As filed with the Securities and Exchange Commission on April 16, 2004
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 20-F
(Mark One)

     [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                                      OR

     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                      OR

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

                         Commission file number: 1-13314
                         _______________________________

                       HUANENG POWER INTERNATIONAL, INC.
            (Exact name of Registrant as specified in its charter)
                         _______________________________

                          PEOPLE'S REPUBLIC OF CHINA
                (Jurisdiction of incorporation or organization)
                         _______________________________

                    WEST WING, BUILDING C, TIANYIN MANSION,
         2C, FUXINGMENNAN STREET, BEIJING, PEOPLE'S REPUBLIC OF CHINA
                   (Address of principal executive offices)
                         _______________________________

                            Securities registered or to be registered pursuant
to Section 12(b) of the Act.

                                                         Name of each exchange
         Title of Each Class                              on which registered
         ------------------                             -----------------------
Ordinary American Depositary Shares.................    New York Stock Exchange
Overseas Listed Foreign Shares of RMB1.00 each......    New York Stock Exchange*
                         _______________________________

               Securities registered or to be registered pursuant
                          to Section 12(g) of the Act.
                                     NONE
                               (Title of Class)
                         _______________________________

              Securities for which there is a reporting obligation
                     pursuant to Section 15(d) of the Act.
                                     NONE
                               (Title of Class)
                         _______________________________

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
     Domestic Shares of RMB1.00 each.....................   4,500,000,000
     Overseas Listed Foreign Shares of RMB1.00 each......   1,527,671,200

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                                 Yes |X| No [ ]

Indicate by check mark which financial statement item the registrant has elected
to follow.

                            Item 17 |X| Item 18 [ ]
_______________
* Not for trading, but only in connection with the registration of American
Depositary Shares.

================================================================================





                               TABLE OF CONTENTS

                                                                                                                 Page
                                                                                                              
PART I............................................................................................................1


   ITEM 1      Identity of Directors, Senior Management and Advisers..............................................1

   ITEM 2      Offer Statistics and Expected Timetable............................................................1

   ITEM 3      Key Information....................................................................................1
     A.      Selected Financial Data..............................................................................1
     B.      Capitalization and Indebtedness......................................................................3
     C.      Reasons for the offer and use of proceeds............................................................3
     D.      Risk factors.........................................................................................3

   ITEM 4      Information on the Company.........................................................................7
     A.      History and development of the Company...............................................................7
     B.      Business overview....................................................................................8
     C.      Organizational Structure............................................................................14
     D.      Property, plants and equipment......................................................................16

   ITEM 5      Operating and Financial Review and Prospects......................................................28
     A.      Operating Results...................................................................................31
     B.      Impact of Government Policies.......................................................................42
     C.      Liquidity and Capital Resources.....................................................................43
     D.      Trend Information...................................................................................47
     E.      Off-Balance Sheet Arrangements......................................................................48
     F.      Tabular Disclosure of Contractual Obligations and Commercial Commitments............................49

   ITEM 6      Directors, Senior Management and Employees........................................................50
     A.      Directors, members of the supervisory committee and senior management...............................50
     B.      Compensation of Directors and Officers..............................................................54
     C.      Board Practice......................................................................................54
     D.      Employees...........................................................................................54
     E.      Share Ownership.....................................................................................55

   ITEM 7      Major Shareholders and Related Party Transactions.................................................55
     A.      Major shareholders..................................................................................55
     B.      Related party transactions..........................................................................57
     C.      Interests of experts and counsel....................................................................59

   ITEM 8      Financial Information.............................................................................59
     A.      Consolidated Statements and Other Financial Information.............................................59
     B.      Significant Changes.................................................................................59

   ITEM 9      The Offer and Listing.............................................................................60

   ITEM 10     Additional Information............................................................................61
     A.      Share Capital.......................................................................................61
     B.      Memorandum and articles of association..............................................................61
     C.      Material Contracts..................................................................................61
     D.      Exchange controls...................................................................................61
     E.      Taxation............................................................................................62
     F.      Dividends and paying agents.........................................................................67
     G.      Statement by experts................................................................................67
     H.      Documents on display................................................................................67
     I.   Subsidiary Information.................................................................................67

   ITEM 11     Quantitative and Qualitative Disclosures About Market Risk........................................67

   ITEM 12     Description of Securities Other than Equity Securities............................................69

PART II..........................................................................................................69

   ITEM 13     Defaults, Dividend Arrearages and Delinquencies...................................................69

   ITEM 14     Material Modifications to the Rights of Security Holders and Use of Proceeds......................69

   ITEM 15     Controls and Procedures...........................................................................69

   ITEM 16     [Reserved]........................................................................................69

   ITEM 17     Financial Statements..............................................................................71

   ITEM 18     Financial Statements..............................................................................71

   ITEM 19     Exhibits..........................................................................................71





                                 INTRODUCTION

     We maintain our accounts in Renminbi yuan ("Renminbi" or "RMB"), the
lawful currency of the People's Republic of China (the "PRC" or "China").
References herein to "US$" or "US dollars" are to United States dollars, and
references to "HK$" are to Hong Kong dollars. References to ADRs and ADSs are
to American Depositary Receipts and American Depositary Shares, respectively.
Translations of amounts from Renminbi to US dollars are solely for the
convenience of the reader. Unless otherwise indicated, any translations from
Renminbi to US dollars or from US dollars to Renminbi were translated at the
average rate announced by the People's Bank of China (the "PBOC Rate") on
December 31, 2003 of US$1.00 to RMB8.2767. No representation is made that the
Renminbi or US dollar amounts referred to herein could have been or could be
converted into US dollars or Renminbi, as the case may be, at the PBOC Rate or
at all.

     References to "A Shares" are to common shares issued to domestic
shareholders.

     References to the "Company" include, unless the context requires
otherwise, Huaneng Power International, Inc. and the operations of our power
plants and our proposed projects.

     References to "HIPDC" are to Huaneng International Power Development
Corporation and, unless the context requires otherwise, include the operations
of the Company prior to the formation of the Company on June 30, 1994.

     References to the "central government" refer to the national government
of the PRC and its various ministries, agencies and commissions.

     References to "Huaneng Group" are to China Huaneng Group.

     References to "local governments" in the PRC are to governments at all
administrative levels below the central government, including provincial
governments, governments of municipalities directly under the central
government, municipal and city governments, county governments and township
governments.

     References to "power plants" or "our power plants" are to the power
plants that are wholly-owned by the Company or to the power plants in which
the Company owns majority equity interests.

     References to the "PRC Government" include the central government and
local governments.

     References to "provinces" include provinces, autonomous regions and
municipalities directly under the central government.

     References to the "State Plan" refer to the plans devised and implemented
by the PRC Government in relation to the economic and social development of
the PRC.

     References to "tons" are to metric tons.

     Previously, the Overseas Listed Foreign Shares were also referred to as
the "Class N Ordinary Shares" or "N Shares". Since January 21, 1998, the date
on which the Overseas Listed Foreign Shares were listed on The Stock Exchange
of Hong Kong Limited by way of introduction, the Overseas Listed Foreign
Shares have been also referred to as "H Shares".


                                    GLOSSARY

actual generation        The total amount of electricity generated by a power
                         plant over a given period of time.

auxiliary power          Electricity consumed by a power plant in the course
                         of generation.

availability factor      For any period, the ratio (expressed as a percentage)
                         of a power plant's available hours to the total number
                         of hours in such period.

available hours          For a power plant for any period, the total number of
                         hours in such period less the total number of hours
                         attributable to scheduled maintenance and planned
                         overhauls as well as to forced outages, adjusted for
                         partial capacity outage hours.

capacity factor          The ratio (expressed as a percentage) of the gross
                         amount of electricity generated by a power plant in a
                         given period to the product of (i) the number of hours
                         in the given period multiplied by (ii) the power
                         plant's installed capacity.

demand                   For an integrated power system, the amount of power
                         demanded by consumers of energy at any point in time.

dispatch                 The schedule of production for all the generating units
                         on a power system, generally varying from moment to
                         moment to match production with power requirements. As
                         a verb, to dispatch a plant means to direct the plant
                         to operate.

excess output            The amount by which the total output of a power plant
                         in a particular year exceeds its planned output for
                         such year.

GW                       Gigawatt. One million kilowatts.

GWh                      Gigawatt-hour. One million kilowatt-hours. GWh is
                         typically used as a measure for the annual energy
                         production of large power plants.

installed capacity       The manufacturers' rated power output of a generating
                         unit or a power plant, usually denominated in MW.

kV                       Kilovolt. One thousand volts.

kW                       Kilowatt. One thousand watts.

kWh                      Kilowatt-hour. The standard unit of energy used in the
                         electric power industry. One kilowatt-hour is the
                         amount of energy that would be produced by a generator
                         producing one thousand watts for one hour.

MVA                      Million volt-amperes. A unit of measure used to express
                         the capacity of electrical transmission equipment such
                         as transformers.

MW                       Megawatt. One million watts. The installed capacity of
                         power plants is generally expressed in MW.

MWh                      Megawatt-hour. One thousand kilowatt-hours.

Net Fixed Assets         The annual average of the book value of our fixed
                         assets (less accumulated depreciation) and construction
                         work in progress, each as determined in accordance with
                         PRC statutory accounting principles.

peak load                The maximum demand on a power plant or power system
                         during a specific period of time.

planned generation       An annually determined target gross generation level
                         for each of our operating power plants used as the
                         basis for determining planned output.

total output             The actual amount of electricity sold by a power plant
                         in a particular year, which equals total generation
                         less auxiliary power.

transmission losses      Electric energy that is lost in transmission lines and
                         therefore is unavailable for use.





                                     PART I

ITEM 1   Identity of Directors, Senior Management and Advisers

     Not applicable.

ITEM 2   Offer Statistics and Expected Timetable

     Not applicable.

ITEM 3   Key Information

A.       Selected Financial Data

     Our consolidated balance sheet data as of December 31, 2003 and 2002 and
the consolidated income statement and cash flow data for each of the years in
the three-year period ended December 31, 2003 are derived from the historical
financial statements included herein. Our consolidated balance sheet data as
of December 31, 2001, and balance sheet data of the Company as of December 31,
2000 and 1999 and income statement and cash flow data for each of the years in
the two-year period ended December 31, 2000, are derived from historical
financial statements not included herein. The Selected Financial Data should
be read in conjunction with the consolidated financial statements and "Item 5
- - Operating and Financial Review and Prospects". The financial statements have
been prepared in accordance with International Financial Reporting Standards
("IFRS") which differ from the generally accepted accounting principles in the
United States of Ameica ("US GAAP").

     In accordance with IFRS, we have adopted the acquisition method to
account for our acquisitions of power plants in 2002 and 2003. Accordingly,
the consolidated financial statements and, except as otherwise noted, all
other IFRS financial information presented in this Annual Report, include the
results of these power plants, only from the respective dates of acquisition.
In contrast, under US GAAP, our acquisitions of these power plants are
considered as combination of entities under common control and the acquired
assets and liabilities are accounted for at historical cost in a manner
similar to pooling of interests method. Accordingly, the consolidated
financial statements for all periods presented have been retroactively
restated as if the current structure and operations had been in existence
since inception. The differences between IFRS and US GAAP that would have
significant impact on the net income for each of the years in the three-year
period ended December 31, 2003 and the equity as of December 31, 2002 and 2003
are set forth in Note 41 to the Financial Statements. The Selected Financial
Data may not be indicative of future earnings, cash flows or financial
position.



                                                                      Year Ended December 31,
                                        ------------------------------------------------------------------------------
                                            1999         2000         2001          2002         2003        2003
                                        ------------------------------------------------------------------------------
RMB and US dollars in thousands             (RMB)        (RMB)        (RMB)        (RMB)        (RMB)      (US$)(1)
except per share data
                                                                                          
Income Statement Data
IFRS

Operating revenue, net..............      10,488,158  12,553,254   15,791,362    18,474,469    23,388,237   2,825,793
Operating expenses..................      (7,508,172) (8,646,356)  (10,777,328) (12,896,455)  (16,315,075) (1,971,205)
                                        ------------------------------------------------------------------------------
Profit from operations..............       2,979,986   3,906,898    5,014,034     5,578,014     7,073,162     854,588
Total financial expenses............        (727,256)   (979,866)    (796,215)     (510,265)     (544,285)    (65,761)
Gain from disposal of investments...              --          --       24,671         1,288        10,705       1,293
Share of profit (loss) of associates              --          --       (5,381)      (11,145)      212,091      25,625
Other income, net...................              --          --           --            --        12,070       1,458
Profit before tax...................       2,252,730   2,927,032    4,237,109     5,057,892     6,763,743     817,203
Income tax expenses.................        (384,555)   (411,202)    (715,220)     (980,854)   (1,149,441)   (138,877)
Minority Interests..................              --          --      (71,231)     (156,034)     (183,894)    (22,218)
                                        ------------------------------------------------------------------------------
Net profit..........................       1,868,175   2,515,830    3,450,658     3,921,004     5,430,408     656,108
                                        ==============================================================================
Basic earnings per share............            0.33        0.45         0.61          0.65         0.90         0.11
Fully diluted earnings per share....             N/A        0.44         0.60          0.65         0.90         0.11

US GAAP(2)

Operating revenue, net..............                               19,151,816    20,834,089    24,142,713   2,916,949
Net profit..........................                                3,528,753     3,952,112     5,470,041     660,897
Basic earnings per share............                                     0.62            0.66         0.91       0.11
Fully diluted earnings per share....                                     0.61            0.65         0.90       0.11





                                                                   Year Ended December 31,
                                        ------------------------------------------------------------------------------
                                            1999         2000         2001         2002         2003         2003
                                        ------------------------------------------------------------------------------
RMB and US dollars in thousands             (RMB)        (RMB)        (RMB)        (RMB)        (RMB)      (US$)(1)
except per share data
                                                                                         
Balance Sheet Data
IFRS

Current assets......................      5,866,082   10,061,689   10,763,919    7,685,441    8,303,195    1,003,202
Property, plant and equipment, net..     34,073,768   31,643,530   37,557,114   41,103,468   42,658,365    5,154,031
Available-for-sale investments......             --           --           --      254,990      254,990       30,808
Investment in associates............             --           --      226,488      200,960    2,766,031      334,195
Land use rights and other long-term         642,880      761,729      970,759    1,067,838    1,037,859      125,395
assets..............................
Deferred tax assets.................             --           --           --           --       21,311        2,575
Goodwill............................             --           --           --      126,560      298,876       36,111
Less: Negative goodwill.............             --           --   (2,225,505)  (1,978,227)  (1,730,949)    (209,135)
Total assets........................     40,582,730   42,466,948   47,292,775   48,461,030   53,609,678    6,477,182

Current liabilities.................      6,237,140    7,070,603    8,922,347    7,652,216    9,242,408    1,116,679
Non-current liabilities.............     12,573,185   11,616,610    9,590,637    9,482,050    9,256,718    1,118,407
Minority Interests..................              -            -      486,261      910,704    1,155,197      139,572
Shareholders' equity................     21,772,405   23,779,735   28,293,530   30,416,060   33,955,355    4,102,524
                                        ------------------------------------------------------------------------------
Total liabilities and equity........     40,582,730   42,466,948   47,292,775   48,461,030   53,609,678    6,477,182
                                        ==============================================================================
US GAAP (2)

Total assets........................                                            50,314,436   52,748,452    6,373,126
Total liabilities...................                                           (19,335,937) (18,496,249)  (2,234,737)
Minority Interests..................                                              (957,224)  (1,125,259)    (135,955)
                                                                             -----------------------------------------
Shareholders' equity................                                            30,021,275   33,126,944    4,002,434
                                                                             =========================================






                                                                      Year Ended December 31,
                                        ------------------------------------------------------------------------------
                                                 1999        2000         2001        2002        2003        2003
                                        ------------------------------------------------------------------------------
                                                (RMB)        (RMB)       (RMB)       (RMB)       (RMB)      (US$)(1)
                                                                                          
Cash Flow Data
IFRS

Purchase of property, plant and equipment.    (2,274,342)  (351,966)   (2,870,858) (1,594,210) (3,606,704)  (435,766)
Net cash provided by operating activities.     5,007,377   5,643,361    5,918,896   7,079,718   9,533,289  1,151,822
Net cash (used in) provided by investing      (2,634,962) (5,317,519)  (4,564,536)  1,074,101  (5,225,080)  (631,300)
activities................................
Net cash used in financing activities.....    (2,064,635)  (830,667)   (1,169,597) (7,324,354) (3,182,162)  (384,472)

US GAAP (2)

Purchase of property, plant and equipment.                             (3,496,781) (2,259,724) (4,898,282)  (591,816)
Net cash provided by operating activities.                             6,528,209   7,820,762   9,655,472   1,166,585
Net cash (used in) provided by investing                               (5,340,464) 2,077,754   (5,904,727)  (713,416)
activities................................
Net cash used in financing activities.....                             (1,129,337) (9,239,037) (2,767,549)  (334,378)

Other Financial Data
IFRS and US GAAP

Dividend declared per share...............          0.09        0.22         0.30        0.34        0.50       0.06
Number of ordinary shares (`000)..........     5,650,000   5,650,000    6,000,000   6,000,274   6,027,671  6,027,671
_______________

(1)      The US dollar data has been translated from RMB solely for
         convenience at the PBOC Rate on December 31, 2003 of US$1.00 to
         RMB8.2767. See Item 10. Additional Information -- Exchange control
         for more information on exchange rates between RMB and US dollars.

(2)      The amounts as of December 31, 2003 and 2002 and for each of the
         years in the three-year period ended December 31, 2003 are presented
         to reflect the acquisitions of the power plants in a manner similar
         to pooling of interests method, as well as the effects of other
         differences between IFRS and US GAAP.



B.       Capitalization and Indebtedness

     Not applicable.

C.       Reasons for the offer and use of proceeds

     Not applicable.

D.       Risk factors

Risks relating to our business and the PRC's power industry

Government regulation of power rates and other aspects of the power industry may
adversely affect our business

     Similar to electric power companies in other countries, we are subject to
governmental and electric power grid regulations in virtually all aspects of
our operations, including the amount and timing of electricity generation,
power rates setting, performance of scheduled maintenance and compliance with
power grid control and dispatch directives. There can be no assurance that
these regulations will not change in the future in a manner which could
adversely affect our operations. Since 1995, we have charged and collected
power rates that were designed to enable us to recover all operating and debt
service costs and to earn a fixed return on our Net Fixed Assets. However,
there can be no assurance that there will not be any change in the
implementation of the power rate setting principles that could materially
adversely affect our operations. In addition, the PRC government started in
1999 to experiment with a program to effect power sales through a bidding
process in some of the provinces where we operate our power plants. The power
rates for power sold by this bidding process are generally lower than the
approved power rates for planned output. Although the power sales through the
bidding process in the last 5 years constituted only a small fraction of our
total output, it is expected that the government will expand the program in
the future. On July 3, 2003, the State Council approved an electricity pricing
reform plan and made it clear that the long-term objective of electric power
pricing reform is to establish a standardized and transparent power price
setting mechanism. At present, a detailed rule for the implementation of this
pricing reform plan is in the process of being formulated. There is no
assurance that the power rates and the revenues of our power plants will not
be adversely affected. See "Item 4 Information of the Company-B Business
Preview - Pricing Policy."

If our power plants receive less dispatching than Planned Generation, the
power plants will sell less electricity than planned

     Our profitability depends, in part, upon each of our power plants
generating electricity at a level sufficient to meet or exceed the Planned
Generation, which in turn will be subject to local demand for electric power
and dispatching to the grids by the dispatch centers of the local grid
companies.

     The dispatch of electric power generated by a power plant is controlled
by the Dispatch Center of the applicable grid companies pursuant to a dispatch
agreement with us and to governmental dispatch regulations. In each of the
markets we operate, we compete against other power plants for power sales. No
assurance can be given that the Dispatch Centers will dispatch the full amount
of the Planned Generation of our power plants. A reduction by the Dispatch
Center in the amount of electric power dispatched relative to a power plant's
Planned Generation could have an adverse effect on the profitability of our
operations. However, we have not encountered any such bias in the past.

The power industry reform may negatively affect our business

     PRC government in 2002 announced and started to implement measures to
further reform the power industry, with the ultimate goal to create a more
open and fair power market. As part of the reform, five power generation
companies, including Huaneng Group, were created or restructured to take over
all the power generation assets originally belonging to the State Power
Corporation of China. In addition, two grid companies were created to take
over the power transmission and distribution assets originally belonging to
the State Power Corporation of China. An independent power supervisory
commission, the State Electricity Regulatory Commission ("SERC'), was created
to regulate the power industry. It is uncertain how these reform measures and
any further reforms are going to be implemented and how they will impact our
business. We may face enhanced competition as the reform is being carried out.

We are effectively controlled by HIPDC, whose interest may differ from those of
our other shareholders

     HIPDC, as our controlling shareholder, together with other local
government investment companies, is able to elect the entire board of
directors. HIPDC's interests may sometimes conflict with those of our other
minority shareholders. There is no assurance that HIPDC will always vote its
shares, or direct the directors nominated by it to act in a way that will
benefit our other minority shareholders.

Disruption in Fuel supply and its transportation may negatively affect the
normal operation of our power plants

     We have obtained our coal and oil supplies for our power plants through a
combination of purchases pursuant to allocations coordinated under the state
guidance and purchases on the open market. At the same time, we have also
enjoyed priority access pursuant to PRC Government allocations to
transportation services required to transport our coal and oil supplies. PRC
Government allocations help to assure priority in the receipt of certain
limited resources, sometimes at regulated prices. Although we have received
sufficient and timely allocations of fuel supply and transportation services
for our operations and have not experienced shutdowns or reduced electricity
generation caused by inadequate fuel supply or transportation services, there
can be no assurance that the system of PRC Government allocations which ensure
priority access by the major power plants to coal, oil and transportation will
continue in the future, that we will continue to obtain allocations to match
our operation requirements or that the loss of priority access through PRC
Government allocations will not, in the event of national supply shortfalls,
adversely affect our operations.

Power plant development, acquisition and construction are a complex and
time-consuming process, the delay of which may negatively affect the
implementation of our growth strategy

     We develop, construct, manage and operate large power plants; success
depends upon our ability to secure all required PRC Government approvals,
power sales and dispatch agreements, construction contracts, fuel supply and
transportation and electricity transmission arrangements. Delay or failure to
secure any of these could increase cost or delay or prevent commercial
operation of the affected power plant. Although each of our power plants in
operation and the power plants under construction received all required PRC
Government approvals in a timely fashion, no assurances can be given that all
the future projects will receive approvals in a timely fashion or at all.

     We have generally acted as, and intend to continue to act as, the general
contractor for the construction of our power plants. As with any major
infrastructure construction effort, the construction of a power plant involves
many risks, including shortages of equipment, material and labor, labor
disturbances, accidents, inclement weather, unforeseen engineering,
environmental, geological, delays and other problems and unanticipated cost
increases, any of which could give rise to delays or cost overruns.
Construction delays may result in loss of revenues. Failure to complete
construction according to specifications may result in liabilities, decrease
power plant efficiency, increase operating costs and reduce earnings. Although
the construction of each of our power plants was completed on or ahead of
schedule and within its budget, no assurance can be given that construction of
future projects will be completed on schedule or within budget.

     In addition, from time to time, we may acquire existing power plants from
HIPDC, Huaneng Group or other parties. The timing and the likelihood of the
consummation of any such acquisition will depend, among other things, on our
ability to obtain financing and relevant PRC Government approvals and to
negotiate relevant agreements for terms acceptable to us.

Substantial capital is required for investing in or acquiring new power plants
and failure to obtain capital on reasonable commercial terms will increase our
financing cost and cause delay in our expansion plans

     An important component of our growth strategy is to acquire operating
power plants and related development rights from HIPDC, Huaneng Group or other
companies on commercially reasonable terms. Our ability to arrange financing
and the cost of such financing depend on numerous factors, including general
economic and capital market conditions, credit availability from banks or
other lenders, investor confidence in us and the continued success of our
power plants. Although we have historically been able to obtain financing on
terms acceptable to us, there can be no assurance that financing for future
power plant acquisitions will be available on terms acceptable to us or, in
the event of an equity offering, that such offering will not result in
substantial dilution to existing shareholders.

Operation of power plants involves many risks and we may not have enough
insurance to cover the economic losses if any of our power plants' ordinary
operation is interrupted

     The operation of power plants involves many risks and hazards, including
breakdown, failure or substandard performance of equipment, improper
installation or operation of equipment, labor disturbances, natural disasters,
environmental hazards and industrial accidents. The occurrence of material
operational problems, including but not limited to the above events, may
adversely affect the profitability of a power plant. We maintain insurance
typical in the electric power industry in China and in amounts that we believe
to be adequate. Such insurance, however, may not provide adequate coverage in
certain circumstances. In particular, in accordance with industry practice in
the PRC, we do not currently carry any business interruption insurance or,
except for third party liability insurance coverage for accidents during
capital construction and equipment installation and other types of assets
insurances, any third party liability insurance to cover claims in respect of
bodily injury or property or environmental damage arising from accidents on
our property or relating to our operation except for one of our power plants.
Although each of our power plants has a good record of safe operation, there
is no assurance that the afore-mentioned accidents will not occur in the
future.

If the PRC government adopts new and stricter environmental laws and
additional capital expenditure is required for complying with such laws, the
operation of our power plants may be adversely affected and we may be required
to make more investment in compliance with these environmental laws

     Our power plants, like all coal- and oil-fired power plants, discharge
pollutants into the environment. We are subject to central and local
government environmental protection laws and regulations, which currently
impose base-level discharge fees for various polluting substances and
graduated schedules of fees for the discharge of waste substances. These laws
and regulations impose fines for violations of laws, regulations or decrees
and provide for the possible closure by the central government or local
government of any power plant which fails to comply with orders requiring it
to cease or cure certain activities causing environmental damage.

     We attach great importance to the environmental related matters of our
existing power plants and our power plants under construction. We have
implemented a system that is designed to control pollution caused by our power
plants, including the establishment of an environmental protection office at
each power plant, adoption of relevant control and evaluation procedures and
the installation of certain pollution control equipment. We believe our
environmental protection systems and facilities for the power plants are
adequate for us to comply with applicable central government and local
government environmental protection laws and regulations. The PRC Government
may impose new, stricter laws and regulations which would require additional
expenditure on environmental protection.

     The PRC is a party to the Framework Convention on Climate Change
("Climate Change Convention"), which is intended to limit or capture emissions
of "greenhouse" gases, such as carbon dioxide. Ceilings on such emissions
could limit the production of electricity from fossil fuels, particularly
coal, or increase the costs of such production. At present, ceilings on the
emissions of "greenhouse" gases have not been assigned to developing countries
such as the PRC under the Climate Change Convention, and the PRC has objected
to any imposition of such ceilings. If the PRC were to agree to such ceilings,
or otherwise reduce its reliance on coal-fired power plants, our business
prospects could be adversely affected.

If there is a devaluation of Renminbi, our debt burden will increase and the
dividend return to our overseas shareholders may decrease

     As a power producer operating only in China, we collect our revenues in
Renminbi and have to convert Renminbi into foreign currencies to (i) repay
some of our borrowings which are denominated in foreign currencies, (ii)
purchase foreign made equipment and parts for repair and maintenance, and
(iii) pay out dividend to our overseas shareholders. Although China has had a
stable foreign exchange rate for Renminbi for the last several years, there is
no assurance that there will not be a significant devaluation of Renminbi in
the future. And if there is such a devaluation, our debt servicing cost will
increase and the return to our overseas investors may decrease.

Forward-looking information may prove inaccurate

     This document contains certain forward-looking statements and information
relating to us that are based on the beliefs of our management as well as
assumptions made by and information currently available to our management.
When used in this document, the words "anticipate," "believe," "estimate,"
"expect," "going forward" and similar expressions, as they relate to us or our
management, are intended to identify forward-looking statement. Such
statements reflect the current views of our management with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including the risk factors described in this document. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated or expected. We do not intend to
update these forward-looking statements.

Risks relating to the PRC

PRC economic, political and social conditions as well as government policies
could significantly affect our business

     All of our business, assets and operations are located in China. The
economy of China differs from the economies of most developed countries in
many respects, including government involvement, level of development, economy
growth rate, control of foreign exchange, and allocation of resources.

     The economy of China has been transitioning from a planned economy to a
more market oriented economy. Although the majority of productive assets in
China are still owned by the PRC government at various levels, in recent years
the PRC government has implemented economic reform measures emphasizing
utilization of market forces in the development of the economy of China and a
high level of management autonomy. Some of these measures will benefit the
overall economy of China, but may have a negative effect on us. For example,
our operating results and financial condition may be adversely affected by
changes in taxation, changes in power rates for our power plants, changes in
the usage and costs of state controlled transportation services, and state
policies affecting the power industry.

Interpretation of PRC laws and regulations involves significant uncertainties

     The PRC legal system is based on written statutes and their
interpretation by the Supreme People's Court. Prior court decisions may be
cited for reference but have limited value as precedents. Since 1979, the PRC
government has been developing a comprehensive system of commercial laws, and
considerable progress has been made in introducing laws and regulations
dealing with economic matters such as foreign investment, corporate
organization and governance, commerce, taxation and trade. However, because
these laws and regulations are relatively new, and because of the limited
volume of published cases and judicial interpretation and their lack of force
as precedents, interpretation and enforcement of these laws and regulations
involve significant uncertainties. In addition, as the PRC legal system
develops, we cannot assure that changes in such laws and regulations, and
their interpretation or their enforcement will not have a material adverse
effect on our business operations.

     We are subject to certain PRC regulations governing PRC companies that
are listed overseas. These regulations contain certain provisions that are
required to be included in the articles of association of these PRC companies
and are intended to regulate the internal affairs of these companies. The PRC
Company Law and these regulations, in general, and the provisions for
protection of shareholders' rights and access to information, in particular,
are less developed than those applicable to companies incorporated in Hong
Kong, the US, the UK and other developed countries or regions. Such limited
investor protections are compensated for, to a certain extent, by the
Mandatory Provisions for the Articles of Association of Companies to be Listed
Overseas and certain additional requirements that are imposed by the Listing
Rules of The Hong Kong Stock Exchange with a view to reducing the magnitude of
differences between the Hong Kong Company Law and PRC Company Law. The
articles of association of all PRC companies listed in Hong Kong must
incorporate such Mandatory Provisions and these additional requirements.
Although our Articles of Association have incorporated such provisions and
requirements, there can be no assurance that our shareholders will enjoy
protections to which they may be entitled in other jurisdictions.

ITEM 4   Information on the Company

A.       History and development of the Company

     Our legal and commercial name is Huaneng Power International, Inc. Our
head office is at West Wing, Building C, Tianyin Mansion, 2C, Fuxingmennan
Street, Beijing, People's Republic of China and our telephone number is
(8610)66491999. We were established in June 1994 as a company limited by
shares organized under the laws of the People's Republic of China.

     In 2003, we entered into an agreement with Shenzhen Investment Holding
Corporation and Shenzhen Energy Group Co., Ltd. to acquire 25% interest of the
enlarged share capital of Shenzhen Energy Group Co., Ltd. representing
attributable generation capacity of 417 MW. The consideration for this
acquisition was RMB 2,390 million.

     In 2003, we also made the following acquisitions, all of which were
financed by our own funds. Please see "Item 4 Information of the
Company--Property, plants and equipment" for a detailed description of these
newly acquired power plants:

     55% of the equity interest in the registered capital of Qinbei Power
Plant, 60% of the equity interest in the registered capital of Yushe Power
Plant, and the net assets of Xindian Power Plant formerly owned by Huaneng
Group.

     These acquisitions increased our attributable generation capacity by 770
MW and attributable capacity under construction by 1,020 MW. The consideration
for these acquisitions was RMB550 million.

     See "Item 5 Operating and Financial Review and Prospects -- Liquidity and
Capital Resources" for a description of the Company's principal capital
expenditures since the beginning of its last three financial years.

B.       Business overview

     We are one of China's largest independent power producers based on the
total attributable generation capacity of 15,736 MW. We wholly own 14 power
plants and have controlling interests in five power plants and minority
interests in three power companies. Our power plants are in nine of China's
provinces: Liaoning, Hebei, Shanxi, Shandong, Henan, Fujian, Jiangsu, Zhejiang
and Guangdong, and in Shanghai Municipality, the largest financial and
commercial center in mainland China. In 2003, our power plants had an average
availability factor of 92.15% and an average capacity factor of 68.06%. We
also have 3,060 MW generation capacity under construction in the same areas.
We believe that these areas present greater potential for increasing demand
for electricity and enjoy the most favorable conditions for running power
plants. To maintain our leadership position among independent power producers
and to enhance shareholder value, we will focus on more efficient operation of
our current power plants and aggressively pursue our development strategy. Our
development strategy is to place equal emphasis on acquisition and
development, on greenfield and expansion plants, on coal-fuel and other
feasible fuel sources, and on domestic and foreign funds.

     We will also continue to leverage our relationship with HIPDC, our
controlling shareholder, as well as with Huaneng Group, the controlling
shareholder of HIPDC, in respect of acquisition and development of power
projects. We have a preferential right to purchase interest in existing power
plants owned by Huaneng Group and HIPDC and the preferential right on all of
their respective future power development projects that we may realistically
develop. In 2002, the restructured Huaneng Group reiterated its support policy
to us. Furthermore, we entered into an Entrusted Management Agreement with
Huaneng Group and HIPDC in relation to the management of their respective
thermal power plants. By entering into the Entrusted Management Agreement, we
will further accumulate management experience as a result of the expansion of
our operation scale and set a precedent for large-scale and multi-entities
entrusted management in the PRC. Some of these thermal power plants could be
our potential acquisition targets. Please see "Item 7--Major Shareholders and
Related Party Transactions" for detailed description of the Entrusted
Management Agreement.

     We believe our significant capability in the development and construction
of power projects, as exemplified in the completion of our projects under
construction ahead of schedule, and our experience gained in the successful
acquisitions of power assets in recent years will enable us to take full
advantage of the opportunities presented in China's power market and made
available to us through our relationship with HIPDC and Huaneng Group.

     With respect to the acquisition or development of any project, we will
consider, among other factors, changes in power market conditions, and adhere
to prudent commercial principles in the evaluation of the feasibility of the
project. In addition to business development strategies, we will continue to
work on our profit enhancement through relentlessly strengthening cost
control, especially in respect of fuel costs and construction costs, so as to
hedge against fluctuations in fuel price and increase competitiveness in the
power market.

Development of power plants

     The process of identifying potential sites for power plants, obtaining
government approvals, completing construction and commencing commercial
operations is usually lengthy. However, because of our significant experience
in developing and constructing power plants, we have been able to identify
promising power plant projects and to obtain all required PRC Government
approvals in a timely manner.

Opportunity Identification and Feasibility Study

     We initially identify an area in which additional electric power is
needed by determining its existing installed capacity and projected demand for
electric power. The initial assessment of a proposed power plant involves a
preliminary feasibility study. The feasibility study examines the proposed
power plant's land use requirements, access to a power grid, fuel supply
arrangements, availability of water, local requirements for permits and
licenses and the ability of potential customers to afford the proposed power
rates. To determine projected demand, factors such as economic growth,
population growth and industrial expansion are used. To gauge the expected
supply of electricity, the capacities of existing plants and plants under
construction or development are studied.

Approval Process

     In 2003, State Development and Reform Commission ("SDRC") was created to
replace the former State Development Planning Commission. At present, any
project proposal and supporting documents for new power plants must first be
submitted to the SDRC for approval and then be submitted to the State Council.
Joint venture power projects are subject to additional governmental approvals.
Approval by Ministry of Commerce (the former Ministry of Foreign Trade and
Economic Cooperation) is also required when foreign investment is involved.

Permits and Contracts

     In developing a new power plant, we and third parties obtain permits
required before commencement of the project. Such permits include operating
licenses and similar approvals related to plant site, land use, construction,
and the environment. To encourage the cooperation and support of the local
governments of the localities of the power plants, it has been and will be our
policy to seek investment in such power plants by the relevant local
governments.

Power Plant Construction

     We have generally acted as the general contractor for the construction of
our power plants. Equipment procurement and installation, site preparation and
civil works are subcontracted to domestic and foreign subcontractors through a
competitive bidding process. All of our power plants were completed on or
ahead of schedule, enabling certain units to enter service and begin
generating income earlier than the estimated in-service date.

Import Duties

     On April 1, 1996, the central government reduced the "general level" of
China's import duties to 23%. Along with the change in import duties,
preferential import duty treatment, including exemptions and reductions, for
equipment and raw materials imported by foreign-invested enterprises ("FIEs")
were eliminated. As our power plants were acquired from HIPDC, which is a FIE,
we had enjoyed duty-free treatment of equipment imported for the Power Plants.
Under the new regulations, equipment and raw materials imported by FIEs may
continue to enjoy duty-free treatment if the relevant project was approved
before April 1, 1996. In October, 1997 the central government further lowered
the general level of China's import duties to 17%. Any import duties will be
reflected in adjustments to our power rates under the Pricing Policy and the
Electric Power Law. In addition, the central government in 1998 reinstated the
import-duty exemption policy for equipment imported by FIEs that invested in
projects encouraged by the central government under the Catalogue for the
Guidance of Foreign Investment Industries that is amended by the PRC
government from time to time ("the Catalogue"). Pursuant to the current
Catalogue issued on March 11, 2002, construction and operation of coal-fired
power plants with 300 MW or larger generating units or of power plants with
clean-burning coal technologies belong to the category of encouraged projects.
Under the relevant Chinese laws, FIEs will continue to be entitled to import
duty exemption with respect to imported equipment and raw materials for
investment projects that fall into the encouraged category under the current
Catalogue. As a FIE, we are eligible for import-duty exemption for imported
generating units, as all our planned power plants or power plants under
construction meet the conditions for encouraged projects under the current
Catalogue.

     In addition, China's general import-tariff level has been declining
annually since China acceded to the WTO in November 2001. China's average
import-tariff rate for 2002 is 12.7%, which was reduced to 11.3% in 2003. In
2004, the average import-tariff rate will be further reduced to 10.4%. In
general, China's entry to WTO will bring its import-tariff to a level
consistent with the average level of all other WTO members.

Plant Start-up and Operation

     We have historically operated and intend to continue to operate our power
plants. Our power plants have established management structures based on
modern management techniques. We select the superintendent for a new power
plant from the senior management of our operating plants early in the
construction phase of the new plant, invest in the training of operational
personnel, adopt various rational management techniques and structures its
plant bonus program to reward efficient and cost-effective operation of the
plant in order to ensure the safety, stability and high level of availability
of each power plant. Our senior management meets several times a year with the
superintendents of the power plants as a group, fostering a team approach to
operations, and conducts annual plant performance reviews with the appropriate
superintendent, during which opportunities to enhance the power plant's
performance and profitability are evaluated.

     After a generating unit is constructed, the contractor tests its
installation and systems. Following such tests, the contractor puts the unit
through a continuous 168-hour trial run at full load. After successfully
passing the continuous 168-hour test, the unit may enter into commercial
operation.

Pricing policy

     Because we were established to develop power plants using advanced
equipment and technology financed with foreign and domestic loans, our power
rates, under the authority of State Council Document 72, were initially
designed to ensure recovery of all production and financing costs and yield a
profit of RMB40 to RMB50 per MWh during the period when such loans were
outstanding.

     On June 6, 1994, the former Ministry of Electric Power ("MEP") announced
the pricing policy (the "Pricing Policy") applicable to us. The Pricing Policy
specifies that our power rates should be determined with reference to
international principles and methods for setting power rates based upon the
return on net fixed assets methodology to which international investors are
accustomed.

     While we anticipate that we will consistently generate a profitable
return and recover our costs under the existing Pricing Policy, there is no
assurance that the government agencies will approve our proposed power rates
in accordance with the Pricing Policy. We have received power rates that
delivered a return below the permitted 15% return on the Net Fixed Assets in
the last several years. The Electric Power Law, which came into effect in
1997, has provided for the general principles for determining power rates in
the future. The power rate granted to a power producer shall be formulated to
provide reasonable compensation for costs as well as a reasonable return, to
share expenses fairly and to promote the construction of power projects.

     In June 2003, SERC started a pilot program to establish regional power
markets in Northeast China and East China regions. It is also our knowledge
that the central government plans to carry out an experiment in power pricing
reform in the Northeast China region. However, detailed implementation
measures are still being formulated. East China regional power market will
start a test run on a simulated basis in May 2004 and is expected to commence
operation on an experimental basis next year. Under the relevant rules
governing such power market, power sold through the bidding process will
account for approximately 15% of total electric power sold in such market.

     On July 3, 2003, the State Council approved a power pricing reform plan
and made it clear that the long term objective of power pricing reform is to
establish a standardized and transparent power price setting mechanism. At
present, the detailed rules for the implementation of this reform plan are
being formulated.

     Usually the power rate determined under the bidding practice is lower
than the power rate for planned generation, primarily because the competitive
bidding drives down the prices. We believe, however, that the output subject
to the bidding practice represents only a small portion of our total output
and power rate applicable to this portion is calculated to enable the power
plants to at least recover variable costs, part of fixed costs and also
produce some profit. For our planned generation, the power rate is still
determined on a basis which permits us to recover all the operating costs plus
a margin of profit. Establishing regional power markets and increasing the use
of the bidding method are the general trend in China's power market reform,
which is conducive to creating a competition environment that is fair,
transparent and equitable. We believe that this reform will benefit the
Company in the long term. We will adopt different bidding strategies and fully
take advantage of the large scales of our power plants in accordance with the
specific circumstances of different power grids and different power plants,
thereby maximizing our profits in the power bidding process. We also believe
that our large and highly efficient generating units are competitive in a more
open, orderly and fair market.

     In 2003, coal prices increased and certain parts of China experienced
severe power shortage due to increased demand for power caused by various
factors including the rapid expansion of the Chinese economy. To adjust the
demand and supply for electric power and also to address the adverse effect
that the increase of coal prices had on the power industry, SDRC issued the
"Circular on Adjusting Power Rate" with the approval of the State Council in
December 2003. Pursuant to such circular, effective as of January 1, 2004,
on-grid power rate of coal-fired power plants that supply power to the grids
at provincial or higher level increased by RMB7/MWh (inclusive of taxes) to
offset their higher cost of operation due to increase in coal prices in 2003
and 2004. Effective as of January 1, 2004, newly operated power plants, which
have not yet received on-grid power rate, are allowed to sell power at rates
equal to the previous year's average on-grid power rates of their service
area. The existing power plants are allowed to sell output (actual output in
that financial year minus 2003 actual output) based on the previous year's
average on grid power rates of their service area.

Power sales

     Each of our power plants has entered into a written agreement with the
local grid companies for the sales of its power output. Generally, the
agreement has a fixed term of multiple years and provides that the annual
utilization hours of the power plant will be determined with reference to the
average annual utilization hours of the similar generating units connected to
the same grid.

     Recently, SERC and the State Administration of Commerce and Industry
jointly promulgated a model contract form ("the "Model Contract Form") for use
by power grid companies and power generating companies in connection with
electricity sale and purchase transactions. The Model Contract Form contains
provisions on the parties' rights and obligations, amount of electricity
subject to purchase, payment method and liabilities for breach of contract,
etc. We believe that the publication of the Model Contract Form will
facilitate the negotiation and execution of electricity purchase contracts
between power grid companies and power generating companies in a fair,
transparent and efficient manner, thereby reducing transaction costs and
improving performance rate of both power grid companies and power generating
companies.

     In addition, a small percentage of power output of Dalian, Dandong,
Shidongkou II, Shidongkou I, Huaiyin, Taicang, Fuzhou, Nanjing and Nantong
Power Plants were sold through the power bidding process in 2003.

     The following table sets forth the average power rates (RMB/MWh) of
electric power sold by the power plants which we operate, for each of the five
years ended December 31, 2003 and the approved power rates for 2003 and 2004.



                                   1999        2000          2001         2002               2003               2004
                               ----------------------------------------------------------------------------------------
                                  Average     Average      Average       Average    Average      Approved    Approved
                                 Rate (1)    Rate (1)      Rate (1)     Rate (1)     Rate(1)     Rate(1)     Rate(1)(7)
                               ----------------------------------------------------------------------------------------
                                                                                            
Dalian Power Plant
   Phase I.................         331.69       316.53        291.38       280.53     272.69     321.00(5)      314.00
   Phase II................         303.97       305.42
Fuzhou Power Plant
   Phase I.................         339.52       353.40        357.50       327.80     331.82     365.00         365.00
   Phase II................         500.00       405.35        349.18
Nantong Power Plant
   Phase I.................         336.17       323.71        318.38       309.54     312.52     334.6(2)       334.00
   Phase II................         288.66       323.71
Shangan Power Plant........
   Phase I.................         298.73       283.30        292.71       315.65     307.94     334.00         334.00
   Phase II................         306.33       379.50        371.73
Shantou Oil-Fired Plant....         597.51       669.77        618.24       621.02     672.41     594.39         594.39
Shantou coal-fired Power Plant      473.85       473.85        473.85       455.95     435.17     436.41         436.41
Shidongkou II..............         358.46       362.44        356.76       345.90     332.85     368.80         368.80
Dandong Power Plant........         309.70       306.27        298.93       273.70     276.95     330.00(6)      323.00
Nanjing Power Plant........         354.61       325.68        318.60       304.07     307.31     336.1(2)       334.00
Dezhou Power Plant.........
   Phase I.................             --           --        340.33       339.64     333.34     352.50         352.50
   Phase II................             --           --
   Phase III...............             --           --                                           320.00         320.00
Jining Power Plant.........             --           --        267.31       275.15     274.66     280.76         280.76
Weihai Power Plant.........
   Phase I.................             --           --        390.72       393.74     386.50     443.50         443.50
   Phase II................             --           --                                           376.40         376.40
Shidongkou I...............             --           --            --       252.97     256.64     259.50         259.50
Taicang....................             --           --            --       317.52     321.80     374.00(3)      365.00
Huaiyin....................             --           --            --       314.79     317.21     345.60(4)      343.00
Changxing..................             --           --            --       362.70     320.57     332.00         332.00
Yushe......................             --                         --           --     200.63     301.60         301.60
Qinbei.....................             --           --            --           --
Xindian                                                                                            o
   Phase I.................             --           --            --                  342.41     343.70         343.70
   Phase II................             --           --            --                             320.00         320.00

_______________

Notes:
(1) Includes value-added tax.

(2)      Changed to 334.00 effective as of January 15, 2003.

(3)      Changed to 365.00 effective as of January 15, 2003.

(4)      Changed to 343.00 effective as of January 15, 2003.

(5)      Changed to 314.00 effective as of June 10, 2003.

(6)      Changed to 323.00 effective as of June 10, 2003.

(7) Approved before the power rate increase of RMB 7/MWh.




Fuel supply arrangements

     Eighteen of our nineteen power plants are fueled by coal, and only
Shantou Oil-Fired Plant is a combined-cycle facility fueled by oil.

Coal

     Most of the coal supply for the eighteen coal-fired power plants is
obtained from numerous coal producers in Shanxi Province.

     In recent years, as part of its efforts to make a transition from a
comprehensive planned economy to a "socialist market economy," the PRC has
experimented with a variety of methods of setting coal prices. In 1996, the
government allowed coal prices to fluctuate within a range around a reference
price for coal allocated under the State Plan to be used in electricity
generation, and set maximum allowable prices in various coal-producing areas
for coal used in electricity generation.

     Starting in 2002, there was no longer official State Plan for coal
supplies, but the government continues to coordinate the coal prices at the
annual sales conferences. Allocations for coal purchases are made at annual
sales conferences attended by, among others, representatives of each of coal
purchasers, coal suppliers, the railway authorities and the shipping
companies. The annual sales conferences were sponsored and coordinated by
SDRC. At these conferences, we obtain allocations for coal on a company-wide
basis. We then sign delivery orders with the coal producers and with the
railway and shipping companies for the amount of coal and transportation
allocated to us. These delivery orders specify on a monthly basis the amount
of coal to be delivered to each power plant. We, the suppliers and the railway
and shipping companies then hold monthly conferences to schedule the following
month's allocated coal deliveries.

     In 2003, we consumed a total of 38.57 million tons of coal, 43.16% of
which was purchased from the state allocations, and the remainder was
purchased from the open market.

     Given our good reputation and commercial relationships with open market
coal suppliers and the increasing market orientation of the coal industry in
China, we believe that we will be able to purchase sufficient coal on the open
market to meet our future requirements in excess of allocations by the PRC
Government.

     We have been allocated 24.22 million tons of coal and related
transportation for 2004, which is about 59% of the coal required for the total
planned generation.

     Coal prices, including transportation costs and miscellaneous expenses,
for the eighteen coal-fired power plants in 2003 averaged approximately
RMB239.06 per ton. We strive to reduce the fuel costs in a number of ways,
including seeking to purchase high quality coal at competitive prices directly
from coal mines or coal shipment terminals, improving coal storage management
and inspection and demanding compensation from suppliers for failure to
deliver coal of the specified quantity and quality in accordance with the
relevant purchase arrangements. We have also started to experiment in some of
our power plants with the method of mixing different types of coal as a
measure of cost reduction.

Oil

     We obtain our entire supply of oil for the Shantou Oil-Fired Plant
through government allocation from the Shengli Oil Field in Shandong Province.
The crude oil is transported by pipeline to Huangdao in eastern Shandong
Province, loaded onto ships, shipped along the coast to the Zhanjiang port in
western Guangdong, trans-shipped to the Shantou port, unloaded into storage
tanks in Shantou and finally transported to the Shantou Oil-Fired Plant by
pipeline.

     We were allocated 75,000 metric tons of oil in 2003. The price at which
the Shantou Oil-Fired Plant purchases Shengli crude oil from the China
Petroleum and Chemical Corporation is determined by the PRC Government in
accordance with the State Plan.

     During 2003, the average of the State Plan prices for crude oil from the
Shengli Oil Field was RMB2,175 per ton.

     We received allocations under the State Plan of crude oil from the
Shengli Oil Field and transportation sufficient to meet our oil supply
requirements at the Shantou Oil-Fired Plant for 2003. We believe that we will
continue to receive allocations of oil and transportation under the State Plan
sufficient to meet our crude oil requirements.

Repair and maintenance

     Each of our power plants has a timetable for routine maintenance, regular
inspections and repairs. Such timetables and the procedures for the repair and
maintenance of generating units comply with the relevant regulations
promulgated by the former MEP.

     Pursuant to our procedures, generating units with a capacity of 350 MW or
more are currently operating on a cycle of four to six years. At the end of
each operating cycle, an overhaul is carried out. In each cycle, there are
four different levels of maintenance:

     (i)    regular checks and routine maintenance are carried out throughout
            the period during which a generating unit is in operation;

     (ii)   a small-scale servicing is performed every year, which takes
            approximately 20 days;

     (iii)  a medium-scale check-up is carried out between the two overhauls,
            the length of which depends on the actual condition of the
            generating unit at the time of the check-up; and

     (iv)   a full-scale overhaul is conducted at the end of each operating
            cycle, which takes approximately 60 days.

     With respect to the Shantou Oil-Fired Plant, repair and maintenance are
scheduled according to cumulative operating hours. A small-scale servicing
takes approximately seven days. A full-scale maintenance takes approximately
30 days.

C.       Organizational Structure

     We are 42.39% owned by HIPDC, which in turn is a subsidiary of Huaneng
Group. Huaneng Group was established in 1988 with the approval of the State
Council. In 2002, Huaneng Group was restructured as one of the five
independent power generation group companies to take over the power producing
assets originally belonging to the State Power Corporation of China. Huaneng
Group has invested in industries that are related to power generation which
include energy, transportation, raw materials development, finance,
information, environment protection and trade.

     HIPDC was established in 1985 as a joint venture with 51.98% of its
interest currently owned by Huaneng Group. HIPDC is engaged in developing
power plants using foreign capital. Some of the power plants currently owned
and operated by us were originally built and later transferred to us by HIPDC.
Both Huaneng Group and HIPDC have agreed to give us preferential rights in the
power development business.

     The following organizational chart sets forth the organizational
structure of us and HIPDC as of December 31, 2003:




                                                                             

                                                      China Resources
                                        China Group        Power            China Xinda         International
     China Huaneng     Guohua Energy    Development     Investments        Investments Co.,    Water & Electric
         Group        Investment Corp.    Limited      Company Limited          Ltd.                Corp.

        |               |                  |                |                   |                   |
        |               |                  |                |                   |                   |
        | 51.98%        | 15.77%           | 15.0%          | 10.0%             | 5.8%              | 1.45%
        |               |                  |                |                   |                   |
        ---------------------------------------------------------------------------------------------
          |
          |
          |                                       Jiangsu Province
          |            Hebei Provincial          International Trust             Dalian Municipal       Shantou Electric
        HIPDC            Construction               & Investment                   Construction*            Power
          |             Investment Co.                Company                     Investment Co.        Development Co.
          |                   |                           |                             |                      |
          |                   |        Fujian             |                             |                      |
          |                   |   International Trust     |                             |                      |
Listed A  |     Existing H    |     & Investment          |      Liaoning Energy        |  Nantong Investment  |
 Shares   |       Shares      |       Company             |     Investment (Group)      |  Management Center   |
          |
 |        |         |                    |                             |                         |
 | 4.15%  | 42.39%  | 25.34%        7.5% | 5.56%                 5.18% | 3.81%             3.75% | 1.13%
 |                  |                    |                             |                         |
 -----------------------------------------------------------------------------------------------------------------------


Chart Continued


                    Dandong Energy
                      Investment
                   Development Center
                           |
                           |
     Shantou Power         |
 Development Joint Stock   |
    Company Limited        |

          |
    0.77% |  0.31%           0.11%
          |
- --------------------------------------


                                                   |-----------|
                                                   |    The    |
                                                   |  Company  |
                                                   |-----------|



Note:  * On September 17, 2003, Liaoning Energy Corporation changed its name to Liaoning Energy Investment (Group).
Thereafter, on February 15, 2004, China Securities Registration Company Limited updated its record on the name of such
company accordingly.




D.  Property, plants and equipment

     The following table presents certain summary information on our power
plants, projects under construction and proposed projects.



Summary Information on the Company's Power Plants and Proposed Projects

                                                                                Current                               Type
                             Province/      Actual/Estimated    Total Actual   Installed               Attributable    of
    Plant or Expansion      Municipality  In-service Date (1)     Cost (2)     Capacity    Ownership     Capacity     Fuel
- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------
 (Names as defined below)                                        (Millions       (MW)          %            MW
                                                                    RMB/
                                                                  Millions
                                                                    US$)
Power Plants
- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------
                                                                                             
Shantou Oil-Fired(5)        Guangdong     Units I & II: Jan.       215/24.7     2 x 34.1       100%        103       Oil
                                          1987
                                          Unit III: April 1988                  1 x 34.95
Dalian         Phase I      Liaoning      Unit I: Sep. 1988      1,569/180      2 x 350        100%        700       Coal
                                          Unit II: Dec. 1988
               Phase II                   Unit III: Jan. 1999    3,554/408      2 x 350        100%        700       Coal
                                          Unit IV: Jan. 1999
Fuzhou         Phase I      Fujian        Unit I: Sep. 1988      1,713/197      2 x 350        100%        700       Coal
                                          Unit II: Dec. 1988
               Phase II                   Unit III: Oct. 1999    3,535/406      2 x 350        100%        700       Coal
                                          Unit IV: Oct. 1999
Nantong(5)     Phase I      Jiangsu       Unit I: Sep. 1989      1,682/193      2 x 352        100%        704       Coal
                                          Unit II: March 1990
               Phase II                   Unit III: Jul. 1999    3,573/410      2 x 350        100%        700       Coal
                                          Unit IV: Oct. 1999
Shangan        Phase I      Hebei         Unit I: Aug. 1990      1,959/225      2 x 350        100%        700       Coal
                                          Unit II: Dec. 1990
               Phase II                   Unit III: Oct. 1997    2,804/322      2 x 300        100%        600       Coal
               (3)
                                          Unit IV: Oct. 1997
Shantou Coal-Fired          Guangdong     Unit I: Jan. 1997      4,942/568      2 x 300        100%        600       Coal
                                          Unit II: Jan. 1997
Shidongkou II               Shanghai      Unit I: Jun. 1992      4,395/505      2 x 600        100%       1,200      Coal
                                          Unit II: Dec. 1992
Dandong                     Liaoning      Unit I: Jan. 1999      4,798/551      2 x 350        100%        700       Coal
                                          Unit II: Jan. 1999
Nanjing(4)                  Jiangsu       Unit I: March 1994     3,212/369      2 x 320        100%        640       Coal
                                          Unit II: Oct. 1994
Dezhou                      Shandong      Units I & II: 1992        1,313       2 x 300        100%        600       Coal
                                          Units III & IV:           1,760       2 x 300        100%        600       Coal
                                          Jun. 1994,May 1995
                                          Unit V & VI: Jun.         5,111       2 x 660        100%       1,320      Coal
                                          2002; Oct. 2002
Jining (4)                  Shandong      Units I & II: 1973           43       2 x 50         100%        100       Coal
                                          Units III & IV:              69       1 x 115        100%        225       Coal
                                          1976 & 1978
                                                                                1 x 110
                                          Unit V & Unit               760       2 x 135        100%        270       Coal
                                          VIJuly 2003 &
                                          August 2003
Weihai                      Shandong      Units I & II: May         1,110       2 x 125         60%        150       Coal
                                          1994,Jan. 1995
                                          Units III & IV:           2,834       2 x 300         60%        360       Coal
                                          Mar.Nov. 1998
Shidongkou I                Shanghai      Unit I: Feb. 1988           N/A       4 x 300        100%       1,200      Coal
                                          Unit II: Dec. 1988
                                          Unit III: Sep. 1989
                                          Unit IV: May 1990
Changxing                   Zhejiang      Unit I: Jan. 1992           N/A       2 x 125        100%        250       Coal
                                          Unit II: Aug. 1992

Taicang                     Jiangsu       Unit I: Dec. 1999           N/A       2 x 300         75%        450       Coal


                                          Unit II: April 2000

Huaiyin                     Jiangsu       Unit I: Nov. 1993          N/A        2 x 200       63.64%       255       Coal
                                          Unit II: Aug. 1994
- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------
Yushe                       Shanxi        Unit I: June 1994          N/A        2 x 100         60%        120        Coal
                                          Unit II: Dec 1994
Xindian                     Shandong      Unit III: Jan 2002         N/A        2 x 225(6)     100%        450        Coal
                                          Unit IV: Dec 2001

- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------

Project under Construction
- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------
Huaiyin Phase II            Jiangsu                                             2 x 330                   63.64%     Coal
Shantou Phase II            Guangdong                                           1 x 600                    100%      Coal
Qinbei Phase II             Henan                                               2 x 600                    55%       Coal
Yushe Phase II              Shanxi                                              2 x 300                    60%       Coal
- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------
                                                                Subtotal         3060
Proposed Projects
- ----------------------------------------- --------------------- ------------- ------------ ----------- ------------- -------
Shanghai Gas Turbine project                                                    3 x 300                              Gas
                                                                                 class
Jinling Gas Turbine                                                             3 x 300                              Gas
project                                                                          class
Taicang Phase II            Jiangsu                                             2 x 600                              Coal
Yuhuan Phase I              Zhejiang                                           2 x 1000                              Coal
Shangan Phase III           Hebei                                               2 x 600                              Coal
Shidongkou II               Shanghai                                            2 x 600                              Coal
Xindian Phase III           Shandong                                            2 x 300                              Coal
Qinbei Phase II             Henan                                               2 x 600                              Coal
- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------

                                                                Subtotal          9,200

- --------------------------- ------------- --------------------- ------------- ------------ ----------- ------------- -------



Notes:

(1)  Commencement of commercial operations. See "Development of Power Plants --
     Plant Start-up and Operation."

(2)  Including start-up costs and interest expense during construction. At the
     exchange rate of US$1.00 to Rmb8.7.

(3)  Assumes a current construction cost of US$322 million. The final
     construction costs have not been determined as of the date of filing.

(4)  After the technical renovation, the generation capacity of the units III
     and IV of Jining power plant have been increased from 100MW to 115MW and
     110MW, respectively; and the generation capacity of Nanjing power plant has
     increased from 600MW to 640MW.

(5)  The generation capacity of Shantou oil-fired power plant and Nantong power
     plant were adjusted from 100MW and 1,400MW to 103MW and 1,404MW,
     respectively, according to the nameplate capacity of the generating units.

(6)  Two 100MW oil-fired generating units of Xindian power plant were shut down
     with the consideration of rising oil prices and the need of reducing
     operating costs at the end of 2003.




     The following table presents the availability factors and the capacity
factors for the years, 2000, 2001, 2002 and 2003 for the power plants which we
operate.



                                           Availability factor (%)                    Capacity factor (%)
                                   ----------------------------------------------------------------------------------
                                     2000       2001      2002      2003       2000      2001       2002      2003
                                   ----------------------------------------------------------------------------------
                                                                                     
Dalian
   Phase I.....................      89.35     96.79     93.58      90.66     53.58      53.66     56.59     64.32
   Phase II....................      88.81     90.33     94.71      96.77     50.13      49.25     58.46     73.79
Fuzhou
   Phase I.....................      89.33     90.99     95.57      91.08     57.11      51.3      54.61     72.03
   Phase II....................      89.61     95.42     92.19      93.58     47.71      41.35     62.82     72.43
Shangan
   Phase I.....................      93.86     90.01     86.72      89.15     66.51      64.46     64.85     69.76
   Phase II....................      90.48     94.52     94.16      91.72     62.99      65.6      69.44     71.18
Nantong
   Phase I.....................      86.78     93.45     96.73      89.69     55.24      58.95     59.84     62.61
   Phase II....................      90.09     88.28     97.28      99.72     46.50      60.34     67.03      73.8
Dandong........................      90.03     88.35     96.07      97.74     52.55      45.37     57.37     68.84
Shantou Oil-Fired..............      92.69     91.69     82.09      91.05     19.88      22.15     23.66     33.93
Shantou coal-fired.............      92.41     90.39     96.88      94.23     74.39      73.08     79.53     84.71
Shidongkou II..................      91.25     93.33     93.43      91.47     69.99      69.98     71.71     78.87
Nanjing........................      86.92     89.16     91.77      94.16     57.71      60.73     67.76     72.55
Dezhou.........................      90.37     92.33     91.25      90.47     63.76      64.97     49.92     54.05
Jining.........................      93.83     95.33     96.49      94.32     68.14      72.36     69.30     51.28
Weihai.........................      90.58     95.89     95.88      94.87     55.42      58.46     60.28     58.53
Shidongkou I...................       --         --      91.33      81.86       --        --       70.70     74.58
Taicang........................       --         --      90.21      95.31       --        --       70.65     80.71
Huaiyin........................       --         --      88.72      94.44       --        --       60.84     67.98
Changxing......................       --         --      90.21      86.56       --        --       70.65     81.65
Yushe..........................       --         --        --       94.69       --        --         --       80.2
Xindian........................       --         --        --       95.52       --        --         --      44.99
- ----------------------------------------------------------------------------------------------------------------------



     Our power plants, their respective operations and proposed projects are
described below.

Power plants in Liaoning Province

     Huaneng Dalian Power Plant ("Dalian Power Plant") Dalian Power Plant is
located on the outskirts of Dalian, on the coast of Bohai Bay. Dalian Power
Plant, including Phase I and Phase II, has an installed capacity of 1,400 MW
and consists of four 350 MW coal-fired units which commenced commercial
operations in 1988 and 1999 respectively.

     The coal supply for Dalian Power Plant is obtained from several coal
producers located mostly in northern Shanxi Province. The coal is transported
by rail from the mines to Qinhuangdao port and shipped by special 27,000 ton
automatic unloading ships to the wharf at the Dalian Power Plant. The wharf is
owned and maintained by the Dalian Port Authority and is capable of handling
30,000 ton vessels. Dalian Power Plant typically stores 140,000 to 150,000
tons of coal on site.

     Dalian Power Plant consumes 14,000 tons of coal per day when operating at
maximum generating capacity. In 2003, Dalian Power Plant obtained 24.14% of
its total consumption of coal pursuant to allocations and the remainder on the
open market. The weighted average cost of coal for Dalian Power Plant was
RMB260.48 (2002: RMB261.70) per ton in 2003.

     Dalian Power Plant sells all its electricity through the Liaoning
Electric Power Co., Ltd. Electricity generated by Dalian Power Plant is
delivered to the Liaoning Provincial Power Grid.

     Huaneng Dandong Power Plant ("Dandong Power Plant") Dandong Power Plant
is located on the outskirts of the city of Dandong in Liaoning. Dandong Power
Plant had originally been developed by HIPDC which, pursuant to the
Reorganization Agreement, transferred all its rights and interests therein to
us effective December 31, 1994. In March 1997, we began construction of
Dandong Power Plant, which comprises two 350 MW coal-fired units supplied by
an international consortium including Westinghouse Electric Corporation,
Mitsui Babcock Energy Limited and Sargent & Lundy L.L.C.

     Dandong Power Plant consumes 6,200 tons of coal per day when operating at
maximum generating capacity. In 2003, Dandong Power Plant obtained 38.14% of
its total consumption of coal pursuant to allocation and the remainder on the
open market. The weighted average cost of coal for Dandong Power Plant was
RMB227.64 (2002: RMB230.56) per ton in 2003.

     All the electricity generated by Dandong Power Plant is delivered to the
Liaoning Provincial Power Grid and was sold through the Liaoning Electric
Power Co., Ltd. The coal supply is obtained from several coal producers in
northern Shanxi Province. The coal is transported by rail from the mines to
Qinhuangdao port and shipped by barge to the Dadong port in Dandong, where it
is unloaded and transported to Dandong Power Plant using special coal handling
facilities. The wharf is owned and maintained by Dandong Power Plant and is
capable of handling 28,000 ton vessels. Dandong Power Plant typically stores
200,000 tons of coal on site.

Power plant in Fujian Province

     Huaneng Fuzhou Power Plant ("Fuzhou Power Plant") Fuzhou Power Plant is
located on the south bank of the Min River, southeast of the city of Fuzhou.
Fuzhou Power Plant, including Phase I and Phase II, has an installed capacity
of 1,400 MW and consists of four 350 MW coal-fired units which commenced
commercial operations in 1988 and 1999 respectively. The units of Phase I and
Phase II were respectively supplied by the Mitsubishi Consortium and an
international consortium including Siemens Aktiengesellschaft and Mitsui
Babcock Energy Limited.

     The coal supply for Fuzhou Power Plant is obtained from several coal
producers located mostly in northern Shanxi Province. The coal is transported
by rail from the mines to Qinhuangdao port and by ship down the east coast of
China and up the Min River to a wharf located at Fuzhou Power Plant. We own
and maintain the wharf, which is capable of handling vessels of up to 20,000
tons and of unloading 10,000 tons to 15,000 tons of coal per day. Fuzhou Power
Plant typically stores 170,000 to 180,000 tons of coal on site.

     Fuzhou Power Plant consumes up to 14,000 tons of coal per day when
operating at maximum generating capacity. In 2003, the Fuzhou Power Plant
obtained 44.63% of its total consumption of coal pursuant to allocations and
the remainder was obtained on the open market. The weighted average cost of
coal for Fuzhou Power Plant in 2003 was RMB274.01 (2002: RMB273.39) per ton.

     All the electricity sales of Fuzhou Power Plant are made through the
Fujian Electric Power Company, Ltd. Electricity generated by Fuzhou Power
Plant is delivered to the Fujian Provincial Power Grid.

Power plant in Hebei Province

     Huaneng Shangan Power Plant ("Shangan Power Plant") Shangan Power Plant
is located on the outskirts of Shijiazhuang. Shangan Power Plant has been
developed in two separate expansion phases. The Shangan Power Plant Phase I
has an installed capacity of 700 MW and consists of two 350 MW coal-fired
units which commenced commercial operations in 1990. The units were supplied
by the General Electric Consortium. Shangan Power Plant Phase II shares with
the Shangan Power Plant Phase I certain facilities, such as coal storage
facilities and effluence pipes, which have been built to accommodate the
requirements of plant expansions. The Shangan Power Plant Phase II utilizes
two 300 MW coal-fired units supplied by China Dongfang Group using technology
licensed for boilers from Foster Wheeler Energy Corporation. The two
generating units commenced commercial operation in 1997.

     The coal supply for Shangan Power Plant is obtained from numerous coal
producers in central Shanxi Province, which is approximately 64 kilometers
from Shangan Power Plant. The coal is transported by rail from the mines to
the Shangan Power Plant. We own and maintain the coal unloading facilities
which are capable of unloading 10,000 tons of coal per day. Shangan Power
Plant typically stores 80,000 to 120,000 tons of coal on site.

     Shangan Power Plant consumes 9,000 tons of coal per day when operating at
maximum generating capacity. In 2003, Shangan Power Plant obtained 45.63% of
its total consumption of coal pursuant to allocations and the remainder was
obtained on the open market. The weighted average cost of coal for Shangan
Power Plant in 2003 was RMB178.26 (2002: RMB169.91) per ton.

     Shangan Power Plant sells all its electricity through the Hebei Electric
Power Corporation. Electricity generated by Shangan Power Plant is delivered
to the Hebei Provincial Power Grid.

Proposed project in Hebei Province

     Huaneng Shangan Power Plant Phase III ("Shangan Phase III Expansion") The
Shangan Phase III Expansion is expected to be adjacent to the Shangan Power
Plant Phase I and the Shangan Power Plant Phase II. The Shangan Phase III
Expansion is expected to consist of two 600 MW coal-fired units. The project
proposal has been submitted to SDRC. Financing has not yet been arranged for
this project.

Power plants in Jiangsu Province

     Huaneng Nantong Power Plant ("Nantong Power Plant") Nantong Power Plant
is located in the city of Nantong. Nantong Power Plant, including Phase I and
Phase II, has an installed capacity of 1,404 MW and consists of two 352 MW and
two 350 MW coal-fired units which commenced commercial operations in 1989,
1990 and 1999, respectively. The units were supplied by the General Electric
Consortium.

     The coal supply for Nantong Power Plant is obtained from several coal
producers located mostly in northern Shanxi Province. The coal is transported
by rail from the mines to Qinhuangdao port and by ship to Yaogang, 7.5
kilometers from the Nantong Power Plant, where it is transshipped onto Company
barges for the last stage of the journey up the Yangtze River to the wharf
located adjacent to the Nantong Power Plant. The Company owns and maintains
the wharf which is capable of handling 5,000 ton barges and of unloading
15,000 tons of coal per day. Nantong Power Plant typically stores 120,000 to
150,000 tons of coal on site.

     Nantong Power Plant consumes up to 14,000 tons of coal per day when
operated at maximum generating capacity. In 2003, Nantong Power Plant obtained
29.97% of its total consumption of coal pursuant to allocations and the
remainder was obtained on the open market. The weighted average cost of coal
for Nantong Power Plant in 2003 was RMB257.83 (2002: RMB252.48) per ton.

     Nantong Power Plant sells all its electricity through the Jiangsu
Electric Power Company. Electricity generated by Nantong Power Plant is
delivered to the Jiangsu Provincial Power Grid.

     Huaneng Nanjing Power Plant ("Nanjing Power Plant") Nanjing Power Plant
has an installed capacity of 640 MW consisting of two 320 MW coal-fired units
which commenced commercial operations in March and October 1994, respectively.

     The coal supply for the Nanjing Power Plant is obtained from several coal
producers located in the Shanxi and Anhui Provinces. The coal is transported
by rail from the mines to Yuxikou Port and Pukou Port and shipped to the
plant's own wharf facilities. The wharf is capable of handling 6,000 ton
vessels. Nanjing Power Plant typically stores 100,000 tons of coal on site and
consumes 5,000 tons of coal per day when operating at maximum generating
capacity.

     In 2003, Nanjing Power Plant obtained approximately 45.61% of its total
consumption of coal pursuant to allocations and the remainder was obtained on
the open market. The weighted average cost of coal for Nanjing Power Plant in
2003 was RMB256.44 (2002: RMB247.87) per ton.

     Nanjing Power Plant sells all its electricity through the Jiangsu
Electric Power Company. Electricity generated by Nanjing Power Plant is
delivered to the Jiangsu Provincial Power Grid.

     Jiangsu Taicang Power Plant ("Taicang Power Plant") Taicang Power Plant
was constructed in the late 1990's. It is located in the vicinity of Suzhou,
Wuxi and Changzhou, which is the most affluent area in Jiangsu Province.
Taicang Power Plant is an ancillary facility of the China-Singapore Suzhou
Industrial Park and has a total planned capacity of 1,200 MW. Taicang Power
Plant now comprises 2 X 300 MW PRC-built coal-fired generating units, which
commenced operation in December, 1999 and April, 2000 respectively.

     The coal supply for Taicang Power Plant is primarily from Shenhua in
Inner Mongolia and Datong in Shanxi Province. Electricity generated by Jiangsu
Taicang Power Plant is transmitted to the East China Power Grid through 220 kV
transmission lines.

     In 2003, Taicang Power Plant obtained approximately 41.35% of its total
consumption of coal pursuant to allocations and the remainder was obtained on
the open market. The weighted average cost of coal for Taicang Power Plant in
2003 was RMB262.95 (2002: RMB 257.04) per ton.

     Taicang Power Plant sells all its electricity through the Jiangsu
Electric Power Company. Electricity generated by Taicang Power Plant is
delivered to the Jiangsu Provincial Power Grid.

     Jiangsu Huaiyin Power Plant ("Huaiyin Power Plant") Huaiyin Power Plant
was constructed in the early 1990's. It is located in the center of the
northern Jiangsu power grid. The plant's 2 X 200MW PRC-built coal-fired
generating units commenced operation in November, 1993 and August, 1994
respectively. In order to reduce energy consumption and increase capacity, one
generation unit of Huaiyin Power Plant was upgraded in October 2001, which
increased the maximum generation capacity of that unit to 220 MW. In 2002,
upgrading of the second generating unit was completed, and the actual
generation capacity of Huaiyin Power Plant is 400 MW.

     In 2003 Huaiyin Power Plant obtained approximately 73.69% of its total
consumption of coal pursuant to state allocations and the remainder was
obtained on the open market. The weighted average cost of coal for Huaiyin
Power Plant in 2003 was RMB256.21 per ton.

     The coal supply for the Huaiyin Power Plant is primarily from Anhui
Province, Shanxi Province, Henan Province and Shanxi Province. Electricity
generated by Jiangsu Power Plant is transmitted to the Jiangsu Power Grid
through 110 kV and 220 kV transmission lines.

     Jiangsu Huaiyin Power Plant sells its electricity to Jiangsu Electric
Power Company through a power purchase agreement and through competitive
bidding. Electricity generated by Huaiyin Power Plant is delivered to the
Jiangsu Provincial Power Grid.

Proposed projects in Jiangsu Province

     Huaiyin Power Plant Phase II Expansion ("Huaiyin Phase II Expansion")
This project is planned to consist of two 330 MW coal-fired generating units.
The estimated total investment is approximately RMB2.4 billion, of which 20%
will be financed by equity capital and 80% by bank borrowing. We expect to own
63.64% equity interest in this project, with Jiangsu Provincial National Trust
and Asset Management Group an Jiangsu Provincial Power Development Joint Stock
Limited Company owning 26.36% and 10% respectively. The project has commenced
construction and is expected to be put into operation in 2005.

     Huaneng Jinling Combined-cycle Gas turbine Project ("Jinling Gas Turbine
Project") The project is expected to be located on the outskirts of Nanjing.
Three 300 MW-class combined-cycle-gas-turbine generating units will be
constructed and the project investment is estimated to be approximately RMB3.6
billion, of which 25% will be financed by equity capital and 75% by bank
borrowing. The Jinling Gas Turbine Project will be jointly developed by us,
Jiangsu Provincial Investment Management Company, Ltd. and Nanjing Municipal
Investment Corporation. The project proposal for Jinling Gas Turbine Project
has been approved by the State Council. We have signed a letter of intent with
PetroChina Company Limited with regards to the purchase and transportation of
natural gas for Jinling Gas turbine Project.

     Taicang Power Plant Phase II Expansion ("Taicang Phase II Expansion").
This project is planned to consist of two 600MW coal-fired generating units
and the project proposal has been approved by the State Council.

Power plants in Shanghai Municipality

     Huaneng Shanghai Shidongkou Second Power Plant ("Shidongkou II")
Shidongkou II is located in the northern suburbs of Shanghai. Shidongkou II
has an installed capacity of 1,200 MW and consists of two 600 MW coal-fired
super-critical units which commenced commercial operations in June and
December 1992, respectively. The units supplied by a consortium of
international suppliers led by Sargent & Lundy L.L.C.

     The coal supply for Shidongkou II is obtained from several coal producers
located mostly in northern Shanxi Province. The coal is transported by rail
from the mines to Qinhuangdao port or Tianjin port and shipped to the plant's
own wharf facilities. The wharf is capable of handling 35,000 ton vessels.
Shidongkou II typically stores 140,000 to 180,000 tons of coal on site and
consumes 11,450 tons of coal per day when operating at maximum generating
capacity.

     In 2003, Shidongkou II obtained 34.55% of its total consumption of coal
pursuant to allocations and the remainder was obtained on the open market. The
weighted average cost of coal for Shidongkou II in 2003 was RMB250.81 (2002:
RMB255.09) per ton.

     Shidongkou II sells all its electricity through Shanghai Municipal
Electric Power Company. Electricity generated by Shidongkou II is delivered to
the Shanghai Municipal Power Grid.

     Shanghai Shidongkou First Power Plant ("Shidongkou I") Shidongkou I was
constructed in the 1980's and is located in the northern region of the
Shanghai Power Grid. The plant comprises 4 X 300 MW PRC-built coal-fired
generation units, which commenced operation in February, 1988, December, 1988,
September, 1989 and May, 1990 respectively, and has a total installed capacity
of 1,200 MW.

     The coal supply for Shidongkou I is primarily from Shanxi Province, Anhui
Province and Henan Province. Electricity generated by Shidongkou I is
transmitted to the East China Power Grid through 220 kV and 500 kV
transmission lines.

     In 2003, Shidongkou I obtained approximately 50.89% of its total
consumption of coal pursuant to allocations and the remainder was obtained on
the open market. The weighted average cost of coal for Shidongkou I in 2003
was RMB262.69 (2002: RMB 256.2) per ton.

     Shidongkou I sells its electricity through Shanghai Municipal Electric
Power Company. Electricity generated by Shidongkou I is delivered to the
Shanghai Municipal Power Grid.

Proposed projects in Shanghai Municipality

     Shanghai Combined-cycle Gas Turbine Power Plant ("Shanghai Gas Turbine
Project") Three 300 MW-class combined-cycle-gas-turbine generating units will
be constructed, and the project investment is estimated to be approximately
RMB3.6 billion, of which 25% will be financed by equity capital and 75% by
bank borrowing. Shanghai Gas Turbine Project will be jointly developed by us
and Shenergy Company, Ltd. according to the expected ownership of 70% and 30%
respectively. The project proposal for Shanghai Gas turbine Project has been
approved by the State Council. We have signed a letter of intent with Shanghai
Natural Gas Pipeline Company with regard to the purchase and transportation of
natural gas for Shanghai Gas Turbine Project.

     Shanghai Shidongkou Second Power Plant Phase II Expansion ("Shidongkou II
Phase II Expansion"): This project is planned to consist of two 600MW
coal-fired generating units.

Power plants in Guangdong Province

     Huaneng Shantou Oil-Fired Power Plant ("Shantou Oil-Fired Plant") Shantou
Oil-Fired Plant is located on the outskirts of the city of Shantou. Shantou
Oil-Fired Plant has an installed capacity of 103 MW and consists of two gas
turbine units and a single steam turbine unit. The two gas turbine units
commenced commercial operations in January 1987, and Shantou Oil-Fired Plant
commenced full-scale commercial operations in April 1988. The units were
supplied by Alsthom.

      Shantou Oil-Fired Plant obtains 100% of its crude oil requirements
pursuant to government allocation under the State Plan. Prior to 1995, each
year SDRC allocated 120,000 tons of crude oil produced by the Shengli Oil
Field to Shantou Oil-Fired Plant. This allocation is currently made in
accordance with our planned generation. The crude oil purchased by Shantou
Oil-Fired Plant is transported from the Shengli Oil Field to the Huangdao port
in Shandong Province and shipped by the Guangzhou Ocean Shipping (Group)
Company by tanker to storage facilities at the Maoming Petrochemical Facility
in Zhanjiang. The crude oil is then transported twice a month by 5,000 ton
barge loads to the port in Shantou where the oil is stored in a 30,000 cubic
meter storage tank. From the Shantou port, the crude oil is pumped once a week
through a 14-kilometer pipeline to Shantou Oil-Fired Plant. Shantou Oil-Fired
Plant typically stores 2,500 tons of oil on site and consumes 200 tons of oil
per day.

     The average price for crude oil from the Shengli Oil Field to Shantou
during 2003 was RMB1880.03 (2002: RMB1,542.60) per ton.

     The electricity sales of Shantou Oil-Fired Plant were made through the
Shantou Power Supply Branch of Guangdian Group Company. Electricity generated
by Shantou Oil-Fired Plant is delivered to the Guangdong Shantou Municipal
Power Grid.

     Huaneng Shantou Coal-Fired Power Plant ("Shantou Power Plant") Shantou
Power Plant had originally been developed and constructed by HIPDC which,
transferred all its rights and interests therein to us effective December 31,
1994. See "Item 7. Major Shareholders and Related Transactions." Located on
the outskirts of the city of Shantou near Shantou Oil-Fired Plant, Shantou
Power Plant was set up with the support of the Shantou municipal government
and the Guangdong provincial government. Shantou Power Plant consists of two
300 MW coal-fired units with boilers supplied by Dongfang Group using
technology from Foster Wheeler Energy Corporation and Russian-made turbines
and generators. The two units commenced commercial operation on January 1,
1997.

     The coal supply for Shantou Power Plant is obtained from several coal
producers located mostly in the northern area of Shanxi Province. The coal is
transported by rail from the mines to Qinhuangdao port and by ship down the
east coast of China to the wharf located at Shantou Power Plant, which is
maintained by the Shantou Port Authority and is capable of handling 35,000 ton
vessels. The Shantou Power Plant typically stores 140,000 to 150,000 tons of
coal on site.

     Shantou Power Plant will consume up to 5,000 tons of coal per day when
operated at maximum generating capacity. In 2003, the Shantou Power Plant
obtained 44.01% of its total consumption of coal pursuant to allocations and
the remainder was purchased on the open market. The weighted average costs of
coal for Shantou Power Plant in 2003 was RMB293.60 (2002: RMB294.32) per ton.

     The electricity sales of Shantou Power Plant are made to the Shantou
Municipal Power Corporation and the Guangdong Guangdian Power Grid Group Co.,
Ltd. Electricity generated by Shantou Power Plant is delivered to the
Guangdong Provincial Power Grid.

Proposed project in Guangdong Province

     Huaneng Shantou Coal-Fired Power Plant Phase II ("Shantou Phase II
Expansion") Shantou Phase II Expansion is expected to be adjacent to the
Shantou Power Plant. We expect that the Shantou Phase II Expansion will share
with the Shantou Power Plant certain facilities, such as coal unloading and
storage facilities and effluence pipes, which have been built to accommodate
the requirements of plant expansions. The Shantou Phase II Expansion is
expected to consist of one 600 MW coal-fired unit, with total investment of
RMB2.26 billion, of which 25% will be financed by equity capital and 75% by
bank borrowing. The project has commenced construction and is expected to be
put into operation in 2006.

Power plants in Shandong Province

     Dezhou Power Plant ("Dezhou Plant") Dezhou Plant, is located in Dezhou
City, near the border between Shandong and Hebei Provinces, close to an
industrial zone that is an important user of electric power for industrial and
commercial purposes.

     Dezhou Plant comprises of three Phases, with Phases I and II each
consisting of two 300 MW coal-fired generation units, and Phase III consisting
of two 660 MW coal-fired generation units. Phase III was completed in 2002,
which is ahead of plan schedule by one year.

     Dezhou Plant is approximately 200 km from Taiyuan, Shanxi Province, the
source of the plant's coal supply. The plant is located on the
Taiyuan-Shijiazhuang-Dezhou rail line, giving it access to transportation
facilities for coal. In 2003, Dezhou Power Plant obtained approximately 60.16%
of its total consumption of coal pursuant to allocations and the remainder was
obtained on the open market. The weighted average cost of coal for Dezhou
Power Plant in 2003 was RMB182.60 (2002: RMB176.24) per ton. The plant is
connected to the main trunk rail line at Dezhou by a dedicated 3.5 km spur
line owned by us. The plant is located 22 km from its reservoir and 108 km
from the Yellow River, which supplies water to the reservoir.

     Dezhou Plant sells its electricity through the Shandong Electric Power
Corporation is connected to the Shandong Provincial Power Grid by one 500 KV
circuit and six 220 KV circuits.

     Jining Power Plant ("Jining Plant") Jining Plant is located in Jining
City, near the Jining load center and near numerous coal mines. Yanzhou coal
mine, which is adjacent to the plant, alone has annual production of
approximately 20 million tons.

     Jining Plant facilities have undergone replacement, renovation and
construction as necessary. Jining Plant has higher rates of auxiliary power
and coal consumption than many larger and newer plants. Generating units V and
VI of Jining Plant (using cycled fluidized bed combustion boiler) with
capacity of 270 MW have been put into commercial operation in July and August
2003, respectively. Jining Plant currently comprises six coal-fired generating
units, with an aggregate installed capacity of 595 MW.

     In 2003, Jining Power Plant obtained approximately 3.56% of its total
consumption of coal pursuant to allocations and the remainder was obtained on
the open market. The weighted average cost of coal for Jining Power Plant in
2003 was RMB195.55 (2002: RMB197.17) per ton.

     Jining Plant sells its electricity through the Shandong Electric Power
Corporation. The generation units of Jining Plant are connected to the
Shandong Provincial Power Grid through a combination of 110 KV and 220 KV
lines.

     Weihai Power Plant ("Weihai Plant") we hold a 60% interest in Weihai
Plant, the remaining 40% interest of which is owned by Weihai Power
Development Bureau ("WPDB"). The facility is situated approximately 16 km
southeast of Weihai City, on the shore of the Bohai Gulf. Its location
provides access to cooling water for operations and transportation of coal as
well as ash and slag disposal facilities.

     Weihai Plant, developed in two phases, consists of four coal-fired
generation units with an aggregate design capacity of 850 MW. Phase I consists
of two 125 MW generation units (Units I and II), and Phase II consists of two
300 MW generation units (Units III and IV). Unit I began commercial operation
in May 1994, and Unit II began commercial operation in January 1995.

     Unit III commenced commercial operation in March 1998. Unit IV commenced
commercial operation in November 1998. Phase I comprises two domestically
manufactured coal-fired generation units. Phase II comprises two domestically
manufactured coal-fired generation units with sub-critical pressure turbines
and reheating boilers.

     In 2003, Weihai Power Plant obtained approximately 57.48% of its total
consumption of coal pursuant to allocations and the remainder was obtained on
the open market. The weighted average cost of coal for Weihai Power Plant in
2003 was RMB250.16 (2002: RMB253.98) per ton.

     Weihai Power Plant sells its electricity through Shandong Electric Power
Corporation and delivers its electricity to Shandong Provincial Power Grid.

     Huaneng Xindian Power Plant ("Xidian Power Plant") Xindian Power Plant is
located in Zibo Municipality of Shandong Province. Xindian Power Plant
currently has an installed capacity of 450 MW and consists of two 225 MW
coal-fired units which commenced commercial operations in December 31, 2001
and January 22, 2002, respectively.

     Two 100 MW oil-fired generating units of Xindian Power Plant were shut
down with the consideration of rising oil prices and the need of reducing
operating costs.

     The coal supply for Xindian Power Plant is obtained from several coal
producers located mostly in Shanxi Province. In 2003, Xindian Power Plant
obtained 21.19% of its total consumption of coal pursuant to allocations and
the remainder on the open market. The weighted average cost of coal for
Xindian Power Plant was RMB235.94 per ton in 2003.

     Xindian Power Plant sells all its electricity through the Shandong
Electric Power Corporation. Electricity generated by Xindian Power Plant is
delivered to the Shandong Provincial Power Grid.

Proposed project in Shandong Province

     Xindian Power Plant Phase III Expansion ("Xindian Phase III Expansion")
This project is planned to consist of two 300MW coal-fired generating units.
The project proposal has been submitted to SDRC.

Power plant in Zhejiang Province

     Zhejiang Changxing Power Plant ("Changxing Power Plant") Changxing Power
Plant was constructed in the early 1990's. It is located at the intersection
of Zhejiang Province, Jiangsu Province and Anhui Province. Changxing Power
Plant is a key power plant in northern Zhejiang area. It has 2 X 125 MW
PRC-built coal-fired generating units which commence operation in January 1992
and August 1992, respectively.

     The coal supply for Changxing Power Plant is primarily from Jungar in
Inner Mongolia and Xuzhou in Jiangsu Province. In 2003, Changxing Power Plant
obtained approximately 66.55% of its total consumption of coal pursuant to
allocations and the remainder was obtained on the open market. The weighted
average cost of coal for Changxing Power Plant in 2003 was RMB263.96 per ton
(2002: RMB258.47). Electricity generated by Changxing Power Plant is
transmitted to the Zhejiang Provincial Power Grid through 110 kV and 220 kV
transmission lines.

     Changxing Power Plant sells its electricity to Zhejiang Provincial
Electric Power Company. Changxing Power Plant delivers its electricity to
Zhejiang Provincial Power Grid.

Proposed project in Zhejiang Province

     Yuhuan Power Plant ("Yuhuan Phase I"). This project is expected to
consist two 1000 MW ultra-super critical coal-fired generating units, with an
estimated total investment of RMB8.49 billion, of which 25% will be financed
by equity capital and 75% by bank borrowing. We expect to own 100% interests
of this project. The feasibility study report on the project has been approved
by the State Council.

Power Plant in Shanxi Province

     Huaneng Yushe Power Plant ("Yushe Power Plant") Yushe Power Plant is
located in Yushe County of Shanxi Province, currently has an installed
capacity of 200 MW and consists of two 100 MW coal-fired units which commenced
commercial operations in August and December 1994, respectively.

     The coal supply for Yushe Power Plant is obtained from several coal
producers located mostly in Shanxi Province. In 2003, Yushe Power Plant
obtained 42.92% of its total consumption of coal pursuant to allocations and
the remainder on the open market. The weighted average cost of coal for Yushe
Power Plant was RMB146.77 per ton in 2003.

     Yushe Power Plant sells all its electricity through the Shanxi Electric
Power Corporation. Electricity generated by Yushe Power Plant is delivered to
the Shanxi Provincial Power Grid.

Proposed Project in Shanxi Province

     Yushe Power Plant Phase II Expansion ("Yushe Phase II Expansion") This
project is planned to consist of two 300MW coal-fired generating units and the
construction work has commenced. The project is expected to be put into
operation in 2004.

Power Plant in Henan Province

     Huaneng Qinbei Power Plant ("Qinbei Power Plant") Qinbei Power Plant is a
power plant under construction, located in Jiyuan Municipality of Henan
Province. Its planned installed capacity is 1,200 MW which consists of two 600
MW supercritical coal-fired generating units and will commence commercial
operations in 2004 and 2005, respectively.

Proposed Project in Henan Province

     Qinbei Power Plant phase II Expansion ("Qinbei Phase II Expansion") This
project is planned to consist of two 600 MW coal-fired generating units. The
project proposal has been submitted to SDRC.

Competition and dispatch

     All power plants in China are subject to dispatch conducted by various
dispatch centers. A dispatch center is required to dispatch electricity
pursuant to the Regulations on the Administration of Electric Power Dispatch
Networks and Grids, issued by the State Council with effect from November 1,
1993, and in accordance with its agreements with power plants subject to its
dispatch. As a result, there is competition for favorable dispatch treatment
in the PRC electric power industry, especially during the off-peak load
periods. More efficient power plants usually operate at higher output than
less efficient power plants. We believe that in order to increase system
stability, large and efficient power plants such as those of us will be
preferred as base load plants to generate power for the grids to which they
connect. We believe that our dispatch arrangements with the local power
corporations and dispatch centers, superior quality equipment, lower coal
consumption rate, higher efficiency of plant operation, lower emission levels
and larger capacity represent competitive advantages in the markets in which
we operate.
     Since 1985, a number of foreign power developers and foreign companies
(including Hong Kong companies), have been pursuing investment opportunities
in the PRC electric power industry, which opportunities include the
development of power plants (through joint ventures with PRC partners) or the
purchase of interests in existing power plants. While we believe that we
currently possess advantages over such foreign developers because of our
extensive experience in the electric power industry of China and our close
relationships with the central and local governments, there can be no
assurance that we will not experience increased competition in the future.

Environmental regulation

     We are subject to the PRC Environmental Protection Law, the regulations
of the State Council issued thereunder, the PRC Law on the Prevention and
Treatment of Water Pollution, the PRC Law on the Prevention and Treatment of
Air Pollution, the Emission Standard of Air Pollutants for Thermal Power
Plants (the "New Emission Standards") thereunder and the PRC Law on Ocean
Environment Protection (collectively the "National Environmental Laws") and
the environmental rules promulgated by the Local Governments in whose
jurisdictions our various power plants are located (the "Local Environmental
Rules"). According to the National Environmental Laws, the State Environmental
Protection Bureau sets national environmental protection standards and local
environmental protection bureaus may set stricter local standards. Enterprises
are required to comply with the stricter of the two standards.

     According to the New Emission Standards, promulgated by the State
Environmental Protection Agency and State Technology Supervision
Administration with effect from January 1, 1997, more restrictive standards to
control sulfur dioxide and nitrous oxide emissions are applicable to all
thermal power plant projects for which environmental impact study reports are
yet to be approved. These restrictive standards govern both the total sulfur
dioxide emissions from the power plant and the emission density of each
chimney. Although the New Emission Standards are not applicable to the power
plants, they apply to the Proposed Projects as well as any additional projects
that we decide to undertake.

     We have adopted measures to control different emissions into the
atmosphere. In order to reduce fly ash, we use very high-efficiency
electrostatic precipitators. Sulfur emissions are reduced by burning
low-sulfur content coal, which is reflected in the design of the coal-fired
Power Plants.

     Each power plant has a waste water treatment facility to treat water used
by the power plant before it is released into the river or the sea. We pay
discharge fees on the basis of measurements made at discharge points of each
plant where waste is released. The PRC currently does not have any regulations
regarding thermal pollution of the cooling water used by the electric power
industry.

     Approximately 70% of the ash remaining after the combustion of coal is
used in the manufacture of bricks and other construction materials in 2003.

     In 2001, 2002 and 2003, we paid discharge fees to local governments of
approximately RMB29.7 million, RMB38.9 million and RMB72.68 million
respectively. The increase in 2001 and 2002 was primarily due to the fact that
some local governments started to implement the sulfur dioxide discharge
regulation in accordance with the PRC Law of the Prevention and Treatment of
Air Pollution, as a result of which the discharge fees were collected for the
actual amount of discharge, rather than only for the amount in excess of
certain threshold as in the past. The increase in 2003 was due to the
implementation of a new regulation and the implementing Standard Measures on
Collection of Pollution Discharge Fees which became effective on July 1, 2003.
Effective July 1, 2003, all power plants in China became subject to the
pollutant discharge levy system, pursuant to which discharge fees are levied
based on the actual amount of pollutants discharged. As a result, all of our
power plants are now required to pay discharge fees in such manner. Under this
new regulation, the discharge fees for sulphur dioxide are RMB 0.21 per
kilogram, which will be increased annually by RMB0.21 per kilogram to RMB 0.63
per kilogram in 2005. Discharge fees for nitrous dioxide will be RMB0.63 per
kilogram starting from July 1, 2004. The discharge fees for the dust are
RMB0.28 per kilogram from July 1, 2003.

     We believe that we have implemented systems that are adequate to control
environmental pollution caused by our facilities. In addition to the measures
identified above, each power plant has its own environment protection office
and staff responsible for monitoring and operating the environmental
protection equipment. The environmental protection departments of the local
governments monitor the level of emissions and base their fee assessments on
the results of their tests.

     We believe our environmental protection systems and facilities for the
power plants are adequate for us to comply with applicable national and local
environmental protection regulations. However, the PRC Government may impose
additional, stricter regulations similar to the New Emission Regulations which
would require additional expenditure on compliance with environmental
regulations.

Insurance

     We currently maintain with the PICC Property and Casualty Company Ltd.,
China Pacific Property Insurance Co., Ltd. and Ping An Property and Casualty
Insurance Company of China, Ltd. approximately RMB69.9 billion of coverage on
our property, plant and equipment (including construction insurance against all
risks for the expansion project of Jining Power Plant). We also purchased
insurance coverage for construction and installation related damages for Yushe
Power Plant and Qinbei Power Plant.

     With the exception of Yushe Power Plant for which we currently maintain
third-party liability insurance, we do not currently carry any third party
liability insurance to cover claims in respect of personal injury or property
or environmental damage arising from accidents on our property or relating to
our operations. We have not had a third party liability claim filed against us
during the last three years. We do not carry business interruption insurance,
which is not customarily carried by power companies in the PRC.

     We believe that our insurance coverage is adequate and is standard for
the power industry in China.

ITEM 5   Operating and Financial Review and Prospects

     Our core business is to develop, construct and operate large-thermal
power plants throughout China by making use of modern technology and equipment
and financial resources available domestically and internationally and provide
sustainable and stable electricity supply to users through local grid
companies. Currently, we wholly own 14 power plants and have controlling
interests in 5 power plants and minority interests in three power companies.
These power plants and power companies are widely located in the Liaoning,
Hebei, Henan, Shanxi, Shangdong, Jiangsu, Zhejiang, Fujian and Guangdong
Provinces, and in Shanghai, which is the largest financial and business center
of China.

     Our financial performance has been affected by factors arising from
operating in a regulated industry and in an economy still in the transition
from a planned economy to a freer one. These factors include the fact that
many of our inputs, including fuel and transportation, are subject to PRC
Government coordination or allocations and a power rate setting process
whereby the power rate for most of our output is subject to PRC Government
approval. The PRC Government is implementing certain economic reform programs
which have reduced its involvement in allocations of fuel and transportation
services.

     In 2002, the PRC Government announced and started to implement measures
to further reform the power industry. On December 29, 2002, five independent
power generation group companies were created or restructured to take over the
power generation assets originally owned by the State Power Corporation of
China. Two national grid companies were created to take over power
transmission and distribution assets originally owned by the State Power
Corporation of China. The State Electricity Regulatory Commission was created
to regulate the power industry. Huangeng Group was restructured to be one of
the five power generation group companies. The restructured Huaneng Group has
reiterated the existing supporting policies to us.

Critical Accounting Policies

     We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact of
and any associated risks related to these policies on our business operation
is discussed throughout the Operating and Financial Review and Prospects where
such policies affect our reported and expected financial results. For a
detailed discussion on the application of these and other accounting policies,
see Note 2 in the Notes to the Financial Statements in Item 17 of this Annual
Report on Form 20-F, beginning on page F-9. Note that our preparation of this
Annual Report on Form 20-F requires us to make estimates and assumptions that
affect the reported amount of assets and liabilities, disclosure of contingent
assets and liabilities at the date of our financial statements, and the
reported amount of revenue and expenses during the reporting period. There can
be no assurance that actual results will not differ from those estimates.

     Depreciation of Property, Plant and Equipment. Depreciation is calculated
on a straight-line basis to write off the cost of each asset to their
estimated residual value over their estimated useful life as follows:

     Buildings                                                8-35 years
     Electric utility plant in service                        4-30 years
     Transportation facilities                                13-27 years
     Others                                                   5-13 years

     The useful life and depreciation method are reviewed periodically to
ensure that the method and period of depreciation are consistent with the
expected pattern of economic benefits from items of property, plant and
equipment.

     Impairment of long-lived assets. Our long-lived assets include property,
plant and equipment, investments in associates and other long-term assets. As
of December 31, 2003, we and our subsidiaries had RMB42,658 million of
property, plant and equipment, RMB2,766 million of investment in associates
and RMB1,038 million of other long-term assets, accounting for approximately
87% of our total assets.

     Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Whenever the carrying amount of an asset exceeds its recoverable
amount, an impairment loss is recognized in the income statement. The
recoverable amount is the higher of an asset's net selling price and value in
use. The net selling price is the amount obtainable from the sale of an asset
in an arm's length transaction less the costs of disposal while value in use
is the present value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its useful
life. Recoverable amounts are estimated for individual assets or, if it is not
possible, for the cash-generating unit to which the asset belongs.

     Deferred taxes. As part of the process of preparing our consolidated
financial statements, we are required to exercise considerable judgment to
estimate our deferred tax in each individual power plant and our headquarters.
This process involves us estimating future tax effects of temporary
differences between the tax bases of assets and liabilities and amounts
reported in the accompanying consolidated balance sheets. We use currently
enacted tax rates to determine deferred income tax. If these rates change, we
would have to adjust our deferred tax in the period these changes happen
through the income statement. Deferred tax assets relating to the carry
forward of unused tax losses are recognized to the extent that it is probable
that future taxable income will be available against which the unused tax
losses can be utilized. As of December 31, 2003, we and our subsidiaries had
RMB 21 million and RMB 103 million of deferred tax assets and deferred tax
liabilities, respectively.


Certain Operating and Financial Data

     The following table sets forth certain unaudited operating and financial
data for each of our operating power plants for the fiscal year ended December
31, 2003.



     Renminbi in millions, except as otherwise stated


                                                           Shantou                        Shidongkou
                 Dalian     Fuzhou    Nantong    Shangan  Oil-Fired   Dandong    Shantou      II       Nanjing     Dezhou
               -------------------------------------------------------------------------------------------------------------
                                                                                    
Operating
  Data
- ---------------
Actual
  generation
  (million kWh)   8,468.73  8,857.67   8,386.39   8,018.67    306.54   4,220.94   4,452.18  8,290.41    4,067.29  11,932.24
Coal
  consumption
  rate
  (grams/kWh)       310.03    306.47     312.49     325.94    323.50     309.64     312.66    296.59      309.76     322.11

Financial Data
Operating
  revenue, net    1,900.33  2,389.79   2,147.36   2,007.60    178.36     926.81   1,521.56  2,249.59    1,027.06   3,205.85
Fuel               (874.37)  (901.06)   (863.65)   (613.31)  (129.97)   (423.69)   (499.09)  (775.05)    (389.00)   (979.65)
Maintenance         (92.88)   (77.34)    (76.00)    (97.58)   (12.24)    (26.61)    (44.18)   (63.54)     (57.84)    (98.00)
Depreciation       (396.22)  (383.87)   (394.54)   (347.02)   (25.56)   (285.31)   (304.12)  (404.82)    (161.12)   (563.79)
Labor               (74.37)   (78.28)    (90.62)    (85.65)   (11.63)    (33.68)    (81.60)   (80.91)     (75.32)   (171.45)
Service fees to
  HIPDC               -        (3.77)      -       (126.96)     -          -        (84.00)     -           -          -
Other
  operating
  expenses          (47.75)   (70.9)     (63.91)    (64.40)    (8.07)    (28.69)    (56.77)   (76.21)     (32.45)   (180.61)
               -------------------------------------------------------------------------------------------------------------
Profit (loss)
  from
  operation         414.74    874.57     658.64     672.68     (9.11)    128.83     451.80    849.06      311.33   1,212.35
Financial
  (expenses)
  income, net       (75.05)   (94.85)   (109.48)    (11.34)     0.05     (89.91)      0.21     (2.29)       0.14     (47.91)
Gain from
  disposal of
  investments         -         -          -          -         0.02       -          9.17      0.12        -          -
               -------------------------------------------------------------------------------------------------------------
Profit (loss)
  before tax        339.69  779.72       549.16     661.34     (9.04)     38.92     461.18    846.89      311.47   1,164.44
Income tax
  expense           (61.75) (69.12)      (63.04)    (97.27)     -          -        (44.91)  (138.68)     (42.43)   (198.27)
Net profit
  (loss)            277.94  710.6        486.12     564.07     (9.04)     38.92     416.27    708.21      269.04     966.17
               =============================================================================================================



(TABLE CONTINUED)




     Renminbi in millions, except as otherwise stated


                                       Shidongkou
                   Jining   Changxing      I        Xindian*  Weihai    Taicang    Huaiyin    Yushe*
               --------------------------------------------------------------------------------------
                                                                        
Operating
  Data
- ---------------
Actual
  generation
  (million kWh)    2,132.71   1,788.12   7,839.50     559.47  4,357.84   4,241.68   2,620.15    278.46
Coal
  consumption
  rate
  (grams/kWh)        353.27     339.58     341.66     323.33    331.95     313.71     330.81    369.01

Financial Data
Operating
  revenue, net       452.68     454.05   1,622.98     149.97  1,339.60   1,104.98     652.30     57.35
Fuel                (207.46)   (227.35)   (885.35)    (60.13)  (459.25)   (430.17)   (286.38)   (20.07)
Maintenance          (29.97)    (30.46)    (87.25)     (7.22)   (52.36)    (30.17)    (33.80)    (2.96)
Depreciation         (62.05)    (50.17)   (205.95)    (14.62)  (213.46)   (171.69)   (112.47)    (8.65)
Labor               (108.08)    (61.21)   (141.97)    (14.96)  (106.28)    (41.04)    (60.17)    (5.75)
Service fees to
  HIPDC                -          -          -          -         -          -          -         -
Other
  operating
  expenses            (8.29)    (33.03)   (117.52)     (8.20)   (70.15)    (20.76)    (35.03)    (7.59)
               ---------------------------------------------------------------------------------------
Profit (loss)
  from
  operation           36.83      51.83     184.94      44.84    438.10     411.15     124.45     12.33
Financial
  (expenses)
  income, net         11.68       0.24     (38.93)     (5.02)   (74.00)    (76.12)     (6.23)    (3.14)
Gain from
  disposal of
  investments          0.75        -         0.06       -         -          -          -         -
               ----------------------------------------------------------------------------------------
Profit (loss)
  before tax          49.26      52.07     146.07      39.82    364.10     335.03     118.22      9.19
Income tax
  expense             (7.57)     (8.85)    (28.55)     (7.20)  (120.54)   (114.03)    (35.43)    (3.91)
Net profit
  (loss)              41.69      43.22     117.52      32.62    243.56     221.00      82.79      5.28
               ========================================================================================

Note*    Since the end of October 2003, we had more than 50% equity interests
         in these two operating plants.


A.       Operating Results

     Our Financial Statements are prepared under IFRS. The audited financial
statements are accompanied with notes setting out the differences between IFRS
and US GAAP. The following management's discussion and analysis is based on
the financial information prepared under IFRS. For material differences
between IFRS and US GAAP, please refer to Note 41 to the Financial Statements.

Year Ended December 31, 2003 compared to Year Ended December 31, 2002

General

     We have achieved good operating results in 2003.

     In 2003, our electricity sales reached 86.242 billion kWh, representing
an increase of 28.08% from 67.332 billion kWh of last year. Accordingly, net
operating revenue, net profit and earnings per share increased significantly
by 26.60%, 38.50% and 38.50%, respectively, when compared with that of 2002.
The Board of Directors of the Company was satisfied with the operating results
for the year 2003.

     Our good performance is mainly attributed to the rapid development of the
national economy and the hard work of all of our staff.

     In 2003, the rapid development of the national economy has resulted in a
strong demand for electricity. The growth rate of the production and
consumption of electricity exceeded that of the GDP in the PRC. In the peak
seasons, such as in the hot summer days when urban residents had higher demand
for electricity supply, and in the arid winter days when hydro power
generation decreased significantly, there was a serious shortage of
electricity supply in some regions of the country, especially in the
comparatively more developed south-eastern coastal areas. The local government
called on people to save electricity, and some users had to face restrictions
on electricity consumption. The local government also took measures to
maintain and encourage generation companies to increase generation and limit
the electricity consumption of certain high power-consuming enterprises in
order to maintain a stable supply to residential and key users such as
hospitals.

     The power output and the operating hours of the domestic thermal power
plants had increased significantly in 2003 due to the strong demand for
electricity caused by the rapid development of the national economy; the
significant increase of the consumption of high power-consuming enterprises;
and the arid atmosphere in certain areas.

     Faced with the favourable macro environment, we accomplished and exceeded
the annual production and sales plan notwithstanding the challenges posed by
the outbreak of SARS; the need to ensure an adequate supply of coal given the
critical coal transportation issue; and the need to carefully maintain plant
and equipment and plan our overhaul programs around the off-peak period given
the hot summer weather. Our modern technology and equipment helped to enhance
our competitive advantage. For the year ended December 31, 2003, our power
generation reached 90.91 billion kWh, representing an increase of 27.3%
compared to prior year.

     Our growth of power generation was attributed to the following factors:

     1) the rapid-growth of the national economy resulted in a significant
increase in the demand for electricity and caused the increase of generation
of our power plants;

     2) the significant decrease of hydro power generation in the Fujian
Province provided an opportunity for our power plant in Fujian province to
generate more electricity;

     3) the significant increase of our generation capacity with two
generation units of the Jining Power Plant being put into operation in 2003
and the full year generation capacity of the two generation units of the
Dezhou Power Plant Phase III, that were put into commercial operation during
2002;

     4) two months' power generation contribution from Yushe Power Plant and
Xindian Power Plant, both of which were acquired in 2003.

     In 2003, we completed a number of acquisitions.

     On April 22, 2003, we acquired 25% of the enlarged share capital of SEG
at a consideration of RMB2.39 billion. Through this acquisition, we gained
entrance into the Shenzhen power market, which is a market with high power
demand. We are confident that we can work together with the local partners to
exploit the Shenzhen power market, to provide high quality power supply and
services to local customers and to obtain a satisfactory return from this
strategic investment.

     On October 27, 2003, we acquired from China Huaneng Group all the assets
and liabilities of Xindian Power Plant, 60% of the equity interest of Yushe
Power Plant and 55% of the equity interest of Qinbei Power Plant at a total
consideration of RMB550 million. This acquisition was in line with our market
development strategy to consolidate our positions in the coastal regions and
to expand into central China. The above three power plants are located in the
Shandong Province, the Henan Province and the Shanxi Province, respectively.
Our entry into the Henan and the Shanxi Provinces enlarged our regional
coverage to central China where there is a strong demand for power. Henan
Province is situated in the middle and lower reaches of the Yellow River. It
is an important energy base as its production of coal and oil is one of the
highest in the nation. Shanxi Province is situated in Northern China and is
the top coal production province in China, with proven coal reserve accounting
for one-third of the total coal reserve of the country. These acquisitions
represent an execution of our development and acquisition strategy.

     2003 was a year that presented both opportunities and challenges to us
and many factors shall continue to have an impact in 2004. In terms of power
production, the sustained and significant increase in the demand for
electricity enabled us to generate more electricity and create more profits,
but at the same time, it puts the safe and stable operation of the plants
under pressure, due to an extended period of full-loaded operation of the
generators. To maintain a robust operation of the generators and the equipment
is one of our challenges in 2004.

     Coal supply is another challenge this year. From the second half of last
year, coal supply was short and the price of coal rose as a result of various
factors. We have taken a series of measures to ensure coal supply. We believe
that we can work together with the coal suppliers to ensure a safe supply of
coal for power generation.

     The development in the country's economy and the rise of people's living
standards have created an enormous market space for the power sector. This has
provided good opportunities for us to accelerate our development efforts, but
also put enormous strain on the project management of large-scale electric
power constructions. Another major challenge for us is to ensure the
commencement of operation of all constructions-in-progress projects in
accordance with plan and be able to control the cost of construction.

     With market reform, it is inevitable that we will face competition and
meet with various challenges. As an early entrant into the power market as an
independent power producer, we have a competitive edge and our extensive
experience should allow us to overcome challenges and place us in a position
to capture development opportunities in a well-structured competitive market.
Our competitive advantages include an experienced management team with
excellent management skills; a large scale operation with a good geographical
distribution of power plants; advanced and efficient equipment and technology;
a strong cash flows and funding capability; and a strong support from the
parent company. With these advantages, we believe that we will continue to
grow in a competitive environment and be able to capture a greater share of
the market. There will be more opportunities for acquisitions from the parent
company and as a result of the restructuring of the power industry. We are
confident that we will continue to maintain our leading position amongst the
independent power producing companies in China.

Net Operating Revenue

     The output and bidding output of our operating power plants are as
follows:




                                         Total output                                Including: Bidding output
                         --------------------------------------------------------------------------------------------------
                                                            Increase/                                         Increase/
                             2003            2002          (decrease)           2003            2002         (decrease)
Operating power plants   (million kWh)   (million kWh)        (%)           (million kWh)  (million kWh)        (%)
- -----------------------  -------------   -------------     -----------      -------------  --------------    --------------
                                                                                              
Dalian                      8,145.09         6,763.24         20.43%           1,582.48       1,068.24          48.14%
Fuzhou                      8,464.43         6,874.24         23.13%             181.35         222.10         (18.35%)
Nantong                     8,078.32         7,504.23          7.65%             379.20       1,028.59         (63.13%)
Shang'an                    7,587.44         7,202.98          5.34%               -              -              -
Shantou Oil-Fired             295.66           203.69         45.15%               -              -              -
Shantou                     4,125.11         3,871.44          6.55%               -              -              -
Dandong                     4,046.36         3,365.41         20.23%             921.38         853.41           7.96%
Shidongkou II               8,023.99         7,268.10         10.40%             664.65         637.89           4.19%
Nanjing                     3,866.66         3,608.33          7.16%             255.90         558.80         (54.21%)
Dezhou                     11,252.03         7,873.33         42.91%               -              -              -
Weihai                      4,107.21         4,225.47         (2.80%)              -              -              -
Jining                      1,928.35         1,805.19          6.82%               -              -              -
Shidongkou I 1              7,395.39         3,792.96         94.98%             587.71         316.73          85.56%
Taicang 1                   4,062.43         2,109.49         92.58%             363.46         282.22          28.79%
Changxing 1                 1,657.19           863.47         91.92%               -              -              -
Huaiyin 2                   2,435.14              N/A             N/A            222.75            N/A             N/A
Xindian 3                     512.44              N/A             N/A              -               N/A             N/A
Yushe 3                       258.70              N/A             N/A              -               N/A             N/A
                         -------------   -------------                      -------------  --------------
Total                      86,241.94        67,331.57         28.09%           5,158.88       4,967.98           3.84%
                         =============   =============                      =============  ==============



Note1:   Since July 2002, we have more than 50% equity interest in the
         Shidongkou I Power Plant, the Taicang Power Plant and the Changxing
         Power Plant.

Note2:   Since the end of December 2002, we have more than 50% equity interest
         in the Huaiyin Power Plant.

Note3:   Since the end of October 2003, we have more than 50% equity interest
         in the Xindian Power Plant and the Yushe Power Plant.

     Our output increased significantly from the previous year. The increase
is attributed to firstly, our increased overall generation capacity as a
result of the acquisition of new power plants (please refer to Note1, Note2
and Note3 above) and the commencement of operation of the new generators
(Dezhou Phase III Expansion Project and Jining Expansion Project) and
secondly, the strong market demand for electric power during the year.

     The output of the Weihai Power Plant decreased because of an equilibrium
in the supply and demand within the Shandong Power Grid. There was no
additional capacity added to the Weihai Power Plant in 2003.

     Our total output in 2003 increased significantly, but there was no
significant change in the bidding output.

     The average tariff rate (inclusive of VAT) and the net operating revenue
of our operating power plants are as follows:





                              Average tariff rate (inclusive of VAT)                   Net operating revenue
                           --------------------------------------------       -----------------------------------------
                                                            Increase/            2003               2002     Increase/
                              2003             2002         (decrease)          (RMB               (RMB      (decrease)
Operating power plants      (RMB/MWh)       (RMB/MWh)          (%)             million)           million)      (%)
- -----------------------    -----------     -----------     ------------       ----------        -----------  ----------
                                                                                            
Dalian                          272.69        280.53          (2.79%)             1,900           1,587       19.72%
Fuzhou                          331.82        327.80           1.23%              2,390           1,889       26.52%
Nantong                         312.52        309.54           0.96%              2,147           1,955        9.82%
Shang'an                        307.94        315.65          (2.44%)             2,008           1,924        4.37%
Shantou-Oil                     672. 41       621.02           8.28%                178             114       56.14%
Shantou                         435.17        455.95          (4.56%)             1,522           1,487        2.35%
Dandong                         276.95        273.70           1.19%                927             754       22.94%
Shidongkou II                   332.85        345.90          (3.77%)             2,250           2,106        6.84%
Nanjing                         307.31        304.07           1.07%              1,027             933       10.08%
Dezhou                          333.34        339.64          (1.85%)             3,206           2,286       40.24%
Weihai                          386.50        393.74          (1.84%)             1,340           1,405       (4.63%)
Jining                          274.66        275.15          (0.18%)               453             422        7.35%
Shidong-kou 1                   256.64        252.97           1.45%              1,623             813       99.63%
Taicang 1                       321.80        317.52          (1.35%)             1,105             566       95.09%
Changxing1                      320.57        316.93           1.15%                454             233       94.43%
Huaiyin 2                       317.21         N/A              N/A                 652            N/A         N/A
Xindian 3                       342.41         N/A              N/A                 149            N/A         N/A
Yushe 3                         200.63         N/A              N/A                  57            N/A         N/A
                           -----------     -----------                        ----------        -----------
Total                           318.68        325.38          (2.06%)            23,388          18,474       26.60%
                           ===========     ===========                        ==========        ===========


Note1:   Since July 2002, we have more than 50% equity interest in the
         Shidongkou I Power Plant, the Taicang Power Plant and the Changxing
         Power Plant.

Note2:   Since the end of December 2002, we have more than 50% equity interest
         in the Huaiyin Power Plant.

Note3:   Since the end of October 2003, we have more than 50% equity interest
         in the Xindian Power Plant and the Yushe Power Plant.

     Our average tariff rate decreased by 2.06% from RMB325.38 per MWh to
RMB318.68 per MWh. The principal reason was the higher relative increase of
excess generation, which had a lower tariff rate. Although the tariff rate for
excess generation was lower than the tariff rate applicable to base load
generation, it was higher than our variable cost and would, therefore, result
in a positive contribution margin.

     Net operating revenue represents operating revenue net of the value-added
tax and deferred revenue. For the year ended December 31, 2003, our
consolidated net operating revenue was RMB23.388 billion, representing an
increase of 26.60% over the RMB18.474 billion of last year. The significant
increase of net operating revenue was primarily because of the 28.08% increase
of power output compared to last year. The operating revenue of the Dezhou
Power Plant, the Fuzhou Power Plant, the Dalian Power Plant and the Dandong
Power Plant had increased significantly. The output of the Dezhou Power Plant
had increased 42.91% compared to last year. The main reason for the increase
was that the Phase III project of the Dezhou Power Plant was put into
commercial operation in the second half of 2002. The increase of output of the
Fuzhou Power Plant was due to the significant reduction of hydropower
generation in the Fujian Province which provided an opportunity to our plant
in Fuzhou to increase its generation. The operating revenue of the Dalian
Power Plant and the Dandong Power Plant increased because of the continuous
expansion of the power market in the Liaoning Province. Due to the decrease of
the average tariff rate in 2003, the growth rate of net operating revenue is
lower than that of our power output.

Operating Expenses

     Our total operating expenses increased by 26.51% to RMB16.315 billion in
2003 from RMB12.896 billion in 2002. The rate of increase of operating
expenses was lower than that of power output.

Fuel Cost

     Our primary operating expense was fuel cost. Fuel cost increased by
30.49% to RMB9.025 billion in 2003, when compared to RMB 6.916 billion in
2002. The weighted average unit price of natural coal increased by 2.89% to
RMB239.06 per ton in 2003 from RMB232.34 per ton in 2002. Accordingly the unit
fuel cost of power output increased by 2.28% to RMB105.05 per MWh. Xindian
Power Plant and Yushe Power Plant's unit fuel cost of power was RMB103.48 per
MWh, which was lower than the average unit fuel cost of the original power
plants.

Maintenance Expense

     Our maintenance expense was RMB922 million in 2003, representing an
increase of 51.64% when compared to RMB608 million of last year. The increase
of the maintenance expense was mainly due to two factors: 1) The plants
acquired in 2002, including the Changxing Power Plant, the Shidongkou First
Power Plant, the Taicang Power Plant and Huaiyin Power Plant, were
consolidated in 2003 on a full-year basis. 2) The original power plants such
as the Dezhou Power Plant, the Dalian Power Plant and the Fuzhou Power Plant,
carried out major overhaul according to the annual plan and incurred more
maintenance expenses.

Depreciation and Amortization

     Our depreciation and amortization were RMB4.117 billion in 2003,
representing an increase of 16.50% from RMB3.534 billion in 2002. The
depreciation and amortization of the original power plants and our
headquarters were RMB4.093 billion, representing an increase of 15.82%
compared to last year. The newly acquired Xindian Power Plant and Yushe Power
Plant incurred RMB24 million of depreciation and amortization expenses in
2003. The increase in depreciation and amortization was also attributable to
the fact that the Phase III project of the Dezhou Power Plant was put into
commercial operation in late 2002, and that the plants acquired in 2002,
including the Changxing Power Plant, the Shidongkou First Power Plant, the
Taicang Power Plant and the Huaiyin Power Plant, were consolidated in 2003 on
a full-year basis.

Labor Cost

     Our labor cost was RMB1.439 billion in 2003, representing an increase of
38.90% from RMB1.036 billion in 2002. The increase in labor cost was mainly
due to the plants acquired in the second half of 2002, including the Changxing
Power Plant, the Shidongkou First Power Plant, the Taicang Power Plant and the
Huaiyin Power Plant, that were consolidated in 2003 on a full-year basis.

Service Fee paid to HIPDC

     The service fee paid to HIPDC refers to a fee for use of its grid
connection and transmission facilities based on reimbursement of cost plus a
profit.

     In 2003, we incurred the service fee in relation to the grid connection
and transmission facilities for the Shang'an Power Plant and the Shantou
Coal-fired Power Plant (HIPDC had transferred the ownership of transmission
and transformation facilities of the Fuzhou Power Plant Phase I and the
Shidongkou Second Power Plant to the Fujian Electric Power Company and the
Shanghai Power Corporation, respectively, on July 1, 2002. We were not
required to pay the service fee for the two plants since the transfer). The
service fee paid to HIPDC was RMB215 million in 2003, representing a decrease
of 18.56% when compared with RMB264 million in 2002.

Other Expenses

     With the rapid growth of the power output, our other expenses increased
by 10.76% to RMB597 million in 2003 from RMB539 million in 2002. Another
factor that caused the increase of other expenses was the consolidation of the
other expenses of the newly acquired plants, including the Xindian Power
Plant, the Yushe Power Plant and the Qinbei Power Plant. The consolidated
other expenses of the original plants and our headquarters, excluding the
newly acquired plants were RMB581 million in 2003, an increase of 7.79%
compared to RMB539 million in 2002.

Net Profit Before Financial Expenses

     Our net profit before financial expenses in 2003 was RMB7.073 billion, an
increase of 26.80% compared to RMB5.578 billion in 2002.

Interest Expense

     Our interest expense was RMB569 million in 2003, which is comparable to
the RMB562 million in 2002.

Income Tax Expenses

     Pursuant to the relevant tax regulations, we are treated as a
Sino-foreign equity joint venture that enjoys a preferential income tax
policy. Each of our plants is exempted from PRC income tax for two years
starting from the first profit-making year after covering the accumulated
deficits followed by a 50% reduction of the applicable tax rate for the next
three years. In addition, as confirmed by the State Tax Bureau, our
wholly-owned power plants pay their respective income tax to local tax
authorities, even though they are not separate legal entities. Our income tax
expenses in 2003 were RMB1.149 billion, an increase of 17.13% compared to
RMB981 million in 2002. The income tax expenses of the original power plants
and our headquarters (excluding the newly acquired power plants in 2003) were
RMB1.138 billion, an increase of 16.00% compared in 2002. The consolidated
income tax of the newly acquired Xindian Power Plant and Yushe Power Plant was
RMB11 million.

Net profit

     Our net profit was RMB5.430 billion in 2003, an increase of 38.50%
compared to RMB3.921 billion in 2002. The significant increase of net profit
was primarily due to the increase of power output, the full year contribution
from the plants acquired in 2002 (including the Changxing Power Plant, the
Shidongkou I Power Plant, the Taicang Power Plant and the Huaiying Power
Plant), the full year contribution from the Dezhou Power Plant Phase III
project, the commercial operation of the expansion project of the Jining Power
Plant and the attributable income from SEG.

Impact of Difference between IFRS and US GAAP

     In addition to the above management discussion and analysis of our
results of the operation under IFRS between the years ended December 31, 2003
and 2002, the following provides a summary of the significant accounting
differences between IFRS and US GAAP that would have a significant impact on
our management discussion and analysis of the results of our operation between
the years ended December 31, 2003 and 2002 under US GAAP. See also Note 41 to
the financial statements for a complete summary of all significant accounting
differences between IFRS and US GAAP that are relevant to us.

     Under IFRS, we have adopted the acquisition method to account for our
acquisitions of the Shidongkou I Power Plant, the Taicang Power Plant and the
Changxing Power Plant in 2002 and the acquisitions of the 55% equity interest
in the Qinbei Power Plant, 60% equity interest in the Yushe Power Plant and
all of the assets and liabilities of the Xindian Power Plant in 2003.
Accordingly, our results of operations under IFRS include the results of these
power plants only from the respective dates of acquisition. In contrast, under
US GAAP, our acquisition of these power plants are considered as combinations
of entities under common control which are accounted for at historical cost
and reflected retroactively to include the results of operations for each of
the years ended December 31, 2003 as if the acquisitions of these power plants
had taken place since the beginning of the earliest period presented.

     In accordance with IFRS, we capitalized interest on general borrowings
used for the purpose of obtaining a qualifying asset in addition to the
capitalization of interest on specific borrowings. Under US regulatory
accounting requirements, interest on funds borrowed generally but used for the
purpose of obtaining a qualifying asset was not capitalized because such
interest would not be taken into consideration when determining the
recoverable rate base for tariff setting purposes.

     Under IFRS, goodwill is amortised using the straight-line method over its
estimated useful life and recognized in the income statement as other
operating expenses. Under US GAAP, in accordance with Statement of Financial
Accounting Standard Number 142 "Goodwill and Other Intangible Assets",
goodwill is not amortised but tested for impairment on an annual basis and
between annual tests in certain circumstances.

     Other than the above, there was no material difference between IFRS and
US GAAP that would have a significant impact on our management discussion and
analysis of the results of our operation between the years ended December 31,
2003 and 2002.

Year Ended December 31, 2002 compared to Year Ended December 31, 2001

General

     During the year ended December 31, 2002, we successfully carried out a
number of acquisitions. On July 1, 2002, we completed the acquisition of all
the assets and liabilities of the Changxing Power Plant, 70% equity interest
in the Shidongkou I Power Plant, 70% equity interest in the Taicang Power
Plant and 44.16% equity interest in the Huaiyin Power Plant. Subsequently on
December 31, 2002, we further acquired the remaining 30% equity interest in
the Shidongkou I Power Plant, 5% equity interest in the Taicang Power Plant
and 19.48% equity interest in the Huaiyin Power Plant. In addition, on June
18, 2002, we acquired the remaining 25% minority interest of the Jining Power
Plant, which then became our 100% owned power plant. Furthermore, the Dezhou
Power Plant Phase III, the expansion project with a capacity of 2x660MW, was
put into commercial operation in 2002. These acquisitions and the expansion
project enabled us to expand our scale of operation, increase our market
share, and enhance our geographical coverage and competitiveness.

     The total assets and liabilities of the four new power plants were
included in the consolidated balance sheet as of December 31, 2002. As we only
obtained the control of Huaiyin Power Plant on December 31, 2002, the
operating revenue and operating expenses of Huaiyin Power Plant were not
included in our consolidated income statement, but equity accounting was
applied for the original 44.16% purchased from July 1, 2002 to December 31,
2002. All of the revenue and expenses of the Changxing Power Plant, the
Shidongkou I Power Plant and the Taicang Power Plant have been consolidated in
our consolidated income statement since a controlling stake of more than 50%
was acquired.

     In 2002, our power output increased by 24.45% to 67.3316 billion kWh from
54.1053 billion kWh in 2001. Accordingly, net operating revenue and net profit
were increased significantly when compared to 2001. In addition, because of
our consistent effort on cost control measures, we achieved our cost control
target on fuel costs and other costs.


Net Operating Revenue

     The output and bidding output of our operating power plants are as
follows:



                                           Total output                              Including: bidding output
                          --------------------------------------------      ---------------------------------------------
                                                            Increase/                                          Increase/
                              2002             2001        (decrease)          2002            2001           (decrease)
Operating power plants    (million kWh)   (million kWh)        (%)          (million kWh)    (million kWh)       (%)
- -----------------------   --------------  --------------   -----------      --------------  ---------------  ------------
                                                                                              
Dalian                        6,763.24         6,048.9        11.81%             1,068.24           465.0       129.73%
Fuzhou 2                      6,874.24         5,403.9        27.21%               222.10             -           N/A
Nantong                       7,504.23         6,843.5         9.70%             1,028.59           684.4        50.29%
Shang'an                      7,202.98         6,957.3         3.53%                 -                -           -
Shantou Oil-Fired               203.69           188.4         8.13%                 -                -           -
Shantou                       3,871.44         3,551.3         9.02%                 -                -           -
Dandong                       3,365.41         2,654.7        26.77%               853.41           438.7        94.53%
Shidongkou II                 7,268.10         7,087.9         2.54%               637.89           778.6       (18.07%)
Nanjing                       3,608.33         3,027.1        19.20%               558.80           428.4        30.44%
Dezhou                        7,873.33         6,482.9        21.45%                 -                -           -
Weihai                        4,225.47         4,087.2         3.38%                 -                -           -
Jining                        1,805.19         1,768.5         2.08%                 -                -           -
Shidongkou I 1                3,792.96            N/A           N/A                316.73             N/A         N/A
Taicang 1                     2,109.49            N/A           N/A                282.22             N/A         N/A
Changxing1                      863.47            N/A           N/A                  -                N/A         N/A
                          --------------  --------------                    --------------  ---------------
Total                        67,331.57        54,101.6        24.45%             4,967.98         2,795.1        77.74%
                          ==============  ==============                    ============== ================


___________________

Note1:   Since July 2002, we have more than a 50% equity interest in the
         Shidongkou I Power Plant, the Taicang Power Plant and the Changxing
         Power Plant.

Note2:   In 2001, the Fuzhou Power Plant did not have any bidding output.



     A significant factor contributing to the increase in our total output in
2002 was the acquisition of the Shidongkou I Power Plant, the Taicang Power
Plant and the Changxing Power Plant in July 2002.

     The average tariff rate (inclusive of VAT) and the net operating revenue
of our operating power plants are as follows:




                              Average tariff rate (inclusive of VAT)                Net operating revenue
                           --------------------------------------------     -----------------------------------------
                                                              Increase/         2002            2001         Increase/
Operating Power               2002              2001         (decrease)         (RMB            (RMB        (decrease)
Plants                     (RMB/MWh)         (RMB/MWh)           (%)            million)      million)          (%)
- --------------------       -------------    ------------     ----------     --------------  -----------   ------------
                                                                                           
Dalian                           280.53          291.38         (3.72%)         1,587           1,505        5.35%
Fuzhou                           327.80          353.77         (7.34%)         1,889           1,634       15.61%
Nantong                          309.54          318.38         (2.78%)         1,955           1,860        5.10%
Shang'an                         315.65          328.95         (4.04%)         1,924           1,956      (1.64%)
Shantou Oil-fired                621.02          618.24           0.45%          114              100       14.45%
Shantou                          455.95          473.85         (3.78%)         1,487           1,440        3.28%
Dandong                          273.70          298.96         (8.45%)          754              678       11.20%
Shidongkou II                    345.90          352.78         (1.95%)         2,106           2,161      (2.57%)
Nanjing                          304.07          318.60         (4.56%)          933              824       13.32%
Dezhou                           339.64          340.33         (0.20%)         2,286           1,884       21.30%
Weihai                           393.74          390.72           0.77%         1,405           1,349        4.18%
Jining                           275.15          267.31           2.93%          422              400        5.58%
Shidong-kou 1                    252.97             N/A             N/A          813              N/A          N/A
Taicang 1                        317.52             N/A             N/A          566              N/A          N/A
Changxing1                       316.93             N/A             N/A          233              N/A          N/A
                           -------------    ------------                    --------------  -----------
Total                            325.38          342.03         (4.87%)         18,474         15,791       16.99%
                           =============    ============                    ==============  ===========


___________________

Note 1:  Since July 2002, we have more than 50% equity interests in Shidongkou
         I Power Plant, Taicang Power Plant and Changxing Power Plant.

     Our average tariff rate decreased by 4.87% from RMB342.03 per MWh to
RMB325.38 per MWh. The principal reason was the increase of excess generation,
which had a lower tariff rate. Although the tariff rate of excess generation
was lower than the tariff rate applicable to base load generation, it was
higher than our variable cost and would, therefore, result in a positive
contribution margin.

     Net operating income represents the operating revenue net of value-added
tax and deferred revenue. For the year ended December 31, 2002, the
consolidated net operating revenue was RMB18,474 million, representing an
increase of 16.99% over the net operating revenues of RMB15,791 million in
2001. The increase in net operating revenue was mainly due to the 24.45%
increase in power output compared with the previous year. Except for those
that were newly acquired after the middle of the year and the Shantou
Oil-fired Power Plant, which has a small capacity, the power plants whose
operating revenue increased significantly include the Dezhou Power Plant, the
Fuzhou Power Plant, the Nanjing Power Plant and the Dandong Power Plant. The
significant increase in operating revenue of the Dezhou Power Plant was mainly
due to the start of commercial operation of its Phase III project in the
second half of 2002 and the output being increased by 21.45% from the previous
year. The increase in electricity generation of the Fuzhou Power Plant was due
to the significant reduction of hydro power generation in the Fujian Province
as a result of the dry weather which provided an opportunity to our plant to
increase its generation. The operating revenue of the Nanjing Power Plant
increased because of the significant growth in the demand for electricity in
East China where the plant locates. The principal reasons for the increase in
operating revenue of the Dandong Power Plant were the continuous expansion of
the power market in the Liaoning Province and the significant increase in
electricity transmitted to the grid. The growth rate in net operating revenue
was lower than that of power output because of the decrease in the average
tariff rate.

Operating Expenses

     Our total operating expenses increased by 19.66% to RMB12,896.5 million
in 2002 from RMB10,777.3 million in 2001. As a result of implementing
effective cost control measures, the rate of increase of operating expenses
was lower than that of power output.

Fuel Cost

     Our primary operating expense was fuel cost. The fuel cost increased by
34.36% to RMB6,916.0 million in 2002, when compared to RMB5,147.4 million in
2001. Before considering the four power plants acquired in 2002, the weighted
average unit price of natural coal of the original twelve power plants
increased by 5.29% to RMB232.34 per ton in 2002 from RMB220.66 per ton in
2001. The unit fuel cost per MWh increased by 6.41% to RMB101.20 per MWh. The
higher unit fuel cost per MWh of the four power plants acquired than that of
the original twelve power plants resulted in the increase of overall unit fuel
cost to RMB102.71 per MWh in 2002.

Maintenance Expense

     Our maintenance expenses were RMB608.0 million in 2002. The maintenance
expenses of the original twelve power plants and the four power plants
acquired in current year amounted to RMB535.3 million and RMB72.7 million,
respectively.

Depreciation and Amortization

     Our depreciation and amortization were RMB3,533.6 million in 2002. The
depreciation and amortization of the original twelve power plants and our
headquarters were RMB3,313.3 million, which represented an increase of 1.60%
from RMB3,261.0 million in 2001. The depreciation and amortization of the four
power plants acquired in 2002 were RMB220.3 million.

Labor Cost

     Our labor costs were RMB1,035.7 million in 2002, which represented an
increase of 28.32% from RMB807.1 million in 2001. The increase was mainly due
to the increase in the number of employees for the four power plants acquired.

Transmission Cost

     Transmission service fees paid to Shandong Electric Power Group
Corporation by the Dezhou Power Plant, the Weihai Power Plant and the Jining
Power Plant were RMB35.8 million in 2002, which represented a decrease of
3.17% from RMB36.9 million in 2001.

Service Fee paid to HIPDC

     The service fee paid to HIPDC refers to a fee for the use of its grid
connection and transmission facilities based on reimbursement of cost plus a
profit.

     In 2002, we incurred the service fee in relation to the grid connection
and transmission facilities for the Fuzhou Power Plant Phase I, the Shidongkou
II Power Plant, the Shangan Power Plant, and the Shantou Coal-fired Plant.
HIPDC had transferred the ownership of transmission and transformation
facilities of the Fuzhou Power Plant Phase I and the Shidongkou II to the
Fujian Electric Power Company and the Shanghai Power Corporation,
respectively, on July 1, 2002. No service fee is required for these two plants
since the transfer. Hence, the service fee to HIPDC decreased by 14.19% to
RMB263.7 million in 2002, when compared to RMB307.3 million in 2001.

Other Expenses

     Our other expenses were RMB503.6 million in 2002, which represented an
increase of 11.46% from RMB451.9 million in 2001. Other expenses mainly
comprised the environmental protection fees, general and administrative
expenses and other miscellaneous expenses. The increase of other expenses was
mainly due to the inclusion of other expenses of the four power plants
acquired in the current year. Before considering the four power plants
acquired in the current year, the other expenses of the original twelve power
plants decreased by 12.68% to RMB394.5 million, despite the increase of the
total power output. This demonstrated the effectiveness of the cost control
measures implemented by the Company.

Net Profit Before Financial Expenses

     The profit from our operation increased by 11.25% to RMB5,578.0 million
in 2002 from RMB5,014.0 million in 2001.

Financial Expenses

     Our financial expenses were reduced by 35.91% to RMB510.3 million in 2002
from RMB796.2 million in 2001. The financial expenses of the original twelve
power plants were RMB492.0 million, which represented a decrease of 43.29%
from RMB867.5 million in 2001. The overall reduction of financial expenses was
mainly due to the significant decrease of debt balances in 2002. In addition,
in order to reduce interest expenses, we grasped the opportunity of the
declining market interest rate and borrowed loans with lower interest rates to
refinance the higher interest rate loans. As a result, the financial expense
of the relevant loans were reduced by US$9.5 million (RMB78.63 million) in
2002.

Income Tax Expenses

     Pursuant to the relevant tax regulations, we are treated as a
sino-foreign joint venture that enjoys the relevant tax holiday. Each of our
power plants is exempted from PRC income tax for two years starting from the
first profit-making year after covering any accumulated deficits followed by a
50% reduction of the applicable tax rate for the next three years. In
addition, as confirmed by the State Tax Bureau, our wholly owned power plants
pay their respective income tax to local tax authorities, even though they are
not separate legal entities. The consolidated income tax expense was RMB980.9
million in 2002, which represented an increase of 37.15% from RMB715.2 million
in 2001 due to a higher profit before tax in 2002. The income tax expenses for
the original twelve power plants and the four power plants acquired in the
current year amounted to RMB873.5 million and RMB107.4 million, respectively.

     Jining Power Plant and Changxing Power Plant became our wholly owned
power plants in 2002. As approved by the relevant tax authorities, the income
tax rate of the Jining Power Plant decreased from 33% to 15% effective from
September 1, 2002, and the income tax rate of the Changxing Power Plant
decreased from 33% to 16.5% effective from July 1, 2002.

Net profit

     Our consolidated net profit increased by 13.63% to RMB3,921.0 million
from RMB3,450.7 million in 2001. The increase was primarily due to the
increase of power output, the decrease of the financial expenses and the
profit contributed by the four power plants acquired in the current year.

     The net loss of the Dandong Power Plant was RMB104.4 million in 2002,
which represented a decrease of 48.20% when compared to 2001 as the power
output was substantially increased in 2002. The net loss of the Shantou
Oil-fired Power Plant was RMB16.1 million in 2002, which represented a
decrease of RMB12.9 million.

Impact of Differences between IFRS and US GAAP

     In addition to the above management discussion and analysis of our
results of the operation under IFRS between the years ended December 31, 2002
and 2001, the following is a summary of the significant accounting differences
between IFRS and US GAAP that would have a significant impact on our
management discussion and analysis of the results of our operation between the
years ended December 31, 2002 and 2001 under US GAAP. Also see Note 41 to the
financial statements for a complete summary of all significant accounting
differences between IFRS and US GAAP that are relevant to us.

     Under IFRS, we have adopted the acquisition method to account for our
acquisitions of the Shidongkou I Power Plant, the Taicang Power Plant and the
Changxing Power Plant in 2002 and the acquisition of 55% equity interest in
the Qinbei Power Plant, 60% equity interest in the Yushe Power Plant and all
of the assets and liabilities of the Xindian Power Plant in 2003. Accordingly,
our results of operations under IFRS include the results of these power plants
only from the respective dates of acquisition. In contrast, under US GAAP, our
acquisitions of these power plants are considered as combinations of entities
under common control, which are accounted for at historical cost and reflected
retroactively to include the results of operations for each of the years ended
December 31, 2002 as if the acquisitions of these power plants had taken place
since the beginning of the earliest period presented.

     In accordance with IFRS, we capitalized interest on general borrowings
used for the purpose of obtaining a qualifying asset in addition to the
capitalization of interest on specific borrowings. Under US regulatory
accounting requirements, interest on funds borrowed generally and used for the
purpose of obtaining a qualifying asset was not capitalized because such
interest would not be taken into consideration when determining the
recoverable rate base for tariff setting purposes.

     Other than the above, there are no material differences between IFRS and
US GAAP that would have a significant impact on our management discussion and
analysis of the results of our operation between the years ended December 31,
2002 and 2001.

B.       Impact of Government Policies

The Decrease in Price of Electricity Transmitted to the Grid for Some Power
Plants in 2003

     In accordance with the documents issued by SDRC, Jiangsu Province made
adjustments to the price of electricity transmitted to the grid for power
plants in Jiangsu Province. This decreased the unit price for electricity
transmitted to the grid by the Nanjing Power Plant, the Nantong Power Plant,
the Huaiyin Power Plant, and the Taicang Power Plant. In June 2003, the price
of electricity transmitted to the grid for the Dalian Power Plant and the
Dandong Power Plant of the Liaoning Province was reduced by RMB7 per MWh
(inclusive of tax). However, the annual utilization hours for the generators
of the Dalian Power Plant Phase II and the Dandong Power Plant, settled at the
approved price for electricity transmitted to the grid, were both raised from
3,000 hours to 4,000 hours.

     We strengthened our control over cost through tighter management and
succeeded in acquiring more market shares to offset the adverse effect of the
decrease in tariffs.

The Effect of the Levy of Emission Fees

     On January 2, 2003, the State Council issued the "Regulations on the
Administration of the Levy and Usage of Emission Fee" (State Council Order No.
369). According to the new regulations, environment protection authorities
have the responsibility to determine and verify the types and amounts of
pollutants of an enterprise. An enterprise should pay emission fees according
to the amount of gas pollutant, waste water, solid wastes and noise pollution.
The new regulations are applicable across the country. Previously, only
certain areas were subject to emission charges. Further, under the new
regulations, fees are charged for any amount (zero tolerance) of pollutants
discharged.

     In April of the same year, SDRC, Ministry of Finance, State Environmental
Protection Bureau and the former State Economic and Trade Commission jointly
issued the "Rules on the Administration of the Levy Standards of Emission
Fees" (Order No. 31), which provide for details of the implementation rules
for the new regulations. According to the Rules, new standards for charges
took effect from July 1, 2003.

     We paid a total of RMB72.68 million of emission fees to local governments
in 2003.

     The adoption of the Regulations on the Administration of the Levy and
Usage of Emission Fees is beneficial to our state and the society, although it
adds pressure to our operation. We strongly support the increase of
environmental protection efforts and are confident that the implementation of
the new rules can improve the environmental protection standards of power
plants.

     We will implement an overall environmental protection plan in 2004
according to the environmental protection requirements of the State as well as
our development plan. In terms of control of sulfur dioxide discharges, we
plan to construct desulfur facilities at key areas and further increase the
consumption rate of low-sulfur coal in power generation. For the control of
nitrogen oxides, our power plants will strengthen their operational management
to partially reduce the discharge of nitrogen oxides, and at the same time,
arrange for renovation projects on the low-nitrogen burners. So far,
construction of desulfurizing facilities for four 300 MW generators in the
Shantou Power Plant and the Taicang Power Plant is already in process, and
construction of desulfurizing facilities for the power plants in Shanghai,
Shandong and Zhejiang is being considered.

C.       Liquidity and Capital Resources

     Cash and cash equivalents at the end of 2003 amounted to RMB4,129
million, representing an increase of RMB1,126 million from RMB3,003 million at
the beginning of the year. This increase in cash is contributed by an increase
in the net cash inflow from operating activities of RMB9,533 million, offset
by a decrease in net cash outflow from investing activities and financing
activities of RMB5,225 million and RMB3,182 million, respectively.

Cash Flows Generated by Operating Activities




                                                              2003            2002            2001
                                                         ------------    ------------    -------------
                                                         RMB million     RMB million     RMB million
                                                                                      
   Cash received from sales of electricity                     27,129          21,401          18,469
   Other cash received relating to operating
      activities                                                  148             282             297
   Cash paid for goods and services                            (9,942)         (7,893)         (6,003)
   Cash paid to and on behalf of employees                     (1,079)           (931)           (997)
   Tax paid                                                    (3,856)         (3,327)         (2,970)
   Interest paid                                                 (632)           (750)           (716)
   Other cash paid relating to operating activities            (2,235)         (1,702)         (2,161)
                                                         ------------    ------------    -------------
Net cash provided by operating activities                       9,533           7,080           5,919
                                                         ------------    ------------    -------------



     Net cash generated from operating activities is our main source of cash.
Our expansion and the increase in profit enabled us to realize an increase in
net cash inflow from operating activities from RMB5,919 million in 2001 to
RMB7,080 million in 2002 and to RMB9,533 million in 2003.

     We expect that our operating activities will continue to provide
sufficient and sustained cash flows in the future.


Cash Flows (Used in)/Generated by Investing Activities



                                                               2003           2002           2001
                                                         ------------    ------------    -------------
                                                           RMB million     RMB million    RMB million
                                                                                    
   Purchase of property, plant and equipment                  (3,607)         (1,594)        (2,871)
   Proceeds from disposals of fixed assets                         8              42             33
   (Increase)/decrease in other long-term assets                 (29)              3             82
   Decrease/(increase) in temporary cash investments           1,066           5,082         (4,666)
   Proceeds from disposal of investments                          81               2            385
   Cash consideration paid for available-for-sale
       investment                                                  -            (255)             -
   Repayment of payable to Nanjing Investment
       Company                                                     -               -           (142)
   Cash consideration paid for acquisitions                   (2,940)         (2,759)             -
   Direct costs paid for acquisitions                            (20)            (17)           (22)
   Cash inflow from the acquired power plants                    216             570          2,636

                                                         ------------    ------------    -------------
   Net cash (used in) provided by investing activities        (5,225)          1,074         (4,565)
                                                         ------------    ------------    -------------


     The cash outflows in investing activities mainly consist of the capital
expenditures for the purchase of property, plant and equipment and cash paid
for acquisitions of power plants.

Cash Flows Used in Financing Activities



                                                               2003            2002            2001
                                                         ------------    ------------    -------------
                                                            RMB million    RMB million      RMB million
                                                                                      
   Drawdown of short-term loans                                  769             120           1,300
   Repayment of short-term loans                                (450)           (190)         (2,560)
   Repayment of long-term loans from shareholders               (389)            (16)      (209)
   Drawdown of long-term bank loans                            1,016             174       1,604
   Repayment of long-term bank loans                          (2,322)         (2,955)      (2,234)
   Drawdown of other long-term bank loans                        350               -       -
   Repayment of other long-term loans                            (37)           (283)      (575)
   Capital injection from minority shareholders of the
      subsidiaries                                                78               -       -
   Dividend paid to shareholders of the Company               (2,049)         (1,800)      (1,266)
   Dividend paid to minority shareholders of the
       subsidiaries                                             (148)           (139)      -
   Redemption of convertible notes                                 -          (2,235)      -
   Net proceeds from issuance of Domestic Shares                   -               -       2,770
                                                         ------------    ------------    -------------
Net cash used in financing activities                         (3,182)         (7,324)      (1,170)
                                                         ------------    ------------    -------------


     The cash flows in financing activities consist of repayment of loans,
dividends payment and financing for new projects.

     In 2001, we repaid loans of RMB5,578 million, paid dividends of RMB1,266
million and borrowed loans of RMB2,904 million.

     In 2002, we repaid loans of RMB3,444 million, paid dividends of RMB1,800
million and borrowed loans of RMB 294 million.

     In 2003, we repaid loans of RMB3,198 million, paid dividends of RMB2,049
million and borrowed loans of RMB 2,135 million.

     In 2004, there will be a relatively high level of cash required for new
projects. These projects will be financed through debt in order to minimize
the cost of capital. The Company is confident that we will be able to manage
the financial risk and maintain an appropriate capital structure.

     As of December 31 2003, our total interest bearing debts amounted to
approximately RMB13,796 million, including long-term loans (including
long-term loans maturing within one year), short-term loans and convertible
notes. The long-term debts denominated in foreign currencies amounted to
approximately RMB7,355 million.

Capital Expenditure in Acquisition

     Cash payment for acquisition amounted to RMB2,940 million in 2003 when we
acquired 25% equity interest in SEG, 60% equity interest in the Yushe Power
Plant, 55% equity interest in the Qinbei Power Plant and all the assets and
liabilities of the Xindian Power Plant.

     Cash payment for acquisitions during 2002 amounted to RMB2,759 million.

     We will continue to follow our construction and acquisition strategy by
proactively seeking new acquisition opportunities to ensure the sustainable
growth of our profitability and shareholders' value. Since there are
uncertainties associated with acquisition projects, the amount of capital
expenditures required are uncertain. However, the significant cash flows from
operating activities and the available undrawn borrowing facilities provide us
with strong cash support for acquisition projects.

Capital Expenditure on Construction and Renovation

     The capital expenditure for construction and renovation in 2003 amounted
to RMB3,607 million, including RMB355 million for the Jining Phase III
expansion construction, RMB439 million for the Yuhuan Phase I project, RMB215
million for the Shantou phase III project, RMB497 million for the Huaiyin
Phase II project, RMB240 million for the Qinbei Phase I project, RMB177
billion for the Yushe Phase II project, RMB80 million for the Xindian
expansion construction, RMB144 million for the renovation of the Shidongkou I
Power Plant and RMB459 million for the construction of the Taichang Phase II
project. Others mainly include the expenditure of RMB349 million for the
settlement of construction payable of the Dezhou Phase III and the expenditure
of RMB214 million of construction payable for the Nantong Phase II.

     The capital expenditures in 2002 were RMB1,594 million, primarily for the
construction of the Dezhou Power Plant Phase III.

     The capital expenditures in 2001 were RMB2,871 million, primarily for the
construction of the Dezhou Power Plant Phase III.

     The above capital expenditures were financed by long-term borrowings and
cash from operations.

     We will incur significant capital expenditures in 2004. The feasibility
study for the Huaneng Yuhuan Power Plant Phase I Project, which was planned in
2003 and in which two 1,000 MW ultra super critical coal-fired generator units
will be installed for the first time in China, has been approved by the
relevant government authorities. The project initiation applications for the
construction of two 600 MW coal-fired generator units of the Taicang Power
Plant Phase II, the three 300 MW gas-fueled generator units for the Shanghai
Power Plant and the three 300 MW gas-fueled generator units for the Jinling
Power Plant have been approved by the State Council. We will actively monitor
the progress of the above projects and engage in new project developments for
our long-term development.

Cash Resources and Anticipated Financing Cost

     The cash resources for our expected capital expenditure for construction
and acquisition include internal fund, cash flows from operating activities
and future debt and equity financing.

     Through years of successful operations, we believe we have continuously
enhanced our market image and "brand". Standard & Poors upgraded our rating to
BBB+ in February 2004. The significant improvement of our operating results
and our good credit status give us strong financing capabilities. We have
obtained unsecured borrowing facilities from PRC banks, amounting to RMB7
billion and RMB5 billion to finance our funding requirement for a period of
three years starting from September 18, 2003 and March 4, 2002, respectively.
These unsecured borrowing facilities from PRC banks provide us with a
sufficient level of available cash.

     After the acquisition of the 25% equity interest of SEG and the
acquisitions of the Xindian Power Plant, the Yushe Power Plant and the Qinbei
Power Plant, we have still maintained a strong overall debt repayment ability.

     As at December 31, 2003, our loans denominated in foreign currencies
amounted to approximately US$872 million and Japanese Yen1.786 billion, of
which US$250 million and Japanese Yen238 million were repayable within one
year. We will closely monitor the foreign exchange market and cautiously
assess the exchange rate risk.

     Our long-term loans were mainly fixed-rate loans. As at December 31,
2003, our floating-rate loans amounted to approximately US$262 million and
Japanese Yen1.786 billion according to the original loan agreements. We have
entered into interest swap contracts with PRC banks to reduce the floating
interest rate risk.

     In view of the development of the electric power industry and our stage
of growth, we will make continuous efforts to establish an optimal capital
structure to minimize the cost of capital and manage our financial risk.

Other Financing Requirements

     Our objective is to bring long-term, stable and growing returns to the
shareholders. In line with this objective, on the board meeting held on March
16, 2004, the Board of Directors resolved to propose for the year ended
December 31, 2003 a cash dividend of RMB0.50 per ordinary share, totaling
approximately RMB3.014 billion. This proposal of cash dividend is subject to
shareholders' approval at the next general annual meeting.

Comparison of key financial ratios




                                                    December 31, 2003                       December 31, 2002
                                            -----------------------------------    ------------------------------------
                                                                                                            
Current ratio                                                             0.90                                    1.00
Quick ratio                                                               0.81                                    0.88
Ratio of liabilities and owner's equity                                   0.54                                    0.56
Multiples of interest earned                                             12.03                                    8.28



     After the investment in SEG and the acquisitions of the Xindian Power
Plant, the Yushe Power Plant and the Qinbei Power Plant, our current ratio and
quick ratio decreased slightly when compared with those at the beginning of
2003.

     Multiples of interest earned increased when compared with that of last
year.

     Calculation formula of the financial ratio:



                                         
Debt to equity ratio                     =      balance of liabilities at the end of the year/ balance of
                                                shareholders' equity at the end of the year
Current ratio                            =      balance of current assets at the end of the year/balance of current
                                                liabilities at the end of the year
Quick ratio                              =      (balance of current assets at the end of the year -net amount of
                                                inventory at the end of the year)/ balance of current liabilities at
                                                the end of the year
Multiples of interest earned             =      (profit before taxation + interest expenses)/ interest expenditure
                                                (including capitalized interest)


D.       Trend Information

Impact of Demand and Supply

     It is estimated by the Central Government that the growth rate of the GDP
in PRC will be about 7% in 2004. At this growth rate, it is likely that there
will continue to be a tight supply, in general, to meet the growing demand of
electricity in general. This offers a continuing opportunity for the Company
to grow and expand its generating capacities.

Impact of the Electricity Pricing Policy

i) The Electricity Pricing Reform Scheme

     The State Council approved the Electricity Pricing Reform Scheme on July
3, 2003, which defined the short-term and long-term objectives of the power
pricing reform. The specific implementation methods are still being
established.

     The short-term objectives for the electricity pricing reform are to
establish an appropriate on-grid price setting mechanism to accommodate a
reasonable level of competition in power generation; to establish a
preliminary pricing mechanism for transmission and distribution to facilitate
the healthy development of the power grids; to link the retail prices with the
on-grid prices; to optimize the structure of the retail price; and to
pilot-run the practice for high voltage users to directly make purchases from
the power generation companies based on a reasonable price for transmission
and distribution.

     The long-term objective for the electricity pricing reform is to
establish a standardized and transparent tariff setting mechanism, classifying
the electricity prices into the on-grid price, the transmission price, the
distribution price and the end-user retail price, and to allow the on-grid
prices and retail prices to be determined through market competition. The
transmission and distribution prices are to be regulated by the government.

     We understand that the government needs to maintain the overall stability
of the electricity prices in the early stage of the reform to ensure the
smooth transition from the old pricing mechanism to the new one. Based on
present conditions, we expect our average settlement price to remain stable as
a whole in 2004.

ii) Policy to Raise the Electricity Price by RMB7 per MWh

     SDRC issued the "Circular on Adjusting Power Rate" with the approval of
the State Council in December 2003. Pursuant to such circular, effective on
January 1, 2004, on-grid power rate of coal-fired power plants that supply
power to the grids at provincial or higher level was increased by RMB7/MWh
(inclusive of taxes) to offset the higher cost of operation due to the
increase in coal prices in 2003 and 2004. Effective as of January 1, 2004,
newly operated power plants, which have not yet received on-grid power rate,
are allowed to sell power at rates equal to the previous year's average
on-grid power rates of their service area. The existing power plants are
allowed to sell output (actual output in that financial year minus 2003 actual
output) based on the previous year's average on grid power rates of their
service area.

     The upward adjustment of the on-grid prices will help us to offset the
adverse impact of the higher coal prices.

Impact of Rise of the Fuel Prices

     Due to various reasons, the overall coal supply is expected to be tight
in 2004. We will need to properly plan for our coal needs for our power plants
by developing our fuel budgets in advance taking into account our market
predictions. Our focus will be to ensure that we will secure our planned
supply of coal from the coal suppliers. Because of the tight supply of coal,
the price for coal beyond the planned supply level will increase.

     The increase in coal prices will cause an increase in our fuel cost. If
the volume of electricity generation maintains a certain level of growth, we
will be able to reduce the unit consumption of coal through economies of scale
and thereby offsetting part of the negative effect caused by the rise in coal
prices. In addition, we will strengthen fuel management and conduct researches
and studies to find better fuel mixture, so as to minimize the adverse impact
of rising coal prices.

Impact of the Environmental Protection Policies

     Please refer to page 42 to 43 for details.

Impact of the Pilot Activities of the Power Market

     In June 2003, SERC started a pilot program to establish a regional power
market in both the Northeast China Region and the East China Region. However,
detailed implementation measures are still being formulated in Northeast
China. We believe that the tariff rates of our Dalian Power Plant and Dandong
Power Plant located in Northeast China will be affected by this program.

     The East China regional power market will start a test run on a simulated
basis in May 2004 and is expected to commence operation on an experimental
basis in 2005. Under the relevant rules governing such power market, power
sold through the bidding process will account for approximately 15% of total
electric power sold in such market. Our power plants covered by the East China
regional power market are located in the high loading areas. Based on our
technologically advanced generating units and our experienced management team,
we believe, in general, our plants have a competitive advantage under the
bidding program.

Entrusted Management Agreement

     On November 6, 2002, we signed an Entrusted Management Agreement with
Huaneng Group and HIPDC. Based on this agreement, Huaneng Group and HIPDC
agreed to entrust the management of certain of their power plants to us and
pay us a management fee. The term for the service lasts for five years. This
type of large scale Entrusted Management Agreement represented the first of
its kind in China and the management experience would be beneficial to our
future expansion and acquisitions of power plants.

Emphasis on Both Development and Acquisition

     One of our main focuses in 2004 is to actively develop the new projects
as planned based on the progress of constructions-in-progress so as to build a
strong foundation for our long development. In addition, we will actively seek
new opportunities for acquisition to ensure the sustainable growth of our
profit and the shareholders' equity.

E.       Off-Balance Sheet Arrangements

     Our off-balance sheet arrangements consisted of the following
arrangements:

     -  Operating lease commitments;

     -  Purchase and construction commitment;

     - Guarantees for an associate's long-term loan.

     We have discussed these arrangements in F. Tabular Disclosure of
Contractual Obligations and Commercial Commitment and disclosed the detail in
Notes 36 and 37 of the Financial Statements.

F.      Tabular Disclosure of Contractual Obligations and Commercial Commitments

     A summary of payments due by period of our contractual obligations and
commercial commitments as of December 31, 2003 is shown in the tables below. A
more complete description of these obligations and commitments is included in
the Notes to the Financial Statements as referenced below.

Contractual Cash Obligations



(RMB millions)
                                               2004      2005-2006     2007-2008      Thereafter          Total
                                             --------    ---------     ---------     ------------       --------
                                                                                             
Long-term Debt (1)                              3,042      2,435         2,306           4,412            12,195
Convertible Notes (2)                               1          -             -               -                 1
Operating Lease - Head office, Nanjing
   Power Plant and Shidongkou II (3)               32          7             7             300               346
Operating Lease - Dezhou Power Plant (3)           30         59            60             463               612
Interest Rate Swap (4)                              4          -             -               -                 4
                                             --------    ---------     ---------     ------------       ---------
                                                3,109      2,501         2,373           5,175            13,158
                                             ========    =========     =========     ============       =========
Other Commercial Commitments

(RMB millions)
                                 2004          2005-2006           2007-2008           Thereafter          Total
                               --------       -----------         -----------         ------------        -------
Guarantee (5)                         -                 -                  46                  293            339
Commitment (3)                   12,072                 -                   -                    -         12,072
                               --------       -----------         -----------         ------------        -------
                                 12,072                 -                  46                  293         12,411
                               ========       ===========         ===========         ============        =======



_______________

(1)      See financial statement Note 23, "Long-term Loans from Shareholders",
         Note 24, "Long-term bank Loans" and Note 25, "Other Long-term Loans".

(2)      See financial statement Note 22, "Convertible Notes".

(3)      See financial statement Note 36, "Obligations and Commitments".

(4)      See financial statement Note 38, "Interest Rate Swap". The amounts
         due for the interest swap agreements are based on market valuation as
         of December 31, 2003. Actual payment, if any, may differ at
         settlement date.

(5)      See financial statement Note 37, "Contingent Liabilities".


ITEM 6   Directors, Senior Management and Employees

A.       Directors, members of the supervisory committee and senior management

     As required by the Company Law, the Special Regulations of the State
Council for Overseas Stock Offerings and Listings by Joint Stock Limited
Companies and other implementing regulations (collectively, the "Company Law")
and the Articles of Association, we have formed the Supervisory Committee,
whose primary duty is the supervision of our senior management, including the
Chairman of the Board of Directors, the Board of Directors, the President and
other senior officers. The function of the Supervisory Committee is to ensure
that our senior management acts in the interest of us, our shareholders and
employees and does not abuse its power. The Supervisory Committee reports to
the shareholders in general meeting. The Articles of Association provide the
Supervisory Committee with the right to investigate the business and the
financial affairs of us and to request shareholders' meetings from time to
time.

     The table below sets forth certain information concerning the Directors
and executive officers and members of the supervisory committee of us (the
"Supervisory Committee"). All Directors will serve a term of three years or
until the election of their respective successors. The term of the current
board will expire in December 2005.




Name                                                           Age               Position with us
- -----------------------------------------------------------    ---    ----------------------------------------
                                                                
Li Xiaopeng................................................    44     Chairman
Wang Xiaosong..............................................    57     Vice Chairman
Ye Daji....................................................    58     Director and President
Huang Jinkai...............................................    61     Director
Liu Jinlong................................................    62     Director
Na Xizhi...................................................    50     Vice President
Zhang Hong.................................................    57     Vice President
Chen Baoliang..............................................    49     Vice President
Huang Long.................................................    50     Vice President and Company Secretary
Hu Jianmin.................................................    49     Vice President
Wu Dawei...................................................    50     Vice President
Liu Guoyue.................................................    40     Vice President
Li Shiqi...................................................    47     Chief Economic Engineer
Huang Jian.................................................    41     Chief Accountant
Shan Qunying...............................................    50     Director
Yang Shengming.............................................    60     Director
Xu Zujian..................................................    49     Director
Gao Zongze.................................................    64     Independent Director
Zheng Jianchao.............................................    64     Independent Director
Qian Zhongwei..............................................    65     Independent Director
Xia Donglin................................................    42     Independent Director
Wei Yunpeng................................................    61     Chairman of the Supervisory Committee
Liu Shuyuan................................................    53     Vice Chairman of the Supervisory Committee
Zhao Xisheng...............................................    60     Member of the Supervisory Committee
Pan Jianmin................................................    48     Member of the Supervisory Committee
Li Yonglin.................................................    58     Member of the Supervisory Committee
Shen Weibing...............................................    36     Member of the Supervisory Committee
Shen Zongmin...............................................    49     Member of the Supervisory Committee



     Li Xiaopeng Mr. Li is Chairman of the Company, Chairman and President of
HIPDC, as well as President of China Huaneng Group. Starting from June 1994,
Mr. Li was Vice President, President and Vice Chairman of the Company as well
as Vice President, President and Vice Chairman of HIPDC, Chairman of China
Huaneng Group and Vice President of State Power Corporation. Before joining
HIPDC, he had successively served as Engineer of the Power System Research
Division, as Deputy Division Chief of the Planning and Operations Division,
and as General Manager of the Power Technology and Economic Research Division,
Electric Power Research Institute. Mr. Li is a senior engineer and graduated
from the North China Institute of Electric Power specializing in power plants
and power systems.

     Wang Xiaosong Mr. Wang is Vice Chairman of the Company, Director and Vice
President of HIPDC, and Vice President of China Huaneng Group. Beginning from
June 1994, he was General Manager of the Capital Market Department of the
Company, Vice President of the Company, Vice President of HIPDC and Director
of China Huaneng Group. Before joining the Company, he had served as Deputy
General Manager of Fushun Power Plant, General Manager of Yuanbaoshan Power
Plant and Chief of the Labour and Wages Division of Northeast Power
Administration. Mr. Wang is a senior engineer and graduated from Beijing
Institute of Electric Power specializing in thermal power engineering.

     Ye Daji Mr. Ye is Director and President of the Company. After joining
the Company, he has been Deputy General Manager of Huaneng Shanghai Branch and
General Manager of Huaneng Shanghai Shidongkou Second Power Plant. From
December 1995, he was Vice President of the Company, Vice President of HIPDC
and Director of China Huaneng Group. Before joining the Company, he had served
as Deputy Chief Engineer of Huaneng Shanghai Shidongkou Second Power Plant.
Mr. Ye is a senior engineer and graduated from Shanghai Jiaotong University
specializing in mechanical engineering.

     Huang Jinkai Mr. Huang is the Director of the Company. He served as
Director (General Manager) of the Northeast Power Administration Group
Company, Chairman of the Company, Chairman of HIPDC, General Manager
(Director) of North China Power Group Corporation (Power Administration) and
Vice Chairman of China Huaneng Group. He is a senior engineer and graduated
from Shenyang Agricultural Institute, specialising in agricultural
electrization.

     Liu Jinlong Mr. Liu is the Director of the Company. He served as General
Manager of Central China Power Group Corporation and Director of Central China
Power Administration, Chairman, General Manager, and Vice Chairman of China
Huaneng Group. Mr. Liu is a senior engineer and graduated from Wuhan
Hydroelectric Institute, specialising in power generation.

     Shan Qunying Mr. Shan is the Director of the Company and Vice President
of Hebei Provincial Construction Investment Company. He had been the Division
Chief of Hebei Provincial Construction Investment Company. Mr. Shan is a
senior engineer and graduated from Beijing Steel Institute specializing in
automation.

     Yang Shengming Mr. Yang is Director of the Company, Vice President of
Fujian International Trust and Investment Company Limited and Chairman of
Fujian International Leasing Company. Mr. Yang is a senior economist and
graduated from Beijing Light Industries Institute.

     Xu Zujian Mr. Xu is Director of the Company and Chairman of Jiangsu
Investment Management Co. Ltd. He was Vice President of Jiangsu International
Trust and Investment Company Limited, President of Jiangsu Province Investment
Management Co. Ltd., Director and Vice President of Jiangsu Province Guoxin
Asset Management Group Limited Company. Mr. Xu is a senior economist. He
graduated from Liaoning Finance Institute majoring in infrastructure finance.

     Gao Zongze Mr. Gao is an Independent Director of the Company and Senior
Partner at C&I Partners. He is an approved arbitrator of China International
Economic and Trade Arbitration Commission and China Marine Affairs Arbitration
Commission and President of All China Lawyers Association. Mr. Gao graduated
from Dalian Marine Institute and received a master's degree in law from the
Law Department of the Graduate School of the Institute of China Academy of
Social Sciences.

     Zheng Jianchao Mr. Zheng is an Independent Director of the Company and
Honorary President of China Electric Power Research Institute in China and
Vice Chairman of its Academic Committee. He was elected Fellow of Chinese
Academy of Engineering in 1995. He is Vice President of China Electrical
Engineering Institute, editor-in-chief of the Journal of Chinese Electrical
Engineering and chief of the Science and Technology Committee of China
Guangdong Nuclear Power Group Corporation. Mr. Zheng graduated from Qinghua
University majoring in electrical engineering and graduated from its Graduate
School.

     Qian Zhongwei Mr. Qian is an Independent Director of the Company and Vice
President of the United Association of China Electric Enterprises. He has been
the Deputy Chief Engineer, Chief Engineer and Deputy Chief of the Eastern
China Power Industry Management Bureau, Director of Shanghai Electricity
Bureau and President of Eastern China Power Group Company. Mr. Qian is a
senior engineer and graduated from the electrical engineering department of
Qinghua University.

     Xia Donglin Mr. Xia is an Independent Director of the Company, a
professor and Ph.D. tutor of the Economic and Management School of Qinghua
University. He is also the Advisory Specialist of the Accounting Standard
Committee of the PRC Ministry of Finance, committee member of the China
Accounting Society, and Independent Director of Zhejiang Zhongda companies and
other companies. He was the head of Accounting Department of Economic and
Management School of Qinghua University. Mr. Xia is a certified public
accountant (non-practising member). He graduated from the Finance and
Administration Science Research Institute of Ministry of Finance, specialising
in accounting and was awarded a Ph.D. degree of Economics.

     Wei Yunpeng Mr. Wei is Chairman of the Supervisory Committee of the
Company, Chief Accountant of China Huaneng Group, Chief Accountant of HIPDC
and Chairman of China Huaneng Finance Limited Liability Company. He served as
Chief Accountant of the Company. He is a senior accountant. He graduated from
Hunan Institute of Electric Power, specialising in Finance and Accounting.

     Liu Shuyuan Mr. Liu is Vice Chairman of the Supervisory Committee of the
Company, President of Liaoning Energy Investment (Group) Limited Liability
Company and Liaoning Energy Corporation. He has been the General Manager of
Liaoning Tieling Steel Plant, Director of Tieling Municipal Construction
Commission and Assistant to the Mayor. Mr. Liu is a senior economist and a
postgraduate specializing in economic management.

     Pan Jianmin Mr. Pan is a member of the Supervisory Committee of the
Company and General Manager of the Finance Department of China Huaneng Group.
He has served as Deputy Division Chief of the Finance Department and Deputy
General Manager of the Supervising and Auditing Department of China Huaneng
Group, and Deputy General Manager of Beijing Huaneng Real Estate Development
Company. Mr. Pan is a senior accountant and graduated from Liaoning Economic
and Finance Institute specializing in infrastructure finance and credit.

     Li Yonglin Mr. Li is a member of the Supervisory Committee of the Company
and Director of the Power Department of Dalian Municipal Construction
Investment Company. He was a departmental grade researcher of the Energy and
Transportation Department of Dalian Municipal Planning Committee. Mr. Li
graduated from Changchun Hydro-electric School of Ministry of Water Resources
and Electric Power, specializing in power plants, power grids and power
system.

     Shen Weibing Mr. Shen is a member of the Supervisory Committee of the
Company and Chief Officer of Nantong Investment Management Center. He worked
in Nantong Planning Commission He was the Vice President and President of
Nantong Municipal Oil Company, Vice President and legal representative of
Nantong Municipal Construction Investment Company, and Deputy Chief Officer of
Nantong Investment Management Centre. Mr. Shen graduated from the Department
of Materials Management of Beijing Materials Management Institute with a
bachelor degree in engineering . In 2002, he studied the MBA course in Nanjing
University and obtained a Master of Business Administration degree. Mr. Shen
is a senior economist.

     Shen Zongmin Mr. Shen is a member of the Supervisory Committee of the
Company and President of Shantou Electric Power Development Company.
Previously, he was the President of Shantou Light Industry Mechanical (Group)
Company and Chairman of Shantou Power Development Joint Stock Company Limited.

     Zhao Xisheng Mr. Zhao is a member of the Supervisory Committee and Senior
Consultant of the Company. He has served as Deputy General Manager of the
Finance Department, General Manager of the Management Department of the
Company and the General Manager of the Company's Supervising and Auditing
Department. Before joining the Company, he served as Section Chief, Deputy
Chief Accountant and Deputy General Manager of Beijing Shijingshan Power
Plant. Mr. Zhao is a senior accountant and graduated from the People's
University of China specializing in industrial economics.

     Na Xizhi Mr Na is Vice President of the Company and Adjunct Deputy Chief
Engineer of China Huaneng Group. Before he joined the Company, he served in
China Huaneng Group as Deputy Manager of the Power Generation Department,
General Manager of the Operation Department, General Manager of the Power
Safety and Production Department, and Deputy Chief Engineer of China Huaneng
Group. Previously, Mr Na was the Vice General Manager of Fuxin Power Plant,
Deputy Officer of the Planning Department of Suizhong Power Plant, Deputy
Chief and Chief of the Bio-technology Department of Northeast Power
Administration Bureau, and General Manager of Shenyang Shenhai Thermal Power
Plant. Mr Na is a senior engineer. He graduated from Wuhan Hydro-electric
University, specializing in thermal power with a master degree in engineering.

     Zhang Hong Mr. Zhang is the Vice President of the Company and Deputy
Chief Engineer of China Huaneng Group. Mr. Zhang served as the General Manager
of Dandong Branch of the Company, General Manager of Yingkou Branch of HIPDC,
General Manager of Power Construction Department and Planning Department of
China Huaneng Group, and Deputy Chief Engineer of China Huaneng Group.
Previously, Mr. Zhang was the Manager of the Fourth Engineering Company of
Northeast Power Administration Group. He is a senior engineer and graduated
from Northeast Power Institute specializing in Management Engineering.

     Chen Baoliang Mr. Chen is Vice President of the Company. He joined the
Company in 1996 and has worked as General Manager of Huaneng Dalian Branch and
Superintendent of Dalian Power Plant. Before joining the Company, he had been
Deputy Chief Engineer of Liaoning Qinghe Power Plant, Deputy Chief of the
Planning Department and Deputy General Manager of the Construction Department
of Tieling Power Plant, and Superintendent of Yuan Bao Shan Power Plant. Mr.
Chen is a senior engineer and graduated with a M.S. degree from North China
Electric Power University specializing in thermal power engineering.

     Huang Long Mr. Huang is Vice President of the Company as well as
Secretary of the Board of Directors. After joining the Company, he served as
Deputy General Manager and General Manager of the International Co-operation
Department of the Company. Mr. Huang is a senior engineer and graduated with a
M.S. degree from North Carolina State University in the U.S. specializing in
communications and auto-control.

     Hu Jianmin Mr. Hu is Vice President of the Company. From April 1998 to
January 2001, he worked as Chief Engineer of Shandong Electric Power Group
Corp. Before joining the Company, he had been Chairman of Shandong Rizhao
Power Company Limited, General Manager of Shandong Liaocheng Power Plant,
Shiheng Power Plant and Zouxian Power Plant respectively. Mr. Hu is a senior
engineer and graduated from Shandong Industrial Institute specializing in
relay protection.

     Wu Dawei Mr. Wu is Vice President of the Company. He joined the Company
in 1988 and has served as Deputy General Manager of Huaneng Shanghai
Shidongkou Second Power Plant, Deputy Manager of Shanghai branch of the
Company, and the General Manager of Huaneng Shanghai Shidongkou Second Power
Plant. Mr. Wu is a senior engineer. He has obtained a Master of Business
Administration degree from the Central Europe International Business School.

     Liu Guoyue Mr. Liu is Vice President of the Company. He joined the
Company in 1987 and served as the Deputy General Manager (Vice President) and
General Manager (President) of Shijiazhuang branch (power plant) of the
Company as well as the President of Huaneng Dezhou Power Plant. Mr. Liu is a
senior engineer, graduated from Northern China Electric Power University with
a bachelor degree in engineering and a bachelor degree in business management.

     Li Shiqi Mr. Li is the Chief Economic Engineer of the Company. During the
period from 1996 to 2002, he served as Chief Accountant of Beijing Branch
Company of HIPDC, Deputy General Manager and General Manager of the Finance
Department of the Company, and General Manager of the Marketing Department of
China Huaneng Group. Before these, Mr. Li worked in Power Science Institute as
Deputy Manager, Deputy Chief, Chief and Deputy Chief Accountant, and in
Beijing Power Research and Hi-Tech Business Corporation as Chief Accountant.
Mr. Li is a senior accountant and graduated from Renmin University of China,
specializing in finance.

     Huang Jian Mr. Huang is the Chief Accountant of the Company. He served as
Deputy Chief, Chief of the Finance Department of the Company, Chief Accountant
of the Beijing Branch Company of HIPDC, Deputy General Manager of the Finance
Department of the Company, Deputy Chief Accountant of the Company. Mr. Huang
is a senior accountant and graduated from Finance and Administration Research
Institute of the Ministry of Finance, specializing in accounting, with a
master degree in economics.

B        Compensation of Directors and Officers

     We paid RMB6,044,377 to our Directors, Supervisors and senior management
as aggregate cash compensation (including salaries, bonuses and allowances
(inclusive of taxes)) for the year ended December 31, 2003 for services
performed as Directors, Supervisors and officers or employees of us. In
addition, Directors and Supervisors who are also officers or employees of us
receive certain other benefits-in-kind, such as subsidized or free health care
services, housing and transportation, which are customarily provided by large
enterprises in the PRC to their employees. We do not have any service contract
with any director that provides for benefits upon termination of employment.

C.       Board Practice

     As of the end of 2003, we, in accordance with the resolutions passed at a
shareholders' general meeting, have set up four special committees, namely,
the Audit Committee, the Strategy Committee, the Nomination Committee, and the
Remuneration and Appraisal Committee, and formulated the working regulations
for such committees in accordance with the relevant rules and regulations. All
committees operate in accordance with the working rules and utilize their
members' specific background, experience and industry expertise to provide
advice to us, so as to enhance our operation efficiency and to make the
decision-making process more rationalized.

     The main duties of the Audit Committee are to provide proposal in
relation to the appointment or change of external auditors, to oversee the
internal audit system and its implementation, to co-ordinate the communication
between the internal audit department and external auditors, to examine the
financial information and its disclosure; and to oversee the internal control
system.

     The main duties of the Strategy Committee are to advise on, and conduct
research in relation to, its long term development strategies and decisions
regarding significant investments.

     The main duties of the Nomination Committee are to conduct study and
provide advice in relation to the requirements for selection of directors and
managers and the relevant procedures; to search for the qualified candidates
of directors and managers, and to examine the candidates of directors and
managers and advise matters in relation thereto.

     The main duties of the Remuneration and Appraisal Committee are to
conduct research on the appraisal guidelines for directors and managers, to
carry out performance appraisals and provide advice accordingly, and to
conduct research on the remuneration policy and proposal regarding the
directors and senior management.

     The members of Audit Committee are Mr. Xia Donglin (Chairman), Mr. Wang
Xiaosong, Mr. Shan Qunying, Mr. Zheng Jianchao, Mr. Qian Zhongwei.

     The members of Strategy Committee are Mr. Li Xiaopeng (Chairman), Mr.
Zheng Jianchao (Vice-chairman), Mr. Wang Xiaosong, Mr. Ye Daji, Mr. Huang
Jinkai, Mr. Liu Jinlong, Mr. Qian Zhongwei.

     The members of Nomination Committee are Mr. Qian Zhongwei (Chairman), Mr.
Huang Jinkai, Mr. Yang Shengming, Mr. Gao Zongze and Mr. Zheng Jianchao.

     The members of Remuneration and Appraisal Committee are Mr. Gao Zongze
(Chairman), Mr. Liu Jinlong, Mr. Xu Zujian, Mr. Zheng Jianchao and Mr. Xia
Donglin

D.       Employees

     As of December 31, 2003, we employed 17,886 persons. Of these, 2,774 are
headquarters management staff and power plant level management personnel,
8,461 are power plant personnel directly involved in the operation of the
power plants and the remainder are maintenance personnel, ancillary service
workers and others. Approximately 35% of our work force graduated from
university or technical college.

     We conduct continuing education programs for our employees at the head
office and at each Power Plant. We provide training in language, computer,
accounting and other areas to our professionals and technicians in their
relevant fields. Employees are trained in accordance with the different
requirements for professional and managerial positions.

     We have reformed the labor system by introducing individual labor
contracts. Currently, all employees are employed under employment contracts
which specify the employee's position, responsibilities, remuneration and
grounds for termination. Short-term employment contracts have fixed terms of
typically one to five years, at the end of which they may be renewed with the
agreement of both us and the employees. The remaining personnel are employed
for an indefinite term.

     The contract system imposes discipline, provides incentives to adopt
better work methods and provides us with a greater degree of management
control over its work force. We believe that, by linking remuneration to
productivity, the contract system has also improved employee morale.

     Each of our power plants also has a trade union and the employees of our
headquarters are also members of a trade union. These trade unions protect
employee's rights, aim to fulfill our economic objectives, encourage employees
to participate in management decisions and mediate disputes between us and
union members. We have not been subject to any strikes or other labor
disturbances interfering with our operations, and we believe that our
relations with our employees are good.

     Total remuneration of our employees includes salary, bonuses and
allowances. The employees also receive certain benefits in the form of
housing, education and health services subsidized by us and other
miscellaneous subsidies.

     In compliance with the relevant regulations, we and our employees
participate in the electric power industry pension plan under which all the
employees are entitled to upon retirement the pensions payments. See Note 8 to
the Financial Statements. Other pension payments to our retiring employees are
not required under applicable PRC laws and regulations.

     We do not carry workmen's compensation or other similar insurance.
However, all employees (both contract and non-contract employees) who are
unable to work due to illness or disability, whether or not such illness or
disability is job-related, will continue, based on seniority, to receive some
or all of their base salary and certain subsidies throughout the period of
their absence, subject to certain PRC Government specified time limitations.
Employees who are unable to work due to job-related illnesses or disabilities
will receive certain compensation from us, depending on the severity of the
illness or disability. The present workmen's insurance reforms being
implemented by the central and local governments and our own implementation of
the joint stock limited company accounting and financial principles may result
in certain adjustments of the funding, management and payment methods for
these types of workmen's compensation arrangements.

E.       Share Ownership

     None of the people listed under "Directors, members of the supervisory
committee and senior management" owns any of our shares.

ITEM 7   Major Shareholders and Related Party Transactions

A.       Major shareholders

     Our outstanding ordinary shares consist of A Shares and H Shares, each
with a par value of RMB1.00 per share. The following table set forth certain
information regarding the ownership of the outstanding shares of us as of
December 31, 2003 with respect to (i) each person known by us to own
beneficially more than 5% of any class of the outstanding shares of us, (ii)
our directors and officers and (iii) local government investment companies.




                                                                                                 Percentage of
                                                                                                Total Number of
                                                              Number of A        Number of H         Shares
                                                                 Shares             Shares        Outstanding
- -------------------------------------------------------      --------------     -------------    ---------------
                                                             (in thousands)     (in thousands)
                                                                                                  
HIPDC..................................................         2,554,840             --                42.39%
Hebei Provincial Construction Investment Co............          452,250              --                7.50%
Fujian International Trust & Investment Company                  334,850              --                5.56%
  Limited..............................................
Jiangsu Province International Trust and Investment
  Company..............................................          312,375              --                5.18%
Liaoning Energy Investment (Group).....................          229,685              --                3.81%
Dalian Municipal Construction & Investment Co..........          226,125              --                3.75%
Nantong Investment Management Center...................          67,875               --                1.13%
Shantou Electric Power Development Co..................          46,500               --                0.77%
Shantou Power Development Joint Stock                            19,000               --                0.31%
  Company Limited......................................
Dandong Energy Investment Development Center...........           6,500               --                0.11%
Officers and Directors.................................            --                 --                0.00%
     TOTAL ............................................         4,250,000             --                70.51%




     When we were established on June 30, 1994, the assets, liabilities and
businesses of the Dalian, Fuzhou, Nantong and Shangan Power Plants (excluding
Shangan Power Plant Phase II) and Shantou Oil-Fired Plant were acquired by us
from HIPDC and, in return, HIPDC received a then 53.64% equity interest in us.
The local governments of the respective provinces or municipalities in which
the Dalian, Fuzhou, Nantong and Shangan Power Plants and Shantou Oil-Fired
Plant are located had previously extended long-term loans to these Power
Plants to finance their construction. Such loans were subsequently assigned to
the local government investment companies. In accordance with the Promoters'
Agreement dated February 28, 1994 (the "Promoters' Agreement") between HIPDC
and the local government investment companies (excluding Shantou Power
Development Joint Stock Company and Dandong Energy Investment Development
Center) and an understanding between HIPDC and these local government
investment companies, these local government investment companies agreed to
retire approximately RMB435 million of the loans extended to Dalian, Fuzhou,
Nantong and Shangan Power Plants and Shantou Oil-Fired Plant and to forfeit
certain rights to participate in profits of these five Power Plants in
exchange for a then aggregate of 46.36% of the equity in us.

     HIPDC and the local government investment companies (excluding Shantou
Power Development Joint Stock Company and Dandong Energy Investment
Development Center) have entered into the Shareholders Agreement dated May 31,
1994 (the "Shareholders Agreement") which, among other things, grants to HIPDC
the right to vote all the shares owned by each of the other seven signatories
to the Shareholders Agreement so as to enable HIPDC to have majority voting
rights in general meetings for so long as we are in existence. The
Shareholders Agreement also provides that Directors designated by HIPDC will
have majority representation on our board of directors (the "Board of
Directors") and each of the other signatories to the Shareholders Agreement
will have one representative designated by it appointed as a member of the
Board of Directors. The Shareholders Agreement also provides that for so long
as we are in existence (i) HIPDC and the other signatories to the Shareholders
Agreement will maintain their combined shareholdings to ensure their
collective majority control of us, (ii) HIPDC has certain priority rights to
purchase the shares held by the other signatories to the Shareholders
Agreement and (iii) if HIPDC does not exercise its priority rights to purchase
such shares, each of the signatories to the Shareholders Agreement other than
HIPDC has a priority right to purchase such shares on a pro rata basis and
(iv) no shares may be sold or transferred unless their transferees agree to
abide by the terms of the Shareholders Agreement.

     At the completion of the initial public offering in October 1994, HIPDC
and the local government investment companies (excluding Shantou Power
Development Joint Stock Company and Dandong Energy Investment Development
Center) have owned, respectively, 40.23% and 34.77% of the total number of our
outstanding shares.

     On February 26, 1998, we placed 250 million H Shares at the price of
HK$4.40 per H Share or US$22.73 per ADS. Simultaneously with the H Share
placement, we issued 400 million A Shares to our controlling shareholder HIPDC
as part of the consideration paid for the acquisition of the Shidongkou II,
pursuant to the Shanghai Acquisition Agreement. After the completion of the H
Share Placement. HIPDC and the local government investment companies
(excluding Shantou Power Development Joint Stock Company and Dandong Energy
Investment Development Center) each has held 42.17% and 31.28% equity
interest, respectively.

     On November 15 and 16, 2001, we issued successfully a total of
350,000,000 A shares in the PRC, of which 100,000,000 state-owned legal person
shares were placed to HIPDC at the same price. After the completion of the A
share issuance, the total share capital of the Company is 6,000,000,000
shares, HIPDC and the local government investment companies (excluding Shantou
Power Development Joint Stock Company and Dandong Energy Investment
Development Center) each held 42.58%, and 27.82% equity interest,
respectively.

     As a result of the Shareholders Agreement, HIPDC currently has 70.09% of
the total voting rights of the outstanding shares. As a result, HIPDC will
continue to control us and will continue to have the power, subject to the
Shareholders Agreement, to control the election of all of our Directors and to
direct our management and policies.

     In January 2000, Huaneng Group underwent a restructuring, in which State
Power Corporation transferred its 17.22% interest in HIPDC to Huaneng Group.
Huaneng Group became a 51.98% shareholder of HIPDC. At the same time, Huaneng
Group has granted us a preferential right to purchase interest in existing
power plants owned by Huaneng Group and the preferential right on all future
power development projects of Huaneng Group that we may realistically develop.

B........Related party transactions

Guarantees

     As of December 31, 2003, we had long-term loans of approximately RMB4,648
million, RMB1,096 million, RMB280 million and RMB34 million which were
guaranteed by HIPDC, Huaneng Group, WPDB and Henan Construction Investment
Company respectively.

Service Agreement

     Pursuant to the Service Agreement, dated June 30, 1994, entered into
between HIPDC and us (the "Service Agreement"), HIPDC has agreed to provide
certain services to us. The service fee payable by us to HIPDC for the use of
transmission and transformer facilities is calculated on the basis of overhaul
and maintenance expenses, financing charges, insurance premiums and taxes
payable by HIPDC relating to the transmission facilities and reasonable
profits to HIPDC (calculated on the basis of 10% of the current net fixed
asset value of the transmission facilities) and depreciation expenses (10% of
the original net fixed asset value of such transmission facilities on a
straight line basis) until depreciation is no longer calculated. HIPDC is
responsible for the repair and maintenance of such transmission facilities and
related costs. Other services and fees include: (i) the renting of office and
headquarters space by HIPDC to us at a yearly rental of RMB500,000; (ii) the
shared use of the satellite telecommunications facilities owned by HIPDC at a
yearly fee of RMB300,000; (iii) the training by HIPDC of our personnel for a
nominal fee plus reimbursement of HIPDC's actual out-of-pocket expenses if
both parties agree; and (iv) the provision of other consulting services
relating to production, operation and management of us, subject to payment of
service fees equal to at least HIPDC's actual costs to be mutually agreed. The
Service Agreement has a term of 10 years, excluding (i) and (ii) above which
expired on December 31,1999.

Lease Agreement

     Pursuant to a leasing agreement between us and HIPDC signed on December
26, 2000, HIPDC agreed to lease Tianyin Mansion with an area of 27,800 square
meters to us for 5 years, and the annual rent is RMB25 million. The Leasing
Agreement was effective retroactively as of January 1, 2000.

T&T Service Agreement

     Pursuant to the T&T Service Agreement we agreed to pay service fees to
HIPDC in relation to the provision of transmission and transformer facilities
for our newly constructed power plants, power plants under expansion and
acquired power plants which commence commercial operations after January 1,
1997 for a fixed fee equal to 12% of the original book value of the
transmission and transformer facilities as set forth in the financial
statements of HIPDC. The terms of the T&T Service Agreement are to be reviewed
after a period of 10 years.

Acquisitions from Huaneng Group in 2003

     We made the following acquisitions from Huaneng Group in 2003, each of
which have been disclosed to our shareholders in more detail in the respective
circulars dated June 12, 2003 regarding each acquisition and each has been
approved by the independent shareholders.

     We acquired 55% of the equity interest in the registered capital of
Qinbei Power Plant, 60% of the equity interest in the registered capital of
Yushe Power Plant, and the net assets of Xindian Power Plant formerly owned by
Huaneng Group. The acquisition increased our attributable generation capacity
by 770 MW and capacity under construction by 1,020 MW. The consideration was
RMB550 million.

Entrusted Management Agreement with Huaneng Group and HIPDC

     In 2002, we entered into an Entrusted Management Agreement with Huaneng
Group and HIPDC in relation to the management of their thermal power plants.
Our services include, comprehensive planned management, annual planned
management, power operation and sale management, production management of
power plants, fuel management, construction management, financial management,
human resources and labor wages management, comprehensive affairs management,
shareholding management and reporting/co-ordination management. The Entrusted
Management Agreement has a term of 5 years. Upon the expiry of the Entrusted
Management Agreement, unless any party intends otherwise, it will continue to
be operational. The Entrusted Management Agreement may also be terminated by,
inter alia, (i) Huaneng Group and/or HIPDC giving 30 days notice to us or (ii)
we giving 90 days notice to Huaneng Group and/or HIPDC. The entrusted power
plants include 17 power plants currently managed by Huaneng Group with a total
net installed capacity of 10,799 MW and 5 power plants currently managed by
HIPDC with a total net installed capacity of 3,644 MW.

     By entering into the Entrusted Management Agreement, we will further
accumulate management experience as a result of the expansion of our operation
scale and set a precedent for large-scale and multi-entities entrusted
management in the PRC. The Entrusted Management will also enable us to obtain
direct knowledge of the development status of more power markets, thereby
exploring new development opportunities.

     The service fee payable by Huaneng Group and HIPDC comprises the
following three components:

     (i)    costs (including set-up, operational and other recurrent items to
            be incurred by the Company in managing the Entrusted Power
            Plants), namely RMB46 million per annum;

     (ii)   a premium to cover estimation risks which represents 10% of the
            costs, namely RMB4.6 million per annum; and

     (iii)  an incentive / penalty component which is calculated based on the
            confirmed results of the Entrusted Management and shall not exceed
            15% of the costs in (i), namely either an incentive or a penalty
            of not more than RMB6.9 million per annum.

     The costs in (i) will be adjusted annually in accordance with the
Entrusted Management Agreement, which will be by reference to the inflation
rate of the previous year as published by the State Statistic Department and
the salary component of the service fee will be adjusted by the percentage
increase approved by our board.

     The Entrusted Management Agreement has been disclosed to our shareholders
in more details in the circular dated November 22, 2002 and has been approved
by the independent shareholders.

C.       Interests of experts and counsel

     N/A

ITEM 8   Financial Information

A.       Consolidated Statements and Other Financial Information

     See page F-1 to F-53.

Legal proceedings

     We are not a defendant in any material litigation or arbitration and no
litigation or claim of material importance is known to us or any member of the
Board of Directors of us to be pending or threatened against us.

Dividend Distribution Policy

     Our board of directors will determine the payment of dividends, if any,
with respect to our shares on a per share basis. Any final dividend for a
financial year shall be subject to shareholders' approval. The board may
declare interim and special dividends at any time under general authorization
by a shareholders' ordinary resolution. A decision to declare or to pay any
dividends in the future, and the amount of any dividends, will depend on our
results of operations, cash flows, financial condition, future prospects and
other factors which our directors may determine as important.

     For holders of our H shares, cash dividend payments, if any, shall be
declared by our board of directors in Renminbi and paid in HK dollars. The
depositary will convert the HK dollar dividend payments and distribute them to
holders of ADSs in US dollars, less expenses of conversion.

     Dividends may be paid only out of our distributable profits (less
allocations to the statutory funds which generally range from 15% to 20% of
our net income determined in accordance with PRC GAAP) and may be subject to
PRC withholding tax. Our Articles of Association limit our distributable
profits to the lower of the amount determined in accordance with PRC GAAP,
IFRS and US GAAP. Subject to the above, we expect to carry a positive,
balanced and stable dividend distribution policy.

     On March 16, 2004, the Board of Directors proposed a cash and stock
dividend plan together with the conversion of additional paid-in capital and
statutory surplus reserve fund to share capital. Under the plan, every 10
shares of the issued and outstanding common stock of the Company will be
entitled to receiving RMB5.0 in cash and 10 shares of the Company's common
stock. The proposed dividend plan is subject to shareholders' approval at our
2003 Annual General Meeting of Shareholders to be held on May 11, 2004.

B.       Significant Changes

     None.

ITEM 9   The Offer and Listing

Offer and listing details and markets

     The ADSs have been listed on the New York Stock Exchange since October 6,
1994. The table below sets forth, for the periods indicated, the high and low
closing prices of the ADSs on the New York Stock Exchange.



                                                                                        Closing Price Per ADS
                                                                                   -------------------------------
                                                                                       High               Low
                                                                                   ------------       ------------
                                                                                      (US$)              (US$)


                                                                                                    
1999.......................................................................            17.44              8.38
2000.......................................................................            18.94              7
2001.......................................................................            24.91             16.75
2002.......................................................................            35.82             23.06
2003.......................................................................            71.35             31.36
2002   First Quarter.......................................................            28.97             23.06
       Second Quarter......................................................            35.82             26.60
       Third Quarter.......................................................            34.90             27.67
       Fourth Quarter......................................................            33.27             25.50

2003   First Quarter.......................................................            38.43             31.36
       Second Quarter......................................................            46.60             34.75
       Third Quarter.......................................................            56.18             46.4
       Fourth Quarter......................................................            71.35             54.21

2004   First Quarter.......................................................            78.95             64.8

2003   October.............................................................            64.95             54.32
       November............................................................            63.42             54.21
       December............................................................            71.35             58.1

2004   January.............................................................            76.4              64.8
       February............................................................            74.88             66.05
       March...............................................................            78.95             65.64


___________________

Source: Reuters

     Each ADS represents 40 Overseas Listed Foreign Shares. As of December 31,
2003, there were 109 registered holders of American Depositary Receipts
evidencing ADS.

     On January 21, 1998, we listed our H shares on the Hong Kong Stock
Exchange. On February 26, 1998, we placed 250 million H Shares Placement at
the price of HK$4.40 per H share or US$22.73 per ADS. The table below sets
forth, for the periods indicated, the high and low closing prices of H shares
on the Hong Kong Stock Exchange.




                                                                                     Closing Price Per H shares
                                                                                       High               Low
                                                                                       (HK$)              (HK$)


                                                                                                   
1999.........................................................................          3.3               1.72
2000.........................................................................          3.77              1.27
2001.........................................................................          4.2               3.4
2002.........................................................................          6.95              4.53
2003.........................................................................         13.2               6.05




2002     First Quarter.......................................................          5.7               4.53
         Second Quarter......................................................          6.95              5.05
         Third Quarter.......................................................          6.9               5.5
         Fourth Quarter......................................................          6.55              5.2

2003     First Quarter.......................................................          7.5               6.05
         Second Quarter......................................................          8.9               6.6
         Third Quarter.......................................................         11.2               8.9
         Fourth Quarter......................................................         13.45             10.55

2004     First Quarter.......................................................         15.45             12.5

2003     October.............................................................         12.30             10.55
         November............................................................         12.30             10.75
         December............................................................         13.45             10.25

2004     January.............................................................         14.4              12.5
         February............................................................         14.8              13
         March...............................................................         15.45             13.2


___________________
Source: Reuters

     As of December 31, 2003, there were 86 registered holders of H Shares.

ITEM 10  Additional Information

A.       Share Capital

     Not applicable.

B.       Memorandum and articles of association

     The information under the heading "Description of Capital Stock" in the
Registration Statement on Form F-3 filed with SEC on December 25, 1997 is
incorporated herewith by reference.

C.       Material Contracts

     See "Item 7. Major Shareholders and Related Party Transactions-- B.
Related party Transactions" for certain arrangements we have entered into with
HIPDC and Huaneng Group.

D.       Exchange controls

     The existing foreign exchange regulations have significantly reduced
government foreign exchange controls for transactions under the current
account, including trade and service related foreign exchange transactions and
payment of dividends. We may undertake current account foreign exchange
transactions without prior approval from the State Administration of Foreign
Exchange by producing commercial documents evidencing such transactions,
provided that they are processed through Chinese banks licensed to engage in
foreign exchange transactions. The PRC government has stated publicly that it
intends to make the Renminbi freely convertible in the future. However, we
cannot predict whether the PRC government will continue its existing foreign
exchange policy and when the PRC government will allow free conversion of
Renminbi to foreign currency.

     Foreign exchange transactions under the capital account, including
principal payments in respect of foreign currency-denominated obligations,
continue to be subject to significant foreign exchange controls and require
the approval of the State Administration of Foreign Exchange. These
limitations could affect our ability to obtain foreign exchange through debt
or equity financing, or to obtain foreign exchange for capital expenditures.

     Since 1994, the conversion of Renminbi into Hong Kong and United States
dollars has been based on rates set by the People's Bank of China, which are
set daily based on the previous day's PRC interbank foreign exchange market
rate and current exchange rates on the world financial markets. Although the
Renminbi to US dollar exchange rate has been relatively stable since 1994, we
cannot predict nor give any assurance of its future stability. Fluctuations in
exchange rates may adversely affect the value, translated or converted into US
dollars or Hong Kong dollars, of our net assets, earnings and any declared
dividends. We cannot give any assurance that any future movements in the
exchange rate of the Renminbi against the US dollar and other foreign
currencies will not adversely affect our results of operations and financial
condition.

     The following table sets forth the noon buying rates in New York for
cable transfers payable in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") for
the periods indicated:




                                                                                    Noon Buying Rate
Period                                                   Period End       Average(1)         High           Low
                                                                         (expressed in RMB per US$)

                                                                                                   
1999...............................................             8.2795            8.2785        8.2800         8.2770
2000...............................................             8.2774            8.2784        8.2799         8.2768
2001...............................................             8.2766            8.2770        8.2786         8.2676
2002...............................................             8.2800            8.2772        8.2780         8.2759
2003...............................................             8.2767            8.2772        8.2800         8.2769
2003   October.....................................             8.2766            8.2768        8.2776         8.2765
       November....................................             8.2770            8.2768        8.2772         8.2766
       December....................................             8.2767            8.2770        8.2772         8.2765
2004   January.....................................             8.2768            8.2770        8.2772         8.2767
       February....................................             8.2769            8.2771        8.2773         8.2769
       March.......................................             8.2770            8.2771        8.2774         8.4767


___________________
Source: Datastream

Note:

(1)      Determined by averaging the rates on the last business day of each
         month during the respective period.



E.       Taxation

     The following is a summary of (i) certain tax consequences from
acquiring, owning and disposing the H Shares and ADSs based on tax laws of the
PRC, the United States and the Income Tax Treaty between the PRC and the
United States (the "Tax Treaty") as in effect on the date of this annual
report, and is subject to changes in PRC or United States law, including
changes that could have retroactive effect, and (ii) the principal PRC taxes
to which we are subject. The following summary does not take into account or
discuss the tax laws of any country or region other than the PRC and the
United States, nor does it take into account the individual circumstances of
an investor. This summary does not purport to be a complete technical analysis
or examination of all potential tax effects relevant to an investment in the H
Shares or ADSs and current and prospective investors in all jurisdictions of
the H Shares or ADSs are advised to consult their tax advisors as to PRC,
United States or other tax consequences of the purchase, ownership and
disposition of the H Shares or ADSs. This summary also does not purport to be
a complete technical analysis or examination of all potential PRC taxes that
may be levied upon us.

PRC Tax Considerations

Tax on Dividends

     Individual Investors. According to the Provisional Regulations of China
Concerning Questions of Taxation on Enterprises Experimenting with the Share
System (the "Provisional Regulations"), dividends paid by PRC companies are
ordinarily subject to a PRC withholding tax levied at a flat rate of 20%.
However, the PRC State Tax Bureau issued, on July 21, 1993, a Notice
Concerning the Taxation of Gains on Transfer and Dividends from Shares
(Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and
Foreign Individuals (the "Tax Notice") which states that dividends paid by a
PRC company to individuals with respect to shares listed on an overseas stock
exchange, such as H Shares (including H Shares represented by ADSs), would not
be subject to PRC withholding tax.

     Under the Individual Income Tax Law of China, as amended on August 30,
1999, foreign individuals are subject to withholding tax on dividends paid by
a PRC company at a rate of 20% unless specifically exempted by the financial
authority of the State Council. However, in a letter dated July 26, 1994 to
Former State Commission for Restructuring the Economic System, the former
State Council Securities Commission and the China Securities Regulatory
Commission, the PRC State Administration of Taxation (the "SAT", the PRC
central government tax authority which succeeded the State Tax Bureau)
reiterated the temporary tax exemption stated in the Tax Notice for dividends
received from a PRC company listed overseas. In the event that this letter is
withdrawn, a 20% tax may be withheld on dividends in accordance with the
Provisional Regulations, and the Individual Income Tax Law. Such withholding
tax may be reduced pursuant to an applicable double taxation treaty.

     Under the Tax Treaty, China may tax a dividend paid by us to an eligible
US Holder up to a maximum of 10% of the gross amount of such dividends.

     Enterprises. According to the Income Tax Law of the PRC Concerning
Foreign Investment Enterprises and Foreign Enterprises, dividends paid by PRC
companies to enterprises are ordinarily subject to a PRC withholding tax
levied at a flat rate of 20%. However, according to the Tax Notice, a foreign
enterprise with no permanent establishment in China receiving dividends paid
with respect to a PRC company's H Shares will temporarily not be subject to
the 20% withholding tax. If such withholding tax becomes applicable in the
future, the rate could be reduced pursuant to an applicable double taxation
treaty.

Capital Gains Tax on Sales of Shares

     The Tax Notice provides that a foreign enterprise not having an
establishment in the PRC and selling or disposing of shares of a PRC
corporation listed overseas will be exempt from PRC income tax on such capital
gains. With respect to shareholders who are foreign individuals, whether or
not resident in the PRC, the PRC's Individual Income Tax Law, which superseded
the July 21, 1993 Notice with respect to this particular matter, provides that
such capital gains realized by individuals will be taxable and authorizes the
State Tax Bureau to promulgate implementing regulations. However, in April
1994 the State Tax Bureau expressed its intention not to impose the tax for
two years. In March 1996, the Ministry of Finance and the State Tax Bureau
jointly issued a notice stating that personal income tax shall not be
collected on capital gains realized on the sales or dispositions of shares in
1996. The exemption was further renewed by a notice issued by SAT on March 30,
1998. There can be no assurance that such exemption will continue to be
available. In the event that capital gains tax is imposed on gains from the
sale or disposition of H Shares or ADSs, foreign holders would be subject to a
20% tax unless reduced by an applicable double-taxation treaty. It is arguable
that pursuant to the terms of the Tax Treaty, gains derived from the
alienation of H Shares or ADSs by a Foreign Holder that is a resident of the
United States for purposes of the Tax Treaty should not be subject to PRC tax;
provided that such foreign holder owns H Shares or ADSs which represent a
participation of less than 25% in us. But this position is uncertain and the
PRC authorities may take a different position. Further, the PRC has not,
promulgated any rules or regulations that address the procedures that a
Foreign Holder must follow in order to claim the benefits of the Tax Treaty.
Accordingly, it is currently unclear how a Foreign Holder may claim the
benefits of the Tax Treaty.

     On November 18, 2000, the State Council issued a notice entitled "State
Council Notice on the Income Tax Reduction for Interest and Other Income that
Foreign Enterprises derive in China" ( the "State Council Notice"). Under the
State Council Notice, beginning January 1, 2001, enterprise income tax at a
reduced 10% rate will apply to interests, rental, license fees and other
income obtained in China by foreign enterprises without agencies or
establishment in China, or by foreign enterprises without any substantive
relationship with their agencies or establishment in China. If the exemption
as described in the preceding paragraph does not apply or is not renewed, and
the State Council Notice is found not to apply, a foreign enterprise
shareholder may be subject to a 20% tax on capital gain, unless reduced by an
applicable double tax treaty.

Tax Treaties

     Non-PRC Investors residing in countries which have entered into
double-taxation treaties with the PRC may be entitled to a reduction of the
withholding tax imposed on the payment of dividends to such Foreign Holders of
us. The PRC currently has double-taxation treaties with a number of countries,
including Australia, Canada, France, Germany, Japan, Malaysia, the
Netherlands, Singapore, the United Kingdom and the United States.

Stamp Tax

     Under the Provisional Regulations of The People's Republic of China
Concerning Stamp Tax, which became effective in October 1988, PRC stamp tax
should not be imposed on the transfer of shares of PRC publicly traded
companies (including H Shares or ADSs) effected outside China.

Taxation of the Company

     Income tax Pursuant to the Income Tax Law of the People's Republic of
China concerning Foreign Invested Enterprises and Foreign Enterprises (the
"EIT Law"), Sino-foreign joint stock companies are subject to a 30% national
income tax plus 3% local income tax. In certain special zones, however, such
tax rate may be reduced. In addition, manufacturing FIEs with an operating
period of more than ten years enjoy a tax holiday of a two-year exemption and
a three-year 50% reduction starting from the first profit-making year.

     We are a Sino-foreign joint stock company and enjoy the tax holiday
described above. Pursuant to Document 327 (1989) of the PRC State Tax Bureau,
the Dalian, Fuzhou, Nantong and Shangan Power Plants (excluding Shangan Power
Plant Phase II) and Shantou Oil-Fired Plant, which previously belonged to
HIPDC, were subject to income tax supervision by the local tax bureaus and
were entitled to calculate each of their tax holidays separately. Following
the Reorganization, we have continued to pay tax pursuant to the EIT Law, so
these five Power Plants enjoyed the tax holidays available to them prior to
the Reorganization. The tax holiday for each of these five Power Plants has
expired. For new projects, including the Shantou Power Plant, each new plant
will enjoy its own tax holiday to be calculated separately.

     All of our power plants, except for Weihai Power Plant, Taicang Power
Plant, Huaiyin Power Plant and Yushe Power Plant, are subject to a 15%
national income tax, without considering the tax holiday described above.

     Value-added Tax Since January 1, 1994, the government has implemented a
turnover tax system applicable to FIEs. Under the turnover tax provisions, we
have to collect from our electricity customers and pay to the PRC tax
authorities a value-added tax ("VAT") on our sales. The tax rate on sales of
electricity by us is 17% of total sales. The amount of VAT payable by us is
the VAT on sales reduced by the VAT paid by us on our purchases of coal, fuel
and other inputs.

United States Federal Income Tax Considerations

     The following is a summary of United States federal income tax
considerations that are anticipated to be material for US Holders (as defined
below) who purchase H shares or ADSs of the Company. This summary is based
upon existing United States federal income tax law, which is subject to
change, possible with retroactive effect. This summary does not discuss all
aspects of United States federal income taxation which may be important to
particular investors in light of their individual investment circumstances,
such as investors subject to special tax rules including: financial
institutions, insurance companies, broker-dealers, tax-exempt organizations,
and, except as described below, non-US Holders, or to persons that will hold H
shares or ADSs as part of a straddle, hedge, conversion, or constructive sale
transaction for United States federal income tax purposes or that have a
functional currency other than the United States dollar, all of whom may be
subject to tax rules that differ significantly from those summarized below. In
addition, this summary does not discuss any foreign, state, or local tax
consideration. This summary assumes that investors will hold their H shares or
ADSs as "capital assets" (generally, property held for investment) under the
United States Internal Revenue Code. Each prospective investor is urged to
consult its tax advisor regarding the United Stated federal, state, local, and
foreign income and other tax considerations of the purchase, ownership, and
disposition of H shares or ADSs.

     For purposes of this summary, a US Holder is a beneficial owner of H
shares or ADSs that is for United States federal income tax purposes:

     o   an individual who is a citizen or resident of the United States;

     o   a corporation, partnership or other entity created in or organized
         under the laws of, the United States or any state or political
         subdivision thereof;

     o   an estate the income of which is includible in gross income for
         United States federal income tax purposes regardless of its source;

     o   a trust the administration of which is subject to the primary
         supervision of a United States court and which has one or more United
         States persons who have the authority to control all substantial
         decisions of the trust; or

     o   a trust that was in existence on August 20, 1996, was treated as a
         United States person, for United States federal income tax purposes,
         on the previous day and elected to continue to be so treated.

     A beneficial owner of the H shares or ADSs that is not a US Holder is
referred to herein as a "Non-US Holder."

     If a partnership (including any entity treated as a partnership for
United States federal income tax purposes) holds ADS or H shares, the tax
treatment of a partner in such partnership will depend upon the status of the
partner and the activities of the partnership. Partners in such a partnership
should consult their tax advisors as to the particular United States federal
income tax consequences applicable to them.

     A foreign corporation will be treated as a "passive foreign investment
company" (a "PFIC"), for United States federal income tax purposes, if 75% or
more of its gross income consists of certain types of "passive" income or 50%
or more of its assets are passive. The Company presently believes that it is
not a PFIC and does not anticipate becoming a PFIC. This is, however, a
factual determination made on an annual basis and is subject to change. The
following discussion assumes that the Company will not be subject to treatment
as a PFIC for United States federal income tax purposes.

US Holders

     For United States federal income tax purposes, a US Holder of an ADS will
be treated as the owner of the proportionate interest of the H shares held by
the depositary that is represented by an ADS and evidenced by such ADS.
Accordingly, no gain or loss will be recognized upon the exchange of an ADS
for the holders' proportionate interest in the H shares. A US Holder's tax
basis in the withdrawn H shares will be the same as the tax basis in the ADS
surrendered therefor, and the holding period in the withdrawn H shares will
include the period during which the holder held the surrendered ADS.

Dividends

     Any cash distributions paid by the Company out of earnings and profits,
as determined under United States federal income tax principles, will be
subject to tax as ordinary dividend income and will be includible in the gross
income of a US Holder upon receipt. Cash distributions paid by the Company in
excess of its earnings and profits will be a return of capital to the extent
of the US Holder's adjusted tax basis in its shares or ADSs, which will not be
subject to tax. Any excess will be treated as gain from the sale or exchange
of a capital asset which will be treated as discussed below. Dividends paid in
Hong Kong dollar will be includible in income in a United States dollar amount
based on the United States Dollar - Hong Kong dollar exchange rate prevailing
at the time of receipt of such dividends by the depositary, in the case of
ADSs, or by the US Holder, in the case of H shares held directly by such US
Holder. A non-corporate holder of ADS or shares of Common Stock will generally
be subject to tax on such dividend income at a maximum U.S. federal rate of
15% rather than the marginal tax rates generally applicable to ordinary
income. Dividends received on H shares or ADSs will not be eligible for the
dividends received deduction allowed to corporations. Any subsequent gain or
loss in respect of such Hong Kong dollar arising from exchange rate
fluctuations will be ordinary income or loss. This gain or loss will generally
be treated as United States source income for United States foreign tax credit
limitation purposes. If the Depository converts the Hong Kong dollar to U.S.
Dollar on the date it receives such Hong Kong dollar, United States persons
will not recognize any such gain or loss.

     Dividends received on H shares or ADSs will be treated, for United States
federal income tax purposes, as foreign source income. A US Holder may be
eligible, subject to a number of complex limitations, to claim a foreign tax
credit in respect of any foreign withholding taxes imposed on dividends
received on H shares or ADSs. US Holders who do not elect to claim a foreign
tax credit for foreign income tax withheld may instead claim a deduction, for
United States federal income tax purposes, in respect of such withholdings,
but only for a year in which the US Holder elects to do so for all creditable
foreign income taxes. In certain circumstances, a US Holder may not claim a
foreign tax credit (and instead may claim a deduction) for foreign taxes
imposed on the payment of a dividend if the US Holder:

     o   has not held the H shares or ADSs for at least 16 days in the 30-day
         period beginning 15 days before the ex-dividend date, during which it
         is not protected from risk of loss;

     o   is obligated to make payments related to the dividends; or

     o   subject to the promulgation of future Treasury regulations that are
         anticipated to be retroactively applied, holds the H shares or ADSs
         in an arrangement in which the expected economic profit of the US
         Holder is insubstantial compared to the value of the foreign tax
         credit expected to be obtained as a result of the arrangement.

     A distribution of additional shares of the Company's stock to US Holders
with respect to their H shares or ADSs that is pro rata to all the Company's
shareholders may not be subject to Unites States federal income tax. The tax
basis of such additional shares will be determined by allocating the US
Holders' adjusted tax basis in the H shares or ADSs between the H shares or
ADSs and the additional shares, based on their relative fair market values on
the date of distribution.

Sale or Other Disposition of H shares or ADSs

     A US Holder will recognize capital gain or loss upon the sale or other
disposition of H shares or ADSs in an amount equal to the difference between
the amount realized upon the disposition and the US Holder's adjusted tax
basis in such H shares or ADSs, as each is determined in US dollars. Any
capital gain or loss will be long-term if the H shares or ADSs have been held
for more than one year and will generally be United States source gain or
loss. The claim of a deduction in respect of a capital loss, for United States
federal income tax purposes, may be subject to limitations. Under the Tax
Treaty, any such gain should be treated as foreign source income.

PFIC Considerations

     If the Company were to be classified as a PFIC in any taxable year, a
U.S. Holder would be subject to special rules generally intended to reduce or
eliminate any benefits from the deferral of United States federal income tax
that a U.S. Holder could derive from investing in a foreign company that does
not distribute all of its earnings on a current basis. In such event, a U.S.
Holder of the H shares or ADSs may be subject to tax at ordinary income tax
rates on (i) any gain recognized on the sale of the H shares or ADSs and (ii)
any "excess distribution" paid on the H shares or ADSs (generally, a
distribution in excess of 125% of the average annual distributions paid by the
Company in the three preceding taxable years). In addition, a U.S. Holder may
be subject to an interest charge on such gain or excess distribution.

Non-US Holders

     An investment in H shares or ADSs by a Non-US Holder will not give rise
to any United States federal income tax consequences unless:

     o   the dividends received or gain recognized on the sale of H shares or
         ADSs by such person are treated as effectively connected with the
         conduct of a trade or business by such person in the United States as
         determined under United States federal income tax law; or

     o   in the case of gains recognized on a sale of H shares or ADSs by an
         individual, such individual is present in the United States for 183
         days or more and certain other conditions are met.

     In order to avoid back-up withholding on dividend payments made in the
United States, a Non-US Holder of the H shares or ADSs may be required to
complete, and provide the payor with, an Internal Revenue Service Form W-8, or
other documentary evidence, certifying that such holder is an exempt foreign
person.

F.       Dividends and paying agents

     Not applicable.

G.       Statement by experts

     Not applicable.

H.       Documents on display

     We are subject to the information reporting requirements of the
Securities Exchange Act and, in accordance with the Act, file certain reports
and other information with the SEC. You may read and copy and report,
statement or other information filed by us at the SEC's public reference rooms
in Washington, D.C., New York and Chicago, Illinois. Please call the SEC at
1-800-0330 for further information on the public reference rooms. Our reports
and other information filed with the SEC are also available to the public from
commercial document retrieval services and the website maintained by the SEC
at http://www.sec.gov.

I.       Subsidiary Information

     Not applicable.

ITEM 11  Quantitative and Qualitative Disclosures About Market Risk

     We are exposed to market risk from changes in foreign currency exchange
rates, interest rates and fuel prices.

     Foreign currency exchange rate risk exists with respect to (i) our
indebtedness denominated in currencies other than Renminbi and (ii) its
equipment purchase commitments. Fluctuations in exchange rates may lead to
significant fluctuations in the exposure of our foreign currency denominated
liabilities.

     We are subject to market rate risks due to fluctuations in interest
rates, principally as a result of our indebtedness that bears interests at
variable rates. To mitigate its exposure to interest rate risks, we entered
into certain interest rate swap agreements for the total notional amount of
US$21 million with a weighted average rate of 6.45% per annum. We use such
interest rate swap transactions solely for risk hedging purposes. As of
December 31, 2003, the notional amount of interest rate swap agreements which
we were exposed to was approximately US$21 million.

     We are also exposed to market rate risk due to fluctuations in fuel
prices, mainly coal prices. For the year ended December 31, 2003, our total
fuel costs were RMB9,025 million and the weighted average unit fuel cost was
RMB105.05 per MWh.

     The following table provides information, by maturity date, regarding our
foreign currency sensitive financial instruments, which consist of cash and
cash equivalent, temporary cash investments, short-term and long-term debt
obligations and capital commitments as of December 31, 2003.




(RMB millions)
                                                                   As of December 31, 2003
- -------------------------------------------------------------------------------------------------------------------
                                                                                                     Total
                                                                                                   recorded    Fair
                                                          Expected Maturity Date                     value    value
                                        ---------------------------------------------------------------------------
                                          2004     2005     2006     2007     2008   Thereafter
                                        -------   ------   ------   ------   ------ -------------
                                                                                      
On-balance sheet financial
     instruments
Cash and cash equivalents:
     in US$                                 234        -        -        -        -            -        234     234
     in JPY                                 130        -        -        -        -            -        130     130
     in RMB                               3,765        -        -        -        -            -      3,765   3,765
Temporary cash investments:
     in US$                                  50        -        -        -        -            -         50      50
     in RMB                                  95        -        -        -        -            -         95      95
Debts:
Fixed rate banks and other loans (US$)      613      621      606      588      588        2,032      5,048   5,399
Average interest rate                     6.22%    6.23%    6.26%    6.28%    6.29%        6.29%

Convertible notes (US$)                       1        -        -        -        -            -          1       1
Average interest rate                     1.75%        -        -        -        -            -

Variable rate banks and other loans
   (US$)                                  1,461       80       76       76       76          399      2,168   2,064
Average interest rate                     2.33%    1.32%    1.31%    1.30%    1.29%        1.28%
Variable rate banks and other loans
   (JPY)                                     18       18       18       18       18           48        138     138
Average interest rate                     1.52%    1.52%    1.52%    1.52%    1.52%        1.52%
Capital commitments (in US$)                 33        -        -        -        -            -         33      33



____________________

(1)      The interest rates for variable rate banks and other loans are
         calculated based on the year end indice.



     The following table provides information, by maturity date, regarding our
interest rate sensitive financial instruments, which consist of fixed and
variable rate short-term and long-term debt obligations, as of December 31,
2003.











(RMB millions)
                                                                As of December 31, 2003
                                    ---------------------------------------------------------------------------------
                                                                                                   Total
                                                                                                  recorded    Fair
                                                      Expected Maturity Date                       value      value
                                    -----------------------------------------------------------  -----------  -------
                                      2004     2005     2006     2007      2008     Thereafter
                                    -------   ------   ------   ------    ------   -------------
                                                    (RMB expressed in million, except interest rate)
                                                                                      
Debts
Fixed rate banks and other loans        3,163    1,227    1,016    1,210       908         3,965      11,489   11,832
Average interest rate                   5.72%    5.87%    5.88%    5.91%     5.92%         5.92%

Convertible notes                           1                                                              1        1
Average interest rate                   1.75%

Variable rate banks and other loan      1,479       98       94       94        94           447       2,306    2,202
Average interest rate                   2.28%    1.35%    1.34%    1.33%     1.32%         1.31%



___________________

(1)      The interest rates for variable rate banks and other loans are
         calculated based on the year end indice.



ITEM 12  Description of Securities Other than Equity Securities

     Not applicable.


PART II

ITEM 13  Defaults, Dividend Arrearages and Delinquencies

     None.

ITEM 14  Material Modifications to the Rights of Security Holders and Use
         of Proceeds

     None.

ITEM 15  Controls and Procedures

         Our principal executive officer and principal financial officer have
evaluated the effectiveness of our disclosure controls and procedures (as
defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31,
2003 ("the "Evaluation Date"), and they have concluded that, based on their
evaluation, our disclosure controls and procedures are effective as to ensure
that material information required to be included this annual report is made
known to them by others on a timely basis. There has been no significant
change in our internal controls or in other factors that could significantly
affect these controls subsequent to the Evaluation Date.

ITEM 16  [Reserved]

ITEM 16A  Audit Committee Financial Expert

     The Board of Directors has determined that Mr. Xia Donglin qualifies as
an Audit Committee Financial Expert in accordance with the terms of Item 16.A
of Form 20-F. See "Item 6 Directors, Senior Management and Employees -- A.
Directors, members of the supervisory committee and senior management."

ITEM 16B  Code of Ethics

     Although, as of the date of this annual report, we do not have, in form,
a code of ethics that applies to the Company's principal executive officer,
principal financial officer and principal accounting officer (collectively,
the "Senior Corporate Officers"), we believe that, as a substantive matter,
the Senior Corporate Officers are subject to a set of written requirements
under the PRC law that are substantially similar to the ethical standards
described under Item 16B(b) of Form 20-F. Joint stock companies that are
incorporated in China and listed on both PRC and foreign stock exchanges are
heavily regulated by the central government. To a large extent, these
requirements, which are designed to promote honest and ethical conduct and
compliance with applicable laws and regulations by the directors and senior
executives of such companies, are not merely ethical requirements, but more
importantly, statutory obligations that are legally binding on these
individuals under the PRC Company Law, relevant rules and regulations
promulgated by China Securities Regulatory Commission and the Mandatory
Provisions of Articles of Association of Overseas Listed Companies.

     In spite of the above specific circumstances relating to the Company, we
nevertheless intend to adopt the type of written code of ethics as described
in Item 16B(b) of Form 20-F and expect to do so soon.

ITEM 16C  Principal Accountant Fees and Services

PricewaterhouseCoopers has served as our independent public auditor for each
of the fiscal years in the two-year period ended December 31, 2003, for which
audited consolidated financial statements appear in this annual report on Form
20-F.



The following table shows information about fees paid by us to
PricewaterhouseCoopers




                                                                For the year ended
                                                                   December 31,
                                                         ---------------------------------
(In RMB million)                                             2003                 2002
                                                         ------------         ------------
                                                                             
Audit fees                                                    14                   11

Audit-related fees                                             2                   -

Tax fees                                                       -                   -

All other fees                                                 -                   -
                                                         ------------         ------------
Total                                                         16                   11
                                                         ------------         ------------




Audit Services are defined as the standard audit work that needs to be
performed each year in order to issue an opinion on the consolidated financial
statements of the Company. It also includes other audit services which are
those services that only the external auditor reasonably can provide, such as
auditing of non-recurring transactions and application of new accounting
policies, audits of significant and newly implemented system controls and
pre-issuance reviews of quarterly financial results.

Audit Related Services include those other assurances and related services
provided by auditors, but not restricted to those that can only reasonably be
provided by the external auditor signing the audit report, that are reasonably
related to the performance of the audit or review of the company's financial
statements such as acquisition due diligence, audits of pension and benefit
plans, consultations concerning financial accounting and reporting standards.

Tax Services include the assistance with compliance and reporting of
enterprise and value added taxes, assistance with our assessment of new or
changing tax regimes, assessment of our transfer pricing policies and
practices, and assistance with assessing relevant rules, regulations and facts
going into our correspondence with tax authorities.

Other Services consist primarily of consultancy services provided to improve
certain processes and tools related to economic modeling, analysis, and budget
control, as well as some limited assistance with our filing in a legal case.

Audit Committee Pre-approval Policies and Procedures

     The Audit Committee of the Company's Board of Directors is responsible,
among other things, for the oversight of the external auditor subject to the
requirements of the PRC Law and the Company's Articles of Association. The
Audit Committee has adopted a policy regarding pre-approval of audit and
permissible non-audit services to be provided by our independent auditors (the
"Policy"). Under the policy, proposed services either (i) may be pre-approved
by the Audit Committee without consideration of specific case-by-case services
("general pre-approval"); or (ii) require the specific pre-approval of the
Audit Committee ("specific pre-approval"). General approval applies to
services of recurring and predictable nature. These types of services, once
approved by the Audit Committee in the beginning, will not require further
approval in future, except when actual fees and expenses exceed pre-approved
budget levels. In such a case, the Audit Committee may authorize one of its
members to approve budget increases subject to the requirement that such
member provide a report on his decision to approve or deny an application for
budget increases to the Audit Committee at an Audit Committee meeting held
immediately after such member grants or denies the approval.

     Specific pre-approval applies to all other services. These services must
be approved by the Audit Committee on a case-by-case basis after an
application including proposed budget and scope of services to be provided by
our independent auditors is submitted to the Audit Committee.

ITEM 16D Exemptions from the Listing Standards for Audit Committees

Not applicable

ITEM 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers

                  Not applicable

ITEM 17  Financial Statements

     See pages F-1 through F-53 incorporated by reference.

ITEM 18  Financial Statements

     Not applicable.

ITEM 19  Exhibits

     1.1    Amended Articles of Association of Huaneng Power International,
            Inc., incorporated by reference to Exhibit 1.1 of the Annual
            Report on Form 20-F for the year ended December 31, 2001 filed
            with the SEC.

     3.1    Shareholders Agreement dated May 31, 1994, incorporated by
            reference to Exhibit 9.1 of our Registration Statement on Form
            F-1, filed with the SEC on August 24, 1994.

     12.1   Certifications of Principal Executive Officer pursuant to Rule
            13a-14(a) promulgated under the U.S. Securities Exchange Act of
            1934.

     12.2   Certification of Principal Financial Officer pursuant to Rule
            13a-14(a) promulgated under the U.S. Securities Exchange Act of
            1934.

     13.1   Certification pursuant to 18 U.S.C. Section 1350 as adopted
            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



                     THIS PAGE IS INTENTIONALLY LEFT BLANK







                       REPORT OF INDEPENDENT ACCOUNTANTS



TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF HUANENG POWER INTERNATIONAL, INC.
(Incorporated in the People's Republic of China with limited liability)

We have audited the accompanying consolidated balance sheets of Huaneng Power
International, Inc. (the "Company") and its subsidiaries as of December 31,
2003 and 2002 and the related consolidated statements of income, of cash flows
and of changes in shareholders' equity for each of the three years in the
period ended December 31, 2003. These financial statements are the
responsibility of the management of the Company and its subsidiaries. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company and its subsidiaries as of December 31, 2003 and 2002 and of the
results of their operations and cash flows for each of the three years in the
period ended December 31, 2003 in conformity with International Financial
Reporting Standards, as published by the International Accounting Standards
Board.

International Financial Reporting Standards vary in certain significant
respect from the accounting principles generally accepted in the United States
of America. The application of the latter would have affected the
determination of consolidated net income for each of the three years in the
period ended December 31, 2003 and the determination of consolidated
shareholders' equity at December 31, 2003 and 2002 to the extent summarized in
Note 41 to the consolidated financial statements.



PricewaterhouseCoopers



Hong Kong,
March 16, 2004





HUANENG POWER INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

(Amounts expressed in thousands of Rmb, except per share data)




                                                                    For the year ended December 31,
                                                  -------------------------------------------------------------------
                                          Note                  2003                      2002              2001
                                         ------   ---------------------------------  -------------     --------------
                                                        Rmb              US$               Rmb              Rmb
                                                                                        
Operating revenue, net                               23,388,237        2,825,793       18,474,469        15,791,362
                                                  ----------------  ---------------  -------------     --------------
Operating expenses
    Fuel                                             (9,025,013)      (1,090,412)      (6,916,038)       (5,147,364)
    Maintenance                                        (921,561)        (111,344)        (607,951)         (765,712)
    Depreciation                                     (4,117,478)        (497,478)      (3,533,609)       (3,261,001)
    Labor                                            (1,439,673)        (173,943)      (1,035,740)         (807,136)
    Service fees to HIPDC                 7(a)         (214,723)         (25,943)        (263,716)         (307,322)
    Others                                 14          (596,627)         (72,085)        (539,401)         (488,793)
                                                  ----------------  ---------------  -------------     --------------
    Total operating expenses                        (16,315,075)      (1,971,205)     (12,896,455)      (10,777,328)
                                                  ----------------  ---------------  -------------     --------------
Profit from operations                                7,073,162          854,588        5,578,014         5,014,034
                                                  ----------------  ---------------  -------------     --------------
    Interest income                                      53,044            6,409            83,015          113,081
    Interest expense                                   (569,148)         (68,765)         (561,875)         (867,538)
    Bank charges and exchange losses,
    net                                                 (28,181)          (3,405)          (31,405)          (41,758)
                                                  ----------------  ---------------  -------------     --------------
    Total financial expenses                           (544,285)         (65,761)         (510,265)         (796,215)
                                                  ----------------  ---------------  -------------     --------------
Share of profit (loss) of associates       11           212,091           25,625           (11,145)           (5,381)

Gain from disposal of investments                        10,705            1,293             1,288            24,671

Other income, net                          5             12,070            1,458                 -                 -
                                                  ----------------  ---------------  -------------     --------------
Profit before tax                          6          6,763,743          817,203         5,057,892         4,237,109

Income tax expense                         32        (1,149,441)        (138,877)         (980,854)         (715,220)
                                                  ----------------  ---------------  -------------     --------------
Profit before minority interests                      5,614,302          678,326         4,077,038         3,521,889

Minority interests                         33          (183,894)         (22,218)         (156,034)          (71,231)
                                                  ----------------  ---------------  -------------     --------------
Net profit attributable to shareholders               5,430,408          656,108         3,921,004         3,450,658
                                                  ----------------  ---------------  -------------     --------------
Proposed dividend                          21         3,013,836          364,135         2,049,408         1,800,000
                                                  ----------------  ---------------  -------------     --------------
Proposed dividend per share (Rmb)          21              0.50             0.06              0.34              0.30
                                                  ----------------  ---------------  -------------     --------------
Basic earnings per share (Rmb)             34              0.90             0.11              0.65              0.61

                                                  ----------------  ---------------  -------------     --------------
Diluted earnings per share (Rmb)           34              0.90             0.11              0.65              0.60
=========================================         ================  ===============  ================  ==============



The accompanying notes are an integral part of these financial statements.



HUANENG POWER INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002

(Amounts expressed in thousands of Rmb)



                                                                           As of December 31,
                                                    --------------------------------------------------------------
                                     Note                              2003                               2002
                                    ------          ------------------------------------------       -------------
                                                            Rmb                     US$                   Rmb
ASSETS
                                                                                         
Non-current assets
  Property, plant and equipment, net    10             42,658,365                5,154,031              41,103,468
  Investment in associates              11              2,766,031                  334,195                 200,960
  Available-for-sale investments        13                254,990                   30,808                 254,990
  Land use rights and other assets                      1,037,859                  125,395               1,067,838
  Deferred tax assets                   29                 21,311                    2,575                       -
  Goodwill                              14                298,876                   36,111                 126,560
  Less: Negative goodwill               14             (1,730,949)                (209,135)             (1,978,227)
                                                    ------------------        ----------------       -------------
    Total non-current assets                           45,306,483                5,473,980              40,775,589
                                                    ------------------        ----------------       -------------
Current assets
  Inventories, net                      15                800,281                   96,691                 923,341
  Other receivables and assets, net     16                259,421                   31,344                 242,905
  Accounts receivable                   17              2,804,026                  338,785               2,361,833
  Due from related parties             7(h)                 5,862                      708                       -
  Restricted cash                                         159,961                   19,327                  13,259
  Temporary cash investments            18                144,996                   17,519               1,141,502
  Cash and cash equivalents           35(a)             4,128,648                  498,828               3,002,601
                                                    ------------------        ----------------       -------------
    Total current assets                                8,303,195                1,003,202               7,685,441
                                                    ------------------        ----------------       -------------
    Total assets                                       53,609,678                6,477,182              48,461,030
                                                    ==================        ================       =============



                                                                                                  (To be Continued)





HUANENG POWER INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D)
AS OF DECEMBER 31, 2003 AND 2002

(Amounts expressed in thousands of Rmb)



                                                                              As of December 31,
                                                        -----------------------------------------------------------
                                               Note                       2003                             2002
                                              ------    ------------------------------------------    -------------
                                                                Rmb                   US$                  Rmb
                                                                                         
EQUITY AND LIABILITIES
Shareholders' equity
   4,250,000,000 PRC Domestic Shares, par
    value Rmb1.00 each, in form of legal
    person shares                              19           4,250,000               513,490             4,250,000
   250,000,000 A shares, par value Rmb1.00
    each                                       19             250,000                30,205               250,000
   1,527,671,200 (2002: 1,500,273,960)
    Overseas Listed Foreign Shares, par
    value Rmb 1.00 each                        19           1,527,671               184,575             1,500,274
   Additional paid-in capital                  22          10,780,133             1,302,468            10,604,843
   Dedicated capital                           20           4,328,423               522,965             3,373,423
   Equity component of convertible notes       22                 255                    31                44,647
   Retained earnings                                       12,818,873             1,548,790            10,392,873
                                                    ------------------        ----------------       -------------
         Total shareholders' equity                        33,955,355             4,102,524            30,416,060
                                                    ------------------        ----------------       -------------
Minority interests                             33           1,155,197               139,572               910,704
                                                    ------------------        ----------------       -------------
Non-current liabilities
   Liability component of convertible notes    22                   -                     -               155,999
   Long-term loans from shareholders           23                   -                     -               388,891
   Long-term bank loans                        24           8,305,320             1,003,458             8,464,521
   Other long-term loans                       25             848,284               102,491               331,389
   Other financial liabilities                 38                   -                     -                19,397
   Deferred tax liabilities                    29             103,114                12,458               121,853
                                                    ------------------        ----------------       -------------
         Total non-current liabilities                      9,256,718             1,118,407             9,482,050
                                                    ------------------        ----------------       -------------
Current liabilities
   Accounts payable and other liabilities      26           3,342,517               403,847             3,734,350
   Taxes payable                               27             917,362               110,837               620,189
   Due to HIPDC                                 7(h)           87,508                10,573               100,475
   Due to other related parties                 7(h)           27,338                 3,303                     -
   Staff welfare and bonus payable                            220,896                26,689               233,566
   Short-term loans                            28           1,600,000               193,314               550,000
   Current portion of long-term loans from
    shareholders                               23             388,875                46,984               388,891
   Current portion of long-term bank loans     24           2,409,240               291,087             1,928,732
   Current portion of other long-term loans    25             243,386                29,406                96,013
   Liability component of convertible notes    22                 935                   113                     -
   Other financial liabilities                 38               4,351                   526                     -
                                                    ------------------        ----------------       -------------
         Total current liabilities                          9,242,408             1,116,679             7,652,216
                                                    ------------------        ----------------       -------------
         Total equity and liabilities                      53,609,678             6,477,182            48,461,030
                                                    ==================        ================       =============



The accompanying notes are an integral part of these financial statements.



HUANENG POWER INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

(Amounts expressed in thousands of Rmb)



                                                                    For the year ended December 31,
                                                   ---------------------------------------------------------------
                                                                2003                    2002              2001
                                                   -----------------------------     ------------   --------------
                                                        Rmb              US$             Rmb              Rmb
                                                                                        
CASH FLOWS FROM OPERATING ACTIVITIES
   Profit before tax                                 6,763,743          817,203        5,057,892        4,237,109
   Adjustments to reconcile profit before
      tax to net cash provided by operating
      activities:
      Depreciation                                   4,117,478          497,478        3,533,609        3,261,001
      Amortisation of prepaid land use
      rights                                            19,136            2,312           16,847           14,359
      Amortisation of goodwill and negative
        goodwill                                      (222,108)         (26,835)        (246,128)        (247,279)
      Amortisation of other long-term assets            41,566            5,022           24,112           19,600
      Provision for bad debts                           12,567            1,518           15,826            1,030
      (Reversal of provision)/provision for
        inventory obsolescence                            (751)             (91)            (945)           2,576
      Gain from disposal of investments                (10,705)          (1,293)          (1,288)         (24,671)
      Loss on disposals of fixed assets                138,726           16,761           31,980           36,592
      Unrealised exchange loss/(gain)                    1,094              132            4,846           (1,429)
      Unrealised loss on put option of
        convertible notes                                    -                -                -           46,562
      (Gain)/loss on interest rate swaps               (11,771)          (1,422)          (2,179)          14,875
      Share of (profit)/loss of associates            (212,091)         (25,625)          11,145            5,381
      Interest income                                  (53,044)          (6,409)         (83,015)        (113,081)
      Interest expenses                                569,148           68,765          561,875          867,538
   Changes in working capital:
      Restricted cash                                 (146,702)         (17,725)         (13,259)               -
      Accounts receivable                             (353,637)         (42,727)        (496,559)         (28,510)
      Due from other related parties                    (5,862)            (708)               -                -
      Inventories                                      159,419           19,261          (39,272)         (62,063)
      Other receivables and assets                     (65,900)          (7,962)          92,579           20,228
      Accounts payable and other liabilities           226,584           27,377          279,019         (370,300)
      Taxes payable                                    131,281           15,862           44,070          (57,289)
      Due to hipdc                                     (12,967)          (1,567)          65,891          (93,574)
      Due to huaneng Group                             (13,968)          (1,688)               -                -
      Due to other related parties                      27,338            3,303           (3,225)         (49,118)
      Staff welfare and bonus payable                  (12,670)          (1,531)        (152,033)        (199,973)
   Interest paid                                      (617,162)         (74,566)        (733,600)        (715,846)
   Income tax paid                                    (989,635)        (119,569)        (984,047)        (799,669)
   Interest received                                    54,182            6,546           95,577          154,847
                                                   --------------    ------------     ------------   --------------
      Net cash provided by operating
      activities                                     9,533,289        1,151,822        7,079,718        5,918,896
                                                   ==============    ============     ============   ==============


                                                            (To be Continued)



HUANENG POWER INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS (CONT'D)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(Amounts expressed in thousands of Rmb)




                                                                     For the year ended December 31,
                                                      ---------------------------------------------------------------
                                               Note                2003                     2002             2001
                                              ------  ------------------------------   --------------   -------------
                                                            Rmb              US$             Rmb              Rmb
                                                                                         
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of property, plant and equipment          (3,606,704)       (435,766)      (1,594,210)      (2,870,858)
    Proceeds from disposals of fixed assets                 7,679             928           41,567           32,904
    (Increase)/decrease in other long-term
      assets                                              (29,355)         (3,547)           3,412           81,646
    Decrease/(increase) in temporary cash
      investments                                       1,066,629         128,871        5,082,568       (4,665,290)
    Proceeds from disposal of investments                  80,704           9,751            2,390          384,569
    Cash consideration paid for
      available-for-sale investment               13            -               -         (254,990)               -
    Repayment of payable to Nanjing
      Investment Company                                        -               -                -         (141,641)
    Cash consideration paid for acquisitions       3   (2,940,000)       (355,214)      (2,759,435)               -
    Direct costs paid for acquisitions             3      (19,618)         (2,370)         (17,042)         (21,561)
    Cash inflow from the acquired power plants     3      215,585          26,047          569,841        2,635,695
                                                      -------------    -------------   --------------    ------------
      Net cash (used in) provided by
        investing activities                           (5,225,080)       (631,300)       1,074,101       (4,564,536)
                                                      -------------    -------------   --------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES
    Drawdown of short-term loans                          769,000          92,911          120,000        1,300,000
    Repayment of short-term loans                        (450,000)        (54,369)        (190,000)      (2,560,000)
    Repayment of long-term loans from
      shareholders                                       (388,988)        (46,998)         (15,565)        (208,538)
    Drawdown of long-term bank loans                    1,016,230         122,782          173,379        1,604,100
    Repayment of long-term bank loans                  (2,322,348)       (280,588)      (2,954,748)      (2,233,721)
    Drawdown of other long-term bank loans                350,000          42,287                -                -
    Repayment of other long-term loans                    (36,060)         (4,357)        (283,683)        (575,179)
    Capital injection from minority
      shareholders of the subsidiaries                     77,632           9,380                -                -
    Dividend paid to shareholders of the
      Company                                          (2,049,408)       (247,612)      (1,800,000)      (1,266,317)
    Dividend paid to minority shareholders of
      the subsidiaries                                   (148,220)        (17,908)        (138,947)               -
    Redemption of convertible notes                             -               -       (2,234,790)               -
    Net proceeds from issuance of Domestic
      Shares                                      19            -               -                -        2,770,058
                                                      -------------    -------------   --------------    ------------
      Net cash used in financing activities            (3,182,162)       (384,472)      (7,324,354)      (1,169,597)
                                                      -------------    -------------   --------------    ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS               1,126,047         136,050          829,465          184,763
    Cash and cash equivalents, beginning of
      year                                              3,002,601         362,778        2,173,136        1,988,373
                                                      -------------    -------------   --------------    ------------
CASH AND CASH EQUIVALENTS, END OF YEAR            35(a) 4,128,648         498,828        3,002,601        2,173,136
                                                      =============    =============   ==============    ============



The accompanying notes are an integral part of these financial statements.


HUANENG POWER INTERNATIONAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

(Amounts expressed in thousands of Rmb)




                                                                                           Equity
                                                                                          Component
                                     Additional                                               of
                          Share       Paid-in                                            Convertible
                         Capital      Capital                                               Notes      Retained
                        (Note 19)    (Note 19)           Dedicated Capital (Note 20)      (Note 22)    Earnings       Total
                        ---------    ---------    -------------------------------------  -----------   --------       -----
                                                  Statutory
                                                     and
                                                 discretionary   Statutory
                                                   surplus        public
                                                 reserve fund   welfare fund  Sub-total
                                                 -------------  ------------  ----------
                                                                                           
 Balance at January 1,
    2001                 5,650,000    7,717,674     1,532,664   490,037     2,022,701      510,506    7,878,854    23,779,735

 Effect of adoption of
    IAS 39 (Note 22)             -            -             -         -             -            -     (463,921)     (463,921)
 Dividend relating to
    2000                         -            -             -         -             -            -   (1,243,000)   (1,243,000)
 Net profit for the
    year ended December
    31, 2001                     -            -             -         -             -            -    3,450,658     3,450,658
 Transfer to dedicated
    capital                      -            -       363,606   272,705       636,311            -     (636,311)            -
 Issuance and sale of
    350,000,000 new
    Domestic Shares,
    net of direct
    issuance costs
    (Note 19)              350,000    2,420,058             -         -             -            -            -     2,770,058
 Balance at December
    31, 2001             6,000,000   10,137,732     1,896,270   762,742     2,659,012      510,506    8,986,280    28,293,530

 Dividend relating to
    2001                         -            -             -         -             -            -   (1,800,000)   (1,800,000)
 Net profit for the
    year ended
    December 31, 2002            -            -             -         -             -            -    3,921,004     3,921,004
 Conversion of
    convertible notes
    to share capital
    (Note 22)                  274        1,696             -         -             -         (444)           -         1,526
 Redemption of
    convertible notes
    (Note 22)                    -      465,415             -         -             -     (465,415)           -             -
 Transfer from
    statutory public
    welfare fund to
    discretionary
    surplus reserve fund         -            -        15,398   (15,398)            -            -            -             -
 Transfer to dedicated
    capital                      -            -       408,235   306,176       714,411            -     (714,411)            -

 Balance at  December
    31, 2002             6,000,274   10,604,843     2,319,903 1,053,520     3,373,423       44,647   10,392,873    30,416,060

 Dividend relating to
    2002                         -            -             -         -             -            -   (2,049,408)   (2,049,408)
 Net profit for the
    year ended
    December 31, 2003            -            -             -         -             -            -    5,430,408     5,430,408
 Conversion of
    convertible notes
    to share capital
    (Note 22)               27,397      175,290             -         -             -      (44,392)           -       158,295
 Transfer from
    statutory public
    welfare fund to
    discretionary
    surplus reserve fund         -            -         2,104    (2,104)            -            -            -             -
 Transfer to dedicated
    capital                      -            -       545,714   409,286       955,000            -     (955,000)            -

 Balance at  December
    31, 2003             6,027,671   10,780,133     2,867,721 1,460,702     4,328,423          255   12,818,873    33,955,355




The accompanying notes are an integral part of these financial statements.




HUANENG POWER INTERNATIONAL, INC. AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

(Amounts expressed in thousands of Rmb unless otherwise stated)

1. COMPANY ORGANIZATION AND PRINCIPAL ACTIVITIES

     Huaneng Power International, Inc. (the "Company") was incorporated in the
     People's Republic of China (the "PRC") as a Sino-foreign joint stock
     limited company on June 30, 1994. As of December 31, 2003, the Company
     and its subsidiaries had 17,886 employees (2002: 15,222 employees; 2001:
     9,350 employees).

     The Company and its subsidiaries are principally engaged in the
     generation and sale of electric power to the respective regional or
     provincial grid companies.

     Particulars of the Company's, its subsidiaries' and its associates'
operating power plants are as follows:




                                                                Total installed
                                                                Capacity of the
                                                                  Company, its     Equity portion
                                                                  subsidiaries        of total
                                                                      and            capacity of       Province/
                                                                  associates         the Company     Municipality
                        Operating Plants                             (MW)               (MW)           located
    --------------------------------------------------------    --------------     ---------------   ------------
                                                                                             
    The Company:
       Huaneng Dalian Power Plant (the "Dalian Power Plant")         700                  700           Liaoning
       Huaneng Shangan Power Plant (the "Shangan Power
         Plant")                                                     700                  700            Hebei
       Huaneng Nantong Power Plant (the "Nantong Power
         Plant")                                                     704                  704           Jiangsu
       Huaneng Fuzhou Power Plant (the "Fuzhou Power Plant")         700                  700            Fujian
       Huaneng Shantou Oil-Fired Power Plant (the "Shantou
         Oil-Fired Power Plant")                                     103                  103          Guangdong
       Huaneng Shantou Coal-Fired Power Plant (the "Shantou
         Power Plant")                                               600                  600          Guangdong
       Huaneng Shangan Power Plant Phase II ( the "Shangan
         Phase II")                                                  600                  600            Hebei
       Huaneng Shanghai Shidongkou Second Power Plant (the
         "Shanghai Power Plant")                                   1,200                1,200           Shanghai
       Huaneng Dalian Power Plant Phase II (the "Dalian
         Phase II")                                                  700                  700           Liaoning
       Huaneng Dandong Power Plant (the "Dandong Power
         Plant")                                                     700                  700           Liaoning
       Huaneng Nantong Power Plant Phase II (the "Nantong
         Phase II")                                                  700                  700           Jiangsu
       Huaneng Fuzhou Power Plant Phase II (the "Fuzhou
         Phase II")                                                  700                  700            Fujian
       Huaneng Nanjing Power Plant (the "Nanjing Power
         Plant")                                                     640                  640           Jiangsu
       Huaneng Dezhou Power Plant (the "Dezhou Power Plant")       2,520                2,520           Shandong
       Huaneng Jining Power Plant (the "Jining Power Plant")
         (Note 3)                                                    595                  595           Shandong
       Huaneng Changxing Power Plant (the "Changxing Power
         Plant) (Note 3)                                             250                  250           Zhejiang
       Shanghai Shidongkou I Power Plant (the "Shidongkou I
         Power Plant") (Note 3)                                    1,200                1,200           Shanghai
       Huaneng Xindian Power Plant (the "Xindian Power
         Plant") (Note 3)                                            450                  450           Shandong
    Subsidiaries:
       Huaneng Weihai Power Limited Liability Company (the
         "Weihai Power Company")                                     850                  510           Shandong
       Suzhou Industrial Park Huaneng Power Limited
         Liability Company (the "Taicang Power Company")
         (Note 3)                                                    600                  450           Jiangsu
       Jiangsu Huaneng Huaiyin Power Limited Company (the
         "Huaiyin Power Company") (Note 3)                           400                  255           Jiangsu
       Shanxi Huaneng Yushe Power Co., Ltd. (the "Yushe
         Power Company") (Note 3)                                    200                  120            Shanxi
    Associates:
       Shandong Rizhao Power Company Ltd. (the "Rizhao Power
         Company")                                                   700                  178           Shandong
       Shenzhen Energy Group Co., Ltd. ("SEG") (Note 3)            1,844                  461          Guangdong
                                                                 ---------           ----------
     Total                                                        18,356               15,736
                                                                 =========           ===========



1.   COMPANY ORGANIZATION AND PRINCIPAL ACTIVITIES (CONT'D)

     The parent company and ultimate parent company of the Company are Huaneng
     International Power Development Corporation ("HIPDC") and China Huaneng
     Group Corporation ("Huaneng Group") respectively. Both companies are
     incorporated in the PRC.

2.       Accounting Policies

     The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:

     (a) Basis of preparation

         The consolidated financial statements have been prepared in
         accordance with International Financial Reporting Standards ("IFRS")
         under the historical cost convention. This basis of accounting
         differs from that used in the preparation of the statutory financial
         statements of the Company and its subsidiaries ("PRC statutory
         financial statements"). The PRC statutory financial statements of the
         Company and its subsidiaries comprising the financial statements have
         been prepared in accordance with the relevant accounting principles
         and regulations applicable to the Company and its subsidiaries, as
         appropriate in the PRC. Appropriate adjustments have been made to the
         PRC statutory financial statements to conform with IFRS. Difference
         arising from the restatement have not been incorporated in the
         statutory accounting records of the Company and its subsidiaries.

         The consolidated financial statements are expressed in Renminbi
         ("Rmb"), the national currency of the PRC. Solely for the convenience
         of the reader, the December 31, 2003 financial statements have been
         translated into United States dollars (US$) at the rate of
         US$1.00=Rmb8.2767 announced by the People's Bank of China on December
         31, 2003. No representation is made that Renminbi amounts could have
         been, or could be, converted into United Stated dollars at the rate
         on December 31, 2003, or at any other certain rate.

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires the use of estimates and
         assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at
         the date of the financial statements and the reported amounts of
         revenues and expenses during the reporting period. Although these
         estimates are based on management's best knowledge of current events
         and actions, actual results ultimately may differ from those
         estimates.

         The Company and its subsidiaries adopted IAS 39 Financial
         Instruments: Recognition and Measurement in 2001 (see Note 2(e) and
         Note 22). The financial effects of adopting these standards were
         reported in the consolidated financial statements of 2001.

     (b) Principles of consolidation

         (i)      Subsidiaries

         Subsidiaries, which are those entities in which the Company has an
         interest of more than one half of the voting rights or otherwise has
         power to govern the financial and operating policies are
         consolidated.

         Subsidiaries are consolidated from the date on which control is
         transferred to the Company and are no longer consolidated from the
         date that control ceases. The purchase method of accounting is used
         to account for the acquisition of subsidiaries. The cost of an
         acquisition is measured as the fair value of the assets given up,
         shares issued or liabilities undertaken at the date of acquisition
         plus costs directly attributable to the acquisition. The excess of
         the cost of acquisition over the fair value of the net assets of the
         subsidiary acquired is recorded as goodwill. See Note 2(f) for the
         accounting policy on goodwill.

         Intercompany transactions, balances and unrealised gains on
         transactions between group companies are eliminated; unrealised
         losses are also eliminated unless cost cannot be recovered. Where
         necessary, accounting policies of subsidiaries have been changed to
         ensure consistency with the policies adopted by the Company.

         Details of the Company's subsidiaries are set out in Note 12.

     2.  ACCOUNTING POLICES (CONT'D)

     (b) principles of consolidation (cont'd)

         (ii)   Associates

         Associates are entities over which the Company generally has between
         20% and 50% of the voting rights, or over which the Company has
         significant influence, but which it does not control. Investments in
         associates are accounted for by the equity method of accounting.
         Under this method the company's share of the post-acquisition profits
         or losses of associates is recognized in the income statement and its
         share of post-acquisition movements in reserves is recognized in
         reserves. The cumulative post-acquisition movements are adjusted
         against the cost of the investment. Unrealised gains on transactions
         between the Company and its associates are eliminated to the extent
         of the Company's interest in the associates; unrealised losses are
         also eliminated unless the transaction provides evidence of an
         impairment of the asset transferred. The Company's investment in
         associates includes goodwill (net of accumulated amortisation) on
         acquisition. When the Company's share of losses in an associate
         equals or exceeds its interest in the associates, the Company does
         not recognize further losses, unless the Company has incurred
         obligations or made payments on behalf of the associates.

         Details of the Company's associates are set out in Note 11.

     (c) Foreign currency translation

         (i)      Measurement currency

         Items included in the financial statements of each entity in the
         Company and its subsidiaries are measured using the currency that
         best reflects the economic substance of the underlying events and
         circumstances relevant to that entity ("the measurement currency").
         The consolidated financial statements are presented in Rmb, which is
         the measurement currency of the Company and its subsidiaries.

         (ii) Transactions and balances

         Foreign currency transactions are translated into the measurement
         currency using the exchange rates prevailing at the dates of the
         transactions. Foreign exchange gains and losses resulting from the
         settlement of such transactions and from the translation of monetary
         assets and liabilities denominated in foreign currencies, are
         recognized in the income statement.

         Translation differences on debt securities and other monetary
         financial assets measured at fair value are included in foreign
         exchange gains and losses.

     (d) Property, plant and equipment

         Property, plant and equipment are stated at historical cost less
         accumulated depreciation and accumulated impairment loss. When assets
         are sold or retired, their cost and accumulated depreciation and
         accumulated impairment loss are eliminated from the accounts and any
         gain or loss resulting from their disposal is determined by comparing
         proceeds with the carrying amount and is included in the income
         statement.

         The initial cost of property, plant and equipment comprises its
         purchase price, including import duties and non-refundable purchase
         taxes and any directly attributable costs of bringing the asset to
         its working condition and location for its intended use.

         Expenditures incurred after the property, plant and equipment have been
         put into operation, such as repairs and maintenance and overhaul costs,
         are  normally  charged to income  statement in the period the costs are
         incurred.  In situations where it can be clearly  demonstrated that the
         expenditures  have  resulted  in an  increase  in the  future  economic
         benefits  expected to be obtained  from the use of an item of property,
         plant  and  equipment  beyond  its  originally   assessed  standard  of
         performance,  the expenditures are capitalised as an additional cost of
         property, plant and equipment.

     2.  ACCOUNTING POLICIES (CONT'D)

     (d) Property, plant and equipment (cont'd)

         Depreciation is calculated on a straight-line basis to write off the
         cost of each asset to their estimated residual value over their
         estimated useful life as follows:

         Buildings                                            8-35 years
         Electric utility plant in service                    4-30 years
         Transportation facilities                            13-27 years
         Others                                               5-13 years

         The useful life and depreciation method are reviewed periodically to
         ensure that the method and period of depreciation are consistent with
         the expected pattern of economic benefits from items of property,
         plant and equipment.

         Where the carrying amount of an asset is greater than its estimated
         recoverable amount, it is written down immediately to its recoverable
         amount.

         Construction-in-progress represents plants and properties under
         construction and is stated at cost. This includes the costs of
         construction, plant and machinery and other direct costs.
         Construction-in-progress is not depreciated until such time as the
         relevant asset is completed and ready for its intended use.

         Interest costs on borrowings to finance the construction of property,
         plant and equipment are capitalised during the period of time that is
         required to complete and prepare the asset for its intended use.
         Other borrowing costs are expensed.

(e)      Investments

         The Company and its subsidiaries classify its investments in debt and
         equity securities into the following categories: trading,
         held-to-maturity and available-for-sale. The classification is
         dependent on the purpose for which the investments were acquired.
         Management determines the classification of its investments at the
         time of the purchase and re-evaluates such designation on a regular
         basis. Investments that are acquired principally for the purpose of
         generating a profit from short-term fluctuations in price are
         classified as trading investments and included in current assets; for
         the purpose of these financial statements short term is defined as 3
         months. Investments with a fixed maturity that management has the
         intent and ability to hold to maturity are classified as
         held-to-maturity and are included in non-current assets, except for
         maturities within 12 months from the balance sheet date which are
         classified as current assets. Investments intended to be held for an
         indefinite period of time, which may be sold in response to needs for
         liquidity or changes in interest rates, are classified as
         available-for-sale; and are included in non-current assets unless
         management has the express intention of holding the investment for
         less than 12 months from the balance sheet date or unless they will
         need to be sold to raise operating capital, in which case they are
         included in current assets.

         Purchases and sales of investments are recognized on the trade date,
         which is the date that the Company and its subsidiaries commits to
         purchase or sell the asset. Cost of purchase includes transaction
         costs. Trading and available-for-sale investments are subsequently
         carried at fair value. Held-to-maturity investments are carried at
         amortised cost, which is the amount at which the investment was
         measured at initial recognition less principal repayments, plus or
         minus the amortisation of any difference between that initial amount
         and maturity amount by using the effective yield method. Realised and
         unrealised gains and losses arising from changes in the fair value of
         trading investments are included in the income statement in the
         period in which they arise. Unrealised gains and losses arising from
         changes in the fair value of securities classified as
         available-for-sale are recognized in equity. The fair values of
         investments are based on quoted bid prices or amounts derived from
         cash flow models. Fair values for unlisted equity securities are
         estimated using applicable price/earnings or price/cash flow ratios
         refined to reflect the specific circumstances of the issuer. Equity
         securities for which fair values cannot be measured reliably are
         recognized at cost less impairment. When securities classified as
         available-for-sale are sold or impaired, the accumulated fair value
         adjustments are included in the income statement as gains and losses
         from investment securities.

     2.  ACCOUNTING POLICIES (CONT'D)

     (f) Goodwill and negative goodwill

         Goodwill represents the excess of the cost of an acquisition over the
         fair value of the Company's share of the net assets of the acquired
         subsidiary/associate at the date of acquisition, and negative
         goodwill represents the excess of the fair value of the Company's
         share of the net assets of the acquired subsidiary/associate over the
         cost of an acquisition at the date of acquisition.

         Goodwill and negative goodwill are amortised using the straight-line
         method over its estimated useful life and recognized in the income
         statement. Management determines the estimated useful life of
         goodwill and negative goodwill based on the remaining weighted
         average useful life of the identifiable acquired
         depreciable/amortisable assets of the respective business at the time
         of the acquisition.

         At each balance sheet date the Company assesses whether there is any
         indication of impairment. If such indications exist an analysis is
         performed to assess whether the carrying amount of goodwill is fully
         recoverable. A write down is made if the carrying amount exceeds the
         recoverable amount.

     (g) Impairment of long-lived assets

         Property, plant and equipment and other non-current assets, including
         goodwill and intangible assets are reviewed for impairment losses
         whenever events or changes in circumstances indicate that the
         carrying amount may not be recoverable. An impairment loss is
         recognized for the amount by which the carrying amount of the asset
         exceeds its recoverable amount which is the higher of an asset's net
         selling price and value in use. The net selling price is the amount
         obtainable from the sale of an asset in an arm's length transaction
         less the cost of disposal while value in use is the present value of
         estimated future cash flow expected to arise from the continuing use
         of an asset and from its disposal at the end of its useful life. For
         the purposes of assessing impairment, assets are grouped at the
         lowest level for which there are separately identifiable cash flows.

     (h) Inventories

         Inventories consist of fuel, materials and supplies. They are stated
         at the lower of weighted average costs or net realisable values after
         provision for obsolete items, and are expensed to fuel costs or
         repairs and maintenance when used, or capitalised to fixed assets
         when installed, as appropriate. Cost of inventories includes direct
         material cost and transportation expenses incurred in bringing the
         inventories to the working locations.

     (i) Receivables

         Receivables are carried at original invoice amount less provision
         made for impairment of these receivables. A provision for impairment
         of receivables is established when there is an objective evidence
         that the Company and its subsidiaries will not be able to collect all
         amounts due according to the original terms of receivables.

     (j) Temporary cash investments

         Temporary cash investments are cash invested in fixed-term deposits
         with original maturities ranging from more than 3 months to one year.
         Temporary cash investments are classified as held-to-maturity
         investments and are carried at amortised cost (see Note 2(e)).

     (k) Cash and cash equivalents

         Cash and cash equivalents are carried in the balance sheet at cost.
         For the purposes of the cash flow statement, cash and cash
         equivalents comprise cash on hand, deposits held at call with banks,
         other short-term highly liquid investments with original maturities
         of 3 months or less.


     2.  ACCOUNTING POLICIES (CONT'D)

     (l) Borrowings and convertible notes

         Borrowings are recognized initially at the proceeds received, net of
         transaction costs incurred. Borrowings are subsequently stated at
         amortised cost using the effective yield method; any difference
         between proceeds (net of transaction costs) and the redemption value
         is recognized in the income statement over the period of the
         borrowings.

         The proceeds received on the issue of the convertible notes were
         allocated into liability and equity components. Upon initial
         recognition, the liability component represents the present value, at
         the issuance date, of the contractually determined stream of cash
         flows discounted at the market interest rate for instruments of
         comparable credit status providing substantially the same cash flows,
         on the same terms, but without the conversion option. The equity
         component is then determined by deducting the liability component
         from the proceeds received on the issue of the notes. After the
         initial recognition, the liability component is measured at amortised
         cost.

         As further discussed in Note 22, the convertible notes were issued at
         par with a put option allowing the investors to redeem the notes at a
         premium for cash at 128.575% of the par value on May 21, 2002. The
         put option is accounted for as an embedded derivative and separated
         from the host contract. This embedded derivative is carried at fair
         value, with changes in fair value included in the income statement.

     (m) Provisions

         Provisions are recognized when the Company and its subsidiaries have
         a present legal or constructive obligation as a result of past
         events, it is probable that an outflow of resources will be required
         to settle the obligation, and a reliable estimate of the amount can
         be made. Where the Company and its subsidiaries expect a provision to
         be reimbursed, for example under an insurance contract, the
         reimbursement is recognized as a separate asset but only when the
         reimbursement is virtually certain.

     (n) Equity transaction costs

         Incremental external costs directly attributable to the issue of new
         shares, other than in connection with business combinations, are
         shown in equity as a deduction, net of tax, from the proceeds. Share
         issue costs incurred, if any, directly in connection with a business
         combination are included in the cost of acquisition.

     (o) Revenue and income recognition

         Revenue and income are recognized when it is probable that the
         economic benefits associated with the transaction will flow to the
         Company and its subsidiaries and the amount of the revenue and income
         can be measured reliably.

         (i) Operating revenue, net

         Net operating revenue represents amounts earned for electricity
         generated and transmitted to the respective regional or provincial
         grid companies (net of value added tax ("VAT") and deferred revenue).
         Revenue is earned and recognized upon transmission of electricity to
         the power grid controlled and owned by the respective grid companies.

         (ii)     Interest income

         Interest income from deposits in banks or other financial
         institutions is recognized on a time proportion basis that reflects
         the effective yield on the assets.

         (iii) Management service income

         As mentioned in Note 5, the company provides management services to
         certain power plants owned by Huaneng Group and HIPDC. The Company
         recognizes the service income as other income when service is
         provided in accordance with the management service agreement.

     2.  ACCOUNTING POLICIES (CONT'D)

     (p) Borrowing costs

         Borrowing costs generally are expensed as incurred. Borrowing costs
         are capitalised as part of the cost of property, plant and equipment,
         if they are directly attributable to the acquisition, construction or
         production of a qualifying asset. Capitalisation of borrowing costs
         commences when the activities to prepare the asset are in progress
         and expenditures and borrowing costs are being incurred. Borrowing
         costs are capitalised until the assets are substantially ready for
         their intended use. Borrowing costs include interest charges and
         other costs incurred in connection with the borrowing of funds,
         including exchange differences arising from foreign currency
         borrowings used to finance these projects to the extent that they are
         regarded as an adjustment to interest costs.

     (q) Operating leases

         Leases where a significant portion of the risks and rewards of
         ownership are retained by the lessor are classified as operating
         leases. Payments made under operating leases (net of any incentives
         received from the lessor) are charged to the income statement on a
         straight-line basis over the period of the lease.

     (r) Taxation

         (i) VAT

         Under the relevant PRC tax laws, the Company and its subsidiaries are
         subject to Value Added Tax ("VAT"). The Company and its subsidiaries
         are subject to output VAT levied at 17% of the Company's and its
         subsidiaries' operating revenue. The input VAT can be used to offset
         the output VAT levied on operating revenue to determine the net VAT
         payable. Because the VAT is a tax on the customer and the Company and
         its subsidiaries collect such tax from the customers and pay such tax
         to the suppliers on behalf of the tax authority, the VAT has not been
         included in operating revenues or operating expenses.

         (ii)     Income Tax

         In accordance with the practice notes on the PRC income tax laws
         applicable to Sino-foreign enterprises investing in energy and
         transportation infrastructure businesses, the reduced income tax rate
         of 15% (after the approval of State Tax Bureau) are applicable across
         the country.

         All the power plants (except for the Dezhou Power Plant, Jining Power
         Plant, Changxing Power Plant, Shidongkou I Power Plant, Xindian Power
         Plant and Dalian Phase II) are exempted from income tax for two years
         starting from the first profit-making year, after offsetting all tax
         losses carried forward from the previous years (at most five years),
         followed by a 50% reduction of the applicable tax rate for the next
         three years ("tax holiday").

         The tax holiday of the Dalian Power Plant, the Shangan Power Plant,
         the Nantong Power Plant, the Fuzhou Power Plant, the Shantou
         Oil-Fired Power Plant, the Shanghai Power Plant and the Nanjing Power
         Plant had already expired prior to 2003. The tax holiday of Shang'an
         Phase II expired in 2003, the tax holiday of the Nantong Phase II and
         Fuzhou Phase II will expire in 2004, and the tax holiday of Shantou
         Power Plant will expire in 2005.

         The statutory income tax is assessed on an individual power plant
         basis, based on each of their results of operations. The commencement
         dates of tax holiday of each power plant are individually determined.
         The statutory income tax rates applicable to the head office,
         Shandong branch and the operating power plants, after taking the
         effect of tax holidays into consideration, are summarized below:


     2.  ACCOUNTING POLICIES (CONT'D)

     (r) Taxation (cont'd)

         (ii)     Income Tax (Cont'd)



                                                               2003              2002                  2001
                                                            ----------        ----------            ----------
                                                                                             
        Head Office                                           15.0%              15.0%                15.0%
        Dalian Power Plant (including Dalian Phase II)        18.0%              18.0%                15.0%
        Shangan Power Plant                                   18.0%              18.0%                16.5%
        Shangan Phase II                                       9.0%              9.0%                  9.0%
        Nantong Power Plant                                   15.0%              15.0%                15.0%
        Nantong Phase II *                                    7.5 %              7.5%                 15.0%
        Fuzhou Power Plant                                    15.0%              15.0%                15.0%
        Fuzhou Phase II **                                     7.5%              7.5%                 15.0%
        Shantou Oil-Fired Plant                               15.0%              15.0%                15.0%
        Shantou Power Plant ***                               10.0%              7.5%                  7.5%
        Shanghai Power Plant                                  16.5%              16.5%                16.5%
        Dandong Power Plant *****                               -                  -                    -
        Nanjing Power Plant                                   15.0%              15.0%                 7.5%
        Shandong Branch                                       17.0%              17.0%                17.0%
        Dezhou Power Plant                                    17.0%              17.0%                17.0%
        Jining Power Plant                                    15.0%              15.0%                33.0%
        Changxing Power Plant ****                            16.5%              16.5%            Not Applicable
        Shidongkou I Power Plant ****                         18.0%              33.0%            Not Applicable
        Xindian Power Plant ****                              18.0%         Not Applicable        Not Applicable
        Weihai Power Company                                  33.0%              33.0%                33.0%
        Taicang Power Company ****                            33.0%              33.0%            Not Applicable
        Huaiyin Power Company ****                            33.0%              33.0%            Not Applicable
        Yushe Power Company ****                              33.0%         Not Applicable        Not Applicable



         *        In accordance with Su Guo Shui Han [2003] No. 248 and Tong
                  Guo Shui Wai Zi [2003] No.1, the tax holiday of the Nantong
                  Phase II is determined separately from the Nantong Power
                  Plant. The Nantong Phase II is entitled to a 50% reduction
                  of the applicable tax rate from January 1, 2002 to December
                  31, 2004. The Nantong Phase II is currently negotiating with
                  the Jiangsu State Tax Bureau for a refund of the overpaid
                  income tax for the year ended December 31, 2002.

         **       In accordance with Min Guo Shui Han [2003] No. 37 the tax
                  holiday of the Fuzhou Phase II is determined separately from
                  the Fuzhou Power Plant. The Fuzhou Phase II is entitled to a
                  50% reduction of the applicable tax rate from January 1,
                  2002 to December 31, 2004. The Fuzhou Power Plant is
                  currently negotiating with the Fujian State Tax Bureau for a
                  refund of the overpaid income tax for the year ended
                  December 31, 2002.

         ***      In accordance with the approval from Shantou State Tax
                  Bureau Shewai Branch dated January 16, 2003, the Shantou
                  Power Plant is qualified as a foreign invested advanced
                  technology enterprise and is, therefore, entitled to extend
                  its tax holiday for three years from January 1, 2003 to
                  December 31, 2005. The applicable tax rate during the
                  extension is 10%.

         ****     Not applicable in 2002 and /or 2001 as they were not
                  subsidiaries or branches of the Company.

         *****    The tax holiday of Dandong Power Plant has not commenced yet
                  as it has not recovered all of the accumulated deficits.

         The income tax charge is based on profit for the year and after
considering deferred taxation.


     2.  ACCOUNTING POLICIES (CONT'D)

     (r) Taxation (cont'd)

         (ii)     Income Tax (Cont'd)

         Deferred income tax is provided in full, using the liability method,
         on temporary differences arising between the tax bases of assets and
         liabilities and their carrying amounts in the financial statements.
         Currently enacted tax rates are used in the determination of deferred
         income tax. Deferred tax assets are recognized to the extent that it
         is probable that future taxable profit will be available against
         which the temporary differences can be utilized. Deferred income tax
         is provided on temporary differences arising on investments in
         subsidiaries and associates, except where the timing of the reversal
         of the temporary difference can be controlled and it is probable that
         the temporary difference will not reverse in the foreseeable future.

     (s) Employee benefits

         Pension obligations

         The Company and its subsidiaries have various defined contribution
         plans in accordance with the local conditions and practices in the
         provinces in which they operate. A defined contribution plan is a
         pension plan under which the Company and its subsidiaries pay fixed
         contributions into a separate entity (a fund) and will have no legal
         or constructive obligations to pay further contributions if the fund
         does not hold sufficient assets to pay all employee benefits relating
         to employee service in the current and prior periods.

         For defined contribution plans, the Company and its subsidiaries pay
         contributions to publicly administered pension insurance plans on a
         mandatory, contractual or voluntary basis. Once the contributions
         have been paid, the Company and subsidiaries have no further payment
         obligations. The regular contributions constitute net periodic costs
         for the year in which they are due and as such are included in staff
         costs.

     (t) Related parties

         Parties are considered to be related if one party has the ability,
         directly or indirectly, to control the other party or exercise
         significant influence over the other party in making financial and
         operating decisions. Parties are also considered to be related if
         they are subject to common control or common significant influence.

     (u) Financial instruments

         Financial instruments are classified as liabilities or equity in
         accordance with the substance of the contractual arrangement.
         Interest, dividends, gains and losses relating to a financial
         instrument classified as a liability, are reported as expense or
         income. Distributions to holders of financial instruments classified
         as equity are charged directly to equity. When the rights and
         obligations regarding the manner of settlement of financial
         instruments depend on the occurrence or non-occurrence of uncertain
         future events or on the outcome of uncertain circumstances that are
         beyond the control of both the issuer and the holder, the financial
         instrument is classified as a liability unless the possibility of the
         issuer being required to settle in cash or another financial asset is
         remote at the time of issuance, in which case the instrument is
         classified as equity.

         Financial instruments are reviewed for impairment at each balance
         sheet date. For financial assets carried at amortised cost, whenever
         it is probable that the Company and its subsidiaries will not collect
         all amounts due according to the contractual terms of loans,
         receivables or held-to-maturity investments, an impairment or bad
         debt loss is recognized in the income statement. Reversal of
         impairment losses previously recognized is recorded when the decrease
         in impairment loss can be objectively related to an event occurring
         after the write-down. Such reversal is recorded in income. However,
         the increased carrying amount is only recognized to the extent it
         does not exceed what amortised cost would have been had the
         impairment not been recognized.


     2.  ACCOUNTING POLICIES (CONT'D)

     (v) Contingencies

         Contingent liabilities are not recognized in the financial
         statements. They are disclosed unless the possibility of an outflow
         of resources embodying economic benefits is remote. A contingent
         asset is not recognized in the financial statements but disclosed
         when an inflow of economic benefits is probable.

     (w) Dividends

         Dividends are recorded in the financial statements of the Company and
         its subsidiaries in the period in which they are approved by the
         shareholders of the Company and its subsidiaries.


     3.  ACQUISITIONS

     During 2001, 2002 and 2003, the Company acquired a number of power plants
     from both the Huaneng Group as well as other parties. These acquisitions
     have been accounted for under the purchase method of accounting. These
     acquisitions became effective when, amongst other things, the Company
     obtained minority shareholders' approval where applicable and all
     necessary government approvals and made payment of the purchase
     considerations. All of the acquisitions by the Company were paid by cash.




     Details of these acquisitions are shown in the table below:


                                                             For the year ended December 31, 2003
                                               ----------------------------------------------------------------
                                               Acquisition of subsidiaries
                                                       and net assets               Acquisition of an associate
                                              -------------------------------     ------------------------------
                                              55% equity interest in Henan
                                              Huaneng Qinbei Power Co., Ltd.
                                              (the "Qinbei Power Company"),
                                              60% equity interest in Yushe
                                              Power Company and all of the         25% equity interest in SEG's
                                              assets and liabilities of            enlarged share capital
    Equity interest acquired                  Xindian Power Plant*                 (Note 11)
                                              -------------------------------     ------------------------------
                                                                           
                                                                                   Shenzhen Investment Holding
    Acquired from                             Huaneng Group                        Corporation ("SIH") and SEG

    Effective date                            October 27, 2003                     April 22, 2003

    Consideration paid                        Rmb550 million                       Rmb2,390 million

    Direct cost of acquisitions               Rmb12 million                        Rmb15 million

    Fair value of net assets acquired         Rmb382 million                       Rmb1,585 million

    Goodwill                                  Rmb180 million                       Rmb820 million





                                                      For the year ended December 31, 2002
                              ----------------------------------------------------------------------------------
                               Acquisition of
                               subsidiaries, an
                               associate and net              Acquisition of additional equity interests in
                               assets                                          subsidiaries
                              ------------------------   -------------------------------------------------------
                                                    
                               70% equity interest
                               in Shidongkou I
                               Power Plant, 70%
                              equity interest in
                               Taicang Power
                               Company, 44.16%                              30% additional
                               equity interest in                           equity interest
                               Huaiyin Power                                in Shidongkou I       19.48%
                               Company and all of        25% additional     Power Plant and       additional
                               the assets and            equity             additional 5%         equity
                               liabilities of            interest in        equity interest       interest in
    Equity interest            Changxing Power           Jinning Power      in Taicang Power      Huaiyin Power
    acquired                   Plant *                   Plant              Company               Company*
                              ------------------------   ---------------    ----------------     ---------------
                                                                                                  Jiangsu
                                                         Shandong                                 Huaiyin
                                                         Electricity                              Investment
                                                         Power Group                              Company
    Acquired from              Huaneng Group             Corporation        Huaneng Group         ("JHIC")

                                                                            December 31,          December 31,
    Effective date             July 1, 2002              June 18, 2002      2002                  2002

    Consideration paid         Rmb2,050 million          Rmb109 million     Rmb415 million        Rmb185 million

    Direct cost of
       acquisitions            Rmb18 million                    -           Rmb4 million                 -

    Fair value of net
       assets acquired         Rmb2,047 million          Rmb106 million     Rmb374 million        Rmb109 million

    Goodwill                   Rmb21 million             Rmb3 million       Rmb45 million         Rmb76 million




     3.  ACQUISITIONS (CONT'D)





                                                         For the year ended December 31, 2001
                                      ------------------------------------------------------------------------
                                               Acquisition of subsidiaries, an associate and net assets
                                      ------------------------------------------------------------------------
                                      Net assets of Shandong Huaneng Power Development Co., Ltd. ("Shandong
                                      Huaneng"), which owned and operated the net assets of Dezhou Power Plant
                                      and held 60%, 75% and 25.5% equity interests in Weihai Power Company,
                                      Jining Power Plant and Rizhao Power Company, respectively, before the
    Equity interest acquired          acquisition.*
                                      ------------------------------------------------------------------------
                                   
    Acquired from                     The shareholders of Shandong Huaneng (including Huaneng Group)

    Effective date                    January 1, 2001

                                      Rmb5,768 million (Rmb1.34 per ordinary A share or US$0.1618 per ordinary N
    Consideration paid                share)

    Direct cost of acquisitions       Rmb32 million

    Fair value of net assets
    acquired                          Rmb8,272 million

    Negative Goodwill                 Rmb2,473 million



     * The aggregated assets and liabilities arising from these acquisitions
     of subsidiaries and net assets in 2001, 2002 and 2003 were as follows:




                                                                 2003                2002               2001
                                                          ---------------     ---------------    ---------------
                                                                Rmb'000            Rmb'000            Rmb'000
                                                          ---------------     ---------------    ---------------
                                                                                           
    Property, plant and equipment, net                       3,085,503           4,923,490          6,427,841
    Investment in an associate                                       -                   -            231,869
    Deferred tax assets                                         21,809                   -                  -
    Other long-term assets                                      18,667             121,324            270,017
    Inventories                                                 35,608             164,127             95,769
    Other current assets                                        96,608              54,402          1,803,269
    Accounts receivable                                         88,556             458,103            182,589
    Cash and cash equivalents                                  215,585             569,841          2,635,695
    Minority Interest                                         (115,639)           (829,320)          (240,083)
    Long-term loans                                         (1,706,104)         (2,039,735)        (1,808,458)
    Due to Huaneng Group                                       (13,968)                  -                  -
    Deferred tax liabilities                                         -            (109,568)                 -
    Current liabilities                                     (1,344,842)         (1,156,534)        (1,326,169)
                                                          ---------------     ---------------    ---------------
    Fair value of net assets acquired                          381,783           2,156,130          8,272,339

    Add: Goodwill/ (less: Negative goodwill)                   179,997              97,280         (2,472,784)
    Less: Direct costs of acquisition                          (11,780)            (18,410)           (31,657)
                                                          ---------------     ---------------    ---------------
    Total consideration paid                                   550,000           2,235,000          5,767,898

    Add: Direct costs of acquisition paid                        2,528              17,042             21,561
    Less: Cash inflow from the acquired power plants          (215,585)           (569,841)        (2,635,695)
                                                          ---------------     ---------------    ---------------
    Net cash outflow for the acquisitions                      336,943           1,682,201          3,153,764
                                                          ===============     ===============    ===============



4.   Financial risk management

     (1) Financial risk factors

         The Company and its subsidiaries' activities expose them to a variety
         of financial risks, including the effects of changes in debt and
         equity market prices, foreign currency exchange rates and interest
         rates. The Company and its subsidiaries' overall risk management
         programme focuses on the unpredictability of financial markets and
         seeks to minimise potential adverse effects on the financial
         performance of the Company and its subsidiaries. The Company and its
         subsidiaries use derivative financial instruments such as interest
         rate swaps to hedge certain exposures.

     (a) Interest rate risk

         The Company's floating rate bank loans expose the Company to interest
         rate risk. The Company uses derivative instruments when considered
         appropriate, to manage exposures arising from changes in interest
         rates by entering into interest rate swap agreements with PRC banks
         to convert certain floating rate bank loans into fixed rate debts of
         the same principal amounts and for the same maturities to hedge
         against cash flow interest rate risk.

         The interest rates and terms of repayment of the convertible notes,
         shareholders loans, bank loans and other loans of the Company and its
         subsidiaries are disclosed in Notes 22, 23, 24, 25 and 28.

     (b) Foreign currency risk

         The Company and its subsidiaries have foreign currency risk as a
         significant portion of its long-term bank loans, shareholder loans
         and other loans are denominated in foreign currencies, principally US
         dollars, as described in Note 23, 24(b) and 25. Fluctuation of
         exchange rates of Renminbi against foreign currencies could affect
         the Company and its subsidiaries' results of operation.

     (c) Credit risks

         Significant portions of the Company and its subsidiaries' cash and
         cash equivalents and temporary cash investments maturing over 3
         months are deposited with the four largest state-owned banks of the
         PRC and a non-bank financial institution in the PRC, which is a
         related party of the Company.

         Each power plant of the Company and its subsidiaries sells the
         electricity generated to its sole customer (the provincial or
         regional grid companies) in the province or region where the power
         plant is situated.

     (2) Fair value estimation

         The fair value of publicly traded derivatives and trading and
         available-for-sale securities is based on quoted market prices at the
         balance sheet date.

         In assessing the fair value of non-traded derivatives and other
         financial instruments, the Company and its subsidiaries use a variety
         of methods and make assumptions that are based on market conditions
         existing at each balance sheet date. Quoted market prices or dealer
         quotes for the specific or similar instruments are used for long-term
         debt. Other techniques, such as option pricing models and estimated
         discounted value of future cash flows, are used to determine fair
         values for the remaining financial instruments.

         The face values less any estimated credit adjustments for financial
         assets and liabilities with a maturity of less than one year are
         assumed to approximate their fair values. The fair value of financial
         liabilities for disclosure purposes is estimated by discounting the
         future contractual cash flows at the current market interest rate
         available to the Company and its subsidiaries for similar financial
         instruments.


5.   Other Income, Net

     Pursuant to a management service agreement entered into with Huaneng
     Group and HIPDC, the Company has, in 2003, provided management services
     to certain power plants owned by the Huaneng Group and HIPDC in return
     for a service fee. Net other income represented the management service
     fee income net of relevant expenses.


6.    Profit Before Tax

     Profit before tax was determined after charging and (crediting) the
following:




                                                                          2003           2002            2001
                                                                      ------------   ------------     ------------
                                                                          `000           `000            `000
                                                                                              
    Interest expenses on convertible notes                                 3,248         47,904        108,581
    Interest expenses on bank loans:
       - repayable within 5 years                                        104,012        155,987        236,832
       - repayable beyond 5 years                                        422,809        415,181        492,079
    Interest expenses on shareholders loans wholly repayable
    within 5 years                                                        22,053         29,622         73,524
    Interest expenses on other long-term loans wholly repayable
    within 5 years                                                        57,493         29,619         43,726
                                                                      ------------   ------------     ------------
                                                                         609,615        678,313        954,742
    Less: Amount capitalised in property, plant and equipment            (40,467)      (116,438)       (87,204)
                                                                      ------------   ------------     ------------
    Total interest expenses                                              569,148        561,875        867,538

    Interest income                                                      (53,044)       (83,015)      (113,081)

    Bank charges and exchange losses, net                                 28,181         31,405         41,758

    Change in fair value on financial instruments:
       - (Gains)/loss of interest rate swaps                             (11,771)        (2,179)        14,875
       - Fair value change of put option                                       -              -         46,562

    Auditors' remuneration                                                19,359         10,750         12,747

    Loss on disposals of fixed assets                                    138,726         31,980         36,592

    Gain from disposals of investment                                    (10,705)        (1,288)       (24,671)

    Operating leases :
       - Buildings                                                        25,985         27,566         25,000
       - Land use rights                                                  44,100         42,293         37,208

    Depreciation of property, plant and equipment                      4,117,478      3,533,609      3,261,001

    Amortisation of prepaid land use rights                               19,136         16,847         14,359

    Amortisation of other long-term assets                                41,566         24,112         19,600

    Amortisation of goodwill                                              25,170          1,150              -

    Amortisation of negative goodwill                                   (247,278)      (247,278)      (247,279)

    Cost of inventories                                                9,222,583      7,100,336      5,337,630

    Provision for doubtful accounts                                       12,567         15,826          1,030

    (Reversal of provision)/Provision for inventory obsolescence            (751)          (945)         2,576

    Staff costs:
       - Wages and staff welfare                                       1,020,444        698,862        588,552
       - Retirement benefits                                             235,950        142,734        107,301
       - Staff housing benefits                                           72,163         78,612         56,406
       - Other staff costs                                               111,116        115,532         54,877




7.    Related Party Transactions

     The related parties of the Company and its subsidiaries include:




                       Name of related parties                                   Nature of relationship
- ------------------------------------------------------------           -----------------------------------------
                                                                  
    Huaneng Group                                                      Ultimate parent

    HIPDC                                                              Parent

    China Huaneng Finance Company ("Huaneng Finance")                  A subsidiary of Huaneng Group

    Weihai Power Development Bureau ("WPDB")                           Minority shareholder of Weihai Power
                                                                       Company

    Henan Construction Investment Company ("Henan Investment")         Minority shareholder of Qinbei Power
                                                                       Company

    China Huaneng International Trade Economics Corporation            A subsidiary of Huaneng Group
    ("CHITEC")

    Time Shipping Company ("Time Shipping")                            A join venture of Huaneng Group

    Rizhao Power Company                                               An associate of the Company



     a.     Pursuant to the relevant service agreements entered into between
            the Company and HIPDC on June 30, 1994, HIPDC provides
            transmission services and transformer facilities to some of the
            power plants of the Company and receives service fees. The
            agreements cover a period of 10 years. Such service fees represent
            recoverable costs for rate setting purposes. The total amount of
            service fees paid to HIPDC for the year ended December 31, 2003
            were approximately Rmb215 million (2002: Rmb264 million; 2001:
            Rmb307 million).

     b.     In accordance with the leasing agreement entered into between the
            Company and HIPDC, the land use rights of the Shanghai Power Plant
            is leased to the Company for a period of 50 years at an annual
            rental payment of Rmb6 million, starting from June 30, 1997.

     c.     Pursuant to a leasing agreement entered into amongst the Company,
            HIPDC and Nanjing Investment Company, the land use rights of the
            Nanjing Power Plant is leased to the Company for 50 years with an
            annual rental payment of approximately Rmb1.3 million, starting
            from January 1, 1999.

     d.     As of December 31, 2003, current deposits of approximately
            Rmb2,792 million (2002: current deposits: Rmb2,376 million; fixed
            deposits: Rmb570 million) were placed with a non-bank PRC
            financial institution, Huaneng Finance.

            As of December 31, 2003, the interest rate per annum of the
            current deposits placed with Huaneng Finance ranged from 0.72% to
            1.44% (2002: current deposits: 0.72% to 1.44%; fixed deposits:
            1.71%). The interest earned from these deposits amounted to Rmb14
            million (2002: Rmb52 million; 2001: Rmb20 million) in 2003.

     e.     Pursuant to the leasing agreement between the Company and HIPDC,
            HIPDC agreed to lease its building to the Company for 5 years at
            an annual rental of Rmb25 million effective from January 1, 2000.

     f.     As described in Note 23 and Note 25, certain loans of the Company
            and its subsidiaries were on-lent from HIPDC or borrowed from WPDB
            and Huaneng Finance.

     g.     As of December 31, 2003, short-term loans amounting to Rmb1,130
            million (2002: Rmb200 million) and Rmb130 million (2002: nil) were
            borrowed from Huaneng Finance and Henan Investment, which bore
            interest at 4.78% to 5.05% (2002: 5.56%) and 4.78% per annum
            respectively.


7.   RELATED PARTY TRANSACTIONS (CONT'D)

     h.     As of December 31, 2003 and 2002, the balances with HIPDC and
            other related parties are unsecured, non-interest bearing and
            receivable or repayable within one year.

     i.     As of December 31, 2003, long-term bank loans of approximately
            Rmb4,648 million, Rmb1,096 million, Rmb280 million, and Rmb34
            million (2002: Rmb5,544 million, Rmb1,140 million, Rmb280 million
            and nil) were guaranteed by HIPDC, Huaneng Group, WPDB and Henan
            Investment, respectively.

     j.     As of December 31, 2003, the Company had provided guarantees on
            certain long-term bank loans of the Rizhao Power Company totaling
            approximately Rmb339 million (2002: Rmb399 million).

     k.     During the years ended December 31, 2003 and 2002, the Company
            entered into several agreements with Huaneng Group to acquire
            equity interests or net assets of certain power plants (See Note
            3).

     l.     On November 6, 2002, the Company entered into a management service
            agreement with Huaneng Group and HIPDC. Pursuant to which, the
            Company provides management services to certain power plants owned
            by Huaneng Group and HIPDC for 5 years. For the year ended
            December 31, 2003, the service fee earned from Huaneng Group and
            HIPDC amounted to approximately Rmb33 million and Rmb17 million,
            respectively (2002: nil; 2001: nil). The Company incurred a total
            costs of services of Rmb38 million, and recorded the management
            service fee, net of relevant expenses, as other income.

     m.     In accordance with an equipment import agency service agreement
            entered into between Shandong Huaneng and CHITEC, the Company is
            required to pay an agency fee at 0.5% of the value of imported
            equipment in return for the agency service provided by CHITEC. For
            the year ended December 31, 2003, no agency fee was due to CHITEC
            (2002: Rmb3 million; 2001: Rmb32 million).

     n.     For the year ended December 31, 2003, the Company and its
            subsidiaries paid approximately Rmb145 million for coal purchased
            from CHITEC (2002: nil; 2001: nil).

     o.     For the year ended December 31, 2003, the Company and its
            subsidiaries paid approximately Rmb457 million for the fuel
            purchased and transportation services received from Time Shipping
            (2002: Rmb301 million; 2001: Rmb115 million).


8.    Retirement Plan and Post-retirement Benefits

     All PRC employees of the Company and its subsidiaries are entitled to a
     monthly pension at their retirement dates. The PRC government is
     responsible for the pension liability to these employees on retirement.
     The Company and its subsidiaries are required to make contributions to
     the state-sponsored retirement plan at a specified rate, currently set at
     18% to 20%, of the basic salary of the PRC employees. The retirement plan
     contributions paid by the Company and its subsidiaries for the year ended
     December 31, 2003 were approximately Rmb132 million (2002: Rmb89 million;
     2001: Rmb66 million).

     In addition, the Company and its subsidiaries have implemented a
     supplementary defined contribution retirement scheme. Under this scheme,
     the employees are required to make a specified contribution based on the
     number of years of service with the Company and its subsidiaries, and the
     Company and its subsidiaries are required to make a contribution equal to
     two to three times the employees' contributions. The employees will
     receive the total contributions upon their retirement. The contributions
     paid by the Company and its subsidiaries for the year ended December 31,
     2003 totaled approximately Rmb111 million (2002: Rmb80 million; 2001:
     Rmb60 million).

     The Company and its subsidiaries have no further obligation for
     post-retirement benefits beyond the above annual contributions made.



9. Directors', senior managements' and supervisors' emoluments

     (a) Directors' and supervisors' emolument

         The aggregate amounts of emoluments payable to directors and
supervisors of the company during the year are as follows:




                                                                            2003           2002           2001
                                                                         ----------     -----------    ----------
                                                                            `000           `000           `000
                                                                                              
         Fees for executive directors                                             -               -             -
         Fees for non-executive directors                                         -               -             -
         Fees for supervisors                                                     -               -             -
         Other emoluments for executive directors:
          Basic salaries and allowances                                         120             445           522
          Discretionary bonuses                                                 264           1,027         1,128
          Contributions to pensions schemes for directors (and past
          directors):
             -  as directors                                                      -               -             -
             -  for other offices                                                42             263           148
         Other emoluments for non-executive directors                         1,332           1,118             -
         Other emoluments for supervisors                                       850             576           589
                                                                         ----------     -----------    ----------
                                                                              2,608           3,429         2,387
                                                                         ==========     ===========    ==========



         During the year, no option was granted to the directors (2002 and
         2001: nil).

         During the year, no emolument was paid to the directors and
         supervisors (including the five highest paid employees) as an
         inducement to join or upon joining the Company or as compensation for
         loss of office.

         The annual emoluments paid during the year to each of the directors
         and supervisors (including the five highest paid employees) fell
         within the range of nil to Rmb1 million.

         No director had waived or agreed to waive any emoluments during the
year.

     (b) Five highest paid individuals

         For the year ended December 31, 2003, none of the five individuals,
         whose emoluments were the highest in the Company and its
         subsidiaries, were directors (2002 and 2001: all of the five
         individuals were directors). The emoluments payable to the five
         highest paid individuals during the year are as follows:




                                                                            2003           2002           2001
                                                                         ----------     -----------    ----------
                                                                            `000           `000           `000
                                                                                                 
        Basic salaries and allowances                                       516             477           404
        Bonuses                                                            1,835           1,034          815
        Pensions                                                            192             282           112
                                                                         ----------     -----------    ----------
                                                                           2,543           1,793         1,331
                                                                         ==========     ===========    ==========




10.  Property, Plant and Equipment, NET

     Property, plant and equipment, net comprised:




                                                              2003                                              2002
                     -------------------------------------------------------------------------------------   ----------
                                      Electric
                                      Utility
                                      Plant in    Transportation               Construction-
                       Buildings      Service       Facilities     Others      in-progress      Total            Total
                    --------------  -----------  ----------------  -------   ----------------  -----------   ----------
                         `000           `000           `000          `000           `000          `000          `000
                                                                              
    Cost
    ----
    Beginning of year  2,097,231    52,567,658        634,870      1,067,217       685,758     57,052,734    50,014,849
    Reclassification    (895,175)      809,030        (49,930)       136,075             -              -             -
    Acquisition
       (Note 3)          131,452     1,022,451         18,184        115,027     1,798,389      3,085,503     4,923,490
    Additions              5,432        26,144            245         46,039     2,655,419      2,733,279     2,257,383
    Transfer from CIP     23,540       885,859            699         39,304      (949,402)             -             -
    Disposals             (5,698)     (295,512)             -       (108,771)            -       (409,981)     (142,988)
                     ------------   ------------  --------------  -----------  -------------  ------------   -----------
    End of year        1,356,782    55,015,630        604,068      1,294,891     4,190,164     62,461,535    57,052,734
                     ------------   ------------  --------------  -----------  -------------  ------------   -----------
    Accumulated Depreciation
    ------------------------
    Beginning of year    419,048    14,913,396        127,132        489,690             -     15,949,266    12,457,735
    Reclassification    (153,025)      169,355        (12,073)        (4,257)            -              -             -
    Charge for the
    year                  68,331     3,877,634         30,035        141,478             -      4,117,478     3,533,609
    Written back on
         disposals        (2,054)     (184,152)             -        (77,368)            -       (263,574)      (42,078)
                     ------------   ------------  --------------  -----------  -------------  ------------   -----------
    End of year          332,300    18,776,233        145,094        549,543             -     19,803,170    15,949,266
                     ------------   ------------  --------------  -----------  -------------  ------------   -----------
    Net Book Value
    --------------
    End of year        1,024,482    36,239,397        458,974        745,348     4,190,164     42,658,365    41,103,468
                     ============   ============  ==============  ===========  =============  ============   ===========
    Beginning of year  1,678,183    37,654,262        507,738        577,527       685,758     41,103,468    37,557,114
                     ============   ============  ==============  ===========  =============  ============   ===========


     Borrowing costs capitalised to construction-in-progress for the year
     ended December 31, 2003 amounted to approximately Rmb40 million (2002:
     Rmb116 million). The capitalisation rate used to determine the amount of
     borrowing costs eligible for capitalisation was 5.06% per annum for the
     year ended December 31, 2003 (2002: 5.25%).

     There was no write-down of any property, plant and equipment during the
year.



11. INVESTMENT IN ASSOCIATEs




                                                                                        2003             2002
                                                                                    ------------     ------------
                                                                                        `000             `000
                                                                                                  
    Beginning of year                                                                  200,960          226,488
    Acquisition of 44.16% equity interest of Huaiyin Power Company (Note 3)                  -          271,598
    Acquisition of 25% equity interest of SEG (Note 3)                               2,404,562                -
    Share of results before tax                                                        212,091          (11,145)
    Share of tax (Note 32)                                                             (51,582)          (5,059)
    Transfer to investment in subsidiary as a result of acquisition of                       -         (280,922)
    additional interest (Note 3)
                                                                                    ------------     ------------
    End of year                                                                      2,766,031          200,960
                                                                                    ============     ============


     The share of results before tax included the amortisation charge of
     goodwill of Rmb55 million (2002: nil) in respect of the acquisition of an
     associate. Investment in associates at December 31, 2003 included
     goodwill with a carrying amount of Rmb765 million (2002: nil).

     As of December 31, 2003, the following are details of the Company's
investment in associates:




                                                         Percentage of         Issued and
                                 Country and date       equity interest        fully paid           Principal
             Name                of incorporation            held                capital            activities
- --------------------------     --------------------    ----------------     ----------------     ----------------
                                                                                    
    Rizhao Power Company        PRC; March 20, 1996         25.5%           US$150,000,000      Power generation

    SEG                         PRC; July 16, 1997            25%           Rmb955,555,556      Power generation





12. INVESTMENT IN SUBSIDIARIES

     As of December 31, 2003, the Company had equity interests in the
following subsidiaries:




                                                                    Percentage
                                                                    of equity
                                          Country, date of           interest         Issued and
                                       incorporation and type        directly         fully paid       Principal
        Name of subsidiaries              of legal entity              held            capital         activities
- --------------------------------     -------------------------    -------------   -----------------   -------------
                                                                                         
    Weihai Power Company              PRC; November 22, 1993;          60%          Rmb761,832,800     Power
                                      Limited liability                                                generation
                                      company

    Taicang Power Company             PRC; June 19, 1997;              75%          Rmb682,840,000     Power
                                      Limited liability                                                generation
                                      company

    Huaiyin Power Company             PRC; January 26, 1995;          63.64%        Rmb265,000,000     Power
                                      Limited liability                                                generation
                                      company

    Qinbei Power Company              PRC; July 12, 1995;              55%          Rmb10,000,000      Power
                                      Limited liability                                                generation
                                      company

    Yushe Power Company               PRC; November 29, 1994;          60%          Rmb80,000,000      Power
                                      Limited liability                                                generation
                                      company



     Summarized financial information of the two subsidiaries (Qinbei Power
     Company and Yushe Power Company) acquired in 2003 is as follows:



                                                                                                 As of December
                                                                                                    31, 2003
                                                                                               -----------------
                                                                                                      `000
                                                                                          
    Balance sheet
    Current assets                                                                                  323,032
    Long-term assets                                                                              2,739,414
                                                                                               -----------------
    Total assets                                                                                  3,062,446
                                                                                               =================

    Current liabilities                                                                           1,073,960
    Long-term liabilities                                                                         1,641,484
                                                                                               -----------------
    Total liabilities                                                                             2,715,444
                                                                                               =================

                                                                                                 For the period
                                                                                                    from the
                                                                                               effective date of
                                                                                                the acquisition
                                                                                                to December 31,
                                                                                               -----------------
                                                                                                      2003
                                                                                                      `000
    Income statement
    Revenue                                                                                          57,348
    Expenses                                                                                        (54,282)
                                                                                               -----------------
    Net profit                                                                                        3,066
                                                                                               =================



13.  AVAILABLE-FOR-SALE INVESTMENT

     Available-for sale investment represents a 3% equity interest (unlisted)
     in a power generation company China Yangtze Power Co., Ltd. ("Yangtze
     Power") in the PRC.

     The investment does not have a quoted market price in an active market.
     There is no appropriate method to reliably measure its fair values.
     Accordingly, the investment is stated at cost and subject to review for
     impairment loss.



14.  GOODWILL AND NEGATIVE GOODWILL

     Goodwill and negative goodwill arose from acquisitions. Goodwill and
     negative goodwill are recognized in the income statement as other
     operating expenses and deduction of other operating expenses respectively
     on a systematic basis over the remaining weighted average useful lives of
     the identifiable acquired depreciable/ amortisable assets (see Note 3).
     The movement on the carrying amount of goodwill and negative goodwill
     during the year is as follows:




                                                                                      Negative
                                                                     Goodwill         goodwill          Total
                                                                  --------------   --------------    -----------
                                                                       `000             `000             `000
                                                                                            
    Year  ended December 31, 2002:

    Beginning of year                                                      -        (2,225,505)      (2,225,505)
    Addition from acquisitions (Note 3)                              127,710                -          127,710
    Amortisation for the year                                         (1,150)         247,278          246,128
                                                                  --------------   --------------    -----------
    End of year                                                      126,560        (1,978,227)      (1,851,667)
                                                                  ==============   ==============    ===========
    As of December 31, 2002

    Cost                                                             127,710        (2,472,784)      (2,345,074)
    Accumulated amortisation                                          (1,150)         494,557          493,407
                                                                  --------------   --------------    -----------
    Net book value                                                   126,560        (1,978,227)      (1,851,667)
                                                                  ==============   ==============    ===========
    Year ended December 31, 2003:

    Beginning of year                                                126,560        (1,978,227)      (1,851,667)
    Addition from acquisitions (Note 3)                              197,486                -          197,486
    Amortisation for the year                                        (25,170)         247,278          222,108
                                                                  --------------   --------------    -----------
    End of year                                                      298,876        (1,730,949)      (1,432,073)
                                                                  ==============   ==============    ===========
    As of December 31, 2003

    Cost                                                             325,196        (2,472,784)      (2,147,588)
    Accumulated amortisation                                         (26,320)         741,835          715,515
                                                                  --------------   --------------    -----------
    Net book value                                                   298,876        (1,730,949)      (1,432,073)
                                                                  ==============   ==============    ===========




15. Inventories, NET

     Inventories comprised:




                                                                                   2003                2002
                                                                              -------------       -------------
                                                                                   `000                `000
                                                                                                 
    Fuel (coal and oil) for power generation                                      308,861              434,726
    Material and other supplies                                                   505,041              500,854
                                                                              -------------       -------------
                                                                                  813,902              935,580

    Less: provision for inventory obsolescence                                    (13,621)             (12,239)
                                                                              -------------       -------------
                                                                                  800,281              923,341
                                                                              =============       =============


     As of December 31 2003, approximately Rmb406 million of the total
     carrying amount of inventories are carried at net realisable value (2002:
     Rmb396 million)



16.  Other Receivables and Assets, NET

     Other receivables and assets comprised:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                                  
    Prepayments for inventories                                                    76,543               6,113
    Prepayments for contractors                                                    42,282              20,356
    Interest receivable on temporary cash investments                               3,291               3,792
    Receivable from Shantou Coal Port Group Company                                     -              70,000
    Others                                                                        191,190             164,088
                                                                              -------------       -------------
                                                                                  313,306             264,349

    Less: Provision for doubtful accounts                                         (53,885)            (21,444)
                                                                              -------------       -------------
                                                                                  259,421             242,905
                                                                              =============       =============




17. Accounts receivable

     Accounts receivable comprised:



                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                              
    Accounts receivable                                                         2,356,826           1,889,083
    Notes receivable                                                              447,200             472,750
                                                                              -------------       -------------
                                                                                2,804,026           2,361,833
                                                                              =============       =============



     The Company and its subsidiaries usually grant about one month credit
     period to all the local grid companies from the end of the month in which
     the sales are made.

     As of December 31, 2003, the aging analysis of accounts receivable was as
follows:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                              
    Within one year                                                             2,800,330           2,357,213
    Between one to two years                                                            -               4,620
    Between two to three years                                                      3,696                   -
                                                                              -------------       -------------
                                                                                2,804,026           2,361,833
                                                                              =============       =============




     As of December 31, 2003, the maturity period of the notes receivable
     ranged from one month to six months (2002: one month to six months).



18.  Temporary Cash Investments

     Temporary cash investments consist of fixed-term deposits denominated in
     Renminbi and US dollars with original maturities ranging from more than
     three months to one year.


19.  Capitalisation

     Authorized Share Capital

     As of December 31, 2003, the authorized share capital of the Company was
     Rmb6,027,671,200, divided into 6,027,671,200 shares of Rmb1.00 each. In
     addition, the issued and fully paid share capital of the Company as of
     December 31, 2003 was Rmb6,027,671,200 (2002: Rmb6,000,273,960)
     comprising of 4,500,000,000 Domestic Shares and 1,527,671,200 Overseas
     Listed Foreign Shares. The holders of Overseas Listed Foreign Shares and
     Domestic Shares, with minor exceptions, are entitled to the same economic
     and voting rights.

     Public Offering in the PRC

     On November 15 and November 16, 2001, 250,000,000 new ordinary shares par
     value Rmb1.00 each, in the form of A shares, were issued to the public in
     a public offering on the Shanghai Stock Exchange at Rmb7.95 per A share.
     The 250,000,000 A shares were listed on the Shanghai Stock Exchange on
     December 6, 2001. Net issuing cost of Rmb12.4 million were incurred to
     sell the A shares and reduced the net proceeds. In addition, on November
     15, 2001, 100,000,000 new Domestic Shares of Rmb1.00 each were issued to
     HIPDC at Rmb7.95 each.

     Conversion of Convertible Notes to Share Capital

     The noteholders converted the convertible notes with principal of
     US$200,000 to 6,849 American Depositary Shares ("ADS") (273,960 H shares
     equivalent) during the year ended December 31, 2002 (see Note 22).

     The noteholders converted the convertible notes with principal of US$20
     million to 685,931 ADS (27,397,240 H shares equivalent) during the year
     ended December 31, 2003 (see Note 22).

19.  CAPITALISATION (CONT'D)

     Conversion of the Additional Paid-in Capital and the Statutory Surplus
     Reserve Fund to Share Capital

     On March 16, 2004, the Board resolved to propose to convert part of the
     additional paid-in capital and the statutory surplus reserve fund into
     share capital by issuing new shares to all of its shareholders on the
     basis of 5 new shares for every 10 existing ordinary shares (3 of which
     from additional paid-in capital and 2 from statutory surplus reserve
     fund). The proposal is subjected to shareholders' approval at the annual
     general meeting.


20.  APPROPRIATION AND DISTRIBUTION OF PROFIT

     The Board of Directors decides on an annual basis the percentages of the
     profit after tax, as determined under the PRC accounting standards and
     regulations, to be appropriated to the statutory surplus reserve fund,
     the statutory public welfare fund and, on an optional basis, the
     discretionary surplus reserve fund. When the balance of the statutory
     surplus reserve fund reaches 50% of the Company's share capital, any
     further appropriation will be optional. The statutory surplus reserve
     fund can be used to offset prior years' losses, if any, and may be
     converted into share capital by the issue of new shares to shareholders
     in proportion to their existing shareholding or by increasing the par
     value of the shares currently held by them, provided that the balance
     after such issue is not less than 25% of registered capital. The
     statutory public welfare fund can only be utilised on capital items for
     the collective benefits of the Company's employees. Titles of these
     capital items will remain with the Company. This fund is
     non-distributable other than in liquidation. The discretionary surplus
     reserve fund can be provided and used in accordance with the resolutions
     of the shareholders.

     For the year ended December 31, 2003, the Board of Directors resolved the
following on March 16, 2004:

     (i)    to appropriate 10% and 7.5% (2002: 10% and 7.5%; 2001: 10% and
            7.5%), respectively, of the profit after taxation as determined
            under the PRC accounting standards and regulations to the
            statutory surplus reserve fund and the statutory public welfare
            fund. The total amount of appropriation is approximately Rmb955
            million (2002: Rmb714 million; 2001 Rmb636 million).

     (ii)   to make no appropriation to the discretionary surplus reserve
            fund.

     In accordance with the Articles of Association, earnings available for
     distribution by the Company will be based on the lowest of the amounts
     determined in accordance with (a) the PRC accounting standards and
     regulations, (b) IFRS and (c) US GAAP. The amount of distributable profit
     resulting from the current year operation after appropriation to
     dedicated capital for the year ended December 31, 2003 was approximately
     Rmb4.48 billion (2002: Rmb3.18 billion; 2001: Rmb2.70 billion). The
     cumulative balance of distributable profit as of December 31, 2003 was
     approximately Rmb10.97 billion (2002: Rmb9.13 billion; 2001: Rmb9.31
     billion).


21.  DIvidends

     On March 16, 2004, the Board of Directors proposed a cash dividend of
     Rmb0.50 per share, totaling approximately Rmb3,014 million, together with
     an issue of bonus shares on the basis of 5 bonus shares for every 10
     existing ordinary shares. This proposal is subject to the approval of the
     shareholders at the annual general meeting. These financial statements do
     not reflect this dividend payable, which will be accounted for in
     shareholders' equity as an appropriation of retained earnings in the year
     ending December 31, 2004.

     On May 28, 2003, the shareholders approved the declaration of Rmb0.34
     (2001: Rmb0.30) per share, totaling Rmb2,049 million (2001: Rmb1,800
     million) in respect of the year ended December 31, 2002, based on the
     6,027,671,200 outstanding shares on the date, in their annual general
     meeting.


22.  Convertible notes

     In May 1997, the Company issued at par value convertible notes with an
     aggregate principal amount of US$230 million at 1.75% due 2004. These
     notes are listed on the New York Stock Exchange and the Luxemburg Stock
     Exchange. The notes mature on May 21, 2004, unless previously redeemed or
     converted.


22.  CONVERTIBLE NOTES (CONT'D)


     The notes are convertible, at the option of the noteholders, at any time
     from and including August 21, 1997 up to and including the date of
     maturity, unless previously redeemed, at an initial conversion price of
     US$29.20 per ADS, each of which represents 40 Overseas Listed Foreign
     Shares, subject to adjustment in certain circumstances.

     The notes were redeemable, at the option of the noteholders, in whole or
     in part, on May 21, 2002 at 128.575% of the principal amount of the notes
     together with accrued interest, if any.

     The notes may be redeemed, at the option of the Company, at any time on
     or after May 21, 2000, but prior to maturity, in whole or in part, at a
     redemption price equal to 100% of the principal amount of the notes,
     together with accrued interest, if any, if the closing price of the ADSs
     for a period of 30 consecutive trading days is at least 130% of the
     conversion price in effect on each such trading day.

     The proceeds received were allocated for accounting purposes into a
     liability component of approximately US$168 million (equivalent to
     Rmb1,393 million) and an equity component of approximately US$62 million
     (equivalent to Rmb511 million) at the issuance date.

     Before May 21, 2002, the put option for the noteholders to redeem the
     notes at 128.575% of the principal amount of the notes was accounted for
     as an embedded derivative. It was separated from the host contract of the
     convertible notes and measured at its fair value with changes in fair
     value included in net profit or loss. The liability component was
     measured at amortised cost.

     The fair value of the put option was determined on the following basis:

     (i)    No fair value was attributed to the share conversion option.
            Management believed that the probability of the noteholders
            exercising the conversion option was very low because the
            prevailing share price of the Company was significantly below
            128.575% of the principal amount of the notes.

     (ii)   The fair value of the liability component was determined by
            discounting the stream of future payments of interest and
            principal at the prevailing market rate for a similar liability
            (instrument of comparable credit status and providing
            substantially the same cash flows, on the same terms, but without
            the conversion option).

     (iii)  Given (i) and (ii) above, the fair value of the put option was
            then determined by deducting the fair value of the liability
            component from the prevailing market price of the convertible
            notes.

     At the beginning of 2001 in which IAS 39 was initially applied, the
     Company recognised the put option of the convertible notes, which allows
     the noteholders to redeem the convertible notes at a premium, as an
     embedded derivative and measured it at fair value. The difference between
     the previous carrying amount and the current fair value amounted to
     approximately Rmb229 million, which was recognised as an adjustment to
     the opening retained earnings as of January 1, 2001.

     In addition, in accordance with IAS 39, the liability component is
     measured at amortised cost. The difference of approximately Rmb235
     million compared with the previous carrying amount was recognised as an
     adjustment to the opening retained earnings as of January 1, 2001.

     During the year ended December 31, 2001, the Company recorded a loss
     amounting to approximately Rmb47 million arising from the changes in the
     fair value of the put option during the year.

     On May 21, 2002, the noteholders, by exercising their put option rights,
     redeemed a substantial portion of the convertible notes with an aggregate
     principal amount of US$209,685,000, at 128.575% of the principal amount
     together with accrued interest. Upon the redemption, the equity component
     attributable to the redeemed portion of the convertible notes amounting
     to approximately Rmb465 million was transferred to additional paid-in
     capital as of May 21, 2002. The net shortfall of approximately Rmb42
     million between (a) the sum of the relevant principal amount plus accrued
     interest and the 28.575% put premium settled upon redemption and (b) the
     sum of the amortised cost of the liability component attributable to the
     redeemed portion of the convertible notes and the total carrying amount
     of the put option value as of May 21, 2003, was charged to the income
     statement as interest expense.

22.  CONVERTIBLE NOTES (CONT'D)

     During the year ended December 31, 2003, convertible notes with principal
     of US$20 million were converted by noteholders to 684,931 ADS (27,397,240
     H shares equivalent) (2002: principal of US$200,000, converted to
     6,849ADS, 273,960 H shares equivalent). Upon the conversion, the equity
     component attributable to the converted portion of the convertible notes
     amounting to Rmb44 million was transferred to additional paid-in-capital
     (2002 Rmb0.44 million; 2001: nil).


23.  Long-term Loans from Shareholders

     Long-term loans from shareholders comprised the United States dollar
     ("US$") denominated bank loans on lent by HIPDC. These loans bear both
     fixed and floating interest rates that ranged from 3.62% to 4.01% per
     annum for the year ended December 31, 2003 (2002: 4.01% to 7.40%; 2001:
     4.25% to 7.40%), and are repayable in accordance with the repayment
     schedules set by the banks.

     The shareholders' loans are repayable as follows:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                                
    Within one year                                                               388,875             388,891
    Between one to two years                                                            -             388,891
                                                                              -------------       -------------
                                                                                  388,875             777,782

    Less: Amount due within one year included under current liabilities          (388,875)           (388,891)
                                                                              -------------       -------------
                                                                                        -             388,891
                                                                              =============       =============



24.  Long-term Bank Loans

     Long-term bank loans comprised:




                                                                          2003                         2002
                                                             ------------------------------       -------------
                                                                US$'000          Rmb'000             Rmb'000
                                                             -------------    -------------       -------------
                                                                                              
    Renminbi bank loans (a)                                                     4,064,499           2,053,000

    United States dollar bank loans (b)                          803,465        6,650,061           8,340,253
                                                                              -------------       -------------
                                                                               10,714,560          10,393,253
                                                                              =============       =============


     a.     Renminbi bank loans were borrowed from PRC banks to finance the
            construction of the power plants of the Company and its
            subsidiaries. These loans bore fixed interest rates from 4.94% to
            6.21% per annum for the year ended December 31, 2003 (2002: 5.76%
            to 6.21%; 2001: 6.21%) and are repayable in accordance with the
            agreed repayment schedules set by the banks.

     b.     United States dollar bank loans were borrowed to finance the
            construction of the power plants of the Company and its
            subsidiaries. These loans bore interest at lending rates (both
            fixed and floating) ranging from 1.18% to 6.60% per annum for the
            year ended December 31, 2003 (2002: 2.00% to 6.60%; 2001: 5.89% to
            6.60%), and are repayable in accordance with the agreed repayment
            schedules set by the banks. The Company had entered into interest
            rate swap agreements with PRC banks to convert certain floating
            rate bank loans into fixed rate debts to hedge against the
            interest rate risk (See Note 38).


24.  LONG-TERM BANK LOANS (CONT'D)

     The long-term bank loans are repayable as follows:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                              
    Within one year                                                             2,409,240           1,928,732
    Between one to two years                                                    1,058,155           2,179,281
    Between two to five years                                                   2,940,506           2,490,335
    Over five years                                                             4,306,659           3,794,905
                                                                              -------------       -------------
                                                                               10,714,560          10,393,253

    Less: Amount due within one year included under current liabilities        (2,409,240)         (1,928,732)
                                                                              -------------       -------------
                                                                                8,305,320           8,464,521
                                                                              =============       =============




25.  OTHER Long-term LoanS

     Other long-term loans comprised:




                                                                          2003                         2002
                                                       ------------------------------------       -------------
                                                       Original currency          Rmb'000             Rmb'000
                                                       ------------------    --------------       -------------
                                                                                         
    Renminbi loans                                                                776,342             427,402
    Foreign currency bank loans
       US$                                                        21,429          177,358                   -
       Japanese Yen ("JPY")                                    1,785,714          137,970                   -
                                                                              -------------       -------------
                                                                                1,091,670             427,402
                                                                              =============       =============



     The other long term-loans were drawn from:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                                
    Long-term loan from WPDB                                                      106,389             106,389
    Long-term loan from Huaneng Finance                                           610,000             225,000
    Long-term loan from Jiangsu International Trust and Investment                 31,505              43,245
    Corporation
    Long-term loan from Huaian Investment Company                                   8,980              25,050
    Long-term loan from Jiangsu Electric Power Development Co,. Ltd                19,468              27,718
    Long-term foreign loans on lent by Ministry of Finance                        315,328                   -
                                                                              -------------       -------------
                                                                                1,091,670             427,402
                                                                              =============       =============




25.  OTHER LONG-TERM LOANS (CONT'D)

     The other long-term loans bear both fixed and floating interest rates,
     which ranged from 4.94% to 6.21% per annum for the year ended December
     31, 2003 (2002: 5.64% to 6.21%; 2001: 6.21%), and are repayable in
     accordance with the repayment schedules set by the contracts.

     Other long-term loans are repayable as follows:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                                 
    Within one year                                                               243,386              96,013
    Between one to two years                                                      267,044             106,389
    Between two to five years                                                     476,131             225,000
    Over five years                                                               105,109                   -
                                                                              -------------       -------------
                                                                                1,091,670             427,402
    Less: Amounts due within one year included under current liabilities         (243,386)            (96,013)
                                                                              -------------       -------------
                                                                                  848,284             331,389
                                                                              =============       =============



26.  Accounts Payable and OTHER Liabilities

     Accounts payable and other liabilities comprised:



                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                                
    Accounts payable                                                              635,860             471,609
    Deferred revenue                                                              987,500             939,564
    Payable to contractors for construction                                       846,473           1,333,448
    Other payable to contractors                                                  207,257             140,328
    Accrued interest                                                               96,127             115,861
    Others                                                                        569,300             733,540
                                                                              -------------       -------------
                                                                                3,342,517           3,734,350
                                                                              =============       =============


     As of December 31, 2003, the aging analysis of accounts payable was as
follows:



                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                                
    Within one year                                                               595,994             465,624
    Between one to two year                                                        36,188               3,395
    Over two years                                                                  3,678               2,590
                                                                              -------------       -------------
                                                                                  635,860             471,609
                                                                              =============       =============



27.  Taxes Payable

     Taxes payable comprised:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                                
    VAT payable                                                                   415,147             291,456
    Income tax payable                                                            472,850             311,436
    Others                                                                         29,365              17,297
                                                                              -------------       -------------
                                                                                  917,362             620,189
                                                                              =============       =============



28.  Short-term LoanS

     Short-term loans are denominated in Renminbi and bear interest at the
     prevailing interest rates in the PRC, which ranged from 4.54% to 5.05%
     per annum for the year ended December 31, 2003 (2002: 4.78% to 5.56%;
     2001: 5.30%), and are repayable within one year (see Note 7(g)).


29.  DEFERRED INCOME TAXES

     Deferred income taxes are calculated in full on temporary differences
     under the liability method using the applicable tax rates for the
     respective operating units.

     The movement on the deferred income tax account is as follows:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                            
    As of January 1                                                               121,853                   -

    Acquisitions (Note 3)                                                         (21,809)            109,568
    Income statement charge (Note 32)                                             (18,241)             12,285
                                                                              -------------       -------------
    As of December 31                                                              81,803             121,853
                                                                              =============       =============




     The power plants acquired in 2003 (Note 3) recognized deferred tax assets
     for the temporary differences of amortisation of prepaid land use rights,
     provisions for doubtful debt and others.

     The Company and its subsidiary recognized deferred tax liabilities mainly
     arising from the acquisitions of the Shidongkou I Power Plant, Changxing
     Power Plant, Taicang Power Company and Huaiyin Power Company in 2002. The
     initial recognition of the identifiable assets and liabilities acquired
     was based on valuations performed by valuers. The resulting valuation
     surplus is not a tax deductible credit. Deferred tax liability of
     approximately Rmb107 million relating to this temporary difference was
     recorded in 2002.

     The movement in deferred tax assets and liabilities during the year is as
follows:




                                                                           Difference in
                                                   --------------------------------------------------------------
                                                   Amortisation of
                                                    prepaid land      Provisions for
    Deferred tax assets                              use rights       doubtful debts      Others         Total
                                                   ----------------   ---------------   ----------   ------------
                                                       '000              '000              '000           '000
                                                                                         
    As of January 1, 2003                                   -               -                  -              -
    Acquisition of power plants                        13,261           3,288              5,260         21,809
    charged to profit and loss account                    (22)            (69)              (407)          (498)
                                                   ----------------   ---------------   ----------   ------------
    As of December 31, 2003                            13,239           3,219              4,853         21,311
                                                   ================   ===============   ==========   ============


                                                                                      Difference in depreciation
                                                                                     ----------------------------
   Deferred tax liabilities                                                                      '000

   As of January 1, 2003                                                                         121,853
   Credited to profit and loss account                                                           (18,739)
                                                                                     ----------------------------

   As of December 31, 2003                                                                       103,114
                                                                                     ============================



29.  DEFERRED INCOME TAXES (CONT'D)

     Deferred income tax assets and liabilities are offset when there is
     legally enforceable right to set off current tax assets against current
     tax liabilities and when the deferred income taxes relate to the same
     fiscal authority. The following amounts, determined after appropriate
     offsetting, are shown in the consolidated balance sheet:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  '000                 '000
                                                                                             
   Deferred tax assets                                                            (21,311)                  -
   Deferred tax liabilities                                                       103,114             121,853
                                                                              -------------       -------------
                                                                                   81,803             121,853
                                                                              =============       =============
   The amounts shown in the consolidated balance sheet include the following:

   Deferred tax assets to be recovered after more than 12 months                  (21,311)                  -
   Deferred tax liabilities to be settled after more than 12 months                84,375             121,853
                                                                              =============       =============




30.  ADDITIONAL FINANCIAL INFORMATION ON BALANCE SHEET

     As of December 31, 2003, the net current liabilities of the Company and
     its subsidiaries amounted to approximately Rmb939 million (2002: net
     current assets Rmb33 million). On the same date, the total assets less
     current liabilities was approximately Rmb44,367 million (2002: Rmb40,809
     million).


31.  HOUSING SCHEME

     In accordance with the PRC housing reform regulations, the Company and
     its subsidiaries are required to make contributions to the
     State-sponsored housing fund at 7%-11% of the specified salary amount of
     the PRC employees. At the same time, the employees are required to make a
     contribution equal to the Company's and its subsidiaries' contribution
     out of their payroll. The employees are entitled to claim the entire sum
     of the fund under certain specified withdrawal circumstances. For the
     year ended December 31, 2003, the Company and its subsidiaries
     contributed approximately Rmb77 million (2002: Rmb71 million; 2001: Rmb31
     million) to the fund.

     In addition, the Company and its subsidiaries provided housing benefits
     to certain employees to enable them to purchase living quarters from the
     Company and its subsidiaries at a substantial discount. Such housing
     benefits represent the difference between the cost of the staff quarters
     sold to and the net proceeds collected from the employees. The provision
     of housing benefits is expected to benefit the Company and its
     subsidiaries over the estimated remaining average service life of the
     relevant employees. For the year ended December 31, 2003, the housing
     benefits provided by the Company and its subsidiaries to the employees
     amounted to approximately Rmb29 million (2002: Rmb18 million; 2001: Rmb16
     million) which is recorded as a long-term deferred asset and amortised
     over the remaining average service life of the relevant employees which
     is estimated to be about 10 years.

     The Company and its subsidiaries have no further obligation for housing
benefits.



32.  Income Tax EXPENSE

     Income tax expense comprised:




                                                              2003                2002                 2001
                                                          ------------         ----------           -----------
                                                              `000                `000                 `000
                                                                                             
    Current tax expense                                     1,116,100             963,510             715,220
    Deferred tax (Note 29)                                    (18,241)             12,285                   -
    Share of tax of associates (Note 11)                       51,582               5,059                   -
                                                          ------------         ----------           -----------
                                                            1,149,441             980,854             715,220
                                                          ============         ==========           ===========


     The reconciliation of the effective income tax rate to the statutory
income tax rate in the PRC is as follows:



                                                              2003                2002                 2001
                                                          ------------         ----------           -----------
                                                                                              
    Average statutory tax rate                                 18%                 18%                 17%
    Effect of tax holiday                                     (1%)                (1%)                 (2%)
    Others                                                      -                  2%                   2%
                                                          ------------         ----------           -----------
    Effective tax rate                                         17%                 19%                 17%
                                                          ============         ==========           ===========


     The aggregate effect of the tax holiday was approximately Rmb61 million
     for the year ended December 31, 2003 (2002: Rmb58 million; 2001: Rmb79
     million).

     The average statutory tax rate for the year ended December 31, 2003
     represented the weighted average tax rate of the head office and the
     individual power plants calculated on the basis of the relative amounts
     of net profit before tax and the applicable statutory tax rates.


33. MINORITY INTERESTS




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                             
    As of January 1                                                               910,704             486,261
    Acquisitions (Note 3)                                                         115,639             330,993
    Minority shares in net profit of subsidiaries                                 183,894             156,034
    Capital injection from minority shareholders of subsidiaries                   77,632                   -
    Dividends paid                                                               (132,672)            (62,584)
                                                                              -------------       -------------
    As of December 31                                                           1,155,197             910,704
                                                                              =============       =============





34.  Earnings per share




                                      2003                          2002                           2001
                          ---------------------------    ---------------------------   ---------------------------
                                     Weighted   Per                 Weighted   Per               Weighted    Per
                          Net        Average   Share     Net        Average   Share     Net       Average   Share
                         Profit      Shares   Amount     Profit     Shares   Amount    Profit     Shares   Amount
                        --------   ---------  -------   --------   --------- -------  -------   ---------  --------
                           `000       `000                `000       `000               `000       `000
                                                                                
Earnings per Share
Net profit
   attributable to
   shareholders           5,430,408  6,019,114    0.90   3,921,004  6,000,099   0.65   3,450,658  5,693,750    0.61
Finance costs in
   relation to
   convertible notes
   and the relevant
   put option (net of
   tax effect)               2,746          -              41,368           -            128,955          -
Effect of assumed
   conversion                    -      8,715                   -     139,754                  -    315,068
                        ----------   --------            --------    --------            -------    -------
Diluted Earnings per
   Share
Net profit
   attributable to
   shareholders plus
   effect of assumed
   conversion            5,433,154  6,027,829    0.90   3,962,372   6,139,853   0.65   3,579,613  6,008,818    0.60
                        ==========  =========           =========   =========          =========  =========


     Basic earnings per share was computed by dividing the net profit
     attributable to shareholders for the year by the weighted average number
     of ordinary shares outstanding during the year. On a diluted basis, both
     net profit and the weighted average number of ordinary shares outstanding
     were adjusted on the assumption that the convertible notes (see Note 22)
     had been fully converted at the beginning of the year.


35.  Notes to Cash Flow STATEMENT

     a. Analysis of cash and cash equivalents

         As of December 31, 2003, cash and cash equivalents consisted of:




                                                               2003                2002                2001
                                                          ------------         ----------           -----------
                                                               `000                `000                `000
                                                                                                 
        Cash in Rmb                                                726                 266                381
        Current deposits
           Rmb                                               3,763,015           2,815,473          2,123,393
           US$ denominated                                     234,468             186,862             49,362
           JPY denominated                                     130,439                   -                  -
                                                          ------------         -----------          -----------
        Total cash and cash equivalents                      4,128,648           3,002,601          2,173,136
                                                          ============         ===========          ===========


     b. Undrawn borrowing facilities

         The Company has obtained unsecured borrowing facilities from banks
         amounting to Rmb7 billion (2002: Rmb7 billion) and Rmb5 billion
         (2002: Rmb5 billion) to finance its funding requirements for a period
         of three years starting from September 18, 2003 and March 4, 2002,
         respectively. As of December 31, 2003, the unutilized borrowing
         facilities amounted to Rmb11,998 million (2002: Rmb11,993 million).
         Such borrowing facilities would be drawn down in accordance with the
         level of working capital and planned capital expenditure of the
         Company and its subsidiaries.



36.  OBLIGATIONS AND COMMITMENTS

     a.  Capital and Operational Commitments

         Commitments mainly relate to the construction of new power projects,
         certain complementary facilities and renovation projects for existing
         power plants and the purchase of coal. Commitments outstanding as of
         December 31, 2003 not provided for in the balance sheet were as
         follows:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                            
        Authorized and contracted for
           - purchase of inventories                                            2,279,191           2,012,170
           - construction                                                       9,793,244             643,344
                                                                              -------------       -------------
                                                                               12,072,435           2,655,514
                                                                              =============       =============



     b.  Operating Lease Commitments

         The Company has various operating lease arrangements with HIPDC for
         land and buildings (see Note 7). Some of the leases contain renewal
         options. Most of the leases contain escalation clauses. Lease terms
         do not contain restrictions on the Company's activities concerning
         dividends, additional debts or further leasing.

         Total future minimum lease payments under non-cancellable operating
         leases in respect of land and buildings of the Head Office, the
         Nanjing Power Plant and the Shanghai Power Plant are as follows:




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                            
        Land and buildings
           - not later than one year                                               32,334              32,334
           - later than one year and not later than two years                       7,334              32,334
           - later than two years and not later than five years                    22,002              22,002
           - later than five years                                                284,360             291,694
                                                                              -------------       -------------
                                                                                  346,030             378,364
                                                                              =============       =============


         In accordance with the land use operating lease agreement signed by
         the Dezhou Power Plant and the relevant land management authorities
         for the land occupied by Dezhou Phase I and Phase II, annual rental
         is approximately Rmb30 million effective June 1994 and is subject to
         revision five years after the said date. Thereafter, the annual
         rental is subject to revision once every three years. The increment
         for each rental revision is restricted to no more than 30 percent of
         the previous annual rental amount. For the year ended December 31,
         2003, the annual rental is approximately Rmb30 million.


37.  contingent liabilities




                                                                                  2003                 2002
                                                                              -------------       -------------
                                                                                  `000                 `000
                                                                                            
        Guarantee for loan facilities
           - granted to an associate                                              339,250             399,250





38.  interest rate swaps

     As of 31st December, 2003, the notional amount of the outstanding
     interest rate swap agreements was approximately US$20.5 million (2002:
     US$52 million). Such agreements will mature in September 2004. For the
     year ended December 31, 2003, there was a gain amounting to approximately
     Rmb11.8 million (2002: Rmb2.2 million) arising from changes in the fair
     value of the interest rate swaps subsequent to initial recognition. Since
     the hedging relationship does not meet all of the conditions required for
     special hedge accounting as set out in IAS 39, the gain was credited to
     earnings in current year.


39.  FAIR VALUE OF FINANCIAL INSTRUMENTs

     The Company and its subsidiaries' financial instruments not carried at
     fair value are cash and cash equivalents, temporary cash investments,
     accounts receivables, other current assets, other non-current assets,
     accounts and other payables, short-term borrowings, long-term borrowings
     and held-to-maturity investments.

     The carrying amounts of the Company and its subsidiaries' cash and cash
     equivalents, temporary cash investments, short-term investments,
     short-term borrowings and other current financial assets and liabilities
     approximated their fair value due to the short-term maturity of these
     instruments.

     Similarly, the historical cost carrying amounts of receivables and
     payables which are all subject to normal trade credit terms approximate
     their fair values.

     Available-for-sale investments are measured at cost as they are not
     traded in an active market and their fair value cannot be reliably
     measured.

     The estimated fair value of long-term debt including current maturities
     was Rmb12.43 billion as of December 31, 2003 (2002: Rmb11.93 billion).
     The fair value of long-term debt is determined by discounting the stream
     of future payments of interest and principal at the prevailing market
     interest rates for comparable instruments. The book value of these
     liabilities was Rmb12.20 billion as of December 31, 2003 (2002: Rmb11.75
     billion).


40.  Business Risk

     The Company and its subsidiaries conduct their operations in the PRC and
     accordingly investing in the shares of the Company and its subsidiaries
     are subject to the risks of, among others, the PRC's political, economic
     and legal environment, restructuring of the PRC electric power industry
     and regulatory reform, new regulation pertaining to setting of power
     tariff and availability of fuel supply at stable price.

     For the year ended December 31, 2003, the Company and its subsidiaries
     sold electricity to five major customers, each of which amounted to 10%
     or more of the operating revenue. In aggregation, these customers
     represented approximately 77% (2002: 90%; 2001: 90%) of the operating
     revenue of the Company and its subsidiaries.


41.  US GAAP INFORMATION

     The consolidated financial statements of the Company and its subsidiaries
     prepared under IFRS differ in certain respects from those prepared under
     generally accepted accounting principles in the United States of America
     ("US GAAP"). Significant differences between IFRS and US GAAP, which
     affect the equity and net profit of the Company and its subsidiaries, are
     summarised below:

     (a) Effect of the Acquisition of Entities under Common Control

         Under IFRS, the Company and its subsidiaries adopted the acquisition
         method to account for the acquisition of 70% equity interest in
         Shidongkou I Power Plant, 70% equity interest in Taicang Power
         Company and all of the assets and liabilities of Changxing Power
         Plant in July 2002 and the acquisition of 55% equity interest in
         Qinbei Power Company, 60% equity interest in Yushe Power Company and
         all of the assets and liabilities of Xindian Power Plant in October
         2003. Under the acquisition method, the results of the acquired
         businesses are included in the results of operations of the Company
         and its subsidiaries from the date of the acquisition. The difference
         between the purchase consideration and the fair value of the
         underlying net assets acquired is treated as goodwill and amortised
         on a systematic basis to the income statement over its useful
         economic life, being the remaining weighted average useful life of
         the acquired depreciable or amortisable assets.

         As the Company and its subsidiaries, Shidongkou I Power Plant,
         Taicang Power Company, Changxing Power Plant, Qinbei Power Company,
         Yushe Power Company, and Xindian Power Plant were under the common
         control of the Huaneng Group prior to the acquisition, under US GAAP,
         the acquisition is considered to be a transfer of businesses under
         common control and the acquired assets and liabilities are accounted
         for at historical cost in a manner similar to the pooling of
         interests method. Accordingly, the consolidated financial statements
         for all periods presented shall be retroactively restated as if the
         current structure and operations resulting from the acquisition had
         been in existence since the beginning of the earliest period
         presented, with financial data of previously separate entities
         combined. The cash consideration paid by the Company is treated as an
         equity transaction in the year of the acquisition for US GAAP
         purposes. Accordingly, the resulting impact of depreciation and
         amortisation expenses on income is also different.

     (b) Effect of Acquisition of 30% Additional Equity Interests in
         Shidongkou I Power Plant, 5% Additional Equity Interests in Taicang
         Power Company and 44.16% Equity Interests in Huaiyin Power Company

         On July 1, 2002, the Company acquired 44.16% equity interests of
         Huaiyin Power Company from Huaneng Group. In addition, the Company
         also acquired 30% additional equity interests of Shidongkou I Power
         Plant and 5% additional equity interests of Taicang Power Company
         from Huaneng Group on December 31 2002.

         Under IFRS, upon the completion of the above acquisitions, the
         relevant equity interests of net assets of Shidongkou I Power Plant,
         Taicang Power Company and Huaiyin Power Company are recorded at fair
         value. The excess of the total cost of the acquisition over the fair
         value of the relevant portion of net assets of power plant acquired
         is recorded as goodwill. Such goodwill is amortised on a systematic
         basis to the income statement over its useful economic life, being
         the remaining weighted average useful life of the acquired
         depreciable or amortisable assets. Under US GAAP, upon completion of
         the above acquisitions, Huaneng Group's proportionate share in the
         net assets of Shidongkou I Power Plant, Taicang Power Company and
         Huaiyin Power Company being sold to the Company was recorded at the
         historical carrying value. The excess of the total cost of
         acquisition over the net assets acquired was recorded as a deemed
         contribution. Accordingly, the resulting impact of depreciation and
         amortisation expenses on income is also different.

41.  US GAAP INFORMATION (CONT'D)

     (c) Housing Benefits Provided by HIPDC

         HIPDC sold to certain qualified employees of the Company living
         quarters owned by HIPDC at preferential prices. The difference
         between the cost of living quarters and the sales proceeds received
         from the employees is considered to be housing benefits. Under IFRS,
         such housing benefits provided by HIPDC are not reflected in the
         financial statements of the Company. Under US GAAP, the amount of
         housing benefits provided by HIPDC to the employees of the Company
         are recognized as the Company's operating expenses on a straight-line
         basis over the estimated remaining average service life of the
         employees. The corresponding amount is recorded as an addition of
         capital contribution from HIPDC.

     (d) Acquisition of Shandong Huaneng

         Huaneng Group is the controlling parent company of HIPDC, which in
         turn is the controlling parent of the Company. Huaneng Group used to
         be one of the substantial shareholders of Shandong Huaneng, holding
         33.09% equity interest in it before the Company's acquisition of
         Shandong Huaneng. Under IFRS, upon the completion of the acquisition
         of Shandong Huaneng, the entire net assets of Shandong Huaneng were
         recorded at fair value. The excess of the fair value of the entire
         net assets acquired over the total cost of the acquisition was
         recorded as negative goodwill. Under US GAAP, upon completion of the
         acquisition of Shandong Huaneng, Huaneng Group's proportionate share
         of 33.09% in the net assets of Shandong Huaneng being transferred to
         the Company was recorded at the historical carrying value. The excess
         of the proportionate share in the book value of the net assets
         acquired over the relevant portion of the cash consideration was
         recorded as a capital contribution to the Company. The book value of
         the remaining 66.91% of the net assets continues to be part of the
         recoverable rate base under the cost recovery formula of the tariff
         setting mechanism. Under US GAAP, the difference between these net
         asset values and the cash consideration was recorded as a reduction
         to the property, plant and equipment value of the respective power
         plants.

         As the amount of negative goodwill under IFRS is different from the
         amount of the reduction to property, plant and equipment under US
         GAAP due to the 33.09% portion of the net assets previously owned by
         Huaneng Group as described above and also that the negative goodwill
         under IFRS is recognized as income over the remaining weighted
         average useful life of the acquired depreciable or amortisable assets
         whereas, for US GAAP purpose, the property, plant and equipment,
         after the reduction described above, are depreciated over the
         respective assets' useful life, the net income under IFRS and US GAAP
         is different.

     (e) Accounting Treatment of Convertible Notes

         Under IFRS, the proceeds received on the issue of the convertible
         notes were allocated into liability and equity components. Upon
         initial recognition, the liability component represented the present
         value, at the issuance date, of the contractually determined stream
         of cash flows discounted at the market interest rate for instruments
         of comparable credit status providing substantially the same cash
         flows, on the same terms, but without the conversion option. The
         equity component was then determined by deducting the liability
         component from the proceeds received on the issue of the notes. Under
         US GAAP, the entire proceeds of the issue of convertible notes were
         recorded as long-term liabilities without distinguishing between the
         equity and liability components.

         In accordance with IAS 39, which was effective on January 1, 2001,
         the put option of the convertible notes, which allowed the
         noteholders to redeem the convertible notes at a premium, was
         separated from the host contract and accounted for as an embedded
         derivative. This put option was recorded as a liability and measured
         at its fair value. When IAS 39 was initially applied in 2001, the
         difference between the previous carrying amount and the fair value of
         the put option was recognised as an adjustment to the opening
         retained earnings as of January 1, 2001. In addition, the liability
         component was measured at amortised cost and the resulting difference
         with the previous carrying amount was recognized as an adjustment to
         the opening retained earnings as of January 1, 2001. After initial
         recognition, subsequent changes in the value of the put option and
         the amortised cost of the liability component were charged or
         credited to the income statements.

41.  US GAAP INFORMATION (CONT'D)

     (e) Accounting Treatment of Convertible Notes (Cont'd)

         Under US GAAP, it is permitted not to measure the put option
         separately at its fair value, as it represents a derivative embedded
         in a pre-1998 hybrid instrument. The Company continued to accrue for
         the put premium liability together with the interest payable on the
         notes using effective interest rate of 6.66% up to the redemption
         date of May 21, 2002. On May 21, 2002, a portion of the convertible
         notes was not redeemed by the noteholders. Under US GAAP, the
         relevant portion of the accrued put premium attributable to the
         remaining convertible notes not redeemed was amortised as a yield
         adjustment over the remaining term of the convertible notes because
         the put price exceeded the market value of the ordinary shares of the
         Company at the time of the redemption.

     (f) Capitalisation of Borrowing Costs

         In accordance with IAS 23, the Company capitalised interests on
         general borrowings used for the purpose of obtaining a qualifying
         asset in addition to the capitalisation of interest on specific
         borrowings.

         Under US regulatory accounting requirements, interest on funds
         borrowed generally and used for the purpose of obtaining a qualifying
         assets are not capitalised if such interests cannot be taken into
         consideration when determining the recoverable rate base for tariff
         setting purposes. Consequently, under US GAAP, the Company did not
         capitalise interest on general borrowings.

     (g) Reversal of goodwill amortisation

         Under IFRS, goodwill is amortised using the straight-line method over
         its estimated useful life and recognized in the income statement as
         other operating expenses. Under US GAAP, in accordance with Statement
         of Financial Accounting Standard Number 142 "Goodwill and Other
         Intangible Assets", goodwill is not amortised but tested for
         impairment on an annual basis and between annual tests in certain
         circumstances.

     (h) Deferred Tax Impact

         This represents deferred tax effect on the above GAAP differences
         where applicable.

     (i) US Regulatory Accounting

         Under US GAAP, Statement of Financial Accounting Standard Number 71
         "Accounting for the Effects of Certain Types of Regulation" ("SFAS
         71") is applicable to utilities in the United States whose regulators
         have the power to approve and/or regulate rates that may be charged
         to customers. SFAS 71 recognizes that the regulatory process produces
         economic effects which should be reflected in the financial
         statements. Because revenues are based on costs, SFAS 71 governs the
         period in which various costs are included in the income statements
         with the objective of matching costs with revenues. Provided that,
         through the rate setting process, the utility is substantially
         assured of recovering its allowable costs by the collection of
         revenue from its customers, such costs not yet recovered are deferred
         as regulatory assets. The regulatory process may also impose a
         liability on a rate-regulated enterprise, usually representing
         obligations to the enterprise's customers, which should be recognized
         as a regulatory liability.

         In order to apply SFAS 71, three criteria must be met. These criteria
         require that a) the power rates for regulated services or products
         provided to customers be established by or are subject to approval by
         an independent, third-party regulator or by an entity's own governing
         board empowered by statute or contract to establish power rates that
         bind customers; b) the regulated power rates are designed to recover
         the costs of providing the regulated services or products; and c) in
         view of the demand for the regulated services or products and the
         level of competition, direct and indirect, it is reasonable to assume
         that power rates, which are set at levels that will recover costs,
         can be charged to and collected from customers; this criterion
         requires consideration of anticipated changes in levels of demand or
         competition during the recovery period for any capitalised costs.

41.  US GAAP INFORMATION (CONT'D)

     (i) US Regulatory Acconting (Cont'd)

         The Company and its subsidiaries believe that all of their power
         plants meet these specific criteria of SFAS 71 with the exception of
         the Shidongkou I Power Plant, the Taicang Power Company, the Huaiyin
         Power Company, the Changxing Power Plant, the Qinbei Power Company,
         Yushe Power Company and Xindian Power Plant acquired in 2002 and 2003
         (the "power plants acquired in 2002 and 2003"). Firstly, the power
         rates are established by an independent regulator, the provincial or
         local price bureau. Secondly, the pricing policy applicable to the
         power plants provides for rate-setting based on the specific costs of
         the power plants. This process has operated historically and will
         continue under the pricing policy. Finally, based on the significant
         demand for electricity in the Company and its subsidiaries' service
         territory, it is reasonable to assume that the authorized power rates
         will be collected from customers.

         With respect to the power plants acquired in 2002 and 2003, these
         criteria mentioned above are not met and, therefore, SFAS71 cannot be
         applied. Consequently, the power plants acquired in 2002 and 2003
         have adopted US GAAP without specific reference to the regulatory
         basis of accounting provided for under SFAS71.

         Under IFRS, as there is no equivalent regulatory accounting standard,
         the Company's and its subsidiaries' policy is to recognize regulatory
         assets established under SFAS 71 only where they comprise rights or
         other access to future economic benefits as a result of past events;
         or to recognize regulatory liabilities only where they comprise a
         present obligation the settlement of which is expected to result in
         an outflow of resources embodying economic benefits.

         As of December 31, 2003 and 2002, there was no material difference in
         the recognition of both regulatory and non-regulatory assets and
         liabilities between IFRS and US GAAP.


41.  US GAAP INFORMATION (CONT'D)

         Differences between IFRS and US GAAP which affect the net assets and
         net profit of the Company and its subsidiaries are summarized below:



                                                                                Net Assets
                                                              ----------------------------------------
                                                              As of December 31,     As of December 31,
                                                      Note           2003                 2002
                                                    --------  ------------------     ------------------
                                                                   Rmb`000                Rmb`000
                                                                                      
Net assets under IFRS                                               33,955,355              30,416,060
Impact of US GAAP adjustments  Note i:
   Effect of acquisition of Qinbei Power Company,
     Yushe Power Company and Xindian Power Plant       (a)            (417,368)                 97,690
   Effect of acquisition of Shidongkou I Power
     Plant, Taicang Power Company and Changxing
     Power Plant                                       (a)            (886,116)               (998,752)
   Effect of acquisition of 30% additional equity
     interests in Shidongkou I Power Plant, 5%
     additional equity interests in Taicang Power
     Company and 44.16% equity interests in
     Huaiyin Power Company                             (b)            (296,717)               (313,859)
   Recording of capital contribution arising from
     acquisition of Shandong Huaneng                   (d)             862,922                 862,922
   Difference in accounting treatment for
     acquisition of Shandong Huaneng                   (d)            (261,273)               (174,182)
   Adjustments on convertible notes
     - Reversal of equity component of the
       convertible notes                               (e)            (510,506)               (510,506)
     - Reversal of adjustment relating to the
       convertible notes arising from the initial
       adoption of IAS 39                              (e)             463,921                 463,921
     - Difference in accounting treatment of
       convertible notes                               (e)              37,933                   5,246
   Difference in capitalisation of borrowing costs     (f)             (93,890)                (88,412)
   Reversal of goodwill amortisation
     - Reversal of goodwill amortisation of equity
       investment in SEG                               (g)              54,639                       -
     - Reversal of goodwill amortisation of
       investment in Huaiyin Power Company             (g)              17,370                       -
   Applicable deferred tax impact of the above
     GAAP differences                                  (h)             200,674                 261,147
                                                              ------------------     ------------------
   Net assets under US GAAP Note i                                  33,126,944              30,021,275
                                                              ==================     ==================




41.  US GAAP INFORMATION (CONT'D)




                                                                                 Net profit
                                                                 -----------------------------------------
                                                                      For the year ended December 31,
                                                                 -----------------------------------------
                                                         Note        2003           2002           2001
                                                        ------   ----------      ----------     ----------
                                                                   Rmb'000         Rmb'000        Rmb'000
                                                                                     
Net profit under IFRS                                             5,430,408       3,921,004      3,450,658
Impact of US GAAP adjustments  Note i:
   Effect of acquisition of Qinbei Power Company,
     Yushe Power Company and Xindian Power Plant         (a)        13,109         56,919        (42,789)
   Effect of acquisition of Shanghai Shidongkou I
     Power Plant, Taicang Power Company and Changxing
     Power Plant                                         (a)       112,636         126,498        234,127
   Effect of acquisition of 30% additional equity
     interests in Shidongkou I Power Plant , 5%
     additional equity interests in Taicang Power
     Company and 44.16% equity interests in Huaiyin
     Power Company                                       (b)        19,347         10,556            -
   Recording housing benefits provided by HIPDC          (c)       (26,152)       (26,152)       (26,152)
   Difference in accounting treatment for acquisition
     of Shandong Huaneng                                 (d)       (87,091)       (87,091)       (87,091)
   Difference in accounting treatment of convertible
     notes                                               (e)        25,434          5,116            -
   Difference in capitalisation of borrowing costs       (f)       (5,478)        (88,412)           -
   Reversal of goodwill amortisation
    - Reversal of goodwill amortisation of equity
      investment in SEG                                  (g)        54,639            -              -
    - Reversal of goodwill amortisation of investment
      in Huaiyin Power Company                           (g)        17,370            -              -
   Applicable deferred tax impact of the above GAAP
     differences                                         (h)       (84,181)        33,674            -
                                                                 ----------      ----------     ----------
   Net profit under US GAAP (Note i)                              5,470,041       3,952,112      3,528,753
                                                                 ==========      ==========     ==========
   Basic earnings per ordinary share under US GAAP
     (Rmb) (Note ii)                                                 0.91           0.66           0.62
                                                                 ==========      ==========     ==========
   Basic earnings per ADS under US GAAP (Rmb) (Note ii)             36.35           26.35          24.79
                                                                 ==========      ==========     ==========
   Diluted earnings per ordinary share under US GAAP
     (Rmb) (Note ii)                                                 0.90           0.65           0.61
                                                                 ==========      ==========     ==========
   Diluted earnings per ADS under US GAAP (Rmb) (Note
     ii)                                                            36.18           25.99          24.32
                                                                 ==========      ==========     ==========



(Note    i) Consistent with applying the accounting treatment under US GAAP as
         described in Note (a) above, the consolidated financial statements
         under US GAAP for prior periods presented have been retroactively
         restated as if the current structure and operations resulted from the
         acquisition of the Qinbei Power Company, the Yushe Power Company and
         the Xindian Power Plant had been in existence since the beginning of
         the earliest period presented.

(Note    ii)Earning per ordinary shares and per equivalent ADS were calculated
         by dividing the net profit for the financial year under US GAAP by
         the weighted average number of ordinary shares and ADS in issue
         during the financial year. On a diluted basis, both net profit for
         the financial year and the weighted average number of ordinary shares
         and ADS outstanding for the financial year were adjusted on the
         assumption that the convertible notes had been fully converted at the
         beginning of the year.



41.  US GAAP INFORMATION (CONT'D)

In preparing the summary of difference between IFRS and US GAAP, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Accounting estimates have been employed in these financial statements to
determine reported amounts, including realisability, useful lives of assets
and other areas. Actual results could differ from those estimates.

The following are condensed consolidated balance sheets of the Company and its
subsidiaries as of December 31, 2002 and 2003, and the related condensed
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2003,
restated to reflect the impact of the effect of the acquisition of entities
under common control which is accounted for at historical cost in a manner
similar to the pooling of interests method, with financial data of previously
separate entities combined, under US GAAP and other differences between IFRS
and US GAAP.

Condensed Combined Balance Sheets



                                                                  As of December 31,
                                                 -------------------------------------------------------
                                                              2003                              2002
                                                 ---------------------------------     -----------------
                                                 Rmb'000                US$'000               Rmb'000
                                                                              
ASSETS

  Non-current assets
  Property, plant and equipment, net            40,042,558              4,837,987             40,207,383
  Investment in associates                       2,820,669                340,796                200,960
  Deferred tax assets                              210,455                 25,427                249,804
  Land use rights and other assets               1,292,849                156,203              1,322,828
  Goodwill                                          78,726                  9,512                 63,754
                                                -----------          -------------           -----------
     Total non-current assets                   44,445,257              5,369,925             42,044,729
                                                -----------          -------------           -----------
  Current assets
  Inventories, net                                 800,281                 96,691                964,468
  Other receivables and assets, net                259,421                 31,344                269,488
  Accounts receivable                            2,804,026                338,785              2,514,975
  Due from related parties                           5,862                    708                      -
  Restricted cash                                  159,961                 19,327                 13,259
  Temporary cash investments                       144,996                 17,519              1,362,065
  Cash and cash equivalents                      4,128,648                498,827              3,145,452
                                                -----------          -------------           -----------
     Total current assets                        8,303,195              1,003,201              8,269,707
                                                -----------          -------------           -----------
     Total assets                               52,748,452              6,373,126             50,314,436
                                                ===========          =============           ===========



41.  US GAAP INFORMATION (CONT'D)



                                                                  As of December 31,
                                                 -------------------------------------------------------
                                                              2003                              2002
                                                 ---------------------------------     -----------------
                                                 Rmb'000                US$'000               Rmb'000
                                                                              
EQUITY AND LIABILITIES

Shareholders' equity                            33,126,944              4,002,434             30,021,275
                                                -----------          -------------           -----------
Minority interests                               1,125,259                135,955                957,224
                                                -----------          -------------           -----------
Non-current liabilities
   Convertible notes                                     -                      -                166,498
   Accrued put premium on convertible
     notes                                               -                      -                 30,841
   Long-term loans from shareholders                     -                      -                404,891
   Long-term bank loans                          8,305,320              1,003,458              9,114,651
   Other long-term loans                           848,284                102,491                671,027
   Other financial liabilities                           -                      -                 19,397
   Deferred tax liabilities                         91,584                 11,065                110,510
                                                -----------          -------------           -----------
     Total non-current liabilities               9,245,188              1,117,014             10,517,815
                                                -----------          -------------           -----------
   Current liabilities
   Accounts payable and accrued
     liabilities                                 3,342,517                403,846              4,021,982
   Taxes payable                                   917,362                110,837                680,692
   Due to HIPDC                                     87,508                 10,573                100,475
   Due to other related parties                     27,338                  3,303                      -
   Staff welfare and bonus payable                 220,896                 26,689                233,566
   Short-term loans                              1,600,000                193,314              1,266,686
   Current portion of long-term loans
     from shareholders                             388,875                 46,984                404,891
   Current portion of long-term bank
     loans                                       2,409,240                291,087              1,946,732
   Current portion of other long-term
     loans                                         243,386                 29,406                163,098
   Convertible notes                                   952                    115                      -
   Accrued put premium for convertible
     notes                                           8,636                  1,043                      -
   Other financial liabilities                       4,351                    526                      -
                                                -----------          -------------           -----------
     Total current liabilities                   9,251,061              1,117,723              8,818,122
                                                -----------          -------------           -----------
     Total liabilities and equity               52,748,452              6,373,126             50,314,436
                                                ===========          =============           ===========




41.  US GAAP INFORMATION (CONT'D)

Condensed Combined Income Statements




                                                              Year ended December 31,
                                          -----------------------------------------------------------------
                                                     2003                       2002              2001
                                          -----------------------------     -------------     -------------
                                           Rmb'000          US$'000            Rmb'000           Rmb'000
                                                                                    
Operating revenue, net                    24,142,713        2,916,949        20,834,089         19,151,816

Operating expenses:
     Fuel                                 (9,374,408)      (1,132,626)       (8,007,244)        (6,639,223)
     Maintenance                            (971,282)        (117,351)         (746,138)          (966,985)
     Depreciation                         (4,067,809)        (491,477)       (3,609,605)        (3,531,839)
     Labor                                (1,532,605)        (185,171)       (1,267,136)        (1,135,627)
     Service fees to HIPDC                  (230,792)         (27,885)         (263,716)          (307,322)
     Income tax                           (1,276,478)        (154,225)       (1,043,675)          (882,465)
     Others                                 (706,802)         (85,397)         (972,610)          (910,127)
                                          ------------     -----------     --------------      ------------
         Total operating expenses        (18,160,176)      (2,194,132)      (15,910,124)       (14,373,588)

Income before financial expenses           5,982,537          722,817         4,923,965          4,778,228
                                          ------------     -----------     --------------      ------------
     Interest income                          53,884            6,510            88,157            120,146
     Interest expense                       (610,278)         (73,734)         (810,879)        (1,154,827)
     Exchange losses, net                    (30,929)          (3,737)          (33,131)           (42,578)
                                          ------------     -----------     --------------      ------------
         Total financial expenses           (587,323)         (70,961)         (755,853)        (1,077,259)
                                          ------------     -----------     --------------      ------------
Share of profit (loss) of associates         266,730           32,227            (1,634)            (5,381)
Minority interests                          (191,903)         (23,186)         (214,366)          (166,835)
                                          ------------     -----------     --------------      ------------
Net profit attributable to the
     shareholders                          5,470,041          660,897         3,952,112          3,528,753
                                          ============     ===========     ==============      ============







41.  US GAAP INFORMATION (CONT'D)

Condensed Combined Statements of Changes in Shareholders' Equity

                                                                                                   Rmb'000
                                                                                               -----------------
                                                                                               
Balance as of January 1, 2001                                                                        23,991,504

Dividend relating to 2000                                                                            (1,243,000)

Net profit attributable to shareholders for the year ended December 31, 2001                          3,528,753

Capital contribution arising from acquisition of Shandong Huaneng                                       862,922

Capital contribution from HIPDC arising from housing benefits provided by HIPDC                          26,152

Issuance and sale of 350,000,000 new Domestic Shares, net of direct issuance cost                     2,770,058

Distribution to Huaneng Group                                                                          (146,546)
                                                                                               -----------------
Balance as of December 31, 2001                                                                      29,789,843

Dividends relating to 2001                                                                           (1,800,000)

Net profit attributable to shareholders for the year ended December 31, 2002                          3,952,112

Conversion of convertible notes to new ordinary shares                                                    1,655

Net deemed capital distribution to Huaneng Group arising from the acquisition of the
     equity interests of the Shidongkou I Power Plant, Taicang Power Plant, Huaiyin Power
     Plant and Changxing Power Plant and additional interests in Shidongkou I Power Plant
     and Taicang Power Company                                                                       (2,034,222)

Contribution from Huaneng Group                                                                          85,735

Capital contribution from HIPDC arising from housing benefits provided by HIPDC                          26,152
                                                                                               -----------------
Balance as of December 31, 2002                                                                      30,021,275

Dividends relating to 2002                                                                           (2,049,408)

Net profit attributable to shareholders for the year ended December 31, 2003                          5,470,041

Conversion of convertible notes to new ordinary shares                                                  165,548

Net deemed capital distribution to Huaneng Group arising from the acquisition of the
     equity interests of the Qinbei Power Company, Yushe Power Company and Xindian Power
     Plant                                                                                             (506,664)

Capital contribution from HIPDC arising from housing benefits provided by HIPDC                          26,152
                                                                                               -----------------
Balance as of December 31, 2003                                                                      33,126,944
                                                                                               =================



41.  US GAAP INFORMATION (CONT'D)

Condensed combined statements of cash flows




                                                                    Year ended December 31,
                                                     --------------------------------------------------------
                                                               2003                  2002           2001
                                                     -------------------------    -----------   -------------
                                                      Rmb'000        US$'000        Rmb'000       Rmb'000
                                                                                       
Net cash provided by operating activities             9,655,472      1,166,585      7,820,762      6,528,209

Net cash (used in) / provided by  investing
   activities                                        (5,904,727)      (713,416)     2,077,754     (5,340,464)

Net cash used in financing activities                (2,767,549)      (334,378)    (9,239,037)    (1,129,337)
                                                     ------------    ----------    -----------    -----------
Net increase in cash and cash equivalents               983,196        118,791        659,479         58,408

Cash and cash equivalents, beginning of year          3,145,452        380,037      2,485,973      2,427,565
                                                     ------------    ----------    -----------    -----------
Cash and cash equivalents, end of year                4,128,648        498,828      3,145,452      2,485,973
                                                     ============    ==========    ===========    ===========



Statement of Comprehensive Income

Under US GAAP, certain items shown as components of common equity must be more
prominently reported in a separate statement as components of comprehensive
income. However, for each of the three years in the period ended December 31,
2003, apart from the net income, there was no other comprehensive income which
should be included in the statement of comprehensive income.

New Accounting Pronouncements

In 2003, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities ("SFAS 149"), Statement of
Financial Accounting Standards No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ("SFAS 150")
and FASB Interpretation No.46, Consolidation of Variable Interest Entities
("FIN 46").

SFAS 149 amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS 149 is effective for contracts entered into or
modified after June 30, 2003. The Company considered the effects of adoption
SFAS 149 and do not expect any material impact on the financial statements.



41.  US GAAP INFORMATION (CONT'D)

SFAS 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. Some of the provisions
of this Statement are consistent with the current definition of liabilities in
FASB Concepts Statement No. 6, Elements of Financial Statements. The remaining
provisions of this Statement are consistent with the Board's proposal to
revise that definition to encompass certain obligations that a reporting
entity can or must settle by issuing its own equity shares, depending on the
nature of the relationship established between the holder and the issuer. In
addition, SFAS 150 concludes the first phase of the Board's
redeliberations of the Exposure Draft, Accounting for Financial Instruments
with Characteristics of Liabilities, Equity, or Both. SFAS 150 is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003, except for mandatorily redeemable financial instruments
of nonpublic entities. The Company considered the effects of adoption SFAS 150
and do not expect any material impact on the financial statements.

FIN 46 provides guidance on the identification of and financial reporting for
entities over which controls is achieved through means other than voting
rights. This interpretation requires existing unconsolidated variable interest
entities to be consolidated by their primary beneficiaries if the entities do
not effectively disperse risks among parties involved. FIN 46 applies
immediately to variable interest entities created after January 31, 2003, and
to variable interest entities in which an enterprise obtains an interest after
that date. It applies in the first fiscal year or interim period beginning
after June 15, 2003, to variable interest entities in which an enterprise
holds a variable interest that it acquired before February 1, 2003. The
Company considered the effects of adoption FIN 46 and do not expect any
material impact on the financial statements.


                                   Signature

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                          Huaneng Power International, Inc.


                                          By: /s/ Wang Xiao Song
                                          Name: Wang Xiao Song
                                          Title: Vice Chairman




     Date: April 16, 2004



                                CERTIFICATIONS

Exhibit 12.1

I, Li Xiaopeng, certify that:

1. I have reviewed this annual report on Form 20-F of Huaneng Power
International, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this annual report;

4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

         (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being
prepared;

         (b) Evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure procedures, as of the end of the period
covered by the report based on such evaluation; and

         (c) Disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting;
and

5. The Company's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and the audit committee of company's board of directors (or
persons performing the equivalent function):

         (a) All significant deficiencies and material weakness in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Company's ability to record, process, summarize
and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal control
over financial reporting.


Date: April 16 , 2004

                                                     By: /s/ Li Xiaopeng
                                                         ---------------------
                                                         Li Xiaopeng, Chairman






                                CERTIFICATIONS


Exhibit 12.2

I, Huang Jian, certify that:

1. I have reviewed this annual report on Form 20-F of Huaneng Power
International, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this annual report;

4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

         (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being
prepared;

         (b) Evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure procedures, as of the end of the period
covered by the report based on such evaluation; and

         (c) Disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting;
and

5. The Company's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and the audit committee of company's board of directors (or
persons performing the equivalent function):

         (a) All significant deficiencies and material weakness in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Company's ability to record, process, summarize
and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal control
over financial reporting.


Date: April 16 , 2004

                                              By: /s/ Huang Jian
                                                  ----------------------------
                                                  Huang Jian, Chief Accountant



Exhibit 13.1

                   Certification of CEO and CFO Pursuant to
                            18 U.S.C. Section 1350,
                            as Adopted Pursuant to
                 Section 906 of the Sarbanes-Oxley Act of 2002

         In connection with the Annual Report on Form 20-F of Huaneng Power
International, Inc. (the "Company") for the year ended December 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Li Xiaopeng, as Chairman of the Company, and Huang Jian, as Chief
Accountant of the Company, each hereby certifies, pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that,
to the best of his knowledge:

         (1)  The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



By: /s/ Li Xiaopeng
- -------------------------------
Name: Li Xiaopeng
Title:   Chairman
Date:   April 16 , 2004


By: /s/ Huang Jian
- -------------------------------
Name: Huang Jian
Title:   Chief Accountant
Date:  April 16 , 2004


         This certification accompanies the Report pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
ss.18 of the Securities Exchange Act of 1934, as amended.

         A signed original of this written statement required by Section 906
has been provided to Huaneng Power International, Inc. and will be retained by
Huaneng Power International, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.