of Contents
and per share data)
Development right of Binglangjiang Phase II | 30 years | |
Dam water use right of Yuanping | 40 years |
F-19
Table of Contents
and per share data)
F-20
Table of Contents
and per share data)
F-21
Table of Contents
and per share data)
F-22
Table of Contents
and per share data)
(w) | Share-based payment |
F-23
Table of Contents
and per share data)
F-24
Table of Contents
and per share data)
3. | ACQUISITIONS |
F-25
Table of Contents
and per share data)
US$ | ||||
Purchase price | 6,473 | |||
Direct acquisition costs | 50 | |||
Total purchase consideration | 6,523 | |||
Cash | 16,182 | |||
Property, plant and equipment, net | 17,215 | |||
Intangible asset | 2,909 | |||
Goodwill | 2,623 | |||
Other non-current assets | 162 | |||
Total assets acquired | 39,091 | |||
Short-term loans | (803 | ) | ||
Current portion of long-term loan | (4,272 | ) | ||
Long-term loan | (9,710 | ) | ||
Other current liabilities | (17,783 | ) | ||
Total liabilities assumed | (32,568 | ) | ||
Net assets acquired | 6,523 | |||
F-26
Table of Contents
and per share data)
US$ | ||||
Cash consideration | 10,028 | |||
Direct acquisition costs | 341 | |||
Total purchase consideration | 10,369 | |||
Property, plant and equipment, net | 10,369 | |||
Net assets acquired | 10,369 | |||
US$ | ||||
Cash consideration | 4,545 | |||
Direct acquisition costs | 203 | |||
Total purchase consideration | 4,748 | |||
Equity in net assets | 2,846 | |||
Equity method goodwill | 1,902 | |||
Cost of investment | 4,748 | |||
F-27
Table of Contents
and per share data)
US$ | ||||
Purchase price | 42,313 | |||
Guarantee fee relating to the acquisition (Note 23(d)) | 124 | |||
Direct acquisition costs | 142 | |||
Total purchase consideration | 42,579 | |||
Property, plant and equipment, net | 44,681 | |||
Goodwill | 10,592 | |||
Total assets acquired | 55,273 | |||
Current portion of long-term loans | (4,175 | ) | ||
Other current liabilities | (326 | ) | ||
Long-term loans | (6,263 | ) | ||
Deferred tax liabilities | (1,930 | ) | ||
Total liabilities assumed | (12,694 | ) | ||
Net assets acquired | 42,579 | |||
F-28
Table of Contents
and per share data)
US$ | ||||
Purchase price | 47,617 | |||
Guarantee fee relating to the acquisition (Note 23(d)) | 620 | |||
Direct acquisition costs | 150 | |||
Total purchase consideration | 48,387 | |||
Guarantee asset (Note 23(d)) | 221 | |||
Property, plant and equipment, net | 65,689 | |||
Goodwill | 16,686 | |||
Total assets acquired | 82,596 | |||
Current portion of long-term loans | (3,062 | ) | ||
Guarantee liability (Note 23(d)) | (221 | ) | ||
Other current liabilities | (2,017 | ) | ||
Long-term loans | (27,695 | ) | ||
Deferred tax liabilities | (1,214 | ) | ||
Total liabilities assumed | (34,209 | ) | ||
Net assets acquired | 48,387 | |||
F-29
Table of Contents
and per share data)
US$ | ||||
Purchase price | 21,896 | |||
Guarantee fee relating to the acquisition (Note 23(d)) | 641 | |||
Direct acquisition costs | 146 | |||
Total purchase consideration | 22,683 | |||
Guarantee asset (Note 23(d)) | 257 | |||
Current assets | 92 | |||
Construction in progress | 56,509 | |||
Total assets acquired | 56,858 | |||
Current portion of long-term loans | (418 | ) | ||
Guarantee liability (Note 23(d)) | (257 | ) | ||
Other current liabilities | (961 | ) | ||
Long-term loans | (29,505 | ) | ||
Deferred tax liabilities | (3,034 | ) | ||
Total liabilities assumed | (34,175 | ) | ||
Net assets acquired | 22,683 | |||
F-30
Table of Contents
and per share data)
US$ | ||||
Purchase price | 17,721 | |||
Direct acquisition costs | 92 | |||
Total purchase consideration | 17,813 | |||
Cash | 205 | |||
Property, plant and equipment, net | 20,374 | |||
Other assets | 4,767 | |||
Goodwill | 21,630 | |||
Total assets acquired | 46,976 | |||
Short-term loan | (2,928 | ) | ||
Current portion of long-term loans | (586 | ) | ||
Deferred tax liabilities — current | (11 | ) | ||
Other liabilities | (2,281 | ) | ||
Long-term loans | (22,402 | ) | ||
Deferred tax liabilities — non-current | (955 | ) | ||
Total liabilities assumed | (29,163 | ) | ||
Net assets acquired | 17,813 | |||
F-31
Table of Contents
and per share data)
US$ | ||||
Purchase price | 32,294 | |||
Direct acquisition costs | 100 | |||
Total purchase consideration | 32,394 | |||
Cash | 15 | |||
Other assets | 1,596 | |||
Deferred tax assets — current | 12 | |||
Property, plant and equipment, net | 36,396 | |||
Goodwill | 20,261 | |||
Total assets acquired | 58,280 | |||
Short-term loan | (2,635 | ) | ||
Current portion of long-term loans | (2,928 | ) | ||
Other liabilities | (2,298 | ) | ||
Long-term loans | (15,079 | ) | ||
Deferred tax liabilities — non-current | (2,155 | ) | ||
Total liabilities assumed | (25,095 | ) | ||
Minority interest | (791 | ) | ||
Net assets acquired | 32,394 | |||
F-32
Table of Contents
and per share data)
US$ | ||||
Purchase price | 8,490 | |||
Direct acquisition costs | 88 | |||
Total purchase consideration | 8,578 | |||
Cash | 115 | |||
Other assets | 1,586 | |||
Property, plant and equipment, net | 17,687 | |||
Intangible asset (Note 9) | 597 | |||
Goodwill | 2,529 | |||
Total assets acquired | 22,514 | |||
Short-term loan | (901 | ) | ||
Current portion of long-term loans | (439 | ) | ||
Other liabilities | (476 | ) | ||
Long-term loans | (11,560 | ) | ||
Deferred tax liabilities — non-current | (560 | ) | ||
Total liabilities assumed | (13,936 | ) | ||
Net assets acquired | 8,578 | |||
F-33
Table of Contents
and per share data)
US$ | ||||
Purchase price | 19,638 | |||
Direct acquisition costs | 91 | |||
Total purchase consideration | 19,729 | |||
Cash | 499 | |||
Other assets | 799 | |||
Property, plant and equipment, net | 49,370 | |||
Deferred tax assets — current | 1,114 | |||
Goodwill | 20,587 | |||
Total assets acquired | 72,369 | |||
Short-term loans | (2,927 | ) | ||
Guarantee liability (Note 23) | — | |||
Current portion of long-term loans | (7,076 | ) | ||
Long-term loans | (27,266 | ) | ||
Deferred tax liabilities | (3,239 | ) | ||
Other liabilities | (12,132 | ) | ||
Total liabilities assumed | (52,640 | ) | ||
Net assets acquired | 19,729 | |||
F-34
Table of Contents
and per share data)
For the Period from | ||||||||
July 10, 2006 to | For the Year Ended | |||||||
December 31, 2006 | December 31, 2007 | |||||||
(Unaudited) | (Unaudited) | |||||||
US$ | US$ | |||||||
Revenues | 989 | 3,021 | ||||||
Loss before income taxes | (1,215 | ) | (4,499 | ) | ||||
Net loss | (1,224 | ) | (4,516 | ) | ||||
Basic and diluted loss per share | (0.29 | ) | (0.33 | ) |
For the Year Ended | For the Year Ended | |||||||
December 31, 2007 | December 31, 2008 | |||||||
(Unaudited) | (Unaudited) | |||||||
US$ | US$ | |||||||
Revenues | 25,123 | 28,218 | ||||||
Loss before income taxes | (6,065 | ) | (7,555 | ) | ||||
Net loss | (6,142 | ) | (7,729 | ) | ||||
Basic and diluted loss per share | (0.44 | ) | (0.50 | ) |
4. | RESTRICTED CASH |
5. | ACCOUNTS RECEIVABLE |
F-35
Table of Contents
and per share data)
6. | PREPAYMENTS AND OTHER CURRENT ASSETS |
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Prepayments | — | 2,005 | 4,665 | |||||||||
Guarantee deposit-current portion | — | — | 2,560 | |||||||||
Deposit | — | 1,095 | — | |||||||||
Amounts due from original shareholders of an acquired subsidiary | — | — | 481 | |||||||||
Guarantee assets | — | — | 42 | |||||||||
Others | — | 169 | 1,689 | |||||||||
Total | — | 3,269 | 9,437 | |||||||||
F-36
Table of Contents
and per share data)
7. | DEFERRED INITIAL PUBLIC OFFERING COSTS |
8. | PROPERTY, PLANT AND EQUIPMENT |
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Dams and reservoirs | — | 10,854 | 114,084 | |||||||||
Buildings | — | 5,560 | 60,180 | |||||||||
Machinery | — | 4,349 | 66,184 | |||||||||
Transportation equipment | — | 261 | 563 | |||||||||
Electronic equipment and others | — | 39 | 370 | |||||||||
Land use right | — | 8,333 | 31,372 | |||||||||
Less: Accumulated depreciation | — | (572 | ) | (5,482 | ) | |||||||
— | 28,824 | 267,271 | ||||||||||
Construction in progress | — | 222 | 97,919 | |||||||||
Total | — | 29,046 | 365,190 | |||||||||
F-37
Table of Contents
and per share data)
Zhougongyuan | Wuliting | Binglangjiang | Total | |||||||||||||
US$ | US$ | US$ | US$ | |||||||||||||
Balance as of December 31, 2006 | — | — | — | — | ||||||||||||
Acquisition during the year | ||||||||||||||||
Addition to construction in progress | — | — | 215 | 215 | ||||||||||||
Transfer to property, plant and equipment | — | — | — | — | ||||||||||||
Foreign currency translation adjustment | — | — | 7 | 7 | ||||||||||||
Balance as of December 31, 2007 | — | — | 222 | 222 | ||||||||||||
Acquisition during the year | 56,509 | 3,831 | — | 60,340 | ||||||||||||
Addition to construction in progress | 32,751 | 818 | 4,496 | 38,065 | ||||||||||||
Transfer to property, plant and equipment | — | (4,714 | ) | — | (4,714 | ) | ||||||||||
Foreign currency translation adjustment | 3,740 | 96 | 170 | 4,006 | ||||||||||||
Balance as of December 31, 2008 | 93,000 | 31 | 4,888 | 97,919 | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Cost of revenues | — | (561 | ) | (4,709 | ) | |||||||
General and administrative expenses | — | (11 | ) | (46 | ) | |||||||
Total | — | (572 | ) | (4,755 | ) | |||||||
9. | INTANGIBLE ASSETS |
F-38
Table of Contents
and per share data)
December 31, 2007 | ||||||||||||||||
Foreign | ||||||||||||||||
Gross | Currency | Net | ||||||||||||||
Carrying | Accumulated | Translation | Carrying | |||||||||||||
Value | Amortization | Adjustment | Value | |||||||||||||
Development right of Binglangjiang Phase II | 2,909 | (66 | ) | 165 | 3,008 | |||||||||||
December 31, 2008 | ||||||||||||||||
Foreign | ||||||||||||||||
Gross | Currency | Net | ||||||||||||||
Carrying | Accumulated | Translation | Carrying | |||||||||||||
Value | Amortization | Adjustment | Value | |||||||||||||
Development right of Binglangjiang Phase II | 2,909 | (172 | ) | 368 | 3,105 | |||||||||||
Water use right of Jinzaoqiao station | 563 | (2 | ) | — | 561 | |||||||||||
Total | 3,472 | (174 | ) | 368 | 3,666 | |||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Cost of revenues | — | — | (2 | ) | ||||||||
General and administrative expenses | — | (66 | ) | (106 | ) | |||||||
Total | — | (66 | ) | (108 | ) | |||||||
US$ | ||||
2009 | 111 | |||
2010 | 111 | |||
2011 | 111 | |||
2012 | 111 | |||
2013 | 111 |
10. | GOODWILL |
F-39
Table of Contents
and per share data)
Yunnan | Sichuan | Fujian | Zhejiang | |||||||||||||||||
Province | Province | Province | Province | Total | ||||||||||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
Balance as of December 31, 2006 | — | — | — | — | — | |||||||||||||||
Goodwill acquired during the year | 2,623 | — | — | — | 2,623 | |||||||||||||||
Foreign currency translation adjustment | 150 | — | — | — | 150 | |||||||||||||||
Balance as of December 31, 2007 | 2,773 | — | — | — | 2,773 | |||||||||||||||
Goodwill acquired during the year | — | — | 65,007 | 27,278 | 92,285 | |||||||||||||||
Subsequent realization of tax benefit from acquired subsidiaries | (86 | ) | — | — | — | (86 | ) | |||||||||||||
Foreign currency translation adjustment | 191 | — | (30 | ) | 1,400 | 1,561 | ||||||||||||||
Balance as of December 31, 2008 | 2,878 | — | 64,977 | 28,678 | 96,533 | |||||||||||||||
11. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Accrued payroll expenses | — | — | 1,784 | |||||||||
Retainage due to contractors | — | 1,252 | 4,371 | |||||||||
Purchase consideration payable | — | — | 4,143 | |||||||||
Employee termination costs | — | — | 4,387 | |||||||||
Guarantee deposits from original shareholders of acquired subsidiaries | — | — | 4,806 | |||||||||
Taxes payable | — | 93 | 2,454 | |||||||||
Guarantee liabilities (Note 23(d)) | — | — | 42 | |||||||||
Amounts due to original shareholders of acquired subsidiaries | — | — | 5,622 | |||||||||
Customer deposits | — | — | 56 | |||||||||
Other liabilities | 796 | 1,005 | 4,759 | |||||||||
Total | 796 | 2,350 | 32,424 | |||||||||
F-40
Table of Contents
and per share data)
12. | INCOME TAX EXPENSE |
F-41
Table of Contents
and per share data)
For the Period from | For The Year | For The Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Cayman Islands | (1,434 | ) | (3,873 | ) | (4,353 | ) | ||||||
PRC | — | (670 | ) | 769 | ||||||||
(1,434 | ) | (4,543 | ) | (3,584 | ) | |||||||
For the Period from | For The Year | For The Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31 | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Current income tax expense | — | 17 | 398 | |||||||||
Deferred income tax expense | — | — | 46 | |||||||||
Income tax expense | — | 17 | 444 | |||||||||
For the Period from | For The Year | For The Year | ||||||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||
2006 | 2007 | 2008 | ||||||||||||||
US$ | US$ | US$ | ||||||||||||||
Taxation at PRC EIT statutory rate (33% for the periods ended December 31, 2006 and 2007 and 25% for the year ended December 31, 2008) | (473 | ) | (1,499 | ) | (896 | ) | ||||||||||
Impact of tax rate differences | 473 | 1,278 | 1,089 | |||||||||||||
Impact from statutory tax rate change | — | 184 | — | |||||||||||||
Effect of tax holidays in the PRC | — | 21 | (286 | ) | ||||||||||||
Non-deductible expenses | — | 10 | 198 | |||||||||||||
Change in valuation allowance | — | 23 | 339 | |||||||||||||
Income tax provision | — | 17 | 444 | |||||||||||||
Effective Tax Rate(%) | — | (0.4 | )% | (12.4 | )% | |||||||||||
F-42
Table of Contents
and per share data)
US$ | ||||
Balance as of January 1, 2008 | 39 | |||
Additions for tax position taken in the current year | 1,332 | |||
Reduction relating to settlement with tax authorities in the current year | (9 | ) | ||
Balance as of December 31, 2008 | 1,362 | |||
13. | DEFERRED TAX ASSETS / DEFERRED TAX LIABILITIES |
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Deferred tax assets — current | ||||||||||||
Allowance for uncollectible other receivables | — | — | 7 | |||||||||
Accrued water resource fee | — | — | 131 | |||||||||
Guarantee deposit | — | — | 51 | |||||||||
Other payable | — | — | 1,097 | |||||||||
Total deferred tax assets — current | — | — | 1,286 | |||||||||
Deferred tax liabilities — current | ||||||||||||
Unfavourable contract obligation — electricity supply contract | — | — | (95 | ) | ||||||||
Total deferred tax liabilities — current | — | — | (95 | ) | ||||||||
Valuation allowance | — | — | (25 | ) | ||||||||
Net deferred tax assets — current | — | — | 1,166 | |||||||||
Deferred tax assets — non-current | ||||||||||||
Net operating loss carry-forwards | — | 47 | 670 |
F-43
Table of Contents
and per share data)
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Investment tax credit carry-forwards | — | — | 470 | |||||||||
Depreciation of property, plant and equipment | — | 1,346 | 1,339 | |||||||||
Pre-operation expenses | — | — | 49 | |||||||||
Guarantee deposit | — | — | 34 | |||||||||
Unfavourable contract obligation — water use right | — | — | 9 | |||||||||
Government grant | — | — | 26 | |||||||||
Deferred revenue | — | — | 16 | |||||||||
Total deferred tax assets — non-current | — | 1,393 | 2,613 | |||||||||
Deferred tax liabilities — non-current | ||||||||||||
Fair valuestep-up of property, plant and equipment | — | — | (13,359 | ) | ||||||||
Unfavourable contract obligation — electricity supply contract | — | — | (136 | ) | ||||||||
Amortization of acquired intangible assets | — | (722 | ) | (755 | ) | |||||||
Total deferred tax liabilities — non-current | — | (722 | ) | (14,250 | ) | |||||||
Valuation allowance | — | (671 | ) | (1,778 | ) | |||||||
Net deferred tax liabilities — non-current | — | — | (13,415 | ) | ||||||||
F-44
Table of Contents
and per share data)
For the Period from | For The Year | For The Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Basic and diluted | — | — | 0.02 | |||||||||
14. | BORROWINGS |
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Short-term: | ||||||||||||
Secured | — | — | 5,560 | |||||||||
Unsecured | — | — | 3,221 | |||||||||
Long-term: | ||||||||||||
Current portion, secured | — | 2,052 | 29,037 | |||||||||
Non-current, secured | — | 10,269 | 138,133 | |||||||||
Total borrowings | — | 12,321 | 175,951 | |||||||||
F-45
Table of Contents
and per share data)
December 31, | December 31, | |||||||
Guaranteed by | 2007 | 2008 | ||||||
US$ | US$ | |||||||
Guangsha Construction Group Co., Ltd. | — | 64,525 | ||||||
Sanming Ruifeng Hydropower Investment Co., Ltd. | — | 4,926 | ||||||
Fujian Province Anheng Assets Management Co., Ltd. and Fujian Yuneng Power Group Ltd. | — | 9,071 | ||||||
Dachuang Group and original shareholders of Yuanping | — | 1,902 | ||||||
Huang Shaojian (original shareholder of Wangkeng) | — | 5,853 | ||||||
Pingnan County Minfeng Electric Power Co., Ltd. | — | 2,048 | ||||||
— | 88,325 | |||||||
US$ | ||||
2009 | 29,037 | |||
2010 | 26,013 | |||
2011 | 25,428 | |||
2012 | 18,259 | |||
2013 | 18,624 | |||
Thereafter | 49,809 | |||
167,170 | ||||
15. | OTHER NON-CURRENT LIABILITIES |
F-46
Table of Contents
and per share data)
16. | LONG-TERM NOTES |
(a) | Holders that vote against such business combination shall receive (i) the principal amount of such holders’ Notes, (ii) accrued and unpaid Current Interest of such holders’ Notes, (iii) Deferred Interest of such holders’ Notes and (iv) a payment equal to 5% of the principal amount of the holders’ Notes (“Business Combination Payment”). |
F-47
Table of Contents
and per share data)
(b) | Holders that vote for such business combination and elect to convert Notes shall receive (i) accrued and unpaid Current Interest of such holders’ Notes, (ii) Deferred Interest of such holders’ Notes, (iii) the Business Combination Payment and (iv) one ordinary share and two warrants each to purchase one ordinary share of the Company at US$5.00 per share for each US$6.00 of the first US$26,000 and US$7,000 of the principal amount held by Vicis and JMG, respectively. To the extent that Vicis and JMG convert a principal amount of the Notes at the time of the business combination in excess of US$26,000 and US$7,000, respectively (the “Excess Amount”), Vicis and JMG shall receive one ordinary share and four warrants each to purchase one ordinary share of the Company at US$5.00 per share for each US$6.00 of their respective Excess Amount. |
(c) | Holders that vote for such business combination and elect not to convert Notes shall (i) have the Notes remain outstanding until the maturity date (unless such Note is earlier redeemed at the option of the Company), (ii) have interest continue to accrue on the outstanding principal amount of the Notes at an interest rate of 7% per annum and (iii) receive a payment that will result in the holders receiving a return on investment equal to 20% per annum through the date of such payment after taking into account any accrued and unpaid Current Interest, Deferred Interest and the Business Combination Payment (“Contingent Payment”) and (iv) receive two warrants each to purchase one ordinary share of the Company at US$5.00 per share for each US$6.00 of the holders’ respective Excess Amount. The Company must make the Contingent Payment no later than the third anniversary of the date on which such business combination is completed. |
F-48
Table of Contents
and per share data)
F-49
Table of Contents
and per share data)
US$ | ||||
Issuance of long-term notes, net of debt discounts | 46,867 | |||
Compound derivative liability | 3,133 | |||
Accretion expense | 285 | |||
Balance as of December 31, 2006 | 50,285 | |||
Accretion expense | 833 | |||
Change in fair value of compound derivative liability | 266 | |||
Settlement of compound derivative liability | (2,500 | ) | ||
Conversion of long-term notes | (39,124 | ) | ||
Balance as of December 31, 2007 | 9,760 | |||
Accretion expense | 139 | |||
Change in fair value of compound derivative liability | (61 | ) | ||
Redemption of long-term notes | (9,000 | ) | ||
Settlement of compound derivative liability | (838 | ) | ||
Balance as of December 31, 2008 | — | |||
17. | CONVERTIBLE REDEEMABLE PREFERRED SHARES |
F-50
Table of Contents
and per share data)
• | Each Series A and Series B Preferred Share plus any declared but unpaid dividends shall be convertible at the option of the holder, at any time after the date of issuance of such share, into ordinary shares as determined by dividing the par value plus any accrued dividends by the lesser of (i) the applicable conversion price and (ii) in the event of a qualified public offering, the issue price per ordinary share multiplied by an applicable percentage. For Series A Preferred Shares, the applicable percentage is 70% if the qualified public offering is consummated before April 28, 2009, 60% if the qualified public offering is consummated after April 28, 2009 and before January 28, 2010, and 50% if the qualified public offering is consummated after January 28, 2010. For Series B Preferred Shares, the applicable percentage is 70% if the qualified public offering is consummated before September 30, 2009, 60% if the qualified public offering is consummated after September 30, 2009 and before June 30, 2010, and 50% if the qualified public offering is consummated after June 30, 2010. The initial conversion price of the Series A and Series B Preferred Shares is US$7.00. | |
• | All of the Series A and Series B Preferred Shares shall automatically be converted into ordinary shares at the each then-effective conversion price upon the closing of a qualified public offering, as defined in the Series A and Series B Preferred Shares agreements. |
F-51
Table of Contents
and per share data)
• | If the Company fails to consummate certain specified acquisitions of hydroelectric assets in the Zhejiang province in order for the proceeds of the Series A Preferred Shares to be released from an escrow account to the Company by March 30, 2008, the Company is obligated to redeem all of the Series A Preferred Shares at a redemption price equal to the Series A Preferred Shares issue price plus any interest earned in the escrow account. | |
• | If a qualified public offering has not occurred prior to January 28, 2011, upon written election by the holders of the Series A and Series B Preferred Shares, the Company is obligated to redeem such holders’ Series A and Series B Preferred Shares by paying a redemption price equal to the Series A and Series B Preferred Shares issue price plus any accrued but unpaid dividends. | |
• | If a qualified public offering has not occurred prior to January 28, 2013, the Company may elect to redeem all of the Series A and Series B Preferred Shares at a redemption price equal to the Series A and Series B Preferred Shares issue price plus any accrued but unpaid dividends. | |
• | Prior to the consummation of a change in control event, if requested by holders of a majority of the Series A and Series B Preferred Shares and the Company has sufficient legally available funds or assets to redeem in full all of the Series A and Series B Preferred Shares, the Company is obligated to redeem all of the Series A and Series B Preferred Shares at a redemption price equal to the Series A and Series B Preferred Shares issue price plus any accrued but unpaid dividends. |
F-52
Table of Contents
and per share data)
Series A | Series B | Total | ||||||||||
US$ | US$ | US$ | ||||||||||
Balance as of December 31, 2007 | — | — | — | |||||||||
Issuance of preferred shares | 150,025 | 129,000 | 279,025 | |||||||||
Issuance costs (including Morgan Joseph Preferred Shares Warrant (Note 18) for Series A Preferred Shares) | (10,569 | ) | (4,134 | ) | (14,703 | ) | ||||||
Changes in redemption value | 10,569 | 4,134 | 14,703 | |||||||||
Cumulative dividends | 14,680 | 5,531 | 20,211 | |||||||||
Balance as of December 31, 2008 | 164,705 | 134,531 | 299,236 | |||||||||
18. | WARRANTS |
F-53
Table of Contents
and per share data)
F-54
Table of Contents
and per share data)
Morgan | ||||||||
Morgan | Joseph | |||||||
Founders’ | Joseph | Holders’ | Preferred Shares | |||||
Warrants | Warrants | Warrants | Warrant | |||||
Commitment date/year-end date | November 10, 2006 | November 10, 2006 | November 10, 2006 | December 31, 2008 | ||||
Average risk-free rate of return | 5.11% | 5.11% | 5.11% | 3.19% | ||||
Expected term/life | 5 years | 5 years | 5 years | 4.1 years | ||||
Volatility rate | 33.70% | 33.70% | 33.70% | 59.00% | ||||
Expected dividend yield | — | — | — | 1.43% | ||||
Fair value of ordinary share | 0.11 | 0.11 | 0.11 | 1.74 | ||||
Fair value of Series A Preferred Share | N/A | N/A | N/A | 608.05 | ||||
Estimated forfeiture rate | 0% | 0% | 0% | 0% |
19. | SHARE CAPITAL |
F-55
Table of Contents
and per share data)
20. | BASIC AND DILUTED LOSS PER SHARE |
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Numerator for basic loss per share: | ||||||||||||
Loss attributable to ordinary shareholders | (1,434 | ) | (4,560 | ) | (38,901 | ) | ||||||
Cumulative dividends on Series A convertible redeemable preferred shares | — | — | — | |||||||||
Cumulative dividends on Series B convertible redeemable preferred shares | — | — | — | |||||||||
Changes in redemption value of Series A convertible redeemable preferred shares | — | — | — | |||||||||
Changes in redemption value of Series B convertible redeemable preferred shares | — | — | — | |||||||||
Numerator for diluted loss per share | (1,434 | ) | (4,560 | ) | (38,901 | ) | ||||||
F-56
Table of Contents
and per share data)
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Denominator: | ||||||||||||
Weighted average number of ordinary shares outstanding — basic | 4,230,822 | 13,817,466 | 15,554,416 | |||||||||
Dilutive effect of convertible securities: | ||||||||||||
Warrants | — | — | — | |||||||||
Convertible redeemable preferred shares | — | — | — | |||||||||
Convertible notes | — | — | — | |||||||||
Weighted average number of ordinary shares outstanding — diluted | 4,230,822 | 13,817,466 | 15,554,416 | |||||||||
Loss per share — basic and diluted | (0.34 | ) | (0.33 | ) | (2.50 | ) | ||||||
21. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
F-57
Table of Contents
and per share data)
22. | INTEREST EXPENSES |
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Accrued interest on long-term bank loans | — | 693 | 5,293 | |||||||||
Accrued or paid interest on convertible notes | 489 | 1,456 | 164 | |||||||||
Accrued interest on unrecognized tax benefits (Note 12) | — | — | 99 | |||||||||
Amortization of debt issuance costs | 99 | 293 | 47 | |||||||||
Accretion of guarantee fee payable | — | — | 105 | |||||||||
Amortization of discount on convertible notes | 285 | 833 | 139 | |||||||||
873 | 3,275 | 5,847 | ||||||||||
23. | COMMITMENTS AND CONTINGENCIES |
December 31, | ||||
2008 | ||||
US$ | ||||
2009 | 403 | |||
2010 | 356 | |||
2011 | 46 | |||
2012 and thereafter | — | |||
Total | 805 | |||
F-58
Table of Contents
and per share data)
F-59
Table of Contents
and per share data)
24. | OTHER INCOME, NET |
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Change in value of guarantee assets (Note 23(d)) | — | — | (449 | ) | ||||||||
Change in value of guarantee liabilities (Note 23(d)) | — | — | 449 | |||||||||
Fees for supporting service provided to an equity investee (Note 2(i)) | — | — | 229 | |||||||||
Others | — | 8 | (85 | ) | ||||||||
Other income, net | — | 8 | 144 | |||||||||
25. | SEGMENT AND GEOGRAPHIC INFORMATION |
F-60
Table of Contents
and per share data)
Yunnan | Sichuan | |||||||||||||||||||
Province | Province | Unallocated | Eliminations | Consolidated | ||||||||||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
Revenues | 1,719 | 715 | — | — | 2,434 | |||||||||||||||
Cost of revenues | (500 | ) | (288 | ) | (25 | ) | — | (813 | ) | |||||||||||
General and administrative expenses | (159 | ) | (110 | ) | (2,291 | ) | — | (2,560 | ) | |||||||||||
Interest income | 147 | 50 | 854 | — | 1,051 | |||||||||||||||
Interest expenses | (684 | ) | — | (2,591 | ) | — | (3,275 | ) | ||||||||||||
Change in fair value of derivative financial liabilities | — | — | (266 | ) | — | (266 | ) | |||||||||||||
Exchange loss | (714 | ) | (359 | ) | (22 | ) | — | (1,095 | ) | |||||||||||
Share of losses in an equity investee | — | — | (27 | ) | — | (27 | ) | |||||||||||||
Other income | 8 | — | — | — | 8 | |||||||||||||||
Income tax expenses | — | (8 | ) | (9 | ) | — | (17 | ) | ||||||||||||
Net loss | (183 | ) | — | (4,377 | ) | — | (4,560 | ) | ||||||||||||
Total assets | 37,596 | 16,896 | 46,607 | (41,988 | ) | 59,111 | ||||||||||||||
Total liabilities | (13,773 | ) | (208 | ) | (11,646 | ) | 922 | (24,705 | ) | |||||||||||
Capital expenditures | 316 | 58 | 161 | — | 535 | |||||||||||||||
Depreciation & amortization expenses | 433 | 200 | 5 | — | 638 |
F-61
Table of Contents
and per share data)
Yunnan | Sichuan | Zhejiang | Fujian | |||||||||||||||||||||||||
Province | Province | Province | Province | Unallocated | Eliminations | Consolidated | ||||||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||
Revenues | 2,746 | 971 | 9,635 | 1,363 | — | — | 14,715 | |||||||||||||||||||||
Cost of revenues | (1,120 | ) | (478 | ) | (4,598 | ) | (1,025 | ) | — | 1,196 | (6,025 | ) | ||||||||||||||||
General and administrative expenses | (245 | ) | (223 | ) | (567 | ) | (210 | ) | (5,516 | ) | — | (6,761 | ) | |||||||||||||||
Interest income | 359 | 84 | 18 | 5 | 877 | (3 | ) | 1,340 | ||||||||||||||||||||
Interest expenses | (361 | ) | — | (3,519 | ) | (1,514 | ) | (456 | ) | 3 | (5,847 | ) | ||||||||||||||||
Change in fair value of derivative financial liabilities and warrant liability | — | — | — | — | 420 | — | 420 | |||||||||||||||||||||
Exchange (loss) gain | (269 | ) | 172 | (165 | ) | (2 | ) | (803 | ) | — | (1,067 | ) | ||||||||||||||||
Share of losses in an equity investee | — | — | — | — | (503 | ) | — | (503 | ) | |||||||||||||||||||
Other income, net | (3 | ) | 1 | (6 | ) | (5 | ) | 1,353 | (1,196 | ) | 144 | |||||||||||||||||
Income tax (expenses) benefit | (171 | ) | 9 | (447 | ) | 165 | — | (444 | ) | |||||||||||||||||||
Minority interest | — | — | — | 41 | — | — | 41 | |||||||||||||||||||||
Net income (loss) | 936 | 536 | 351 | (1,182 | ) | (4,628 | ) | — | (3,987 | ) | ||||||||||||||||||
Total assets | 40,997 | 13,919 | 242,057 | 212,801 | 337,115 | (313,321 | ) | 533,568 | ||||||||||||||||||||
Total liabilities | (14,569 | ) | (32 | ) | (93,358 | ) | (119,423 | ) | (23,249 | ) | 21,230 | (229,401 | ) | |||||||||||||||
Capital expenditures | 4,589 | 21 | 33,789 | 12 | 342 | — | 38,753 | |||||||||||||||||||||
Depreciation & amortization expenses | 696 | 305 | 3,113 | 718 | 31 | — | 4,863 |
26. | SHARE-BASED PAYMENT |
F-62
Table of Contents
and per share data)
27. | RELATED PARTY TRANSACTIONS |
Name of Related parties | Relationship with the Group | |
China Hydro LLC | A shareholder of the Company | |
Kuhns Brothers, Inc. | A company owned by the CEO | |
China Carbon Investment Consulting, Ltd. | A company controlled by the CEO | |
China Silicon Zhuo-Xin Investment Consulting, Ltd. | A company controlled by the CEO | |
Sanming City Chenyang Hydropower Co., Ltd. | A minority shareholder of Wangkeng |
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Expenses paid on behalf by related parties: | ||||||||||||
China Hydro LLC | 1,263 | — | — | |||||||||
Kuhns Brothers, Inc | 143 | 247 | — | |||||||||
1,406 | 247 | — | ||||||||||
Expenses paid on behalf of related parties: | ||||||||||||
China Carbon Investment Consulting, Ltd. | — | — | 81 | |||||||||
China Silicon Zhuo-Xin Investment Consulting, Ltd. | — | — | 32 | |||||||||
— | — | 113 | ||||||||||
F-63
Table of Contents
and per share data)
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Rental for office space provided by: | ||||||||||||
Kuhns Brothers, Inc. | 8 | 154 | 257 | |||||||||
8 | 154 | 257 | ||||||||||
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Short-term loans from related parties: | ||||||||||||
China Hydro LLC | — | 23 | — | |||||||||
Kuhns Brothers, Inc. | — | 60 | — | |||||||||
— | 83 | — | ||||||||||
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Guarantee deposits received from related parties: | ||||||||||||
Sanming City Chenyang Hydropower Co., Ltd. | — | — | 241 | |||||||||
— | — | 241 | ||||||||||
F-64
Table of Contents
and per share data)
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Amounts due from related parties: | ||||||||||||
China Hydro LLC | 25 | 25 | — | |||||||||
Kuhns Brothers, Inc. | 8 | — | — | |||||||||
China Silicon Zhuo-Xin Investment Consulting, Ltd. | — | — | 13 | |||||||||
33 | 25 | 13 | ||||||||||
Amounts due to related parties: | ||||||||||||
China Hydro LLC | — | 23 | — | |||||||||
China Carbon Investment Consulting, Ltd. | — | — | 1 | |||||||||
Sanming City Chenyang Hydropower Co., Ltd. | — | — | 241 | |||||||||
— | 23 | 242 | ||||||||||
28. | STATUTORY RESERVES |
F-65
Table of Contents
and per share data)
29. | CONCENTRATION OF RISKS |
December 31, | December 31, | |||||||||
Segment | 2007 | 2008 | ||||||||
Yunnan Dehong Electric Power Co., Ltd. | Yunnan province | 71 | % | 19 | % | |||||
Sichuan Cangxi Electric Power Co., Ltd. | Sichuan province | 29 | % | 7 | % | |||||
Lishui Electric Power Bureau | Zhejiang province | — | 65 | % | ||||||
Fujian Electric Power Co., Ltd. | Fujian province | — | 7 | % | ||||||
Pingnan Power Supply Company | Fujian province | — | 2 | % | ||||||
100 | % | 100 | % | |||||||
F-66
Table of Contents
and per share data)
30. | SUBSEQUENT EVENTS |
F-67
Table of Contents
and per share data)
31. | CONDENSED FINANCIAL INFORMATION OF THE COMPANY |
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 628 | 58 | 32,473 | |||||||||
Restricted cash | 50,340 | — | — | |||||||||
Debt issuance costs | — | 47 | — | |||||||||
Prepayments and other current assets | 33 | 150 | 8 | |||||||||
Total current assets | 51,001 | 255 | 32,481 | |||||||||
Non-current assets | ||||||||||||
Debt issuance costs | 975 | — | — | |||||||||
Property, plant and equipment, net | — | 10 | 14 | |||||||||
Deferred initial public offering costs | — | — | 6,032 | |||||||||
Investment in subsidiaries | — | 41,018 | 282,940 | |||||||||
Investment in an equity investee | — | 4,721 | 4,295 | |||||||||
Other non-current assets | — | — | 230 | |||||||||
Total non-current assets | 975 | 45,749 | 293,511 | |||||||||
�� | ||||||||||||
TOTAL ASSETS | 51,976 | 46,004 | 325,992 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | 54 | — | — | |||||||||
Current portion of long-term notes | — | 9,760 | — | |||||||||
Amounts due to an equity investee | — | — | 2 | |||||||||
Amounts due to subsidiaries | — | 918 | 17,349 | |||||||||
Accrued expense & other liabilities | 796 | 920 | 4,684 | |||||||||
Warrant liabilities | — | — | 540 | |||||||||
Total current liabilities | 850 | 11,598 | 22,575 | |||||||||
Non-current liabilities | ||||||||||||
Long-term notes | 50,285 | — | — | |||||||||
Total non-current liabilities | 50,285 | — | — | |||||||||
Total liabilities | 51,135 | 11,598 | 22,575 | |||||||||
F-68
Table of Contents
and per share data)
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Series A (par value US$0.001 per share; 2,500,000 shares authorized; nil, nil and 152,193 shares issued and outstanding as of December 31, 2006, 2007 and 2008) | — | — | 164,705 | |||||||||
Series B (par value US$0.001 per share; 2,500,000 shares authorized; nil, nil and 129,000 shares issued and outstanding as of December 31, 2006, 2007 and 2008) | — | — | 134,531 | |||||||||
Shareholders’ equity | ||||||||||||
Ordinary shares (par value US$0.001 per share, 130,000,000 shares authorized; 8,875,000, 15,708,333 and 15,541,666 shares issued and outstanding as of December 31, 2006, 2007 and 2008) | 9 | 16 | 16 | |||||||||
Additional paid-in capital | 2,266 | 38,241 | 38,241 | |||||||||
Accumulated other comprehensive income | — | 2,143 | 10,819 | |||||||||
Accumulated deficit | (1,434 | ) | (5,994 | ) | (44,895 | ) | ||||||
Total shareholders’ equity | 841 | 34,406 | 4,181 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 51,976 | 46,004 | 325,992 | |||||||||
F-69
Table of Contents
and per share data)
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Revenues | — | — | — | |||||||||
Cost of revenues | — | — | — | |||||||||
Gross profit | — | — | — | |||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (901 | ) | (1,839 | ) | (3,890 | ) | ||||||
Total operating expenses | (901 | ) | (1,839 | ) | (3,890 | ) | ||||||
Operating loss | (901 | ) | (1,839 | ) | (3,890 | ) | ||||||
Equity in (losses) profits of subsidiaries | — | (687 | ) | 366 | ||||||||
Share of losses in an equity investee | — | (27 | ) | (503 | ) | |||||||
Interest income | 340 | 850 | 873 | |||||||||
Interest expenses | (873 | ) | (2,591 | ) | (455 | ) | ||||||
Change in fair value of derivatives and warrant liability | — | (266 | ) | 420 | ||||||||
Exchange loss | — | — | (798 | ) | ||||||||
Loss before income tax expenses | (1,434 | ) | (4,560 | ) | (3,987 | ) | ||||||
Income tax expenses | — | — | — | |||||||||
Net loss | (1,434 | ) | (4,560 | ) | (3,987 | ) | ||||||
For the Period from | For the Year | For the Year | ||||||||||
July 10, 2006 to | Ended | Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
US$ | US$ | US$ | ||||||||||
Cash flows used in operating activities | (515 | ) | (2,277 | ) | (2,055 | ) | ||||||
Cash flows (used in) provided by investing activities | (50,340 | ) | 6,667 | (216,265 | ) | |||||||
Cash flows provided by (used in) financing activities | 51,483 | (4,960 | ) | 250,735 | ||||||||
Net increase (decrease) in cash and cash equivalents | 628 | (570 | ) | 32,415 | ||||||||
Cash and cash equivalents at the beginning of the year | — | 628 | 58 | |||||||||
Cash and cash equivalents at the end of the year | 628 | 58 | 32,473 | |||||||||
F-70
Table of Contents
and per share data)
32. | PRO FORMA LOSS PER SHARE (UNAUDITED) |
For the Year | ||||
Ended | ||||
December 31, | ||||
2008 | ||||
US$ | ||||
Numerator: | ||||
Loss attributable to ordinary shareholders | (38,901 | ) | ||
Cumulative dividends on Series A convertible redeemable preferred shares | 14,680 | |||
Cumulative dividends on Series B convertible redeemable preferred shares | 5,531 | |||
Changes in redemption value of Series A convertible redeemable preferred shares | 10,569 | |||
Changes in redemption value of Series B convertible redeemable preferred shares | 4,134 | |||
Numerator for pro forma basic and diluted loss per share | (3,987 | ) | ||
Denominator: | ||||
Number of shares outstanding, opening | 15,708,333 | |||
Conversion of convertible redeemable preferred shares to ordinary shares | 39,860,714 | |||
Weighted average number of shares cancelled | (153,917 | ) | ||
Denominator for pro forma basic and diluted loss per share | 55,415,130 | |||
Pro forma basic and diluted loss per share | (0.07 | ) | ||
F-71
Table of Contents
Pro Forma | ||||||||||||||
Balance Sheet at | ||||||||||||||
December 31, | September 30, | September 30, | ||||||||||||
Notes | 2008 | 2009 | 2009 | |||||||||||
Note 2(a) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | 38,693 | 23,787 | 23,787 | |||||||||||
Accounts receivable (net of allowance for doubtful accounts of US$nil as of December 31, 2008 and September 30, 2009) | 4 | 3,137 | 12,230 | 12,230 | ||||||||||
Deferred tax assets | 1,166 | 551 | 551 | |||||||||||
Amounts due from related parties | 20 | 13 | 13 | 13 | ||||||||||
Amounts due from an equity investee | 2(d) | 4,534 | — | — | ||||||||||
Prepayments and other current assets | 5 | 9,437 | 6,621 | 6,621 | ||||||||||
Total current assets | 56,980 | 43,202 | 43,202 | |||||||||||
Non-current assets: | ||||||||||||||
Investment in an equity investee | 2(d) | 4,295 | — | — | ||||||||||
Deferred initial public offering costs | 8 | 6,032 | 9,574 | — | ||||||||||
Property, plant and equipment, net | 6 | 365,190 | 427,941 | 427,941 | ||||||||||
Intangible assets, net | 3,666 | 4,556 | 4,556 | |||||||||||
Goodwill | 7 | 96,533 | 107,768 | 107,768 | ||||||||||
Deferred tax assets | — | 1,022 | 1,022 | |||||||||||
Other non-current assets | 872 | 777 | 777 | |||||||||||
Total non-current assets | 476,588 | 551,638 | 542,064 | |||||||||||
TOTAL ASSETS | 533,568 | 594,840 | 585,266 | |||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | 6,259 | 1,749 | 1,749 | |||||||||||
Short-term loans | 17 | 8,781 | 7,097 | 7,097 | ||||||||||
Current portion of long-term loans | 17 | 29,037 | 20,545 | 20,545 | ||||||||||
Warrant liability | 12 | 540 | 983 | 983 | ||||||||||
Amounts due to related parties | 20 | 242 | 242 | 242 | ||||||||||
Amounts due to an equity investee | 2 | — | — | |||||||||||
Deferred tax liabilities | — | 5 | 5 | |||||||||||
Accrued expenses and other current liabilities | 9 | 32,424 | 24,955 | 24,955 | ||||||||||
Total current liabilities | 77,285 | 55,576 | 55,576 | |||||||||||
Non-current liabilities: | ||||||||||||||
Long-term loans | 17 | 138,133 | 217,418 | 217,418 | ||||||||||
Deferred tax liabilities | 13,415 | 18,761 | 18,761 | |||||||||||
Other non-current liabilities | 568 | 103 | 103 | |||||||||||
Total non-current liabilities | 152,116 | 236,282 | 236,282 | |||||||||||
Total liabilities | 229,401 | 291,858 | 291,858 | |||||||||||
Commitments and contingencies | 21 | |||||||||||||
Convertible redeemable preferred shares | ||||||||||||||
Series A (par value US$0.001 per share; 2,500,000 shares authorized; 152,193 shares issued and outstanding as of December 31, 2008 and September 30, 2009) | 11 | 164,705 | 178,533 | — | ||||||||||
Series B (par value US$0.001 per share; 2,500,000 shares authorized; 129,000 shares issued and outstanding as of December 31, 2008 and September 30, 2009) | 11 | 134,531 | 144,857 | — | ||||||||||
Shareholders’ equity | ||||||||||||||
China Hydroelectric Corporation shareholders’ equity (deficit): | ||||||||||||||
Ordinary shares (par value US$0.001 per share; 130,000,000 shares authorized; 15,541,666 shares issued and outstanding as of December 31, 2008 and September 30, 2009) | 13 | 16 | 16 | 125 | ||||||||||
Additional paid-in capital | 38,241 | 35,991 | 349,698 | |||||||||||
Accumulated other comprehensive income | 10,819 | 11,032 | 11,032 | |||||||||||
Accumulated deficit | (44,895 | ) | (68,286 | ) | (68,286 | ) | ||||||||
Total China Hydroelectric Corporation shareholders’ equity (deficit) | 4,181 | (21,247 | ) | 292,569 | ||||||||||
Noncontrolling interests | 750 | 839 | 839 | |||||||||||
Total shareholders’ equity (deficit) | 4,931 | (20,408 | ) | 293,408 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | 533,568 | 594,840 | 585,266 | |||||||||||
F-72
Table of Contents
Unaudited Interim Condensed Consolidated Statements of Operations
for the Nine Months Ended September 30, 2008 and 2009
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)
For the Nine Months Ended | ||||||||||||
September 30, | ||||||||||||
Notes | 2008 | 2009 | ||||||||||
Revenues | 10,261 | 30,453 | ||||||||||
Cost of revenues | (3,539 | ) | (11,526 | ) | ||||||||
Gross profit | 6,722 | 18,927 | ||||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (4,134 | ) | (5,653 | ) | ||||||||
Total operating expenses | (4,134 | ) | (5,653 | ) | ||||||||
Operating income | 2,588 | 13,274 | ||||||||||
Interest income | 970 | 444 | ||||||||||
Interest expenses | (3,334 | ) | (10,239 | ) | ||||||||
Changes in fair value of derivative financial liabilities and warrant liability | 10, 12 | (1,521 | ) | (443 | ) | |||||||
Exchange loss | (1,760 | ) | (20 | ) | ||||||||
Share of losses in an equity investee | (236 | ) | (70 | ) | ||||||||
Other income, net | 116 | 2 | ||||||||||
(Loss) income before income tax expenses | (3,177 | ) | 2,948 | |||||||||
Income tax expenses | 18 | (477 | ) | (2,167 | ) | |||||||
Consolidated net (loss) income | (3,654 | ) | 781 | |||||||||
Less: | ||||||||||||
Net income attributable to noncontrolling interests | — | 18 | ||||||||||
Net (loss) income attributable to China Hydroelectric Corporation shareholders | (3,654 | ) | 763 | |||||||||
Less: | ||||||||||||
Cumulative dividends on Series A convertible redeemable preferred shares | (10,580 | ) | (13,828 | ) | ||||||||
Cumulative dividends on Series B convertible redeemable preferred shares | (2,234 | ) | (10,326 | ) | ||||||||
Changes in redemption value of Series A convertible redeemable preferred shares | (10,569 | ) | — | |||||||||
Changes in redemption value of Series B convertible redeemable preferred shares | (4,134 | ) | — | |||||||||
Loss attributable to ordinary shareholders | (31,171 | ) | (23,391 | ) | ||||||||
Basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per share | 15 | (2.00 | ) | (1.51 | ) | |||||||
Weighted average ordinary shares used in basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per share computation | 15 | 15,558,698 | 15,541,666 | |||||||||
Pro forma basic net income attributable to China Hydroelectric Corporation shareholders per share on an as converted basis | 24 | 0.01 | ||||||||||
Pro forma diluted net income attributable to China Hydroelectric Corporation shareholders per share on an as converted basis | 24 | 0.01 | ||||||||||
Shares used in pro forma basic net income attributable to China Hydroelectric Corporation shareholders per share computation | 24 | 116,635,592 | ||||||||||
Shares used in pro forma diluted net income attributable to China Hydroelectric Corporation shareholders per share computation | 24 | 116,635,592 |
F-73
Table of Contents
Unaudited Interim Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2008 and 2009
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2008 | 2009 | |||||||
Cash flows from operating activities: | ||||||||
Consolidated net (loss) income | (3,654 | ) | 781 | |||||
Adjustments to reconcile consolidated net (loss) income to net cash used in operating activities: | ||||||||
Depreciation of property, plant and equipment | 2,922 | 8,609 | ||||||
Amortization of intangible assets | 80 | 143 | ||||||
Share of losses in an equity investee | 236 | 70 | ||||||
Changes in fair value of derivative financial liabilities and warrant liability | 1,521 | 443 | ||||||
Amortization of long-term notes discount | 139 | — | ||||||
Amortization of debt issuance costs | 47 | 79 | ||||||
Exchange loss | 1,760 | 20 | ||||||
Deferred income taxes | 71 | 810 | ||||||
Accretion of guarantee fee payable | 77 | 10 | ||||||
Accretion of guarantee deposit | — | 54 | ||||||
Amortization of unfavorable contract obligations | — | (589 | ) | |||||
Share-based compensation expenses | — | 311 | ||||||
Loss from disposal of property, plant and equipment | — | 46 | ||||||
Remeasurement gain on pre-existing interest in an equity investee at acquisition-date fair value (Note 3) | — | (105 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (3,049 | ) | (7,464 | ) | ||||
Prepayments and other current assets | 1,143 | 108 | ||||||
Amounts due from an equity investee | (1,023 | ) | (127 | ) | ||||
Other non-current assets | (65 | ) | 542 | |||||
Accounts payable | (2,024 | ) | 116 | |||||
Accrued expenses and other current liabilities | (1,188 | ) | (6,130 | ) | ||||
Net cash used in operating activities | (3,007 | ) | (2,273 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of subsidiaries, net of cash acquired | (105,634 | ) | (30,269 | ) | ||||
Prepayment of purchase consideration | (5,044 | ) | — | |||||
Loans to an equity investee | (2,802 | ) | (3,937 | ) | ||||
Repayment of loans by an equity investee | — | 3,486 | ||||||
Acquisition of an intangible asset | — | (1,025 | ) | |||||
Acquisition of property, plant and equipment | (24,895 | ) | (643 | ) | ||||
Payment to contractors for construction projects | (2,492 | ) | (13,541 | ) | ||||
Net cash used in investing activities | (140,867 | ) | (45,929 | ) | ||||
Cash flows from financing activities: | ||||||||
Purchase of subsidiary shares from noncontrolling interests | — | (2,490 | ) | |||||
Proceeds from issuance of convertible redeemable preferred shares | 279,025 | — | ||||||
Proceeds from short-term loans | — | 4,391 | ||||||
Proceeds from long-term loans | 1,428 | 124,835 | ||||||
Payment of convertible redeemable preferred shares issuance costs | (13,805 | ) | (126 | ) | ||||
Payment of debt issuance costs | (307 | ) | (274 | ) | ||||
Payment of equity issuance costs | (47 | ) | — | |||||
Payment of deferred initial public offering costs | (2,053 | ) | (4,834 | ) | ||||
Repayment of long-term notes | (9,907 | ) | — | |||||
Repayment of short-term loans | — | (6,082 | ) | |||||
Repayment of long-term loans | (4,713 | ) | (82,177 | ) | ||||
Net cash provided by financing activities | 249,621 | 33,243 | ||||||
Net increase(decrease) in cash and cash equivalents | 105,747 | (14,959 | ) | |||||
Effect of changes in exchange rate on cash and cash equivalents | (683 | ) | 53 | |||||
Cash and cash equivalents at the beginning of the period | 15,606 | 38,693 | ||||||
Cash and cash equivalents at the end of the period | 120,670 | 23,787 | ||||||
F-74
Table of Contents
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
for the Nine Months Ended September 30, 2008 and 2009
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)
China Hydroelectric Corporation shareholders | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Number of | Additional | other | Total | |||||||||||||||||||||||||||||
ordinary | Ordinary | paid-in | comprehensive | Accumulated | Noncontrolling | shareholders’ | Comprehensive | |||||||||||||||||||||||||
shares | shares | capital | income | deficit | interests | equity (deficit) | income (loss) | |||||||||||||||||||||||||
Balance at January 1, 2008 | 15,708,333 | 16 | 38,241 | 2,143 | (5,994 | ) | — | 34,406 | — | |||||||||||||||||||||||
Repurchase of ordinary shares | (166,667 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
Cumulative dividend on Series A convertible redeemable preferred shares | — | — | — | — | (10,580 | ) | — | (10,580 | ) | — | ||||||||||||||||||||||
Cumulative dividend on Series B convertible redeemable preferred shares | — | — | — | — | (2,234 | ) | — | (2,234 | ) | — | ||||||||||||||||||||||
Changes in redemption value of Series A convertible redeemable preferred share | — | — | — | — | (10,569 | ) | — | (10,569 | ) | — | ||||||||||||||||||||||
Changes in redemption value of Series B convertible redeemable preferred share | — | — | — | — | (4,134 | ) | (4,134 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 9,818 | — | — | 9,818 | 9,818 | ||||||||||||||||||||||||
Net loss | — | — | — | — | (3,654 | ) | — | (3,654 | ) | (3,654 | ) | |||||||||||||||||||||
Balance at September 30, 2008 | 15,541,666 | 16 | 38,241 | 11,961 | (37,165 | ) | — | 13,053 | 6,164 | |||||||||||||||||||||||
Balance at January 1, 2009 | 15,541,666 | 16 | 38,241 | 10,819 | (44,895 | ) | 750 | 4,931 | — | |||||||||||||||||||||||
Cumulative dividend on Series A convertible redeemable preferred shares | — | — | — | — | (13,828 | ) | — | (13,828 | ) | — | ||||||||||||||||||||||
Cumulative dividend on Series B convertible redeemable preferred shares | — | — | — | — | (10,326 | ) | — | (10,326 | ) | — | ||||||||||||||||||||||
Purchase of subsidiary shares from noncontrolling interests | — | — | (2,561 | ) | — | — | 71 | (2,490 | ) | — | ||||||||||||||||||||||
Share-based compensation expenses | — | — | 311 | — | — | 311 | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 213 | — | — | 213 | 213 | ||||||||||||||||||||||||
Net income | — | — | — | — | 763 | 18 | 781 | 781 | ||||||||||||||||||||||||
Balance at September 30, 2009 | 15,541,666 | 16 | 35,991 | 11,032 | (68,286 | ) | 839 | (20,408 | ) | 994 | ||||||||||||||||||||||
F-75
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
1. | ORGANIZATION AND BASIS OF PRESENTATION |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-76
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
F-77
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Level 1 — | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2 — | Include other inputs that are directly or indirectly observable in the marketplace. | |
Level 3 — | Unobservable inputs which are supported by little or no market activity. |
Quoted Price in | ||||||||||||
Active Market for | Significant Other | Significant | ||||||||||
Identical Assets | Observable | Unobservable | ||||||||||
(Level 1) | Inputs (Level 2) | Inputs (Level 3) | ||||||||||
US$ | US$ | US$ | ||||||||||
Money market funds in cash equivalent | 10,623 | — | — | |||||||||
Morgan Joseph Preferred Shares Warrant (Note 12) | — | — | 983 | |||||||||
Total | 10,623 | — | 983 | |||||||||
F-78
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Preferred Shares | ||||||||
Warrants (Note 12) | Total | |||||||
US$ | US$ | |||||||
Balance as of December 31, 2008 | 540 | 540 | ||||||
Realized or unrealized loss | 443 | 443 | ||||||
Balance as of September 30, 2009 | 983 | 983 | ||||||
US$ | ||||
Revenues | 1,420 | |||
Gross profit | 703 | |||
Net loss | (140 | ) |
F-79
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
F-80
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
F-81
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
3. | ACQUISITIONS |
F-82
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2008 | 2009 | |||||||
US$ | US$ | |||||||
Net (loss) income attributable to the Company | (3,654 | ) | 763 | |||||
Decrease in the Company’s paid-in capital for purchase of 10% of equity interest in Banzhu | — | (2,561 | ) | |||||
Net transfers to noncontrolling interest | — | (2,561 | ) | |||||
Change from net income attributable to the Company and transfers to noncontrolling interest | (3,654 | ) | (1,798 | ) | ||||
F-83
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
US$ | ||||
Previously held 50% equity interest remeasured at acquisition-date fair value | 4,331 | |||
Cash purchase price (13% equity interest) | 1,256 | |||
Cash purchase price (37% equity interest) | 3,074 | |||
Total purchase consideration | 8,661 | |||
Cash | 14 | |||
Property, plant and equipment, net | 27,431 | |||
Other assets | 751 | |||
Goodwill | 1,013 | |||
Total assets acquired | 29,209 | |||
Current portion of long-term loans | (1,625 | ) | ||
Other liabilities | (6,441 | ) | ||
Long-term loans | (10,540 | ) | ||
Deferred tax liabilities — non-current | (1,942 | ) | ||
Total liabilities assumed | (20,548 | ) | ||
Net assets acquired | 8,661 | |||
F-84
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
US$ | ||||
Purchase price | 23,420 | |||
Total purchase consideration | 23,420 | |||
Cash | 1,095 | |||
Property, plant and equipment, net | 32,503 | |||
Other assets | 1,203 | |||
Goodwill | 10,078 | |||
Total assets acquired | 44,879 | |||
Current portion of long-term loan | (1,756 | ) | ||
Other liabilities | (2,539 | ) | ||
Long-term loan | (14,052 | ) | ||
Deferred tax liabilities — non-current | (3,112 | ) | ||
Total liabilities assumed | (21,459 | ) | ||
Net assets acquired | 23,420 | |||
Acquisition Date | Revenues | Net income | ||||||||||
US$ | US$ | |||||||||||
Shapulong | August 3, 2009 | 667 | 280 | |||||||||
Ruiyang | August 20, 2009 | 308 | 43 |
F-85
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
For the Nine Months | For the Nine Months | |||||||
Ended September 30, 2008 | Ended September 30, 2009 | |||||||
US$ | US$ | |||||||
Revenues | 15,115 | 35,143 | ||||||
Net income (loss) | (4,568 | ) | 897 |
4. | ACCOUNTS RECEIVABLE |
F-86
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
5. | PREPAYMENTS AND OTHER CURRENT ASSETS |
December 31, 2008 | September 30, 2009 | |||||||
US$ | US$ | |||||||
Prepayments | 4,665 | 1,837 | ||||||
Guarantee deposit-current portion | 2,560 | 2,402 | ||||||
Amounts due from original shareholders of an acquired subsidiary | 481 | 637 | ||||||
Guarantee assets | 42 | — | ||||||
Others | 1,689 | 1,745 | ||||||
Total | 9,437 | 6,621 | ||||||
6. | PROPERTY, PLANT AND EQUIPMENT |
7. | GOODWILL |
F-87
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Yunnan | Sichuan | Zhejiang | Fujian | |||||||||||||||||
Province | Province | Province | Province | Total | ||||||||||||||||
US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
Balance as of December 31, 2008 | 2,878 | — | 28,678 | 64,977 | 96,533 | |||||||||||||||
Goodwill acquired during the period | — | — | 11,091 | — | 11,091 | |||||||||||||||
Adjustments during allocation period | — | — | — | 60 | 60 | |||||||||||||||
Foreign currency translation adjustment | 2 | — | 28 | 54 | 84 | |||||||||||||||
Less: Impairment of goodwill | — | — | — | — | — | |||||||||||||||
Balance as of September 30, 2009 | 2,880 | — | 39,797 | 65,091 | 107,768 | |||||||||||||||
8. | DEFERRED INITIAL PUBLIC OFFERING COSTS |
F-88
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
9. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | September 30, | |||||||
2008 | 2009 | |||||||
US$ | US$ | |||||||
Accrued payroll expenses | 1,784 | 845 | ||||||
Retainage due to contractors | 4,371 | 3,943 | ||||||
Purchase consideration payable | 4,143 | 2,684 | ||||||
Employee termination costs | 4,387 | — | ||||||
Guarantee deposits from original shareholders of acquired subsidiaries | 4,806 | 4,903 | ||||||
Taxes payable | 1,092 | 3,001 | ||||||
Guarantee liabilities | 42 | — | ||||||
Amounts due to original shareholders of acquired subsidiaries | 5,622 | 3,154 | ||||||
Customer deposits | 56 | — | ||||||
Unrecognized tax benefits(Note 18) | 1,362 | 2,327 | ||||||
Accrued water resource fee | 323 | 925 | ||||||
Other liabilities | 4,436 | 3,173 | ||||||
Total | 32,424 | 24,955 | ||||||
10. | LONG-TERM NOTES |
F-89
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
11. | CONVERTIBLE REDEEMABLE PREFERRED SHARES |
F-90
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Series A | Series B | Total | ||||||||||
US$ | US$ | US$ | ||||||||||
Balance as of December 31, 2008 | 164,705 | 134,531 | 299,236 | |||||||||
Cumulative dividends | 13,828 | 10,326 | 24,154 | |||||||||
Balance as of September 30, 2009 | 178,533 | 144,857 | 323,390 | |||||||||
12. | WARRANTS |
F-91
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
F-92
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Morgan Joseph | ||||||||||||||||
Preferred | ||||||||||||||||
Founders’ | Morgan Joseph | Holders’ | Shares | |||||||||||||
Warrants | Warrants | Warrants | Warrant | |||||||||||||
Commitment date/period-end date | November 10, 2006 | November 10, 2006 | November 10, 2006 | September 30, 2009 | ||||||||||||
Average risk-free rate of return | 5.11 | % | 5.11 | % | 5.11 | % | 2.54 | % | ||||||||
Expected term/life | 5 years | 5 years | 5 years | 3.3 years | ||||||||||||
Volatility rate | 33.70 | % | 33.70 | % | 33.70 | % | 66.00 | % | ||||||||
Expected dividend yield | — | — | — | — | ||||||||||||
Fair value of ordinary share | 0.11 | 0.11 | 0.11 | 2.49 | ||||||||||||
Fair value of Series A Preferred Share | N/A | N/A | N/A | 668.47 | ||||||||||||
Estimated forfeiture rate | 0 | % | 0 | % | 0 | % | 0 | % |
13. | SHARE CAPITAL |
F-93
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
14. | SHARE-BASED PAYMENT |
F-94
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Weighted- | �� | |||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number of | Exercise Price | Contractual | Intrinsic | |||||||||||||
Options | (US$) | Life (Years) | Value (US$) | |||||||||||||
Outstanding at January 1, 2009 | — | — | — | — | ||||||||||||
Granted | 40,000 | 7.70 | 3.88 | — | ||||||||||||
Exercised | — | — | — | — | ||||||||||||
Forfeited or cancelled | — | — | — | — | ||||||||||||
Outstanding at September 30, 2009 | 40,000 | 7.70 | 3.88 | — | ||||||||||||
Vested and expected to vest at September 30, 2009 | 40,000 | 7.70 | 3.88 | — | ||||||||||||
Exercisable at September 30, 2009 | 40,000 | 7.70 | 3.88 | — | ||||||||||||
Suboptimal exercise factor | 1.5 | |||
Risk-free interest rate | 3.67% | |||
Expected volatility rate | 59% | |||
Expected dividend yield | 0% | |||
Expected share option life | 4.46 years | |||
Estimated forfeiture rate | 0% | |||
Fair value of ordinary share | US$2.08 |
F-95
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number of | Exercise Price | Contractual | Intrinsic | |||||||||||||
Options | (US$) | Life (Years) | Value (US$) | |||||||||||||
Outstanding at January 1, 2009 | — | — | — | — | ||||||||||||
Granted | 260,000 | 7.7 | 3.88 | — | ||||||||||||
Exercised | — | — | — | — | ||||||||||||
Forfeited or cancelled | — | — | — | — | ||||||||||||
Outstanding at September 30, 2009 | 260,000 | 7.7 | 3.88 | — | ||||||||||||
Vested and expected to vest at September 30, 2009 | 260,000 | 7.7 | 3.88 | — | ||||||||||||
Exercisable at September 30, 2009 | 86,667 | 7.7 | 3.88 | — | ||||||||||||
Suboptimal exercise factor | 1.5 | |||
Risk-free interest rate | 2.60% | |||
Expected volatility rate | 63% | |||
Expected dividend yield | 0% | |||
Expected share option life | 3.88 years | |||
Estimated forfeiture rate | 0% | |||
Fair value of ordinary share | US$2.49 |
F-96
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number of | Exercise Price | Contractual | Intrinsic | |||||||||||||
Options | (US$) | Life (Years) | Value (US$) | |||||||||||||
Outstanding at January 1, 2009 | — | — | — | — | ||||||||||||
Granted | 3,627,000 | 7.70 | 3.89 | — | ||||||||||||
Exercised | — | — | — | — | ||||||||||||
Forfeited or cancelled | — | — | — | — | ||||||||||||
Outstanding at September 30, 2009 | 3,627,000 | 7.70 | 3.89 | — | ||||||||||||
Vested and expected to vest at September 30, 2009 | 3,620,783 | 7.70 | 3.89 | — | ||||||||||||
Exercisable at September 30, 2009 | 1,197,333 | 7.70 | 3.88 | — | ||||||||||||
Suboptimal exercise factor | 1.5 | |||
Risk-free interest rate | 3.67%-3.8% | |||
Expected volatility rate | 57%-59% | |||
Expected dividend yield | 0% | |||
Expected share option life | 4.46-4.88 years | |||
Estimated forfeiture rate | ||||
Founders | 0% | |||
Senior management | 0.8% | |||
Employees | 1.3% | |||
Fair value of ordinary shares | US $2.08 |
F-97
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
US$ | ||||
Cost of revenues | — | |||
General and administrative expenses | 311 | |||
311 | ||||
15. | BASIC AND DILUTED LOSS PER SHARE |
For the | For the | |||||||
Nine Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2009 | |||||||
US$ | US$ | |||||||
Numerator for basic loss per share: | ||||||||
Loss attributable to ordinary shareholders | (31,171 | ) | (23,391 | ) | ||||
Cumulative dividends on Series A convertible redeemable preferred shares | — | — | ||||||
Changes in redemption value of Series A convertible redeemable preferred shares | — | — | ||||||
Cumulative dividends on Series B convertible redeemable preferred shares | — | — | ||||||
Changes in redemption value of Series B convertible redeemable preferred shares | — | — | ||||||
Numerator for diluted loss per share | (31,171 | ) | (23,391 | ) | ||||
Denominator: | ||||||||
Weighted average number of ordinary shares outstanding — basic | 15,558,698 | 15,541,666 | ||||||
Dilutive effect of convertible securities: | ||||||||
Warrants | — | — | ||||||
Convertible redeemable preferred shares | — | — | ||||||
Share options | — | — | ||||||
Weighted average number of ordinary shares outstanding — basic | 15,558,698 | 15,541,666 | ||||||
Loss per share — basic and diluted | (2.00 | ) | (1.51 | ) | ||||
16. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
F-98
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
17. | BORROWINGS |
December 31, | September 30, | |||||||
2008 | 2009 | |||||||
US$ | US$ | |||||||
Short-term: | ||||||||
Secured | 5,560 | 4,393 | ||||||
Unsecured | 3,221 | 2,704 | ||||||
Long-term: | ||||||||
Current portion, secured | 29,037 | 20,545 | ||||||
Non-current, secured | 138,133 | 217,418 | ||||||
Total borrowings | 175,951 | 245,060 | ||||||
F-99
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
US$ | ||||
October 1 to December 31, 2009 | 13,106 | |||
2010 | 27,427 | |||
2011 | 28,027 | |||
2012 | 27,120 | |||
2013 | 28,613 | |||
Thereafter | 113,670 | |||
237,963 | ||||
18. | INCOME TAX EXPENSE |
For the | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2008 | 2009 | |||||||
US$ | US$ | |||||||
Cayman Islands | (4,873 | ) | (3,252 | ) | ||||
PRC | 1,696 | 6,200 | ||||||
(3,177 | ) | 2,948 | ||||||
�� |
F-100
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
For the | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2008 | 2009 | |||||||
US$ | US$ | |||||||
Current income tax expenses | 509 | 1,357 | ||||||
Deferred income tax (benefits) expenses | (32 | ) | 810 | |||||
477 | 2,167 | |||||||
US$ | ||||
Balance as of January 1, 2009 | 1,362 | |||
Increase for tax positions in prior year | 1,335 | |||
Decrease for tax positions in prior year | (370 | ) | ||
Balance as of September 30, 2009 | 2,327 | |||
F-101
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
19. | SEGMENT AND GEOGRAPHIC INFORMATION |
Yunnan | Sichuan | Zhejiang | Fujian | |||||||||||||||||||||||||
Province | Province | Province | Province | Unallocated | Eliminations | Consolidated | ||||||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||||
For nine months ended September 30, 2008 | ||||||||||||||||||||||||||||
Revenues | 1,939 | 676 | 7,646 | — | — | — | 10,261 | |||||||||||||||||||||
Net income (loss) | 689 | (11 | ) | 1,546 | — | (5,878 | ) | — | (3,654 | ) | ||||||||||||||||||
Total assets as of September 30, 2008 | 40,195 | 17,828 | 233,412 | — | 314,346 | (193,231 | ) | 412,550 | ||||||||||||||||||||
For nine months ended September 30, 2009 | ||||||||||||||||||||||||||||
Revenues | 2,153 | 793 | 15,260 | 12,247 | — | — | 30,453 | |||||||||||||||||||||
Net income (loss) | 940 | 241 | 2,855 | 1,091 | (4,364 | ) | — | 763 | ||||||||||||||||||||
Total assets as of September 30, 2009 | 44,987 | 14,782 | 365,952 | 215,834 | 341,254 | (387,969 | ) | 594,840 |
20. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Group | |
China Hydro LLC | A shareholder of the Company | |
Kuhns Brothers, Inc. | A company owned by the CEO | |
China Carbon Investment Consulting, Ltd. | A company controlled by the CEO | |
China Silicon Zhuo-Xin Investment Consulting, Ltd. | A company controlled by the CEO | |
Sanming City Chenyang Hydropower Co., Ltd. | A minority shareholder of Wangkeng |
F-102
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
US$ | ||||
Amounts due from related parties: | ||||
China Silicon Zhuo-Xin Investment Consulting, Ltd. | 13 | |||
13 | ||||
Amounts due to related parties: | ||||
Sanming City Chenyang Hydropower Co., Ltd. | 242 | |||
242 | ||||
21. | COMMITMENTS AND CONTINGENCIES |
US$ | ||||
October 1, 2009 to December 31, 2009 | 171 | |||
2010 | 445 | |||
2011 | 49 | |||
2012 | 1 | |||
2013 and thereafter | — | |||
Total | 666 | |||
F-103
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
22. | STATUTORY RESERVES |
23. | SUBSEQUENT EVENTS |
F-104
Table of Contents
Notes to the Unaudited Interim Condensed Consolidated Financial Statements — (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or Renminbi (“RMB”), except for number of shares
and per share data)
24. | PRO FORMA EARNINGS PER SHARE |
For the Nine Months | ||||
Ended September 30, 2009 | ||||
US$ | ||||
Numerator: | ||||
Loss attributable to ordinary shareholders | (23,391 | ) | ||
Cumulative dividends on Series A convertible redeemable preferred shares | 13,828 | |||
Cumulative dividends on Series B convertible redeemable preferred shares | 10,326 | |||
Numerator for pro forma basic and diluted income per share | 763 | |||
Denominator: | ||||
Number of shares outstanding, opening | 15,541,666 | |||
Conversion of convertible redeemable preferred shares to ordinary shares | 101,093,926 | |||
Denominator for pro forma basic income per share | 116,635,592 | |||
Dilutive effect of convertible securities: | ||||
Warrants | — | |||
Share options | — | |||
Denominator for pro forma diluted income per share | 116,635,592 | |||
Pro forma basic income per share | 0.01 | |||
Pro forma diluted income per share | 0.01 | |||
F-105
Table of Contents
Yunnan Huabang Electric Power Development Co., Ltd.
F-106
Table of Contents
Notes | December 31, 2006 | |||||||
US$ | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | 142 | |||||||
Accounts receivable, net of allowance for doubtful accounts of nil | 3 | 152 | ||||||
Amount due from related parties | 11 | 64 | ||||||
Prepayments and other current assets | 4 | 206 | ||||||
Total current assets | 564 | |||||||
Non-current Assets | ||||||||
Property, plant and equipment, net | 5 | 16,752 | ||||||
Total non-current assets | 16,752 | |||||||
TOTAL ASSETS | 17,316 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | 764 | |||||||
Amount due to related parties | 11 | 922 | ||||||
Tax payable | 31 | |||||||
Dividends payable | 6 | 562 | ||||||
Accrued expenses and other current liabilities | 7 | 113 | ||||||
Total current liabilities | 2,392 | |||||||
Non-current Liabilities | ||||||||
Long-term loan | 8 | 13,831 | ||||||
Total non-current liabilities | 13,831 | |||||||
Total liabilities | 16,223 | |||||||
Commitments and contingencies | 13 | — | ||||||
Shareholders’ equity | ||||||||
Share capital | 1 | 6,054 | ||||||
Reserve fund | 9 | 152 | ||||||
Accumulated other comprehensive income | 35 | |||||||
Accumulated deficit | (5,148 | ) | ||||||
Total shareholders’ equity | �� | 1,093 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 17,316 | |||||||
F-107
Table of Contents
Statements of Operations for the Year Ended December 31, 2006 and
the Period from January 1, 2007 to April 24, 2007
(Amounts in thousands of U.S. Dollars (“US$”))
Period from | ||||||||||
Year Ended | January 1 to | |||||||||
Note | December 31, 2006 | April 24, 2007 | ||||||||
US$ | US$ | |||||||||
Revenues | 2,075 | 571 | ||||||||
Cost of revenues | (691 | ) | (219 | ) | ||||||
Gross profit | 1,384 | 352 | ||||||||
Operating expenses: | ||||||||||
General and administrative expenses | (13 | ) | (23 | ) | ||||||
Total operating expenses | (13 | ) | (23 | ) | ||||||
Operating profit | 1,371 | 329 | ||||||||
Interest income | 1 | — | ||||||||
Interest expenses | (914 | ) | (285 | ) | ||||||
Income before income tax expenses | 458 | 44 | ||||||||
Income tax expenses | 10 | (19 | ) | (1 | ) | |||||
Net income | 439 | 43 | ||||||||
F-108
Table of Contents
the Period from January 1, 2007 to April 24, 2007
(Amounts in thousands of U.S. Dollars (“US$”))
Period from | ||||||||
Year Ended | January 1 to | |||||||
December 31, 2006 | April 24, 2007 | |||||||
US$ | US$ | |||||||
Cash flows from operating activities: | ||||||||
Net income | 439 | 43 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation of property, plant and equipment | 492 | 159 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 68 | (3 | ) | |||||
Prepaid expenses and other current assets | (63 | ) | 73 | |||||
Other current liabilities | 37 | 28 | ||||||
Tax payable | 16 | (7 | ) | |||||
Net cash provided by operating activities | 989 | 293 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of property, plant and equipment | (196 | ) | (306 | ) | ||||
Net cash used in investing activities | (196 | ) | (306 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from capital injection | — | 16,171 | ||||||
Payment of long-term bank loan | (630 | ) | — | |||||
Proceeds from short-term loans | 2,047 | 64 | ||||||
Payment of short-term bank loans | (2,399 | ) | (193 | ) | ||||
Net cash (used in) provided by financing activities | (982 | ) | 16,042 | |||||
Effect of changes in exchange rate on cash | 7 | — | ||||||
Net increase in cash and cash equivalents | (182 | ) | 16,029 | |||||
Cash and cash equivalents at the beginning of the year | 324 | 142 | ||||||
Cash and cash equivalents at the end of the year/period | 142 | 16,171 | ||||||
Supplementary disclosure of cash flow information | ||||||||
Income taxes paid | — | — | ||||||
Interest paid | 997 | 320 |
F-109
Table of Contents
Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Share | Reserve | Comprehensive | Accumulated | Shareholders’ | Comprehensive | |||||||||||||||||||
Capital | Fund | Income | Deficit | Equity | Income | |||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | US$ | |||||||||||||||||||
Balance as of January 1, 2006 | 6,054 | 126 | 4 | (5,416 | ) | 768 | ||||||||||||||||||
Cumulative translation adjustment | — | — | 31 | — | 31 | 31 | ||||||||||||||||||
Net income | — | — | — | 439 | 439 | 439 | ||||||||||||||||||
Comprehensive income | 470 | |||||||||||||||||||||||
Appropriation to statutory reserve | — | 26 | — | (26 | ) | — | ||||||||||||||||||
Cash dividends declared | — | — | — | (145 | ) | (145 | ) | |||||||||||||||||
Balance as of December 31, 2006 | 6,054 | 152 | 35 | (5,148 | ) | 1,093 | ||||||||||||||||||
Cumulative translation adjustment | — | — | 10 | — | 10 | 10 | ||||||||||||||||||
Net income | — | — | — | 43 | 43 | 43 | ||||||||||||||||||
Comprehensive income | 53 | |||||||||||||||||||||||
Cash dividends declared | — | — | — | (156 | ) | (156 | ) | |||||||||||||||||
Balance as of April 24, 2007 | 6,054 | 152 | 45 | (5,261 | ) | 990 | ||||||||||||||||||
F-110
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-111
Table of Contents
Dams and reservoirs | 30–50 years | |||
Buildings | 19–49 years | |||
Machinery | 10–30 years | |||
Transportation equipments | 1–10 years | |||
Electronic equipments and others | 5 years |
F-112
Table of Contents
F-113
Table of Contents
F-114
Table of Contents
F-115
Table of Contents
3. | ACCOUNTS RECEIVABLE, NET |
4. | PREPAYMENTS AND OTHER CURRENT ASSETS |
December 31, 2006 | ||||
US$ | ||||
Advances to suppliers | 192 | |||
Prepaid expenses | 12 | |||
Other receivable | 2 | |||
Total | 206 | |||
F-116
Table of Contents
5. | PROPERTY, PLANT AND EQUIPMENT |
December 31, 2006 | ||||
US$ | ||||
Dams and reservoirs | 8,144 | |||
Buildings | 5,702 | |||
Plant & Machinery | 1,961 | |||
Less: accumulated depreciation | (1,500 | ) | ||
14,307 | ||||
Construction in progress | 2,445 | |||
Total | 16,752 | |||
6. | DIVIDEND PAYABLE |
7. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, 2006 | ||||
US$ | ||||
Accrued payroll | 26 | |||
Other payable | 87 | |||
Total | 113 | |||
8. | LONG -TERM LOAN |
F-117
Table of Contents
December 31, 2006 | ||||
US$ | ||||
Within one year | 2,305 | |||
2008 | 1,920 | |||
2009 | 3,202 | |||
2010 | 3,202 | |||
2011 | 3,202 | |||
13,831 | ||||
9. | RESERVE FUND |
10. | INCOME TAX EXPENSES |
F-118
Table of Contents
Period from | ||||||||
Year Ended | January 1 to | |||||||
December 31, 2006 | April 24, 2007 | |||||||
US$ | US$ | |||||||
Current income tax expense | 19 | 1 | ||||||
Deferred income tax expense | — | — | ||||||
19 | 1 | |||||||
Period from | ||||||||
Year Ended | January 1 to | |||||||
December 31, 2006 | April 24, 2007 | |||||||
US$ | US$ | |||||||
Taxation at PRC EIT statutory rate at 33% | 151 | 14 | ||||||
Effect of tax holidays in PRC | (117 | ) | (11 | ) | ||||
Non-deductible expenses | 2 | 4 | ||||||
Change in valuation allowance | (17 | ) | (6 | ) | ||||
Income tax provision | 19 | 1 | ||||||
Effective Tax Rate (%) | 4 | % | 2 | % |
US$ | ||||
Balances as of January 1, 2007 | 19 | |||
Additions for tax position taken is current year | 1 | |||
Balance as of April 24, 2007 | 20 | |||
F-119
Table of Contents
11. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Zhejiang Huabang Electricity Power Company | A shareholder of the Company | |
Longjiang Hydroelectricity Company | Company controlled by a significant shareholder of the Company | |
Mr. Zhou Jianbin | A shareholder of the Company |
Period from | ||||||||
Year Ended | January 1 to | |||||||
December 31, 2006 | April 24, 2007 | |||||||
US$ | US$ | |||||||
Loan proceeds received from : | ||||||||
Mr. Zhou Jianbin | 504 | — | ||||||
Longjiang Hydroelectricity Company | 1,165 | 64 | ||||||
1,669 | 64 | |||||||
Repayment of loans to: | ||||||||
Mr. Zhou Jianbin | 504 | — | ||||||
Longjiang Hydroelectricity Company | 1,518 | 193 | ||||||
2,022 | 193 | |||||||
Interest associated with the borrowing from: | ||||||||
Mr. Zhou Jianbin | 12 | — | ||||||
Longjiang Hydroelectricity Company | 14 | 34 |
Period from | ||||||||
Year Ended | January 1 to | |||||||
December 31, 2006 | April 24, 2007 | |||||||
US$ | US$ | |||||||
Loan to: | ||||||||
Zhejiang Huabang Electricity Power Company | 126 | — | ||||||
Collection from: | ||||||||
Zhejiang Huabang Electricity Power Company | 63 | — |
F-120
Table of Contents
December 31, 2006 | ||||
US$ | ||||
Amount due from related parties: | ||||
Zhejiang Huabang Electricity Power Company | 64 | |||
64 | ||||
Amount due to related parties: | ||||
Longjiang Hydroelectricity Company | 922 | |||
922 | ||||
12. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
13. | COMMITMENTS AND CONTINGENCIES |
14. | CONCENTRATION OF RISKS |
F-121
Table of Contents
15. | SUBSEQUENT EVENT |
F-122
Table of Contents
Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd.
Beijing, the People’s Republic of China
F-123
Table of Contents
December 31, | ||||||||||||
Notes | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 260 | 108 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2006 and 2007 | 3 | 3,109 | 2,608 | |||||||||
Amount due from related parties | 10 | 8,250 | 8,356 | |||||||||
Prepayments and other current assets | 557 | 585 | ||||||||||
Total current assets | 12,176 | 11,657 | ||||||||||
Non-current Assets: | ||||||||||||
Deferred tax asset | 6 | 403 | 369 | |||||||||
Property, plant and equipment, net | 4 | 273,332 | 264,454 | |||||||||
Total non-current assets | 273,735 | 264,823 | ||||||||||
TOTAL ASSETS | 285,911 | 276,480 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Short-term loan | 7 | 10,000 | — | |||||||||
Amount due to related parties | 10 | 4,539 | 10,226 | |||||||||
Current portion of long-term loans | 8 | 35,000 | 30,000 | |||||||||
Accrued expenses and other current liabilities | 5 | 9,911 | 5,477 | |||||||||
Dividends payable | 12 | 9,973 | — | |||||||||
Tax payable | 596 | 6,887 | ||||||||||
Total current liabilities | 70,019 | 52,590 | ||||||||||
Non-current Liabilities: | ||||||||||||
Long-term loans | 8 | 50,000 | 45,000 | |||||||||
Total non-current liabilities | 50,000 | 45,000 | ||||||||||
Total liabilities | 120,019 | 97,590 | ||||||||||
Commitments and contingencies | 11 | |||||||||||
Shareholders’ equity | ||||||||||||
Issued capital | 1 | 140,470 | 140,470 | |||||||||
Reserve fund | 13 | 9,596 | 10,874 | |||||||||
Retained earnings | 15,826 | 27,546 | ||||||||||
Total shareholders’ equity | 165,892 | 178,890 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 285,911 | 276,480 | ||||||||||
F-124
Table of Contents
Years Ended December 31, | ||||||||||||
Note | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
Revenues | 38,925 | 42,998 | ||||||||||
Cost of revenues | (13,204 | ) | (12,174 | ) | ||||||||
Gross profit | 25,721 | 30,824 | ||||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (1,699 | ) | (1,485 | ) | ||||||||
Total operating expenses | (1,699 | ) | (1,485 | ) | ||||||||
Operating profit | 24,022 | 29,339 | ||||||||||
Interest income | 14 | 13 | ||||||||||
Interest expenses | (8,166 | ) | (8,817 | ) | ||||||||
Other income | — | 67 | ||||||||||
Income before income tax expense | 15,870 | 20,602 | ||||||||||
Income tax benefits (expenses) | 6 | 85 | (7,604 | ) | ||||||||
Net income | 15,955 | 12,998 | ||||||||||
F-125
Table of Contents
Years Ended December 31, | ||||||||
2006 | 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net income | 15,955 | 12,998 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation of property, plant and equipment | 8,878 | 8,878 | ||||||
Deferred income tax | (84 | ) | 34 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 1,345 | 501 | ||||||
Amount due from related parties | (373 | ) | (106 | ) | ||||
Prepaid expenses and other current assets | (505 | ) | (28 | ) | ||||
Accrued expenses and other current liabilities | 2,053 | (4,434 | ) | |||||
Tax payable | 210 | 6,291 | ||||||
Net cash provided by operating activities | 27,479 | 24,134 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from related parties borrowings, net | — | 5,687 | ||||||
Proceeds from short-term borrowings | 10,000 | — | ||||||
Proceeds from long-term borrowings | — | 25,000 | ||||||
Repayment of related parties borrowings, net | (7,514 | ) | — | |||||
Repayment of short-term borrowings | (25,000 | ) | (10,000 | ) | ||||
Repayment of long-term borrowings | — | (35,000 | ) | |||||
Cash paid for distribution of dividends | (5,027 | ) | (9,973 | ) | ||||
Net cash used in financing activities | (27,541 | ) | (24,286 | ) | ||||
Net decrease in cash and cash equivalents | (62 | ) | (152 | ) | ||||
Cash and cash equivalents at the beginning of the year | 322 | 260 | ||||||
Cash and cash equivalents at the end of the year | 260 | 108 | ||||||
Supplementary disclosure of cash flow information | ||||||||
Cash paid during the year for: | ||||||||
Income taxes paid | — | 1,481 | ||||||
Interest paid | 7,553 | 7,689 |
F-126
Table of Contents
Total | ||||||||||||||||
Issued | Reserve | Retained | Shareholders’ | |||||||||||||
Capital | Fund | Earnings | Equity | |||||||||||||
RMB | RMB | RMB | RMB | |||||||||||||
Balance at January 1, 2006 | 140,470 | 7,791 | 16,676 | 164,937 | ||||||||||||
Net income | — | — | 15,955 | 15,955 | ||||||||||||
Appropriation to statutory reserve | — | 1,805 | (1,805 | ) | — | |||||||||||
Cash dividends declared | — | — | (15,000 | ) | (15,000 | ) | ||||||||||
Balance at December 31, 2006 | 140,470 | 9,596 | 15,826 | 165,892 | ||||||||||||
Net income | — | — | 12,998 | 12,998 | ||||||||||||
Appropriation to statutory reserve | — | 1,278 | (1,278 | ) | — | |||||||||||
Balance at December 31, 2007 | 140,470 | 10,874 | 27,546 | 178,890 | ||||||||||||
F-127
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-128
Table of Contents
Dams and reservoirs | 45 years | |||
Buildings | 20–40 years | |||
Machinery | 10–25 years | |||
Transportation equipment | 10 years | |||
Electronic equipment and others | 8 years |
F-129
Table of Contents
F-130
Table of Contents
F-131
Table of Contents
3. | ACCOUNTS RECEIVABLE |
F-132
Table of Contents
4. | PROPERTY, PLANT AND EQUIPMENT |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Dams and reservoirs | 203,649 | 203,649 | ||||||
Buildings | 57,307 | 57,307 | ||||||
Machinery | 52,781 | 52,781 | ||||||
Transportation equipment | 131 | 131 | ||||||
Electronic equipment and others | 201 | 201 | ||||||
Less: Accumulated depreciation | (40,737 | ) | (49,615 | ) | ||||
Total | 273,332 | 264,454 | ||||||
5. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Accrued interest expense | 1,606 | 1,349 | ||||||
Accrued payroll and welfare payable | 1,217 | 1,566 | ||||||
Accrued maintenance fees | 5,906 | — | ||||||
Accrued water resource fees | 390 | 1,413 | ||||||
Accrued business surcharges | 137 | 495 | ||||||
Other liabilities | 655 | 654 | ||||||
Total | 9,911 | 5,477 | ||||||
6. | INCOME TAXES |
F-133
Table of Contents
Years Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Deferred income tax | (85 | ) | 33 | |||||
Current income tax expense | — | 7,571 | ||||||
(85 | ) | 7,604 | ||||||
Years Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Taxation at PRC EIT statutory rate of 33% | 5,237 | 6,799 | ||||||
Non-deductible expenses | 297 | 687 | ||||||
Effect of tax holidays in the PRC | (5,619 | ) | — | |||||
Impact from statutory tax rate change | — | 118 | ||||||
Income tax (benefit) provision | (85 | ) | 7,604 | |||||
Effective Tax Rate (%) | (1 | ) | 37 | |||||
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Deferred tax asset — non-current | ||||||||
Depreciation | 403 | 369 | ||||||
Total deferred tax asset — non-current | 403 | 369 | ||||||
F-134
Table of Contents
RMB | ||||
Balance as of January 1, 2007 | — | |||
Additions for tax position taken in current year | 841 | |||
Balance as of December 31, 2007 | 841 | |||
7. | SHORT-TERM LOAN |
8. | LONG-TERM LOANS |
December 31, | ||||
2007 | ||||
RMB | ||||
2008 | 30,000 | |||
2009 | 20,000 | |||
2010 | 25,000 | |||
75,000 | ||||
F-135
Table of Contents
9. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
10. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Zhejiang Guangsha Stock Co., Ltd. | A shareholder of the Company | |
Zhejiang Guangsha Hydropower Investment Co., Ltd. | A shareholder of the Company | |
Zhejiang Guangning Hydroelectric Development Ltd. | Company controlled by a significant shareholder of the Company | |
Guangsha Construction Group Co., Ltd. | Ultimate shareholder of the Company |
Years Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Repayment from / Loan from: | ||||||||
Zhejiang Guangsha Stock Co., Ltd. | 2,777 | 17,500 | ||||||
Zhejiang Guangsha Hydropower Investment Co., Ltd. | 35,500 | 67,049 | ||||||
Zhejiang Guangning Hydroelectric Development Ltd. | 8,450 | 8 | ||||||
46,727 | 84,557 | |||||||
Repayment to / Loan to: | ||||||||
Guangsha Construction Group Co., Ltd. | 9,000 | — | ||||||
Zhejiang Guangsha Stock Co., Ltd. | — | 25,856 | ||||||
Zhejiang Guangsha Hydropower Investment Co., Ltd. | 34,300 | 61,650 | ||||||
Zhejiang Guangning Hydroelectric Development Ltd. | 11,600 | — | ||||||
54,900 | 87,506 | |||||||
F-136
Table of Contents
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Amount due from related parties: | ||||||||
Zhejiang Guangning Hydroelectric Development Ltd. | 8,250 | — | ||||||
Zhejiang Guangsha Stock Co., Ltd. | — | 8,356 | ||||||
8,250 | 8,356 | |||||||
Amount due to related parties: | ||||||||
Zhejiang Guangsha Hydropower Investment Co., Ltd. | 4,539 | 10,226 | ||||||
4,539 | 10,226 | |||||||
11. | COMMITMENTS AND CONTINGENCIES |
12. | DIVIDENDS PAYABLE |
13. | RESERVE FUND |
14. | CONCENTRATION OF RISKS |
F-137
Table of Contents
F-138
Table of Contents
15. | SUBSEQUENT EVENT |
F-139
Table of Contents
Qingtian Wuliting Hydroelectric Development Co., Ltd.
Beijing, the People’s Republic of China
September 26, 2008
F-140
Table of Contents
December 31, | ||||||||||||
Notes | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 365 | 185 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2006 and 2007 | 3 | — | 3,549 | |||||||||
Amount due from related parties | 8 | 22 | — | |||||||||
Prepayments and other current assets | 167 | 303 | ||||||||||
Total current assets | 554 | 4,037 | ||||||||||
Non-current Assets: | ||||||||||||
Property, plant and equipment, net | 4 | 393,946 | 426,916 | |||||||||
Total non-current assets | 393,946 | 426,916 | ||||||||||
TOTAL ASSETS | 394,500 | 430,953 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts Payable | 7,510 | 7,218 | ||||||||||
Amount due to related parties | 8 | 500 | 180 | |||||||||
Current portion of long-term loans | 7 | 6,000 | 25,000 | |||||||||
Accrued expenses and other current liabilities | 5 | 22,365 | 31,911 | |||||||||
Tax payable | 378 | 879 | ||||||||||
Total current liabilities | 36,753 | 65,188 | ||||||||||
Non-current Liabilities: | ||||||||||||
Amount due to related parties | 8 | 54,206 | 105,172 | |||||||||
Long-term loans | 7 | 224,000 | 199,000 | |||||||||
Total non-current liabilities | 278,206 | 304,172 | ||||||||||
Total liabilities | 314,959 | 369,360 | ||||||||||
Commitments and contingencies | 10 | |||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 80,000 | 80,000 | ||||||||||
Accumulated deficit | (459 | ) | (18,407 | ) | ||||||||
Total shareholders’ equity | 79,541 | 61,593 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 394,500 | 430,953 | ||||||||||
F-141
Table of Contents
Year Ended December 31, | ||||||||||||
Notes | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
Revenues | — | 27,532 | ||||||||||
Cost of revenues | — | (15,244 | ) | |||||||||
Gross profit | — | 12,288 | ||||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (115 | ) | (1,064 | ) | ||||||||
Total operating expenses | (115 | ) | (1,064 | ) | ||||||||
Operating (loss) profit | (115 | ) | 11,224 | |||||||||
Interest income | — | 5 | ||||||||||
Interest expenses | 7 | — | (28,887 | ) | ||||||||
Other expenses | (290 | ) | ||||||||||
Loss before income tax expenses | (115 | ) | (17,948 | ) | ||||||||
Income tax expenses | 6 | (208 | ) | — | ||||||||
Net loss | (323 | ) | (17,948 | ) | ||||||||
F-142
Table of Contents
Years Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Cash flows from operating activities: | ||||||||
Net loss | (323 | ) | (17,948 | ) | ||||
Adjustments to reconcile net income to net cash generated from operating activities: | ||||||||
Depreciation of property, plant and equipment | — | 12,923 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | — | (3,549 | ) | |||||
Amount due from related parties | 2,736 | 22 | ||||||
Prepaid expenses and other current assets | (47 | ) | (136 | ) | ||||
Accounts payable | — | (292 | ) | |||||
Accrued expenses and other current liabilities | 88 | 1,549 | ||||||
Amount due to related parties | (9,660 | ) | 6,319 | |||||
Tax payable | 304 | 501 | ||||||
Net cash provided by operating activities | (6,902 | ) | (611 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of property, plant and equipment | (90,763 | ) | (36,269 | ) | ||||
Net cash used in investing activities | (90,763 | ) | (36,269 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from long-term loans with related parties | 58,100 | 57,100 | ||||||
Proceeds from long-term bank loans | 40,000 | — | ||||||
Repayment of long-term loans with related parties | (1,500 | ) | (14,400 | ) | ||||
Repayment of long-term bank loans | — | (6,000 | ) | |||||
Net cash provided by financing activities | 96,600 | 36,700 | ||||||
Net decrease in cash and cash equivalents | (1,065 | ) | (180 | ) | ||||
Cash and cash equivalents at the beginning of the year | 1,430 | 365 | ||||||
Cash and cash equivalents at the end of the year | 365 | 185 | ||||||
Supplementary disclosure of cash flow information | ||||||||
Interest paid | 15,500 | 9,755 |
F-143
Table of Contents
Share | Total | |||||||||||
Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at January 1, 2006 | 80,000 | (136 | ) | 79,864 | ||||||||
Net loss | — | (323 | ) | (323 | ) | |||||||
Balance at December 31, 2006 | 80,000 | (459 | ) | 79,541 | ||||||||
Net loss | — | (17,948 | ) | (17,948 | ) | |||||||
Balance at December 31, 2007 | 80,000 | (18,407 | ) | 61,593 | ||||||||
F-144
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-145
Table of Contents
Dams and reservoirs | 45 years | |||
Buildings | 40 years | |||
Machinery | 20 years | |||
Transportation equipment | 10 years | |||
Electronic equipment and others | 8 years |
F-146
Table of Contents
F-147
Table of Contents
F-148
Table of Contents
F-149
Table of Contents
3. | ACCOUNTS RECEIVABLE |
4. | PROPERTY, PLANT AND EQUIPMENT |
December 31, | December 31, | |||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Buildings | 75,885 | 75,885 | ||||||
Dams and reservoirs | 157,862 | 157,862 | ||||||
Machinery | 128,946 | 178,566 | ||||||
Less: Accumulated depreciation | — | (12,923 | ) | |||||
362,693 | 399,390 | |||||||
Construction in progress | 31,253 | 27,526 | ||||||
Total | 393,946 | 426,916 | ||||||
5. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | December 31, | |||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Retainage due to contractors | 19,578 | 29,173 | ||||||
Accrued interest expense | — | 882 | ||||||
Accrued payroll and welfare payable | 563 | 756 | ||||||
Other liabilities | 2,224 | 1,100 | ||||||
Total | 22,365 | 31,911 | ||||||
F-150
Table of Contents
6. | INCOME TAX EXPENSES |
Year Ended December 31, | |||||||||
2006 | 2007 | ||||||||
RMB | RMB | ||||||||
Current income tax expense | 208 | — | |||||||
Deferred income tax expense | — | — | |||||||
208 | — | ||||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Taxation at PRC EIT statutory rates of 33% | (38 | ) | (5,923 | ) | ||||
Non-deductible expenses | 246 | 4,653 | ||||||
Changes in valuation allowance | — | 1,270 | ||||||
Income tax provision | 208 | — | ||||||
Effective Tax Rate(%) | (181 | ) | — | |||||
F-151
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Deferred tax assets — non-current | ||||||||
Net operating loss carry-forwards | — | 1,203 | ||||||
Depreciation of property, plant and equipment | — | 67 | ||||||
Total deferred tax assets — non-current | — | 1,270 | ||||||
Valuation allowance | — | (1,270 | ) | |||||
Net deferred tax assets — non-current | — | — | ||||||
RMB | ||||
Balance as of January 1, 2007 | 208 | |||
Additional liability in current year | 25 | |||
Balance as of December 31, 2007 | 233 | |||
F-152
Table of Contents
7. | LONG-TERM LOANS |
December 31, 2007 | ||||
RMB | ||||
2008 | 25,000 | |||
2009 | 29,000 | |||
2010 | 34,000 | |||
2011 | 35,000 | |||
2012 | 31,000 | |||
Thereafter | 70,000 | |||
Total | 224,000 | |||
8. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Zhejiang Guangsha Stock Co., Ltd. | A shareholder of the Company | |
Zhejiang Guangning Hydroelectric Development Ltd. | Controlled by a shareholder of the Company | |
Zhejiang Guangsha Hydropower Investment Co., Ltd. | Controlled by a shareholder of the Company | |
Zhejiang Guangsha Group | Company controlled by a significant shareholder of the Company |
F-153
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Loan proceeds received from : | ||||||||
Zhejiang Guangsha Hydropower Investment Co., Ltd. | 56,100 | 53,100 | ||||||
Zhejiang Guangning Hydroelectric Development Ltd. | 2,000 | 4,000 | ||||||
58,100 | 57,100 | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Repayment of long-term loans to: | ||||||||
Zhejiang Guangsha Hydropower Investment Co., Ltd. | — | 9,900 | ||||||
Zhejiang Guangning Hydroelectric Development Ltd. | 1,500 | 4,500 | ||||||
1,500 | 14,400 | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Net operational funds transfer from (to): | ||||||||
Zhejiang Guangning Hydroelectric Development Ltd. | 1,500 | — | ||||||
Zhejiang Guangsha Hydropower Investment Co., Ltd. | (14,200 | ) | (12,000 | ) | ||||
(12,700 | ) | (12,000 | ) | |||||
F-154
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Amount due from related parties: | ||||||||
Zhejiang Guangsha Beichuan Hydroelectric Exploiture Ltd. | 22 | — | ||||||
22 | — | |||||||
Amount due to related parties: | ||||||||
Zhejiang Guangsha Hydropower Investment Co., Ltd. | 37,091 | 87,022 | ||||||
Guangsha Construction Group Co., Ltd. | 4,155 | 4,154 | ||||||
Zhejiang Guangning Hydroelectric Development Ltd. | 500 | 180 | ||||||
Zhejiang Guangsha Group | 12,960 | 13,996 | ||||||
54,706 | 105,352 | |||||||
9. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
10. | COMMITMENTS AND CONTINGENCIES |
11. | CONCENTRATION OF RISKS |
F-155
Table of Contents
12. | SUBSEQUENT EVENT |
F-156
Table of Contents
Sanming Zhongyin Banzhu Hydroelectric Co., Ltd.
F-157
Table of Contents
December 31, | ||||||||||||
Notes | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 1,881 | 2,492 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2006 and 2007 | 3 | 3,733 | 2,798 | |||||||||
Amounts due from related parties | 10 | 20,559 | 38,887 | |||||||||
Prepayments and other current assets | 856 | 891 | ||||||||||
Total current assets | 27,029 | 45,068 | ||||||||||
Non-current assets: | ||||||||||||
Amounts due from related parties | 10 | — | 20,000 | |||||||||
Deferred tax asset | 6 | 9,566 | 6,873 | |||||||||
Property, plant and equipment, net | 4 | 262,973 | 246,955 | |||||||||
Total non-current assets | 272,539 | 273,828 | ||||||||||
TOTAL ASSETS | 299,568 | 318,896 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Amounts due to related parties | 10 | 48 | 131 | |||||||||
Accounts payable | 6,042 | 3,855 | ||||||||||
Short-term loans | 7 | 55,000 | 30,000 | |||||||||
Current portion of long-term loans | 8 | 35,479 | 29,016 | |||||||||
Accrued expenses and other current liabilities | 5 | 6,503 | 6,050 | |||||||||
Tax payable | 663 | 3,022 | ||||||||||
Total current liabilities | 103,735 | 72,074 | ||||||||||
Non-current Liabilities: | ||||||||||||
Long-term loans | 8 | 176,550 | 225,828 | |||||||||
Government grant | 4 | 13,842 | 13,495 | |||||||||
Total non-current liabilities | 190,392 | 239,323 | ||||||||||
Total liabilities | 294,127 | 311,397 | ||||||||||
Commitments and contingencies | 11 | |||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 1 | 56,207 | 56,207 | |||||||||
Accumulated deficit | (50,766 | ) | (48,708 | ) | ||||||||
Total shareholders’ equity | 5,441 | 7,499 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 299,568 | 318,896 | ||||||||||
F-158
Table of Contents
Year Ended December 31, | ||||||||||||
Notes | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
Revenues | 55,561 | 52,029 | ||||||||||
Cost of revenues | (23,765 | ) | (23,915 | ) | ||||||||
Gross profit | 31,796 | 28,114 | ||||||||||
Operating (expenses)/income: | ||||||||||||
General and administrative expenses | (6,122 | ) | (6,748 | ) | ||||||||
Gain on sale of property, plant and equipment | 197 | 1,112 | ||||||||||
Total operating expenses | (5,925 | ) | (5,636 | ) | ||||||||
Operating profit | 25,871 | 22,478 | ||||||||||
Interest income | 71 | 24 | ||||||||||
Interest expenses | (18,817 | ) | (19,626 | ) | ||||||||
Foreign exchange gain | 1,314 | 1,733 | ||||||||||
Interest income from related parties | 10 | 1,114 | 2,240 | |||||||||
Non operating income/(expenses) | 128 | (2 | ) | |||||||||
Income before income tax expenses | 9,681 | 6,847 | ||||||||||
Income tax expenses | 6 | (3,234 | ) | (4,789 | ) | |||||||
Net income | 6,447 | 2,058 | ||||||||||
F-159
Table of Contents
For the Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Cash flows from operating activities: | ||||||||
Net income | 6,447 | 2,058 | ||||||
Adjustments to reconcile net income to net cash generated by operating activities: | ||||||||
Depreciation of property, plant and equipment | 17,555 | 17,636 | ||||||
Gain on disposal of property, plant and equipment | (197 | ) | (1,112 | ) | ||||
Deferred tax asset | 3,234 | 2,693 | ||||||
Foreign exchange gain | (1,314 | ) | (1,733 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Government grant | (347 | ) | (347 | ) | ||||
Accounts receivable | (721 | ) | 935 | |||||
Amounts due from related parties | 122 | (38,328 | ) | |||||
Prepaid expenses and other current assets | (12 | ) | (35 | ) | ||||
Accounts payable | (1,043 | ) | (2,187 | ) | ||||
Amounts due to related parties | (153 | ) | 83 | |||||
Accrued expenses and other current liabilities | 1,257 | (453 | ) | |||||
Tax payable | 44 | 2,359 | ||||||
Net cash provided by (used in) operating activities | 24,872 | (18,431 | ) | |||||
Cash flows from investing activities: | ||||||||
Acquisition of property, plant and equipment | (1,456 | ) | (3,413 | ) | ||||
Proceeds from sale of property, plant and equipment | 250 | 2,907 | ||||||
Net cash used in investing activities | (1,206 | ) | (506 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from short-term loans | 44,000 | 41,000 | ||||||
Proceeds from long-term loans | 47,066 | 83,660 | ||||||
Repayment of short-term loans | (55,876 | ) | (66,000 | ) | ||||
Repayment of long-term loans | (63,237 | ) | (39,112 | ) | ||||
Net cash (used in) provided by financing activities | (28,047 | ) | 19,548 | |||||
Net (decrease) increase in cash and cash equivalents | (4,381 | ) | 611 | |||||
Cash and cash equivalents at the beginning of the year | 6,262 | 1,881 | ||||||
Cash and cash equivalents at the end of the year | 1,881 | 2,492 | ||||||
Supplementary disclosure of cash flow information | ||||||||
Cash paid during the year for: | ||||||||
Income taxes paid | — | — | ||||||
Interest paid | 18,513 | 20,451 |
F-160
Table of Contents
Statements of Changes in Shareholders’ Equity for the Years Ended
December 31, 2006 and 2007
(Amounts in thousands of Renminbi (“RMB”))
Total | ||||||||||||
Share | Accumulated | Shareholder’s | ||||||||||
Capital | Deficit | Equity | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at December 31, 2005 | 56,207 | (57,213 | ) | (1,006 | ) | |||||||
Net income | — | 6,447 | 6,447 | |||||||||
Balance at December 31, 2006 | 56,207 | (50,766 | ) | 5,441 | ||||||||
Net income | — | 2,058 | 2,058 | |||||||||
Balance at December 31, 2007 | 56,207 | (48,708 | ) | 7,499 | ||||||||
F-161
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-162
Table of Contents
Dams and reservoirs | 45 years | |||
Buildings | 20–35 years | |||
Machinery | 8–30 years | |||
Transportation equipment | 6 years | |||
Electronic equipment and others | 5–8 years |
F-163
Table of Contents
F-164
Table of Contents
F-165
Table of Contents
F-166
Table of Contents
3. | ACCOUNTS RECEIVABLE |
4. | PROPERTY, PLANT AND EQUIPMENT |
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Buildings | 255,118 | 254,093 | ||||||
Machinery | 153,250 | 154,130 | ||||||
Transportation equipment | 1,756 | 2,159 | ||||||
Office equipment | 2,873 | 3,002 | ||||||
Less: Accumulated depreciation | (150,149 | ) | (167,111 | ) | ||||
Construction in progress | 125 | 682 | ||||||
Total | 262,973 | 246,955 | ||||||
5. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Accrued payroll and welfare payable | 1,695 | 1,425 | ||||||
Accrued reservoir maintenance fund | 1,324 | 1,330 | ||||||
Retainage due to contractors | 1,193 | 1,882 | ||||||
Other liabilities | 2,291 | 1,413 | ||||||
Total | 6,503 | 6,050 | ||||||
F-167
Table of Contents
6. | INCOME TAX EXPENSES |
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Current income tax expense | — | 2,096 | ||||||
Deferred income tax expense | 3,234 | 2,693 | ||||||
3,234 | 4,789 | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Taxation at PRC EIT statutory rates of 33% | 3,195 | 2,259 | ||||||
Non-deductible expenses | 39 | 330 | ||||||
Impact from statutory tax rate change | — | 2,200 | ||||||
Income tax provision | 3,234 | 4,789 | ||||||
Effective Tax Rate (%) | 33.4 | 70.0 | ||||||
F-168
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Deferred tax asset — non-current | ||||||||
Net operating loss carry-forwards | 839 | — | ||||||
Deferred Revenue | 4,568 | 3,373 | ||||||
Depreciation of property, plant and equipment | 4,159 | 3,500 | ||||||
Total deferred tax asset — non-current | 9,566 | 6,873 | ||||||
Valuation allowance | — | — | ||||||
Net deferred tax asset — non-current | 9,566 | 6,873 | ||||||
RMB | ||||
Balance as of January 1, 2007 | — | |||
Additions for tax position taken in current year | 2,096 | |||
Balance as of December 31, 2007 | 2,096 | |||
F-169
Table of Contents
7. | SHORT-TERM LOANS |
8. | LONG-TERM LOANS |
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB dominated loans | 174,000 | 233,661 | ||||||
USD dominated loans | 38,029 | 21,183 | ||||||
212,029 | 254,844 | |||||||
Current portion of long-term loans | (35,479 | ) | (29,016 | ) | ||||
176,550 | 225,828 | |||||||
December 31, | ||||
2007 | ||||
RMB | ||||
2008 | 29,016 | |||
2009 | 40,957 | |||
2010 | 10,000 | |||
2011 | 10,000 | |||
2012 | 10,000 | |||
Thereafter | 154,871 | |||
254,844 | ||||
F-170
Table of Contents
9. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
10. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Yong’an Ruifeng Hydroelectric Ltd. | A shareholder of the Company | |
Sanming Ruifeng Economic Technological Development Ltd. | An entity controlled by management of the Company |
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Loans lent to: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | — | 33,400 | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 9,200 | 4,700 | ||||||
9,200 | 38,100 | |||||||
Repayment of loans from: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 6,700 | 2,060 | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 4,250 | 200 | ||||||
10,950 | 2,260 | |||||||
Interest income from loans: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 274 | 842 | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 840 | 1,398 | ||||||
1,114 | 2,240 | |||||||
Service provided by: | ||||||||
Sanming Ruifeng Economic Technological Development Ltd. | 745 | 283 | ||||||
745 | 283 | |||||||
F-171
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Amounts due from related parties — current: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 20,129 | 12,613 | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 430 | 26,274 | ||||||
20,559 | 38,887 | |||||||
Amounts due from related parties — non-current | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | — | 20,000 | ||||||
— | 20,000 | |||||||
Amounts due to related parties: | ||||||||
Sanming Ruifeng Economic Technological Development Ltd. | 48 | 131 | ||||||
48 | 131 | |||||||
11. | COMMITMENTS AND CONTINGENCIES |
12. | CONCENTRATION OF RISKS |
F-172
Table of Contents
13. | SUBSEQUENT EVENT |
F-173
Table of Contents
December 31, | September 30, | |||||||||||
Notes | 2007 | 2008 | ||||||||||
RMB | RMB | |||||||||||
Unaudited | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 2,492 | 7,342 | ||||||||||
Accounts receivable (net of allowance for doubtful accounts of nil as of December 31, 2007 and September 30, 2008) | 2,798 | 4,242 | ||||||||||
Amounts due from related parties | 6 | 38,887 | 30,781 | |||||||||
Deferred tax assets-current | — | 134 | ||||||||||
Prepayments and other current assets | 891 | 1,337 | ||||||||||
Total current assets | 45,068 | 43,836 | ||||||||||
Non-current assets: | ||||||||||||
Amounts due from related parties | 6 | 20,000 | 20,000 | |||||||||
Deferred tax assets-non current | 6,873 | 7,595 | ||||||||||
Property, plant and equipment, net | 246,955 | 231,610 | ||||||||||
Total non-current assets | 273,828 | 259,205 | ||||||||||
TOTAL ASSETS | 318,896 | 303,041 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | 3,855 | 4,166 | ||||||||||
Short-term loans | 3 | 30,000 | 20,000 | |||||||||
Amounts due to related parties | 6 | 131 | 131 | |||||||||
Current portion of long-term loans | 4 | 29,016 | 48,335 | |||||||||
Accrued expenses and other current liabilities | 6,050 | 9,597 | ||||||||||
Tax payable | 3,022 | 5,785 | ||||||||||
Total current liabilities | 72,074 | 88,014 | ||||||||||
Non-current liabilities: | ||||||||||||
Long-term loans | 4 | 225,828 | 188,308 | |||||||||
Government grant | 5 | 13,495 | 14,708 | |||||||||
Total non-current liabilities | 239,323 | 203,016 | ||||||||||
Total liabilities | 311,397 | 291,030 | ||||||||||
Commitments and contingencies | 7 | |||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 56,207 | 56,207 | ||||||||||
Accumulated deficit | (48,708 | ) | (44,196 | ) | ||||||||
Total shareholders’ equity | 7,499 | 12,011 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 318,896 | 303,041 | ||||||||||
F-174
Table of Contents
For Nine Months Ended | ||||||||||||
September 30, | ||||||||||||
Note | 2007 | 2008 | ||||||||||
RMB | RMB | |||||||||||
Unaudited | Unaudited | |||||||||||
Revenues | 45,551 | 40,780 | ||||||||||
Cost of revenues | (17,904 | ) | (20,061 | ) | ||||||||
Gross profit | 27,647 | 20,719 | ||||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (4,954 | ) | (5,282 | ) | ||||||||
Gain on disposal of property, plant and equipment | 20 | 2,168 | ||||||||||
Total operating expenses | (4,934 | ) | (3,114 | ) | ||||||||
Operating income | 22,713 | 17,605 | ||||||||||
Interest income | 20 | 14 | ||||||||||
Interest expenses | (14,499 | ) | (15,674 | ) | ||||||||
Foreign exchange gain | 1,082 | 1,416 | ||||||||||
Interest income from related parties | 1,321 | 2,801 | ||||||||||
Non-operating expenses | (5 | ) | (25 | ) | ||||||||
Income before income tax expenses | 10,632 | 6,137 | ||||||||||
Income tax expenses | 8 | (7,443 | ) | (1,625 | ) | |||||||
Net income | 3,189 | 4,512 | ||||||||||
F-175
Table of Contents
For the Nine Months Ended | ||||||||
September 30 | ||||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Cash flows (used in) provided by operating activities | (8,234 | ) | 29,239 | |||||
Cash flows (used in) provided by investing activities | (2,135 | ) | 2,401 | |||||
Cash flows provided by (used in) financing activities | 22,157 | (26,790 | ) | |||||
Net increase in cash and cash equivalents | 11,788 | 4,850 | ||||||
Cash and cash equivalents at the beginning of the period | 1,881 | 2,492 | ||||||
Cash and cash equivalents at the end of the period | 13,669 | 7,342 | ||||||
F-176
Table of Contents
Unaudited Interim Condensed Statements of Changes in Shareholders’ Equity
for the Nine Months Ended September 30, 2007 and 2008
(Amounts in thousands of Renminbi (“RMB”))
Total | ||||||||||||
Share | Accumulated | Shareholders’ | ||||||||||
Capital | Deficit | Equity | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at January 1, 2007 | 56,207 | (50,766 | ) | 5,441 | ||||||||
Net income | — | 3,189 | 3,189 | |||||||||
Balance at September 30, 2007 | 56,207 | (47,577 | ) | 8,630 | ||||||||
Balance at January 1, 2008 | 56,207 | (48,708 | ) | 7,499 | ||||||||
Net income | — | 4,512 | 4,512 | |||||||||
Balance at September 30, 2008 | 56,207 | (44,196 | ) | 12,011 | ||||||||
F-177
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-178
Table of Contents
Dams and reservoirs | 45 years | |||
Buildings | 20-35 years | |||
Machinery | 8-30 years | |||
Transportation equipment | 6 years | |||
Electronic equipment and others | 5-8 years |
F-179
Table of Contents
F-180
Table of Contents
F-181
Table of Contents
3. | SHORT-TERM LOANS |
4. | LONG-TERM LOANS |
December 31, | September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | ||||||||
RMB dominated loans | 233,661 | 216,870 | ||||||
USD dominated loans | 21,183 | 19,773 | ||||||
254,844 | 236,643 | |||||||
Current portion of long-term loans | (29,016 | ) | (48,335 | ) | ||||
225,828 | 188,308 | |||||||
F-182
Table of Contents
September 30, | ||||
2008 | ||||
RMB | ||||
Unaudited | ||||
From October 1, 2008 to December 31, 2008 | 11,545 | |||
2009 | 49,017 | |||
2010 | 18,790 | |||
2011 | 18,790 | |||
2012 | 18,790 | |||
Thereafter | 119,711 | |||
236,643 | ||||
5. | GOVERNMENT GRANT |
6. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Yong’an Ruifeng Hydroelectric Ltd. | A shareholder of the Company | |
Sanming Ruifeng Economic Technological Development Ltd. | An entity controlled by management of the Company |
F-183
Table of Contents
For the Nine Months | ||||||||
Ended September 30 | ||||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Loans lent to: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 23,300 | — | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 3,500 | 13,500 | ||||||
26,800 | 13,500 | |||||||
Repayment of loans lent to: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 1,759 | 6,400 | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 200 | 18,100 | ||||||
1,959 | 24,500 | |||||||
Interest income from loans: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 324 | 1,732 | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 995 | 1,069 | ||||||
1,319 | 2,801 | |||||||
Service provided by : | ||||||||
Sanming Ruifeng Economic Technological Development Ltd. | 212 | 1,742 | ||||||
212 | 1,742 | |||||||
F-184
Table of Contents
December 31, | September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | ||||||||
Amounts due from related parties -current: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 12,613 | 7,944 | ||||||
Sanming Ruifeng Economic Technological Development Ltd. | 26,274 | 22,837 | ||||||
38,887 | 30,781 | |||||||
Amounts due from related parties -non-current: | ||||||||
Yong’an Ruifeng Hydroelectric Ltd. | 20,000 | 20,000 | ||||||
20,000 | 20,000 | |||||||
Amounts due to related parties: | ||||||||
Sanming Ruifeng Economic Technological Development Ltd. | 131 | 131 | ||||||
131 | 131 | |||||||
7. | COMMITMENTS AND CONTINGENCIES |
8. | INCOME TAX EXPENSES |
F-185
Table of Contents
9. | SUBSEQUENT EVENT |
F-186
Table of Contents
F-187
Table of Contents
December 31, | ||||||||||
Notes | 2006 | 2007 | ||||||||
RMB | RMB | |||||||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents | 14,919 | 657 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2006 and 2007 | 3 | 1,271 | 1,260 | |||||||
Amounts due from a related party | 9 | — | 1,000 | |||||||
Advance to suppliers | 875 | 2,180 | ||||||||
Other receivables | 1,241 | 1,330 | ||||||||
Prepayments and other current assets | 2,645 | 1,763 | ||||||||
Total current assets | 20,951 | 8,190 | ||||||||
Non-current Assets: | ||||||||||
Property, plant and equipment, net | 4 | 216,646 | 213,603 | |||||||
Total non-current assets | 216,646 | 213,603 | ||||||||
TOTAL ASSETS | 237,597 | 221,793 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable | 2,679 | 5,687 | ||||||||
Amounts due to related parties | 9 | 51,540 | 26,900 | |||||||
Short-term loan | 7 | — | 22,000 | |||||||
Current portion of long-term loans | 8 | 19,000 | 20,000 | |||||||
Accrued expenses and other current liabilities | 5 | 1,471 | 1,888 | |||||||
Total current liabilities | 74,690 | 76,475 | ||||||||
Non-current Liabilities: | ||||||||||
Long-term loans | 8 | 123,000 | 103,000 | |||||||
Deferred tax liabilities | 6 | 2,480 | 2,676 | |||||||
Total non-current liabilities | 125,480 | 105,676 | ||||||||
Total liabilities | 200,170 | 182,151 | ||||||||
Commitments and contingencies | 11 | |||||||||
Shareholders’ equity | ||||||||||
Share capital | 1 | 18,000 | 18,000 | |||||||
Additional paid-in capital | — | 69 | ||||||||
Reserve fund | 12 | 1,943 | 2,157 | |||||||
Retained earnings | 17,484 | 19,416 | ||||||||
Total shareholders’ equity | 37,427 | 39,642 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 237,597 | 221,793 | ||||||||
F-188
Table of Contents
Year Ended December 31, | ||||||||||
Notes | 2006 | 2007 | ||||||||
RMB | RMB | |||||||||
Revenues | 40,242 | 31,475 | ||||||||
Cost of revenues | (14,004 | ) | (13,897 | ) | ||||||
Gross profit | 26,238 | 17,578 | ||||||||
Operating expenses: | ||||||||||
General and administrative expenses | (3,868 | ) | (4,355 | ) | ||||||
Total operating expenses | (3,868 | ) | (4,355 | ) | ||||||
Operating profit | 22,370 | 13,223 | ||||||||
Interest income | 233 | 34 | ||||||||
Interest expenses | 8 | (9,664 | ) | (10,758 | ) | |||||
Gain on the disposal of investment in equity investee | 1,033 | — | ||||||||
Non-operating expenses | (1,178 | ) | (156 | ) | ||||||
Income before income tax expenses | 12,794 | 2,343 | ||||||||
Income tax expenses | 6 | (1,052 | ) | (197 | ) | |||||
Net income | 11,742 | 2,146 | ||||||||
F-189
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Cash flows from operating activities: | ||||||||
Net income | 11,742 | 2,146 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation of property, plant and equipment | 7,412 | 7,660 | ||||||
Changes in deferred tax | 1,052 | 197 | ||||||
Gain on the disposal of long-term investment in equity investee | (1,030 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 1,151 | 11 | ||||||
Accounts payable | (8,367 | ) | 3,007 | |||||
Amounts due to related parties | (860 | ) | (500 | ) | ||||
Prepayments and other current assets | (2,660 | ) | (513 | ) | ||||
Accrued expenses and other current liabilities | (2,112 | ) | 486 | |||||
Net cash provided by operating activities | 6,328 | 12,494 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of property, plant and equipment | (5,301 | ) | (4,616 | ) | ||||
Proceeds from disposal of trading securities | 90 | — | ||||||
Acquisition of long-term investment in equity investee | (2,475 | ) | — | |||||
Disposal of long-term investment in equity investee | 8,305 | — | ||||||
Net cash used in investing activities | 619 | (4,616 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from short-term loans | 600 | 22,000 | ||||||
Repayment of short-term loans | (2,300 | ) | — | |||||
Proceeds from long-term loans | 40,000 | — | ||||||
Repayment of long-term loans | (18,000 | ) | (19,000 | ) | ||||
Proceeds from related parties borrowings | — | 6,550 | ||||||
Repayment of related parties borrowings | (12,760 | ) | (31,690 | ) | ||||
Net cash provided by (used in) financing activities | 7,540 | (22,140 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 14,487 | (14,262 | ) | |||||
Cash and cash equivalents at the beginning of the year | 432 | 14,919 | ||||||
Cash and cash equivalents at the end of the year | 14,919 | 657 | ||||||
Supplementary disclosure of cash flow information | ||||||||
Interest paid | (9,664 | ) | (10,758 | ) |
F-190
Table of Contents
Additional | Total | |||||||||||||||||||
Share | Paid-in | Reserve | Retained | Shareholders’ | ||||||||||||||||
Capital | Capital | Fund | Earnings | Equity | ||||||||||||||||
RMB | RMB | RMB | RMB | |||||||||||||||||
Balance at January 1, 2006 | 18,000 | — | 768 | 6,917 | 25,685 | |||||||||||||||
Net income | — | — | — | 11,742 | 11,742 | |||||||||||||||
Appropriation to statutory reserve | — | 1,175 | (1,175 | ) | — | |||||||||||||||
Balance at December 31, 2006 | 18,000 | — | 1,943 | 17,484 | 37,427 | |||||||||||||||
Net income | — | — | — | 2,146 | 2,146 | |||||||||||||||
Appropriation to statutory reserve | — | 214 | (214 | ) | — | |||||||||||||||
Compensation expenses related to interest-free loans to related parties | — | 69 | — | — | 69 | |||||||||||||||
Balance at December 31, 2007 | 18,000 | 69 | 2,157 | 19,416 | 39,642 | |||||||||||||||
F-191
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-192
Table of Contents
Dams and reservoirs | 45 years | |||
Buildings | 10–42 years | |||
Machinery | 3–18 years | |||
Transportation equipment | 2–10 years | |||
Electronic equipment and others | 3–8 years |
F-193
Table of Contents
F-194
Table of Contents
F-195
Table of Contents
F-196
Table of Contents
3. | ACCOUNTS RECEIVABLE |
4. | PROPERTY, PLANT AND EQUIPMENT |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Dams and reservoirs | 114,493 | 114,493 | ||||||
Buildings | 87,986 | 89,796 | ||||||
Machinery | 31,858 | 32,051 | ||||||
Transportation equipment | 927 | 1,117 | ||||||
Office equipment | 452 | 522 | ||||||
Less: Accumulated depreciation | (19,070 | ) | (26,730 | ) | ||||
216,646 | 211,249 | |||||||
Construction in progress | — | 2,354 | ||||||
Total | 216,646 | 213,603 | ||||||
F-197
Table of Contents
5. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Payroll payable | 881 | 1,143 | ||||||
Other taxes payable | 520 | 593 | ||||||
Other payable | 70 | 152 | ||||||
Total | 1,471 | 1,888 | ||||||
6. | INCOME TAX EXPENSES |
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Current income tax expense | — | — | ||||||
Deferred income tax expense | 1,052 | 197 | ||||||
1,052 | 197 | |||||||
F-198
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Taxation at PRC EIT statutory rates of 33% | 4,222 | 773 | ||||||
Non-deductible expenses | 496 | 342 | ||||||
Impact from statutory tax rate change | — | (856 | ) | |||||
Effect of tax holidays in the PRC | (3,666 | ) | (62 | ) | ||||
Income tax provision | 1,052 | 197 | ||||||
Effective Tax Rate (%) | 8.2 | 8.4 |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Deferred tax assets — non-current | ||||||||
Pre-operation expenses | 301 | 151 | ||||||
Deferred tax liabilities — non-current | ||||||||
Depreciation of property, plant and equipment | (2,781 | ) | (2,827 | ) | ||||
Net deferred tax liabilities — non-current | (2,480 | ) | (2,676 | ) | ||||
7. | SHORT-TERM LOAN |
8. | LONG-TERM LOANS |
F-199
Table of Contents
December 31, | ||||
2007 | ||||
RMB | ||||
2008 | 20,000 | |||
2009 | 21,000 | |||
2010 | 22,000 | |||
2011 | 14,000 | |||
2012 | 13,000 | |||
Thereafter | 33,000 | |||
123,000 | ||||
9. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Sanming City Chenyang Hydropower Co., Ltd. | A shareholder of the Company | |
Sanming City Fufeng Industrial Co., Ltd. | A shareholder of the Company | |
Sanming Yuantai Hydroelectric Co., Ltd. | A shareholder of the Company | |
Sanming Shunxi Hydroelectric Co., Ltd. | Company controlled by a shareholder of the Company | |
Sanming Anhe Travel Agent Company | Company controlled by a shareholder of the Company | |
Fujian Dachuang Rock Products Co., Ltd. | Company controlled by a shareholder of the Company | |
Fujian Dachuang Hydroelectric Group, Ltd. | Company controlled by a shareholder of the Company | |
Fujian Tianrun Infrastructure Co., Ltd. | A shareholder of the Company | |
Fujian Taige Investment Co., Ltd. | A shareholder of the Company | |
Chen Licai | A shareholder of the Company | |
Sun Xiaodong | A shareholder of the Company | |
Xie Fangwu | A shareholder of the Company | |
Zhang Rongbin | A shareholder of the Company | |
Ye Changhe | A shareholder of the Company |
F-200
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Short-term loans lent to: | ||||||||
Sanming Anhe Travel Agent Company | — | 2,850 | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | — | 2,000 | ||||||
Xie Fangwu | — | 300 | ||||||
— | 5,150 | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Repayment of short-term loans lent to: | ||||||||
Sanming Anhe Travel Agent Company | — | 1,850 | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | — | 2,000 | ||||||
Xie Fangwu | — | 200 | ||||||
— | 4,050 | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Services provided by: | ||||||||
Sanming Shunxi Hydroelectric Co., Ltd. | 1,360 | 500 | ||||||
1,360 | 500 | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Short-term loans borrowed from: | ||||||||
Sanming City Fufeng Industrial Co., Ltd. | 1,000 | — | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 2,040 | 1,300 | ||||||
Sanming Anhe Travel Agent Company | — | 1,200 | ||||||
3,040 | 2,500 | |||||||
F-201
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Repayment of short-term loans to: | ||||||||
Sanming City Fufeng Industrial Co., Ltd. | 5,600 | — | ||||||
Sanming Yuantai Hydroelectric Co., Ltd. | 1,800 | — | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | — | 3,340 | ||||||
Sanming Anhe Travel Agent Company | — | 1,200 | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | 3,000 | 8,726 | ||||||
Sanming City Fufeng Industrial Co., Ltd. | — | 8,124 | ||||||
Chen Licai | 3,000 | 2,000 | ||||||
Sun Xiaodong | 2,000 | 1,250 | ||||||
Xie Fangwu | 400 | 800 | ||||||
Zhang Rongbin | — | 1,000 | ||||||
Ye Changhe | — | 100 | ||||||
15,800 | 26,540 | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Interests paid to: | ||||||||
Sanming City Fufeng Industrial Co., Ltd. | 123 | — | ||||||
Sanming Yuantai Hydroelectric Co., Ltd. | 110 | — | ||||||
Fujian Taige Investment Co., Ltd. | 5 | — | ||||||
238 | — | |||||||
F-202
Table of Contents
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Amounts due from a related party: | ||||||||
Sanming Anhe Travel Agent Company | — | 1,000 | ||||||
— | 1,000 | |||||||
Amounts due to related parties: | ||||||||
Sanming Shunxi Hydroelectric Co., Ltd. | 500 | — | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 2,040 | — | ||||||
Sanming City Fufeng Industrial Co., Ltd. | 15,151 | 7,987 | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | 19,469 | 10,103 | ||||||
Chen Licai | 8,400 | — | ||||||
Sun Xiaodong | 4,100 | 1,890 | ||||||
Xie Fangwu | 1,880 | 980 | ||||||
Zhang Rongbin | — | 5,400 | ||||||
Ye Changhe | — | 540 | ||||||
51,540 | 26,900 | |||||||
10. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
11. | COMMITMENTS AND CONTINGENCIES |
F-203
Table of Contents
12. | RESERVE FUND |
13. | CONCENTRATION OF RISKS |
F-204
Table of Contents
F-205
Table of Contents
December 31, | September 30, | |||||||||||
Notes | 2007 | 2008 | ||||||||||
RMB | RMB | |||||||||||
Unaudited | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 657 | 6,853 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2007 and September 30, 2008 | 1,260 | 4,227 | ||||||||||
Amounts due from related parties | 5 | 1,000 | 10,000 | |||||||||
Advance to suppliers | 2,180 | 87 | ||||||||||
Other receivables | 1,330 | 3,742 | ||||||||||
Deferred tax assets | — | 74 | ||||||||||
Prepayments and other current assets | 1,763 | 999 | ||||||||||
Total current assets | 8,190 | 25,982 | ||||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment, net | 213,603 | 203,869 | ||||||||||
Total non-current assets | 213,603 | 203,869 | ||||||||||
TOTAL ASSETS | 221,793 | 229,851 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | 5,687 | 1,295 | ||||||||||
Dividend payable | 8 | — | 13,781 | |||||||||
Amounts due to related parties | 5 | 26,900 | 9,950 | |||||||||
Short-term loan | 3 | 22,000 | 18,000 | |||||||||
Current portion of long-term loans | 4 | 20,000 | 20,000 | |||||||||
Accrued expenses and other current liabilities | 1,888 | 3,465 | ||||||||||
Income tax payable | — | 2,217 | ||||||||||
Total current liabilities | 76,475 | 68,708 | ||||||||||
Non-current liabilities: | ||||||||||||
Long-term loans | 4 | 103,000 | 103,000 | |||||||||
Deferred tax liabilities | 2,676 | 3,288 | ||||||||||
Total non-current liabilities | 105,676 | 106,288 | ||||||||||
Total liabilities | 182,151 | 174,996 | ||||||||||
Commitments and contingencies | 6 | |||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 1 | 18,000 | 40,800 | |||||||||
Additional paid-in capital | 69 | 395 | ||||||||||
Reserve fund | 2,157 | 2,157 | ||||||||||
Retained earnings | 19,416 | 11,503 | ||||||||||
Total shareholders’ equity | 39,642 | 54,855 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 221,793 | 229,851 | ||||||||||
F-206
Table of Contents
Unaudited Interim Condensed Statement of Operations
for the Nine Months Ended September 30, 2007 and
Unaudited Interim Condensed Consolidated Statement of Operations
for the Nine Months Ended September 30, 2008
(Amounts in thousands of Renminbi (“RMB”))
For the Nine Months Ended September 30, | ||||||||||||
Notes | 2007 | 2008 | ||||||||||
RMB | RMB | |||||||||||
Unaudited | Unaudited | |||||||||||
Revenues | 28,132 | 31,138 | ||||||||||
Cost of revenues | (9,156 | ) | (8,235 | ) | ||||||||
Gross profit | 18,976 | 22,903 | ||||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (3,041 | ) | (3,542 | ) | ||||||||
Loss on the disposal of property, plant and equipment, net | — | (746 | ) | |||||||||
Total operating expenses | (3,041 | ) | (4,288 | ) | ||||||||
Operating profit | 15,935 | 18,615 | ||||||||||
Interest income | 22 | 6 | ||||||||||
Interest expenses | (7,819 | ) | (8,647 | ) | ||||||||
Non-operating expenses | (24 | ) | (169 | ) | ||||||||
Income from continuing operations before income tax expenses | 8,114 | 9,805 | ||||||||||
Income tax benefit (expenses) | 7 | 3 | (2,755 | ) | ||||||||
Income from continuing operations | 8,117 | 7,050 | ||||||||||
Discontinued operations: | ||||||||||||
Loss from operations of discontinued subsidiary, net of income tax expenses of nil for 2007 and 2008 | 2 | — | (207 | ) | ||||||||
Net income | 8,117 | 6,843 | ||||||||||
F-207
Table of Contents
Unaudited Interim Condensed Statement of Cash Flows
for the Nine Months Ended September 30, 2007 and
Unaudited Interim Condensed Consolidated Statement of Cash Flows
for the Nine Months Ended September 30, 2008
(Amounts in thousands of Renminbi (“RMB”)
For the Nine Months Ended September 30, | ||||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Cash flows provided by operating activities | 4,597 | 10,103 | ||||||
Cash flows used in investing activities | (1,275 | ) | (6,657 | ) | ||||
Cash flows (used in) provided by financing activities | (3,690 | ) | 2,750 | |||||
Net (decrease) increase in cash and cash equivalents | (368 | ) | 6,196 | |||||
Cash and cash equivalents at the beginning of the period | 14,919 | 657 | ||||||
Cash and cash equivalents at the end of the period | 14,551 | 6,853 | ||||||
Non-cash activity: | ||||||||
Waivers of amounts due to related parties | — | 22,800 |
F-208
Table of Contents
Unaudited Interim Condensed Statement of Changes in Shareholders’ Equity
for the Nine Months Ended September 30, 2007 and Unaudited Interim Condensed Consolidated
Statement of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2008
(Amounts in thousands of Renminbi (“RMB”))
Additional | Total | |||||||||||||||||||
Share | paid-in | Reserve | Retained | Shareholders’ | ||||||||||||||||
capital | capital | fund | earnings | equity | ||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
Balance at January 1, 2007 | 18,000 | — | 1,943 | 17,484 | 37,427 | |||||||||||||||
Net income | — | — | — | 8,117 | 8,117 | |||||||||||||||
Compensation expenses related to interest-free loans to related parties | — | 37 | — | — | 37 | |||||||||||||||
Balance at September 30, 2007 (unaudited) | 18,000 | 37 | 1,943 | 25,601 | 45,581 | |||||||||||||||
Balance at January 1, 2008 | 18,000 | 69 | 2,157 | 19,416 | 39,642 | |||||||||||||||
Waivers of amounts due to related parties | 22,800 | — | — | — | 22,800 | |||||||||||||||
Cash dividends declared | — | — | — | (14,756 | ) | (14,756 | ) | |||||||||||||
Net income | — | — | — | 6,843 | 6,843 | |||||||||||||||
Compensation expenses related to interest-free loans to related parties | — | 6 | — | — | 6 | |||||||||||||||
Disposal of a subsidiary to shareholders | — | 320 | — | — | 320 | |||||||||||||||
Balance at September 30, 2008 (unaudited) | 40,800 | 395 | 2,157 | 11,503 | 54,855 | |||||||||||||||
F-209
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-210
Table of Contents
F-211
Table of Contents
Dams and reservoirs | 45 years | |||
Buildings | 10-42 years | |||
Machinery | 3-18 years | |||
Transportation equipment | 2-10 years | |||
Electronic equipment and others | 3-8 years |
F-212
Table of Contents
F-213
Table of Contents
F-214
Table of Contents
3. | SHORT-TERM LOAN |
4. | LONG-TERM LOANS |
September 30, | ||||
2008 | ||||
RMB | ||||
Unaudited | ||||
From October 1, 2008 to December 31, 2008 | 20,000 | |||
2009 | 21,000 | |||
2010 | 22,000 | |||
2011 | 14,000 | |||
2012 | 13,000 | |||
Thereafter | 33,000 | |||
123,000 | ||||
F-215
Table of Contents
5. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Sanming City Chenyang Hydropower Co., Ltd. | A shareholder of the Company | |
Sanming City Fufeng Industrial Co., Ltd. | A shareholder of the Company | |
Sanming Anhe Travel Agent Company | Company controlled by a shareholder of the Company | |
Fujian Dachuang Rock Products Co., Ltd. | Company controlled by a shareholder of the Company | |
Fujian Dachuang Hydroelectric Group, Ltd. | Company controlled by a shareholder of the Company | |
Beijing Xunjing Interactive Tech. Co.,Ltd. | A shareholder of the Company | |
Chen Licai | A shareholder of the Company | |
Sun Xiaodong | A shareholder of the Company | |
Xie Fangwu | A shareholder of the Company | |
Zhang Rongbin | A shareholder of the Company | |
Ye Changhe | A shareholder of the Company | |
Yu Rongji | A shareholder of the Company | |
Huang Shaojian | A shareholder of the Company |
For the Nine Months | For the Nine Months | |||||||
Ended September 30, | Ended September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Short-term loans lent to: | ||||||||
Sanming Anhe Travel Agent Company | 2,850 | — | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | 2,000 | — | ||||||
Xie Fangwu | 300 | — | ||||||
5,150 | — | |||||||
Repayment of short-term loans lent to: | ||||||||
Sanming Anhe Travel Agent Company | — | 1,000 | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | 2,000 | — | ||||||
Xie Fangwu | — | 100 | ||||||
2,000 | 1,100 | |||||||
F-216
Table of Contents
For the Nine Months | For the Nine Months | |||||||
Ended September 30, | Ended September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Disposal of long-term investment in a subsidiary to: | ||||||||
Sanming City Chenyang Hydropower Co., Ltd. | — | 6,000 | ||||||
Sanming City Fufeng Industrial Co., Ltd. | — | 4,000 | ||||||
— | 10,000 | |||||||
Short-term loans borrowed from: | ||||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 1,300 | 600 | ||||||
Sanming Anhe Travel Agent Company | 1,200 | 3,250 | ||||||
Yu Rongji | — | 7,000 | ||||||
2,500 | 10,850 | |||||||
Repayment of short-term loans borrowed from: | ||||||||
Sanming City Chenyang Hydropower Co., Ltd. | 8,726 | — | ||||||
Sanming City Fufeng Industrial Co., Ltd. | 8,124 | — | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 3,340 | — | ||||||
Sanming Anhe Travel Agent Company | 1,200 | 500 | ||||||
Chen Licai | 2,000 | — | ||||||
Sun Xiaodong | 900 | — | ||||||
Xie Fangwu | 750 | — | ||||||
Yu Rongji | — | 4,600 | ||||||
25,040 | 5,100 | |||||||
Waivers of short-term loans borrowed from: | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | — | 5,016 | ||||
Sanming City Fufeng Industrial Co., Ltd. | — | 2,736 | ||||
Beijing Xunjing Interactive Tech. Co., Ltd. | — | 912 | ||||
Sun Xiaodong | — | 1,596 | ||||
Xie Fangwu | — | 912 | ||||
Zhang Rongbin | — | 4,560 | ||||
Ye Changhe | — | 456 | ||||
Yu Rongji | — | 3,096 | ||||
Huang Shaojian | — | 3,516 | ||||
— | 22,800 | |||||
F-217
Table of Contents
December 31, | September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | ||||||||
Amounts due from related parties: | ||||||||
Sanming Anhe Travel Agent Company | 1,000 | — | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | — | 6,000 | ||||||
Sanming City Fufeng Industrial Co., Ltd. | — | 4,000 | ||||||
1,000 | 10,000 | |||||||
Amounts due to related parties: | ||||||||
Sanming City Fufeng Industrial Co., Ltd. | 7,987 | 504 | ||||||
Sanming City Chenyang Hydropower Co., Ltd. | 10,103 | 924 | ||||||
Beijing Xunjing Interactive Tech. Co.,Ltd. | — | 168 | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | — | 600 | ||||||
Sanming Anhe Travel Agent Company | — | 2,750 | ||||||
Sun Xiaodong | 1,890 | 294 | ||||||
Xie Fangwu | 980 | 168 | ||||||
Zhang Rongbin | 5,400 | 840 | ||||||
Ye Changhe | 540 | 84 | ||||||
Yu Rongji | — | 2,970 | ||||||
Huang Shaojian | — | 648 | ||||||
26,900 | 9,950 | |||||||
F-218
Table of Contents
6. | COMMITMENTS AND CONTINGENCIES |
7. | INCOME TAX EXPENSES |
8. | DECLARATION OF DIVIDENDS |
9. | SUBSEQUENT EVENT |
F-219
Table of Contents
F-220
Table of Contents
December 31, | ||||||||||||
Notes | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 2,124 | 1,045 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2006 and 2007 | 3 | — | 609 | |||||||||
Amounts due from related parties | 10 | 2,535 | 5,685 | |||||||||
Prepayments and other current assets | 4 | 7,324 | 259 | |||||||||
Total current assets | 11,983 | 7,598 | ||||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment, net | 5 | 84,947 | 108,740 | |||||||||
Intangible assets, net | 6 | 30,686 | 30,921 | |||||||||
Total non-current assets | 115,633 | 139,661 | ||||||||||
TOTAL ASSETS | 127,616 | 147,259 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | 3,708 | 5,228 | ||||||||||
Amounts due to related parties | 10 | 12,200 | 12,500 | |||||||||
Accrued expenses and other current liabilities | 7 | 6,106 | 8,164 | |||||||||
Customer deposits | — | 6,274 | ||||||||||
Current portion of long- term loans | 9 | — | 4,000 | |||||||||
Total current liabilities | 22,014 | 36,166 | ||||||||||
Non-current liabilities: | ||||||||||||
Long-term loans | 9 | 69,000 | 79,000 | |||||||||
Total non-current liabilities | 69,000 | 79,000 | ||||||||||
Total liabilities | 91,014 | 115,166 | ||||||||||
Commitments and contingencies | 12 | |||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 38,300 | 44,800 | ||||||||||
Accumulated deficit | (1,698 | ) | (12,707 | ) | ||||||||
Total shareholders’ equity | 36,602 | 32,093 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 127,616 | 147,259 | ||||||||||
F-221
Table of Contents
Year Ended December 31, | ||||||||||||
Note | 2006 | 2007 | ||||||||||
RMB | RMB | |||||||||||
Revenues | — | — | ||||||||||
Cost of revenues | — | (4,665 | ) | |||||||||
Gross loss | — | (4,665 | ) | |||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (1,398 | ) | (2,135 | ) | ||||||||
Total operating expenses | (1,398 | ) | (2,135 | ) | ||||||||
Operating loss | (1,398 | ) | (6,800 | ) | ||||||||
Interest expenses | — | (4,209 | ) | |||||||||
�� | ||||||||||||
Loss before income tax expense | (1,398 | ) | (11,009 | ) | ||||||||
Income tax expenses | 8 | — | — | |||||||||
Net loss | (1,398 | ) | (11,009 | ) | ||||||||
F-222
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Cash flows from operating activities: | ||||||||
Net loss | (1,398 | ) | (11,009 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation of property, plant and equipment | 24 | 3,052 | ||||||
Amortization of intangible assets | — | 590 | ||||||
Provision for other receivables | — | 1,000 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | — | (609 | ) | |||||
Customer deposits | — | 6,274 | ||||||
Amounts due from related parties | (2,384 | ) | (3,150 | ) | ||||
Amounts due to related parties | (2,800 | ) | 300 | |||||
Prepayments and other current assets | (2,631 | ) | 3,091 | |||||
Accrued expenses and other current liabilities | 687 | 887 | ||||||
Net cash (used in)/provided by operating activities | (8,502 | ) | 426 | |||||
Cash flows from investing activities: | ||||||||
Acquisition of property, plant, and equipment | (75,403 | ) | (24,154 | ) | ||||
Acquisition of intangible asset | (15,686 | ) | (825 | ) | ||||
Amount lent to / (repaid from) unrelated parties | (3,964 | ) | 2,974 | |||||
Net cash used in investing activities | (95,053 | ) | (22,005 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from long-term borrowings | 69,000 | 14,000 | ||||||
Proceeds from capital injection | 27,800 | 6,500 | ||||||
Net cash provided by financing activities | 96,800 | 20,500 | ||||||
Net decrease in cash and cash equivalents | (6,755 | ) | (1,079 | ) | ||||
Cash and cash equivalents at the beginning of the year | 8,879 | 2,124 | ||||||
Cash and cash equivalents at the end of the year | 2,124 | 1,045 | ||||||
Supplementary disclosure of cash flow information | ||||||||
Interest paid | — | 4,162 | ||||||
Noncash portion of property, plant, and equipment additions during the year | 9,126 | 2,691 |
F-223
Table of Contents
Total | ||||||||||||
Share | Accumulated | Shareholders’ | ||||||||||
Capital | Deficit | Equity | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at December 31, 2005 | 10,500 | (300 | ) | 10,200 | ||||||||
Additional capital injection | 27,800 | — | 27,800 | |||||||||
Net loss | — | (1,398 | ) | (1,398 | ) | |||||||
Balance at December 31, 2006 | 38,300 | (1,698 | ) | 36,602 | ||||||||
Additional capital injection | 6,500 | — | 6,500 | |||||||||
Net loss | — | (11,009 | ) | (11,009 | ) | |||||||
Balance at December 31, 2007 | 44,800 | (12,707 | ) | 32,093 | ||||||||
F-224
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-225
Table of Contents
Dams and reservoirs | 40 years | |||
Buildings | 20-30 years | |||
Machinery | 10-15 years | |||
Transportation equipment | 5-10 years | |||
Electronic equipment and others | 5 years |
F-226
Table of Contents
Right to use water from dam and reservoir of Yuheng station | 40 years | |||
Right to use water from dam and reservoir of Jinzaoqiao station | 40 years |
F-227
Table of Contents
F-228
Table of Contents
F-229
Table of Contents
3. | ACCOUNTS RECEIVABLE |
4. | PREPAYMENTS AND OTHER CURRENT ASSETS |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Other receivables | 4,170 | 130 | ||||||
Advances to suppliers | 2,672 | 83 | ||||||
Prepaid expenses | 482 | 46 | ||||||
Total | 7,324 | 259 | ||||||
F-230
Table of Contents
5. | PROPERTY, PLANT AND EQUIPMENT, NET |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Waterway | — | 40,709 | ||||||
Buildings | — | 51,926 | ||||||
Machinery | 71 | 18,983 | ||||||
Transportation equipment | 97 | 97 | ||||||
Electronic equipment and others | 52 | 101 | ||||||
Less: Accumulated depreciation | (24 | ) | (3,076 | ) | ||||
Net book value | 196 | 108,740 | ||||||
Construction in progress | 84,751 | — | ||||||
Total | 84,947 | 108,740 | ||||||
6. | INTANGIBLE ASSETS, NET |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Right to use water from the dam and reservoir of Yuheng station | 15,000 | 15,000 | ||||||
Right to use water from the dam and reservoir of Jinzaoqiao station | 15,686 | 16,511 | ||||||
Less: Accumulated amortization | — | (590 | ) | |||||
30,686 | 30,921 | |||||||
F-231
Table of Contents
RMB | ||||
2008 | 788 | |||
2009 | 788 | |||
2010 | 788 | |||
2011 | 788 | |||
2012 | 788 |
7. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Construction guarantee payable to contractors | 3,555 | 4,756 | ||||||
Equipment payable to suppliers | 1,256 | 1,887 | ||||||
Other payables | 1,295 | 1,521 | ||||||
Total | 6,106 | 8,164 | ||||||
8. | INCOME TAX EXPENSES |
F-232
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Deferred income tax | — | — | ||||||
Current income tax expense | — | — | ||||||
— | — | |||||||
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Taxation at PRC EIT statutory rates | (461 | ) | (3,633 | ) | ||||
Permanent difference — non-deductible expenses | 165 | 553 | ||||||
Impact from statutory tax rate change | — | 819 | ||||||
Effect of tax holiday in the PRC | — | (5,006 | ) | |||||
Change in valuation allowance | 296 | 7,267 | ||||||
Income tax provision | — | — | ||||||
Effective Tax Rate(%) | — | — | ||||||
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Deferred tax assets — non-current | ||||||||
Net operating loss carry-forwards | — | 831 | ||||||
Investment tax credit carry-forwards | — | 5,006 | ||||||
Pre-operating expenses | 296 | 341 | ||||||
Customer deposits | — | 1,569 | ||||||
Valuation allowance | (296 | ) | (7,563 | ) | ||||
— | 184 | |||||||
Deferred tax liability-non-current | ||||||||
Depreciation | — | (184 | ) | |||||
Net deferred tax liability | — | — | ||||||
F-233
Table of Contents
9. | LONG-TERM LOANS |
December 31, | December 31, | |||||||||||||||||||
Start Date | Maturity Date | Interest Rate | 2006 | 2007 | ||||||||||||||||
RMB | RMB | |||||||||||||||||||
Feb. 27, 2006 | Nov. 20, 2011 | 6.732 | % | 1 | 17,000 | 17,000 | ||||||||||||||
Feb. 27, 2006 | Nov. 20, 2012 | 6.732Order of Magnitude Symbol7.029 | % | 2 | 16,000 | 16,000 | ||||||||||||||
Jun. 30, 2006 | Nov. 20, 2016 | 7.029Order of Magnitude Symbol7.524 | % | 3 | 36,000 | 36,000 | ||||||||||||||
Oct. 31, 2007 | Oct. 20, 2018 | 8.613 | % | 4 | — | 14,000 | ||||||||||||||
Total | 69,000 | 83,000 | ||||||||||||||||||
Less: Current portion of long-term loans | — | (4,000 | ) | |||||||||||||||||
Long-term loans | 69,000 | 79,000 | ||||||||||||||||||
1. | Guaranteed by Pingnan Minfeng Electric Power Co., Ltd. | |
2. | Secured by non-current assets of the Company. | |
3. | Secured by non-current assets of the Company. | |
4. | Guaranteed by Fujian Dachuang Hydroelectric Group, Ltd., a related party, and four individual shareholders of the Company. Secured by accounts receivables of the Company. |
December 31, | ||||
2007 | ||||
RMB | ||||
2008 | 4,000 | |||
2009 | 6,000 | |||
2010 | 9,000 | |||
2011 | 9,000 | |||
2012 | 10,000 | |||
Thereafter | 45,000 | |||
83,000 | ||||
F-234
Table of Contents
10. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Zhou Jian | A shareholder of the Company | |
Lin Yun | A shareholder of the Company | |
Zhang Yaofang | A shareholder of the Company | |
Wu Tingli | A shareholder of the Company | |
Liu Donghua | CEO of the Company | |
Li Congbin | CFO of the Company | |
Lin Yong | Employee of the Company | |
Fujian Dachuang Hydroelectric Group, Ltd. | Common management | |
Shanghai Xinhongquan Investment Ltd. | Common management | |
Pingnan County Yuheng Hydropower Co., Ltd. | Common management | |
Pingnan County Hengli Hydroelectric Co., Ltd. | Common management | |
Pingnan Minfeng Electric Power Co., Ltd. | Common management |
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Short-term loans lent to: | ||||||||
Zhou Jian | 2,400 | 1,762 | ||||||
Li Congbin | — | 40 | ||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 4,500 | ||||||
2,400 | 6,302 | |||||||
Repayment of short-term loans lent to: | ||||||||
Zhou Jian | — | 3,033 | ||||||
Liu Donghua | — | 100 | ||||||
Lin Yong | 16 | 19 | ||||||
16 | 3,152 | |||||||
F-235
Table of Contents
Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Short-term loans borrowed from: | ||||||||
Wu Tingli | 80 | — | ||||||
Zhou Jian | 30 | — | ||||||
Shanghai Xinhongquan Investment Ltd. | 90 | 10,575 | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 1,600 | 9,350 | ||||||
Pingnan County Yuheng Hydropower Co., Ltd. | — | 300 | ||||||
1,800 | 20,225 | |||||||
Repayment of short-term loans borrowed from: | ||||||||
Wu Tingli | — | 4,230 | ||||||
Zhou Jian | — | 1,586 | ||||||
Shanghai Xinhongquan Investment Ltd. | — | 4,759 | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 4,600 | 9,350 | ||||||
4,600 | 19,925 | |||||||
December 31, | ||||||||
2006 | 2007 | |||||||
RMB | RMB | |||||||
Amounts due from related parties: | ||||||||
Zhou Jian | 2,400 | 1,129 | ||||||
Li Congbin | 16 | 56 | ||||||
Liu Donghua | 100 | — | ||||||
Lin Yong | 19 | — | ||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 4,500 | ||||||
2,535 | 5,685 | |||||||
Amounts due to related parties: | ||||||||
Wu Tingli | 4,880 | 650 | ||||||
Zhou Jian | 1,830 | 244 | ||||||
Shanghai Xinhongquan Investment Ltd. | 5,490 | 11,306 | ||||||
Pingnan County Yuheng Hydropower Co., Ltd. | — | 300 | ||||||
12,200 | 12,500 | |||||||
F-236
Table of Contents
11. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
12. | COMMITMENTS AND CONTINGENCIES |
13. | CONCENTRATION OF RISKS |
14. | SUBSEQUENT EVENT |
F-237
Table of Contents
December 31, | September 30, | |||||||||||
Notes | 2007 | 2008 | ||||||||||
RMB | RMB | |||||||||||
Unaudited | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 1,045 | 181 | ||||||||||
Accounts receivable (net of allowance for doubtful accounts of nil as of December 31, 2007 and September 30, 2008) | 609 | 727 | ||||||||||
Amounts due from related parties | 4 | 5,685 | 1,145 | |||||||||
Prepayments and other current assets | 259 | 718 | ||||||||||
Total current assets | 7,598 | 2,771 | ||||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment, net | 108,740 | 106,771 | ||||||||||
Intangible assets, net | 30,921 | 30,330 | ||||||||||
Total non-current assets | 139,661 | 137,101 | ||||||||||
TOTAL ASSETS | 147,259 | 139,872 | ||||||||||
�� | ||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | 5,228 | 1,179 | ||||||||||
Amounts due to related parties | 4 | 12,500 | 14,300 | |||||||||
Current portion of long-term loans | 3 | 4,000 | 3,000 | |||||||||
Accrued expenses and other current liabilities | 8,164 | 7,485 | ||||||||||
Customer deposits | 6,274 | 13,595 | ||||||||||
Total current liabilities | 36,166 | 39,559 | ||||||||||
Non-current liabilities: | ||||||||||||
Long-term loans | 3 | 79,000 | 79,000 | |||||||||
Total non-current liabilities | 79,000 | 79,000 | ||||||||||
Total liabilities | 115,166 | 118,559 | ||||||||||
Commitments and contingencies | 5 | |||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 44,800 | 44,800 | ||||||||||
Accumulated deficit | ( 12,707 | ) | ( 23,487 | ) | ||||||||
Total shareholders’ equity | 32,093 | 21,313 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 147,259 | 139,872 | ||||||||||
F-238
Table of Contents
Unaudited Interim Condensed Statements of Operations
for the Nine Months Ended September 30, 2007 and 2008
(Amounts in thousands of Renminbi (“RMB”))
Nine Months Ended September 30, | ||||||||||||
Note | 2007 | 2008 | ||||||||||
RMB | RMB | |||||||||||
Unaudited | Unaudited | |||||||||||
Revenues | — | — | ||||||||||
Cost of revenues | (2,980 | ) | (5,088 | ) | ||||||||
Gross loss | (2,980 | ) | (5,088 | ) | ||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (931 | ) | (493 | ) | ||||||||
Total operating expenses | (931 | ) | (493 | ) | ||||||||
Operating loss | (3,911 | ) | (5,581 | ) | ||||||||
Interest expenses | (2,647 | ) | (5,199 | ) | ||||||||
Loss before income tax expense | (6,558 | ) | (10,780 | ) | ||||||||
Income tax expenses | 6 | — | — | |||||||||
Net loss | (6,558 | ) | (10,780 | ) | ||||||||
F-239
Table of Contents
Unaudited Interim Condensed Statements of Cash Flows
for the Nine Months Ended September 30, 2007 and 2008
(Amounts in thousands of Renminbi (“RMB”))
For the Nine Months Ended September 30, | ||||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Cash flows provided by operating activities | 5,745 | 3,678 | ||||||
Cash flows used in investing activities | (5,020 | ) | (5,342 | ) | ||||
Cash flows provided by financing activities | — | 800 | ||||||
Net increase (decrease) in cash and cash equivalents | 725 | (864 | ) | |||||
Cash and cash equivalents at the beginning of the period | 2,124 | 1,045 | ||||||
Cash and cash equivalents at the end of the period | 2,849 | 181 | ||||||
F-240
Table of Contents
Unaudited Interim Condensed Statements of Changes in
Shareholders’ Equity for the Nine Months Ended September 30, 2007 and 2008
(Amounts in thousands of Renminbi (“RMB”))
Total | ||||||||||||
Share | shareholders’ | |||||||||||
capital | Accumulated deficit | equity | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at January 1, 2007 | 38,300 | (1,698 | ) | 36,602 | ||||||||
Net loss | — | (6,558 | ) | (6,558 | ) | |||||||
Balance at September 30, 2007 (unaudited) | 38,300 | (8,256 | ) | 30,044 | ||||||||
Balance at January 1, 2008 | 44,800 | (12,707 | ) | 32,093 | ||||||||
Net loss | — | (10,780 | ) | (10,780 | ) | |||||||
Balance at September 30, 2008 (unaudited) | 44,800 | (23,487 | ) | 21,313 | ||||||||
F-241
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-242
Table of Contents
Waterway | 40 years | |||
Buildings | 20-30 years | |||
Machinery | 10-15 years | |||
Transportation equipment | 5-10 years | |||
Electronic equipment and others | 5 years |
F-243
Table of Contents
Right to use water from the dam and reservoir of Yuheng station | 40 years | |||
Right to use water from the dam and reservoir of Jinzaoqiao station | 40 years |
F-244
Table of Contents
F-245
Table of Contents
3. | LONG-TERM LOANS |
December 31, | September 30, | |||||||||||||||||||
Start Date | Maturity Date | Interest Rate | 2007 | 2008 | ||||||||||||||||
Unaudited | ||||||||||||||||||||
Feb 27, 2006 | Nov 20, 2011 | 6.732 | % | 1 | 17,000 | 17,000 | ||||||||||||||
Feb 27, 2006 | Nov 20, 2012 | 6.732 - 7.029 | % | 2 | 16,000 | 16,000 | ||||||||||||||
Jun 30, 2006 | Nov 20, 2016 | 7.029 - 7.524 | % | 3 | 36,000 | 36,000 | ||||||||||||||
Oct 31, 2007 | Oct 20, 2018 | 8.613 | % | 4 | 14,000 | 13,000 | ||||||||||||||
Total | 83,000 | 82,000 | ||||||||||||||||||
Less: Current portion of long-term loans | (4,000 | ) | (3,000 | ) | ||||||||||||||||
Long-term loans | 79,000 | 79,000 | ||||||||||||||||||
1. | Guaranteed by Pingnan Minfeng Electric Power Co., Ltd. | |
2. | Secured by non-current assets of the Company. | |
3. | Secured by non-current assets of the Company. | |
4. | Guaranteed by Fujian Dachuang Hydroelectric Group, Ltd. and four individual shareholders of the Company. Secured by accounts receivables of the Company. |
F-246
Table of Contents
4. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Zhou Jian | A shareholder of the Company | |
Lin Yun | A shareholder of the Company | |
Zhang Yaofang | A shareholder of the Company | |
Wu Tingli | A shareholder of the Company | |
Liu Donghua | CEO of the Company | |
Li Congbin | CFO of the Company | |
Lin Yong | Employee of the Company | |
Fujian Dachuang Hydroelectric Group, Ltd. | Common management | |
Shanghai Xinhongquan Investment Ltd. | Common management | |
Pingnan County Yuheng Hydropower Co., Ltd. | Common management | |
Pingnan County Hengli Hydroelectric Co., Ltd. | Common management | |
Pingnan Minfeng Electric Power Co., Ltd. | Common management | |
Wanshun Hydropower Generation Co., Ltd. | Common management |
F-247
Table of Contents
Nine Months Ended, | ||||||||
September 30, | September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Loans lent to: | ||||||||
Zhou Jian | 1,762 | — | ||||||
Li Congbin | 40 | — | ||||||
1,802 | — | |||||||
Repayment of loans borrowed from: | ||||||||
Shanghai Xinhongquan Investment Ltd. | — | 10,575 | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 1,650 | 6,210 | ||||||
Pingnan County Yuheng Hydropower Co., Ltd. | — | 447 | ||||||
1,650 | 17,232 | |||||||
Advances to contractors: | ||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 45 | ||||||
Wanshun Hydropower Generation Co., Ltd. | — | 40 | ||||||
— | 85 | |||||||
Service provided by: | ||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 45 | ||||||
Wanshun Hydropower Generation Co., Ltd. | — | 40 | ||||||
— | 85 | |||||||
F-248
Table of Contents
Nine Months Ended, | ||||||||
September 30, | September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
Loans borrowed from: | ||||||||
Pingnan County Yuheng Hydropower Co., Ltd. | 200 | 147 | ||||||
Wu Tingli | 9,400 | — | ||||||
Zhang Yaofang | — | 10,575 | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 2,150 | 8,310 | ||||||
11,750 | 19,032 | |||||||
Repayment of loans from : | ||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 4,500 | ||||||
Lin Yong | 19 | — | ||||||
Li Congbin | — | 40 | ||||||
19 | 4,540 | |||||||
December 31, | September 30, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Unaudited | ||||||||
Amounts due from related parties: | ||||||||
Li Congbin | 56 | 16 | ||||||
Zhou Jian | 1,129 | 1,129 | ||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 4,500 | — | ||||||
5,685 | 1,145 | |||||||
Amounts due to related parties: | ||||||||
Wu Tingli | 650 | 650 | ||||||
Zhou Jian | 244 | 244 | ||||||
Shanghai Xinhongquan Investment Ltd. | 11,306 | 731 | ||||||
Zhang Yaofang | — | 10,575 | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | — | 2,100 | ||||||
Pingnan County Yuheng Hydropower Co., Ltd. | 300 | — | ||||||
12,500 | 14,300 | |||||||
F-249
Table of Contents
5. | COMMITMENTS AND CONTINGENCIES |
6. | INCOME TAX EXPENSES |
7. | SUBSEQUENT EVENT |
F-250
Table of Contents
F-251
Table of Contents
December 31, | October 20, | |||||||||||
Notes | 2007 | 2008 | ||||||||||
RMB | RMB | |||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 142 | 1,401 | ||||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2007 and October 20, 2008 | 9,947 | 8,635 | ||||||||||
Amounts due from related parties | 12 | 656 | 22 | |||||||||
Prepayments and other current assets | 4 | 18,600 | 19,193 | |||||||||
Total current assets | 29,345 | 29,251 | ||||||||||
Non-current Assets: | ||||||||||||
Guarantee deposit | 5 | 11,603 | 4,678 | |||||||||
Property, plant and equipment, net | 6 | 131,101 | 129,300 | |||||||||
Goodwill | 7 | 50,911 | 50,806 | |||||||||
Total non-current assets | 193,615 | 184,784 | ||||||||||
TOTAL ASSETS | 222,960 | 214,035 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable | 155 | 37 | ||||||||||
Amounts due to related parties | 12 | 45,797 | 20,080 | |||||||||
Current portion of long-term loans | 8 | 4,000 | 4,000 | |||||||||
Accrued expenses and other current liabilities | 9 | 39,206 | 5,352 | |||||||||
Deferred tax liabilities | 10 | 351 | 72 | |||||||||
Current portion of unfavorable contract obligations | 11 | 5,786 | 5,786 | |||||||||
Total current liabilities | 95,295 | 35,327 | ||||||||||
Non-current Liabilities: | ||||||||||||
Long-term loans | 8 | 97,500 | 153,000 | |||||||||
Deferred tax liabilities | 10 | 3,493 | 4,063 | |||||||||
Unfavorable contract obligations | 11 | 8,821 | 3,428 | |||||||||
Total non-current liabilities | 109,814 | 160,491 | ||||||||||
Total liabilities | 205,109 | 195,818 | ||||||||||
Commitments and contingencies | 15 | |||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 20,000 | 20,000 | ||||||||||
Accumulated deficit | (2,149 | ) | (1,783 | ) | ||||||||
Total shareholders’ equity | 17,851 | 18,217 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 222,960 | 214,035 | ||||||||||
F-252
Table of Contents
Period from | ||||||||||||
May 18, 2007 | Period from | |||||||||||
(date of inception) to | January 1, 2008 to | |||||||||||
Note | December 31, 2007 | October 20, 2008 | ||||||||||
RMB | RMB | |||||||||||
Revenues | 12,963 | 19,547 | ||||||||||
Cost of revenues | (5,307 | ) | (8,016 | ) | ||||||||
Gross profit | 7,656 | 11,531 | ||||||||||
Operating expenses: | ||||||||||||
General and administrative expenses | (824 | ) | (1,011 | ) | ||||||||
Total operating expenses | (824 | ) | (1,011 | ) | ||||||||
Operating profit | 6,832 | 10,520 | ||||||||||
Interest income | 742 | 530 | ||||||||||
Interest expenses | (8,138 | ) | (10,152 | ) | ||||||||
(Loss)/Income before income tax expenses | (564 | ) | 898 | |||||||||
Income tax expenses | 10 | (1,585 | ) | (532 | ) | |||||||
Net (loss)/income | (2,149 | ) | 366 | |||||||||
F-253
Table of Contents
Statements of Cash Flows for the Period from May 18, 2007 (date of inception) to December 31, 2007
and the Period from January 1, 2008 to October 20, 2008
(Amounts in thousands of Renminbi (“RMB”))
Period from | ||||||||||||
May 18, 2007 | Period from | |||||||||||
(date of inception) to | January 1, 2008 to | |||||||||||
Note | December 31, 2007 | October 20, 2008 | ||||||||||
RMB | RMB | |||||||||||
Cash flows from operating activities: | ||||||||||||
Net (loss)/income | (2,149 | ) | 366 | |||||||||
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities: | ||||||||||||
Unfavorable contract obligations | (3,579 | ) | (5,393 | ) | ||||||||
Depreciation of property, plant and equipment | 3,292 | 5,009 | ||||||||||
Deferred income tax expenses | 220 | 396 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (9,947 | ) | 1,312 | |||||||||
Amounts due from related parties | (656 | ) | 334 | |||||||||
Guarantee deposit | (27,158 | ) | 5,075 | |||||||||
Prepayments and other current assets | (1,788 | ) | 1,568 | |||||||||
Accounts payable | — | (137 | ) | |||||||||
Accrued expenses and other current liabilities | 8,394 | 1,399 | ||||||||||
Amounts due to related parties | — | (366 | ) | |||||||||
Net cash (used in)/provided by operating activities | (33,371 | ) | 9,563 | |||||||||
Cash flows from investing activities: | ||||||||||||
Acquisition of Yuanping Station | 3 | (123,668 | ) | (35,256 | ) | |||||||
Advances for purchase of property, plant and equipment | (1,257 | ) | — | |||||||||
Purchase of property, plant and equipment | (8,412 | ) | (3,198 | ) | ||||||||
Net cash used in investing activities | (133,337 | ) | (38,454 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from capital injection | 20,000 | — | ||||||||||
Proceeds from long-term loans | 101,500 | 58,500 | ||||||||||
Proceeds from Shareholders’ loans | 61,193 | 7,050 | ||||||||||
Repayment of long-term loans | — | (3,000 | ) | |||||||||
Repayment of Shareholders’ loans | (15,843 | ) | (32,400 | ) | ||||||||
Net cash provided by financing activities | 166,850 | 30,150 | ||||||||||
Net increase in cash and cash equivalents | 142 | 1,259 | ||||||||||
Cash and cash equivalents at the beginning of the period | — | 142 | ||||||||||
Cash and cash equivalents at the end of the period | 142 | 1,401 | ||||||||||
Supplemental disclosure | ||||||||||||
Interest paid | 3,245 | 9,161 | ||||||||||
Non-cash investing activities: | ||||||||||||
Acquisition of property and equipment included in payables and accrued expenses | 155 | 10 | ||||||||||
Non-cash portion of acquisition of Yuanping Station | 35,256 | — |
F-254
Table of Contents
Total | ||||||||||||
Share | Accumulated | Shareholders’ | ||||||||||
Capital | Profit/(Deficit) | Equity | ||||||||||
RMB | RMB | RMB | ||||||||||
Balance at May 18, 2007 | 10,000 | — | 10,000 | |||||||||
Increase in share capital | 10,000 | — | 10,000 | |||||||||
Net loss | — | (2,149 | ) | (2,149 | ) | |||||||
Balance at December 31, 2007 | 20,000 | (2,149 | ) | 17,851 | ||||||||
Net income | — | 366 | 366 | |||||||||
Balance at October 20, 2008 | 20,000 | (1,783 | ) | 18,217 | ||||||||
F-255
Table of Contents
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-256
Table of Contents
F-257
Table of Contents
Dams and reservoirs | 40 years | |||
Buildings | 20 years | |||
Machinery | 15 years | |||
Transportation equipment | 5 years | |||
Electronic equipment and others | 8 years | |||
Land use right | 40 years |
F-258
Table of Contents
F-259
Table of Contents
F-260
Table of Contents
F-261
Table of Contents
3. | ACQUISITION OF A HYDROELECTRIC POWER STATION |
RMB | ||||
Purchase consideration: | ||||
Cash consideration (Note a) | 146,003 | |||
Direct costs related to the acquisition | 5,971 | |||
Portion of guarantee deposit relating to the acquisition | 2,954 | |||
Total consideration | 154,928 | |||
Assets acquired and liabilities assumed: | ||||
Property, plant and equipment, net | 125,828 | |||
Goodwill (Note 7) | 50,911 | |||
Total assets acquired | 176,739 | |||
Unfavorable contract obligations (Note 11) | (18,186 | ) | ||
Deferred tax liabilities | (3,625 | ) | ||
Total liabilities assumed | (21,811 | ) | ||
Net assets acquired | 154,928 | |||
F-262
Table of Contents
4. | PREPAYMENTS AND OTHER CURRENT ASSETS |
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Guarantee deposit-current portion (Note 5) | 15,555 | 17,405 | ||||||
Other receivables | 1,975 | 1,641 | ||||||
Advances to supplier | 957 | — | ||||||
Prepaid expense | 113 | 147 | ||||||
Total | 18,600 | 19,193 | ||||||
5. | GUARANTEE DEPOSIT |
F-263
Table of Contents
6. | PROPERTY, PLANT AND EQUIPMENT |
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Buildings | 20,029 | 20,158 | ||||||
Dams and reservoirs | 78,978 | 79,920 | ||||||
Machinery | 28,279 | 30,761 | ||||||
Transportation Equipments | 8 | 8 | ||||||
Electronic Equipments | 50 | 64 | ||||||
Land use right | 6,690 | 6,690 | ||||||
Less: Accumulated depreciation | (3,292 | ) | (8,301 | ) | ||||
130,742 | 129,300 | |||||||
Construction in progress | 359 | — | ||||||
Total | 131,101 | 129,300 | ||||||
7. | GOODWILL |
RMB | ||||
Balance as of December 31, 2007 and January 1, 2008 | 50,911 | |||
Less: Impairment of goodwill | — | |||
Less: Adjustment of goodwill | (105 | ) | ||
Balance as of October 20, 2008 | 50,806 | |||
F-264
Table of Contents
8. | LONG-TERM LOANS |
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Industrial and Commercial Bank of China | 95,000 | 92,000 | ||||||
Agricultural Bank of China | 6,500 | 65,000 | ||||||
Total | 101,500 | 157,000 | ||||||
October 20, | ||||
2008 | ||||
RMB | ||||
2008 | 1,000 | |||
2009 | 13,000 | |||
2010 | 11,000 | |||
2011 | 18,000 | |||
2012 | 18,000 | |||
Thereafter | 96,000 | |||
157,000 | ||||
F-265
Table of Contents
9. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Acquisition cost for Yuanping Station | 35,808 | — | ||||||
Unrecognized tax benefits | 1,365 | 1,501 | ||||||
Customer deposit | 1,000 | 1,000 | ||||||
Other taxes payable | 522 | 1,070 | ||||||
Accrued payroll | 200 | 250 | ||||||
Other liabilities | 311 | 1,531 | ||||||
Total | 39,206 | 5,352 | ||||||
10. | INCOME TAX EXPENSES |
Period from | ||||||||
May 18, 2007 | Period from | |||||||
(date of inception) to | January 1, 2008 to | |||||||
December 31, 2007 | October 20, 2008 | |||||||
RMB | RMB | |||||||
Current income tax expense | 1,365 | 136 | ||||||
Deferred income tax expense | 220 | 396 | ||||||
1,585 | 532 | |||||||
F-266
Table of Contents
Period from | ||||||||
May 18, 2007 | Period from | |||||||
(date of inception) to | January 1, 2008 to | |||||||
December 31, 2007 | October 20, 2008 | |||||||
RMB | ||||||||
Taxation at PRC EIT statutory rates at 25% (33% in 2007) | (185 | ) | 225 | |||||
Permanent differences | 1,840 | 307 | ||||||
Impact from statutory tax rate change | (70 | ) | — | |||||
Income tax provision | 1,585 | 532 | ||||||
Effective Tax Rate (%) | 282 | 59 | ||||||
RMB | ||||
Balance as of December 31, 2007 and January 1, 2008 | 1,365 | |||
Additional liability | 136 | |||
Balance as of October 20, 2008 | 1,501 | |||
F-267
Table of Contents
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Deferred tax assets — current | ||||||||
Unfavorable contract obligation-water use right | 2 | 2 | ||||||
Guarantee deposit | 168 | 315 | ||||||
Others | 129 | 261 | ||||||
Total | 299 | 578 | ||||||
Deferred tax liabilities — current | ||||||||
Unfavorable contract obligation-electricity supply contract | (650 | ) | (650 | ) | ||||
Total | (650 | ) | (650 | ) | ||||
Net deferred tax liabilities — current | (351 | ) | (72 | ) | ||||
Deferred tax assets — non-current | ||||||||
Unfavorable contract obligation-water use right | 60 | 60 | ||||||
Guarantee deposit | 542 | 267 | ||||||
Total | 602 | 327 | ||||||
Deferred tax liabilities — non-current | ||||||||
Property, plant and equipment | (2,556 | ) | (3,459 | ) | ||||
Unfavorable contract obligation-electricity supply contract | (1,539 | ) | (931 | ) | ||||
Total | (4,095 | ) | (4,390 | ) | ||||
Net deferred tax liabilities — non-current | (3,493 | ) | (4,063 | ) | ||||
11. | UNFAVORABLE CONTRACT OBLIGATIONS |
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Current portion | ||||||||
Unfavorable service contract obligation from the electricity supply contract | 5,780 | 5,780 | ||||||
Unfavorable service contract obligation from the granting of a right to use water | 6 | 6 | ||||||
Total | 5,786 | 5,786 | ||||||
F-268
Table of Contents
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Non-current portion | ||||||||
Unfavorable service contract obligation from the electricity supply contract | 8,576 | 3,188 | ||||||
Unfavorable service contract obligation from the granting of a right to use water | 245 | 240 | ||||||
Total | 8,821 | 3,428 | ||||||
12. | RELATED PARTY TRANSACTIONS |
Name of Related Parties | Relationship with the Company | |
Fujian Province Anheng Assets Management Co., Ltd. | A shareholder of the Company | |
Fujian Yuneng Power Group Ltd. | A shareholder of the Company | |
Fujian Dachuang Hydroelectric Group, Ltd. | A shareholder of the Company | |
Shanghai Yufeng Hotel Management Co., Ltd. | A shareholder of the Company | |
Mr. Chen Canling | A shareholder of the Company | |
Mr. Wang Jiang | A shareholder of the Company | |
Mr. Zhang Rongbin | A shareholder of the Company | |
Mr. Liu Donghua | CEO of the Company | |
Jinzaoqiao Hydroelectric Co., Ltd. | A company controlled by a shareholder | |
Wanquan Power Generation Co., Ltd. | A company controlled by a shareholder | |
Wanshun Hydropower Generation Co., Ltd. | A company controlled by a shareholder | |
Pingnan County Hengli Hydroelectric Co., Ltd. | A company controlled by a shareholder | |
Pingnan County Yuanping Hydroelectric Co., Ltd. | A company under common management |
F-269
Table of Contents
Period from | ||||||||
May 18, 2007 | Period from | |||||||
(date of inception) to | January 1 to | |||||||
December 31, 2007 | October 20, 2008 | |||||||
RMB | RMB | |||||||
Water Expenses payable to: | ||||||||
Wanquan Power Generation Co., Ltd. | 399 | 416 | ||||||
399 | 416 | |||||||
Repairs performed by: | ||||||||
Wanshun Hydropower Generation Co., Ltd. | 48 | 153 | ||||||
48 | 153 | |||||||
Staff Advances to : | ||||||||
Mr. Liu Donghua | 6 | 50 | ||||||
6 | 50 | |||||||
Refund of staff advance from: | ||||||||
Mr. Liu Donghua | — | 56 | ||||||
— | 56 | |||||||
Constructions performed by: | ||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 6,180 | — | ||||||
Pingnan County Yuanping Hydroelectric Co., Ltd. | — | 397 | ||||||
6,180 | 397 | |||||||
F-270
Table of Contents
Period from | ||||||||
May 18, 2007 | Period from | |||||||
(date of inception) to | January 1 to | |||||||
December 31, 2007 | October 20, 2008 | |||||||
RMB | RMB | |||||||
Short-term loans borrowed from: | ||||||||
Fujian Province Anheng Assets Management Co., Ltd. | 28,350 | 2,300 | ||||||
Fujian Yuneng Power Group Ltd. | 18,500 | — | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 13,500 | 3,400 | ||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 843 | — | ||||||
Shanghai Yufeng Hotel Management Co., Ltd. | — | 1,350 | ||||||
61,193 | 7,050 | |||||||
Repayment of short-term loans to: | ||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 843 | — | ||||||
Fujian Dachuang Hydroelectric Group, Ltd. | 3,000 | 6,500 | ||||||
Fujian Yuneng Power Group Ltd. | 3,000 | 9,500 | ||||||
Fujian Province Anheng Assets Management Co., Ltd. | 9,000 | 13,900 | ||||||
Mr. Zhang Rongbin | — | 1,800 | ||||||
Shanghai Yufeng Hotel Management Co., Ltd. | — | 450 | ||||||
Mr. Wang Jiang | — | 250 | ||||||
15,843 | 32,400 | |||||||
Transfer of short-term loans from: | ||||||||
Fujian Dachuang Hydroelectric Group, Ltd. | — | 7,000 | ||||||
Mr. Zhang Rongbin | — | 900 | ||||||
— | 7,900 | |||||||
Transfer of short-tem loans to: | ||||||||
Fujian Province Anheng Assets Management Co., Ltd. | — | 1,250 | ||||||
Shanghai Yufeng Hotel Management Co., Ltd. | — | 900 | ||||||
Mr. Zhang Rongbin | — | 4,500 | ||||||
Mr. Wang Jiang | — | 1,250 | ||||||
— | 7,900 | |||||||
Loans lent to: | ||||||||
Pingnan County Yuanping Hydroelectric Co., Ltd. | — | 50 | ||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 5,400 | ||||||
— | 5,450 | |||||||
Repayment of loans from: | ||||||||
Pingnan County Yuanping Hydroelectric Co., Ltd. | — | 50 | ||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 5,400 | ||||||
— | 5,450 | |||||||
F-271
Table of Contents
Period from | ||||||||||||
May 18, 2007 | Period from | |||||||||||
(date of inception) to | January 1 to | |||||||||||
Note | December 31, 2007 | October 20, 2008 | ||||||||||
RMB | RMB | |||||||||||
Advances to contractors: | ||||||||||||
Pingnan County Yuanping Hydroelectric Co., Ltd. | 300 | 97 | ||||||||||
Wanshun Hydropower Generation Co., Ltd. | — | 22 | ||||||||||
Jinzaoqiao Hydroelectric Co., Ltd. | — | 600 | ||||||||||
300 | 719 | |||||||||||
Payment by the Company on behalf of : | ||||||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 3 | — | ||||||||||
Jinzaoqiao Hydroelectric Co., Ltd. | 3 | — | ||||||||||
Wanshun Hydropower Generation Co., Ltd. | — | 4 | ||||||||||
Mr. Chen Canling | — | 400 | ||||||||||
6 | 404 | |||||||||||
Repayment to the Company by: | ||||||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 3 | — | ||||||||||
Jinzaoqiao Hydroelectric Co., Ltd. | 3 | — | ||||||||||
Wanshun Hydropower Generation Co., Ltd. | — | 4 | ||||||||||
Mr. Chen Canling | — | 400 | ||||||||||
6 | 404 | |||||||||||
Net-advance to: | ||||||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 350 | — | ||||||||||
350 | — | |||||||||||
Refund of advances from: | ||||||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | — | 350 | ||||||||||
Jinzaoqiao Hydroelectric Co., Ltd. | — | 600 | ||||||||||
— | 950 | |||||||||||
F-272
Table of Contents
December 31, | October 20, | |||||||
2007 | 2008 | |||||||
RMB | RMB | |||||||
Amounts due from related parties: | ||||||||
Pingnan County Hengli Hydroelectric Co., Ltd. | 350 | — | ||||||
Mr. Liu Donghua | 6 | — | ||||||
Pingnan County Yuanping Hydroelectric Co., Ltd. | 300 | — | ||||||
Wanshun Hydropower Generation Co., Ltd. | — | 22 | ||||||
656 | 22 | |||||||
Amounts due to related parties: | ||||||||
Fujian Province Anheng Assets Management Co., Ltd. | 19,350 | 9,000 | ||||||
Fujian Yuneng Power Group Ltd. | 15,500 | 6,000 | ||||||
Fujian Dachuan Hydroelectric Group, Ltd. | 10,500 | 400 | ||||||
Wanquan Power Generation Co., Ltd. | 399 | 20 | ||||||
Wanshun Hydropower Generation Co., Ltd. | 48 | 60 | ||||||
Mr. Zhang Rongbin | — | 1,800 | ||||||
Shanghai Yufeng Hotel Management Co., Ltd. | — | 1,800 | ||||||
Mr. Wang Jiang | — | 1,000 | ||||||
45,797 | 20,080 | |||||||
13. | EMPLOYEE DEFINED CONTRIBUTION PLAN |
14. | RESERVE FUND |
F-273
Table of Contents
15. | COMMITMENTS AND CONTINGENCIES |
16. | CONCENTRATION OF RISKS |
F-274
Table of Contents
17. | SUBSEQUENT EVENT |
F-275
Table of Contents
Broadband Capital Management LLC | I-Bankers Securities, Inc. |
Maxim Group LLC | Morgan Joseph | Pali Capital, Inc. |
Table of Contents
Item 6. | Indemnification of Directors and Officers |
Item 7. | Recent Sales of Unregistered Securities |
Number of | ||||||||||
Securities | ||||||||||
Originally | ||||||||||
Purchaser | Date of Issuance | Issued | Title of Securities | Consideration | ||||||
Reid Services Limited | July 10, 2006 | 1 | ordinary share | N/A | ||||||
China Hydro, LLC | November 8, 2006 | 8,499,999 | ordinary shares | $25,000 | ||||||
China Hydro, LLC | November 8, 2006 | 375,000 | ordinary shares | $2,250,000(1) | ||||||
China Hydro, LLC | November 8, 2006 | 750,000 | warrants each to purchase one ordinary share | $2,250,000(1) | ||||||
Vicis Capital Master Fund | November 10, 2006 | 1 | secured exchangeable note | $41,000,000 | ||||||
JMG Capital Partners, LP | November 10, 2006 | 1 | secured exchangeable note | $5,000,000 | ||||||
JMG Triton Offshore Fund, Ltd. | November 10, 2006 | 1 | secured exchangeable note | $4,000,000 | ||||||
Vicis Capital Master Fund | April 11, 2007 | 6,833,333 | ordinary shares | $41,000,000(2) | ||||||
JMG Capital Partners, LP | September 28, 2007 | 377,733 | warrants each to purchase one ordinary share | $5,000,000(3) | ||||||
JMG Triton Offshore Fund, Ltd. | September 28, 2007 | 288,933 | warrants each to purchase one ordinary share | $4,000,000(3) |
II-1
Table of Contents
Number of | ||||||||||
Securities | ||||||||||
Originally | ||||||||||
Purchaser | Date of Issuance | Issued | Title of Securities | Consideration | ||||||
Vicis Capital Master Fund | November 4, 2007 | 18,666,666 | warrants each to purchase one ordinary share | $41,000,000(2) | ||||||
Morgan Joseph & Co. Inc. | November 10, 2006 | 550,000 | warrants to purchase units each consisting of one ordinary share and two warrants each to purchase one ordinary share | Service as placement agent | ||||||
Morgan Joseph & Co. Inc. | November 10, 2006 | 283,333 | warrants to purchase units each consisting of one ordinary share and four warrants each to purchase one ordinary share | Service as placement agent | ||||||
CPI Ballpark Investments, Ltd. | January 23, 2008 | 50,000 | Series A convertible redeemable preferred shares | $50,000,000 | ||||||
Jennison Utility Fund | January 23, 2008 | 30,000 | Series A convertible redeemable preferred shares | $30,000,000 | ||||||
Vicis Capital Master Fund | January 23, 2008 | 28,500 | Series A convertible redeemable preferred shares | $28,500,000 | ||||||
Swiss Re Financial Products Corporation | January 23, 2008 | 10,000 | Series A convertible redeemable preferred shares | $10,000,000 | ||||||
Citigroup Global Markets Inc. | January 23, 2008 | 10,000 | Series A convertible redeemable preferred shares | $10,000,000 | ||||||
Sandelman Partners Multi-Strategy Master Fund, Ltd. | January 23, 2008 | 5,000 | Series A convertible redeemable preferred shares | $5,000,000 | ||||||
HSBC GEM Common Fund | January 23, 2008 | 1,750 | Series A convertible redeemable preferred shares | $1,750,000 | ||||||
HSBC Global Investment Fund — New World Income Fund | January 23, 2008 | 2,275 | Series A convertible redeemable preferred shares | $2,275,000 | ||||||
Jayhawk Private Equity Co. — Invest Fund, LP | January 23, 2008 | 207 | Series A convertible redeemable preferred shares | $207,000 | ||||||
Jayhawk Private Equity Fund, LP | January 23, 2008 | 3,293 | Series A convertible redeemable preferred shares | $3,293,000 | ||||||
Rosebud Trust — Green | January 23, 2008 | 600 | Series A convertible redeemable preferred shares | $600,000 | ||||||
AGE Trust — Green | January 23, 2008 | 600 | Series A convertible redeemable preferred shares | $600,000 | ||||||
Kazak II Trust — Green | January 23, 2008 | 600 | Series A convertible redeemable preferred shares | $600,000 | ||||||
Tehachapi Pass Trust — Green | January 23, 2008 | 600 | Series A convertible redeemable preferred shares | $600,000 | ||||||
NISA Revocable Trust | January 23, 2008 | 600 | Series A convertible redeemable preferred shares | $600,000 | ||||||
Radcliffe SPC, Ltd. | January 23, 2008 | 3,000 | Series A convertible redeemable preferred shares | $3,000,000 | ||||||
Concordia Asia Pacific Multi-Strategy Master Fund LP | January 23, 2008 | 3,000 | Series A convertible redeemable preferred shares | $3,000,000 |
II-2
Table of Contents
Number of | ||||||||||
Securities | ||||||||||
Originally | ||||||||||
Purchaser | Date of Issuance | Issued | Title of Securities | Consideration | ||||||
Morgan Joseph & Co. Inc. | January 28, 2008 | 15,000 | Warrants, each to purchase one Series A convertible redeemable preferred share | Service as placement agent | ||||||
Shareholders of Series A Preferred Shares | March 15, 2008 | 2,168 | Series A convertible redeemable preferred shares | Stock dividends | ||||||
CPI Ballpark Investments Ltd. | July 24, 2008 | 25,000 | Series B convertible redeemable preferred shares | $25,000,000 | ||||||
Vicis Capital Master Fund | July 24, 2008 | 25,000 | Series B convertible redeemable preferred shares | $25,000,000 | ||||||
Blue Ridge Investments, LLC | July 24, 2008 | 20,000 | Series B convertible redeemable preferred shares | $20,000,000 | ||||||
Jennison Utility Fund | July 24, 2008 | 16,000 | Series B convertible redeemable preferred shares | $16,000,000 | ||||||
Swiss Re Financial Products Corporation | July 24, 2008 | 15,000 | Series B convertible redeemable preferred shares | $15,000,000 | ||||||
China Environment Fund III, LP | August 15, 2008 | 20,000 | Series B convertible redeemable preferred shares | $20,000,000 | ||||||
Abrax | August 15, 2008 | 5,000 | Series B convertible redeemable preferred shares | $5,000,000 | ||||||
IWU International Ltd. | August 15, 2008 | 3,000 | Series B convertible redeemable preferred shares | $3,000,000 | ||||||
Certain former and current Directors, Officers, Employees and Consultants | August 18, 2008 | 3,897,000 | (4) | Options to purchase ordinary shares | N/A | |||||
Certain Employees | January 20, 2009 | 35,000 | Options to purchase ordinary shares | N/A | ||||||
Aqua Resources Asia Holdings Limited | October 27, 2009 | 20,000 | Series C convertible redeemable preferred shares | $20,000,000 | ||||||
Certain Directors, Officers, Employees and Consultants | December 3, 2009 | 7,000,000 | Options to purchase ordinary shares | N/A |
(1) | $25,000 was the subscription price for 375,000 ordinary shares and the warrants to purchase 750,000 ordinary shares. | |
(2) | The 6,833,333 ordinary shares and the warrants to purchase 18,666,666 ordinary shares were issued to Vicis Capital Master Fund in exchange for the $41 million in notes held by Vicis Capital Master Fund. | |
(3) | The warrants to purchase 377,733 ordinary shares by JMG Capital Partners, LP and the warrant to purchase 288,933 ordinary shares by JMG Triton Offshore Fund, Ltd were issued to such JMG entities in exchange for their agreement to vote for a business combination of the company and not to exchange their $9 million in notes. | |
(4) | The options granted to one employee to purchase 5,000 ordinary shares expired as the employee terminated their service to our company before any of the options vested. |
II-3
Table of Contents
Item 8. | Exhibits and Financial Statement Schedules |
Exhibit | ||||
No. | Description of Exhibit | |||
1 | .1* | Form of Underwriting Agreement | ||
3 | .1* | Conformed Memorandum and Articles of Association dated as of October 27, 2009 | ||
3 | .2* | Form of Amended and Restated Memorandum and Articles of Association of the Registrant to be adopted upon completion of this offering | ||
4 | .1* | Form of Ordinary Share Certificate | ||
4 | .2* | Form of Deposit Agreement between the Registrant and the Bank of New York Mellon as depositary | ||
4 | .3* | Form of American depositary receipt evidencing American depositary shares (included in Exhibit 4.2) | ||
4 | .4* | Amended and Restated Shareholders Agreement, dated October 27, 2009, amongst the Registrant and its shareholders | ||
4 | .5* | Amended and Restated Right of First Offer and Co-Sale Agreement, dated October 27, 2009, amongst the Registrant and its shareholders | ||
5 | .1** | Opinion of Appleby regarding the issue of ordinary shares being registered | ||
5 | .2** | Option of DLA Piper Hong Kong regarding the warrants | ||
8 | .1** | Opinion of DLA Piper LLP (US) regarding certain U.S. tax matters | ||
8 | .2** | Opinion of Appleby regarding certain Cayman Islands tax matters | ||
8 | .3** | Opinion of Global Law Office regarding certain PRC tax matters | ||
9 | .1* | Amended and Restated Limited Liability Company Agreement of China Hydro, LLC, adopted as of November 6, 2006 | ||
10 | .1* | Warrant to Purchase Common Shares of the Registrant by China Hydro, LLC, dated November 10, 2006 | ||
10 | .2* | 2008 Share Incentive Plan of the Registrant and form of Option Agreement | ||
10 | .3* | Form of Indemnification Agreement between the Registrant and its directors | ||
10 | .4* | Sino-Foreign Equity Joint Venture Contract entered into by the Registrant, Zhejiang Water Resources and Hydroelectric Investment Group Co., Ltd. and Zhejiang Guangning Hydroelectric Development Co., Ltd. on November 6, 2007 | ||
10 | .5* | Contract for Transfer of Fifty Percent of the Equity Interests of Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Yunhe County Yunhe State-Owned Assets Management Co., Ltd. and the Registrant on October 12, 2007 | ||
10 | .6* | (Intentionally left blank) | ||
10 | .7* | Share Transfer and Capital Increase Contract entered into by the Registrant, and Ye Jian Hua, Zhou Jian Bin and Zhejiang Dahua Construction Group Co., Ltd. on March 15, 2007 | ||
10 | .8* | Supplemental Agreement entered into by the Registrant, Ye Jian Hua, Zhou Jian Bin and Zhejiang Dahua Construction Group Co., Ltd. on March 27, 2007 | ||
10 | .9* | Share Transfer Agreement for Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into by Sanming City Chenyang Hydroelectric Co., Ltd., Sanming City Fufeng Industrial Co., Ltd., Beijing Xunjing Interactive Technology Co., Ltd., Huang Shao Jian, Yu Rong Ji, Zhang Rong Bin, Sun Xiao Dong, Xie Fang Wu, Ye Chang He and the Registrant on August 9, 2008 | ||
10 | .10* | Equity Joint Venture Contract for the establishment of Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into by the Registrant and Sanming City Chenyang Hydroelectric Co., Ltd. on August 10, 2008 | ||
10 | .11** | Equity Interest Transfer Contract entered into by Guangsha Construction Group Co., Ltd., Lu Chunliang and the Registrant regarding Qingtian Wuliting Hydropower Development Co., Ltd. on December 13, 2007 |
II-4
Table of Contents
Exhibit | ||||
No. | Description of Exhibit | |||
10 | .12** | Equity Interest Transfer Contract entered into by Zhejiang Guangsha Stock Co., Ltd., Zhejiang Guangsha Hydropower Investment Co., Ltd. and the Registrant regarding Zhejiang Province Jingning Yingchuan Hydropower Development Co., Ltd. on December 13, 2007 | ||
10 | .13** | Equity Interest Transfer Contract entered into by Guangsha Construction Group Co., Ltd., Lu Chunliang and the Registrant regarding Suichang County Jiulongshan Hydropower Development Co., Ltd. on December 13, 2007 | ||
10 | .14** | Agreement relating to the Sale and Purchase of the equity of Sunpower Asia Limited entered into by the Registrant and Sanming Ruifeng Hydropower Investment Co., Ltd. on July 11, 2008 | ||
10 | .15* | Equity Interest Transfer Contract entered into by the Registrant, Sanming Ruifeng Hydropower Investment Co., Ltd. and Yong’an Ruifeng Hydroelectric Ltd. on July 11, 2008 | ||
10 | .16* | Contract on Transfer of Ten Percent Equity Interests of Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by China Hydroelectric Corporation (Hong Kong) Limited and Sanming Ruifeng Economic Technological Development Ltd. on January 30, 2009 | ||
10 | .17* | Supplemental Agreement of the Contract on Transfer of Ten Percent Equity Interests of Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by Sanming Ruifeng Economic Technological Development Ltd., China Hydroelectric Corporation (Hong Kong) Limited, Sanming Ruifeng Hydropower Investment Co., Ltd. and the Registrant on January 30, 2009 | ||
10 | .18* | Joint Venture Contract Among Foreign Investors for Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by the Registrant, China Hydroelectric Corporation (Hong Kong) Limited and Sunpower Asia Limited in February 2009 | ||
10 | .19* | Share Transfer Agreement for Pingnan County Yuheng Hydropower Co., Ltd. entered into by the Registrant and Fujian Province Anheng Assets Management Co., Ltd., Shanghai Yufeng Hotel Management Co., Ltd., Chen Can Ling, Wang Jiang, Zhang Rong Bin and Zhou Jian Biao on August 15, 2008 | ||
10 | .20* | Share Transfer Agreement for Pingnan County Yuanping Hydroelectric Co., Ltd. entered into by the Registrant and Lin Yun, Wu Ting Li, Zhang Yao Fang and Zhou Jian on August 15, 2008 | ||
10 | .21* | Consulting Agreement with Michael H. Best entered into on March 7, 2008† | ||
10 | .22* | Power Purchase Contract entered into by Yunnan Huabang Electric Power Development Co., Ltd. and Yunnan Dehong Electric Power Co., Ltd. on June 19, 2009 | ||
10 | .23* | Supplemental Agreement to Power Purchase and Sale Contract entered into by Yunnan Huabang Electric Power Development Co., Ltd. and Yunnan Dehong Electric Power Co., Ltd. on June 19, 2009 | ||
10 | .24* | Grid Connection and Dispatching Agreement entered into by Yunnan Dehong Electric Power Co., Ltd. and Yingjiang County Huafa Electric Power Development Co., Ltd. (formerly Yunnan Huabang Electric Power Development Co., Ltd.) on January 15, 2004 | ||
10 | .25* | Grid Connection and Dispatching Agreement entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 17, 2009 | ||
10 | .26* | Power Purchase and Sale Contract entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 16, 2009 | ||
10 | .27* | Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Yunhe County Shapulong Hydropower Generation Co., Ltd. in October 2008 | ||
10 | .28* | Grid Connection and Dispatching Agreement for Wangkeng Hydropower Station entered into by Fujian Province Ningde Electric Power Industry Bureau and Pingnan County Wangkeng Hydroelectric Co., Ltd. on July 21, 2008 | ||
10 | .29* | Power Purchase and Sale Contract for Wangkeng Hydropower Station entered into by Fujian Province Electric Power Co., Ltd. and Pingnan County Fushun Hydroelectric Co., Ltd. on October 28, 2004 |
II-5
Table of Contents
Exhibit | ||||
No. | Description of Exhibit | |||
10 | .30* | Grid Connection and Dispatching Agreement for Wuliting Hydropower Station entered into by Lishui Electric Power Bureau and Qingtian Wuliting Hydroelectric Development Co., Ltd. on November 20, 2008 | ||
10 | .31* | Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Qingtian Wuliting Hydroelectric Development Co., Ltd. in November, 2007 | ||
10 | .32* | Grid Connection and Dispatching Agreement for Jingning Yingchuan Hydropower Station entered into by Lishui Electric Power Bureau and Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on November 20, 2008 | ||
10 | .33* | Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. in November 2007 | ||
10 | .34* | Intent Agreement of Conformity of Power Purchase and Supply in Rongping Supply Area entered into by Fujian Province Pingnan County Power Supply Co., Ltd., Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd., Pingnan County Hengli Hydroelectric Co., Ltd. and Pingnan County Yuheng Hydropower Co., Ltd. on August 31, 2007 | ||
10 | .35* | Grid Connection and Dispatching Agreement for Pingnan Yuanping Hydropower Station of Fujian Province entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuheng Hydropower Co., Ltd. on December 26, 2008 | ||
10 | .36* | Power Purchase and Sale Contract for old Yuanping Hydropower Station entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuheng Hydropower Co., Ltd. in December 2008 | ||
10 | .37* | Grid Connection and Dispatching Agreement for Yuanping Technological Upgrading Hydropower Station of Fujian Province entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuanping Hydroelectric Co., Ltd. on December 26, 2008 | ||
10 | .38* | Power Purchase and Sale Contract for Technological Upgrading Project of Yuanping Hydropower Station entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuanping Hydroelectric Co., Ltd. in December 2008 | ||
10 | .39* | Grid Connection and Dispatching Agreement for Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by Fujian Province Sanming Power Industry Bureau and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. on September 22, 2006 | ||
10 | .40* | Grid Connection and Power Purchase Agreement entered into by Fujian Province Sanming Power Industry Bureau and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. on April 30, 1997 | ||
10 | .41* | Share Transfer Contract for Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. entered into by Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd., Guangdong Qingneng Power Generation Group Co., Ltd. and Yao Lin Fu on August 11, 2009 | ||
10 | .42* | Share Transfer Contract for Thirteen Percent of the Equity Interests of Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Zhejiang Province Water Resources and Hydroelectric Investment Group Co., Ltd. and the Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on June 29, 2009 | ||
10 | .43* | Share Transfer Contract for Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Zhejiang Guangning Hydroelectric Development Co., Ltd. and the Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on July 22, 2009 | ||
10 | .44* | Grid Connection Economic Agreement entered into by Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. and Lishui Power Industry Bureau in April 2007 | ||
10 | .45* | Grid Connection and Dispatching Agreement entered into by Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. and Lishui Power Industry Bureau, Dispatching and Communication Center, on October 18, 2003 | ||
10 | .46* | Renminbi Loan Agreement (Long/Medium Term) entered into by Qingtian Wuliting Hydroelectric Development Co., Ltd. and Bank of China Limited, Lishui City Dayang Sub-branch, on March 19, 2009 |
II-6
Table of Contents
Exhibit | ||||
No. | Description of Exhibit | |||
10 | .47* | Medium/Long-Term Renminbi Loan Contract entered into by Pingnan County Wangkeng Hydroelectric Co., Ltd. and Industrial Bank Co., Ltd., Ningde Branch, on March 24, 2009 | ||
10 | .48* | Renminbi Loan Contract (Medium/Long Term) entered into by Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. and Bank of China Limited, Fujian Province Branch, on June 16, 2009 | ||
10 | .49* | Loan Contract entered into by Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and Agricultural Bank of China, Lishui City Branch, on June 19, 2009 (RMB9.0 million) | ||
10 | .50* | Loan Contract entered into by Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and Agricultural Bank of China, Lishui City Branch, on June 19, 2009 (RMB216.0 million) | ||
10 | .51* | Memorandum of Understandings entered into by Bank of China, Fujian Branch, and China Hydroelectric Corporation in July 2009 | ||
10 | .52* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Fang Chen on July 1, 2008† | ||
10 | .53* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and You-Su Lin on July 1, 2008† | ||
10 | .54* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Gan Wu on July 1, 2008† | ||
10 | .55* | Employment Agreement entered into by China Hydroelectric Corporation and Mary E. Fellows on January 1, 2009† | ||
10 | .56* | Employment Agreement entered into by China Hydroelectric Corporation and “James” Tie Li on January 1, 2009† | ||
10 | .57* | Employment Agreement entered into by China Hydroelectric Corporation and John D. Kuhns on January 1, 2009† | ||
10 | .58* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Xinchun Lian on October 1, 2008, as amended on January 13, 2009† | ||
10 | .59* | Labor Contract entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Shu Zhang on May 12, 2009† | ||
10 | .60* | Labor Contract entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Gang Meng on April 7, 2008, as amended on November 1, 2008† | ||
10 | .61* | Capital Increase Agreement for Henan Wuyue Storage Power Generation Co., Ltd. entered into by China Hydroelectric Corporation and Henan Lan Tian Group Co., Ltd. on October 22, 2009 | ||
10 | .62* | Form of Warrant to Purchase Ordinary Shares of the Registrant by Broadband Capital Management LLC to be dated the closing of this offering | ||
10 | .63* | Warrant to Purchase Units Consisting of Ordinary Shares and Warrants to Purchase Ordinary Shares of the Registrant by Morgan Joseph & Co. Inc. dated November 10, 2006 (283,333 Units) | ||
10 | .64* | Warrant to Purchase Units Consisting of Ordinary Shares and Warrants to Purchase Ordinary Shares of the Registrant by Morgan Joseph & Co. Inc. dated November 10, 2006 (550,000 Units) | ||
10 | .65* | Warrant to Purchase Common Shares of the Registrant by JMG Capital Partners, L.P. dated September 28, 2007 | ||
10 | .66* | Warrant to Purchase Common Shares of the Registrant by JMG Triton Offshore Fund, Ltd. dated September 28, 2007 | ||
10 | .67* | Warrant to Purchase Preferred Shares or Ordinary Shares, as Applicable, of the Registrant by Morgan Joseph & Co. Inc. dated January 28, 2008 | ||
10 | .68* | Letter Agreement between the Registrant and Vicis Capital Master Fund dated April 11, 2007 | ||
10 | .69** | Form of warrant agreement | ||
21 | .1* | Subsidiaries of the Registrant | ||
23 | .1** | Consents of Ernst & Young Hua Ming | ||
23 | .2** | Consent of Appleby (included in Exhibit 8.2) |
II-7
Table of Contents
Exhibit | ||||
No. | Description of Exhibit | |||
23 | .3** | Consent of Global Law Office | ||
23 | .4** | Consent of DLA Piper Hong Kong | ||
23 | .5** | Consent of DLA Piper LLP (US) (included in Exhibit 8.1) | ||
23 | .6* | Consent of American Appraisal China Limited | ||
23 | .7** | Consent of Appleby (included in Exhibit 5.1) | ||
24 | .1* | Powers of Attorney (included on the signature page in Part II of this Registration Statement) | ||
99 | .1* | Code of Business Conduct and Ethics of the Registrant | ||
99 | .2* | Calculation of Effective Tariff Rate, Effective Utilization Rate and Weighted Average Effective Utilization Rate |
* | Filed previously. |
** | Filed herewith. |
† | Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933, as amended. The omitted materials have been filed separately with the Securities and Exchange Commission. |
Item 9. | Undertakings |
II-8
Table of Contents
II-9
Table of Contents
II-10
Table of Contents
By: | /s/ “James” Tie Li |
Title: | Chief Financial Officer and |
Signature | Title | |||
/s/ John D. Kuhns John D. Kuhns | Chairman and Chief Executive Officer | |||
/s/ “James” Tie Li “James” Tie Li | Chief Financial Officer (principal financial and accounting officer) and Executive Vice President* | |||
/s/ ** Richard H. Hochman | Director | |||
/s/ ** Anthony H. Dixon | Director | |||
/s/ ** Dr. Yong Cao | Director | |||
/s/ ** Shadron Lee Stastney | Director | |||
/s/ ** Dr. You-Su Lin | Director | |||
/s/ ** Stephen Outerbridge | Director |
**By: | /s/ “James” Tie Li |
II-11
Table of Contents
AUTHORIZED U.S. REPRESENTATIVE | ||||
By: | /s/ “James” Tie Li | |||
Name: | “James” Tie Li | |||
Title: | Chief Financial Officer and Executive Vice President* |
II-12
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | |||
1 | .1* | Form of Underwriting Agreement | ||
3 | .1* | Conformed Memorandum and Articles of Association dated as of October 27, 2009 | ||
3 | .2* | Form of Amended and Restated Memorandum and Articles of Association of the Registrant to be adopted upon completion of this offering | ||
4 | .1* | Form of Ordinary Share Certificate | ||
4 | .2* | Form of Deposit Agreement between the Registrant and the Bank of New York Mellon as depositary | ||
4 | .3* | Form of American depositary receipt evidencing American depositary shares (included in Exhibit 4.2) | ||
4 | .4* | Amended and Restated Shareholders Agreement, dated October 27, 2009, amongst the Registrant and its shareholders | ||
4 | .5* | Amended and Restated Right of First Offer and Co-Sale Agreement, dated October 27, 2009, amongst the Registrant and its shareholders | ||
5 | .1** | Opinion of Appleby regarding the issue of ordinary shares being registered | ||
5 | .2** | Opinion of DLA Piper Hong Kong regarding the warrants | ||
8 | .1** | Opinion of DLA Piper LLP (US) regarding certain U.S. tax matters | ||
8 | .2** | Opinion of Appleby regarding certain Cayman Islands tax matters | ||
8 | .3** | Opinion of Global Law Office regarding certain PRC tax matters | ||
9 | .1* | Amended and Restated Limited Liability Company Agreement of China Hydro, LLC, adopted as of November 6, 2006 | ||
10 | .1* | Warrant to Purchase Common Shares of the Registrant by China Hydro, LLC, dated November 10, 2006 | ||
10 | .2* | 2008 Share Incentive Plan of the Registrant and form of Option Agreement | ||
10 | .3* | Form of Indemnification Agreement between the Registrant and its directors | ||
10 | .4* | Sino-Foreign Equity Joint Venture Contract entered into by the Registrant, Zhejiang Water Resources and Hydroelectric Investment Group Co., Ltd. and Zhejiang Guangning Hydroelectric Development Co., Ltd. on November 6, 2007 | ||
10 | .5* | Contract for Transfer of Fifty Percent of the Equity Interests of Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Yunhe County Yunhe State-Owned Assets Management Co., Ltd. and the Registrant on October 12, 2007 | ||
10 | .6* | (Intentionally left blank) | ||
10 | .7* | Share Transfer and Capital Increase Contract entered into by the Registrant, and Ye Jian Hua, Zhou Jian Bin and Zhejiang Dahua Construction Group Co., Ltd. on March 15, 2007 | ||
10 | .8* | Supplemental Agreement entered into by the Registrant, Ye Jian Hua, Zhou Jian Bin and Zhejiang Dahua Construction Group Co., Ltd. on March 27, 2007 | ||
10 | .9* | Share Transfer Agreement for Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into by Sanming City Chenyang Hydroelectric Co., Ltd., Sanming City Fufeng Industrial Co., Ltd, Beijing Xunjing Interactive Technology Co., Ltd., Huang Shao Jian, Yu Rong Ji, Zhang Rong Bin, Sun Xiao Dong, Xie Fang Wu, Ye Chang He and the Registrant on August 9, 2008 | ||
10 | .10* | Equity Joint Venture Contract for the establishment of Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into by the Registrant and Sanming City Chenyang Hydroelectric Co., Ltd. on August 10, 2008 | ||
10 | .11** | Equity Interest Transfer Contract entered into by Guangsha Construction Group Co., Ltd., Lu Chunliang and the Registrant regarding Qingtian Wuliting Hydropower Development Co., Ltd. on December 13, 2007 |
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | |||
10 | .12** | Equity Interest Transfer Contract entered into by Zhejiang Guangsha Stock Co., Ltd., Zhejiang Guangsha Hydropower Investment Co., Ltd. and the Registrant regarding Zhejiang Province Jingning Yingchuan Hydropower Development Co., Ltd. on December 13, 2007 | ||
10 | .13** | Equity Interest Transfer Contract entered into by Guangsha Construction Group Co., Ltd., Lu Chunliang and the Registrant regarding Suichang County Jiulongshan Hydropower Development Co., Ltd. on December 13, 2007 | ||
10 | .14** | Agreement relating to the Sale and Purchase of the equity of Sunpower Asia Limited entered into by the Registrant and Sanming Ruifeng Hydropower Investment Co., Ltd. on July 11, 2008 | ||
10 | .15* | Equity Interest Transfer Contract entered into by the Registrant, Sanming Ruifeng Hydropower Investment Co., Ltd. and Yong’an Ruifeng Hydroelectric Ltd. on July 11, 2008 | ||
10 | .16* | Contract on Transfer of Ten Percent Equity Interests of Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by China Hydroelectric Corporation (Hong Kong) Limited and Sanming Ruifeng Economic Technological Development Ltd. on January 30, 2009 | ||
10 | .17* | Supplemental Agreement of the Contract on Transfer of Ten Percent Equity Interests of Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by Sanming Ruifeng Economic Technological Development Ltd., China Hydroelectric Corporation (Hong Kong) Limited, Sanming Ruifeng Hydropower Investment Co., Ltd. and the Registrant on January 30, 2009 | ||
10 | .18* | Joint Venture Contract Among Foreign Investors for Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by the Registrant, China Hydroelectric Corporation (Hong Kong) Limited and Sunpower Asia Limited in February 2009 | ||
10 | .19* | Share Transfer Agreement for Pingnan County Yuheng Hydropower Co., Ltd. entered into by the Registrant and Fujian Province Anheng Assets Management Co., Ltd., Shanghai Yufeng Hotel Management Co., Ltd., Chen Can Ling, Wang Jiang, Zhang Rong Bin and Zhou Jian Biao on August 15, 2008 | ||
10 | .20* | Share Transfer Agreement for Pingnan County Yuanping Hydroelectric Co., Ltd. entered into by the Registrant and Lin Yun, Wu Ting Li, Zhang Yao Fang and Zhou Jian on August 15, 2008 | ||
10 | .21* | Consulting Agreement with Michael H. Best entered into on August 1, 2009† | ||
10 | .22* | Power Purchase Contract entered into by Yunnan Huabang Electric Power Development Co., Ltd. and Yunnan Dehong Electric Power Co., Ltd. on June 19, 2009 | ||
10 | .23* | Supplemental Agreement to Power Purchase and Sale Contract entered into by Yunnan Huabang Electric Power Development Co., Ltd. and Yunnan Dehong Electric Power Co., Ltd. on June 19, 2009 | ||
10 | .24* | Grid Connection and Dispatching Agreement entered into by Yunnan Dehong Electric Power Co., Ltd. and Yingjiang County Huafa Electric Power Development Co., Ltd. (formerly Yunnan Huabang Electric Power Development Co., Ltd.) on January 15, 2004 | ||
10 | .25* | Grid Connection and Dispatching Agreement entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 17, 2009 | ||
10 | .26* | Power Purchase and Sale Contract entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 16, 2009 | ||
10 | .27* | Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Yunhe County Shapulong Hydropower Generation Co., Ltd. in October 2008 | ||
10 | .28* | Grid Connection and Dispatching Agreement for Wangkeng Hydropower Station entered into by Fujian Province Ningde Electric Power Industry Bureau and Pingnan County Wangkeng Hydroelectric Co., Ltd. on July 21, 2008 | ||
10 | .29* | Power Purchase and Sales Contract for Wangkeng Hydropower Station entered into by Fujian Province Electric Power Co., Ltd. and Pingnan County Fushun Hydroelectric Co., Ltd. on October 28, 2004 | ||
10 | .30* | Grid Connection and Dispatching Agreement for Wuliting Hydropower Station entered into by Lishui Electric Power Bureau and Qingtian Wuliting Hydroelectric Development Co., Ltd. on November 20, 2008 |
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | |||
10 | .31* | Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Qingtian Wuliting Hydroelectric Development Co., Ltd. in November, 2007 | ||
10 | .32* | Grid Connection and Dispatching Agreement for Jingning Yingchuan Hydropower Station entered into by Lishui Electric Power Bureau and Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on November 20, 2008 | ||
10 | .33* | Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. in November 2007 | ||
10 | .34* | Intent Agreement of Conformity of Power Purchase and Supply in Rongping Supply Area entered into by Fujian Province Pingnan County Power Supply Co., Ltd., Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd., Pingnan County Hengli Hydroelectric Co., Ltd. and Pingnan County Yuheng Hydropower Co., Ltd. on August 31, 2007 | ||
10 | .35* | Grid Connection and Dispatching Agreement for Pingnan Yuanping Hydropower Station of Fujian Province entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuheng Hydropower Co., Ltd. on December 26, 2008 | ||
10 | .36* | Power Purchase and Sale Contract for old Yuanping Hydropower Station entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuheng Hydropower Co., Ltd. in December 2008 | ||
10 | .37* | Grid Connection and Dispatching Agreement for Yuanping Technological Upgrading Hydropower Station of Fujian Province entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuanping Hydroelectric Co., Ltd. on December 26, 2008 | ||
10 | .38* | Power Purchase and Sale Contract for Technological Upgrading Project of Yuanping Hydropower Station entered into by Fujian Province Pingnan County Power Supply Co., Ltd. and Pingnan County Yuanping Hydroelectric Co., Ltd. in December 2008 | ||
10 | .39* | Grid Connection and Dispatching Agreement for Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered by Fujian Province Sanming Power Industry Bureau and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. on September 22, 2006 | ||
10 | .40* | Grid Connection and Power Purchase Agreement entered into by Fujian Province Sanming Power Industry Bureau and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. on April 30, 1997 | ||
10 | .41* | Share Transfer Contract for Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. entered into by Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd., Guangdong Qingneng Power Generation Group Co., Ltd. and Yao Lin Fu on August 11, 2009 | ||
10 | .42* | Share Transfer Contract for Thirteen Percent of the Equity Interests of Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Zhejiang Province Water Resources and Hydroelectric Investment Group Co., Ltd. and the Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on June 29, 2009 | ||
10 | .43* | Share Transfer Contract for Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Zhejiang Guangning Hydroelectric Development Co., Ltd. and the Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on July 22, 2009 | ||
10 | .44* | Grid Connection Economic Agreement entered into by Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. and Lishui Power Industry Bureau in April 2007 | ||
10 | .45* | Grid Connection and Dispatching Agreement entered into by Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. and Lishui Power Industry Bureau, Dispatching and Communication Center, on October 18, 2003 | ||
10 | .46* | Renminbi Loan Agreement (Long/Medium Term) entered into by Qingtian Wuliting Hydroelectric Development Co., Ltd. and Bank of China Limited, Lishui City Dayang Sub-branch, on March 19, 2009 | ||
10 | .47* | Medium/Long-Term Renminbi Loan Contract entered into by Pingnan County Wangkeng Hydroelectric Co., Ltd. and Industrial Bank Co., Ltd., Ningde Branch, on March 24, 2009 | ||
10 | .48* | Renminbi Loan Contract (Medium/Long Term) entered into by Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. and Bank of China Limited, Fujian Province Branch, on June 16, 2009 |
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | |||
10 | .49* | Loan Contract entered into by Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and Agricultural Bank of China, Lishui City Branch, on June 19, 2009 (RMB9.0 million) | ||
10 | .50* | Loan Contract entered into by Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and Agricultural Bank of China, Lishui City Branch, on June 19, 2009 (RMB216.0 million) | ||
10 | .51* | Memorandum of Understandings entered into by Bank of China, Fujian Branch, and China Hydroelectric Corporation in July 2009 | ||
10 | .52* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Fang Chen on July 1, 2008† | ||
10 | .53* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and You-Su Lin on July 1, 2008† | ||
10 | .54* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Gan Wu on July 1, 2008† | ||
10 | .55* | Employment Agreement entered into by China Hydroelectric Corporation and Mary E. Fellows on January 1, 2009† | ||
10 | .56* | Employment Agreement entered into by China Hydroelectric Corporation and “James” Tie Li on January 1, 2009† | ||
10 | .57* | Employment Agreement entered into by China Hydroelectric Corporation and John D. Kuhns on January 1, 2009† | ||
10 | .58* | Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Xinchun Lian on October 1, 2008, as amended on January 13, 2009† | ||
10 | .59* | Labor Contract entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Shu Zhang on May 12, 2009† | ||
10 | .60* | Labor Contract entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Gang Meng on April 7, 2008, as amended on November 1, 2008† | ||
10 | .61* | Capital Increase Agreement for Henan Wuyue Storage Power Generation Co., Ltd. entered into by China Hydroelectric Corporation and Henan Lan Tian Group Co., Ltd. on October 22, 2009 | ||
10 | .62* | Form of Warrant to Purchase Ordinary Shares of the Registrant by Broadband Capital Management LLC to be dated the closing of this offering | ||
10 | .63* | Warrant to Purchase Units Consisting of Ordinary Shares and Warrants to Purchase Ordinary Shares of the Registrant by Morgan Joseph & Co. Inc. dated November 10, 2006 (283,333 Units) | ||
10 | .64* | Warrant to Purchase Units Consisting of Ordinary Shares and Warrants to Purchase Ordinary Shares of the Registrant by Morgan Joseph & Co. Inc. dated November 10, 2006 (550,000 Units) | ||
10 | .65* | Warrant to Purchase Common Shares of the Registrant by JMG Capital Partners, L.P. dated September 28, 2007 | ||
10 | .66* | Warrant to Purchase Common Shares of the Registrant by JMG Triton Offshore Fund, Ltd. dated September 28, 2007 | ||
10 | .67* | Warrant to Purchase Preferred Shares or Ordinary Shares, as Applicable, of the Registrant by Morgan Joseph & Co. Inc. dated January 28, 2008 | ||
10 | .68* | Letter Agreement between the Registrant and Vicis Capital Master Fund dated April 11, 2007 | ||
10 | .69** | Form of warrant agreement | ||
21 | .1* | Subsidiaries of the Registrant | ||
23 | .1** | Consents of Ernst & Young Hua Ming | ||
23 | .2** | Consent of Appleby (included in Exhibit 8.2) | ||
23 | .3** | Consent of Global Law Office | ||
23 | .4** | Consent of DLA Piper Hong Kong | ||
23 | .5** | Consent of DLA Piper LLP (US) (included in Exhibit 8.1) | ||
23 | .6* | Consent of American Appraisal China Limited | ||
23 | .7** | Consent of Appleby (included in Exhibit 5.1) |
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | |||
24 | .1* | Powers of Attorney (included on the signature page in Part II of previously filed Registration Statement) | ||
99 | .1* | Code of Business Conduct and Ethics of the Registrant | ||
99 | .2* | Calculation of Effective Tariff Rate, Effective Utilization Rate and Weighted Average Effective Utilization Rate |
* | Filed previously. |
** | Filed herewith. |
† | Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933, as amended. The omitted materials have been filed separately with the Securities and Exchange Commission. |