HUANENG POWER INTERNATIONAL INC | CIK:0000929058 | 3

  • Filed: 4/12/2018
  • Entity registrant name: HUANENG POWER INTERNATIONAL INC (CIK: 0000929058)
  • Generator: Unknown
  • SEC filing page: http://www.sec.gov/Archives/edgar/data/929058/000114420418020280/0001144204-18-020280-index.htm
  • XBRL Instance: http://www.sec.gov/Archives/edgar/data/929058/000114420418020280/hnp-20171231.xml
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    • ifrs-full:DisclosureOfBusinessCombinationsExplanatory

    40
    Business combinations

    (a)
    Acquisition from Huaneng Group
     
    On 14 October 2016, the Company entered into equity transfer agreements with Huaneng Group to acquire:
     
    •  80% equity interests of Shandong Power
    • 100% equity interests of Jilin Power
    • 100% equity interests of Heilongjiang Power
    •  90% equity interests of Zhongyuan Gas

    These entities are all mainly engaged in power generation and sales business. The acquisition was completed on 1 January 2017(the acquisition date), when the Company obtained the control over above mentioned entities through the corresponding voting rights obtained and consolidated them in its financial statement. The acquisition is expected to increase its generation capacity in relevant areas. The acquired business contributed consolidated revenue of RMB31.207 billion and consolidated net loss of RMB1,051 million to the Company and its subsidiaries for the period from the date of acquisition to 31 December 2017.

    The total consideration is RMB15.501 billion after certain adjustment of the profits generated from the date of valuation to the acquisition date in accordance with the equity transfer agreements, which has been settled in cash by 31 December 2017 after netting off with the receivables due from Huaneng Group.
     
       
    Acquisition Date
    		  
           
    Total consideration
    		    
    15,500,770
    		  
    Non-controlling interests
    		    
    6,292,577
    		  
    Fair value of pre-existing interest in a subsidiary of Shandong Power
    		    
    690,967
    		  
    Less: Fair value of total identifiable net assets
    		    
    19,316,748
    		  
             
    Goodwill
    		    
    3,167,566
    		  
             
    Total consideration
    		    
    15,500,770
    		  
    Less: Net settlement of the receivables due from Huaneng Group
    		    
    2,361,871
    		  
    Bank balances and cash of acquirees
    		    
    2,342,766
    		  
    Less: Restricted cash
    		    
    (20,974
    )
             
    Cash consideration paid for acquisition of subsidiaries, net of cash acquired
    		    
    10,817,107
    		  
     
    Goodwill arising from the acquisitions is attributable to the synergies expected to arise after the acquisitions of the equity interests in the subsidiaries stated above. None of the goodwill recognised is expected to be deductible for tax purposes.

    In addition, according to the profit compensation agreement associated with the Acquisition, Huaneng Group should compensate the Company in cash based on the shortfall of accumulated actual net profit compared with the accumulated forecast net profit of certain subsidiaries of Shandong Power during the compensation period from year 2017 to 2019.

    As at 31 December 2017, the fair value of above mentioned contingent consideration from Huaneng Group amounted to RMB860 million was recognized (as at acquisition date: nil), which was recorded in other receivables and assets of RMB615 million, and other non-current assets of RMB 245 million, respectively. The actual amount of compensation will be adjusted in line with the actual performance of those subsidiaries in 2018 and 2019.

    The Company incurred acquisition related cost amounted RMB26 million for financial advisory, legal and audit fees.

    The assets and liabilities arising from the acquisitions of above entities are as follows:
     
       
    Shandong Power (consolidated)
    Fair value
    		  
    Jilin Power (consolidated)
    Fair value
    		  
    Heilongjiang Power (consolidated)
    Fair value
    		  
    Zhongyuan Gas
    Fair value
    Property, plant and equipment
    		  
    41,366,757
    		  
    8,496,028
    		  
    12,525,071
    		  
    1,381,060
    Investment in associates and joint ventures
    		  
    1,021,566
    		  
    -
    		  
    -
    		  
    -
    Available-for-sale financial assets
    		  
    4,000
    		  
    100,895
    		  
    -
    		  
    -
    Land use rights
    		  
    2,272,181
    		  
    228,173
    		  
    655,485
    		  
    27,075
    Deferred income tax assets
    		  
    334,055
    		  
    323,522
    		  
    10,404
    		  
    -
    Other non-current assets
    		  
    1,285,838
    		  
    213,589
    		  
    210,965
    		  
    48
    Bank balances and cash
    		  
    1,621,276
    		  
    103,045
    		  
    385,295
    		  
    222,939
    Inventories
    		  
    952,510
    		  
    89,333
    		  
    123,889
    		  
    1,136
    Trade receivables
    		  
    2,509,641
    		  
    293,455
    		  
    127,219
    		  
    124,636
    Other receivables and other current assets
    		  
    2,992,094
    		  
    2,393,835
    		  
    889,392
    		  
    119,974
    Long-term borrowings
    		  
    (15,647,367)
    		  
    (8,330,929)
    		  
    (6,742,580)
    		  
    (1,200,000)
    Deferred income tax liabilities
    		  
    (2,447,672)
    		  
    (214,642)
    		  
    (280,945)
    		  
    (47,235)
    Other non-current liabilities
    		  
    (1,688,306)
    		  
    (10,291)
    		  
    (253,671)
    		  
    -
    Short-term borrowings
    		  
    (8,082,200)
    		  
    (600,000)
    		  
    (1,920,000)
    		  
    -
    Tax payables
    		  
    (270,531)
    		  
    (10,311)
    		  
    (54,302)
    		  
    (419)
    Dividends payables
    		  
    (136,955)
    		  
    -
    		  
    -
    		   -
    Salary and welfare payables
    		  
    (41,667)
    		  
    (2,969)
    		  
    (22,462)
    		  
    (717)
    Payables and other liabilities
    		  
    (9,725,591)
    		  
    (2,668,626)
    		  
    (3,083,130)
    		  
    (606,115)
                     
    Total identifiable net assets
    		  
    16,319,629
    		  
    404,107
    		  
    2,570,630
    		  
    22,382
     
    The fair value of the identifiable assets and liabilities acquired in the acquisition were assessed based on independent valuation prepared by external valuers.
    (b)
    A subsidiary transferred from a joint venture

    Shanxi Xiaoyi Economic Development Zone Huaneng Energy Service Co., Ltd. ('Shanxi Xiaoyi Energy') was previously a joint venture of the Company. In 2017, non-controlling shareholder with 49% equity interests in Shanxi Xiaoyi Energy entered into a voting in concert agreement with the Company whereby it agreed to vote the same in respect of significant financial and operating decisions made by the Company effective from 15 February 2017. As a result, the Company acquired control of Shanxi Xiaoyi Energy since 15 February 2017.
     
       
    Acquisition Date
    		  
    Non-controlling interests
    		    
    10
    		  
    Fair value of pre-existing interest in Shanxi Xiaoyi Energy
    		    
    10,200
    		  
    Less: Fair value of total identifiable net assets
    		    
    10,210
    		  
             
    Goodwill
    		    
    -
    		  
     
    Shanxi Xiaoyi Energy is a limited liability company established on 8 October 2016 in Xiaoyi, Shanxi Province. Shanxi Xiaoyi Energy is primarily engaging in selling of electricity, construction, operation and maintenance of power distribution and regional transmission and distribution grid. Financial information of Shanxi Xiaoyi Energy is as follows:
     
       
    From acquisition date to 31 December 2017 acquiree's
    		  
       
    Revenue
    		    
    Net Profit
    		  
                 
    Shanxi Xiaoyi Energy
    		    
    704
    		      
    228
    		  
     
    The identifiable assets and liabilities of Shanxi Xiaoyi Energy as at the acquisition date are as follows:
     
       
    Fair Value
    		  
           
    Bank balances and cash
    		    
    10,211
    		  
    Accounts payable and other liabilities
    		    
    (1
    )
    Total identifiable net assets
    		    
    10,210
    		  

    (c)
    Acquisition of Ruzhou Xuji Wind Power Generation Co., Ltd.

    The Company has entered an Agreement on establishing Huaneng Ruzhou Clean Energy Co., Ltd. ("Ruzhou Clean Energy") with Beijing Xuji New Energy Technology Co., Ltd. ("Beijing Xuji") in 2017. The Company committed to contribute RMB76 million for 95% equity of Ruzhou Clean Energy. Beijing Xuji contributed the net identifiable assets of its wholly-owned subsidiary, Ruzhou Xuji Wind Power Generation Co., Ltd. ("Xuji Wind Power") which amounted to RMB4 million, for 5% equity of Ruzhou Clean Energy.
     
       
    Acquisition Date
    		  
           
    Consideration
    		    
    4,000
    		  
    Less: Fair value of total identifiable net assets
    		    
    4,000
    		  
    Goodwill
    		    
    -
    		  
     
    Xuji Wind Power was established on 23 November 2015 in Ruzhou, Henan Province, and is mainly engaged in wind power generation and photovoltaic power generation. On the acquisition date, the project is under construction. From the acquisition date to 31 December 2017, Xuji Wind Power had not commenced operation.
     
       
    From acquisition date to
    31 December 2017 acquiree's
    		  
       
    Revenue
    		    
    Net Profit
    		  
    Xuji Wind Power
    		    
    -
    		      
    -
    		  
     
    The identifiable assets and liabilities of Xuji Wind Power as at the acquisition date are as follows:
     
     
    Fair Value
    		  
           
    Other receivables and assets
    		    
    16,080
    		  
    Property, plant and equipment
    		    
    11,893
    		  
    Accounts payable and other liabilities
    		    
    (23,973
    )
    Total identifiable net assets
    		    
    4,000