(Extracted from Annual Report 2009)

FINANCIAL REVIEW

In FY2009, the Group registered higher revenue of S$150.1 million, as compared to S$148.0 million generated in FY2008. The increase of S$2.1 million, or approximately 1.4%, was mainly attributed to higher revenue from the coal-fired power plant operations. The increase was partially offset by lower revenue generated from hydro power plant operations and sales of power related products.

Growing in tandem with revenue, gross profit improved by 1.1% from S$35.0 million in FY2008 to S$35.4 million in FY2009.

The Group saw a decline in other operating income from S$5.2 million in FY2008 to S$3.1 million in FY2009. The decline was mainly due to a one-off gain of S$2.1 million on disposal of a subsidiary and associate in 2008.

For the period under review, administrative expenses increased by approximately S$3.7 million or 31.7% to S$15.3 million in FY2009. The increase was mainly due to allowance for non-trade doubtful debts amounting to S$2.4 million arising from provision made on the profit guarantee receivable from the guarantor (the other shareholder of Rich Bvild Investment Ltd) in respect of JAZ Technology Development (Shenzhen) Co Ltd (“JAZ”), and increase in cost incurred by Heilongjiang Asiapower Xinbao Heating & Power Co Ltd (“Xinbao”) in-line with the higher revenue generated during the financial year.

Other operating expenses increased from S$0.4 million in FY2008 to S$1.7 million in FY2009, mainly due to increased non-operating expenses incurred by the coal-fired power plant division and foreign exchange loss of S$0.9 million in FY2009.

In FY2009, the Group recorded share of profit of associated companies of S$4.1 million as a result of subsidy income received by the Group’s associates, Changzhou Suyuan Electric Power Co Ltd and Changzhou Huayuan Electric Power Co Ltd, and contributions from a newly invested associate, Fu Da Xin Holdings Ltd (“Fudaxin”).

Finance costs decreased from S$4.3 million in FY2008 to S$3.1 million in FY2009. The decrease was mainly due to repayment of bank loans during the year which resulted in lower finance cost.

Income tax increased from S$3.1 million in FY2008 to S$4.6 million in FY2009 mainly due to increase in profitability of the Group and withholding tax on distributable profits of the Group’s subsidiaries and associates.

Despite the global economic downturn, the Group remained profitable with net profit attributable to shareholders registering S$7.2 million in FY2009.

SEGMENTAL REVIEW POWER PLANTS

The Group saw a remarkable performance from its power plants segment with revenue increasing by S$7.9 million to S$140.3 million in FY2009 as compared to S$132.4 million in FY2008. Operating profit from this segment registered a growth of 6%, or approximately S$1.7 million, from S$26.6 million in FY2008 to S$28.3 million in FY2009. The Group’s profitability from this segment is further boosted by a S$4.1 million share of profits of associates.

POWER RELATED TECHNOLOGY

Revenue from the Group’s power related technology business segment declined from S$15.5 million in FY2008 to S$9.8 million in FY2009. The Group’s subsidiary, JAZ Technology Development (Shenzhen) Co Ltd (“JAZ”), which is in the business of provision of power automation system and instruments has been badly hit by theglobal financial downturn in FY2009. JAZ has been operating under very tough and competitive market conditions with reducing demand and margins for its products. Correspondingly, operating profit for this segment fell significantly from S$1.1 million in FY2008 to S$0.3 million in FY2009.

INVESTMENT HOLDING AND OTHERS

Under this segment, the Group completed the acquisition of 20% stake in Fu Da Xin Holdings Ltd (“Fudaxin”) from Mr Tian Shu Zhao, Carter, for a purchase consideration of RMB18.05 million. The 西安凯信实业发展有限公司 and its group of companies, of which Fudaxin holds a 40% stake in 西安凯信实业发展有限公司, has interests in various hydropower plants in the People’s Republic of China (“PRC”). We are of the view that the acquisition is in the best interests of the Group because it is in line with the Group’s growth strategy of expansion in the renewable energy industry in the PRC through acquisitions of existing projects and the development of hydropower electricity generation plants in the PRC.

For the period under review, the Group has, via Asia Power (Neijiang) Hydroelectricity Co Ltd (“Neijiang”), sold its equity interest of 14.25% (the “Sale Shares”) in Asia Power (Leibo) Hydroelectricity Co Ltd (“Leibo”), a subsidiary of the Company, to 成都安河鑫源电力有限公司 (“Anhe”), an existing shareholder of Leibo, for a consideration (the “Consideration”) of RMB13.2million (S$2.6 million) (the “Transaction”). Following the partial disposal of equity stake in Leibo, our effective interest in Leibo is reduced from 61.99% to 53.44%, held through Asia Hydro Power Investment Pte Ltd (“AHPI”).

In FY2009, a wholly-owned subsidiary in the People’s Republic of China (“PRC”), namely Asia Power (Hainan) Investment Co Ltd (亚洲电力(海南)投资有限公司) (the “AP Hainan”) was incorporated. AP Hainan will serve as the Company’s investment holding company for its investments in PRC based projects. By investing in such PRC-based projects through the AP Hainan, the Company will be able to enjoy tax and economic benefits given to PRC-based entities for such investments. AP Hainan has a registered capital of US$31,000,000, which will be fully paid up over a period of two (2) years immediately following the incorporation of the AP Hainan.

PROSPECTS AND STRATEGY

While the global economic slowdown seems to have reached a trough and signs of recovery look promising, the Group remains cautious in the short term. We will continue to focus on renewable and sustainable energy markets to create new business opportunities and expand the Group’s portfolio of services, in line with our eco-friendly vision.

The Group’s acquisition of a 20% stake in Fu Da Xin Holdings Ltd in the year under review furthers Asia Power’s strategy to capture a larger share of the renewable energy market in the PRC. The RMB18.05 million investment places Asia Power with a strong foothold in the hydropower generation segment and provides a platform for the Group to further leverage its expertise in the field to explore greater opportunities within PRC.