2:00pm - 3:15pm，Oct. 28, 2016

Host: Good afternoon, everyone! Welcome to the Q3 Results Announcement of Datang International. Today’s teleconference mainly includes the introduction of the company’s performance in Q3 2016 and the exchanging of views on main concerns. Participants of today’s conference include our executive director, chief economic manager and secretary of board of directors -- Mr. Ying Xuehui; heads of major departments, including Ms. Wang Tongyin as the director of Planning and Marketing Department, Mr. Shang Huaiwei as the deputy director of Fuel Management Department, Mr. Ma Guangcheng as the deputy director of Financial Management Department and Mr. Zhang Hongchu as the deputy director of Safety Production Department; relevant coworkers from Planning and Development Department and Engineering Management Department; and myself--Wei Yuping as the Securities Affairs Representative of the company. Please kindly be noted that since there are too many analysts participating in today’s conference, please use fixed-line telephone to dial the teleconference system, so as to avoid the degradation of connection quality and the influences on the normal proceeding of the conference. Thanks for your cooperation! Now please welcome Mr. Ying to introduce the performance of the company in Q3 2016.

Mr. Ying: Dear analysts and investors at home and abroad, good afternoon! This is the teleconference for the Q3 2016 report issued by the company just now and we are here to exchange views with you. Thanks for your participation.

First of all, on behalf of the company, I’d like to give a brief introduction to the general performance of the company in Q3 2016. In the first three quarters of 2016, the company has realized accumulated sales revenue and net profit attributable to shareholders of RMB 44.503 billion Yuan and RMB -3.145 billion Yuan, decreased by 3.43% and 187.69% respectively compared to the same period of last year; and realized earnings per share of RMB -0.2363 Yuan. By the end of Q3 2016, the asset-liability ratio of the company, the total assets of the company and the owners’ equity attributable to parent company came in 74.77%, RMB 227.955 billion Yuan and RMB 39.408 billion Yuan, decreased by 4.34 percentage point, 24.86% and 12.48% respectively. By the end of Q3, the installed capacity of the company reached 43.49 million kW, increased by 2.72% compared to the end of 2015. In the first three quarters, compared to the same period of last year, the total power volume reached 129.973 billion kWh, increased by 1.2%; the overall utilization hours came in 3,042 hours, decreased with 148 hours; the net coal consumption rate per unit reached 301.67 g/kWh, decreased with 5.91 g/ kWh; the equivalent availability factor of unit reached 94.36%, increased with 0.72 percentage point; and the overall plant service power consumption rate reached 5.19%, decreased with 0.16 percentage point.

The delivery of the reorganized coal chemical assets on August 31, 2016 marks the completion of the coal chemical assets reorganization that had been taking for over two years. After the reorganization, the total assets, total liabilities, net assets, total profits in consolidated statements of the company, net profits attributable to parent company and total profits in the statement of parent company reduced RMB 77.2 billion Yuan, RMB 72 billion Yuan, RMB 5.2 billion Yuan, RMB 4.83 billion Yuan, RMB 5.52 billion Yuan and RMB 18.039 billion Yuan respectively. In the first three quarters of 2016, without considering the influences of non-recurring profit and loss like coal chemical assets reorganization, the net profit attributable to the shareholders of the listed company reached RMB 2.279 billion Yuan, decreased by 32.68% compared to the same period of last year. In a market environment with multiple adverse factors, it’s not easy for the company to make such achievements.

Now is time for you to communicate with our management.

Q: 1. How much was the investment income of Ningde Nuclear Power in Q3? 2. How much was the profit of electricity sector in Q3? How much was the net profit of coal power, gas-fired power, hydropower, power supply and photovoltaic power respectively? 3. How much were the fuel cost per kWh and the unit price of standard coal in Q3? 4. After the reorganization of the coal chemical assets, has the asset injection in the next step been started?

A: In this year, the investment income of Ningde Nuclear Power was RMB 0.539 billion Yuan. The profit of electricity sector from January to September was RMB 8.764 billion Yuan, including RMB 2.122 billion Yuan of thermal power (RMB 0.12 billion Yuan of gas-fired power), RMB 0.33 billion Yuan of hydropower, RMB -30 million Yuan of wind power and RMB 17 million Yuan of photovoltaic power. These are total profits before tax. By the end of Q3, the unit fuel cost was RMB 137.42 Yuan, including RMB 117.47 Yuan of coal-fired unit. The unit fuel cost of coal-fired unit in Q3 was RMB 136.16 Yuan. Coal chemical assets reorganization had been delivered on August 31. At present, there are some follow up works like modification of guarantee left to be carried out according to the agreement. Up to now, we have learned that China Datang Corporation, the large shareholder, hasn’t confirmed the specific scale and mode of capital injection. Therefore, we will actively communicate with the large shareholder for the earlier implementation of relevant capital injection. We believe the large shareholder will fulfill its commitment and support the healthy and sustainable development of the listed company.

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Q: The coal price has been increasing significantly. What’s your estimation on the unit price of standard coal since October? How about the coal price in the next year? Since the coal price has been increasing significantly, will the coal-electricity price linkage be implemented in the next year?

A: The coal price has been rising constantly since the beginning of this year and the rise became significant in Q3 (including October). We think the price will continue increasing in November and December, but with a slower pace. The price in the next year depends on the overcapacity cutting policy of the country. If no material change will be made on this policy, the price can be estimated according to the current condition.

Q: 1. How many power volumes had been completed in the first nine months for direct purchased power? How much discount was offered on power price? 2. Regarding the annual guidance of utilization hour, as the performance in Q3 was good, what’s your opinion on the performance in Q4 and the whole year?

A: For direct supplied power, we offered around 15% discount in the first three quarters. According to the execution conditions of power volume in the market, our discount had the same level as that of the market in other regions, i.e., around RMB 0.035 Yuan /kWh.

As for the power volume in Q4, we think, according to the trend of national power consumption, the actual increased volume in Q4 will be high. However, under the influence of the decreasing regional installed capacity and utilization hour in the first nine months, the average utilization hour of the company will decrease on a year-on-year basis, but increase on a quarter-on-quarter basis.

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Q: I have another question regarding the first aspect. Could you disclose the exact transaction power volume that had been contracted by the company by the end of September? How much percentage did it take in the annual transaction power volume?

A: The total contracted market power volume is expected to be around 20 billion kWh and it takes around 20% in the annual volume.

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Q: 1. How many are the coal inventory days of the company at present? What procurement policy will you adopt? According to your estimation, how many power inventories will be sufficient for winter? At present, the coal price has been increasing rapidly and a series of measures have been adopted by National Development and Reform Commission (NDRC). Under such conditions, does the company prefer to replenish the inventory rapidly for a safe and reasonable level or to maintain it at current level and wait till the final decision?

2. According to the current coal price, most of the power plants should have been in deficit. Under such conditions, will some fringe plants lose the motivation for power generation and even carry out power rationing in winter and influence heating supply?

3. At present, NDRC and State-owned Assets Supervision and Administration Commission cannot reach a consensus regarding coal and electricity power. According to current condition, what’s your estimation on the coal price after policy regulation that is acceptable by both parties?

A: Currently, our coal inventory is 3.56 million tons and coal inventory days are 20 days. Regarding the next procurement policy, since coal price is expected to rise continuously, we wish to properly increase the inventory if the inventory capacities of some power plants are enough, so as to maintain the coal inventory at a safe and reasonable level.

The conflict between coal and electricity is influenced by national regulation. Since the coal price has been rising, some power generation enterprises may turn loss into gain. Regarding power volume, in this July, August and September, a stepped increasing was observed in our power volume and the national power consumption and the percentage reached 7~8 percentage point. We think such condition will continue in Q4. Therefore, the total power volume in next year will be beneficial to the power generation industry. Regarding coal price, the overcapacity cutting policy adopted by the country is in fact a continuous policy that is unlikely to be changed. However, the country has also noticed the excessive rising of coal price in this year and the NDRC has held several meetings for control. The coal price in the next year is expected to increase, but with a controlled step. This is because our country will further adopt relevant supporting policies to keep the coal price at a certain level, but not a higher level. The company will make preparation actively in all the aspects regarding coal procurement and power volume.

A: Regarding heating supply, marginal profits can be made out from the fuel costs and power price by our thermal power plants. Therefore, no cash flow drying up exists.

As for the operation condition of thermal power enterprises, up to September, our average marginal profit of thermal power was RMB 0.17 Yuan/ kWh.

Q: You mean cash?

A: I mean the average marginal profit was RMB 0.17 Yuan/kWh, which means we had a marginal profit of RMB 0.17 Yuan for every kWh power generated.

Q: What does marginal profit refer to?

A: It refers to the amount of power price after deducting fuel costs. Most of the power plants have marginal profits.

Q: How much is the marginal profit of heat supply units?

A: Our heat supply units mainly locate at north areas where coal price and power price are relatively lower than that in other areas. According to present coal price, the marginal profit per kWh should be less than RMB 0.1 Yuan.

Q: The marginal profit of RMB 0.17 Yuan was the data of September end. Have you calculated the average marginal profit from January to September?

A: In the first three quarters, the unit fuel cost of thermal power was RMB 137.42 Yuan /MWh, the average on-grid power tariff of thermal power was RMB 381.74 Yuan / MWh and the marginal profit was round RMB 189 Yuan / MWh.

Q: How much was the average price of standard coal in Q3?

A: RMB 424 Yuan / ton.

Q: According to your estimation, how much coal inventory days shall be extended from the 20 days so that a safe and confortable heating supply in winter can be ensured?

A: It depends on the inventory of generated power and the conditions of coal market in future.

Q: What’s your target?

A: Just longer than 20 days. If the coal market becomes strained and the resources become limited, other solutions shall be figured out. To put it simply, the coal inventory shall be sufficient to ensure heating supply and other measures shall be adopted as well.

Q: 1. How much were the profit contribution and year-on-year variation of every electricity sub-sector in Q3? 2. How much were the unit fuel costs of coal and the year-on-year variation in Q1~Q3 and Q3? 3. How was the year-on-year variation of the utilization hour of coal-fired unit in Q3 and Q1~Q3? 4. With the slowdown of thermal power industry, what’s your plan for capital expenditure? Will you reduce it? 5. What’s your estimation on the full-year unit fuel cost and utilization hour of gas-fired and coal-fired units? For example, will the average unit fuel cost increase in 2016 in comparison with that in 2015? （

A: Regarding the first question on the year-on-year profit variation of every sub-sector, by the end of September, the profit of electricity sector was RMB 8.764 billion Yuan, decreased by 10% from last year’s RMB 9.772 billion Yuan. In the sector, the profit of coal-fired power was RMB 7.2 billion Yuan in compare with RMB 8.74 billion Yuan in last year. These are our profit conditions.

As for unit fuel cost, the unit fuel cost including gas-fired unit was RMB 137.42 Yuan in this year and RMB 148.57 Yuan in the last. The unit fuel cost excluding gas-fired unit was RMB 117.42 Yuan in this year and RMB 146.52 Yuan in the last year.

Q: Could you tell us the average values in Q1~Q3 and Q3 and the value on a year-on-year basis?

A: The unit fuel cost of gas-fired unit in Q1 ~ Q3 and Q3 was RMB 137.42 Yuan and RMB 156.92 Yuan respectively and the year-on-year value was RMB 146.52 Yuan.

Q: How about the unit fuel cost of coal-fired unit without considering the gas-fired unit?

A: Without considering gas-fired unit, the unit fuel cost at the end of Q3 was RMB 117.47 Yuan and RMB 146.52 Yuan year-on-year. The cost from January to September was lower than that in the year earlier.

Q: As the price has been increasing significantly, will the average cost in 2016 turn out to be higher than that of last year?

A: It depends on the overall coal conditions in Q4 and the difference should not be great. Even if this year’s cost is greater than that of last year, the percentage should be around 2%.

A: In fact, there are three unplanned power volumes: the direct supply volume for large consumer, the market substitution volume, and the cross-province transaction volume. The direct supply volume took a large proportion and the reduction in its price was RMB 0.052 Yuan. The market substitution volume was around 5 ~ 6 billion and the reduction in its price was around RMB 0.15 ~ 0.16 Yuan. The cross-province transaction volume is around 2~3 billion and the reduction in its price was around RMB 0.007~0.008 Yuan. Although at the beginning of this year, the reduction had been estimated based on that in the last year, certain deviation still exists. According to the execution condition of the direct supply volume in this year, improvement from last year was observed. The average price reduction of this year’s direct supply volume was around RMB 0.05 Yuan, which was better than what were expected.

A: The average utilization hour of the company’s units in Q3 dropped 148 hours year-on-year. The utilization hour of coal-fired unit was 3,246 hours, dropped 218 hours year-on-year. According to the conditions of the market, the full-year utilization hour of coal-fired unit should be around 4,300 hours and the reduction level was almost at the same level of present.

A: As for the construction progress of thermal power plants, since no explicit instruction from local government for stopping the construction of any project has been received by us, we will carry on the construction as per the original plan.

Q: Do you have any estimation for capital expenditure? Will it remain unchanged as well?

A: We have been controlling our capital expenditure strictly for years. Besides the capital expenditure on necessary projects in capital construction that must be arranged, all the other capital expenditures are controlled based on the principle of economizing. The capital expenditure for this year has been compressed during the plan in earlier this year, so no further compression is planned by now.

Q: Regarding dividend, since no dividend can be distributed from 2016 to 2018 due to the coal chemical assets reorganization, will you take the advantages of accounting policy or make modification on the dividend policy so that the dividend can be distributed in 2017 and 2018?

A: According to normal operations, dividend cannot be distributed for two years. However, we also received some suggestions from many investment institutions and investors. They have suggested us to take some necessary measures to shorten the period of no dividend distribution. We are working on this issue, and if possible, we will try to shorten this period. However, no determination can be made before a thorough study on the feasibility of such issue.

Q: Just now you have mentioned that the market transaction volume was around 20.0 billion kWh. Should we say it takes 15% of the annual total output?

A: Almost 15% in this year.

Q: I have another question regarding data. How much was the unit fuel cost at the end of Q3?

A: At the end of Q3, the unit fuel cost of coal-fired unit was RMB 117.47 Yuan /MWh.

Q: How about total unit fuel cost including the gas-fired unit?

A: RMB 137.72 Yuan /MWh.

Q: How come the unit fuel cost at the end of Q3 is lower than the average value in Q3?

A: The accumulated value will surely be lower than the present value.

Q: How much was it at the end of Q3?

A: The unit fuel cost of coal-fired unit at the end of Q3 was RMB 117.47 Yuan/ MWh.

Q: According to your estimation on this year, was the variation around 2%?

A: That is merely a preliminary estimation. The actual variation depends on the power volume structure and the rising trend of coal price in Q4.

Q: 1. As for market transaction power volume, will the marginal profits of some market transaction volumes become negative due to the rising coal price? 2. The liability ratio of the company is increasing. Do you have any plan regarding this matter? For example, equity financing?

A: I don't think the marginal profit of market transaction power volume will become negative. For all the power volume purchased from the market, if the power price drops to a certain extent, we will abandon it instead of generating power mandatorily. We will only generate power when there is marginal profit.

After the restructuring of the energy & chemical segment, our present asset-liability ratio is 74.77%, and this is a rather healthy level.

Q: No plan for equity financing?

A: Not yet.

Q: 1. When other investor asked about the BEP in Q4, you have mentioned that the average profit per kWh in Q3 was RMB 0.14 ~ 0.15 Yuan. The coal price at present has increased around RMB 150 Yuan from September. If the coal price continues rising in the next two months, will the overall contribution profit of Q4 become negative?

2. Just now you’ve mentioned that the price discount for the market transaction power volume was RMB 0.035 Yuan. In recent three months, Q3 and Q4, have you noticed any shrinkage in this discount instead of any deeper discount due to the rising coal price? How about the conditions at the peer companies?

A: In fact, both parties of the transaction have their own judgments regarding the price of the market transaction power volume. Earlier this year, we obtained some transaction power volume with reduced price. However, due to costs increasing caused by the rising coal price, we refused to generate power. Therefore, we actually have the motivation to make the contract price higher. We won’t generate power without making profit. At present, with the increasing of coal price, the price of market transaction power volume also fluctuates with the market and shows an increasing trend in general. Taking the transaction price of our substitution power volume as an example, though it dropped greatly at the beginning of the year, it still rises up now.

Q: How about the profit and loss balance in Q4?

A: First of all, the condition of coal market is not as pessimistic as what you’ve imagined. Coal price is regulated and controlled by the country and it won’t rise dramatically like what had happened in September. Though the price will continue rising in October, the growth will slowdown. As for the losses incurred in the whole thermal power industry, I don’t think it is the orientation of the national policy. As for the capacity of coal in the next year, since a lot of regulation measures are applicable by the country, the coal price in the next year will be controlled and won’t rise dramatically like what had happened in this year.

Q: You’ve mentioned that the profit before tax of the thermal power in Q3 was RMB 2.212 billion Yuan. Did it include the investment income of nuclear power?

A: It should be included.

Q: You’ve mentioned that the discount for transaction with large consumer was RMB 0.035 Yuan. Is it the price in January ~September or in Q1~Q3?

A: January ~September.

Q: I remember the discount in January ~ July was RMB 0.034 Yuan. Since the discount in January ~September was RMB 0.035 Yuan, did it get deeper in August and September?

A: No.

Q: But according to the interim results announcement, the discount in January ~ July was RMB 0.034 Yuan.

A: RMB 0.0347 Yuan, to be exact. Basically there is no change. The transaction power volume is increasing. The works for the market transaction power volume obtained in Q3 have been carried out rapidly. The works in Q1 and Q2 haven’t been implemented extensively as the government was making plans during the first half year. However, the full-year work plan has been carried out in Q3 and Q4 already. That’s the reason for the slight difference in the price.

Q: Can you tell us the specific data of the transaction with large consumers, the cross-province transaction and the substitution transaction in January ~ September?

A: In January ~ September, the data for the transaction with large consumers, the cross-province transaction and the substitution transaction was RMB 14.5 billion Yuan, RMB 2.4 billion Yuan and RMB 1.6 billion Yuan respectively.

Q: You’ve mentioned that the total amount of direct purchased power volume in July and August was around RMB 6 billion Yuan. Does it mean you start to take the next move at Beijing-Tianjin-Tangshan region in the second half year?

A: There is no direct connection. The market power volume at Beijing-Tianjin-Tangshan grid hasn’t been reflected yet. It was planned to obtain a volume of 30 billion. However, as the amount planned is always greater than the actual amount obtained. The work just begins. The final amount was only 6.1 billion.

Q: Is this the contracted amount only?

A: No. The work just begins.

Q: Is the discount given in this region greater or smaller than that in other regions?

A: It’s our first time working in this area. The discount seems to be greater than that in other regions.

Q: What is the rough figure?

A: We divide this region into three areas, i.e., Beijing, Tianjin and Hebei, and the discount for every area is different. The discount for Beijing is RMB 0.07 Yuan.

Q: It’s double than that in other areas.

A: Yes, double. But since it is our first time working there, we haven’t decided the exact plan yet. It doesn't mean we will apply the same plan in future.

Q: What is the percentage of the market volume at Beijing-Tianjin-Tangshan region in the overall power consumption?

A: Calculating with this year’s data of 6.1 billion, it takes no more than 2%.

Q: How about next year?

A: The actual amount will be greater than that, but the exact amount hasn’t been known yet. For this year, it was planed as 30 billion kWh. I think the amount for the next year should be greater than 6.1 billion but lesser than 30 billion. The exact amount hasn’t been decided yet as this policy might be adjusted accordingly. Relatively speaking, the conditions in Beijing-Tianjin-Tangshan region are complicate and every party has great interest relationships. The grid safety is also an important issue. The progress of the work won’t be fast, especially in Beijing.

Q: ?for 6.1 billion you mentioned, does it mean the amount for the whole group?

A: Yes.

Q: What do you think about the possibility of implementing coal-electricity price linkage due to the rising coal price?

A: I think everyone might be quite worried about the impact of rising coal price on power generation enterprises. We, as a power generation enterprise, are also vigilant about this issue. However, we also have a basic judgment that the coal price rising in this time is influenced by the overcapacity cutting policy of the country and such policy will be executed for a certain period of time instead of merely this year. In the meantime, we’ve also noticed that the NDRC has held several meetings recently for coal price control and coordination. So according to us, the dramatic increasing of coal price is not what the government wants to see and the government has no intension to make the whole power generation industry in deficit, otherwise the coal-electricity price linkage should have been implemented. Regarding this issue, there is no need to be panic, but we will be vigilant about it and pay close attention to it.

By now, we haven’t learned any information about the implementation of coal-electricity price linkage. There is still a possibility for macro-control on coal price by the country.

Q: Could you tell us the unit fuel cost in Q3, the trend of the average procurement price of coal in July, August and September and relevant data in October? Considering present coal price and financial expenses, do you think most power plants are still having certain net profits or closing to the BEP?

A: For July, August and September, the unit fuel cost was RMB 123.23 Yuan / MWh, RMB 135.07 Yuan/ MWh and RMB 150.5 Yuan/ MWh respectively. Taking September as an example, since the average price of our thermal power is RMB 384 Yuan/ MWh, after deducting the costs of fuel, the price should be around RMB 320 Yuan / MWh. After deducting the unit fuel cost in September, which is RMB 150 Yuan/ MWh, there is still a profit of RMB 0.17 Yuan/kWh. Therefore, we haven’t reached the BEP yet. As for financial expenses, it decreases greatly at present. Generally speaking, most of our thermal power enterprises have guaranteed cash flows, and some plants are in deficit due to remote location or small installed capacity. For example, Qian’an thermal power plant is in deficit as it only has one set of 220,000 kWh unit. At present, most power plants can handle the present conditions of coal and operate normally, and haven’t reached the severe condition of profit - loss balance.

Q: You have been talking about the profit-loss balance on the aspect of cash. Regarding this issue, how much unit fuel cost reached shall be regarded as a profit-loss balance on accounting after considering depreciation, management expenses and financial expenses? I mean a profit-loss balance on the aspect of accounting instead of cash.

A: There are many influencing factors like the power volume level of the company, the power volume level influencing income (the level of utilization hour) and the level of power price. According to the present condition, unit fuel cost is just one factor that influences the cash flow of enterprise, and over low unitization hour is the fundamental factor.

Director Wei: If there are no more questions, please allow Mr. Ying to make a brief summary.

Mr. Ying: Wish this in-depth communication between us could solve your concerns regarding the operation and development of the company and the reformation of the industry. Due to the limitation of time, please contact the Investor Relation Office of our Securities and Capital Operation Department if you have any other questions, we will treat every question seriously.

Now is the end of October and there are only two months left in this year. Comparing with our full-year operation objectives and tasks, we are facing great pressure and challenges. In Q4, we will focus on the six major works: safe production, advance power generation, fuel management, costs control, quality and efficiency improvement and development optimization, and endeavor to complete the full-year objectives and tasks in time.

Thanks for your long-term concerns and supports. That’s the end of today’s conference. Thank you!