China Shenhua Energy : PROVISION FOR IMPAIRMENT OF ASSETS

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(a joint stock limited company incorporated in the People's Republic of China with limited liability)

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On 17 March 2017, the Resolution on the Provision for Impairment of Assets of China Shenhua was considered and approved at the 24th meeting of the third session of the board of directors and the 12th meeting of the third session of the supervisory committee of China Shenhua Energy Company Limited (the "Company").

In 2016, power generators of Shenhua Funeng (Fujian Longyan) Power Co., Ltd., a subsidiary of the Company, were shut down upon approval. The Company continued to spend extra efforts on the upgrade and transformation of the energy conservation and environmental protection of coal-fired generators, and renewed certain equipment in coal mines. Subsequently, there were indicators of impairment on relevant assets of certain power plants and coal companies of the Company. In order to reveal the objective and impartial view of the assets conditions of the Company, in accordance with the principle of prudence, the Company has conducted impairment tests on the fixed assets and inventories which had indication of impairment for 2016 based on China Accounting Standards for Business Enterprises ("CASs") and International Accounting Standards ("IASs") and made corresponding provision for impairment based on the results of the impairment tests.

1. BASIC INFORMATION ON THE PROVISION FOR IMPAIRMENT OF ASSETS

   The Company made accumulated provision for impairment of assets for the year 2016 totaling RMB2.807 billion, including RMB2.07 billion for the provision for impairment of principal assets. Details of which are as follows:

2. Shenhua Fujian Energy Co., Ltd.

3. Reasons for and basis of the provision for impairment

   In accordance with relevant approval from the Consent Letter on Application for the Shut Down of Small Thermal Power Generating Units of Shenhua Fujian Energy Co., Ltd. by Fujian Provincial Commission of Economy and Information Technology (Min Jing Xin Han Neng Yuan [2016] No. 62), Shenhua Funeng (Fujian Longyan) Power Co., Ltd., a subsidiary of Shenhua Fujian Energy Co., Ltd., has shut down its power generators in the fourth quarter of 2016.

   Pursuant to the requirements of CAS No. 8 - Asset Impairment and IAS 36 - Impairment of Assets, if an asset has or will become idle, its usage has been terminated or disposed of ahead of schedule, it indicates that such asset may have been impaired. The Company shall estimate its recoverable amount by the net amount of the fair value of the asset minus the disposal costs of the asset and the provision for impairment shall be made if the carrying amount is higher than the recoverable amount.

4. Amount of the provision for impairment

   According to the results of the asset impairment tests, Shenhua Funeng (Fujian Longyan) Power Co., Ltd. made an impairment provision for fixed assets of RMB799 million and Shenhua Funeng Power Generation Co., Ltd., its parent company, made an impairment provision for goodwill of RMB98 million.

5. Certain power plants of the Company

6. Seven power plants including Guangdong Guohua Yudean Taishan Power Co., Ltd.

7. Reasons for and basis of the provision for impairment

   In 2016, the Company commenced upgrade and technology transformation of energy conservation and environmental protection for seven power plants including Guangdong Guohua Yudean Taishan Power Co., Ltd.. Indication of impairment occurred to the fixed assets and unusable spare parts which had been demolished or were necessary to be demolished including machineries and equipment due to technical transformation.

   Pursuant to the requirements of CAS No. 1 - Inventories, CAS No. 8 - Asset Impairment and IAS 36 - Impairment of Assets, if an asset has or will become idle, its usage has been terminated or disposed of ahead of schedule, it indicates that such asset may have been impaired. The Company shall estimate its recoverable amount by the net amount of the fair value of the asset minus the disposal costs of the asset and the provision for impairment shall be made if the carrying amount is higher than the recoverable amount; if the inventory cost is higher than the net realizable value, provision for inventory impairment shall be made.

8. Amount of the provision for impairment

   According to the results of the asset impairment tests, Guangdong Guohua Yudean Taishan Power Co., Ltd. made an impairment provision for fixed assets of RMB144 million and an impairment provision for inventories (spare parts) of RMB14 million; Zhejiang Guohua Zheneng Power Generation Co., Ltd. made an impairment provision for fixed assets of RMB137 million and an impairment provision for inventories (spare parts) of RMB4 million; Guohua Taicang Power Generation Co., Ltd. made an impairment provision for fixed assets of RMB74 million and an impairment provision for inventories (spare parts) of RMB2 million; Suizhong Power Co., Ltd. made an impairment provision for fixed assets of RMB61 million and an impairment provision for inventories (spare parts) of RMB9 million; Sanhe Power Co., Ltd. made an impairment provision for fixed assets of RMB29 million and an impairment provision for inventories (spare parts)

   of RMB10 million; Zhejiang Guohua Yuyao Gas-fired Power Co., Ltd. made an impairment provision for fixed assets of RMB28 million and an impairment provision for inventories (spare parts) of RMB16 million; Shaanxi Guohua Jinjie Energy Co., Ltd. made an impairment provision for fixed assets of RMB33 million and an impairment provision for inventories (spare parts) of RMB1 million.

   The above seven power plants have made impairment provision for fixed assets totaling RMB506 million and impairment provision for inventories (spare parts) of RMB56 million.

9. Guohua Beijing Thermal Power Branch

10. Reasons for and basis of the provision for impairment

    Guohua Beijing Thermal Power Branch has shut down its coal-fired generators and made an impairment provision based on the results of the impairment tests in 2015. During the disposal process of assets in 2016, there were further indications of impairment on certain specialized equipment.

    Pursuant to the requirements of CAS No. 8 - Asset Impairment and IAS 36 - Impairment of Assets, if an asset has or will become idle, its usage has been terminated or disposed of ahead of schedule, it indicates that such asset may have been impaired. The Company shall estimate its recoverable amount by the net amount of the fair value of the asset minus the costs of disposal and the provision for impairment shall be made if the carrying amount is higher than the recoverable amount.

11. Amount of the provision for impairment

12. According to the results of the asset impairment tests, Guohua Beijing Thermal Power Branch made additional impairment provision for fixed assets of RMB173 million.