CONFIDENTIALAPartnerforFutureGrowthDiscussionDocumentMarch27,20032CONTENT•China’spowerindustryislargeandgrowingrapidly;therearetremendousopportunitiesforvaluecreationasderegulationunfolds•JiangsuPower’spositioninganduniquestrengths•Preliminarythoughtsonpartnershipandproposalforfurtherexploration3127138151167183200217237254277319198919901991199219931994199519961997199819992000200229935031920015856216787548369271,0071,0791,1341,1581,23314841369198919901991199219931994199519961997199819992000200220011553InstalledcapacityGWPowergeneratedTWhCAGR=7.8%CAGR=8.1%CHINAEXPERIENCEDDRAMATICGROWTHINPOWERCONSUMPTIONANDSUPPLYINTHEPASTDECADE…Source:ElectricPowerIndustryinChina4Totalpowerconsumption-2000billionkWhGrowthinPowerconsumption%,1999-2000…ANDISALREADYTHESECONDLARGESTELECTRICITYCONSUMERINTHEWORLD3980132610848765845645485413733482.410.72.93.54.31.75.63.41.74.61.USA2.China3.Japan4.RussianFed5.Canada6.Germany7.India8.France9.UK10.BrazilTop10electricityconsumersSource:BPStat20015CURRENTREFORMISFUNDAMENTALLYCHANGINGTHEINDUSTRYTOWARDSMARKETORIENTATION…FromIndustrystructureTo•VerticallyintegratedStatemonopoly•Fragmentedgenerationsector•Multiplegovernmententitiesregulatingdifferentaspectsofthesector,e.g.:–SPCinpricingandinvestment–SETCinindustryplanning–Localgovernmentsincompliance•“Cost-plus”pricingmodelresultinginwidevarianceinpricesacrosspowerproducers•InsignificantTransmissionpricing•BreakupofSPCinto7large,P&Lresponsiblegridcosandgencos•SeparationofgenerationandT&D•Consolidationofgenerationthroughrestructuring•StateElectricityRegulatoryCommission(SERC)willserveasprimaryregulatorybody•Powerpricebiddingsystemwillbeintroduced•Regionalpowerexchangewillbesetuptofacilitatethebidding•TransmissionpricingwillbeintroducedRegulatoryenvironmentPricingSource:Litsearch6OFFERINGUNIQUEVALUECREATIONOPPORTUNITIESFORFOREIGNELECTRICITYCOMPANIESDistributionTransmissionGenerationOpportunities•InvestmentingenerationfacilitiestocapitalizeonChina’sfastgrowingneedsforelectricity•Immediate:cooperationonthemanagerialprocesses,technology,andhumancapitalinvestment•Inthefuture:explorationofpotentialinvestmentopportunitiesinthetransmission&distributionbusinessasregulatoryenvironmentpermitsTransmissionanddistributioncompanieswithinternationalaspirationsneedtostartearlytoestablishrelationshipsanddevelopmarketinsights7CONTENT•China’spowerindustryislargeandgrowingrapidly;therearetremendousopportunitiesforvaluecreationasderegulationunfolds•JiangsuPower’spositioninganduniquestrengths•Preliminarythoughtsonpartnershipandproposalforfurtherexploration8JIANGSUPROVINCEISONEOFCHINA’SLARGESTANDMOSTDEVELOPEDMARKETSFORELECTRICITYPopulation:5thlargestGDPpercapita:3rdhighestElectricitycapacity:3rdbiggestPowerconsumption:2ndhighest9690867874HenanShandongSichuanGuangdongJiangsu1,6851,5761,4901,4251,383938ZhejiangGuangdongJiangsuFujianLiaoning2001,EUR2001,MillionSource:ChinaStatisticalYearbook,ChinaPowerStatisticalYearbook,ElectricPowerIndustryinChina,GoldmanSachs34.025.220.720.718.32002,GWGuangdongShandongJiangsuZhejiangHenan163.7124.5124.2101.196.6GuangdongJiangsuShandongZhejiangHebei2002,TWhChinaaverage91618253547596977838999110123CAGR=18.2%JIANGSUISALEADINGENGINEINECONOMICDEVELOPMENTSource:JiangsuProvincialGovernmentwebsiteAchievements•Jiangsuaccountedfor20%ofthecountry’stotalforeigndirectinves...
