Management Review of Sanfeng Environment's Board of Directors in 2020

The business review of Sanfeng Environment (601827) in the first half of 2020 is as follows:

I. Discussion and analysis of operating conditions

In the first half of 2020, faced with the complicated and changeable external environment, such as COVID-19 epidemic, economic downturn at home and abroad, adjustment of industrial policies, and strengthening of environmental protection supervision, the company kept its strength, actively responded, worked hard to develop its internal strength steadily, accelerated its resumption of work, seized the construction period, strengthened its business innovation, and achieved good business performance. From June to June, 2020, the company * * * realized an operating income of 2.377 billion yuan, a year-on-year increase of 65.438+08.62%, and a net profit of 338 million yuan, a year-on-year increase of 27.67%. By the end of June, the company's total assets reached 654.38+08.287 billion yuan, an increase of 26.20% over the previous period. The company's main operations in the first half of the year are as follows:

(1) The garbage incineration power plant is well managed.

Shanwei Project (Phase II) was officially completed and put into production during the reporting period. By the end of the reporting period, the company has put into operation 65,438+09 waste incineration power generation projects (excluding shareholding projects), which are distributed in 65,438+00 provinces, municipalities and autonomous regions such as Sichuan, Guangdong, Chongqing and Xinjiang. Relying on the integrated information system of production management and control, the company has realized the sustained, stable and efficient operation of various projects through scientific, streamlined and standardized management methods. During the reporting period, the total amount of garbage disposal of all the projects put into operation was 465,438+05.8110,000 tons, an increase of 65,438+03.165,438+0% year-on-year; The power generation was 65.438+52.4 million kWh, up 654.38+02.8% year-on-year; The online electricity consumption reached 65.438+34.3 million kWh, up 654.38+03.22% year-on-year; The average self-use electricity rate was 1 1.99%, down 0.45 percentage points year-on-year.

(2) The market expansion has achieved good results.

During the reporting period, the company successfully won the bid for two PPP projects of waste incineration power generation in Hechuan, Chongqing and Lvliang, Shanxi, with an additional processing capacity of 2,000 tons/day. In the general contracting construction business, the consortium formed by its subsidiary Sanfeng Kavanta and China Harbor Engineering Co., Ltd. successfully won the bid for the third phase expansion project of Macau Waste Incineration Center, with the winning bid amount of MOP 2.567 billion. In terms of core equipment R&D and manufacturing business, during the reporting period, Sanfeng Kavanta acquired 65,438+02 new supply projects of waste incineration equipment such as Yingkou, Liaoning and Handan, Hebei, and Sanfeng Technology acquired six new supply projects of waste leachate membrane treatment system equipment such as Guangyuan, Sichuan and Yuncheng, Shanxi. By the end of the reporting period, the company has invested in 45 waste incineration power generation projects with a designed waste treatment capacity of 50,950 tons/day (including shareholding projects). In 65,438+094 garbage incineration projects around the world, the company has achieved the core equipment and components and technical application performance of 325 incineration lines (including contracted projects), and is in a leading position in the market.

(3) The projects under construction and preparation are progressing steadily.

By the end of the reporting period, the company was building and preparing to build 20 waste incineration power generation projects (excluding shareholding projects). The company overcame the adverse effects of COVID-19 epidemic, seized the construction period, and basically advanced the construction and preparation of various projects as planned. Among them, Shanwei Project (Phase II) was officially put into production during the reporting period, Dongying Project (Phase II) has entered the trial operation stage, the construction of projects under construction such as Luo Qi Project, Chifeng Project (Phase I), Anshan Project and Pujiang Project is progressing normally, and the preparatory work for the previous projects such as Qijiang Project, Xichang Project (Phase II) and Huidong Project is progressing as planned.

(4) Intensify technological research and development.

The company focused on several scientific research projects, such as "Research Project of Near Zero Emission Flue Gas Treatment Technology for Waste Incineration Power Generation" and "Research Project of Low Nitrogen Combustion Technology for Flue Gas Resource at the Tail of Grate Furnace", and applied for three invention patents. By the end of the reporting period, the company has obtained 24 invention patents and 48 utility model patents. At the same time, entrusted by the Ministry of Housing and Urban-Rural Development, it took the lead in revising the national standards for domestic waste incinerators and waste heat boilers, and compiled a report on the development of domestic waste clean incineration technology under the background of building a "waste-free city" according to the requirements of the Ministry of Ecology and Environment.

Second, possible risks

1, industrial policy risk

According to the Notice of the National Development and Reform Commission on Improving the Price Policy of Waste Incineration Power Generation (development and reform price [20 12]80 1No.), the waste incineration power generation project is converted into on-grid electricity according to the waste treatment capacity in the plant, and the conversion ratio is 280 kWh per ton of domestic waste. For the part that does not exceed the above-mentioned electricity, the national unified benchmark electricity price is 0.65 yuan per kWh (including tax); For the part exceeding the above electricity, the on-grid electricity price of similar local coal-fired generating units shall be implemented. Since 2020, The Ministry of Finance, the National Development and Reform Commission, the National Energy Administration, the Ministry of Ecology and Environment and other ministries and commissions have successively issued Several Opinions on Promoting the Healthy Development of Non-water Renewable Energy Power Generation (Caijian [2020] No.4), Measures for the Administration of Renewable Energy Electricity Price Subsidy Funds (Caijian [2020] No.5) and Notice on the Work Related to the Review of Renewable Energy Power Generation Subsidy Projects (Cai Jianjian [2020]). A series of important documents, such as the Notice on Reducing the Additional Subsidy Fund for Renewable Energy Electricity Price of Waste Incineration Power Generation Projects with Environmental Violations (Caijian [2020] 199), basically determined the policy principle of "fixing expenditure by income" and reasonably determined the scale of newly-added subsidy projects every year, and adopted the subsidy list management for existing projects, which was directly linked to environmental violations. The company's projects under construction may face the risk of not being able to enter the subsidy list or the subsidy level will decline. Although the company actively improves the power generation efficiency, reduces the investment cost and operating cost by optimizing the technical scheme and strengthening the operation management of new projects, and strives to incorporate the adjustment factor of electricity price policy into the price adjustment mechanism of garbage disposal fees to cope with the uncertain risk of future policy changes, if the government reduces its support for the garbage incineration power generation industry in the future, it may have an adverse impact on the company's operating status, financial status and profitability.

2. Market competition risk

With the rapid development of waste incineration power generation industry in recent years, the competition in the industry market is becoming increasingly fierce. Some companies that entered the waste incineration power generation industry earlier, developed on a larger scale, and had strong financing ability and R&D ability, occupied a higher market share in the industry by virtue of their strong competitive advantages. The vast market space of waste incineration power generation industry may attract more capital-driven enterprises to enter this industry, and the market competition will be further intensified in the future. With the intensification of industry competition, it is more difficult for the company to acquire new projects in the future, and the yield of newly acquired projects will also face the risk of decline.

3. Environmental risks

In order to ensure that the company's garbage incineration power generation production process meets the environmental protection requirements, the company actively fulfills its environmental protection responsibilities, invests a lot of manpower, financial resources and material resources to improve environmental protection facilities, establishes an environmental protection implementation system consisting of a number of environmental protection facilities such as a flue gas treatment system and a garbage leachate treatment system, and formulates a strict environmental protection system and an emergency plan for environmental accidents. However, with the increasing attention of the state to environmental protection and the continuous improvement of people's awareness of environmental protection, the requirements of national policies, laws and regulations on environmental protection will be more stringent. If the issuer fails to strictly meet the requirements of environmental protection laws and regulations, or even an environmental pollution incident occurs, the issuer will face the risk of administrative punishment. At the same time, with the continuous improvement of relevant environmental protection standards, the company's environmental protection investment will increase, which may have a certain impact on the company's profitability.

4, production safety risk

The company attaches great importance to safety in production, formulates relatively perfect safety production management norms and establishes a relatively complete safety production management system. However, the company's production, operation and project construction process have high technical requirements for operators. If employees encounter accidents such as improper operation and incorrect use of equipment in daily production, the company will face risks such as production safety accidents, casualties and property losses.

5. Risk of rising project construction and operation costs

Due to the long construction period of the company's BOT project, during the project construction, such as the price of materials or equipment spare parts, labor costs, etc. , or affected by unexpected factors such as environment and geology, and the public's concern about the secondary pollution caused by the project, the project construction cost may rise.

During the operation of the project, if the production materials and labor costs such as lime and activated carbon increase substantially, the company's operating costs will increase. In addition, with the improvement of environmental protection standards, the company's expenditure on environmental protection will increase, and the company will also face the risk of increased operating costs.

6. Tax preference risk

During the reporting period, the company mainly benefited from the state's preferential tax policies on environmental protection industry, western development, "three exemptions and three reductions" of corporate income tax, and exemption of environmental protection tax. If the state makes unfavorable adjustments to the relevant preferential tax policies in the future, it may adversely affect the company's operating performance and profitability. In addition, according to the Notice of State Taxation Administration of The People's Republic of China, Ministry of Finance of People's Republic of China (PRC) on Printing and Distributing (Caishui [2015] No.78), if the company is punished for violating laws and regulations such as taxation and environmental protection, the company faces the risk of not being able to enjoy the corresponding VAT policy within 36 months from the next month after the penalty decision is issued.

Three. Analysis of core competitiveness during the reporting period

After years of rapid development, the company has developed into a comprehensive waste incineration power generation enterprise integrating investment and operation of waste incineration power generation projects, general contracting construction, R&D and core equipment manufacturing, with strong market competitiveness.

1, the company has high market visibility and brand advantages.

The company focuses on waste incineration power generation industry. After years of development and precipitation, the company's brand has a high popularity and reputation in the market. The company has successively won the honors of "Influential Enterprise in Solid Waste Industry in China", "Top 50 Environmental Protection Enterprises in China in 20 18", "Top 50 Enterprises in the whole industry in CITI Green Supply Chain Index in 20 19" and "Top 50 Domestic Waste Incineration Power Generation Enterprises in 20 19". By June 30, 2020, the garbage incineration treatment project invested by the company has treated about 432,654,38+million tons of domestic garbage and provided more than 654,380+04.3 billion kWh of green electricity. The company took the initiative to fulfill its social responsibility, and continued to carry out environmental publicity and education activities based on the "National Social Practice Base for Environmental Education in Primary and Secondary Schools", striving to enhance the public's awareness of ecological and environmental protection, and achieved good social comprehensive benefits.

2. The company has mature core equipment manufacturing capabilities.

Incinerator is the core equipment in waste incineration system, and it is the foundation to realize the safe, stable and environmental protection operation of waste incineration power plant. Since the introduction of German Martin SITY2000 waste incineration technology, aiming at the characteristics of high moisture content and low calorific value of municipal solid waste in China and developing countries, the company has continuously improved and took the lead in realizing the localization of the core equipment of waste incineration. The national standard "Domestic Waste Incinerator and Waste Heat Boiler" edited by Sanfeng Environment was promulgated and implemented in 2009, which promoted and standardized the development of waste incineration power generation industry in China. The reverse-push mechanical grate furnace produced by the company adopts inclined reverse-push grate, and the grate blade and air intake mode are optimized, which has the characteristics of full garbage disturbance, good combustion effect, low slag loss rate and reliable and stable operation.

3. The company has the synergistic advantages of the whole industry chain.

After years of development, the company has the service ability of the whole industry chain in the research and development, investment, construction, equipment manufacturing and operation of waste incineration power generation technology, and the industrial synergy advantage is obvious. The cooperation among the business links of the company's waste incineration power generation industry chain is conducive to effectively reducing the project investment cost, speeding up project construction, improving operational efficiency, strengthening equipment operation and maintenance, and promoting technological innovation, thus providing an effective guarantee for the company's profitability.

4. The company has strong technology research and development capabilities.

Through continuous technical research and development, the company has gradually established a technical system covering the manufacturing of core equipment for waste incineration power generation, project design and construction, project operation management and other fields, formed a calculation model of "low calorific value, high moisture" and "high calorific value, low moisture" domestic waste incineration treatment, and established a variety of flue gas treatment process calculation platforms such as semi-dry, dry and wet methods. Relying on innovative platforms such as "National Environmental Protection Waste Incineration and Recycling Engineering Technology Center" of the Ministry of Ecology and Environment and "National and Local Joint Engineering Research Center for Domestic Waste Incineration Technology" of the National Development and Reform Commission, we will actively carry out technology research and development. The company has edited six national and industrial standards such as Domestic Waste Incinerators and Waste Heat Boilers, Technical Conditions for Grates of Large Waste Incinerators, and Technical Standards for Safety in Operation and Maintenance of Domestic Waste Incinerators (Revised), and participated in compiling several national and industrial standards such as Evaluation Standards for Domestic Waste Incinerators, Supervision Standards for Operation of Domestic Waste Incinerators, Maintenance Regulations for Domestic Waste Incinerators, etc.

The company has accumulated rich experience in the operation and management of waste incineration power plant.

The company is one of the earliest enterprises to enter the waste incineration power generation industry in China, and some of its waste incineration power plants have been running continuously for more than 10 years. Through long-term stable operation, the company has accumulated a lot of key data and operation management experience, gradually established a set of scientific and systematic technical standards and operation mode, and formed the operation management ability of systematization of operation, standardization of management, specialization of team and intensive resources, ranking among the top in the industry. In 20 14, the company's professional project operation management technology and experience were exported to the waste incineration power generation project in Phuket, Thailand. In the "20 18 Harmless Grade Evaluation of Municipal Domestic Waste Treatment Facilities" organized by China Urban Environmental Sanitation Association entrusted by the Ministry of Housing and Urban-Rural Development, Chengdu Jiujiang, Chongqing Shengfeng and Lu 'an Sanfeng were rated as "AAA-level domestic waste incineration plants", while Nanning Sanfeng and Chengdu Jiujiang were rated as "green development benchmark enterprises" by China Ecological Civilization Research and Promotion Association.

6. The company has an experienced core management team.

The company's core management team has been deeply involved in the waste incineration power generation industry for many years, and has maintained * * * growth with the company since its establishment. He has a deep understanding of the industry development trend and the company's development strategy, and has a solid professional foundation, rich experience and strong management ability in waste incineration power generation technology, core equipment manufacturing, project investment, design, construction and operation. Team members are diligent, pragmatic, enterprising and pioneering. At the same time, the company has continuously absorbed high-end talents in the fields of industry technology, investment and financing management, risk management, etc., and formed a stable comprehensive management team, laying a solid foundation for the company to achieve sustained and rapid development.