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Operating Results

(i) Overview

According to the audited consolidated financial statements for 2016, the Group’s net profit for the year was RMB647 million, representing an increase of 242.3% as compared with 2015, of which, the profit attributable to the equity holders of the Group was RMB542 million, representing an increase of 222.6% as compared with 2015, mainly due to a significant increase in realized revenue from the wind power business as compared with last year.

(ii) Revenue

In 2016, the Group recorded revenue of RMB4,384 million, representing an increase of 3.8% as compared with 2015, of which:

1. Natural gas business recorded revenue of RMB2,401 million, representing a decrease of 14.1% as compared with 2015. This was mainly attributable to a decrease in gas sales unit price in 2016..

2. Wind power business achieved revenue of RMB1,983 million, representing an increase of 38.9% as compared with 2015. This was mainly due to an increase in installed capacity and utilization hours of operational equipment, which resulted in an increase in sales volume of electricity and revenue of electricity sales.

(iii) Other income and net gains

During the reporting period, the Group recorded other income and net gains of RMB97 million, representing an increase of 26.0% as compared with 2015. This was mainly due to the redemption of financing capital of RMB230 million by the Company during the report period, which resulted in an increase in investment revenue and an increase of value-added tax refunds.

(iv) Operating costs

During the reporting period, the Group’s operating costs (including cost of sales, selling and distribution expenses, administrative expenses and other expenses) aggregated to RMB3,252 million, representing a decrease of 9.5% as compared with 2015, of which:

1. Cost of sales was RMB2,943 million, representing a decrease of 5.2% as compared with 2015. This was mainly because the purchase of natural gas represented the major sales costs of the Group, and the unit price decreased which lowered the cost of purchasing gas.

2. Administrative expenses was RMB302 million, representing an increase of 11.0% as compared with 2015. This was mainly due to the corresponding increase in staff costs and administrative costs as a result of the expansion of the Group’s production scale.

3. Other expenses were RMB7 million, representing a decrease of 96.8% as compared with 2015. This was mainly due to a provision for bad debts made by Hebei Natural Gas last year.

(v) Finance cost

During the reporting period, the Group’s finance costs were RMB549 million, representing a decrease of 4.0% as compared with RMB572 million in 2015. This was mainly due to the low-interest-rate external financing loan secured by the Company and an enhanced capital management which effectively lowered the interest expenses.

(vi) Share of profit of associates

During the reporting period, the Group’s share of profit of associates was RMB65 million, representing an increase of RMB2 million as compared with RMB63 million last year. This was mainly due to a slight increase in the profitability of the associated entities.

(vii) Income tax expenses

During the reporting period, the Group’s net income tax expense was RMB97 million, representing an increase of RMB86 million as compared with RMB11 million last year. This was mainly due to a significant increase in profit of the wind power business of the Group during the reporting period as compared with 2015, which in turn resulted in an increase in income tax expenses.

(viii) Net profit

During the reporting period, the Group recorded a net profit of RMB647 million, representing an increase of 242.3% as compared with 2015. Among others, the natural gas segment realized a net profit of RMB119 million, representing an increase of 213.2% as compared with 2015, which was mainly due to a provision of RMB214 million for bad debts made by Hebei Natural Gas, which resulted in a significant decrease in profit last year. the wind power segment recorded a net profit of RMB536 million, representing an increase of 232.9% as compared with 2015, which was mainly due to a significant increase in sales revenue of wind power sector and an increase in gross profit margin.

(ix) Profit attributable to owners of the Company

During the reporting period, the profit attributable to owners of the Company was RMB542 million, representing an increase of RMB374 million as compared with RMB168 million last year. This was primarily attributable to an increase in net profit of the Group as compared with last year.

The basic earnings per share attributable to shareholders of the Company was RMB0.1458.

(x) Profit attributable to non-controlling interests

During the reporting period, the profit attributable to non-controlling interests of the Company was RMB106 million, representing an increase of RMB85 million as compared with RMB21 million last year.

This was primarily attributable to an increase in net profit of the Group as compared with last year.