China Shenhua Energy : 2020 Annual Report

March 28, 2021 at 07:06 am EDT

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

Stock Code: 01088

2020 Annual Report

Important Notice

I. The Board, supervisory committee and all directors, supervisors and senior management of the Company warrant that this report does not contain any misrepresentations, misleading statements or material omissions, and are jointly and severally liable for the authenticity, accuracy and completeness of the information contained in this report.
II. This report was approved at the sixth meeting of the fifth session of the Board of the Company. eight out of eight directors attended the meeting in person.
III. KPMG has issued a standard unqualified independent auditor's report to the Company under the Hong Kong Standard on Auditing, in connection with the Company's 2020 financial statements prepared under International Financial Reporting Standards.
IV. Wang Xiangxi, Chairman of the Company, Xu Shancheng, Chief Financial Officer, and Ban Jun, person-in-charge of the accounting department, warrant the authenticity, accuracy and completeness of the financial statements contained in this report.
V. The Board proposed the payment of a final dividend in cash of RMB1.81 per share (inclusive of tax) for the year 2020 based on the total registered share capital on the equity registration date of the implementation of the equity distribution. The profit distribution proposal is subject to the approval by shareholders at the general meeting. According to the total share capital of 19,868,519,955 shares of the Company as at 26 March 2021, the final dividend totalling RMB35,962 million (inclusive of tax) will be paid.
VI. Change in the scope of consolidated financial statements: on 1 September 2020, transaction of capital increase in Shenhua Finance Company was completed and the Company decreased its shareholding in Shenhua Finance Company to 40%, and Shenhua Finance Company will not be consolidated to the consolidated financial statements of the Company ("Financial Statement of Shenhua Finance Company").
VII. Is there any situation of non-operating appropriation of funds by controlling shareholder(s) and its subsidiaries?: No
VIII. Is there any situation of violation of decision-making procedures for external guarantee provision?: No
IX. Disclaimer of forward-looking statements: the forward-looking statements in this report made on the basis of subjective assumptions and judgments on future policies and economic conditions, which are subject to risks, uncertainties and assumptions, may differ materially from the actual outcome. Such statements do not constitute actual commitments to investors. Investors should be aware that undue reliance on or use of such information may lead to risks of investment.
X. Warning on Major Risks: impacted by the supply and demand of coal and power generation and the adjustment to industrial policies, the Group is exposed to some uncertainties on achieving the business targets for 2021. In addition, investors please note that the Company has disclosed risks including macro economy, production safety, environmental protection, market competition and international operation, etc. in the section headed "Directors' Report".

Contents

Section I	Definitions	4
Section II	Company Profile and Major Financial Indicators	8
Section III	Business Overview	13
Section IV	Chairman's Statement	15
Section V	Directors' Report	28
Section VI	Significant Events	78
Section VII	Changes in Share Capital and Shareholders	121
Section VIII	Directors, Supervisors, Senior Management and Employees	129
Section IX	Corporate Governance and Corporate Governance Report	153
Section X	Supervisory Committee's Report	167
Section XI	Investor Relations	170

Section XII	Independent Auditor's Report and Financial Statements	174
Section XIII	Documents Available for Inspection	304
Section XIV	Summary of Major Financial Information for the Recent Five Years	305

Section IDefinitions

Unless the context otherwise requires, the following terms used in this report have the following meanings:

China Shenhua/the Company	China Shenhua Energy Company Limited
The Group	The Company and its subsidiaries
China Energy/Shenhua Group	China Energy Investment Corporation Limited (਷࢕ঐ๕ҳ༟ණྠϞ
Corporation	ࠢப΂ʮ̡), the new name of Shenhua Group Corporation Limited
(ग़ശණྠϞࠢப΂ʮ̡)
China Energy Group/	China Energy and its subsidiaries (excluding the Group)
Shenhua Group
China Guodian	China Guodian Group Co., Ltd. (ʕ਷਷ཥණྠϞࠢʮ̡)
Guodian Group	China Guodian and its subsidiaries
GD Power	GD Power Development Co., Ltd.
Shendong Coal	Shenhua Shendong Coal Group Co., Ltd.
Shendong Power	Shenhua Shendong Power Co., Ltd.
Zhunge'er Energy	Shenhua Zhunge'er Energy Co., Ltd.
Beidian Shengli	Shenhua Beidian Shengli Energy Co., Ltd.
Shuohuang Railway	China Energy Shuohuang Railway Development Co., Ltd.
Railway Equipment	Shenhua Railway Transportation Co., Ltd.
Trading Group	China Energy Trading Group Limited
China Shenhua Energy Company Limited

Huanghua Harbour Administration	China Energy Huanghua Harbour Administration Co., Ltd.
Baoshen Railway	China Energy Baoshen Railway Group Co., Ltd.
Baotou Energy	China Energy Baotou Energy Co., Ltd.
Baotou Coal Chemical	Shenhua Baotou Coal Chemical Co., Ltd.
Shenbao Energy	China Energy Baorixile Energy Co., Ltd.
Tianjin Coal Dock	Shenhua Tianjin Coal Port Dock Co., Ltd.
Zhuhai Coal Dock	China Energy Zhuhai Harbour Administration Co., Ltd.
Sichuan Energy	Shenhua Sichuan Energy Co., Ltd.
Fujian Energy	Shenhua Fujian Energy Co., Ltd.
EMM Indonesia	PT.GH EMM INDONESIA
Zhunge'er Power	Power-generating division controlled and operated by Zhunge'er
Energy
Shenmu Power	CLP Guohua Shenmu Power Co., Ltd.
Taishan Power	Guangdong Guohua Yudean Taishan Power Co., Ltd.
Cangdong Power	Hebei Guohua Cangdong Power Co., Ltd.
Jinjie Energy	Shaanxi Guohua Jinjie Energy Co., Ltd.
Dingzhou Power	Hebei Guohua Dingzhou Power Generation Co., Ltd.
Mengjin Power	Shenhua Guohua Mengjin Power Generation Co., Ltd.

Section I	Definitions (Continued)
Jiujiang Power	Shenhua Guohua Jiujiang Power Co., Ltd.
Huizhou Thermal	Guohua Huizhou Thermal Power Branch of China Shenhua

Beijing Gas-fired Power	Shenhua Guohua (Beijing) Gas-fired Power Co., Ltd.
Shouguang Power	Shenhua Guohua Shouguang Power Generation Company Limited
Liuzhou Power	Shenhua Guohua Guangtou (Liuzhou) Power Generation Co., Ltd.
Pembangkitan Jawa	PT. Shenhua Guohua Pembangkitan Jawa Bali
Shenhua Lease Company	Shenhua (Tianjin) Finance Lease Co., Ltd.
Beijing GD Power	Beijing GD Power Co., Ltd
Finance Company	China Energy Finance Co., Ltd. (formerly known as Shenhua
Finance Co., Ltd.)
Capital Increase Transaction of	the Transaction that China Energy Group subscribed additional
Shenhua Finance Company	registered capital of RMB7.5 billion in Shenhua Finance Company
at a consideration of RMB13,273.716 million in cash (for details,
please refer to the H Share announcement on 27 March 2020 and
A Share announcement on 28 March 2020 of the Company)
JORC	Australasian Code for Reporting of Mineral Resources and Ore
Reserves
SSE	Shanghai Stock Exchange
China Shenhua Energy Company Limited

HKEx

The Stock Exchange of Hong Kong Limited

Shanghai Listing Rules

Rules Governing the Listing of Stocks on SSE

Hong Kong Listing Rules

Rules Governing the Listing of Securities on the HKEx

China Accounting Standards for

Business Enterprises

the latest Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People's Republic of China and the related application guidance, interpretations and other related requirements

International Financial Reporting

Standards

International Financial Reporting Standards issued by the International Accounting Standards Board

Articles of Association

Articles of Association of China Shenhua Energy Company Limited

EBITDA

Profit for the year + net financial costs + income tax + depreciation and amortization - share of profits and losses of associates

Gearing ratio

total liabilities/total assets

Total debt to total debt and total equity ratio

[long-term interest bearing debt + short term interest bearing debt (including notes payable)]/[long term interest bearing debt + short term interest bearing debt (including notes payable) + total equity]

Shanghai-Hong Kong Stock

Connect

A mutual access and connect mechanism for transactions in stock markets between SSE and HKEx

Shenzhen-Hong Kong Stock

Connect

A mutual access and connect mechanism for transactions in stock markets between Shenzhen Stock Exchange and HKEx

RMB

Renminbi unless otherwise specified

Section IICompany Profile and Major Financial Indicators

II.


Name	Huang Qing	Sun Xiaoling
Address	22 Andingmen Xibinhe Road,	22 Andingmen Xibinhe Road,
Dongcheng District, Beijing	Dongcheng District, Beijing
(Postal Code: 100011)	(Postal Code: 100011)
Tel	(8610) 5813 3399	(8610) 5813 3355
Fax	(8610) 5813 1804/1814	(8610) 5813 1804/1814
E-mail	1088@csec.com	ir@csec.com
Office of the Board of the Company	Hong Kong Office of the Company
Address	22 Andingmen Xibinhe Road,	Room B, 60th Floor, Bank of China Tower,
Dongcheng District, Beijing	1 Garden Road, Central, Hong Kong
(Postal Code: 100011)
Tel	(8610) 5813 1088/3399/3355	(852) 2578 1635
Fax	(8610) 5813 1804/1814	(852) 2915 0638

INFORMATION OF THE COMPANY
Chinese Name of the Company	ʕ਷ग़ശঐ๕ٰ΅Ϟࠢʮ̡
Short Name of Chinese Name of the Company	ʕ਷ग़ശ
English Name of the Company	China Shenhua Energy Company Limited
Abbreviation/Short Name of English Name of the	CSEC/China Shenhua
Company
Legal Representative of the Company	Wang Xiangxi
Authorised Representatives of the Company under	Wang Xiangxi, Huang Qing
the Hong Kong Listing Rules
CONTACTS AND CONTACT DETAILS
Secretary to the Board	Representative of Securities Affairs

III.

PARTICULARS
Registered Address of the Company	22 Andingmen Xibinhe Road, Dongcheng District,
Beijing
Postal Code of Registered Address of	100011
the Company
Office Address of the Company	22 Andingmen Xibinhe Road, Dongcheng District,
Beijing
Postal Code of Office Address of	100011
the Company
Company Website	http://www.csec.comor http://www.shenhuachina.com
E-mail	ir@csec.com

IV. INFORMATION DISCLOSURE AND PLACE FOR DOCUMENT INSPECTION
Designated Media for Information
Disclosure
Internet website designated by CSRC for publishing annual report
Annual report is available at
China Securities Journal, Shanghai Securities News, Securities Times and Securities Dailyhttp://www.sse.com.cnand http://www.hkexnews.hk
SSE, Board Office of the Company and Hong Kong Office of the Company
V. BASIC INFORMATION ON SHARES
VI. OTHER RELEVANT INFORMATION

Type	Stock Exchange	Abbreviation	Stock Code
A Share	SSE	China Shenhua	601088
H Share	HKEx	China Shenhua	01088
KPMG Huazhen LLP

Auditor engaged by the Company (the PRC)

Name

Office AddressSigning Auditors

8th, Tower E2, Oriental Plaza, 1 East Chang An Avenue, Beijing

Zhang Nan, Wang Xia

Auditor engaged by the Company (Hong Kong)

Name

Office Address

Signing Auditors

KPMG

(Public Interest Entity Auditor registered in accordance with the Financial Reporting

Council Ordinance)

8th Floor, Prince's Building,

10 Chater Road, Central, Hong Kong Guen Kin Shing

Share Registrar and Transfer

Office of the Company

(A Share)

Share Registrar and Transfer

Office of the Company

Name

Office Address

Name

(H Share)

Office Address

China Securities Depository and Clearing

Corporation Limited Shanghai Branch 188 Yanggao South Road,

Pudong New Area, Shanghai

Computershare Hong Kong Investor Services

Limited

Rooms 1712-1716, 17th Floor, Hopewell Centre,

183 Queen's Road East, Wanchai, Hong Kong

VII. MAJOR ACCOUNTING DATA AND FINANCE INDEX

2020

2019

Change %Revenue

Profit for the year

Profit for the year attributable to equity holders of the Company Basic earnings per share

Net cash generated from operating activities

Net cash generated from operating activities excluding the effect from

Finance Company

Return on total assets as at the end of the period

Return on net assets as at the end of the period

RMB million RMB million

RMB million RMB/share

RMB millionRMB million %

EBITDA

RMB million

233,263 43,984 35,849 1.803 81,289

62,690

7.8

9.8 79,018

241,871 (3.6)

49,777 (11.6)

41,707 (14.0)

2.097 (14.0)

63,106 28.8

66,768 (6.1)

Decreased by 1.0 8.8 percentage point

Decreased by 1.9 11.7 percentage points

86,992

(9.2)

At the end of 2020

At the end of 2019

Change %

Equity attributable to equity holders per share

Total assets Total liabilities Total equity

Equity attributable to equity holders of the Company Total share capital at the end of the period

Gearing ratio

Total debt to total debt and total equity ratio

RMB million RMB million RMB million

RMB million

RMB/share %

562,904 133,317 429,587 364,203 19,890 18.33 23.7

13.4

563,083 (0.0)

142,865 (6.7

420,218 2.2

356,077 2.3

19,890 0.0

17.90 2.4

Decreased by 1.7 25.4 percentage points

Increased by 2.8 10.6 percentage points

VIII. DIFFERENCE IN ACCOUNTING DATA UNDER DOMESTIC AND OVERSEAS

ACCOUNTING STANDARDS

Unit: RMB million

Net profit attributable to equity holders of the CompanyNet assets attributable to equity holders of the Company

2020

2019

At the end of 2020

At the end of 2019

Under China Accounting Standards for

Business Enterprises

39,170

43,250

360,189 351,928

Adjustments for:

Simple production maintenance, safety production and other related expenditure Under International Financial Reporting

(3,321)

(1,543)

4,014 4,149

Standards

35,849

41,707

364,203 356,077

Explanation on differences in domestic and overseas accounting standards:

Pursuant to the relevant regulations of the related government authorities in the PRC, the Group accrued provisions for simple production maintenance, safety production and other related expenditures, recognised as expenses in profit or loss and separately recorded as a specific reserve in shareholders' equity. On utilisation of the specific reserve as fixed assets within the stipulated scope, the full amount of accumulated depreciation is recognised at the same time when the cost of the relevant assets is recorded. Under International Financial Reporting Standards, these expenses are recognised in profit or loss as and when incurred. Relevant capital expenditure is recognised as property, plant and equipment and depreciated according to the relevant depreciation method. The effect on deferred tax arising from such difference is also reflected.

IX. MAJOR FINANCIAL DATA OF EACH QUARTER OF 2020

Unit: RMB million

Third quarter	Fourth quarter
(January	Second quarter	(July -	(October -
- March)	(April - June)	September)	December)
Revenue	51,077	53,939	61,087	67,160
Profit for the period attributable
to equity holders of the Company	9,980	10,390	12,208	3,271
Net cash generated from operating activities	29,984	23,736	17,820	9,749

First quarter

In the fourth quarter, the decrease in profit for the period attributable to owners of the Company as compared to the previous three quarters was primarily due to the following reasons: (1) The cost expenditure occurred in the fourth quarter is higher than that in the first three quarters; (2) According to relevant documents, and the relevant branches and subsidiaries of the Group continued to calculate the income tax preferential rate of 15% of the development of the Western region in the first three quarters of 2020; in the fourth quarter, upon a comprehensive evaluation, the Group expected that there was a great uncertainty to continue enjoying the preferential tax rate of 15% in 2020 for certain relevant subsidiaries. Based on the prudence principle, certain relevant subsidiaries adjusted the annual enterprise income tax rate without the preferential tax rate of the development of the Western region, and the annual enterprise income tax would be calculated at the rate of 25%; (3) the Group conducted impairment assessment on assets with impairment indications and accrued provisions for impairment of assets based on the assessment results; (4) other expenses incurred in the fourth quarter increased as compared to the previous three quarters, mainly due to the rectification expenditure of certain coal mines, the loss on the retirement of fixed assets, and the expected loss of guarantees, etc.

Section III Business Overview

I. EXPLANATION ON PRINCIPAL BUSINESSES AND OPERATION MODEL OF THE COMPANY AND INDUSTRY CONDITIONS DURING THE REPORTING PERIOD
China Shenhua Energy Company Limited was established in Beijing in November 2004, and was listed on the HKEx in June 2005 and on the SSE in October 2007. The Group is principally engaged in the production and sale of coal and electricity, railway, port and shipping transportation, and coal-to-olefins businesses.
The Group owns high-quality coal resources in Shendong Mines, Zhunge'er Mines, Shengli Mines and Baorixile Mines, etc. On 31 December 2020, the Company had coal reserves of 29.68 billion tonnes and recoverable coal reserves of 14.42 billion tonnes under the PRC Standard; the marketable coal reserve of 7.73 billion tonnes under the JORC Standard. In 2020, the Group realized commercial coal production volume of 291.6 million tonnes and the sales volume of coal of 446.4 million tonnes. The Group controls and operates high capacity clean coal-fired power generators with great parameters, the Group controls and operates power generators with an installed capacity of 32,279MW by the end of 2020, with a total power output dispatch of 127.65 billion kWh in 2020. The Group controls and operates completion of a network of concentric transportation railways around the major coal production bases in western Shanxi, northern Shaanxi and southern Inner Mongolia as well as "Shenshuo - Shuohuang Line", a major channel for coal transportation from western to eastern China. By the end of 2020, Huanghua-Dajiawa Railway, a new energy channel in Bohai Sea, was put into trial operation. The total length of railways controlled and operated by the Group has increased to 2,371 km. The transportation turnover of the self-owned railway completed 285.7 billion tonnes km all year. The Group also controls and operates a number of ports and docks (approximately 270 million tonnes/year vessel loading capability in aggregate), such as Huanghua Port, possesses the shipping transportation team comprising its own vessels with approximately 2.18 million tonnes of loading capacity and conducts coal-to-olefins businesses with approximately 0.6 million tonnes/year of operation and production capacity. The Group's technology in coal exploitation and production safety has secured a leading position in the global market, and that of clean coal-fired power generation and heavy-loaded railway transportation has secured a leading position in the domestic market.
During the reporting period, the Group made no significant change in the scope of its principal businesses.
For industry conditions in which the Company operates, please refer to the section "Directors'
Report" in the report.
II. EXPLANATION ON MATERIAL CHANGES IN MAJOR ASSETS OF THE COMPANY DURING THE REPORTING PERIOD
As of 31 December 2020, the total assets of the Group amounted to RMB562,904 million, which was basically the same as compared with that at the end of last year; the net assets attributable to owners of the Company amounted to RMB364,203 million, representing an increase of 2.3% as compared with that at the end of last year. The total offshore assets of the Group (including Hong Kong, Macau and Taiwan) amounted to RMB26,027 million, representing 4.6% to total assets, which are mainly composed of the power generation assets in Indonesia, and assets from U.S. dollar-denominated bonds issued in Hong Kong, the PRC.

Section III Business Overview (Continued)

III. ANALYSIS ON CORE COMPETITIVENESS DURING THE REPORTING PERIOD

The core competitiveness of the Group is mainly:

(I) Unique operation and profitability model: The Group has a large and efficient operation of coal and power generation business, and possesses a large-scale integrated transportation network consisting of railways, ports and ships, forming a core competitive advantage of integrated development of coal, power, transportation and coal-to-chemical industry, one-stop operation of production, transportation and sales, in-depth cooperation and effective synergy among various industrial sectors.
In 2020, the Company adhered to market orientation, further promoted the in-depth supply-side structural reform, strengthened resource organization and transportation management, fully developed its advantages of coal-power-transportation synergic effect and unified operation, highlighted the precise management of production, transportation and marketing, and comprehensively completed the maintenance and supply of energy in key regions and key period, in order to continuously strengthen the overall competitiveness.
(II) Coal reserve: The Group possesses an abundant pool of high-quality coal resources which are suitable for modern high-output and high-efficient mining. As of the end of 2020, among the coal mining rights possessed and controlled by the Group, the coal resources are 29.68 billion tonnes and recoverable coal reserves 14.42 billion tonnes under the PRC Standard; the marketable coal reserves are 7.73 billion tonnes under the JORC Standard. The coal reserves of the Group is among the top of listed coal companies in China.
(III) Management team focusing on principal business and advanced business concepts: The management team of China Shenhua has profound knowledge and management experience in the industry, attaches great importance to enhancement of the Company's capabilities in value creation, conducts operation with a focus on the principal businesses of the Company, and persistently focuses on clean generation, clean transportation and clean conversion in the energy sector.
(IV) Industrial technology and innovation capabilities: China Shenhua strengthens its industrial technology and innovation capabilities continuously. The Group's technology in coal green exploitation and production safety has secured a leading position in the global market, and that of clean coal-fired power generation and heavy-loaded railway transportation has secured a leading position in domestic market, basically establishing a unified operation model of technology and resources and a technological innovation-driven development model comprising scientific decision-making, systematic management, research and development, and transformation of achievements.
In 2020, the Group focused on promoting the research of digital intelligent technology in coal mine, ecological restoration and renovation of coal-fired power base, clean and efficient coal-fired power generation technology and intelligent heavy-haul technologies and port transportation technology, etc. During the reporting period, China Shenhua was granted a total of 915 patents, including 198 invention patents.

Section IV Chairman's Statement

Dear Shareholders,

On behalf of the Board, I am delighted to present you the 2020 annual report of China Shenhua, and express sincere gratitude to all of you for your support!

2020 was an extremely unusual year. Amid the severe and complicated internal and external environment, especially the severe impact of the COVID-19 pandemic, under the strong leadership of the Party Central Committee with Comrade Xi Jinping at the core, China Shenhua deeply implemented the spirit of the important speeches and the important instructions made by General Secretary Xi Jinping, the decision-making deployment of the Party Central Committee of stability on the six fronts and security in the six areas, accelerated the implementation of "One Target, Three Models and Five Strategies, and Seven First-class" enterprise development strategy, organized the promotion of various work, and completed the annual target tasks. The "13th Five-Year" plan has come to a successful conclusion. In this year, the Company achieved RMB35,849 million in profit for the year attributable to equity holders of the Company and basic earnings per share of RMB1.803, the gearing ratio at the end of the period was 23.7%, and the total market value reached USD52.3 billion, showing a stable performance while at the same time securing progress.

Over the past year, we steadily pushed forward the epidemic prevention and control, ensured the safe production, health of employees and energy supply, and carried out a series of activities including "being a pioneer in the fight against COVID-19, and being brave in times of crisis". There was no cluster of infection incident throughout the entire Company. We overcame challenges and took courage to assume heavy responsibilities. We have taken the lead in the full resumption of work and production, actively supported the socioeconomic development of Hubei and other places, and completed the task of ensuring supply, warmth and people's livelihood in key regions at the critical moment. We firmly upheld the concept of safe development and comprehensively carried out the three-year action of special rectification in safe production, and 22 coal mines were awarded the most safe and highly efficient mines in 2018-2019. We have vigorously implemented pollution control and ecological governance, and 15 coal mines were included in the list of national green mines. The Company also won the title of advanced enterprise in coal industry for energy conservation and emission reduction.

Over the past year, we fully leveraged our core competitive advantages of integration and implemented coal-fired power synergy, coal chemical synergy, production and transportation synergy, transportation and marketing synergy, continued to promote digital empowerment and industrial connectivity, improved the price coordination mechanism, smoothed production, transportation and marketing channels, and maintained integrated high-end operation. Production and operation have improved month by month, with better-than-expected and better-than-peers key indicators, making positive contributions to the steady growth of the national economy and creating higher value for stakeholders such as investors and customers.

Section IV Chairman's Statement (Continued)

Over the past year, we adhered to the new development concept, advanced in-depth supply-side structural reform, focused on expanding effective investment, strengthened breakthroughs in core technologies for key field, and continued to promote transformation and upgrade. We focused on the target tasks of peak carbon dioxide emissions and carbon neutrality and prepared the "14th Five-Year" development plan in a scientific manner. We made great contribution in coal production, increased the proportion of high-quality production capacity and promoted safe, clean, intelligent and efficient mining. We optimised coal power, built clean and highly efficient units with high standards and reduced unit energy consumption, such as commencing production of the world's first turbine platform high-level layout project of Jinjie Power, and operation for power generation of the million kilowatt coal power project in Java, Indonesia. We excelled ourselves in modern coal chemical, enhanced technological transformation and upgrade, and ensured the safe, stable and clean operation of the project. We implemented the construction of transportation system and the adjustment to the transportation structure of "road to railway". The Huangda Railway has been in full operation and the logistics business has actively expanded. We led the business development with digital transformation, construction of intelligent mine, intelligent power station, intelligent transportation, and intelligent chemical industry achieved remarkable results, and the dispatch center command platform project was successfully launched.

Over the past year, we adhered to the two "consistent implementation principles", gave full play to the role of the Party committee in "providing direction, managing the overall situation and ensuring implementation", continued to reinforce theoretical arms, enhanced the building of team of cadre talents, encouraged a number of cadres and employees to take up their role and work hard to build a world-class comprehensive listed energy company with strong synergy. We continued to consolidate the foundation of the "three basics", promoted the integration of party building and core businesses, and steadily carried out the action of making contributions on the position of "formation of socialism by action", created an excellent culture and brand, and strengthened the building of Party style and clean government and the fight against anticorruption in order to provide a strong guarantee for the reform development of the Company.

Over the past year, we won the final battle against poverty in all respects, invested RMB136 million in targeted poverty alleviation funds, and helped all three deeply impoverished counties get rid of poverty. We implemented the Securities Law, protected the interests of minority investors and carried out H share repurchase. We continued to distribute a large proportion of dividends, with a distributed annual profit paid in cash no less than 50% of the net profit attributable to shareholders of the Company achieved at the year during the year 2019-2021. We comprehensively strengthened ESG governance and promoted the standardisation of ESG management system construction. The Company won a number of awards and honors, including China Securities Golden Bauhinia Awards, New Fortune's Best Listed Company, and the Annual Sustainability Award "Golden Awards", and maintained a good record of A-level performance evaluation of information disclosure by SSE for 7 consecutive years.

Section IV Chairman's Statement (Continued)

2021 will embrace the 100th anniversary of the founding of the Communist Party of China as well as the beginning of "14th Five-Year" plan. It is also the first year that our country will march towards the Second Centenary Goal. Adhering to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the Company will be on a new development stage, completely and accurately implement the new development concept in all aspects, accelerate the construction of a new development pattern, implement the "14th Five-Year" development plan with high standards, actively contribute to the construction of a clean, low-carbon, safe and efficient modern energy system, spared no effort to create a new situation in green transformation, innovation driving, quality and efficiency improvement, management improvement, reform deepening, and party building, and strive to achieve new development, show new achievements, and create new performance in the new journey of the "14th Five-Year" plan.

We firmly believe that we would not have brilliant results unless we strive our best prudently. There is no way out for hesitation, and we can only achieve progress by taking on responsibilities. With a complete industrial chain, China Shenhua has obvious integrated competitive advantages and strong market advantages, brand advantages, capital advantages and talent advantages. With the joint efforts of the Board, management and all employees as always, as well as the strong support of shareholders and all walks of life, we will seize opportunities, overcome challenges, and achieve better performance on the new journey of building a modern socialist country in an all aspect, so as to make greater contributions to the national economic and social development, and create greater value for investors, customers and society.

Wang Xiangxi

Chairman

Section V Directors' Report

Overview of China Shenhua's Operating Results for the Year of 2020

Table 1

Business Targets of 2021

Commercial coal production Coal sales

Power generation Revenue

Cost of sales Selling, general and administrative expenses,

R&D and net finance costs Change in unit production costs of self-produced coal

100 million tonnes 100 million tonnes billion kWh RMB100 million RMB100 million RMB100 million

Target for 2021

2.84

4.76

135

2,426

1,704

125

Year-on-year increase of about 5%

Table 4

Operation Data

Commercial coal production Coal sales

million tonnes million tonnesTransportation turnover of self- billion tonne km owned railway

Loading volume at Huanghua

Port

Loading volume at Shenhua

Tianjin Coal Dock Shipping volume Shipping turnover

Gross power generation Total power output dispatch Sales of polyethylene

Sales of polypropylenemillion tonnes billion tonne nautical miles billion kwh billion kwh thousand tonnes thousand tonnes

Table 2
Change
%
Revenue	RMB million	233,263	(3.6)
Profit for the year	RMB million	43,984	(11.6)
EBITDA	RMB million	79,018	(9.2)
RMB million	35,849	(14.0)
RMB/share	1,803	(14.0)
RMB million	81,289	28.8
RMB million	62,690	(6.1

2.097 63,106

Financial Indicators

Actual amount in 2020

Change %

2020

2019

2.916 (2.6)

241,871

4.464 6.6

49,777

136.33 (1.0)

86,992

2,332.63 4.0

1,623.74 4.9

114.44 9.2

Profit for the year attributable to equity holders of the Company Basic earnings per share

Net cash generated from operating activities

Year-on-year increase of 3.6%

Net cash generated from operating activities excluding Finance Company

41,707

66,768

Table 5 Commercial Coal Production Volume

2020

2019

Change %

2020 million tonnes

2019 million tonnes

291.6 446.4 285.7

282.7 3.1

Change %

Total production

447.1 (0.2)

285.5 0.1

291.6

By mines

million tonnes

282.7

Shendong Mines Zhunge'er Mines Shengli Mines Baorixile Mines Baotou Mines

203.8

185.0

199.7 2.1

184.8 0.1

62.2

million tonnes

54.1 15.0

45.4

44.7 1.6

21.1

21.5

113.0 93.0

109.8 2.9

13.7 54.0

28.1 (23.5)

1.8

89.6 3.8

By regions

136.33 127.65 356.9 331.2

2.0 (10.0)

153.55 (11.2)

144.04 (11.4)

302.3 9.6

319.0 11.9

Inner Mongolia Shaanxi Shanxi

195.4 93.2 3.0

188.8 3.5

91.1 2.3

2.8 7.1

Table 9

Domestic Coal Sales VolumeTable 10 Capital Expenditure Plan for 2021

Domestic sales

By regions Northern ChinaProportion of 2020 domestic sales 2019 Change million tonnes Ĉ million tonnes %

444.3

Eastern China Central China and

Southern China Northeast China Others

137.7 180.4 76.6

35.6 14.0

By usage

Thermal coal Metallurgy Chemical (including coal slurry) Others

Table 12

356.3 23.2 60.2

4.6

Coal Sales Price

Total sales volume/average price (excluding tax)

I. Classify by contract pricing mechanism

(I) Sales through Trading Group
- 1. Annual long-term agreement
- 2. Monthly long-term agreement
- 3. Spot commodity
(II) Direct sales at the coal mine pit

II.

Classify by internal and external customers

(I) Sales to external customers
(II) Sales to internal power segment
(III) Sales to internal coal chemical segment

100.0

31.0 40.6 17.2

442.3 0.5 137.4 0.2174.8 3.281.6 (6.1)

8.0 3.2

35.9 (0.8)

12.6 11.1

80.3 5.2 13.5

355.8 0.1

26.3 (11.8)

54.9 9.7

1.0

5.3 (13.2)

2020

Percentage to

Sales volume total sales volume

1. Coal segment
(Excluding equity investment)
2. Power segment
3. Transportation segment Including: Railway
Port
Shipping
4. Coal chemical segmentPlan for 2021 Completion in 2020
RMB100 million
74.48 81.51
147.99 77.66
92.06 38.40
79.29 34.41
12.45 3.88
0.32 0.11
30.81 5.64
5. Others

10.48 12.02

Total

Price (excluding tax)

2019

Percentage to

Sales volume total sales volume

355.82 215.23

Table 3

Results of Each Segment

Coal

Power

Railway

Port

Shipping

Coal chemical

2020 RMB million

2019 RMB millionRevenue from external customers Inter-segment revenueSub-total of segment revenue Segment cost of sales Segment profit/(loss) from operations

Segment total assets Segment total liabilities

169,197 20,832

190,029 (153,373) 29,832

As at 31

December 2020

RMB million

222,984 (106,897)

173,471 23,925

197,396 (157,224) 33,188

As at 31 December 2019

RMB million

224,344 (108,449)

Table 6

Power Business

3.1

RMB100 million

ChangePrice (excluding tax)

Sales volume %

Price (excluding tax)

million tonnes

RMB/tonne

million tonnes

RMB/tonne

446.4

100.0

410

447.1

100.0

426

(0.2) (3.8)

430.1

96.3

419

431.0

96.4

434

(0.2) (3.5)

190.0

42.5

380

193.3

43.2

392

(1.7) (3.1)

163.5

36.6

465

176.9

39.6

478

(7.6) (2.7)

76.6

17.2

418

60.8

13.6

440

26.0 (5.0)

16.3

3.7

176

16.1

3.6

204

1.2 (13.7)

394.0 47.7

4.7

88.2 10.7

1.1

416 374 322

389.9 53.0

87.2 11.9

432 387 363

1.1 (3.7)

(10.0) (3.4)

4.2

0.9

11.9 (11.3)

Power plants

Power grid

Zhunge'er PowerNorth China Power GridShendong Power

Northwest/North China/

Shaanxi Provincial Local Power GridCangdong Power Dingzhou Power Taishan Power Huizhou Thermal Fujian Energy Jinjie Energy Shouguang Power Jiujiang Power

North China Power Grid North China Power Grid South China Power Grid South China Power Grid East China Power Grid North China Power Grid North China Power Grid Central China Power Grid

Sichuan Energy (coal-fired Sichuan Power Grid power)

Mengjin PowerCentral China Power Grid

Liuzhou Power EMM Indonesia

Guangxi Power Grid PLN

Total of coal-fired power plants/weighted averageOther power plants

Beijing Gas Power Sichuan Energy (hydropower)North China Power Grid Sichuan Provincial Local Power Grid

2020 RMB million

49,486 (38,729) 7,976

As at 31 December 2020

RMB million

150,299 (110,040)

LocationGross power generation 100 million kWhTotal power output dispatch 100 million kWh

Inner Mongolia Inner Mongolia

32.9

223.7

Hebei Hebei Guangdong Guangdong Fujian Shaanxi Shandong Jiangxi

114.2

177.2

39.5

143.4

136.5

102.1

103.3

Sichuan

39.6

Henan

44.1

Guangxi Indonesia

32.0 15.8

1,318.5

Beijing Sichuan

38.4 6.4

Table 13

Coal Resources Reserve

Mines

December 2020 100 million tonnes

Shendong Mines Zhunge'er Mines Shengli Mines Baorixile Mines Baotou Mines

Xinjie Mines (under exploration rights permit to Taigemiao North Area) Others

TotalCoal resources (under PRC standard)As at 31

As at 31

December 2019 100 million tonnes

2019 RMB million

2020 RMB million

49,348

52,484

138

52,626 (40,540) 9,779

As at 31 December 2019

RMB million

148,754 (109,730)

Average utilization hours hours

29.9

4,482

207.0

3,914

108.7

4,532

105.6

4,533

166.4

3,462

35.8

5,992

137.4

5,104

124.8

5,687

97.2

5,053

36.0

30.4 13.7

41.2

98.6

5,163 3,139 3,672 4,572 5,266

1,232.7

4,412

37.5 6.3

4,045 5,124

Recoverable reserve (under PRC standard)As at 31

Change December 2020 100 million

142

2019 RMB million

5,804 32,919

6,464 33,237

38,723 (20,304) 16,636

As at 31 December 2020

RMB million

39,701 (20,641) 17,360

As at 31 December 2019

RMB million

124,113 (50,470)

128,578 (56,774)

2020 RMB million

974 5,385

6,359 5,926

(3,314) (3,064)

2,678 2,536

As at 31 December 2020

RMB million

21,619 (6,629)

As at 31 December 2019

Standard coal consumption for power outpour dispatch

Increase/

Total installed capacity as at 31 December 2019

(decrease) Total installedPower tariff RMB/mWh

in installed capacity for 2020

g/kWh

390

219

660

324

290

5,814

(100)

278 334 304 316 366

278

321

311

294

312

305

298

363 382 301 309 523

343

277

347

369

322

318

2,000 1,260 1,200 700 300

2,020

2,400

2,810

5,090

2,520

660

- - 30 - - 1,320 - - - - - -

307

327

29,954

1,250

192 -

563 232

950 125

Marketable reserve (under JORC standard)

As at 31

tonnes

December 2019 100 million tonnes

As at 31

Change December 2020 100 million

2019 RMB million

652 5,274

RMB million

22,197 (8,285)

Table 7

Equitycapacity as at 31 December 2020

Installed capacity as at 31 December 2020

660 381

5,714 5,228

2,520 1,285

2,520 1,021

5,120 4,096

660 660

2,810 1,459

3,720 2,400

2,020 1,212

2,000 2,000

1,260 604

1,200 612

700 490

300 210

31,204 21,658

- -

950 950

125 48

As at 31

tonnes

December 2019 100 million tonnes

Change

156.0

158.1

(1.3)

88.9

90.5

(1.8)

44.4

46.3 (4.1)

37.9

38.5

(1.6)

30.2

30.8

(1.9)

19.5

20.1 (3.0)

19.9

20.1

(1.0)

13.5

13.7

(1.5)

1.8

2.0 (10.0)

13.5

13.7

(1.5)

11.3

11.5

(1.7)

11.6

11.8 (1.7)

2020 RMB million

3,112 (2,755)

1,747 1,365

As at

209

2019 RMB million

3,297 (2,913)

1,813 1,484

As at

232

2020 RMB million

5,165 (4,675)

5,165

As at

259

2019 RMB million

5,327 (4,693)

5,327

As at

311

RMB million

Unallocated items	Eliminations	Total
2020	2020	2020
RMB million	RMB million
-	233,263
(61,464)	-
(61,464)	233,263
60,804	(162,374)
(660)	57,977
As at	As at

2019 RMB million

1,028 825

1,660 1,153

1,853 (28)

2,813

(33)

1,047

1,960

As at

31 December 2020 31 December 2019 31 December 2020 31 December 2019 31 December 2020 31 December 2019

RMB million

6,410 (257)

6,516 (397)

Cost of Sales of Coal Segment

Cost of coal purchased Materials, fuel and power Personnel expenses Repairs and maintenance Depreciation and amortization Cost of transportation

Other costs

Taxes and surcharges

Total cost of salesRMB million

2019 RMB million

2019RMB million241,871

(65,215)

(65,215) 241,871

64,129 (164,979)

(1,086) 64,280

8,938 (2,950)

RMB million

9,202 (3,346)

424,257 (154,901)

Table 8 Cost of Sales of Power Segment

2020 RMB million

RMB million

449,806 (188,866)

31 December 2020	31 December 2020
RMB million	RMB million
(395,716)	562,904
298,827	(133,317)

As at 31 December 2019

RMB million

(426,314) 332,982

RMB million563,083(142,865)

48,742

2019 RMB millionChange%

53,831 (9.5)

7,897

7,458 5.9

8,119

7,686 5.6

2,756

2,680 2.8

5,318

4,961 7.2

51,557

52,497 (1.8)

19,453

19,312 0.7

9,531

8,799 8.3

153,373

157,224 (2.4)

RMB million million kWh RMB/mWh RMB million million kWh RMB/mWhCost of power output dispatch

Materials, fuel and power Personnel expenses Repairs and Maintenance Depreciation and amortization Others

Other operating costs Taxes and surcharges

Total cost of salesCost

2020 Power output dispatch 100

Unit cost

Cost

24,827

35,246

1,276.5

276.1 39,785 194.5 28,739

2,307

2,086

4,911

1,115

1,276.5

18.1 2,371 1,440.4 16.3 1,956 1,440.4 38.5 5,319 1,440.4 8.7 1,400 1,440.4

2,852 51 631 704

2019 Power output dispatch 100

Unit cost

Change in unit cost

1,440.4 1,440.4

276.2 (0.0)

199.5 (2.5)

16.5 9.7

13.6 19.9

36.9 4.3

9.7

(10.3)

38,729

40,540

Table 14

Table 11 Cost of Sales of

Transportation and Coal Chemical Segments

Cost of internal transportation business Materials, fuel and power

Personnel expenses Repairs and Maintenance Depreciation and amortization External transportation charges Others

Cost of external transportation business Cost of prime business

Other operating costs Taxes and surcharges

Total cost of sales

Railway

Port

Shipping

Coal Chemical

2020 RMB million

2019 RMB million

Change

2020 RMB million

2019 RMB million

Change

2020 RMB million

2019 RMB million

Change

2020 RMB million

2019 RMB million

Change

15,871 2,372 4,185

16,087 (1.3)

2,459 (3.5)

4,043 3.5

2,463

2,493 (1.2)

365

366 (0.3)

344

352 (2.3)

316

334 (5.4)

736 /

791 (7.0)

702

254

2,717

410

650 8.0 271 (6.3) 2,764 (1.7) 113 262.8

187

1,156

1,290 (10.4)

231

255 (9.4)

1 200.0

22 (63.6)

113

114 (0.9)

671

752 (10.8)

130

146 (11.0)

1,591 / /

1,620 (1.8)

/ / 3

/ / 166.7

2,475

2,244 10.3

311

333 (6.6)

298

387 (23.0)

811 /

852 (4.8)

51 /

176 /

/ (71.0)

3,946

609

120

3,992 (1.2) 549 10.9 152 (21.1)

3,231

3,642 (11.3)

3,917

3,879 1.0

665

913 (27.2)

1,501

1,151 30.4

2,976

3,013 (1.2)

18,847

19,100 (1.3)

1,036 421

1,119 (7.4)

422 (0.2)

20,304

20,641

(1.6)

3,314

3,064

8.2

2,755

2,913

(5.4)

4,675

4,693

(0.4)

Table15 Railway Cargo Transportation Turnover

Seaborne Coal at Ports

Self-owned ports

Huanghua Port

Shenhua Tianjin Coal Dock

Third-party portsTotal seaborne coal sales

2020 million tonnes

2019 million tonnes

239.1

193.9 45.2

29.0

268.1

Table 16

Shipping Volume

0.5

- -

0.3

- /

0.0

64.2

0.0

The Group's internal customers External customers

Total of shipping volume

4.8

/Change

232.1 3.0

187.1 3.6

45.0 0.4

37.6 (22.9)

269.7 (0.6)

2020 million tonnes

2019 million tonnesChange%

43.0 70.0

44.7 (3.8)

65.1 7.5

113.0

109.8 2.9

Self-owned railways

Shenshuo Railway Shuohuang-Huangwan Railway Dazhun Railway

Baoshen Railway Ganquan Railway Bazhun Railway Zhunchi Railway Tahan Railway Huangda Railway

State owned railways

Total

2020 billion tonne km

2019 billion tonne km

Change

285.7

285.5 0.1

54.1

52.4 3.2

183.4

176.8 3.7

26.9

31.7 (15.1)

8.6

9.1 (5.5)

1.1

1.4 (21.4)

1.7

3.4 (50.0)

9.9

10.7 (7.5)

- -

- /

44.9

50.5 (11.1)

330.6

336.0 (1.6)

296.8

299.9

(1.0)

144.2

146.8

(1.8)

77.3

80.2

(3.6)

港口 PORT

D1.

黃驊港

Huanghua Port

D2. 神華天津煤碼頭

Shenhua Tianjin Coal Dock

D3. 珠海煤碼頭

Zhuhai Coal Dock

註： ① 於2020年12月31日之分佈圖，僅做示意 ② 以審圖號GS(2016)1600號地圖為基礎編制

Note: ① This map as at 31 December 2020 is for illustrative purpose only. ② Prepared on the basis of the map with the approval number of GS(2016)1600.

圖例 Legend

省界線

Provincial Boundary

國有或地方鐵路線

State-owned or Local Railway

自有運營鐵路

Self-owned Railway (in operation)

自有礦區

Self-owned mines

准班輪航線

Quasi-liner Shipping Route

Equity structure diagram

Major Controlling Companies

Major BranchesCoal Sales

100.00% Shenhua Shendong Coal Group Co., Ltd.

57.76% Shenhua Zhunge'er Energy Co., Ltd.

62.82% Shenhua Beidian Shengli Energy Co., Ltd.

70.00% Shenhua Xinjie Energy Co., Ltd.

100.00% China Energy Baotou Energy Co., Ltd.

56.61% China Energy Baorixile Energy Co., Ltd.

50.10% China Energy Yulin Shenhua Energy Co., Ltd.

60.00% Shenhua Bayannur Energy Co., Ltd. Shenhua Australia Holdings Pty Limited

Shendong Coal Branch

Ha'erwusu Opencast Mine

100.00% China Energy Baoshen Railway Group Co., Ltd.
100.00%
China Energy Trading Group Limited
5.00%
China National Coal Exchange Co., Ltd.
88.16% Shenhua Baoshen Railway Co., Ltd.
88.46% Shenhua Ganquan Railway Co., Ltd.
90.00% Shenhua Xinzhun Railway Co., Ltd.
52.72% China Energy Shuohuang Railway Development Co., Ltd.
Major Controlling Companies
Major associated companies12.5% Haoji Railway Co., Ltd.
Port
- 51.00% Shenhua Zhonghai Shipping Co., Ltd.
100.00%
Major Branches
(directly and indirectly)
40.00%China Energy Finance Co., Ltd.
*The equity structure diagram of China Shenhua (including major branches/subsidiaries) as at 31 December 2020 is for illustrative purpose only.
Upon the cancellation of 21,100,500 on 8 March 2021, the total issued share of the Company decreased to 19,868,519,955 Shares. Investors are advised to pay attention to changes in shareholdings.
75.00% Huangda Railway Co., Ltd.
85.00% Shenhua Zhunchi Railway Company Limited
100.00% Shenhua Railway Equipment Co., Ltd.
Shenshuo Railway Branch
Track Mechanical Maintenance Branch

70.00% China Energy Huanghua Harbour Administration Co., Ltd.
55.00% Shenhua Tianjin Coal Dock Co., Ltd.
55.00% China Energy Zhuhai Harbour Administration Co., Ltd.
- 100.00% Shenhua Logistics Group Corporation Limited
- 100.00% Shenhua Information Technology Co., Ltd.
- 100.00% Shenhua Geological Exploration Co., Ltd.
- 100.00% China Shenhua Overseas Development and Investment Co., Ltd.
- 100.00% Shenhua International (Hong Kong) Limited
- 100.00% China Energy Zhunneng Group Co., Ltd.
- 51.00% Shenhua (Tianjin) Financial Leasing Co., Ltd.
- 100.00% Shenhua Science and Technology Institute Co., Ltd.
100.00%

Section V Directors' Report

I. DISCUSSION AND ANALYSIS ON OPERATION RESULTS

In 2020, in the face of the complicated domestic and international environment and the severe impact of the COVID-19 pandemic, the Group actively responded, precisely implemented measures, enhanced the supply-sales channels, and gave full play to the integrated operation advantages to better achieve the annual operation targets.

The Group recorded a profit before tax for the year of RMB59,362 million (2019: RMB64,922 million), representing a year-on-year decrease of 8.6%; a profit for the year attributable to equity holders of the Company of RMB35,849 million (2019: RMB41,707 million), and basic earnings per share of RMB1.803/share (2019: RMB2.097/share), representing a year-on-year decrease of 14.0%.

Actual	Actual
amount for	Target for	Proportion of	amount for	Year-on-year
2020	2020	Completion	2019	change
%	%
Commercial coal production	100 million tonnes	2.916	2.68	108.8	2.827	3.1
Coal sales	100 million tonnes	4.464	4.03	110.8	4.471	(0.2)
Power generation	100 million kWh	1,363.3	1,451	94.0	1,535.5	(11.2)
Revenue	RMB100 million	2,332.63	2,163	107.8	2,418.71	(3.6)
Costs	RMB100 million	1,623.74	1,484	109.4	1,649.79	(1.6)
Sales, General and Administration,	RMB100 million	114.44	143	80.0	126.92	(9.8)
R&D fee and net finance costs
Changes in unit production costs	/	Year-on-year	Year-on-year	/	Year-on-year	/
of self-produced coal	increase of 3.6%	increase of	increase of 16.1%
approximately 8%

Section VDirectors' Report (Continued)

II.

MAJOR OPERATION RESULTS DURING THE REPORTING PERIOD

(I)Analysis on principal business

Changes in the Major Items in the Consolidated Statement of Profit or Loss and

Consolidated Statement of Cash Flows

Unit: RMB million

Items	2020	2019	Change
%
Revenue	233,263	241,871	(3.6)
Cost of sales	(162,374)	(164,979)	(1.6)
Research and development costs	(1,362)	(940)	44.9
Other gains and losses	(194)	(2)	9,600.0
Loss allowances, net of reversal	(524)	(139)	277.0
Other expenses	(1,090)	(278)	292.1
Interest income	1,684	1,170	43.9
Finance costs	(2,263)	(3,294)	(31.3)
Share of results of associates	947	433	118.7
Income tax expense	(15,378)	(15,145)	1.5
Net cash inflows from operating
activities	81,289	63,106	28.8
Of which: Net cash inflows from
operating activities of Shenhua
Finance Company Note	18,599	(3,662)	(607.9)
Net cash inflows from operating
activities excluding the effect of
Shenhua Finance Company	62,690	66,768	(6.1)
Net cash inflows/(outflows) in investing
activities	32,048	(46,307)	(169.2)
Net cash outflows in financing activities	(42,079)	(37,172)	13.2

Note:As Finance Company provides financial services including deposits and loans for entities other than the Group, the item represents the cash flows of deposits and loans and interest, fees and commission generated from this business from January to August 2020.

1. Revenue and costs (1) Factors affecting the revenue

The revenue of the Group in 2020 recorded a year-on-year decrease. The main reasons for the decrease are:

Ǻ The year-on-year decrease of 3.8% in the Group's average sales price of coal resulted in the decrease in revenue from coal sales;
ǻ Change in consolidation scope of financial statement of the Company and year-on-year decrease in power output dispatch and average power output price resulted in the decrease in revenue from sale of powerj(i) the revenue in January 2019 including the revenue generated from the power assets invested by the Company in the transaction of establishing Beijing GD Power is no longer consolidated to the consolidated financial statement of the Company since February 2019; (ii) except the above factor, year-on-year decrease of 2.6% in power output dispatch and decrease of 1.2% in average power output price of the Group in 2020 on a comparative basis.

Change for 2020 compared

(III) Power generation

1. Gross power generation

2. Total power output dispatch

(IV) Coal chemical

1. Sales of polyethylene

2. Sales of polypropylene



(I)	Coal
1. Commercial coal production
2. Coal sales
Of which: Self-produced coal
Purchased coal
(II)	Transportation
1. Turnover of self-owned
railway
2. Loading volume at
Huanghua Port
3. Loading volume at Shenhua
Tianjin Coal Dock
4. Shipping volume
5. Shipment turnover

Major operating	with that
indicators	Unit	2020	2019	for 2019	2018
%
Million tonnes	291.6	282.7	3.1	296.6
Million tonnes	446.4	447.1	(0.2)	460.9
Million tonnes	296.0	284.8	3.9	300.7
Million tonnes	150.4	162.3	(7.3)	160.2
Billion tonne km	285.7	285.5	0.1	283.9
Million tonnes	203.8	199.7	2.1	/
Million tonnes	45.4	44.7	1.6	/
Million tonnes	113.0	109.8	2.9	103.6
Billion tonne	93.0	89.6	3.8	89.9
nautical miles
Billion kWh	136.33	153.55	(11.2)	285.32
Billion kWh	127.65	144.04	(11.4)	267.59
Thousand tonnes	356.9	319.0	11.9	315.4
Thousand tonnes	331.2	302.3	9.6	297.7

Note: According to the comparative basis, the power generation and power output dispatch of the Group in 2019 were 139.78 billion kWh and 131.04 billion kWh, respectively.

(2) Analysis of costs

Unit: RMB million

Percentage	Percentage
to cost of	to cost of	Year-on-year
Amount for	sales for	Amount for	sales for	change in
Breakdown of cost items	2020	2020	2019	2019	amount
%	%	%
Cost of coal purchased	48,742	30.0	53,831	32.6	(9.5)
Raw materials, fuel and power	19,501	12.0	19,863	12.0	(1.8)
Personnel expenses	16,066	9.9	15,585	9.5	3.1
Depreciation and amortisation	16,647	10.3	16,798	10.2	(0.9)
Repairs and maintenance	9,124	5.6	9,491	5.8	(3.9)
Transportation charges	15,076	9.3	16,155	9.8	(6.7)
Tax and surcharge	10,926	6.7	10,299	6.2	6.1
Others	26,292	16.2	22,957	13.9	14.5
Total cost of sales	162,374	100.0	164,979	100.0	(1.6)

Among the cost of sales of the Group in 2020:

Ǻ Main reason for the year-on-year decrease in the cost of coal purchasedj decreases in sales volume of coal purchased and unit purchase cost of the Group;
ǻ Main reason for the year-on-year decrease in the transportation charges: decreases in volume of coal transported by state-owned railways and cost of vessel lease;
Ǽ Main reason for the increase in tax and surcharges over the same period: the increase of resource tax rate in major coal district of the Group, resulting in the increase of resource tax;
ǽ Main reason for the year-on-year increase in other costs: the Indonesia Java No. 7 Power Generating Project was audited based on the service concession arrangement, resulting in the increase in operation cost of single unit business and increase of the relevant cost of port dredging business.

Directors' Report (Continued)

Unit: RMB million

Cost of sales by business segment (before eliminations on consolidation)

Business segment

Items of costs

2020

2019

Change %

CoalPowerRailwayPortShippingCoal chemicalCost of coal purchased, raw materials, fuel and power, personnel expenses, repairs and maintenance, depreciation and amortisation, transportation charges, other costs, and taxes and surcharges

Raw materials, fuel and power, personnel expenses, repairs and maintenance, depreciation and amortisation, other costs, other operating costs, and taxes and surcharges

Cost of internal transportation business (raw materials, fuel and power, personnel expenses, repairs and maintenance, depreciation and amortisation, external transportation charges, and other expenses), external transportation charges, other operating costs, and taxes and surcharges

Cost of internal transportation business (raw materials, fuel and power, personnel expenses, repairs and maintenance, depreciation and amortisation, and other expenses), external transportation charges, other operating costs, and taxes and surcharges

Raw materials, fuel and power, personnel expenses, repairs and maintenance, depreciation and amortisation, other expenses, other operating costs, and taxes and surcharges

153,373

38,729

20,304

3,314

2,755

4,675

157,224 (2.4)

40,540 (4.5)

20,641 (1.6)

3,064 8.2

2,913 (5.4)

4,693 (0.4)

(3) Major Business segments

The major business model of the Group is the integrated coal industry chain: i.e. coal production ÷ coal transportation (railway, port and shipping) ÷ conversion of coal (power and coal chemical), and there are business intercourses between each segment. The percentages of profits (before elimination on consolidation) from operations of coal, power, transportation and coal chemical segments of the Group was 52%,14%, 34% and 0% in 2020 respectively (2019: 52%, 15%, 32% and 1%).

Major business segments in 2020 (before eliminations on consolidation)

Business segment

Revenue RMB million

Cost of sales RMB millionGross profit margin %Increase/ decrease in revenue as compared with previous year %Increase/ decrease in cost of sales as compared with previous year %

Increase/ decrease in gross profit margin as compared with previous year

Coal

190,029

(153,373)

19.3

(3.7)

(2.4) Decreased by
1.1 percentage points
Power
49,486
(38,729)
21.7
(6.0)
(4.5) Decreased by
1.3 percentage points
Railway
38,723
(20,304)
47.6
(2.5)
(1.6) Decreased by
0.4 percentage point
Port
6,359
(3,314)
47.9
7.3
8.2 Decreased by
0.4 percentage point
Shipping
3,112
(2,755)
11.5
(5.6)
(5.4) Decreased by
0.1 percentage point
Coal chemical
5,165
(4,675)
9.5
(3.0)
(0.4) Decreased by

2.4 percentage points

(4) Analysis of the production and sales volume

Increase/ decrease in

Year-on-year	inventory
increase/	Year-on-year	as compared
Inventory	decrease in	increase/	with the
production	decrease in	beginning
volume	sales volume	of the year
%	%	%
3.1	(0.2)	(13.6)
(11.2)	(11.4)	/

Major products

UnitProduction Sales volumeat the end of the period %

Coal Powermillion tonnes billion kWh

291.6 136.33

446.4 127.65

19.7

(5) Major customers
In 2020, the total revenue from the top five customers of the Group amounted to RMB87,857 million, accounting for 37.7% of the revenue of the Group, including the revenue of the Group from its largest customer of RMB65,260 million, accounting for 28.0%of the revenue of the Group. The largest customer of the Group was China Energy and its subsidiaries, the controlling shareholder of the Company. The Group mainly sells coal products and provides coal transportation service to the company.
Except for the above, as far as the Board of the Company is aware, none of the Directors of the Company, their close associates or shareholders holding more than 5% of shares of the Company has any interest in the top five customers of the Group. The Group has maintained long-term cooperative relationship with the top five customers. The Company is of the view that such cooperative relationship would not cause material risk to the business of the Group.
(6) Major suppliers
In 2020, the total procurement from the top five suppliers of the Group amounted to RMB22,436 million, accounting for 17.5% (less than 30%) of the total procurement for the year, among which, the procurement from the largest supplier amounted to RMB10,725 million, representing 8.3% of the total procurement for the year.

2. Other items of income statement

(1) Other gains and losses were aggregated as losses, the main reasons for increase year-on-year: the relevant accumulated fair value gains were realized and transferred for the recovery of wealth management products of banks upon maturity.
(2) Main reasons for year-on-year increase of loss allowances: provision for bad debt loss for some coal sales receivable and the receivables.
(3) Main reasons for year-on-year increase of other expenses: expenditure related to rectification of certain coal mines has increased; debt guarantee losses and loss on write-off of fixed assets were expected to increase during the reporting period as compared with the same period last year.
(4) Main reasons for the year-on-year increase of interest income: Deconsolidation of Finance Company, the interest income deposited by the Group in the Finance Company will no longer be offset on a consolidated basis, and an increase in the average balance of deposits with financial institutions other than Finance Company.
(5) Main reasons for the year-on-year decrease in finance costs: lowered interest rate of loan market, and the repayment of matured bonds during the reporting period.
(6) The main reason for year-on-year increase of profit and loss attributable to associates: the year-on-year increase in the Company's investment income from Beijing GD Power and other associates.
(7) Main reasons for year-on-year increase of income tax: Since some subsidiaries of the Group enjoy the preferential income tax rate of 15% for the Western Development, in 2020, such subsidiaries will calculate the annual income tax at the income tax rate of 25%. This increased the Group's average income tax rate to 25.9%, representing a year-on-year increase of 2.6 percentage points.

Section V	Directors' Report (Continued)
3.	Research and development expenditure
Expensed research and development expenditure in the period (RMB million)	1,362
Capitalised research and development expenditure in the period (RMB million)	787
Total research and development expenditure (RMB million)	2,149
Ratio of capitalised research and development expenditure (%)	36.6
Percentage of total research and development expenditure to revenue (%)	0.9
Number of research and development personnel in the Company (number of person)	2,904
The ratio of research and development personnel to the total number of persons in the Company (%)	3.8
4.

In 2020, investment in the research and development of the Group amounted to RMB2,149 million (2019: RMB1,245 million), which is mainly utilized in development of the technology and equipment integration of intelligent and mechanised mining with massive in Shendong Mines, key technology development and demonstration project for open-pit coal mine underground reservoir; 150,000 tonnes/year level whole-flow demonstration project of capture and storage of CO2; research and application of railway intelligent loading and conveying system, the moving block expansion test and engineering application of heavy-haul railway, the intelligent driving technology of AC drive freight electric locomotive, research and development of technology and equipment of condition maintenance of freight cars.

Cash flow

The Group formulated capital management policies that aimed to achieve maximized interests for the shareholders and maintained a sound capital structure as well as reduced the costs of capital under the premise of safeguarding the operation on an on-going basis, and the capital was invested in accordance with the policy of the Company.

(1) Net cash generated from operating activities: net cash generated in 2020 recorded a year-on-year increase of 28.8%, of which, net cash inflows from operating activities of Finance Company was RMB18,599 million (2019: RMB3,662 million used in operating activities), representing a year-on-year change of 607.9%, which was mainly attributable to the increase in deposits accepted by Finance Company for the period from January to August 2020 and the corresponding increase in net cash inflow, while the loans issued decreased year on year. After excluding the effects of Finance Company, net cash of operating activities of the Group represented a year-on-year decrease of 6.1%, which was mainly attributable to the decrease in cash flows due to decreased income.
(2) Net cash inflows in investing activities: net cash inflows of RMB32,048 million in 2020 recorded a year-on-year change of 169.2% (2019: net outflow of RMB46,307 million), which was mainly attributable to the recovery of due wealth management products, and the year-on-year decrease in cash paid for investment during the reporting period.
(3) Net cash used in financing activities: net cash outflows in 2020 recorded a year-on-year increase of 13.2%, which was mainly attributable to the increase in the percentage of dividends payable by the Company, and the increase in final dividend for 2019 as compared to 2018.

Section VDirectors' Report (Continued)

(II)Analysis on Assets and Liabilities

Assets and Liabilities

Items

Unit: RMB million

Amount at the end of the yearPercentage of total assets at the end of the year %

Amount at the end of the previous yearPercentage of total assets at the end of the previous year %Change of the amount at the end of the year compared to the end of the previous year %

Main reasons for changesConstruction in progressExploration and evaluation assets

Interests in associatesOther non-current assetsInventoriesAccounts and bills receivables

39,845

7.1

34,495

6.1

15.5 The Group pushed forward construction in progress, such as the construction of Huangda Railway, Sichuan Jiangyou Coal Reserves Power Integration Project and Hunan Yongzhou Phase I Project
0
0.0
484
0.1
(100.0) Exploitation rights of
Watermark Open-pit Mine Project in Australia was made full provision for impairment
49,556
8.8
40,539
7.2
22.2 Due to Deconsolidation of
Finance Company's financial statements, and the Company recognized the long-term equity investment according to the equity method in the Finance Company
35,890
6.4
54,006
9.6
(33.5) Due to Deconsolidation of Finance Company's financial statements, the loans granted by Finance Company and treasury bonds purchased by Finance Company were no longer included in the Group
12,750
2.3
12,053
2.1
5.8 Increase of spare tools and spare parts related to coal mine production
11,759
2.1
10,436
1.9
12.7 The notes receivable of power generation and coal sales business increased

Directors' Report (Continued)

Items

Unit: RMB million

Amount at the end of the yearPercentage of total assets at the end of the year %

Amount at the end of the previous yearPercentage of total assets at the end of the previous year %Change of the amount at the end of the year compared to the end of the previous year %

Main reasons for changesPrepaid expenses and other current assets

Restricted bank depositsTime deposits with original maturity over three months

Cash and cash equivalentsAssets classified as held for sale

Short-term borrowings

17,480

3.1

86,524

15.4

(79.8) Due to Deconsolidation of
Finance Company's financial statements, the short-term loans and advances of the Finance Company were no longer included in the Group, as well as recovery of interbank certificates of deposits upon maturity
3,391
0.6
7,664
1.4
(55.8) Due to Deconsolidation of
Finance Company's financial statements, the legal deposit reserves deposited by Finance Company with the Central Bank were no longer included in the Group
11,186
2.0
1,990
0.4
462.1 Increase in the Group's deposits with Finance Company
112,880
20.1
41,827
7.4
169.9 Recovery of wealth management products and the effect of deconsolidation of Finance Company's financial statements

2,783

0.5

0.0

N/A

8,847

1.6

4,172

0.7

112.1

Shendong Power signed the Equity Transfer Contract with China Energy Guoyuan Power Co., Ltd. ("Guoyuan Power"), which transferred the 100% equity of China Energy Shaanxi Fuping Thermal Power Co., Ltd. ("Fuping Thermal Power") to Guoyuan Power, which is mainly the related assets of Fuping Thermal Power Due to Deconsolidation of Finance Company's financial statements, the short-term borrowings of the Group borrowed from Finance Company were no longer offset;

Section VDirectors' Report (Continued)

Unit: RMB million

Change of the amount

Items

Amount at the end of the yearPercentage of total assets at the end of the year %

Amount at the end of the previous yearPercentage of total assets at the end of the previous year %at the end of the year compared to the end of the previous year %

Main reasons for changesAccounts and bills payablesAccrued expenses and other payables

28,980

5.1

25,043

4.4

15.7 Increase in engineering, equipment and material payments due for coal mines and power plants under construction
18,949
3.4
53,578
9.5
(64.6) Due to Deconsolidation of
Finance Company's financial statements, the deposits it accepted were no longer included in the Group.
Bonds due within 1 yearLong-term liabilities due within 1 year
Income tax payableLong-term borrowings
0
0.0
3,488
0.6
(100.0) The USD-denominated bonds classified as bonds due within one year in 2019 were due and repaid in January 2020
689
0.1
1,493
0.3
(53.9) Some of the matters involved in the estimated liabilities were solved, and the relevant accounts payable decreased
6,313
1.1
2,727
0.5
131.5 In 2020, the enterprise income tax of some subsidiaries of the Group that originally enjoyed the preferential tax rate of 15% for Western Development will be calculated at the rate of 25%
50,251
8.9
36,943
6.6
36.0 Due to Deconsolidation of

Finance Company's financial statements, the long-term borrowings of the Group borrowed from Finance Company were no longer consolidated and offset

Unit: RMB million

Items

Amount at the end of the yearPercentage of total assets at the end of the year %

Amount at the end of the previous yearPercentage of total assets at the end of the previous year %Change of the amount at the end of the year compared to the end of the previous year %

Main reasons for changesLong-term payables

2,661

0.5

2,201

0.4

20.9 Due to the continuous loss of
Liangyi Railway Company, Shenbao Energy is expected to repay the principal and interest on behalf of Liangyi Railway Company; the new fixed assets for financing leasing of the railway segment
Accrued reclamation obligations
6,169
1.1
3,372
0.6
82.9 Increase in mine environment restoration fund accrued by the Company as in accordance with the relevant requirements of the local government

2. Restrictions on main assets
The Group is free from seizure and detention of main assets. As at the end of the reporting period, the balance of the restricted assets of the Group was RMB5,178 million, among which, security deposits for bank acceptance bills, relevant deposits related to port operations, deposit for letter of credit and mine geographical environment governance recovery fund amounted to RMB3,391 million in total; Other restricted assets mainly consisted of fixed assets, intangible assets and various deposits secured and guaranteed for acquiring bank borrowings.
3. Distributable reserves
As of 31 December 2020, the distributable reserves of the Company were RMB183,374 million.

(III) Operation results by business segment

1. Coal segment (1) Production, operation and construction

The majority of the coal products produced and sold by the Group were thermal coal. In 2020, the Group overcame the impact of COVID-19 pandemic, took multiple measures to guarantee coal production and market supply, and realized a commodity coal output of 291.6 million tonnes (2019: 282.7 million tonnes), representing a year-on-year increase of 3.1%. The total footage of advancing tunnels at underground mines was 426 thousand meters (2019: 356 thousand meters), representing an increase of 70 thousand meters year on year, of which, the total footage of advancing tunnels at Shendong Mines was 377 thousand meters.

We strive to improve the quality and efficiency of coal business. The coal slurry reduction process was promoted in coal preparation plants, and the structure of coal products was continuously optimized. The average calorific value of self-produced commercial coal increased by 20 kcal/kg compared with the previous year.

We promote the parallel development of coal mining and environmental protection. We will continue to optimize production processes, accelerate technological transformation, and achieve remarkable results in soil pollution control and ecological restoration. There were 20 national or provincial-level green mines, representing an increase of 8 compared with the previous year; the reclamation rate of Zhunge'er Mines reached 100%, the vegetation coverage was over 80%, and the soil erosion control rate reached 80%.

Great progress has been made in intelligent coal mining. In Shendong Mines, 10 intelligent fully mechanised mining surface, 3 intelligent demonstration projects and 3 kinds of intelligent comprehensive mining models have been set up. Yujialiang Mines realizes transparent and intelligent coal mining in medium-thick and thin coal seams; Shigetai Mines realizes intelligent mining in thin coal seams and other heights; Jinjie Coal Mine implements intelligent coal cutting in prediction.

We will accelerate the application for mining land and access to mining resources to ensure the continuity and stability of coal production. Zhunge'er Mines has obtained the blank area mining right between Ha'erwusu and Heidaigou Open-pit Mine, and the processing of resource mining license for the expanded area of Wanli No.1 Mines has been steadily advanced.

In 2020, the Group's coal exploration expenses (which were incurred before the conclusion of feasibility study and represented the expenses related to exploration and evaluation of coal resources) amounted to approximately RMB22 million (2019: RMB12 million), which was mainly attributable to the relevant expenses of Watermark Project in Australia. The Group's relevant capital expenditure of mining development and exploration amounted to approximately RMB3,152 million (2019: RMB2,175 million), which was mainly attributable to the acquisition of fixed assets and engineering construction expenditures in relation to coal mining for Shendong Mines, Shengli Mines, Zhungeer Mines, and the expenditure on the preliminary development of Taigemiao District of Xinjie Mining Area.

The Group has independently operated railway collection and distribution channels. These channels are centralised and distributed in the rim of self-owned core mines, and can transport coal in the core mines.

(2) Sales of coal

The coal sold by the Group is mainly self-produced coal. In order to fulfill the needs of customers and adequately make use of railways transportation, the Group also purchased the coal from third parties in the surrounding areas of the self-owned mines and railways and produced different kinds and levels of coal products and sold them to external customers. The Group implemented specialised division management. Production enterprises are responsible for production of coal, and the sales group of the Company is mainly responsible for sales of coal. Customers are involved in different industries, such as power, metallurgy, chemical and construction materials.

In 2020, the Group overcame the negative impact of periodical imbalance of demand and supply in the coal market and substantial fluctuation of coal price, further improved the sales network, enriched the logistics modes, and ensured the stable operation of production-transportation-sales integration. During the year, sales volume of coal of the Group reached 446.4 million tonnes (2019: 447.1 million tonnes), representing a year-on-year decrease of 0.2%. Sales volume of coal under the annual long-term contracts was 190.0 million tonnes, accounting for 42.5% of the domestic sales volume of coal of the Group, of which 144.5 million tonnes of coal were sold to 15 external customers who had signed the three-year (2019-2021) thermal coal annual long-term contract and accounts for 76.1% of the annual long-term contract sales volume. The sales volume for the top five external coal customers was 153.3 million tonnes, accounting for 34.3% of the total coal sales volume; in particular, the sales volume of China Energy, the largest customer, was 133.1 million, representing 29.8% of the total coal sales volume. The top five external coal customers are mainly electrical, chemical and coal trading companies. The domestic seaborne coal sales for the year reached 267.4 million tonnes, accounting for 35.7% of 750 million tonnes of the seaborne coal volume of major ports in China.

The Group implemented three unified pricing mechanisms, namely, the pricing mechanisms for annual long-term contracts, monthly long-term contracts and spot commodity, for all internal and external customers. In 2020, the average coal sales price of the Group was RMB410/tonne (tax exclusive) (2019: RMB426/tonne (tax exclusive)), representing a year-on-year decrease of 3.8%.

The production and sales of each kind of coal of the Group in 2020 are set out below:

Output	Sales volume	Sales income	Sales cost	Gross profit
Types of coal	Million tonnes	Million tonnes	RMB million	RMB million	RMB million
Thermal coal	291.6	445.9	182,645	140,369	42,276
Others	/	0.5	436	435	1
Total	291.6	446.4	183,081	140,804	42,277

As coal products were in great variety with a large sales volume, and some of self-produced coal products were transported and sold together with purchased coal, the Group cannot present the revenue, cost of sales and gross profit by source of coal (self-produced coal and purchased coal).

Section VDirectors' Report (Continued)

The coal sales of the Group in 2020 is set out below:

By contract pricing mechanisms

II. Direct sales in coal mines


Sales	of total
volume	sales
Million
tonnes	%
430.1	96.3
190.0	42.5
163.5	36.6
76.6	17.2
16.3	3.7
Total sales volume/average price
(exclusive of tax)	446.4	100.0

2020	2019
Proportion	Price	Proportion	Price	Price
(exclusive	Sales	of total	(exclusive	Sales	(exclusive
of tax)	volume	sales	of tax)	volume	of tax)
RMB/	Million	RMB/
tonne	tonnes	%	tonne	%	%
419	431.0	96.4	434	(0.2)	(3.5)
380	193.3	43.2	392	(1.7)	(3.1)
465	176.9	39.6	478	(7.6)	(2.7)
418	60.8	13.6	440	26.0	(5.0)
176	16.1	3.6	204	1.2	(13.7)
410	447.1	100.0	426	(0.2)	(3.8)

Changes

Sales through sales group Limited

1. Annual long-term contracts
2. Monthly long-term contracts
3. Spot commodity

Note:The above is the summary of the sales of coal products with different calorific values.


Sales	of total	Sales
volume	sales	volume
Million	Million
tonnes	%	tonnes
Sales to external customers	394.0	88.2	389.9
Sales to internal power segment	47.7	10.7	53.0
Sales to internal coal chemical segment	4.7	1.1	4.2
Total sales volume/average price
(exclusive of tax)	446.4	100.0	447.1

By internal and external customers
2020	2019
Proportion	Proportion	Price	Price
of total	(exclusive	Sales	(exclusive
sales	of tax)	volume	of tax)
RMB/
%	tonne	%	%
87.2	432	1.1	(3.7)
11.9	387	(10.0)	(3.4)
0.9	363	11.9	(11.3)
100.0	426	(0.2)	(3.8)

Changes

Price (exclusive of tax) RMB/ tonne

416 374 322

410

By sales regions

I. Domestic sales

II. III.

Total sales volume/average price (exclusive of tax)

2020	2019
Proportion	Price	Proportion	Price	Price
Sales	of total	(exclusive	Sales	of total	(exclusive	Sales	(exclusive
volume	sales	of tax)	volume	sales	of tax)	volume	of tax)
Million	RMB/	Million	RMB/
tonnes	%	tonne	tonnes	%	tonne	%	%
444.3	99.5	410	442.3	98.9	425	0.5	(3.5)
429.5	96.2	411	430.6	96.3	427	(0.3)	(3.7)
162.1	36.3	317	162.6	36.4	329	(0.3)	(3.6)
267.4	59.9	468	268.0	59.9	486	(0.2)	(3.7)
9.7	2.2	353	8.2	1.8	343	18.3	2.9
(III) Sales of imported coal	5.1	1.1	418	3.5	0.8	441	45.7	(5.2)
Export sales	0.7	0.2	556	1.7	0.4	626	(58.8)	(11.2)
Overseas sales	1.4	0.3	435	3.1	0.7	446	(54.8)	(2.5)
446.4	100.0	410	447.1	100.0	426	(0.2)	(3.8)

Changes

(I) Self-produced coal and purchased coal

1. Direct arrival
2. Seaborne

(II) Sales of domestic trading coal

(3) Production safety

In 2020, the Group took various measures to ensure coal mine production safety. The Group fully carried out the three-year special rectification action for safety production with generally stable situation of safety production, conducted safety supervision to ensure the implementation of the safety system, as well as upgraded the equipment and facilities of the emergency rescue base to improve safety guarantee capability. In 2020, the fatality rate per million tonnes of raw coal output in the coal mines of the Group was 0.0034, which was below the national average of 0.0580.

Efforts in ensuring safe coal production are detailed in the 2020 ESG Report of the Company.

(4) Coal resources

As at 31 December 2020, under the PRC Standard, the Group had coal reserves amounting to 29.68 billion tonnes, representing a decrease of 0.31 billion tonnes as compared with that of the end of 2019 and recoverable coal reserve amounting to 14.42 billion tonnes, representing a decrease of 0.26 billion tonnes as compared with that of the end of 2019. The Group's marketable coal reserve amounted to 7.73 billion tonnes under the JORC Standard, representing a decrease of 0.29 billion tonnes as compared with that of the end of 2019.

Unit: '00 million tonnes

Recoverable	Marketable
Coal reserve	coal reserve	coal reserve
(under the PRC	(under the PRC	(under the JORC
Mines	Standard)	Standard)	Standard)
Shendong Mines	156.0	88.9	44.4
Zhunge'er Mines	37.9	30.2	19.5
Shengli Mines	19.9	13.5	1.8
Baorixile Mines	13.5	11.3	11.6
Baotou Mines	0.5	0.3	0.0
Xinjie Mines (under exploration rights
permit to Taigemiao North Area)	64.2	/	/
Others	4.8	/	/
Total	296.8	144.2	77.3

Note: As of 31 December 2020, the marketable coal reserve of Baotou Mines under the JORC Standard was 547 thousand tonnes.

Characteristics of the commercial coal produced in the Company's major mines are as follows:

No.

Mines

Major types of coalCalorific value of major commercial coal products kcal/kgSulphur Content %Ash content average,%

1 Shendong Mines
2 Zhunge'er Mines
3 Shengli MinesLong flame coal/ non-caking coal Long flame coal Lignite
4 Baorixile Mines
Lignite
5 Baotou Mines

Long flame coal/non-caking coal

5,000-5,800 4,700-5,300 2,900-3,100 3,500-3,700 4,300-4,800

0.2-0.6 5-18

0.4-0.6 18-26

0.7-0.8 18-22

0.15-0.3 12-15

0.5-1.0 10-15

Note: The above calorific value, sulphur content and ash content of major commercial coal products produced by each mine may be inconsistent with the characteristics of the commercial coal products produced by individual mine and those of the commercial coal products sold by the Company due to geological conditions and production process.

Directors' Report (Continued)

(5)Operating results

Ǻ The operating results of the coal segment of the Group before elimination on consolidation
2020
Main reasons for
2019
Change %changesRevenueCost of salesGross profit marginProfit from operations Profit margin from operations
%RMB million
190,029
197,396
- (3.7) Decrease in average price of coal of the
  Group year-on-yearRMB million
  (153,373)
  (157,224)
- (2.4) Decrease in sales volume and purchase price of purchased coal resulting in the reduction of the cost of purchased coal; decrease in volume of coal transported through national railways resulting in a reduction in transportation costs
%
19.3
- 20.4 Decreased
- by 1.1
  percentage pointsRMB million
  29,832
  33,188
  (10.1)
  15.7
- 16.8 Decreased by 1.1 percentage points
ǻ The sales gross profit of the coal of the Group before elimination on consolidation

2020

RevenueCosts Gross profitRMB million RMB million RMB million

2019

Gross profit margin

RevenueCostsGross profit

% RMB million RMB million RMB millionGross profit margin %

Domestic Export and overseas

182,082

139,976

42,106

23.1

188,052

142,718

45,334 24.1

999

828

171

17.1

2,450

1,987

463 18.9

Total

183,081

140,804

42,277

23.1

190,502

144,705

45,797

24.0

Ǽ Unit production cost of self-produced coal
Unit: RMB/tonne
2020
2019
Change %
Main reasons for changesUnit production cost of self-produced coal Raw materials fuel and power
139.6
134.8 3.6
27.1
26.2 3.4 The increase in depth of exploration led to the increase of related costs
Personnel expenses
27.8
27.0 3.0 Larbor cost increased in certain coal mines
Repairs and maintenance Depreciation and amortisation Other costs
9.4
9.4 0.0
18.8
17.4 8.0 Increase in fixed assets of coal mines
56.5
54.8 3.1 Increase mineral engineering fee and washing and processing fees year-on-year
Other costs consist of the following three components: (1) expenses directly related to production, including coal washing, selecting and processing expenses, and mining engineering expenses, etc., accounting for 63%; (2) auxiliary production expenses, accounting for 21%; (3) land requisition and surface subsidence compensation, environmental protection expenses and tax, accounting for 16%.
ǽ Cost of coal purchased from third parties
The coal purchased from third parties and sold by the Company includes coal purchased from the surrounding areas of the self-owned mines and railways, domestic trading coal, imported and re-exported coal.
In 2020, sales volume of coal purchased by the Group from third parties was 150.4 million tonnes (2019: 162.3 million tonnes), representing a year-on-year decrease of 7.3%, accounting for 33.7% of the Group's total sales volume of coal (2019: 36.3%). The costs of coal purchased from third parties for the year was RMB48,742 million (2019: RMB53,831 million), representing a year-on-year decrease of 9.5%.

2. Power segment

(1) Production and operations
In 2020, the Group strengthened its marketing measures to improve the stable operation of the units and the power generation efficiency has remained stable. The Group realised a total power generation of 136.33 billion kWh and a total power sales of 127.65 billion kWh throughout the year, accounting for 1.7% of 751.1 billion kWh of the total power consumption of the society in the corresponding period. In active response to the market-based reform of power, the market-based transaction power and power sales business developed rapidly. During the year, the Group has realised 67.54 billion kWh of market-based transaction power with a proportion of the total power output dispatch increased by 52.9%.
(2) Power consumption and power tariffs

Subtotal

Other

Total

Note:

Power tariff
(RMB/mWh)
Change	Change	2020	2019	Change
%	%	%
(I)	coal-fired power	131.85	135.18	(2.5)	123.27	126.54	(2.6)	327	332	(1.5)
Hebei	22.84	25.73	(11.2)	21.43	24.18	(11.4)	320	317	0.9
Shaanxi	26.07	26.53	(1.7)	23.88	24.37	(2.0)	277	277	(0.0)
Guangdong	21.68	21.11	2.7	20.21	19.69	2.6	365	389	(6.2)
Fujian	14.34	13.21	8.6	13.74	12.65	8.6	347	345	0.6
Inner Mongolia	7.59	7.44	2.0	6.90	6.74	2.4	224	229	(2.2)
Henan	4.41	5.18	(14.9)	4.12	4.88	(15.6)	301	308	(2.3)
Sichuan	3.96	3.87	2.3	3.60	3.52	2.3	382	392	(2.6)
Chongqing	5.64	6.55	(13.9)	5.40	6.26	(13.7)	360	353	2.0
Shandong	10.21	10.86	(6.0)	9.72	10.35	(6.1)	343	348	(1.4)
Guangxi	3.20	2.32	37.9	3.04	2.19	38.8	309	344	(10.2)
Jiangxi	10.33	10.78	(4.2)	9.86	10.31	(4.4)	363	359	1.1
Indonesia	1.58	1.60	(1.3)	1.37	1.40	(2.1)	523	523	0.0
(II)	gas-fired power	3.84	3.90	(1.5)	3.75	3.81	(1.6)	563	573	(1.7)
Beijing	3.84	3.90	(1.5)	3.75	3.81	(1.6)	563	573	(1.7)
(III)	hydropower	0.64	0.70	(8.6)	0.63	0.68	(7.4)	232	229	1.3
Sichuan	0.64	0.70	(8.6)	0.63	0.68	(7.4)	232	229	1.3
136.33	139.78	(2.5)	127.65	131.03	(2.6)	334	338	(1.2)
-	13.77	-	-	13.01	-	-	-	-
136.33	153.55	(11.2)	127.65	144.04	(11.4)	-	-	-

Power type/ operation location

Gross power generationTotal power output dispatch

(billion kWh)

2020 2019

In the above table, "others" refers to the power generation and power output dispatch in January 2019 of power plants contributed by the Company when establishing Beijing GD Power.

(3) Installed capacity

At the end of the reporting period, the total installed capacity of power generation of the Group reached 32,279MW, among which, the total installed capacity of the coal-fired power generators was 31,204MW, accounting for 2.5% of the total installed capacity of thermal power generators of the society (being 1.25 billion kW).

Unit: MW
Installed
capacity
Gross installed	increased/	Gross installed
capacity as at	(decreased)	capacity as at
31 December	during the	31 December
Power type	2019	reporting period	2020
Coal-fired power	29,954	1,250	31,204
Gas-fired power	950	0	950
Hydro power	125	0	125
Total	31,029	1,250	32,279

In 2020, the Group's variation of installed capacity for coal-fired power generating units are as follows:

Newly installed

Unit

Location

capacityDescription

MWNo. 5, 6 Unit of Phase III of JinjieShaanxi

Coal and Power Integration

1,320 Operation of newly-added generating unit
Project
Unit No. 4 of Taishan PowerGuangdong
30 Reduction in consumption, transform and increase in capacity
Unit No. 1, 2 of Shenhua Shendong Chongqing
Power Chongqing Wanzhou
Harbor Co., Ltd.
(100) Adjustment in accordance with the approved capacity of generating unit of power business license

Total

1,250

As at the end of 2020, the major coal-fired power generating units under construction and approved but not yet constructed by the Group are as follows:

Planned installed

Project	Location	capacity
Inner Mongolia Shengli Power Plant	Inner Mongolia	2Ò660 MW
Phase I of Hunan Yongzhou Power
Plant Project	Hunan	2Ò1,000 MW
Sichuan Jiangyou Coal Reserves
Power Integration Project	Sichuan	2Ò1,000 MW
Fujian Luoyuanwan Port Power
Storage Integration Project	Fujian	2Ò1,000 MW
Guangxi Beihai Thermal Power Plant
Project	Guangxi	2Ò1,000 MW

(4) Utilisation rate of power generation equipment

The average utilisation hours of coal-fired generators of the Group reached 4,412 hours for the year of 2020, representing a year-on-year decrease of 173 hours and 4,3401 hours above the national average utilisation hours (being 72 hours) of coal-fired power plant equipment with capacity of 6,000kW and above.

Power consumption rate of

Power type

Average utilisation hours (Hour)

power plant (%)

2020

2019

Change %

2020

2019

ChangeCoal-fired power (includes Gangue-fired Power Plant)

4,412

4,585

(3.8)

5.73

5.73 -
Gas-fired power
Hydro power
4,045 5,124
4,092 5,567
(1.1)
(8.0)
1.67 0.30
1.72 Decreased by 0.05 percentage point
0.26 Increased by 0.04 percentage pointWeighted average

4,403

4,574

(3.7)

5.59

5.60

Decreased by 0.01 percentage point

Source: China Electricity Council

(5) Market Transaction of Power
2020
2019
Change %
Total volume of power in market-based transactions (billion kWh) Total volume of on-grid power
(billion kWh)
67.54 127.65
41.72 144.04
61.9
Percentage of the power in market-based transactions (%)
52.9
29.0
(11.4) Increased by 23.9 percentage points
(6) Operation results of the power sales business
The Group owns three power sales companies located in Shandong, Jiangsu and Guangdong, respectively. The principal operation model is to make profit through the price difference between sales and purchase of electricity, to provide customers with value-added services, including preventive test of transformers, insulation test, energy-saving diagnosis, power consumption related data, etc.. The provision of value-added services has positive impact on the Group's development of the electricity market and enhancement of its competitiveness.
In 2020, the power output dispatch of purchased electricity sold by the above three power sales companies was 6.51 billion kWh, achieving total income of RMB208 million with total operating cost of RMB96 million.

Average selling

No.

Province of the power sales companies

price of sold power

Sold power Billion kWh 2020

(excluding tax)

2019

RMB/MWh 2020

2019

1 2 3

Shandong Jiangsu Guangdong

0.69 4.76 1.06

0.37 2.82 1.19

339 332

367 370

371 372

Directors' Report (Continued)

(7)Capital Expenditure

In 2020, the total capital expenditure of the power generation segment was RMB7,766 million, mainly for the following items:

Unit: RMB Million

Percentage of accumulated in project

The	accounting for
contribution	the total budget as
amount for	of the end of
the Reporting	the Reporting
No.	Name of Project	Period	Period
%
1	Sichuan Jiangyou Coal Reserves Power Integration	1,575	66
Project (2Ò1,000MW)
2	Phase I of Hunan Yongzhou Project(2Ò1,000MW)	1,169	35
3	Shaanxi Jinjie Coal Power Integration Project	965	76
(2Ò660MW)
4	Phase I of Inner Mongolia Shengli Power Plant	488	31
Construction(2Ò660MW)
5	Fujian Luoyuan Bay Port Power Storage Integration	234	37
Project Power Plant Construction(2Ò1,000MW)

Section VDirectors' Report (Continued)

(8)Operation results

The operation results of the power segment of the Group before elimination on consolidation

2020

Main reasons

2019

Change %

for changesRevenueCost of salesGross profit marginProfit from operations Profit margin from operations

RMB million

49,486

52,626

(6.0) Exclusion of the investment in the establishment of the power plant contributed by Beijing GD Power in the consolidation of the Group's account from February 2019; decrease in electricity sales and average electricity price year-on-yearRMB million
(38,729)
(40,540)
(4.5) Decrease in coal-fired costs of power plants

21.7

23.0 Decreased by 1.3 percentage points
RMB million %
7,976 16.1
9,779
(18.4)
18.6 Decreased by 2.5 percentage points

ǻ Revenue and cost from the sale of power of the Group before elimination on consolidation
Power type
2020
Coal-fired power Gas-fired power Hydro power Wind power
42,188 2,111 146 0
Total
44,445
The Group's cost of sale of power is mainly comprised of such costs as raw materials, fuel and power, personnel expenses, depreciation and amortisation and other costs. repairing and maintenance, The unit cost of power output dispatch of the Group in 2020 was RMB276.1/MWh (2019: RMB276.2/MWh).
The power segment consumed a total of 47.8 million tonnes of China Shenhua's coal, accounting for 82.6% of the total thermal coal consumption (being 57.9 million tonnes), representing a year-on-year decrease of 4.4 percentage points, primarily due to the relatively low procurement price of purchased coal in the second quarter of 2020 and the increase in coals purchased by the power plant.
Ǽ Cost of sale of power of coal-fired power plant of the Group before elimination on consolidation

Revenue from sale of power


Percentage	Percentage
to total	to total
cost of	cost of
sale of	sale of	Change in
power in	power in	2020 over
2020	2019	2019	2019
%	%	%
93.9	37,411	94.1	(11.6)
5.9	2,282	5.7	(9.1)
0.2	91	0.2	(3.3)
0.0	1	0.0	(100.0)
100.0	39,785	100.0	(11.4)

Unit: RMB million

Cost of sale of power

2019

Change %

2020

49,125 2,338 156 0

(14.1) 33,084

(9.7) 2,074

(6.4) 88

N/A 0

51,619

(13.9)

35,246

Change
in costs
%
Raw materials, fuel and power	23,103	69.9	26,802	71.7	(13.8)
Personnel expenses	2,265	6.8	2,328	6.2	(2.7)
Repairs and maintenance	1,989	6.0	1,862	5.0	6.8
Depreciation and amortisation	4,742	14.3	5,133	13.7	(7.6)
Others	985	3.0	1,286	3.4	(23.4)
Total cost of sale of power of
coal-fired power plant	33,084	100.0	37,411	100.0	(11.6)

2020

2019

Costs Percentage

Costs PercentageRMB million % RMB million %

3. Railway segment

(1) Production and operations
In 2020, the Group has actively implemented the state policy of "road to railway", promoted the construction of Huangda Railway, special lines and connect lines, and continuously optimized the road network layout. The Group promoted the market reforms of the self-owned railways to expand new customers and market, and ensured an adequate and stable supply of goods. The non-coal transportation business has been continuously developed, the cargo transportation volume of noncoal was 20.8 million tonnes, representing a year-on-year increase of 31.4% while reverse transportation volume of iron ore, manganese ore was 14.3 million tonnes, representing a year-on-year increase of 51.2%. During the year, the turnover volume of self-owned railways of the Group reached 285.7 billion tonne km (2019: 285.5 billion tonne km), representing a year-on-year increase of 0.1%.
Huangda Railway commenced trial operation in December 2020.
(2) Operation results
The operation results of the railway segment of the Group before elimination on consolidation are as follows:

2020

2019

Change %

Main reasons for changesRevenue

RMB million

38,723

39,701 (2.5)Increase in freight turnover of railway lines with relatively low freight rates

Cost of sales Gross profit marginRMB million %

(20,304)

(20,641) (1.6)

47.6

48.0 Decreased
by 0.4
percentage point
Profit from operations Profit margin from operations
RMB million %
16,636 43.0
17,360
(4.2)
43.7 Decreased by 0.7 percentage point

In 2020, the unit transportation cost in the railway segment was RMB0.066/ tonne km (2019: RMB0.067/tonne km), representing a year-on-year decrease of 1.5%.

4. Port segment

(1) Production and operations
In 2020, the port segment of the Group fully promoted the improvement of equipment capability and efficiency, and the efficiency of loading volume was continuously enhanced. During the year, the accumulated loading volume of vessels at Huanghua Port and Shenhua Tianjin Coal Dock was 249.2 million tonnes (2019: 244.4 million tonnes), representing a year-on-year increase of 2.0%. The Group further promoted the construction of smart and green ports. Huanghua Port has become the first coal port in the world to achieve intelligent management and control of turning-stacking-fetching-loading full-process equipment, and the operation quality and efficiency have been significantly improved. The Group has achieved intelligent and precise management and control in sprinkling and dust suppression, and the total water consumption, storage yard and dumpers water consumption are significantly reduced. The rain and sewage treatment rate and reuse rate of Tianjin Coal Dock reached 100%.
Ports capacity improvement project prompted steadily. The 70 thousand-tonne round-way channel construction of Huanghua Port passed the navigation safety evaluation and other preliminary work, and the construction of break-bulk berths and oil terminals promoted steadily. The project preliminary approval work of Zhuhai Coal Dock No. 6 Storage Yard was completed.
(2) Operation results
The operation results of the port segment of the Group before eliminations on consolidation are as follows:

2020

2019

Change %

Main reasons for changesRevenue

RMB million

6,359

5,926

7.3 Increase in loading volume of vessels at the portsCost of sales
RMB million
- (3,314) (3,064)
8.2 Increase in loading volume of vessels at the ports and the increase in dredging business volume resulting in an increase in related costsGross profit margin

47.9

48.3 Decreased by 0.4 percentage point

Profit from operations Profit margin from operations

RMB million %

2,678 42.1

2,536 42.8

5.6 Decreased by 0.7 percentage point

The unit transportation cost in the port segment was RMB10.1/tonne in 2020 (2019: RMB10.5/tonne), representing a year-on-year decrease of 3.8%.

5. Shipping segment

(1) Production and operations
In 2020, the shipping segment of the Group overcame unfavorable situation of market downturn. The Group actively expanded external market and promoted non-coal transportation provided that the transport demand of power plants within the Group and the port logistics of coal in self-own port is guaranteed. The shipping volume for the year was 113.0 million tonnes (2019: 109.8 million tonnes), representing a year-on-year increase of 2.9% while shipment turnover amounted to 93.0 billion tonne nautical miles (2019: 89.6 billion tonne nautical miles), representing a year-on-year increase of 3.8%.
(2) Operation results
The operation results of the shipping segment of the Group before eliminations on consolidation are as follows:

2020

2019

Change %

Main reasons for changesRevenue Cost of salesRMB million RMB million

3,112

3,297

(5.6) Decrease in freight rates
- (2,755) (2,913)
(5.4) Decrease in vessel rental charges resulting in a decrease in external transportation costs; decrease in fuel price resulting in a decrease in fuel costs

Gross profit margin

11.5

11.6 Decreased by 0.1 percentage point

Profit from operations Profit margin from operations

RMB million %

209 6.7

232 7.0

(9.9) Decreased by 0.3 percentage point

In 2020, the unit transportation cost of the shipping segment was RMB0.030/ tonne nautical mile (2019: RMB0.032/tonne nautical mile), representing a year-on-year decrease of 6.3%.

6. Coal chemical segment (1) Production and operations

The coal chemical business of the Group comprises the coal-to-olefins project of Baotou Coal Chemical (Phase I). Its main products consist of polyethylene (with production capacity of approximately 300,000 tonnes/year) and polypropylene (with production capacity of approximately 300,000 tonnes/year) and minor byproducts including industrial sulfur, mixed C5, industrial propane, mixed C4, industrial methanol, etc.. The methanol-to-olefins (MTO) equipment of the coal-to-olefins project was the first large-scale MTO equipment in China.

In 2020, Baotou Coal Chemical strived to overcome the impact of unfavorable factors such as fluctuations in international crude oil prices and the COVID-19 pandemic, made overall arrangement in production load, adjusted product structure in a timely manner, carried out R&D of new products, and hit a record high in the production and sales of polyolefin products. Throughout the year, the coal-to-olefins facilities had maintained stable and consecutive operation for 8,760 hours, with the average production capacity reaching 100%, and produced 700.5 thousand tonnes (2019: 615.7 thousand tonnes) of polyolefin products in aggregate, representing a year-on-year increase of 13.8%. Product quality continued to improve, and the cumulative pass rates of polyethylene and polypropylene products reached 98.96% and 100%, respectively. Polypropylene S2040 high melt index spinning material, the raw material for the production of medical protective products such as masks and protective clothing, has passed the US Food and Drug Administration (FDA) testing, national standard testing and EU RoHS testing. Significant results have been achieved in energy conservation and consumption reduction, with the lowest level of the comprehensive energy and water consumption per unit product in history.

The Baotou coal-to-olefins upgrade and demonstration project has been in the preparation stage, and the environmental impact assessment and approval work has been proceeding in an orderly manner.

The sales of polyethylene and polypropylene products of the Group in 2020 is as follows:

2020

Sales volume Thousand tonnes

Price RMB/ tonne

2019 Sales volume Thousand tonnes

Price RMB/ tonne

Change Sales volumePrice

%Polyethylene Polypropylene

356.9 331.2

5,459 6,015

319.0 302.3

6,292 6,797

11.9 (13.2)

9.6 (11.5)

(2) Operation results
The operation results of the coal chemical segment of the Group before eliminations on consolidation are as follows:
2020
2019
Change %
Main reasons for changesRevenue
RMB million
5,165
5,327 (3.0)Decrease in sale price of olefin products
Cost of sales Gross profit margin
RMB million %
(4,675)
9.5
(4,693) (0.4) 11.9 Decreased by 2.4 percentage pointsProfit from operations
Profit margin from operationRMB million %
259 5.0
311 5.8
(16.7) Decreased by 0.8 percentage point
(3) Unit production cost of major products

2020

ProductionUnit

2019 ProductionUnit

volume productionThousand tonnesRMB/ tonne

volume Thousand tonnes

productionChange Production Unit volume production

RMB/ tonne

% %Polyethylene Polypropylene

360.4 340.1

5,079 4,970

319.4 296.3

5,857 5,759

12.8 (13.3)

14.8 (13.7)

(IV) Regional operation analysis

Unit: RMB million

2020	2019
Revenue from external transactions in domestic markets	227,539	238,889
Revenue from external transactions in overseas markets	5,724	2,982
Total	233,263	241,871

Note: Revenue from external transactions was classified based on the locations of the recipients of the services and products.

The Group is mainly engaged in the production and sales of coal and power, railway, port and shipping transportation as well as coal-to-olefins businesses in the PRC. In 2020, the revenue from external transactions in domestic markets was RMB227,539 million, accounting for 97.5% of the Group's revenue; revenue from external transactions in overseas markets was RMB5,724 million, representing a year-on-year increase of 92.0%, mainly due to commencement of operation of the single unit business of Indonesia Java No. 7 Power Generating Project.

In 2020, the Company conducted international operation stably to promote the construction and operation of overseas projects. The Guohua Sumsel EMM Coal-fired Power Project (Phase I) (2 Ò 150MW) in Indonesia has been under safe and stable operation for many consecutive years with No. 1 unit under safe and stable operation for more than 1,300 days and both units for more than 660 days, winning two awards "Independent Power Generation Enterprise of the Year (Indonesia)" and "Environmental Protection Enterprise of the Year (Indonesia)". The No. 1 unit of Indonesia Java No. 7 Power Generating Project (2Ò1,050MW) has been under safe and stable operation with high load for 301 days consecutively after its commissioning, which has effectively improved the stability of the Java-Bali power system; the No. 2 unit has been completed in all aspects with high standards in September 2020. the Indonesia South Sumatra No. 1 Project in Indonesia (2Ò350MW) started construction in September 2020. The 29 gas wells of the shale gas project in Pennsylvania, the U.S. have been in normal production. Affected by the decline in international oil prices, the COVID-19 pandemic and the rare warm winter, the project has been in a state of loss in the current period, however, the risk is under control as the total investment can be fully recovered based on the calculation from the whole project cycle. Other external projects are in progress under the principle of stability and prudence.

(V) Analysis on Investments

The equity investments of the Company in 2020 amounted to RMB3,400 million (2019: RMB33,047 million), representing a significant year-on-year decrease, mainly due to the long-term equity investment in Beijing GD Power of RMB27,213 million recognized in the same period of the previous year. The equity investment in 2020 was mainly used to increase the capital of the Company's subsidiaries in coal, power and transportation to accelerate the project construction.

1. Material investment in equity interest
Applicable
✔ Not applicable
2. Material investment in non-equity interest

Applicable

✔ Not applicable

3. Financial assets at fair value

During the Reporting Period, the financial assets at fair value held by the Group were mainly bank wealth management products, US dollar-denominated forward purchases, thermal coal short selling and the non-tradable equity investments that have no significant impact on the investee.

Unit: RMB million

Opening balance	Closing balance
at the beginning	at the end of	Change for the	profit for the
Name of items	of the period	the period	current period	current period
Banks' wealth management products	33,334	0	(33,334)	323
Forward foreign exchange contracts	31	0	(31)	(1)
Futures trading	70	0	(70)	(12)
Other investments in equity instruments	1,789	1,845	56	0
Total	35,224	1,845	(33,379)	310

Change of

(1) Thermal coal futures
In 2020, the Group has completed the delivery of 1.52 million tons of thermal coal futures with 2,000 tons of thermal coal futures offset. As of 31 December 2020, the Group has no thermal coal futures.
(2) USD debt hedging
In order to avoid the USD debt risk, the Group used financial derivatives to make exchange rate hedge against the debt of USD150 million. As of 31 December 2020, the above financial derivatives had all been delivered.
The exchange rate hedging conducted by the Group aimed at risk management rather than investment profit, and the specific scheme adopted conformed to the nature of hedging.

(VI) Disposal of material assets and equity interest

Applicable

✔ Not applicable

(VII) Analysis on major holding and associated companies

Major subsidiaries
Registered	Total	Net
capital	assets	assets

No.

Unit: RMB million

Net profit attributable to the equity holders of the parent companyCompany

As at 31 December 2020

2020

2019

Change %

Main reasons for changes

Shendong Coal

4,989

31,927

22,971

10,528

12,945 (18.7) Decrease in sales volume and average price of coal, and increase in enterprise income tax

2 3 4

Shuohuang Railway

Jinjie Energy

Zhunge'er Energy

15,231 2,278 7,102

42,554 10,604 41,802

34,479 8,835 34,518

7,668 2,959 1,291

7,601 0.9

3,211 (7.8)

2,769 (53.4) Decrease in transportation turnover of railway and the decrease average price of coal

Trading Group

1,889

21,223

7,841

1,835

2,514 (27.0) Decrease in sales volume and average price of coal

Huanghua Harbour Administration

6,790

13,789

11,091

1,542

1,391 10.9

Beidian Shengli

2,858

6,674

4,644

743

28 2,553.6

Reduction in production affected by the approval cycle for mining land use resulting in a lower coal production in 2019, and the increase in sales volume and average price of coal in 2020

Baotou Energy

2,633

7,028

5,810

515

963 (46.5) Decrease in sales volume and average price of coal, and increase in enterprise income tax

Shenbao Energy

1,169

6,037

4,533

790

935 (15.5) Decrease in coal production and sales

10 Indonesia Java

2,540

13,703

3,993

778

(9) (8,744.4)Indonesia Java No. 7 power generating single unit business operation project

Notes:

(1) The financial information of the major subsidiaries in the above table was prepared in accordance with the China Accounting Standards for Business Enterprises. The data have not been audited or reviewed.
(2) Shendong Coal recorded a revenue of RMB53,364 million and a profit from operations of RMB14,085 million in 2020.
(3) Shuohuang Railway recorded a revenue of RMB20,585 million and a profit from operations of RMB10,259 million in 2020.

2. Major companies in which the Company has invested

After the deconsolidation of Finance Company, the Finance Company was directly and indirectly owned 40% by the Company, and 60% by China Energy, the controlling shareholder of the Company. The provision of financial services by the Finance Company to the Group constitutes connected/related party transactions of the Company.

(1) Major financial indicators of the Finance Company
Unit
2020
2019
Change %
Revenue Total profit Net profit
RMB million RMB million RMB million
3,547 1,318 1,020
3,131 13.3
1,443 (8.7)
1,078 (5.4)
31 December 2020
31 December
2019
Change %
Total asset Total liability Ownership interest
RMB million RMB million RMB million
105,607 83,136 22,471
118,251 (10.7)
110,068 (24.5)
8,183 174.6
Note: The financial data of the above table is prepared in accordance with the PRC Accounting Standards for Business Enterprises and has been audited.
(2) Major risk indicators of Finance Company

Compliant
with
regulatory
Completion	requirements
No.	Indicators	in 2020	or not
1	Capital adequacy rate not lower than 10%	24.75%	Yes
2	Non-performing asset rate not higher than 4%	0.00%	Yes
3	Non-performing loan rate not higher than 5%	0.00%	Yes
4	Capital loss coverage ratio not lower than 100%	2,955.36%	Yes
5	Loan loss coverage ratio not lower than 100%	2,951.33%	Yes
6	Liquidity ratio not lower than 25%	38.06%	Yes
7	Ratio of self-owned fixed assets not higher than 20%	0.07%	Yes
8	Ratio of investment (against total capital)	44.32%	Yes
not higher than 70%
9	Inter-bank borrowing ratio not higher than 100%	0.00%	Yes
10	Guarantee ratio not higher than 100%	0.01%	Yes

(3) Deposits and loans of Finance Company

Unit: RMB million

Balance of deposits

Of which: balance of deposits of the Group

Balance of loans

Of which: balance of loans of the Group

(VIII) Structured Vehicle Controlled by the Company

Applicable ✔ Not applicable

(IX) Compliance with Relevant Laws and Regulations

As of
31 December
2020	2019	Change
(%)
82,866	109,512	(24.3)
19,726	77,328	(74.5)
76,264	43,003	77.3
24,046	17,725	35.7

31 December

As of

So far as the Board and management of the Company are aware, the Group has complied in all material aspects with the relevant laws and regulations that are related to the business and operation of the Group. In 2020 there was no material breach of or non-compliance with the applicable laws and regulations by the Group.

(X) Relationship with Stakeholders

For details of remuneration and training of the Group's employees, please refer to the section headed "Directors, Supervisors, Senior Management and Employees".

The Group attaches great emphasis on good relationships with stakeholders such as customers, suppliers and other business partners to achieve its long-term goals. Accordingly, our senior management have kept good communication, promptly exchanged ideas and shared business updates with them when appropriate. For details, please refer to the 2020 ESG Report of the Company.

In 2020, there was no material dispute between the Group and its stakeholders.

III. DISCUSSION AND ANALYSIS ON FUTURE DEVELOPMENT OF THE COMPANY1

(I) Competition and Development Trend in the Industry

(I) Macro economy

2020 is an extraordinary year in the history of the new China. Confronted with a complex international environment and an arduous task of domestic reform, development and stability, especially the severe impact of the COVID-19 epidemic, the Chinese government has led the country, guided by the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, maintained strategic focus, accurately judged the situation, carefully planned, acted decisively, coordinated both the domestic and international situations, coordinated the prevention and control of the epidemic and economic and social development, continuously persisted with "Four Confidences", exploited the advantages of the system of tackling major events with centralized power, overcome all the difficulties and achieve great success, achieve decisive achievements in the three tough battles, achieved significant progress in scientific innovation, made major breakthroughs in reform and opening up and effectively guaranteed people 's livelihood. The Gross Domestic Product (GDP) for the year has seen a year-on-year increase of 2.3%. The Consumer Price Index (CPI) has seen a year-on-year increase of 2.5%. The Producer Price Index for Industrial Products (PPI) has seen a year-on-year decrease of 1.8%.

In 2021, the Chinese government will adhere to the general principle of making progress while ensuring stability, secure the continuity, stability and sustainability of macro policies, base the new development stage, adhere to new development ideologies, forge a new development landscape and promote high-quality development. The Chinese government will continue to deepen the result of the supply-side structural reform, take reform and innovation as the fundamental driving force, consolidate and expand the prevention and control of the epidemic and economic and social development achievements, better coordinate development and safety, exert all efforts on "stability on the six fronts", fully implement "security in the six areas" and strive to keep the economic operation in a reasonable range.

This section is for reference only and does not constitute any investment advice. The Company has used its best endeavors to ensure the accuracy and reliability of information in this section, but does not assume any liability or provide any form of guarantee for the accuracy, completeness or validity of all or part of its content. If there is any error or omission, the Company does not assume any liability. The content in this section may contain certain forward-looking statements based on subjective assumptions and judgments of future political and economic developments; therefore, there may exist uncertainties in these statements. The Company does not undertake any responsibility for updating the information or correcting any subsequent error that may appear. The opinions, estimates and other data set out herein can be amended or withdrawn without further notice. The data contained in this section are mainly derived from sources such as the National Bureau of Statistics, National Energy Administration, China Coal Market Network, China Coal Resources Network, China Electricity Council, and China Coal Transportation & Sales Society etc.

2. Market environment of the coal industry (1) Thermal coal market in the PRC

Review of 2020

In 2020, the domestic coal market maintained fundamental balance in terms of supply and demand. Due to a number of factors, there may be loose or tight supply in some periods and regions and the price fluctuation increases. As of the end of 2020, the price index of Bohai Bay thermal coal (5,500 kcal) was RMB585/tonne, increasing by RMB34/tonne compared with the end of the previous year; the average value of the price index was RMB549/tonne, decreasing by RMB24/tonne compared with the previous year. The fluctuation of the spot price of coal intensifies.

Year-on-year

2020	change
%
Raw coal production volume above national scale
(100 million tonnes)	38.4	0.9
Coal import (100 million tonnes)	3.0	1.5
National coal transportation volume by railway (100 million tonnes)	23.6	(4.1)

In respect of the supply side, the production enterprises of coal have actively responded to the epidemic, coordinated and promoted the prevention and control of the epidemic and the resumption and achievement of production and maintained a relatively high level of coal production. With the continuous advancement of the supply-side structural reform of the coal industry, the safety and environmental protection inspections of the coal industry has been normalized, high-quality coal production capacity has been continuously released and the coal production volume has further concentrated in the main production areas. In 2020, the raw coal production volume above national scale reached 3.84 billion tonnes, representing a year-on-year increase of 0.9%. The raw coal production volume in Inner Mongolia, Shanxi and Shaanxi accounted for 71.4% of the national output, representing an increase of approximately 0.9 percentage points over the previous year. Among them, the raw coal production of Shanxi was 1,060 million tonnes, representing a year-on-year increase of 8.2%; as affected by policy factors such as resources, environmental protection and safety, the raw coal production of Inner Mongolia was 1,000 million tonnes, representing a year-on-year decrease of 7.8%; the raw coal production of Shaanxi was 680 million tonnes, representing a year-on-year increase of 6.3%. The total output of Shanxi, Shaanxi and Inner Mongolia increased by 36.871 million tonnes, which was 108.9% of the national increase. The coal supply channel was smoother. The coal transportation volume through railways in China was 2,360 million tonnes, representing a year-on-year decrease of 4.1%. The transportation volume of coal through major ports in China was 750 million tonnes, representing a year-on-year decrease of 3.7%.

The import volume of coal continued to grow, and the total import volume of coal throughout the year amounted to 300 million tonnes, representing a year-on-year increase of 1.5%.

In respect of the demand side, in early 2020, the epidemic threw an impact on the economy and the demand for coal declined. Since the second quarter of the year when China had achieved significant results in the prevention and control of the epidemic as well as economic and social development, the economy has been steadily recovering and the coal demand has been rising. Demand for coal has increased significantly since the winter, driven by factors such as economic recovery and weather conditions. Total consumption of coal of the nation increased slightly by 0.5%, while the consumption of coal by the power industry has increased year-on-year by 0.8%, accounting for 52.9% of the national total consumption of coal. The coal consumption in the steel, building materials and chemical industries recorded rapid growth.

Prospects for 2021

In 2021, the promotion of high-quality development serves the key theme of the PRC's economy and society. The recovery growth of the macro economy will play a supporting role in energy consumption, the coal consumption is expected to maintain a small increase, and the coal consumption structure will be further optimized. The effect of "structural de-capacity and systematic capacity optimization" of coal will continue to emerge, and the utilisation rate of coal production capacity will improve. Coal imports are expected to remain generally stable. The capacity of major coal rail transportation channels will be sufficient, and domestic coal supply will be stable.

Overall, the supply and demand of coal are expected to be practically balanced in 2021. However, subject to factors including environmental protection safety crackdown, seasonal fluctuations and unexpected events, there may be structural tight supply in certain periods and regions.

(2) Thermal coal market in the Asia Pacific region

Review of 2020

In 2020, affected by the epidemic, global industrial production slowed down and energy demand declined. Under the influence of factors including environmental protection agreements such as carbon reduction, fossil energy continued to fall short of expectations and the proportion of coal in primary energy continued to decline. The Asia Pacific region remains the focus of global coal consumption. In the second half of the year, with the economic recovery of some countries, especially China, industrial activities accelerated and the demand for coal consumption rebounded.

As a result of the decrease in demand, the import volume from the major importers of coal showed a decreasing trend throughout the year. India imported 216 million tonnes of coal for the year, representing a year-on-year decrease of 11.0%; Japan imported 174 million tonnes of coal for the year, representing a year-on-year decrease of 6.8%; Korea imported 141 million tonnes of coal for the year, representing a year-on-year decrease of 12.7%. Indonesia, Australia and Russia were still the major exporters of coal. India exported 407 million tonnes of coal for the year, representing a year-on-year decrease of 11.3%; Australia exported 358 million tonnes of coal for the year, representing a year-on-year decrease of 7.7%; Russia exported 191 million tonnes of coal for the year, representing a year-on-year increase of 1.6%.

Global coal price dropped first and then rose, the spot price of Newcastle NEWC thermal coal dropped to a low of US$47.53/tonne during the year and rebounded to US$83.72/tonne at the end of the year, representing an increase of 29.2% as compared to the beginning of the year.

Prospects for 2021

In 2021, there is still some uncertainty in the global economic recovery, and the fluctuation of coal market will be mainly dominated by demand. South Asia and Southeast Asia, affected by the growth of power demand, are still the main force of coal demand growth. Indonesia and Australia will continue to be the major coal suppliers in the Asia Pacific region. Russia and Mongolia have growth potential in coal exports, while the US coal exports are expected to continue to decline.

It is expected that in 2021 the supply in global coal market will be loose as a whole, and there may be tight supply for a short time due to demand fluctuations in certain periods and regions.

3. Market environment of the power industry

Review of 2020

In 2020, after the impact at the beginning of the year, the national power consumption demand gradually picked up in the second quarter, and the growth rate of the whole social electricity consumption in the fourth quarter stood higher than that in the same period of last year. In the whole year, the power supply capacity was generally loose, the installed capacity of renewable energy grew rapidly, and the scope and proportion of market transaction of power were further expanded.

The total electricity consumption for the year was 7,511.0 billion kWh, representing a year-on-year increase of 3.1%, and the growth rate decreased by 1.4 percentage points as compared with that of last year. The generating capacity of power plants above national scale was 7,417.4 billion kWh, representing a year-on-year increase of 2.7%, and the growth rate decreased by 2.0 percentage points as compared with that of last year. Among them, thermal power generated 5,279.9 billion kWh, representing a year-on-year increase of 1.2%, and accounting for 71.1% of the power generation in the PRC, which was 2.2 percentage points higher than that of the previous year. The average utilisation hours of power generation equipment of power plants with capacity of 6,000 kW and above in the PRC was 3,758 hours, decreasing by 70 hours year-on-year. Among them, the average utilisation time of thermal power equipment was 4,216 hours, decreasing by 92 hours year-on-year. The average utilisation hours of hydropower were 3,827 hours, representing a year-on-year increase of 130 hours.

The installed capacity of renewable energy increased significantly, and the proportion of the installed capacity of thermal power generation decreased. In 2020, the new installed capacity of power supply in China was 190.87 million kW, including 56.37 million kW of thermal power, accounting for 29.5% of the total annual installed capacity, and 133.10 million kW of hydropower, wind power and solar power, accounting for 69.7% of the total annual installed capacity. By the end of 2020, the installed capacity of power generation equipment in China was 2.20 billion kW, an increase of 9.5% over the end of last year. Among them, thermal power was 1.25 billion kW, accounting for 56.6% of the total installed capacity, which was 2.6 percentage points lower than that at the end of last year.

In 2020, the power market-oriented reform was progressing rapidly and deeply, the market participants continued to increase, the market openness was significantly improved, and the market vitality was further released. The market electricity accumulated trading volume of all trading center across the whole country is 3,166.33 billion kWh, accounting for 42.2%% of the total electricity consumption of the whole society; the medium and long-term power direct trading volume of the electricity market is 2,475.99 billion kWh, accounting for 33.0% of the total electricity consumption of the whole society.

Prospects for 2021

The stable operation of macro economy in 2021 will support the growth of electricity demand. The overall power supply capacity is surplus. Affected by extreme factors such as weather, there may be power shortage in certain areas and periods. The installed capacity of non-fossil energy will keep growing, and the development space of thermal power will further incline to high-parameter power generation units with large capacity. The scale of direct electricity trading will be further expanded, the number of medium and long-term contracts will be increased, and the short-term market competition pressure will gradually go down.

(II) Development Strategy of China Shenhua

Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the Company fully implemented the spirit of the 19th CPC National Congress and the second, third, fourth and fifth plenary sessions of the 19th CPC National Congress, responded to the great call of "socialism is realized by earnest work", adhered to the general working tone of seeking progress while ensuring stability, implemented the new strategy for energy security highlighting "four reform and one cooperation", closely followed the requirements of the State-owned Assets Supervision and Administration Commission of the State Council to create a world-class model enterprise - "three services, three practical and three bans", and implemented the overall development strategy requirements of "One target, Three Model and Five Strategies and Seven First-class" of China Energy Group. Taking the promotion of high-quality development as the theme, deepened supply-side structural reforms as the main line, reforms and innovation as the fundamental driving force, the Company adhered to the principles of strategic orientation, market orientation, value creation, green and low-carbon, transformed development concepts and methods, adjusted the industrial structure and layout, innovated systems and mechanisms as well as management models, ensured energy security and energy supply, enhanced its capability in scientific and technological innovation and investment profitability, continuously improved its competitiveness, innovation and risk resistance, and took the lead to build the world-class comprehensive energy listed company with global competitiveness.

(III) Business Targets for 2021

Target of	Actual amount	Increase/
Item	Unit	2021	in 2020	(decrease)
%
Commercial coal production	100 million tonnes	2.84	2.916	(2.6)
Coal sales	100 million tonnes	4.76	4.464	6.6
Gross power generation	100 million kWh	1,350	1,363.3	(1.0)
Revenue	RMB100 million	2,426	2,332.63	4.0
Cost of sales	RMB100 million	1,704	1,623.74	4.9
Selling, general and administrative	RMB100 million	125	114.44	9.2
expenses and net finance costs
Percentage change of unit	/	Year-on-year	Year-on-year	/
production cost of the self-	increase of	increase of
produced coal	approximately	3.6%
5%

The above business targets are subject to factors including changes in scope of consolidated financial statements, risks, uncertainties and assumptions. The actual outcome may differ materially from these statements. Such statements do not constitute actual commitments to investors. Investors should be aware that undue reliance on or use of such information may lead to investment risks.

The explanation of conditions under which the Company's net profit attributable to shareholders of the Company in the first quarter of 2021 is expected to reach a year-on-year change of 50% or above:

Applicable

✔ Not applicable

(IV) Capital expenditure plan for 2021

Unit: RMB100 million

Target of	Actual amount
2021	in 2020
1. Coal segment	74.48	81.51
2. Power segment	147.99	77.66
3. Transportation segments	92.06	38.40
Of which: Railway	79.29	34.41
Port	12.45	3.88
Shipping	0.32	0.11
4. Coal chemical segment	30.81	5.64
5. Others	10.48	12.02
Total	355.82	215.23

Total capital expenditure of the Group in 2020 amounted to RMB21.523 billion, which were mainly used for the expenses in the prepayment of the mining rights costs, the purchase for the exploitation equipment for coal mines and the construction of the coal distribution system; the power generation projects under construction, such as Phase I of Hunan Yongzhou Project, Sichuan Jiangyou Coal Reserves Power Integration Project; the upgraded demonstration projects such as Huangda Railway construction and the coal-to-olefins project of Baotou Coal Chemical.

Based on the principles of strict control of investment and focusing on quality and efficiency, the Board of the Company approved a total planned capital expenditure of 2021 of RMB35.582 billion (excluding equity investment), including:

(1) Among the capital expenditures of the coal segment, RMB3.008 billion will be used in new construction as well as renovation and expansion projects (including the purchase of infrastructure-related equipment); RMB1.791 billion will be used in technical renovation for equipment purchase; RMB2.438 billion will be used in technical renovation for non-equipment purchases. The major investment projects include: the purchase of equipment for the capacity expansion project of Shengli No. 1 Open-pit Mines, the green and high-efficiency energy-saving heating project in the Shendong Mines, the second panel project in Guojiawan coal mine and etc.
(2) Among the capital expenditure of the power segment, RMB13.19 billion will be used in new projects (including the purchase of related equipment); RMB304 million will be used in technology renovation in environmental protection; RMB1.170 billion will be used in technology renovation in non-environmental protection. The major investment projects include: Fujian Luoyuan Bay Port Power Storage Integration Project (2Ò1,000MW), Sichuan Jiangyou Coal Reserves Power Integration Project (2Ò1,000MW), Guangxi Beihai Power Plant Project (2Ò 1,000MW) and etc.
(3) The capital expenditure of the railway segment will be mainly used for the Huangda Railway, the expansion renovation of 300-million-tonne capacity project of Shenshuo, and the purchase of railway locomotives, vehicles and other equipment.
(4) The capital expenditure of the coal chemical segment will be mainly used for coal-to-olefins upgrade demonstration project of Baotou Coal Chemical, coal coking project construction of Bayannur Energy and others.

The capital expenditure plans of the Group in 2021 are subject to the development of business plans (including potential acquisitions), progress of capital projects, market conditions, outlook for future operation environment and the obtaining of the requisite permissions and approval documents. Unless required by laws, the Company shall not assume any responsibilities for updating the data of its capital expenditure plans. The Company intends to finance its capital expenditures by cash generated from operating activities, short-term and long-term borrowings, and other debt and equity financing.

(V) Major risks faced and countermeasures

Investors should be aware that although the Company has reviewed and listed the major risks, and adopted relevant countermeasures, there is no absolute guarantee that all adverse impact could be eliminated due to the limitation of various factors.

1. Risk of macroeconomic fluctuations
The industry in which the Group operates is closely correlated to the prosperity of the macro economy. Currently, with complex and severe external environment, there have been increased pressure on economic structure adjustment and economic downward pressure due to the impact of the COVID-19 pandemic. Besides, the reform and innovation in the energy sector will have a significant impact on the Group's development strategy.
To cope with the risk of macroeconomic fluctuations, the Group will further strengthen the studies on macro-control policy and relevant industrial trends, take the initiative to make pre-adjustment, promote high-quality development by taking the supply-side structural reforms as paramount, make great efforts to push scientific innovation and progress, continue to implement strategies of green energy, accelerate the development of new energy industries, create new highlights for clean energy, and cultivate new growth poles.
2. Risk of safety production and environmental protection
The Group has established the production safety targets of preventing major and above production safety accidents as well as effectively curbing general accidents to achieve "zero deaths". Although the Group has been sustaining stable performance in safe production for its coal mines, there are uncertainties in the course of safe production. Given the facts that national policies on energy-saving and environmental protection have been further tightened, that local standards on ultra-low emissions are even stricter than national standards, that operating costs of enterprises are increased due to the levy of environmental tax, and that the demand for better ecological environment puts more stringent requirements on the development and operation of enterprises, the constraints on energy-saving, emission reduction and environmental protection are further imposed on the Group.
To cope with the risks of production safety for coal mines, the Group will strengthen various areas in respect of the implementation of its safety risk prevention and control management system, inspections and treatments and assessment of significant risks, reinforcement of safety production training and emergency rescue management, innovative mechanism of safety supervision, all-round promotion of safety management ability, and consolidation of production safety fundamentals.

To cope with the risks of environmental protection, the Group continues to strengthen environmental monitoring, strictly adheres to the ecological red line, vigorously promotes the construction of green mines, focuses on the development strategy of clean energy, and takes the efficient development, use and conversion of clean coal as the core. The Group spares no effort in constructing ecological civilization through continuously strengthening its soft power of environmental protection and the brand image building of ultra-low emissions in coal power on an on-going basis. It continues to identify environmental hidden dangers, further improves the environmental risk pre-control management system and strengthens the identification, remediation of potential issues and environmental emergency management in order to achieve energy-saving and emission reduction targets as well as to prevent severe environmental pollution incidents.

3. Risk of market competition
In 2020, the energy consumption structure continued to be adjusted, the proportion of coal consumption kept declining, coal production continued to grow, coal enterprise mergers and reorganizations advanced on an ongoing basis, and the market competition intensified. As reforms of the electricity market accelerated, the proportion of power transactions continued to increase; the market competition intensified, and the transaction size and price were uncertain. The state has increased the construction of cross-provincial coal transportation railway channels, and local coal transportation railways have been putting into operation or under expansion. The coal transportation capacity will be gradually released, and the transportation formats tends to be diversified.
In response to the risks of market competition, the Group will improve the accuracy of the pre-judgment to coal market, strictly implement long-term contracts, enhance quality control, increase brand advantage on an ongoing basis, strengthen the development of new markets, maintenance of existing markets and construction of interchange bases, and deepen the comprehensive coordination of production, transportation, sales, storage and use. It will also further conduct quality improvement and efficiency enhancement in the power industry and conduct risk pre-control, production safety and power market transactions in compliance with laws and regulations; the Company will actively participate in investment in coal flowing channels of national railways, increase the collection and distribution capacity of railways owned by the Company and keep improving the core competitiveness of transportation of the Company.
4. Risk of international operations
The international political situation is increasingly complicated. Affected by multiple factors including the complex international political, economic, social and religious environments, diverse legal systems among different countries, fluctuations in exchange rates, stricter environmental protection requirements, and intensified trade conflicts among certain countries, there may be ups and downs as well as fluctuations in the future international trades and economic situations. Together with the highly competitive energy market worldwide, the uncertainties in the Group's international operations may have an impact on its overseas business.

To cope with the risk of international operations, the Group will further carry out overseas resource evaluation, operation performance evaluation and technology assessment based on sound information collection, analysis and research prior to making any decision on overseas project investment so as to ensure economic and technological feasibility. The Group will actively respond to the impact of the COVID-19 pandemic on overseas business, strengthen overseas risk screening, and take multiple measures to prevent and resolve risks. Furthermore, the Company will strengthen the cultivation and introduction of interdisciplinary talents to lay a solid cornerstone for its "Going Overseas" strategy.

5. Legal risk
The Group is large in size and has a long industrial chain with complicated and changeable risk factors. It is difficult to identify and prevent risks, which may trigger contract disputes and regulatory penalties. Changes in the international political and economic situation as well as the global spread of the COVID-19 pandemic have increased the legal compliance risks in the construction and operation of overseas projects.
To cope with the legal risk, the Group will optimize the legal risk prevention system on a continuous basis, carry out compliance risk identification and early warning in layers and categories, and use information technology to improve the effectiveness of compliance management. The Group will promote the "standardization of main business contracts", proceed the "layered listing supervision" mechanism for major cases, and improve the prevention and response capabilities for major legal cases. The Group will strengthen the compliance management of coal-fired power projects, such as project approval and licensing, and standardize the construction and operation of projects. The Group will enhance the follow-up research on overseas legal systems, conduct overseas legal investigations, monitor overseas legal compliance risks in a regular manner, and implement risk prevention and control measures.
6. Risk of project management
The overall progress of the Group's existing projects is stable, however, there are uncertainties to a certain extent in the construction of specific projects, which includes risks arising from safety incidents due to the inadequate fulfillment of safety responsibilities and the lack of safety awareness of some of the construction workers; risks of prolonged construction period, excessive changes, delayed construction period and increased investment due to insufficient project risk prediction and insufficient capacity of the design unit.
To cope with the risk of project management, the Group will strengthen its construction safety management, enforce its administration in safety emergency plans and eliminate major and more severe safety incidents. Strict control of project design and settlement will be implemented, and construction cost control at the early stage will be strengthened. Each project team will keep track, timely and comprehensively interpret the general information of the project, actively communicate with each participating unit and supplier, and formulate effective measures to reduce or eliminate the impact of the factors of phase expansion.

7. Risk of integrated operations
The Group's advantages in integrated coal mines, power, transportation and coal chemical operations come along with the risks arising from the interruption of individual parts of the entire integrated chain. In case of poor organisation or coordination or a discontinuation of any part, the balance and high efficiency of integrated organisation and operations will be affected and the impact may adversely affect the Group's business results.
To cope with the risk of integrated operations, the Group will take an array of measures based on production safety, including, scientific scheduling and plan management, improve railway collection and distribution system, strengthen the coordination of power grid, and strengthen the operation management of production equipment, with an aim at balanced production and uninterrupted integrated operations to maximise its competitiveness.
8. Policy risk
The business activities of the Group are affected by the national industrial control policies. Establishing the goal of "carbon peak and carbon neutrality ", the country has put forward new and higher requirements for the high-quality development of the energy industry. Policies stipulated to continue deepening the supply-side structural reform of the coal industry, actively promote the elimination of backward production capacity in the coal industry, accelerate the release of high-quality production capacity, and realise the conversion of new and old development momentum, may objectively affect the Company's industrial layout, the approval and operation of new and expansion projects, as well as the renovation of management models.
To cope with the risk of changes in industrial policies, the Group will strengthen the research on the latest national industrial policies and industry regulations, enhance policy coordination, reasonably match the investment scale of each sector, actively promote industrial upgrading and structural adjustment, and actively implement the "carbon peak and carbon neutrality "goals.

IV. REASONS AND CASES OF FAILURE OF DISCLOSURE IN ACCORDANCE WITH GUIDELINES BY THE COMPANY DUE TO NON-APPLICABLE GUIDELINES OR SPECIAL REASONS
Applicable ✔ Not applicable
V. PERFORMANCE OF THE BOARD AND ITS SPECIAL COMMITTEES
Please refer to the section headed "Corporate Governance and Corporate Governance Report" of this report.
VI. OTHERS
Please see the section headed "Significant Events" for donations, dividends and management contracts; please see the section headed "Directors, Supervisors, Senior Management and Employees" for permitted indemnity provision, interests of directors and supervisors in significant transactions, arrangements or contracts; please see the section headed "Changes in Share Capital and Shareholders" for repurchase of listed securities.

Section VI Significant Events

I. PROFIT DISTRIBUTION PLAN

(I) Formulation, implementation or adjustment of cash dividend policy
In accordance with the requirements of the relevant laws and regulations and the Articles of Association, the profit distribution policy of the Company shall maintain continuity and stability and emphasize on achieving reasonable returns for investors. The Company shall give priority to profit distribution in cash dividends. The profit distribution policy of the Company complies with the Opinions of the State Council on Further Improving the Quality of Listed Companies ( ਷ਕ৫ᗫ׵ආɓӉ౤৷ɪ̹ʮ̡ۜሯٙจԈ') and the Guideline on Encouragement of Cash Dividend Distribution of Listed Companies announced by the CSRC.
Pursuant to the Articles of Association, the profit distribution of the Company shall be made based on the profit for the year attributable to equity holders of the Company in the consolidated financial statements prepared under the China Accounting Standards for Business Enterprises and the International Financial Reporting Standards, whichever is lower. Annual profit distribution in cash shall be no less than 35% of the net profit for the year attributable to equity holders of the Company subject to the relevant conditions.
In order to implement the securities Law of the PRC, strengthen the protection of investors' legitimate rights and interests, and respond to the demands of investors, especially minority shareholders, as approved on the AGM of the Company in 2019 and in line with the Article of Association, the profit distributed by the Company in cash from 2019 to 2021 shall not be less than 50% of the net profit attributable to shareholders of the Company realized in that year.
(II) Profit distribution scheme/plan
1. Profit distribution plan for the recent three years (including the reporting period)

Dividend per 10 shares

(inclusive of tax)Amount of cash dividend (inclusive of tax)

RMB

RMB million

Net profit attributable to equity holders of the Company in the consolidated financial statements of the respective dividend year in accordance with China Accounting Standards for Business Enterprises RMB millionPercentage to the net profit attributable to equity holders of the Company in the consolidated financial statements %

Final dividend for year 2020 (Proposed)

Final dividend for year 2019

Final dividend for year 2018

18.1 12.6 8.8

35,962 25,061 17,503

39,170 91.8

43,250 57.9

43,867 39.9

Net profit for the year attributable to equity holders of the Company for 2020 under the China Accounting Standards for Business Enterprises amounted to RMB39,170 million, with basic earnings per share of RMB1.970/share; profit for the year attributable to equity holders of the Company under the International Financial Reporting Standards amounted to RMB35,849 million, with basic earnings per share of RMB1.803/share. As at 31 December 2020, the retained earnings available for distribution to shareholders of the Company under the China Accounting Standards for Business Enterprises amounted to RMB183,374 million.

The Board proposed the payment of a final dividend in cash of RMB1.81 per share (inclusive of tax) for the year 2020 based on the total share capital registered on the equity registration date of implementing equity distribution. According to the total share capital of 19,868,519,955 shares of the Company as at 26 March 2021, the final dividend totals RMB35,962 million (inclusive of tax), accounting for 100.3% of the profit for the year attributable to equity holders of the Company under the International Financial Reporting Standards, or 91.8% of the net profit for the year attributable to equity holders of the Company under the China Accounting Standards for Business Enterprises. In addition, in 2020, the Company repurchased a total of 21,100,500 H shares for a consideration of HKD303.12 million (excluding commission and other expenses), accounting for approximately 0.7% of the profit for the year attributable to the owners of the Company under the International Financial Reporting Standards and 0.7% of the net profit attributable to the equity holders of the Company under the China Accounting Standards for Business.

2. The above final dividend plan for year 2020 is in compliance with the requirement of the Articles of Association and endorsed by the independent directors and approved by the Board. When recommending the plan for year 2020, the Board has attended to and considered the opinions and concerns of the shareholders of the Company. The Company will hold the 2020 annual general meeting on Friday, 25 June 2021 to consider the relevant resolutions, including the above dividend plans as proposed by the Board.
3. The final dividend for year 2020, which is denominated and declared in RMB, will be paid in RMB to holders of the Company's A shares, including holders of the Company's A shares through the Northbound Trading Link of the Shanghai-Hong Kong Stock Connect, hereinafter referred to as the "Northbound Shareholders", and holders of the Company's H shares through the Southbound Trading Link (including Shanghai and Shenzhen markets, hereinafter referred to as the "Southbound Shareholders"). Dividends to holders of the Company's H shares, except the Southbound Shareholders, are paid in HKD. The dividend paid in HKD is calculated according to the exchange rate based on the average benchmark rate of RMB against HKD, as published by the Bank of China five business days preceding the date of declaration of such dividend.
In accordance with the preliminary arrangement of profit distribution plan for year 2020 and annual general meeting of the Company, the final dividend for year 2020 for the Company's H shareholders are estimated to be distributed on or about 27 August 2021.

4. Pursuant to the Articles of Association:
- (1) After the SSE is closed in the afternoon on Tuesday, 22 June 2021, the shareholders of A shares of the Company and the proxies of shareholders as registered in the China Securities Depository and Clearing Corporation Limited Shanghai Branch are entitled to attend and vote at the 2020 annual general meeting of the Company;
- (2) According to the relevant regulations of China Securities Depository and Clearing Corporation Limited Shanghai Branch and market practice adopted for final dividend distribution for A shares, the Company will publish a separate announcement on implementation of equity distribution in respect of the distribution of final dividend for year 2020 to holders of A shares after the 2020 annual general meeting to determine the record date, ex-rights date and dividend distribution date for the distribution of final dividend for year 2020 to holders of A shares.
5. The arrangement of temporary closure of the register of members of H shares of the Company:
Temporary closure of the register of members
No.
Corresponding Rights
First Day (inclusive)Last Day (inclusive)The last day for registering members
The Company's share registrar for H shares
- 1 Attending and voting 22 June 2021
  25 June 2021
  4:30 p.m. on 21 June Computershare Hongat the 2020 annual general meeting
  (Tuesday)
  (Friday)
  2021 (Monday)Kong Investor Services Limited
- 2 Entitled to the final dividend for year 2020
3 July 2021
9 July 2021 (Friday)
(Saturday)
4:30 p.m. on 2 July 2021 (Friday)
Computershare Hong
Kong Investor Services Limited
6. In accordance with the Enterprise Income Tax Law of the PRC and its implementation regulations which came into effect on 1 January 2008, the Company is required to withhold and pay enterprise income tax at the rate of 10% on behalf of the non-resident enterprise shareholders whose names appear on the register of members for H shares of the Company when distributing final dividends. The Company shall withhold and pay enterprise income tax in respect of the final dividend for year 2020 of the Company for the non-resident enterprise shareholders whose name would
appear on the register of members for H shares of the Company on 9 July 2021.
7. According to Guo Shui Han [2011] No. 348 issued by the State Administration of Taxation, the Company shall withhold and pay individual income tax for dividend payable to the individual shareholders of H shares. The individual shareholders of H shares are entitled to the relevant preferential tax treatment pursuant to the provisions in the tax agreements entered into between their countries of residence and China or the tax arrangements between mainland China and Hong Kong (Macau).

If the individual shareholders of the H shares who are Hong Kong or Macau residents or residents of the countries which have an agreed tax rate of 10% with China, the Company shall withhold individual income tax at a rate of 10%. If the individual shareholders of the H shares are residents of countries which have an agreed tax rate of less than 10% with China, the Company shall withhold individual income tax on behalf of them in accordance with relevant provisions required by the Announcement of the State Administration of Taxation in relation to the Administrative Measures on Preferential Treatment Entitled by Non-resident Taxpayers under Tax Treaties (No. 35 Announcement of the State Administration of Taxation in 2019). If the individual shareholders of the H shares are residents of countries which have an agreed tax rate of over 10% but less than 20% with China, the Company shall withhold the individual income tax at the agreed actual rate. In case the individual shareholders of the H shares are residents of countries which have not entered into any tax agreement with China, or the agreed tax rate with China is 20% or otherwise, the Company shall withhold the individual income tax at a rate of 20%.

The Company shall use the registered address (hereinafter referred to as "registered address") as recorded in the register of members of H shares on 9 July 2021 as the criterion in determining the residence of the individual shareholders of H shares who are entitled to receive the final dividend for year 2020 of the Company, and withhold and pay individual income tax accordingly. If the residence of the individual shareholders of H shares is inconsistent with the registered address, such shareholders shall notify the Company's share registrar for H shares at or before 4:30 p.m. on 2 July 2021 with the relevant evidence at Computershare Hong Kong Investor Services Limited of 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong.

With respect to the Southbound Shareholders, according to the relevant requirements of China Securities Depository and Clearing Corporation Limited, China Securities Depository and Clearing Corporation Limited Shanghai Branch and Shenzhen Branch shall receive cash dividends distributed by the Company as the nominee of the Southbound Shareholders for Shanghai market and Shenzhen market, respectively and distribute such cash dividends to the relevant Southbound Shareholders through its depository and clearing system.

According to the relevant provisions under the "Notice on Tax Policies for Shanghai-Hong Kong Stock Connect Pilot Programme" (Cai Shui [2014] No. 81) and the "Notice on Tax Policies for Shenzhen-Hong Kong Stock Connect Pilot Programme" (Cai Shui [2016] No. 127), the Company shall withhold individual income tax at the rate of 20% with respect to dividends received by Mainland individual investors for investing in H-shares listed on the HKEx through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. For Mainland securities investment funds investing in shares listed on the HKEx through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, the above rules also apply and individual income tax shall be levied on dividends derived therefrom. The Company is not required to withhold income tax on dividends derived by Mainland enterprise investors, and such enterprises shall report the income and make tax payment by themselves. The record date and the relevant arrangements of dividend distribution for Southbound Shareholders are the same as that of the Company's shareholders of H shares.

9. The Company assumes no responsibility arising from any delayed or inaccurate determination of the status of the shareholders or any dispute over the mechanism of withholding. Shareholders should consult their tax advisers regarding the PRC, Hong Kong and other tax implications of owning and disposing of the Company's H shares.
10. Pursuant to the Articles of Association, the Company is entitled to forfeit the dividends which have been declared for more than six years but yet to be claimed, subject to compliance with relevant Chinese laws and administrative regulations. Shareholders are advised to collect the dividends distributed by the Company in a timely manner.

II. PERFORMANCE OF COMMITMENT

Detailed reasons shallFurther stepsBackground of CommitmentType of CommitmentParty Making the CommitmentCommitmentDate and Duration of CommitmentAny Time Limit for CommitmentTimely and Strict Performance of Commitmentbe specified if shall be specified commitment is if commitment not fulfilled in is not fulfilled intimetime

Commitment in relation to initial public offeringNon-competition undertakingChina EnergyThe two parties entered into "Non-competition Agreement" on 24 May 2005 and a "Supplemental Agreement to the Existing Non-Competition Agreement" on 1 March 2018. As an integrated platform which was responsible for the coal business and affiliated to China Energy, China Energy has committed not to compete with the Company in respect of the Company's principal businesses (coal exploration, mining, processing, sales; production and sales of comprehensive utilization of coal products; development and management of coal products; railway transportation; port transportation; the industry and systematic service related to the business aforementioned) whether inside or outside of the PRC, and granted the Company options and pre-emptive rights to acquire and be transferred from China Energy any business opportunities and assets which may pose potential competition.

24 May 2005, long-term

YesYes, in progressN/AN/A

To further formulate the performance of the Non-competition Agreement, the Resolution on the Performance of Non-competition Undertaking was approved at the 45th meeting of the second session of the Board on 27 June 2014 and the Announcement in relation to the Performance of Non-competition Undertaking was disclosed to public. The Company disclosed that it will gradually commence the acquisition of 14 assets of the former Shenhua Group Corporation Limited and its subsidiaries as planned ("Original Undertaking Assets") (For details, please refer to the H shares announcement dated 27 June 2014 and the A shares announcement of the Company dated 28 June 2014). The Company completed acquisitions of 100% equity of Ningdong Power, 100% equity of Xuzhou Power and 51% equity of Zhoushan Power in 2015.

Being the parent company subsequent to the restructuring, China Energy merged with China Guodian by the way of absorption. As approved in the 2018 first extraordinary general meeting of the Company, the Company entered into the Supplemental Agreement to the Existing Non-Competition Agreement with China Energy. It is agreed by both parties that other than the amendments in the Supplemental Agreement to the Existing Non-Competition Agreement, the clauses of the Existing Non-competition Agreement will not be changed.

Pursuant to the Supplemental Agreement to the Existing Non-competition Agreement, within five years after the completion of China Energy merging with China Guodian by the way of absorption, the Company will discretionally exercise the Options and the Pre-emptive Rights to acquire the assets within the retained businesses, and will no longer implement the 2014 Non-Competition Undertakings. The retained business refer to (1) original committed assets (excluding the completed acquisition of three equity assets by the Company in 2015) other than the assets of Conventional Power Generation Business, and (2) the unlisted businesses held by China Guodian which directly or indirectly compete with the core businesses of the Company (excluding the relevant assets that China Guodian undertook to inject into its subsidiary Inner Mongolia Pingzhuang Energy Co., Ltd. in 2007). For details, please refer to the H share announcement of the Company dated 1 March 2018 and the A shares announcement of the Company dated 2 March 2018.

III. APPROPRIATION OF FUNDS AND PROGRESS OF THE COLLECTION DURING THE REPORTING PERIOD
Applicable
✔ Not applicable
IV. AUDIT OPINIONS AND OTHER EXPLANATIONS
- (I) Explanation from the Board and the Supervisory Committee for the "non-standard audit report" issued by the auditors

Applicable

✔ Not applicable

(II) The Company's analysis and explanation about the reasons for and impact of changes in accounting policies, accounting estimates or accounting method
In order to meet the needs of the Company's business development, further strengthen fixed assets management, and more fairly reflect the impact of the Company's fixed assets on its financial position and operating results, with approval at the 26th meeting of the fourth session of the Board of the Company, from 1 January 2020, the Group changed the accounting estimates relevant to the depreciation of certain fixed assets in accordance with the relevant provisions of "Accounting Standards for Enterprises No. 4 - Fixed Assets". The change of accounting estimate does not have a significant impact on the Group's financial position and operating results. (For details, please refer to the Company's H-shares announcement and A-shares announcement dated 24 April 2020 and 25 April 2020, respectively.)
(III) The Company's analysis and explanation about the reasons for and impact of correction to material previous errors

Applicable

✔ Not applicable

V.	APPOINTMENT AND REMOVAL OF AUDITORS
Name of Domestic Auditors of the Company	KPMG Huazhen LLP
Remuneration of Domestic Auditors of the Company (RMB million)	7.15
Term of Auditing of Domestic Auditors of the Company (year)	2
Name of International Auditors of the Company	KPMG
Remuneration of International Auditors of the Company (RMB million)	1.4
Term of Auditing of International Auditors of the Company (year)	2
VI.
VII.

In 2020, the above two auditors did not serve as the external auditors of subsidiaries of the Company.

On 29 May 2020, KPMG Huazhen LLP and KPMG were appointed as the domestic and international (Hong Kong) auditors of the Company respectively for 2020 at the Company's 2019 Annual General Meeting. Saved as disclosed above, the Company did not replace auditors in any year of the last three years.

Name	Remuneration
Internal Control Auditor	KPMG Huazhen LLP	RMB0.95 million

INSOLVENCY OR RESTRUCTURING RELATED MATTERS

Applicable

✔ Not applicable

MATERIAL LITIGATION AND ARBITRATION

Applicable

✔ Not applicableAs at the end of the reporting period, the Group was not involved in any material litigation or arbitration. As far as the Group was aware, the Group did not have any material litigation or claim which was pending or threatened against the Group.

As at 31 December 2020, the Group was the plaintiff, defendant or the party of certain non-material litigations and arbitration. The management of the Company believes that any possible legal liability which may be incurred from the aforesaid cases will not have any material impact on the financial position of the Group.

VIII. SANCTIONS AND RECTIFICATIONS IMPOSED ON THE LISTED COMPANY AND

ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, DE FACTO CONTROLLER AND OFFEROR

Applicable

✔ Not applicable

IX. EXPLANATION FOR CREDIT OF THE COMPANY AND ITS CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLER
Applicable
✔ Not applicableAfter enquiring National Enterprise Credit Information Publicity System, neither the Company nor China Energy, the controlling shareholder of the Company, was included in the list of enterprises with serious illegal and dishonest acts.
X. THE SHARE OPTIONS INCENTIVE PLAN, EMPLOYMENT STOCK OWNERSHIP SCHEME OR OTHER EMPLOYEE INCENTIVE SITUATION OF THE COMPANY AND THEIR IMPACTS
Applicable
✔ Not applicable
XI. MATERIAL RELATED/CONNECTED TRANSACTIONS
(I) Related/Connected transactions during the daily operation

Pursuant to the requirements under the "Guidelines of SSE on Connected Transactions of Listed Companies", the Audit Committee of the Board of the Company shall perform the duties of control and daily management of related/connected transactions of the Company. The Company has a related/connected transaction team under the direct supervision of the Chief Financial Officer, which is responsible for the management of related/connected transactions; and has established a business process, which properly delineates the responsibilities of the Company, its subsidiaries and branches in the management of related/ connected transactions. The team has also established routine examinations, reporting systems and accountability systems in the subsidiaries and branches of the Company, as to ensure the related/connected transactions conduct in accordance with the terms of framework agreement.

On 21 June 2019, as approved at the 2018 annual general meeting, the Company and China Energy renewed the Mutual Coal Supply Agreement, Mutual Supplies and Services Agreement, and the Financial Services Agreement ("Former Financial Services Agreement") for 2020-2022 and the annual caps of transactions contemplated under the connected/ related party transactions mentioned above for each year from 2020 to 2022 on 22 March 2019.

The capital increase transaction of the Finance Company was completed and settled upon the approval of the 2019 annual general meeting of the Company, and in accordance with the Reply to the Intended Change of Registered Capital and Adjustment of Equity Structure of Shenhua Finance Co., Ltd. ( ᗫ׵ग़ശৌਕϞࠢʮ̡ᜊһൗ̅༟͉ʿሜ዆ٰᛆഐ࿴ٙҭᔧ') (Jing Yin Bao Jian Fu [2020] No. 529) issued by Beijing Regulatory Bureau of China Banking and Insurance Regulatory Commission ("CBIRC"). The Finance Company has changed from a subsidiary of the Company into a subsidiary of China Energy. The provision of financial services by the Finance Company to the Company and its holding subsidiaries (collectively referred to as "Members of the Group") constitutes the related/connected transactions of the Company. The 2020 Financial Services Agreement ("New Financial Services Agreement") entered into by the Company and the Finance Company on 27 March 2020 has become effective on 1 September 2020, and the Former Financial Services Agreement becomes invalid at the same time.

As being considered and approved by the fifth meeting of the fifth session of the Board of the Company, the 2021 Financial Services Agreement entered into by the Company and the Finance Company on 29 December 2020 has become effective on 1 January 2021 and shall remain in force until 31 December 2021.

As of the end of the reporting period and during the reporting period, the continuing related/ connected transaction agreements entered into by the Company include:

1. Non-exempt continuing related/connected transactions between the Group and China Energy Group

The related/connected transactions are beneficial for the Company to obtain a reliable and quality-assured provision of materials and services, lower operation risks and costs. The continuing provision of financial services by the Finance Company for Members of the Group after the deconsolidation is conducive to maintain the continuity of receiving financial services by Members of the Group, make full use of the functions of internal platform for financing and capital management, and reduce financing costs.

A. Mutual Coal Supply Agreement

On 22 March 2019 the Company and China Energy, the controlling shareholder of the Company, entered into the Mutual Coal Supply Agreement. The Mutual Coal Supply Agreement is effective from 1 January 2020 and will expire on 31

December 2022. Pursuant to the Mutual Coal Supply Agreement, the Group and China Energy Group mutually supplies coal.

The supply price under the Mutual Coal Supply Agreement is the product of the unit price RMB/tonne multiplied by the actual weight. The unit price of coal shall be determined by both parties after arm's length negotiations with reference to the then market price and conditions and the following factors, provided that the transaction terms shall not be less favourable than those provided by independent third parties:

(1) The national industrial policy as well as industry and market conditions in the PRC;
(2) The specified guidelines issued by NDRC setting out the coal purchase prices (if any);
(3) The current transacted coal prices of the local coal exchange or market in the PRC, i.e., the coal price with same quality that is offered to or offered by independent third parties under normal market conditions and normal commercial terms in the same or nearby regions. For local spot coal price, reference is generally made to (i) the spot price index of the local coal exchange or market in Bohai-rim region or nearby provinces as published on China Coal Market Website (www.cctd.com.cn) organised by China Coal Transportation & Sale Society in the PRC; (ii) the sale price of local large-scale coal enterprises as published by each coal industry website (if any); and/or (iii) price quotation of a few enterprises with comparable quality, quantity and location;

(4) The quality of the coal (including the estimated calorific value of coal as required by different coal-fired power generating units);

(5) The quantity of coal; and
(6) The transportation fees.

B. Mutual Supplies and Services Agreement

On 22 March 2019, the Company entered into the Mutual Supplies and Services Agreement with China Energy, the controlling shareholder of the Company. The Mutual Supplies and Services Agreement is effective from 1 January 2020 and will expire on 31 December 2022. Pursuant to the Mutual Supplies and Services Agreement, the Group and China Energy Group mutually supply products and provide services.

The pricing of the products and services provided under the Mutual Supplies and Services Agreement shall be determined in accordance with the general principles and in the order of the section below:

(a) Government-prescribed price and government-guided price: if at any time, the government-prescribed price is applicable to any particular product or service, such product or service shall be supplied at the applicable government prescribed price. Where a government-guided fee standard is available, the price will be agreed within the range of the government guided price;
(b) Tender and bidding price: where tender and bidding process is necessary under applicable laws and regulations, the price will be ultimately determined in accordance with the tender and bidding process;
(c) Market price: the price of the same or similar products or services provided by an independent third party during its ordinary course of business on normal commercial terms. The management shall consider at least two comparable deals with independent third parties for the same period when determining whether the price for any product or service transaction under this Agreement is the market price;
(d) Agreed price: to be determined by adding a reasonable profit margin over a reasonable cost. The management shall consider at least two comparable deals with independent third parties for the same period when determining the reasonable profit of any product or service transaction under this Agreement.

In addition to the above, for certain types of product or service, specific pricing policy is adopted as follows:

(a) Rail transportation: price prescribed by NDRC or other related government competent authorities;
(b) Construction: where tender and bidding process is necessary under applicable laws and regulations, the price ultimately determined in accordance with the tender and bidding process; where tender and bidding process is not necessary under applicable laws, the market price;
(c) Oil products: government-guided price;
(d) Power transaction: government-guided price shall prevail if there is any; the uniform clearing price shall prevail in centralized price bidding transaction; the price of recent comparable transaction shall be referred to in independently negotiated transactions;
(e) Hardware and software equipment and related services: market price (including tender and bidding price);
(f) Chemical products: market price;
(g) Production equipment and spare parts, office products: market price;
(h) Tendering services: price prescribed by NDRC;
(i) Technical consulting services: agreed price with a profit margin of approximately 10%;
(j) Information technology services: The parties negotiate and agree on the service price within the scope of budget, which is reviewed by professional institution(s) with pricing reviewing qualification according to relevant national and industrial rules and regulations on construction pricing, pricing mechanism and fee standards, with reference to the market customs of the information technology industry, actual standards and market price, taking into account the actual condition of the Company's information technology construction;
(k) Logistics and support services and training services: agreed price (cost plus a profit margin of approximately 5%);
(l) Social security and pension management services and staff data recording services: agreed price (cost plus a profit margin of approximately 5%); and
(m) Various daily administrative services to the headquarters of China Energy (exclusive of financial management and services): agreed price (cost plus a profit margin of approximately 5%).

C. The Former Financial Services Agreement entered into by the Company and China Energy

On 22 March 2019, the Company entered into the Former Financial Services Agreement with China Energy. The Former Financial Services Agreement is effective from 1 January 2020 and will expire on 31 December 2022. The Former Financial Services Agreement terminated on the completion date of capital increase transaction of the Finance Company (i.e. 1 September 2020).

Pursuant to the Former Financial Services Agreement, from January to August 2020, the Company has agreed to provide, through the Finance Company, financial services to members of China Energy Group, and the China Energy Group has agreed to provide, at the request of the Group and through the Finance Company, entrustment loans to the Group.

The pricing policy of the Former Financial Services Agreement is as follows:

(1) subject to compliance with the terms and conditions under the Financial Services Agreement, the Finance Company is appointed as one of the financial institutions to provide financial services to members of China Energy Group. Members of China Energy Group, as they may consider appropriate, may seek (additional) financial services from financial institutions other than the Finance Company;
(2) the interest rates for deposits placed by members of China Energy Group with the Finance Company shall be in compliance with relevant regulations of the PBOC and with reference to the benchmark deposit rate (if any) regularly promulgated by the PBOC, interest rates determined by major commercial banks for the same type of deposit provided to members of China Energy Group, and shall be determined on normal commercial terms;
(3) the interest rates for loans granted by the Finance Company to members of China Energy Group shall be in compliance with relevant regulations of the PBOC and with reference to the benchmark lending rate (if any) regularly promulgated by the PBOC, interest rates determined by the major commercial banks for the same type of loan provided to members of China Energy Group, and shall be determined on normal commercial terms; and
(4) the service fees charged by the Finance Company for the provision of the financial services to members of China Energy Group shall be determined according to the fee rates fixed by the PBOC or the CBIRC, and if such fixed fee rates are not available, the service fees shall be with reference to the fee rates charged by major commercial banks for comparable financial services provided to members of China Energy Group, and shall be determined on normal commercial terms.

D. The New Financial Services Agreement entered into by the Company and Finance Company

The Company entered into the New Financial Services Agreement with Finance Company on 27 March 2020. The agreement came into effect from the date of completion of capital increase transaction of Finance Company and expired on 31 December 2020. Hence, the agreement came into effect on 1 September 2020. After the completion of capital increase transaction, Finance Company is owned 60% by China Energy (the controlling shareholder of the Companyand becomes the related party (connected person) of the Company.

Pursuant to the New Financial Services Agreement, Finance Company would provide comprehensive facilities and credit (without any pledge and guarantee provided by the Members of the Group) and other financial services to the Members of the Group, and the Members of the Group may place deposit in Finance Company.

The pricing policy of the New Financial Services Agreement is as follows:

(1) In terms of deposits and loans or similar services provided by Finance

Company to Members of the Group, subject to compliance with the relevant rules and regulations of PBOC, CBIRC and other relevant regulatory authorities:

(i) The interest rates for deposits placed by Members of the Group with Finance Company shall be no less than the interest rate paid by major commercial banks in the PRC for comparable deposits services provided to Members of the Group and shall be negotiated in normal commercial terms;
(ii) The interest rates for loans granted by Finance Company to Members of the Group shall be no more than the benchmark loan interest rate for the corresponding period stipulated by the PBOC and no more than the interest rate charged by major commercial banks in the PRC for comparable loans services provided to Members of the Group and shall be negotiated in normal commercial terms.
With respect to the deposit interest rate offered by Finance Company for deposits placed by Members of the Group, Finance Company will pay close attention to the benchmark interest rate stipulated by the PBOC on monthly basis and, by way of inquiry, ascertain the deposit interest rates of major commercial banks in the PRC (i.e. Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications), to ensure the interest rates for deposits placed by Members of the Group with Finance Company shall be no less than the interest rate paid by major commercial banks in the PRC for comparable deposits services provided to Members of the Group. Furthermore, price determination of deposits interest rate offered by Finance Company will be under strict supervision and the Company will enforce relevant internal approval procedures.

(2) In terms of paid services provided by Finance Company to Members of the Group:

(i) Finance Company can provide paid consultation, agency, settlement, transfer, investment, letter of credit, online banking, entrusted loan, guarantee, bill acceptance and other related services to Members of the Group.
(ii) Subject to compliance with the relevant rules and regulations of PBOC, CBIRC and other relevant regulatory authorities, the service fees charged by Finance Company for the provision of the above financial services to Members of the Group shall be no more than the service fees charged by major commercial banks in the PRC for comparable financial services provided to Members of the Group and shall be negotiated in normal commercial terms.

With respect to the service fees charged by Finance Company for provision of financial services to Members of the Group, Finance Company will, by way of inquiry, ascertain the service fees rate charged by major commercial banks on monthly basis and ensure the service fees charged by Finance Company for provision of financial services to Members of the Group shall be no more than the service fees charged by major commercial banks in the PRC for comparable financial services provided to Members of the Group. In addition, price determination of service fees charged by Finance Company will be under strict supervision and the Company will enforce relevant internal approval procedures.

E. The 2021 Financial Services Agreement entered into by the Company and Finance Company

The Company entered into the 2021 Financial Services Agreement with Finance Company on 29 December 2020. The agreement is effective from 1 January 2021 and will expire on 31 December 2021. Finance Company, 60% owned by China Energy (the controlling shareholder of the Company, is a related party (connected person) of the Company.

The pricing policy adopted by Finance Company in the provision of financial services to Members of the Group under the 2021 Financial Services Agreement is the same as the policy of the New Financial Services Agreement as stipulated in Clause D.

2. Non-exempt continuing connected transactions between the Group and other parties

F. Continuing Connected Transactions Framework Agreement between the Company and China State Railway Group Co., Ltd. ("China Railway")

China Railway Taiyuan Group Co., Ltd. ("Taiyuan Railway Bureau") is the parent company of Daqin Railway Co., Ltd., which is a substantial shareholder of Shuohuang Railway, a significant subsidiary of the Company. China Railway is the controlling shareholder of Taiyuan Railway Bureau. Therefore China Railway constitutes a connected person of the Company under the Hong Kong Listing Rules. On 28 October 2019, the Company and Taiyuan Railway Bureau which acted for and on behalf of China Railway entered into the Continuing Connected Transactions Framework Agreement, effective from 1 January 2020 to 31

December 2022. Pursuant to the agreement, the Group and China Railway Group (China Railway and its subsidiaries, including Taiyuan Railway Bureau Group (including Taiyuan Railway Bureau and its subsidiaries)) have agreed to provide transportation service, supply coal and provide other products and services to each other.

The pricing of the transactions under the Continuing Connected Transactions Framework Agreement shall be agreed in the implementation agreements, but shall be determined in accordance with the general principles below:

(a) The price of transportation service mutually provided by the China Railway Group and the Group shall be determined in the following priority:

(i) the prices as determined by the government;
(ii) if the prices are not specified by the government, the prices will be determined in accordance with the pricing standards and rules of national railways within the guidance prices set by the government;
(iii) if the prices are not specified by the government and the government has not set applicable guidance prices, the prices shall be determined in accordance with the applicable industry price settlement rules;
(iv) except for applying the prices specified by the government, the guidance prices set by the government and the industry settlement rules, if there are comparable market prices or pricing standards, priority shall be given to such market prices or pricing standards as reference to determine the prices upon negotiation;
(v) if none of the above-mentioned pricing standards is available, the prices shall be determined with reference to the prices of non-connected transactions between the connected parties and independent third parties;
(vi) if neither comparable market prices nor prices of non-connected transactions are available for reference, the prices shall be determined upon negotiation according to the aggregate of the total actual costs for providing the relevant services, reasonable profits and taxes and additional charges paid.

(b) The price of coal mutually supplied by the China Railway Group and the Group is the product of the unit price RMB/tone multiplied by the actual weight. The unit price of coal shall be determined by both parties after arm's length negotiations with reference to the market price and conditions and the following factors, provided that the transaction terms shall not be less favourable than those provided by independent third parties:
- (i) the national industrial policy as well as industry and market conditions in the PRC;
- (ii) the specified guidelines issued by NDRC setting out the coal purchase prices (if any);
- (iii) the current transacted coal prices of the local coal exchange or market in the PRC, i.e., the coal price with comparable quality that is offered to or offered by independent third parties under normal market conditions and normal commercial terms in the same or nearby regions. For local spot coal price, reference is made to (i) the spot price index of the local coal exchange or market in Bohai-rim region or nearby provinces as published on the website of ʕ਷๩ލ̹ఙၣ(www.cctd.com.cn) organised by China Coal Transportation& Sale Society (ʕ਷๩ލ༶ቖ՘ึ) in the PRC; (ii) the sale price of local large coal enterprises as published by each coal industry website (if any); and/or (iii) price quotation of one or more other enterprises with comparable quality, quantity and location (if any);
- (iv) the quality of the coal;
- (v) the quantity of coal; and
- (vi) the estimated transportation fees.
(c) The price of other products and services mutually provided by the China Railway Group and the Group shall be determined in accordance with the general principles and order of this section:
- (i) Government-prescribed price and government-guided price: if at any time, the government-prescribed price is applicable to any particular product or service, such product or service shall be supplied at the applicable government-prescribed price. Where a government-guided fee standard is available, the price will be agreed within the range of the government-guided price;
- (ii) Tender and bidding price: where tender and bidding process is necessary under applicable laws, regulations and rules, the price shall be ultimately determined in accordance with the tender and bidding process;
- (iii) Market price: The price will be determined as same as or similar to products or services provided by an independent third party during its ordinary course of business on normal commercial terms. The management shall consider at least two comparable deals with independent third parties for the same period when determining whether the price for any product or service transaction under this agreement is the market price; and

Significant Events (Continued)

(iv)Agreed price: to be determined by adding a reasonable profit margin over a reasonable cost. The management shall consider at least two comparable deals with independent third parties for the same period when determining the reasonable profit of any product or service transaction under this agreement.

In addition to the above, for certain types of product or service, specific pricing policy is adopted as follows:

(i) Rolling stock usage: market price.
(ii) Overhaul services and railway track maintenance services: price prescribed by NDRC or other related government competent authorities.
(iii) Equipment supply: tender and bidding price.
(iv) Business consulting and technical services: agreed price (cost plus a profit margin of approximately 5%).

The agreements A to E above are daily related transactions under the Shanghai Listing Rules, while the agreements A to F above are continuing connected transactions under the Hong Kong Listing Rules.

Implementation of and review opinions on the non-exempt continuing related/ connected transactions

In 2020, the implementation of the agreements A to D and F above is set out in the table below. In particular, the total amount of related/connected transactions for sale of products and provision of services by the Group to China Energy Group under the Mutual Coal Supply Agreement and the Mutual Supplies and Services Agreement amounted to RMB64,640 million, representing 27.7% of the revenue of the Group during the reporting period.

Provision of products and services by the Group to related/ connected persons and other inflows

Transaction amount Proportion

No.	Name of agreement
A	Mutual Coal Supply Agreement
B	Mutual Supplies and Services
Agreement
including: (1) Products
(2) Services
F	Continuing Connected Transactions
Framework Agreement

Prevailing during the in the same transaction reporting type of cap period transactions RMB million RMB million %

Purchase of products and services from related/connected persons by the Group and other outflows

Transaction amount Proportion

Prevailing during the in the same transaction reporting type of cap period transactions RMB million RMB million %

65,500 13,000

54,906 9,734 7,927 1,807 932

33.5

16,000 9,000

9,131 3,270

18.7

- 16.1

1,501 2.0

9.4 0.5

1,769 7.3

7,300

19,800

7,873 5.3

No.

Name of agreement

CFormer Financial Services Agreement

No.

Name of agreement

DNew Financial Services Agreement

Transaction item

Transaction	Transaction
cap during	amount
the valid	during the
period of	reporting
Transaction item	agreement	period
RMB million	RMB million
3,500	-
10,000	33
65,000	50,783
30,000	26,875
10,000	900
200	13
Transaction	Transaction
cap during	amount
the valid	during the
period of	reporting
agreement	period
RMB million	RMB million
100,000	24,222
20,500	20,364
200	1

(1) Total amount in relation to the provision of financial services of guarantee (including guarantee business within the business scope of financial enterprises, such as performance guarantee and quotation sharing) to members of China Energy Group
(2) Annual total transaction amount of bill acceptance and discount services
(3) Maximum daily balance (including interests accrued thereon) of deposits placed by members of China Energy Group
(4) Maximum daily balance of loans, consumption credit, buyer's credit and financial leasing (including relevant accrued thereon) granted to members of China Energy Group
(5) Maximum daily balance (including interests accrued thereon) of entrusted loans granted by China Energy and its subsidiaries to the Company and/or its subsidiaries through Finance Company
(6) Annual total fee charged for providing the members of China Energy Group with consultancy, agency, settlement, transfer, investment, lease finance, letter of credit, online banking, entrusted loan, guarantee, acceptance of bill and other financial services

(1) Maximum daily balance of comprehensive facilities provided by Finance Company to the members of the Company (including loans, credits, bill acceptance and discount, guarantee, performance guarantee, overdrafts, opening letters of credit, etc., inclusive of accrued interest thereon)
(2) Daily deposit balance of the members of the Company in Finance Company (inclusive of accrued interest thereon)
(3) Total fee charged by Finance Company for providing the members of the Company with financial services, including but not limited to consultancy, agency, settlement, transfer, investment, letter of credit, online banking, entrusted loan, guarantee, acceptance of bill and other services to the members of the Company

The above continuing related/connected transactions were in the ordinary course of business of the Company, and were strictly in compliance with procedures of review and approval by independent directors and independent shareholders as well as disclosure requirements.

The independent non-executive directors of the Company have confirmed to the Board of the Company that they have reviewed the transactions contemplated under the agreements A to D and F above and are of the view that (1) those transactions were entered into in the ordinary course of business of the Group; (2) those transactions were on normal commercial terms or better terms; and (3) those transactions were conducted according to the agreements governing them on terms that are fair and reasonable and in the interest of the shareholders of the Company as a whole.

KPMG, the international auditors of the Company, have reviewed the continuing connected transactions under the agreements A to D and F above and issued a letter to the Board, indicating that they were not aware of any matter for which they would consider that the continuing connected transactions above (1) were not approved by the Board; (2) were not conducted according to the Company's pricing policy in terms of all material aspects; (3) were not conducted according to the terms of the relevant agreements in terms of all material aspects; and (4) incurred an aggregate amount for the year ended 31 December 2020 that had exceeded the annual caps disclosed in the Company's announcements on the continuing connected transactions.

21 types of related party transactions were disclosed in Note 44 of the financial statements for the year 2020 prepared by the Company under the International Financial Reporting Standards. According to the Hong Kong Listing Rules, except for the transactions under item ii "income from entrusted loans" and the transactions in relation to the purchase of coal from associates of the Group under item vi "ancillary and social services", item x "purchase of coal" and item xvi "other income", all of the other related party transactions disclosed in Note 44 constituted connected transactions under the Hong Kong Listing Rules and were required to be disclosed in accordance with Chapter 14A of the Hong Kong Listing Rules. The Company has complied with the disclosure requirements of Chapter 14A of the Hong Kong Listing Rules in respect of disclosure of the above connected transactions and continuing connected transactions.

(II) Related transactions regarding the acquisition and disposal of assets or equity

As considered and approved at the fifth meeting of the fifth session of the Board of the Company, Shendong Power, a wholly-owned subsidiary of the Company transferred 100% equity interests of Fuping Thermal Power to Guoyuan Power at a price of RMB2,258.2617 million which is the appraised value. Guoyuan Power, 100% owned by China Energy (controlling shareholder of the Company), is a related party (connected person) of the Company. After the transfer, Fuping Thermal Power ceased to be consolidated into the financial statements of the Company. For details, please refer to the H share announcement dated 29 December 2020 and A share announcement dated 30 December 2020 of the Company.

(III) Material related transactions regarding joint external investments

1. On 27 March 2020, the Company, Shuohuang Railway, Zhunge'er Energy, Baoshen Railway, China Energy (the controlling shareholder of the Company) and Finance Company entered into the Capital Increase Agreement of Finance Company. China Energy proposed to subscribe additional registered capital of RMB7.5 billion in Finance Company by way of cash contribution at a consideration of RMB13,273.7160 million. The Company, Shuohuang Railway, Zhunge'er Energy and Baoshen Railway, all being subsidiaries controlled by the Company, waived the pre-emptive rights in respect of the capital increase. As approved at the 2019 annual general meeting of the Company as well as relevant regulatory authorities, the above capital increase transaction of Finance Company was completed on 1 September 2020. Since then, Finance Company is 60% owned by China Energy and not consolidated into the financial statements of the Company. For details, please refer to the H share announcement on 27 March 2020, A share announcement on 28 March 2020, the H share announcement on 9 September 2020 and the A share announcement on 10 September 2020 of the Company.
2. As approved at the fifth meeting of the fifth session of the Board of the Company, on 22 January 2021 the Company, as a limited partner, contributed RMB4 billion with its own funds to participate in the establishment of Beijing Guoneng New Energy Industrial Investment Fund (Limited Partnership)and signed the Partnership Agreement of Beijing Guoneng New Energy Industrial Investment Fund (Limited Partnership) with limited partners including Guohua Energy Investment Co., Ltd. ("Guohua Investment") and general partners including Guohua Investment Development Asset Management (Beijing) Co., Ltd. ("Guohua Asset Management"). Guohua Investment is a wholly-owned subsidiary of China Energy, the controlling shareholder of the Company and Guohua Asset Management is a wholly-owned subsidiary of Guohua Investment, all being the related parties (connected persons) of the Company. For details, please refer to H share announcement on 29 December 2020, 22 January 2021, 9 February 2021 and 26 February 2021 and A share announcement on 30 December 2020, 23 January 2021, 10 February 2021 and 27 February 2021 of the Company.

(IV) Debts and liabilities between related parties

Unit: RMB million

Funds offered by related partiesRelated parties

Relationship

Funds provided to related parties

to the Group


Generation Co., Ltd.	parent company
Other related parties	Others
Total

Opening	Amount	Closing	Opening	Amount	Closing
balance	incurred	balance	balance	incurred	balance
-	-	-	874	-	874
-	19,750	19,750	-	24,076	24,076
Anhui Anqing Wanjiang Power Controlling subsidiary of the
176	(121)	55	-	-	-
484	(23)	461	-	-	-
660	19,606	20,266	874	24,076	24,950

China Energy Finance Company

Controlling shareholder Controlling subsidiary of the parent company

Significant Events (Continued)

Reasons for debts and liabilities between related parties

Repayment of debts and liabilities between related parties

(1) Long and short-term borrowing were provided by the Company to China Energy. (2) The Group's deposits and loans with Finance Company. (3)Prior to the jointly establishment of Beijing GD by the Company with GD Power, the finance lease provided by the Company to Anhui Anqing Wanjiang Power Generation Co., Ltd., its former subsidiary, through Shenhua Lease Company. As approved at the general meeting of the Company, the financial lease payment will be gradually returned in accordance with the original agreement/contract arrangement, that is, the repayment will be gradually completed in 2021. (4)The funds provided to other related parties are entrusted loans.

Internal decision procedures have been performed in respect of the above transfer of related debts and liabilities in accordance with relevant regulations.

Currently, the principal and interests of the above entrusted loans, finance leasing receivables and borrowings are repaid in a normal manner in accordance with the repayment schedule.

Undertakings related to debts and liabilities between related parties

N/A

Impacts of debts and liabilities between related parties on the operating results and financial position of the Company

The above entrusted loans and borrowings are beneficial to the normal commencement of relevant project construction and production operation of the Company and have no material impact on the operating results and financial position of the Company.

XII. MATERIAL CONTRACTS AND THEIR PERFORMANCE

(I)Trust, contracting and leasing

Applicable

✔ Not applicableDuring the reporting period, the Company did not enter into or have any management and administration contracts in respect of the whole or any material part of the business of the Company.

(II) Guarantees

Unit: RMB million

1. Guarantee provided by the Company to external parties (excluding guarantee granted to its subsidiaries)

Date of

GuarantorRelationship between the guarantor and the listed companyprovision of guarantee

(execution BeginningWhether performance WhetherWhether Amount of counterWhether guarantee is for the benefitAmount date ofdate ofExpiry date of Type ofhas beenguarantee is guarantee guarantee is of relatedGuaranteed guaranteed agreement guarantee guarantee guarantee completed overdueoverdueprovidedpartiesRelationship

Shenbao EnergyControlling Hulunbei'ersubsidiaryLiangyi Railway Company Limited

81.30 2008.08.30 2008.08.30 2029.08.29 Joint and several liability guarantee

NoNo

0 NoNoN/A

Total amount of guarantee provided during the reporting period

(121.69)

(excluding guarantee provided to its subsidiaries)

Total balance of guarantee at the end of the reporting period (A)

81.30

(excluding guarantee provided to its subsidiaries)

2. Guarantee provided by the Company and its subsidiaries for the benefit of its subsidiaries

Total amount of guarantee provided for the benefit of subsidiaries during the reporting period

(3,763.75)

Total balance of guarantee provided for the benefit of subsidiaries at the end of the reporting period (B)

3,262.45

3. Total amount of guarantee (including guarantee for the benefit of its subsidiaries)

Total amount of guarantee (A+B)	3,343.75
Proportion of total amount of guarantee to the net assets attributable to equity holders of	0.9
the Company at the end of the year under China Accounting Standards
for Business Enterprises in 2020 (%)
Including:
Amount of guarantee provided for the benefit of shareholders, de facto controller	0
and their related parties (C)
Amount of guarantee directly or indirectly provided for the benefit of parties	3,343.75
with a gearing ratio in excess of 70% (D)
Portion of the total amount of guarantee in excess of 50% of net assets (E)	0
Aggregated amount of the above three amounts of guarantee (C+D+E)	3,343.75
Description of the potential joint and several repayment liability for outstanding guarantee	Please refer to below
Description of guarantee	Please refer to below

Note: The balance of guarantee provided by the subsidiary to external parties of total amount of guarantee at the end of the reporting period equals to the amount of external guarantee of the subsidiary multiplies by the shareholding of the Company in the subsidiary.

As at the end of the reporting period, the total balance of the amount of guarantee provided by the Group amounted to RMB3,343.75 million, including:

(1) As at the end of the reporting period, the guarantee provided by Shenbao Energy, a subsidiary of which the Company owns 56.61% of the shares, for the benefit of external parties was as follows: prior to the acquisition of Shenbao Energy by the Company in 2011 and pursuant to the Guarantee Agreement on the Syndicated Renminbi Loan for the Cooperative Railway Project Connecting Yimin and Yiershi Newly Constructed by Hulunbei'er Liangyi Railway Company Limited, in 2008, Shenbao Energy, as one of the guarantors, provided joint and several liability guarantee to Hulunbei'er Liangyi Railway Company Limited (hereinafter referred to as the "Liangyi Railway Company", of which Shenbao Energy owns 14.22% of the shares) for the syndicated loans. The major liability guaranteed was the debts due to the lender with a maximum balance of RMB207.47 million from 2008 to 2027, regardless of whether the debt is due when the above period expires. The above syndicated loans will fall due by tranches between 2011 and 2026. The Guarantee Agreement provides that the guarantee period of the debts borne by the guarantor shall be calculated from the due date of each tranche to two years after the due date of the last tranche, i.e. 2029.
Given that Liangyi Railway Company failed to pay the loan interest on time due to its deteriorating business operation, as resolved by the shareholders' general meeting of Liangyi Railway Company, additional capital was injected into Liangyi Railway Company by its shareholders (including Shenbao Energy). Shenbao Energy has injected an accumulated amount of RMB11.82 million into Liangyi Railway Company. As of the end of the reporting period, Shenbao Energy, in proportion to its shareholding, repaid the principal on the loans on behalf of Liangyi Railway Company Limited amounting to a total of RMB57.59 million. Shenbao Energy already made full provision for impairment on its 14.22% equity interest in Liangyi Railway Company and the repayment amount paid on its behalf. Together with other shareholders, Shenbao Energy will continue to call for improvement of business operation of Liangyi Railway Company. As at 31 December 2020, Liangyi Railway Company had a gearing ratio of 149.3%.
(2) As at the end of the reporting period, the external joint and several liability counter guarantee provided by Zhuhai Coal Dock, a controlling subsidiary of the Company is as follows:
Zhuhai Coal Dock entered into a loan contract with Zhuhai branch of SPD Bank for a term of 10 years (from 30 September 2017 to 30 September 2027) with an amount of RMB336.0 million, pursuant to which Guangdong Yudean Farnon Investment Co., Ltd. ("Yudean Farnon") and Zhuhai Port Co., Ltd. ("Zhuhai Port") provided joint and several liabilities guarantee for such loan with an amount of RMB168 million, respectively. The guarantee periods are both two years from the expiry of term of debt performance by the debtor in the loan contract. Zhuhai Coal Dock provided counter guarantee of joint and several liabilities to Yudean Farnon and Zhuhai Port with the caps of counter guarantee amount of RMB168 million, respectively. The above counter guarantee was approved at the eleventh meeting of the fourth session of the Board of the Company.

As at the end of the reporting period, Zhuhai Coal Dock has entered into a counter guarantee contract for joint and several liabilities counter guarantee ("Counter Guarantee Contract") with Zhuhai Port and Yudean Farnon respectively, with the caps of counter guarantee amount of RMB168 million. The counter guarantee period would be from the effective date of the Counter Guarantee Contract to the settlement of all payment by Zhuhai Coal Dock.

As of 31 December 2020, loan of RMB233 million to Coal Dock granted by Zhuhai branch of SPD Bank has been all repaid.

(3) As of the end of the reporting period, the amount of guarantee between subsidiaries in consolidated reports of the Company, in proportion to its shareholding, amounted to approximately RMB3,262.45 million, which was mainly due to the fact that Shenhua Hong Kong Limited, the wholly-owned subsidiary of the Company, provided guarantees for the issuance of USD0.5 billion bonds by China Shenhua Overseas Capital Co., Ltd., its wholly-owned subsidiary. The loan guarantees provided by Shenhua Funeng Power Co., Ltd., which was 51% indirectly held by the Company, for its holding subsidiaries has been released.

For the details of the opinions of the independent Directors, please refer to the relevant reports simultaneously disclosed with this Report.

(III) Entrusted cash asset management

I. Entrusted wealth management (1) General status of entrusted wealth management

Unit: RMB million

Maximum

Outstanding	Overdue
ending	Uncollectible
Type of products	Source of funding	Balance Note	balance	amount
Banks' wealth management products	Own fund	33,200	0	0

Note: Maximum balance refers to the daily highest balance of the entrusted wealth management of such type of the Group in 2020.

Significant Events (Continued)

(2)Individual entrusted wealth management

No.

Type of entrusted wealth management productsAmount of Initial dateExpiry dateentrusted of entrusted of entrustedwealth wealthwealthSource ofTrustorTrustee

management management management fund

Unit: RMB million

Investment of fundDetermination of compensation

Annualized rate of return

Whether it Amount of has been principal through redeemed legal in 2020 procedures

1 China Shenhua Industrial and
Commercial Bank of ChinaBanks' wealth management products
5,000 26 December 2 April 2020 2019
Own fundHigh-liquidityOne-off paymentassets including of principal with
3.50%
89.4
5,000 Yesbonds and depositsaccrued interest upon expiry
2 China Shenhua Agricultural Bank Banks' wealthof Chinamanagement products
- 5,000 29 September 30 March 2020 Own fund 2019
  High-liquidityOne-off paymentassets including of principal with
  3.15%
  79.0
  5,000 Yesbonds and depositsaccrued interest upon expiry
3 China Shenhua Industrial and
Commercial Bank of ChinaBanks' wealth management products
- 500 24 October 2019
  23 January 2020
  Own fundBonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry
  3.70%
  5.2
  500 Yes
4 China Shenhua China ConstructionBanks' wealthBankmanagement products
- 2,000 22 November 20 May 2020 2019
  Own fundHigh-liquidityOne-off paymentassets including of principal with
  3.00%
  29.6
  2,000 Yesbonds and depositsaccrued interest upon expiry
5 China Shenhua China Merchants Banks' wealth
- 1,000 22 November 21 FebruaryOwn fundBonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry
  3.80%
  9.5
  1,000 YesBankmanagement products
  2019
  2020
6 China Shenhua Industrial and
Commercial Bank of ChinaBanks' wealth management products
- 200 22 November 21 FebruaryOwn fundBonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry
  3.70%
  1.9
  200 Yes
  2019
  2020
7 China Shenhua Industrial Bank

(China)Banks' wealth management products

8,000 29 November 29 May 2020 2019

Own fundHigh-liquidityOne-off paymentassets including of principal with

3.05%

121.7

8,000 Yesbonds and depositsaccrued interest upon expiry

Section VI

Type of entrusted wealth management productsAmount of Initial dateExpiry dateentrusted of entrusted of entrustedwealth wealthwealthSource ofNo.

TrustorTrustee

management management management fund

Significant Events (Continued)

Unit: RMB million

Whether it Amount of has beenInvestment of fundDetermination of compensation

Annualized rate of return

principal through redeemed legal in 2020 procedures

8 China Shenhua Industrial and
Commercial Bank of ChinaBanks' wealth management products
500 2 December 2019
1 March 2020 Own fundBonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry
3.70%
4.7
500 Yes
9 China Shenhua Postal Savings
Bank of ChinaBanks' wealth management products
- 1,000 17 December 17 March 2020 Own fund 2019
  Bonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry
  3.60%
  8.9
  1,000 Yes
10 China Shenhua Industrial and
Commercial Bank of ChinaBanks' wealth management products
- 1,000 18 December 22 June 2020 Own fund 2019
  High-liquidityOne-off paymentassets including of principal with
  3.15%
  16.2
  1,000 Yesbonds and depositsaccrued interest upon expiry
11 China Shenhua Industrial and
Commercial Bank of ChinaBanks' wealth management products
- 1,000 18 December 23 June 2020 Own fund 2019
  High-liquidityOne-off paymentassets including of principal with
  3.15%
  16.3
  1,000 Yesbonds and depositsaccrued interest upon expiry
12 China Shenhua China Everbright Banks' wealth
- 1,000 20 December 19 MarchOwn fundBonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry
  3.80%
  9.4
  1,000 YesBankmanagement products
  2019
  2020
13 China Shenhua Bank of ChinaBanks' wealth management products
- 1,000 24 December 24 MarchOwn fundBonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry
  3.55%
  8.9
  1,000 Yes
  2019
  2020
14 China Shenhua China

Construction BankBanks' wealth management products

1,000 24 December 24 MarchOwn fundBonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry

3.55%

8.9

1,000 Yes

2019

2020

Unit: RMB million

No.

TrustorTrusteeType of entrusted wealth management productsAmount of Initial dateExpiry dateentrusted of entrusted of entrustedwealth wealthwealthSource ofmanagement management management fundInvestment of fundDetermination of compensation

Annualized rate of return

Whether it Amount of has been principal through redeemed legal in 2020 procedures

15 China Shenhua China
Construction BankBanks' wealth management products
4,000 25 December 23 June 2020 Own fund 2019
High-liquidityOne-off payment
3.10%
61.2
4,000 Yesassets including of principal withbonds and depositsaccrued interest upon expiry
16 China Shenhua China CITIC

BankBanks' wealth management products

1,000

26 December 26 June 2020 Own fund 2019

Bonds and money market instrument assets, non-standardized credit assets and equity assetsOne-off payment of principal with accrued interest upon expiry

3.85%

9.6

1,000 Yes

As of the end of 2020, all the entrusted wealth management products of the Group have been recovered upon maturity. The Group did not have any failure of redeeming or cashing principal when due and no provision for impairment for the above wealth management products has been made.

II. Entrusted loans (1) General status of entrusted loans

Unit: RMB million

Maximum	Outstanding	Overdue
balance	ending	uncollectible
Type of products	Source of funding	in 2020 Note	balance	amount
Entrusted loans	Own fund	857.4	400.0	37.4

Note: Maximum balance in 2020 refers to the daily highest balance of the entrusted loans of such type of the Group in 2020.

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CSEC - China Shenhua Energy Company Ltd. published this content on 28 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 March 2021 11:05:03 UTC.

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Apr. 26	China Shenhua Energy Company Limited Reports Earnings Results for the First Quarter Ended March 31, 2024	CI
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