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Inv. & Fin.

I. Investment Overview

HYDROCHINA ZHONGNAN has commenced its investment and financing business since 2004 for the purpose of further strengthening its hydropower survey and design market and expanding its EPC market; it mainly engaged in the cooperation with a number of large-scale electric power investment enterprises and had joint stocks in the fields of hydropower, pumped storage and wind power. Since the year 2008, HYDROCHINA ZHONGNAN has began its autonomous investment in water affairs and wind power projects, signifying the turning point of the investment business to one of the business areas of HYDROCHINA ZHONGNAN to realize business transformation and diversified development.By Sep. 30th, 2012, HYDROCHINA ZHONGNAN has made long-term outward investment to all together 15 companies (including 8 joint stock companies, 2 holding companies and 5 wholly-owned companies) with the accumulated input capital fund of long-term equity investment up to RMB 824.60 million yuan (including 4 hydropower projects, 1 wind power project and other 3 projects of shareholding investment) and the accumulated input capital found of wholly-owned or investment holding at RMB 347.92 million yuan (including 5 BOT or TOT water affair investment projects and 2 wind power projects). The attributable installed capacity for electric power project is about 481 MW, including the attributable installed capacity of 86 MW already put into operation and the 375MW under construction; the daily water treatment quantity for water investment is 305000 ton/day with the current scale of operation up to 160000 ton/day.

Summary of Long-term Investment

in million yuan

No.

1

Name of Invested Company

Beijing Millennium Engineering Technology Co., Ltd.

Investment

Date

Jan. 2002

Investment

Proportion

6.25%

Input of

Capital Fund

0.50

2

Huaihua Yuan River Electric Power Development Co., Ltd.

Apr. 2004

5.00%

25.00

3

Chongqing Youshui Hydropower Development Co., Ltd.

Jul. 2004

30.00%

87.43

4

Jiangsu Guoxin Dongling Wind Power Co., Ltd.

Jan. 2006

30.00%

108.00

5

Jiangsu Guoxin Liyang Pumped Storage

Power Generation Co., Ltd.

Mar. 2007

10.00%

80.00

6

HYDROCHINA International Engineering Co., Ltd.

Sep. 2007

4.50%

4.50

7

HYDROCHINA Investment Co., Ltd.

Sep. 2007

4.00%

81.25

8

HYDROCHINA Taoyuan Development Co., Ltd.

Aug. 2009

30.00%

90.00

9

HYDROCHINA Guiyang Power Development Co., Ltd.

Dec. 2011

100.00%

90.00

10

HYDROCHINA Huarong Wind Power

Development Co., Ltd.

Jul. 2012

100.00%

20.00

11

Guiyang Guoshui Wastewater Treatment Corp.

Nov. 2008

92.00%

15.18

12

Chenzhou Guoshui Wastewater Treatment Corp.

Sep. 2009

98.00%

21.56

13

Yunnan Guoshui Environmental Protection Technology Corp.

Nov. 2010

100.00%

140.00

14

Hunan Yongxing Guoshui Wastewater Treatment Corp.

Feb. 2011

100.00%

11.18

15

Zhejiang Guoshui Environmental Protection

Technology Corporation

Oct. 2011

100.00%

50.00


II. Brief Introduction to Part of the Investment Projects

1. Autonomous Investment Projects

(1)Qiaoshi Wind Farm in Guiyang County

Qiaoshi Wind Farm in Guiyang County is the first wind farm proposed to be invested by HYDROCHINA ZHONGNAN in Hunan Province. It is located in Heye Town of Guiyang County with a geographical coordinates at 112°38′-42′ east longitude and 25°27′-31′north altitude. The planning capacity already confirmed by anemometry for this project is about 80MW; the total estimate cost of this project is about RMB 800 million yuan and will be constructed in two phases. The Phase I Project was commenced in Apr. 2012 and has began to generate power by its first units in Oct. 2012, making great achievement of the year in terms of approval, construction and production.

(2)Guiyang Sewage Treatment Plant

The sewage treatment plant in Guiyang County is the first water affair project constructed by HYDROCHINA ZHONGNAN in the mode of autonomous investment; it is located in Xiangxincheng village, the suburb of Guiyang County and is constructed in two phases, with a total capacity of 60,000 m3/d and a recent capacity of construction of 30,000 m3/d; the plant applies the treatment process of Carrousel oxidation ditch and has a design effluent quality up to the Level I Type B standard as specified in Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant (GB 18918-2002). The Guiyang Sewage Treatment Plant passed the environmental protection acceptance organized by Chenzhou Environmental Protection Bureau on Oct. 31st, 2009, being one of the first sewage treatment plants passing the environmental protection acceptance in the three-year action plan of Hunan urban wastewater treatment facilities; it was officially put into commercial operation on Dec. 8th, 2009.

(3)Chenzhou Third Sewage Treatment Plant

Chenzhou Third Sewage Treatment Plant is located on the west bank of the East River in Jintian Village of Bailutang Town of Suxian District of Chenzhou City; the plant was constructed in three phases and has a total capacity of 180,000m3/d, with the capacity at Phase I of 45,000m3/d, the capacity at Phase II 45,000m3/d and that at Phase III 90,000m3/d. The plant applies the A2/O (i.e. A-A-O, anaerobic-anoxia-oxic process) technology and its design effluent quality reaches the Level I Type B standard as specified in Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant (GB 18918-2002). On Nov. 5th, 2009, the engineering construction of Chenzhou Third Sewage Treatment Plant was officially started and on Oct. 16th, 2010 the commissioning of daily water supply succeed.

(4)Productive water plant of Anning Industrial Park

The productive water plant of Anning Industrial Park in Yunnan Province and its auxiliary pipe network project are located at the northeast corner of the land for steel expansion processing in the paillasse area of Anning Industrial Park, including the water intake project, plant area purification project and water transportation pipe network project. The total planned construction scale of this project is 250,000m3/d and the advanced treatment capacity at Phase I construction is 60,000m3/d, mainly for the supply of productive water up to the make-up water quality standard in an open-type recirculating cooling water system as specified in the Reuse of Urban Recycling Water- Water Quality Standard for Industrial Uses (GB/T19923—2005); the raw water supply capacity stands at 36,000m3/d, mainly the productive cooling raw water supplied by Wuhan Iron and Steel (Group) Corp. (Kunming Iron & Steel Holding Co., Ltd.) . In Oct. 2010, the Administration Committee of Anning Industrial Park has signed the BOT agreement with HYDROCHINA ZHONGNAN with 25 years of concession period.

(5)Wangjiatan Reservoir Water Supply Project

Wangjiatan Reservoir is located in the southwest of Anning City, on the Wangjiatan River upstream of the Ba River of the tributary on the left bank Lvzhi River of Red River System; the river upstream of the dam is 18.08 long and 84.8km2 in catchment area. As a small (I) type reservoir, Wangjiatan Reservoir has the main function of water supply to the phosphorus chemical industry base in the paillasse zone, the iron and steel base and the petroleum refining plant; it has a design annual water supply capacity of 7.665 million m2. The total static investment of the reservoir is RMB 16.4 million yuan and the total static investment of the water supply project is RMB 98 million yuan. The construction period for Wangjiatan Water Supply Project is 32 months and the period of operational commissioning lasts for 2 months; the planned completion data is on Dec. 30th, 2013; among the 32 months of reservoir construction period, the preparatory period lasts for 6 months, the construction period lasts for 24 months and the completion period for 2 months; the commencement ceremony was already done on Mar. 7th, 2010; the construction period for water supply project is 24 months.

(6)Yongxing County Sewage Treatment Plant

Yongxing County Sewage Treatment Plant seats at the Peng’s Team of Tongjiaowan Village in Chengguan Town of Yongxing County and has a land area of 30mu, with service population of 102,000; the plant is to be constructed in two phases with a short-term capacity of 25,000m3/d and a long-term capacity of 40,000m3/d. The sewerage pipe network is 44km in total length, with the main pipeline 15km long and the submain 29km long. The sewage treatment plant adopts the treatment technology of oligodynamic biofilm process; the design effluent quality of the project reaches the Level I Type B standard as specified in Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant. In 2011, Hunan Yongxing Guoshui Wastewater Treatment Corp. won the bid of Yongxing County Party Committee and Yongxing County Government and then was authorized to take over the operation of the plant with the agreement on operation and maintenance signed on Apr. 9th, 2011.

(7)Kunao Sewage Treatment Plant in Pingyang County

The project of centralized sewage treatment and discharge into the river(sewerage system) for Pingyang County was initiated in 1997 and began construction in Dec. 1999, with a total capacity of 60,000m3/d. The total project cost is RMB 258.075 million yuan, with the cost on sewage treatment plant up to RMB 107.68 million yuan; the project is constructed in two phases, with the capacity for Phase I project to be 30,000m3/d and that for Phase II to be 60,000m3/d. The Phase I project of Kunao Centralized Sewage Treatment and Discharge into River was completed in Jun. 2003 and put into operation in Jul. On Sep. 19th, 2011, HYDROCHINA ZHONGNAN signed Investment Agreement on TOT Project of Kunao Sewage Treatment Plant in Pingyang County, taking over the operation on Phase I Project of Kunao Sewage Treatment Plant.


2、Shareholding Investment in Electric Power Project

(1)Taoyuan Hydropower Station

Taoyuan Hydropower Station is located on the mian stream of Yuan River near Taoyuan County of Changde City in Hunan Province; the dam site is next to Taoyuan County with Zhuangjiangyuan and Xunyangyan on the left and right bank respectively; the dam site is 31km and 216km away from Changde and Changsha in highway milage respectively. The reservior has a normal storage level of 39.50m, a normal storage capacity of 128 million m3 and a water head of 7.50m; the station has a total installed capacity of 180MW comprising 9 single units of turbular turbines with a unit capacity of 20MW; the station has an average annual energy output of 793GW•h and an annual utilization hours of 4404h. The total project cost is RMB 2.73billion yuan with RMB 1.69 yuan for the cost on the main structure works.

(2)Liyang Pumped Storage Power Station

Liyang Pumped Storage Power Station is located in Liyang City of Jiangsu Province; it has a total installed capacity of 150GW (6×250MW), a design annual output of 2.007×103GW/h and an annual pumping output of 2.676×103GW/h; the station has a max. water head of 290.00m, a min. water head of 227.30m and a rated head of 259.00m, with a ratio of tunnel length to water head to be 7.9. The service area of the station is the electric power system of Jiangsu Province, wher_e the power grid of Jiangsu is connected to the 500kV Liyang Substation through 2 circuits of 500kV lines. The total static cost of the project is RMB 6.096 billion yuan with the project preparatory period to be 20 months, the power generation period of the first units to be 63 months and a total construction period of 80 months (excluding the preparatory period); the station is planned to be completed and put into operation in 2015.


(3)Tuokou Hydropower Station

Tuokou Hydropower Station is located in Hongjiang City of Huaihua, Hunan Province at the 5th cascade of planned cascade of Yuan River; it is the last large-scale hydropower station under construction in Hunan Province. The reservoir has a normal storage level of 250m and a dead water level of 235m; the storage capacity at normal storage level stands at 1.249 billion m³; the upstream drainage area is 24450m2, taking up 27.2% of the total drainage area of Yuan River; the station has an average annual discharge of 540m³/s and an average annual net discharge of 17.03 billion m³. The project is constructed for the main purpose of power generation and concurrently for navigation, flood control and other purposes for comprehensive application. The station has a total installed capacity of 830MW and an annual average output of 2.131 ×103GW/h.

(4)Hongjiang Hydropower Station

Hongjiang Hydropower Station is 4.5km upstream of Hongjiang City and is the 8th cascade hydropower plant among the 15 cascades of the main steam of Yuan River. The project is constructed mainly for power generation and concurrently for other comprehensive application purposes like navigation, irrigation and flood control. The station has a total installed capacity of 225MW, a firm output of 33.4MW and an annual output of 970GWh; during the joint operation of cascade power stations, the firm output stands at 56.7MW and the annual output at 1.054×103GW/h. Hongjiang Hydropower Project is one of the progressively developed projects at Phase I in the Yuan River Basin; site mobilization and construction was began in Mar. 1998, the first units were put into operation and began power generation in Feb. 2003 and all the units were put into operation and began power generation on Dec. 5th of the same year.


(5)Youchou Hydropower Station

Youchou Hydropower Station is upstream of Youshui River, the tributary of Yuan River. The dam site is located in the Youchou Town in the east of Youyang County of Chongqing Municipality, about 200m away upstream of the Youchou Bridge and 73km from Youyang County. Youchou Hydropower Station is Grade 2 large(II) project and has a normal storage level of 335.00m, a total storage capacity of 152 million m3 and a regulation storage capacity of 54 million m3; the station has two units with a unit capacity of 60MW and a total installed capacity of 120MW; the station has an annual output of 392GW•h and a backwater length of 51.29km. The hydropower station is a seasonal regulating reservoir and for the main purpose of power generation, concurrently applied for navigation improvement in the reservoir area, tourism development and other functions. The total cost on the project is RMB 939.52 million yuan. The project was commenced in Dec. 2005 and completed in Dec. 2008, with a construction period of 31 months.


(6)Jiangsu Dongling Wind Power Plant

Jiangsu Dongling Wind Power Plant is jointly invested by HYDROCHINA ZHONGNAN Engineering Corporation and Jiangsu Guoxin Investment Group Limited; it is located at the intertidal zone and part of the shallow sea area of Dongling reclamation area; it is about 18km long from north to south along the coastal line with a total area of up to 150km2; the plant has a total installed capacity of 700MW and is constructed in three phases. The Phase I Project has an installed capacity of 70.5MW with a total cost of RMB 800 million yuan, which has already been put into operation and began power generation; the Phase II Project has an installed capacity of 48MW with a total cost of RMB 360 million yuan and has already been put into operation and began power generation.