The Company

China Power New Energy Development Company Limited (the "Company") is a company incorporated in Bermuda with limited liability, whose shares are listed on The Stock Exchange of Hong Kong Limited. The Company’s head office is located in Hong Kong.

Principal business activities of the Company and its subsidiaries (the "Group")

The principal activity of the Company is investment holding. The subsidiaries of the Company are principally engaged in the business of property investment and development, bakery and food, general trading, consultancy and the power generating business.

Since 2006, the Group has revived its interest in environment-related projects and completed the acquisition on 27 November 2006 from China Power International New Energy Development Limited (中電國際新能源發展有限公司) ("China Power") of (a) a company which is principally engaged in the operation of a combined heat-and-power plant; (b) a company which will establish a combined heat-and-power plant using mainly biomass as fuel. As consideration for the said acquisitions, 325,000,000 shares of the Company were issued to China Power, which has since become a substantial shareholder of the Company.

On 7 February 2007, the Group entered into an agreement to acquire 44% of the issued share capital of Tianhan Development Limited (天瀚發展有限公司*) ("Tianhan Development") from China Power for a consideration of HK$102.7 million. Through 中電國際新能源(上海)控股有限公司 (China Power International New Energy (Shanghai) Holding Company Limited*), a wholly-owned subsidiary of Tianhan Development, Tianhan Development Limited has, among other power generating project, an investment in a company (the "Invested Company") which will be involved in the wind power electricity generating business. The Invested Company has the right to set up a 100 gigawatt sea wind electricity generating project located near Dong Hai Bridge, Shanghai, the PRC. This project is expected to cost approximately RMB2.3 billion. The construction of the project is estimated to commence later in the 2007/2008 fiscal year. At the Special General Meeting of the shareholders of the Company held on 2 April 2007, the agreement was approved.

On 31 March 2007, the Group entered into two framework agreements, which on 9 May 2007 led to two formal agreements, for the proposed acquisitions of 40% of each of the entire issued capital of (a)東莞東城東興熱電有限公司(Dongguan Dong Cheng Dong Xin Heat and Power Company Limited*), a company which is principally engaged in the operation of a natural gas and oil power generating plant in Dongguan, the PRC, for a proposed consideration of HK$316 million; and (b)東莞市科偉環保電力有限公司 (Dongguan City Kewei Environmental Power Company Limited *), a company which is principally engaged in the operation of a waste incineration plant in Dongguan, the PRC, for a proposed consideration of HK$122 million. The consideration for each of (a) and (b) will be settled by cash and equity. A Special General Meeting of the Company’s shareholder will be held on 10 July 2007 to consider, inter alia, and if thought fit approve the two agreements.

The above acquisitions are in line with the business plan of the Group. Completion of which will give the Group an opportunity to invest in projects with different environmental-friendly technologies for generating power and which will provide gateways for the Group to further develop its interest and expertise in such projects.

Future Plan of the Group

Although the Group will retain its interest in its existing principal businesses, it will however focus more of its attention on the power generating business in the coming years.

Taking into account the continued escalation in the market prices of the properties in major cities of China, the continued increases in interest rates in the PRC and the increased pressure by the PRC government in controlling further increases in the price of properties, the directors of the Company are of the view that it is the appropriate time to dispose of its PRC property interests in order to realize any gains that can be derived therefrom. Nevertheless, the Group will continue to identify other suitable property investments and/or projects in the PRC and consider acquiring these investments and/or projects if the Group considers that it is the appropriate time to do so and these are of appropriate value and that such acquisition(s) would be in the interests of the Company and its shareholders.

As part of its business plan, the Group will continue to explore and evaluate new businesses and investment opportunities which could be of good potential and/or long-term benefit to the Group. At present, the Group is evaluating and considering other power plants and projects in the environmental domain for future possible acquisitions.

It has been the intention of the Group to allot and issue new Shares and/or convertible debt securities of the Company which may be used to satisfy part or all of the consideration for the above potential acquisitions, should they materialize. As and when considered to be appropriate, the Company may consider raising further funds by means of rights issues and/or open offers and/or otherwise as may be considered to be effective and appropriate.