(Extracted from Annual Report 2008)

Financial Review


In FY2008, the Group registered higher revenue of S$148.0 million, as compared to S$129.8 million generated in FY2007. The increase of approximately 14.01% is mainly attributed to higher revenue from all three divisions of coal-fired power plant operations, hydro power plant operations and sales of power related products.

In tandem with higher revenue, gross profit improved by 6.1% from S$33.0 million in FY2007 to S$35.0 million in FY2008.

Other operating income also inched S$0.8 million higher to S$5.2 million in FY2008, following a S$2.1 million gain from disposal of a subsidiary and its associate that was offset by reduced subsidy income from coal-fired power plant operation.

For the period under review, the Group's administrative expenses decreased by S$0.7 million to S$11.6 million. However, the Group tightened other operating expenses by S$1.1 million to S$0.4 million in FY2008. This was mainly due to reduced non-operating expenses incurred in the coal-fired power plant division. Similarly, the Group also lowered finance costs, comprising mainly bank loans, to S$4.3 million in FY2008 after certain repayment of loan.

In FY2008, the Group also recorded a S$3.4 million loss as a result of a write down of assets of associated companies that have ceased operations.

Nonetheless, the Group remained profitable with net profit attributable to shareholders registering S$7.7 million in FY2008 despite the global economic tsunami.

Segmental Review

Power Plants

The Group's power plants gave an improved performance with revenue from this segment climbing S$13.6 million to S$132.4 million in FY2008 as compared to S$118.8 million in FY2007. Operating profit from power plants registered S$26.6 million for the period under review, S$2.2 million more than S$24.4 million in FY2007. However, the Group also incurred losses of S$3.4 million in this segment as a result of share of losses of associates.

In FY2008, the People's Republic of China ("PRC") experienced a 7.8-magnitude earthquake in southwestern Sichuan province. Fortunately, the Group's hydro power plants escaped unscathed and none of our power plants were affected. Nonetheless, as part of the Group's belief in staff safety, all the hydro power plants near the region underwent stringent maintenance checks to ensure that the structures and equipments remain safe for operation.

In FY2008, Asia Power also completed the de-registration of Asia Power (Yuxian) Hydroelectricity Co., Ltd ("AP Yuxian") after detailed research found it unsuitable for further developments. Nonetheless, the Group continued to expand our presence in hydropower by increasing our stakes in Asia Power (Leibo) Hydroelectricity Co., Ltd ("AP Leibo"), which were funded through the use of part of the net proceeds from the placement of 40 million new ordinary shares in FY2008.

Power Related Technology

Revenue from the Group's power related technology business segment also improved from S$10.5 million in FY2007 to S$15.5 million in FY2008. However, operating profit for this segment fell marginally from S$1.2 million in FY2007 to S$1.1 million in FY2008.

Investment Holding and Others

Under this segment, the Group acquired an additional 49% stake in Asia Hydro Power Investment Pte Ltd ("AHPI") from Chung Wah Development Ltd for a consideration of US$0.6 million. Prior to this, the Group already owned 51% of the equity stake in AHPI. With the successful acquisition, AHPI is now a wholly-owned subsidiary of the Group.

While we acquired AHPI, we also disposed APC Hydro Power (Investment) Pte. Ltd. ("APC Hydro Power") to Chongqing Dingtai Energy Sources (Group) Co., Ltd ("Chongqing Dingtai"), a company incorporated in the PRC, for a consideration of approximately S$13.4 million. APC Hydro Power was set up as an investment holding company for the purpose of holding a 31.6% equity interest in Chongqing Yujiankou Hydroelectricity Co., Ltd ("Chongqing Yujiankou"), a hydropower plant located in the city of Chongqing.

The Directors are of the view that it would be in the best interest of the Group to dispose APC Hydro Power so that gains from its investment in Chongqing Yujiankou can be unlocked. Moreover, with Chongqing Dingtai, who was already an existing shareholder of Chongqing Yujiankou, expressing interest in acquiring the Group's 31.6% equity interest, it was a good opportunity to undertake the disposal and realise the gains from the investment in Chongqing Yujiankou.

Prospects and Strategy

With the global economic slowdown, the Group believes that demand for energy will be affected. Nonetheless, with the PRC rolling out a massive RMB 4 trillion economic stimulus plan to stimulate the domestic economy, the Group expects this plan to provide a much-needed spike in demand for energy over the long run.

Furthermore, the PRC's aim to increase the provision of energy through renewable means remains focused and this will be beneficial to the Group's direction in expanding our renewable energy presence in the PRC. As said by Liu Qi, a vice administrator at China's National Energy Administration, "China will continue to push energy conservation to reduce emissions and fight climate change." The Group will use this opportunity to explore and tap into more business opportunities, as well as, increase our innovation efforts to capture a larger share of the renewable energy market in the PRC.