20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                       TO                        

OR
o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF EVENT REQUIRING THIS SHELL COMPANY REPORT . . . . . . . . . . . . . . . . . . .

Commission file number: 001-34609

CHINA HYDROELECTRIC CORPORATION

(Exact name of Registrant as specified in its charter)

Not applicable

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Scott Powell

Investor Relations and Corporate Communications

China Hydroelectric Corporation

901, Marco Polo Plaza Building, No. 80 Anli Road

Chaoyang District, Beijing

People’s Republic of China 100101

Phone (U.S.): +1(646)650-1351

Email: ir@china-hydro.com

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
American Depositary Shares, each representing three Ordinary Shares, par value $0.001 per share	New York Stock Exchange
Ordinary Shares, par value $0.001 per share	New York Stock Exchange*
Warrants each to purchase three Ordinary Shares	New York Stock Exchange**

*Not for trading, but only in connection with the registration of American Depositary Shares.

** Expired on January 25, 2014 unexercised.

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

162,126,002 ordinary shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes   x No

If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes   x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP x International Financial Reporting Standards as issued
by the International Accounting Standards Board o Other o

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17   o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

CHINA HYDROELECTRIC CORPORATION

TABLE OF CONTENTS

		Page
INTRODUCTION		1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		2
PART I.		4
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	4
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	4
ITEM 3.	KEY INFORMATION	4
ITEM 4.	INFORMATION ON THE COMPANY	30
ITEM 4A.	UNRESOLVED STAFF COMMENTS	66
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	66
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	94
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	103
ITEM 8.	FINANCIAL INFORMATION	104
ITEM 9.	THE OFFER AND LISTING	105
ITEM 10.	ADDITIONAL INFORMATION	108
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	114
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	116
PART II.
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	117
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	117
ITEM 15.	CONTROLS AND PROCEDURES	117
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	118
ITEM 16B.	CODE OF ETHICS	118
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	118
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	118
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	118
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	118
ITEM 16G.	CORPORATE GOVERNANCE	118
ITEM 16H	MINE SAFETY DISCLOSURE	119
PART III.
ITEM 17.	FINANCIAL STATEMENTS	120
ITEM 18.	FINANCIAL STATEMENTS	120
ITEM 19.	EXHIBITS	120
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1
EX- 8.1
EX- 12.1
EX- 12.2
EX- 13.1
EX- 13.2
EX- 15.1
EX- 15.2

i

INTRODUCTION

This annual report contains translations of Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, the asset and liability accounts have been translated from Renminbi to U.S. dollars using the middle rates promulgated by People’s Bank of China at the balance sheet dates, and income and expense items have been translated using the average of the middle rates promulgated by People’s Bank of China during the applicable period. We make no representation that the Renminbi amounts referred to in this annual report could have been or could be converted into U.S. dollars at any particular rate or at all. See “Item 3—A. Selected Consolidated and Other Financial and Operating Data—Exchange Rate Information”.

Unless the context otherwise requires, references in this annual report to:

·“years” are to calendar years and, where the context requires, our fiscal year;

·our “hydroelectric power projects” are to the power projects and, where the context requires, the operating companies which owns the projects;

·“we,” “us,” “our company,” “our,” “CHC” and “China Hydroelectric” are to China Hydroelectric Corporation and its subsidiaries. For SEC reporting purposes, China Hydroelectric Corporation is the successor company to our predecessor company, Binglangjiang. Certain financial and operating data presented in this annual report reflect the results of operations of Binglangjiang from April 25, 2007, the date we acquired Binglangjiang;

·“shares” or “ordinary shares” are to our ordinary shares, par value $0.001 per share;

·“ADSs” are to our American depositary shares, each of which represents three ordinary shares, and “ADRs” refers to the American depositary receipts that evidence our ADSs;

·“China” or “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, Taiwan, Hong Kong and Macau;

·“RMB” or “Renminbi” are to the legal currency of China and “US$”, “U.S. dollars” or “$” refers to the legal currency of the United States;

·“effective tariff” are to gross revenues, which are revenues not netted for VAT or other applicable business surcharges, if any, recorded in the relevant period, divided by the quantity of electricity sold in such period;

·“effective utilization rate” are to the quantity of electricity sold in the relevant period expressed as a percentage of installed capacity for electricity generation in such period;

·“Yuanping” are to the Yuanping Hydroelectric power project, which is located in Pingnan County, Ningde City, Fujian province; and

·“Yuheng” are to the Yuheng Hydroelectric power project, which is located in Pingnan County, Ningde City, Fujian province.

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that relate to our current expectations and views of future events. These forward-looking statements are contained principally in the items entitled “Information on the Company,” “Risk Factors,” “Operating and Financial Review and Prospects,” “Financial Information” and “Quantitative and Qualitative Disclosures About Market Risk.” These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. These forward-looking statements include, among other things, statements relating to:

·our business strategies and plan of operations;

·our ability to acquire productive hydroelectric companies and assets;

·our capital expenditure and funding plans;

·our operations and business prospects;

·our dividend policy;

·estimates of production of and tariffs applicable to our hydroelectric power projects;

·projects under development, construction and planning;

·the regulatory environment for the power industry in general and the level of policy support for renewable energy; and

·future developments in the PRC hydropower industry.

These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors set forth in “Risk Factors” and the following:

·supply and demand changes in the electric power markets;

·changes in electricity tariffs in the regions in which we operate;

·our production and transmission capabilities;

·availability of sufficient and reliable transmission resources;

·our relationship with, and other conditions affecting, the power grids we service;

·risks inherent to hydroelectric power production, in particular hydrological conditions, as well as changes in geologic conditions and equipment failure;

·weather conditions or catastrophic weather-related damage;

·competition, in particular increased supply of power generated by renewable energy resources available to the power grids we service;

·our plans and objectives for future operations and expansion or consolidation;

·the effectiveness of our cost-control measures;

·inflationary trends and interest rate changes;

·the effects of changes in currency exchange rates;

·environmental laws, including those directly affecting our operations, and those affecting our customers’ demand for electricity;

·changes in political, economic, legal and social conditions in China, including the PRC government’s specific policies with respect to investment in the hydroelectric and power industries, economic growth, inflation, foreign exchange and the availability of credit; and

·our liquidity and financial condition.

2

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we reference in this annual report and have filed as exhibits to this annual report, completely and with the understanding that our actual future results or performance may be materially different from what we expect.

3

PART I.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following tables present our selected historical consolidated financial information. Our selected consolidated statements of comprehensive income data for the years ended December 31, 2011, 2012 and 2013 and the selected consolidated balance sheet data as of December 31, 2012 and 2013 have been derived from our audited consolidated financial statements and the related notes included elsewhere in this annual report, which have been audited by Ernst & Young Hua Ming LLP, an independent registered public accounting firm. Our selected consolidated statements of comprehensive income data for the years ended December 31, 2009 and 2010 and selected consolidated balance sheet data as of December 31, 2009, 2010, and 2011 were derived from our audited consolidated financial statements, which are not included in this annual report. Our audited consolidated financial statements is prepared and presented in accordance with United States generally accepted accounting principles, or U.S. GAAP. Historical results are not necessarily indicative of the results of operations to be expected for future periods.

You should read this information together with “Item 5. Operating and Financial Review and Prospects” and the consolidated and other financial statements and the related notes of our company.

4

	Our Company
	For the Year Ended December 31,
	2009		2010		2011		2012		2013
	(US$ in thousands, except share and per share data)
Consolidated Statements of Comprehensive Income Data:
Continuing operations:
Revenues	31,977		58,158		54,597		85,388		74,517
Cost of revenues	(15,330	)	(22,653	)	(31,314	)	(35,795	)	(35,357	)
Gross profit	16,647		35,505		23,283		49,593		39,160
Operating expenses:
General and administrative expenses	(8,931	)	(19,166	)	(28,896	)	(20,348	)	(13,258	)
Impairment loss on long-lived assets	—		—		(11,590	)	—		(3,549	)
Impairment loss on goodwill	—		—		(11,388	)	—		—
Operating income (loss)	7,716		16,339		(28,591	)	29,245		22,353
Interest income	501		798		101		84		98
Interest expense	(11,780	)	(13,855	)	(24,757	)	(28,070	)	(22,568	)
Change in fair value of derivative financial liabilities and warrant liabilities	(13,793	)	365		951		(399	)	839
Exchange (loss) gain	(23	)	(855	)	(851	)	28		(41	)
Share of losses in an equity investee	(70	)	—		—		—		—
Other (loss) income, net	(205	)	166		(334	)	507		275
(Loss) income before income tax expense	(17,654	)	2,958		(53,481	)	1,395		956
Income tax expense	(1,271	)	(3,208	)	(1,527	)	(6,451	)	(3,474	)
Net (loss) from continuing operations	(18,925	)	(250	)	(55,008	)	(5,056	)	(2,518	)
Net (loss) income net of income tax (expense) benefit from discontinued operations	(503	)	4,235		(282	)	3,907		—
Net (loss) income for the year	(19,428	)	3,985		(55,290	)	(1,149	)	(2,518	)
Less:
Net loss (income) attributable to noncontrolling interests	32		(243	)	9,901		(94	)	297
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(19,396	)	3,742		(45,389	)	(1,243	)	(2,221	)
-Continuing operations	(18,893	)	(493	)	(45,107	)	(5,150	)	(2,221	)
-Discontinuing operations	(503	)	4,235		(282	)	3,907		—
Other comprehensive income (loss), net of income tax expense
Foreign currency translation adjustments	246		11,857		20,394		(1,413	)	12,395
Defined benefit pension plans	—		—		(33	)	33		—
Other comprehensive income (loss)	246		11,857		20,361		(1,380	)	12,395
Comprehensive (loss) income	(19,182	)	15,842		(34,929	)	(2,529	)	9,877
Less: Comprehensive income (loss) attributable to noncontrolling interests	32		(243	)	9,586		(85	)	364
Comprehensive (loss) income attributable to China Hydroelectric Corporation shareholders	(19,150	)	15,599		(25,343	)	(2,614	)	10,241

5

	Our company
	For the Year Ended December 31,
	2009		2010		2011		2012		2013
	(US$ in thousands, except share and per share data)
Consolidated Statements of Comprehensive Income Data:
Less:
Cumulative dividends on Series A convertible redeemable preferred shares	(19,836	)	(1,989	)	—		—		—
Cumulative dividends on Series B convertible redeemable preferred shares	(14,412	)	(1,412	)	—		—		—
Cumulative dividends on Series C convertible redeemable preferred shares	(356	)	(162	)	—		—		—
Beneficial conversion feature on Series A convertible redeemable preferred shares	—		(6,990	)	—		—		—
Beneficial conversion feature on Series B convertible redeemable preferred shares	—		(5,040	)	—		—		—
Beneficial conversion feature on Series C convertible redeemable preferred shares	—		(222	)	—		—		—
Changes in redemption value of Series C convertible redeemable preferred shares	(1,872	)	—		—		—		—
Loss attributable to ordinary shareholders	(55,872	)	(12,073	)	(45,389	)	(1,243	)	(2,221	)
Net loss attributable to ordinary shareholders per share	(3.59	)	(0.08	)	(0.29	)	(0.01	)	(0.01	)
From continuing operations	(3.56	)	(0.11	)	(0.29	)	(0.03	)	(0.01	)
From discontinuing operations	(0.03	)	0.03		(0.00	)	0.02		—
Weighted average ordinary shares used in basic and diluted net loss attributable to China Hydroelectric Corporation shareholders per share computation	15,541,666		143,253,450		156,505,076		161,989,097		162,071,626
Net loss attributable to ordinary shareholders per ADS	—		(0.25	)	(0.87	)	(0.02	)	(0.03	)
From continuing operations	N/A		(0.34	)	(0.86	)	(0.09	)	(0.03	)
From discontinuing operations	N/A		0.09		(0.01	)	0.07		—
Weighted average ordinary shares used in basic and diluted net loss attributable to ordinary shareholders per ADS computation	—		47,751,150		52,168,358		53,996,366		54,023,875
Other Financial Data:
EBITDA as adjusted(1)	22,750		43,031		31,527		60,479		49,904

(1)See “Item 5. Operating and Financial Review and Prospects—Results of Operations of our Company—EBITDA from continuing operations, as adjusted” for a reconciliation of this non-GAAP number.

6

	Our Company
	As of December 31,
	2009		2010	2011	2012	2013
	(US$ in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	31,618		33,457	8,391	7,967	14,165
Restricted cash	—		—	—	5,171	—
Accounts receivable, net	8,434		4,359	4,246	5,772	3,741
Notes receivable	—		—	—	1,877	492
Deferred tax assets	489		1,260	1,799	1,659	1,994
Amounts due from related parties, net	—		5,950	—	86	—
Amounts due from an equity investee	—		—	—	—	—
Prepayments and other current assets	4,582		8,221	2,999	14,150	3,226
Assets classified as held-for-sale	—		—	21,693	—	—
Total current assets	45,123		53,247	39,128	36,682	23,618
Deferred IPO initial public offering costs	12,774		—	—	—	—
Property, plant and equipment, net	384,493		583,686	580,964	548,511	540,242
Land use rights, net	38,707		48,944	50,666	48,640	48,962
Intangible assets, net	4,513		6,249	5,788	4,660	4,714
Goodwill	107,824		136,635	135,651	112,481	115,960
Deferred tax assets	—		986	1,767	1,329	1,526
Other non-current assets	399		709	951	2,013	2,220
Total non-current assets	548,710		777,209	775,787	717,634	713,624
Total assets	593,833		830,456	814,915	754,316	737,242
Liabilities classified as held-for-sale	—		—	11,920	—	—
Total current liabilities	101,467		163,720	177,855	117,706	90,165
Long term loan	172,469		224,297	215,382	212,970	211,723
Deferred tax liabilities	18,599		25,350	26,563	24,345	24,720
Other non-current liabilities	104		106	237	6,780	8,005
Convertible redeemable preferred shares	353,840		—	—	—	—
Total China Hydroelectric Corporation shareholders’ equity (deficit)	(53,435	)	405,887	394,400	391,952	402,430
Noncontrolling interests	789		11,096	478	563	199
Total liabilities and shareholders’ equity	593,833		830,456	814,915	754,316	737,242

7

	Our Company
	As of and For the Period Ended December 31
	2009	2010	2011	2012	2013
Selected Operation Data(1)
Installed Capacity(2) (MW)	330.60	502.8	517.8	517.8	517.8
Electricity Sold(3) (kWh)	722,521,642	1,263,659,795	1,262,311,479	1,767,978,032	1,534,267,140
Effective tariff(4) (RMB/kWh)	0.30	0.34	0.30	0.33	0.33

(1)For our company, operating data given are for our period of ownership of the hydroelectric power projects during the years indicated, excluding Yuanping and Yuheng, which are discontinued operation as of all years indicated.

(2)Our aggregate installed capacity information presented includes, as of December 31, 2009, the installed capacity of Shapulong, Banzhu, and Wangkeng, as of December 31, 2009, the installed capacity of Wangkeng, as of December 31, 2010, the installed capacity of Wangkeng, Jinlong, Jintang and Jinwei, although as of such respective dates, our equity interest in Shapulong, Banzhu, Wangkeng, Jinlong, Jintang and Jinwei were 50.0%, 90.0%, 90.0%, 55.0%, 74.0% and 74.0% respectively. We acquired the remaining 10.0% interest in Banzhu in March 2009, the remaining 50.0% interest in Shapulong in August 2009 and the remaining 10.0% interest in Wangkeng in January 2011. Our aggregate installed capacity for the year ended December 31, 2009, 2010, 2011, 2012 and 2013, respectively, reflects installed capacity by our operating projects, excluding Yuanping and Yuheng, which are discontinued operation as of all years indicated.

(3)Electricity sold for the year ended December 31, 2009, 2010, 2011, 2012 and 2013 reflects electricity sold by all our operating projects, excluding Yuanping and Yuheng, which are discontinued operation as of all years indicated.

(4)See Exhibit 15.1 to this Annual Report on Form 20-F for the details of the calculation of effective tariff. Effective tariff for the year ended December 31, 2009, 2010, 2011, 2012 and 2013, respectively, reflects contributions from all our projects excluding Yuanping and Yuheng, which are discontinued operations as of all years indicated.

8

Exchange Rate Information

Our financial statements and other financial data included in this annual report are presented in U.S. dollars. Our business and operations are primarily conducted in China through our PRC subsidiaries. The functional currency of our PRC subsidiaries is RMB and their revenues and expenses are denominated in that currency. Unless otherwise noted, the asset and liability accounts have been translated from RMB to U.S. dollars using middle rates published by the People’s Bank of China, or the PBOC, at the balance sheet dates, and income and expense items have been translated using the average of the middle rates published by the PBOC during the applicable period. We make no representation that any RMB or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in our shareholders’ equity. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On April 21, 2014, the noon middle rate was RMB6.1591 to $1.00.

The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated.

	Middle Rate
Period	Period End	Average	Low	High
	(RMB per $1.00)
2009	6.8282	6.8314	6.8201	6.8397
2010	6.6227	6.7255	6.6227	6.8284
2011	6.3009	6.4618	6.3009	6.6349
2012	6.2855	6.2932	6.2670	6.3495
2013	6.0969	6.1912	6.0969	6.2898
Most recent six months:
October 2013	6.1425	6.2140	6.1330	6.1458
November 2013	6.1325	6.2090	6.1305	6.1482
December 2013	6.0969	6.1912	6.0969	6.1352
January 2014	6.1050	6.1010	6.0930	6.1109
February 2014	6.1214	6.1092	6.1053	6.1224
March 2014	6.1521	6.1245	6.1201	6.1521
April 2014 (through April 21, 2014)	6.1591	6.1280	6.1490	6.1591

Source: People’s Bank of China

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Our business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business, prospects, financial condition or results of operations could be materially and adversely affected.

Risks Relating to our Company and the PRC Hydroelectric Power Industry

Our liquidity position poses risk to our operations.

As of December 31, 2013, we had a working capital deficiency of approximately $66.5 million. Due to our working capital deficiency, our independent registered public accountant has stated in its report dated April 21, 2014 with respect to our financial statements as of and for the year ended December 31, 2013 that these circumstances raise substantial doubt about our ability to continue as a going concern. We are currently seeking to raise funds through various means as described below. Our ability to continue as a going concern is dependent upon obtaining the necessary financing to meet our current and future liquidity needs.

Management has been closely monitoring our costs and intends to restrict such costs to those expenses that are essential to our operations. Management has been actively pursuing various means of securing additional financing. However, we cannot make any assurances that our cost reduction efforts will be effective or that any additional financing will be completed on a timely basis, on acceptable terms or at all. In the event that we fail to raise funds sufficient to meet our liquidity needs, we may be forced to substantially curtail our operations or otherwise take measures that would materially and adversely affect our business, results of operations and business prospects.

9

Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Should the going concern assumption not be appropriate and we are not able to realize our assets and settle our liabilities, commitments and contingencies in the normal course of operations, adjustments would be required to our consolidated financial statements to the amounts and classifications of assets and liabilities, and these adjustments could be significant.

We have a limited operating history which provides limited reference for you to evaluate our ability to achieve our business objectives.

We were formed in July 2006 as a Cayman Islands exempted company with limited liability without any operating business. We currently have a total of twenty-five operating hydroelectric power projects from continuing operations. Our financial condition, results of operations and our future success will, to a significant extent, depend on our ability to continue to acquire, retain and, develop hydroelectric power projects throughout China and to achieve significant economies of scale. Our company has a limited operating history and is subject to the risks and uncertainties associated with early stage companies. Accordingly, you will have a limited basis on which to evaluate our ability to achieve our business objectives. We cannot assure you that more acquisitions can be consummated on terms favorable to us or at all, or that if we achieve those acquisitions we will be able to operate our expanded business profitably. Due to restrictions on bank lending imposed by the PRC government in 2011, we have been experiencing difficulty in obtaining financing from our principal banks, and, as part of our effort to seek funding from other sources, we entered an Equity Purchase and Sale Agreement to sell the Yuanping hydroelectric power project in December 2011 and the disposal date was March 2, 2012, which was the date we lost effective control over Yuanping, and the sale transaction was completed on the same date. We entered into a Share Transfer Agreement to sell the Yuheng hydroelectric power project in October 2012, the disposal date was October 31, 2012, which was the date we lost effective control over Yuheng. The sale transaction was completed in April 2013. Although we generally intend to minimize sales of our operating assets, we may need to sell additional hydroelectric power projects in the future. If we fail to achieve our business objectives, then we may not be able to realize our expected revenue growth, maintain our existing revenue levels or operate at a profit. Even if we do realize our business objectives, our business may not be profitable in the future.

Our business is dependent upon hydrological conditions, which may from time to time result in conditions that are unfavorable to our business operations.

Our hydroelectric power generating prospects are dependent upon hydrological conditions prevailing from time to time in the broad geographic regions in which our existing and future hydroelectric power projects are located. There can be no assurance that the water flows at our existing and future sites will be consistent with our expectations, or that climatic and environmental conditions will not change significantly from the prevailing conditions at the time our projections were made. Water flows vary each year, and depend on factors such as rainfall, snowfall, rate of snowmelt and seasonal changes. Based on decades of hydrology recordkeeping by government and other organizations for the provinces where we have projects situated, as well as engineering studies prepared during the project design phase, we believe that over time, while annual precipitation levels will typically be above or below average, such variations will mostly likely average out. However, our existing and future hydroelectric power projects may be subject to substantial variations in climatic and hydrological conditions which may reduce water flow and thus our ability to generate electricity. While we have selected and will continue to select our hydroelectric power projects for acquisition in part on the basis of their projected outputs, the actual water flow required to produce those outputs may not exist or be sustained. For example, overall utilization at our hydroelectric power projects in 2013 was lower than the overall utilization in 2012 due to lower levels of precipitation, which has affected our results of operations in 2013. If hydrological conditions result in droughts or other conditions that negatively affect our existing or proposed hydroelectric generation business, our results of operations may be materially and adversely affected.

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We have encountered and may continue to encounter difficulties in pursuing our acquisition strategy and have sold and may continue to sell operating assets, which would result in us being dependent upon our current or remaining portfolio of hydroelectric power projects and having limited revenue growth potential.

Our ability to implement our acquisition strategy depends on a number of factors, in particular, our ability to maintain our current portfolio of hydroelectric power projects, identify suitable acquisition targets, and reach agreements with sellers for acceptable consideration and on commercially reasonable terms and secure financing necessary for completing future acquisitions. There is no guarantee that we have the ability to pursue acquisition opportunities we identify in the future or the ability to maintain our current portfolio of power projects. In 2013, we did not acquire any additional hydroelectric power projects, nor do we currently anticipate any major asset purchase in at least the short term. Due to restrictions on bank lending imposed by the PRC government, we did not proceed with two acquisitions as planned in 2011 and entered into agreements to sell Yuanping hydroelectric power project in December 2011 and Yuheng hydroelectric power project in October 2012, respectively, to help meet our liquidity needs. The disposal date of Yuanping was March 2, 2012, which was the date we lost effective control over Yuanping. The sale transaction was completed on the same date. The disposal date of Yuheng was October 31, 2012, which was the date we lost effective control over Yuheng. The sale transaction was completed in April 2013. We cannot assure you that we will not need to sell additional operating assets. In addition, if we decide to make additional acquisitions in the future, we believe identifying and acquiring projects on reasonable terms may be more difficult as domestic and international competitors seek to acquire small hydroelectric power projects in China. Furthermore, depending on factors such as the national monetary policy and the credit market environment in China, in the event that we are in a position to pursue acquisitions in the future, we may not be able to secure financing for additional acquisitions.

If we need to sell additional operating assets or we are unable to acquire suitable hydroelectric power projects in China, we will continue to remain dependent upon our existing or remaining hydroelectric power projects. This may:

·result in our dependence upon the performance of our existing operating plants;

·result in our dependence upon electricity sales in the existing geographical areas;

·subject us to increased risks associated with drought or other natural disasters in the existing geographical areas we operate; and

·limit our ability to grow our revenues and to obtain the benefits of scale that we anticipate.

We may need additional funding to accomplish our growth strategy and to meet our operational needs and may be unable to raise capital or borrow money on terms favorable to us or at all, which could increase our financing costs, dilute the ownership interests our existing shareholders, affect our business operations or force us to delay, reduce or abandon our growth strategy.

Despite the sales of the Yuanping and Yuheng Hydroelectric power projects, our long-term growth strategy remains to acquire and develop additional hydroelectric power projects in China and expand those projects with potential for expansion. To successfully implement this growth strategy, we will need to raise additional funds. In addition, we may need to raise additional funds to meet our liquidity and other operational needs. Our ability to arrange financing and the cost of such financing are dependent on numerous factors, including but not limited to:

·general economic and capital market conditions;

·the availability of credit from banks or other lenders;

·investor confidence in us; and

·the continued performance of our hydroelectric power projects.

We cannot predict if our operations will generate sufficient annual cash flows to fund our capital investment requirements. If and when that does not occur, we will be required to finance our cash needs through public or private equity offerings, bank loans or other debt financing, or otherwise. We intend to increase our levels of debt financing to optimize our capital structure. There can be no assurance that international or domestic financing for future power plant acquisitions, development and expansion of existing hydroelectric power projects will be available on terms favorable to us or at all, which could force us to delay, reduce or abandon our growth strategy, increase our financing costs, or both.

Additional funding from debt financings, if available at all, may make it more difficult for us to operate our business because we would need to make principal and interest payments on the indebtedness and may be obligated to abide by restrictive covenants contained in the debt financing agreements, which may, among other things, limit our ability to make business and operational decisions and pay dividends.

Furthermore, raising capital through public or private sales of equity or securities convertible in equity to finance acquisitions or expansion or meet our liquidity and other business needs could cause earnings or ownership dilution to your shareholding interests in our company. We cannot assure you that we will not pursue sale of our ADSs or ordinary shares or securities convertible into our ordinary shares that would be highly dilutive to our existing shareholders.

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We cannot assure you that we can obtain bank loans on terms acceptable to us or at all.

In 2011, the PRC government, as part of its effort to reduce inflation, implemented a monetary policy that severely limited the amounts that banks could lend. As a result, we experienced difficulty in borrowing from our principal banks, although we were able to meet our liquidity needs at the end of 2011 through negotiations to extend the term of certain current obligations, several smaller loans with one-year terms, an exercise of warrants by a stockholder and the sale of the Yuanping hydroelectric power project. In 2013, the bank lending market in China has improved. While our ability to borrow remains somewhat challenging, we have been able to secure a total of $52.2 million through borrowings from banks and non-financial institutions in 2013. The sale of the Yuheng hydroelectric power project also helped us to meet our liquidity needs at the end of 2013. It is unclear what the PRC government’s monetary policy will be in 2014. We cannot assure you that we can obtain bank financing on terms acceptable to us or at all in the future or that we will be able to meet our liquidity needs through bank loans whether it is due to changes in the PRC’s monetary policy or otherwise.

The operation of our hydroelectric power projects and customer demand for our power may be vulnerable to disruptions caused by natural and man-made disasters, which may materially and adversely affect our results of operations.

Our hydroelectric power projects could be required to cease operating in the event of a drought, and to cease operating or even be damaged in the event of a flood. Water supply to our hydroelectric power projects and the projects themselves are vulnerable to natural disasters including, but not limited to, earthquakes, storms, tornadoes and floods, as well as disasters caused by human actions such as terrorist attacks, military conflicts and other deliberate or inadvertent actions which may affect the availability of water supplies or water flow to our hydroelectric power projects. For example, in 2013, a severe flood in Sichuan province hit our Liyuan hydroelectric power project causing damage to the tailrace concrete apron, spillway gates, power generation plant, auxiliary equipment, and the 35KV substation. We recorded a net asset impairment loss of $3.5 million, reflecting the insurance recovery of $0.6 million we received in 2013. We are still assessing the total asset loss caused by such flood and working with the insurance company to determine how much of the total loss can be recovered. Our hydroelectric power projects located in Yunnan province, Sichuan province and Fujian province are all in areas of relatively high seismic risk as compared to other areas of China. Such disasters are unpredictable and can significantly damage our access to water supply and power plant equipment as well as the property of our consumers. Under such circumstances, market demand for power in general may be significantly and adversely affected, reducing the need for the electricity we produce, and we may be unable to continue operation of our plants or to produce the level of electricity we expect. The insurance coverage we maintain may not be adequate to compensate us for all damages and economic losses which may arise in connection with these disasters. Such disruption to our operations could materially and adversely affect our results of operations.

Greenfield projects and projects under construction present substantial development, construction, start-up and partnership risks, which could materially and adversely affect our results of operations, financial condition and growth prospects.

Greenfield projects and projects under construction, present substantial development risk. The development and construction of hydroelectric power projects is time-consuming and complex and requires significant capital investment. In connection with the development and construction of hydroelectric power projects, we will seek to obtain government permits and approvals, land purchase or leasing agreements, equipment procurement and construction contracts, operation and maintenance agreements, and sufficient equity capital and debt financing. Factors that may impair our ability to develop and construct hydroelectric power projects include:

·inability to obtain financing on satisfactory terms or obtain any financing at all;

·delays in obtaining various regulatory approvals, licenses or permits from different governmental authorities at different levels, including permission for the construction and operation of the hydroelectric power project itself, the environmental permits and permits to use the relevant land;

·shortages or increases in the cost of equipment, materials or labor;

·adverse weather conditions, which may delay the completion of hydroelectric power projects or substations, or natural disasters, accidents or other unforeseen events;

·unforeseen engineering, design, environmental or geological problems;

·opposition of local interests;

·strikes and labor disputes; and

·adverse changes in the PRC regulatory environment.

Any of these factors may cause delays in completion of hydroelectric power projects and may increase the cost of contemplated projects. If we are unable to complete the projects contemplated, the costs incurred in connection with such projects may not be recoverable. Even if we complete these projects, as a result of project delays, cost overruns, changes in market circumstances or other reasons, we may not be able to achieve the intended economic benefits or demonstrate the commercial viability of these projects, which may materially and adversely affect our results of operations, financial condition and growth prospects.

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In addition, the commencement of operations at a newly constructed hydroelectric power project involves many risks, including start-up problems, the breakdown or failure of equipment or processes, performance below expected or contracted levels of output or efficiency and problems with the construction of new supporting infrastructure, such as grid transmission equipment. While manufacturers’ warranties are generally obtained for limited periods relating to each project and its equipment in varying degrees, and construction contractors may guarantee certain performance levels, subject to the payment of liquidated damages, the proceeds of such warranties or performance guarantees, if any, may not be adequate to cover lost revenues or increased costs and expenses associated with equipment problems during project start-up. We also may develop projects with local development partners, which expose us to risks associated with our partners’ failure to retain development rights, obtain permits and approvals required for the development of a project or perform their management, construction or financing obligations. Realization of any of these risks could materially and adversely affect our results of operations, financial condition and growth prospects.

On October 22, 2009, we entered into a capital injection agreement with Henan Lantian Group to subscribe for a 79.0% equity interest in Henan Wuyue Storage Power Generation Co., Ltd. (“Wuyue”), which owns the right to develop a pumped storage hydropower project of 1,000 megawatts in Henan province. Pursuant to the agreement, we completed the first capital injection of RMB32.5 million ($4.8 million) on March 23, 2010. In September 2010, we signed a framework agreement with China Guangdong Nuclear Energy Development Co. Ltd. (“Guangdong Nuclear”) for the equity transfer of a controlling interest of Wuyue. Under the framework agreement, subject to the completion of definitive documents, completion of due diligence and receipt of required governmental and other approvals in the PRC, we would transfer a 51.0% equity interest in Wuyue to Guangdong Nuclear, in exchange for which Guangdong Nuclear agreed to fund its proportionate share of the on-going development costs of the project. The framework expired on December 31, 2011, and the project has been largely at a standstill since 2009. We expect the project will continue to be at a standstill and has no intention to make further investments. As a result, we recognized impairment loss of Wuyue’s construction in progress for $11.6 million in 2011. The impairment loss attributable to the company’s shareholder is $5.0 million in 2011. No impairment loss of Wuyue’s construction in progress was recognized as of December 31, 2012 and 2013.  There can be no assurance that we will not in the future pursue other greenfield projects that would eventually turn out to be unsuccessful.

We derive our revenues solely from the sale of hydroelectric power electricity and each of our projects typically has only one customer. Any prolonged disruption to the demand for hydropower or termination of a customer relationship may cause our revenues to decrease significantly.

We derive revenues solely from the sale of electricity generated by hydroelectric power projects, and most of our power is sold to one of two national power grids. If for any reason the national power grids reduce or eliminate their purchases of hydropower, whether due to the emergence of a cheaper renewable energy source, withdrawal of government policy support for the dispatch of renewable energy or a severe drop in the PRC’s demand for power, we may not have alternative customers readily available to us. Without alternative sources of income, our revenues would decrease significantly should a reduction in demand for hydropower or lack of customers continue for a prolonged period.

Failure to renew the power purchase agreement could result in a reduction or complete loss of revenues from the hydroelectric power project, which would have a materially adverse effect on our revenues, results of operations and net cash used in operating activities.

Our power purchase agreements with the local grids to which our hydroelectric power projects are connected generally have terms of one to five years. Some of these agreements provide for automatic renewal while others do not. If we should be unable to renegotiate a power purchase agreement with the local grid, it is unlikely we would be able to obtain alternative customers for the power generated by the project, as only one grid is available to each hydroelectric power project and there are no neighboring industrial sites ready to take up the power.

Assumptions applied to our investment analyses and feasibility studies may not be accurate, and thus our actual return on investments, operational results, and overall growth may be materially and adversely affected.

In performing investment analysis and feasibility studies for our acquisition and development targets, we consider factors such as: (i) demand for power and growth potential in the province where the hydroelectric power projects is located, (ii) increase in power generation capacity in the locality, (iii) the average tariff of hydroelectric power projects of similar types and capacity, (iv) quality of transmission systems to the local power grids, (v) facilities and technology at the power plant and (vi) ability to retain existing debt financing for the plant or obtain new financing. However, much of the information we rely on in preparing these analyses is provided by the sellers of the plants. With the rapid development of the PRC hydroelectric power industry in recent years, there is some increased risk of plants being built based on inaccurate or incomplete technical data. As a result, the assumptions we use to perform our internal investment analyses and feasibility studies may not be accurate or complete. If any one of our observations or assumptions, or a combination thereof, proves to be inaccurate, then our estimated returns on investments, operational results and our overall growth may be materially adversely affected.

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The operations of our hydroelectric power projects may be adversely affected by the failure of key equipment, civil structures or transmission systems, which could result in lost revenues, increased maintenance costs and our owing damages to our customers for lost revenues.

The breakdown of generation equipment or failure of other key equipment or of a civil structure in one or more of our hydroelectric power projects could disrupt the generation of electricity and result in revenues being lower than expected. Further, any breakdown or failure of one or more of our transmission systems could disrupt transmission of electricity by a power plant to the power grid. We have in the past experienced an equipment breakdown at two of our hydroelectric power projects, resulting in temporary suspensions of electricity generation and distribution. Repair of such breakdowns may take one or two days or up to a month, depending on the nature of the problem and availability of spare parts. In addition, if the problem is related to the grid, we will not be able to dispatch our power until the grid carries out the necessary repairs. A portion of the generation facilities that we have acquired, or may acquire in the future, were, or may have been, constructed many years ago. Older generating equipment may require significant capital expenditure to keep it operating efficiently. Such equipment is also likely to require periodic upgrading and improvement. Breakdown or failure of one of our plants also may prevent us from performing under the applicable power sales agreement which, in certain situations, could result in termination of the agreement or incurring liability for liquidated damages. These events may reduce our ability to generate power, resulting in loss of revenues and increased maintenance costs.

Our power generating operations may be adversely affected by operational risks, which may result in uninsured losses.

Operating hydroelectric power projects involves many risks and hazards which may be beyond our control and could cause significant business interruptions, personal injuries and property or environmental damage, and could increase power generating costs at affected hydroelectric power projects for an unknown duration. These risks include but are not limited to:

·failure of power transmission systems;

·unexpected maintenance or technical problems;

·human error;

·failure of our mechanical, software or monitoring systems; and

·industrial accidents.

The occurrence of any of these events, and the consequences resulting from them, may not be covered adequately or at all by our insurance policies. We do not currently carry any third-party liability insurance, business interruption insurance or insurance covering environmental damage arising from accidents on our property or relating to our operations. See “Information on the Company—Insurance”. Uninsured losses incurred or payments we may be required to make may have a material adverse effect on our results of operations and financial condition.

Our operations may be interrupted by realization of unexpected risks or difficulties in integrating acquired businesses, which could interrupt our existing business and materially and adversely affect our results of operations.

Our continued growth and ability to leverage our management expertise depend on the successful implementation of our acquisition strategy. We cannot assure you that any particular acquisition will produce the intended benefits. For instance, if we fail to integrate an acquired project into our operations successfully, or the synergies expected from an integration ultimately fail to materialize, then our existing business operations may be interrupted. We may have as a result expended significant management time, capital and other resources to the transaction, which interrupted our existing business operations.

Risks which may be incurred through acquisitions include, but are not limited to:

·potential construction or engineering problems which may expose us to severe economic loss or legal liabilities and require substantial expenditure from us to remediate;

·unforeseen or hidden liabilities, including exposure to legal proceedings, associated with newly acquired companies;

·failure to generate sufficient revenues to offset the costs and expenses of acquisitions;

·potential impairment losses and amortization expenses relating to goodwill and intangible assets arising from any of such acquisitions, which may materially reduce our net income or result in a net loss; and

·possible contravention of Chinese regulations applicable to such acquisitions.

Any one or a combination of the above risks could interrupt our existing business and materially adversely affect our results of operations.

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On-grid tariffs are set based on regulatory guidance, actual supply of electricity to a power grid and regional demand for electricity, and changes in these factors may materially and adversely affect our results of operations.

All our electricity sales are to power grids and such sales are subject to on-grid tariffs. Since April 2001, the Chinese government has gradually implemented an on-grid tariff setting mechanism based on the actual costs of power projects as well as the average costs of comparable power projects that were constructed during the same period within the same provincial power grid.

This on-grid tariff setting mechanism was intended to replace the old mechanism for setting on-grid tariffs for planned output. Based on our experience, the determination of such average costs usually takes into consideration such factors as:

·construction costs, which vary according to the installed capacity of the individual power projects;

·operating and administrative expenses;

·maintenance and repair costs of power projects; and

·interest expense on outstanding debts.

Based on the factors listed above, we receive lower tariffs in comparison to thermal power projects because we have (i) minimal fuel costs and (ii) lower operating and capital construction costs. Any future reductions in our tariffs, which is considered unlikely at least in the short term given the existing shortage in electric power generation capacity in China and the desire of the central government to reduce the adverse environmental problems caused by thermal power projects, or inability to obtain higher tariffs, for example, to cover any increased costs we may have to incur, as a result of the on-grid tariff-setting mechanism or a change to such on-grid tariff-setting mechanism may adversely affect our revenues and profits. In some regions we negotiate annually with the local grid operators the on-grid tariff for our power before applying to the government for approval of the tariff, while in other regions the tariff is set by agreement between the power grid and the government.

In addition, the price for electric power sold to end consumers is fixed in China because the sales price of electricity is uniformly formulated by the National Development and Reform Commission. Thus, we must estimate the price at which the National Development and Reform Commission will allow power grids to sell electricity and set our prices so that, from the power grids’ perspective, their cost for our electricity is acceptable when considered with the costs of other power producers on the grid. Thus, although our on-grid tariffs are lower than those for thermal power projects, the tariff levels we obtain from local grids may still be impacted by changes in the cost of generating thermal power and actual regional demand for power. In addition, if demand for electricity rises beyond expectations, then we cannot raise our prices accordingly to benefit from the increased demand. If actual sales prices are significantly below our estimates for such sales prices, then our financial condition and results of operations may be materially and adversely affected.

If less than all of the electricity we generate is dispatched by the grids, our future revenues will be reduced.

Our profitability depends, in part, upon each of our hydroelectric power projects generating electricity at a level sufficient to meet or exceed the planned generation agreed with our local dispatch company, which in turn will be subject to local demand for electric power and dispatching to the grids by the dispatch centers of the local grid companies.

The dispatch of electric power generated by a power project is controlled by the dispatch centers of the applicable grid companies pursuant to a dispatch agreement with us and pursuant to governmental dispatch regulations. In each of the markets in which we operate, we compete against other power projects for power sales, and dispatch is allocated based on actual demand from the grid. No assurance can be given that the dispatch centers will dispatch the full amount of the planned generation of our power projects. A reduction by the dispatch centers in the amount of electric power dispatched relative to our hydroelectric power projects’ planned generation could have a material adverse effect on our power generation and thus reduce our revenues. To date, however, other than external factors described elsewhere, such as limitations on transmission capacity in several instances, the only situation we have experienced when the dispatch centers accept less than the full amount of the power capable of being generated by our power projects is during brief periods of particularly heavy precipitation when our projects and others generate more power than the grids can physically accept and transmit. This occurs notwithstanding regulatory requirements that grids accept all power generated by renewable energy sources.

Compliance with environmental regulations can be costly, and we may become subject to further environmental compliance requirements in connection with our operations, which could materially and adversely affect our results of operations and financial condition.

We are required to comply with PRC national and local regulations regarding environmental protection for the construction and operation of our hydroelectric power projects. For all of our existing hydroelectric power projects, we have applied for all the environmental permits that are necessary under current PRC laws and regulations to conduct our business, but have not obtained some of the environmental permits from the relevant governmental authorities yet. Furthermore, to the extent that our existing hydroelectric power projects may have been in compliance with PRC environmental protection laws and regulations at the time they were constructed, we cannot assure you that the PRC government will not require retroactive application of current laws and regulations to such old plants. Compliance with environmental regulations can be very expensive, and non-compliance with these regulations may result in adverse publicity, potentially significant monetary damages and fines and suspension of our business operations. In addition, if more stringent regulations are adopted in the future, the costs of compliance with these new regulations could be substantial. If we fail to comply with any future environmental regulations, we may be required to pay substantial fines, suspend production or even cease operations. We do not carry any insurance for damages resulting from failure to comply with environmental regulations.

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Our business and business prospects rely in part on policy support from the PRC government, and our financial condition and results of operations may be materially and adversely affected if we lose such support.

National, provincial and local governments in China support the expansion of hydroelectric power, which eases the approval process for facility acquisition, construction and financing. Under the PRC Renewable Energy Law, Catalogue for the Guidance of Foreign Investment Industries, the Twelfth Five-year Plan of the Development of Renewable Energy Resources and other relevant laws, expansion of both large and small-scale hydroelectric power production is one of the priorities for the development of the nation’s power supply, and foreign investment in the sector is encouraged. We currently enjoy several types of government support, including policy support for local grids to purchase all the power we generate and lower levels of VAT levied on small hydropower production in some provinces where we have operations. If for any reason, such as development of new energy production technologies or migration to other renewable energy sources, China removes such policy support, our financial condition and results of operations may be materially and adversely affected.

Competition in the PRC power industry may increase, and our results of operations and growth prospects may be materially and adversely affected if we are unable to compete effectively.

We compete in the Chinese domestic market with other PRC power generation companies. The five biggest power companies in China, namely, China Huaneng Group, China Datang Group, China Huadian Group, China Guodian Group and China Power Investment Group, collectively operated 46.8% of China’s total power generation installed capacity by the end of 2013, according to the State Electricity Regulatory Commission. These power companies and a number of other power producers have substantially greater financial, infrastructure or other resources than we do. We may also face competition from new entrants to the hydropower industry having business objectives similar to ours, including venture capital and private equity funds, leveraged buyout funds, and other operating businesses that may offer more advanced technological capabilities or that have greater financial resources. The ability of our competitors to access resources that we cannot access may prevent us from acquiring additional hydropower projects in strategic locations or from increasing our generating capacity. There is also increasing competition among operating power projects for increases in dispatched output, higher on-grid tariffs and land use rights. If we are unable to compete successfully, our growth opportunities to increase generating capacity may be limited and our revenue and profitability may be adversely affected. In recent years, the ongoing reform of the PRC power industry has included experimental programs to set on-grid tariffs through competitive bidding among thermal power projects. The tariffs determined by competitive bidding may be lower than the pre-approved tariffs for planned output. In the future, competitive bidding may extend to hydroelectric power projects and further increase price competition among domestic power generation companies. We cannot assure you that increased competition in the future will not have a material adverse effect on our results of operations and growth prospects.

Our business depends on the competitiveness of hydroelectric power generation in relation to other forms of electric power generation. Fewer hydroelectric power projects may be built and less electricity from hydroelectric power sources may be sold if fossil fuel prices decline significantly or if other renewable energy sources become less expensive than hydroelectric power, either of which could have a material adverse effect on our results of operations, financial condition and growth prospects.

The demand for power projects that produce electricity from renewable energy sources such as water depends in part on the cost of generation from other sources of energy. The terms under which supplies of petroleum, coal, natural gas and other fossil fuels, as well as uranium, can be obtained are key factors in determining the economic interest of using these energy sources rather than renewable energy sources. The principal energy sources in competition with renewable energy sources are petroleum, coal, natural gas and nuclear energy. The high price levels for fossil fuels, in particular, petroleum and natural gas, can enhance the price competitiveness of electricity from renewable energy sources. A decline in the competitiveness of electricity from renewable energy sources in terms of cost of generation, technological progress in the exploitation of other energy sources, discovery of large new deposits of oil, gas or coal, or a decline in prices of those fuels, could weaken demand for electricity generated from renewable energy sources.

In the renewable energy sector, competition primarily exists with regard to factors such as bidding for available sites, performance of sites in generation, quality of technologies used, price of power produced and scope and quality of services provided, including operation and maintenance services. A decline in the competitiveness of electricity generated from hydroelectric sources in terms of such factors could weaken demand for hydroelectric power. Should hydroelectric power production become uncompetitive with other forms of renewable energy production, or if fossil fuel production becomes more cost competitive, the construction of hydroelectric power projects may slow, thus reducing our pool of potential acquisition targets and limiting our ability to grow our operations.

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Certain of our operating subsidiaries are parties to loan agreements that provide for lender rights that may adversely affect our ability to operate our business and restrict our ability to pay dividends and we could be materially adversely affected if our lenders accelerate our debt due to our current or future failures to comply with our loan agreements.

Pursuant to loan agreements to which certain of our operating subsidiaries are a party, our lenders have rights that include the following: (i) restricting the borrower during the term of the loan from undertaking any shareholding change or restructuring without obtaining prior approval of the lender; (ii) restricting the borrower from undertaking investment, asset transfer or pledging or mortgaging its assets without obtaining prior approval of the lender; (iii) restricting the borrower from paying dividends until the loan is fully repaid; and (iv) placing the borrower’s power generation revenues into escrow until the loan is repaid. These restrictions may prevent us from disposing of or restructuring the ownership of our hydroelectric power projects, and limit the funds available to pay dividends to our shareholders.

Planning, construction, acquisition and operation of our hydroelectric power projects require us to obtain and maintain a significant number of permits and approvals from PRC government agencies, some of which we have not obtained or were not transferred to us upon project acquisition. Failure to obtain these permits and approvals could result in significant fines and our loss of the right to develop or operate those assets, which would materially and adversely affect our future growth plans and results of operations.

The planning, construction, acquisition and operation of small hydroelectric power projects in China requires permits and approvals to be obtained and maintained under different regulatory schemes administered by a wide range of PRC government agencies. Many of the completed projects we have acquired have not historically obtained or have failed to maintain all of those permits required for their operation, and in some cases permits that were obtained have not been transferred to us following our acquisition of the plant. Furthermore, the development rights we have obtained or may obtain are, in most cases, for projects that have not yet received planning and other permits. We believe we have applied for the grant, transfer or renewal, as applicable, of all permits and approvals required to develop and operate our hydroelectric power projects. However, our applications with respect to one or more projects may be rejected and we may be fined for failure to timely obtain permits and approvals for any of those projects. Failure to obtain missing permits and approvals may in certain cases result in significant fines or the government authorities requiring us to cease operation of our hydroelectric power projects, or unwind the acquisition of the project, any of which would materially and adversely affect our future growth plans and results of operations. Failure to obtain permits and approvals for our development projects may result in our inability to complete and operate the project, or our being subject to penalties and fines upon completion of the project, either of which could materially and adversely affect our future growth and results of operations.

Our operations in China are extensively regulated by the PRC government and our costs associated with compliance with such regulations are substantial. Our results of operations and future growth prospects may be materially and adversely affected by future changes in government regulations and policies.

All of our hydroelectric power projects in China are subject to extensive regulation by the PRC governmental authorities, including central governmental authorities such as the Ministry of Commerce, the State Administration for Industry and Commerce, the National Development and Reform Commission, the State Electricity Regulatory Commission, the State Administration of Taxation, the Ministry of Environmental Protection, the Ministry of Communications and Transportation, the Ministry of Water Resources, the Ministry of Land and Resources and the Ministry of Housing and Urban- Rural Development, as well as their provincial and local counterparts. Government regulations address virtually all aspects of our operations, including, among others, the following:

·planning and construction of new power projects;

·the granting of power generation, dispatch and supply permits;

·the amount and timing of power generation;

·the setting of on-grid tariffs paid to power producers and power tariffs paid by consumers of electricity;

·power grid control and power dispatch, including the setting of preferential policies for the dispatch of renewable energy generated power;

·allocation of water resources and control of water flows;

·environmental protection and safety standards;

·acquisitions by foreign investors; and

·taxes, in particular Enterprise Income Tax and Value Added Tax.

Our costs of compliance with, and reliance on, this regulatory system are significant to our business. An increase in the cost of compliance could increase our operating costs and expenses and materially and adversely affect our results of operations. Moreover, policy movements against renewable energy power producers could limit our opportunities for growth and materially and adversely affect our revenues.

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The transfer of state-owned assets in China is subject to approval by authorities in charge of state-owned assets administration and supervision and involves a public bidding process. Any failure by us or prior owners of our projects to comply with PRC laws and regulations in respect of the transfer of state-owned assets may result in the imposition of fines or forfeiture of our projects.

We currently have a portfolio of 25 operating hydroelectric power projects. Some of our projects were previously state-owned assets. Under PRC law, the transfer of state-owned assets is subject to strict procedures and approvals. We believe we have complied with all requisite procedures in acquiring state-owned assets, namely our Shapulong hydroelectric power project. However, if a previous transferor of state-owned assets failed to comply with relevant PRC law, the transfer of the state-owned assets may be reversed by the government or fines may be levied. In such circumstances, we will have a legal right to recover our investment in the assets, but we may not be able to recover from the relevant parties, which could result in a loss of power generation plants, loss of revenues and a significant increase in operating costs.

Under PRC law, we are also required to bid for the acquisition of state-owned assets that we wish to acquire. We typically negotiate the terms of the sale with the state-owned seller prior to the bidding process, however, we may not be successful in the bid and may fail to obtain the project as a result. To the extent we seek in the future to acquire state-owned assets, we will need to follow this process, and may not be successful in obtaining the target business. To the extent we are unsuccessful in our bids for these state-owned interests, our future growth and the ability to control our existing projects may be materially and adversely affected.

Certain of our acquisitions have not obtained approval from the local counterparts of the National Development and Reform Commission, which could result in our being required to subsequently obtain the approval, losing preferential tax treatments and other preferential government support, or being ordered to cease operation of the subject hydroelectric power project.

In accordance with relevant PRC laws and regulations, acquisitions involving foreign investment require approval from the National Development and Reform Commission, or its local counterparts. Certain of our acquisitions of hydroelectric power projects have not procured approvals from the local counterparts of the National Development and Reform Commission, despite having obtained approvals from relevant local counterparts of the Ministry of Commerce. We have in some instances approached the local counterparts of the National Development and Reform Commission to apply for these approvals, but have been told by the government agency that it is not necessary for our projects to obtain these approvals. Failure to obtain any of the approvals may have a material adverse effect on our business operations, including our being required to subsequently obtain the approval, losing preferential tax treatments and other preferential government support, or being ordered to cease operation of the subject hydroelectric power project.

We have not obtained formal title certificates to some of the properties we occupy, which may subject us to lawsuits or other actions being taken against us and may result in our loss of the right to operate on these properties and increased operating expenses.

We have not obtained formal title certificates in respect of the land that we use at the Zhougongyuan, Binglangjiang II, Jinlong, Jintang, Jinwei, Jinjiu, and Dongguan hydroelectric power projects with a total area of approximately 2,499,278 m2. We are in the process of completing the legal procedures for obtaining the relevant title certificates for the parcels of land and buildings involved and registering them in the name of our operating companies. However, we may not be able to obtain all of the formal title certificates. While we are indemnified by certain predecessors of our operating companies for any losses or expenses that we may suffer from these title defects, our rights as owner or occupier of these properties and buildings may be adversely affected as a result of the absence of formal title certificates and we may be subject to lawsuits or other actions taken against us and may lose the right to continue to operate on these properties.

In addition, certain of the land use rights currently held by us were obtained by way of allocation by the PRC government without charge. These parcels of land at the Wuliting, Shapulong, Banzhu, Wangkeng, Liyuan, Ruiyang, Yingchuan, Xiaopengzu, Mangxian, Husahe Cascade III, Husahe Cascade IV, and Qianling sites are used as workshops, dams and reservoirs, and have a total area of approximately 10,807,730 m2. The PRC central or local governments may in the future require us to re-obtain such land use rights by way of grant by the government or require us to pay site use fees. In the event that we are required to obtain the land use rights by way of grant, we will be obligated to enter into state-owned land use rights grant contracts with the competent land administration authorities and pay relevant taxes and fees, including but not limited to land premiums in accordance with relevant PRC laws and regulations. These taxes and fees for obtaining land use rights may be significant and if we are required to pay these amounts our operating expenses could be significantly increased.

Furthermore, part of the land occupied by Jinwei hydroelectric project is leased allocated land. In accordance with relevant PRC laws and regulations, the lease of allocated land shall obtain approval from the competent land and resources authority. We have not procured such approval so far. Jinwei hydroelectric project is also leasing certain land from the local peasants which is collectively-owned. In accordance with relevant PRC laws and regulations, collectively-owned land shall not be leased for industrial use purpose such as hydropower generation. The total area for the aforesaid leased allocated land and collectively-owned land is approximately 435,300 m2. In the event that we are required to cease such lease and/or any penalties are imposed on us, our business operations and financial condition could be materially and adversely affected.

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Certain of our existing hydroelectric power projects have not passed the completion acceptance procedure, which could result in the imposition of fines or the closure of non-permitted hydroelectric power projects.

In accordance with relevant PRC laws and regulations, hydroelectric power projects are required to pass a completion acceptance procedure. Currently, only sixteen of our twenty-five projects have passed the completion acceptance procedure and two projects, namely, Husahe Cascade IV and Mangxian projects, cannot verify whether they have passed completion acceptance due to the loss of files caused by flood in 2004. The remaining seven of our existing hydroelectric power projects have not passed the completion acceptance procedure and they may not successfully pass the completion acceptance procedure in the future. We expect two will complete the procedure by the end of 2014. As for the remaining five projects in Fujian Province, we have been informed by relevant governmental authorities that Fujian Province has temporarily suspended the completion acceptance procedure for small hydroelectric projects and the time for resumption is uncertain. Failure by any of our existing projects to pass completion acceptance procedure could result in the government imposing fines or ordering us to shut down such hydroelectric power projects.

Our directors and officers may in the future become affiliated with entities engaged in business activities similar to those conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented, which could limit the business growth opportunities for our company.

Our directors and officers may become affiliated with entities engaged in business activities similar to those conducted by us. Additionally, our directors and officers may become aware of business opportunities which may be appropriate for presentation to us as well as to the other entities with which they are or may be affiliated. Due to these existing affiliations, they may have fiduciary obligations or contractual obligations to present potential business opportunities to those entities prior to presenting them to us. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. The loss of these business opportunities could limit the growth of our company.

If a poll is not demanded at our shareholder meetings, voting will be by a show of hands and shares will not be proportionately represented. Shareholder resolutions may be passed without the presence of the majority of our shareholders in person or by proxy.

Voting at any of our shareholder meetings is by a show of hands unless a poll is demanded. A poll may be demanded by the chairman of the meeting or by any three shareholders present in person or by proxy or by any shareholder(s) holding 1/10 of the total voting rights of shareholders present at the meeting or by any shareholder(s) present in person or by proxy holding shares conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than 1/10 of the total sum paid up on all such shares conferring such right. If a poll is demanded, each shareholder present in person or by proxy will have one vote for each ordinary share registered in his name. If a poll is not demanded, voting will be by show of hands and each shareholder present in person or by proxy will have one vote regardless of the number of shares registered in his name. In the absence of a poll, shares will therefore not be proportionately represented. In addition, the quorum required for our shareholder meetings consists of shareholders who hold at least one-third in nominal value of our ordinary shares being present at a meeting in person or by proxy. Therefore, subject to the requisite majorities, shareholder resolutions may be passed at our shareholder meetings without the presence of the majority of our shareholders in person or by proxy.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

We are subject to reporting obligations under the U.S. securities laws. Under the current SEC regulations, we are required to include a management report on internal control over financial reporting in our annual report, which contains management’s assessment of the effectiveness of our internal control over financial reporting for the year ended December 31, 2013. However, the management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act that permits us, a non-accelerated filer, to provide only management’s report in this annual report. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2013. See “Item 15. Control and Procedures.” However, if we fail to maintain effective internal control over financial reporting in the future, our management may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level. Moreover, effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important to help us to manage our company effectively and prevent fraud. As a result, our failure to maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our ADSs. Furthermore, we have incurred and expect to continue to incur considerable costs and devote significant management time and efforts and other resources to comply with Section 404 of the Sarbanes-Oxley Act.

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Compliance with rules and requirements applicable to public companies is costly and complex and any failure by us to comply with these requirements on an ongoing basis could negatively affect investor confidence in us and cause the market price of our securities to decline.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules adopted by the SEC and the NYSE, have required changes in the corporate governance practices of public companies. We expect these rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. Complying with these rules and requirements may be especially difficult and costly for us because we may have difficulty locating sufficient personnel in China with experience and expertise relating to U.S. GAAP and U.S. public-company reporting requirements and such personnel may command high salaries. If we cannot attract or retain sufficient personnel to ensure compliance with these rules and regulations, we may need to rely more on outside legal, accounting and financial experts, which may be very costly. Any failure by us to comply with these requirements on an ongoing basis could expose us to increased risk of fraud and subject us to potential delisting from the NYSE, regulatory investigations and civil or criminal sanctions. In addition, we will incur additional costs associated with our public company reporting requirements.

Risks Relating to Doing Business in China

Adverse changes in PRC economic and political policies could have a material adverse effect on the overall economic growth of China, which could reduce the demand for electricity and materially and adversely affect our business.

Our operating businesses are based in China and all of our power sales are made in China. As such, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many aspects, including:

·the level of government involvement;

·the level of development;

·the growth rate;

·the level and control of capital investment;

·the control of foreign exchange; and

·the allocation of resources.

While the Chinese economy has grown significantly in the past decades, the growth has been uneven geographically, among various sectors of the economy and during different periods. We cannot assure you that the Chinese economy will continue to grow or to do so at the pace that has prevailed in recent years, or that if there is growth, such growth will be steady and uniform. In addition, if there is a slowdown, such slowdown could have a negative effect on our business. It is uncertain whether various macroeconomic measures and monetary policies adopted by the PRC government will be effective in sustaining the fast growth rate of the Chinese economy. In addition, such measures, even if they benefit the overall Chinese economy in the long term, may have a negative effect on us. For example, our financial condition and results of operations may be materially and adversely affected by government control over capital investments, and our ability to access bank financing has been and likely will continue to be adversely affected by changes in the PRC’s monetary policy.

Although the Chinese economy has been transitioning from a planned economy to a more market-oriented economy, a substantial portion of the productive assets in China is still owned by the PRC government. The continued control of these assets and other aspects of the national economy by China government could materially and adversely affect our business. The PRC government also exercises significant control over Chinese economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Any adverse change in the economic conditions or government policies in China could have a material adverse effect on the overall economic growth and the level of investments and expenditures in China, which in turn could lead to a reduction in demand for electricity and consequently have a material adverse effect on our businesses.

Interpretation of PRC laws and regulations involves uncertainty.

We are incorporated in Cayman Islands and are subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned companies. All of our operating businesses are located within China and are governed by PRC laws and regulations. The PRC legal system is based on written statutes, and prior court decisions can only be used as a reference. Since 1979, the PRC government has promulgated laws and regulations in relation to economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, due to the fact that these laws and regulations have not been fully developed, and because of the limited volume of published cases and the non-binding nature of prior court decisions, interpretations of PRC laws and regulations are not always uniform and involves a relatively high degree of uncertainty. Laws may be changed without being immediately published or may be amended with retroactive effect. Depending on the government agency or how an application or case is presented to such agency, we may receive less favorable interpretations of laws and regulations than certain of our competitors. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

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The Antimonopoly Law may subject our future acquisitions to increased scrutiny, which could affect our ability to consummate acquisitions on terms favorable to us or at all.

The Antimonopoly Law of China became effective on August 1, 2008. The law was enacted in part to guard against and cease monopolistic activities, and to safeguard and promote orderly market competition. In accordance with the law, monopolistic acts shall include monopolistic agreements among business operators, abuse of dominant market positions by business operators and concentration of business operators that eliminates or restricts competition or might be eliminating or restricting competition.

On August 3, 2008, the State Council promulgated the Regulations on the Thresholds for Reporting of Concentration of Business Operators, or the Reporting Threshold Regulations, which provide specific thresholds for reporting of concentration of business operators. Under the Antimonopoly Law and the Reporting Threshold Regulations, the parties to an acquisition must report to the Ministry of Commerce in advance if in the preceding accounting year the turnover in the aggregate achieved by all the parties to the transaction exceeds RMB10.0 billion ($1.5 billion) worldwide or RMB2.0 billion ($0.3 billion) within China, and the turnover achieved by at least two of them respectively exceeds RMB400.0 million ($58.6 million) within China. However, the Ministry of Commerce has the right to initiate investigation of a transaction not reaching the above-mentioned reporting thresholds if the Ministry of Commerce has evidence that the transaction has or may have the effect of excluding or restricting competition. The antitrust scrutiny procedures and requirements set forth in the Antimonopoly Law and the Reporting Threshold Regulations grant the government extensive authority of evaluation and control over the terms of acquisitions in China by foreign investors, and their implementation involves significant uncertainties and risks. To the extent our future acquisitions meet the threshold requirements set forth in the law and the Reporting Threshold Regulations, or are deemed by the Ministry of Commerce to meet the thresholds, we will be subject to antimonopoly review. The consummation of our future acquisitions could therefore be much more time-consuming and complex, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or prevent the consummation of such acquisitions, and prevent us from attaining our business objectives.

On February 3, 2011, General Office of the PRC State Council issued the Circular of the General Office of the State Council on the Establishment of Security Review System Regarding Mergers and Acquisitions in China by Foreign Investors with effect in March, according to which, the acquisitions by foreign investors of domestic Chinese companies active in the certain sectors shall be subject to security review, including military enterprises, key agricultural products, key energy and resources, key infrastructure, key transportation services, key technologies and key equipment manufacturing activities that raise national security concerns, where the foreign investor might acquire actual control of the target Chinese company through the acquisition. This newly-issued regulation is unclear in certain aspects including the definition of key sectors which are expected to be further specified and therefore how it will be interpreted and implemented in practice remains to be seen. In case our future acquisitions fall within the security review scope, the consummation of such acquisitions could therefore be much more time-consuming and complex, and any required approval processes may delay or prevent the consummation of such acquisitions, and prevent us from attaining our business objectives.

The discontinuation or revocation of the preferential tax treatments and government incentives available to us could decrease our net income and materially and adversely affect our financial condition and results of operations.

On March 16, 2007, the new PRC Enterprise Income Tax law, or EIT Law, was enacted, which became effective on January 1, 2008 and replaced the previous two separate tax legal regimes for foreign invested enterprises, or FIEs, and Chinese domestic companies. The EIT Law adopts a uniform tax rate of 25% for all enterprises, including FIEs, and revokes many of the previous tax exemption, reduction and preferential treatments which were applicable to FIEs. However, any enterprises that were established before the promulgation of the EIT Law that are entitled to preferential tax treatments for a fixed period will continue to be entitled to such preferential tax treatments until the expiration of such period. If the fixed period has not commenced because of losses, it shall be deemed to commence on January 1, 2008. In addition, under the pre-2008 tax regulations, enterprises established in the Western region of the PRC and engaged in encouraged industries (e.g., hydroelectric power activities) are entitled to a preferential tax rate of 15% from 2001 to 2010 and a two-year tax exemption followed by three-year 50% tax rate reduction starting from the first year of operation (for domestic enterprises) or first profit-making year (for foreign-invested enterprises). The treatment of preferential tax rate of 15% has been renewed in 2011 and extended to the period from 2011 to 2020. In addition, enterprises established before December 31, 2010 that entitled to the tax term holiday may continue to enjoy such tax holiday until its expiration. Many our PRC subsidiaries are currently enjoyed various preferential tax treatments including reduced tax rate and/or term tax holidays. See “Item 5. Operating and Financial Review and Prospects - A. Operating Results - Taxation”.

Preferential tax treatments and incentives granted to us by PRC governmental authorities are subject to review and may be adjusted or revoked at any time in the future. The discontinuation or revocation of any preferential tax treatments and incentive currently available to us will cause our effective tax rate to increase, which will decrease our net income and materially and adversely affect our financial condition and results of operations.

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Our company may be classified as a “resident enterprise” for PRC enterprise income tax purposes under the PRC EIT Law. Such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders, including subject to PRC taxation on our worldwide income.

Under the PRC EIT Law, an enterprise established outside of China with its “de facto management body” in China is considered a “resident enterprise,” meaning that it can be treated the same as a Chinese enterprise for enterprise income tax purposes, which will be subject to a uniform 25% enterprise income tax rate on its worldwide income and tax reporting obligations. In addition, the Notice on Certain Issues regarding the Recognition of Resident Enterprises for Offshore-registered Enterprises Controlled by Chinese Enterprises on the Basis of a De Facto Management Body, or Circular 82, issued by the State Administration of Taxation, or the SAT, on April 22, 2009 regarding the standards used to classify certain Chinese-controlled enterprises established outside of China as “resident PRC source income, subject to PRC withholding tax currently at a rate of 10%, when paid to non-PRC enterprise shareholders. Circular 82 also subjects such “resident enterprises” to various reporting requirements with the PRC tax authorities. Under the implementation regulations to the PRC EIT Law, a “de facto management body” is defined as a body that exercises “substantial and overall management and control over the manufacturing and business operations, personnel, and human resources, finances and properties of an enterprise. In addition, Circular 82 details that certain Chinese-controlled enterprises will be classified as “resident enterprises” if the following are located or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. On July 27, 2011, the SAT issued Administrative Measures of Enterprise Income Tax of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin 45, which became effective on September 1, 2011, to provide further guidance on the implementation of Circular 82. Bulletin 45 clarifies certain issues related to determining PRC resident enterprise status, post-determination administration and which competent tax authorities are responsible for determining offshore incorporated PRC resident enterprise status. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate issued by the competent tax authorities from an offshore incorporated PRC resident enterprise, the payer should not withhold 10% income tax when paying Chinese-sourced dividends, interest and royalties to the offshore incorporated PRC resident enterprise.

Currently, a substantial majority of the members of our management team are located in China. However, Circular 82 or Bulletin 45 only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign corporations like us. In the absence of detailed implementing regulations or other guidance determining that offshore companies controlled by PRC individuals or foreign corporations like us are PRC resident enterprises, we do not currently consider our company or any of our overseas subsidiaries to be PRC resident enterprises. However, the SAT may take the view that the determining criteria set forth in Circular 82 and Bulletin 45 reflects the general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. It is also possible that additional implementing regulations or guidance may be issued determining that our Cayman Islands holding company is a “resident enterprise” for PRC enterprise income tax purposes. Any determination by the PRC tax authorities that our Cayman Islands holding company is a “resident enterprise” for PRC enterprise income tax purposes would result in a number of unfavorable PRC tax consequences. First, we would be subject to enterprise income tax at a rate of 25% on our worldwide income as well as PRC enterprise income tax reporting obligations. This would mean that income such as interest on offering proceeds and other income from sources other than China would be subject to PRC enterprise income tax at a rate of 25%, in comparison to no taxation in the Cayman Islands. Second, although under the PRC EIT Law and its implementing rules and Bulletin 45, dividends paid by a PRC tax resident enterprise to an offshore incorporated PRC tax resident enterprise controlled by PRC enterprise or enterprise group would qualify as “tax-exempt income,” we cannot guarantee that dividends paid to us by our PRC subsidiary will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities and tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes but not controlled by PRC enterprise or enterprise group like us. Finally, a 10% withholding tax will be imposed on dividends we pay to our non-PRC enterprise shareholders and gains derived by our non-PRC enterprise shareholders from transferring our ADSs or ordinary shares. It is also unclear whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise.

We rely principally on dividends and other distributions, if any, on equity paid by our operating businesses in China, and limitations on their ability to pay dividends to us could have a material adverse effect on our business and results of operations.

We are a holding company and we rely principally on dividends and other distributions, if any, on equity paid by our operating businesses in China for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses. We currently expect to permanently reinvest the earnings of our operating businesses in China and have no plan to cause our operating businesses to make a dividend distribution to us.

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As entities established in China, our operating businesses are subject to certain limitations with respect to dividend payments. PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. For each of our operating businesses that is a Sino-foreign joint venture enterprise, it may not distribute its after-tax profits to us if it has not already made contributions to its reserve fund, enterprise development fund and employee bonus and welfare fund at percentages that are decided by its board of directors. For each of our operating businesses that is a wholly foreign-owned enterprise, it may not distribute its after-tax profits to us if it has not already made contributions to its employee bonus and welfare fund at a percentage that is decided by its board of directors and to its reserve fund at a rate of no less than 10% of its net profit. A wholly foreign-owned enterprise is required to continue making contributions to its reserve fund until such fund reaches 50% of its registered capital. For each of our operating businesses that is a PRC domestic company, it may not distribute its after-tax profits to us if it has not already made contributions to its statutory reserve fund at a rate of no less than 10% of its net profit. A PRC domestic company is required to continue making contributions to its statutory reserve fund until such fund reaches 50% of its registered capital. These reserve funds may not be distributed as cash dividends. The total amount of our restricted net assets was RMB3,483.9 million ($503.9 million) as of December 31, 2013, which exceeded our stockholders’ equity balance of $402.4 million as of that date. In addition, if our operating businesses in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. Limitations on the ability of our operating businesses in China to pay dividends to us could adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business. Accordingly, if for any of the above or other reasons, we do not receive dividends from our operating businesses in China, our liquidity, financial condition and ability to make dividend distributions to our shareholders will be materially and adversely affected.

Fluctuations in the value of RMB will affect the amount of our non-RMB debt service in RMB terms and affect the value of, and dividends payable on, our ADSs in foreign currency terms.

Our financial statements are expressed in U.S. dollars. However, a majority of our revenues and expenses are denominated in RMB. We do not believe that we currently have any significant direct foreign exchange risk and have not hedged exposures denominated in foreign currencies or any other derivative financial instruments. However, the value of our ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB because the primary value of our business is effectively denominated in RMB, while the ADSs are traded in U.S. dollars.

The value of RMB against the U.S. dollar and other currencies depends, to a large extent, on China’s domestic and international economic, financial and political developments and government policies, as well as the currency’s supply and demand in the local and international markets. The People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rate and achieve certain exchange rate targets, and through such intervention kept the U.S. dollar-RMB exchange rate relatively stable for almost two years from July 2008. On June 20, 2010, the People’s Bank of China announced that the PRC government would further reform the RMB exchange rate regime and increase the flexibility of the exchange rate. Since that time, the RMB has gradually appreciated against the U.S. dollar. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuation of the RMB against the U.S. dollar. Fluctuation of the value of RMB will affect the amount of our non-RMB debt service in RMB terms since we have to convert RMB into non-RMB currencies to service our foreign debt.

As we may rely on dividends paid to us by our PRC subsidiaries, any significant revaluation of the RMB may have a material adverse effect on our revenues and financial condition, and the value of any dividends payable on our ADSs in foreign currency terms. For example, to the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. Furthermore, appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations.

We incurred foreign exchange loss of $851,000 and $41,000 in 2011 and 2013, respectively, and generated a foreign exchange gain of $28,000 in 2012. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur foreign exchange losses in the future. In addition, our foreign exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

Restrictions on currency exchange may limit our ability to receive dividends from our operating businesses in China and their ability to obtain overseas financing.

Our operating businesses in China may convert a portion of RMB held by them into foreign currencies to meet its foreign currency obligations, including, among others, payments of dividends declared, if any, in respect of our ordinary shares. Under China’s existing foreign exchange regulations, our operating businesses in China are able to pay dividends in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, we cannot assure you that China government will not take measures in the future to restrict access to foreign currencies for current account transactions, including payment of dividends.

Foreign exchange transactions for capital account items, such as direct equity investments, loans and repatriation of investments, by our operating businesses in China continue to be subject to significant foreign exchange controls and require the approval of PRC governmental authorities, including SAFE. In particular, if our operating businesses in China borrow foreign currency-denominated loans from us or other foreign lenders, these loans must be registered with the local offices of SAFE. These limitations could affect their ability to obtain additional equity or debt funding that is denominated in foreign currencies.

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Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by Public Company Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.

Our independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditor is located in China, a jurisdiction where PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, our auditor, like other independent registered public accounting firms operating in China, is currently not inspected by PCAOB.

Inspection of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future auditor quality. The inability of PCAOB to conduct inspections of independent registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedure. As a result, investors may be deprived of the benefits of PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

We may be adversely affected by the proceedings instituted recently by the SEC against five PRC-based accounting firms, including our independent registered public accounting firm.

In December 2012, the SEC instituted proceedings under Rule 102(e)(1)(iii) of the SEC’s Rules of Practice against five PRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ work papers related to their audits of certain PRC-based companies that are publicly traded in the United States. Rule 102(e)(1)(iii) grants the SEC the authority to deny to any person, temporarily or permanently, the ability to practice before the SEC who is found by the SEC, after notice and opportunity for a hearing, to have willfully violated any such laws or rules and regulations. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of the five firms from practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until reviewed and approved by the SEC. On February 12, 2014, four of these PRC-based accounting firms appealed to the SEC against this decision. Accordingly, the sanction will not become effective until after a full appeal process is concluded and a final decision is issued by the SEC. The accounting firms can also further appeal the final decision of the SEC through the federal appellate courts. We are not involved in the proceedings brought by the SEC against the accounting firms. However, our independent registered public accounting firm is one of the four accounting firms subject to the six month suspension from practicing before the SEC in the initial administrative law decision. We may therefore be adversely affected by the outcome of the proceedings, along with other U.S.-listed companies audited by these accounting firms.

PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit our ability to make additional capital contributions or loans to our PRC operating businesses.

Any capital contributions or loans that we, as an offshore company, make to our PRC operating businesses are subject to PRC regulations. For example, any of our loans to our PRC operating businesses cannot exceed the difference between the total amount of investment our PRC operating businesses are approved to make under relevant PRC laws and their respective registered capital, and must be registered with the local branch of SAFE as a procedural matter. In addition, our capital contributions to our PRC operating businesses must be approved by the National Development and Reform Commission and the Ministry of Commerce or their local counterpart and registered with the State Administration for Industry and Commerce or its local counterpart. We cannot assure you that we will be able to obtain these approvals on a timely basis, or at all. If we fail to obtain such approvals, our ability to make equity contributions or provide loans to our PRC operating businesses or to fund their operations may be negatively affected, which could adversely affect their liquidity and their ability to fund their working capital and expansion projects and meet their obligations and commitments.

Furthermore, SAFE promulgated a new circular in August 2008 with respect to the administration of conversion of foreign exchange capital contribution of foreign invested enterprises into RMB. Pursuant to this new circular, RMB converted from foreign exchange capital contribution can only be used for the activities within the approved business scope of such foreign invested enterprise and cannot be used for domestic equity investment or acquisition unless otherwise allowed by PRC laws or regulations. As a result, we may not be able to increase the capital contribution of our operating subsidiaries and subsequently convert such capital contribution into RMB for equity investment or acquisition in China. In addition, SAFE strengthened its oversight of the flow and use of RMB funds converted from the foreign currency-denominated capital of a foreign-invested enterprise. The use of such RMB may not be changed without approval from SAFE, and may not be used to repay RMB loans if the proceeds of such loans have not yet been used for purposes within the foreign-invested enterprise’s approved business scope.

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We may be subject to fines and legal sanctions imposed by SAFE or other Chinese government authorities if we or our domestic employees or directors fail to comply with the PRC regulations relating to employee stock incentive plans adopted by companies for domestic employees.

On December 25, 2006, the People’s Bank of China issued the Administration Measures on Individual Foreign Exchange Control, or the PBOC Regulation. On January 5, 2007, the SAFE issued the Implementation Rules for the PBOC Regulation. Both of these regulations became effective on February 1, 2007. According to these regulations, all foreign exchange matters relating to employee stock holding plans, share option plans or similar plans of overseas-listed companies with domestic employees’ participation require approval from the SAFE or its local branch. In February 2012, the SAFE promulgated the Notice on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas-Listed Company, or the Stock Option Rule, which terminated the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Holding Plan or Stock Option Plan of Overseas-Listed Company issued by the SAFE on March 28, 2007. Under the Stock Option Rule, domestic employees who participate in any stock incentive plan, including employee stock holding plans, share option plans or similar plans in an overseas-listed company, are required to register with the relevant local SAFE branch and complete certain other procedures through a PRC agent. Under the Stock Option Rule: (i) domestic employees include PRC citizens (inclusive of Hong Kong, Macau and Taiwan nationals) and foreign nationals who have continuously resided in China for at least a year, and (ii) a PRC agent may be a domestic company participating in the stock incentive plan or a domestic institution that is qualified to engage in asset custodian business and has been duly designated by a domestic company. We are an overseas-listed company and as a result we and our domestic employees who have been granted share options or shares under our 2008 Share Incentive Plan are subject to the Stock Option Rule. We are preparing the filing with the relevant local SAFE branch and undertaking certain other procedures according to the Stock Option Rule. Failure to comply with these regulations may subject us to fines or other legal sanctions imposed by the SAFE or other Chinese government authorities. In addition, the Ministry of Finance and the State Administration of Taxation has issued certain circulars concerning employee share options. Pursuant to these circulars, our employees working in China who exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have an obligation to file documents related to employee share options with the relevant tax authorities and withhold individual income taxes resulting from the exercise of their share options. If our employees fail to pay and we fail to withhold their income taxes, we may face sanctions imposed by tax authorities or other relevant PRC government authorities. See “Item 4. Information on the Company - Regulation — Regulations on Employee Share Options.”

Risks Relating to Our Securities

There can be no assurance that the agreement and plan of merger entered into with various parties on January 13, 2014 and the going private transaction contemplated thereby will be approved by our shareholders or successfully consummated. Potential uncertainty involving the going private transaction may adversely affect our business and the market price of our ADSs.

On September 4, 2013, our board of directors received a proposal letter from NewQuest Capital Partners, through its affiliated entity, CPI Ballpark Investments Ltd, and on behalf of its affiliates and the funds managed by it (collectively, “NewQuest”) to acquire all of the Company’s outstanding ordinary shares, including ordinary shares represented by the Company’s American depositary shares or “ADSs” (each representing three ordinary shares of the Company), not currently owned by NewQuest, in a going private transaction for US$1.17 per ordinary share and US$3.51 per ADS, as the case may be, in cash, subject to certain conditions. Following receipt of the proposal, our board of directors formed a special committee of independent directors to consider the proposal as well as any alternative proposals. On January 13, 2014, we entered into a definitive agreement and plan of merger (“Merger Agreement”) with various parties pursuant to which CPT Wyndham Holdings Ltd. (“Parent”) will acquire our company for US$1.17 per ordinary share and US$3.51 per ADS, as the case may be, through the merger of its wholly owned acquisition subsidiary, CPT Wyndham Sub Ltd., with and into our company, with our company continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”). The per ADS merger consideration to be paid in the Merger represents a 57.4% premium over the closing price of US$2.23 per ADS as quoted by the NYSE on September 3, 2013, and a 60.5% premium over the volume-weighted average trading price of our ADSs during the 30 trading days prior to, and including, September 3, 2013, the last trading day prior to our announcement on September 4, 2013 that it had received the non-binding proposal from NewQuest.

The Merger is subject to customary closing conditions as well as the approval by an affirmative vote of holders of the Company’s ordinary shares representing at least two-thirds of the ordinary shares present and voting in person or by proxy as a single class at an extraordinary general meeting of our shareholders which will be convened to consider the approval of the Merger Agreement and the Merger. The Merger, whether or not consummated, presents a risk of diverting management focus, employee attention and resources from other strategic opportunities and from operational matters. In addition, we are subject to various restrictions under the Merger Agreement on the conduct of our business prior to the completion of the Merger, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the Merger.

We filed a going private transaction statement on Schedule 13E-3 on February 7, 2014 and further revised it on March 20, 2014, both of which attach as an exhibit a preliminary proxy statement that, subject to completion, will be used in connection with the extraordinary general meeting of our shareholders. Please refer to the preliminary proxy statement for more information about the Merger including the effects of the Merger on our company and the effects on our company if the Merger is not completed.

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The trading prices of our ADSs and warrants are likely to be volatile, which could result in substantial losses to investors.

The trading prices of our ADSs and warrants have been and are likely to continue to be volatile and fluctuate widely in response to factors beyond our control. In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigation against that company. If we were involved in a class action suit, it could divert the attention of senior management, and, if adversely determined, could have a material adverse effect on our results of operations and financial condition.

The performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States may affect the volatility in the price of and trading volumes for our ADSs and warrants. The trading performances of these PRC-based companies’ securities at the time of or after their offerings may affect the overall investor sentiment towards PRC-based companies listed in the United States and consequently may impact the trading performance of our ADSs and warrants. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting or other practices at other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless whether we have engaged in such practices. Furthermore, short sellers and other funds may take a short position or positions in our ADSs and warrants for the specific purpose of driving down market price for our ADSs and warrants. Short sellers may also publish articles or other allegations in conjunction with such attacks. Even when there is no truth to their claims and we rebut their allegations, such attacks can have a material impact on the market price of our ADSs and warrants and divert management resources and attention. These broad market and industry factors may significantly affect the market price and volatility of our ADSs and warrants, regardless of our actual operating performance.

In addition to market and industry factors, the price and trading volume of our ADSs and warrants may be highly volatile for specific business reasons. Factors such as variations in our financial results, announcements of new business initiatives by us or by our competitors, recruitment or departure of key personnel, changes in the estimates of our financial results or changes in the recommendations of any securities analysts electing to follow our securities or the securities of our competitors could cause the market price for our ADSs and warrants to change substantially. Any of these factors may result in large and sudden changes in the trading volume and price for our ADSs and warrants.

If we do not meet the NYSE continued listing requirements, our ADSs may be delisted.

On June 27, 2012, we were notified by the NYSE that we were not in compliance with the NYSE’s continued listing standard that requires that the average closing price of our ADS not fall below $1.00 per ADS for any consecutive 30-trading-day period. We can regain compliance at any time during the six-month cure period if our ADS have a closing share price of at least $1.00 on the last trading day of any calendar month during the period and also have an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month or on the last day of the cure period. On October 8, 2012, the NYSE notified us that we had regained compliance with the NYSE’s continued listing standard that requires that the average closing price of our ADS not fall below $1.00 per ADS for any consecutive 30-trading-day period. There is no assurance that the average closing price of our ADSs will not drop below $1.00 per ADS over a consecutive 30-trading-day period again or we will be always in compliance with other NYSE continued listing requirements. The delisting of our ADSs may significantly affect the ability of investors to trade our shares and negatively affect the value and liquidity of our ADSs. The delisting may have other negative results, including the potential loss of confidence by employees and the loss of investor interest in our ADSs and damaging our reputation and standing with lenders, suppliers and customers.

The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.

Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our future ability to raise capital through offerings of our ADSs.

Currently there are 162,126,002 ordinary shares outstanding. In addition, there are outstanding options to purchase an aggregate of 2,788,672 ordinary shares, including options to purchase an aggregate of 2,788,672 ordinary shares immediately exercisable as of the date of this annual report.

All of the ADSs sold in our initial public offering are freely tradable without restriction or further registration under the U.S. Securities Act of 1933, or the Securities Act, unless held by our “affiliates” as that term is defined in Rule 144 under the Securities Act. Subject to applicable restrictions and limitations under Rule 144 of the Securities Act of 1933, all of our shares outstanding prior to our initial public offering are eligible for sale in the public market. In addition, the ordinary shares subject to options and warrants for the purchase of our ordinary shares will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act of 1933. If these additional shares are sold, or if it is perceived that they will be sold in the public market, the trading price of our ADSs could decline.

Future issuances of ordinary shares or ADSs may depress the trading price of our ADSs.

Any future issuance of equity securities could dilute the interests of our existing shareholders and could substantially decrease the trading price of our ADSs. We may issue equity securities in the future for a number of reasons, including to finance our operations and business strategy (including in connection with acquisitions and other transactions), to adjust our ratio of debt to equity, to satisfy our obligations upon the exercise of outstanding warrants or options or for other reasons.

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Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

If we offer holders of our shares any rights to subscribe for additional shares or any other rights, the depositary may make these rights available to you if it is lawful and reasonably practicable. However, the depositary may allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them. In addition, U.S. securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to holders of ADSs, or are registered under the provisions of the Securities Act. We can give no assurance that we can establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, you may be unable to participate in our rights offerings and may experience dilution of your holdings as a result.

A significant percentage of our outstanding ordinary shares are held by a small number of our existing shareholders, and these shareholders may have significantly greater influence on us and our corporate actions by nature of the size of their shareholdings relative to our public shareholders.

CPI Ballpark Investments Ltd owns a significant portion of our voting shares. See “Item 6E. Share Ownership.” CPI Ballpark Investments Ltd is an affiliate within the meaning of the Securities Act, due to the size of their shareholdings in us. CPI Ballpark Investments Ltd currently has two board representatives on our seven director board. Accordingly, the shareholder has had, and may continue to have, significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. We cannot assure you that we will not issue additional ordinary shares or securities convertible into ordinary shares to each of these or other shareholders. In the event that these shareholders increase their shareholdings in us, they may be in an even stronger position to exert influence over us.

As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the New York corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listing standards.

As a Cayman Islands company listed on the New York Stock Exchange, we are subject to the NYSE corporate governance listing standards. However, NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NYSE corporate governance listing standards. We have in the past decided to follow Cayman Islands corporate governance practices instead of the NYSE listing standards. See “Item 16G. Corporate Governance.” As a result, our shareholders may be afforded less protection than they otherwise would under the NYSE corporate governance listing standards applicable to U.S. domestic issuers.

Anti-takeover provisions in our charter documents may discourage a third party from acquiring us, which could limit our shareholders’ opportunities to sell their shares at a premium.

Our Amended and Restated Memorandum and Articles of Association include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in a change-of-control transaction. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction.

For example, our board of directors will have the authority, without further action by our shareholders, to issue new preferred shares in one or more tranches, which may have powers and rights, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, greater than the rights associated with our ordinary shares. These new preferred shares could thus be issued quickly, and could have terms calculated to delay or prevent a change in control or make removal of management more difficult. In addition, if our board of directors issues new preferred shares, the market price of our ADSs or warrants may fall and the voting and other rights of the holders of our ordinary shares may be adversely affected. In addition, our board of directors is divided into three classes and only one class of directors is up for re-election at each annual meeting of shareholders.

We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you may have less protection of your shareholder rights than you would under U.S. law.

Our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association, the Cayman Islands Companies Law and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.

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Unlike many jurisdictions in the United States, Cayman Islands law does not specifically provide for shareholder appraisal rights on a merger or consolidation of a company where the shares of the company are listed on a recognized stock exchange or inter-dealer quotation system. This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation or to require that the offer or give you additional consideration if you believe the consideration offered is insufficient.

Shareholders of Cayman Islands exempted companies such as ourselves have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our Amended and Restated Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

You will have limited ability to bring an action in the Cayman Islands or in China against us or against our directors and officers, or to enforce a judgment against us or them, because we are incorporated in the Cayman Islands and because we conduct a majority of our operations in China.

We are incorporated in the Cayman Islands, and conduct substantially all of our operations in China. Most of our directors and officers reside outside the United States and substantially all of the assets of those persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the applicable securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

There are uncertainties as to whether Cayman Islands courts would:

·recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

·impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts, and therefore China courts have discretion not to enforce judgments of U.S. courts.

Your ability to protect your rights as shareholders through the U.S. federal courts may be limited because we are incorporated under Cayman Islands law.

Cayman Islands companies may not have standing to initiate a derivative action in a federal court of the United States. As a result, your ability to protect your interests if you are harmed in a manner that would otherwise enable you to sue in a U.S. federal court may be limited.

The voting rights of holders of ADSs must be exercised in accordance with the terms of the deposit agreement, the ADRs, and the procedures established by the depositary. The process of voting through the depositary may involve delays that limit the time available to you to consider proposed shareholders’ actions and also may restrict your ability to subsequently revise your voting instructions.

Holders of our ADSs may only exercise their voting rights with respect to the underlying shares in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from a holder of ADSs in the manner set forth in the deposit agreement, the depositary will endeavor to vote the underlying shares in accordance with these instructions. Under our Amended and Restated Memorandum and Articles of Association and Cayman Islands law, the minimum notice period required for convening a general meeting is 21 days, provided that a general meeting may be called on short notice, subject to Cayman Islands law, if it is so agreed (i) in the case of an annual general meeting, by all the shareholders entitled to vote and attend such meeting, and (ii) in the case of any other meeting, by a majority number of shareholders having the right to attend and vote at such meeting.  When a general meeting is convened, you may not receive sufficient notice of a shareholders’ meeting to permit you to withdraw your shares to allow you to cast your vote with respect to any specific matter at the meeting. In addition, the depositary and its agents may not be able to send voting instructions to you to give your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to send voting information to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares.

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Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your shares are not voted as you requested. In addition, ADS holders will not be able to call a shareholders’ meeting.

Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests.

Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our shares underlying your ADSs at shareholders’ meetings if it does not receive your voting instructions, unless:

·we have failed to timely provide the depositary with our notice of meeting and related voting materials;

·we have instructed the depositary that we do not wish a discretionary proxy to be given;

·we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;

·a matter to be voted on at the meeting would have a material adverse impact on shareholders.

The effect of this discretionary proxy is that we will be able to control the voting of the shares underlying your ADSs if you fail to instruct the depository in time, absent the situations described above, and it may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

You may not receive distributions on our shares or any value for them if it is illegal or impractical for us to make them available to you.

The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian for our ADSs receives on our shares or other deposited securities after deducting its fees and expenses.

You will receive these distributions in proportion to the number of our shares your ADSs represent. However, the depositary is not responsible if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration is required for such distribution. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, common shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of our ADSs, shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may have a material and adverse effect on the value of your ADSs.

You may be subject to limitations on transfers of your ADSs.

Your ADSs, represented by ADRs, are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary thinks it is necessary or advisable to do so in connection with the performance of its duty under the deposit agreement, including due to any requirement of law or any government or governmental body, or under any provision of the deposit agreement.

We may be classified as a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.

Depending upon the value of our ADSs or ordinary shares and the nature of our assets and income over time, we could be classified as a PFIC for U.S. federal income tax purposes. We will be classified as a PFIC in any taxable year if either (a) the average quarterly value of our gross assets that produce passive income or are held for the production of passive income is at least 50% of the average quarterly value of our total gross assets or (b) 75% or more of our gross income for the taxable year is passive income. According to these technical rules, we would likely become a PFIC for a given taxable year if our market capitalization were to decrease significantly while we hold substantial cash and cash equivalents in that year.

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We believe we were not a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2013. Although we intend to conduct our business activities in a manner to reduce the risk of our classification as a PFIC in the future, there can no assurance that we will not be classified as a PFIC for 2014 or any future taxable year. If we are treated as a PFIC for any taxable year during which a U.S. investor holds our ADSs or ordinary shares, certain adverse U.S. federal income tax consequences would apply to the U.S. investor. For more information on the U.S. tax consequences to U.S. holders that would result from our classification as a PFIC, please see “Item 10.E. Taxation—U.S. Federal Income Taxation—Passive Foreign Investment Company.”

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

We were formed in July 2006 as an exempted company under the laws of the Cayman Islands to serve as a vehicle for the acquisition of hydroelectric assets in China. At the time of our formation we considered, but did not pursue, operating as a publicly traded special purpose acquisition company. We did not have any operating business until the completion of our first acquisition in April 2007. We have acquired and sold multiple operating assets since then and our principal capital expenditures and divestitures since January 1, 2011 including the following. Please note that U.S. dollar translations provided below are derived from our consolidated financial statements.

·in January 2011, we completed our purchase the remaining 10.0% equity interests in Pingnan County Wangkeng Hydroelectric Co., Ltd. for a purchase price of RMB 39.0 million ($5.9 million);

·in April 2011, we completed our purchase of Jinping Kanghong Hydroelectric Development Co., Ltd., which owns and operates Dazhaihe hydroelectric power project, a 15.0 MW project in Yunnan province for a purchase price of RMB59.0 million ($9.0 million);

·in December 2011, we entered into an Equity Purchase and Sale agreement to sell Pingnan County Yuanping Hydroelectric Co., Ltd., which owns and operates Yuanping hydroelectric power project, a 16.0 MW project located in Fujian province, for total consideration of $22.2 million, including the assumption of debt by a third-party buyer; and

·in October 2012, we entered into a Share Transfer Agreement to sell the Pingnan County Yuheng hydroelectric power project, a 30.0 MW project located in Fujian province, for total consideration of $44.3 million, including the assumption of debt by the buyer;

·in September 2013, our board of directors received a proposal letter from NewQuest to acquire all of our outstanding ordinary shares, including ordinary shares represented by our ADSs. Following receipt of the proposal, our board of directors formed a special committee of independent directors to consider the proposal as well as any alternative proposals. On January 13, 2014, we entered into a definitive Merger Agreement with various parties pursuant to which CPT Wyndham Holdings Ltd. (“Parent”) will acquire our company for US$1.17 per ordinary share and US$3.51 per ADS, as the case may be, through the merger of its wholly owned acquisition subsidiary, CPT Wyndham Sub Ltd., with and into our company, with our company continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”). The Merger is subject to customary closing conditions as well as the approval by an affirmative vote of holders of the Company’s ordinary shares representing at least two-thirds of the ordinary shares present and voting in person or by proxy as a single class at an extraordinary general meeting of our shareholders which will be convened to consider the approval of the Merger Agreement and the Merger.

We conduct our business through our subsidiaries in China. For additional information on our organizational structure, see “Item 4.C. Information on the Company - Organizational Structure.”

Our registered office is located at the offices of Appleby Trust (Cayman) Ltd., Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman, KY1-1108, Cayman Islands. Our executive offices are located at 901, Marco Polo Plaza Building, No.80 Anli Road, Chaoyang District, Beijing, PRC 100101 and our telephone number at such location is (86-10) 59636881. Our website is www.chinahydroelectric.com. The information contained on our website does not form part of this annual report.

In January 2010, we completed our initial public offering, and our ADSs and warrants started trading on the NYSE under the symbols “CHC” and “CHCWS”, respectively. Our warrants expired on January 25, 2014 without exercise. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., 400 Madison Avenue, 4th Floor, New York, NY 10017.

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B. Business overview

Overview

We are a developer, owner and operator of small hydroelectric power projects in China. We were formed in July 2006 to acquire existing small hydroelectric assets in China. Our primary business is to identify, evaluate, acquire, develop, construct and finance hydroelectric power projects in China.

Our revenues to date have derived from the sale of electricity generated by our small hydroelectric power projects to the southern power grid, and our costs of operations relate to the operation of our hydroelectric power projects, as well as the cost of financing our acquisition of these hydroelectric power projects and necessary capital contributions. The map below sets out the locations and installed capacities of our hydroelectric power projects in operation as at December 31, 2013.

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We wholly own twenty-two operating hydroelectric power projects and have a controlling interest in three additional operating hydroelectric power projects. Our operating hydroelectric power projects are located in four provinces in China: Zhejiang, Fujian, Yunnan and Sichuan. Revenues from continuing operations contributed by projects in Zhejiang, Fujian, Yunnan and Sichuan provinces were 46.5%, 27.2%, 25.3% and 1.0% in 2011, 48.7%, 34.8%, 15.8% and 0.7% in 2012, and 48.3%, 31.6%, 19.6% and 0.5% in 2013, respectively. See Item 5.A “Operating Results — Geographical Information” for details.

We acquired all of our existing hydroelectric power projects from other developers and operators beginning in 2007. We intend to continue our expansion by acquiring, operating and developing a diversified portfolio of additional small hydroelectric power projects in targeted locations in China. We believe our experience and capabilities gained in the acquisition, development and operation of small hydroelectric power project in China will enable us to take advantage of the opportunities present in the PRC hydropower market. Installed capacity at our projects were 517.8 MW, 517.8 MW and 517.8 MW at December 31, 2011, 2012 and 2013, respectively.

In December 2011, we entered into an Equity Purchase and Sale Agreement with a third-party buyer to sell Pingnan County Yuanping hydroelectric Co., Ltd., which owns and operates Yuanping hydroelectric power project, a 16.0 MW project located in Fujian province, for a total consideration of $22.2 million, including the assumption of debt by the buyer. The disposal date of Yuanping was March 2, 2012, which was the date we lost effective control over Yuanping. The sale transaction was completed on the same date. Its results of operations have been classified as discontinued operations for all periods presented.

In October 2012, we entered into a Share Transfer Agreement with a third-party buyer to sell Pingnan County Yuheng Hydroelectric Co., Ltd., which owns and operates Yuheng hydroelectric power project, a 30.0 MW project located in Fujian province, for a total consideration of $44.3 million, including the assumption of debt by the buyer. The disposal date of Yuheng was October 31, 2012, which was the date we lost effective control over Yuheng. The sale transaction was completed in April 2013.

Our Hydropower Assets

Overview

We categorize hydropower projects into the following four categories:

·completed projects refer to projects that are built and in operation;

·projects under construction refer to projects that are being built and are not yet in operation;

·approved projects refer to projects that have received the approvals, permits and licenses necessary for construction to commence; and

·greenfield projects refer to projects that lack one or more construction permits and have not begun construction.

We currently operate in four Chinese provinces: Zhejiang, Fujian, Sichuan and Yunnan. We focus on a number of diverse locations that are rich in hydroelectric power resources and either have relatively high tariffs or present a high likelihood of tariff increases. The provinces in which we currently operate reflect this strategy. All these provinces are rich in hydroelectric power resources. We believe Yunnan and Sichuan currently have some of the lowest tariff rates in China, and we believe there is a likelihood of tariff increases, while Zhejiang and Fujian already have some of the highest tariff rates in China. In order to rationalize overhead costs, we have acquired and plan to continue to acquire hydroelectric power assets that are clustered or located around good hydrological resources and where we might have the opportunity to acquire adjacent projects. Our six hydroelectric power projects in Zhejiang province are clustered together in the southern part of Zhejiang province, and our three hydroelectric power projects in Fujian are clustered together in the northern part of Fujian province, neighboring Zhejiang province. Our hydroelectric power projects located in Yunnan province, Sichuan province and Fujian province are all in areas of relatively high seismic risk as compared to other areas of China.

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Descriptions of the projects

Our hydroelectric power projects are of the following types:

A—Run-of-the-river diversion dam. The typical feature of this type of hydroelectric power project is that a water diversion structure (dam) spans a river and water is conveyed to a powerhouse via a water conveyance facility, which is a tunnel, pipeline, or a combination of the two. The rate of water flow to the powerhouse is equal to the natural rate of flow in the river.

B—Low head run-of-the-river. The typical feature of this type of hydroelectric power project is that a dam spans a river, a powerhouse with low head turbine generator(s) is incorporated into the diversion structure, and water flowing through the powerhouse is released back into the river at the dam. The rate of water flow to the powerhouse is equal to the natural rate of flow in the river.

C—Impoundment dam reservoir. The typical feature of this type of hydroelectric power project is that a water diversion structure (dam) spans a river and water is conveyed to a powerhouse via a water conveyance facility, which is a tunnel, pipeline, or a combination of the two. The rate of water flow to the powerhouse is not equal to the natural rate of flow in the river, as water is impounded or stored at the dam site in a reservoir. This storage provides flexibility in energy production so that it can be dispatched in line with demand.

D—Pumped storage (none presently owned). The essential feature of this type of hydroelectric power project is a powerhouse with reversible pump hydraulic turbine generators connected by a water conveyance facility to an upper and a lower reservoir. The water is transferred between the two reservoirs, pumped from the lower to the upper reservoir (consuming power) during off-peak periods of surplus grid power and released from the upper to the lower reservoir (producing power) during peak periods of grid deficit.

The table below sets forth technical and operating data of our hydroelectric power projects as of the dates indicated.

Project or							Effective
Expansion	Actual	Approved	Installed				Utilization Rate			Design
and	Date in	Tariff in 2013(1)	Capacity	Electricity Sold (kWh)			(%)(8)			Utilization
Location	Service	(RMB/kWh)	(MW)	2011	2012	2013	2011	2012	2013	(%)	Type
Completed Projects
Binglangjiang I, Yunnan	Jan-88	0.227 January to May; 0.177 June to December	21	86,994,684	73,643,279	105,140,774	47.3	39.9	57.2	45.0	A
Binglangjiang II, Yunnan	Sept-09	0.227 January to May; 0.177 June to December	20	92,596,193	84,495,870	62,529,840	52.9	48.1	35.7	50.0	A
Liyuan, Sichuan	Aug-06	0.29	12	13,096,779	13,758,781	8,444,200	12.5	19.5	10.7	42.0	B
Shapulong, Zhejiang	Jun-01	0.535 peak hours; 0.268 off-peak	25	36,611,340	55,304,212	55,764,645	14.4	25.2	25.5	18.6	C
Yingchuan, Zhejiang	Apr-02	0.535 peak hours; 0.268 off-peak	40	101,896,872	144,948,740	139,554,431	29.1	41.3	39.8	31.0	C
Wuliting, Zhejiang	Oct-07	0.535 peak hours; 0.268 off-peak	42	92,118,840	146,626,920	117,231,840	25.0	39.7	31.9	33.0	B
Ruiyang, Zhejiang	Dec-03	0.535 peak hours; 0.268 off-peak	32	49,810,200	92,434,320	72,077,280	17.8	32.9	25.7	24.2	C
Jiulongshan(2), Zhejiang		0.535 peak hours 0.268 off-peak	37.6	67,157,924	116,570,891	80,512,711	20.4	35.3	24.4	20.7	C/A
Zhougongyuan(2), Zhejiang	Mar-09	0.535 peak hours; 0.268 off-peak	16	39,827,794	64,816,701	46,963,319	28.4	46.1	33.5	29.0	C/A
Banzhu, Fujian	Nov-98	0.381	45	112,241,606	214,147,080	162,613,500	28.5	54.2	41.3	42.2	B
Wangkeng(3), Fujian	July 04	0.331	40	96,398,922	165,273,169	126,323,663	27.5	47.0	36.1	42.5
Husahe(4), Yunnan	Mar-95	0.227 January to May; 0.177 June to December	18.7	67,753,458	51,666,207	58,632,431	41.4	31.5	35.8	45.1	A
Aluhe(4), Yunnan	Jun-06	0.20 January to April, and December; 0.16 May to November	10	29,478,703	31,229,866	30,548,628	33.7	35.6	34.9	54.3	A
Zilenghe(4), Yunnan	Oct-07	0.20 January to April, and December; 0.16 May to November	25.2	86,162,474	90,217,295	87,165,181	39.0	40.8	39.5	60.4	A
Latudi(4), Yunnan	Feb-09	0.20 January to April, and December; 0.16 May to November	18.9	45,296,415	62,695,720	50,163,960	27.4	37.8	30.3	46.1	A

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Project or							Effective
Expansion	Actual	Approved	Installed				Utilization Rate			Design
and	Date in	Tariff(1)	Capacity	Electricity Sold (kWh)			(%)(8)			Utilization
Location	Service	(RMB/kWh)	(MW)	2011	2012	2013	2011	2012	2013	(%)	Type
Xiaopengzu(4), Yunnan	Oct-09	0.247 January to April, and December; 0.222 May and November; 0.197 June to October	44	68,255,227	72,662,313	81,161,158	17.7	18.8	21.1	46.0-50.0	C
Qianling(5), Fujian	Jul-84	0.261	10	27,297,172	47,216,556	35,887,928	31.2	53.8	41.0	40.0	B
Jinjiu(5), Fujian	Oct-04	0.301	3	11,592,491	19,602,939	18,889,692	44.1	74.4	71.9	52.0	B
Dongguan(5), Fujian	Nov-04	0.301	4.8	8,147,040	15,041,000	13,857,940	19.4	46.6	33.0	48.1	B
Jinlong(5), Fujian	Nov-05	0.30	10	29,761,388	51,311,594	40,297,236	34.0	58.4	46.0	42.6	B
Jintang(5), Fujian	Oct-06	0.26	11.6	29,475,704	53,688,256	43,242,996	29.0	52.7	42.6	40.5	B
Jinwei(5), Fujian	Jul-09	0.3051	16	37,846,120	62,600,520	52,856,160	27.0	44.5	37.7	41.1	B
Dazhaihe(6), Yunnan	Sept-09	0.247 January to April, and December; 0.222 May and November; 0.197 June to October	15	32,494,133	38,025,803	44,548,027	34.1	28.9	33.8	49.1	A
		Total:	517.8

(1)     We are required to withhold VAT due on our power dispatched at a rate of 6.0%, or in the case of two of our projects, of 17.0%, depending on the size and location of the plant. Approved tariffs presented above are gross of VAT. Peak hours are generally from 8 a.m. to 10 p.m. For Binglangjiang II, the effective tariff stated was effective from January 1, 2010. In 2009, from September 4 to November 3, the effective approved tariff was RMB0.12 and from November 4 to December 31 was RMB0.17. Effective from May 1, 2010, the tariff for Binglangjiang I, II and Husahe was increased from RMB0.22 to RMB0.227 for the period from January to May and from RMB0.17 to RMB0.177 for the period from June to December. We did not receive any tariff increase in 2011. In 2012, we received tariff increases of RMB0.021 at the following projects: Banzhu, Wangkeng, Qianling, Jinjiu, Dongguan, Jinlong, and Jintang; an increase of RMB0.0051 at the Jinwei project; and, an increase at the Dazhaihe project of RMB0.017 from January to April and December, RMB0.04 in May and November and RMB0.067 from June to October. We did not receive any tariff increases in 2013.

(2)     The Zhougongyuan project consists of three separate hydropower plants in series on the same river. The upstream hydropower plant is an impoundment dam reservoir hydropower plant (type C) and the other two in series downstream are run-of-the-river diversion dam hydropower plants (type A). Zhougongyuan project was split into two subsidiary projects in December 2009: Jiulongshan project and Zhougongyuan project.

(3)     We have owned 100.0% of the equity interest in Wangkeng since January 2011.

(4)     The acquisition of the Husahe, Aluhe, Zilenghe, Latudi and Xiaopengzu hydroelectric projects was made during 2010. The Electricity Sold and Effective Utilization Rate for 2010 represents the period during which the projects were under our control. Operating data are on a full year basis for 2013 and 2012.

(5)     We completed our acquisition of Shaowu City Jinling Power Generation Co., Ltd., the owner of the Qianling, Jinjiu and Dongguan hydroelectric power project, together with Jinling’s 55.0% controlling interest in Shaowu City Jinlong Hydroelectric Co., Ltd., the owner of the Jinlong project, Jinling’s 74.0% controlling interest in Shaowu City Jintang Hydroelectric Co., Ltd., the owner of the Jintang project, and Jinling’s 74.0% controlling interest in Shaowu City Jinwei Hydroelectric Co., Ltd., the owner of the Jinwei on December 30, 2010. As a result, we are not entitled to the revenue of these projects for the year ended December 31, 2010. In 2011, 2012 and 2013, we are entitled to the electricity production and revenue of Jinlong, Jintang and Jinwei on an equity basis of 55.0%, 74.0% and 74.0%, respectively.

(6)We completed our acquisition of Jinping Kanghong Hydropower Development Co., Ltd., or the Dazhaihe Hydroelectric power project, in April 2011. The 2011 data for Dazhaihe are for the period from April 10, 2011 to December 31, 2011.

(7)     See Exhibit 15.1 to this annual report for detailed calculations of effective utilization rates.

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Completed Projects

Yunnan Province

Binglangjiang I. Binglangjiang I is a run-of-the-river, diversion-type hydroelectric facility commissioned in January 1988 with an installed capacity of 21.0 MW and an annual design utilization rate of 60.0%, which was reduced to 45.0% when Binglangjiang II was commissioned and water previously dedicated solely to Binglangjiang I was then allocated between Binglangjiang I and Binglangjiang II. The effective utilization rate for Binglangjiang I was 47.3%, 39.9% and 57.2% in 2011, 2012 and 2013, respectively. We have been operating this project and supplying power to local grids since 2007. On July 19, 2011, Yunnan Huabang Electric Power Development Co., Ltd. entered into our latest grid connection and dispatching agreement with Yunnan Grid Company Dehong Power Supply Bureau for Binglangjiang I and II which is valid until July 19, 2012. The agreement shall remain valid until July 19, 2013 or when a new agreement is signed. On December 29, 2010, Yunnan Huabang Electric Power Development Co., Ltd. entered into a supplemental agreement on the power purchase and sale contract for the calendar year of 2011 with Dehong Power Supply Co., Ltd. with respect to Binglangjiang I, pursuant to which, Dehong Power Supply Co., Ltd. agrees to pay RMB0.227 per kWh (January to May, and December) and RMB0.177 per kWh (June to November). In December 2012, Yunnan Huabang Electric Power Development Co., Ltd renewed such agreement for the calendar year of 2013.

Binglangjiang I is located on the Binglangjiang River, which is in the southwestern corner of Yunnan province in Yingjiang County, Dehong Prefecture. Binglangjiang I is a four-component complex consisting of a concrete diversion dam, canal and penstock, powerhouse and substation. The powerhouse contains three 7.0 MW vertical Francis-type or mixed-flow-type turbines manufactured by Hangzhou Electric Equipment Co., Ltd. The area of the powerhouse building that contains the plant is 592 m2. The area of the land the project utilizes is 2,310.7 km2 including the drainage basin. We acquired Binglangjiang I in April 2007.

Binglangjiang II. Binglangjiang II is a run-of-the-river, diversion-type hydroelectric power project commissioned in September 2009 with a design capacity of 20.0 MW and an annual design utilization rate of 50.0%. The effective utilization rate for Binglangjiang II was 52.9%, 48.1% and 35.7% in 2011, 2012 and 2013, respectively. The combined effective utilization rate for Binglangjiang I and II was 50.0%, 44.0%, and 45.6% in 2011, 2012 and 2013, respectively. We have been operating this project and supplying power to local grids since 2009. On July 19, 2011, Yunnan Huabang Electric Power Development Co., Ltd. entered into our latest grid connection and dispatching agreement with Yunnan Grid Company Dehong Power Supply Bureau for both Binglangjiang I and II which is valid until July 19, 2012. The agreement shall remain valid until July 19, 2013 or when a new agreement is signed. On December 29, 2010, Yunnan Huabang Electric Power Development Co., Ltd. entered into a supplemental agreement on the power purchase and sale contract for the calendar year of 2011 with Dehong Power Supply Co., Ltd. with respect to Binglangjiang II, pursuant to which, Dehong Power Supply Co., Ltd. agrees to pay RMB0.227 per kWh (January to May, and December) and RMB0.177 per KWh (June to November). On December 25, 2012, Yunnan Huabang Electric Power Development Co., Ltd renewed such agreement for the calendar year of 2013.

Binglangjiang II is located on the Binglangjiang River in the southwestern corner of Yunnan province in Yingjiang County, Dehong Prefecture. Binglangjiang II is a four-component complex with a concrete diversion dam, tunnel and penstock, powerhouse and substation. The powerhouse contains two 10.0 MW vertical Francis turbine generators manufactured by Kunming Electric Equipment Co., Ltd. The area of the powerhouse building that contains the plant is 800 m2. The area of the land the project utilizes is 2,310.7 km2 including the drainage basin.

Husahe. The Husahe hydroelectric project is located in Yingjiang County, Dehong Prefecture, Yunnan province and consists of three independent projects, Husahe 3, Husahe 4 and Mangxian, in a series on the Husa River with a drainage basin of 262.6 km2, a total installed capacity of 18.7 MW and a combined Design utilization rate of 45.1%. The effective utilization rate for this three facility complex was 41.4%, 31.5% and 35.8% for the year 2011, 2012 and 2013, respectfully. The lower than the design utilization rate in 2012 and 2013 reflects normal facility operations and lower than normal precipitation. Husahe 3 is a 3.2 MW four component facility consisting of a masonry diversion, 816 meter long canal and penstock, powerhouse and a 35KV substation which is connected to a 110KV substation at Mangxian hydropower Station. The powerhouse contains two horizontal Francis type turbine generator units. The project was placed in service in 1995. The design capacity utilization rate is 74.0%.

Husahe 4 is a 14.0 MW four component facility consisting of a gravity dam, 459 meter concrete lined tunnel and penstock, powerhouse and 35KV substation which is connected to a 110KV substation owned by the utility at Mangxian Hydropower Station. The project buildings occupy 1,575.72 square meters. The powerhouse contains two vertical Francis type turbine generators. The project was placed in service in 1998. The actual utilization rate is 41.4%. During periods of high water flows, the overflow from Husahe 4 is directed to the 1.5 MW Mangxian Hydropower Station, which has a utilization rate of 15.0%.

Mangxian is a 1.5 MW small overflow hydroelectric power project which produces power from flows which exceed the capacity of Husahe 4.

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On April 19, 2012, Yingjiang County Qinrui Husahe Hydropower Co., Ltd. entered into our latest grid connection and dispatching agreement with Yunnan Grid Company Dehong Power Supply Co., Ltd for Husahe 3, which is valid for one year. Such agreement will remain valid until the agreement is renewed. On December 29, 2010, Yingjiang County Qinrui Husahe Hydropower Co., Ltd. entered into a supplemental agreement on power purchase and sale contract for the calendar year of 2011, pursuant to which, Dehong Power Supply Co., Ltd. agrees to pay RMB0.227 per KWh (January to May) and RMB0.177 per KWh (June to December). On December 25, 2012, Yingjiang County Qinrui Husahe Hydropower Co., Ltd renewed such agreement for the calendar year of 2013.

Xiaopengzu. Xiaopengzu is an impoundment reservoir type of hydroelectric power project commissioned in October 2009 with a design capacity of 44.0 MW and an annual design utilization rate which is expected to range from 46.0% to 50.0% based upon completion and the operations of the Dianchi Reservoir Diversion Project, a water project unrelated to Xiaopengzu which is expected to influence the amount of water annually that flows to Xiaopengzu, and the other hydroelectric facilities downstream. The effective utilization rate was 17.7%, 18.8% and 21.1% in 2011, 2012 and 2013, respectively, reflecting normal facility operations and below average precipitation in all three years.

In March 2012, Luquan Xiaopengzu Power Generation Corporation entered into a grid connection and dispatching agreement with Yunnan Grid Company, which is valid for one year. Such agreement will remain valid until the new agreement is signed. Luquan Xiaopengzu Power Generation Corporation entered into a power purchase and sale agreement effective from January 1, 2013 to December 31, 2013, pursuant to which the Yunnan Grid Corporation agrees to pay Xiaopengzu tariff on a seasonal basis. In 2013, Xiaopengzu received a tariff of RMB0.247 per kWh during the dry season from January to April and in December and RMB0.222 per kWh during the normal season in May and November, and RMB0.197 per kWh during the rainy season from June to October. According to a tariff adjustment notice dated Dec 29, 2013, effective from January 1, 2014, electricity provided to the provincial grid company will receive RMB0.1927 per kWh from June to October, RMB0.235 per kWh during May and November, and RMB0.282 per kWh from December to April. The VAT for this plant is 6.0%.

Xiaopengzu is located on the Pudu River in the Luquan County, Kunming City in Yunnan Province. Xiaopengzu is a four-component complex consisting of a concrete impoundment dam, tunnel and penstock, powerhouse and substation. The powerhouse contains two 22.0 MW vertical Francis turbine generators. The area of the powerhouse building is 697 m2. The area of the land the project utilizes is 8,162 km2 including the drainage basin.

Aluhe. Aluhe is a high head run-of-the-river diversion-type hydroelectric power project located on the Alu River, commissioned in April 2007 with a design capacity of 10.0 MW and an annual design utilization rate of 54.3%. The effective utilization rate was 33.7%, 35.6% and 34.9% in 2011, 2012 and 2013, respectively. The lower than design utilization rates in 2011, 2012 and 2013 were the result of intermittent grid availability and lower than normal precipitation.

On July 25, 2012, Fugong County Hengda Hydroelectric Development Co., Ltd entered into a grid connection and dispatching agreement with Yunnan Grid Company Nujiang Power Supply Bureau for a valid period of one year. Such agreement will remain valid until the new agreement is signed. On January 1, 2013, Fugong County Hengda Hydroelectric Development Co., Ltd entered into a new power purchase and sale agreement with Yunnan Grid Company Nujiang Power Supply Bureau and Nujiang Power Supply Co., Ltd for Aluhe and Zilenghe, which is valid for one year. The agreement will remain effective unless any party intends to change the clause. In 2013, Aluhe received a tariff of RMB0.20 per kWh during the dry season from January to April and December, and RMB0.16 per kWh during the rainy season from May to November. According to a tariff adjustment notice dated Dec 29, 2013, effective from January 1, 2014, electricity provided to the provincial grid company will receive RMB0.1927 per kWh from June to October, RMB0.235 per kWh during May and November, and RMB0.282 per kWh from December to April. The VAT for this plant is 6.0%.

Aluhe is a four-component complex consisting of concrete diversions, tunnels, pipeline and penstock, powerhouse and substation. The powerhouse contains two 5.0 MW horizontal Pelton turbines coupled to 6.3 MW generators with effective capacity of 10.0 MW manufactured by Lingling Hengyuan Hydropower Equipment Co., Ltd. The area of the powerhouse building that contains the plant is 450 m2. The area of the land the project utilizes is 23 km2 including the drainage basin.

Zilenghe. Zilenghe is a high head run-of-the-river, diversion-type hydroelectric power project commissioned in October 2007 with a design capacity of 25.2 MW and an annual design utilization rate of 60.4%. The effective utilization rate was 39.0%, 40.8% and 39.5% in 2011, 2012 and 2013, respectively. The lower than the design utilization rate in all three years was attributable to intermittent grid availability and lower than normal precipitation.

On July 25, 2012, Fugong County Hengda Hydroelectric Development Co., Ltd entered into a grid connection and dispatching agreement with Yunnan Grid Company Nujiang Power Supply Bureau for a valid period of one year. Such agreement will remain valid until the new agreement is signed. In 2013, Zilenghe received a tariff of RMB0.20 per kWh during the dry season from January to April and December, and RMB0.16 per kWh during the rainy season from May to November. According to a tariff adjustment notice dated Dec 29, 2013, effective from January 1, 2014, electricity provided to the provincial grid company will receive RMB0.1927 per kWh from June to October, RMB0.235 per kWh during May and November, and RMB0.282 per kWh from December to April.

Zilenghe is a four-component complex consisting of concrete diversion dams, tunnels, pipeline and penstock, powerhouse and substation. The powerhouse contains four 6.3 MW horizontal Pelton turbine generators manufactured by Lingling Hengyuan Hydropower Equipment Co., Ltd. The area of the powerhouse building is 600 m2. The area of the land the project utilizes is 1,942 km2 including the drainage basin.

Latudi. Latudi Hydropower Station is located on the Latudi River in Fugong County, Nujiang Prefecture, Yunnan Province. Latudi is a high head run of the river diversion type project commissioned in February 2009 with a design capacity of 18.9 MW and an annual design utilization rate of 46.1%. The effective utilization rate was 27.4%, 37.8% and 30.3% in 2011, 2012 and 2013, respectively. The lower than the design utilization rate in all three years was attributable to intermittent grid availability and lower than normal precipitation.

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On July 25, 2012, Fugong Xineng Power Development Co., Ltd entered into a grid connection and dispatching agreement with Yunnan Grid Company Nujiang Power Supply Bureau for a valid period of one year. Such agreement will remain valid until the new agreement is signed. On January 1, 2013, Fugong Xineng Power Development Co., Ltd. entered into a new power purchase and sale agreement with Nujiang Power Supply Co., Ltd, which is valid for one year. The agreement will remain effective unless any party intends to change the clause. In 2012, Aluhe received a tariff of RMB0.20 per kWh during the dry season from January to April and December, and RMB0.16 per kWh during the rainy season from May to November. According to a tariff adjustment notice dated Dec 29, 2013, effective from January 1, 2014, electricity provided to the provincial grid company will receive RMB0.1927 per kWh from June to October, RMB0.235 per kWh during May and November, and RMB0.282 per kWh from December to April. The VAT for this plant is 6.0%.

Latudi Hydropower Station is a four-component complex consisting of two concrete diversion dams, pipelines and penstock, powerhouse and substation. The powerhouse contains three 6.3 MW horizontal Pelton turbine generators manufactured by Lingling Hengyuan Hydropower Equipment Co., Ltd. The area of the powerhouse building is 500 m2. The area of the land the project utilizes is 28 km2 including the drainage basin.

Dazhaihe. Dazhaihe is a high head run of the river hydro project located in the lower stream of the Dazhai River in Manhao town, Jinping county, Honghe prefecture. The project was commissioned in September 2009 with a design capacity of 15.0MW and an annual design utilization rate of 49.1%. The effective utilization rate was 34.1%, 28.9% and 33.8% in 2011, 2012 and 2013, respectively. The lower than the design utilization rates in all three years are attributable to normal facility operations and lower than normal precipitation.  On June 1, 2011, Jinping Kanghong Hydropower Development Co., Ltd entered into a grid connection and dispatching agreement with Yunnan Grid Company Honghe Power Supply Bureau for a valid period of one year. The agreement will remain valid until new agreement is signed. Jinping Kanghong Hydropower Development Co., Ltd entered into a power purchase and sale agreement effective from March 13, 2013 to March 12, 2014, pursuant to which the Yunnan Grid Corporation Honghe Power Supply Bureau agrees to pay Dazhaihe tariff on a seasonal basis. Such agreement will be renewable automatically unless both parties agree to terminate. According to a tariff increase notice issued by Yunnan Provincial Pricing Bureau on March 7, 2012, Dazhaihe currently received a tariff of RMB0.247 per kWh during the dry season from January to April and in December and RMB0.222 per kWh during the normal season in May and November, and RMB0.197 per kWh during the rainy season from June to October. According to a tariff adjustment notice dated Dec 29, 2013, effective from January 1, 2014, electricity provided to the provincial grid company will receive RMB0.1927 per kWh from June to October, RMB0.235 per kWh during May and November, and RMB0.282 per kWh from December to April. The VAT for this plant is 6.0%.

Dazhaihe is a four component single-purpose power generation construction. The facility consists of diversion structure, tunnel, penstock, surge shaft, powerhouse and substation. The Dazhai river is in the Honghe drainage basin, and is a branch of the Honghe River. The size of the drainage area above the water diversion is 50.9 KM2.

Sichuan Province

Liyuan. Liyuan is a low head run-of-the-river hydroelectric power project commissioned in August 2006 with an installed capacity of 12.0 MW and an annual design utilization rate of 42.0%. The effective utilization rate was 12.5%, 19.5 and 10.7% in 2011, 2012 and 2013, respectively. The effective utilization rates for Liyuan in 2011 and 2012 were lower than its design utilization rate due to high variability and concentration of precipitation and water flows during such periods. Water flows at times exceeded facility capacity resulting in abandoned water. We expect this situation to be mitigated in the future with the completed development and construction of a series of upstream plants on the Donghe river which will have the effect of moderating water flows in the river. Until such development is completed, the utilization rates for Liyuan may remain below design. The effective utilization rate for Liyuan in 2013 was lower due to scheduled repairs being completed in the beginning of the year and the flood damage. Sichuan Huabang Hydroelectric Development Co., Ltd. entered into a grid connection and dispatching agreement with Sichuan Cangxi Electric Power Co., Ltd. on May 17, 2012, which is valid until May 17, 2013, pursuant to which Sichuan Huabang Hydroelectric Development Co., Ltd. is to connect the hydroelectric power project to the power grid owned or controlled by Sichuan Cangxi Electric Power Co., Ltd. On June 4, 2012, Sichuan Huabang Hydroelectric Development Co., Ltd. and Sichuan Cangxi Electric Power Co., Ltd., part of the China Southern Power Grid Corporation Ltd., or the Southern Grid, entered into a power purchase and sale agreement effective from June 5, 2012 until June 4, 2013, pursuant to which the Sichuan Cangxi Electric Power Co., Ltd. is paying Liyuan a tariff of RMB0.29 per KWh. According to the terms of such agreement, the agreement remains effective, unless both parties agree to terminate. No new agreement signed due to the plant destroyed by flood. The VAT for this plant is 6.0%.

Liyuan is located on the Donghe river, which is in northeast Sichuan province at Donghe, Cangxi County, Guangyuan City. Liyuan consists of a concrete gravity dam, powerhouse, hinged spill way gates and ship lock integrated into one structure, and a substation. The power house contains six vertical 2.0 MW axial Kaplan type turbines manufactured by Jiangxi Pingxiang Hydro Power Facility. The area of the structure that contains the plant is 644.0 m2. The area of the land the project utilizes is 4,934 km2 including the drainage basin. We acquired Liyuan in May 2007. The major earthquake that struck Sichuan province in 2008 caused damage to the tailwater concrete apron and the spillway gates of Liyuan hydroelectric power project and the repair of such damage cost us RMB11.7 million ($1.7 million) and was completed in March 2010. During the repair period, power generation was limited and hence less than normal production from Liyuan hydroelectric power project was achieved in 2009. In 2013, a severe flood in Sichuan province hit our Liyuan hydroelectric power project resulting in damage to the tailrace concrete apron, spillway gates, power generation plant, auxiliary equipment, and the 35KV substation.

Zhejiang Province

Shapulong. Shapulong is an impoundment reservoir hydroelectric power project commissioned in June 2001 with an installed capacity of 25.0 MW and an annual design utilization rate of 18.6%. The effective utilization rate was 14.4%, 25.2% and 25.5% in 2011, 2012 and 2013 respectively.

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Yunhe Shapulong Hydropower Generation Co., Ltd. entered into a grid connection and dispatching agreement with Lishui Electric Power Bureau on November 2008, which is valid for one year and thereafter so long as there is no disagreement between the two parties, pursuant to which Shapulong is to connect the hydroelectric power project to the power grid owned or controlled by Lishui Electric Power Bureau. Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into a power purchase and sale agreement with Lishui Electric Power Bureau, part of the State Grid, on November 2, 2011, which is valid until November 1, 2014. Without disagreement from either party, the agreement will be automatically renewed every two years, pursuant to which Lishui Electric Power Bureau is currently paying Shapulong a tariff of RMB0.535 per kWh during peak hours and RMB0.268 per kWh during off-peak hours. According to the terms of such agreement, the agreement remains effective after the initial term, unless both parties agree to its modification or termination. The VAT for this plant is 6.0%.

Shapulong is located in the watershed of the Wutongkeng River, which is part of the Ou river basin in Yunhe County, Zhejiang province. Shapulong is a four component project consisting of a concrete faced dam, tunnel and penstock, powerhouse and substation. The powerhouse contains two 12.5 MW vertical Francis turbine generators manufactured by Kvaerner Hangzhou Power Equipment Co., Ltd. The area of the powerhouse is 506.3 m2. The area of the land the project utilizes is 42 km2 including the drainage basin. We acquired Shapulong in December 2007.

Yingchuan. Yingchuan is an impoundment reservoir hydroelectric power project commissioned in April 2002 with an installed capacity of 40.0 MW and an annual design utilization rate of 31.0%. The effective utilization rates were 29.1%, 41.3% and 39.8% in 2011, 2012 and 2013, respectively.

Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. entered into a grid connection and dispatching agreement with Lishui Electric Power Bureau in November 2008, which is valid until November 2009 and thereafter so long as there is no disagreement between the two parties, pursuant to which Jingning Yingchuan Hydroelectric Development Co., Ltd. connected the hydroelectric power project to the power grid which is currently under the operation and management of Lishui Electric Power Bureau. According to the terms of such agreement, the agreement remains effective after the initial term, unless both parties agree to terminate. In October 2013 a power purchase agreement was executed between Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. and Zhejiang Province Power Company Lishui Power Supply Company, part of the State Grid, effective from October 1, 2013 to September 30, 2016 Without disagreement from either party, the agreement will be automatically renewed every two years, pursuant to which the Zhejiang Province Power Company Lishui Power Supply Company is paying Yingchuan a tariff of RMB0.535 per kWh during peak hours and RMB0.268 per kWh during off-peak hours. The VAT for this plant is 6.0%.

Yingchuan is located on the Yingchuan stream, which is a tributary of the Xiaoxi river in the upper reaches of the Oujiang water system in Jingning County, Zhejiang province. Yingchuan is a four-component complex consisting of a concrete-faced dam, tunnel and penstock, powerhouse and substation. The powerhouse contains two 20.0 MW vertical Francis turbine generators manufactured by Kvaerner Hangzhou Power Equipment Co., Ltd. The area of the powerhouse is 489.2 m2. The area of the land the project utilizes is 200 km2 including the drainage basin. We acquired Yingchuan in January 2008.

Wuliting. Wuliting is a low head, run-of-the-river hydroelectric power project commissioned in October 2007 with an installed capacity of 42.0 MW and an annual design utilization rate of 33.0%. The effective utilization rate was 25.0%, 39.7% and 31.9% in 2011, 2012 and 2013, respectively.

Qingtian Wuliting Hydroelectric Development Co., Ltd. entered into a grid connection and dispatching agreement with Lishui Electric Power Bureau in November 2008, which is valid until November 2009 and thereafter so long as there is no disagreement between the two parties, pursuant to which Qingtian Wuliting Hydroelectric Development Co., Ltd. is to connect the hydroelectric power project to the power grid which is currently under the operation and management of Lishui Electric Power Bureau. According to the terms of such agreement, the agreement remains effective after the initial term, unless both parties agree to terminate. In October 2013 a power purchase agreement was executed between Qingtian Wuliting Hydroelectric Development Co., Ltd. and Zhejiang Province Power Company Lishui Power Supply Company, part of the State Grid, effective from October 1, 2013 to September 30, 2016. Without disagreement from either party, the agreement will be automatically renewed every two years, pursuant to which the Zhejiang Province Power Company Lishui Power Supply Company is paying Wuliting a tariff of RMB0.535 per kWh during peak hours and RMB0.268 per kWh during off-peak hours. The VAT for this plant is 6.0%.

Wuliting is located on the Daxi stream at the lower reaches of the Oujiang River, Wuliting village, Qingtian County, Zhejiang province. Wuliting consists of a concrete gated structure, powerhouse, spill way, and ship lock integrated into one structure, and a substation. The powerhouse contains three 14.0 MW horizontal bulb turbines manufactured by Hangzhou Jianghe Electromechanical Equipment Co., Ltd. The area of the structure is 1,683.1 m2. The area of the land the project utilizes is 8,872 km2 including the drainage basin. We acquired Wuliting in January 2008.

Ruiyang. Ruiyang is an impoundment reservoir hydroelectric power project commissioned in December 2003 with an installed capacity of 32.0 MW and an annual design utilization rate of 24.2%. The effective utilization rate was 17.8%, 32.9% and 25.7% in 2011, 2012 and 2013, respectively.

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Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Lishui Electric Power Bureau on October 18, 2003, for an indefinite term, pursuant to which Ruiyang is to connect the hydroelectric power project to the power grid owned or controlled by Lishui Electric Power Bureau. Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. entered into a power purchase and sale agreement with Lishui Electric Power Bureau in January 1, 2012, which is valid until December 31, 2015. Without disagreement from either party, the agreement will be automatically renewed every two years, pursuant to which Lishui Electric Power Bureau is currently paying Ruiyang a tariff of RMB0.535 per kWh during peak hours and RMB0.268 per kWh during off-peak hours. According to the terms of such agreement, the agreement remains effective after the initial term, unless both parties agree to its modification or termination. The VAT for the plant is 6.0%.

Ruiyang is located on the upper reach of Longquan Brook (Mei Brook), a tributary to the Ou river, within the boundaries of Xiaomei Township, Longquan City, Zhejiang province. Ruiyang is a five-component project consisting of a concrete-faced-rock-fill dam, a 4 km tunnel, penstock, powerhouse, and substation. The power house contains two 16.0 MW vertical Francis turbine generators manufactured by Kvaerner Hangzhou Power Equipment Co., Ltd. The area of the powerhouse structure is 892 m2. The area of the land the project utilizes is 188 km2 including drainage basin. We acquired Ruiyang in August 2009.

Jiulongshan and Zhougongyuan. The Jiulongshan-Zhougongyuan Hydro Complex consists of Jiulongshan I, a 25.0 MW impoundment dam facility, Jiulongshan II, a 12.6 MW diversion facility, and Zhougongyuan, a 16.0 MW diversion facility. Each of the three facilities is located on a tributary of upper Wuxijiang River in Suichang County, Zhejiang Province.

The three projects have a total design capacity of 53.6 MW and a combined annual design utilization rate of 25.0%. The complex of three facilities was commissioned during May through December 2009. The effective utilization rate for Jiulongshan complex was 20.4%, 35.3% and 24.4% in 2011, 2012 and 2013, respectively. The effective utilization rate for Zhougongyuan was 28.4%, 46.1% and 33.5% in 2011, 2012 and 2013, respectively. Suichang County Jiulongshan Hydroelectric Development Co., Ltd. entered into a grid connection and dispatching agreement with Lishui Electric Power Bureau on April 21, 2009 for each of the three hydroelectric power projects, which was valid until April 2010. Without disagreement from either party, the agreement automatically renews every year, pursuant to which Suichang County Jiulongshan Hydroelectric Development Co., Ltd. is to connect the hydroelectric power projects to the power grid which is currently under the operation and management of Lishui Electric Power Bureau. In October 2013, Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. respectively entered into a power purchase and sale contract with Zhejiang Province Power Company Lishui Power Supply Company, part of the State Grid for Jiulongshan I (Zhougongyuan I), Jiulongshan II (Zhougongyuan II), and Zhougongyuan, which are valid from July 1, 2013 to June 30, 2016. Without disagreement from either party, the agreement will be automatically renewed every two years, pursuant to which Zhejiang Province Power Company Lishui Power Supply Company, part of the State Grid, is paying Jiulongshan and Zhougongyuan a tariff of RMB0.535 per kWh during peak hours and RMB0.268 per kWh during off-peak hours. In December 2009, Suichang County Jiulongshan Hydroelectric Development Co., Ltd., which then owned all of the three hydroelectric power projects, transferred one of them, Zhougongyuan III, to the newly established Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. with total investment of RMB140.0 million ($19.5 million) and registered capital of RMB90.0 million ($12.8 million). In connection with the transfer, Suichang County Jiulongshan Hydroelectric Development Co., Ltd., reduced its total investment to RMB320.0 million ($44.5 million) and registered capital to RMB204.1 million ($29.0 million). The purpose of the transfer is to have two interconnect arrangements of less than 50 MW resulting in lower VAT for the complex. The VAT for the three hydroelectric power projects was 17.0% for 2009 and 6.0% for 2010 and onwards.

Each of the facilities consists of a concrete dam, tunnel, penstock, powerhouse and substation. The Zhougongyuan I powerhouse contains two 12.5 MW vertical Francis type turbine generators, the Zhougongyuan II powerhouse contains two 6.3 MW vertical Francis type turbines generators and the Zhougongyuan III powerhouse contains two 8.0 MW vertical Francis type turbine generators, all of which were manufactured by Nanping Equipment Manufacturing Co., Ltd. The area of the structures that contain powerhouses are 447.1 m2, 440.9 m2 and 487.9 m2, respectively. The area of the land the project utilizes is 388.0 km2 including the drainage basin.

Fujian Province

Banzhu. Banzhu is a low head, run-of-the-river hydroelectric power project commissioned in November 1998 with an installed capacity of 45.0 MW and an annual design utilization rate of 42.2%. The effective utilization rate was 28.5%, 54.2% and 41.3% in 2011, 2012 and 2013, respectively.

On September 30, 2010, Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Fujian Province Electric Power Co., Ltd. Sanming Power Industry Bureau which is valid for five years from the execution date and without disagreement from either party, the agreement will be automatically renewed on an annual basis. On December 29, 2013, Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into a power purchase and sale agreement with Fujian Province Electric Power Co., Ltd. which was valid until December 31, 2017. According to a tariff increase notice issued by Fujian Provincial Pricing Bureau on March 15, 2012, Banzhu currently receives a tariff of RMB0.381 per kWh. The VAT for this plant is 17.0%.

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Banzhu is located on the Shaxi River, a main tributary of the Minjiang River in Fujian province, 8 km downstream from Sanming City. Banzhu consists of a full gated structure, powerhouse, spill way and ship lock integrated into one structure, and substation. The powerhouse contains three 15.0 MW horizontal bulb turbines manufactured by Hangzhou Generation Equipment Manufacturing Co., Ltd. The area of the structure is 5,915.3 m2. The area of the land the project utilizes is 9,774 km2 including the drainage basin. We acquired a 90.0% equity interest of Banzhu in October 2008 and the remaining 10.0% equity interest in March 2009.

Wangkeng. Wangkeng is an impoundment reservoir hydroelectric power project commissioned in July 2004 with an installed capacity of 40.0 MW and an annual design utilization rate of 42.5%. The effective utilization rate was 27.5%, 47.0% and 36.1% in 2011, 2012 and 2013, respectively.

On September 30, 2010, Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into a new grid connection and dispatching agreement with Fujian Province Electric Power Co., Ltd. Ningde Power Industry Bureau which is valid until December 31, 2015. The agreement will remain effective unless both parties agree to its modification or termination. On June 28, 2010, Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into a new power purchase and sale contract with Fujian Province Electric Power Co., Ltd. which is valid till March 31, 2011. Without disagreement from either party, the agreement will be automatically renewed every three years. According to a tariff increase notice issued by Fujian Provincial Pricing Bureau on March 15, 2012, Banzhu currently receives a tariff of RMB0.331 per kWh. The VAT for this project is 17.0%.

Wangkeng is located on the Huotongxi river in Pingnan County, Fujian province. Wangkeng is a four component complex consisting of a concrete arch dam, tunnel and penstock, powerhouse and substation. The powerhouse contains two 20.0 MW vertical Francis type turbine generators manufactured by GE Asia (Hangzhou) Hydroelectric Equipment Co., Ltd. The area of the powerhouse structure is 706.8 m2. The area of the land the project utilizes is 290 km2 including the drainage basin. We acquired Wangkeng in October 2008.

Jinlong. Jinlong is a low head run of the river hydroelectric power facility commissioned in November 2005 with an installed capacity of 10.0 MW and an annual design utilization rate of 42.6%. The effective utilization rate was 34.0%, 58.4% and 46.0% in 2011, 2012 and 2013, respectively.

On May 5, 2012, Shaowu City Jinlong Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Fujian Province Nanping Electric Power Industry Bureau and Fujian Province Power Co., Ltd., which is valid until December 2017. On January 1, 2012, Shaowu City Jinlong Hydroelectric Co., Ltd. entered into a new power purchase agreement with Fujian Province Shaowu Power Supply Bureau, which is valid until December 31, 2013. As of 2013 year end, Jinlong receives a tariff of RMB0.321 per kWh. The VAT for this plant is 6.0%.

Jinlong is located on the on the Fu Tun Xi River in northwest Fujian province in Shaowu City. Jinlong is a low head run of the river gated complex with the powerhouse incorporated into the diversion structure on the right bank. The powerhouse contains two 5.0 MW horizontal fully regulated bulb turbine generators manufactured by Fu Chung Jiang Hydraulic Turbine Factory.

Jintang. Jintang is a low head run of the river hydroelectric power facility commissioned in October 2006 with a design capacity of 11.6 MW and an annual design utilization rate of 40.5%. The effective utilization rate was 29.0%, 52.7% and 42.6% in 2011, 2012 and 2013, respectively.

On July 31, 2011, Shaowu City Jintang Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Fujian Province Nanping Electric Power Industry Bureau and Fujian Province Power Co., Ltd., which is valid until December 2016. The VAT for this plant is 6.0%. On January 1, 2012, Shaowu City Jinlong Hydroelectric Co., Ltd. entered into a new power purchase agreement with Fujian Province Shaowu Power Supply Bureau, which is valid until December 31, 2013. As of 2013 year end, Jintang receives a tariff of RMB0.281 per kWh.

Jintang is located on the Futunxi River in the northwest of Fujian province in Shaowu City. Jintang is a low head run of the river gated complex with the powerhouse incorporated into the diversion structure on the right bank. The powerhouse contains two 5.8 MW horizontal fully regulated bulb turbine generators manufactured by Dong Feng Hydroelectric Machinery Works.

Jinling. Jinling is located in Shaowu City, Fujian province and consists of three projects, Qianling, Jinjiu and Dongguan. Qianling and Jinjiu are incorporated into the same powerhouse and gate structure on the Futunxi River. The entire complex of Qianling and Jinjiu has a total design capacity of 13.0 MW. Dongguan has a design capacity of 4.8 MW.

Shaowu City Jinling Power Generation Co., Ltd. entered into a power purchase agreement with Fujian Province Shaowu Power Supply Bureau for each of Qianling, Jinjiu and Dongguan hydroelectric power projects in January 2012, which is valid until December 31, 2013. The VAT for these three plants is 6.0%.

Qianling. The Qianling hydroelectric facility is a low head run of the river hydroelectric power facility commissioned in July 1984 with a design capacity of 10.0 MW and an annual design utilization rate of 52.0% reduced to 40.0% with diversion of water to the Jinjiu facility. The effective utilization rate was 31.2%, 53.8% and 41.0% in 2011, 2012 and 2013, respectively.  On June 6, 2012, Shaowu City Jinling Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Fujian Province Nanping Electric Power Industry Bureau and Fujian Province Power Co., Ltd., which is valid until December 2017. As of 2013 year end, Qianling receives a tariff of RMB0.261 per kWh.

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The Qianling hydropower complex is located on the on the Fu Tun Xi River in northwest Fujian province in Shaowu City. Qianling is a low head run of the river gated complex with the powerhouse incorporated into the diversion structure on the right bank. The powerhouse contains eight 1.25 MW vertical partially regulated kaplan turbine generators manufactured by Dong Feng Hydroelectric Turbine Factory.

Jinjiu. The Jinjiu hydroelectric facility is a low head run of the river hydroelectric power facility commissioned in October 2004 with a design capacity of 3.0 MW and an annual design utilization rate of 52.0%. The effective utilization rate was 44.1%, 74.4% and 71.9% in 2011, 2012 and 2013, respectively. The higher than design utilization rate was attributable to operator preference in optimizing performance and water allocation between Jinjiu and Qianling. On December 15, 2003, Shaowu City Jinling Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Fujian Province Shaowu Power Supply Bureau for an indefinite term. The agreement will remain effective unless both parties agree to resign the agreement. As of 2013 year end, Jinjiu receives a tariff of RMB0.301 per kWh.

The Jinjiu hydropower facility is located on the Fu Tun Xi River in northwest Fujian province in Shaowu City. Jinjiu has a single 3.0 MW fully regulated vertical kaplan style turbine that is incorporated into the Qianling complex which is a low head run of the river gated complex with the powerhouse incorporated into the diversion structure. The powerhouse contains the Qianling eight 1.25 MW vertical partially regulated kaplan turbine generators manufactured by Dong Feng Hydroelectric Turbine Factory plus the single Jinjiu 3.0 MW vertical kaplan turbine generator manufactured by Nanping Hydroelectric Turbine Generator company.

Dongguan. The Dongguan hydroelectric facility is a low head run of the river hydroelectric power facility commissioned in November 2004 with a design capacity of 4.8 MW and an annual design utilization rate of 48.1%. The effective utilization rate was 19.4%, 46.6% and 33.0% in 2011, 2012 and 2013, respectively. Effective utilization has been lower than design as water levels at the dam were reduced to accommodate construction activity immediately upstream unrelated to the project. On December 20, 2002, Shaowu City Jinling Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Fujian Province Shaowu Power Supply Bureau for an indefinite term. The agreement will remain effective unless both parties agree to resign the agreement. As of 2013 year end, Dongguan receives a tariff of RMB0.301 per kWh.

Dongguan is located on the Fu Tun Xi River in northwest Fujian province in Shaowu City. Dongguan is a low head run of the river gated complex with the powerhouse incorporated into the diversion structure at the left bank. The powerhouse contains three 1.6 MW horizontal fully regulated bulb turbine generators.

Jinwei. Jinwei is a low head run of the river hydroelectric power facility commissioned in July 2009 with a design capacity of 16.0 MW and an annual design utilization rate of 41.1%. The effective utilization rate was 27.0%, 44.5% and 37.7% in 2011, 2012 and 2013, respectively. Effective utilization has been lower than design in 2011 reflecting lower than normal precipitation in 2011. Through reviewing past operating parameters, there may be an opportunity to improve the utilization by modifying the existing intake structure. Project company is scheduled to perform detailed studies and implement the designed modification accordingly.

On December 24, 2010, Shaowu City Jinwei Hydroelectric Co., Ltd. entered into a grid connection and dispatching agreement with Fujian Province Nanping Electric Power Industry Bureau, which is valid until December 2015. Shaowu City Jinwei Hydroelectric Co., Ltd. entered into a power purchase agreement with Fujian Province Nanping Power Bureau on March 31, 2011, which is valid until March 31, 2014, pursuant to which Fujian Province Nanping Power Bureau agrees to pay a tariff of RMB0.30 per kWh for supplying electricity. According to the approval regarding the tariff of Shaowu City Jinwei Hydroelectric Co., Ltd issued by Shaowu Pricing Bureau, Nanping Pricing Bureau, and Fujian Provincial Pricing Bureau Ltd on June 28, 2012, Shaowu City Jinwei Hydroelectric Co., Ltd. currently receives a tariff of RMB0.3051 per kWh. The VAT for this plant is 6.0%. According to the terms of the power purchase agreement, the agreement remains effective unless any party has disagreement on the terms of the agreement, and its term will be automatically extended for three years.

Jinwei is located on the Fu Tun Xi River in the northwest of Fujian province in Shaowu City. Jinwei is a run of the river gated complex with the powerhouse incorporated into the diversion structure on the right bank. The powerhouse contains two 8.0 MW horizontal fully regulated bulb turbine generators manufactured by Dong Feng Hydroelectric Machinery Works.

Other Projects

Henan Province

Wuyue. On October 22, 2009, we entered into a capital injection agreement with Henan Lantian Group to subscribe for a 79.0% equity interest in Wuyue, which owns the right to develop a pumped storage hydropower project of 1,000.0 megawatts in Henan province. Pursuant to the agreement, we completed the first capital injection of RMB32.5 million ($4.8 million) on March 23, 2010. In September 2010, we signed a framework agreement with Guangdong Nuclear for the equity transfer of a controlling interest of Wuyue. Under the framework agreement, subject to the completion of definitive documents, completion of due diligence and receipt of required governmental and other approvals in the PRC, we would transfer 51.0% equity interest in Wuyue to Guangdong Nuclear, in exchange for which Guangdong Nuclear agreed to fund its proportionate share of the on-going development costs of the project. The framework agreement expired on December 31, 2011 and the project has been largely at a standstill since the acquisition in 2009. We expect the project will continue to be at a standstill and as it has no intention to make further investments to Wuyue. The investment in Wuyue was written off as of December 31, 2011.

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Projects We Sold

Fujian Province

Yuanping. In December 2011, we entered into an Equity Purchase and Sale Agreement with a third-party buyer to sell Pingnan County Yuanping Hydroelectric Co., Ltd., which owns and operates Yuanping hydroelectric power project, a 16.0 megawatt (“MW”) project located in Fujian province, for a total consideration of $22.2 million, including the assumption of debt by the buyer. The disposal date of Yuanping was March 2, 2012, which was the date we lost effective control over Yuanping. The sale transaction was completed on the same date.

Yuheng. In October 2012, we entered into a Share Transfer Agreement to sell Pingnan County Yuheng Hydroelectric Co., Ltd., which owns and operates Yuheng hydroelectric power project, a 30.0 MW project located in Fujian province, for total consideration of $44.3 million, including the assumption of debt by the buyer. The disposal date of Yuheng was October 31, 2012, which was the date we lost effective control over Yuheng. The sale transaction was completed in April 2013.

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Our Project Acquisition Process

Our steps for evaluating and acquiring hydroelectric power projects are set forth below.

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Opportunity Sourcing and Screening

Our management has a broad network of contacts throughout China, including contacts in the hydroelectric industry and in the central, provincial and local governments, through which we have developed a pipeline of hydroelectric project acquisition opportunities.

Our criteria for evaluating a potential target hydroelectric power project or development project for acquisition include the following:

·acquisition price, and anticipated construction cost where applicable, as compared to current and projected cash flow and the historical and projected return on investment, taking into account historical tariff levels and tariff trends;

·the acquisition cost as compared to the estimated replacement value, the appraised value and our own assessment of fair value using a number of valuation methodologies;

·the status of approvals, permits and licenses required for the construction and operation of the plant, including the legal status of the land occupied by the plant;

·the hydrological condition of the plant site;

·the ability to retain existing or obtain new local bank financing on reasonable terms;

·the operating history of the target business, including actual power production and local supply and demand;

·the installed capacity and design of the hydroelectric power project operated by the target business, including opportunities to expand or otherwise improve generation capacity taking into consideration the current installed capacity and design utilization;

·the potential to diversify the regions in which we operate or to realize operational efficiencies from clustering multiple plants on a single water way;

·the competency of existing management and operational personnel of the target project; and

·the local government for the project, the relationship with the customer grid and the local tax rates.

These criteria are not intended to be exhaustive. Any screening relating to the merits of a particular target business will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting the acquisition consistent with our business strategy. Our management believes there are ample acquisition targets that meet the above criteria. Furthermore, we believe that there are few experienced and funded buyers in the market. In evaluating prospective acquisitions, our management has sourced a large number of hydroelectric projects in China, including conducting site visits and analyzing operating data from the projects. In addition, our management has conducted comprehensive research on market and competitive dynamics in the industry.

Sign Memorandum of Understanding or Letter of Intent

Once an acquisition opportunity is identified, our staff will conduct an internal preliminary engineering, legal and financial assessment of the target project. The results of the internal preliminary assessment are reported to our management, which decides whether we will pursue the opportunity.

If our management decides to pursue the opportunity, we will enter into a memorandum of understanding or letter of intent with the owner of the target project. This sets forth the general terms and conditions for a possible acquisition and may elect to provide for the payment by us of a deposit of up to 5.0% of the purchase price. The memorandum of understanding or letter of intent allows us to conduct our due diligence review. The memorandum of understanding or letter of intent is generally non-binding, although where we pay a deposit, we may forfeit it if we do not complete the acquisition for reasons other than the failure of the project to pass our due diligence review.

Due Diligence

After the execution of a memorandum of understanding or letter of intent, we conduct a full due diligence review of the target project. The due diligence review covers four main aspects: financial, engineering, legal and asset appraisal. Generally, third-party advisors, such as engineering firms, law firms and asset appraisers, are engaged to assist us with in-depth due diligence under our direction, and will provide due diligence reports for our review. Our own staff is also responsible for the financial review of target projects.

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Our financial evaluation is the key first step to understanding the viability of the potential project. We conduct different analyses of the business to ensure the valuation sought is in line with market. We achieve this through evaluation of the asked price, operating expenditure and capital expenditure to ensure that the price we are paying is reasonable. The engineering firm is directed to include in their report an estimate of cost to operate the plant, taking into account periodic equipment maintenance.

The engineering review generally consists of site visits, physical inspection of the facilities, meetings with plant management, analysis of hydrological conditions and potential and historical electricity production, review of project design, construction and operation records, and review of the acquisition cost, operating cost and annual capital expenditures.

In the review of hydrological conditions and electricity production, the engineering firm is directed to (i) review the precipitation records and the methods used to determine the amount and timing of water flow and the project water intake; (ii) review the methods employed to convert the kinetic energy of water into electricity, including applying the hydrologic potential from the project water to the water conveyance facilities and turbine equipment of the project; and (iii) account for reasonable estimates of planned and unplanned outages due to maintenance, high and low water levels, and transmission interruption due to grid conditions outside the control of the project operator. The engineering firm’s report typically includes monthly and annual electricity production using historical hydrologic records and the equipment installed or to be installed, reflecting a simulation of historical and likely future net electricity production from the project which is then compared, in the case of plants already in operation, to actual electricity production since commencement of operations.

The review of project design is intended to ensure that the civil, mechanical and electrical design of the project is prudent and suitable for the intended duty of a utility grade hydroelectric power project performing continuous operation. In the review of project design, the engineering firm is directed to review the suitability of the project for specific geotechnical conditions, civil structures, and the mechanical and electrical requirements for infrastructure and equipment, including the dimensions, methods of fabrication, depth of excavation, and source of materials used in all project features, including diversion structure, water conveyance, support, power house and outflow.

The actual records of the project construction are selectively reviewed to ensure that customary quality control practices were performed and that construction materials, including steel and concrete, incorporated in the project were manufactured and placed in accordance with prudent design practice. The review covers quality control measures employed by the manufacturers of turbines, generators and electrical equipment in the manufacturing and assembly process and identifies any substandard material or completed work that was removed and replaced. The review of the actual construction ensures that civil, mechanical and electrical aspects of the project conform with the design, that any redesign improvements from the original design necessitated by the actual conditions have been properly incorporated into the work, and that the final as built project is a utility grade hydroelectric power project suitable for continuous duty. Our third party-review of the project design and project construction is intended, among other things, to uncover any deficiencies in the structural or operational integrity of the hydroelectric power project that may have arisen due to construction of the hydroelectric power project based on incomplete or inaccurate technical data, faulty design or poor construction process or materials.

We engage legal counsel to investigate the legal status of the target hydropower project through a review of relevant legal documents, including permits and approvals, tax records, and building ownership certificates and land use rights. The legal counsel prepares a legal due diligence report that sets forth any issues they identify and the associated risks. This process allows us to reduce our risk exposure and more effectively negotiate with the seller to remediate material legal issues before acquiring the target project.

Finally, we also obtain an appraisal from a reputable appraiser of the fair market value of the target project before entering into an agreement with the seller. We generally obtain a written appraisal that covers the plant, property and equipment.

Investment Committee Approval

Upon completion and review of the financial, engineering, legal, and appraisal due diligence, our investment committee comprised of our executive officers, will decide whether to enter into a definitive acquisition agreement.

Negotiate and Sign Definitive Agreement

The legal documentation of the acquisition is prepared by our legal counsel in conjunction with their in-depth due diligence review of the target. If our project review committee is satisfied with the results of the in-depth due diligence, we will enter into an equity interest or asset purchase agreement and other related agreements with the seller of the target and other related parties as necessary. The agreements cover the pricing and payment terms for the acquisition, the financing requirements for the transaction, estimates of approval status and timing and may involve divestiture of non-core assets. These acquisition agreements contain representations, warranties and covenants of the parties that we believe are customary for comparable transactions in China, covering historical tariff, electricity generation and hydrology, the condition of the plant and equipment, the status of government approvals and the ownership history of the plant. Certain representations and warranties of the sellers of these projects, such as those relating to the quality and performance of the projects and obtaining key government approvals, may survive the closing of the project acquisition for a certain period of time, and the breach of these representations, warranties and covenants may entitle us to a setoff against the amounts payable to the sellers or other compensation or indemnification. The executed acquisition agreements are submitted to the relevant government authorities, in particular the provincial or local commerce authorities, for approval. The government approval process generally takes 15 to 60 days, but may take longer in some cases. We generally seek to establish a new wholly foreign-owned enterprise to hold our acquired projects, or we may transfer the assets to an existing FIE.

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Upon approval by the authorities, including the Ministry of Commerce, the State Administration of Foreign Exchange, the National Development and Reform Commission and the State Administration for Industry and Commerce, of the acquisition, the relevant engineering, assets, financial and personnel records and materials are handed over from the prior owner of the hydroelectric power project to us, and we assume the operation of the hydroelectric power project. See “Regulation—Regulation Relating to Foreign Investment”.

For projects which are wholly or partially state-owned, we must enter into a competitive bidding process to win the right to acquire a hydroelectric power project. Our acquisition process for these state-owned projects is otherwise the same as that for privately held projects. We may in the future bid for other state-owned projects. See “Risk Factors—Risks Relating to our Company and the PRC Hydropower Industry—Acquisition of state-owned assets involves a public bidding process and failure to win the bids for our state-owned target companies or equity interests therein may limit our future growth and the control of our existing projects.” and “Regulation—Regulations Relating to Transfer of State-Owned Assets”.

Project Construction

Substantially all of the design, construction and engineering supervision work for our greenfield projects and projects under construction is subcontracted to third parties. Typically, design institutes, contractors and engineering supervisors are selected through an open bidding process. A general contractor may be hired, who is responsible for the selection of sub-contractors, or, in some projects, more than one contractor is hired, each responsible for a designated portion of the project on a turnkey basis. A selection procedure is put in place to ensure compliance with quality and workmanship standards. Factors taken into account when selecting contractors may include their qualifications, reputation, track record, past cooperation with us, and financial condition and resources, as well as the competitiveness of their bids. The qualifications and performance of the contractors are reviewed from time to time. Information throughout the entire project construction process is constantly collected from the contractors and directly by our team, and is closely monitored and analyzed to ensure compliance with quality and workmanship standards and to avoid unanticipated delays and cost overruns.

The construction contracts typically provide for fixed or capped payments, subject to adjustments for certain types of excess, such as design modifications during construction, unanticipated geological conditions discovered during construction and changes in commodities prices. The contractors are typically responsible for procuring the necessary raw materials, as well as providing engineering and construction services, if required.

We generally purchase key equipment from domestic manufacturers and vendors. China is the biggest hydroelectric power producer in the world, according to the International Energy Agency, and as a result has a number of manufacturers providing quality hydroelectric equipment at competitive prices. There are also numerous hydroelectric contractors, supervisors and installers competing for projects in China. We expect that, as we grow, we will have greater negotiating power with equipment manufacturers, vendors, contractors and related service providers for the construction and maintenance of our projects.

Commissioning of Project

Since March 2003, the National Development and Reform Commission was created and assumed authority over the review and approval of major new hydroelectric power projects. Approval by the Ministry of Commerce or its designated authority is also required when foreign investment is involved in establishing or acquiring a hydroelectric power project.

On July 19, 2004, the State Council issued a decision entitled “Reform of the Investment System”, or the State Council Decision, which changed the approval process for investments in China. Depending on the types of investments, investments are subject to one of three types of procedures: a full approval procedure, a verification procedure, or a filing for the record procedure.

According to the State Council Decision, hydroelectric power projects without PRC government funding are subject to a verification procedure. This involves the review and verification by the investment regulatory authority of the State Council; if the project is classified as important, additional review and verification by the State Council will be required. Verification by the National Development and Reform Commission and the Ministry of Commerce or local government will also be necessary if foreign investment is involved. Applicants are required to submit only project application reports in lieu of the project proposals, feasibility studies and application reports for commencing construction previously required. The types of specified investments qualified for the verification procedure are subject to change by the State Council.

To develop a new hydroelectric power project, the requisite approvals and permits must be obtained prior to the commencement of construction of a project. These approvals and permits generally include approvals in connection with the plant site, water and soil conservation, environmental protection, land use rights, water resources demonstration, construction land planning permit, construction works planning permit, and construction works commencement permit, among others. We do not plan to develop greenfield projects in the near term.

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The construction of hydroelectric power projects is also subject to acceptance inspections, including acceptance inspections with respect to water storage, commissioning of generator units, environmental protection, water and soil conservation facilities and construction completion, among others. Currently, sixteen of our twenty-five projects have completed completion acceptance procedures, and two more are expected to complete the procedures in 2013. See “Risk Factors—Risks Relating to our Company and the PRC Hydropower Industry—Certain of our existing hydroelectric power projects have not passed the completion acceptance procedure, which could result in the imposition of fines or the closure of non-permitted hydroelectric power projects.”

To operate hydroelectric power projects, relevant permits such as an Electric Power Business Permit (for power generation) and Water Drawing Permit are also required. In addition, the operation of hydroelectric power projects is subject to the supervision and administration of certain relevant governmental authorities, which include the State Electricity Regulatory Commission, and its local branches, and other authorities in charge of water resources, environmental protection, and work safety, among others. See “Regulation”.

Project Operation and Maintenance

We manage most of our existing hydroelectric power projects, except for the Liyuan and Xiaopengzu hydroelectric power projects in Sichuan and Yunnan provinces, and we intend to continue to manage our hydroelectric power projects in the future. The management of the Liyuan and Xiaopengzu hydroelectric power projects is currently outsourced to companies affiliated with the local power grid to which the plants are connected. We have acquired and will continue to acquire hydroelectric power projects that are clustered or located where we have the potential to acquire adjacent projects, which enables us to centralize operational and management functions for the hydroelectric power projects and thus achieve cost savings.

Repairs and maintenance of hydroelectric power projects are conducted on a regular basis or when necessary. Regular repairs and maintenance are generally scheduled during the off-peak season in order to reduce their impact on normal operations. We perform regular inspections of our generators to look for signs of possible equipment degradation. Minor repairs are typically carried out on an annual basis without interruption to the planned generation of the hydroelectric power project. Major repairs are carried out every four to six years and involve the generator ceasing operation for up to three months. Emergency repairs may be required to be made by our company or by the grid through which we dispatch our power when equipment failures or natural disasters occur. For example, we had been unable to transmit power at the Shapulong power plant to the local grid for approximately six weeks, as the transmission line connecting our plant to the local grid failed during a severe snow storm. Emergency repairs may take one or two days to a month, depending on the nature of the repair, and may interrupt our planned generation.

Sales and Marketing

Power Sale

Each of our operating hydroelectric power projects has entered into a written power purchase agreement with the grid to which it is connected. Generally, the agreement has a term of three to five years, with the tariff negotiated annually. The agreement normally provides that the annual utilization hours of the hydroelectric power project will be determined with reference to the estimated demand for electricity, the forecast water inflow volume at the plant and the strategic importance of the hydroelectric power project to the customer grid. The output that each of our hydroelectric power projects generates is also subject to local demand for power and the amount of power to be dispatched to the grid, and is set and controlled by the relevant provincial government. Actual daily generation of electricity is determined by the dispatch authority based on the needs of the grid. Our actual power generated may therefore be less than our planned power production as approved by the provincial authorities. In practice, our actual power generated is determined based on our daily interactions with our local power grids. We must inform each grid of our ability to produce power based on actual hydrological conditions, and they will take this into account when requesting us to dispatch power each day. In Sichuan, Yunnan and Fujian provinces, our experience has been that we may dispatch all the power we can produce on any given day to the local grid. In Zhejiang province, where we receive different tariffs for peak and off-peak power, we generally dispatch all the power we can produce, however, the local grids may restrict the amount of peak power we dispatch. In line with national policy, we believe the local grids in Zhejiang generally favor renewable energy generators in selecting dispatch of peak power.

We expect that the dispatch of the power we generate will be increasingly influenced by market demand and our competitive tariff as the dispatch system continues to develop towards a market mechanism. The development of this market mechanism is described below.

In 2003, the State Electricity Regulatory Commission and the State Administration for Industry and Commerce jointly promulgated a model contract form, or the Model Contract Form, for use by power grid companies and power generation companies in connection with electricity sale and purchase transactions. The Model Contract Form contains provisions for stipulating the parties’ rights and obligations, amount of electricity subject to purchase, payment method and liabilities for breach of contract. We believe that the publication of the Model Contract Form has facilitated the negotiation and execution of electricity purchase contracts between power grid companies and power generation companies in a fair, transparent and efficient manner. In 2007, all of the agreements entered into between our hydroelectric power projects and the local grid companies were based on the Model Contract Form.

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Power sales through competitive bidding are one of the targets of the power market reform. The PRC government began to experiment with a program in 1999 to effect power sales through competitive bidding in some provinces, and has been gradually expanding the program with a view to creating a market-oriented electric power industry. Pursuant to the Implementation Opinions Regarding Promotion of Electric Power System Reform in the Twelfth Five-year Plan promulgated on April 6, 2007, the State Electricity Regulatory Commission will speed up the reform to establish an electric power market suitable to China’s circumstances. Among other things, the State Electricity Regulatory Commission will propose relevant policies based on the practices pioneered in the northeastern region and eastern region; promote the construction of a uniform competitive bidding system in each regional power market; accelerate the development of power markets in the eastern region and the northeastern region; carry out trial or simulated operations in the southern region and central region as appropriate; formulate plans and marketing rules for the power market in the northern region and northwestern region; and expand the experimental program on direct power sales between power generation companies and large-scale end-users.

Currently, participants in the trial operations of the regional power markets are limited to coal-fired power projects. Although the Renewable Energy Law and regulations promulgated thereunder require the dispatch and purchase of all power generated by small hydroelectric power projects, these requirements are not always followed in practice. Relevant law requires 100% of our power produced to be purchased by our customer grid, but in practice our planned generation is agreed with the grid each year and may be below our design utilization output. Furthermore, where there is a decrease in demand or increased competition for supply of power to a grid, we may be required by the local dispatch company to generate less than the planned generation agreed with the grid. Establishing regional power markets and increasing the use of the bidding method are the trend in China’s power market reform, and we believe this will create a competitive environment that is fair, transparent and equitable. In general, we believe the move away from local grids to larger regional and state grids will increase our competitive advantage as a low tariff provider of renewable energy, and allow us to increase our utilization levels. We believe that hydroelectric power projects may benefit from this reform, if extended to hydroelectric power projects, as hydroelectricity is a low-cost renewable energy compared to thermal energy. We expect that our efficient operations and management will enable us to compete effectively in an open, orderly and fair market. However, the recent global economic downturn, and the domestic stimulus programs implemented by the PRC government to combat the downturn, may result in the slowing of the reform process outlined above, as the government seeks to support existing thermal power producers through periods of reduced demand. We believe this may in particular be true in the coastal regions, such as Fujian and Zhejiang provinces, which have been affected significantly by the shrinking of the PRC’s export economy. See “Regulation—Regulations on Renewable Energy Resources; Regulations of Power”.

On-grid Tariff

Since April 2001, the Chinese government has started to gradually implement a new on-grid tariff-setting mechanism based on the operating and capital costs of individual power projects as well as the average costs of comparable power projects. On July 3, 2003, the Chinese government approved the tariff reform plan and made it clear that the long-term objective of the reform is to establish a standardized and transparent tariff-setting mechanism.

Pursuant to the National Development and Reform Commission circular issued in June 2004, on-grid tariffs for newly built power generating units commencing operation since June 2004 should be set based on a number of factors. This new mechanism was intended to replace the old tariff-setting mechanism which was designed to enable power projects to recover all operating and debt service costs and to earn a reasonable profit or a fixed rate of return on the net fixed assets. Based on our experience, the determination of average costs under the new mechanism usually takes into consideration factors such as the following:

·construction costs, which vary according to the capacities of the individual power projects;

·operating and administrative expenses, such as labor and fuel costs;

·maintenance and repair costs of power projects; and

·interest expenses on outstanding debts.

In December 2004, the National Development and Reform Commission proposed and the State Council approved a linkage mechanism between coal and power tariff rates, pursuant to which the National Development and Reform Commission may adjust power tariffs if the average coal price changes by 5.0% within a period of six months compared with the preceding period. The change in a period, if less than 5.0%, will be carried forward to the future periods until the accumulated changes reach 5.0%. Currently, the tariff rates of hydropower are not subject to this linkage mechanism, but reforms in the pricing of coal-fired and other power projects influence the tariffs we receive, and the demand for hydropower, as they impact the economics of the grid as a whole.

On March 28, 2005, the National Development and Reform Commission issued the Interim Measures on Regulation of on-grid Tariff, or the Interim Measures, to provide guidance for the reform of tariff-setting mechanism in the transition period. Under the Interim Measures, the tariff is classified into an on-grid tariff, a transmission and distribution tariff and an end-user tariff. The transmission and distribution tariff will be set by the government. The end-user tariff will comprise power purchasing cost, loss of power in transmission and distribution, the transmission and distribution tariff and any government subsidy. The government is responsible for regulating and supervising power tariffs in light of the principles of efficiency, incentives, and investment encouragement and taking into consideration affordability of power to local consumers.

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The on-grid tariffs for our planned output and excess output are subject to an annual review and approval process involving the relevant provincial government authority and the National Development and Reform Commission. In Zhejiang and Fujian provinces, where the tariff rates are among the highest in the country and where our hydroelectric power projects are connected to the state grid, we have little influence on the setting of the tariff rates for our planned and excess output, which are set by the local pricing bureau in line with the Interim Measures upon consultation with the state grid. In Yunnan and Sichuan provinces, where the tariff rates are among the lowest in the country and where our hydroelectric power projects are connected to local grids, we have some ability to negotiate the tariff rates for our planned and excess output with the local grid companies before the tariffs are submitted to the local pricing bureau for approval. Our ability to influence the tariff will depend on the local supply and demand for electricity and the strategic location of our plant in the grid. See “Regulation—Regulations on Renewable Energy Resources; Regulations of Power.”

Competition

Competition within the electric power industry has only been introduced recently in China, as energy producers were historically controlled by the government. China has experienced significant capacity shortages, and suppliers have often been unable to meet the surging demand for electricity. We believe that competition between power projects to sell electricity is lessened due to prevalent supply shortages. Nonetheless, we believe that competition will increase in the long run.

All hydroelectric power projects in China are subject to dispatch conducted by various dispatch centers. A dispatch center is required to dispatch electricity pursuant to the Regulations on the Administration of Electric Power Dispatch Networks and Grids, issued by the State Council with effect from November 1, 1993, and in accordance with its agreements with hydroelectric power projects subject to its dispatch. Power generation companies are also required to enter into on-grid dispatch agreements with power grid companies. As a result, there is competition for favorable dispatch treatment in China’s electric power industry, especially during the off-peak periods. Our ability to sell electricity depends on the dispatch and allocation determined by the dispatch requirements of the local grids to which we sell our electricity. We therefore do not compete directly with other power producers to sell the electricity we generate, but instead, to sell the electricity solely through the local girds. Please see “Business—Sales and Marketing—Power Sale.” As a generator of renewable energy, hydroelectric power projects are technically entitled to preferential treatment in dispatchment over thermal power projects. This factor, combined with the increasing cost of coal and other fossil fuels, has led to increased interest in and support to hydropower in China. If the gap between supply and demand for power in China is met largely by renewable energy generators in the same regions we may in the long term face competition from other renewable energy generators for dispatch of our power. However, we believe that in markets dominated by fossil fuel generators, we will experience rising tariffs over the long term.

In addition to competition from other hydroelectric power projects and other power generators to dispatch the power we generate, we may in the future face competition in acquiring additional hydroelectric power projects. Competition may come from China’s five biggest power generating companies, which are all state-owned enterprises and currently operate primarily coal-fired power projects but have become increasingly interested in hydroelectric power projects and other forms of renewable energy. These companies have excellent relationships with the power grids, which provide them an advantage when introducing new plants to a grid. We expect these five companies will focus on large hydroelectric power projects and be slower to seize acquisition opportunities, while we target small projects and have a demonstrated ability to move quickly. Certain smaller China-based and overseas listed power companies are also seeking to acquire hydroelectric power projects in China. Hydroelectric power projects in China are also attractive investments for international investors seeking to generate and trade certified emissions reduction credits. We believe these local and foreign companies are acquiring hydroelectric power projects along with other renewable energy operations and lack the segment focus that our Company has. While we are aware of their activities in the market, we have not experienced direct competition with them to date for project acquisition. We may also encounter some competition from venture capital and private equity funds, leveraged buyout funds and other foreign funded entities interested in acquiring hydropower assets in China. We believe we have the expertise and experience in the hydropower sector to compete effectively with these players.

Intellectual Property Rights

We have registered the Internet domain name www.chinahydroelectric.com.

In China, the registration and protection of a company’s corporate name is carried out at the provincial level. We cannot prevent others from registering our corporate name. If a company first registers China Hydroelectric Corporation as its corporate name in a province where we operate our business, we will have to adopt another corporate name. However, we do not believe that any such loss of our right to use the name China Hydroelectric Corporation would have a significant adverse impact on our business or operations.

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Insurance

We currently maintain property insurance for our hydroelectric power projects. Our current insurance coverage is maintained with Ping An Property and Casualty Insurance Company of China, Ltd., PICC Property and Casualty Company Limited, China United Property Insurance Company Limited, Tian An Insurance Company Limited, China Pacific Property Insurance Co., Ltd., Sunshine Property and Casualty Insurance Company Limited and Taiping General Insurance Co., Ltd. on our properties, plants and equipment, and includes construction all risk insurance. Our current coverage totals approximately RMB 3,652.4 million ($599.1 million). As with most property insurance policies in China, our policies do not cover damage resulting from earthquakes, war or acts of terror. In addition, we currently maintain liability insurance for our directors and officers with coverage of $0.3 million and employment practice liability insurance with coverage of $9.0 thousand. We do not currently carry any third-party liability insurance, business interruption insurance or insurance covering environmental damage arising from accidents on our property or relating to our operations. We believe that our insurance coverage is adequate and is standard for the power industry in China. See “Risk Factors—Risks relating to the Company and PRC Hydropower Industry—Our power generating operations may be adversely affected by operational risks, which may result in uninsured losses.”

Environmental Matters

We are subject to various environmental laws and regulations set by the national, provincial and municipal governments in China, including regulations on water pollution, as well as water and waste discharge. See “Regulation.”

Our new power projects are normally required to undergo an environmental impact assessment by qualified third parties, and a report of the assessment needs to be submitted to the relevant environmental authorities in order to obtain their approval before commencing construction. Upon completion of each project, the relevant environmental authorities inspect the site to ensure that applicable environmental standards have been complied with, and the resulting report is presented together with other specified documents to the relevant construction administration authorities for their approval. See “Regulation—Regulations on Environmental Protection in Construction Projects.”

We believe our environmental protection systems and facilities for our hydroelectric power projects are adequate for us to comply with currently effective national and local environmental protection regulations. It is expected that the PRC government will impose additional and stricter environmental protection regulations which could require us to make additional expenditures to remain in compliance with environmental regulations. In particular, in the event the PRC government introduced minimum water flow requirements for hydroelectric power projects, a reduction of our power generation at some of our plants could result.

We focus on acquiring projects in operation or under construction rather than developing greenfield projects of our own. When we acquire hydropower projects, we conduct due diligence to determine whether the target project has obtained the approvals and permits necessary for construction and operation, including approvals issued by the Environmental Protection Authority. Where approvals and permits are missing, we require the target project to take remedial action after the acquisition to obtain the necessary approvals and permits. See “Regulation—Regulations on Environmental Protection on Construction Projects”.

Headquarters

We currently maintain our headquarters at 901, Marco Polo Plaza Building, No.80 Anli Road, Chaoyang District, Beijing, PRC 100101. Our headquarters occupy 314.57 square meters under a lease agreement expiring in November 13, 2014.

Legal Proceedings

From time to time, we are subject to various legal or administrative proceedings arising in the ordinary course of our business.

In 2009, we entered into a capital injection agreement with Lantian to acquire a certain equity interest in Wuyue. We completed the first capital injection of RMB 32.5 million in 2010. Thereafter, the project has been largely at a standstill and the investment in Wuyue was written off as of December 31, 2011. In 2012, we initiated a negotiation with Lantian to terminate the original agreement. In May 2013, Lantian filed an arbitration claim against us at China International Economic and Trade Arbitration Commission (“CIETAC”) for the penalty of delayed capital injection in Wuyue in total amount of RMB25.74million. We filed a counterclaim against Lantian at CIETAC for termination of the agreements between Lantian and us, no penalty of delayed capital injection and return of our injected capital. In September 2013, Lantian increased the penalty claim amount from RMB 25.74 million to RMB 38.2 million. The hearing was held on November 8, 2013. As of this annual report, no ruling or award has been granted in respect of the claim. We expect CIETAC to deliver a ruling in relation to this proceeding during the second quarter, which will be final and binding to all parties.

In October 2013, twenty-four employees of Wuyue filed an arbitration claim against Wuyue. Lantian and the Company were named as joint respondents for unpaid salary and social security payment of RMB6.6 million. The claim was heard by the Henan Guangshan County Labour Arbitration Committee (“GCLAC”) in November 2013. On November 26, 2013, GCLAC delivered a ruling which (i) awarded RMB3.5 million to Wuyue for unpaid employee salary and social security up to November 30, 2013, and (ii) concluded that we shall not pay any salary or social security for the employees of Wuyue since November 30, 2013. On February 17, 2014, we paid RMB3.5 million to Wuyue in accordance with the ruling, which has been immediately allocated to the Wuyue employees.

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REGULATION

This section sets forth a summary of the most significant PRC regulations that affect our business and the industry in which we operate.

We operate our business in China under a legal regime consisting of the State Council, or China central government, and several ministries and agencies under its authority, including the Ministry of Commerce, the State Administration for Industry and Commerce, the State Administration of Foreign Exchange, the National Development and Reform Commission, the Ministry of Water Resources, the Ministry of Environmental Protection, the Ministry of Land and Resources, the Ministry of Housing and Urban-Rural Development, the State Administration of Taxation, and the State Electricity Regulatory Commission. From time to time, these authorities issue regulations that apply to our business.

Regulations Relating to Foreign Investment

On December 27, 2011, the National Development and Reform Commission and the Ministry of Commerce jointly promulgated a revised Catalogue for the Guidance of Foreign Investment Industries, or the Catalogue, which came into effect on January 30, 2012. The Catalogue lists those industries and economic activities in which foreign investment in China is encouraged, restricted or prohibited. Pursuant to the Catalogue, construction and operation of hydroelectric power projects with the main purpose of power generation fall within the encouraged category.

The principal PRC regulations in connection with foreign investment include:

·The Sino-foreign Equity Joint Venture Law (1979), as amended;

·The Regulations of Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;

·The Wholly Foreign-owned Enterprise Law (1986), as amended;

·The Detailed Rules of the Wholly Foreign-owned Enterprise Law (1990), as amended;

·The Company Law of the PRC (1993), as amended;

·The Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (2009);

·The Interim Administrative Measures on Foreign Investment (2004);

·The Circular Regarding Further Strengthening and Regulating the Administration of Foreign Invested Projects issued by the National Development and Reform Commission (2008).

·Circular of the General Office of the State Council on the Establishment of Security Review System Regarding Mergers and Acquisitions in China by Foreign Investors (2011)

Generally, the acquisitions of domestic enterprises by foreign investors in China are subject to the prior approvals of the National Development and Reform Commission and the Ministry of Commerce, or their local counterparts. After obtaining the approvals from the National Development and Reform Commission and the Ministry of Commerce, the change of shareholders must be registered with the State Administration for Industry and Commerce or its local counterparts and other alteration registrations shall be filed with the government authorities in charge of foreign exchange, customs, tax, land, etc. The acquisition of hydropower plants may also be subject to security review.

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Regulations on Renewable Energy Resources

The Law of Renewable Energy Resources of China

On February 28, 2005, the Standing Committee of the National People’s Congress adopted the Law of Renewable Energy Resources, or the Renewable Energy Law, effective from January 1, 2006. On December 26, 2009, the Standing Committee of the National People’s Congress adopted an amendment to the Renewable Energy Law, which has come into effect on April 1, 2010. Pursuant to the Renewable Energy Law, the PRC government encourages the development and utilization of renewable energy resources, including the connection of renewable energy power generators to local power grids. Pursuant to the Renewable Energy Law, the PRC government implements the development and utilization of renewable energy resources by encouraging the purchase of all renewable energy generated. The State Council energy department, in conjunction with the national power regulatory agency and the State Council finance department, determines, in accordance with the national renewable energy development and utilization plan, the proportion of renewable energy power generation with respect to the overall generating capacity for the planning period. The grid enterprises must enter into grid connection agreements with renewable energy power generation enterprises which have procured administrative permits or have submitted filings and must purchase all hydro-produced power meeting the technical standards for grid connection within their grid coverage. Grid enterprises refusing to purchase power produced by renewable energy generators may be fined in an amount up to double the economic loss suffered by the renewable energy generator. The Renewable Energy Law also authorizes the relevant pricing authorities to set on grid tariffs based on the principles in favor of promoting the utilization of renewable energy and being economically reasonable, and to adjust the tariffs in accordance with the improvement of the renewable energy development and utilization technologies. However, the Renewable Energy Law also stipulates that the application of the Renewable Energy Law to hydroelectric power is guided by the department in charge of energy of the State Council and subject to the approval of the State Council. Such guidance has yet to be provided by the State Council, and in practice the local grids or relevant pricing authorities may not always follow the Renewable Energy Law when purchasing power or setting tariffs.

The Medium and Long Term Development Plan of Renewable Energy Resources

In light of the rapid growth of China economy and rising consumption of energy, China government increasingly encourages the development and use of renewable energy resources. On August 31, 2007, the National Development and Reform Commission issued the Medium and Long Term Development Plan of Renewable Energy Resources, or the Medium and Long Term Development Plan. According to the Medium and Long Term Development Plan, the share of the development and use of renewable energy accounted for 7.5% of the primary energy consumption in 2005. It aims to have the consumption of renewable energy reach 10.0% of the total energy consumption by 2010, and 15.0% by 2020.

The Twelfth Five-year Plan of the Development of Renewable Energy Resources

On October 24, 2012, the National Development and Reform Commission issued the Twelfth Five-year Plan of the Development of Renewable Energy Resources, or the Twelfth Five-year Plan. In accordance with the Twelfth Five-year Plan, the total installed capacity of hydroelectric power generation plants in China is to reach 290,000 MW in 2015, up from 220,000 MW at the end of 2010, among which, the newly installed capacity of small hydroelectric power generation plants shall account for 10,000 MW. During the period of the Twelfth Five-year Plan, China government plans to continue to build up small hydropower in China, aiming to build up 300 small hydro-electrical new rurals at the end of 2015.

The Notice on the Twelfth Five-year Plan of the Resource Development

On January 1, 2013, the Standing Committee of the National People’s Congress issued “the Notice on the Twelfth Five-year Plan of the Resource Development”, which insists on proactively developing the hydroelectric power, coordinating the relationships of migrants’ wealth, environmental protection, water resource comprehensive utilization and local economic development, and enhancing the hydroelectric power planning of the water basins on the preconditions of ecological environment protection and proper migrants arrangement. It is noted that numerous large hydroelectric power generation bases will be constructed in western regions. The utilization of distributed renewable energy sources will be promoted dramatically in the form of small-size hydroelectric power plants, solar power, biomass energy, marine energy, etc.

The Guiding Catalogue for the Development of Renewable Energy Resources Industry

On November 29, 2005, in accordance with the Renewable Energy Law, the National Development and Reform Commission promulgated the Guiding Catalogue for the Development of Renewable Energy Resources Industry, or the Guiding Catalogue. Grid-connected hydroelectric power projects are included in the Guiding Catalogue. In accordance with relevant provisions of the Renewable Energy Law, financial institutions may provide preferential loans with interest subsidies to the development and utilization projects relating to renewable energy resources which are included in the Guiding Catalogue and satisfy the credit requirements. In addition, the Guiding Catalogue contains two categories of hydropower and four categories of relevant equipment manufacturing which are encouraged and shall be entitled to a series of preferential policies in the area of technology research/development, taxation, pricing, marketing/sales and import/export, the details of which shall be promulgated by the State Council. To date, the State Council has not issued any regulatory guidance to provide relevant details regarding these preferential policies. Business activities conducted by us in the development and use of hydroelectric power are encouraged by the government and we may be entitled to benefit from these preferential policies once the State Council issues detailed implementation rules.

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The Administrative Regulations on Power Generation of Renewable Energy Resources

On January 5, 2006, the National Development and Reform Commission promulgated the Administrative Regulations on Power Generation of Renewable Energy Resources. Pursuant to this regulation, grid operators are required to ensure renewable energy power generators are connected to their power grid.

The Supervision and Administrative Measures on the Full Purchase of Electricity of Renewable Energy Resources by Grid Enterprises

On July 25, 2007, the State Electricity Regulatory Commission promulgated the Supervision and Administrative Measures on the Full Purchase of Electricity of Renewable Energy Resources by Grid Enterprises effective from September 1, 2007. This regulation further stipulates the grid operators must purchase all the power generated by renewable energy power generators connected to their grid. The regulation also provides that except for large or medium sized hydroelectric power projects, renewable energy power generators do not need to participate in competitive bidding for their on-grid tariffs. This regulation also provides that power dispatch institutions must give priority to renewable power generation companies when dispatching power.

Regulation of Power

The Electric Power Law, which became effective on April 1, 1996, Regulation on the Administration of Electric Power Dispatch to Networks and grids effective on November 1, 1993 and the Regulations on Electric Power Supervision and Administration, which became effective on May 1, 2005, set out the regulatory framework of the power industry in China. Pursuant to this framework the on-grid tariffs are approved and supervised by China government, and all power projects in China are subject to the dispatch of the power they produce by power grid companies assigned to them.

Regulation of On-grid Tariffs

On February 10, 2002, the State Council promulgated the Issuance of the Reform Plan for the Electric Power System Circular, according to which, in the long-term on-grid tariff will be gradually determined by market competition.

On April 6, 2007, the General Office of the State Council issued the Opinions on Implementing Further Reform in Electric Power Industry during the “Eleventh Five-year Plan” Period, which confirms, among other things, the continuance of further reform of tariff, establishment of the formation system of on-grid tariff corresponding to the competition in power generation segment, execution of the tariff policies favorable to energy saving and environmental protection, and full implementation of the tariff scheme stimulating the development of clean energy.

The Electric Power Law, effective from April 1, 1996, provides the general principles for determining tariffs, which are intended to include reasonable compensation for costs, a reasonable profit and tax, to share expenses fairly and to promote the construction of power projects.

In April 23, 2001, the former State Development and Planning Commission, the predecessor to the National Development and Reform Commission, issued a notice containing guidelines for tariff administration. Pursuant to the notice, a new on-grid tariff-setting mechanism, based on the operating term of power stations as well as the average costs of comparable advanced power stations adopting the same type of techniques that were constructed during the same period within the same provincial power grid, was gradually implemented.

On July 9, 2003, the State Council promulgated the Tariff Reform Scheme. In accordance with the Tariff Reform Scheme, the direction of the reform of the on-grid tariff is to introduce a competitive mechanism in all respects and the tariff shall be set through the competition of supplying and demanding parties. During the transition period, the on-grid tariff is mainly implemented by a two-part tariff system, among which, capacity tariff shall be set by the government and the energy tariff shall be set by market competition. Competitive bidding for a portion of the energy tariff and other transition methods may also be adopted according to actual situations.

On March 28, 2005, the National Development and Reform Commission issued the Interim Measures on Regulation of On-grid Tariff, the Interim Measures on Regulation of Transmission and Distribution Tariff, and the Interim Measures on Regulation of End-user Tariff, to provide guidance for the reform of the tariff-setting mechanism in the transition period.

The National Development and Reform Commission issued the Trial Measures for the Administration of the Tariff of, and the Sharing of Costs in Connection with, Power Generation Using Renewable Energy Resources, or the Trial Measures, on January 4, 2006, however, the Trial Measures explicitly stipulate that the mechanism for setting the tariff after tax for hydroelectricity be in accordance with prevailing regulations for the time being.

On July 25, 2007, the State Electricity Regulatory Commission promulgated the Supervision and Administration Measures on the Full Purchase of Electricity of Renewable Energy Resources by Grid Enterprises effective from September 1, 2007. The Measures provide that except for large or medium hydroelectric power projects, renewable energy power generators will not participate in competitive bidding for on-grid tariffs. If hydropower generators with the electricity fully purchased by grid companies are engaged in any transaction in the power market, they shall comply with relevant rules and regulations of the State Electricity Regulatory Commission.

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Regulation of Distributed Power Generation

On July 18, 2013, the Interim Measures on Distributed Power Generation (“the Interim Measures”) was issued by the National Development and Reform Commission for the purpose of encouraging enterprises, professional resource service companies and individuals to invest in and to operate distributed power generation projects by exempting the electric power business permits of the distributed power generation projects. The distributed power generation applies to the small-size hydroelectric power plants with total installed capacity of no more than 50 MW. In accordance with the Interim Measures, power grid enterprises shall simplify the procedures of grid-connected application and provide consulting, moderating and grid-connected testing service for the distributed power generation connected with the distribution network of no more than 35KV. As for the small-size hydroelectric power plants and other distributed power generation connected with the distribution network of no more than 35KV, the power grid enterprises shall manage the grid connection work based on the principle of convenience and efficiency.

Regulation of Power Dispatch

On November 1, 1993, the Regulations on the Administration of Electric Power Dispatch to Networks and Grids, or the Dispatch Regulations, became effective. The Dispatch Regulations apply to all power projects in China and require them to generate power in accordance with their grid connection agreements.

On August 2, 2007, the State Council approved the Measures on Dispatch of Energy Saving Power Generation (For Trial Implementation), or the Trial Dispatch Measures, jointly issued by the National Development and Reform Commission, the State Electricity Regulatory Commission, the former State Environmental Protection Bureau, the predecessor of the Ministry of Environmental Protection and Office of the National Energy Leading Group. Pursuant to the Trial Dispatch Measures, the dispatch priority of power generation units is determined in the following sequence: (a) non-adjustable power generation units utilizing renewable energy (including hydraulic energy); (b) adjustable power generation units utilizing renewable energy (including hydraulic energy) and garbage generator units which meet the requirements of environmental protection; (c) nuclear power generation units; (d) coal- fired heat-load based CHP units and multiple resource power generation units; (e) gas-fired power generation units; (f) coal-fired power generation units, including cogeneration units without heat load; and (g) oil-fired power generation units.

The Provisions on the Administration of Electric Power Business Permits

On October 13, 2005, the State Electricity Regulatory Commission promulgated the Provisions on the Administration of Electric Power Business Permits, which came into effect on December 1, 2005. Pursuant to this regulation, public power projects, grid-connected self-provided power projects, and other projects as prescribed by the State Electricity Regulatory Commission shall apply for and procure power generation permits. The enterprises failing to obtain power generation permits and illegally conducting power business shall be ordered to obtain the permits and any illegal income shall be forfeited, with fines up to five times the illegal income being imposed. If a crime is constituted, criminal liability shall arise.

Regulations Relating to Transfer of State-Owned Assets

Under the Interim Measures for the Management of the Transfer of State-owned Assets of Enterprises, or the Interim Measures, jointly promulgated by the State-owned Assets Supervision and Administration Commission of the State Council, and the Ministry of Finance, with the effective date on February 1, 2004, the transfer of state-owned assets can be carried out by auction, bidding, agreement or other means that are permitted under the PRC laws and regulations. A seller of state-owned assets must appoint an asset valuation institution to evaluate the to-be-transferred assets and the valuation report, after being confirmed by or filed with relevant authority in charge of state-owned assets administration, shall be referenced to determine the transfer price. In case the transfer price is lower than 90% of the valuation result, the transaction shall be suspended and shall not proceed until being approved by relevant approval authorities.

On December 31, 2006, the State-owned Assets Supervision and Administration Commission and the Ministry of Finance jointly issued the Circular on Some Issues Relevant to the Transfer of State-owned Assets of Enterprises, or the Circular. Pursuant to the Circular, the state-owned assets are permitted to be transferred over the counter only under the following two (2) circumstances with the approval of the State-owned Assets Supervision and Administration Commission or the State-owned Assets Supervision and Administration Commission offices at provincial level and at the set price:

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(1) Where there are special requirements on the transferee in the restructuring of the key industries and sectors of national economy; or

(2) Where the direct transfer by agreement is necessary in the internal assets reorganization of the invested enterprises that is the enterprises supervised by relevant state-owned assets regulatory authorities as the investors, and the transferor and the transferee should both be the invested enterprises or their wholly invested or absolutely controlled enterprises.

According to the Circular, in the event that the proposed state-owned assets are to be transferred to a foreign investor, such transfer shall proceed publicly in a related assets exchange market. If the agreement must necessarily be conducted by agreement, the requirements on transfer by agreement specified by the Interim Measures and the Circular shall be all satisfied. If the foreign investors are potential transferees and the target assets belong to the sectors in which foreign capital is restricted or forbidden to be invested in accordance with the Catalogue for the Guidance of Foreign Investment Industries and other applicable PRC laws and regulations, the transferor shall indicate the relevant information publicly to remind the potential transferees. If a foreign investor becomes the transferee in the assets exchange market, the transferor shall obtain approval from relevant governmental authorities in accordance with applicable laws and regulations.

Regulations on the Safety Management of the Hydroelectric Power Plants

On November 29, 2013, the Ministry of Water Resource issued the “Urgent Notice on the Safety Management of the Hydroelectric Power Plants”. In accordance with the notice, the hydroelectric power plants shall check the hidden dangers, establish safety management system and liability system, enhance the relevant safeguard measures and deliver the information in time in case of emergency.

Regulations on Environmental Protection in Construction Projects

All hydropower stations in China are subject to the Environmental Protection Law, the Environmental Impact Evaluation Law, the Law on the Prevention and Treatment of Water Pollution, the Law on the Prevention and Treatment of Air Pollution and the Law on Ocean Environment Protection, or collectively, the National Environmental Laws, relevant administrative regulations, ministerial rules and the environmental rules promulgated by the local governments in which jurisdictions the hydropower stations are located. According to the National Environmental Laws, the State Environmental Protection Administration, the predecessor of the Ministry of Environmental Protection, sets national pollutants emission standards and provincial governments may set their local standards for the pollutant emission not specified in the national standards, and set stricter local standards which are required to be filed at the State Administration for Environmental Protection, the predecessor of the Ministry of Environmental Protection. Enterprises discharging pollutants in areas where the local standards for pollutant emission have been set shall observe such local standards.

Pursuant to the Environmental Impact Evaluation Law promulgated on October 28, 2002, the Administrative Rules on Environmental Protection of Construction Projects promulgated on November 29, 1998, and Administrative Measures on Environmental Protection Acceptance upon Completion of Construction Projection promulgated on December 27, 2001, enterprises are required to engage qualified and certified institutions to provide environmental impact evaluations on construction projects and to prepare environmental impact assessments. Construction of any new hydroelectric power project or expansion of an existing hydroelectric power project may only commence after such an assessment is submitted to and approved by the relevant environmental protection administrative authority.

According to the Classified Directory for Environmental Protection and Administration of Construction Projects, promulgated on September 2, 2008 by the Ministry of Environmental Protection and effective on October 1, 2008, the construction of hydroelectric power projects are required to prepare environmental impact assessment forms except for those with total installed capacity of 1,000.0KW or above, pumped storage power stations and hydroelectric power projects in environmental sensitive areas being required to prepare environmental impact assessment reports. In accordance with the Environmental Impact Evaluation Law, construction of any hydropower station is prohibited without the approval of the relevant government authorities of such environmental report or form and the related underlying documents if construction of a hydropower station occurs without such governmental approval, whether by failing the evaluation or not applying for an evaluation, then the relevant enterprise will be ordered to cease construction and be subject to making up relevant procedures within a prescribed time period with the relevant environmental protection administrative authorities. Enterprises that fail to complete such formal procedures within the prescribed time may be fined, and the management and other personnel with direct responsibility for the enterprise are subject to administrative penalties. The National Environmental Laws generally impose discharge fees for polluting substances, and provide for possible closure by the central or local government of any enterprise which fails to comply with orders requiring it to cease or rectify the activities causing environmental damage.

In accordance with the Administrative Rules on Environmental Protection of Construction Projects, the Administrative Measures on the Completion Acceptance of Environmental Protection of the Construction Projects and other relevant regulations, each hydroelectric power project must be tested and approved by local environmental agencies before commissioning, and is subject to continuous government monitoring after commissioning. After the completion of the construction of the hydroelectric power project, it must apply for completion acceptance of environmental protection.

On December 29, 2011, the Ministry of Environment Protection issued the Notice on Strengthening Environment Impact Assessment in Southwestern China (the “Notice”), which became effective on the same date of its issuance. According to the Notice, the acceptance for approving environmental assessment documents for hydroelectric constructing projects shall be supported by an investigative opinion on the environment impact assessment of the development plan for the river valleys where such projects are located. With respect to the river valleys with prior development history, if no environment impact assessment on the development plan is available, submission of environmental assessment documents for the hydroelectric construction projects must be supported by retrospective researches on the environment impact assessment of the development.

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The Law of Energy Conservation of China

On October 28, 2007, the Standing Committee of the National People’s Congress adopted amendments to the Law of Energy Conservation, which sets forth policies to encourage energy conservation in industrial sector, buildings, transportation, public institutions and key energy consumption entities. The amendments also seek to develop small hydroelectric power generation plants based on the principle of scientific planning and orderly development.

Regulations on Water and Soil Conservation

On June 29, 1991, the Law of Water and Soil Conservation was promulgated, which was amended on December 25, 2010 with effect from March 1, 2011. On August 1, 1993, the Implementation Regulations on the Law of Water and Soil Conservation were issued, which were amended on December 29, 2010 with effect from January 8, 2011. In accordance with these regulations, when launching a construction project that may result in water and soil loss in mountainous areas, upland areas, and sandy areas with high wind or any other area specified in the water and soil conservation plan prone to water and soil loss, the construction entity shall compile a water and soil conservation scheme and submit it to the water resources authority of the people’s government at or above the county level for approval. Facilities for water and soil conservation shall be designed, constructed and put into operation simultaneously with the principal part of the construction project and subject to the completion acceptance by relevant governmental authorities, including the water resources authority, before the construction project is put into production. Enterprises shall in the course of construction and production adopt water and soil conservation measures and shall be liable to the control of any loss of water and soil. In case commencing the construction of a construction project, which is required to compile a water and soil conservation scheme, without such scheme or without procuring the approval for such scheme, the water resources authority of the people’s government at or above the county level shall order the construction entity to cease the illegal act and go through the relevant formalities within the prescribed time limit; if it fails to do so, a fine up to RMB500,000 shall be imposed upon; and disciplinary actions shall be taken against the directly liable person in charge and other directly liable persons of the production or construction entity according to law. Where any entity puts a construction project into operation without going through completion acceptance of facilities for water and soil or failing to pass such completion acceptance, the water resources authority of the people’s government at or above the county level shall order it to cease production or use until the completion acceptance is passed, and a fine up to RMB500,000 shall be imposed upon.

On January 29, 2014, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Water Resources and the People’s Bank of China jointly issued the Administrative Measures for the use of the compensation fees for water and soil conservation. The enterprises and individuals shall be obligated to the compensation fees for water and soil conservation for the construction projects conducted in the mountainous area, hilly area, the windy desert region and the other regions liable to the water and soil loss, which will result in the unrecoverable water and soil conservation capability. The compensation fees shall be charged one-time based on the area of the occupied land.

Regulations on Water Drawing

According to the Water Law, which was promulgated by the Standing Committee of the National People’s Congress on August 29, 2002 and took effect on October 1, 2002, any legal entity or individual drawing water directly from rivers, lakes or underground shall apply to the water administrative departments or the drainage management departments for a Water Drawing Permit and pay the water resource fees in order to obtain the water drawing rights in accordance with the national water drawing system and the water resource fees system. The State Council is responsible for stipulating the detailed rules regarding the implementation of the Water Drawing Permit system and the collection of water resource fees.

On February 21, 2006, the State Council promulgated the Administrative Regulations on Water-drawing Permits and the Collection of Water Resource Fees, or the Water Drawing Regulations, effective from April 15, 2006. Pursuant to the Water Drawing Regulations, any entity or individual that draws water resources shall, other than for the exceptions prescribed in the Water Drawing Regulations, apply for a Water Drawing Permit and pay water resource fees. Absence of the water drawing permit or failure to obtain such a permit may result in the forced cessation of the water drawing activity, the requirement of immediate remediation and/or the imposition of fines.

The Water Drawing Regulations also provide that a water-drawing entity or individual shall pay water resource fees. A water-drawing entity or individual shall draw water according to the government-approved annual water drawing plan. For water drawing exceeding the plan or quota, water resource fees shall be charged progressively on the excess.

In accordance with the Water Drawing Regulations, the amount of water resource fees due shall be determined based on the levy standard of water resource fees at the locality of the water intake and the actual volume of water for drawing. As for water drawing for the purpose of hydroelectric power generation, the amount of water resource fees due may be determined based on the levy standard of water resource fees at the locality of the water intake and the actual quantity of electricity generated. When a water drawing entity or individual refuses to pay, delays, or otherwise defaults on the payment of water resource fees, the entity or individual will be subject to the penalties prescribed under the Water Law.

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On April 9, 2008, the Ministry of Water Resources promulgated the Measures for Administration of Water Drawing Permits, or the Water Drawing Permit Measures. Under the Water Drawing Permit Measures, for construction projects which need to apply for water drawing, the applicant shall entrust an organization with corresponding qualification to prepare a Construction Project Water Resources Analysis Report. For construction projects which draw a comparatively low volume of water and have a comparatively small impact on the surrounding environment, the applicant may be exempted from complying with the requirement to prepare a Construction Project Water Resources Analysis Report but should fill out a Construction Project Water Resources Analysis Form. The applicant should submit the application documents to the relevant authority for obtaining the Water Drawing Permit after the construction of the water-drawing project or facility has been completed and its trial operation has lasted for 30 days.

On November 10, 2008, the Ministry of Finance, the National Development and Reform Commission and the Ministry of Water Resources jointly issued the Administrative Measures on the Collection and Use of Water Resource Fees, or the Water Resource Fees Measures, effective from January 1, 2009. In accordance with the Water Resource Fees Measures, the water resource fees shall be levied on a monthly basis. A water-drawing entity or individual shall submit the volume of water drawn (or the quantity of electricity generated) to the competent water resources authority in charge of collection of water resource fees on a monthly basis and shall make payment of water resource fees within seven days after receiving the Water Resource Fees Payment Notice sent by the competent water resources authority in charge of collection of water resource fees. The Water Resource Fees Measures further clarify that the levy standard of water resource fees shall be set by the National Development and Reform Commission jointly with the Ministry of Finance and the Ministry of Water Resources with respect to the water conservancy projects directly under the administration of the PRC central government or covering different provinces, autonomous regions, or municipalities directly under the PRC central government whose water drawing shall be subject to examination and approval of the drainage area management authority. In addition, the Water Resource Fees Measures stipulate that the levied water resource fees are to be exclusively used for water conservation protection and management, as well as the reasonable development of water resources.

Regulation in Relation to Land

All land in China is either state owned or collectively owned, depending on the location of the land. All land in the urban areas of a city or town is state owned, and all land in the suburban areas of a city or town and all rural land are, unless otherwise specified by law, collectively owned. The State has the right to expropriate or requisition with compensations land in accordance with law if required for the benefit of the public.

In April 1988, the Constitution of China, or the Constitution, was amended by the National People’s Congress to allow for the transfer of land use rights for value. In December 1988, the Land Administration Law was amended to permit the transfer of land use rights for value.

In accordance with the Land Administration Law amended in 2004, the construction unit shall obtain the state-owned land use rights through grant or by other means with consideration. But the following land may be obtained through governmental allocation with the approval of the people’s governments at and above the county level according to law:

·Land for use by government organs and for military use;

·Land for building urban infrastructure and for public welfare undertakings;

·Land for building energy, communications and water conservancy and other infrastructure projects heavily supported by the State; and

·Other land as provided for by the law and administrative decrees.

Under the Provisional Regulations of China concerning the Grant and Assignment of the Land Use Right of State-owned Land in Urban Areas, or the Urban Land Regulations, promulgated in May 1990, local governments at or above county level have the power to grant land use rights for specific purposes and for a definite period to a land user pursuant to a contract for the grant of land use rights against payment of a grant premium.

Under the Urban Land Regulations, all local and foreign enterprises are permitted to acquire land use rights unless the law provides otherwise. The State may not resume possession of lawfully granted land use rights prior to expiration of the term of grant. If public interest requires the resumption of possession by the State under special circumstances during the term of grant, compensation must be paid by the State. A land user may lawfully assign, mortgage or lease its granted land use rights to a third party for the remainder of the term of grant. Under the Urban Land Regulations, there are different maximum periods of grant for different uses of land: 70 years for residential purposes; 40 years for commercial, tourism and entertainment purposes; 50 years for industrial, public utilities, comprehensive or other purposes.

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On October 22, 2001, the Ministry of Land and Resources promulgated the Catalogue of Allocated Land, according to which, for infrastructure facilities projects, such as energy, transportation and water resources heavily supported by the State, the land use rights may be allocated; for the infrastructure facilities projects, such as energy, transportation and water resources which are aimed at profit-making and not heavily supported by the State, land use rights shall be supplied for value.

On March 16, 2007, the National People’s Congress promulgated the Properties Rights Law of China effective from October 1, 2007, which stipulates that the construction land use rights may only be created through grant or allocation. For land used for industrial, business, entertainment or commercial residential purposes, the construction land use rights must be granted by means of public tender, auction or listing-for-sale. To create the construction land rights through allocation is stringently restrained. For adopting such means of allocation, the provisions on land uses in the laws and administrative regulations must be observed.

On January 3, 2008, the State Council promulgated the Notice of the State Council Regarding Promoting Saving and Intensive Use of Land, according to which, except for the lands used for military, social security housing and special purposes, it is promoted that the use of land for governmental offices, transportation, energy, water resources and other infrastructures (industries) shall be compensated. In particular, the compensated use of land should be applied to those lands used for commercial purposes firstly. As a result, we expect to be required to pay compensation for some or all of the allocated land occupied by our hydroelectric power projects.

On March 5, 2011, the State Council issued the Regulations on Land Reclamation, which was effective on the same date. On December 27, 2012, the Ministry of Land and Resources promulgated Measures for the Implementation of the Regulation on Land Reclamation, which is effective from March 1, 2013. According to the regulations and its implementation measures, “land reclamation” means the activities of adopting rectification measures on land damaged by production or construction activities or natural disasters to restore the land to usable condition. With respect to reclaiming the land, the land damaged by production or construction activities shall be reclaimed by the production or construction entity according to the principle of “reclamation by the party causing the damage”. The party responsible for rehabilitating the land shall submit the land reclamation plan together with the other relevant materials when filing an application for construction land or mining rights. If such party fails to prepare the land reclamation plan or the land reclamation plan fails to meet the relevant requirements, the application will be denied.

Regulations on Construction

Pursuant to the Construction Law, effective from March 1, 1998 and amended on April 22, 2011 with effect from July 1, 2011, prior to the start of construction projects, project owners must, in accordance with relevant provisions of the State, apply to competent construction administrations at or above the county level of the place where the project is to be located for construction permits, except for small projects below a value set by the competent construction administration of the State Council.

Regulations on Bid Invitation and Bid Tendering

On August 30, 1999, the Standing Committee of the National People’s Congress adopted the Law of China on Bid Invitation and Bid Tendering, effective from January 1, 2000; on December 20, 2011, the State Council promulgated the Implement Measures on the Law of China on Bid Invitation and Bid Tendering, which came into effect on February 1, 2012. According to the aforesaid law and its implementation measures, the projects such as large-scale infrastructure facilities and public utilities involving the social and public interests and public safety, projects which are, wholly or partially, invested by the State-owned funds or funded through State financing and projects using loans or aid funds from international organizations or foreign governments, including surveying and prospecting, design, engineering and supervision of such projects as well as the procurement of major equipment and materials related to the construction of such projects, must be subject to bid invitation procedure.

On May 1, 2000, the National Development and Reform Commission, the former State Development and Planning Commission, promulgated the Provisions on the Scope and Scale Standards of Bid Invitation for Construction Projects, which further defines the scope of projects of large-scale infrastructure facilities and public utilities involving the social and public interests and public safety, projects which are, wholly or partially, invested by the State-owned funds or funded through State financing and projects using loans or aid funds from international organizations or foreign governments.

On October 29, 2001, the Ministry of Water Resources promulgated the Administrative Provisions on Bid Invitation and Bid Tendering of Water Resources Construction Projects, effective from January 1, 2002, according to which the bid invitation procedure shall be required where any of surveying and prospecting, design, engineering, and supervision of water resources works construction projects and the procurement of substantial equipment and materials related to water resources works construction projects falls within the following specific scope and concurrently meets any of the following scale standards:

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A.Specific scope

·water resources construction projects involving the social and public interests and public safety such as flood prevention, drainage, irrigation, hydraulic power generation, diversion (supply) of water, harnessing shoals, water conservation and protection of water resources;

·water resources construction projects which are, wholly or partially, invested by the State-owned funds or funded through State financing; or

·water resources construction projects using loans or aid funds from international organizations or foreign governments.

B.Scale standards

·the estimated price for any single construction contract exceeds RMB2,000,000;

·the estimated price for any single procurement of substantial equipment and materials exceeds RMB1,000,000;

·the estimated price for any of surveying and prospecting, design or supervision exceeds RMB500,000; or

·the estimated prices are lower than the above standards, but the total investment of the projects exceeds RMB30,000,000.

Regulations Relating to Anti-trust

The Antimonopoly Law of China was adopted by the Standing Committee of the National People’s Congress on August 30, 2007 and became effective on August 1, 2008. The Antimonopoly Law provides that business operators shall not eliminate or restrict competition by engaging in activities such as:

·entering into monopoly agreement;

·abusing the dominant market position;

·conducting concentrations (as defined under the Antimonopoly Law) without first obtaining approvals from relevant authorities;

·abusing administrative power; or

·abusing intellectual property rights.

On August 3, 2008, the State Council promulgated the Regulations on the Thresholds for Reporting of Concentration of Business Operators. In accordance with this new regulation, the concentration of business operators refers to merger of business operators, acquisition of control over other business operator(s) by acquiring equity interests or assets, or contracting or in other manners to acquire control of, or become capable of exerting decisive influences on, other business operator(s). This new regulation further provides that, where the concentration of business operators reaches any of the following thresholds, the business operators concerned shall report it to the commercial authority of the State Council beforehand, otherwise, the concentration shall not be carried out: (1) the annual turnover achieved by all the business operators to a concentration transaction exceeds RMB10 billion world-wide in the preceding financial year, and at least two of them has turnover which in each case exceeds RMB400 million in China in the preceding financial year; or (2) the annual turnover achieved by all the business operators to a concentration transaction exceeds RMB2 billion in China in the preceding financial year, and at least two of them has turnover which in each case exceeds RMB400 million in the preceding financial year. Where a concentration of business operators does not reach the aforesaid reporting thresholds but the facts and evidence collected through prescribed procedures indicate that such concentration can or may eliminate or restrict competition, the commercial authority of the State Council shall carry out investigations in accordance with the law. The calculation of turnover shall take into consideration special situations in certain industries and sectors such as banking, insurance, securities, futures and specific rules shall be formulated by the commercial authority together with other departments under the State Council.

On February 3, 2011, General Office of the PRC State Council issued the Circular of the General Office of the State Council on the Establishment of Security Review System Regarding Mergers and Acquisitions in China by Foreign Investors, or Security Review Circular, which provides for the establishment of a new inter-ministerial-security-review committee under the State Council, or the Committee, which will be comprised of members from National Development and Reform Commission, Ministry of Commerce and other relevant departments. According to the Security Review Circular, the acquisitions by foreign investors of domestic Chinese companies active in the following sectors shall be subject to security review: (i) military including related activities, companies located near key and sensitive military facilities, and other units concerning national defense; or (ii) key agricultural products, key energy and resources, key infrastructure, key transportation services, key technologies and key equipment manufacturing enterprises etc. that raise national security concerns, where the foreign investor might acquire actual control of the target Chinese company through the acquisition.

The types of merger and acquisition transaction covered by the Security Review Circular include: (i) the purchase by foreign investors of existing equity interest or shares or increased capital of Chinese non-foreign-invested-enterprises and conversion of such domestic Chinese enterprises into foreign invested enterprises; (ii) the purchase by foreign investors of equity interests or shares owned by Chinese parties in foreign invested enterprises or the purchase by foreign investors of the increased capital of foreign invested enterprises; (iii) the establishment by foreign investors of foreign invested enterprises and the purchasing and operating of assets acquired from domestic Chinese enterprises through such foreign invested enterprises, or the purchase of equity interests or shares of domestic Chinese enterprises through foreign invested enterprises; and (iv) the purchase directly by foreign investors of assets owned by domestic Chinese enterprises and the establishment of foreign invested enterprises to operate such assets.

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As contemplated by the Security Review Circular, the new security review process will consider the impact of the proposed transaction on national defense, national economic stability, basic social living order, and the research and development capacity for key technologies related to national security. The new security review process would begin with a preliminary screening conducted upon application to the Ministry of Commerce initiated by the foreign investors in a proposed transaction. Chinese government agencies, national trade unions/associations, competitors, and upstream and downstream enterprises are also entitled to initiate a security review of a proposed transaction by the Committee through an application to Ministry of Commerce. The Ministry of Commerce will transfer to the Committee all applications determined to fall within the purview of the security review regulations within five working days. The Committee will first complete a general review of the proposed transaction. If after the general review, the Committee concludes that the proposed transaction may have an impact on national security, the Committee will conduct a special review of the proposed transaction. If after the special review, the Committee concludes that the proposed transaction may have a material impact on national security (including economic and social stability), the Committee will so notify Ministry of Commerce and the parties to the proposed transaction will be required to terminate the transaction or implement other measures or modifications to eliminate the impact of the proposed transaction on national security. It is unclear whether the Security Review Circular would have retrospective effect. If any of our existing projects is considered as having caused concerns to the national security, the relevant PRC authority may require us to terminate the transaction, transfer relevant equity interests or assets, or implement other measures or modifications to eliminate the impact of the transaction on national security.

On March 4, 2011, Ministry of Commerce issued Tentative Measures on Certain Issues Concerning Implementation of Security Review System Regarding Mergers and Acquisitions in China by Foreign Investors with effect from March 5, 2011 to August 31, 2011, which specifies, inter alia, the application procedure and requisite documents need to be submitted to the Ministry of Commerce.

On August 25, 2011, the Ministry of Commerce issued the Provisions of the Ministry of Commerce on the Implementation of the National Security Review System for Merger and Acquisition of Domestic Enterprises by Foreign Investors (the “Implementation Provisions”), which became effective on September 1, 2011. The Implementation Provisions further specifies the application procedure and stipulates that (i) whether a transaction falls within the scope of the security review will be judged from the substantive contents and actual influences of the transaction and that (ii) foreign investors may not substantially evade the security review by any means, including but not limited to holding on agency basis, trust, multi-tier reinvestment, leasing, loan, control by agreement, and overseas transactions.

Tax Law

Enterprise Income Tax Law

Prior to January 1, 2008, under applicable PRC tax laws, companies established in China were generally subject to an enterprise income tax, or EIT, at the statutory rate of 33%. However, certain types of foreign-invested enterprises and high and new technology enterprises located in certain specified high-tech zones were entitled to preferential tax treatments. In March 2007, the National People’s Congress enacted the Enterprise Income Tax Law, or the EIT Law, and in December 2007, the State Council promulgated the implementing rules of the EIT Law, both of which became effective on January 1, 2008. The EIT Law significantly curtails tax incentives granted to foreign-invested enterprises under the previous tax law. The EIT Law, however, (i) reduces the statutory rate of enterprise income tax from 33% to 25%, (ii) permits companies to continue to enjoy their existing tax incentives, subject to certain transitional phase-out rules, and (iii) introduces new tax incentives, subject to various qualification criteria. Under the phase-out rules, enterprises established before the promulgation date of the EIT Law and which were granted preferential EIT treatment under the then effective tax laws or regulations may continue to enjoy their preferential tax treatments until their expiration. However, its preferential time period shall be counted from 2008 if such an enterprise has not enjoyed the preferential treatments yet because of its failure to make profits. The EIT Law and its implementing rules permit qualified “high and new technology enterprises” to enjoy a reduced 15% EIT rate. In case a nonresident enterprise that has no site or establishment within the territory of PRC, or its income has no actual connection to its site or establishment within the territory of PRC obtains income sourced within the territory of PRC, the EIT shall be levied at the rate of 20% for such incomes, which has been reduced to 10% by the implementing rules of the EIT Law. As regards a small meager-profit enterprise satisfying the prescribed conditions, the EIT shall be levied at a reduced rate of 20%. Businesses contributing to the development of Western China are also entitled to a reduced EIT rate of 15%.

Under current PRC tax laws, regulations and rulings, an enterprise payer is classified as either a resident enterprise or non-resident enterprise. A resident enterprise refers to an enterprise that is established under PRC law within the PRC, or is established under the laws of foreign country or region but has its de facto management body located in China. “De facto management body” is defined as an organization that exercises material and full management and control over matters including the enterprise’s production and operations, personnel, finance and property. Further, a circular issued by the State Administration of Taxation on April 22, 2009 regarding the standards used to classify certain PRC-controlled enterprises established outside of China as “resident enterprises,” or Circular 82, clarified that dividends and other income paid by such PRC “resident enterprises” will be considered PRC-source income and subject to PRC withholding tax, currently at a rate of 10%, when paid to non-PRC enterprise shareholders. This circular also subjects such PRC “resident enterprises” to various reporting requirements with the PRC tax authorities. On July 27, 2011, the State Administration of Taxation issued Administrative Measures of Enterprise Income Tax of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin 45, which became effective on September 1, 2011, to provide further guidance on the implementation of Circular 82. Bulletin 45 clarifies certain issues related to determining PRC resident enterprise status, post-determination administration and which competent tax authorities are responsible for determining offshore incorporated PRC resident enterprise status.

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Under the PRC EIT Law, dividends generated from retained earnings after January 1, 2008 from a PRC company to a foreign parent company are subject to a withholding tax rate of 10% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding arrangement. See “Risk Factor— Our Company may be classified as a “resident enterprise” for PRC enterprise income tax purposes under the PRC EIT Law. Such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders, including subject to PRC taxation on our worldwide income.”

Value-added Tax

According to the amended Provisional Regulations of the PRC on Value-added Tax effective on January 1, 2009, and the amended Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-added Tax effective since November 1, 2011, all organizations and individuals engaged in the sale of goods, provision of processing, repairs and replacement services, and importation of goods within the territory of the PRC are taxpayers of value-added tax. Ordinary tax payers shall pay value-added tax at the rate of 13% or 17%, while small scale tax payers shall pay value-added tax at the rate of 3%. According to the Notice Regarding the Application of Low Value-added Tax Rate and Simplified Method Taxation Policies to Certain Products, or the Notice, which was jointly issued by the Ministry of Finance and the State Administration of Taxation on January 19, 2009 and took effect, retrospectively, on January 1, 2009, small hydropower generation units administrated at or below the county level may choose to apply the value-added tax rate of 6% in accordance with the simplified method to electric power they generate. Small hydropower generation units are defined as hydropower generation units with the installed capacity of no greater than 50 MW. The value-added tax payers using simplified method cannot claim the input value-added tax credits on their purchases.

Urban Maintenance & Construction Tax and Education Surcharges

On October 18, 2010, the State Council of the PRC released a Circular on Unifying the System of Urban Maintenance & Construction Tax and Education Surcharges for Domestic and Foreign-invested Enterprises and Individuals or (“Circular 35”) providing that, effective from December 1, 2010, the relevant regulations, rules, and policies regarding urban maintenance & construction tax and education surcharges shall be applicable to foreign-invested enterprises, foreign enterprises, and foreign individuals (FIEs). Following the release of Circular 35, on November 4, 2010, the Ministry of Finance and the State Administration of Taxation jointly issued a Circular on Issues Relating to Levying Urban Maintenance & Construction Tax and Education Surcharge on FIEs for implementation of Circular 35, which provides that urban maintenance & construction tax and education surcharges will be imposed on FIEs in respect of value-added tax, consumption tax and business tax payable on and after December 1, 2010. The urban maintenance & construction tax and education surcharges are calculated as a percentage of the value-added tax, consumption tax and business tax due. The education surcharges are levied at a unified rate at 3%, while the rates for urban maintenance & construction tax differ depending on the location of the taxpayer: (i) 7% for taxpayers located in a city; (ii) 5% for taxpayers located in a county and town area; and (iii) 1% for taxpayers located in other regions.

Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Currency Administration Rules amended and promulgated on August 5, 2008, and the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange. Under the above-referenced rules, for current account items such as trade and service-related foreign exchange transactions, entities or individuals inside the PRC could either retain their foreign exchange income or sell them to financial institutions engaged in foreign exchange settlement and sale business (the “Authorized Financial Institutions”); additionally, they could make foreign exchange payments with their own foreign exchange or with the foreign exchange purchased from the Authorized Financial Institutions. For capital account items, the retaining or sale to the Authorized Financial Institutions of foreign exchange income (such as from direct investments, loans and investments in securities) will be subject to approval by the State Administration of Foreign Exchange, except as otherwise provided by PRC laws and regulations. Moreover, foreign exchange payments should be made to the Authorized Financial Institutions by presenting valid documentations with the payer’s own foreign exchange or with the foreign exchange purchased from the Authorized Financial Institutions, with the exception of certain foreign exchange payments that are subject to approval by the State Administration of Foreign Exchange (such as repatriation of investment outside the PRC). Capital investments by foreign-invested enterprises outside of PRC are also subject to approval by certain authorities, including but not limited to, the Ministry of Commerce, the State Administration of Foreign Exchange and the National Development and Reform Commission (or their local counterparts). Currently, PRC laws and regulations do not provide clear criteria for obtaining the State Administration of Foreign Exchange approval. Generally speaking, the State Administration of Foreign Exchange and its local branches have broad discretion on the issuance of such approval.

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On August 29, 2008, the General Affairs Department of the State Administration of Foreign Exchange issued the Circular on Relevant Operating Issues concerning the Improvement of Administration of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or the Circular. According to the Circular, among other things, the RMB fund obtained from the settlement of foreign currency capital of a foreign-invested enterprise shall be used within the business scope approved by governmental authorities, and shall not be used for domestic equity investment unless otherwise provided by PRC laws or regulations. When an enterprise intends to repay a RMB loan with the RMB fund obtained from the settlement of foreign currency capital, it shall submit a statement that the loan has been used in accordance with provisions under the respective contract, and used within the business scope approved by the government. In case of a deviation from the business scope without authorization, or a repayment of the unused RMB loan with RMB obtained from the settlement of foreign exchange capital, the exchange administration agency shall order that corrections be made, and shall confiscate the illegal gains and impose a fine of not more than 30.0% of the amount of capital involved; in case of serious violation, a fine of not less than 30.0% of the amount of capital involved but not more than the total amount involved will be imposed.

Regulations on Employee Stock Options

In December 2006, the People’s Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for Individuals or the People’s Bank of China Regulation. In January 2007, the State Administration of Foreign Exchange issued implementing rules for the People’s Bank of China Regulation, which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen’s participation in the equity incentive plan of an overseas publicly listed company. On March 28, 2007, the State Administration of Foreign Exchange issued the Operating Procedures on Administration of Foreign Exchange regarding PRC Individuals’ Participation in Employee Share Ownership Plans and Employee Stock Option Plans of Overseas Listed Companies, or the Stock Option Rule. The purpose of the Stock Option Rule is to regulate foreign exchange administration of PRC citizens who participate in equity incentive plans of overseas-listed companies. The Stock Option Rule was replaced by the Notice of the State Administration of Foreign Exchange on Issues Related to Foreign Exchange Administration in Domestic Individuals’ Participation in Equity Incentive Plans of Companies Listed Abroad, or the New Stock Option Rule, which was issued on February 15, 2012.

According to the New Stock Option Rule, PRC residents who are granted shares or stock options by companies listed on overseas stock exchanges based on the stock incentive plans are required to register with the State Administration of Foreign Exchange or its local branches. Pursuant to the New Stock Option Rule, PRC residents participating in the stock incentive plans of overseas listed companies shall retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another qualified institution selected by such PRC subsidiary, to conduct the registration with the State Administration of Foreign Exchange and other procedures with respect to the stock incentive plans on behalf of these participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, purchase and sale of corresponding stocks or interests, and fund transfer. In addition, the PRC agents are required to amend the registration the State Administration of Foreign Exchange with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agents or the overseas entrusted institution or other material changes. The PRC agents shall, on behalf of the PRC residents who have the right to exercise the employee share options, apply to the State Administration of Foreign Exchange or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents. In addition, the PRC agents shall file each quarter the form for record-filing of information of the Domestic Individuals Participating in the Stock Incentive Plans of Overseas Listed Companies with the State Administration of Foreign Exchange or its local branches.

We and our PRC employees who have been granted stock options are subject to the New Stock Option Rule. If we or our PRC employees fail to comply with the New Stock Option Rule, we and/or our PRC employees may face sanctions imposed by the State Administration of Foreign Exchange or other PRC government authorities.

In addition, the State Administration for Taxation has issued circulars concerning employee stock options. Under these circulars, our employees working in China who exercise stock options will be subject to PRC individual income tax. Our PRC subsidiary has obligations to file documents related to employee stock options with relevant tax authorities and to withhold individual income taxes of those employees who exercise their stock options. If our employees fail to pay their income taxes, or we fail to withhold them, we may face sanctions imposed by the tax authorities or other PRC government authorities.

Dividend Distribution

The principal PRC regulations governing the distribution of dividends by foreign-invested enterprises include:

·The Sino-foreign Equity Joint Venture Law (1979), as amended;

·The Regulations of Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;

·The Wholly Foreign-owned Enterprise Law (1986), as amended;

·The Detailed Rules of the Wholly Foreign-owned Enterprise Law (1990), as amended;

·Foreign Currency Administration Rules (1996), as amended;

·The Company Law of China (1993), as amended;

·The Enterprise Income Tax Law of China; and

·The Implementation Regulations of Enterprise Income Tax Law of China.

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Under the above-mentioned regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to set aside at least 10.0% of their after-tax profits each year, if any, to fund the reserve fund unless such reserve fund has reached 50.0% of their respective registered capital and to set aside a percentage of their after-tax profits to their employee bonus and welfare fund which is decided by their respective board of directors. Sino-foreign equity joint ventures are required to set aside their reserve fund, enterprise development fund and employee bonus and welfare fund at percentages that are decided by their respective board of directors. PRC domestic companies are required to set aside at least 10.0% of their after-tax profits each year, if any, to fund their respective statutory reserve fund unless such fund has reached 50.0% of their respective registered capital. These reserves are not distributable as cash dividends.

Regulations Relating to Labor and Social Insurance

We are subject to various labor laws and regulations in the PRC including but not limited to the PRC Labor Law, the PRC Labor Contract Law, the Implementation Regulations of the PRC Labor Contract Law, the PRC Social Insurance Law (promulgated on October 28, 2010 with effect from July 1, 2011), the Regulations of Insurance for Work-related Injury, the Interim Provisions on Registration of Social Insurance and the Interim Regulations on the Collection and Payment of Social Insurance Premiums. Pursuant to the PRC Labor Law and the PRC Labor Contract Law, labor contracts in written form shall be executed to establish labor relationship between our employees and our company. We must provide wages which are no lower than local minimum wage standards to our employees. We are required to establish a system for labor safety and sanitation, strictly abide by State rules and standards and provide relevant education to our employees. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative liabilities. Criminal liability may arise in serious cases.

The amendment of PRC Labor Contract Law was issued on December 28, 2012 and was effective from July 1, 2013. The amended labor contract law enhances the protection of the dispatched workers, who shall be entitled to equal pay for equal work as the permanent staff members of an employing unit. The employment by labor dispatching is only a supplementary form, which shall apply only to temporary (no more than 6 months), auxiliary or back-up positions.

According to the Regulations of Insurance for Work-related Injury effective as of January 1, 2004 (which was amended on December 8, 2010 with effect from January 1, 2011), employers in China shall pay the work-related injury insurance fees for their employees, and their employees do not pay the work related injury insurance fees.

According to the Interim Regulation on the Collection and Payment of Social Insurance Premiums effective as of January 22, 1999 and Interim Measures concerning the Management of the Registration of Social Insurance effective as of March 19, 1999, employers in China shall conduct the registration of social insurance with the competent authorities, and make contributions to the basic pension insurance, basic medical insurance and unemployment insurance for their employees.

According to Interim Measures concerning the Maternity Insurance for Employees of Enterprises effective as of January 1, 1995, the employers in China shall pay the maternity insurance fees not more than one percent of an employee’s total salary for their employees, and their employees do not pay the maternity insurance fees.

According to Regulations on the Management of Housing Fund effective as of April 3, 1999, employers in China shall conduct the registration of housing fund with the competent authorities, open the relevant account with the designated banks and pay the housing fund equal to not less than five percent of an employee’s monthly average salary in the last year for their employees.

On October 28, 2010, Social Insurance Law of the PRC was promulgated, which took effect on July 1, 2011. Pursuant to the Social Insurance Law, the government will establish a social insurance system including basic endowment insurance, basic medical insurance, employment injury insurance, unemployment insurance and maternity insurance. An employer must, within 30 days from the date of its formation, apply to local social insurance agency for social insurance registration. Where an employer fails to apply for social insurance registration, the social insurance administrative department will order it to take remedial measures within a prescribed time limit. Failure to implement these measures within the prescribed time limit will lead to a fine of 1 to 3 times the amount of the social insurance premiums due and payable. The social insurance administrative department may also impose a fine of not less than RMB500 but not more than RMB3,000 upon persons primarily responsible for such failure.

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According to the Interim Measures for Participation in the Social Insurance System by Foreign Nationals Working within the Territory of China, effective on October 15, 2011, foreigner nationals legally recruited and employed by enterprises duly registered within the territory of China must participate in basic social insurance, with social insurance premiums to be contributed respectively by themselves and their employer as required.

Regulations Relating to Construction and Work Safety

Our operations are subject to extensive legislation and regulation relating to construction and work safety matters, including the PRC Labor Law, the PRC Construction Law, the PRC Safe Production Law, the Supervision Measures on the Safe Production of Electric Power, the Administrative Regulation on Work Safety of Construction Projects, the Provisions on the Administration of Work Safety in the Construction of Water Resources Projects and other relevant laws, regulations, national standards and industrial standards.

Pursuant to the PRC Labor Law, an employer should establish and enhance its system for labor safety, strictly abide by the PRC rules and standards on labor safety, educate employees to prevent occupational injury, and provide employees with labor safety conditions meeting the government regulations and necessary articles of labor protection.

According to the PRC Construction Law, the survey, design, and construction of projects must meet requirements of the State on safety standards of construction projects. Pursuant to the Administrative Regulation on Work Safety of Construction Projects enacted by the State Council and the Provisions on the Administration of Work Safety in the Construction of Water Resources Projects promulgated by the Ministry of Water Resources, entities involved in the work safety of construction projects, including, without limitation, construction entities, surveying entities, designing entities, supervision entities, consultancy entities, must comply with laws and regulations relating to safe production, ensure the safe construction and production of water resources projects, and assume liability for the work safety of water resources construction projects.

The PRC Safe Production Law provides that any entity that is not sufficiently equipped to ensure safe production may not engage in production and business operation activities and entities must provide production safety education and training programs to employees. The design, manufacture, installation, use, checking and maintenance of our safety equipment are required to conform to applicable national or industrial standards. In addition, it is required that labor protection equipment must meet the national or industrial standards and that entities must supervise and educate their employees to wear or use such equipment according to the prescribed rules.

In accordance with the Supervision Measures on the Safe Production of Electric Power, power plants are responsible for maintaining their safe production. Power plants are required to report to the State Electricity Regulatory Commission, State Administration of Work Safety, and relevant local government authorities, within 24 hours, any fatal accident, grid accident, equipment damage accident, dam collapse accident or fire accident which is serious or extraordinary.

Regulations Relating to Resettlement of Relocated Residents

In accordance with the PRC Water Law, the PRC shall apply the policies of “resettlement of relocated residents for development purposes” to the resettlement of relocated residents in construction of water projects, and shall appropriately arrange the production and lives of the resettled relocated residents and protect their lawful rights and interests according to the principles of providing compensation and subsidy in the early stage and support in the latter stage. The resettlement of relocated residents shall be conducted at the same pace as that of the project construction. The construction entity shall, according to the environment capacity of the area of resettlement and the principle of sustainable development, formulate a plan for relocated residents’ resettlement in accordance with local conditions, and the relevant local people’s government shall organize the implementation of the plan after it is legally approved. The expenses arising from the resettlement of relocated residents shall be included in the investment plan for project construction.

The State Council of the PRC promulgated the amended Regulation on Land Requisition Compensation and Resettlement of Relocated Residents for Construction of Large and Medium-sized Water Resources and Hydropower Projects, or the Requisition and Resettlement Regulation, on July 7, 2006 effective from September 1, 2006, which adopted amendments on July 18, 2013. Pursuant to the Requisition and Resettlement Regulation, relevant governmental authorities shall not approve or verify the construction of those large and medium-sized water resources and hydropower projects for which a plan for relocated residents’ resettlement (“Plan”) has not been formulated or approved. Prior to the commencement of the construction of large and medium-sized water resources and hydropower projects, the project entity shall enter into the Plan with the people’s government at provincial, municipal or county level located at the relocated residents’ regions and resettlement. In addition, the project entity is required to fund a relocated residents’ resettlement fund for the local government with which it has entered into the Plan. The staged completion acceptance or overall completion acceptance for large and medium-sized water resources and hydropower projects shall not be conducted if the relocated residents’ resettlement has not passed acceptance. In the case of a violation of the Requisition and Resettlement Regulation, the project entity shall be ordered to rectify the violation and pay fines ranging from RMB100,000 to RMB500,000.

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C. Organizational Structure

Organizational Chart

The following diagram illustrates our corporate operating structure as of the date of this report:

All of our PRC subsidiaries are organized as wholly foreign-owned enterprises established pursuant to the Law of China on Wholly Foreign-Owned Enterprises, except for Yunhe County Shapulong Hydropower Generation Co., Ltd. and Henan Wuyue Storage Power Generating Co., Ltd., which are equity joint ventures established pursuant to the Law of China on Sino-Foreign Equity Joint Ventures, and Longquan Ruiyang Cascade II Hydroelectric Co., Ltd., Yingjiang County Qinrui Husahe Hydropower Co., Ltd., Shaowu City Jinlong Hydroelectric Co., Ltd., Shaowu City Jintang Hydroelectric Co., Ltd., Shaowu City Jinwei Hydroelectric Co., Ltd., which are domestic companies established pursuant to the Company Law of China.

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D. Property, Plant and Equipment

See “Information on the Company—Our Hydropower Assets.”

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of financial condition and results of operations in conjunction with the section entitled “Selected Consolidated and Other Financial and Operating Data” and the financial statements and related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this annual report.

A. Operating Results

Overview

We are a developer, owner and operator of small hydroelectric power projects in China. We were formed on July 10, 2006 to acquire existing small hydroelectric assets in China. Our primary business is to identify, evaluate, acquire, develop, construct, finance and operate hydroelectric power projects in China. Our revenues to date have derived from the sale of electricity generated by our small hydroelectric power projects to local power grids, while our costs of operations relate to the operation of our hydroelectric power projects, and general and administrative expenses, as well as the cost of financing our acquisition of these hydroelectric power projects and necessary capital contributions. We were formed as an exempted company under the laws of the Cayman Islands to serve as a vehicle for the acquisition of operating hydroelectric power projects and plants under construction in China. We conduct substantially all of our business through our PRC operating subsidiaries and investment companies.

We currently wholly own twenty-two operating hydroelectric power projects and have controlling interests in three operating hydroelectric power projects. Our operating hydroelectric power projects are located in four provinces in China: Zhejiang, Fujian, Yunnan and Sichuan. Installed capacity at our plants reached 517.8MW at December 31, 2011, 2012 and 2013, respectively. Revenues contributed by projects in Zhejiang, Fujian, Yunnan and Sichuan provinces were 46.5%, 27.2%, 25.3% and 1.0% in 2011, 48.7%, 34.8%, 15.8% and 0.7% in 2012, and 48.3%, 31.6%, 19.6% and 0.5% in 2013, respectively.

Our activities during the year ended December 31, 2011 were primarily comprised of our acquisition of Dazhaihe hydroelectric power project, the acquisition of remaining 10.0% equity interest in Pingnan County Wangkeng Hydroelectric Co., Ltd., and our operation of twenty seven completed projects including Yuanping, which the results were reflected as discontinued operations.

On December 3, 2011, we entered into an Equity Purchase and Sale Agreement to sell our Yuanping hydroelectric power project, a 16.0 MW project located in Fujian province, for total consideration of $22.2 million, including assumption of certain bank loans by the buyer. The disposal date of Yuanping was March 2, 2012, which was the date we lost effective control over Yuanping. The sale transaction was completed on the same date. We have classified Yuanping as a discontinued operation and have adjusted our consolidated statements of comprehensive income for both 2009 and 2010 accordingly. Our revenues from continuing operations for the year ended December 31, 2011 were $54.6 million, while our cost of revenues from continuing operations was $31.3 million, resulting in a gross profit from continuing operations of $23.3 million. After deducting operating and other expenses, including interest expense of $24.8 million, we reported a net loss from continuing operations of $55.0 million for the year ended December 31, 2011. We sold 1,262.3 million kilowatt hours of electricity produced at our hydroelectric power projects in 2011, at an effective tariff of RMB0.30 per kWh.

On August 19, 2011, we sold 8,662,509 common shares (equivalent to 2,887,503 ADSs) at $1.15 per share (equivalent to $3.46 per ADS) to Vicis Capital Master Fund by way of a partial exercise of an existing warrant held by Vicis Capital Master Fund, which was issued to Vicis Capital Master Fund in April 2007 and allows Vicis Capital Master Fund to purchase up to 18,666,666 ordinary shares at an exercise price of $5.00 per share. The transaction yielded aggregate gross proceeds of $10.0 million. On October 27, 2011, we signed a warrant exercise agreement with certain members of the China Hydro LLC, to amend the Founders Warrants agreement. Pursuant to the amendment, these members exercised 31,072 units of their warrants at the adjusted exercise price of US$1.15 per share to purchase 31,072 ordinary shares from us and are entitled to purchase up to 35,892 ordinary shares from us at US$1.15 per share or the adjusted exercise price (“New Founders’ Warrants”). The proceeds, net of applicable expenses, have been used for working capital and general corporate purposes.

On October 18, 2012, we entered into a Share Transfer Agreement to sell our Yuheng hydroelectric power project, a 30.0 MW project located in Fujian province, for total consideration of $44.3 million, including assumption of certain bank loans by the buyer. The disposal date of Yuheng was October 31, 2012, which was the date we lost effective control over Yuheng. The sale transaction was completed in April 2013. We have classified Yuheng as a discontinued operation and have adjusted our consolidated statements of comprehensive income for all years presented. Our revenues from continuing operations for the year ended December 31, 2012 were $85.4 million, while our cost of revenues from continuing operations was $35.8 million, resulting in a gross profit from continuing operations of $49.6 million. After deducting operating and other expenses, including interest expense of $28.1 million, we reported a net loss from continuing operations of $5.1 million for the year ended December 31, 2012. We sold 1,768.0 million kilowatt hours of electricity produced at our hydroelectric power projects in 2012, at an effective tariff of RMB0.33 per kWh.

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In 2011, 2012, and 2013 our revenues from continuing operations were $54.6 million, $85.4 million, and $74.5 million respectively. Our net loss attributed to China Hydroelectric Corporation shareholders were $45.4 million, $1.2 million and $2.2 million for 2011, 2012 and 2013, respectively.

Our Acquisitions and Asset Sales

We set forth below the key facts regarding our acquisitions and asset sales during 2011 and 2012. U.S. dollar translations provided below are derived from our consolidated financial statements presented elsewhere in this annual report. There has been no asset sale or acquisition in 2013.

Acquisitions and Asset Sale in 2011

In January 2011, we completed our purchase of the remaining 10.0% equity interest in Pingnan County Wangkeng Hydroelectric Co., Ltd. for a purchase price of RMB39.0 million ($5.9million). This acquisition was accounted for as an equity transaction.

In April 2011, we completed our purchase of Jinping Kanghong Hydroelectric Development Co., Ltd., which owns and operates Dazhaihe hydroelectric project, a 15 MW project in Yunnan province for a purchase price of RMB59.0 million ($9.0 million). This acquisition was accounted for as a business combination using the acquisition method of accounting.

In December 2011, we entered into an Equity Purchase and Sale Agreement with a third-party buyer to sell Pingnan County Yuanping Hydroelectric Co., Ltd., which owns and operates Yuanping hydroelectric power project, a 16 MW project located in Fujian province, for a total consideration of $22.2 million, including the assumption of debt by the buyer. The disposal date of Yuanping was March 2, 2012, which was the date we lost effective control over Yuanping. The sale transaction was completed on the same date.

Asset Sale in 2012

In October 2012, we entered into a Share Transfer Agreement with a buyer to sell Pingnan County Yuheng Hydroelectric Co., Ltd., which owns and operates Yuheng hydroelectric power project, a 30.0 MW project located in Fujian province, for total consideration of $44.3 million, including the assumption of debt by the buyer. The disposal date of Yuheng was October 31, 2012, which was the date we lost effective control over Yuheng. The sale transaction was completed in April 2013.

Impact of Acquisitions and Asset Sales on our Results of Operations

The aforementioned acquisitions resulted in a significant increase in the book value of our net property, plant and equipment, our intangible assets, goodwill, revenues and gross profit. The sale of the Yuanping and Yuheng power projects resulted in gain of $1.4 million and $1.4 million, net of taxes, respectively.

Our consolidated results of operations in 2011 reflect eight months of revenue, cost of revenue, including additional depreciation and amortization expense, and G&A expenses of the Dazhaihe project acquired in 2011. Our consolidated results of operations in 2011 also reflect the effect of a full year of revenue, cost of revenue, including depreciation and amortization expense, and G&A expenses relating to the eight acquisitions made in 2010.

Our consolidated results of operations in 2012 reflect the effect of a full year of revenue, cost of revenue, including depreciation and amortization expense, and G&A expenses relating to all acquisitions made in previous years.

We have classified Yuanping and Yuheng as a discontinued operation and have adjusted our consolidated statements of comprehensive income for all the years presented.

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Going Concern

As of December 31, 2013, we had a working capital deficiency of approximately $66.5 million. Due to our working capital deficiency, our independent registered public accountant has stated in its report dated April 21, 2014 with respect to our financial statements as of and for the year ended December 31, 2013 that these circumstances raise substantial doubt about our ability to continue as a going concern. We regularly raise funds through various means, such as new borrowings from banks and other non-financial institutions. New borrowings are used for multiple purposes, such as daily operating liquidity and to refinance existing short-term loans into longer-term debt. Over the course of 2013, we reduced the working capital deficiency by 17.9% to $66.5 million as of December 31, 2013, from $81.0 million as of December 31, 2012. In 2013, we raised $52.2 million through borrowings from banks and other institutions. Improvements in cash flow improved during 2013 are also due to the continuing cost reduction efforts initiated in January 2012.

Investors should still expect us to have a working capital deficit in the foreseeable future, due to the use of leverage to finance the construction and acquisition of hydroelectric projects.

Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Management remains confident in our ability to secure capital in order to fund our liquidity needs, debt obligations and growth plans, but obtaining financing cannot be guaranteed. In the event that we fail to raise funds sufficient to meet our liquidity needs, we may be forced to substantially curtail our operations or otherwise take measures that would materially and adversely affect our current operations and business prospects.

Factors Affecting Our Results of Operations

The most significant factors that affect our financial condition and results of operations are:

·availability and cost of debt financing;

·tariffs;

·hydrological conditions;

·production efficiency of our hydroelectric power projects; and

·depreciation of property, plant and equipment and amortization of intangible assets.

General Factors Affecting Our Results of Operations

On a macro-level, we have benefited significantly from the growth of the industrial base, increase in consumer consumption of electricity and overall economic growth in China, which has contributed to a significant increase in electricity demand. China’s electricity consumption grew 7.7% from 4,940 TWh in 2012 to 5,322 TWh in 2013, according to the China Electricity Council. Renewable energy has become a strong driving force contributing to the growth in capacity. Reform of the PRC power industry, in particular support for foreign investment in hydroelectric power, has assisted our rapid entry into and growth in the PRC’s small hydroelectric power market. Deregulation of the industry and policy support for the purchase of hydroelectric power will, we believe, in the long-term result in increasing tariffs for hydroelectric power in China. However, although hydroelectric power currently is the lowest -cost source of electricity in the PRC, any adverse changes in the economic growth or regulatory environment in China may have a materially adverse effect on the demand for our electricity or our ability to operate in the PRC market, which in turn may materially adversely, affect our results of operations.

Specific Factors Affecting Our Results of Operations

Availability and cost of debt financing

We seek to improve shareholder returns through increasing our financial leverage at reasonable rates of interest, and we seek to enter into discussions with both PRC and international financial institutions to arrange credit facilities to support our future acquisitions. To the extent such financing is unavailable in the PRC, for policy reasons or otherwise, we are unable to raise debt financing in the international markets for any reason or such financing is unavailable at reasonable rates, our ability to increase our leverage for further acquisitions, and thus our revenue growth, will be reduced, and our ability to meet our liquidity needs will be affected. In 2013, due to the improvement in bank lending market in China, we have raised a total of $52.2 million through borrowing from banks and other institutions. See “—Going Concern” and “—Liquidity and Capital Resources” and “Risk Factors—Risks Relating to our Company and the PRC Hydroelectric Power Industry—Our liquidity position poses risk to our operations.”

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Tariffs

Due to the historical mechanisms used by the PRC government to set on-grid tariffs, on-grid tariffs for renewable energy producers have until relatively recently been lower than on-grid tariffs for thermal power projects. We believe that through continued policy support from the PRC government, renewable energy throughout China, including hydroelectric power, will in the long-term achieve on-grid tariffs equal to those for thermal power. This is already the case in Zhejiang province, where heavy demand for electricity and insufficient supply has made the on-grid tariff for hydropower comparable with many thermal plants during peak hours. We believe the move to market pricing for hydroelectric power on-grid tariffs will depend on (i) the continued relatively high price of coal in the PRC, (ii) the absence of significantly cheaper sources of other renewable energy and (iii) the enforcement of laws requiring the purchase by power grids of electricity from renewable energy generators. If the level of coal prices in the PRC were to drop significantly, a cheaper form of renewable energy were to be discovered and implemented throughout China or government support for hydroelectric power and the reform of on-grid tariff setting were to be withdrawn, we might not realize these increases in tariffs or tariffs may decrease, which could materially adversely affect our future revenues. However, to date we have not experienced a deterioration in our tariffs, and expect the tariff for hydroelectric power in the PRC to continue to increase in the medium-term. For provinces where our tariff is equal or close to that for thermal power, notably in Zhejiang province, we have not experienced a decline in tariffs as the price of electricity is still driven primarily by the cost of generating thermal power. In 2013, we received a RMB0.021 per kilowatt hour tariff increase for Banzhu, Wangkeng, Dongguan, Qianling and Jinjiu which are located in Fujian province and an effective annual increase of 17% of Dazhaihe which is located in Yunnan province and received seasonally adjusted tariff rates. This is unlikely to diminish in the near-term given the high cost of transporting coal within China to thermal power projects, the built up losses at these thermal power projects, the timing difference between the setting of power tariffs and the fluctuation of coal prices and the PRC government’s desire to maintain pricing stability.

We believe in Yunnan and Sichuan provinces, where the price for hydropower is well below that for thermal power, the price for hydropower will increase in the near-term and medium-term through the policy drive to bring electricity to the rural areas where our hydroelectric power projects are located. As mentioned above, one of our projects in Yunnan Province, Dazhaihe, received a tariff increase in 2012.

We seek to secure and retain favorable tariffs for each of our hydroelectric power projects by maintaining good relations with the local power grids and increasing our importance to the power grid by continuing to be a reliable supplier of peak power, power supplied from 8:00 a.m. to 10:00 p.m. We are accomplishing this through the following means:

·maintaining a good working relationship with the grid’s dispatch control team, with whom our hydroelectric power project managers communicate on a daily basis;

·providing technical cooperation and support to the local grid by sharing hydrology and operations data; and

·conducting thorough and accurate forecasts of our hydropower generation capacity and management of water flows to supply power as and when required by the local grid.

In the years ended December 31, 2011, 2012 and 2013, the effective tariff of electricity sold by us was RMB0.30 per kWh, RMB0.33 per kWh, and RMB0.33 per kWh, respectively. The effective tariff for electricity sold in the year ended December 31, 2012 was slightly higher than that in the year ended December 31, 2011 because in 2012, 35.1%, 28.5% and 35.6% of the electricity sold and 47.7%, 15.4% and 36.2% of the gross revenue were derived from our hydroelectric power projects in Zhejiang, Yunnan and Fujian provinces, respectively, where the average effective tariff was RMB0.45, RMB0.18 and RMB0.34, respectively. The effective tariff of 2012 is higher than that of 2011 is also partially because five projects in Fujian Province and one project in Yunnan Province received tariff increase in 2012. The effective tariff for electricity sold in the year ended December 31, 2013 remained the same with that in the year ended December 31, 2012. In 2013, 33.4%, 33.9% and 32.2% of the electricity sold and 47.4%, 19.2% and 32.9% of the gross revenue were derived from our hydroelectric power projects in Zhejiang, Yunnan, and Fujian provinces, respectively, where the average effective tariff was RMB0.46, RMB0.18 and RMB0.33 respectively. The tariffs for our power dispatched are set through power purchase agreements with the grids to which our hydroelectric power projects are connected, and generally have terms of one to five years. We do not expect there to be any disruption in the service to the local power grid or any impact on our futures revenues or liquidity regardless of the term of our agreements. If we should be unable to renegotiate a power purchase agreement with the local grid, the possibility of which we currently consider to be low due to shortage of electricity generating capacity in the PRC, it is possible we would not be able to obtain alternative customers for the power generated by the hydroelectric power project, as only one grid is available to each hydroelectric power project and there are no neighboring industrial sites ready to take up the power. Furthermore, even if we do renegotiate a power purchase agreement for the hydroelectric power project, it may be at a lower tariff or for lower volumes of power than what was in place previously. The realization of any of the outcomes described above could materially and adversely reduce our revenues and our results of operations and net cash used in operating activities could be materially and adversely affected.

Hydrological conditions

Our hydroelectric power generating prospects are dependent upon hydrological conditions prevailing in the broad geographic regions in which our existing and future hydroelectric generation facilities are located. Our business is seasonal, with the majority of our power generation occurring during times of high precipitation and snow melt, primarily in the second and third quarters of the calendar year. However, unusually low or high levels of precipitation or significant volatility or uneven distribution of water supply can significantly reduce or disrupt our power generation. Floods on our waterways may force us to shut down our run-of-the-river plants to avoid damage to the equipment, while droughts may cause water flows to be insufficient to operate the plant. In the future, we may construct additional projects along our waterways to help control the flow of water to our hydroelectric power projects. In the absence of further development on our waterways, other than carefully forecasting the amount of water we will receive, preparing for generation during periods of high water flow and storing water in anticipation of periods of low water flow, we are unable to mitigate the impact of hydrological conditions on our results of operations.

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Hydrological conditions and resultant precipitation levels vary significantly from year to year, and as such, it is typical for hydroelectric power projects to experience up to a 20.0% or greater variance in their effective utilization rates each year. In the geographical areas our plants are located, overall precipitation in 2013 was below the historical average, while precipitation was significantly above historical average in 2012. We cannot predict with certainty hydrological conditions for 2014 or any other future periods. We expect our revenues will continue to be directly impacted by the hydrological conditions at our plants.

Production efficiency of our hydroelectric power projects

Our future results of operations will depend on our ability to maintain or increase the levels of generation at the projects we acquire, while at the same time maintaining or lowering the costs of operating those projects. We seek to achieve increased generation revenues from our hydroelectric power projects through controlling water flow to maximize power generation, predicting hydrological conditions to increase generation, operating clusters of power projects where we can balance the generation load amongst multiple projects, improving management of individual projects, and improving transmission of electricity from our hydroelectric power projects through better connections to power grids. All of these efforts will be realized through the oversight of our expert management team. If our management team is unable to implement these programs, or if we are unable to maintain generation levels at any given project or control our cost of revenues and operating expenses, we may not realize expected returns on the investment in the project, which would have a material adverse effect on our results of operations.

Depreciation

The primary component of our cost of revenues is depreciation of property, plant and equipment. As a result, the actual cash portion of cost of revenues is low. Our depreciation expense for 2011 was $20.5 million out of a total cost of revenues of $31.3 million from continuing operations. Our depreciation expense for 2012 was $21.4 million out of a total cost of revenues of $35.8 million from continuing operations while our depreciation expense for 2013 was $22.2 million out of a total cost of revenues of $35.4 million from continuing operations. Unlike other renewable energy generation systems, hydroelectric power projects may operate for decades if properly maintained. In accordance with U.S. GAAP, we depreciate the machinery at our plants over a 1-30 year period, the dams and reservoirs over a 30-49 year period and the buildings over an 8-50 year period, all on a straight line basis. For property, plant and equipment acquired through a business combination, depreciation is recorded on a straight-line basis over their respective remaining estimated useful lives.

All direct and indirect costs that are related to the construction of property, plant and equipment and incurred before the assets are ready for their intended use are capitalized as construction in progress. Construction in progress is transferred to specific property, plant and equipment accounts and depreciation commences when these assets are ready for their intended use. Interest costs are capitalized if they are incurred during the acquisition, construction or production of a qualifying asset and such costs could have been avoided if expenditures for the assets have not been made. Capitalization of interest costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Interest costs are capitalized until the assets are ready for their intended use.

Upon the acquisition of our hydroelectric power projects, we either record the new asset value based on the consideration paid in the case of an asset purchase or based on the fair values if it is accounted for using the acquisition method of accounting, often resulting in increased depreciation costs for the plant. We may at the time of acquisition also restate the useful lives of a plant’s key assets. We may also from time to time revaluate the useful life of an asset, thus extending our depreciation expense over a longer period of time. We expect that our depreciation costs will continue to account for a significant portion of our cost of revenues.

Critical accounting policies

We prepare our consolidated and other financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), which requires us to make judgments, estimates and assumptions that affect:

·the reported amounts of our assets and liabilities;

·the disclosure of our contingent assets and liabilities at the end of each reporting period; and

·the reported amounts of revenue and expenses during each reporting period.

We continually evaluate these estimates based on our own experience, knowledge and assessment of current business and other conditions and on our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. When reading our consolidated and other financial statements, you should consider:

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·our selection of critical accounting policies; the judgment and other uncertainties affecting the application of such policies; and

·the sensitivity of reported results to changes in conditions and assumptions.

We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements:

Fair value of financial instruments

The fair value measurement guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (also referred to as an exit price). When available, we measure the fair value of financial instruments based on quoted market prices in active markets, valuation techniques that use observable market-based factors or unobservable factors that are corroborated by market data. When observable market prices are not readily available, we generally estimate fair value using valuation techniques that rely on alternate market data or factors that are generally less readily observable from objective sources and are estimated based on pertinent information available at the time of the applicable reporting periods. In certain cases, fair values are not subject to precise quantification or verification and may fluctuate as economic and market factors vary and our evaluation of those factors changes. Although we use our best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique.

Financial instruments include cash and cash equivalents, accounts receivable, notes receivable, certain other current assets, accounts payable, certain other liabilities, short-term loans, long-term loans and warrants. The carrying values of these financial instruments, other than long-term loans and warrants, approximate their fair values due to their short-term maturities. During the year ended December 31, 2011, certain warrants were reclassified from equity to liability upon modification of terms. These amended warrants were recorded as liabilities at fair value on the day of modification and subsequently adjusted to the fair value at each reporting date. All liability-classified warrants expired unexercised as of December 31, 2013. The warrants classified as equity were measured at fair value on the grant dates. The carrying values of long-term loans approximate their fair values due to the fact that the interest rates on these loans are reset each year based on prevailing market interest rates.

Revenue recognition

Our revenue is derived from the sale of electricity. Revenues are recognized when the following four criteria are met as prescribed by Accounting Standards Codification (“ASC”) topic 605, Revenue Recognition: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. We consider the terms of each arrangement to determine the appropriate accounting treatment. Revenue is generally earned and recognized upon transmission of electricity to a power grid. For transactions in which electricity has been transmitted to the power grid without a fixed or determinable unit price per kWh while the tariff is pending approval of the regional or provincial pricing bureau, cash received in exchange for the transmission of electricity to a power grid has been recorded as customer deposits until such time the price becomes fixed and determinable. When the price becomes fixed and determinable, all or a portion of the customer deposits will be recognized as revenue. We do not defer the related cost of revenues, which is charged to expense as incurred. We have not offered any discounts or rebates to our customers nor do we provide for refunds in our sales contracts with customers.

Our subsidiaries are subject to value-added tax (“VAT”) on the revenues earned in the PRC. The applicable rate of VAT is 6% for small hydroelectric power projects with a total installed capacity of 50.0 MW or less and 17% for large hydroelectric power projects with a total installed capacity of over 50 MW. For the year ended December 31, 2011, 2012 and 2013, the VAT rate of 17% was applied to the hydroelectric power projects of Banzhu and Wangkeng, 6% was applied to the rest of the hydroelectric power projects we owned at that time period. VAT on revenues earned from the sale of electricity by us to our customers for the years ended December 31, 2011, 2012 and 2013 were $4.6 million, $7.4 million and $6.0 million, respectively. We have recognized revenues net of VAT in the consolidated statements of comprehensive income.

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Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of acquired businesses. ASC sub-topic 350-10, Intangibles—Goodwill and other: Overall, requires that goodwill be tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. We assign and assess goodwill for impairment at the reporting unit level at each reporting date.

The performance of the quantitative impairment test involves a two-step process. The first step of the impairment test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. Fair value is primarily determined through the income approach by computing the future discounted cash flows expected to be generated by the reporting unit and is dependent on a number of significant entity specific assumptions, including plant utilization rate, electricity sales volumes and tariffs, costs of production, capital expenditures, working capital changes, long-term sustainable growth rates and the discount rate. The underlying assumptions used in the first step of the impairment test considered our market capitalization at the date of the impairment test as well as any impact from the current local operating environment in the PRC on the fair value of the reporting units. The discount rate is commensurate with the risk inherent in the projected cash flows and reflects the rate of return required by an investor in the current economic conditions. For reporting units to be disposed of subsequent to the reporting date, the market approach is used where estimates of prices reasonably expected to be realized from the sale of the reporting units are used to determine the fair value of each reporting unit. The fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The fair value estimates as of December 31, 2013 are based on a discount rate of 10% and a long-term sustainable growth rate of 3%. If the carrying value exceeds the fair value, goodwill may be impaired. If this occurs, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. This implied fair value is then compared with the carrying amount of the reporting unit goodwill, and if it is less, we would then recognize an impairment loss. All of goodwill on our balance sheet related to the acquisition of our power projects. In accordance with ASU No. 2011-08 (“ASU 2011-08”), Intangible-Goodwill and other (ASC 350), we have the option to first assess qualitative factors to determine whether it is necessary to perform two-step test. If we believe, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. In 2011, we continued to experience significant decline in our stock price. As a result, our company stock price closed at $1.14 per ADS on December 30, 2011, the last trading date of 2011, representing a 84.2% decline from $7.21 per ADS on January 3, 2011, the first trading date of 2011. The circumstances prompted management to evaluate and test the fair value of our assets against its carrying amount in accordance with US GAAP. We concluded that the carrying amount of its acquired projects mentioned above was higher than their fair value and consequently recorded a one-time goodwill impairment charge of $4.2 million, $1.1 million and $6.1 million, respectively, for Xiaopengzu, Xineng, Jinling and its subsidies during the last quarter of 2011, the goodwill impairment attributable to our shareholders is $9.8 million. In 2012 and 2013 we performed our annual impairment test at the end of the year and concluded that no additional goodwill impairment charge should be recognized.

The results of our annual impairment test as of December 31, 2013 indicated that we do not have any reporting units that are at risk of failing Step 1 of the goodwill impairment test. The estimated fair value of all the reporting units substantially exceeded their carrying values, except that the estimated fair value of the Dazhaihe reporting unit exceeded its carrying value by approximately 3%. The amount of goodwill assigned to Dazhaihe reporting unit as at December 31, 2013 was US$7.1 million. We cannot guarantee that we will not record a material impairment charge in the future. Changes in our assumptions or estimates could materially affect the estimation of the fair value of a reporting unit and, therefore, could reduce the excess of fair value over the carrying value of a reporting unit and could result in goodwill impairment. Potential events and circumstances that could negatively affect the key assumption used in determining the fair value of a reporting unit may include (i) deterioration in overall economic conditions in future years (including increase in discount rates), (ii) business conditions or strategies changing from current assumptions, (iii) increased competition or loss of market share, or (iv) investors requiring high rates of return on equity investments in the marketplace.

Intangible assets are carried at cost less accumulated amortization. Intangible assets acquired in a business combination are recognized initially at fair value at the date of acquisition. Intangible assets with a finite useful life are amortized using the straight-line method over the estimated economic life of the intangible assets. In connection with the acquisition of Binglangjiang in 2007, we acquired a legal right to expand and operate the Binglangjiang II plant. The development rights allow us to expand the power generation capacity of Binglangjiang by utilizing the existing water dam of Binglangjiang, which have an estimated useful life of 30 years. We completed construction of the Binglangjiang II hydroelectric power project in August 2009. In connection with the acquisition of Yuanping in October 2008, we acquired a contractual right to use water from the dam and reservoir of the Jinzaoqiao station, which has an estimated useful life of 40 years. As we entered into an Equity Purchase and Sale Agreement to sell Yuanping in December 2011, the contractual right to use water from the dam and reservoir of the Jinzaoqiao station was reclassified as part of the assets held for sale. On August 12, 2009, Yuheng acquired a contractual right to use water from the dam and reservoir of Wangquan Power Generation Co., Ltd., the term of which is 30 years. In 2012, both Yuanping and Yuheng were disposed and their water use right were derecognized accordingly. In connection with the acquisition of Jinling, we acquired a right to use the dam of the Dongguan hydropower project which has a useful life of 40 years. We recognized the fair value of $1,759,000 for the dam use right as a separate intangible asset apart from goodwill. The estimated useful life of the dam use right of Dongguan is 40 years.

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We review and adjust the carrying value of the intangible assets if the facts and circumstances suggest the intangible assets may be impaired. We assess and concluded that there was no impairment for intangible assets in any of the periods presented.

Impairment of long-lived assets

We evaluate our long-lived assets, including property, plant and equipment, land use right and intangible assets with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360. When these events occur, we assess the recoverability of long-lived assets by comparing the carrying amount of the assets to the expected future undiscounted cash flows resulting from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, we recognize an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. As of December 31, 2011, we recognized impairment loss of Wuyue’s construction in progress for $11.6 million. As of December 31, 2013, we recognized impairment loss of Liyuan’s fixed assets for $3.5 million. The impairment loss attributable to our shareholders is $5.0 million in 2011 for Wuyue and $3.5 million in 2013 for Liyuan.

Long-lived assets held for sale

We evaluate long-lived asset to be disposed of other than by sale in accordance with the provisions of ASC 360, where such long-lived asset continues to be classified as held and used until it is disposed of. When a long-lived asset ceases to be used, the carrying amount of the asset is written down to its salvage value, if any. When all of the following conditions are met, the asset should be classified as held for sale:

·A plan to sell the asset has been committed to by management;

·The asset can be sold in its current condition;

·An active plan has been initiated to find a buyer;

·It is probable that the sale will be completed within one year and will qualify as a completed sale;

·The sales price is reasonable relative to the asset’s current fair value and the entity is actively marketing the asset; and

·It is unlikely that the plan to sell the asset will be withdrawn or changed significantly;

The sale of Yuanping in December 2011 which was completed in March 2012 met all of the preceding requirements. Accordingly, the assets were classified as held for sale as of December 31, 2011.

Discontinued operations

We evaluate the criteria in accordance with ASC topic 205-20, Presentation of Financial Statements: Discontinued Operations, to determine whether long-lived assets held for sale should be reported as a discontinued operation. When the following two conditions are met, the component’s results of operations are reported as a discontinued operation:

·The disposal group must qualify as a component of an entity;

·The operations and cash flows of the component have been eliminated from the ongoing operations of the entity as a result of the disposal transaction;

·The entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

In the accounting period that a disposition occurs is expected, the results of operations for the component must be included in a separate section of statement of comprehensive income after income from continuing operations and before the extraordinary item section. The results of operations must be presented not only for the current year, but for all prior periods, presented with current year statements. Assets and liabilities from discontinued operations for which the disposition has not occurred should not be offset, but should be reported separately as assets and liabilities on the balance sheet. In addition, major classes of assets and liabilities subject to disposition should be reported separately or disclosed in related footnotes.

The sale of Yuanping in December 2011, which was completed in March 2012, met all of the preceding requirements. Accordingly, the results of operations are reported in a separate section of statement of comprehensive income as discontinued operations for both the year of disposing and for all prior periods.

On December 31, 2012, although part of considerations of sale of Yuheng has not been received, the handover of control was officially completed on October 31, 2012. Accordingly, the sale of Yuheng in October 2012 met all of the preceding requirements and the results of operations are reported in a separate section of statement of comprehensive income as discontinued operations for both the year of disposing year and for all prior periods.

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Income taxes

We follow the liability method of accounting for income taxes in accordance with ASC 740 (“ASC 740”), Income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities, net operating loss and credits carryforwards, using enacted tax rates that will be in effect for the period in which the differences are expected to reverse. We record a valuation allowance against the amount of deferred tax assets if based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in the consolidated statements of comprehensive income in the period that includes the enactment date.

We account for uncertainty in income taxes in accordance with ASC 740. Interest and penalties arising from underpayment of income taxes are computed in accordance with the related PRC tax law. The amount of interest expenses is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to be taken in a tax return. Interest recognized from the accounting for uncertainty in income taxes is classified in the financial statements as interest expenses, while penalties recognized from the accounting for uncertainty in income taxes are classified in the financial statements as other expenses.

We recognize in our financial statements the impact of a tax position if a tax return position or future tax position is “more likely than not” to prevail, which is defined as a likelihood of more than fifty percent of being sustained upon audit, based on the technical merits of the tax position. Tax positions that meet the “more likely than not” threshold are measured, using a probability weighted approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement.

Preferred shares warrant

On January 28, 2008 (“Warrant Issue Date”), we issued warrants to Morgan Joseph & Co. Inc. (“Morgan Joseph”), which allow Morgan Joseph to purchase (i) up to 15,000 Series A Preferred Shares at $1,100 per share prior to the closing of an IPO, or (ii) up to such number of ordinary shares automatically converted into from 15,000 Series A Preferred Shares upon the closing of an IPO at 110% of the then-effective conversion price per Series A Preferred Shares (“Morgan Joseph Preferred Shares Warrant”). Following the IPO, the warrant currently allows Morgan Joseph to purchase 4,606,880 ordinary shares at a price of $3.26 per share. The estimated fair value of Morgan Joseph Preferred Shares Warrant at the issue date was based on a valuation performed by us with the assistance of American Appraisal China Limited, or American Appraisal, an unrelated and independent valuation firm.

We estimated the fair value of Morgan Joseph Preferred Shares Warrant at the Warrant Issue Date as call options using Black-Scholes option-pricing model, with the assistance of American Appraisal. Under this model, we made a number of assumptions, including:

·the expected future volatility of our ordinary share prices;

·the risk-free interest rate;

·the expected dividend yield; and

·the estimated fair value of our ordinary and preferred shares at the Warrant Issue Date.

Since we were a privately held company at the Warrant Issue Date, we estimated the expected future volatility of our ordinary shares price based on the historical price volatility of the publicly traded shares of five comparable companies in the hydroelectric power related businesses over the periods equal to the contractual term of Morgan Joseph Preferred Shares Warrant. The risk-free interest rate was based on the market yield of China sovereign bonds denominated in U.S. dollars with maturity terms equal to the contractual term of the Morgan Joseph Preferred Shares Warrant. The dividend yield was estimated based on the expected dividend policy over the expected term of the warrants.

The fair value of our Morgan Joseph Preferred Shares Warrant granted on January 28, 2008 was determined based on the fair value of our ordinary shares and preferred shares based on valuation performed by us retrospectively, with the assistance of American Appraisal, as of that day. The following discussion sets forth the significant factors considered and key assumptions and methodologies used in such valuation.

Determining the fair equity value requires making complex and subjective judgments, including those regarding our projected financial and operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time of Warrant Issue Date. The significant factors considered include the following:

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·our financial and operating results;

·the assumptions and basis of our financial projections;

·the nature of our business since our inception;

·the stage of development of our operations;

·our business plan;

·our business risks;

·the nature and prospects of the hydroelectric power industries in China;

·the global economic outlook in general and the specific economic and competitive elements affecting our business, industry and market; and

·the market-derived investment returns of entities engaged in the hydroelectric power businesses.

We used the discounted cash flow method, or DCF method, under the income approach to assess the fair value of our equity as of December 31, 2007, based on our projected cash flow using management’s best estimate as of the valuation date. As we believed that there was no material change in our operations in the short period between December 31, 2007 and January 28, 2008 that would materially impact the fair value of our total equity value, our equity value as of the Warrant Issue Date was derived based on (i) the equity value derived as of December 31, 2007; and (ii) the issuance proceeds from Series A preferred shares issued on January 23, 2008. Since our Company only had three hydroelectric power projects in operation as at the Warrant Issue Date and our scale of business was much smaller than those listed companies in similar business and similar locations, we concluded that a market comparison approach would not have been meaningful in determining the fair value of our equity.

The DCF method involved applying appropriate discount rates to future free cash flows that are based on five-year financial projections developed by us. The major assumptions used in deriving the financial projections were consistent with our business plan at the time of the valuation. In deriving the discount rates used in the DCF method, we considered the weighted average cost of capital, or WACC, applicable to us as well. The WACC we used was 13% for the valuation with respect to our equity value as of December 31, 2007.

In addition, we have taken into account the discount for lack of marketability of our shares in the valuation to reflect the fact that we were a private company. We quantified the discount for lack of marketability, or DLOM, using the option-pricing method. This method treats the right to sell a company’s shares freely before a liquidity event as a put option. The more distant the valuation date is from a liquidation event, the higher the put option value and thus the higher the implied DLOM. We obtained and used a DLOM of 13.0% for valuation with respect to our equity value as of December 31, 2007.

To the extent our capital structure comprised ordinary shares and preferred shares as of the Warrant Issue Date, we used the option-pricing method to allocate total equity value derived to different classes of shares, taking into account the guidance prescribed by the AICPA Audit and Accounting Practice Aid “Valuation of Privately-Held-Company Equity Securities Issued as Compensation,” or the Practice Aid. Under the option-pricing method, we treated ordinary shares and preferred shares as call options on our enterprise value, with exercise prices based on the liquidation preference of our preferred shares. We estimated the value of these call options using the Black-Scholes option-pricing model.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the fair value of our common shares as of each balance sheet date.

Upon the closing of the IPO on January 25, 2010, all of the outstanding Series A Preferred Shares were automatically converted into ordinary shares. As a result, pursuant to the preferred shares subscription agreement, the Morgan Joseph Preferred Shares Warrant automatically became a warrant that allows Morgan Joseph to purchase up to 4,606,880 ordinary shares at $3.26 per share and was reclassified from liability to equity and will be subsequently accounted for as such. Up to January 28, 2013, the warrant was fully forfeited as the warrant was not exercised before its expiration on January 28, 2013.

Except for the exercise and expiration of warrants described above, no other warrants were redeemed, forfeited, cancelled or exercised for the years ended December 31, 2011, 2012 and 2013.

Share-Based Compensation

We account for share awards issued to employees in accordance with ASC topic 718 (“ASC 718”), Compensation-Stock Compensation. In accordance with the fair value recognition provision of ASC 718, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period. We have elected to recognize share-based compensation expense for share awards granted to employees using the straight-line method.

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We account for share awards issued to non-employees in accordance with the provisions of ASC 718 and ASC sub-topic 505-50 (“ASC505-50”), Equity-Based Payment to Non-employees. Our share awards issued to non-employees are subject to graded vesting provisions. We recognize share-based compensation expense for share awards granted to non-employees using the accelerated recognition method over the requisite service period of the award. In accordance with ASC 718 and ASC 505-50, we use the binomial option pricing valuations model, or binomial model, to measure the value of options granted to non-employees at each vesting date to determine the appropriate charge to share-based compensation.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to vest. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and is adjusted to reflect future change in circumstances and facts, if any. In accordance with ASC 718, the grant date for the options to employees and non-employees approved by the board of directors on August 18, 2008 and January 20, 2009, was March 4, 2009 (“Option Grant Date”) and the grant date for the options to employees and one non- employee approved by the board of directors on December 3, 2009 was January 25, 2010 (“Option Grant Date”). On December 22, 2011, our Board of Director approved the fair value to fair value exchange of the options granted in 2008 and 2009 except those options issued to certain former and current board members and one former consultant. Employees were offered the opportunity to participate in the exchange program on a voluntary basis. All of the options exchanged were vested immediately on December 28, 2011, the date on which the exchange program was implemented and the exchange agreements were signed.

In accordance with ASC 718, the grant date for the options to employees and non-employees approved by the board of directors was May 1, 2012 (“Option Grant Date”) on which the agreements were signed. We estimated the fair value of our share options at the Option Grant Date using the binomial model, with the assistance of American Appraisal. It should be noted that the binomial model requires the input of highly subjective assumptions, including the expected share price volatility. We use projected volatility rates, which are based upon historical price volatility rates experienced by comparable public companies. Because changes in the subjective input assumptions can materially affect the fair value estimate, in our management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our share options. Changes in our estimates and assumptions regarding the expected volatility and fair value of our ordinary shares, for example, could significantly impact the estimated fair value of our share options and, as a result, our net income and net income attributable to holders of our ordinary shares.

Under the binomial model, we made a number of assumptions regarding the fair value of the options, including:

·the expected future volatility of our ordinary share price;

·the risk-free interest rate;

·the expected dividend yield;

·the expected employee share option exercise behavior;

·the expected forfeiture rate; and

·the estimated fair value of our ordinary shares at the grant date.

Since we were a privately held company at each Option Grant Date, we estimated the expected future volatility of our ordinary share price based on the historical price volatility of the publicly traded shares of five comparable companies in the hydroelectric power related businesses over the periods equal to the contractual term of our share options. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield in effect with maturity terms equal to the contractual term of the options. The dividend yield was estimated to be zero. We use historical turnover data to estimate the expected forfeiture rate.

The fair value of our share options on the grant date of March 4, 2009 was determined based on the fair value of our ordinary shares based on valuation performed by us contemporaneously, with the assistance of American Appraisal, as of that day. The following discussion sets forth the significant factors considered and key assumptions and methodologies used in such valuation.

Determining the fair equity value requires making complex and subjective judgments, including those regarding our projected financial and operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time of the Option Grant Date. The significant factors considered include the following:

·our financial and operating results;

·the assumptions and basis of our financial projections;

·the nature of our business since our inception;

·the stage of development of our operations;

·our business plan;

·our business risks;

·the nature and prospects of the hydroelectric power industries in China;

·the global economic outlook in general and the specific economic and competitive elements affecting our business, industry and market; and the market-derived investment returns of entities engaged in the hydroelectric power businesses.

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We used a combination of (i) the guideline company method under the market approach and (ii) the DCF method under the income approach to assess the fair value of our equity value as of March 4, 2009, based on our projected cash flow using management’s best estimate as of the valuation date. We assigned an equal weighting of 50.0% to each of the results obtained using the guideline company method and the results obtained using the DCF method.

Under the guideline company method, different value measures and market multiples of comparable companies were calculated and analyzed to induce a series of multiples that were considered representative of the industry average. The market multiples were then adjusted based on our growth rate, business risks and profitability.

Thereafter, the adjusted multiples were applied to our performance indicators to determine our value on a minority and freely traded basis. We specifically applied the financial ratios of enterprise value to revenues multiple, or EV/Revenues multiple, and enterprise value to earnings before interest, tax, depreciation and amortization multiple, or EV/EBITDA multiple, to our pro-forma financial results for fiscal year 2008 in arriving at an indicative value of us under the guideline company method. For the valuation with respect to our equity value as of the Option Grant Date, we applied an EV/Revenues multiple of 11.4 and an EV/EBITDA multiple of 28.3.

We have selected five companies in the hydroelectric power related businesses listed in Shanghai Stock Exchange in China for reference as comparable companies: Chongqing Three Gorges Water Conservancy and Electric Power Co. Ltd., Guangxi Guiguan Electric Power Co. Ltd., Qianjiang Water Resources Development Co. Ltd., Guangxi Guidong Electric Power Co. Ltd., Leshan Electric Power Co. Ltd. Since the nature of our operation is highly subject to geographical factors such as water supply, tariff and demand for power, etc., our business risks are most similar to the comparable companies having similar business and similar locations in China.

The DCF method involved applying appropriate discount rates to future free cash flows that are based on five-year financial projections developed by us. The major assumptions used in deriving the financial projections were consistent with our business plan at the time of the valuation. In deriving the discount rates used in the DCF method, we considered the weighted average cost of capital, or WACC, applicable to us as well. The WACC we used was 10.0% for the valuation with respect to our equity value as of the Option Grant Date.

In addition, we have taken into account the discount for lack of marketability of our shares in the valuation to reflect the fact that we are a private company. We adopted a DLOM of 10.0% for valuation with respect to our equity value as of the Option Grant Date.

To the extent our capital structure comprised ordinary shares and preferred shares as of the Option Grant Date, we used the option-pricing method to allocate total equity value derived to different classes of shares, taking into account the guidance prescribed by the AICPA Audit and Accounting Practice Aid “Valuation of Privately-Held-Company Equity Securities Issued as Compensation,” or the Practice Aid. Under the option-pricing method, we treated ordinary shares and preferred shares as call options on our enterprise value, with exercise prices based on the liquidation preference of our preferred shares. We estimated the value of these call options using the Black-Scholes option-pricing model.

The estimated fair value of our ordinary shares at the Option Grant Date of March 4, 2009 was $2.08. Based on the initial public offering price of $4.93 per ordinary share, we have determined that the intrinsic value of the outstanding options as of December 31, 2009 was nil. Although it is reasonable to expect that the completion of the initial public offering should increase the value of our ordinary shares because of their increased liquidity and marketability, we believe that the added value cannot be measured with precision or certainty.

The decrease in our ordinary share value from $2.56 per share as of January 28, 2008 to $2.08 per share as of March 4, 2009 was primarily due to the dilutive effect of the Series B convertible redeemable preferred shares we issued in July 2008 on our ordinary share value; and a generally unfavorable market sentiment towards China-based publicly traded companies, reflected in an overall decrease in the market value of those companies, which was partially offset by our subsequent acquisitions of Yingchuan, Wuliting, Zhougongyuan, Banzhu, Wangkeng, Yuanping and Yuheng between the period from January 28, 2008 to March 4, 2009, which were expected to expand our business operations and improve our cash flow and financial prospects.

Under ASC topic 718 Share-Based Compensation—Additional Consideration, modifications of equity instruments should be accounted for as follows:

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·Any incremental compensation cost is determined as the excess of the fair value of the new award compared to the fair value of the original award measured just prior to its modification, total compensation cost is equal to the grant date fair value of the award for the service period over which it is expected to be satisfied and the incremental cost from the modification;

·and when the entity uses the intrinsic method, the change in compensation cost is measured by comparing the intrinsic value of the original award measured just prior to the modification.

Under ASC topic 718, the incremental cost for the stock options is to be recorded and expensed over the vested period of the exchanged options. The incremental cost is the difference between the fair value of the options immediately prior to the exchange and the fair value of the exchange options immediately after the exchange.

On December 28, 2011, the Board approved an option exchange program. Pursuant to the option exchange program, 10,109,000 and 275,000 share options originally granted to employees and a non-employee consultant, respectively, were cancelled. Simultaneously, 407,706 and 9,250 share options at an exercise price of US$0.46 were granted to these employees and the non-employee consultant, respectively, in exchange for the cancelled options. The option exchange program was set to give the same total fair value to the new and the original options, both determined based on Black-Scholes valuation model. The grant-date fair value was estimated with the assumptions including: suboptimal exercise factor of zero, risk-free interest rate of 0.85%, expected volatility rate of 71.87%, expected dividend yield of zero, expected share option life of 5 years, estimated forfeiture rate for founders, senior management and employees of zero and the fair value of ordinary shares of US$0.39.

On May 1, 2012, the Board approved the grant of 9,929,998 share options and 50,000 options to the employees and a consultant of the Group, respectively, at an exercise price of US$0.62 with a contractual life of five years. The fair value of the options at the Option Grant Date was estimated using a binomial option pricing model. The grant-date fair value was estimated with the assumptions including: suboptimal exercise factor of 1.5, risk-free interest rate of 0.83%, expected volatility rate of 73.4%, expected dividend yield of zero, expected share option life of 5 years, estimated forfeiture rate for founders, senior management and employees of zero and the fair value of ordinary shares of US$0.44.

On December 1, 2012, the Board approved the grant of 600,000 share options to an employee at an exercise price of US$0.72 with a contractual life of five years. 25% of share options will vest and become exercisable on May 31, 2013 and 25% of the share options will vest and become exercisable on each of the first, second and third anniversaries of the grant date. The fair value of the options at the Option Grant Date was estimated using a binomial option pricing model. The grant-date fair value was estimated with the assumptions including: suboptimal exercise factor of 1.5, risk-free interest rate of 0.62%, expected volatility rate of 89.21%, expected dividend yield of zero, expected share option life of 5 years, estimated forfeiture rate for founders, senior management and employees of zero and the fair value of ordinary shares of US$0.62.

On August 26, 2013, the Board approved the grant of 900,000 share options to employees and 400,000 share options to one executive at exercise price of US$0.8474 and US$0.99 with a contractual life of five years and three years, respectively. The fair value of the options at the Option Grant Date was estimated using a binomial option pricing model. The grant-date fair value was estimated with the assumptions including: suboptimal exercise factor of 1.5, risk-free interest rate of 1.52%, expected volatility rate of 84.86%, expected dividend yield of zero, expected share option life of 4.62 to 5 years, estimated forfeiture rate for founders, senior management and employees of nil, 6.7 and 6.7, respectively and the fair value of ordinary shares of US$0.78.

Taxation

We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the Cayman Islands. Stamp duty may be payable on certain instruments if they are executed, retained or adjudicated in the Cayman Islands.

Enterprise Income Tax

Effective from January 1, 2008, the PRC’s statutory income tax rate is 25%. Our PRC subsidiaries are subject to income tax at 25% unless otherwise specified.

Pursuant to GuoShuiFa [2002] No. 47 and CaiShui [2011] No. 58, our PRC subsidiaries which are located in the Western region of the PRC and engaged in hydroelectric power activities are entitled to the preferential tax rate of 15% from 2001 to 2020 and 2-year income tax exemption followed by 3-year 50% income tax reduction (the “2+3 tax holiday”), respectively. For a domestic enterprise, the 2+3 tax holiday starts from its commencement of business operation. For a foreign investment enterprise, the 2+3 tax holiday starts from its first profit-making year from income tax perspective. Accordingly, our PRC subsidiaries are currently subject to the following tax preferential treatments:

(i)	Binglangjiang and Husahe are subject to income tax at 15% from 2010 to 2020;
(ii)	Liyuan and Hengda were subject to income tax at 7.5% for 2011, and are subject to income tax at 15% from 2012 to 2020;
(iii)	Xineng and Xiaopengzu are subject to income tax at 7.5% from 2011 to 2013, and at 15% from 2014 to 2020; and
(iv)	Based on the local tax authority’s approvals, Dazhaihe is subject to income tax at 7.5% for 2011, at 12.5% for 2012 and 2013, and at 15% from 2014 to 2020.

Value Added Tax

In accordance with the relevant tax laws in China, all entities engaged in the sale of goods within the territory of China are required to pay VAT. Pursuant to applicable regulations prior to January 1, 2009, hydroelectric power projects under 50.0 MW of installed capacity are subject to a VAT of 6%, while larger hydroelectric power projects are subject to a VAT of 17%; however, in one province the higher VAT rate of 17% is applied on an exception basis to two of our hydroelectric power projects under 50.0 MW in size. Our tariffs are set gross of VAT and our revenues are reported net of VAT.

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Urban Maintenance & Construction Tax and Education Surcharges

In accordance with relevant PRC regulations, an urban maintenance and construction tax and education surcharges will be imposed on foreign-invested enterprises, foreign enterprises, and foreign individuals in respect of value-added tax, consumption tax and business tax payable on and after December 1, 2010. The urban maintenance and construction tax and education surcharges are calculated as a percentage of the value-added tax, consumption tax and business tax due. The education surcharges are levied at a unified rate at 3%, while the rates for the urban maintenance and construction tax differ depending on the location of the taxpayer: (i) 7% for taxpayers located in a city; (ii) 5% for taxpayers located in a county and town area; and (iii) 1% for taxpayers located in other regions.

Results of Operations of Our Company

Our consolidated results of operations are summarized below in thousands of U.S. dollars.

	For the Year Ended December 31,
	2011		2012		2013
Continuing operations:
Revenues	54,597		85,388		74,517
Cost of revenues	(31,314	)	(35,795	)	(35,357	)
Gross profit	23,283		49,593		39,160
% of revenue	43	%	58	%	53	%
Operating expenses
General and administrative expenses	(28,896	)	(20,348	)	(13,258	)
Impairment loss on goodwill	(11,388	)	—		—
Impairment loss on long-lived assets	(11,590	)	—		(3,549	)
Operating (loss) income	(28,591	)	29,245		22,353
% of revenue	-52	%	34	%	30	%
Interest income	101		84		98
Interest expense	(24,757	)	(28,070	)	(22,568	)
Change in fair value of warrant liabilities	951		(399	)	839
Exchange (loss) gain	(851	)	28		(41	)
Other (loss) income, net	(334	)	507		275
(Loss) income before income tax expenses	(53,481	)	1,395		956
Income tax expense	(1,527	)	(6,451	)	(3,474	)
Net loss from continuing operations	(55,008	)	(5,056	)	(2,518	)
% of revenue	-101	%	-6	%	-3	%
Net (loss) income net of income tax (expense) benefits from discontinued operations	(282	)	3,907		—
Less:
Net income (loss) attributable to noncontrolling interest	9,901		(94	)	297
Net loss attributable to China Hydroelectric Corporation shareholders	(45,389	)	(1,243	)	(2,221	)
-Continuing operations	(45,107	)	(5,150	)	(2,221	)
-Discontinued operations	(282	)	3,907		—

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Revenues

We derive revenues solely from the sale of electricity generated by our hydroelectric power projects. The generation of electricity by our hydroelectric power projects for any given period will depend on the planned annual generation as agreed with the power grid to whom the electricity is sold and as approved by the relevant pricing bureau, the actual demand for our electricity from the power grid and the actual hydrological conditions experienced during the period. The on-grid tariff for electricity generated by our hydroelectric power projects is set annually by the relevant pricing bureau in consultation with the relevant power grid. The on-grid tariff is determined in light of the initial capital investment in the plant, the historical operating cost, the water resource fees, the debt financing expense for the plant, an allowance for a reasonable return and, in practice, by the supply and demand for electricity in the local market. Furthermore, we have benefited from the central government’s policy of promoting the development of additional hydroelectric power generating capacity by raising hydro tariffs to more closely approximate the higher tariffs paid for thermal generated electric power. The tariff we receive is subject to VAT and, in some cases, business surcharges, and our revenues are reported net of VAT and business surcharges. The on-grid tariff for hydropower for our plants in Zhejiang and Fujian provinces has increased over time to approach on-grid tariffs for thermal generated electric power. In Yunnan province, the tariff received by our plants is significantly lower than that for thermal power, and we expect that in the long-term we will experience an increase in the on-grid tariff for hydropower, as power grids seek to improve their operating margins through increased purchase of hydropower and the approved tariff for thermal power increases.

The power grids make monthly payments for our power delivered 30 to 60 days after month end. In 2011, 2012 and 2013 we sold our electricity to seven, ten and nine power grids as a result of our acquisitions in Yunnan and Fujian provinces, respectively. Any deterioration in our relationship with any of these grids, or in their financial condition could result in a material credit risk to our company and have a materially adverse effect on our financial condition and results of operations. The table below sets forth the percentage of our revenues from continuing operations derived from sales to each of these power grids for the year ended December 31, 2011, 2012 and 2013.

	Year Ended December 31, 2011	Year Ended December 31, 2012	Year Ended December 31, 2013
	% of Revenues from continuing operations
Yunnan Nujiang Electric Power Co., Ltd.	8	5	6
Yunnan Dehong Electric Power Co., Ltd.	13	6	8
Yunnan Power Grid Company, Ltd.	4	3	3
Sichuan Cangxi Electric Power Co., Ltd.	1	1	1
Lishui Electric Power Bureau	46	49	49
Fujian Electric Power Co., Ltd.	17	22	19
Yunnan Honghe electric Power Co., Ltd.	1	1	2
Shaowu Electric Power Bureau	8	9	9
Nanping electric Power Bureau	2	4	3
Total	100	100	100

Before we acquired the remaining 50.0% of the equity interest in Shapulong in August 2009, our investment in Shapulong was accounted for using the equity method of accounting under Accounting Standard Codification subtopic ASC 323-10, Investments—Equity Method and Joint Ventures: Overall, and included as an investment in equity investees on our balance sheet. Under the equity method, our proportionate share of Shapulong’s net income or loss is included as share of income or losses, as applicable, in equity investees in our statement of comprehensive income. Accordingly, Shapulong’s results of operations are not reflected in our consolidated results of operations other than as a share of income or losses, as applicable, in equity investees in our consolidated statement of comprehensive income before August 2009. Shapulong became our wholly-owned subsidiary in August and its results of operations after the acquisition are reflected in our consolidated results of operations.

In discussing our revenues, we have included information relating to (i) the effective tariff for electricity sold in the years ended December 31, 2011, 2012 and 2013 (ii) the effective utilization rate(s) for our hydroelectric power projects by province in the years ended December 31, 2011, 2012 and 2013, and (iii) the weighted average effective utilization rate for our hydroelectric power projects for both the years ended December 31, 2011, 2012 and 2013 from continuing operations.

Effective tariff is calculated as (a) gross revenues, revenues before netting for VAT and other applicable business surcharges, if any, recorded in the relevant period, divided by (b) the quantity of electricity sold in such period. Effective utilization rate of a hydroelectric power project is calculated as the quantity of electricity sold in the relevant period divided by the installed capacity for electricity generation in such period. The weighted average effective utilization rate of our hydroelectric power projects is calculated as the aggregate quantity of electricity sold in the relevant period, divided by the aggregate installed capacity for electricity generation of all our hydroelectric power projects for the period under consideration. As our effective tariffs are calculated using gross revenues, the product of our installed capacity, effective tariff and effective utilization rate for a hydroelectric power project is not equal to the net revenues for that plant in any given period. We use effective utilization rates to measure the historic ability of a hydroelectric power project to generate electricity during any given period. However, absent mechanical failure, damage to the hydroelectric power project or human error, effective utilization rates only reflect the effect of hydrological conditions for any given period, and are therefore not indicative of future effective utilization rates to be expected for a hydroelectric power project.

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The design utilization rate for a hydroelectric power project is a calculation performed at the feasibility study phase used to assist in the design optimization of civil structures, and in the selection of turbine generator equipment. The design utilization rate for any given hydroelectric power project is the multi-year average electricity production a facility is capable of producing given the equipment selection and historical hydrological conditions. We use design utilization rates as a management tool in monitoring actual production against precipitation to ensure our hydroelectric power projects are operating to standard.

Cost of Revenues

Our cost of revenues consists primarily of depreciation, employee salaries and benefits for hydroelectric power project staff, water resource fees, non-capitalized maintenance and repair costs, amortization expenses relating to water use rights and dam use rights, and other operating costs directly related to the generation of electricity. We expect that as we optimize the management and staffing of our newly acquired plants, we may in the future reduce the cost of revenues associated with operating any given plant.

Operating Expenses

Our general and administrative expenses comprise employee salaries and benefits for corporate and project level staff that are not classified as direct labor and therefore included in cost of revenue, office rent, travel and entertainment, office supplies, amortization of intangible assets, costs of our acquisitions that cannot otherwise be capitalized, and professional fees such as audit and legal fees. Share-based compensation expense represents the period cost associated with stock option grants.

EBITDA, as adjusted

We have included earnings before interest, taxes, depreciation and amortization and certain non-cash charges, which we refer to as EBITDA, as adjusted, a non-GAAP financial measure, on a consolidated basis in this annual report. We had EBITDA, as adjusted, attributable to China Hydroelectric Corporation shareholders of $31.5 million, $60.5 million and $49.9 million in the year ended December 31, 2011, 2012 and 2013, respectively.

We believe that EBITDA, as adjusted, is a useful financial metric to assess our operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, we believe that EBITDA is widely used by other companies in the power industry and may be used by investors as a measure of our financial performance. We note, however, that as individual companies may have different methods of calculating EBITDA for their business, their EBITDA results may not be directly comparable to our EBITDA, as adjusted. Given the significant investments that we have made in the past in net property, plant and equipment, depreciation and amortization expense comprises a meaningful portion of our cost structure. We believe that EBITDA, as adjusted, will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures and business acquisitions. The presentation of EBITDA, as adjusted, should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.

The use of EBITDA, as adjusted, has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expenses, interest expenses and interest income and certain non-cash charges have been and will be incurred and are not reflected in the presentation of EBITDA, as adjusted. Each of these items should also be considered in the overall evaluation of our results. Additionally, EBITDA, as adjusted, does not consider capital expenditures and other investing and financing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, interest expense and interest income, income tax expenses, capital expenditures and other relevant items both in our reconciliations to the U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term EBITDA, as adjusted, is not defined under U.S. GAAP, and EBITDA, as adjusted, is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP.

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A reconciliation of EBITDA, as adjusted, to our net income (loss) in thousands of U.S. dollars is provided below:

	For the Year Ended December 31,
	2011		2012		2013
Net loss	(55,290	)	(1,149	)	(2,518	)
Interest expense, net	24,656		27,986		22,470
Other non-cash charges, including exchange loss and change in fair value of warrant liabilities and share-based compensation expense	10,379		537		(587	)
Income tax expense	1,527		6,451		3,474
Interest expense, Income tax expense, depreciation and amortization related to discontinued operations	3,974		2,743		—
Impairment loss on long-lived assets	11,590		—		3,549
Impairment loss on goodwill	11,388		—		—
Provision for impairment allowance for doubtful accounts on amount due from related party and prepayments and other current assets	1,256		843		—
Depreciation of property, plant and equipment, and amortization of land use rights and intangible assets	22,047		23,068		23,516
EBITDA, as adjusted	31,527		60,479		49,904

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Our results of operations for the year ended December 31, 2012 reflect the results of operations of Dazhaihe hydroelectric power project for the whole year of 2012, and the results of operations of Yuanping and Yuheng from January 1, 2012 to their respective disposal dates namely, March 2, 2012 and October 31, 2012, respectively.

Revenues, Cost of Revenues and Gross Profit

Our revenues from continuing operations decreased by $10.9 million, or 12.8%, to $74.5 million in the year ended December 31, 2013, compared to revenues from continuing operations of $85.4 million in the year ended December 31, 2012. The decrease in revenues was primarily attributable to the unfavorable hydrological conditions in Zhejiang and Fujian provinces.

We sold 1,534.3 million and 1,768.0 million kilowatt hours of electricity in the years ended December 31, 2013 and 2012, respectively.

The effective tariff of electricity sold by us in the years ended December 31, 2012 and 2013 was RMB0.33 per kWh. The effective tariff in the year ended December 31, 2013 remained the same with that in the year ended December 31, 2012. In 2012, 35.1%, 28.5% and 35.6% of the electricity sold and 47.7%, 15.4% and 36.2% of the gross revenue resulted from our hydroelectric power projects located in Zhejiang province, Yunnan province and Fujian province, respectively, where the average effective tariff was RMB0.45, RMB0.18 and RMB0.34, respectively, while in 2013, 33.4%, 33.9% and 32.2% of the electricity sold and 47.4%, 19.2% and 32.9% of the gross revenue resulted from our hydroelectric power projects located in Zhejiang province, Yunnan province and Fujian province, respectively, where the average effective tariff was RMB0.46, RMB0.18 and RMB0.33 respectively.

The effective utilization rate for the year ended December 31, 2013 for our hydroelectric power projects located in Sichuan, Yunnan, Zhejiang and Fujian provinces was 10.7%, 34.3%, 30.4% and 40.2%, respectively, compared to 19.5%, 33.2%, 36.7% and 51.0%, respectively, in 2012. In general, year over year comparisons plus or minus 5% during periods of normal equipment availability are attributed to natural fluctuation in precipitation and water flows. The decrease of 8.8% in utilization in 2013 for the facilities located in Sichuan was due to the damage caused by flood to Liyuan project; the decrease of 6.3% and 10.8% in utilization in 2013 for the facilities located in, Zhejiang and Fujian, respectively, was attributable to the unfavorable precipitation in these regions in 2013. As a result of the forgoing factors, the effective utilization rate for our entire portfolio of hydroelectric power projects was 34.0% in 2013, compared to 39.2% in 2012.

Our cost of revenues from continuing operations consist primarily of depreciation, as well as salaries and benefits for staff employed at our hydroelectric power projects, water resource fees, water reservoir fund, non-capitalized maintenance and repair expenses, amortization expenses relating to water use rights and other operating costs directly attributable to the production of electricity. The total cost of revenues from continuing operations decreased by $0.4 million, or 1.1%, to $35.4 million in the year ended December 31, 2013, compared to $35.8 million in the year ended December 31, 2012. In 2012, the cost of depreciation and amortization, employee salaries and benefits, and water resource fees accounted for 63.1%, 11.1%, and 5.3%, respectively, of the total cost of revenues, compared to 64.4%, 11.8%, and 3.9%, respectively, in 2013. We expect depreciation to continue to account for a high percentage of our cost of revenues since all our hydroelectric power projects are capital intensive.

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As a result of the foregoing factors, our gross profit from continuing operations in the year ended December 31, 2013 was $39.2 million, a decrease of $10.4 million from $49.6 million for the year ended December 31, 2012. Gross profit margin from continuing operations was 52.6% for the year ended December 31, 2013, compared to 58.1% for the year ended December 31, 2012. The lower gross profit and margin from continuing operations in the year ended December 31, 2013 compared to the prior year were principally attributable to lower revenues from continuing operations due to unfavorable hydrological conditions.

Operating Expenses

Our operating expenses from continuing operations for the years ended December 31, 2012 and 2013 consisted of general and administrative expenses incurred at both the project level and at the corporate level, and principally consist of salaries and benefits, professional fees, non-cash employee stock option expenses, rent, travel expenses, office supplies, acquisition related expenses, and other costs related to the management and impairment loss of long-lived assets for the year ended December 31, 2013. Operating expenses from continuing operations decreased by $3.5 million, or 17.2%, to $16.8 million in the year ended December 31, 2013, compared to $20.3 million in the year ended December 31, 2012 for the reasons described below.

General and administrative expenses from continuing operations incurred at the hydroelectric power project level principally consist of salaries and travel expenses which decreased from $8.8 million in the year ended December 31, 2012 to $5.6 million in the year ended December 31, 2013, principally attributable to the professional service fees and expenses decreased by $1.4 million as well as the $0.8 million bad debt provision was recorded by four projects in Fujian Province in 2012 while no such provision was recorded in 2013. Wuyue is a standstill project and its construction-in-progress was fully recognized asset impairment in 2011. The salaries and welfares occurred in 2012 and 2013 in connection with this project were recorded in general and administrative expenses due to the ongoing arbitration proceeding with the employees hired for this project. As with the final ruling from the Arbitration Commission, dated November 26, 2013, there will be no more accruals from November 30, 2013 and onwards.

General and administrative expenses from continuing operations at the corporate level decreased by $4.5 million from $11.5 million in the year ended December 31, 2012 to $7.0 million in the year ended December 31, 2013. This decrease resulted from a decrease of $1.3 million in salaries and welfares, from $4.3 million in the year ended December 31, 2012 to $3.0 million in the year ended December 31, 2013, due to the close of Cayman office in 2012, as well as the non-recurring Extraordinary General Meeting of shareholders (“EGM”) related counsel fee of $1.6 million and termination costs of $1.8 million to John Kuhns and Mary Fellows, our former senior management, which were incurred in 2012.

Of the $7.0 million in corporate level general and administrative expenses in the year ended December 31, 2013, share-based compensation expenses of $0.2 million accounted for 2.9%, employee salaries and benefits of $3.0 million accounted for 42.9%, while professional fees of $1.2 million, including consulting and legal fees accounted for 17.1%. Other costs, including the non-recurring expenses related to de-listing legal expenses related to a preliminary non-binding proposal from NewQuest Capital Partners (“NewQuest”) received on September 4, 2013 to acquire all of the Company’s outstanding ordinary shares not owned by the buyer consortium, travel expenses, lease expenses, acquisition related project expenses, director fees and insurance expenses accounted for the remaining 37.1%. In the year ended December 31, 2012, share-based compensation expenses of $0.2 million accounted for 1.7%, employee salaries and benefits of $4.3 million accounted for 37.4%, non-recurring EGM related costs and termination costs of $3.4 million accounted for 29.6%, while professional fees of $0.5 million, including consulting, legal and auditing fees accounted for 4.4%. Other costs, such as travel expenses, lease expenses, director fees and insurance expenses accounted for the remaining 26.9%.

In the year ended December 31, 2013, we recorded an asset impairment loss of $3.5 million, primarily reflecting the estimated asset damages resulting from a severe flood in Sichuan province in July 2013 which damaged the tailrace concrete apron, spillway gates, power generation plant, auxiliary equipment and the 35KV substation of our Liyuan hydroelectric power project.

Operating Profit (Loss)

Our operating profit from continuing operations was $22.4 million for the year ended December 31, 2013, compared to operating profit from continuing operations of $29.2 million for the year ended December 31, 2012, principally as a result of the effect on revenues from unfavorable precipitation during 2013 compared to significantly higher than average precipitation during 2012, the relatively fixed nature of our cost of revenue and decreased general and administrative expenses, as well as the effect of impairment loss long-lived assets for the reasons described above.

Other Income and Expenses

Our interest expense from continuing operations decreased by $5.5 million, or 19.6%, to $22.6 million in the year ended December 31, 2013, compared to $28.1 million in the year ended December 31, 2012. The interest on bank loans decreased by $0.9 million to $19.1 million in the year ended December 31, 2013 compared to $20.0 million in the year ended December 31, 2012 primarily due to interest expenses on short-term loans, as the short-term loan balance decreased by $9.7 million to $12.0 million in the year ended December 31, 2013 compared to $21.7 million in the year ended December 31, 2012. Interest penalty to original shareholders of acquired subsidiaries decreased by $0.9 million from $1.1 million for the year ended December 31, 2012 as we paid off such loans in 2013. Interest on loans from unrelated parties decreased by $3.1 million from $4.8 million for the year ended December 31, 2012 as we partially paid off such loans in 2013. Other interest costs, such as accrued interest on unrecognized tax benefits, bank charges, amortization of debt costs accounted for the remaining $0.8 million increase.

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We recorded interest income from continuing operations of $0.1 million in both years ended December 31, 2012 and 2013, respectively. We also experienced an exchange gain from continuing operations of $28,000 and a loss of $41,000 for the years ended December 31, 2012 and 2013, respectively.

Income Tax

We incurred income tax expenses from continuing operations of $6.5 million and $3.5 million in the years ended December 31, 2012 and 2013, respectively. We have adopted an income tax return preparation method principally based on tax invoices issued and received. In accordance with applicable PRC income tax laws and regulations, an income tax return should be prepared based on accounting income following certain tax adjustments. We have recognized total additional income tax provisions of US$1.5 million and US$2.2 million in the year ended December 31, 2012 and 2013, respectively, for unrecognized tax benefits, mainly related to transfer pricing issues and non-deductible expenses. The Group also recognized a decrease of unrecognized tax benefits of US$0.2 million and US$27 thousands for the change in prior year tax position and released unrecognized tax benefits of US$0.1 million and US$0.7 million in 2012 and 2013, respectively.

Noncontrolling Interest

In the year ended December 31, 2013, we recorded a loss of $0.3 million for the net income attributable to noncontrolling interests relating to Jinling’s, compared to a gain of $0.1 million attributable to noncontrolling interests relating to Jinling’s subsidiaries for the year ended December 31, 2012.

Net Loss from Continuing Operations

The foregoing factors resulted in a net loss from continuing operations of $2.5 million in the year ended December 31, 2013, a decrease of $2.6 million from a net loss of $5.1 million in the year ended December 31, 2012.

Net Loss Attributable to Ordinary Shareholders

In the year ended December 31, 2013, the net loss attributable to ordinary shareholders was $2.2 million as an increase of $1.0 million from a net loss from continuing operations attributable to ordinary shareholders of $1.2 million in the year ended December 31, 2012.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

In January 2011, we acquired the remaining 10.0% equity interest in Pingnan County Wangkeng Hydroelectric Co., Ltd. In April 2011, we acquired Dazhaihe hydroelectric power project. In December 2011, we sold Yuanping hydroelectric power project and the disposal date of Yuanping was March 2, 2012, which was the date we lost effective control over Yuanping. The sale transaction was completed on the same date. In October 2012, we signed a Share Transfer Agreement to sell Yuheng hydroelectric power project and the disposal date of Yuheng was October 31, 2012, which was the date we lost effective control over Yuheng. The sale transaction was completed in April 2013.

Our results of operations for the year ended December 31, 2011 reflect the results of operations during the period for which Dazhaihe hydroelectric power project was consolidated in our financial statements.

Our results of operations for the year ended December 31, 2012 reflect the results of operations of Dazhaihe hydroelectric power project for the whole year of 2012, and the results of operations of Yuanping and Yuheng from January 1, 2012 to their respective disposal dates.

Revenues, Cost of Revenues and Gross Profit

Our revenues from continuing operations increased by $30.8 million, or 56.4%, to $85.4 million in the year ended December 31, 2012, compared to revenues from continuing operations of $54.6 million in the year ended December 31, 2011. The increase in revenues was primarily attributable to the better than average hydrological conditions in Zhejiang and Fujian provinces and a higher effective tariff rate due to the tariff increases at the projects in Fujian and Yunan projects.

We sold 1,768.0 million and 1,262.3 million kilowatt hours of electricity in the years ended December 31, 2012 and 2011, respectively.

The effective tariff of electricity sold by us in the years ended December 31, 2011 and 2012 was RMB0.30 per kWh and RMB0.33 per kWh, respectively. The effective tariff in the year ended December 31, 2012 was higher than that in the year ended December 31, 2011 because in 2011, 30.7%, 40.3% and 27.9% of the electricity sold and 45.7%, 24.8% and 28.5% of the gross revenue resulted from our hydroelectric power projects located in Zhejiang province, Yunnan province and Fujian province, respectively, where the average effective tariff was RMB0.45, RMB0.19 and RMB0.31, respectively, while in 2012, 35.1%, 28.5% and 35.6% of the electricity sold and 47.7%, 15.4% and 36.2% of the gross revenue resulted from our hydroelectric power projects located in Zhejiang province, Yunnan province and Fujian province, respectively, where the average effective tariff was RMB0.45, RMB0.18 and RMB0.34 respectively. Moreover, another reason that the effective tariff of 2012 is higher than 2011 is because five projects in Fujian Province and one project in Yunnan Province received tariff increase in 2012.

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The effective utilization rate for the year ended December 31, 2012 for our hydroelectric power projects located in Sichuan, Yunnan, Zhejiang and Fujian provinces was 19.5%, 33.2%, 36.7% and 51.0%, respectively, compared to 12.5%, 34.4%, 23.0% and 28.7%, respectively, in 2011. In general, year over year comparisons plus or minus 5% during periods of normal equipment availability are attributed to natural fluctuation in precipitation and water flows. The increase of 13.7% and 22.3% in utilization in 2012 for the facilities located in Zhejiang and Fujian, respectively, is attributable to the favorable precipitation in these regions in 2012. As a result of the forgoing factors, the effective utilization rate for our entire portfolio of hydroelectric power projects was 39.2% in 2012, compared to 28.1% in 2011.

Our cost of revenues from continuing operations consist primarily of depreciation, as well as salaries and benefits for staff employed at our hydroelectric power projects, water resource fees, water reservoir fund, non-capitalized maintenance and repair expenses, amortization expenses relating to water use rights and other operating costs directly attributable to the production of electricity. The total cost of revenues from continuing operations increased by $4.5 million, or 14.4%, to $35.8 million in the year ended December 31, 2012, compared to $31.3 million in the year ended December 31, 2011. In 2011, the cost of depreciation and amortization, employee salaries and benefits, and water resource fees accounted for 69.0%, 10.1%, and 3.9%, respectively, of the total cost of revenues, compared to 63.1%, 11.1%, and 5.3%, respectively, in 2012. We expect depreciation to continue to account for a high percentage of our cost of revenues since all our hydroelectric power projects are capital intensive.

As a result of the foregoing factors, our gross profit from continuing operations in the year ended December 31, 2012 was $49.6 million, an increase of $26.3 million from $23.3 million for the year ended December 31, 2011. Gross profit margin from continuing operations was 58.1% for the year ended December 31, 2012, compared to 42.7% for the year ended December 31, 2011. The higher gross profit and margin from continuing operations in the year ended December 31, 2012 compared to the prior year were principally attributable to higher revenues from continuing operations due to hydrological conditions.

Operating Expenses

Our operating expenses from continuing operations for the years ended December 31, 2011 and 2012 consisted of general and administrative expenses incurred at both the project level and at the corporate level, and principally consist of salaries and benefits, professional fees, non-cash employee stock option expenses, rent, travel expenses, office supplies, acquisition related expenses, and other costs related to the management, expansion of our business and impairment loss of long-lived assets and goodwill for the year ended December 31, 2011. Operating expenses from continuing operations decreased by $31.6 million, or 60.9%, to $20.3 million in the year ended December 31, 2012, compared to $51.9 million in the year ended December 31, 2011 for the reasons described below.

General and administrative expenses from continuing operations incurred at the hydroelectric power project level principally consist of salaries and travel expenses which increased from $6.3 million in the year ended December 31, 2011 to $8.8 million in the year ended December 31, 2012, principally attributable to the audit fee of $1.9 million recorded at the project level instead of at the corporate level, as well as the $0.4 million salaries and benefits recorded by Wuyue project in 2012. Wuyue is a standstill project and its construction-in-progress was fully recognized asset impairment in 2011. The salaries and welfares occurred in 2012 in connection with this project were recorded in general and administrative expenses due to the ongoing arbitration proceeding with the employees hired for this project.

General and administrative expenses from continuing operations at the corporate level decreased by $11.1 million from $22.6 million in the year ended December 31, 2011 to $11.5 million in the year ended December 31, 2012. This decrease resulted from a decrease of $10.3 million in share-based compensation expense, from $10.5 million in the year ended December 31, 2011 to $0.2 million in the year ended December 31, 2012, due to the one-time amortization of the remaining share-based compensation cost associated with the stock options granted prior to 2010 in connection to the fair value option exchange program in 2011, a decrease of $0.5 million for employee salaries and benefits, a decrease of $2.6 million for professional fees and a decrease of $1.1 million for other expenses, offset by the non-recurring Extraordinary General Meeting of shareholders (“EGM”) related counsel fee of $1.6 million and termination costs of $1.8 million to John Kuhns and Mary Fellows, our former senior management.

Of the $11.5 million in corporate level general and administrative expenses in the year ended December 31, 2012, share-based compensation expenses of $0.2 million accounted for 1.7%, employee salaries and benefits of $4.3 million accounted for 37.4%, non-recurring EGM related costs and termination costs of $3.4 million accounted for 29.6%, while professional fees of $0.5 million, including consulting and legal fees accounted for 4.4%. Other costs, such as travel expenses, lease expenses, acquisition related project expenses, director fees and insurance expenses accounted for the remaining 26.9%. In the year ended December 31, 2011, share-based compensation expenses of $10.5 million accounted for 46.5%, employee salaries and benefits of $4.8 million accounted for 21.2%, while professional fees of $3.1 million, including consulting, legal and auditing fees accounted for 13.7%. Other costs, such as travel expenses, lease expenses, acquisition related project expenses, director fees and insurance expenses accounted for the remaining 18.6%.

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In the year ended December 31, 2011, we recorded an impairment loss on long-lived assets of $11.6 million for expenditures for Wuyue pumped storage hydropower project in Henan province previously classified as Construction in Progress on our consolidated balance sheet. Net of noncontrolling interest, the loss attribute to us was $5.0 million. In 2011, we also recorded an impairment loss on goodwill of $4.2 million, $1.1 million and $6.1 million for Xiaopengzu, Xineng, Jinling and its subsidiaries, respectively, due to the significant reduction of our market capitalization since the beginning of 2011.

In the year ended December 31, 2012, no impairment loss was recognized.

Operating Profit (Loss)

Our operating profit from continuing operations was $29.2 million for the year ended December 31, 2012, compared to operating loss from continuing operations of $28.6 million for the year ended December 31, 2011, principally as a result of the effect on revenues from significantly higher than average precipitation during 2012 compared to significantly lower than average precipitation during 2011, the relatively fixed nature of our cost of revenue and decreased general and administrative expenses, as well as the effect of impairment loss on goodwill and long-lived assets and a one-time write off unamortized share-based compensation expense of $6.8 million in 2011 for the reasons described above.

Other Income and Expenses

Our interest expense from continuing operations increased by $3.3 million, or 13.3%, to $28.1 million in the year ended December 31, 2012, compared to $24.8 million in the year ended December 31, 2011. The interest on bank loans increased by $1.6 million to $20.0 million in the year ended December 31, 2012 compared to $18.4 million in the year ended December 31, 2011 primarily due to interest expenses on long-term loans obtained by Binlangjiang, Shapulong, Yingchuan, Ruiyang and Wuliting. Interest penalty to original shareholders of acquired subsidiaries decreased by $1.4 million from $2.5 million for the year ended December 31, 2011 as we paid off such loans in 2012. Interest on loans from unrelated parties increased by $2.2 million from $2.6 million for the year ended December 31, 2011 due to the high refinancing expenses and interest rate. Other interest costs, such as accrued interest on unrecognized tax benefits, bank charges, amortization of debt costs accounted for the remaining $0.9 million increase.

We recorded interest income from continuing operations of $0.1 million and $0.1 million in the years ended December 31, 2011 and 2012, respectively. The decrease in interest income was primarily due to a lower average balance of bank deposits.

We also experienced an exchange loss from continuing operations of $851,000 and a gain of $28,000 for the years ended December 31, 2011 and 2012, respectively.

Income Tax

We incurred income tax expenses from continuing operations of $1.5 million and $6.5 million in the years ended December 31, 2011 and 2012, respectively. We have adopted an income tax return preparation method principally based on tax invoices issued and received. In accordance with applicable PRC income tax laws and regulations, an income tax return should be prepared based on accounting income following certain tax adjustments. As of December 31, 2012, we have recognized total additional income tax provisions of US$1.5 million for unrecognized tax benefits, mainly related to transfer pricing issues and non-deductible expenses. The Group also recognized a decrease of unrecognized tax benefits of US$0.2 million for the change in prior year tax position in 2012. The Group released unrecognized tax benefits of US$0.1 million in 2012 and recognized a decrease of unrecognized tax benefits of US$1.3 million due to the disposal of Yuheng.

Noncontrolling Interest

In the year ended December 31, 2012, we recorded a gain of $0.1 million for the net income attributable to noncontrolling interests relating to Jinling and its subsidiaries, compared to a loss of $9.9 million attributable to noncontrolling interests relating to the impairment of Wuyue project, operation loss and goodwill impairment loss of Jinling and its subsidiaries for the year ended December 31, 2011.

Net Loss from Continuing Operations

The foregoing factors resulted in a net loss from continuing operations of $5.1 million in the year ended December 31, 2012, as compared to a net loss of $55.0 million in the year ended December 31, 2011.

Net Loss Attributable to Ordinary Shareholders

In the year ended December 31, 2012, the net loss attributable to ordinary shareholders was $1.2 million as compared to net loss from continuing operations attributable to ordinary shareholders of $45.4 million in the year ended December 31, 2011.

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Geographic Information

We manage our business, in part, through the analysis of electricity demand, hydrological conditions and the existing hydroelectric power markets in the different provinces where we operate. For the year ended December 31, 2013, 2012 and 2011, we operated and managed our business as four operating and reportable geographic segments, namely, the Yunnan province segment, the Sichuan province segment, the Zhejiang province segment and the Fujian province segment.

Our segment information, in thousands of U.S. dollars, for the year ended December 31, 2013 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	14,608		373		36,000		23,536		—		—		74,517
Cost of revenues	(9,069	)	(634	)	(16,610	)	(12,393	)	(8	)	3,357		(35,357	)
General and administrative expenses including share-based compensation expense of US$256	(1,534	)	(193	)	(1,909	)	(2,423	)	(7,154	)	(45	)	(13,258	)
Impairment loss on long-lived assets	—		(3,549	)	—		—		—		—		(3,549	)
Interest income	340		365		1,801		702		2		(3,112	)	98
Interest expense	(7,726	)	(557	)	(10,128	)	(7,160	)	(109	)	3,112		(22,568	)
Change in fair value of warrant liabilities	—		—		—		—		839		—		839
Exchange gain	—		—		—		—		(41	)	—		(41	)
Other income (loss), net	37				(18	)	91		3,477		(3,312	)	275
Income tax benefit (expense)	43		15		(2,245	)	(843	)	(444	)	—		(3,474	)
Net (loss) income	(3,301	)	(4,180	)	6,891		1,510		(3,438	)	—		(2,518	)
Net income attributable to noncontrolling interests	—		—		—		297		—		—		297
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(3,301	)	(4,180	)	6,891		1,807		(3,438	)	—		(2,221	)
Total assets	197,995		21,135		346,886		288,735		437,477		(554,986	)	737,242
Total liabilities	(117,524	)	(7,144	)	(128,690	)	(123,843	)	(28,315	)	70,903		(334,613	)
Capital expenditures	124		29		233		1,228		13		—		1,627
Depreciation and amortization expenses	5,633		482		10,437		6,839		133		—		23,524

Unallocated general and administrative expenses of $7.2 million for the year ended December 31, 2013 related primarily to various administrative costs associated with supporting the operations of our existing hydropower plants.

Unallocated other income, net for the year ended December 31, 2013 mainly consisted of administrative charges levied by the Beijing corporate operation on our operating subsidiaries.

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Our segment information, in thousands of U.S. dollars, for the year ended December 31, 2012 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,460		598		41,616		29,714		—		—		85,388
Cost of revenues	(8,540	)	(689	)	(16,978	)	(13,133	)	—		3,545		(35,795	)
General and administrative expenses including share-based compensation expense of US$166	(2,108	)	(269	)	(2,569	)	(3,413	)	(11,989	)	—		(20,348	)
Interest income	236		121		838		1,713		3		(2,827	)	84
Interest expense	(9,039	)	(260	)	(10,550	)	(10,787	)	(247	)	2,813		(28,070	)
Change in fair value of warrant liabilities	—		—		—		—		(399	)	—		(399	)
Exchange (loss) gain	—		—		—		(1	)	29		—		28
Other income (loss), net	136		22		(81	)	420		3,736		(3,726	)	507
Income tax benefit (expense)	72		(5	)	(3,831	)	(2,480	)	(207	)	—		(6,451	)
Net (loss) income from continuing operations	(5,783	)	(482	)	8,445		2,033		(9,074	)	(195	)	(5,056	)
Income from discontinued operations (net of income tax expenses of US$399)	—		—		—		959		—		181		1,140
Gain on disposal of discontinued operations (net of income tax expenses of US$959)	—		—		—		—		2,767		—		2,767
Net income for the year from discontinued operation	—		—		—		959		2,767		181		3,907
Net (loss) income	(5,783	)	(482	)	8,445		2,992		(6,307	)	(14	)	(1,149	)
Net loss attributable to noncontrolling interests	—		—		—		(94	)	—		—		(94	)
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(5,783	)	(482	)	8,445		2,898		(6,307	)	(14	)	(1,243	)
Total assets	192,843		22,790		344,923		289,702		426,518		(522,460	)	754,316
Total liabilities	(131,872	)	(8,092	)	(145,312	)	(129,627	)	(27,799	)	80,901		(361,801	)
Capital expenditures	877		1,384		3,973		1,305		15		(58	)	7,496
Depreciation and amortization expenses	5,546		477		10,136		6,767		142		—		23,068

Unallocated general and administrative expenses of $12.0 million for the year ended December 31, 2012 related primarily to various administrative costs associated with supporting the operations of our existing hydropower plants.

Unallocated other income, net for the year ended December 31, 2012 mainly consisted of administrative charges levied by the Beijing corporate operation on our operating subsidiaries

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Our segment information, in thousands of dollars, for the year ended December 31, 2011 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,806		555		25,382		14,854		—		—		54,597
Cost of revenues	(8,349	)	(568	)	(15,034	)	(10,874	)	—		3,511		(31,314	)
General and administrative expenses including share-based compensation expense of US$10,479	(1,519	)	(86	)	(1,148	)	(2,276	)	(23,867	)	—		(28,896	)
Impairment loss on goodwill	(5,260	)	—		—		(6,128	)	—		—		(11,388	)
Impairment loss on long-lived assets	—		—		—		—		(11,601	)	11		(11,590	)
Interest income	180		10		128		1,709		66		(1,992	)	101
Interest expense	(8,468	)	—		(8,565	)	(9,669	)	(73	)	2,018		(24,757	)
Change in fair value of warrant liabilities	—		—		—		—		951		—		951
Exchange loss	(28	)	—		—		(244	)	(579	)	—		(851	)
Other (loss) income, net	(285	)	—		(36	)	(158	)	4,033		(3,888	)	(334	)
Income tax (expense) benefit	(142	)	5		(843	)	115		(662	)	—		(1,527	)
Net loss from continuing operations	(10,065	)	(84	)	(116	)	(12,671	)	(31,732	)	(340	)	(55,008	)
Loss from discontinued operations (net of income tax expenses of US$101)	—		—		—		(631	)	—		349		(282	)
Net loss for the year from discontinued operation	—		—		—		(631	)	—		349		(282	)
Net loss	(10,065	)	(84	)	(116	)	(13,302	)	(31,732	)	9		(55,290	)
Net income attributable to noncontrolling interests	—		—		—		2,546		7,355		—		9,901
Net loss attributable to China Hydroelectric Corporation shareholders	(10,065	)	(84	)	(116	)	(10,756	)	(24,377	)	9		(45,389	)
Total assets	200,681		15,896		318,616		374,296		421,650		(516,224	)	814,915
Total liabilities	(133,670	)	(753	)	(138,688	)	(185,330	)	(20,498	)	58,902		(420,037	)
Capital expenditures	1,763		1,128		3,031		645		970		(5	)	7,532
Depreciation and amortization expenses	5,181		344		9,837		6,569		115		—		22,046

Unallocated general and administrative expenses of $23.9 million for the year ended December 31, 2011 related primarily to various administrative costs associated with supporting the operations of our existing hydropower plants and the acquisitions completed by us in 2011. Unallocated change in fair value of warrant liabilities related to the fair value valuation of the partial warrant exercised by Vicis Master Fund. Unallocated other income, net for the year ended December 31, 2011 mainly consisted of administrative charges levied by the Beijing corporate operation on our operating subsidiaries.

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Holding Company Structure

China Hydroelectric Corporation is a holding company with no material operations of its own, and conducts all operations in China through subsidiaries. As a result, the ability of the holding company to pay dividends and to finance any debt it may incur depends upon dividends paid by its subsidiaries. If its current or future subsidiaries and company incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to the holding company. In addition, the subsidiaries in China are only permitted to pay dividends to us out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under relevant PRC laws and regulations, wholly foreign-owned enterprises in China are required to set aside at least 10% of their after-tax profits each year, if any, to fund the reserve fund unless such reserve fund has reached 50% of their respective registered capital, and set aside a percentage of their after-tax profits to their employee bonus and welfare fund which is decided by the enterprises themselves. Sino-foreign equity joint ventures are required to set aside their reserve fund, enterprise development fund and employee bonus and welfare fund at percentages that are decided by any such entity’s board of directors. PRC domestic companies are required to set aside at least 10% of their after-tax profits each year, if any, to fund their respective statutory reserve fund unless such fund has reached 50% of their respective registered capital. Although the statutory reserves can be used to, among other things, increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserves may not be distributed as cash dividends except in the event of liquidation of the companies. See Note 1 to the audited consolidated financial statements included elsewhere in this annual report.

Recently Issued Accounting Standards

In March 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-05 (“ASU 2013-05”), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which specifies that a cumulative translation adjustment should be released into earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustment attributable to the investment would be recognized in earnings when the investment is sold. When an entity sells either a part or all of its investment in a consolidated foreign entity, cumulative translation adjustment would be recognized in earnings only if the sale results in the parent no longer having a controlling financial interest in the foreign entity. In addition, cumulative translation adjustment should be recognized in earnings in a business combination achieved in stages (i.e., a step acquisition). The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-05.

In July 2013, the FASB issued ASU No. 2013-11 (“ASU 2013-11”), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which concludes an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law. The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-11.

B. Liquidity and Capital Resources

As of December 31, 2013, we had a working capital deficiency of approximately $66.5 million. Due to our working capital deficiency, our independent registered public accountant has stated in its report dated April 21, 2014 with respect to our financial statements as of and for the year ended December 31, 2013 that these circumstances raise substantial doubt about our ability to continue as a going concern. We regularly raise funds through various means, such as new borrowings from banks and other non-financial institutions. New borrowings are used for multiple purposes, such as daily operating liquidity, to fund new projects or acquisitions, and to refinance existing short-term loans into longer-term debt. Over the course of 2013, we reduced the working capital deficiency by 18.4% to $66.5 million as of December 31, 2013, from $81.0 million as of December 31, 2012. In 2013, we raised $52.2 million through borrowings from banks and other institutions. Improvements in cash flow improved during 2013 are also due to the continuing cost reduction efforts initiated in January of 2012.

Investors should still expect us to have a working capital deficit in the foreseeable future, due to the use of leverage to finance the construction and acquisition of hydroelectric projects.

Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Management remains confident in our ability to secure capital in order to fund our liquidity needs, debt obligations and growth plans, but obtaining financing cannot be guaranteed. In the event that we fail to raise funds sufficient to meet our liquidity needs, we may be forced to substantially curtail our operations or otherwise take measures that would materially and adversely affect our current operations and business prospects.

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Our Consolidated Cash Flow

Our operations have primarily been financed by cash flows from operating activities and long-term and short-term loans, issuance of shares upon partial exercise of warrants by Vicis Capital Master Fund and the sale of certain assets, as well as by our initial public offering in January 2010. Our long-term and short-term loans outstanding as of December 31, 2013 were $250.1 million and $12.0 million, respectively. Our short-term and long-term loans are typically secured by pledges of the property, plant and equipment and future electricity sales of the respective entities and/or guaranteed by third parties and with principal repayment date between 2014 and 2027. The interest rates on these short-term and long-term loans are variable based on the benchmark rate published by the People’s Bank of China each year. The average interest rates on the short-term and long-term loans for 2013 were 9.0% and 6.9%, respectively. For detailed informations, please see Note 15 to the Financial Statement “Borrowings”.

We do not present cash flows from discontinued operations separately and believes that a quantification of the cash flows from discontinued operations is not necessary because such cash flows were of immaterial amount. The absence of cash flows from discontinued operations may have a marginally negative effect on future liquidity and capital resources. In 2011, cash and cash equivalents decreased by $25.1 million to $8.4 million, primarily due to $24.7 million used in investing activities and $2.0 million used in financing activities and offset by $1.6 million provided by operating activities and $76,000 due to changes in exchange rate on cash and cash equivalent. In 2012, cash and cash equivalents decreased by $0.4 million to $8.0 million, primarily due to $2.8 million used in investing activities and $20.4 million used in financing activities and offset by $22.7 million provided by operating activities and $11,000 due to changes in exchange rate on cash and cash equivalent. In 2013, cash and cash equivalents increased by $6.2 million to $14.2 million, primarily due to $24.4 million used in financing activities and offset by $19.4 million provided by operating activities, $9.9 million provided by investing activities and $1.3 million due to changes in exchange rate on cash and cash equivalent.

The following table sets forth the components of our consolidated cash flows for the periods indicated:

	For the Year Ended December 31,
	2011		2012		2013
Net cash provided by operating activities	1,644		22,700		19,410
Net cash used in investing activities	(24,734	)	(2,784	)	9,905
Net cash provided by (used in) financing activities	(2,041	)	(20,362	)	(24,428	)
Effect of changes in exchange rate on cash	76		11		1,311
Net (decrease) increase in cash and cash equivalents	(25,055	)	(435	)	6,198

Operating Activities

Net cash provided by operating activities was $19.4 million in 2013, as compared to a net loss of $2.5 million. The non-cash reconciliation items were mainly depreciation of property, plant and equipment of $22.2 million and impairment loss on long-lived assets of $3.5 million for Liyuan project. The principal working capital items changes include (i) a decrease in notes receivable of $0.8 million and accounts receivable of $2.2 million due to the unfavorable precipitation for the Company for the last two months of 2013; (ii) a decrease in accrued expenses and other current liabilities of $6.4 million due to payment of tax payable and the employee termination costs and (iii) an increase in the other non-current liabilities of $1.2 million due to the interest penalty from the unrecognized tax benefit.

Net cash provided by operating activities was $22.7 million in 2012, as compared to a net loss of $1.1 million. The non-cash reconciliation items were mainly depreciation of property, plant and equipment of $22.4 million and gain of $2.8 million from disposal of the Yuanping and Yuheng hydropower projects. The principal working capital items changes include (i) a decrease in notes receivable of $1.9 million and accounts receivable of $1.8 million due to better than average precipitation for the Company for the last two months of 2012 and (ii) net increase in other non-current liabilities, accrued expenses and other current liabilities of $5.1million due to payment of tax payable and an increase in the employee termination costs. The increase of $6.6 million in non-current liabilities was a reclassification from accrued expenses and other current liabilities.

Net cash provided by operating activities was $1.6 million in 2011, as compared to a net loss of $55.3 million. The non-cash reconciliation items were mainly (i) depreciation of property, plant and equipment of $22.0 million, (ii) impairment loss on long-lived assets of $11.6 million, primarily due to fully write-off of the development costs incurred by Wuyue Storage Power Generation project, (iii) impairment loss on goodwill of $11.4 million relating to our power projects in Yunnan and Fujian provinces, and (iv) write-off of share-based compensation expense of $10.5 million, which were partially offset by a decrease in accrued expenses and other current liabilities of $1.9 million, primarily due to payment of payroll and tax payables.

Investing Activities

Net cash provided by investing activities was $9.9 million in 2013, consisting primarily the payment of equipment and intangible assets costs of $1.1 million, which were partially offset by the proceeds from disposal of equipment of $0.5 million and the receiving of net sale proceeds of $11.0 million from disposal of the Yuheng hydroelectric power projects during the year.

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Net cash used in investing activities was $2.8 million in 2012, consisting primarily the payment of outstanding acquisition costs of $8.9 million carried from year 2011 for Xiaopengzu, Wuliting and Wangkeng hydropower projects, the payment of outstanding equipment costs of $7.1 million carried from year 2011 and payment to contractors for construction projects in the amount of $6.9 million relating to capital expenditure for Liyuan, Wuliting, Ruiyang and Zhougongyuan hydropower projects, which were partially offset by the receiving of net sale proceeds of $20.2 million from disposal of the Yuanping and Yuheng hydroelectric power projects during the year.

Net cash used in investing activities was $24.7 million in 2011, consisting primarily of the acquisition of Dazhaihe and Jinling hydropower project and its subsidiaries in the amount of $19.3 million, payment to contractors for construction projects in the amount of $3.3 million and the purchase of property, plant and equipment of $1.5 million relating to capital expenditure for Zhougongyuan, Liyuan and Binlangjiang hydropower projects.

Financing Activities

Net cash used in financing activities was $24.4 million in 2013, primarily because the Company has refinanced certain existing loans with longer terms as a result of the improvement of the lending environment in China since the beginning of 2012. The net cash used in financing activities in 2013 reflected primarily the net repayment of loans from individual third parties in the amount of $9.9 million, the net payment of bank loans of $16.1 million and the net repayment of loans from related parties of $3.6 million, partially offset by release of $5.2 million in restricted cash in relation to deposit RMB equivalent cash in bank in 2012 to exchange for US bank loans.

Net cash used in financing activities was $20.4 million in 2012, primarily because the Company has refinanced certain existing loans with longer terms as a result of the improvement of the lending environment in China since the beginning of 2012. The net cash used in financing activities in 2012 reflected primarily the net repayment of loans from individual third parties in the amount of $18.0 million and $5.2 million in restricted cash in relation to deposit RMB equivalent cash in bank to exchange for US bank loans, partially offset by the net proceeds from long-term loans of $3.0 million and the net proceeds.

Net cash used in financing activities was $2.0 million in 2011, primarily because the Company’s ability of access the available bank facilities was constrained by the tight monetary policy by the central government to control the inflation. The net cash used in financing activities in 2011 reflected primarily the net proceeds of repayment of long-term loans in the amount of $21.1 million, partially offset by the proceeds of $10.0 million from the partial warrant exercise by Vicis Capital Master Fund, the net proceeds of loans from individual third parties in the amount of $6.8 million and the net proceeds from short-term loans of $2.2 million.

Capital Expenditures

In the year ended December 31, 2011, we incurred capital expenditures of $7.5 million consisting primarily of capital expenditures of $1.5 million, $1.1 million, and $2.9 million for the construction of the Binglangjiang II, Liyuan and Zhougongyuan hydroelectric power projects, respectively. In the year ended December 31, 2012, we incurred capital expenditures of $7.5 million consisting primarily of capital expenditures of $1.1 million for the construction of Wangkeng, $1.4 million, $1.4 million, and $1.4 million for Liyuan, Wuliting and Zhougongyuan, respectively. In the year ended December 31, 2013, we incurred capital expenditures of $1.6 million consisting primarily of capital expenditures of $1.0 million, $0.1 million and $0.1 million for the construction of Banzhu, Wangkeng and Ruiyang, respectively. We generally deposit our excess cash in interest-bearing bank accounts in banks in China, Hong Kong and the United States of America.

During the last four years, while the first quarter has been the most volatile quarter in terms of precipitation, it is typically ranked third in terms of electricity production. While each quarter makes a contribution to revenues, the first and fourth quarters contribute less revenue than second and third quarters. Thus far in the first quarter, general precipitation levels for us are below long-term averages. Compared to in 2013, electricity production in the first quarter is lower, but in line with our expectations. We still need additional cash from sources other than tariffs required to meet our expected cash requirements, including for working capital and capital expenditure purposes, for at least the next 12 months. We may seek to sell additional assets which have a ready market and interested buyers in the market, equity securities, debt securities or borrow from lending institutions. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute our shareholders’ interests. The incurrence of debt would divert cash for working capital and capital expenditures to servicing debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may be adversely affected. See “Risk Factors—Risks Relating to our Company and the PRC Hydroelectric Power Industry—We will need additional funding to accomplish our growth strategy and may be unable to raise capital on terms favorable to us or at all, which could increase our financing costs, dilute your ownership interests, affect our business operations or force us to delay, reduce or abandon our growth strategy.”

C. Research and Development

Not applicable.

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D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2013 that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E. Off-Balance Sheet Arrangements

We have not entered into any material outstanding financial guarantees or other commitments to guarantee the payment of obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2013:

	Payment Due by Period
	Total	Within 1 Year	1-3 Years	3-5 Years	More than 5 Years
	(unaudited) (US$ in thousands)
Short-term borrowings(1)	11,973	11,973	—	—	—
Interest on short-term borrowings(1)	768	768	—	—	—
Long-term borrowings (including current portion of long-term borrowings)(1)	250,060	38,337	67,906	60,558	83,259
Interest on long-term borrowings (including interest on current portion of long-term borrowings)(1)	73,315	15,984	24,605	15,505	17,221
Operating lease commitment	42	20	22	—	—
Other commitments(3)	6,154	85	388	395	5,286
Purchase obligations(2)	329	329	—	—	—
Total	342,641	67,496	92,921	76,458	105,766

(1)See Note 15 to our audited consolidated financial statements, which are included elsewhere in this annual report, for a discussion of our short- term and long-term borrowings.

(2)This represents contracted but unpaid amounts for the purchase of property, plant and equipment of Ruiyang, Yingchuan, Zhougongyuan and Wangkeng.

(3)This represents the compensation agreements signed with certain land owners in the Fujian Province, the PRC, who lost the usage of their land due to the operation of our hydroelectric power projects in the areas.

G. Safe Harbor

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Introduction—Special Note Regarding Forward-Looking Statements.”

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table sets forth information regarding our directors and executive officers.

Name	Age	Position/Title
Amit Gupta	37	Chairman, Director
Moonkyung Kim	40	Director
Jui Kian Lim	42	Director
Shadron Lee Stastney	44	Director (resigned in September 17, 2013)
Dr. You-Su Lin	60	Director, Interim CEO, Chairman of Beijing A.B.C. Investment
Yun Pun (Felix) Wong	48	Director
Liya Chen	41	Chief Financial Officer
Wu Gan	56	Vice Chairman of Beijing A.B.C. Investment
Kar Yu Daniel Chan	57	Chief Operating Officer
Allard M. Nooy	51	Director
Min Lin	36	Director

Unless otherwise indicated, the business address of each director and executive officer is c/o 901, Marco Polo Plaza Building, No.80 Anli Road, Chao Yang District, Beijing, PRC 100101.

A description of the business experience and present position of each director and executive officer is provided below:

Directors

Mr. Amit Gupta has been our chairman since October 2012 and a director and interim corporate secretary of our company since September 2012. Mr. Gupta is a co-founder and partner at NewQuest Capital Advisors (HK) Limited. Mr. Gupta heads the India business for the NewQuest Capital Partners group and overseas investments in power and financial services sector. He is also the Chief Operating Officer of the NewQuest Capital Partners group. Mr. Gupta has about 13 years of industry experience. Mr. Gupta is currently a member of the Board and Audit Committee of OM Logistics Limited, Ittiam Systems Private Limited and several other group and investee companies of NewQuest Capital Partners group including CPI Ballpark Investments Ltd. Prior to co-founding the NewQuest Capital Partners group, he was a Director at Bank of America Merrill Lynch’s (“BAML”) Asia Private Equity group where he led the India business and oversaw investments in the energy and financial services sectors across Asia Pacific. Mr. Gupta has also served in other roles in BAML, including the Corporate Principal Investments team in Hong Kong and the Investment Banking team in Mumbai. Prior to working at BAML, he worked as a software engineer based in Mumbai and the USA. Mr. Gupta has an MBA from Indian Institute of Management (IIM), Bangalore India (placed in Director’s Merit List) and an undergraduate degree in electrical engineering from Regional Engineering College (REC) Kurukshetra India (University Gold Medal).

Ms. Moonkyung (Moon) Kim has been a director of our company since September 2012. She is the Founder and Managing Director of Peony Investments (Hong Kong) Limited, providing investment, advisory, and board leadership to green businesses. She is also Cleantech Venture Partner of Spring Capital, a Greater China-focused early growth equity investment fund, and Senior Advisor to SOW Asia Foundation, a not-for-profit venture philanthropic organization in Hong Kong. Ms. Kim has over 15 years of experience in the energy and environmental sectors serving in roles ranging from venture capital and growth equity investment to entrepreneurship, investment banking, strategic consulting, and engineering. From 2007 to 2010, she was head of Asia cleantech growth equity investments at Nomura’s principal investing group based in Hong Kong. Ms. Kim was a member of the board of directors of Moser Baer Solar, a solar photovoltaic company in Delhi, from 2008 to 2010. Prior to joining Nomura, she was with DFJ Element Ventures, a cleantech-focused venture capital fund based in Silicon Valley, and before that she was with the energy and utilities group of Booz Allen Hamilton, a global strategy consulting firm. Ms. Kim received a Master of Business Administration degree from the Wharton School of the University of Pennsylvania and a Bachelor of Science with honors in Environmental Engineering from Harvard University.

Mr. Jui Kian Lim has been a director of our company since September 2012. He is the Managing Director and Head of Asia Environment Group for FourWinds Capital Management (HK) Limited. He joined FourWinds Capital Management (HK) Limited in February 2008. Mr. Lim has more than 17 years of experience in the Asian infrastructure and environment sectors. He began his career in equity research in 1994 with Morgan Grenfell/Deutsche Securities and later, Peregrine Securities covering infrastructure, construction and building materials sector in Malaysia, Thailand and Singapore. In 1998, he joined Veolia Water Asia-Pacific’s Project Finance Department where he spent eight years helping Veolia Water Asia-Pacific build its Asian franchise and worked on acquisitions, joint-ventures, privatizations and project financing transactions across the region. In 2006, Mr. Lim joined JPMorgan Chase’s investment banking department to focus on client advisory services in the infrastructure and environment sectors. A Chevening Scholar, Mr. Lim earned his MSc (Economics) from the London School of Economics in 1994.

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Mr. Shadron Lee Stastney has been a director of our company since October 2012, and previously served as a director of our company from May 2007 to September 2012. Mr. Stastney is the Chairman of Care Media and a member of the board of directors of China Board Mill Corporation, China Silicon Corporation, China New Energy Group Company, China Natural Energy Corporation, Quality Health Plans, MDwerks, the Amacore Group, Inc., Master Silicon Carbide Industries, Inc. and Ambient Corporation. Since June 2004, Mr. Stastney has been a partner at Vicis Capital, LLC, which is an investment management firm and the managing partner of one of our principal shareholders, Vicis Capital Master Fund. From September 2001 to February 2004, Mr. Stastney was a partner of Vicis Capital Management, an investment management firm. Mr. Stastney received his Bachelor of Arts degree from the University of North Dakota and a Juris Doctor degree from the Yale Law School.

Dr. You-Su Lin has been our interim chief executive officer since October 2012, a director of our company since August 2008 and chairman of the board of Beijing A.B.C. Investment since 2007. Dr. Lin has also been the chairman of China Board Mill Corporation since August 2008. Dr. Lin was a chief consultant for Beijing Urban Construction Group Co., Ltd. in charge of the construction of 2008 Olympic venues from 2002 to 2004. Dr. Lin received his Ph.D. in the Arts and master’s degree in the Arts from Australian National University and his bachelor’s degree in the Arts from Beijing Foreign Language University.

Mr. Yun Pun (Felix) Wong has been a director of our company since September 2012. He is the CFO and Executive Director of Tsing Capital, a venture capital firm which manages China Environment Fund III, L.P. Prior to his current role, Mr. Wong has also served as the CFO and Senior Director of Spring Capital, the CFO of Natixis Private Equity Asia and Associate Director of Finance for JAFCO Asia. Mr. Wong has additionally served in the finance departments of several multinational companies and as an auditor for PricewaterhouseCoopers. Mr. Wong graduated from the Hong Kong Polytechnic University and holds a Master of Business from the Curtin University, Australia. He is a fellow member of Hong Kong Institute of Certified Public Accountants.

Mr. Allard Nooy was appointed by the Company’s Board of Directors as an independent non-executive director effective August 19, 2013.  Mr. Nooy has more than 19 years of experience with major water-related infrastructure projects in Asia.  He most recently served as CEO of Jindal Water Infrastructure, Ltd.  Prior to that, he led multiple renewable energy projects in China as President Asia Pacific with U.S. based Covanta Energy, one of the world’s largest waste-to-energy companies.  He was also previously the regional director at Leighton Asia and RWE-Thames Water.  Mr. Nooy completed his MBA and Engineering studies from Amberes University - PWU, Antwerp, Belgium and is based in Hong Kong.

Ms. Min Lin has served on the Company’s Transition Committee since October 2012, has been a director since January 2014, and has assisted the Company on operational, financing and managerial matters. Ms. Lin has more than 12 years of experience in principle investments, structured financing, asset-backed financing and accounting in China and the United States. She has been a partner at NewQuest Capital Advisors (HK) Limited (“NewQuest”) since 2011 and co-heads the Greater China business of NewQuest, overseeing investments in clean energy, retail and industrials. Prior to NewQuest, Ms. Lin was a Director focusing on China investments for Bank of America Merrill Lynch’s (“BAML”) Asia Private Equity Group based in Hong Kong. Ms. Lin also worked for Merrill Lynch in New York advising, structuring and investing in different financial products and transactions. She has previously worked as an accountant for Arthur Andersen in China. Ms. Lin received her MBA from the MIT Sloan School of Management in Cambridge, MA and an undergraduate degree from Sun Yat-Sen University in Guangzhou, China. She is a certified Chartered Financial Analyst. Ms. Lin is currently pursuing her EMBA degree at Cheung Kong Graduate School of Business (CKGSB) at Beijing, China.

Officers

Ms. Liya Chen joined our company in August 2011 and has been appointed the CFO since then. Prior to joining us, Ms. Chen was a Financial Controller for Pharmaron (Beijing) New Drugs Technology Company Ltd. From 2003 to 2010, she was an audit manager in the Energy and Utility Assurance Service Group of PricewaterhouseCoopers. Ms. Chen started her career in PwC’s Canada firm as an associate and worked there for over three years. Ms. Chen is a Canadian Chartered Accountant (CICA) and HKCPA. Ms. Chen received her Master of Accountancy degree from Brock University, Canada in 2003.

Mr. Wu Gan has been the vice chairman of Beijing A.B.C. Investment since January 2011 and was the general manager of Beijing A.B.C. Investment from July 2008 to December 2010. Mr. Gan was the director of the general office of the State Supervision Work Committee of the Communist Party of China from 2002 to 2008. Mr. Gan received his bachelor’s degree in Engineering from the Yellow River Water Conservancy and Hydroelectric Technology School and his master’s degree in Economics from Harbin Institute of Technology.

Mr. Daniel Chan was appointed as the Company’s Chief Operating Officer in the second quarter of 2013.  Mr. Chan brings 32 years of experience in the international power industry and is a registered professional engineer in the United States.  For the past 16 years, Daniel has been in charge of construction, operations and maintenance of several hydro power and other power projects in the PRC with Meiya Power, a leading independent power producer (IPP) in Asia that was acquired by Guangdong Nuclear.

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B. Compensation

Compensation of Directors and Executive Officers

The aggregate cash compensation that we paid to our directors and executive officer for the year ended December 31, 2013 was $1.86 million, including those who left during 2013, was $0.38 million. From 2009 to 2010, we established 401(k) safe harbor plan, which requires a dollar by dollar matching contribution from the employer up to 3% of the employee’s eligible annual salary. In 2010, we introduced 401(k) profit sharing plan, which allows us to contribute up to 25.0% of the employees’ eligible annual salary. Such plan was terminated in May 2013.  For the year ended December 31, 2013, we contributed less than $0.01 million to our 401(k) retirement plan. In 2010, our company established a defined benefit plan for certain executives, which is a type of pension plan in which we promise a specified monthly benefit on retirement for certain executives that is predetermined by a formula based on the employee’s earnings history, tenure of service, age, and present value factor.  Such plan was terminated in December 2012. For share-based compensation, see “—2008 Share Incentive Plan.”

2008 Share Incentive Plan

The China Hydroelectric Corporation 2008 Share Incentive Plan, or the 2008 Plan, allows our company to grant options, share appreciation rights, share awards, phantom awards and other equity-based or cash-based awards to employees, consultants, and other individuals providing services to our company, including our directors. The maximum aggregate number of ordinary shares that may be issued under the 2008 Plan is 12,000,000 ordinary shares. The purpose of the 2008 Plan is to promote long-term growth and profitability of our company by (i) providing key people with incentives to improve shareholder value and to contribute to the growth and financial success of our company through their future services, and (ii) enabling our company to attract, retain and reward the best-available persons.

The 2008 Plan administrator, which may be our board of directors or its authorized designee, has full power and authority to administer, construe and interpret the 2008 Plan. Grants under the 2008 Plan will be governed by individualized grant agreements and stock restriction agreements and may be subject to either time-based or performance-based vesting provisions. Separate form grant agreements have been drafted for employees in China to comply with certain registration, reporting and tax rules.

The only awards that have been granted pursuant to the 2008 Share Incentive Plan are stock options.

Share Options. The exercise price of incentive share options must be at least equal to the fair market value of our ordinary shares on the date of grant. However, the exercise price of all other options may be as determined by the administrator. The term of an incentive stock option may not exceed ten years from the date the 2008 Plan is adopted by our board of directors or the date that is approved by the shareholders. The administrator determines the term of all other options. After termination of an employee, director or consultant, he or she may exercise his or her options for the period of time stated in the option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for twelve months. In all other cases, the option will generally remain exercisable for thirty days. However, an option generally may not be exercised later than the expiration of its term. We grant awards with exercise prices at or above fair market value. In pricing awards under the plan, the administrator has considered the share purchase price negotiated with independent third parties in recently completed equity financings, as well as the progress of the company in developing its business since the time of those financings.

Share Appreciation Rights. Share appreciation rights allow the recipient to receive the appreciation in the fair market value of our ordinary shares between the date of grant and the exercise date. The exercise price of share appreciation rights granted under our plan may be as determined by the administrator.

Share Awards. Share awards relate to the grant of restricted or unrestricted share awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law as the administrator may from time to time determine.

Phantom Shares. Phantom shares are share-equivalent units granted to a participant that is credited to a bookkeeping reserve account solely for SEC reporting purposes and shall not require a segregation of any of our assets. Such shares are granted from time to time as the administrator may determine.

Amendment and Termination. Our 2008 Plan will automatically terminate in 2018, unless we terminate it sooner. Our board of directors has the authority to amend, alter, suspend or terminate the 2008 Plan.

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Our board of directors granted stock options to purchase 3,897,000 ordinary shares in August 2008, of which the options granted to one employee to purchase 5,000 ordinary shares expired as the employee terminated his services to us before the option became exercisable, stock options to purchase 35,000 ordinary shares in January 2009 and subsequently stock options to purchase 7,000,000 ordinary shares in December 2009 under the 2008 Plan to our executive officers, directors, employees and consultants. The options granted in December 2008 and January 2009 to our executive officers, employees and consultants have an exercise price of $7.70 per share and will vest in a three-year period, with one-third vesting each year, and a term of five years. The options granted in December 2009 have an exercise price equal to the price of the ordinary shares underlying the ADSs sold in the IPO and will vest in a four-year period, with one-fourth vesting each year, and a term of five years. The 40,000 options granted to our non-executive directors, Shadron Lee Stastney, and three non-executive directors who have resigned from our board, Richard H. Hochman, Robert W. MacDonald and Dennis Galgano, have an exercise price of $7.70 per share, and will vest, or did vest, 100% on the first anniversary of the grant date or upon the resignation or removal of such director from our board.

In December 2011, the board authorized a stock option exchange program, under which (i) employees would be given the option to voluntarily forfeit their existing stock options, (ii) any cancelled shares resulting from stock options forfeited would be added back to the option share pool to be used to make future grants, (iii) new stock options would be granted to deliver the same current expected value as the forfeited option grants, but at a reduced exercise price of $0.46 per option share (which was the equivalent to one third of the 25 day trailing average closing price of our ADSs as of the close of business on December 21, 2011), which reduced exercise price shall in no event be less than the fair market value on the date of the grant; and (iv) the new options issued under the exchange program would expire on the fifth anniversary of the grant, (v) the new options should become exercisable immediately upon grant; and (vi) the 40,000 options granted to our non-executive directors and 50,000 options granted to a former consultant were excluded on this exchange program.

On May 1, 2012, the Board approved the grant of 9,979,998 share options to the employees and non-employee consultant at exercise prices of US$0.62 with a contractual life of five years. On December 1, 2012, the Board approved the grant of 600,000 share options to our new employee at exercise price of US$0.72 with a contractual life of five years. Subject to the teams and conditions described in the option agreement, the options with exercise price of US$0.62 become exercisable for (i) 50% of the number of shares covered by the options on the first anniversary of the grant date and (ii) 25% of the number of shares covered by the options on each of the second and third anniversaries of the grant date; the options with exercise price of US$0.72 become exercisable for (i) 25% of the number of shares covered by the options on May 1, 2013 and (ii) 25% of the number of shares covered by the options on each of the first, second and third anniversaries of December 1, 2012. During the year ended December 31, 2012, four employees terminated their employment relationship with us and their unvested 7,238,217 share options were forfeited.

On August 26, 2013, the Board approved the grant of 900,000 share options to employees and 400,000 share options to one employee at exercise price of US$0.8474 and US$0.99 with a contractual life of five years, respectively. 33.3% of share options will vest and become exercisable on each of the first, second and third anniversaries of the grant date.

During the year ended December 31, 2013, three former employees and one employee exercised their options by obtaining 107,700 common shares from the Company. During the year ended December 31, 2013, six employees terminated their employment relationship with the Company which resulted in their 630,000 unvested share options forfeited and 79 vested share options expired.

As of the date of this annual report, the maximum number of ordinary shares that may be issued pursuant to all awards under the 2008 Share Incentive Plan is 12,000,000 and options to purchase 3,889,564 ordinary shares are outstanding under the 2008 Share Incentive Plan.

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The following table sets forth information on share options that have been granted and are outstanding as of the date of this annual report under the 2008 Share Incentive Plan, reflecting the participation of the stock option exchange program described above by certain of our employees:

Name	Ordinary Shares Underlying Exercisable  Options	Exercise Price ($/Share)	Grant Date	Expiration Date
Dr. You-Su Lin	101,507	0.46	December 28, 2011	December 28, 2016
Dr. You-Su Lin	1,110,891	0.62	May 1, 2012	May 1, 2017
Other employees as a group	18,774	0.46	December 28, 2011	December 28, 2016
Other employees as a group	117,500	0.62	May 1, 2012	May 1, 2017
Total	1,348,672

Name	Ordinary Shares Underlying Unvested  Options	Exercise Price ($/Share)	Grant Date	Expiration Date
Dr. You-Su Lin	1,110,890	0.62	May 1, 2012	May 1, 2017
Other employees as a group	160,002	0.62	May 1, 2012	May 1, 2017
Other employees as a group	870,000	0.85	August 26, 2013	August 26, 2018
One employee	400,000	0.99	August 26, 2013	April 10, 2018
Total	2,540,892

Compensation Expenses Relating to Stock Option Grants

The administrator, which is the board of directors or its authorized designee, has full power and authority to administer, construe and interpret the 2008 Plan. Under the terms of the 2008 Plan, incentive stock options must be granted at exercise prices at least equal to the fair market value on the date of grant. On August 18, 2008, the board of directors approved the grant of 40,000, 260,000 and 3,597,000 non-qualified stock options to certain directors, non-employees and employees, respectively, at an exercise price of $7.70 per share. On January 20, 2009, our board of directors approved the grant of 35,000 non-qualified stock options to certain employees at an exercise price of $7.70 per share. On March 4, 2009, the board of directors passed a resolution to modify the 2008 Plan such that the 2008 Plan could be made effective without approval by our shareholders. In accordance with ASC sub- topic 718-10, Compensation—Stock Compensation: Overall, the grant date for the share-based awards issued on August 18, 2008 and January 20, 2009 was March 4, 2009. Accordingly, no compensation expense was recognized for the year ended December 31, 2008. We recognized compensation expense of $0.6 million for the year ended December 31, 2009. See Note 27 to our audited consolidated financial statements included elsewhere in this annual report.

On December 3, 2009, our board of directors approved the grant of 7,000,000 share options to certain of directors, officers and employees at an exercise price equal to the price at which the ordinary shares underlying the ADSs are sold in our IPO; provided that the options shall expire in the event that we do not consummate our initial public offering within six months of the approval date. Since the exercise price was not known until the initial public offering was priced on January 25, 2010, the accounting grant date for the share-based awards issued on December 3, 2009 was not established as of December 31, 2009. As such, no compensation expense related to the December 3, 2009 grant was recognized in 2009.

On December 22, 2011, the board of directors approved a stock option for stock option exchange program for the employees and consultants who were holding options, at a reduced exercise price of $0.46 per share and vested immediately on December 28, 2011. As such, the remaining option expenses of $6.8 million for the existing options were expensed immediately at the time of the exchange.

On May 1, 2012, the Board approved the grant of 9,979,998 share options to the employees and non-employee consultant at exercise prices of US$0.62 with a contractual life of five years. On December 1, 2012, the Board approved the grant of 600,000 share options to our new employee at exercise price of US$0.72 with a contractual life of five years. Subject to the teams and conditions described in the option agreement, the options with exercise price of US$0.62 become exercisable for (i) 50% of the number of shares covered by the options on the first anniversary of the grant date and (ii) 25% of the number of shares covered by the options on each of the second and third anniversaries of the grant date; the options with exercise price of US$0.72 become exercisable for (i) 25% of the number of shares covered by the options on May 1, 2013 and (ii) 25% of the number of shares covered by the options on each of the first, second and third anniversaries of December 1, 2012. See Note 27 to our audited consolidated financial statements included elsewhere in this annual report. We recognized compensation expense of $0.2 million for the year ended December 31, 2012.

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On August 26, 2013, the Board approved the grant of 900,000 share options to employees and 400,000 share options to one employee at exercise price of US$0.8474 and US$0.99 with a contractual life of five years, respectively. 33.3% of share options will vest and become exercisable on each of the first, second and third anniversaries of the grant date.

During the year ended December 31, 2013, three former employees and one employee exercised their options by obtaining 110,568 ordinary shares from the Company. During the year ended December 31, 2013, seven employees terminated their employment relationship with the Company which resulted in their 630,000 unvested share options forfeited and 139 vested share options expired.

Employment Agreements with Executive Officers

We have entered into employment agreements with each of our executive officers.

Under the agreements with Dr. You-Su Lin and Wu Gan, we may terminate an executive officer’s employment for cause, with thirty days’ advance written notice and an opportunity to cure, for certain acts of such officer including but not limited to a conviction of a felony or crime involving moral turpitude, willful failure to perform the officer’s responsibilities in our best interests, or breach of any provision of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement executed by the officer for our benefit.

We may also terminate our employment agreements with these executive officers without cause upon thirty calendar days’ advance written notice. Under the employment agreement with Mr. Gan, in such case of termination by us, and also in a case where an officer voluntarily terminates his/her employment with us upon thirty-days’ advance written notice for good reason (except in the event of a qualifying termination during certain change in control periods), we shall continue to provide the officer with his/her base salary and health and welfare benefits for a period of twelve full months. Further, we shall pay the officer all other benefits to which the officer has a vested right at the time, according to the provisions of each governing plan or program. Under the employment agreement with Dr. Lin, in both cases of termination by us for cause or without cause upon thirty calendar days’ advance written notice, such officers will be entitled to any base salary, bonus and incentive payment that has accrued under the agreement but has not been paid on or before the termination date and any reimbursement due to the officer under the agreement for expenses incurred by the officer on or before the termination date. In the event of constructive termination or termination of the employment agreement by the company without cause, under the employment agreements with Mr. Gan and Dr. Lin, such officers shall be entitled to receive an amount equal to 100% of his annualized salary as in effect on the severance date.

In addition, the employment agreement with Mr. Gan contains clauses of non-competition, non-solicitation, confidential information and work product agreements. According to these clauses, Mr. Gan should be bound by (i) non-competition restrictions during his employment and for three years after the termination of his employment, (ii) confidential information restrictions during his employment and for a period of three years thereafter and (iii) non-solicitation restrictions during the non- competition period.

Dr. Lin entered into a letter agreement with us, which contains, among others, confidentiality, non-competition and non-solicitation provisions.

We have also entered into employment agreements with Liya Chen and certain other employees. Each of these employment agreements can be terminated under circumstances stipulated under the PRC Labor Contract Law and refers to confidentiality obligations provided under the PRC Labor Contract Law.

C. Board Practices

Our board of directors currently has six directors. Our board has determined that Mr. Amit Gupta, Mr. Yun Pun (Felix) Wong, Ms. Moonkyung Kim, Mr. Jui Kian Lim, Mr. Allard Nooy and Ms. Min Lin are independent directors under NYSE rules.

Terms of Directors and Executive Officers

Our directors are divided into three classes and are subject to a term of office of three years and shall automatically retire from office (unless vacated sooner) on the expiry of such term, unless appointed for an additional term. Directors may be removed from office by an ordinary resolution of the shareholders. A director will be removed from office automatically if, among other things, the director becomes bankrupt or makes any arrangement or composition with his creditors, or dies or is found by our company to be or to have become of unsound mind. Our officers are appointed by and serve at the discretion of our board of directors.

Committees of the Board of Directors

Our board of directors has established an audit committee, a compensation committee and the corporate governance and nominating committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.

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Audit Committee

Our audit committee consists of Mr. Wong, Ms. Kim and Mr. Lim, each of whom we believe satisfies the “independence” requirements under current NYSE rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Mr. Wong acts as the chairman of our audit committee. Our board of directors has determined that Mr. Wong qualifies as an “audit committee financial expert” under applicable SEC rules. The audit committee oversees our accounting and financial reporting processes and audits of the financial statements of our company. The audit committee is responsible for, among other things:

·selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

·reviewing with the independent auditors any audit problems or difficulties and management’s response;

·reviewing and approving all proposed related party transactions, which term refers to transactions that would be required to be disclosed pursuant to Item 7B of Form 20-F, regardless of the dollar amount involved in such transactions;

·discussing the annual audited financial statements with management and the independent auditors;

·reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;

·annually reviewing and reassessing the adequacy of our audit committee charter; and

·meeting separately and periodically with management and the independent auditors.

Compensation Committee

Our compensation committee consists of Mr. Gupta and Mr. Nooy. Mr. Gupta acts as the chairman of our compensation committee. Our board has determined that both Mr. Gupta and Mr. Nooy qualify as an independent director of our company within the meaning of the current NYSE rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. The compensation committee is responsible for, among other things:

·reviewing and approving the total compensation package for our three most senior executives;

·reviewing and recommending to the board of directors with respect to the compensation of our directors; and

·reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.

Corporate Governance and Nominating Committee

Our corporate governance and nominating committee consists of Ms. Kim, Mr. Nooy and Mr. Lim, each of whom satisfies the “independence” requirements under current NYSE rules. Ms. Kim acts as the chairperson of our corporate governance and nominating committee. The corporate governance and nominating committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The corporate governance and nominating committee is responsible for, among other things:

·identifying and recommending qualified candidates as director nominees for selection of directors, nominees for election to the board of directors, or for appointment to fill any vacancy;

·reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such as independence, age, skills, experience and availability of service to us;

·monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

Duties of Directors

Under Cayman Islands law, our directors have a fiduciary duty to act honestly in good faith with a view to our best interests. Our directors also have a duty to exercise the skill they actually possess with the care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our Amended and Restated Memorandum and Articles of Association. We have the right to seek damages if a duty owed by our directors is breached.

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The functions and powers of our board of directors include, among others:

·convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;

·declaring dividends and distributions;

·appointing officers and determining the term of office of officers;

·exercising the borrowing powers of our company and mortgaging the property of our company; and

·approving the transfer of shares of our company, including the registering of such shares in our share register.

Interested Transactions

Under our code of ethics, in the event that our board of directors considers entering into a transaction which would produce a conflict of interest, interested directors must abstain from any discussion of or vote on such transaction.

Remuneration

The directors may determine remuneration to be paid to the directors. The compensation committee assists the directors in reviewing and approving the compensation structure for the directors. Our directors are not entitled to any post-termination benefits.

Power to Obligate our Company

The directors may exercise all the powers of our company to raise or borrow money and to mortgage or charge all or any part of its undertaking, property and assets (present and future) and uncalled capital, and to issue debentures, bonds or other securities whether outright or as collateral security for any debt liability or obligations of our company or of any third party.

Qualification

There is no shareholding qualification for directors.

Indemnification Agreements

We have entered into indemnification agreements with our directors. Each of the indemnification agreements provides the directors with contractual rights to indemnification and expense advancement rights.

Pursuant to our Amended and Restated Memorandum and Articles of Association and the indemnification agreements, our directors are indemnified to the fullest extent permitted under the law and public policy of the Cayman Islands for all judgments, fines, settlements, legal fees and other expenses actually and reasonably incurred in connection with pending or threatened legal proceedings because of such director’s position with us or another entity that the director serves at our request, subject to various conditions.

D. Employees

We had 681, 609 and 595 employees as of December 31, 2011, 2012 and 2013, respectively. The following table sets forth the number of employees categorized by function as of December 31, 2013:

	Number of Employees	(%)
Management	4	0.7
Finance	36	5.9
Project Construction, Operations and Management	479	80.6
Administrative and Human Resources	76	12.8
Total:	595	100.0

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E. Share Ownership

The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our ordinary shares, as of March 31, 2014, by:

·each of our directors and executive officers; and

·each person known to us to own beneficially more than 5% of our ordinary shares.

Percentage of beneficial ownership is calculated by dividing the number of shares beneficially owned by 162,126,002, which was the number of ordinary shares outstanding as of March 31, 2014. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days from March 31, 2014, including through the exercise of any option, warrant, or other right. These shares, however, are not included in the computation of the percentage ownership of any other person.

	Ordinary Shares Beneficially Owned
Name	Number	Percent
Directors and Executive Officers
Amit Gupta	*	*	%
Moonkyung Kim	*	*	%
Jui Kian Lim	*	*	%
Min Lin	*	*	%
Dr. You-Su Lin	2,700,992	1.7	%
Allard N. Nooy	*	*	%
Yun Pun (Felix) Wong	*	*	%
Kar Yu Daniel Chan	*	*	%
Liya Chen	*	*	%
Gan Wu	*	*	%
All Directors and Executive Officers as a Group(1)	2,984,077	1.8	%
Principal Shareholders:
CPI Ballpark Investments Ltd (2)	87,737,462	54.1	%
Jennison Associates, LLC (3)	19,607,915	12.1	%

*Upon exercise of all options and warrants exercisable within 60 days after March 31, 2014, would beneficially own less than 1.0% of our outstanding ordinary shares.

(1)       Includes ordinary shares held by all of our directors and executive officers as a group and ordinary shares issuable upon the exercise of all of the options and warrants that are exercisable within 60 days after March 31, 2014, held by all of our directors and executive officers.

(2)     Based on a Schedule 13D/A jointly filed by NewQuest Capital Management (Cayman) Limited, NewQuest Asia Fund I (G.P.) Ltd., NewQuest Asia Fund I, L.P. and CPI Ballpark Investments Ltd on January 13, 2014 and includes 87,737,462 shares beneficially owned by NewQuest Asia Fund I, L.P., a Cayman Islands exempted limited partnership, NewQuest Asia Fund I (G.P.) Ltd., a Cayman Islands exempted company and general partner of NewQuest Asia Fund I, L.P., CPI Ballpark Investments Ltd, a limited liability company organized under the laws of Mauritius and a wholly owned subsidiary of NewQuest Asia Fund I, L.P., and NewQuest Capital Management (Cayman) Limited, a Cayman Islands exempted company. NewQuest Capital Management (Cayman) Limited is an exempted company registered in the Cayman Islands. The principal address of NewQuest Capital Management (Cayman) Limited is c/o Intertrust Corporate Services (Caymen) Limited, 190 Elgin Avenue, Georgetown, Grand Cayman, Cayman Islands KY1-9005. NewQuest Asia Fund I (G.P.) Ltd. is an exempted company registered in the Cayman Islands. The principal address of NewQuest Asia Fund I (G.P.) Ltd. is c/o Intertrust Corporate Services (Caymen) Limited, 190 Elgin Avenue, Georgetown, Grand Cayman, Cayman Islands KY1-9005. NewQuest Asia Fund I, L.P. is an exempted limited partnership registered in the Cayman Islands. The principal address of NewQuest Asia Fund I, L.P. is c/o Intertrust Corporate Services (Caymen) Limited, 190 Elgin Avenue, Georgetown, Grand Cayman, Cayman Islands KY1-9005. CPI Ballpark Investments Ltd is wholly owned by NewQuest Asia Fund I, L.P. The principal address of CPI Ballpark Investments Ltd is 10th Floor, Raffles Tower, 19 Cybercity, Ebene, Republic of Mauritius.

(3)     Based on a Schedule 13G/A filed by Jennison Associates LLC and Prudential Financial, Inc. on November 24, 2013, respectively. As a result of its role as investment adviser to clients in its managed portfolios, Jennison Associates, LLC may be deemed to be the beneficial owner of 19,607,913 ordinary shares. The address of Jennison Associates, LLC is 466 Lexington Avenue, New York, New York 10017. Prudential Financial, Inc. is a parent holding company and the indirect parent of Jennison Associates, LLC. The address of Prudential Financial, Inc. is 751 Broad Street, Newark, New Jersey 07102- 3777.

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None of our existing shareholders has voting rights that will differ from the voting rights of other shareholders.

Please refer to “Item 6.B. Directors, Senior Management and Employees — Compensation — 2008 Share Incentive Plan” for information regarding option ownership of our directors and executive officers.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The following table describes the significant changes in percentage of ownership of major shareholders:

	Year ended December 31
Shareholders ownership	2013		2012		2011
CPI Ballpark Investments Ltd	54.1	%	30.2	%	23.9	%
Vicis Capital Master Fund	—		28.4	%	28.4	%
Jennison Associates, LLC	12.1	%	12.1	%	12.1	%
Swiss Re Asset Management (America) Inc.	—		—		6.2	%

Please refer to Item 6.E, “Directors, Senior Management and Employees—Share Ownership”

B. Related Party Transactions

The following describes our related party transactions since the beginning of 2013.

Transactions with CPI Ballpark Investment Ltd. and its affiliates

CPI Ballpark Investment Ltd. is one of our principle shareholders. During the year ended December 31, 2013, CPI Ballpark Investment Ltd. paid administrative expenses on our behalf primarily relating to the proxy contest amounting to $20,000.

Transactions with Xiamen Youen Hydropower Development Co., Ltd. and Sanming Youxin Electric Power Industrial Co., Ltd.

During the year ended December 31, 2013, US$5.6 million was repaid to Sanming Youxin Electric Power Industrial Co., Ltd (“Sanming Youxin”) and additional short-term borrowing of US$0.2 million and US$1.4 million was obtained from Xiamen Youen Hydropower Development Co., Ltd (“Xiamen Youen”) and Sanming Youxin, respectively.

Balances Payable to Nanping City Xingshui Co., Ltd. and Sanming Youxin Electric Power Industrial Co., Ltd.

Nanping City Xingshui Co., Ltd is a minority shareholder of Jinlong, and Sanming Youxin is a minority shareholder of Jintang and Jinwei since June 2013. In December 2010, we completed our purchase of Shaowu City Jinling Power Generation Co., Ltd (hereafter “Jinling”), together with Jinling’s 55.0% controlling interest in Jinlong, Jinling’s 74.0% controlling interest in Jintang, and Jinling’s 74.0% controlling interest in Jinwei. As of December 31, 2013, the amount of US$1.5 million due to Nanping City Xingshui Co., Ltd represents the current liabilities acquired in the acquisition of Jinlong, Jintang and Jinwei. As of December 31, 2013, the $7.5 million due to Sanming Youxin assumed in the acquisition of Jinling and its subsidiaries is unsecured and interest free.

Shareholders Agreement

Under the terms of an amended and restated shareholders agreement with our former Series A, Series B and Series C convertible redeemable preferred shareholders, among others, at any time six months after the closing of our initial public offering, any shareholder(s) holding of record at least 15.0% of Series A, Series B or Series C registrable securities then outstanding may, on three occasions only, request us to effect the registration, on a form other than Form F-3, of all or part of the Series A, Series B or Series C registrable securities then outstanding. Series A, Series B and Series C registrable securities are ordinary shares issued or issuable to the holders of our Series A, Series B and Series C convertible redeemable preferred shares or their respective transferees.

In addition, upon our company becoming eligible for using Form F-3, any holder of registrable securities may request us to effect a registration statement on Form F-3 for a public offering of registrable securities and we are entitled to use Form F-3, or a comparable form, for such offering. Holders of registrable securities may demand a registration on Form F-3 on unlimited occasions, although we are not obligated to affect more than two such registrations in any 12-month period.

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Holders of registrable securities also have “piggyback” registration rights, whereby they may request us to register all or any part of the registrable securities then held by such holders when we register any of our ordinary shares. If any of the offerings involves an underwriting, the managing underwriter of any such offering has certain rights to limit the number of shares included in such registration. However, the number of registrable securities included in an underwritten public offering subsequent to our initial public offering pursuant to “piggyback” registration rights may not be reduced to less than 25% of the aggregate securities included in such offering. However, no specific damages, payment, transfer or any other consideration to holders of registrable securities is provided for in the event of non-performance to effect a registration statement.

2008 Share Incentive Plan

We have granted share options to some of our directors, officers and related parties. See “Item 6.B. Directors, Senior Management and Employees — Compensation —2008 Share Incentive Plan.”

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated statements and other financial information.

We have appended consolidated financial statements filed as part of this annual report. See Item 18, “Financial Statements.”

Legal Proceedings

See Item 4, “Information on the Company—Business Overview—Legal Proceedings.”

Dividend Policy

We have never declared or paid cash dividends on our ordinary shares. We currently intend to retain all of our available funds and future earnings for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Under the terms of our Amended and Restated Memorandum and Articles of Association the declaration and payment of any dividends in the future will be determined by our board of directors, in its discretion, and will depend on a number of factors, including our earnings, capital requirements and overall financial condition and our ability to receive dividends from our operating subsidiaries. If we pay any dividends, we will pay our ADS holders’ dividends with respect to their underlying shares to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

Current regulations in China permit our PRC subsidiaries to pay dividends to us only out of their respective accumulated distributable profits, if any, determined in accordance with their articles of association and PRC accounting standards and regulations. The ability of these subsidiaries to make dividends and other payments to us may be restricted by factors that include changes in applicable foreign exchange laws and other laws and regulations. In particular, wholly foreign-owned enterprises in China are required to set aside at least 10% of their after-tax profits each year, if any, to fund their reserve fund unless such reserve fund has reached 50% of their respective registered capital and to set aside a percentage of their after-tax profits, if any, to their employee bonus and welfare fund which is decided by their respective boards of directors. Sino-foreign equity joint ventures are also required to set aside a percentage of their annual after-tax profits, if any, to their reserve fund, enterprise development fund and employee bonus and welfare fund at percentages that are decided by their respective boards of directors. PRC domestic companies are required to set aside at least 10% of their after- tax profits each year, if any, to fund their respective statutory reserve fund unless such fund has reached 50% of their respective registered capital. Such cash reserve may not be distributed as cash dividends. In addition, if any of our PRC operating subsidiaries incurs further debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Some of our subsidiaries are restricted from paying dividends by the terms of outstanding loan agreements. See “Risk Factors—Risks Relating to our Company and the PRC Hydropower Industry—Certain of our operating subsidiaries are parties to loan agreements that provide for lender rights that may adversely affect our ability to operate our business and restrict our ability to pay dividends.”

B. Significant Changes

See “Item 5. Operating and Financial Review and Prospects—Going Concern” and “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

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ITEM 9. THE OFFER AND LISTING.

A. Offering and listing details.

Price Range of Our ADSs

Our ADSs are listed for trading on the New York Stock Exchange under the symbol “CHC” since January 25, 2010. The following table sets forth the high and low trading prices of our ADSs on the New York Stock Exchange for the periods indicated:

	High		Low
Yearly highs and lows
Year 2010 (starting from January 25, 2010)	$	14.80	$	5.60
Year 2011	7.72		0.67
Year 2012	2.84		0.62
Year 2013	3.25		1.43
Quarterly highs and lows
First Quarter 2012	2.44		0.95
Second Quarter 2012	2.06		0.64
Third Quarter 2012	1.65		0.62
Fourth Quarter 2012	2.84		1.22
First Quarter 2013	2.80		1.43
Second Quarter 2013	3.25		2.10
Third Quarter 2013	2.86		1.73
Fourth Quarter 2013	2.76		2.36
First Quarter 2014	3.42		2.58
Monthly highs and lows
October 2013	2.65		2.36
November 2013	2.53		2.39
December 2013	2.76		2.42
January 2014	3.39		2.58
February 2014	3.41		3.28
March 2014	3.42		3.35
April 2014 (through April 17, 2014)	3.42		3.39

On April 17, 2014, the closing sale price of our ADSs as reported on the New York Stock Exchange was $3.42 per ADS.

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Our warrants are listed for trading on the New York Stock Exchange under the symbol “CHCWS” since January 25, 2010 and expired on January 25, 2014 without exercise. The following table sets forth the monthly high and low trading prices of our warrants on the New York Stock Exchange for the periods indicated:

	High		Low
Yearly highs and lows
Year 2010 (starting from January 25, 2010)	$	1.77	$	0.28
Year 2011	0.38		0.03
Year 2012	0.07		0.00
Year 2013	0.05		0.00
Quarterly highs and lows
First Quarter 2012	0.05		0.01
Second Quarter 2012	0.07		0.01
Third Quarter 2012	0.03		0.01
Fourth Quarter 2012	0.03		0.00
First Quarter 2013	0.03		0.01
Second Quarter 2013	0.05		0.01
Third Quarter 2013	0.04		0.00
Fourth Quarter 2013	0.03		0.01
First Quarter 2014	0.02		0.00
Monthly highs and lows
October 2013	0.02		0.01
November 2013	0.03		0.01
December 2013	0.02		0.01
January 2014 (through January 25, 2014)	0.02		0.00

On January 25, 2014, the closing sale price of our warrants as reported on the New York Stock Exchange was $0.00 per warrant.

B. Plan of Distribution

Not applicable.

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C. Markets

See Item 9.A above.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

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ITEM 10. ADDITIONAL INFORMATION.

A. Share capital

Not applicable.

B. Memorandum and Articles of Association

The following are summaries of material provisions of our amended and restated memorandum and articles of association, as well as the Companies Law (2013 Revision) insofar as they relate to the material terms of our ordinary shares.

Registered Office and Objects

The Registered Office of our company is situated at the offices of Appleby Trust (Cayman) Ltd., Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman, KY-1108, Cayman Islands or at such other place in the Cayman Islands as our directors may from time to time decide. The objects for which our company is established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Law (2013 Revision), as amended from time to time, or any other law of the Cayman Islands.

Board of Directors

Our board of directors consists of seven directors, including five independent directors. Directors who are in any way, whether directly or indirectly, interested in a contract or proposed contract with our company shall declare the nature of their interest at a meeting of the board of directors. Following such declaration, a director may vote in respect of any contract or proposed contract notwithstanding his interest. However, under our code of ethics, in the event that our board of directors considers entering into a transaction which would produce a conflict of interest, interested directors must abstain from any discussion of or vote on such transaction.

Directors are not required to hold shares; however, a minimum share requirement for directors may be established at a general meeting. Directors may exercise all powers of our company to borrow money, under our Amended and Restated Memorandum and Articles of Association, in a variety of ways, including issuing bonds and other securities either outright or as security for any debt liability or obligation of our company or of any third party.

Ordinary Shares

General. The ordinary shares of our company are issued in book-entry form only. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their ordinary shares.

Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by the board of directors subject to the Companies Law. All dividends or distributions will be paid out of our realized or unrealized profits, or out of the share premium account or other reserve account permitted by the Companies Law.

Voting Rights. Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded or required by the rules of the designated stock exchange. A poll may be demanded by (i) the chairman of the meeting, (ii) a shareholder or shareholders present in person by its duly authorized representative or by proxy, and holding not less than one-tenth of the issued share capital of our voting shares; (iii) by at least three shareholders present in person or represented by proxy, or (iv) any shareholder, present in person or represented by proxy, holding shares conferring the right to vote at such meeting, being shares on which as aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all such shares conferring such right.

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A quorum required for a meeting of shareholders consists of one or more shareholders present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative, holding not less than one-third of the total voting rights of ordinary shares represented at a general meeting. Shareholders’ meetings are held annually and may be convened by our board of directors on its own initiative or by one or more members holding an aggregate of one-third of the issued and outstanding shares. Advance notice of at least twenty-one days is required for the convening of a general meeting.

No business may be transacted at a general meeting, other than business that is specified in a notice given at the direction of, or otherwise properly brought before the meeting by, our board of directors or is properly brought by a shareholder who provides us with advance notice, in accordance with our Amended and Restated Memorandum and Articles of Association, describing the business desired to be conducted at the general meeting.

An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the ordinary shares. A special resolution is required for important matters such as a change of name or an amendment to our Amended and Restated Memorandum and Articles of Association.

Transfer of Shares. Subject to the restrictions of our Amended and Restated Memorandum and Articles of Association, as more fully described below, any of our shareholders may transfer all or any of his or her ordinary shares by executing an instrument of transfer and, upon approval by the board in writing, the name of the transferee is entered into the register of shareholders in order for the transfer to become effective.

If a shareholder dies, the legal representative of the deceased shareholder is the only person recognized as having title to his share interest. Any person entitled to a share as a result of death or bankruptcy or liquidation or dissolution of a shareholder (or in any other way than by transfer) may, upon providing evidence of such right, elect to become the holder of the share or nominate someone as the transferee. In either case, our directors have the same right to decline or suspend registration as they would have in the case of a transfer of the share by the shareholder before his death or bankruptcy, unless the transferee is an immediate family member of the shareholder or a trust for their benefit.

Liquidation. On a return of capital on winding-up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among the holders of ordinary shares will be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.

Redemption of Shares. Subject to the provisions of the Companies Law and our Amended and Restated Memorandum and Articles of Association and to any special rights conferred on the holders of any shares or class of shares, the board of directors may issue shares on terms that they are subject to redemption at the option of the board or at the option of the holders, on such terms and in such manner as may be determined by ordinary resolution, before the issue of the shares.

Variations of Rights of Shares. The rights attached to any class of shares may, subject to the provisions of the Companies Law and to any special rights attached to any class of shares, be varied with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class at which the necessary quorum shall be one or more persons holding or representing by proxy not less than one-third of the issued shares of that class.

Cumulative Voting. Under Cayman Islands law, cumulative voting is allowed. However, under our Amended and Restated Memorandum and Articles of Association cumulative voting is not allowed. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director.

Inspection of Books and Records. Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.

Designations and Classes of Shares. Upon the closing of this offering all of our issued shares will be ordinary shares. Our Amended and Restated Articles of Association provide that our authorized unissued shares shall be at the disposal of our board of directors, which may subject to any special rights conferred on the holders of any shares or class of shares, offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration and upon such terms and conditions as our board may in its absolute discretion determine. In particular, our board of directors is empowered to redesignate from time to time authorized and unissued ordinary shares as other classes or series of shares, to authorize from time to time the issuance of one or more series of preferred shares and to fix the designations, powers, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any, including without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption privileges, voting powers and liquidation preferences, and to increase or decrease the size of any such class or series, to the extent permitted by the Amended and Restated Articles of Association and the Companies Law.

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Preferred Shares

Our board of directors will have the authority, without further action by our shareholders, to issue new preferred shares in one or more tranches, which may have powers and rights, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, greater than the rights associated with our ordinary shares. These new preferred shares could thus be issued quickly, and could have terms calculated to delay or prevent a change in control or make removal of management more difficult. In addition, if our board of directors issues new preferred shares, the market price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares may be adversely affected.

C. Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4, “Information on the Company” and in Item 7, “Major Shareholders and Related Party Transactions” or elsewhere in this annual report on Form 20-F.

D. Exchange Controls

Please refer to Item 4, “Information on the Company—Regulation”.

E. Taxation

The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our securities is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our securities, such as the tax consequences under state, local, non-U.S., non-PRC and non-Cayman Islands tax laws.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to our company levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double taxation treaties, save for a Double Taxation Arrangement with the United Kingdom which was signed on 16 June 2009 but which is not, as of the date hereof, in force. There are no exchange control regulations or currency restrictions in the Cayman Islands, apart from standard anti-money laundering legislation.

No Cayman Islands stamp duty will be payable by you in respect of the issue or transfer of ordinary shares or warrants. However, an instrument transferring title to an ordinary share or warrant, if brought to or executed in the Cayman Islands, would be subject to Cayman Islands stamp duty.

People’s Republic of China Taxation

Under the Enterprise Income Tax Law of 2007 and its Implementation Regulations, both of which became effective on January 1, 2008, an enterprise established outside the PRC with its “de facto management body” within the PRC is considered a resident enterprise. The “de facto management body” is defined as an organization that exercises material and full management and control over matters including the enterprise’s production and operations, personnel, finance and property. At present, the PRC tax authorities have not issued any guidance on the application of the new EIT Law and its Implementation Regulations on foreign incorporated enterprises that are not controlled by PRC enterprises or PRC enterprise groups. As a result, it is unclear what factors will be used by the PRC tax authorities to determine whether we are a “de facto management body” in China. However, a substantial number of our management members reside in the PRC, and almost all of our revenues derive from our operations in the PRC. We may therefore be treated as a resident enterprise for PRC tax purposes and be subject to an enterprise income tax rate of 25% on our worldwide income. Furthermore, if we are treated as a resident enterprise for PRC tax purposes, it is unclear whether dividends you receive on our ordinary shares or ADSs, or the gain you may realize from the disposition of our ordinary shares, ADSs or warrants, would be treated as income derived from sources within the PRC and would be subject to PRC withholding tax. It is also unclear whether, if we would be treated as a resident enterprise for PRC tax purposes, holders of our ordinary shares, ADSs or warrants might be able to enjoy the benefit of income tax treaties entered into between the PRC and other countries. See “Risk Factors - Risks Relating to Doing Business in China - Our company may be classified as a ‘resident enterprise’ for PRC enterprise income tax purposes under the PRC EIT Law. Such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders, including subject to PRC taxation on our worldwide income.”

Moreover, the Enterprise Income Tax and its Implementation Regulations provide that a withholding tax rate of 10% will be applicable to dividends payable to non-PRC shareholders by a PRC resident enterprise, unless a tax treaty exists between the PRC and the relevant jurisdictions where such non-PRC shareholders reside and such treaty provides for a reduction or exemption of the relevant tax. If we are considered a non-resident enterprise, dividends we received from our PRC resident subsidiaries will be subject to the 10% PRC withholding tax since the Cayman Islands, where our company was incorporated, has not concluded any tax treaty with the PRC.

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U.S. Federal Income Taxation

Introduction

The following discusses the material U.S. federal income tax consequences of the purchase, ownership and disposition of our ordinary shares, ADSs or warrants, which we refer to collectively as our securities, by U.S. Holders, as defined below. This discussion applies only to U.S. Holders that purchase and hold the securities as capital assets. This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretation. This discussion does not address all of the tax considerations that may be relevant to specific holders in light of their particular circumstances or to holders subject to special treatment under U.S. federal income tax law, such as banks, other financial institutions, insurance companies, tax-exempt entities, persons who acquired the securities pursuant to the exercise of employee stock options, participation in an employee stock purchase plan or otherwise as compensation, regulated investment companies, real estate investment trusts, dealers in securities, brokers, U.S. expatriates, persons subject to the alternative minimum tax, persons who have acquired the securities as part of a straddle, hedge, conversion transaction or other integrated investment, persons that have a “functional currency” other than the U.S. dollar or persons that own, or are deemed to own, 10% or more, by voting power, of our stock. Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our securities through such entities. If a partnership holds securities, the consequences to a partner will depend upon the status of the partner and upon the activities of the partnership. A partner of a partnership holding securities should consult its own tax adviser regarding the U.S. tax consequences of its investment in the securities through the partnership. This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift or alternative minimum tax considerations. Further, the discussion below assumes that any distributions made (or deemed made) on the securities and any consideration received by a holder in consideration for the sale or other disposition of the securities will be in U.S. dollars.

As used in this discussion, the term “U.S. Holder” means a beneficial owner of the securities that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any state or political subdivision thereof or therein, including the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income tax regardless of the source thereof, or (iv) a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person.

The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement have and will be complied with in accordance with their terms. For U.S. federal income tax purposes, a holder of an ADS should be treated as the beneficial owner of the ordinary shares represented by the ADSs and exchanges of ordinary shares for ADSs, and ADSs for ordinary shares, should not be subject to U.S. federal income tax.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS APPLICABLE TO THEM RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SECURITIES, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE AND LOCAL TAX LAWS OR NON-U.S. TAX LAWS, ANY CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.

Tax Consequences to U.S. Holders of Ordinary Shares and Warrants

Exercise of a Warrant

Subject to the PFIC rules discussed below, a U.S. Holder generally will not recognize gain or loss upon the exercise of a warrant. Ordinary shares acquired pursuant to the exercise of a warrant for cash generally will have a tax basis equal to the U.S. Holder’s tax basis in the warrant (that is, the portion of the U.S. Holder’s purchase price for a unit that is allocated to the warrant), increased by the amount paid to exercise the warrant. The holding period of such ordinary shares generally would begin on the day after the date of exercise of the warrant.

Sale, Taxable Exchange, Redemption or Expiration of a Warrant

Subject to the PFIC rules discussed below, upon a sale, taxable exchange (but not exercise), or redemption of a warrant, a U.S. Holder will recognize gain or loss in an amount equal to the difference between (i) the amount realized upon such disposition (or, if the warrant is disposed of through the disposition of a unit, the portion of the amount realized on such disposition that is allocated to the warrant based on the then fair market values of the warrant and the ordinary share included in the unit) and (ii) the U.S. Holder’s tax basis in the warrant (that is, the portion of the U.S. Holder’s purchase price for a unit that is allocated to the warrant). Upon expiration of a warrant, a U.S. Holder will recognize a loss in an amount equal to the U.S. Holder’s tax basis in the warrant. Any such gain or loss would generally be treated as capital gain or loss and will be long-term capital gain or loss if the warrant was held by the U.S. Holder for more than one year at the time of such disposition or expiration. As discussed below in “Sale or other Disposition of Ordinary Shares or ADSs,” the deductibility of capital losses is subject to various limitations. Warrants are expired as of December 31, 2013.

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If PRC taxes apply to any gain from the disposition of a warrant by a U.S. Holder (see “Taxation—People’s Republic of China Taxation,” above), such taxes may be treated as foreign taxes eligible for credit against such holder’s U.S. federal income tax liability (subject to certain limitations), and a U.S. Holder may be entitled to certain benefits under the income tax treaty between the United States and the PRC. The rules relating to the U.S. foreign tax credit are complex. U.S. Holders should consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility for the benefits of the income tax treaty between the United States and the PRC.

Dividends

Subject to the discussion below under “—Passive Foreign Investment Company,” the gross amount of any distribution made by us on the ordinary shares or ADSs will generally be treated as a dividend includible in the gross income of a U.S. Holder as ordinary income to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, when actually or constructively received by the U.S. Holder, in the case of ordinary shares, or when actually or constructively received by the depositary, in the case of ADSs. To the extent the amount of such distribution exceeds our current and accumulated earnings and profits as so computed, it will be treated first as a non-taxable return of capital to the extent of such U.S. Holder’s adjusted tax basis in such ordinary shares or ADSs and, to the extent the amount of such distribution exceeds such adjusted tax basis, will be treated as gain from the sale of such ordinary shares or ADSs. We, however, do not intend to calculate earnings and profits in accordance with U.S. federal income tax principles. Accordingly, distributions paid on our ADSs or ordinary shares, if any, will be treated as dividend distributions for U.S. federal income tax purposes.

Certain dividends received by non-corporate U.S. Holders, including individuals will be subject to a reduced rate of tax. This reduced income tax rate is applicable to dividends paid by “qualified foreign corporations” and only with respect to ordinary shares or ADSs held for a minimum holding period of at least 61 days during a specified 121-day period, and if certain other conditions are met. A qualified foreign corporation is any non-U.S. corporation if (a) either (i) its stock is readily tradable on an established securities market in the United States or (ii) it is eligible for the benefits of a qualifying income tax treaty with the United States that includes an exchange of information program, and (b) it is not a passive foreign investment company (as discussed below) for both the taxable year in which the dividend is paid and the preceding taxable year. We expect to be considered a qualified foreign corporation because our ADSs will be listed on the NYSE. Accordingly, subject to the discussions below under “—Passive Foreign Investment Company,” dividends paid by us on our ADSs should be eligible for the reduced income tax rate. In addition, if we are treated as a “resident enterprise” for PRC tax purposes under the EIT Law, we may be eligible for the benefits of the income tax treaty between the United States and the PRC, see “Taxation—People’s Republic of China Taxation”. Dividends paid by us will not be eligible for the “dividends received” deduction allowed to corporate shareholders with respect to dividends received from U.S. corporations.

Dividends paid by us will constitute income from sources outside the United States for U.S. foreign tax credit limitation purposes and will be categorized as “passive category income” for U.S. foreign tax credit purposes. If PRC withholding taxes apply to dividends paid to a U.S. Holder with respect to our ADSs or ordinary shares, see “Taxation—People’s Republic of China Taxation”, subject to certain conditions and limitations, such PRC withholding taxes may be treated as foreign taxes eligible for credit against such holder’s U.S. federal income tax liability. The rules relating to the U.S. foreign tax credit are complex. U.S. Holders should consult their own tax advisors regarding the effect of these rules in their particular circumstance.

Sale or Other Disposition of Ordinary Shares or ADSs

Subject to the discussion below under “—Passive Foreign Investment Company,” a U.S. Holder will recognize gain or loss for U.S. federal income tax purposes upon a sale or other disposition of the ordinary shares or ADSs in an amount equal to the difference between the amount realized from such sale or disposition and the U.S. Holder’s adjusted tax basis in such ordinary shares or ADSs. Such gain or loss will be a capital gain or loss and will be long-term capital gain, taxable at a reduced rate for non-corporate U.S. Holders, including individuals, or loss if, on the date of sale or disposition, such ordinary shares or ADSs were held by such U.S. Holder for more than one year. The deductibility of capital losses is subject to limitations under the Code. Any gain or loss on the sale or disposition by a U.S. Holder will be treated as U.S. source income or loss for U.S. foreign tax credit limitation purposes, subject to certain exceptions and limitations. However, if we are treated as a “resident enterprise” for PRC tax purposes, you may be eligible for the benefits of the income tax treaty between the United States and the PRC. In such event, if PRC tax were to be imposed on any gain from the disposition of the ADSs or ordinary shares, see “Taxation—People’s Republic of China Taxation”, a U.S. Holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC source income. The U.S. foreign tax credit rules are complex. Therefore, U.S. Holders should consult their own tax advisors regarding the application of such foreign tax credit rules.

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Passive Foreign Investment Company

In general, we will be classified as a passive foreign investment company, or PFIC in any taxable year if either: (a) the average quarterly value of our gross assets that produce passive income or are held for the production of passive income is at least 50% of the average quarterly value of our total gross assets (the “asset test”) or (b) 75% or more of our gross income for the taxable year is passive income (such as certain dividends, interest or royalties). For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. For purposes of the asset test: (a) any cash and cash invested in short-term, interest bearing, debt instruments, or bank deposits that are readily convertible into cash will count as producing passive income or held for the production of passive income, and (b) the total value of our assets is calculated based on our market capitalization.

We believe that we were not a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2012, and we do not expect to be a PFIC in the foreseeable future. However, PFIC status is tested each year and depends on the composition of our assets and income and the value of our assets from time to time. Although we intend to conduct our business activities in a manner to reduce the risk of our classification as a PFIC in the future, there can be no assurance that we will not be a PFIC in 2014 or for any future taxable year.

If we are a PFIC in any year during which a U.S. Holder owns the securities, such U.S. Holder may experience certain adverse tax consequences. Such U.S. Holder could be liable for additional taxes and interest charges (i) upon “excess distributions,” which include distributions received by the U.S. Holder on our securities during the year, but only to the extent that the aggregate of the distributions for the taxable year exceeds 125% of the average amount of distributions received by the U.S. Holder in the preceding three years, or (ii) upon a sale or other disposition of the securities at a gain, whether or not we continue to be a PFIC. The tax will be determined by allocating the excess distribution or recognized gain ratably to each day of the U.S. Holder’s holding period. The amount allocated to the current taxable year and any taxable year with respect to which we were not a PFIC will be taxed as ordinary income, rather than capital gain, earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates applicable to ordinary income for such taxable years and, in addition, an interest charge will be imposed on the amount of such taxes.

With respect to U.S. Holders of ADSs, these adverse tax consequences may be avoided if the U.S. Holder is eligible to and does elect to annually mark-to-market the ADSs.

If a U.S. Holder makes a mark-to-market election with respect to the ADSs, such holder will include as ordinary income the excess, if any, of the fair market value of the ADSs at the end of each taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the ADSs over their fair market value at the end of the taxable year, but only to the extent of the net amount of previously included income as a result of the mark-to-market election. Any gain recognized on the sale or other disposition of the securities will be treated as ordinary income. The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minims quantities on at least 15 days during each calendar quarter on a qualified exchange or other market, as defined in the applicable Treasury regulations. We expect the ADSs to be “marketable stock” because our ADSs will be listed on the NYSE.

Alternatively, a U.S. Holder of stock (but not warrants) in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder that makes a valid qualified electing fund election with respect to a PFIC will include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if the PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations, and we do not intend to prepare or provide the information that would entitle U.S. Holders to make a qualified electing fund election.

If we are regarded as a PFIC, each U.S. Holder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. If we are or become a PFIC, you should consult your tax advisor regarding any reporting requirements that may apply to you.

Backup Withholding and Information Reporting

Dividend payments made to U.S. Holders and proceeds paid from the sale or other disposition of their ordinary shares or ADSs may be subject to information reporting to the Internal Revenue Service and possible U.S. federal backup withholding at a current rate of 28%. Certain exempt recipients, such as corporations, are not subject to these information reporting requirements. Backup withholding will not apply to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification, or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification).

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Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s U.S. federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service in a timely manner and furnishing any required information. Certain individuals holding the ADSs or ordinary shares other than in an account at a U.S. financial institution may be subject to additional information reporting requirements.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts.

Not applicable.

H. Documents on Display

We previously filed with the Securities and Exchange Commission our registration statement on Form F-1.

We have filed this annual report on Form 20-F with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Statements made in this annual report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this annual report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.

We are subject to the informational requirements of the Exchange Act and file reports and other information with the Securities and Exchange Commission. Reports and other information which we filed with the Securities and Exchange Commission, including this annual report on Form 20-F, may be inspected and copied at the public reference room of the Securities and Exchange Commission at 450 Fifth Street N.W. Washington D.C. 20549.

You can also obtain copies of this annual report on Form 20-F by mail from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material may be obtained from the Securities and Exchange Commission’s Internet site at http://www.sec.gov. The Commission’s telephone number is 1-800-SEC-0330.

I. Subsidiaries Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, and foreign currency exchange rates.

Interest rate risk

Our exposure to interest rate risk primarily relates to the interest expense associated with our outstanding debt. All of our existing loans from non-financial institutions and third parties have fixed interest rates and therefore are not subject to interest rate risk. However, the interest rate of our bank loans is subject to the change of the benchmark interest rate published and adjusted by the People’s Bank of China (the”PBOC”). As of December 31, 2013, our outstanding short-term and long-term bank loans were US$12.0 million and US$250.1 million, respectively. Based on our outstanding variable rate loans as of December 31, 2013, a hypothetical increase in the PBOC benchmark interest rate of 50 basis points would increase our annual interest expense by approximately US$1.3 million, which would have accounted for approximately 2% of our revenues in 2013. See “Risk Factors — Risks Relating to our Company and the PRC Hydroelectric Power Industry —We cannot assure you that we can obtain bank loans on terms acceptable to us or at all.”

We have not used any derivative financial instruments to manage our interest rate risk exposure. Based on our observations of the historical changes to the PBOC benchmark interest rate, we believe that it is more likely that the interest rate will remain stable in the near future.

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Foreign currency risk

The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic condition. Since July 2005, the Renminbi has no longer been pegged to the U.S. dollar. Currently the Renminbi exchange rate versus the U.S. dollar is restricted to a rise or fall of no more than 1% per day and the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate. This change in policy has resulted in an appreciation of the RMB against the U.S. dollar of approximately 3.0%, 4.9%, 0.2% and 3.0% in 2010, 2011, 2012 and 2013, respectively. The Renminbi may appreciate or depreciate significantly in value against the U.S. dollar. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the Renminbi exchange rate and reduce their level of intervention in the foreign exchange market. Because substantially all of our earnings and cash assets are denominated in Renminbi, and we maintain our consolidated financial statements in U.S. dollars, fluctuations in the exchange rate between the U.S. dollar and the Renminbi will affect our balance sheet and earnings per share. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollars without giving effect to any underlying change in our business or results of operations. Fluctuations in the Renminbi/U.S. dollar exchange rate will also affect the relative value of any dividend we reserve that will be exchanged into U.S. dollars and earnings from, and the value of, any Renminbi-denominated investments we make in the future. We have not entered into any hedging transactions that would reduce or increase our exposure to this foreign currency exchange risk.

Inflation

In recent years, China has not experienced significant inflation, and therefore inflation has not had a significant effect on our business. According to the National Bureau of Statistics of China, the change in the Consumer Price Index in China was -0.7%, 3.3%, 5.4%, 2.6% and 2.6% in 2009, 2010, 2011, 2012 and 2013, respectively. Based on the upward change of the Consumer Price Index in late 2007, the PRC government announced measures to restrict bank lending and investment in China in order to reduce inflationary pressures on China’s economy. The People’s Bank of China’s benchmark loan interest rate for one-year RMB denominated loans was 5.31%, 5.81%, 6.56%, 6.0% and 6.0% in 2009, 2010, 2011, 2012 and 2013, respectively.

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

A. Debt securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other securities

Not applicable.

D. American Depositary Shares

Fees and Charges Our ADS holders May Have to Pay

The Bank of New York Mellon, the depositary of our ADS program, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book- entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

Persons depositing or withdrawing shares or ADS holders must pay:	For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	·Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
	·Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$0.02 or less per ADS (or portion)	·Any cash distribution made pursuant to the deposit agreement
	·Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to registered ADS holders
	·Depositary services
	·Expenses of the depositary
	·Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
	·Converting foreign currency to U.S. dollars
Registration or transfer fees	Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
Any charges incurred by the depositary or its agents for servicing the deposited securities	As necessary
Taxes and other governmental charges the depositary or the As necessary custodian has to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes	As necessary

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Fees and Other Payments Made by the Depositary to Us

The Bank of New York Mellon, as depositary, has agreed to reimburse us for expenses they incur that are related to establishment and maintenance expenses of the ADS program. The depositary has agreed to reimburse us for its continuing annual stock exchange listing fees. The depositary has also agreed to pay the standard out-of-pocket maintenance costs up to certain amount for the ADRs, which consist of the standard out-of-pocket legal fees and disbursements, including preparing and deposit Agreement and Form F-6. It also agreed to waive us certain value-added services fees, certain technology services fees, and certain administration and ongoing ADR holder servicing fees. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors. We received none depositary for the year ended December 31, 2012 and 2013. The depository also waived us an amount of $130,077 and $130,355 respectively for the same periods for certain technology services fees such as ADR insight and certain administration ADR holder servicing fees.

PART II.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

None of these events occurred in any of the years ended December 31, 2011, 2012 and 2013.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures within the meaning of Rule 13a-15(e) of the Exchange Act as of the end of the period covered by this report. Based on such evaluation, our management has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by our company in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Rule 13a-15 of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reports and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financials.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management, under the supervision and with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee on Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that, as of December 31, 2013, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. After year-end and prior to completion of the audit of our 2013 financial statements, our management noted certain control deficiencies in connection with accounts and business activities at entities and projects previously acquired by us. We are in the process of implementing measures to address these issues. This annual report does not include an attestation report of our registered public accounting firm, Ernst & Young Hua Ming LLP, regarding our internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act that permit us, a non-accelerated filer, to provide only management’s report in this annual report.

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Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.

Our audit committee consists of Mr. Yun Pun (Felix) Wong, Ms. Moonkyung Kim and Mr. Jui Kian Lim, each of whom we believe satisfies the “independence” requirements under current NYSE rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Mr. Wong acts as the chairman of our audit committee. Our board of directors has determined that Mr. Wong qualifies as an “audit committee financial expert” under applicable SEC rules.

ITEM 16B. CODE OF ETHICS.

Our board of directors has adopted a code of business conduct and ethics that is applicable to all of our directors, officers and employees. Our code of ethics and our code of conduct are publicly available on our website.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Ernst & Young Hua Ming LLP, our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our independent auditors during the periods indicated below.

	For the Year Ended December 31,
	2012		2013
	(In US$ thousands)
Audit fees(1)	$	915	$	661
Tax fees(2)	—		20

(1)Audit fees consist of fees and expenses billed associated with the annual audit and procedures performed on our interim financial statements. Fees billed for those services that are normally provided by the independent auditors in connection with regulatory filings are also included.

(2)Tax fees refer to the aggregate fees for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning.

The policy of our audit committee is to pre-approve all audit and non-audit services provided by Ernst & Young Hua Ming LLP, including audit services and audit-related services as described above are approved by the Audit Committee prior to the commencement to services.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

None.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE.

Differences Between the Our Current Corporate Governance Practices and the NYSE Corporate Governance Requirements Applicable to Domestic US Companies

Our American Depositary Shares are listed on the New York Stock Exchange (the “NYSE”). As such, we are subject to corporate governance requirements imposed by the NYSE. Under Section 303A of the NYSE Listed Company Manual, NYSE-listed non-US companies such as ourselves may, in general, follow their home country corporate governance practices in lieu of some of the NYSE corporate governance requirements. The Listed Company Manual requires that non-US companies disclose any significant ways in which their corporate governance practices differ from those followed by U.S. companies listed on the NYSE. We are committed to a high standard of corporate governance and we believe that our corporate governance practices and guidelines are consistent, in principal, with those required of U.S. companies listed on the NYSE.

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The following summarizes one significant difference between our corporate governance practices and the NYSE standards applicable to domestic U.S. companies: we do not intend to rely on any of the exemptions provided by the NYSE to foreign private issuers, except that we will not provide an annual certification by our chief executive officer that he or she is not aware of any non-compliance with any corporate governance rules of the NYSE, and we will not seek shareholder approval for (i) the issuance of more than 1% of our outstanding ordinary shares or more than 1% of our outstanding voting power to a related party, (ii) the issuance of more than 20% of our outstanding ordinary shares, (iii) an issuance that would result in a change of control, and (iv) material revisions to compensation plans. As a result, you may not be provided with the benefits of certain corporate governance requirements of the NYSE.

Other than noted above, currently there is no significant difference between our corporate governance practices and what the NYSE requires of domestic US companies. See “Risk Factors — Risks Relating to Our Securities — As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the New York corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listing standards.”

ITEM 16H. MINE SAFETY DISCLOSURE.

Not applicable.

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PART III.

ITEM 17. FINANCIAL STATEMENTS.

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS.

Our consolidated financial statements are included at the end of this annual report.

ITEM 19. EXHIBITS.

Index to Exhibits

1.1	Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.1 to our Report on Form 6-K filed with the SEC on October 1, 2010)
2.1	Form of Ordinary Share Certificate (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
2.2	Form of Deposit Agreement between the Registrant and the Bank of New York Mellon as depositary (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
2.3	Form of American depositary receipt evidencing American depositary shares (included in Exhibit 2.2)
2.4	Amended and Restated Shareholders Agreement, dated October 27, 2009, amongst the Registrant and its shareholders (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
2.5	Form of Unit Certificate (incorporated by reference to Exhibit 4.6 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.1	2008 Share Incentive Plan of the Registrant and form of Option Agreement (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.2	Amended and Restated Warrant to Purchase the Company’s Ordinary Shares by Vicis Capital Master Fund (incorporated by reference to Exhibit 4.1 to our Report on Form 6-K filed with the SEC on August 19, 2011)
4.3	Form of Indemnification Agreement between the Registrant and its directors (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.4	Sino-Foreign Equity Joint Venture Contract entered into by the Registrant, Zhejiang Water Resources and Hydroelectric Investment Group Co., Ltd. and Zhejiang Guangning Hydroelectric Development Co., Ltd. on November 6, 2007 (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.5	Contract for Transfer of Fifty Percent of the Equity Interests of Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Yunhe County Yunhe State-Owned Assets Management Co., Ltd. and the Registrant on October 12, 2007 (incorporated by reference to Exhibit 10.5 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.6	(Intentionally left blank)
4.7	Share Transfer and Capital Increase Contract entered into by the Registrant, and Ye Jian Hua, Zhou Jian Bin and Zhejiang Dahua Construction Group Co., Ltd. on March 15, 2007 (incorporated by reference to Exhibit 10.7 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.8	Supplemental Agreement entered into by the Registrant, Ye Jian Hua, Zhou Jian Bin and Zhejiang Dahua Construction Group Co., Ltd. on March 27, 2007 (incorporated by reference to Exhibit 10.8 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.9	Share Transfer Agreement for Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into by Sanming City Chenyang Hydroelectric Co., Ltd., Sanming City Fufeng Industrial Co., Ltd, Beijing Xunjing Interactive Technology Co., Ltd., Huang Shao Jian, Yu Rong Ji, Zhang Rong Bin, Sun Xiao Dong, Xie Fang Wu, Ye Chang He and the Registrant on August 9, 2008 (incorporated by reference to Exhibit 10.9 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.10	Equity Joint Venture Contract for the establishment of Pingnan County Wangkeng Hydroelectric Co., Ltd. entered into by the Registrant and Sanming City Chenyang Hydroelectric Co., Ltd. on August 10, 2008 (incorporated by reference to Exhibit 10.10 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.11	Equity Interest Transfer Contract entered into by Guangsha Construction Group Co., Ltd., Lu Chunliang and the Registrant regarding Qingtian Wuliting Hydroelectric Development Co., Ltd. on December 13, 2007 (incorporated by reference to Exhibit 10.11 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)

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4.12	Equity Interest Transfer Contract entered into by Zhejiang Guangsha Stock Co., Ltd., Zhejiang Guangsha Hydropower Investment Co., Ltd. and the Registrant regarding Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on December 13, 2007 (incorporated by reference to Exhibit 10.12 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.13	Equity Interest Transfer Contract entered into by Guangsha Construction Group Co., Ltd., Lu Chunliang and the Registrant regarding Suichang County Jiulongshan Hydroelectric Development Co., Ltd. on December 13, 2007 (incorporated by reference to Exhibit 10.13 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.14	Agreement relating to the Sale and Purchase of the equity of Sunpower Asia Limited entered into by the Registrant and Sanming Ruifeng Hydropower Investment Co., Ltd. on July 11, 2008 (incorporated by reference to Exhibit 10.14 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.15	Equity Interest Transfer Contract entered into by the Registrant, Sanming Ruifeng Hydropower Investment Co., Ltd. and Yong’an Ruifeng Hydroelectric Ltd. on July 11, 2008 (incorporated by reference to Exhibit 10.15 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.16	Contract on Transfer of Ten Percent Equity Interests of Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by China Hydroelectric Corporation (Hong Kong) Limited and Sanming Ruifeng Economic Technological Development Ltd. on January 30, 2009 (incorporated by reference to Exhibit 10.16 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.17	Supplemental Agreement of the Contract on Transfer of Ten Percent Equity Interests of Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by Sanming Ruifeng Economic Technological Development Ltd., China Hydroelectric Corporation (Hong Kong) Limited, Sanming Ruifeng Hydropower Investment Co., Ltd. and the Registrant on January 30, 2009 (incorporated by reference to Exhibit 10.17 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.18	Joint Venture Contract Among Foreign Investors for Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered into by the Registrant, China Hydroelectric Corporation (Hong Kong) Limited and Sunpower Asia Limited in February 2009 (incorporated by reference to Exhibit 10.18 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.19	Share Transfer Agreement for Pingnan County Yuheng Hydropower Co., Ltd. entered into by the Registrant and Fujian Province Anheng Assets Management Co., Ltd., Shanghai Yufeng Hotel Management Co., Ltd., Chen Can Ling, Wang Jiang, Zhang Rong Bin and Zhou Jian Biao on August 15, 2008 (incorporated by reference to Exhibit 10.19 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.20	Share Transfer Agreement for Pingnan County Yuanping Hydroelectric Co., Ltd. entered into by the Registrant and Lin Yun, Wu Ting Li, Zhang Yao Fang and Zhou Jian on August 15, 2008 (incorporated by reference to Exhibit 10.20 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.21	Power Purchase Contract entered into by Yunnan Huabang Electric Power Development Co., Ltd. and Yunnan Dehong Electric Power Co., Ltd. on June 19, 2009 (incorporated by reference to Exhibit 10.22 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.22	Supplemental Agreement to Power Purchase and Sale Contract entered into by Yunnan Huabang Electric Power Development Co., Ltd. and Yunnan Dehong Electric Power Co., Ltd. on June 19, 2009 (incorporated by reference to Exhibit 10.23 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.23	Grid Connection and Dispatching Agreement entered into by Yunnan Dehong Electric Power Co., Ltd. and Yingjiang County Huafa Electric Power Development Co., Ltd. (formerly Yunnan Huabang Electric Power Development Co., Ltd.) on January 15, 2004 (incorporated by reference to Exhibit 10.24 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)

121

4.24	Grid Connection and Dispatching Agreement entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 17, 2009 (incorporated by reference to Exhibit 10.25 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.25	Power Purchase and Sale Contract entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 16, 2009 (incorporated by reference to Exhibit 10.26 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.26	Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Yunhe County Shapulong Hydropower Generation Co., Ltd. in October 2008 (incorporated by reference to Exhibit 10.27 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.27	Grid Connection and Dispatching Agreement for Wangkeng Hydropower Station entered into by Fujian Province Ningde Electric Power Industry Bureau and Pingnan County Wangkeng Hydroelectric Co., Ltd. on July 21, 2008 (incorporated by reference to Exhibit 10.28 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.28	Power Purchase and Sales Contract for Wangkeng Hydropower Station entered into by Fujian Province Electric Power Co., Ltd. and Pingnan County Fushun Hydroelectric Co., Ltd. on October 28, 2004 (incorporated by reference to Exhibit 10.29 to our Registration Statement on Form F- 1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.29	Grid Connection and Dispatching Agreement for Wuliting Hydropower Station entered into by Lishui Electric Power Bureau and Qingtian Wuliting Hydroelectric Development Co., Ltd. on November 20, 2008 (incorporated by reference to Exhibit 10.30 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.30	Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Qingtian Wuliting Hydroelectric Development Co., Ltd. in November, 2007 (incorporated by reference to Exhibit 10.31 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.31	Grid Connection and Dispatching Agreement for Jingning Yingchuan Hydropower Station entered into by Lishui Electric Power Bureau and Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on November 20, 2008 (incorporated by reference to Exhibit 10.32 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.32	Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. in November 2007 (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form F-1 (file no. 333- 163558), as amended, initially filed with the SEC on December 8, 2009)
4.33	Intent Agreement of Conformity of Power Purchase and Supply in Rongping Supply Area entered into by Fujian Province Pingnan County Power Supply Co., Ltd., Fujian Province (Pingnan) Rongping Chemical Industry Co., Ltd., Pingnan County Hengli Hydroelectric Co., Ltd. and Pingnan County Yuheng Hydropower Co., Ltd. on August 31, 2007 (incorporated by reference to Exhibit 10.34 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.34	Grid Connection and Dispatching Agreement for Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. entered by Fujian Province Sanming Power Industry Bureau and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. on September 22, 2006 (incorporated by reference to Exhibit 10.39 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.35	Grid Connection and Power Purchase Agreement entered into by Fujian Province Sanming Power Industry Bureau and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. on April 30, 1997 (incorporated by reference to Exhibit 10.40 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.36	Share Transfer Contract for Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. entered into by Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd., Guangdong Qingneng Power Generation Group Co., Ltd. and Yao Lin Fu on August 11, 2009 (incorporated by reference to Exhibit 10.41 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)

122

4.37	Share Transfer Contract for Thirteen Percent of the Equity Interests of Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Zhejiang Province Water Resources and Hydroelectric Investment Group Co., Ltd. and the Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on June 29, 2009 (incorporated by reference to Exhibit 10.42 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.38	Share Transfer Contract for Yunhe County Shapulong Hydropower Generation Co., Ltd. entered into by Zhejiang Guangning Hydroelectric Development Co., Ltd. and the Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. on July 22, 2009 (incorporated by reference to Exhibit 10.43 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.39	Grid Connection Economic Agreement entered into by Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. and Lishui Power Industry Bureau in April 2007 (incorporated by reference to Exhibit 10.44 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.40	Grid Connection and Dispatching Agreement entered into by Longquan Ruiyang Cascade II Hydroelectric Co., Ltd. and Lishui Power Industry Bureau, Dispatching and Communication Center, on October 18, 2003 (incorporated by reference to Exhibit 10.45 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.41	Renminbi Loan Agreement (Long/Medium Term) entered into by Qingtian Wuliting Hydroelectric Development Co., Ltd. and Bank of China Limited, Lishui City Dayang Sub-branch, on March 19, 2009 (incorporated by reference to Exhibit 10.46 to our Registration Statement on Form F- 1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.42	Medium/Long-Term Renminbi Loan Contract entered into by Pingnan County Wangkeng Hydroelectric Co., Ltd. and Industrial Bank Co., Ltd., Ningde Branch, on March 24, 2009 (incorporated by reference to Exhibit 10.47 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.43	Renminbi Loan Contract (Medium/Long Term) entered into by Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. and Bank of China Limited, Fujian Province Branch, on June 16, 2009 (incorporated by reference to Exhibit 10.48 to our Registration Statement on Form F-1 (file no. 333- 163558), as amended, initially filed with the SEC on December 8, 2009)
4.44	Loan Contract entered into by Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and Agricultural Bank of China, Lishui City Branch, on June 19, 2009 (RMB9.0 million) (incorporated by reference to Exhibit 10.49 to our Registration Statement on Form F-1 (file no. 333- 163558), as amended, initially filed with the SEC on December 8, 2009)
4.45	Loan Contract entered into by Suichang County Jiulongshan Hydroelectric Development Co., Ltd. and Agricultural Bank of China, Lishui City Branch, on June 19, 2009 (RMB216.0 million) (incorporated by reference to Exhibit 10.50 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.46	Memorandum of Understandings entered into by Bank of China, Fujian Branch, and China Hydroelectric Corporation in July 2009 (incorporated by reference to Exhibit 10.51 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.47	Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and You-Su Lin on July 1, 2008 (incorporated by reference to Exhibit 10.53 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.48	Employment Agreement entered into by Beijing A.B.C. Investment Consulting Co., Ltd. and Gan Wu on July 1, 2008 (incorporated by reference to Exhibit 10.54 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.49	Capital Increase Agreement for Henan Wuyue Storage Power Generation Co., Ltd. entered into by China Hydroelectric Corporation and Henan Lan Tian Group Co., Ltd. on October 22, 2009 (incorporated by reference to Exhibit 10.61 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.50	Form of Warrant to Purchase Ordinary Shares of the Registrant by Broadband Capital Management LLC to be dated the closing of the initial public offering (incorporated by reference to Exhibit 10.62 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)

123

4.51	Warrant to Purchase Units Consisting of Ordinary Shares and Warrants to Purchase Ordinary Shares of the Registrant by Morgan Joseph & Co. Inc. dated November 10, 2006 (283,333 Units) (incorporated by reference to Exhibit 10.63 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.52	Warrant to Purchase Units Consisting of Ordinary Shares and Warrants to Purchase Ordinary Shares of the Registrant by Morgan Joseph & Co. Inc. dated November 10, 2006 (550,000 Units) (incorporated by reference to Exhibit 10.64 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.53	Warrant to Purchase Common Shares of the Registrant by JMG Capital Partners, L.P. dated September 28, 2007 (incorporated by reference to Exhibit 10.65 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.54	Warrant to Purchase Common Shares of the Registrant by JMG Triton Offshore Fund, Ltd. dated September 28, 2007 (incorporated by reference to Exhibit 10.66 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.55	Warrant to Purchase Preferred Shares or Ordinary Shares, as Applicable, of the Registrant by Morgan Joseph & Co. Inc. dated January 28, 2008 (incorporated by reference to Exhibit 10.67 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.56	Letter Agreement between the Registrant and Vicis Capital Master Fund dated April 11, 2007 (incorporated by reference to Exhibit 10.68 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.57	Form of warrant agreement (incorporated by reference to Exhibit 10.69 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
4.58	Share Transfer Contract for Yingjiang County Qingrui Husahe Power Co., Ltd. dated as of March 2, 2010 between Dehong Qinrui (Group) Power Investment and Development Co., Ltd. and Yunnan Huabang Electric Power Development Co., Ltd. (incorporated by reference to Exhibit 4.70 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.59	Share Transfer Contract for Fugong County Hengda Hydroelectric Development Co., Ltd. (Aluhe Hydropower Station and Zilenghe Hydropower Station) dated as of April 14, 2010 between Yunnan Minfa Hydroelectric Development Group Co., Ltd., Xiamen Minrui Investment Co., Ltd. and Fujian Huabang Hydroelectric Investment Co., Ltd. (incorporated by reference to Exhibit 4.71 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.60	Share Transfer Contract for Fugong Xineng Power Development Co., Ltd. (Latudihe Hydropower Station) dated as of April 14, 2010 between Yunnan Minhe Hydroelectric Investment Co., Ltd. and Fujian Huabang Hydroelectric Investment Co., Ltd. (incorporated by reference to Exhibit 4.72 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.61	Supplemental Agreement on the Power Purchase and Sale Contract for the Year of 2010 (Contract Number: De Dian Si 2010-011) for Binglangjiang Power Station and Binglangjiang Expanded Power Station dated as of March 31, 2010 between Yunnan Huabang Electric Power Development Co., Ltd. and Dehong Power Supply Co., Ltd. (incorporated by reference to Exhibit 4.73 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)

124

4.62	Supplemental Agreement on the Power Purchase and Sale Contract for the Year of 2010 (Contract Number: 2010-009) for Husahe Cascade III & VI Power Station and Mangxian Power Station (incorporated by reference to Exhibit 4.74 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.63	Power Purchase Agreement (contract Number: De Dian Si 2009-079) (Binglangjiang expanded Power Station) dated as of November 4, 2009 between Dehong Power Supply Co., Ltd. and Yunnan Huabang Electric Power development Co. (incorporated by reference to Exhibit 4.75 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.64	Supplemental Agreement on the Power Purchase and Sale Contract for the Year of 2009 (Contract Number: De Dian Si 2009-079) (Binglangjiang expanded Power Station) dated as of November 4, 2009 between Dehong Power Supply Co., Ltd. and Yunnan Huabang Electric Power Development Co., Ltd. (incorporated by reference to Exhibit 4.76 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.65	Grid Connection Agreement (Serial Number: De Dian Ru Wang No. 2009-003) dated as of July 16, 2009 between Yunnan Dehong Electric Power Co., Ltd. and Yunnan Huabang Electric Power Development Co., Ltd. (incorporated by reference to Exhibit 4.77 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.66	Share Transfer Contract for Luquan Xiaopengzu Power Generation Co., Ltd. dated as of April 23, 2010 among Fujian Huabang Hydroelectric Investment Co., Ltd. and various individual parties thereto (incorporated by reference to Exhibit 4.78 of our Annual Report on Form 20-F filed with the SEC on May 24, 2010)
4.67	Shaowu City Qianling Hydroelectric Station Grid Connection Agreement dated as of October 19, 2000 between Shaowu Power Supply Bureau (hereinafter “Party A”) and Shaowu City Jinling Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.68	Shaowu Power Supply Bureau Grid Connection and Dispatching Agreement dated December 20, 2002 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jinling Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.69	Shaowu Power Supply Bureau Grid Connection and Dispatching Agreement dated December 15, 2003 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jinling Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.70	Shaowu Power Supply Bureau Grid Connection and Dispatching Agreement dated October 15, 2004 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jintang Hydroelectric Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.71	Shaowu Power Supply Bureau Grid Connection and Dispatching Agreement dated October 15, 2004 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jinlong Hydropower Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.72	Power Purchase and Sale Contract for Jinwei Hydropower Station dated as of January 2007 between Fujian Province Nanping Electric Power Industry Bureau and Shaowu City Jinwei Hydroelectric Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.73	Power Purchase and Sale Contract for Dongguan Hydropower Station dated as of March 2007 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jinling Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.74	Power Purchase and Sale Contract for Qianling Hydropower Station dated as of March 2007 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jinling Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)

125

4.75	Power Purchase and Sale Contract for Jinjiu Hydropower Station dated as of March 2007 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jinling Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.76	Power Purchase and Sale Contract for Jinlong Hydropower Station dated as of March 2007 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jinlong Hydropower Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.77	Power Purchase and Sale Contract for Sanming Banzhu Power Station entered into by Fujian Province Electric Power Co., Ltd. and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. on August 18, 2008 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.78	Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Qingtian Wuliting Hydroelectric Development Co., Ltd. in October 2008 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.79	Grid Connection Economic Agreement entered into by Lishui Electric Power Bureau and Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. in October 2008 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.80	Grid Connection and Dispatching Agreement dated as of November 2008 between Lishui Electric Power Industry Bureau and Yunhe County Shapulong Hydropower Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.81	Power Purchase and Sale Contract for Jintang Hydropower Station dated as of December 2008 between Fujian Province Shaowu Power Supply Bureau and Shaowu City Jintang Hydroelectric Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.82	Grid Connection and Dispatching Agreement of Zhougongyuan Cascade I Power Station dated as of April 21, 2009 between Lishui Electric Power Industry Bureau and Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.83	Grid Connection and Dispatching Agreement of Zhougongyuan Cascade II Power Station dated as of April 21, 2009 between Lishui Electric Power Industry Bureau and Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.84	Grid Connection and Dispatching Agreement of Zhougongyuan Cascade III Power Station dated as of April 21, 2009 between Lishui Electric Power Industry Bureau and Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.85	Power Purchase and Sale Contract dated as of June 19, 2009 between Yunnan Dehong Power Co., Ltd. and Yingjiang County Qinrui Husahe Hydropower Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.86	Power Purchase and Sale Contract dated as of January 1, 2010 between Yunnan Nujiang Grid Co., Ltd. and Fugong Xineng Power Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.87	Power Purchase and Sale Contract dated as of January 1, 2010 between Yunnan Nujiang Grid Co., Ltd. and Fugong County Hengda Hydroelectric Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.88	Power Purchase and Sale Contract of Xiaopengzu Power Plant for the Year of 2011 dated as of March 2011 between Yunnan Grid Company and Luquan Xiaopengzu Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.89	Grid Connection and Dispatching Agreement dated as of May 14, 2010 between Yunnan Nujiang Grid Co., Ltd. and Fugong Xineng Power Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.90	Grid Connection and Dispatching Agreement dated as of May 14, 2010 between Yunnan Nujiang Grid Co., Ltd. and Fugong County Hengda Hydroelectric Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)

126

4.91	Power Purchase and Sale Contract entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 17, 2010 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.92	Grid Connection and Dispatching Agreement entered into by Sichuan Cangxi Electric Power Co., Ltd. and Sichuan Huabang Hydroelectric Development Co., Ltd. on May 18, 2010 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.93	Power Purchase and Sales Contract for Wangkeng Hydropower Station entered into by Fujian Province Electric Power Co., Ltd. and Pingnan County Wangkeng Hydroelectric Co., Ltd. on June 28, 2010 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.94	Fixed Assets Loan Contract dated as of July 15, 2010 between Fugong Xineng Power Development Co., Ltd. and Bank of China Limited, Fujian Branch (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.95	Power Purchase and Sale Contract dated as of July 16, 2010 between Lishui Electric Power Industry Bureau and Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.96	Power Purchase and Sale Contract dated as of July 16, 2010 between Lishui Electric Power Industry Bureau and Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.97	Grid Connection and Dispatching Agreement dated as of August 11, 2010 between Dehong Power Supply Co., Ltd. and Yunnan Huabang Electric Power Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.98	Grid Connection and Dispatching Agreement for Husahe III Power Station dated as of August 11, 2010 between Dehong Power Supply Co., Ltd. and Yingjiang County Qinrui Husahe Hydropower Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.99	Grid Connection and Dispatching Agreement for Husahe IV Power Station dated as of August 11, 2010 between Dehong Power Supply Co., Ltd. and Yingjiang County Qinrui Husahe Hydropower Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.100	Grid Connection and Dispatching Agreement for Mangxian Power Station dated as of August 11, 2010 between Dehong Power Supply Co., Ltd. and Yingjiang County Qinrui Husahe Hydropower Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.101	Agricultural Bank of China Fixed Assets Loan Contract and Installment Repayment Agreement dated as of August 26, 2010 between Yunnan Huabang Electric Power Development Co., Ltd. and Agricultural Bank of China, Yingjiang County Sub-branch (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.102	Share Purchase Agreement for Shaowu City Jinling Power Generation Co., Ltd. dated as of September 28, 2010 among Fujian Huabang Hydroelectric Investment Co., Ltd., Fujian Taiyu Investment (Group) Co., Ltd., Shaowu City Fengyi Power Development Co., Ltd. and Jianyang City Xinguang Power Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.103	Grid Connection and Dispatching Agreement for Wangkeng Hydropower Station entered into by Fujian Province Electric Power Co., Ltd. Ningde Electric Power Industry Bureau and Pingnan County Wangkeng Hydroelectric Co., Ltd. on September 30, 2010 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.104	Share Transfer Contract for Jinping Kanghong Hydroelectric Development Co., Ltd. dated as of November 6, 2010 among Luquan Xiaopengzu Power Generation Co., Ltd. and various individual parties thereto (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)

127

4.105	Transfer Contract Regarding 10% of the Equity of Pingnan County Wangkeng Hydroelectric Co., Ltd. dated as of November 22, 2010 between Sanming City Chenyang Hydroelectric Co., Ltd. and Fujian Huabang Hydroelectric Investment Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.106	Fixed Assets Loan Contract dated as of December 24, 2010 between Pingnan County Yuheng Hydroelectric Co., Ltd. and Bank of China Limited, Fujian Branch (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.107	Supplemental Agreement on the Power Purchase and Sale Contract for the Year of 2011 (Contract Number: De Dian Si 2011-079) (Binglangjiang expanded Power Station) dated as of December 29, 2010 between Dehong Power Supply Co., Ltd. and Yunnan Huabang Electric Power Development Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.108	Grid Connection and Dispatching Agreement for Jinwei Hydropower Plant dated as of December 24, 2010 between Fujian Province Electric Power Co., Ltd. Nanping Electric Power Industry Bureau and Shaowu City Jinwei Hydroelectric Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.109	Supplemental Agreement on Power Purchase and Sale Contract for the Year of 2011 dated as of December 29, 2010 between Dehong Power Supply Co., Ltd. and Yingjiang County Qinrui Husahe Hydropower Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.110	Supplemental Agreement to Power Purchase and Sale Contract entered into by Yunnan Huabang Electric Power Development Co., Ltd. and Yunnan Dehong Electric Power Co., Ltd. on December 29, 2010 (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.111	Fixed Assets Loan Contract dated as of December 31, 2010 between Fugong County Hengda Hydroelectric Development Co., Ltd. and Bank of China Limited, Yunnan Branch (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.112	Fixed Assets Loan Contract dated as of January 7, 2011 between Fugong County Hengda Hydroelectric Development Co., Ltd. and Bank of China Limited, Fujian Branch (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.113	Grid Connection and Dispatching Agreement dated as of March 2010 between Yunnan Grid Company and Luquan Xiaopengzu Power Generation Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.114	Grid Connection and Dispatching Agreement dated as of September 30, 2010 between Fujian Province Electric Power Co., Ltd. Sanming Power Industry Bureau and Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. (incorporated by reference to exhibit with identical exhibit number of our Annual Report on Form 20-F filed with the SEC on April 4, 2011)
4.115	Warrant Exercise Agreement dated August 19, 2011 between China Hydroelectric Corporation and Vicis Capital Master Fund (incorporated by reference to Exhibit 4.1 to our Report on Form 6-K filed with the SEC on August 19, 2011)
4.116	Translation of Share Transfer Agreement for Pingnan County Yuanping Hydroelectric Co., Ltd. dated December 3, 2011 between China Hydroelectric Corporation and Mr. You Lang Fei (incorporated by reference to Exhibit 10.2 to our Annual Report on Form 20-F filed with the SEC on April 27, 2012)
4.117	Settlement Agreement dated September 30, 2012 between China Hydroelectric Corporation, Vicis Capital, LLC, John D. Kuhns, Mary Fellows, Richard H. Hochman, Anthony H. Dixon, Shadron Lee Stastney, Stephen Outerbridge, You-Su Lin and the Shareholder Group defined there in (incorporated by reference to Exhibit 99.2 to our Report on 6-K filed with the SEC on October 2, 2012)
4.118	Translation of Share Transfer Agreement for Pingnan County Yuheng Hydroelectric Co., Ltd dated October 18, 2012 between China Hydroelectric Corporation and a third party (incorporated by reference to Exhibit 4.118 to our Annual Report on Form 20-F filed with the SEC on April 18, 2013)
8.1	Subsidiaries of the Registrant
11.1	Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 to our Registration Statement on Form F-1 (file no. 333-163558), as amended, initially filed with the SEC on December 8, 2009)
12.1	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1	Calculation of Effective Tariff Rate, Effective Utilization Rate and Weighted Average Effective Utilization Rate
15.2	Consent of Independent Registered Public Accounting Firm
101.INS	XBRL Instance Document. **
101.SCH	XBRL Taxonomy Extension Schema Document. **
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document. **
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document. **
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document. **
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document. **

**XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

128

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: April 21, 2014

	CHINA HYDROELECTRIC CORPORATION
By:	/s/ You-Su Lin
	Name: Dr. You-Su Lin
	Title: Interim Chief Executive Officer

129

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CHINA HYDROELECTRIC CORPORATION

	PAGE
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2012 and 2013	F-2
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2011, 2012 and 2013	F-3
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2012 and 2013	F-5
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2011, 2012 and 2013	F-7
Notes to the Consolidated Financial Statements	F-8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of China Hydroelectric Corporation

We have audited the accompanying consolidated balance sheets of China Hydroelectric Corporation (“the Company”) as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Hydroelectric Corporation at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that China Hydroelectric Corporation will continue as a going concern. As discussed in Note 2(a) to the financial statements, the Company has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 2(a). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Ernst & Young Hua Ming LLP
Beijing, People’s Republic of China
April 21, 2014

CHINA HYDROELECTRIC CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2012 AND 2013
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)

		December 31,
	Notes	2012		2013
ASSETS
Current assets:
Cash and cash equivalents		7,967		14,165
Restricted cash		5,171		—
Accounts receivable (net of allowance for doubtful accounts of nil as of December 31, 2012 and 2013)	4	5,772		3,741
Notes receivable		1,877		492
Deferred tax assets	14	1,659		1,994
Amounts due from related parties (net of allowance for doubtful accounts of US$1,338 and US$1,379 as of December 31, 2012 and 2013)	27	86		—
Prepayments and other current assets (net of provision for impairment allowance of US$1,560 and US$1,608 as of December 31, 2012 and 2013)	5	14,150		3,226
Total current assets		36,682		23,618
Non-current assets:
Property, plant and equipment, net	7	548,511		540,242
Land use rights, net	10	48,640		48,962
Intangible assets, net	8	4,660		4,714
Goodwill	9	112,481		115,960
Deferred tax assets	14	1,329		1,526
Other non-current assets	11	2,013		2,220
Total non-current assets		717,634		713,624
TOTAL ASSETS		754,316		737,242
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		3,124		1,992
Short-term loans	15	21,676		11,973
Current portion of long-term loans	15	35,537		38,337
Amounts due to related parties	27	12,705		9,491
Deferred tax liabilities	14	—		300
Accrued expenses and other current liabilities	12	43,825		28,072
Warrant liabilities	17	839		—
Total current liabilities		117,706		90,165
Non-current liabilities:
Long-term loans	15	212,970		211,723
Deferred tax liabilities	14	24,345		24,720
Other non-current liabilities	16	6,780		8,005
Total non-current liabilities		244,095		244,448
Total liabilities		361,801		334,613
Commitments and contingencies	23
Shareholders’ equity
China Hydroelectric Corporation shareholders’ equity:
Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2012 and 2013; 161,989,097 and 162,099,665 shares issued and outstanding as of December 31, 2012 and 2013)	18	162		162
Additional paid-in capital		509,665		509,902
Accumulated other comprehensive income	20	41,597		54,059
Accumulated deficit		(159,472	)	(161,693	)
Total China Hydroelectric Corporation shareholders’ equity		391,952		402,430
Noncontrolling interests		563		199
Total shareholders’ equity		392,515		402,629
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		754,316		737,242

The accompanying notes are an integral part of these consolidated financial statements.

F-2

CHINA HYDROELECTRIC CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)

		For the Years Ended December 31,
	Notes	2011		2012		2013
Revenues		54,597		85,388		74,517
Cost of revenues		(31,314	)	(35,795	)	(35,357	)
Gross profit		23,283		49,593		39,160
Operating expenses:
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)		(28,896	)	(20,348	)	(13,258	)
Impairment loss on goodwill	9	(11,388	)	—		—
Impairment loss on long-lived assets	7	(11,590	)	—		(3,549	)
Total operating expenses		(51,874	)	(20,348	)	(16,807	)
Operating (loss) income		(28,591	)	29,245		22,353
Interest income		101		84		98
Interest expense	22	(24,757	)	(28,070	)	(22,568	)
Changes in fair value of warrant liabilities	17	951		(399	)	839
Exchange (loss) gain		(851	)	28		(41	)
Other (loss) income, net	24	(334	)	507		275
(Loss) income before income tax expense		(53,481	)	1,395		956
Income tax expense	13	(1,527	)	(6,451	)	(3,474	)
Net loss from continuing operations		(55,008	)	(5,056	)	(2,518	)
Discontinued operations
(Loss) income from discontinued operations (net of income tax expense of US$101, US$399 and nil in 2011, 2012 and 2013)		(282	)	1,140		—
Gain on disposal of discontinued operations (net of income tax expense of nil, US$959 and nil in 2011, 2012 and 2013)		—		2,767		—
Net (loss) income from discontinued operations	6	(282	)	3,907		—
Net loss		(55,290	)	(1,149	)	(2,518	)
Less:
Net loss (income) attributable to noncontrolling interests		9,901		(94	)	297
Net loss attributable to China Hydroelectric Corporation shareholders		(45,389	)	(1,243	)	(2,221	)
- Continuing operations		(45,107	)	(5,150	)	(2,221	)
- Discontinued operations		(282	)	3,907		—
Other comprehensive income (loss), net of income tax
Foreign currency translation adjustments (net of income tax expense of nil in 2011, 2012 and 2013)		20,394		(1,413	)	12,395
Defined benefit pension plans (net of income tax expense of nil in 2011, 2012 and 2013)		(33	)	33		—
Other comprehensive income (loss)		20,361		(1,380	)	12,395
Comprehensive (loss) income		(34,929	)	(2,529	)	9,877
Less: Comprehensive loss (income) attributable to noncontrolling interests		9,586		(85	)	364
Comprehensive (loss) income attributable to China Hydroelectric Corporation shareholders		(25,343	)	(2,614	)	10,241

F-3

CHINA HYDROELECTRIC CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013 (Continued)
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)

		For the Years Ended December 31,
	Notes	2011		2012		2013
Net (loss) income attributable to ordinary shareholders per share	19	(0.29	)	(0.01	)	(0.01	)
—From continuing operations – basic and diluted		(0.29	)	(0.03	)	(0.01	)
—From discontinued operations – basic and diluted		(0.00	)	0.02		—
Weighted average number of ordinary shares used in computing:
Net loss attributable to ordinary shareholders per share – basic and diluted	19	156,505,076		161,989,097		162,071,626
Net loss income attributable to ordinary shareholders per ADS (equivalent to three ordinary shares)		(0.87	)	(0.02	)	(0.03	)
—From continuing operations – basic and diluted		(0.86	)	(0.09	)	(0.03	)
—From discontinued operations – basic and diluted		(0.01	)	0.07		—
Weighted average number of ADS used in computing:
Net loss attributable to ordinary shareholders per ADS – basic and diluted		52,168,358		53,996,366		54,023,875

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CHINA HYDROELECTRIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)

	For the Years Ended December 31,
	2011		2012		2013
Cash flows from operating activities:
Net loss	(55,290	)	(1,149	)	(2,518	)
Adjustments to reconcile net loss to net cash generated from operating activities:
Depreciation of property, plant and equipment	21,984		22,407		22,182
Amortization of land use rights	1,144		1,174		1,164
Amortization of intangible assets	213		199		178
Impairment loss on goodwill	11,388		—		—
Impairment loss on long-lived assets	11,590		—		3,549
Deferred income taxes	(485	)	(163	)	(482	)
Changes in fair value of warrant liabilities	(951	)	399		(839	)
Gain from disposal of subsidiaries	—		(2,767	)	—
Amortization of debt issuance costs	19		191		175
Amortization of government grant	(3	)	(3	)	(3	)
Share-based compensation expense	10,479		166		211
Loss from disposal of property, plant and equipment	266		508		45
Exchange loss (gain)	851		(28	)	41
Gain from extinguishment of amounts due to original shareholders of acquired subsidiaries	—		(462	)	—
Provision for impairment allowance on prepayments and other current assets	696		843		—
Provision for allowance for doubtful accounts on amounts due from a related party	1,302		—		—
Net pension cost recognized	173		33		—
Changes in operating assets and liabilities:
Accounts receivable	242		(1,797	)	2,175
Notes receivable	—		(1,874	)	789
Prepayments and other current assets	310		(463	)	(426	)
Other non-current assets	(344	)	779		(538	)
Accounts payable	(42	)	(345	)	(1,084	)
Amounts due to related parties	—		(2	)	(1	)
Accrued expenses and other current liabilities	(1,903	)	(1,524	)	(6,437	)
Other non-current liabilities	5		6,578		1,229
Net cash generated from operating activities	1,644		22,700		19,410
Cash flows from investing activities:
Acquisition of subsidiaries, net of cash acquired	(19,330	)	(8,923	)	—
Proceeds from disposal of subsidiaries	—		20,212		10,957
Cash deposit for potential acquisitions	(696	)	—		—
Acquisition of intangible assets	—		—		(90	)
Acquisition of property, plant and equipment	(1,490	)	(7,091	)	(1,087	)
Proceeds from disposal of property, plant and equipment	112		35		26
Payment to contractors for construction projects	(3,330	)	(6,931	)	(450	)
Loans to a related party	—		(86	)	—
Proceeds from insurance claims	—		—		549
Net cash (used in) generated from investing activities	(24,734	)	(2,784	)	9,905

F-5

CHINA HYDROELECTRIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013 (Continued)
(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)

	For the Years Ended December 31,
	2011		2012		2013
Cash flows from financing activities:
Proceeds from exercise of share options	—		—		26
Purchase of subsidiary shares from noncontrolling interests	(1,204	)	—		—
Proceeds from loans from related parties	1,263		572		2,034
Proceeds from short-term loans	23,066		28,070		14,364
Proceeds from long-term loans	45,823		72,947		32,335
Proceeds from exercised warrants	10,036		—		—
Proceeds from loans from third parties	17,456		20,161		3,425
Payment of debt issuance costs and service fee	—		(704	)	(194	)
Repayment of loans from related parties	—		(69	)	(5,585	)
Repayment of short-term loans	(20,889	)	(28,051	)	(26,225	)
Repayment of long-term loans	(66,955	)	(69,986	)	(36,544	)
Repayment of loans from third parties	(10,637	)	(38,136	)	(13,313	)
Restricted cash	—		(5,166	)	5,249
Net cash used in financing activities	(2,041	)	(20,362	)	(24,428	)
Net (decrease) increase in cash and cash equivalents	(25,131	)	(446	)	4,887
Effect of changes in exchange rate on cash and cash equivalents	76		11		1,311
Cash and cash equivalents at the beginning of the year	33,457		8,402		7,967
Cash and cash equivalents at the end of the year	8,402		7,967		14,165
Supplementary disclosure of cash flow information
Interest paid	22,928		19,983		16,588
Income taxes paid	2,333		2,855		5,061
Non-cash activities:
Non-cash portion of acquisition of subsidiaries	1,825		—		—
Non-cash portion of acquisition of property, plant and equipment	9,595		3,330		3,286
Non-cash portion of disposal of property, plant and equipment	20		—		—
Discharge of liability from disposal of subsidiaries	—		158		—

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CHINA HYDROELECTRIC CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(Amounts in thousands of U.S. dollars (“US$”), except for number of shares and per share data)

	China Hydroelectric Corporation shareholders
	Number of ordinary shares	Ordinary shares	Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Noncontrolling interests		Total shareholders’ equity
Balance at December 31, 2010	153,295,516	153	495,652		22,922		(112,840	)	11,096		416,983
Reclassification of warrants from equity to liability	—	—	(1,391	)	—		—		—		(1,391	)
Exercise of warrants	8,693,581	9	9,666		—		—		—		9,675
Purchase of subsidiary shares from noncontrolling interests	—	—	(4,907	)	—		—		(1,032	)	(5,939	)
Share-based compensation expenses	—	—	10,479		—		—		—		10,479
Other comprehensive income	—	—	—		20,046		—		315		20,361
Net loss	—	—	—		—		(45,389	)	(9,901	)	(55,290	)
Balance at December 31, 2011	161,989,097	162	509,499		42,968		(158,229	)	478		394,878
Share-based compensation expenses	—	—	166		—		—		—		166
Other comprehensive loss	—	—	—		(1,371	)	—		(9	)	(1,380	)
Net (loss) income	—	—	—		—		(1,243	)	94		(1,149	)
Balance at December 31, 2012	161,989,097	162	509,665		41,597		(159,472	)	563		392,515
Share-based compensation expenses	—	—	211		—		—		—		211
Exercise of share options	110,568	—	26		—		—		—		26
Other comprehensive income (loss)	—	—	—		12,462		—		(67	)	12,395
Net loss	—	—	—		—		(2,221	)	(297	)	(2,518	)
Balance at December 31, 2013	162,099,665	162	509,902		54,059		(161,693	)	199		402,629

F-7

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

China Hydroelectric Corporation (the “Company”) was incorporated on July 10, 2006 under the laws of the Cayman Islands to serve as a vehicle for the acquisition of equity interests in companies with hydroelectric assets in the People’s Republic of China (the “PRC” or “China”). The Company and its subsidiaries (the “Group”) are principally engaged in the operation and development of hydroelectric assets and the generation of hydroelectric power in the PRC.

On January 25, 2010, the Company completed an initial public offering (“IPO”), whereby the Company issued 6,000,000 units of securities at US$16.00 per unit. Each unit consists of one American Depositary Share (“ADS”) priced at US$14.80 and one warrant priced at US$1.20. Each ADS represents three ordinary shares and each warrant entitles the holder to purchase three ordinary shares for an exercise price of US$15.00. The IPO yielded aggregate gross proceeds of US$96,000. The proceeds, net of applicable expenses, are used to acquire hydroelectric operating companies and assets and to develop new hydroelectric power projects in China, for working capital and for general corporate purposes.

The Company does not conduct any substantive operation of its own and conducts its primary business operations through its subsidiaries.

During the year ended December 31, 2011, the Company acquired one hydroelectric entity. The Company did not make any acquisition of hydroelectric entity during the years ended December 31, 2012 and 2013.

As of December 31, 2013, the Company’s subsidiaries included the following entities:

Subsidiaries	Place of Incorporation	Date of Establishment/ Acquisition	Percentage of Ownership		Principal Activities
Beijing A.B.C. Investment Consulting Co., Ltd. (“ABC”)	The PRC	April 19, 2007	100	%	Provision of general and administrative services to group companies
Yunnan Huabang Electric Power Development Co., Ltd. (“Binglangjiang”)	The PRC	April 25, 2007	100	%	Operation and development of hydroelectric assets
Sichuan Huabang Hydroelectric Development Co., Ltd. (“Liyuan”)	The PRC	May 21, 2007	100	%	Operation and development of hydroelectric assets
Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. (“Yingchuan”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
Qingtian Wuliting Hydroelectric Development Co., Ltd. (“Wuliting”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (“Jiulongshan”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
China Hydroelectric Corporation (Hong Kong) Limited (“CHC HK”)	Hong Kong (“HK”)	June 25, 2008	100	%	Investment holding company

F-8

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

	Place of Incorporation	Date of Establishment/ Acquisition	Percentage of Ownership		Principal Activities
Pingnan County Wangkeng Hydroelectric Co., Ltd. (“Wangkeng”)	The PRC	October 21, 2008	100	%	Operation and development of hydroelectric assets
Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. (“Banzhu”)	The PRC	October 22, 2008	100	%	Operation and development of hydroelectric assets
Sun Power Asia Limited (“Sunpower”)	HK	November 14,2008	100	%	Investment holding company
Yunhe County Shapulong Hydropower Generation Co., Ltd. (“Shapulong”)	The PRC	August 3, 2009	100	%	Operation and development of hydroelectric assets
Zhejiang Longquan Ruiyang Cascaded II Hydropower Plant Co., Ltd. (“Ruiyang”)	The PRC	August 20, 2009	100	%	Operation and development of hydroelectric assets
Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. (“Zhougongyuan”).	The PRC	December 3, 2009	100	%	Operation and development of hydroelectric assets
Fujian Huabang Hydroelectric Investment Co., Ltd. (“Fujian Huabang”).	The PRC	January 14, 2010	100	%	Investment holding company
Henan Wuyue Storage Power Generation Co., Ltd. (“Wuyue”)	The PRC	March 23, 2010	79	%	Development of hydroelectric assets
Yingjiang County Qinrui Husahe Power Co., Ltd. (“Husahe”)	The PRC	April 19, 2010	100	%	Operation and development of hydroelectric assets
Fugong County Hengda Electric Power Development Co., Ltd. (“Hengda”)	The PRC	June 22, 2010	100	%	Operation and development of hydroelectric assets
Fugong County Xineng Electric Power Development Co., Ltd. (“Xineng”)	The PRC	August 16, 2010	100	%	Operation and development of hydroelectric assets
Luquan Xiaopengzu Power Generation Co., Ltd. (“Xiaopengzu”)	The PRC	September 8, 2010	100	%	Operation and development of hydroelectric assets
Shaowu City Jinling Power Generation Co., Ltd. (“Jinling”)	The PRC	December 30, 2010	100	%	Operation and development of hydroelectric assets
Shaowu City Jinlong Hydroelectric Co., Ltd. (“Jinlong”)	The PRC	December 30, 2010	55	%	Operation and development of hydroelectric assets
Shaowu City Jintang Hydroelectric Co., Ltd. (“Jintang”)	The PRC	December 30, 2010	74	%	Operation and development of hydroelectric assets
Shaowu City Jinwei Hydroelectric Co., Ltd. (“Jinwei”)	The PRC	December 30, 2010	74	%	Operation and development of hydroelectric assets
Jinping Kanghong Hydroelectric Development Co., Ltd. (“Dazhaihe”)	The PRC	April 10, 2011	100	%	Operation and development of hydroelectric assets

F-9

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As of December 31, 2013, the Group had working capital deficiency of US$66,547. This factor raises substantial doubt about the Company’s ability to continue as a going concern. The continued operation of the Group is dependent upon the Group’s ability in raising additional capital, obtaining additional financing and improving future operating and financial results. Therefore, the Company may not be able to realize its assets and discharge its liabilities in the normal course of business. In view of this, management has taken steps to actively pursue additional capital and financing.

While the Company strongly believes that its capital resources will be sufficient in the near term, there is no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there is no assurance that any additional financing, if available, will be obtainable on terms satisfactory or attractive to the Company.

The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might have been necessary should the Company not be able to continue in existence as a going concern.

(b) Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control and continued to be consolidated until the date that such control ceases.

Investments in entities that the Company does not control, but has the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method. Investments in entities in which the Company does not have the ability to exercise significant influence are accounted for under the cost method. All significant intercompany transactions and balances have been eliminated upon consolidation.

The Group accounted for business combinations in accordance with ASC topic 805 (“ASC 805”), Business Combinations. ASC 805 requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. During the measurement period, which shall not exceed one year from the acquisition date, the Company recognizes adjustments to the provisional amounts of acquisition-date fair value and the resulting goodwill for new information obtained as if the accounting for the business combination had been completed at the acquisition date. The comparative information for prior periods presented in the consolidated financial statements is revised as needed, including making any change in depreciation, amortization or other income effects recognized in completing the initial accounting.

For a component of the Group that either has been disposed of or is classified as held-for-sale, the Group accounted for the result of operations of the component as a discontinued operation in accordance with ASC sub-topic 205-20 (“ASC 205-20”), Presentation of Financial Statements, when (1)the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Group as a result of the disposal transaction; and (2)the Group will not have any significant continuing involvement in the operations of the component after the disposal transaction.

The Company accounted for the purchase of additional ownership in its subsidiary from noncontrolling interests as an equity transaction in accordance with ASC topic 810 (“ASC 810”), Consolidation. The carrying amount of the noncontrolling interests is adjusted to reflect the change in the Group’s ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interests is adjusted is recognized in additional paid-in capital.

F-10

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(c) Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

(d) Fair value measurement

Financial instruments include cash and cash equivalents, accounts receivable, notes receivable, certain other current assets, accounts payable, certain other liabilities, short-term loans, long-term loans and warrants. The carrying values of these financial instruments, other than long-term loans and warrants, approximate their fair values due to their short-term maturities. During the year ended December 31, 2011, certain warrants were reclassified from equity to liability upon modification of terms (Note 17). These amended warrants were recorded as liabilities at fair value on the day of modification and subsequently adjusted to the fair value at each reporting date. All liability-classified warrants expired unexercised as of December 31, 2013. The warrants classified as equity were measured at fair value on the grant dates. The carrying values of long-term loans approximate their fair values due to the fact that the interest rates on these loans are reset each year based on prevailing market interest rates.

The Group applied the provisions of ASC topic 820 (“ASC 820”), Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

ASC 820 describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

In accordance with ASC 820, the Group measures the fair value of money market funds included in cash equivalents using the market approach based on quoted market prices. The warrant liabilities were valued using the income approach based on inputs that are unobservable in the market (Level 3).

All assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are summarized below:

	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)
	US$	US$	US$
Money market funds in cash equivalent	8	—	—
Warrant liabilities (Note 17)	—	—	839
	8	—	839

No assets and liabilities were measured at fair value on a recurring basis as of December 31, 2013.

F-11

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The following table presents a reconciliation of warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs for the years ended December 31, 2012 and 2013:

	Warrant liabilities
	US$
Balance as of December 31, 2011	440
Realized or unrealized losses	399
Balance as of December 31, 2012	839
Realized or unrealized gain	(839	)
Balance as of December 31, 2013	—

Realized or unrealized gain or losses for the years ended December 31, 2012 and 2013 were recorded in “changes in fair value of warrant liabilities” on the consolidated statements of comprehensive income.

All assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2013 are summarized below:

	Carrying valueat December 31, 2013	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total loss
	US$	US$	US$	US$
Property, plant and equipment	4,098	—	—	—	(4,098	)

In accordance with ASC topic 360 (“ASC 360”), Property, Plant, and Equipment, property, plant and equipment of Liyuan with a carrying amount of US$4,098 was written down to its fair value of nil, resulting in an impairment loss of US$4,098, of which US$549 was recovered through insurance claims. A net impairment charge of US$3,549 was included in the consolidated statements of comprehensive income for the year ended December 31, 2013 (Note 7).

(e) Foreign currency

The Company determined its functional currency to be the US$ while its subsidiaries determine their functional currency based on the criteria of ASC topic 830 (“ASC 830”), Foreign Currency Matters. All of the Company’s subsidiaries determined their functional currency to be their respective local currency, except for CHC HK and Sunpower which determined their functional currency to be the US$. The Company uses the US$ as its reporting currency.

Each entity in the Group maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Exchange gains and losses are included in the consolidated statements of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are remeasured using the exchange rates at the dates of the initial transactions.

The assets and liabilities of the Company’s subsidiaries are translated into the reporting currency of the Company at the exchange rates prevailing at the balance sheet date. The statements of comprehensive income of the Company’s subsidiaries are translated into the reporting currency of the Company at the weighted average exchange rates for the year. The resulting translation gains (losses) are recorded in accumulated other comprehensive income as a component of shareholders’ equity.

For the purpose of the consolidated statements of cash flows, cash flows of the Company’s subsidiaries are translated into the reporting currency of the Company at the exchange rates prevailing on the dates of the cash flows. Frequently recurring cash flows of the Company’s subsidiaries, which arise throughout the year, are translated into the reporting currency of the Company at the weighted average exchange rates for the year.

F-12

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(f) Cash and cash equivalents

Cash and cash equivalents include cash on hand and short-term deposits with original maturity of three months or less at the date of purchase. Except for the restricted cash, none of the Group’s cash and cash equivalents is restricted as to withdrawal and use.

(g) Restricted cash

Restricted cash represents cash pledged to financial institutions as collateral for the Company’s bank loans (Note 15). The restriction on the cash collateral amount of US$5,171 as of December 31, 2012 was released in May 2013 upon repayment of the bank loans.

(h) Accounts receivable

Accounts receivable are carried at net realizable value. In evaluating the collectability of receivable balances, the Group considers many factors, including the aging of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Accounts receivable are written off after all collective efforts have ceased.

(i) Notes receivable

Notes receivable represent short-term bank acceptance notes issued by financial institutions that entitle the holder to receive the stated amount from the financial institutions at the maturity date of the bill, which is generally within six months from the date of issuance. The holder of the bills can obtain payment from the financial institutions prior to the stated maturity date. In such a case, the holder will receive a discounted amount off the face value of the bill. There is recourse to the customers in the event the financial institutions default upon demand for payment by the holders of the notes. To reduce the Group’s credit risk, the Group has required certain customers to pay for electricity using notes receivable during the years ended December 31, 2012 and 2013.

(j) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. The depreciable amount of an item of property, plant and equipment is its cost less its estimated residual value, if any. The residual value is calculated by taking the price such an asset would fetch at the reporting date, with the assumption that it was already in the condition it will be in at the end of its useful life. Depreciation is recorded on a straight-line basis over the following estimated useful lives:

Dams and reservoirs	30-49 years
Buildings	8-50 years
Machinery	1-30 years
Transportation equipment	1-11 years
Electronic equipment and others	1-15 years

For property, plant and equipment acquired through a business combination, depreciation is recorded on a straight-line basis over their respective remaining estimated useful lives. The useful lives, residual values and methods of depreciation are reviewed at each reporting date and adjusted prospectively, if appropriate.

All direct and indirect costs that are related to the construction of property, plant and equipment and incurred before the assets are ready for their intended use are capitalized as construction in progress. Construction in progress is transferred to specific property, plant and equipment accounts and commences depreciation when these assets are ready for their intended use.

Interest costs are capitalized if they are incurred during the acquisition, construction or production of a qualifying asset and such costs could have been avoided if expenditures for the assets have not been made. Capitalization of interest costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Interest costs are capitalized until the assets are ready for their intended use.

Repair and maintenance costs are charged to expense when incurred, whereas the cost of renewals and betterment that extend the useful life of fixed assets are capitalized as additions to the related assets. Retirement, sale and disposal of assets are recorded by removing the cost and accumulated depreciation, with any resulting gain or loss reflected in the consolidated statements of comprehensive income.

F-13

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(k) Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of acquired businesses. ASC topic 350 (“ASC 350”), Intangibles—Goodwill and Other, requires that goodwill be tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group assigns and assesses goodwill for impairment at the reporting unit level at each reporting date. The Group determines that each reporting unit is identified at the component level, which is one level below the operating segment.

The performance of the impairment test involves a two-step process. The first step of the impairment test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. Fair value is primarily determined through the income approach by computing the future discounted cash flows expected to be generated by the reporting unit and is dependent on a number of significant entity specific assumptions, including plant utilization rate, electricity sales volumes and tariffs, costs of production, capital expenditures, working capital changes and the discount rate. The discount rate is commensurate with the risk inherent in the projected cash flows and reflects the rate of return required by an investor in the current economic conditions. For reporting units to be disposed of subsequent to the reporting date, the market approach is used where estimates of prices reasonably expected to be realized from the sale of the reporting units are used to determine the fair value of each reporting unit.

If the carrying value exceeds the fair value, goodwill may be impaired. If this occurs, the Group performs the second step of the quantitative goodwill impairment test to determine the amount of impairment loss. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. This implied fair value is then compared with the carrying amount of the reporting unit goodwill, and if it is less, the Group would then recognize an impairment loss. In accordance with ASU No. 2011-08 (“ASU 2011-08”), Intangibles—Goodwill and Other (ASC 350), the Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test. If the Company believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required.

The Group recognized goodwill impairment loss of US$11,388, nil and nil for the years ended December 31, 2011, 2012 and 2013, respectively (Note 9).

Intangible assets are carried at cost less accumulated amortization. Intangible assets acquired in a business combination are recognized initially at fair value at the date of acquisition. Intangible assets with a finite useful life are amortized using the straight-line method over the estimated economic life of the intangible assets. The estimated useful lives for the intangible assets as of December 31, 2013 were as follows:

Development right of Binglangjiang Phase II	30 years
Dam use right of Dongguan	40 years
Software	5 years

The Group reviews and adjusts the carrying value of the intangible assets if facts and circumstances suggest the intangible assets may be impaired (Note 2(n)). The Group assessed and concluded that there was no impairment for intangible assets in any of the years presented.

(l) Land use rights

The land use rights represent the amounts paid and relevant costs incurred for the right to use land in the PRC and are recorded at purchase cost less accumulated amortization. Amortization is provided on a straight-line basis over the terms of the respective land use rights agreements, which are 50 years. For land use rights acquired through a business combination, amortization is recorded on a straight-line basis over their respective remaining estimated useful lives, which range from 41 to 50 years.

(m) Asset retirement obligations

ASC sub-topic 410-20 (“ASC 410-20”), Asset Retirement Obligations, requires companies to record the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. The value of the liability is capitalized as part of the carrying amount of the related long-lived asset. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The Group’s asset retirement obligations relate primarily to the restoration of leased lands under land use rights granted by the local government to their original condition. Asset retirement obligations as of December 31, 2012 and 2013 were insignificant.

F-14

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(n) Impairment of long-lived assets

The Group evaluates its long-lived assets, including property, plant and equipment, land use rights and intangible assets with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360.  When these events occur, the Group assesses the recoverability of long-lived assets by comparing the carrying amount of the assets to the expected future undiscounted cash flows resulting from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The Group recognized impairment loss on long-lived assets of US$11,590, nil and US$3,549 for the years ended December 31, 2011, 2012 and 2013, respectively.

(o) Derivative instruments

ASC topic 815 (“ASC 815”), Derivatives and Hedging, requires all contracts which meet the definition of a derivative to be recognized in the consolidated financial statements as either assets or liabilities and recorded at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. Changes in fair values of derivatives not qualified as hedges are reported in the consolidated statements of comprehensive income. The estimated fair values of derivative instruments are determined at discrete points in time based on the relevant market information. These estimates are calculated with reference to the market rates using industry standard valuation techniques.

(p) Comprehensive income (loss)

Comprehensive income (loss) is defined as the change in shareholders’ equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. The Group presents items of net income (loss) and other comprehensive income (loss) in one continuous statement. Accumulated other comprehensive income (loss) of the Group includes the cumulative foreign currency translation adjustments and net losses not recognized immediately as a component of net periodic pension cost of a defined benefit plan.

(q) Revenue recognition

The Group’s revenue is derived from the sale of electricity. Revenues are recognized when the following four criteria are met as prescribed by ASC topic 605 (“ASC 605”), Revenue Recognition: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. The Group considers the terms of each arrangement to determine the appropriate accounting treatment. Revenue is generally earned and recognized upon transmission of electricity to the power grid controlled and owned by the respective regional or provincial grid companies. For transactions in which electricity has been transmitted to the power grid without a fixed or determinable unit price per kWh while the tariff is pending approval of the regional or provincial pricing bureau, cash received in exchange for the transmission of electricity to the power grid controlled by the respective regional or provincial grid companies has been recorded as customer deposits until such time the price becomes fixed and determinable. When the price becomes fixed and determinable, all or a portion of the customer deposits will be recognized as revenue. The Group does not defer the related cost of revenues, which is charged to expense as incurred. No customer deposits were recognized as of December 31, 2012 and 2013. The Group has not offered any discounts or rebates to its customers nor does it provide for refunds in its sales contracts with customers.

The Company’s subsidiaries are subject to withholding value-added tax (“VAT”) on the revenues earned in the PRC. The applicable rate of VAT is 6% for small hydroelectric power projects with a total installed capacity of 50 megawatts or less and 17% for large hydroelectric power projects with a total installed capacity of over 50 megawatts. For the years ended December 31, 2011, 2012 and 2013, the lower VAT rate of 6% was applied to the hydroelectric power projects of Binglangjiang, Liyuan, Yingchuan, Wuliting, Jiulongshan, Zhougongyuan, Shapulong, Ruiyang, Husahe, Hengda, Xineng, Xiaopengzu, Jinling, Jinlong, Jintang Jinwei and Dazhaihe, and the VAT rate of 17% was applied to the hydroelectric power projects of Banzhu and Wangkeng. VAT on revenues earned from the sale of electricity by the Group to its customers for the years ended December 31, 2011, 2012 and 2013 were US$4,583, US$7,387 and US$6,047, respectively. The Group has recognized revenues net of VAT in the consolidated statements of comprehensive income.

F-15

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(r) Cost of revenues

Cost of revenues consists primarily of depreciation expense of hydroelectric power projects and related operating costs and overhead expenses directly attributable to the production of electricity.

(s) Leases

In accordance with ASC topic 840 (“ASC 840”), Lease, leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capital lease if any of the following conditions exist: (i) ownership is transferred to the lessee by the end of the lease term, (ii) there is a bargain purchase option, (iii) the lease term is at least 75% of the property’s estimated remaining economic life or (iv) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the lease periods.

The Group has no capital leases for any of the years presented.

(t) Income taxes

The Group follows the liability method of accounting for income taxes in accordance with ASC topic 740 (“ASC 740”), Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities, net operating loss and credits carryforwards, using enacted tax rates that will be in effect for the period in which the differences are expected to reverse. The Group records a valuation allowance against the amount of deferred tax assets if based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in the consolidated statements of comprehensive income in the period that includes the enactment date.

The Company accounts for uncertainty in income taxes in accordance with ASC 740. Interest and penalties arising from underpayment of income taxes are computed in accordance with the related PRC tax law. The amount of interest expenses is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to be taken in a tax return. Interest recognized from the accounting for uncertainty in income taxes is classified in the financial statements as interest expenses, while penalties recognized from the accounting for uncertainty in income taxes are classified in the financial statements as other expenses.

The Group recognizes in its financial statements the impact of a tax position if a tax return position or future tax position is “more likely than not” to prevail, which is defined as a likelihood of more than fifty percent of being sustained upon audit, based on the technical merits of the tax position. Tax positions that meet the “more likely than not” threshold are measured, using a probability weighted approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement.

The Group’s estimated liability for unrecognized tax benefits is periodically assessed for adequacy and may be affected by changing interpretation of laws, rulings by tax authorities, certain changes and/or developments with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from the Group’s estimates. As each audit is concluded, adjustments, if any, are appropriately recorded in the Group’s financial statements. Additionally, in future periods, change in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the change occurs. The Group classified unrecognized tax benefits as current liabilities to the extent the Group anticipates payment of cash within one year or the operating cycle, if longer.

The Company recognizes the tax benefit for the excess of the tax basis over the financial reporting basis or the tax liability when the financial reporting basis exceeds the tax basis (“outside basis difference”) of an investment in subsidiary in accordance with ASC sub-topic 740-30 (“ASC 740-30”), Income Taxes: Recognition, when it is apparent that the temporary differences will reverse in the foreseeable future. If it is “more likely than not” that a deferred tax liability will be realized as a result of the decision to dispose of a subsidiary, the tax liability would be recorded when the disposal group is classified as held for sale even though any gain expected upon disposal cannot be recognized until the sale is consummated.

F-16

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(u) Net (loss) income per share

In accordance with ASC topic 260 (“ASC 260”), Earnings Per Share, basic (loss) income per share is computed by dividing net (loss) income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted (loss) income per share is calculated by dividing net (loss) income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary share equivalents outstanding during the period. Ordinary share equivalents consist of the ordinary shares issuable upon the conversion of warrants (Note 17) and share options (Note 26), using the treasury stock method.

(v) Segment reporting

The Group follows ASC topic 280 (“ASC 280”), Segment Reporting, for the presentation of segment information. The Group’s chief operating decision maker, who has been identified as the chief executive officer (“CEO”), relies upon financial information by provinces with operations in the PRC when making decisions about allocating resources and assessing the performance of the Group. As a result, the Group operates and manages its business as four operating and reportable segments, namely the Yunnan Province segment, the Sichuan Province segment, the Zhejiang Province segment and the Fujian Province segment. As the Group’s long-term assets are substantially all located in and derived from the PRC, no geographical segments are presented.

(w) Government grant

Government grants are recognized when there is reasonable assurance that the attaching conditions will be complied with. A grant relates to an expense item is recognized as income over the period necessary to match the grant on a systematic basis to the related costs, whereas a grant relates to an asset acquisition is recognized as deferred government grant and recognized as income in proportion to depreciation of the related assets. Grant income is recognized on a net basis as a reduction to cost of revenues in the consolidated statements of comprehensive income.

(x) Share-based payment

The Company accounts for share awards issued to employees in accordance with ASC topic 718 (“ASC 718”), Compensation-Stock Compensation. In accordance with the fair value recognition provision of ASC 718, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period. The Company has elected to recognize share-based compensation expense for share awards granted to employees using the straight-line method. The Company uses a binomial option pricing valuations model in determining the fair value of the options granted.

The Company accounts for share awards issued to non-employees in accordance with the provisions of ASC 718 and ASC sub-topic 505-50 (“ASC 505-50”), Equity: Equity-Based Payment to Non-employees. The Company’s share awards issued to non-employees are subject to graded vesting provisions. The Group recognizes share-based compensation expense for share awards granted to non-employees using the accelerated recognition method over the requisite service period of the award. In accordance with ASC 718 and ASC 505-50, the Company uses the binomial option pricing valuations model to measure the value of options granted to non-employees at each vesting date to determine the appropriate charge to share-based compensation.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to vest. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and is adjusted to reflect future change in circumstances and facts, if any.

F-17

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(y) Long-lived assets to be disposed of and discontinued operations

The Company accounts for a long-lived asset to be disposed of other than by sale in accordance with the provisions of ASC 360, where such long-lived asset continues to be classified as held and used until it is disposed of. When a long-lived asset ceases to be used, the carrying amount of the asset is written down to its salvage value, if any.

The Company accounts for a long-lived asset or disposal group to be sold in accordance with ASC 360, where such long-lived asset or disposal group is classified as held for sale in the period in which all six criteria are met: (1) a plan to sell the asset has been committed to by management; (2) the asset can be sold in its current condition; (3) an active plan has been initiated to find a buyer; (4) it is probable that the asset will be sold and the sale will be completed within one year and will qualify as a completed sale; (5) the sales price is reasonable relative to the asset’s current fair value and the entity is actively marketing the asset; and (6) it is unlikely that the plan to sell the asset will be withdrawn or changed significantly.

A long-lived asset or disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell, and it is presented separately on the consolidated balance sheets. Long-lived assets reclassified as held for sale are not depreciated or amortized.

The Company follows ASC 205-20 in its accounting for a component of the Company that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the Company. Such component is reported as discontinued operations. In the period in which a component has been disposed of or classified as held for sale, the results of operations, including any gain or loss after tax recognized in accordance with ASC 360, less applicable income taxes, for the periods presented are reclassified into line items of income separately from net income (loss) from continuing operations before extraordinary items (if applicable), on the consolidated statements of comprehensive income.

(z) Recently issued accounting standards

In March 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-05 (“ASU 2013-05”), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which specifies that a cumulative translation adjustment should be released into earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustment attributable to the investment would be recognized in earnings when the investment is sold. When an entity sells either a part or all of its investment in a consolidated foreign entity, cumulative translation adjustment would be recognized in earnings only if the sale results in the parent no longer having a controlling financial interest in the foreign entity. In addition, cumulative translation adjustment should be recognized in earnings in a business combination achieved in stages (i.e., a step acquisition). The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-05.

In July 2013, the FASB issued ASU No. 2013-11 (“ASU 2013-11”), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which concludes an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law. The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-11.

F-18

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

3. ACQUISITIONS

(a) Acquisition of a subsidiary during the year ended December 31, 2011

During the year ended December 31, 2011, the Company completed the acquisition of 100% ownership interest in Dazhaihe. This acquisition was in line with the Company’s plan to further expand its hydroelectric power generation capacity in the PRC.

On November 6, 2010, Xiaopengzu entered into an equity transfer purchase agreement with seven individual shareholders to acquire 100% of the equity interest in Dazhaihe. The total purchase consideration for the acquisition was US$9,019 (RMB59,000) cash. The hydroelectric project of Dazhaihe is located in Mengqian County, Yunnan Province, and has been in operation since September 2008. The acquisition was completed and Xiaopengzu took effective control of Dazhaihe on April 10, 2011. The acquisition of Dazhaihe meets the definition of a business acquisition and the results of operations of the acquired business have been included in the Company’s consolidated financial statements since April 10, 2011.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition on April 10, 2011.

	US$
Cash purchase price	9,019
Total purchase consideration	9,019
Cash	59
Property, plant and equipment, net	11,540
Other assets	555
Goodwill	6,646
Total assets acquired	18,800
Other liabilities	(9,303	)
Deferred tax liabilities — non-current	(478	)
Total liabilities assumed	(9,781	)
Net assets acquired	9,019

The US$6,646 goodwill from the acquisition of Dazhaihe was assigned to the Yunnan Province segment. The goodwill recognized is primarily attributable to expected synergies and the assembled workforce of Dazhaihe. None of the goodwill is expected to be deductible for tax purposes.

The Company recognized US$28 of acquisition-related costs that were expensed in the year ended December 31, 2011. These costs are included in “General and administrative expenses” on the consolidated statements of comprehensive income.

The amounts of revenue and net loss of Dazhaihe included in the Company’s consolidated statement of comprehensive income from April 10, 2011, the acquisition date, to December 31, 2011 were as follows:

	US$
Revenue	831
Net loss	(717	)

F-19

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(b) Acquisition of noncontrolling interest

On January 14, 2011, Fujian Huabang, a wholly-owned subsidiary of the Company, completed the acquisition of the remaining 10% equity interest of Wangkeng pursuant to an equity transfer purchase agreement with Sanming Chenyang Hydroelectric Co., Ltd. dated November 22, 2010. The purchase consideration for the acquisition was US$5,939 (RMB38,967). The Company accounted for the purchase of subsidiary shares from the noncontrolling interest as an equity transaction in accordance with ASC 810. The carrying amount of the noncontrolling interest was adjusted from US$1,032 (RMB6,777) to nil to reflect the noncontrolling interest holder’s reduced ownership interest in Wangkeng’s net assets. The difference between the consideration paid by the Company to the noncontrolling interest holder and the adjustment to the carrying amount of the noncontrolling interest in Wangkeng was recognized in additional paid-in capital. Upon the completion of this transaction, Wangkeng became a wholly-owned subsidiary of the Group.

The following table shows the effects of changes in the Company’s ownership interest in Wangkeng on the Company’s equity:

	For the yearendedDecember 31,
	2011
	US$
Net income (loss) attributable to the Company	(45,389	)
Decrease in the Company’s paid-in capital for purchase of 10% of equity interest in Wangkeng	(4,907	)
Net transfers to noncontrolling interest	(4,907	)
Change from net income (loss) attributable to the Company and transfers to noncontrolling interest	(50,296	)

During the years ended December 31, 2012 and 2013, the Company did not complete any acquisition of hydropower projects.

F-20

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

4. ACCOUNTS RECEIVABLE

The Group’s trading terms with its customers are mainly on credit. The credit terms are generally within 60 days after the delivery of electricity. The Group does not offer extended payment terms and all accounts receivable balances are non-interest-bearing.

As of December 31, 2012 and 2013, all of the accounts receivable balances were within credit terms.

5. PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets consist of the following:

	December 31,
	2012		2013
	US$		US$
Advances for construction projects	78		109
Acquisition deposits	716		738
Amounts due from original shareholders of acquired subsidiaries	1,297		1,350
Consideration receivable from disposal of a subsidiary	11,534		—
Prepaid insurance	360		509
Rental deposit	182		258
Prepaid finance consulting fee	570		844
Others	973		1,026
	15,710		4,834
Less: Provision for impairment allowance	(1,560	)	(1,608	)
Total	14,150		3,226

Acquisition deposits as of December 31, 2013 represent a deposit of US$492 (2012: US$477) advanced by Wangkeng to Long Yan Ting Zhou Hydroelectric Development Co., Ltd. in April 2011 for the acquisition of the Ting Zhou hydroelectric project and a deposit of US$246 (2012: US$239) advanced by Hengda to Lushui Jinman Hydro Development Co., Ltd. in April 2011 for the acquisition of the Jinmanhe power project. As of December 31, 2011, these acquisitions have not been completed and the memorandums of understanding in relation to these acquisitions have expired. As a result, the Group recognized a full provision for impairment allowance on the acquisition deposits of US$738 (2012: US$716) as of December 31, 2013.

Amounts due from original shareholders of acquired subsidiaries as of December 31, 2013 mainly represent US$819 (2012: US$794) receivable from the original shareholders of Jinling and its subsidiaries for business tax and land value added tax related to the disposal of an office building and US$531 (2012: US$503) from the original shareholders of Banzhu for social insurance which should be borne by the original shareholders in accordance with the equity purchase agreements. As of December 31, 2012, the amounts due from the original shareholders of Jinling and its subsidiaries are determined to be not recoverable. As a result, the Group recognized a full provision for impairment allowance of US$819 (2012: US$794) as of December 31, 2013.

On October 18, 2012, the Company entered into an equity purchase and sale agreement with a third-party to dispose 100% equity interest in Yuheng for a total consideration of US$21,269 (RMB134,000) cash. Consideration receivable from disposal of a subsidiary as of December 31, 2012 represents US$11,534 unpaid consideration due from the buyer, which was fully settled on March 19, 2013.

Prepaid finance consulting fee as of December 31, 2013 mainly represents US$665 (2012: US$451) current portion of prepaid consulting fee paid to banks by Wuliting, Zhougongyuan, Ruiyang, Jiulongshan, Jintang and Jinwei for loans and US$179 (2012: US$119) current portion of prepaid service fee paid to International Far Eastern Leasing Co., Ltd. (“IEL”), by Liyuan and Dazhaihe for certain financing arrangements (Note 11). These prepaid fees for loans are amortized over the loan terms under the effective interest method.

F-21

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

6. DISCONTINUED OPERATIONS

On December 3, 2011, the Company entered into an equity purchase and sale agreement with a third-party to dispose 100% equity interest in Yuanping for a total consideration of US$11,276 (RMB71,050) cash. Yuanping owns and operates one hydroelectric station located in the Fujian Province, the PRC. On the same day, an agreement was entered into between Yuanping and Yuheng whereby Yuanping is assigned a right to use 36.48% of the water generated by Yuheng’s dam and reservoir at nil consideration with immediate effect. The dam and reservoir legally owned by Yuheng had been utilized in power generation by both Yuanping and Yuheng historically. The disposal date was March 2, 2012, which was the date the Company lost effective control over Yuanping. Accordingly, the operating results of Yuanping have been presented as discontinued operations in the consolidated statements of comprehensive income for all years presented.

On October 18, 2012, the Company entered into an equity purchase and sale agreement with a third-party to dispose 100% equity interest in Yuheng for a total consideration of US$21,269 (RMB134,000) cash. Yuheng owns and operates one hydroelectric station located in the Fujian Province, the PRC. The disposal date was October 31, 2012, which was the date the Company lost effective control over Yuheng. Accordingly, the operating results of Yuheng have been presented as discontinued operations in the consolidated statements of comprehensive income for all years presented.

The breakdown of assets and liabilities attributable to discontinued operations as of the disposal dates and the results of discontinued operations for the years presented are as follows:

(a)Assets and liabilities attributable to discontinued operations

The breakdown of assets and liabilities attributable to discontinued operations of Yuanping as of the date of disposal on March 2, 2012 is as follows:

	March  2, 2012
	US$
Assets:
Cash and cash equivalents	56
Property, plant and equipment, net	17,304
Goodwill	3,219
Intangible assets, net	617
Deferred tax assets	259
Prepayments and other current assets	328
Total	21,783
Liabilities:
Current portion of long-term loans	477
Accrued expenses and other current liabilities	163
Long-term loans	10,489
Deferred tax liabilities	827
Total	11,956

F-22

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The breakdown of assets and liabilities attributable to discontinued operations of Yuheng as of the date of disposal on October 31, 2012 is as follows:

	October 31, 2012
	US$
Assets:
Cash and cash equivalents	472
Property, plant and equipment, net	18,509
Goodwill	23,448
Intangible assets, net	1,916
Deferred tax assets	174
Prepayment and other current assets	241
Total	44,760
Liabilities:
Current portion of long-term loans	14,920
Accrued expenses and other current liabilities	2,256
Long-term loans	7,301
Deferred tax liabilities	2,046
Other non-current liabilities	33
Total	26,556

(b)Results of discontinued operations

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Revenues	4,737		4,661		—
Cost of revenues	(2,098	)	(1,131	)	—
General and administrative expenses	(226	)	(176	)	—
Interest income	2		2		—
Interest expense	(2,580	)	(1,634	)	—
Other (loss) income, net	(16	)	3,543		—
Income tax expense	(101	)	(1,358	)	—
Net (loss) income from discontinued operations	(282	)	3,907		—

The gain on disposal of US$1,819 and US$1,907, net of tax effects of US$959, from the dispositions of Yuanping and Yuheng, respectively, was included in “Other (loss) income, net”  from discontinued operations for the year ended December 31, 2012.

(c)No allocation of cash flows has been made between continuing and discontinued operations, as the cash flows provided by or used in the operating, investing and financing activities of the discontinued operations were insignificant.

F-23

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

7. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment and its related accumulated depreciation as of December 31, 2012 and 2013 are as follows:

	December 31,
	2012		2013
	US$		US$
Dams and reservoirs	339,123		348,905
Buildings	124,154		127,356
Machinery	153,837		158,527
Transportation equipment	1,865		1,925
Electronic equipment and others	4,244		1,797
	623,223		638,510
Less: Accumulated depreciation	(74,852	)	(98,513	)
	548,371		539,997
Construction in progress, net	140		245
Total	548,511		540,242

F-24

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Construction in progress, net of impairment charge, as of December 31, 2012 and 2013 is as follows:

	Jiulongshan	Liyuan		Binglangjiang		Banzhu		Wangkeng	Wuliting		Yingchuan	Xineng		Hengda		Ruiyang		Zhougongyuan		Dazhaihe		Total
	US$	US$		US$		US$		US$	US$		US$	US$		US$		US$		US$		US$		US$
Balance as of December 31, 2011	13	1,158		1		—		—	—		9	—		—		9		—		—		1,190
Addition to construction inprogress	—	1,350		—		—		—	1,316		—	278		11		1,091		1,429		48		5,523
Transfer from property, plant andequipment	—	—		—		—		—	—		—	610		—		—		—		13		623
Transfer to property, plant andequipment	—	(2,416	)	(1	)	—		—	(1,316	)	—	(888	)	(11	)	(1,076	)	(1,429	)	(61	)	(7,198	)
Foreign currency translationadjustment	—	2		—		—		—	—		—	—		—		—		—		—		2
Balance as of December 31, 2012	13	94		—		—		—	—		9	—		—		24		—		—		140
Addition to construction inprogress	—	29		—		411		83	—		—	—		—		—		—		—		523
Transfer to property, plant andequipment	—	—		—		(300	)	—	—		—	—		—		—		—		—		(300	)
Impairment of construction inprogress	—	(134	)	—		—		—	—		—	—		—		—		—		—		(134	)
Foreign currency translationadjustment	—	11		—		2		1	—		—	—		—		2		—		—		16
Balance as of December 31, 2013	13	—		—		113		84	—		9	—		—		26		—		—		245

F-25

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Impairment of property, plant and equipment relates to write-off of plant assets of Liyuan which were damaged by flood in July 2013. The Company assessed the recoverability of its long-lived assets and recognized an impairment loss amounting to US$4,098 for the year ended December 31, 2013. Insurance recovery amounting to US$549 was recognized upon the receipt of insurance proceeds for the year ended December 31, 2013.

Interest costs from continuing operations qualifying for capitalization in the years ended December 31, 2011, 2012 and 2013 were US$10, nil and nil, respectively.

Depreciation expenses from continuing operations for the years ended December 31, 2011, 2012 and 2013 were US$20,763, US$21,747 and US$22,182, respectively. Accumulated depreciation as of December 31, 2012 and 2013 included foreign currency translation adjustment of US$157 and US$2,640, respectively. Depreciation expenses have been reported in the following accounts:

	For the Years ended December 31,
	2011		2012		2013
	US$		US$		US$
Cost of revenues	(20,466	)	(21,402	)	(21,841	)
General and administrative expenses	(297	)	(345	)	(341	)
Total	(20,763	)	(21,747	)	(22,182	)

8. INTANGIBLE ASSETS

In connection with the acquisition of Binglangjiang, the Company acquired a legal right to develop and operate Phase II of Binglangjiang’s hydroelectric power project. The development right allows the Company to expand the power generation capacity of Binglangjiang by utilizing the existing water dam of Binglangjiang, which has a useful life of 30 years. The Company recognized the fair value of US$2,909 of the development right as a separate intangible asset apart from goodwill in accordance with ASC 805. The estimated useful life of the development right is 30 years.

In connection with the acquisition of Jinling, the Company acquired a right to use the dam of the Dongguan hydropower project which has a useful life of 40 years. The Company recognized the fair value of US$1,759 for the dam use right as a separate intangible asset apart from goodwill in accordance with ASC 805. The estimated useful life of the dam use right of Dongguan is 40 years.

During the year ended December 31, 2013, the Company acquired financial system software, which has an estimated useful life of 5 years, for US$90.

Intangible assets and their related accumulated amortization as of December 31, 2012 and 2013 are as follows:

	December 31, 2012
	Gross Carrying Value	Accumulated Amortization		Foreign Currency Translation Adjustment	Net Carrying Value
Development right of Binglangjiang Phase II	2,909	(629	)	619	2,899
Dam use right of Dongguan	1,759	(90	)	92	1,761
Total	4,668	(719	)	711	4,660

	December 31, 2013
	Gross Carrying Value	Accumulated Amortization		Foreign Currency Translation Adjustment	Net Carrying Value
Development right of Binglangjiang Phase II	2,909	(749	)	706	2,866
Dam use right of Dongguan	1,759	(137	)	146	1,768
Software	90	(11	)	1	80
Total	4,758	(897	)	853	4,714

F-26

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Amortization expenses from continuing operations for the years ended December 31, 2011, 2012 and 2013 were US$161, US$165 and US$178, respectively, which have been reported in the following accounts:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cost of revenues	(45	)	(45	)	(168	)
General and administrative expenses	(116	)	(120	)	(10	)
Total	(161	)	(165	)	(178	)

The estimated annual amortization expenses for each of the five succeeding fiscal years are as follows:

	US$
2014	185
2015	185
2016	185
2017	185
2018	177

9. GOODWILL

Goodwill of US$115,960 as of December 31, 2013 represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired relating to the acquisition of Binglangjiang during 2007, the acquisitions of Yingchuan, Wuliting, Wangkeng, and Banzhu during 2008, the acquisitions of Shapulong and Ruiyang during 2009, the acquisitions of Husahe, Hengda, Xineng, Xiaopengzu and Jinling and its subsidiaries during 2010 and the acquisition of Dazhaihe during 2011, net of foreign currency translation adjustment. Goodwill is not deductible for tax purposes. In accordance with ASC 350, goodwill is not amortized but is tested for impairment at least annually.

The changes in the carrying amount of goodwill by operating and reportable segments for the years ended December 31, 2012 and 2013 are as follows:

	Yunnan Province	SichuanProvince	Fujian Province		Zhejiang Province	Total
	US$	US$	US$		US$	US$
Balance as of December 31, 2011	21,544	—	70,760		43,347	135,651
Foreign currency translation adjustment	53	—	119		106	278
Disposal of subsidiaries	—	—	(23,448	)	—	(23,448	)
Balance as of December 31, 2012	21,597	—	47,431		43,453	112,481
Foreign currency translation adjustment	668	—	1,467		1,344	3,479
Balance as of December 31, 2013	22,265	—	48,898		44,797	115,960

During the year ended December 31, 2012 the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the qualitative assessment, the Company determined that it is not more likely than not that the fair values of its reporting units were less than their carrying values. Accordingly, the first and second steps of the goodwill impairment test are not necessary in accordance with ASC 350. No impairment on goodwill was recognized for the year ended December 31, 2012.

F-27

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

During the year ended December 31, 2012, the Company completed the disposal of two wholly-owned subsidiaries, Yuheng and Yuanping (Note 6). Goodwill amounting to US$23,448 and US$3,219 for Yuheng and Yuanping, respectively, was derecognized on the respective disposal date.

During the year ended December 31, 2013, due to the decline in its revenue as compared to the year ended December 31, 2012, the Company determined that there was an impairment indicator related to the carrying value of its goodwill. Thus, the Company performed the two-step goodwill impairment test on each of its reporting units.

In estimating the fair value of each of the reporting units in the first step of the impairment test, significant management judgment was applied. The Company estimated the fair value of each of the reporting units using the income approach valuation methodology. The market-based valuation methodology is not considered as appropriate because of volatility of the general market condition as well as insufficient number of comparable companies. In using the income approach methodology of valuation, estimates to determine the fair value of the reporting units included management’s judgment related to forecasts of future operating results, discount rates and expected future growth rates. The underlying assumptions used in the first step of the impairment test considered the market capitalization as of December 31, 2013 as well as the current local operating environment in certain provinces in the PRC and its expected impact on the fair value of the reporting unit. The Company determined that the fair values of all reporting units exceeded their carrying value and the second step of the impairment test was not necessary.

10. LAND USE RIGHTS

Land use rights and their related accumulated amortization as of December 31, 2012 and 2013 are as follows:

	December 31,
	2012		2013
	US$		US$
Land use right	47,521		47,521
Less: Accumulated amortization	(4,614	)	(5,778	)
Foreign currency translation adjustment	5,733		7,219
Total	48,640		48,962

The estimated annual amortization expenses for each of the five succeeding fiscal years are as follows:

	US$
2014	1,192
2015	1,192
2016	1,192
2017	1,192
2018	1,192

F-28

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

11. OTHER NON-CURRENT ASSETS

Other non-current assets consist of the following:

	December 31,
	2012	2013
	US$	US$
Long-term prepaid debt insurance cost	315	311
Long-term prepaid rental expenses	118	3
Long-term prepaid compensation cost	337	230
Deposits for financing arrangement	859	1,358
Unamortized service fees	187	299
Long-term prepaid guarantee fee	197	19
Total	2,013	2,220

Deposit for financing arrangement and unamortized service fee represent the refundable deposits and nonrefundable service fees paid to IEL for arrangements to sell certain power generation assets and simultaneously leased back the assets. In August 2012, Liyuan sold assets to IEL for US$7,151 and simultaneously leased back the assets for three years at a monthly lease payment of US$219. The implicit interest rate on the lease payments is 6.5% per annum which is determined based on 0.35% above the benchmark interest rate announced by the People’s Bank of China for 1 to 3 years loans. In December 2013, Dazhaihe sold assets to IEL for US$3,876 and simultaneously leased back the assets for five years at a quarterly lease payment of US$230. The implicit interest rate on the lease payments is 6.72% per annum which is determined based on 0.32% above the benchmark interest rate announced by the People’s Bank of China for 3 to 5 years loans. As the Company retained substantially all of the benefits and risks from the ownership of the leased assets, the arrangements were accounted for as financing from IEL in accordance with ASC 840-40, Sale-leaseback transactions (Note 15). Pursuant to the agreements, the Company paid refundable deposits of US$858 and US$465 to IEL for the financing arrangements in 2012 and 2013, respectively. The deposits will be repaid to the Company at the end of the lease period.  The Company also paid nonrefundable service fees of US$354 and US$281 to IEL in 2012 and 2013, respectively, which are amortized over the lease terms under the effective interest method.

F-29

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	December 31,
	2012	2013
	US$	US$
Accrued payroll expenses	3,445	2,591
Retainage due to contractors	199	100
Employee termination costs	1,750	875
Guarantee deposits from original shareholders of acquired subsidiaries	1,358	1,394
Income tax payable	5,406	2,922
Other taxes payable	2,326	2,877
Amounts due to original shareholders of acquired subsidiaries	1,345	1,331
Accrued water resource fee	1,496	1,219
Loans from third parties	13,627	4,330
Interest payable	1,260	575
Accrued dam and reservoirs repair fee	1,424	851
Reservoir maintenance fund	1,905	2,338
Advance from customers	1,014	23
Deposits from third parties	716	—
Accrued audit fee	650	543
Accrued settlement costs for legal proceedings (Note 23(e))	—	579
Land compensation costs (Note 23(c))	959	624
Service fee payable	1,036	1,347
Other liabilities	3,909	3,553
Total	43,825	28,072

Employee termination costs as of December 31, 2012 and 2013 represent the termination benefits payable to the former chairman and CEO, John Kuhns, and the former executive vice president and corporate secretary, Mary Fellows. Based on a settlement agreement with the Company, John Kuhns and Mary Fellows resigned from their executive officer positions with the Group with effective date on September 30, 2012 and agreed to serve as senior advisors to the board of directors until December 15, 2012. After completion of their advisory roles, the Company shall pay aggregate termination benefits of US$1,250 and US$500 to John Kuhns and Mary Fellows, respectively, on a monthly basis over the course of 24 months. During the year ended December 31, 2013, the Company paid termination benefits amounting to US$875.

Guarantee deposits of US$90 (2012: US$87) and US$1,304 (2012: US$1,271) from original shareholders of acquired subsidiaries as of December 31, 2013 represent security deposits received by the Company from original shareholders of Yingchuan and Jinling, respectively, which will be returned by the Company when the original shareholders of the acquired subsidiaries furnish the Company with final documentation relating to the acquired hydroelectric power projects and dams and reservoirs or formal title certificates with respect to the land. The final documentation and title certificates have not been provided in full as of December 31, 2013. The Company will retain the security deposits until receipt of such documentations.

Amounts due to original shareholders of acquired subsidiaries as of December 31, 2012 mainly represent US$1,271 payable to the original shareholders of Dazhaihe, Hengda, Xineng and Banzhu for their entitlement to the net working capital surplus of Dazhaihe, Hengda, Xineng and Banzhu immediately prior to the consummation of the acquisitions in accordance with the supplemental equity transfer purchase agreements. Amounts due to original shareholders of acquired subsidiaries as of December 31, 2013 mainly represent US$1,313 payable to the original shareholders of Dazhaihe, Hengda, Xineng and Banzhu for their entitlement to the net working capital surplus of Dazhaihe, Hengda, Xineng and Banzhu immediately prior to the consummation of the acquisitions in accordance with the supplemental equity transfer purchase agreements.

F-30

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Loans from third parties as of December 31, 2012 represent RMB denominated loans from non-financial institutions of US$9,139, US$4,121, US$240 and US$127 for Jinling, Jinlong, Hengda and Binglangjiang, respectively. The loans of US$32, US$2,743 and US$6,364 for Jinling bear an interest rate of 24%, 18% and 32% per annum, respectively. The loans for Jinlong bear an interest rate of 18% per annum. The loans for Hengda and Binglangjiang are interest free. Loans for Jinling, Hengda and Binglangjiang were fully repaid during the year ended December 31, 2013. Loans from third parties as of December 31, 2013 represent RMB denominated loans from non-financial institutions of US$4,330 for Jinlong. The loans for Jinlong bear an interest rate of 18% per annum.

13. INCOME TAX EXPENSE

Cayman Islands

Under the current income tax laws of the Cayman Islands, the Company is not subject to tax on any income or capital gain.

Hong Kong

Under the current income tax laws of Hong Kong, in general, companies are subject to Hong Kong Profits Tax at 16.5% on income arising in or derived from Hong Kong. CHC HK and Sunpower do not derive any income which is subject to Hong Kong Profits Tax since their incorporations. In addition, upon payments of dividends by CHC HK and Sunpower to the Company, no Hong Kong withholding tax will be imposed.

PRC

Effective from January 1, 2008, the PRC’s statutory income tax rate is 25%. The Company’s PRC subsidiaries are subject to income tax at 25% unless otherwise specified.

Pursuant to CaiShui [2012] No. 58, the Company’s PRC subsidiaries which are located in the Western region of the PRC and engaged in hydroelectric power activities are entitled to the preferential tax rate of 15% from 2010 to 2020 and 2-year full income tax exemption followed by 3-year 50% income tax reduction (the “2+3 tax holiday”), respectively. For a domestic enterprise, the 2+3 tax holiday starts from its commencement of business operation. For a foreign investment enterprise, the 2+3 tax holiday starts from its first profit-making year from income tax perspective. Accordingly, the following preferential tax rates are noted:

(i)	Binglangjiang and Husahe are subject to income tax at 15% from 2010 to 2020;
(ii)	Liyuan and Hengda were subject to income tax at 7.5% for 2010 and 2011, and are subject to income tax at 15% from 2012 to 2020;
(iii)	Xineng and Xiaopengzu were tax exempted for 2010, and are subject to income tax at 7.5% from 2011 to 2013, and at 15% from 2014 to 2020; and
(iv)	Based on the local tax authority’s approvals, Dazhaihe was tax exempted for 2010, and is subject to income tax at 7.5% for 2011, at 12.5% for 2012 and 2013, and at 15% from 2014 to 2020.

Further, Banzhu, being a foreign invested production-type enterprise, was entitled to a 2+3 tax holiday which is grandfathered under the prevailing PRC Corporate Income Tax Law (“the CIT Law”) and its relevant regulations. As such, Banzhu is subject to income tax at 12.5% from 2010 to 2012.

In accordance with the prevailing CIT Law and its relevant regulations, enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC territory are considered PRC resident enterprises and subject to the PRC income tax at the rate of 25% on worldwide income. The definition of “place of effective management” refers to an establishment that exercises, in substance, overall management and control over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December 31, 2013, no detailed interpretation or guidance has been issued to define “place of effective management” for non-China-funded overseas enterprises, such as the Company. If the Company’s non-PRC incorporated entities are deemed PRC tax residents, such entities would be subject to PRC tax under the CIT Law. As of December 31, 2013, the Company has analyzed the applicability of this law and has not accrued for PRC tax on such basis. The Company will continue to monitor changes in the interpretation or guidance of this law.

F-31

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The Group had minimal operations in jurisdictions other than the PRC.

Income (loss) before income tax expense from continuing operations consists of:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cayman Islands	(17,593	)	(7,962	)	(2,943	)
Hong Kong	(659	)	(680	)	(480	)
PRC	(35,229	)	10,037		4,379
	(53,481	)	1,395		956

Income tax expense consists of:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Current income tax expense	2,113		7,013		3,956
Deferred income tax benefit	(586	)	(562	)	(482	)
Income tax expense	1,527		6,451		3,474

A reconciliation of the actual income tax expense to the amount computed by applying the PRC statutory tax rate to income (loss) before income tax expense in the consolidated statements of comprehensive income is as follows:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Taxation at PRC statutory tax rate of 25%	(13,370	)	349		239
Effect of non-PRC entities not subject to income tax	4,564		2,161		856
Effect of tax holiday	—		(466	)	(8	)
Effect of preferential tax rate	(248	)	(14	)	(119	)
Current and deferred tax rate differential	1,015		1,167		762
Deemed interest income	1,010		276		46
Non-deductible expenses	4,337		3,041		1,447
Change in valuation allowance	3,818		575		1,041
Impact of changes in enacted tax rates	(325	)	—		—
Prior year tax audit adjustment	190		—		—
PRC withholding tax on the outside basis difference of the discontinued operations	136		—		—
Provision for (reversal of) PRC dividend withholding tax	400		(296	)	300
Effect of changes in the tax basis of property, plant and equipment	—		(225	)	(391	)
Reduction to unrecognized tax benefits due to lapse of statute of limitations	—		(117	)	(699	)
Income tax expense	1,527		6,451		3,474
Effective tax rate (%)	(2.86	)%	462.44	%	363.39	%

The aggregate amount and effect of tax holidays on basic and diluted loss per share are as follows:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Aggregate amount	—	466	8
Basic and diluted	—	0.003	—

F-32

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The Company’s unrecognized tax benefits are mainly related to transfer pricing and non-deductible expenses.

A reconciliation of the Company’s unrecognized tax benefits is as follows:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Balance as of January 1	3,743		6,093		6,077
Addition for tax positions taken in the current year	459		396		464
Reclassified from income tax payable for tax positions of prior years	2,336		1,138		1729
Reduction for tax positions of prior years	(87	)	(171	)	(27	)
Lapse of statute of limitations	—		(117	)	(669	)
Reclassified to liabilities directly associated with the assets classified as held-for-sale or disposal of discontinued operations	(618	)	(1,276	)	—
Foreign currency translation	260		14		211
Balance as of December 31	6,093		6,077		7,785

As of December 31, 2012 and 2013, the Company’s unrecognized tax benefits of US$6,077 and US$7,785, of which US$4,159 and US$5,481, respectively, of the unrecognized tax benefits, if ultimately recognized, will impact the effective tax rate. Of the US$6,077 and US$7,785 unrecognized tax benefits, US$986 and US$1,582, respectively, are presented on a net basis on the face of the consolidated balance sheets against deferred tax assets related to net operating loss, for which a full valuation allowance would otherwise be recorded.

Management does not expect the amount of unrecognized tax benefits will change significantly in the next 12 months. As of December 31, 2012 and 2013, unrecognized tax benefits of US$5,091 and US$6,203 were included in “other non-current liabilities”, respectively. During the years ended December 31, 2011, 2012 and 2013, the Company recognized interest related to unrecognized tax benefits amounting to US$457, US$576 and US$68 in interest expense, respectively. Total accrued interests as of December 31, 2012 and 2013 were US$1,583 and US$1,697, respectively, and were included in “other non-current liabilities”, respectively. There was no penalty recognized by the Company in relation to its unrecognized tax benefits.

For the Company’s PRC subsidiaries, their tax years 2009 through 2013 remain open to examination by the tax authorities as of December 31, 2013.

F-33

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

14. DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

The significant components of deferred tax assets and deferred tax liabilities of the Company are as follows:

	December 31,
	2012		2013
	US$		US$
Deferred tax assets—current
Allowance for uncollectible other receivables	747		770
Accrued water resource fee	332		316
Accrued expenses	706		985
Other payable	622		762
Deferred tax assets—current	2,407		2,833
Valuation allowance	(748	)	(839	)
Net deferred tax assets—current	1,659		1,994
Deferred tax assets—non-current
Net operating loss carryforwards	1,746		2,822
Depreciation of property, plant and equipment	812		948
Provision for impairment allowance	3,481		3,599
Others	10		10
Deferred tax assets—non-current	6,049		7,379
Valuation allowance	(4,720	)	(5,853	)
Net deferred tax asset—non-current	1,329		1,526
Deferred tax liabilities—current
Undistributed earnings of a foreign subsidiary	—		(300	)
Deferred tax liabilities—non-current
Fair value step-up of property, plant and equipment	(23,279	)	(23,647	)
Fair value step-up of intangible assets	(1,066	)	(1,073	)
Deferred tax liabilities—non-current	(24,345	)	(24,720	)

The Group records a valuation allowance on its deferred tax assets that is sufficient to reduce the deferred tax assets to an amount that is more likely than not to be realized. Future reversal of the valuation allowance will be recognized either when the benefit is realized or when it has been determined that it is more likely than not that the benefit in future earnings will be realized.

The Group recognized an increase in valuation allowance of US$3,818, US$575 and US$1,041 during the years ended December 31, 2011, 2012 and 2013, respectively. Foreign currency translation adjustments of US$69, US$12 and US$183 on valuation allowance were recognized in accumulated other comprehensive income during the years ended December 31, 2011, 2012 and 2013, respectively.

Net operating loss carryforward amounted to US$22,365 as of December 31, 2013, of which US$452, US$1,361, US$5,972 US$7,560 and US$7,020 will expire in years 2014, 2015, 2016, 2017 and 2018, respectively.

F-34

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Apart from the amount disclosed above related to PRC dividend withholding tax on the undistributed earnings of a foreign subsidiary, deferred tax liabilities have not been provided on the undistributed earnings amounting US$29,260 and US$39,541 of the Company’s other foreign subsidiaries as of December 31, 2012 and 2013, respectively, as the Company intends to indefinitely reinvest such earnings into its foreign subsidiaries. Under the prevailing income tax law of the PRC and its relevant regulations, dividends paid by PRC enterprises out of profits earned after December 31, 2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries. The amounts of unrecognized deferred tax liabilities for the foreign subsidiaries’ undistributed earnings were US$2,926 and US$3,954 as of December 31, 2012 and 2013, respectively.

15. BORROWINGS

Total borrowings as of December 31, 2012 and 2013 consist of:

	December 31,
	2012	2013
	US$	US$
Short-term:
Secured	21,676	11,973
Long-term:
Current portion, secured	35,537	38,337
Non-current, secured	212,970	211,723
Total borrowings	270,183	262,033

The short-term loans outstanding as of December 31, 2012 represent RMB denominated loans of US$5,823, US$3,818, US$795, US$4,773, US$2,243, US$1,101 and US$623 for Jinling, Wangkeng, Yingchuan, Ruiyang, Zhougongyuan, Binglangjiang and Hengda, respectively, and US$ denominated loans of US$2,500 obtained from financial institutions. These loans are due for settlement in 2013. The short-term loans for Jinling of US$2,386 were obtained from Agricultural Bank of China with annual interest rates between 7.20% and 7.80% and were guaranteed by Wangkeng, and US$3,437 were obtained from Agricultural Bank of China with annual interest rates between 7.80% and 8.528% and were secured by the pledge of the property, plant and equipment of Jinling. The short-term loan for Wangkeng of US$3,818 was obtained from Industrial Bank of Fujian with an annual interest rate of 8.7% and was guaranteed by Pingnan County Yuanping Hydroelectric Co., Ltd. The short-term loan for Yingchuan of US$795 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 9.60% and was guaranteed by Wuliting. The short-term loan for Ruiyang of US$1,591 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 15%, and was secured by the pledge of the property, plant and equipment of Zhougongyuan and guaranteed by Yingchuan; and US$3,182 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 18%, and was secured by the pledge of the property, plant and equipment of Jiulongshan and guaranteed by Wuliting. The short-term loan for Zhougongyuan of US$2,243 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 5.40% and was secured by the pledge of a certificate of deposit of Zhougongyuan. The short-term loan for Binglangjiang of US$1,101 was obtained from Construction Bank of China with an annual interest rate of 7% and was secured by the pledge of proceeds from the future electricity sales of Binglangjiang. The short-term loan for Hengda of US$623 was obtained from Agricultural Bank of China with an annual interest rate of 6.29% and was secured by the pledge of notes receivable with a face amount of US$636. The short-term loan for CHC HK of US$2,500 was obtained from Bank of China with an annual interest rate of 4.64% and was secured by the pledge of a certificate of deposit of Fujian Huabang.

The short-term loans outstanding as of December 31, 2013 represent RMB denominated loans of US$3,280, US$3,773, US$3,280, and US$1,640 for Jinling, Wangkeng, Wuliting and Binglangjiang, respectively, obtained from financial institutions. These loans are due for settlement in 2014. The short-term loans for Jinling of US$3,280 were obtained from Agricultural Bank of China with an annual interest rate of 8.4% and were secured by the pledge of the property, plant and equipment of Jinling. The short-term loan for Wangkeng of US$3,773 was obtained from Industrial Bank of Fujian with an annual interest rate of 8.4% and was guaranteed by Fujian Huabang. The short-term loan for Wuliting of US$3,280 was obtained from Zhejiang Chouzhou Commercial Bank with an annual interest rate of 10.80%, and was guaranteed by Yingchuan and secured by the pledge of the property, plant and equipment, and management rights of Wuliting. The short-term loan for Binglangjiang of US$1,640 was obtained from Agricultural Bank of China with an annual interest rate of 7.80% and was secured by the pledge of the property, plant and equipment of Binglangjiang. As of December 31, 2013, Wangkeng was in violation of certain debt covenant provisions relating to the use of funds. Pursuant to the loan agreement, the financial institution has the right to charge penalties at the stated interest rate of the loan. As the loan was obtained on December 25, 2013, the amount of accrued penalties was insignificant for the year ended December 31, 2013.

F-35

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The long-term loans of US$248,507 outstanding as of December 31, 2012 relate to RMB denominated loans obtained by Binglangjiang, Hengda, Xineng, Xiaopengzu, Yingchuan, Wuliting, Jiulongshan, Ruiyang, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Liyuan, Jinling and its subsidiaries from financial institutions. The loan balances of Yingchuan that were not in compliance with certain debt covenants as of December 31, 2011 were fully settled during the year ended December 31, 2012.

The long-term loans of US$250,060 outstanding as of December 31, 2013 relate to RMB denominated loans obtained by Binglangjiang, Hengda, Xineng, Xiaopengzu, Dazhaihe, Yingchuan, Wuliting, Jiulongshan, Ruiyang, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Liyuan, Jinlong, Jinwei and Jintang from financial institutions.

The interest rates on these long-term loans are variable based on the benchmark rate published by the People’s Bank of China each year. The weighted average interest rate on the long-term loans for the years ended December 31, 2012 and 2013 was 6.96% and 6.88%, respectively. The long-term loans are due from 2014 to 2027 and are secured by the following:

(a) Corporate guarantee by third parties and related parties

Long-term loans amounting to US$17,278 and US$6,069 as of December 31, 2012 and 2013, respectively, were guaranteed by the following third parties:

	December 31,
	2012	2013
	US$	US$
Guaranteed by:
Guangsha Construction Group Co., Ltd.	10,119	6,069
Fujian Taiyu Investment (Group) Co., Ltd.	7,159	—
	17,278	6,069

Long-term loans amounting to US$10,978 and US$39,446 as of December 31, 2012 and 2013, respectively, were guaranteed by the following related parties:

	December 31,
	2012	2013
	US$	US$
Guaranteed by:
Shaowu City Jinling Power Generation Co., Ltd. and Nanping City Xingshui Co., Ltd.	4,455	3,936
Fujian Taiyu Investment (Group) Co., Ltd., Shaowu City Jinling Power Generation Co., Ltd. and Xiamen Youxin Hydropower Development Co., Ltd.	6,523	—
Sanming Youxin Electricity Co., Ltd., Fujian Huabang Hydroelectric Investment Co., Ltd.	—	35,510
	10,978	39,446

(b) Pledge of property, plant and equipment

As of December 31, 2012, long-term loans of US$237,752 were secured by the pledge of the property, plant and equipment in the amount of US$564,563 of Binglangjiang, Liyuan, Hengda, Xineng, Xiaopengzu, Yingchuan, Wuliting, Ruiyang, Jiulongshan, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Jinlong, Jinwei and Jintang.

As of December 31, 2013, long-term loans of US$224,310 were secured by the pledge of the property, plant and equipment in the amount of US$567,035 of Binglangjiang, Liyuan, Hengda, Xineng, Xiaopengzu, Dazhaihe, Yingchuan, Wuliting, Ruiyang, Jiulongshan, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Jinling, Jinlong, Jinwei and Jintang.

F-36

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(c) Pledge of proceeds from future electricity sales

As of December 31, 2012, long-term loans of US$171,740 were secured by the proceeds from future electricity sales of Hengda, Xineng, Xiaopengzu, Wuliting, Zhougongyuan, Jiulongshan, Ruiyang, Yingchuan, Shapulong, Wangkeng, Jinling, Jinlong and Liyuan.

As of December 31, 2013, long-term loans of US$172,838 were secured by the proceeds from future electricity sales of Hengda, Xineng, Xiaopengzu, Dazhaihe, Binglangjiang, Wuliting, Zhougongyuan, Jiulongshan, Ruiyang, Yingchuan, Shapulong, Wangkeng, Jintang, Jinwei, Jinlong and Liyuan.

(d) Pledge of equity interest

As of December 31, 2012, long-term loans of US$20,683 and US$6,431 were secured by the pledge of the Company’s equity interest in Wuliting and Liyuan, respectively.  As of December 31, 2013, long-term loans of US$20,502, US$4,277 and US$3,936 were secured by the pledge of the Company’s equity interest in Wuliting, Liyuan and Dazhaihe, respectively.

Maturities of long-term loans for the five years succeeding December 31, 2013 are as follows:

	US$
2014	38,337
2015	33,835
2016	34,071
2017	33,026
2018	27,532
Thereafter	83,259
	250,060

16. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of the following:

	December 31,
	2012	2013
	US$	US$
Unrecognized tax benefits (Note 13)	5,091	6,203
Accrued interests on unrecognized tax benefits (Note 13)	1,583	1,697
Government grant	100	100
Others	6	5
Total	6,780	8,005

The government grant of Banzhu is recognized as income over the periods necessary to match it on a systematic basis with the related costs which it is intended to compensate. During the years ended December 31, 2011, 2012 and 2013, US$3, US$3 and US$3 has been recognized as a reduction to cost of revenues, respectively.

17. WARRANTS

On January 25, 2010, the Company completed an IPO, whereby the Company issued 6,000,000 units of securities at US$16.00 per unit. Each unit consists of one ADS and one warrant (“IPO Warrant”). Each ADS represents three ordinary shares and each IPO Warrant entitles the holder to purchase three ordinary shares for an exercise price of US$15.00. The Company determined that the relative fair value of the ADSs and the IPO Warrants was US$14.80 and US$1.20, respectively, and allocated the sales proceeds of US$16.00 per unit of securities to the ADS and the IPO Warrant based on their relative fair values. The exercise period of the IPO Warrants commences on the date of issuance and expires on the earlier of January 25, 2014 or the redemption of the warrantsby the Company. The IPO Warrants can be redeemed at the option of the Company at any time during the exercise period at US$0.01 per warrant, provided that the sales price per ADS equals or exceeds US$23.00 for any 20 trading days within a 30-trading day period before the redemption. The IPO Warrants expired unexercised on January 25, 2014.

F-37

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

On January 25, 2010, the Company issued a warrant to Broadband Capital Management LLC (“Broadband Capital”), as part of the payment for services rendered by Broadband Capital in connection with the Company’s IPO, for US$100.00. The warrant allows Broadband Capital to purchase a number of units of securities equal to an aggregate of 4% of the units of securities sold in the IPO at an exercise price of 120% of the IPO price, or US$19.20 per unit (the “Underwriter’s Warrants”). The warrants underlying the units of securities issuable upon exercise of the Underwriter’s Warrant are equivalent to the IPO Warrants, except that the Underwriter’s Warrants are exercisable at 120% of the IPO warrant exercise price, or $18.00 for three ordinary shares. The Underwriter’s Warrants are exercisable on a cashless basis, are non-redeemable and have a five-year term.

Upon the closing of the Company’s IPO on January 25, 2010 and as of December 31, 2012 and 2013, in accordance with ASC sub-topic 815-40 (“ASC 815-40”), Derivatives and Hedging: Contracts in Entity’s Own Equity, the IPO Warrants and Underwriter’s Warrants were concluded to be indexed solely to the Company’s own stock since the warrants do not contain an exercise contingency based on an observable market or an observable index, and the settlement amount would equal to the difference between the fair value of a fixed number of the Company’s ordinary shares and a fixed exercise price. In addition, the Company evaluated ASC 815-40-25-7 to ASC 815-40-25-35 and concluded that the IPO Warrants and Underwriter’s Warrants could only be physical settled or net-share settled but not net-cash settled. Therefore, the IPO Warrants and Underwriter’s Warrants have been classified as equity since the Company’s IPO on January 25, 2010.

The IPO Warrants and Underwriter’s Warrants will continue to be reported as equity until such time as the warrants are exercised, expire, or become cash-settleable. In the event of a reclassification from equity to liability, the warrants will be measured at a new fair value as of the reclassification date with the change from the existing carrying value to the new fair value as an adjustment to shareholders’ equity.

On July 26, 2010, the directors of China Hydro LLC (“CHL”), a limited liability company formed under the laws of the State of Delaware which holds the equity interest in the Company for the founding shareholders, resolved to distribute its ordinary shares in the Company and its warrants to purchase ordinary shares of the Company (the “Founders’ Warrants”) to the founding shareholders in proportion of their shareholding percentage at nil consideration. In connection with the distribution, CHL distributed to Sam Shoen and Shoen’s Trusts (collectively, “Shoen”) 66,964 Founders’ Warrants (the “Shoen’s Warrants”). Except for the Shoen’s Warrants, all of the other Founders’ Warrants expired unexercised.

On August 18, 2011, the Company amended the exercise price of the 18,666,666 warrants, each to purchase one ordinary share, held by Vicis Capital Master Fund (“Vicis”) from US$5.00 per share to US$1.1544 per share. Immediately after the amendment, Vicis exercised 8,662,509 of the warrants to purchase 8,662,509 ordinary shares of the Company at the reduced exercise price of US$1.1544 per share. Vicis holds 10,004,157 warrants after the exercise. On August 19, 2011, the Company further amended four other terms of the remaining 10,004,157 warrants held by Vicis (the “Vicis’ Amended Warrants”) by (i) introducing full-ratchet anti-dilution protection where the exercise price is further adjusted to equal the dilutive price if the Company issues or sells any shares or equity-linked instrument at a price per share or new exercise price per share less than the reduced exercise price of US$1.1544; (ii) providing a cashless exercise option; (iii) increasing the hurdle for the Company’s exercise of its call option over the Holders’ Warrants, from a bid price equals or exceeds US$8.50 per share to US$17.66 per share; and (iv) extending the exercise period to the earlier of December 31, 2013 or upon redemption of the Vicis’ Amended Warrants by the Company.

On October 27, 2011, the Company amended the exercise price of the Shoen’s Warrants to US$1.15 per share. Immediately after the amendment, Shoen exercised 31,072 of the warrants to purchase 31,072 ordinary shares of the Company at the reduced exercise price of US$1.15 per share. After the exercise, the Company further amended four other terms of the remaining 35,892 warrants held by Shoen (the “Shoen’s Amended Warrants”) by (i) introducing full-ratchet anti-dilution protection where the exercise price is further adjusted to equal the dilutive price if the Company issues or sells any shares or equity-linked instrument at a price per share or new exercise price per share less than the reduced exercise price of US$1.15; (ii) providing a cashless exercise option; (iii) increasing the hurdle for the Company’s exercise of its call option over the Founders’ Warrants, from a bid price equals or exceeds US$8.50 per share to US$17.66 per share; and (iv) extending the exercise period to the earlier of December 31, 2013 or upon redemption of the Shoen’s Amended Warrants by the Company.

F-38

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The Company evaluated ASC 815-40-15 and concluded that the 10,004,157 Vicis’ Amended Warrants and the 35,892 Shoen’s Amended Warrants are not indexed to its own stock due to the full-ratchet anti-dilution protection because the issuance of shares or an-equity-linked instrument in the future is not an input to the determination of the fair value of the settlement amount of a fixed-for-fixed or equity instrument. Therefore, the Vicis’ Amended Warrants and the Shoen’s Amended Warrants were reclassified from equity to liability. In accordance with ASC 815-40-35, the change in fair value of the Vicis’ Amended Warrants and the Shoen’s Amended Warrants during the period these warrants were classified as equity was accounted for as an adjustment to shareholders’ equity with any subsequent change in fair value being adjusted through earnings. The aggregate fair value of the Vicis’ Amended Warrants and the Shoen’s Amended Warrants were US$1,391, US$440, US$839 and nil at the time of amendment and as of December 31, 2011, 2012 and 2013, respectively. Thus, a debit to additional paid-in capital of US$1,391 and a gain of US$951 from the change in fair value of the Vicis’ Amended Warrants and Shoen’s Amended Warrants were recognized in the statements of shareholders’ equity and the statements of comprehensive income, respectively, during the year ended December 31, 2011. A loss of US$399 and a gain of US$839 from the change in fair value of the Vicis’ Amended Warrants and Shoen’s Amended Warrants were recognized in the statements of comprehensive income during the years ended December 31, 2012 and 2013, respectively. As of December 31, 2013, the Vicis’ Amended Warrants and Shoen’s Amended Warrants expired unexercised.

The fair values of Vicis’ Amended Warrants and Shoen’s Amended Warrants, which are classified as liabilities, were estimated at their commitment date and December 31, 2011 and 2012 using the following assumptions:

	Vicis’ Amended Warrants	Shoen’s Amended Warrants	Vicis’/Shoen’s Amended Warrants	Vicis’/Shoen’s Amended Warrants
Commitment date/ year-end date	August 18, 2011	October 27, 2011	December 31, 2011	December 31, 2012
Average risk-free rate of return	0.24%	0.24%	0.24%	0.14%
Expected term/life	2.38 years	2.18 years	2.00 years	1.00 years
Volatility rate	52.52%	51.20%	72.00%	88.40%
Expected dividend yield	—	—	—	—
Fair value of ordinary share	0.14	0.04	0.04	0.57
Estimated forfeiture rate	0%	0%	0%	0%

The fair values of the IPO Warrants and Underwriter’s Warrants, which are classified as equity, were estimated at their commitment date using the following assumptions:

	IPO Warrants	Underwriter’s Warrants
Commitment date	January 25, 2010	January 25, 2010
Average risk-free rate of return	2.40%	2.40%
Expected term/life	4.99 years	4.99 years
Volatility rate	66.00%	66.00%
Expected dividend yield	—	—
Fair value of ordinary share	4.93	4.93
Estimated forfeiture rate	0%	0%

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the fair value of the Company’s ordinary shares as of December 31, 2013, for those warrants that have an exercise price currently below the fair value of the Company’s ordinary shares. As of December 31, 2013, the Company has warrants outstanding to purchase an aggregate 19,440,000 ordinary shares. None of these warrants has an exercise price below the fair value of the Company’s ordinary shares, resulting in an aggregate intrinsic value of nil.

All warrants were vested as of the date they were issued, except for the Underwriter’s Warrants which vested on July 19, 2011, 540 days after the IPO. Except for the exercise and expiration of warrants described above, no other warrants were redeemed, forfeited, cancelled or exercised for the years ended December 31, 2011, 2012 and 2013.

F-39

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

18. SHARE CAPITAL

The Company’s authorized ordinary share capital was 400,000,000 shares at par value of US$0.001 per share as of December 31, 2012 and 2013. There were 161,989,097 and 162,099,665 ordinary shares issued and outstanding as of December 31, 2012 and 2013, respectively. There were no preferred shares issued and outstanding as of December 31, 2012 and 2013.

On August 19, 2011 and October 27, 2011, Vicis and Shoen exercised a portion of their warrants to purchase 8,662,509 ordinary shares at US$1.1544 per share and 31,072 ordinary shares at US$1.15 per share from the Company, respectively (Note 17).

During the year ended December 31, 2013, 110,568 share options were exercised by three former employees, one consultant and one employee of the Company. The share options exercised by the former employees and consultant were on a cashless basis (Note 26).

The Group has not paid or declared any dividends on ordinary shares to date. The payment of dividends in the future will be contingent upon the Group’s revenues and earnings, if any, capital requirements and general financial condition subsequent to the completion of a business combination. The payment of dividends will be subject to the discretion of the Group’s board of directors and subject to the requirements of Cayman Islands’ laws.

19.  BASIC AND DILUTED (LOSS) INCOME PER SHARE

Basic and diluted (loss) income per share for the years ended December 31, 2011, 2012 and 2013 are calculated as follows:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Numerator for basic and diluted loss per share:
Loss attributable to ordinary shareholders	(45,389	)	(1,243	)	(2,221	)
Denominator:
Weighted average number of ordinary shares outstanding—basic	156,505,076		161,989,097		162,071,626
Dilutive effect of convertible securities:
Warrants	—		—		—
Share options	—		—		—
Weighted average number of ordinary shares outstanding—diluted	156,505,076		161,989,097		162,071,626
(Loss) income per share—basic and diluted:
From continuing operations	(0.29	)	(0.03	)	(0.01	)
From discontinued operations	(0.00	)	0.02		—
Loss per share—basic and diluted	(0.29	)	(0.01	)	(0.01	)

The Group had warrants and share options outstanding which could potentially dilute basic income per share in the future but these securities were excluded from the computation of diluted loss per share in the years ended December 31, 2011, 2012 and 2013 as their effects would have been anti-dilutive.

F-40

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

20. ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in the balances of each component of accumulated other comprehensive income for the years ended December 31, 2011, 2012 and 2013 are as follows:

	Foreign currency items		Defined benefit pension plan items		Total
	US$		US$		US$
Balance at December 31, 2010	22,922		—		22,922
Current-period other comprehensive income (loss)	20,079		(33	)	20,046
Balance at December 31, 2011	43,001		(33	)	42,968
Current-period other comprehensive income	954		33		987
Amounts reclassified from accumulated other comprehensive income	(2,358	)	—		(2,358	)
Net current-period other comprehensive (loss) income	(1,404	)	33		(1,371	)
Balance at December 31, 2012	41,597		—		41,597
Current-period other comprehensive income	12,462		—		12,462
Balance at December 31, 2013	54,059		—		54,059

The amounts of foreign currency translation adjustments reclassified from accumulated other comprehensive income represent foreign currency translation adjustments realized in “gain on disposal of discontinued operations” on the consolidated statements of comprehensive income upon the dispositions of Yuanping and Yuheng during the year ended December 31, 2012.

21. EMPLOYEE BENEFIT PLANS

(a) Defined contribution plan

The Group’s full time employees in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain medical care unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on 33.5% to 45.9% of the employees’ salaries, subject to a certain cap limit, depending on the location of employment. The total contribution for such employee benefits, which was expensed as incurred, was US$1,045, US1,324 and US$1,024 for the years ended December 31, 2011, 2012 and 2013, respectively. The Group has no additional legal obligations or liabilities for the benefits beyond the paid and accrued amounts.

In November 2008, the New York office of the Company established a 401(k) retirement plan, which requires a dollar by dollar matching contribution from the employer up to 3% of the employee’s annual salary. The total contribution for the 401(k) retirement plan, which was expensed as incurred, was US$155, US$74 and US$2 for the years ended December 31, 2011, 2012 and 2013, respectively. The Group has no additional legal obligation or liabilities for the benefits beyond the paid and accrued amounts. The 401(k) retirement plan was terminated in May 2013.

(b) Defined benefit plan

The Company established a defined benefit plan with a retirement plan service agent for two former executive officers, John Kuhns and Mary Fellows, with an effective date of January 1, 2010. The guaranteed retirement benefit under this defined benefit plan is based on the two former executive officers’ salaries and length of service periods. In 2012, the two former executive officers terminated their employment relationship with the Company and opted to have a lump sum cash distribution for their accumulated defined benefit of US$244, resulting in zero assets and obligation as of December 31, 2012. The benefit obligation, net periodic benefit cost, fair value of plan contributed assets and changes in the funded status of the plan were insignificant as of and for the years ended December 31, 2011 and 2012 based on the actuarial valuation dated January 13, 2012 and January 18, 2013, respectively.

F-41

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

22. INTEREST EXPENSE

Interest expense for the years ended December 31, 2011, 2012 and 2013 consist of:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Interest on loans	18,371	20,017	19,091
Accrued interest on unrecognized tax benefits (Note 13)	457	576	68
Amortization of debt issuance costs	19	191	175
Interest to original shareholders of acquired subsidiaries	2,503	1,126	240
Interest on loans from third parties	2,567	4,757	1,683
Bank charges	672	1,340	1,067
Others	168	63	244
Total	24,757	28,070	22,568

23. COMMITMENTS AND CONTINGENCIES

(a) Operating lease commitments

The Group has entered into certain operating leasing arrangements relating to the lease of the Group’s office premises. Payments made under operating leases are expensed on a straight-line basis over the term of the lease. Rental expenses under operating leases for the years ended December 31, 2011, 2012 and 2013 were US$912, US$639 and US$544, respectively.

Future minimum lease payments for non-cancellable operating leases as of December 31, 2013 are as follows:

	US$
2014	20
2015	22
Thereafter	—
Total	42

The Group’s lease arrangements have no renewal options, rent escalation clauses, restriction or contingent rents and are all conducted with third parties.

(b) Capital commitments

Capital commitments as of December 31, 2013 were approximately US$183 (RMB1,116) representing contracted but unprovided amounts for the purchase of property, plant and equipment by Yingchuan, Jiulongshan , Ruiyang , Wangkeng and Banzhu.

(c) Other commitments

During the year ended December 31, 2011, the Company entered into compensation agreements with certain land owners in the Fujian Province, the PRC, who lost the usage of their land due to the operation of the Company’s hydroelectric power projects in the areas. These agreements have terms ranging from 5 to 43 years from the date of signing of the compensation agreements. The annual compensation is based on the relevant land acres and agreed compensation rate per acre. The total compensation costs to the land owners, which were recorded in “cost of revenues”, were US$166, US$739 and US$202 for the years ended December 31, 2011, 2012 and 2013, respectively.

F-42

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Future minimum compensation costs to the land owners for the five years succeeding December 31, 2013 are as follows:

	US$
2014	85
2015	194
2016	194
2017	193
2018	202
Thereafter	5,286
Total	6,154

(d) Other contingencies

As of December 31, 2013, the Group has not obtained formal title certificates with respect to the land that the Group used at the hydroelectric power projects of Zhougongyuan, Binglangjiang, Jinlong, Jintang, Jinling and Jinwei with a total area of approximately 2,499,278 meter square. The management is in the process of completing the legal procedures for obtaining the relevant title certificates for the parcels of land and buildings involved and registering them in the name of the Group’s operating companies. In addition, the Group has not passed the completion acceptance procedure for hydroelectric power projects of Wangkeng, Banzhu, Jinlong, Jintang, Jinwei and Jinling. Moreover, the hydroelectric power project of Husahe cannot verify whether it has passed completion acceptance due to the loss of files caused by flood in 2004. The management is in the process of performing the completion acceptance procedure for these hydroelectric power projects. In the opinion of management, the likelihood of not obtaining the formal title certificates and completing the acceptance procedures is remote based on current facts and circumstances.

There were no significant contingencies as of December 31, 2012 and 2013.

(e) Legal proceedings

On October 22, 2009, the Company signed a capital increase agreement with Henan Lantian Group Co., Ltd. (“Lantian”) to subscribe 79% equity interest in Wuyue, which owns the right to develop a pumped storage hydropower plant in the Henan Province, the PRC, for US$26,247 (RMB162,500).  The Group completed the first capital injection of US$5,249 (RMB 32,500) in 2010.  The project made minimum progress after the acquisition of Wuyue by the Group in October 2009.  In 2011, the Company decided to abandon the development of the hydropower project and fully impair the construction in progress.  In 2012, the Company initiated negotiations with Lantian to terminate the original capital increase agreement.

In April 2012, twenty-four employees of Wuyue filed an arbitration claim against the Company for the payment of salary in the amount of US$428 and the payment of social security in the amount of US$33. The claim was heard by the Henan Guangshan County Labour Arbitration Committee (“GCLAC”) in May 2012. GCLAC ordered that Wuyue be joined as a joint defendant with the Company. As of December 31, 2012, no ruling or award has been granted in respect of the claim. The Company had made a full accrual of the claimed amount in accrued expenses and other current liabilities.  In October 2013, the twenty-four employees of Wuyue filed an arbitration claim against Wuyue, Lantian and the Company, which were named as joint respondents, for unpaid salary and social security payment in the amount of US$1,066.  The claim was heard by GCLAC in November 2013.  On November 26, 2013, GCLAC made an adjudication that the Company should pay salary and social security of US$540 (RMB3,342) and termination benefits of US$30 (RMB188) to those twenty-four employees.  On February 17, 2014, the Company fully settled the compensation costs of US$570 to the employees of Wuyue in accordance with the verdict.

In May 2013, Lantian filed an arbitration claim against the Company at the China International Economic and Trade Arbitration Commission (“CIETAC”) for the penalties for late capital injection in Wuyue in the amount of US$4,158 (RMB 25,740).  The Company filed a counterclaim against Lantian at the CIETAC for the termination of the capital increase agreement with Lantian and the return of the Company’s initial capital injection without additional penalties for late capital injection.  In September 2013, Lantian increased the penalty claim amount to US$6,174 (RMB 38,220).  As of December 31, 2013, no ruling or award has been granted in respect of the claim.  The Company expects that the arbitration committee at CIETAC will issue a ruling during the second quarter of 2014.  Since there is considerable uncertainty regarding the ultimate resolution of such matter, which includes eventual loss, fine, penalty or business impact, if any, an estimate for the reasonably possible loss or a range of reasonably possible losses cannot be made.

F-43

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

24. OTHER INCOME (LOSS), NET

Other income (loss), net for the years ended December 31, 2011, 2012 and 2013 consists of:

	For the Years Ended December 31,
	2011		2012	2013
	US$		US$	US$
Reimbursement from ADS depositary bank	527		—	—
Gain from extinguishment of amounts due to original shareholders of acquired subsidiaries	—		462	—
Interest penalty income from late consideration payment by the acquirer of a disposed subsidiary	—		—	144
Others	(861	)	45	131
Other (loss) income, net	(334	)	507	275

F-44

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

25. SEGMENT AND GEOGRAPHIC INFORMATION

The Group follows ASC 280 for disclosure of segment information. The Group’s chief operating decision maker, who has been identified as the CEO, relies upon financial information by provinces with operations in the PRC when making decisions about allocating resources and assessing the performance of the Group. For the years ended December 31, 2011, 2012 and 2013, the Group operated and managed its business as four operating and reportable segments, namely the Yunnan Province segment, the Sichuan Province segment, the Zhejiang Province segment and the Fujian Province segment. As the Group’s long-lived assets and revenues are substantially all located in and derived from the PRC, no geographical segments are presented.

The Group’s segment information as of and for the year ended December 31, 2011 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,806		555		25,382		14,854		—		—		54,597
Cost of revenues	(8,349	)	(568	)	(15,034	)	(10,874	)	—		3,511		(31,314	)
General and administrative expenses (including share-based compensation expense of US$10,479)	(1,519	)	(86	)	(1,148	)	(2,276	)	(23,867	)	—		(28,896	)
Impairment loss on goodwill	(5,260	)	—		—		(6,128	)	—		—		(11,388	)
Impairment loss on long-lived assets	—		—		—		—		(11,601	)	11		(11,590	)
Interest income	180		10		128		1,709		66		(1,992	)	101
Interest expense	(8,468	)	—		(8,565	)	(9,669	)	(73	)	2,018		(24,757	)
Changes in fair value of warrant liabilities	—		—		—		—		951		—		951
Exchange loss	(28	)	—		—		(244	)	(579	)	—		(851	)
Other (loss) income, net	(285	)	—		(36	)	(158	)	4,033		(3,888	)	(334	)
Income tax (expense) benefit	(142	)	5		(843	)	115		(662	)	—		(1,527	)
Net loss from continuing operations	(10,065	)	(84	)	(116	)	(12,671	)	(31,732	)	(340	)	(55,008	)
Loss from discontinued operations (net of income tax expense of US$101)	—		—		—		(631	)	—		349		(282	)
Net loss for the year from discontinued operations	—		—		—		(631	)	—		349		(282	)
Net loss	(10,065	)	(84	)	(116	)	(13,302	)	(31,732	)	9		(55,290	)
Net loss attributable to noncontrolling interests	—		—		—		2,546		7,355		—		9,901
Net loss attributable to China Hydroelectric Corporation shareholders	(10,065	)	(84	)	(116	)	(10,756	)	(24,377	)	9		(45,389	)
Total assets	200,681		15,896		318,616		374,296		421,650		(516,224	)	814,915
Total liabilities	(133,670	)	(753	)	(138,688	)	(185,330	)	(20,498	)	58,902		(420,037	)
Capital expenditures	1,763		1,128		3,031		645		970		(5	)	7,532
Depreciation and amortization expenses	5,181		344		9,837		6,569		115		—		22,046

F-45

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The Group’s segment information as of and for the year ended December 31, 2012 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,460		598		41,616		29,714		—		—		85,388
Cost of revenues	(8,540	)	(689	)	(16,978	)	(13,133	)	—		3,545		(35,795	)
General and administrative expenses (including share-based compensation expense of US$166)	(2,108	)	(269	)	(2,569	)	(3,413	)	(11,989	)	—		(20,348	)
Interest income	236		121		838		1,713		3		(2,827	)	84
Interest expense	(9,039	)	(260	)	(10,550	)	(10,787	)	(247	)	2,813		(28,070	)
Changes in fair value of warrant liabilities	—		—		—		—		(399	)	—		(399	)
Exchange (loss) gain	—		—		—		(1	)	29		—		28
Other income (loss), net	136		22		(81	)	420		3,736		(3,726	)	507
Income tax benefit (expense)	72		(5	)	(3,831	)	(2,480	)	(207	)			(6,451	)
Net (loss) income from continuing operations	(5,783	)	(482	)	8,445		2,033		(9,074	)	(195	)	(5,056	)
Income from discontinued operations (net of income tax expense of US$399)	—		—		—		959		—		181		1,140
Gain on disposal of discontinued operations (net of income tax expense of $959)	—		—		—		—		2,767		—		2,767
Net income for the year from discontinued operations	—		—		—		959		2,767		181		3,907
Net (loss) income	(5,783	)	(482	)	8,445		2,992		(6,307	)	(14	)	(1,149	)
Net income attributable to noncontrolling interests	—		—		—		(94	)	—		—		(94	)
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(5,783	)	(482	)	8,445		2,898		(6,307	)	(14	)	(1,243	)
Total assets	192,843		22,790		344,923		289,702		426,518		(522,460	)	754,316
Total liabilities	(131,872	)	(8,092	)	(145,312	)	(129,627	)	(27,799	)	80,901		(361,801	)
Capital expenditures	877		1,384		3,973		1,305		15		(58	)	7,496
Depreciation and amortization expenses	5,546		477		10,136		6,767		142		—		23,068

F-46

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The Group’s segment information as of and for the year ended December 31, 2013 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	14,608		373		36,000		23,536		—		—		74,517
Cost of revenues	(9,069	)	(634	)	(16,610	)	(12,393	)	(8	)	3,357		(35,357	)
General and administrative expenses (including share-based compensation expense of US$211)	(1,534	)	(193	)	(1,909	)	(2,423	)	(7,154	)	(45	)	(13,258	)
Impairment loss on long-lived assets	—		(3,549	)	—		—		—		—		(3,549	)
Interest income	340		365		1,801		702		2		(3,112	)	98
Interest expense	(7,726	)	(557	)	(10,128	)	(7,160	)	(109	)	3,112		(22,568	)
Changes in fair value of warrant liabilities	—		—		—		—		839		—		839
Exchange loss	—		—		—		—		(41	)	—		(41	)
Other income (loss), net	37		—		(18	)	91		3,477		(3,312	)	275
Income tax benefit (expense)	43		15		(2,245	)	(843	)	(444	)	—		(3,474	)
Net (loss) income from continuing operations	(3,301	)	(4,180	)	6,891		1,510		(3,438	)	—		(2,518	)
Net (loss) income from discontinuing operations	—		—		—		—		—		—		—
Net (loss) income	(3,301	)	(4,180	)	6,891		1,510		(3,438	)	—		(2,518	)
Net loss attributable to noncontrolling interests	—		—		—		297		—		—		297
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(3,301	)	(4,180	)	6,891		1,807		(3,438	)	—		(2,221	)
Total assets	197,995		21,135		346,886		288,735		437,477		(554,986	)	737,242
Total liabilities	(117,524	)	(7,144	)	(128,690	)	(123,843	)	(28,315	)	70,903		(334,613	)
Capital expenditures	124		29		233		1,228		13		—		1,627
Depreciation and amortization expenses	5,633		482		10,437		6,839		133		—		23,524

26. SHARE-BASED PAYMENT

On August 18, 2008, the board of directors (the “Board”) of the Company adopted the China Hydroelectric Corporation 2008 Share Incentive Plan (the “2008 Plan”) that provides for the issuance of share-based awards to purchase up to 12,000,000 ordinary shares. The effectiveness of the 2008 Plan is subject to the approval of the Company’s shareholders within twelve months from the date on which the 2008 Plan is adopted by the Board. Under the 2008 Plan, the Company may grant share options including incentive stock options and non-qualified stock options, equity appreciation rights, restricted ordinary shares, restricted ordinary share units, performance-based grants of ordinary shares, performance units and other equity-based or cash-based awards to employees of the Group, consultants and other individuals who provide services to the Group, including the Company’s directors. The administrator, which may be the Board or its authorized designee, has full power and authority to administer, construe and interpret the 2008 Plan. Under the terms of the 2008 Plan, options intended to qualify as incentive shares options must have an exercise price at least equal to the fair market value as of the date of grant, but all other share options can be granted with an exercise price less than the fair market value.

F-47

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

On December 28, 2011, the Board approved an option exchange program. Pursuant to the option exchange program, 10,109,000 and 275,000 share options originally granted to employees and a non-employee consultant, respectively, were cancelled. Simultaneously, 407,706 and 9,250 share options at an exercise price of US$0.46 were granted to these employees and the non-employee consultant, respectively, in exchange for the cancelled options. The option exchange program was structured to provide the same total fair value to the original and the new share options on the day of exchange. These new share options have a contractual life of five years and are exercisable immediately upon grant. These new options expire 30 days after termination of service if unexercised by the employees or non-employee consultant. Other non-employee consultants and directors did not participate in the option exchange program. The Company accounted for the exchange of the original award for a new award as a modification in accordance with ASC sub-topic 718-20-35, and measured the incremental compensation cost from the modification as the excess of the fair value of the modified award based on current circumstances over the fair value of the original option measured immediately before its terms are modified based on current circumstances. The incremental compensation cost was determined to be zero by the Company after considering the terms of fair value to fair value option exchange. The US$7,620 unrecognized compensation cost of the original options was fully recognized on December 28, 2011, the modification date, as the modified share options were immediately vested upon modification.

On May 1, 2012, the Board approved the grant of 9,929,998 and 50,000 share options to employees and a non-employee consultant, respectively, at an exercise price of US$0.62 with a contractual life of five years. 50% of the share options will vest and become exercisable on the first anniversary of the grant date and 25% of the share options will vest and become exercisable on each of the second and third anniversaries of the grant date.

In accordance with the settlement agreement with John Kuhns and Mary Fellows signed on September 28, 2012, all of their unvested options were immediately expired and all of their vested options must be exercised within 90 days from December 15, 2012. On March 5, 2013, John Kuhns and Mary Fellows exercised their options on a cashless basis.

On December 1, 2012, the Board approved the grant of 600,000 share options to an employee at an exercise price of US$0.72 with a contractual life of five years. 25% of share options will vest and become exercisable on May 31, 2013 and 25% of the share options will vest and become exercisable on each of the first, second and third anniversaries of the grant date.

F-48

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

On August 27, 2013, the Board approved the grants of 900,000 share options to certain employees and 400,000 share options to an employee at exercise prices of US$0.8474 and US$0.99, respectively, with a contractual life of five years. 33.3% of the share options will vest and become exercisable on each of the first, second and third anniversaries of the respective contractual date.

During the year ended December 31, 2013, (i) all of the 40,000 options granted to directors on August 18, 2008 expired unexercised; and (ii) 9,250 options granted to non-employee consultants were exercised on a cashless basis with the remaining 50,000 options granted to the non-employee consultants expired unexercised.

The following table summarizes the share options granted to employees as of and for the year ended December 31, 2013:

	Number of Options		Weighted- Average Exercise Price (US$)	Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (US$)
Outstanding at January 1, 2013	3,635,250		0.62	4.17	38
Granted	1,300,000		0.89	—	—
Exercised	(265,547	)	0.49	—	—
Forfeited or cancelled	(630,139	)	0.70	—	—
Expired	—		—	—	—
Outstanding at December 31, 2013	4,039,564		0.70	3.72	787
Vested and expected to vest at December 31, 2013	3,527,057		0.71	3.72	675
Exercisable at December 31, 2013	1,498,674		0.62	3.37	409

As of December 31, 2013, 3,519,283 share options granted to employees have an exercise price below the fair value of the Company’s shares, resulting in an aggregate intrinsic value of US$787. All of the remaining share options granted to employees have an exercise price above the fair value of the Company’s shares as of December 31, 2013, resulting in an aggregate intrinsic value of nil. Total intrinsic value of options exercised for the years ended December 31, 2011, 2012 and 2013 was nil, nil and US$62, respectively.

The weighted average grant-date fair value of options granted to employees of the Group in 2011, 2012 and 2013 was US$0.22, US$0.19 and US$0.41, respectively. During the years ended December 31, 2011, 2012 and 2013, the total fair value of options vested based on the grant date fair value was US$90, nil and US$273, respectively.

During the year ended December 31, 2013, three former employees and one employee exercised their options to obtain 107,700 ordinary shares of the Company, of which 65,202 ordinary shares were obtained on a cashless basis. During the year ended December 31, 2013, eight employees terminated their employment relationship with the Company which resulted in the forfeiture of their 630,139 unvested share options.

As of December 31, 2013, there was US$553 of unrecognized share-based compensation cost related to options granted to employees, which will be recognized over a weighted-average vesting period of 1.78 years. To the extent the actual forfeiture rate is different from the original estimation actual share-based compensation related to these awards may be different from the expectation.

F-49

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

The grant-date fair value of the options granted to employees during the years ended December 31, 2011, 2012 and 2013 was estimated with the following assumptions:

	For the Years Ended December 31,
	2011	2012	2013
Suboptimal exercise factor	—	1.5	1.5
Risk-free interest rate	0.85%	0.62%~0.83%	1.52%
Expected volatility rate	71.87%	73.4%~89.21%	84.86%
Expected dividend yield	—	—	—
Expected share option life	5 years	5 years	4.62~5 years
Estimated forfeiture rate
Founders	—	—	—
Senior management	—	—	6.7
Employees	—	—	6.7
Fair value of ordinary shares	US$0.39	US$0.44~US$0.62	US$0.78

Total compensation cost recognized for share options granted to directors, consultants and employees for the years ended December 31, 2011, 2012 and 2013:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Cost of revenues	—	—	—
General and administrative expenses	10,479	166	211
	10,479	166	211

F-50

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

27. RELATED PARTY TRANSACTIONS

The principal related parties with which the Group had transactions during the years presented are as follows:

Name of related parties	Relationship with the Group
China Hydro LLC	A shareholder of the Company
CPI Ballpark Investments Ltd.	A shareholder of the Company
Kuhns Brothers, Inc.	A company owned by the former CEO, who resigned on September 30, 2012
China New Energy Group Company	A company controlled by the former CEO, who resigned on September 30, 2012
Lantian	Noncontrolling interest in Wuyue
Nanping City Xingshui Co., Ltd.	Noncontrolling interest in Jinlong
Xiamen Youen Hydropower DevelopmentCo., Ltd.(“Xiamen Youen”)	Noncontrolling interest in Jintang and Jinwei before June 23, 2013
Sanming Youxin Electric Power IndustrialCo., Ltd. (“Sanming Youxin”)	Noncontrolling interest in Jintang and Jinwei after June 23, 2013

(a)The Company had the following related party transactions during the years presented:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Expense paid on behalf by related parties:
Kuhns Brothers, Inc.	90	—	—
	90	—	—

During the year ended December 31, 2011, Kuhns Brothers, Inc. paid US$90 of miscellaneous expenses on behalf of the Company. The amounts were fully repaid by the Company as of December 31, 2012.

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Reimbursement of expenses:
CPI Ballpark Investments Ltd.	—	269	20

During the years ended December 31, 2012 and 2013, the Company recorded expenses of US$269 and US$20 incurred by a shareholder in connection with the extraordinary shareholders meeting held on September 28, 2012 for the election of director nominees and certain administrative expenses, respectively.

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Loans to related parties:
China New Energy Group Company	—	86	—

During the year ended December 31, 2012, the Company provided a short-term loan amounting to US$86 to China New Energy Group Company. The short-term loan is unsecured, interest-free and repayable on demand.  During the year ended December 31, 2013, China New Energy Group Company was no longer a related party of the Company and the short-term loan provided was reclassified to “Prepayments and other current assets” on the consolidated balance sheets.

F-51

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Loans from related parties:
Lantian	—	—	402
Xiamen Youen	1,263	572	212
Sanming Youxin	—	—	1,420
Repayment of loans from related parties:
Xiamen Youen	—	69	—
Sanming Youxin	—	—	5,585

During the year ended December 31, 2011, the Company obtained short-term borrowings amounting to US$1,263 from Xiamen Youen. During the year ended December 31, 2012, US$69 was repaid and additional short-term borrowings of US$572 were obtained from Xiamen Youen. During the year ended December 31, 2013, additional short-term borrowings of US$212 was obtained from Xiamen Youen.

During the year ended December 31, 2013, the Company obtained short-term borrowings amounting to US$1,420 and US$402 from Sanming Youxin and Lantian, respectively.

All loans from related parties are unsecured, interest-free and repayable on demand.

(b) The Company had the following related party balances as of December 31, 2012 and 2013:

	December 31,
	2012		2013
	US$		US$
Amounts due from related parties:
China New Energy Group Company	86		—
Lantian	1,338		1,379
Less: Allowance for doubtful accounts	(1,338	)	(1,379	)
	86		—
Amounts due to related parties:
CPI Ballpark Investments Ltd.	2		1
Nanping City Xingshui Co., Ltd.	1,494		1,540
Lantian	—		408
Xiamen Youen	11,209		—
Sanming Youxin	—		7,542
	12,705		9,491

Amounts due from related parties as of December 31, 2013 represent payments made on behalf of Lantian by the Company for the construction of Wuyue’s hydroelectric project in 2010. The Company made a full bad debt provision on the balance due to the abandonment of the Wuyue hydroelectric project.

All balances with related parties as of December 31, 2013 are unsecured, interest free and repayable on demand.

Amounts due to Xiamen Youen of US$11,593 became amounts due to Sanming Youxin upon the transfer of noncontrolling interest in Jintang and Jinwei from Xiamen Youen to Sanming Youxin on June 23, 2013.  During the year ended December 31, 2013, US$5,585 was repaid by the Company.

F-52

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

28. STATUTORY RESERVES

The Group’s ability to pay dividends is primarily dependent on the Group receiving distributions from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Group’s PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Group’s subsidiaries.

In accordance with the Law of the People’s Republic of China on Foreign Invested Enterprises (“FIE”) and its articles of association, a FIE established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A wholly-owned foreign invested enterprise (“WOFE”) is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide all the above allocation of annual after-tax profit at the discretion of its board of directors, except for the general reserve fund which has the same requirement as a WOFE. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. All of the subsidiaries of the Company except Wangkeng, Shapulong, Wuyue, Ruiyang, Husahe, Jinlong, Jintang, Jinwei and Dazhaihe were acquired or established as WOFEs, and therefore are subject to the above mandated restrictions on distributable profits. Wangkeng was acquired as a non-wholly-owned foreign invested equity; Shapulong and Wuyue are equity joint ventures established pursuant to the Law of China on Sino-Foreign Equity Joint Ventures, and Ruiyang, Husahe, Jinlong, Jintang, Jinwei and Dazhaihe are domestic companies established pursuant to the Company Law of China, and therefore are only subject to the 10% general reserve fund requirement.

As a result of the PRC laws, rules and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as general reserve fund, the Group’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital and statutory reserves as determined pursuant to PRC generally accepted accounting principles, totaling US$475,004 and US$503,912 as of December 31, 2012 and 2013, respectively. Profit appropriations of US$333, US$1,005 and US$833 were made for the years ended December 31, 2011, 2012 and 2013, respectively.

29. CONCENTRATION OF RISKS

Financial instruments that potentially subject the Group to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of December 31, 2012 and 2013, substantially all of the Group’s cash and cash equivalents were managed by financial institutions located in the United States and the PRC which management believes are of high credit quality.

Accounts receivable are typically unsecured and derived from revenue earned from customers in the PRC. As a percentage of total accounts receivable, the top five customers accounted for 86% and 91% as of December 31, 2012 and 2013, respectively.

F-53

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Due to the Group’s dependence on a limited number of customers, any negative events or deterioration in financial strength with the Group’s customers or deterioration of relationship with the Group’s customers, may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The major customers and the portion of revenue from these customers for the years ended December 31, 2011, 2012 and 2013 are listed below:

		For the Years Ended December 31,
Customers	Segment	2011		2012		2013
Yunnan Nujiang Electric Power Co., Ltd.	Yunnan Province	7	%	5	%	6	%
Yunnan Dehong Electric Power Co., Ltd.	Yunnan Province	11	%	6	%	8	%
Yunnan Honghe Electric Power Co., Ltd.	Yunnan Province	1	%	1	%	2	%
Yunnan Grid Company, Ltd.	Yunnan Province	4	%	3	%	3	%
Sichuan Cangxi Electric Power Co., Ltd.	Sichuan Province	1	%	1	%	1	%
Lishui Electric Power Bureau	Zhejiang Province	43	%	46	%	49	%
Fujian Electric Power Co., Ltd.	Fujian Province	16	%	20	%	19	%
Pingnan Power Supply Company	Fujian Province	8	%	5	%	—
Shaowu Electric Power Bureau	Fujian Province	7	%	9	%	9	%
Nanping Electric Power Bureau	Fujian Province	2	%	4	%	3	%
		100	%	100	%	100	%

Currency convertibility risk

Substantially all of the Group’s businesses are transacted in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China. However, the unification of the exchange rates does not imply the convertibility of RMB into US$ or other foreign currencies. Under Mainland China’s Foreign Exchange Currency Regulation and Administration, the Group is permitted to exchange RMB for foreign currencies through banks authorized to conduct foreign exchange business. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with invoices and signed contracts.

Foreign currency exchange rate risk

On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to US$. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximately 4.9%, 0.2% and 3.0% appreciation of the RMB against the US$ in 2011, 2012 and 2013, respectively. On June 19, 2010, the People’s Bank of China announced the end of the RMB’s de facto peg to US$, a policy which was instituted in late 2008 in the face of the global financial crisis, to further reform the RMB exchange rate regime and to enhance the RMB exchange rate flexibility. On March 15, 2014, the People’s Bank of China announced the widening of the daily trading band for RMB against US$. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant volatility of the RMB against the US$.

Any significant revaluation of RMB may materially and adversely affect the cash flows, revenues, earnings and financial position in US$.

Current vulnerability due to certain other concentrations

The Group’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for almost 30 years, no assurance can be given that the PRC Government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

F-54

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

30. SUBSEQUENT EVENTS

On January 9, 2014, Xiaopengzu sold power generation assets to IEL for US$5,249 and simultaneously leased back the assets for five years at a quarterly lease payment of US$311. The implicit interest rate on the lease payments is 6.72% per annum which is determined based on 0.32% above the benchmark interest rate announced by the People’s Bank of China for 3 to 5 years loans.

On January 9, 2014 and January 10, 2014, the Group obtained short-term loans amounting to US$1,476 (RMB9,000) and US$328 (RMB2,000), respectively, from Agriculture Bank of China. The loans bear interest at 7.8% per annum which is 1.8% above the benchmark interest rate announced by the People’s Bank of China.

On January 13, 2014, the Company entered into a definitive agreement and plan of merger with various parties pursuant to which CPT Wyndham Holdings Ltd. will acquire the Company for US$1.17 per ordinary share and US$3.51 per ADS, through the merger of its wholly owned acquisition subsidiary, CPT Wyndham Sub Ltd., with and into the Company. On February 7, 2014, the Company filed a going private transaction statement on Schedule 13E-3 with the SEC.

On January 14, 2014, the Group obtained a long-term loan amounting to US$4,100 (RMB25,000) from the Rural Credit Cooperative Union with repayment dates ranging from year 2015 to year 2018. The loan bears interest at 9% per annum which is 2.6% above the benchmark interest rate announced by the People’s Bank of China for 3 to 5 years loans.

On March 5, 2014, the Group obtained a long-term loan amounting to US$13,613 (RMB83,000) from Bank of China with repayment dates ranging from year 2014 to year 2021. The loan bears interest at 6.8775% per annum which is 0.3275% above the benchmark interest rate announced by the People’s Bank of China for loans over 5 years.

On March 18, 2014 the Group received insurance recovery on damage of Liyuan plant amounting to US$955 (RMB5,822) from BOC Insurance Sichuan Branch.

F-55

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

31. CONDENSED FINANCIAL INFORMATION OF THE COMPANY

The following is the condensed financial information of the Company on a non-consolidated basis:

Balance sheets

	December 31,
	2012		2013
	US$		US$
ASSETS
Current assets:
Cash and cash equivalents	164		228
Amounts due from subsidiaries	10,000		4,130
Prepayments and other current assets	11,616		65
Total current assets	21,780		4,423
Non-current assets:
Property, plant and equipment, net	5		1
Investment in subsidiaries	399,364		427,679
Other non-current assets	—		19
Total non-current assets	399,369		427,699
TOTAL ASSETS	421,149		432,122
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Amounts due to subsidiaries	16,464		19,374
Accrued expense and other current liabilities	4,424		2,549
Amounts due to related parties	2		1
Deferred tax liabilities	—		300
Warrant liabilities	839		—
Total current liabilities	21,729		22,224
Total liabilities	21,729		22,224
Shareholders’ equity:
Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2012 and 2013; 161,989,097 and 162,099,665 shares issued and outstanding as of December 31, 2012 and 2013)	162		162
Additional paid-in capital	517,133		517,370
Accumulated other comprehensive income	41,597		54,059
Accumulated deficit	(159,472	)	(161,693	)
Total shareholders’ equity	399,420		409,898
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	421,149		432,122

F-56

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

Statements of comprehensive income

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Revenues	—		—		—
Cost of revenues	—		—		(7	)
Gross profit	—		—		(7	)
Operating expenses:
General and administrative expenses	(18,247	)	(7,324	)	(3,929	)
Total operating expenses	(18,247	)	(7,324	)	(3,936	)
Operating loss	(18,247	)	(7,324	)	(3,936	)
Equity in (losses) profits of subsidiaries	(27,395	)	3,662		1,022
Interest income	66		3		—
Interest expense	(23	)	(142	)	(4	)
Changes in fair value of warrant liabilities	951		(399	)	839
Exchange (loss) gain	(580	)	30		6
Gain from disposal of subsidiaries	—		3,726		—
Other income, net	375		293		152
Loss before income tax expense	(44,853	)	(151	)	(1,921	)
Income tax expense	(536	)	(1,092	)	(300	)
Net loss	(45,389	)	(1,243	)	(2,221	)
Other comprehensive income (loss), net of income tax expense
Foreign currency translation adjustments	20,079		(1,404	)	12,462
Defined benefit pension plans	(33	)	33		—
Other comprehensive income (loss)	20,046		(1,371	)	12,462
Comprehensive (loss) income	(25,343	)	(2,614	)	10,241

Statements of cash flows

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cash flows used in operating activities	(8,740	)	(3,651	)	(2,433	)
Cash flows (used in) provided by investing activities	(6,500	)	931		2,471
Cash flows provided by financing activities	10,036		—		26
Net (decrease) increase in cash and cash equivalents	(5,204	)	(2,720	)	64
Cash and cash equivalents at the beginning of the year	8,088		2,884		164
Cash and cash equivalents at the end of the year	2,884		164		228

F-57

CHINA HYDROELECTRIC CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of U.S. dollars (“US$”) or RMB (“RMB”), except for number of shares and per share data)

(a) Basis of presentation

In the Company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. Company-only financial statements should be read in conjunction with the Company’s consolidated financial statements.

The Company records its investment in its subsidiaries under the equity method of accounting as prescribed in ASC 323. Such investment is presented as “Investment in subsidiaries” on the balance sheets and share of the subsidiaries’ losses or profits is presented as “Equity in profits (losses) of subsidiaries” on the statements of comprehensive income.

The subsidiaries paid nil, US$1,039 and nil, dividend to the Company for the years ended December 31, 2011, 2012 and 2013, respectively.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted by reference to the disclosures in the consolidated financial statements.

(b) Commitments

The Company does not have any significant commitments or long-term obligations as of any of the years presented, except for those disclosed in the consolidated financial statements (Note 23).

F-58

EX-8.1

EXHIBIT 8.1

CHINA HYDROELECTRIC CORPORATION
(incorporated in the Cayman Islands)

NAME OF SUBSIDIARY	OWNERSHIP		JURISDICTION
Beijing A.B.C. Investment Consulting Co., Ltd.	100	%	PRC
Yunnan Huabang Electric Power Development Co., Ltd.	100	%	PRC
Sichuan Huabang Hydroelectric Development Co., Ltd.	100	%	PRC
Yunhe County Shapulong Hydropower Generation Co., Ltd.	100	%	PRC
Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd.	100	%	PRC
Qingtian Wuliting Hydroelectric Development Co., Ltd.	100	%	PRC
Suichang County Jiulongshan Hydroelectric Development Co., Ltd.	100	%	PRC
Suichang County Zhougongyuan Hydroelectric Development Co., Ltd.	100	%	PRC
Sanming Zhongyin Banzhu Hydroelectric Co., Ltd.	100	%	PRC
Pingnan County Wangkeng Hydroelectric Co., Ltd.	100	%	PRC
Sunpower Asia Limited	100	%	Hong Kong
China Hydroelectric Corporation (Hong Kong) Limited	100	%	Hong Kong
Longquan Ruiyang Cascade II Hydroelectric Co., Ltd.	100	%	PRC
Fujian Huabang Hydroelectric Investment Co., Ltd.	100	%	PRC
Henan Wuyue Storage Power Generating Co., Ltd.	79	%	PRC
Yingjiang County Qinrui Husahe Hydropower Co., Ltd.	100	%	PRC
Luquan Xiaopengzu Power Generation Co., Ltd.	100	%	PRC
Fugong County Hengda Hydroelectric Development Co., Ltd.	100	%	PRC
Fugong Xineng Power Development Co., Ltd.	100	%	PRC
Shaowu City Jinlong Hydroelectric Co., Ltd.	55	%	PRC
Shaowu City Jintang Hydroelectric Co., Ltd.	74	%	PRC
Shaowu City Jinwei Hydroelectric Co., Ltd.	74	%	PRC
Shaowu City Jinling Power Generation Co., Ltd.	100	%	PRC
Jinping Kanghong Hydroelectric Development Co., Ltd.	100	%	PRC

EX-12.1

EXHIBIT 12.1

Certification by the Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dr. You-Su Lin, Interim Chief Executive Officer of China Hydroelectric Corporation (the “Company”), certify that:

1.I have reviewed this annual report on Form 20-F of the Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors (or persons performing the equivalent function):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: April 21, 2014

By:	/s/ You-Su Lin
	Name: Dr. You-Su Lin
	Title: Interim Chief Executive Officer

EX-12.2

EXHIBIT 12.2

Certification by the Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Liya Chen, Chief Financial Officer of China Hydroelectric Corporation (the “Company”), certify that:

1.I have reviewed this annual report on Form 20-F of the Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors (or persons performing the equivalent function):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: April 21, 2014

By:	/s/ Liya Chen
	Name: Liya Chen
	Title: Chief Financial Officer

EX-13.1

EXHIBIT 13.1

Certification by the Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F of China Hydroelectric Corporation (the “Company”) for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dr. You-Su Lin, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 21, 2014

By:	/s/ You-Su Lin
	Name: Dr. You-Su Lin
	Title: Interim Chief Executive Officer

EX-13.2

EXHIBIT 13.2

Certification by the Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F of China Hydroelectric Corporation (the “Company”) for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Liya Chen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 21, 2014
	By:	/s/ Liya Chen
		Name: Liya Chen
		Title: Chief Financial Officer

EX-15.1

EXHIBIT 15.1

Calculation of Effective Tariff and Effective Utilization Rate

		Total Revenues (RMB)	Total Electricity Sold (kWh)	Installed Capacity (MW)	Number of days	Tax Rate*	Effective Tariff** (RMB)	Effective Utilization Rate*** (%)
Our Company	the year ended Dec 31, 2009	247,120,130	798,945,372	376.6	N/A	N/A	0.34	30.8
	the year ended Dec 31, 2010	448,218,584	1,480,742,042	548.8	N/A	N/A	0.33	39.4
	the year ended Dec 31, 2011	383,371,322	1,374,178,037	563.8	N/A	N/A	0.30	28.0
	the year ended Dec 31, 2012	566,774,348	1,876,765,124	563.8	N/A	N/A	0.33	39.5
	the year ended Dec 31, 2013	461,347,314	1,534,317,541	517.8	N/A	N/A	0.33	34.0
Binglangjiang I	the year ended Dec 31, 2009	16,556,208	95,514,582	21.0	365	1.06	0.18	51.9
	the year ended Dec 31, 2010	16,818,484	94,591,565	21.0	365	1.06	0.19	51.4
	the year ended Dec 31, 2011	15,531,109	86,994,684	21.0	365	1.06	0.19	47.3
	the year ended Dec 31, 2012	12,345,519	73,643,279	21.0	366	1.06	0.18	39.9
	the year ended Dec 31, 2013	17,843,729	105,140,774	21.0	365	1.06	0.18	57.2
Binglangjiang II	the year ended Dec 31, 2009	3,706,529	29,141,455	20.0	118	1.06	0.13	51.5
	the year ended Dec 31, 2010	11,386,666	64,041,599	20.0	365	1.06	0.19	36.6
	the year ended Dec 31, 2011	16,531,143	92,596,193	20.0	365	1.06	0.19	52.9
	the year ended Dec 31, 2012	14,164,841	84,495,870	20.0	366	1.06	0.18	48.1
	the year ended Dec 31,2013	10,612,111	62,529,840	20.0	365	1.06	0.18	35.7
Liyuan	the year ended Dec 31, 2009	6,411,614	23,435,555	12.0	365	1.06	0.29	22.3
	the year ended Dec 31, 2010	4,436,922	16,217,714	12.0	365	1.06	0.29	15.4
	the year ended Dec 31, 2011	3,583,081	13,096,779	12.0	365	1.06	0.29	12.5
	the year ended Dec 31, 2012	3,764,195	13,758,781	12.0	245	1.06	0.29	19.5
	the year ended Dec 31, 2013	2,310,206	8,444,200	12.0	273	1.06	0.29	10.7
Yingchuan	the year ended Dec 31, 2009	44,925,331	107,225,642	40.0	365	1.06	0.44	30.6
	the year ended Dec 31, 2010	56,172,286	138,329,823	40.0	365	1.06	0.43	39.5
	the year ended Dec 31, 2011	43,375,819	101,896,872	40.0	365	1.06	0.45	29.1
	the year ended Dec 31, 2012	60,205,161	144,948,740	40.0	366	1.06	0.44	41.3
	the year ended Dec 31, 2013	60,011,855	139,554,431	40.0	365	1.06	0.46	39.8

		Total Revenues (RMB)	Total Electricity Sold (kWh)	Installed Capacity (MW)		Number of days	Tax Rate*	Effective Tariff** (RMB)	Effective Utilization Rate*** (%)
Wuliting	the year ended Dec 31, 2009	40,143,784	92,554,440	42.0		365	1.06	0.46	25.2
	the year ended Dec 31, 2010	61,927,235	148,943,520	42.0		365	1.06	0.44	40.5
	the year ended Dec 31, 2011	37,850,518	92,118,840	42.0		365	1.06	0.44	25.0
	the year ended Dec 31, 2012	60,013,023	146,626,920	42.0		366	1.06	0.43	39.7
	the year ended Dec 31, 2013	49,124,571	117,231,840	42.0		365	1.06	0.44	31.9
Jiulongshan	the year ended Dec 31, 2009	27,124,666	73,964,924	37.6	(1)	280	1.17	0.43	20.0
	the year ended Dec 31, 2010	27,706,976	69,618,958	37.6	(1)	365	1.06	0.47	21.1
	the year ended Dec 31, 2011	28,414,330	67,157,924	37.6	(1)	365	1.06	0.45	20.4
	the year ended Dec 31, 2012	50,105,070	116,570,891	37.6	(1)	366	1.06	0.46	35.3
	the year ended Dec 31, 2013	35,647,612	80,512,711	37.6		365	1.06	0.47	24.4
Zhougongyuan	the year ended Dec 31, 2009	1,197,109	2,934,316	16.0	(1)	61	1.17	0.48	12.5
	the year ended Dec 31, 2010	16,976,305	41,837,946	16.0	(1)	365	1.06	0.47	29.9
	the year ended Dec 31, 2011	16,923,433	39,827,794	16.0	(1)	365	1.06	0.45	28.4
	the year ended Dec 31, 2012	27,787,589	64,816,701	16.0	(1)	366	1.06	0.45	46.1
	the year ended Dec 31, 2013	20,613,608	46,963,319	16.0		365	1.06	0.47	33.5
Ruiyang	the period from
	Jan 1 to Aug 19, 2009	24,167,675	55,261,800	32.0		231	1.06	0.46	31.1
	the period from
	Aug 20 to Dec 31, 2009	3,109,994	7,191,974	32.0		134	1.06	0.46	6.1
	the year ended Dec 31, 2009	27,277,669	62,453,774	32.0		365	1.06	0.46	22.3
	the year ended Dec 31, 2010	31,933,990	77,819,280	32.0		365	1.06	0.43	27.8
	the year ended Dec 31, 2011	21,305,440	49,810,200	32.0		365	1.06	0.45	17.8
	the year ended Dec 31, 2012	39,755,322	92,434,320	32.0		366	1.06	0.46	32.9
	the year ended Dec 31, 2013	32,029,983	72,077,280	32.0		365	1.06	0.47	25.7
Shapulong	the period from
	Jan 1 to Aug 2, 2009	9,702,244	22,279,828	25.0		215	1.06	0.44	17.3
	the period from
	Aug 3 to Dec 31, 2009	7,581,398	18,351,068	25.0		150	1.06	0.44	20.0
	the year ended Dec 31, 2009	17,283,642	40,630,896	25.0		365	1.06	0.44	18.6
	the year ended Dec 31, 2010	26,947,680	64,624,002	25.0		365	1.06	0.44	29.5
	the year ended Dec 31, 2011	16,141,486	36,611,340	25.0		365	1.06	0.54	14.4
	the year ended Dec 31, 2012	24,033,386	55,304,212	25.0		366	1.06	0.46	25.2
	the year ended Dec 31, 2013	25,453,767	55,764,645	25.0		365	1.06	0.48	25.5
Banzhu	the year ended Dec 31, 2009	38,972,232	126,659,753	45.0		365	1.17	0.36	32.1
	the year ended Dec 31, 2010	57,011,622	185,287,772	45.0		365	1.17	0.36	47.0
	the year ended Dec 31, 2011	34,535,879	112,241,606	45.0		365	1.17	0.36	28.5
	the year ended Dec 31, 2012	69,201,797	214,147,080	45.0		366	1.17	0.38	54.2
	the year ended Dec 31, 2013	52,953,627	162,613,500	45.0		365	1.17	0.38	41.3

		Total Revenues (RMB)	Total Electricity Sold (kWh)	Installed Capacity (MW)	Number of days	Tax Rate*	Effective Tariff** (RMB)	Effective Utilization Rate*** (%)
Wangkeng	the year ended Dec 31, 2009	28,713,380	108,369,852	40.0	365	1.17	0.31	30.9
	the year ended Dec 31, 2010	48,704,698	183,820,955	40.0	365	1.17	0.31	52.5
	the year ended Dec 31, 2011	25,543,219	96,398,922	40.0	365	1.17	0.31	27.5
	the year ended Dec 31, 2012	46,384,111	165,273,169	40.0	366	1.17	0.33	47.0
	the year ended Dec 31, 2013	35,743,853	126,323,663	40.0	365	1.17	0.33	36.1
Yuanping	the year ended Dec 31, 2009	12,624,433	44,316,824	16.0	365	1.06	0.27	31.6
	the year ended Dec 31, 2010	22,682,552	82,908,637	16.0	365	1.06	0.29	59.2
	the year ended Dec 31, 2011	11,565,379	42,273,514	16.0	365	1.06	0.29	30.2
	the period from Jan 1 to Feb 29, 2012	1,909,541	6,979,641	16.0	60	1.06	0.29	30.3
Yuheng	the year ended Dec 31, 2009	16,053,453	69,284,988	30.0	365	1.06	0.29	26.4
	the year ended Dec 31, 2010	34,445,274	134,173,611	30.0	365	1.06	0.27	51.1
	the year ended Dec 31, 2011	19,042,649	69,593,044	30.0	365	1.06	0.29	26.5
	the period from Jan 1 to Oct 31, 2012	27,502,092	101,807,451	30.0	305	1.06	0.29	46.4
Husahe	the year ended Dec 31, 2010	11,413,357	66,801,125	18.7	257	1.06	0.18	57.9
	the year ended Dec 31, 2011	12,046,457	67,753,458	18.7	365	1.06	0.19	41.4
	the year ended Dec 31, 2012	8,412,869	51,666,207	18.7	366	1.06	0.17	31.5
	the year ended Dec 31, 2013	9,805,386	58,632,431	18.7	365	1.06	0.18	35.8
Zilenghe	the year ended Dec 31, 2010	7,730,041	46,546,038	25.2	193	1.06	0.18	39.9
	the year ended Dec 31, 2011	13,961,579	86,162,474	25.2	365	1.06	0.17	39.0
	the year ended Dec 31, 2012	13,598,500	90,217,295	25.2	366	1.06	0.16	40.8
	the year ended Dec 31, 2013	13,956,784	87,165,181	25.2	365	1.06	0.17	39.5
Aluhe	the year ended Dec 31, 2010	2,316,881	13,950,979	10.0	193	1.06	0.18	30.1
	the year ended Dec 31, 2011	4,776,665	29,478,703	10.0	365	1.06	0.17	33.7
	the year ended Dec 31, 2012	4,707,294	31,229,866	10.0	366	1.06	0.16	35.6
	the year ended Dec 31, 2013	4,891,410	30,548,628	10.0	365	1.06	0.17	34.9
Latudi	the year ended Dec 31, 2010	3,730,075	21,312,493	18.9	138	1.06	0.19	34.0
	the year ended Dec 31, 2011	7,159,053	45,296,415	18.9	365	1.06	0.17	27.4
	the year ended Dec 31, 2012	9,704,342	62,695,720	18.9	366	1.06	0.16	37.8
	the year ended Dec 31, 2013	8,232,122	50,163,960	18.9	365	1.06	0.17	30.3
Xiaopengzu	the year ended Dec 31, 2010	5,877,644	29,916,026	44.0	115	1.06	0.21	24.6
	the year ended Dec 31, 2011	13,844,808	68,255,227	44.0	365	1.06	0.22	17.7
	the year ended Dec 31, 2012	14,242,959	72,662,313	44.0	366	1.06	0.21	18.8
	the year ended Dec 31, 2013	16,124,244	81,161,158	44.0	365	1.06	0.21	21.1
Qianling	the year ended Dec 31, 2010	N/A	N/A	10.0	N/A	1.06	N/A	N/A
	the year ended Dec 31, 2011	6,180,492	27,297,172	10.0	365	1.06	0.26	31.2
	the year ended Dec 31, 2012	11,534,362	47,216,556	10.0	366	1.06	0.26	53.8
	the year ended Dec 31, 2013	9,482,706	35,887,928	10.0	365	1.06	0.28	41.0
Jinjiu	the year ended Dec 31, 2010	N/A	N/A	3.0	N/A	1.06	N/A	N/A
	the year ended Dec 31, 2011	3,062,168	11,592,491	3.0	365	1.06	0.26	44.1
	the year ended Dec 31, 2012	5,541,659	19,602,939	3.0	366	1.06	0.30	74.4
	the year ended Dec 31, 2013	4,991,244	18,889,692	3.0	365	1.06	0.28	71.9

		Total Revenues (RMB)	Total Electricity Sold (kWh)	Installed Capacity (MW)	Number of days	Tax Rate*	Effective Tariff** (RMB)	Effective Utilization Rate*** (%)
Dongguan	the year ended Dec 31, 2010	N/A	N/A	4.8	N/A	1.06	N/A	N/A
	the year ended Dec 31, 2011	2,152,048	8,147,040	4.8	365	1.06	0.26	19.4
	the year ended Dec 31, 2012	4,242,160	15,041,000	4.8	366	1.06	0.30	46.6
	the year ended Dec 31, 2013	3,661,698	13,857,940	4.8	365	1.06	0.28	33.0
Jinlong	the year ended Dec 31, 2010	N/A	N/A	10.0	N/A	1.06	N/A	N/A
	the year ended Dec 31, 2011	8,423,034	29,761,388	10.0	365	1.06	0.30	34.0
	the year ended Dec 31, 2012	15,448,236	51,311,594	10.0	366	1.06	0.32	58.4
	the year ended Dec 31, 2013	12,203,220	40,297,236	10.0	365	1.06	0.32	46.0
Jintang	the year ended Dec 31, 2010	N/A	N/A	11.6	N/A	1.06	N/A	N/A
	the year ended Dec 31, 2011	7,229,890	29,475,704	11.6	365	1.06	0.26	29.0
	the year ended Dec 31, 2012	14,141,584	53,688,256	11.6	366	1.06	0.28	52.7
	the year ended Dec 31, 2013	11,463,473	43,242,996	11.6	365	1.06	0.28	42.6
Jinwei	the year ended Dec 31, 2010	N/A	N/A	16.0	N/A	1.06	N/A	N/A
	the year ended Dec 31, 2011	8,854,564	37,846,120	16.0	365	1.06	0.25	27.0
	the year ended Dec 31, 2012	20,499,343	62,600,520	16.0	366	1.06	0.35	44.5
	the year ended Dec 31, 2013	15,213,598	52,856,160	16.0	365	1.06	0.31	37.7
Dazhaihe	the year ended Dec 31, 2011	5,337,079	32,494,133	15.0	265	1.06	0.17	34.1
	the year ended Dec 31, 2012	7,529,393	38,025,803	15.0	366	1.06	0.21	28.9
	the year ended Dec 31, 2013	8,976,507	44,458,027	15.0	365	1.06	0.21	33.8
	Weighted Average Utilization Rate for Consolidated Number 2008****							29.2	%
	Weighted Average Utilization Rate for Consolidated Number 2009****							30.8	%
	Weighted Average Utilization Rate for whole year Number 2008****							33.7	%
	Weighted Average Utilization Rate for whole year Number 2009****							30.2	%

*	Tax rate = 1+VAT (VAT is 6% or 17%, as applicable)
**	Effective Tariff = Total Revenues / Total Electricity Sold *tax rate
***	Effective Utilization Rate=Total Electricity Sold / (Installed Capacity *1000*24*Number of Days)*100, Consolidated Utilization Rate=Total Electricity Sold/SUM(Installed Capacity(MW)*1000*24*Number of Days)*100
****	Weighted Average Utilization Rate = (Total Sold KWh)/(Total Installed Capacity), with/without Shapulong
(1)	Jiulongshan and Zhougongyuan projects were split from Zhougongyuan projects in December 2009. The total installed capacity for Jiulongshan was 37.6 MW and for Zhougongyuan 16.0 MW.

EX-15.2

Exhibit 15.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-167196) pertaining to the 2008 Share Incentive Plan of China Hydroelectric Corporation of our report dated April 21, 2014, with respect to the consolidated financial statements of China Hydroelectric Corporation included in this Annual Report (Form 20-F) for the year ended December 31, 2013.

/s/ Ernst & Young Hua Ming LLP

Beijing, the People’s Republic of China

April 21, 2014

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

(a) Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As of December 31, 2013, the Group had working capital deficiency of US$66,547. This factor raises substantial doubt about the Company’s ability to continue as a going concern. The continued operation of the Group is dependent upon the Group’s ability in raising additional capital, obtaining additional financing and improving future operating and financial results. Therefore, the Company may not be able to realize its assets and discharge its liabilities in the normal course of business. In view of this, management has taken steps to actively pursue additional capital and financing.

While the Company strongly believes that its capital resources will be sufficient in the near term, there is no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there is no assurance that any additional financing, if available, will be obtainable on terms satisfactory or attractive to the Company.

The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might have been necessary should the Company not be able to continue in existence as a going concern.

Principles of consolidation

(b) Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control and continued to be consolidated until the date that such control ceases.

Investments in entities that the Company does not control, but has the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method. Investments in entities in which the Company does not have the ability to exercise significant influence are accounted for under the cost method. All significant intercompany transactions and balances have been eliminated upon consolidation.

The Group accounted for business combinations in accordance with ASC topic 805 (“ASC 805”), Business Combinations. ASC 805 requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. During the measurement period, which shall not exceed one year from the acquisition date, the Company recognizes adjustments to the provisional amounts of acquisition-date fair value and the resulting goodwill for new information obtained as if the accounting for the business combination had been completed at the acquisition date. The comparative information for prior periods presented in the consolidated financial statements is revised as needed, including making any change in depreciation, amortization or other income effects recognized in completing the initial accounting.

For a component of the Group that either has been disposed of or is classified as held-for-sale, the Group accounted for the result of operations of the component as a discontinued operation in accordance with ASC sub-topic 205-20 (“ASC 205-20”), Presentation of Financial Statements, when (1)the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Group as a result of the disposal transaction; and (2)the Group will not have any significant continuing involvement in the operations of the component after the disposal transaction.

The Company accounted for the purchase of additional ownership in its subsidiary from noncontrolling interests as an equity transaction in accordance with ASC topic 810 (“ASC 810”), Consolidation. The carrying amount of the noncontrolling interests is adjusted to reflect the change in the Group’s ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interests is adjusted is recognized in additional paid-in capital.

Use of estimates

(c) Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Fair value measurement

(d) Fair value measurement

Financial instruments include cash and cash equivalents, accounts receivable, notes receivable, certain other current assets, accounts payable, certain other liabilities, short-term loans, long-term loans and warrants. The carrying values of these financial instruments, other than long-term loans and warrants, approximate their fair values due to their short-term maturities. During the year ended December 31, 2011, certain warrants were reclassified from equity to liability upon modification of terms (Note 17). These amended warrants were recorded as liabilities at fair value on the day of modification and subsequently adjusted to the fair value at each reporting date. All liability-classified warrants expired unexercised as of December 31, 2013. The warrants classified as equity were measured at fair value on the grant dates. The carrying values of long-term loans approximate their fair values due to the fact that the interest rates on these loans are reset each year based on prevailing market interest rates.

The Group applied the provisions of ASC topic 820 (“ASC 820”), Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

ASC 820 describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

In accordance with ASC 820, the Group measures the fair value of money market funds included in cash equivalents using the market approach based on quoted market prices. The warrant liabilities were valued using the income approach based on inputs that are unobservable in the market (Level 3).

All assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are summarized below:

	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)
	US$	US$	US$
Money market funds in cash equivalent	8	—	—
Warrant liabilities (Note 17)	—	—	839
	8	—	839

No assets and liabilities were measured at fair value on a recurring basis as of December 31, 2013.

The following table presents a reconciliation of warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs for the years ended December 31, 2012 and 2013:

	Warrant liabilities
	US$
Balance as of December 31, 2011	440
Realized or unrealized losses	399
Balance as of December 31, 2012	839
Realized or unrealized gain	(839	)
Balance as of December 31, 2013	—

Realized or unrealized gain or losses for the years ended December 31, 2012 and 2013 were recorded in “changes in fair value of warrant liabilities” on the consolidated statements of comprehensive income.

All assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2013 are summarized below:

	Carrying valueat December 31, 2013	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total loss
	US$	US$	US$	US$
Property, plant and equipment	4,098	—	—	—	(4,098	)

In accordance with ASC topic 360 (“ASC 360”), Property, Plant, and Equipment, property, plant and equipment of Liyuan with a carrying amount of US$4,098 was written down to its fair value of nil, resulting in an impairment loss of US$4,098, of which US$549 was recovered through insurance claims. A net impairment charge of US$3,549 was included in the consolidated statements of comprehensive income for the year ended December 31, 2013 (Note 7).

Foreign currency

(e) Foreign currency

The Company determined its functional currency to be the US$ while its subsidiaries determine their functional currency based on the criteria of ASC topic 830 (“ASC 830”), Foreign Currency Matters. All of the Company’s subsidiaries determined their functional currency to be their respective local currency, except for CHC HK and Sunpower which determined their functional currency to be the US$. The Company uses the US$ as its reporting currency.

Each entity in the Group maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Exchange gains and losses are included in the consolidated statements of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are remeasured using the exchange rates at the dates of the initial transactions.

The assets and liabilities of the Company’s subsidiaries are translated into the reporting currency of the Company at the exchange rates prevailing at the balance sheet date. The statements of comprehensive income of the Company’s subsidiaries are translated into the reporting currency of the Company at the weighted average exchange rates for the year. The resulting translation gains (losses) are recorded in accumulated other comprehensive income as a component of shareholders’ equity.

For the purpose of the consolidated statements of cash flows, cash flows of the Company’s subsidiaries are translated into the reporting currency of the Company at the exchange rates prevailing on the dates of the cash flows. Frequently recurring cash flows of the Company’s subsidiaries, which arise throughout the year, are translated into the reporting currency of the Company at the weighted average exchange rates for the year.

Cash and cash equivalents

(f) Cash and cash equivalents

Cash and cash equivalents include cash on hand and short-term deposits with original maturity of three months or less at the date of purchase. Except for the restricted cash, none of the Group’s cash and cash equivalents is restricted as to withdrawal and use.

Restricted cash

(g) Restricted cash

Restricted cash represents cash pledged to financial institutions as collateral for the Company’s bank loans (Note 15). The restriction on the cash collateral amount of US$5,171 as of December 31, 2012 was released in May 2013 upon repayment of the bank loans.

Accounts receivable

(h) Accounts receivable

Accounts receivable are carried at net realizable value. In evaluating the collectability of receivable balances, the Group considers many factors, including the aging of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Accounts receivable are written off after all collective efforts have ceased.

Notes receivable

(i) Notes receivable

Notes receivable represent short-term bank acceptance notes issued by financial institutions that entitle the holder to receive the stated amount from the financial institutions at the maturity date of the bill, which is generally within six months from the date of issuance. The holder of the bills can obtain payment from the financial institutions prior to the stated maturity date. In such a case, the holder will receive a discounted amount off the face value of the bill. There is recourse to the customers in the event the financial institutions default upon demand for payment by the holders of the notes. To reduce the Group’s credit risk, the Group has required certain customers to pay for electricity using notes receivable during the years ended December 31, 2012 and 2013.

Property, plant and equipment

(j) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. The depreciable amount of an item of property, plant and equipment is its cost less its estimated residual value, if any. The residual value is calculated by taking the price such an asset would fetch at the reporting date, with the assumption that it was already in the condition it will be in at the end of its useful life. Depreciation is recorded on a straight-line basis over the following estimated useful lives:

Dams and reservoirs	30-49 years
Buildings	8-50 years
Machinery	1-30 years
Transportation equipment	1-11 years
Electronic equipment and others	1-15 years

For property, plant and equipment acquired through a business combination, depreciation is recorded on a straight-line basis over their respective remaining estimated useful lives. The useful lives, residual values and methods of depreciation are reviewed at each reporting date and adjusted prospectively, if appropriate.

All direct and indirect costs that are related to the construction of property, plant and equipment and incurred before the assets are ready for their intended use are capitalized as construction in progress. Construction in progress is transferred to specific property, plant and equipment accounts and commences depreciation when these assets are ready for their intended use.

Interest costs are capitalized if they are incurred during the acquisition, construction or production of a qualifying asset and such costs could have been avoided if expenditures for the assets have not been made. Capitalization of interest costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Interest costs are capitalized until the assets are ready for their intended use.

Repair and maintenance costs are charged to expense when incurred, whereas the cost of renewals and betterment that extend the useful life of fixed assets are capitalized as additions to the related assets. Retirement, sale and disposal of assets are recorded by removing the cost and accumulated depreciation, with any resulting gain or loss reflected in the consolidated statements of comprehensive income.

Goodwill and intangible assets

(k) Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of acquired businesses. ASC topic 350 (“ASC 350”), Intangibles—Goodwill and Other, requires that goodwill be tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group assigns and assesses goodwill for impairment at the reporting unit level at each reporting date. The Group determines that each reporting unit is identified at the component level, which is one level below the operating segment.

The performance of the impairment test involves a two-step process. The first step of the impairment test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. Fair value is primarily determined through the income approach by computing the future discounted cash flows expected to be generated by the reporting unit and is dependent on a number of significant entity specific assumptions, including plant utilization rate, electricity sales volumes and tariffs, costs of production, capital expenditures, working capital changes and the discount rate. The discount rate is commensurate with the risk inherent in the projected cash flows and reflects the rate of return required by an investor in the current economic conditions. For reporting units to be disposed of subsequent to the reporting date, the market approach is used where estimates of prices reasonably expected to be realized from the sale of the reporting units are used to determine the fair value of each reporting unit.

If the carrying value exceeds the fair value, goodwill may be impaired. If this occurs, the Group performs the second step of the quantitative goodwill impairment test to determine the amount of impairment loss. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. This implied fair value is then compared with the carrying amount of the reporting unit goodwill, and if it is less, the Group would then recognize an impairment loss. In accordance with ASU No. 2011-08 (“ASU 2011-08”), Intangibles—Goodwill and Other (ASC 350), the Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test. If the Company believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required.

The Group recognized goodwill impairment loss of US$11,388, nil and nil for the years ended December 31, 2011, 2012 and 2013, respectively (Note 9).

Intangible assets are carried at cost less accumulated amortization. Intangible assets acquired in a business combination are recognized initially at fair value at the date of acquisition. Intangible assets with a finite useful life are amortized using the straight-line method over the estimated economic life of the intangible assets. The estimated useful lives for the intangible assets as of December 31, 2013 were as follows:

Development right of Binglangjiang Phase II	30 years
Dam use right of Dongguan	40 years
Software	5 years

The Group reviews and adjusts the carrying value of the intangible assets if facts and circumstances suggest the intangible assets may be impaired (Note 2(n)). The Group assessed and concluded that there was no impairment for intangible assets in any of the years presented.

Land use rights

(l) Land use rights

The land use rights represent the amounts paid and relevant costs incurred for the right to use land in the PRC and are recorded at purchase cost less accumulated amortization. Amortization is provided on a straight-line basis over the terms of the respective land use rights agreements, which are 50 years. For land use rights acquired through a business combination, amortization is recorded on a straight-line basis over their respective remaining estimated useful lives, which range from 41 to 50 years.

Asset retirement obligations

(m) Asset retirement obligations

ASC sub-topic 410-20 (“ASC 410-20”), Asset Retirement Obligations, requires companies to record the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. The value of the liability is capitalized as part of the carrying amount of the related long-lived asset. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The Group’s asset retirement obligations relate primarily to the restoration of leased lands under land use rights granted by the local government to their original condition. Asset retirement obligations as of December 31, 2012 and 2013 were insignificant.

Impairment of long-lived assets

(n) Impairment of long-lived assets

The Group evaluates its long-lived assets, including property, plant and equipment, land use rights and intangible assets with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360.  When these events occur, the Group assesses the recoverability of long-lived assets by comparing the carrying amount of the assets to the expected future undiscounted cash flows resulting from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The Group recognized impairment loss on long-lived assets of US$11,590, nil and US$3,549 for the years ended December 31, 2011, 2012 and 2013, respectively.

Derivative instruments

(o) Derivative instruments

ASC topic 815 (“ASC 815”), Derivatives and Hedging, requires all contracts which meet the definition of a derivative to be recognized in the consolidated financial statements as either assets or liabilities and recorded at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. Changes in fair values of derivatives not qualified as hedges are reported in the consolidated statements of comprehensive income. The estimated fair values of derivative instruments are determined at discrete points in time based on the relevant market information. These estimates are calculated with reference to the market rates using industry standard valuation techniques.

Comprehensive income (loss)

(p) Comprehensive income (loss)

Comprehensive income (loss) is defined as the change in shareholders’ equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. The Group presents items of net income (loss) and other comprehensive income (loss) in one continuous statement. Accumulated other comprehensive income (loss) of the Group includes the cumulative foreign currency translation adjustments and net losses not recognized immediately as a component of net periodic pension cost of a defined benefit plan.

Revenue recognition

(q) Revenue recognition

The Group’s revenue is derived from the sale of electricity. Revenues are recognized when the following four criteria are met as prescribed by ASC topic 605 (“ASC 605”), Revenue Recognition: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. The Group considers the terms of each arrangement to determine the appropriate accounting treatment. Revenue is generally earned and recognized upon transmission of electricity to the power grid controlled and owned by the respective regional or provincial grid companies. For transactions in which electricity has been transmitted to the power grid without a fixed or determinable unit price per kWh while the tariff is pending approval of the regional or provincial pricing bureau, cash received in exchange for the transmission of electricity to the power grid controlled by the respective regional or provincial grid companies has been recorded as customer deposits until such time the price becomes fixed and determinable. When the price becomes fixed and determinable, all or a portion of the customer deposits will be recognized as revenue. The Group does not defer the related cost of revenues, which is charged to expense as incurred. No customer deposits were recognized as of December 31, 2012 and 2013. The Group has not offered any discounts or rebates to its customers nor does it provide for refunds in its sales contracts with customers.

The Company’s subsidiaries are subject to withholding value-added tax (“VAT”) on the revenues earned in the PRC. The applicable rate of VAT is 6% for small hydroelectric power projects with a total installed capacity of 50 megawatts or less and 17% for large hydroelectric power projects with a total installed capacity of over 50 megawatts. For the years ended December 31, 2011, 2012 and 2013, the lower VAT rate of 6% was applied to the hydroelectric power projects of Binglangjiang, Liyuan, Yingchuan, Wuliting, Jiulongshan, Zhougongyuan, Shapulong, Ruiyang, Husahe, Hengda, Xineng, Xiaopengzu, Jinling, Jinlong, Jintang Jinwei and Dazhaihe, and the VAT rate of 17% was applied to the hydroelectric power projects of Banzhu and Wangkeng. VAT on revenues earned from the sale of electricity by the Group to its customers for the years ended December 31, 2011, 2012 and 2013 were US$4,583, US$7,387 and US$6,047, respectively. The Group has recognized revenues net of VAT in the consolidated statements of comprehensive income.

Cost of revenues

(r) Cost of revenues

Cost of revenues consists primarily of depreciation expense of hydroelectric power projects and related operating costs and overhead expenses directly attributable to the production of electricity.

Leases

(s) Leases

In accordance with ASC topic 840 (“ASC 840”), Lease, leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capital lease if any of the following conditions exist: (i) ownership is transferred to the lessee by the end of the lease term, (ii) there is a bargain purchase option, (iii) the lease term is at least 75% of the property’s estimated remaining economic life or (iv) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the lease periods.

The Group has no capital leases for any of the years presented.

Income taxes

(t) Income taxes

The Group follows the liability method of accounting for income taxes in accordance with ASC topic 740 (“ASC 740”), Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities, net operating loss and credits carryforwards, using enacted tax rates that will be in effect for the period in which the differences are expected to reverse. The Group records a valuation allowance against the amount of deferred tax assets if based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in the consolidated statements of comprehensive income in the period that includes the enactment date.

The Company accounts for uncertainty in income taxes in accordance with ASC 740. Interest and penalties arising from underpayment of income taxes are computed in accordance with the related PRC tax law. The amount of interest expenses is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to be taken in a tax return. Interest recognized from the accounting for uncertainty in income taxes is classified in the financial statements as interest expenses, while penalties recognized from the accounting for uncertainty in income taxes are classified in the financial statements as other expenses.

The Group recognizes in its financial statements the impact of a tax position if a tax return position or future tax position is “more likely than not” to prevail, which is defined as a likelihood of more than fifty percent of being sustained upon audit, based on the technical merits of the tax position. Tax positions that meet the “more likely than not” threshold are measured, using a probability weighted approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement.

The Group’s estimated liability for unrecognized tax benefits is periodically assessed for adequacy and may be affected by changing interpretation of laws, rulings by tax authorities, certain changes and/or developments with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from the Group’s estimates. As each audit is concluded, adjustments, if any, are appropriately recorded in the Group’s financial statements. Additionally, in future periods, change in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the change occurs. The Group classified unrecognized tax benefits as current liabilities to the extent the Group anticipates payment of cash within one year or the operating cycle, if longer.

The Company recognizes the tax benefit for the excess of the tax basis over the financial reporting basis or the tax liability when the financial reporting basis exceeds the tax basis (“outside basis difference”) of an investment in subsidiary in accordance with ASC sub-topic 740-30 (“ASC 740-30”), Income Taxes: Recognition, when it is apparent that the temporary differences will reverse in the foreseeable future. If it is “more likely than not” that a deferred tax liability will be realized as a result of the decision to dispose of a subsidiary, the tax liability would be recorded when the disposal group is classified as held for sale even though any gain expected upon disposal cannot be recognized until the sale is consummated.

Net (loss) income per share

(u) Net (loss) income per share

In accordance with ASC topic 260 (“ASC 260”), Earnings Per Share, basic (loss) income per share is computed by dividing net (loss) income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted (loss) income per share is calculated by dividing net (loss) income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary share equivalents outstanding during the period. Ordinary share equivalents consist of the ordinary shares issuable upon the conversion of warrants (Note 17) and share options (Note 26), using the treasury stock method.

Segment reporting

(v) Segment reporting

The Group follows ASC topic 280 (“ASC 280”), Segment Reporting, for the presentation of segment information. The Group’s chief operating decision maker, who has been identified as the chief executive officer (“CEO”), relies upon financial information by provinces with operations in the PRC when making decisions about allocating resources and assessing the performance of the Group. As a result, the Group operates and manages its business as four operating and reportable segments, namely the Yunnan Province segment, the Sichuan Province segment, the Zhejiang Province segment and the Fujian Province segment. As the Group’s long-term assets are substantially all located in and derived from the PRC, no geographical segments are presented.

Government grant

(w) Government grant

Government grants are recognized when there is reasonable assurance that the attaching conditions will be complied with. A grant relates to an expense item is recognized as income over the period necessary to match the grant on a systematic basis to the related costs, whereas a grant relates to an asset acquisition is recognized as deferred government grant and recognized as income in proportion to depreciation of the related assets. Grant income is recognized on a net basis as a reduction to cost of revenues in the consolidated statements of comprehensive income.

Share-based payment

(x) Share-based payment

The Company accounts for share awards issued to employees in accordance with ASC topic 718 (“ASC 718”), Compensation-Stock Compensation. In accordance with the fair value recognition provision of ASC 718, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period. The Company has elected to recognize share-based compensation expense for share awards granted to employees using the straight-line method. The Company uses a binomial option pricing valuations model in determining the fair value of the options granted.

The Company accounts for share awards issued to non-employees in accordance with the provisions of ASC 718 and ASC sub-topic 505-50 (“ASC 505-50”), Equity: Equity-Based Payment to Non-employees. The Company’s share awards issued to non-employees are subject to graded vesting provisions. The Group recognizes share-based compensation expense for share awards granted to non-employees using the accelerated recognition method over the requisite service period of the award. In accordance with ASC 718 and ASC 505-50, the Company uses the binomial option pricing valuations model to measure the value of options granted to non-employees at each vesting date to determine the appropriate charge to share-based compensation.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to vest. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and is adjusted to reflect future change in circumstances and facts, if any.

Long-lived assets to be disposed of and discontinued operations

(y) Long-lived assets to be disposed of and discontinued operations

The Company accounts for a long-lived asset to be disposed of other than by sale in accordance with the provisions of ASC 360, where such long-lived asset continues to be classified as held and used until it is disposed of. When a long-lived asset ceases to be used, the carrying amount of the asset is written down to its salvage value, if any.

The Company accounts for a long-lived asset or disposal group to be sold in accordance with ASC 360, where such long-lived asset or disposal group is classified as held for sale in the period in which all six criteria are met: (1) a plan to sell the asset has been committed to by management; (2) the asset can be sold in its current condition; (3) an active plan has been initiated to find a buyer; (4) it is probable that the asset will be sold and the sale will be completed within one year and will qualify as a completed sale; (5) the sales price is reasonable relative to the asset’s current fair value and the entity is actively marketing the asset; and (6) it is unlikely that the plan to sell the asset will be withdrawn or changed significantly.

A long-lived asset or disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell, and it is presented separately on the consolidated balance sheets. Long-lived assets reclassified as held for sale are not depreciated or amortized.

The Company follows ASC 205-20 in its accounting for a component of the Company that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the Company. Such component is reported as discontinued operations. In the period in which a component has been disposed of or classified as held for sale, the results of operations, including any gain or loss after tax recognized in accordance with ASC 360, less applicable income taxes, for the periods presented are reclassified into line items of income separately from net income (loss) from continuing operations before extraordinary items (if applicable), on the consolidated statements of comprehensive income.

Recently issued accounting standards

(z) Recently issued accounting standards

In March 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-05 (“ASU 2013-05”), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which specifies that a cumulative translation adjustment should be released into earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustment attributable to the investment would be recognized in earnings when the investment is sold. When an entity sells either a part or all of its investment in a consolidated foreign entity, cumulative translation adjustment would be recognized in earnings only if the sale results in the parent no longer having a controlling financial interest in the foreign entity. In addition, cumulative translation adjustment should be recognized in earnings in a business combination achieved in stages (i.e., a step acquisition). The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-05.

In July 2013, the FASB issued ASU No. 2013-11 (“ASU 2013-11”), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which concludes an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law. The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-11.

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CONDENSED FINANCIAL INFORMATION OF THE COMPANY (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 14,165	$ 7,967
Amounts due from subsidiaries		86
Prepayments and other current assets	3,226	14,150
Total current assets	23,618	36,682
Non-current assets
Property, plant and equipment, net	540,242	548,511
Other non-current assets	2,220	2,013
Total non-current assets	713,624	717,634
TOTAL ASSETS	737,242	754,316	814,915
Current liabilities
Accrued expense and other current liabilities	28,072	43,825
Amounts due to related parties	9,491	12,705
Deferred tax liabilities	300
Warrant liabilities		839
Total current liabilities	90,165	117,706
Total liabilities	334,613	361,801	420,037
Shareholders' equity
Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2012 and 2013; 161,989,097 and 162,099,665 shares issued and outstanding as of December 31, 2012 and 2013)	162	162
Additional paid-in capital	509,902	509,665
Accumulated other comprehensive income	54,059	41,597	42,968	22,922
Accumulated deficit	(161,693)	(159,472)
Total China Hydroelectric Corporation shareholders' equity	402,430	391,952
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	737,242	754,316
Company
Current assets
Cash and cash equivalents	228	164
Amounts due from subsidiaries	4,130	10,000
Prepayments and other current assets	65	11,616
Total current assets	4,423	21,780
Non-current assets
Property, plant and equipment, net	1	5
Investment in subsidiaries	427,679	399,364
Other non-current assets	19
Total non-current assets	427,699	399,369
TOTAL ASSETS	432,122	421,149
Current liabilities
Amounts due to subsidiaries	19,374	16,464
Accrued expense and other current liabilities	2,549	4,424
Amounts due to related parties	1	2
Deferred tax liabilities	300
Warrant liabilities		839
Total current liabilities	22,224	21,729
Total liabilities	22,224	21,729
Shareholders' equity
Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2012 and 2013; 161,989,097 and 162,099,665 shares issued and outstanding as of December 31, 2012 and 2013)	162	162
Additional paid-in capital	517,370	517,133
Accumulated other comprehensive income	54,059	41,597
Accumulated deficit	(161,693)	(159,472)
Total China Hydroelectric Corporation shareholders' equity	409,898	399,420
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 432,122	$ 421,149

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OTHER NON-CURRENT LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2013

OTHER NON-CURRENT LIABILITIES

Schedule of other non-current liabilities

	December 31,
	2012	2013
	US$	US$
Unrecognized tax benefits (Note 13)	5,091	6,203
Accrued interests on unrecognized tax benefits (Note 13)	1,583	1,697
Government grant	100	100
Others	6	5
Total	6,780	8,005

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LAND USE RIGHTS (Tables) (Land use rights)

12 Months Ended

Dec. 31, 2013

Land use rights

Land use rights

Schedule of land use rights and their related accumulated amortization

	December 31,
	2012		2013
	US$		US$
Land use right	47,521		47,521
Less: Accumulated amortization	(4,614	)	(5,778	)
Foreign currency translation adjustment	5,733		7,219
Total	48,640		48,962

Schedule of estimated annual amortization expenses

	US$
2014	1,192
2015	1,192
2016	1,192
2017	1,192
2018	1,192

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fair value measurement
Proceeds from insurance claims	$ 549
Impairment charge of property, plant and equipment	3,549	0	11,590
Nonrecurring basis | Property, plant and equipment | Carrying amount
Fair value measurement
Assets	4,098
Nonrecurring basis | Property, plant and equipment | Total loss
Fair value measurement
Assets	(4,098)
Nonrecurring basis | Property, plant and equipment | Liyuan | Carrying amount
Fair value measurement
Assets	4,098
Nonrecurring basis | Property, plant and equipment | Liyuan | Fair value
Fair value measurement
Assets	$ 0

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WARRANTS (Tables)

12 Months Ended

Dec. 31, 2013

WARRANTS.

Schedule of assumptions used to estimate the fair values of the outstanding warrants, which are classified as liabilities

	Vicis’ Amended Warrants	Shoen’s Amended Warrants	Vicis’/Shoen’s Amended Warrants	Vicis’/Shoen’s Amended Warrants
Commitment date/ year-end date	August 18, 2011	October 27, 2011	December 31, 2011	December 31, 2012
Average risk-free rate of return	0.24%	0.24%	0.24%	0.14%
Expected term/life	2.38 years	2.18 years	2.00 years	1.00 years
Volatility rate	52.52%	51.20%	72.00%	88.40%
Expected dividend yield	—	—	—	—
Fair value of ordinary share	0.14	0.04	0.04	0.57
Estimated forfeiture rate	0%	0%	0%	0%

Schedule of assumptions used to estimate the fair values of the outstanding warrants, which are classified as equity

	IPO Warrants	Underwriter’s Warrants
Commitment date	January 25, 2010	January 25, 2010
Average risk-free rate of return	2.40%	2.40%
Expected term/life	4.99 years	4.99 years
Volatility rate	66.00%	66.00%
Expected dividend yield	—	—
Fair value of ordinary share	4.93	4.93
Estimated forfeiture rate	0%	0%

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DISCONTINUED OPERATIONS (Details) In Thousands, unless otherwise specified	12 Months Ended								12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2012 Yuanping USD ($)	Mar. 02, 2012 Yuanping USD ($)	Dec. 03, 2011 Yuanping USD ($)	Dec. 03, 2011 Yuanping CNY	Dec. 03, 2011 Yuanping PRC item	Dec. 31, 2012 Yuheng USD ($)	Oct. 31, 2012 Yuheng USD ($)	Oct. 18, 2012 Yuheng USD ($)	Oct. 18, 2012 Yuheng CNY	Oct. 18, 2012 Yuheng PRC item
Discontinued operations
Ownership interest percentage held in discontinued operations						100.00%	100.00%				100.00%	100.00%
Total consideration in cash						$ 11,276	71,050				$ 21,269	134,000
Number of businesses operated								1					1
Right to use water generated by dam assigned (as a percent)						36.48%	36.48%
Assets:
Cash and cash equivalents					56					472
Property, plant and equipment, net					17,304					18,509
Goodwill					3,219					23,448
Intangible assets, net					617					1,916
Deferred tax assets					259					174
Prepayments and other current assets					328					241
Total					21,783					44,760
Liabilities:
Current portion of long-term loans					477					14,920
Accrued expenses and other current liabilities					163					2,256
Long-term loans					10,489					7,301
Deferred tax liabilities					827					2,046
Other non-current liabilities										33
Total					11,956					26,556
Results of discontinued operations
Revenues		4,661	4,737
Cost of revenues		(1,131)	(2,098)
General and administrative expenses		(176)	(226)
Interest income		2	2
Interest expense		(1,634)	(2,580)
Other (loss) income, net		3,543	(16)
Income tax expense		(1,358)	(101)
Net (loss) income from discontinued operations		3,907	(282)
Gain on disposal from disposition		2,767		1,819					1,907
Tax effects of gain on disposal from disposition	$ 0	$ 959	$ 0

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OTHER INCOME (LOSS), NET (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
OTHER INCOME (LOSS), NET
Reimbursement from ADS depositary bank			$ 527
Gain from extinguishment of amounts due to original shareholders of acquired subsidiaries		462
Interest penalty income from late consideration payment by the acquirer of a disposed Subsidiary	144
Others	131	45	(861)
Other (loss) income, net	$ 275	$ 507	$ (334)

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INTANGIBLE ASSETS (Tables) (Intangible assets, excluding land use rights)

12 Months Ended

Dec. 31, 2013

Intangible assets, excluding land use rights

Intangible assets

Schedule of intangible assets and their related accumulated amortization

	December 31, 2012
	Gross Carrying Value	Accumulated Amortization		Foreign Currency Translation Adjustment	Net Carrying Value
Development right of Binglangjiang Phase II	2,909	(629	)	619	2,899
Dam use right of Dongguan	1,759	(90	)	92	1,761
Total	4,668	(719	)	711	4,660

	December 31, 2013
	Gross Carrying Value	Accumulated Amortization		Foreign Currency Translation Adjustment	Net Carrying Value
Development right of Binglangjiang Phase II	2,909	(749	)	706	2,866
Dam use right of Dongguan	1,759	(137	)	146	1,768
Software	90	(11	)	1	80
Total	4,758	(897	)	853	4,714

Schedule of amortization expenses for the intangible assets with finite lives

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cost of revenues	(45	)	(45	)	(168	)
General and administrative expenses	(116	)	(120	)	(10	)
Total	(161	)	(165	)	(178	)

Schedule of estimated annual amortization expenses

	US$
2014	185
2015	185
2016	185
2017	185
2018	177

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SHARE-BASED PAYMENT

12 Months Ended

Dec. 31, 2013

SHARE-BASED PAYMENT

SHARE-BASED PAYMENT

26. SHARE-BASED PAYMENT

On August 18, 2008, the board of directors (the “Board”) of the Company adopted the China Hydroelectric Corporation 2008 Share Incentive Plan (the “2008 Plan”) that provides for the issuance of share-based awards to purchase up to 12,000,000 ordinary shares. The effectiveness of the 2008 Plan is subject to the approval of the Company’s shareholders within twelve months from the date on which the 2008 Plan is adopted by the Board. Under the 2008 Plan, the Company may grant share options including incentive stock options and non-qualified stock options, equity appreciation rights, restricted ordinary shares, restricted ordinary share units, performance-based grants of ordinary shares, performance units and other equity-based or cash-based awards to employees of the Group, consultants and other individuals who provide services to the Group, including the Company’s directors. The administrator, which may be the Board or its authorized designee, has full power and authority to administer, construe and interpret the 2008 Plan. Under the terms of the 2008 Plan, options intended to qualify as incentive shares options must have an exercise price at least equal to the fair market value as of the date of grant, but all other share options can be granted with an exercise price less than the fair market value.

On December 28, 2011, the Board approved an option exchange program. Pursuant to the option exchange program, 10,109,000 and 275,000 share options originally granted to employees and a non-employee consultant, respectively, were cancelled. Simultaneously, 407,706 and 9,250 share options at an exercise price of US$0.46 were granted to these employees and the non-employee consultant, respectively, in exchange for the cancelled options. The option exchange program was structured to provide the same total fair value to the original and the new share options on the day of exchange. These new share options have a contractual life of five years and are exercisable immediately upon grant. These new options expire 30 days after termination of service if unexercised by the employees or non-employee consultant. Other non-employee consultants and directors did not participate in the option exchange program. The Company accounted for the exchange of the original award for a new award as a modification in accordance with ASC sub-topic 718-20-35, and measured the incremental compensation cost from the modification as the excess of the fair value of the modified award based on current circumstances over the fair value of the original option measured immediately before its terms are modified based on current circumstances. The incremental compensation cost was determined to be zero by the Company after considering the terms of fair value to fair value option exchange. The US$7,620 unrecognized compensation cost of the original options was fully recognized on December 28, 2011, the modification date, as the modified share options were immediately vested upon modification.

On May 1, 2012, the Board approved the grant of 9,929,998 and 50,000 share options to employees and a non-employee consultant, respectively, at an exercise price of US$0.62 with a contractual life of five years. 50% of the share options will vest and become exercisable on the first anniversary of the grant date and 25% of the share options will vest and become exercisable on each of the second and third anniversaries of the grant date.

In accordance with the settlement agreement with John Kuhns and Mary Fellows signed on September 28, 2012, all of their unvested options were immediately expired and all of their vested options must be exercised within 90 days from December 15, 2012. On March 5, 2013, John Kuhns and Mary Fellows exercised their options on a cashless basis.

On December 1, 2012, the Board approved the grant of 600,000 share options to an employee at an exercise price of US$0.72 with a contractual life of five years. 25% of share options will vest and become exercisable on May 31, 2013 and 25% of the share options will vest and become exercisable on each of the first, second and third anniversaries of the grant date.

On August 27, 2013, the Board approved the grants of 900,000 share options to certain employees and 400,000 share options to an employee at exercise prices of US$0.8474 and US$0.99, respectively, with a contractual life of five years. 33.3% of the share options will vest and become exercisable on each of the first, second and third anniversaries of the respective contractual date.

During the year ended December 31, 2013, (i) all of the 40,000 options granted to directors on August 18, 2008 expired unexercised; and (ii) 9,250 options granted to non-employee consultants were exercised on a cashless basis with the remaining 50,000 options granted to the non-employee consultants expired unexercised.

The following table summarizes the share options granted to employees as of and for the year ended December 31, 2013:

	Number of Options		Weighted- Average Exercise Price (US$)	Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (US$)
Outstanding at January 1, 2013	3,635,250		0.62	4.17	38
Granted	1,300,000		0.89	—	—
Exercised	(265,547	)	0.49	—	—
Forfeited or cancelled	(630,139	)	0.70	—	—
Expired	—		—	—	—
Outstanding at December 31, 2013	4,039,564		0.70	3.72	787
Vested and expected to vest at December 31, 2013	3,527,057		0.71	3.72	675
Exercisable at December 31, 2013	1,498,674		0.62	3.37	409

As of December 31, 2013, 3,519,283 share options granted to employees have an exercise price below the fair value of the Company’s shares, resulting in an aggregate intrinsic value of US$787. All of the remaining share options granted to employees have an exercise price above the fair value of the Company’s shares as of December 31, 2013, resulting in an aggregate intrinsic value of nil. Total intrinsic value of options exercised for the years ended December 31, 2011, 2012 and 2013 was nil, nil and US$62, respectively.

The weighted average grant-date fair value of options granted to employees of the Group in 2011, 2012 and 2013 was US$0.22, US$0.19 and US$0.41, respectively. During the years ended December 31, 2011, 2012 and 2013, the total fair value of options vested based on the grant date fair value was US$90, nil and US$273, respectively.

During the year ended December 31, 2013, three former employees and one employee exercised their options to obtain 107,700 ordinary shares of the Company, of which 65,202 ordinary shares were obtained on a cashless basis. During the year ended December 31, 2013, eight employees terminated their employment relationship with the Company which resulted in the forfeiture of their 630,139 unvested share options.

As of December 31, 2013, there was US$553 of unrecognized share-based compensation cost related to options granted to employees, which will be recognized over a weighted-average vesting period of 1.78 years. To the extent the actual forfeiture rate is different from the original estimation actual share-based compensation related to these awards may be different from the expectation.

The grant-date fair value of the options granted to employees during the years ended December 31, 2011, 2012 and 2013 was estimated with the following assumptions:

	For the Years Ended December 31,
	2011	2012	2013
Suboptimal exercise factor	—	1.5	1.5
Risk-free interest rate	0.85%	0.62%~0.83%	1.52%
Expected volatility rate	71.87%	73.4%~89.21%	84.86%
Expected dividend yield	—	—	—
Expected share option life	5 years	5 years	4.62~5 years
Estimated forfeiture rate
Founders	—	—	—
Senior management	—	—	6.7
Employees	—	—	6.7
Fair value of ordinary shares	US$0.39	US$0.44~US$0.62	US$0.78

Total compensation cost recognized for share options granted to directors, consultants and employees for the years ended December 31, 2011, 2012 and 2013:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Cost of revenues	—	—	—
General and administrative expenses	10,479	166	211
	10,479	166	211

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PROPERTY, PLANT AND EQUIPMENT, NET (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, plant and equipment, net
Property, plant and equipment, gross, excluding construction in progress	$ 638,510	$ 623,223
Less: Accumulated depreciation	(98,513)	(74,852)
Property, plant and equipment, net excluding construction in progress	539,997	548,371
Total	540,242	548,511
Dams and reservoirs
Property, plant and equipment, net
Property, plant and equipment, gross, excluding construction in progress	348,905	339,123
Buildings
Property, plant and equipment, net
Property, plant and equipment, gross, excluding construction in progress	127,356	124,154
Machinery
Property, plant and equipment, net
Property, plant and equipment, gross, excluding construction in progress	158,527	153,837
Transportation equipment
Property, plant and equipment, net
Property, plant and equipment, gross, excluding construction in progress	1,925	1,865
Electronic equipment and others
Property, plant and equipment, net
Property, plant and equipment, gross, excluding construction in progress	1,797	4,244
Construction in progress, net
Property, plant and equipment, net
Construction in progress, net	$ 245	$ 140	$ 1,190

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 7) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012	Dec. 31, 2011
Impairment of long-lived assets
Impairment loss on long-lived assets	$ 3,549	$ 0	$ 11,590
Revenue recognition
Customer deposits recognized as revenue	0	0
VAT on revenue earned	6,047	7,387	4,583
Leases
Capital leases	$ 0	$ 0	$ 0
Segment reporting
Number of operating segments	4
Number of reportable segments	4
Number of geographic segments	0
PRC
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%
Applicable rate of VAT for large hydroelectric power projects with a total installed capacity of over 50 megawatts (as a percent)	17.00%
Total installed capacity threshold of hydroelectric power projects for determination of value added tax rate (in megawatts)	50
PRC | Binglangjiang
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Liyuan
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Yingchuan
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Wuliting
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Jiulongshan
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Zhougongyuan
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Shapulong
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Ruiyang
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Husahe
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Hengda
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Xineng
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Xiaopengzu
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Jinling
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Jinlong
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Jintang
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Jinwei
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Dazhaihe
Revenue recognition
Applicable rate of VAT for small hydroelectric power projects with a total installed capacity of 50 megawatts or less (as a percent)	6.00%	6.00%	6.00%
PRC | Banzhu
Revenue recognition
Applicable rate of VAT for large hydroelectric power projects with a total installed capacity of over 50 megawatts (as a percent)	17.00%	17.00%	17.00%
PRC | Wangkeng
Revenue recognition
Applicable rate of VAT for large hydroelectric power projects with a total installed capacity of over 50 megawatts (as a percent)	17.00%	17.00%	17.00%

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INCOME TAX EXPENSE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income tax expenses
Income tax rate (as a percent)	25.00%	25.00%	25.00%
Income (loss) before income tax expense	$ 956	$ 1,395	$ (53,481)
Components of income tax expenses
Current income tax expenses	3,956	7,013	2,113
Deferred income tax benefit	(482)	(562)	(586)
Income tax expenses	3,474	6,451	1,527
Reconciliation of the effective income tax provisions to the amount computed by applying the statutory tax rate to (loss) income before income taxes
Taxation at PRC statutory tax rate of 25%	239	349	(13,370)
Effect of non-PRC entities not subject to income tax	856	2,161	4,564
Effect of tax holiday	(8)	(466)
Effect of preferential tax rate	(119)	(14)	(248)
Current and deferred tax rate differential	762	1,167	1,015
Deemed interest income	46	276	1,010
Non-deductible expenses	1,447	3,041	4,337
Change in valuation allowance	1,041	575	3,818
Impact of changes in enacted tax rates			(325)
Prior year tax audit adjustment			190
PRC withholding tax on the outside basis difference of the discontinued operations			136
Provision for (reversal of) PRC dividend withholding tax	300	(296)	400
Effect of changes in the tax basis of property, plant and equipment	(391)	(225)
Reduction to unrecognized tax benefits due to lapse of statute of limitations	(699)	(117)
Income tax expenses	3,474	6,451	1,527
Effective Tax Rate (as a percent)	363.39%	462.44%	(2.86%)
Effect of tax holidays on basic and diluted loss per share
Aggregate amount	8	466
Basic and diluted (in dollars per share)		$ 0.003
Reconciliation of accrued unrecognized tax benefits
Balance at the beginning of the period	6,077	6,093	3,743
Addition for tax positions taken in the current year	464	396	459
Reclassified from income tax payable for tax positions of prior years	1,729	1,138	2,336
Reduction for tax positions of prior years	(27)	(171)	(87)
Lapse of statute of limitations	(669)	(117)
Reclassified to liabilities directly associated with the assets classified as held-for-sale or disposal of discontinued operations		(1,276)	(618)
Foreign currency translation	211	14	260
Balance at the end of the period	7,785	6,077	6,093
Unrecognized tax benefits, which if recognized, would affect the effective tax rate	5,481	4,159
Portion of unrecognized tax benefits presented on a net basis as deferred tax asset related to net operating loss	1,582	986
Interest on unrecognized tax benefits recognized in interest expense	68	576	457
Unrecognized tax benefits included in other non-current liabilities	6,203	5,091
Accrued interests on unrecognized tax benefits	1,697	1,583
Penalty recognized in relation to unrecognized tax benefits	0
PRC
Income tax expenses
Income tax rate (as a percent)	25.00%
Income tax exemption period	2 years
Income tax rate reduction period	3 years
Percentage of tax reduction	50.00%
Income (loss) before income tax expense	4,379	10,037	(35,229)
PRC | From 2010 to 2020
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | From 2010 to 2020 | Binglangjiang
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | From 2010 to 2020 | Husahe
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | From 2010 to 2011 | Liyuan
Income tax expenses
Preferential income tax rate (as a percent)	7.50%
PRC | From 2010 to 2011 | Hengda
Income tax expenses
Preferential income tax rate (as a percent)	7.50%
PRC | From 2012 to 2020 | Liyuan
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | From 2012 to 2020 | Hengda
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | From 2014 to 2020 | Xineng
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | From 2014 to 2020 | Xiaopengzu
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | From 2014 to 2020 | Dazhaihe
Income tax expenses
Preferential income tax rate (as a percent)	15.00%
PRC | In 2011 | Dazhaihe
Income tax expenses
Preferential income tax rate (as a percent)	7.50%
PRC | From 2012 to 2013 | Dazhaihe
Income tax expenses
Preferential income tax rate (as a percent)	12.50%
PRC | From 2010 to 2012 | Banzhu
Income tax expenses
Preferential income tax rate (as a percent)	12.50%
PRC | From 2011 to 2013 | Xineng
Income tax expenses
Preferential income tax rate (as a percent)	7.50%
PRC | From 2011 to 2013 | Xiaopengzu
Income tax expenses
Preferential income tax rate (as a percent)	7.50%
Cayman Islands
Income tax expenses
Income (loss) before income tax expense	(2,943)	(7,962)	(17,593)
Hong Kong
Income tax expenses
Tax rate (as a percent)	16.50%
Withholding tax	0
Income (loss) before income tax expense	$ (480)	$ (680)	$ (659)

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)

12 Months Ended

Dec. 31, 2013

ACCUMULATED OTHER COMPREHENSIVE INCOME

Schedule of changes in the balances of each component of accumulated other comprehensive income

	Foreign currency items		Defined benefit pension plan items		Total
	US$		US$		US$
Balance at December 31, 2010	22,922		—		22,922
Current-period other comprehensive income (loss)	20,079		(33	)	20,046
Balance at December 31, 2011	43,001		(33	)	42,968
Current-period other comprehensive income	954		33		987
Amounts reclassified from accumulated other comprehensive income	(2,358	)	—		(2,358	)
Net current-period other comprehensive (loss) income	(1,404	)	33		(1,371	)
Balance at December 31, 2012	41,597		—		41,597
Current-period other comprehensive income	12,462		—		12,462
Balance at December 31, 2013	54,059		—		54,059

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STATUTORY RESERVES (Details) (PRC, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statutory reserves
Restricted portion of net assets, including paid-up capital and statutory reserves of PRC subsidiaries	$ 503,912	$ 475,004
Appropriation to statutory reserve	$ 833	$ 1,005	$ 333
WOFE
Statutory reserves
Statutory reserve as a percentage of registered capital up to which after-tax profit of PRC subsidiaries shall be transferred to statutory reserve	50.00%
WOFE | Minimum
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Wangkeng
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Shapulong
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Wuyue
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Ruiyang
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Husahe
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Jinlong
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Jintang
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Jinwei
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%
Dazhaihe
Statutory reserves
Appropriation of annual after-tax profit to general reserve fund (as a percent)	10.00%

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ACCOUNTS RECEIVABLE (Details)	12 Months Ended
	Dec. 31, 2013
ACCOUNTS RECEIVABLE
Maximum credit term of accounts receivable	60 days

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OTHER NON-CURRENT ASSETS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended		1 Months Ended				12 Months Ended		1 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Aug. 31, 2012 Liyuan	Aug. 31, 2012 Liyuan Minimum	Aug. 31, 2012 Liyuan Maximum	Dec. 31, 2013 Dazhaihe	Dec. 31, 2013 Dazhaihe	Dec. 31, 2012 Dazhaihe	Dec. 31, 2013 Dazhaihe Minimum	Dec. 31, 2013 Dazhaihe Maximum
OTHER NON-CURRENT ASSETS
Long-term prepaid debt insurance cost	$ 311	$ 315
Long-term prepaid rental expenses	3	118
Long-term prepaid compensation cost	230	337
Deposits for financing arrangement	1,358	859
Unamortized service fees	299	187
Long-term prepaid guarantee fee	19	197
Total	2,220	2,013
Other Non-Current Assets
Consideration for sale of certain power generating assets			7,151			3,876
Term of sale and leaseback			3 years			5 years
Monthly lease payment			219
Implicit interest rate on the lease payments (as a percent)			6.50%			6.72%
Basis spread on variable rate (as a percent)			0.35%			0.32%	0.32%
Variable rate basis			Benchmark interest rate announced by the People's Bank of China			Benchmark interest rate announced by the People's Bank of China
Term of loan for basis spread on variable rate				1 year	3 years				3 years	5 years
Quarterly lease payment						230
Refundable deposit amount paid to IEL	465	858					465	858
Nonrefundable service fee paid	$ 281	$ 354					$ 281	$ 354

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PROPERTY, PLANT AND EQUIPMENT, NET (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
PROPERTY, PLANT AND EQUIPMENT, NET
Foreign currency translation adjustment included in accumulated depreciation	$ 2,640	$ 157
Property, plant and equipment, net
Depreciation expenses	(22,182)	(22,407)	(21,984)
Continuing operations
Property, plant and equipment, net
Depreciation expenses	(22,182)	(21,747)	(20,763)
Cost of revenues | Continuing operations
Property, plant and equipment, net
Depreciation expenses	(21,841)	(21,402)	(20,466)
General and administrative expenses | Continuing operations
Property, plant and equipment, net
Depreciation expenses	$ (341)	$ (345)	$ (297)

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued payroll expenses	$ 2,591	$ 3,445
Retainage due to contractors	100	199
Employee termination costs	875	1,750
Guarantee deposits from original shareholders of acquired subsidiaries	1,394	1,358
Income tax payable	2,922	5,406
Other taxes payable	2,877	2,326
Amounts due to original shareholders of acquired subsidiaries	1,331	1,345
Accrued water resource fee	1,219	1,496
Loans from third parties	4,330	13,627
Interest payable	575	1,260
Accrued dam and reservoirs repair fee	851	1,424
Reservoir maintenance fund	2,338	1,905
Advance from customers	23	1,014
Deposits from third parties		716
Accrued audit fee	543	650
Accrued settlement costs for legal proceedings	579
Land compensation costs	624	959
Service fee payable	1,347	1,036
Other liabilities	3,553	3,909
Total	$ 28,072	$ 43,825

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PREPAYMENTS AND OTHER CURRENT ASSETS (Details) In Thousands, unless otherwise specified	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Oct. 18, 2012 Yuheng USD ($)	Oct. 18, 2012 Yuheng CNY	Dec. 31, 2013 Jinling and its subsidiaries USD ($)	Dec. 31, 2012 Jinling and its subsidiaries USD ($)	Dec. 31, 2013 Wangkeng and Hengda USD ($)	Dec. 31, 2012 Wangkeng and Hengda USD ($)	Dec. 31, 2013 Wangkeng USD ($)	Dec. 31, 2012 Wangkeng USD ($)	Dec. 31, 2013 Hengda USD ($)	Dec. 31, 2012 Hengda USD ($)	Dec. 31, 2013 Banzhu USD ($)	Dec. 31, 2012 Banzhu USD ($)	Dec. 31, 2013 Wuliting, Zhougongyuan, Ruiyang, Jiulongshan, Jintang and Jinwei USD ($)	Dec. 31, 2012 Wuliting, Zhougongyuan, Ruiyang, Jiulongshan, Jintang and Jinwei USD ($)	Dec. 31, 2013 Liyuan and Dazhaihe USD ($)	Dec. 31, 2012 Liyuan and Dazhaihe USD ($)
PREPAYMENTS AND OTHER CURRENT ASSETS
Advances for construction projects	$ 109	$ 78
Acquisition deposits	738	716							492	477	246	239
Amounts due from original shareholders of acquired subsidiaries	1,350	1,297			819	794							531	503
Consideration receivable from disposal of a subsidiary		11,534
Prepaid insurance	509	360
Rental deposit	258	182
Prepaid finance consulting fee	844	570													665	451	179	119
Others	1,026	973
Prepayments and other current assets, gross	4,834	15,710
Less: Provision for impairment allowance	(1,608)	(1,560)			(819)	(794)	(738)	(716)
Total	3,226	14,150
PREPAYMENTS AND OTHER CURRENT ASSETS
Acquisition deposits	738	716							492	477	246	239
Amounts due from original shareholders of acquired subsidiaries	1,350	1,297			819	794							531	503
Prepaid finance consulting fee	844	570													665	451	179	119
Provision for impairment allowance (in dollars)	1,608	1,560			819	794	738	716
Ownership interest percentage held in discontinued operations			100.00%	100.00%
Total consideration in cash			$ 21,269	134,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5)	12 Months Ended
	Dec. 31, 2013
Dams and reservoirs | Minimum
Property, plant and equipment
Estimated useful lives	30 years
Dams and reservoirs | Maximum
Property, plant and equipment
Estimated useful lives	49 years
Buildings | Minimum
Property, plant and equipment
Estimated useful lives	8 years
Buildings | Maximum
Property, plant and equipment
Estimated useful lives	50 years
Machinery | Minimum
Property, plant and equipment
Estimated useful lives	1 year
Machinery | Maximum
Property, plant and equipment
Estimated useful lives	30 years
Transportation equipment | Minimum
Property, plant and equipment
Estimated useful lives	1 year
Transportation equipment | Maximum
Property, plant and equipment
Estimated useful lives	11 years
Electronic equipment and others | Minimum
Property, plant and equipment
Estimated useful lives	1 year
Electronic equipment and others | Maximum
Property, plant and equipment
Estimated useful lives	15 years

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SHARE CAPITAL

12 Months Ended

Dec. 31, 2013

SHARE CAPITAL

SHARE CAPITAL

18. SHARE CAPITAL

The Company’s authorized ordinary share capital was 400,000,000 shares at par value of US$0.001 per share as of December 31, 2012 and 2013. There were 161,989,097 and 162,099,665 ordinary shares issued and outstanding as of December 31, 2012 and 2013, respectively. There were no preferred shares issued and outstanding as of December 31, 2012 and 2013.

On August 19, 2011 and October 27, 2011, Vicis and Shoen exercised a portion of their warrants to purchase 8,662,509 ordinary shares at US$1.1544 per share and 31,072 ordinary shares at US$1.15 per share from the Company, respectively (Note 17).

During the year ended December 31, 2013, 110,568 share options were exercised by three former employees, one consultant and one employee of the Company. The share options exercised by the former employees and consultant were on a cashless basis (Note 26).

The Group has not paid or declared any dividends on ordinary shares to date. The payment of dividends in the future will be contingent upon the Group’s revenues and earnings, if any, capital requirements and general financial condition subsequent to the completion of a business combination. The payment of dividends will be subject to the discretion of the Group’s board of directors and subject to the requirements of Cayman Islands’ laws.

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2013

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accrued expenses and other current liabilities

	December 31,
	2012	2013
	US$	US$
Accrued payroll expenses	3,445	2,591
Retainage due to contractors	199	100
Employee termination costs	1,750	875
Guarantee deposits from original shareholders of acquired subsidiaries	1,358	1,394
Income tax payable	5,406	2,922
Other taxes payable	2,326	2,877
Amounts due to original shareholders of acquired subsidiaries	1,345	1,331
Accrued water resource fee	1,496	1,219
Loans from third parties	13,627	4,330
Interest payable	1,260	575
Accrued dam and reservoirs repair fee	1,424	851
Reservoir maintenance fund	1,905	2,338
Advance from customers	1,014	23
Deposits from third parties	716	—
Accrued audit fee	650	543
Accrued settlement costs for legal proceedings (Note 23(e))	—	579
Land compensation costs (Note 23(c))	959	624
Service fee payable	1,036	1,347
Other liabilities	3,909	3,553
Total	43,825	28,072

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ACQUISITIONS (Tables)

12 Months Ended

Dec. 31, 2013

Dazhaihe

ACQUISITIONS

Summary of fair value of the assets acquired and liabilities assumed at the date of acquisition

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition on April 10, 2011.

	US$
Cash purchase price	9,019
Total purchase consideration	9,019
Cash	59
Property, plant and equipment, net	11,540
Other assets	555
Goodwill	6,646
Total assets acquired	18,800
Other liabilities	(9,303	)
Deferred tax liabilities — non-current	(478	)
Total liabilities assumed	(9,781	)
Net assets acquired	9,019

Schedule of amounts of revenue and net profit of acquired entity included in the Company's consolidated statement of comprehensive income

The amounts of revenue and net loss of Dazhaihe included in the Company’s consolidated statement of comprehensive income from April 10, 2011, the acquisition date, to December 31, 2011 were as follows:

	US$
Revenue	831
Net loss	(717	)

Wangkeng

ACQUISITIONS

Schedule of effects of changes in the Company's ownership interest

	For the yearendedDecember 31,
	2011
	US$
Net income (loss) attributable to the Company	(45,389	)
Decrease in the Company’s paid-in capital for purchase of 10% of equity interest in Wangkeng	(4,907	)
Net transfers to noncontrolling interest	(4,907	)
Change from net income (loss) attributable to the Company and transfers to noncontrolling interest	(50,296	)

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ACQUISITIONS (Details 2) In Thousands, unless otherwise specified	12 Months Ended				0 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2011 Wangkeng USD ($)	Jan. 14, 2011 Wangkeng Fujian Huabang USD ($)	Jan. 14, 2011 Wangkeng Fujian Huabang CNY	Dec. 31, 2011 Wangkeng Fujian Huabang
ACQUISITIONS
Ownership interest (as a percent)					10.00%	10.00%	10.00%
Purchase consideration					$ 5,939	38,967
Carrying amount of noncontrolling interest before changes in the entity's ownership interest					1,032	6,777
Effects of changes in the entity's ownership interest
Net income (loss) attributable to the entity	(2,221)	(1,243)	(45,389)	(45,389)
Decrease in the company's paid-in capital for purchase of 10% of equity interest in Wangkeng				(4,907)
Net transfers to noncontrolling interest				(4,907)
Change from net income (loss) attributable to the entity and transfers to noncontrolling interest				$ (50,296)

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BASIC AND DILUTED (LOSS) INCOME PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Numerator for basic and diluted loss per share:
Loss attributable to ordinary shareholders	$ (2,221)	$ (1,243)	$ (45,389)
Denominator:
Weighted average number of ordinary shares outstanding-basic	162,071,626	161,989,097	156,505,076
Weighted average number of ordinary shares outstanding-diluted	162,071,626	161,989,097	156,505,076
(Loss) income per share-basic and diluted:
From continuing operations (in dollars per share)	$ (0.01)	$ (0.03)	$ (0.29)
From discontinued operations (in dollars per share)		$ 0.02	$ 0.00
Loss per share-basic and diluted (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.29)

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

30. SUBSEQUENT EVENTS

On January 9, 2014, Xiaopengzu sold power generation assets to IEL for US$5,249 and simultaneously leased back the assets for five years at a quarterly lease payment of US$311. The implicit interest rate on the lease payments is 6.72% per annum which is determined based on 0.32% above the benchmark interest rate announced by the People’s Bank of China for 3 to 5 years loans.

On January 9, 2014 and January 10, 2014, the Group obtained short-term loans amounting to US$1,476 (RMB9,000) and US$328 (RMB2,000), respectively, from Agriculture Bank of China. The loans bear interest at 7.8% per annum which is 1.8% above the benchmark interest rate announced by the People’s Bank of China.

On January 13, 2014, the Company entered into a definitive agreement and plan of merger with various parties pursuant to which CPT Wyndham Holdings Ltd. will acquire the Company for US$1.17 per ordinary share and US$3.51 per ADS, through the merger of its wholly owned acquisition subsidiary, CPT Wyndham Sub Ltd., with and into the Company. On February 7, 2014, the Company filed a going private transaction statement on Schedule 13E-3 with the SEC.

On January 14, 2014, the Group obtained a long-term loan amounting to US$4,100 (RMB25,000) from the Rural Credit Cooperative Union with repayment dates ranging from year 2015 to year 2018. The loan bears interest at 9% per annum which is 2.6% above the benchmark interest rate announced by the People’s Bank of China for 3 to 5 years loans.

On March 5, 2014, the Group obtained a long-term loan amounting to US$13,613 (RMB83,000) from Bank of China with repayment dates ranging from year 2014 to year 2021. The loan bears interest at 6.8775% per annum which is 0.3275% above the benchmark interest rate announced by the People’s Bank of China for loans over 5 years.

On March 18, 2014 the Group received insurance recovery on damage of Liyuan plant amounting to US$955 (RMB5,822) from BOC Insurance Sichuan Branch.

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DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2013

DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

Schedule of significant components of deferred tax assets and deferred tax liabilities

	December 31,
	2012		2013
	US$		US$
Deferred tax assets—current
Allowance for uncollectible other receivables	747		770
Accrued water resource fee	332		316
Accrued expenses	706		985
Other payable	622		762
Deferred tax assets—current	2,407		2,833
Valuation allowance	(748	)	(839	)
Net deferred tax assets—current	1,659		1,994
Deferred tax assets—non-current
Net operating loss carryforwards	1,746		2,822
Depreciation of property, plant and equipment	812		948
Provision for impairment allowance	3,481		3,599
Others	10		10
Deferred tax assets—non-current	6,049		7,379
Valuation allowance	(4,720	)	(5,853	)
Net deferred tax asset—non-current	1,329		1,526
Deferred tax liabilities—current
Undistributed earnings of a foreign subsidiary	—		(300	)
Deferred tax liabilities—non-current
Fair value step-up of property, plant and equipment	(23,279	)	(23,647	)
Fair value step-up of intangible assets	(1,066	)	(1,073	)
Deferred tax liabilities—non-current	(24,345	)	(24,720	)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Basis of presentation
Working capital deficiency	$ 66,547

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SUBSEQUENT EVENTS (Details) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended		1 Months Ended			0 Months Ended																0 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012	Aug. 31, 2012 Liyuan USD ($)	Aug. 31, 2012 Liyuan Minimum	Aug. 31, 2012 Liyuan Maximum	Jan. 09, 2014 Subsequent event Short-term loan entered into, January 9, 2014 Agricultural Bank of China USD ($)	Jan. 09, 2014 Subsequent event Short-term loan entered into, January 9, 2014 Agricultural Bank of China CNY	Jan. 11, 2014 Subsequent event Short-term loan entered into, January 10, 2014 Agricultural Bank of China USD ($)	Jan. 11, 2014 Subsequent event Short-term loan entered into, January 10, 2014 Agricultural Bank of China CNY	Jan. 14, 2014 Subsequent event Long-term loan entered into, January 14, 2014 Rural Credit Cooperative Union USD ($)	Jan. 14, 2014 Subsequent event Long-term loan entered into, January 14, 2014 Rural Credit Cooperative Union CNY	Mar. 05, 2014 Subsequent event Long-term loan entered into, March 5, 2014 Bank of China USD ($)	Mar. 05, 2014 Subsequent event Long-term loan entered into, March 5, 2014 Bank of China CNY	Jan. 14, 2014 Subsequent event Minimum Long-term loan entered into, January 14, 2014 Rural Credit Cooperative Union	Mar. 05, 2014 Subsequent event Minimum Long-term loan entered into, March 5, 2014 Bank of China	Jan. 14, 2014 Subsequent event Maximum Long-term loan entered into, January 14, 2014 Rural Credit Cooperative Union	Jan. 09, 2014 Subsequent event Xiaopengzu IEL USD ($)	Jan. 09, 2014 Subsequent event Xiaopengzu IEL Minimum	Jan. 09, 2014 Subsequent event Xiaopengzu IEL Maximum	Jan. 14, 2014 Subsequent event CPT Wyndham Holdings Ltd. CPT Wyndham Sub Ltd. Ordinary shares USD ($)	Jan. 14, 2014 Subsequent event CPT Wyndham Holdings Ltd. CPT Wyndham Sub Ltd. ADS USD ($)	Mar. 18, 2014 Subsequent event Liyuan USD ($)	Mar. 18, 2014 Subsequent event Liyuan CNY
Subsequent Event
Cash consideration for sale of certain power generating assets			$ 7,151														$ 5,249
Term of sale and leaseback			3 years														5 years
Quarterly lease payment																	311
Implicit interest rate on the lease payments (as a percent)			6.50%														6.72%
Basis spread on variable rate (as a percent)			0.35%														0.32%
Variable rate basis			Benchmark interest rate announced by the People's Bank of China														Benchmark interest rate announced by the People's Bank of China
Term of loan for basis spread on variable rate				1 year	3 years													3 years	5 years
Loan obtained						1,476	9,000	328	2,000	4,100	25,000	13,613	83,000
Interest rate (as a percent)						7.80%	7.80%	7.80%	7.80%	9.00%	9.00%	6.8775%	6.8775%
Premium over benchmark interest rate (as a percent)						1.80%	1.80%	1.80%	1.80%	2.60%	2.60%	0.3275%	0.3275%
Purchase price (in dollars per share)																				$ 1.17	$ 3.51
Benchmark rate used for loans	People's Bank of China	People's Bank of China				People's Bank of China	People's Bank of China	People's Bank of China	People's Bank of China	People's Bank of China	People's Bank of China	People's Bank of China	People's Bank of China
Term of debt														3 years	5 years	5 years
Insurance recovery received on damage of plant from BOC Insurance Sichuan Branch	$ 549																					$ 955	5,822

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SEGMENT AND GEOGRAPHIC INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

SEGMENT AND GEOGRAPHIC INFORMATION

Schedule of the Group's segment information

The Group’s segment information as of and for the year ended December 31, 2011 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,806		555		25,382		14,854		—		—		54,597
Cost of revenues	(8,349	)	(568	)	(15,034	)	(10,874	)	—		3,511		(31,314	)
General and administrative expenses (including share-based compensation expense of US$10,479)	(1,519	)	(86	)	(1,148	)	(2,276	)	(23,867	)	—		(28,896	)
Impairment loss on goodwill	(5,260	)	—		—		(6,128	)	—		—		(11,388	)
Impairment loss on long-lived assets	—		—		—		—		(11,601	)	11		(11,590	)
Interest income	180		10		128		1,709		66		(1,992	)	101
Interest expense	(8,468	)	—		(8,565	)	(9,669	)	(73	)	2,018		(24,757	)
Changes in fair value of warrant liabilities	—		—		—		—		951		—		951
Exchange loss	(28	)	—		—		(244	)	(579	)	—		(851	)
Other (loss) income, net	(285	)	—		(36	)	(158	)	4,033		(3,888	)	(334	)
Income tax (expense) benefit	(142	)	5		(843	)	115		(662	)	—		(1,527	)
Net loss from continuing operations	(10,065	)	(84	)	(116	)	(12,671	)	(31,732	)	(340	)	(55,008	)
Loss from discontinued operations (net of income tax expense of US$101)	—		—		—		(631	)	—		349		(282	)
Net loss for the year from discontinued operations	—		—		—		(631	)	—		349		(282	)
Net loss	(10,065	)	(84	)	(116	)	(13,302	)	(31,732	)	9		(55,290	)
Net loss attributable to noncontrolling interests	—		—		—		2,546		7,355		—		9,901
Net loss attributable to China Hydroelectric Corporation shareholders	(10,065	)	(84	)	(116	)	(10,756	)	(24,377	)	9		(45,389	)
Total assets	200,681		15,896		318,616		374,296		421,650		(516,224	)	814,915
Total liabilities	(133,670	)	(753	)	(138,688	)	(185,330	)	(20,498	)	58,902		(420,037	)
Capital expenditures	1,763		1,128		3,031		645		970		(5	)	7,532
Depreciation and amortization expenses	5,181		344		9,837		6,569		115		—		22,046

The Group’s segment information as of and for the year ended December 31, 2012 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,460		598		41,616		29,714		—		—		85,388
Cost of revenues	(8,540	)	(689	)	(16,978	)	(13,133	)	—		3,545		(35,795	)
General and administrative expenses (including share-based compensation expense of US$166)	(2,108	)	(269	)	(2,569	)	(3,413	)	(11,989	)	—		(20,348	)
Interest income	236		121		838		1,713		3		(2,827	)	84
Interest expense	(9,039	)	(260	)	(10,550	)	(10,787	)	(247	)	2,813		(28,070	)
Changes in fair value of warrant liabilities	—		—		—		—		(399	)	—		(399	)
Exchange (loss) gain	—		—		—		(1	)	29		—		28
Other income (loss), net	136		22		(81	)	420		3,736		(3,726	)	507
Income tax benefit (expense)	72		(5	)	(3,831	)	(2,480	)	(207	)			(6,451	)
Net (loss) income from continuing operations	(5,783	)	(482	)	8,445		2,033		(9,074	)	(195	)	(5,056	)
Income from discontinued operations (net of income tax expense of US$399)	—		—		—		959		—		181		1,140
Gain on disposal of discontinued operations (net of income tax expense of $959)	—		—		—		—		2,767		—		2,767
Net income for the year from discontinued operations	—		—		—		959		2,767		181		3,907
Net (loss) income	(5,783	)	(482	)	8,445		2,992		(6,307	)	(14	)	(1,149	)
Net income attributable to noncontrolling interests	—		—		—		(94	)	—		—		(94	)
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(5,783	)	(482	)	8,445		2,898		(6,307	)	(14	)	(1,243	)
Total assets	192,843		22,790		344,923		289,702		426,518		(522,460	)	754,316
Total liabilities	(131,872	)	(8,092	)	(145,312	)	(129,627	)	(27,799	)	80,901		(361,801	)
Capital expenditures	877		1,384		3,973		1,305		15		(58	)	7,496
Depreciation and amortization expenses	5,546		477		10,136		6,767		142		—		23,068

The Group’s segment information as of and for the year ended December 31, 2013 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	14,608		373		36,000		23,536		—		—		74,517
Cost of revenues	(9,069	)	(634	)	(16,610	)	(12,393	)	(8	)	3,357		(35,357	)
General and administrative expenses (including share-based compensation expense of US$211)	(1,534	)	(193	)	(1,909	)	(2,423	)	(7,154	)	(45	)	(13,258	)
Impairment loss on long-lived assets	—		(3,549	)	—		—		—		—		(3,549	)
Interest income	340		365		1,801		702		2		(3,112	)	98
Interest expense	(7,726	)	(557	)	(10,128	)	(7,160	)	(109	)	3,112		(22,568	)
Changes in fair value of warrant liabilities	—		—		—		—		839		—		839
Exchange loss	—		—		—		—		(41	)	—		(41	)
Other income (loss), net	37		—		(18	)	91		3,477		(3,312	)	275
Income tax benefit (expense)	43		15		(2,245	)	(843	)	(444	)	—		(3,474	)
Net (loss) income from continuing operations	(3,301	)	(4,180	)	6,891		1,510		(3,438	)	—		(2,518	)
Net (loss) income from discontinuing operations	—		—		—		—		—		—		—
Net (loss) income	(3,301	)	(4,180	)	6,891		1,510		(3,438	)	—		(2,518	)
Net loss attributable to noncontrolling interests	—		—		—		297		—		—		297
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(3,301	)	(4,180	)	6,891		1,807		(3,438	)	—		(2,221	)
Total assets	197,995		21,135		346,886		288,735		437,477		(554,986	)	737,242
Total liabilities	(117,524	)	(7,144	)	(128,690	)	(123,843	)	(28,315	)	70,903		(334,613	)
Capital expenditures	124		29		233		1,228		13		—		1,627
Depreciation and amortization expenses	5,633		482		10,437		6,839		133		—		23,524

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GOODWILL (Tables)

12 Months Ended

Dec. 31, 2013

GOODWILL.

Schedule of changes in the carrying amount of goodwill by operating and reportable segments

	Yunnan Province	SichuanProvince	Fujian Province		Zhejiang Province	Total
	US$	US$	US$		US$	US$
Balance as of December 31, 2011	21,544	—	70,760		43,347	135,651
Foreign currency translation adjustment	53	—	119		106	278
Disposal of subsidiaries	—	—	(23,448	)	—	(23,448	)
Balance as of December 31, 2012	21,597	—	47,431		43,453	112,481
Foreign currency translation adjustment	668	—	1,467		1,344	3,479
Balance as of December 31, 2013	22,265	—	48,898		44,797	115,960

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As of December 31, 2013, the Group had working capital deficiency of US$66,547. This factor raises substantial doubt about the Company’s ability to continue as a going concern. The continued operation of the Group is dependent upon the Group’s ability in raising additional capital, obtaining additional financing and improving future operating and financial results. Therefore, the Company may not be able to realize its assets and discharge its liabilities in the normal course of business. In view of this, management has taken steps to actively pursue additional capital and financing.

While the Company strongly believes that its capital resources will be sufficient in the near term, there is no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there is no assurance that any additional financing, if available, will be obtainable on terms satisfactory or attractive to the Company.

The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might have been necessary should the Company not be able to continue in existence as a going concern.

(b) Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control and continued to be consolidated until the date that such control ceases.

Investments in entities that the Company does not control, but has the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method. Investments in entities in which the Company does not have the ability to exercise significant influence are accounted for under the cost method. All significant intercompany transactions and balances have been eliminated upon consolidation.

The Group accounted for business combinations in accordance with ASC topic 805 (“ASC 805”), Business Combinations. ASC 805 requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. During the measurement period, which shall not exceed one year from the acquisition date, the Company recognizes adjustments to the provisional amounts of acquisition-date fair value and the resulting goodwill for new information obtained as if the accounting for the business combination had been completed at the acquisition date. The comparative information for prior periods presented in the consolidated financial statements is revised as needed, including making any change in depreciation, amortization or other income effects recognized in completing the initial accounting.

For a component of the Group that either has been disposed of or is classified as held-for-sale, the Group accounted for the result of operations of the component as a discontinued operation in accordance with ASC sub-topic 205-20 (“ASC 205-20”), Presentation of Financial Statements, when (1)the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Group as a result of the disposal transaction; and (2)the Group will not have any significant continuing involvement in the operations of the component after the disposal transaction.

The Company accounted for the purchase of additional ownership in its subsidiary from noncontrolling interests as an equity transaction in accordance with ASC topic 810 (“ASC 810”), Consolidation. The carrying amount of the noncontrolling interests is adjusted to reflect the change in the Group’s ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interests is adjusted is recognized in additional paid-in capital.

(c) Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

(d) Fair value measurement

Financial instruments include cash and cash equivalents, accounts receivable, notes receivable, certain other current assets, accounts payable, certain other liabilities, short-term loans, long-term loans and warrants. The carrying values of these financial instruments, other than long-term loans and warrants, approximate their fair values due to their short-term maturities. During the year ended December 31, 2011, certain warrants were reclassified from equity to liability upon modification of terms (Note 17). These amended warrants were recorded as liabilities at fair value on the day of modification and subsequently adjusted to the fair value at each reporting date. All liability-classified warrants expired unexercised as of December 31, 2013. The warrants classified as equity were measured at fair value on the grant dates. The carrying values of long-term loans approximate their fair values due to the fact that the interest rates on these loans are reset each year based on prevailing market interest rates.

The Group applied the provisions of ASC topic 820 (“ASC 820”), Fair Value Measurements and Disclosures, in measuring fair value. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

ASC 820 describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

In accordance with ASC 820, the Group measures the fair value of money market funds included in cash equivalents using the market approach based on quoted market prices. The warrant liabilities were valued using the income approach based on inputs that are unobservable in the market (Level 3).

All assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are summarized below:

	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)
	US$	US$	US$
Money market funds in cash equivalent	8	—	—
Warrant liabilities (Note 17)	—	—	839
	8	—	839

No assets and liabilities were measured at fair value on a recurring basis as of December 31, 2013.

The following table presents a reconciliation of warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs for the years ended December 31, 2012 and 2013:

	Warrant liabilities
	US$
Balance as of December 31, 2011	440
Realized or unrealized losses	399
Balance as of December 31, 2012	839
Realized or unrealized gain	(839	)
Balance as of December 31, 2013	—

Realized or unrealized gain or losses for the years ended December 31, 2012 and 2013 were recorded in “changes in fair value of warrant liabilities” on the consolidated statements of comprehensive income.

All assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2013 are summarized below:

	Carrying valueat December 31, 2013	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total loss
	US$	US$	US$	US$
Property, plant and equipment	4,098	—	—	—	(4,098	)

In accordance with ASC topic 360 (“ASC 360”), Property, Plant, and Equipment, property, plant and equipment of Liyuan with a carrying amount of US$4,098 was written down to its fair value of nil, resulting in an impairment loss of US$4,098, of which US$549 was recovered through insurance claims. A net impairment charge of US$3,549 was included in the consolidated statements of comprehensive income for the year ended December 31, 2013 (Note 7).

(e) Foreign currency

The Company determined its functional currency to be the US$ while its subsidiaries determine their functional currency based on the criteria of ASC topic 830 (“ASC 830”), Foreign Currency Matters. All of the Company’s subsidiaries determined their functional currency to be their respective local currency, except for CHC HK and Sunpower which determined their functional currency to be the US$. The Company uses the US$ as its reporting currency.

Each entity in the Group maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Exchange gains and losses are included in the consolidated statements of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are remeasured using the exchange rates at the dates of the initial transactions.

The assets and liabilities of the Company’s subsidiaries are translated into the reporting currency of the Company at the exchange rates prevailing at the balance sheet date. The statements of comprehensive income of the Company’s subsidiaries are translated into the reporting currency of the Company at the weighted average exchange rates for the year. The resulting translation gains (losses) are recorded in accumulated other comprehensive income as a component of shareholders’ equity.

For the purpose of the consolidated statements of cash flows, cash flows of the Company’s subsidiaries are translated into the reporting currency of the Company at the exchange rates prevailing on the dates of the cash flows. Frequently recurring cash flows of the Company’s subsidiaries, which arise throughout the year, are translated into the reporting currency of the Company at the weighted average exchange rates for the year.

(f) Cash and cash equivalents

Cash and cash equivalents include cash on hand and short-term deposits with original maturity of three months or less at the date of purchase. Except for the restricted cash, none of the Group’s cash and cash equivalents is restricted as to withdrawal and use.

(g) Restricted cash

Restricted cash represents cash pledged to financial institutions as collateral for the Company’s bank loans (Note 15). The restriction on the cash collateral amount of US$5,171 as of December 31, 2012 was released in May 2013 upon repayment of the bank loans.

(h) Accounts receivable

Accounts receivable are carried at net realizable value. In evaluating the collectability of receivable balances, the Group considers many factors, including the aging of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Accounts receivable are written off after all collective efforts have ceased.

(i) Notes receivable

Notes receivable represent short-term bank acceptance notes issued by financial institutions that entitle the holder to receive the stated amount from the financial institutions at the maturity date of the bill, which is generally within six months from the date of issuance. The holder of the bills can obtain payment from the financial institutions prior to the stated maturity date. In such a case, the holder will receive a discounted amount off the face value of the bill. There is recourse to the customers in the event the financial institutions default upon demand for payment by the holders of the notes. To reduce the Group’s credit risk, the Group has required certain customers to pay for electricity using notes receivable during the years ended December 31, 2012 and 2013.

(j) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation. The depreciable amount of an item of property, plant and equipment is its cost less its estimated residual value, if any. The residual value is calculated by taking the price such an asset would fetch at the reporting date, with the assumption that it was already in the condition it will be in at the end of its useful life. Depreciation is recorded on a straight-line basis over the following estimated useful lives:

Dams and reservoirs	30-49 years
Buildings	8-50 years
Machinery	1-30 years
Transportation equipment	1-11 years
Electronic equipment and others	1-15 years

For property, plant and equipment acquired through a business combination, depreciation is recorded on a straight-line basis over their respective remaining estimated useful lives. The useful lives, residual values and methods of depreciation are reviewed at each reporting date and adjusted prospectively, if appropriate.

All direct and indirect costs that are related to the construction of property, plant and equipment and incurred before the assets are ready for their intended use are capitalized as construction in progress. Construction in progress is transferred to specific property, plant and equipment accounts and commences depreciation when these assets are ready for their intended use.

Interest costs are capitalized if they are incurred during the acquisition, construction or production of a qualifying asset and such costs could have been avoided if expenditures for the assets have not been made. Capitalization of interest costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Interest costs are capitalized until the assets are ready for their intended use.

Repair and maintenance costs are charged to expense when incurred, whereas the cost of renewals and betterment that extend the useful life of fixed assets are capitalized as additions to the related assets. Retirement, sale and disposal of assets are recorded by removing the cost and accumulated depreciation, with any resulting gain or loss reflected in the consolidated statements of comprehensive income.

(k) Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of acquired businesses. ASC topic 350 (“ASC 350”), Intangibles—Goodwill and Other, requires that goodwill be tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group assigns and assesses goodwill for impairment at the reporting unit level at each reporting date. The Group determines that each reporting unit is identified at the component level, which is one level below the operating segment.

The performance of the impairment test involves a two-step process. The first step of the impairment test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. Fair value is primarily determined through the income approach by computing the future discounted cash flows expected to be generated by the reporting unit and is dependent on a number of significant entity specific assumptions, including plant utilization rate, electricity sales volumes and tariffs, costs of production, capital expenditures, working capital changes and the discount rate. The discount rate is commensurate with the risk inherent in the projected cash flows and reflects the rate of return required by an investor in the current economic conditions. For reporting units to be disposed of subsequent to the reporting date, the market approach is used where estimates of prices reasonably expected to be realized from the sale of the reporting units are used to determine the fair value of each reporting unit.

If the carrying value exceeds the fair value, goodwill may be impaired. If this occurs, the Group performs the second step of the quantitative goodwill impairment test to determine the amount of impairment loss. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. This implied fair value is then compared with the carrying amount of the reporting unit goodwill, and if it is less, the Group would then recognize an impairment loss. In accordance with ASU No. 2011-08 (“ASU 2011-08”), Intangibles—Goodwill and Other (ASC 350), the Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test. If the Company believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required.

The Group recognized goodwill impairment loss of US$11,388, nil and nil for the years ended December 31, 2011, 2012 and 2013, respectively (Note 9).

Intangible assets are carried at cost less accumulated amortization. Intangible assets acquired in a business combination are recognized initially at fair value at the date of acquisition. Intangible assets with a finite useful life are amortized using the straight-line method over the estimated economic life of the intangible assets. The estimated useful lives for the intangible assets as of December 31, 2013 were as follows:

Development right of Binglangjiang Phase II	30 years
Dam use right of Dongguan	40 years
Software	5 years

The Group reviews and adjusts the carrying value of the intangible assets if facts and circumstances suggest the intangible assets may be impaired (Note 2(n)). The Group assessed and concluded that there was no impairment for intangible assets in any of the years presented.

(l) Land use rights

The land use rights represent the amounts paid and relevant costs incurred for the right to use land in the PRC and are recorded at purchase cost less accumulated amortization. Amortization is provided on a straight-line basis over the terms of the respective land use rights agreements, which are 50 years. For land use rights acquired through a business combination, amortization is recorded on a straight-line basis over their respective remaining estimated useful lives, which range from 41 to 50 years.

(m) Asset retirement obligations

ASC sub-topic 410-20 (“ASC 410-20”), Asset Retirement Obligations, requires companies to record the present value of obligations associated with the retirement of tangible long-lived assets in the period in which it is incurred. The value of the liability is capitalized as part of the carrying amount of the related long-lived asset. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. The Group’s asset retirement obligations relate primarily to the restoration of leased lands under land use rights granted by the local government to their original condition. Asset retirement obligations as of December 31, 2012 and 2013 were insignificant.

(n) Impairment of long-lived assets

The Group evaluates its long-lived assets, including property, plant and equipment, land use rights and intangible assets with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360.  When these events occur, the Group assesses the recoverability of long-lived assets by comparing the carrying amount of the assets to the expected future undiscounted cash flows resulting from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The Group recognized impairment loss on long-lived assets of US$11,590, nil and US$3,549 for the years ended December 31, 2011, 2012 and 2013, respectively.

(o) Derivative instruments

ASC topic 815 (“ASC 815”), Derivatives and Hedging, requires all contracts which meet the definition of a derivative to be recognized in the consolidated financial statements as either assets or liabilities and recorded at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. Changes in fair values of derivatives not qualified as hedges are reported in the consolidated statements of comprehensive income. The estimated fair values of derivative instruments are determined at discrete points in time based on the relevant market information. These estimates are calculated with reference to the market rates using industry standard valuation techniques.

(p) Comprehensive income (loss)

Comprehensive income (loss) is defined as the change in shareholders’ equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. The Group presents items of net income (loss) and other comprehensive income (loss) in one continuous statement. Accumulated other comprehensive income (loss) of the Group includes the cumulative foreign currency translation adjustments and net losses not recognized immediately as a component of net periodic pension cost of a defined benefit plan.

(q) Revenue recognition

The Group’s revenue is derived from the sale of electricity. Revenues are recognized when the following four criteria are met as prescribed by ASC topic 605 (“ASC 605”), Revenue Recognition: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. The Group considers the terms of each arrangement to determine the appropriate accounting treatment. Revenue is generally earned and recognized upon transmission of electricity to the power grid controlled and owned by the respective regional or provincial grid companies. For transactions in which electricity has been transmitted to the power grid without a fixed or determinable unit price per kWh while the tariff is pending approval of the regional or provincial pricing bureau, cash received in exchange for the transmission of electricity to the power grid controlled by the respective regional or provincial grid companies has been recorded as customer deposits until such time the price becomes fixed and determinable. When the price becomes fixed and determinable, all or a portion of the customer deposits will be recognized as revenue. The Group does not defer the related cost of revenues, which is charged to expense as incurred. No customer deposits were recognized as of December 31, 2012 and 2013. The Group has not offered any discounts or rebates to its customers nor does it provide for refunds in its sales contracts with customers.

The Company’s subsidiaries are subject to withholding value-added tax (“VAT”) on the revenues earned in the PRC. The applicable rate of VAT is 6% for small hydroelectric power projects with a total installed capacity of 50 megawatts or less and 17% for large hydroelectric power projects with a total installed capacity of over 50 megawatts. For the years ended December 31, 2011, 2012 and 2013, the lower VAT rate of 6% was applied to the hydroelectric power projects of Binglangjiang, Liyuan, Yingchuan, Wuliting, Jiulongshan, Zhougongyuan, Shapulong, Ruiyang, Husahe, Hengda, Xineng, Xiaopengzu, Jinling, Jinlong, Jintang Jinwei and Dazhaihe, and the VAT rate of 17% was applied to the hydroelectric power projects of Banzhu and Wangkeng. VAT on revenues earned from the sale of electricity by the Group to its customers for the years ended December 31, 2011, 2012 and 2013 were US$4,583, US$7,387 and US$6,047, respectively. The Group has recognized revenues net of VAT in the consolidated statements of comprehensive income.

(r) Cost of revenues

Cost of revenues consists primarily of depreciation expense of hydroelectric power projects and related operating costs and overhead expenses directly attributable to the production of electricity.

(s) Leases

In accordance with ASC topic 840 (“ASC 840”), Lease, leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capital lease if any of the following conditions exist: (i) ownership is transferred to the lessee by the end of the lease term, (ii) there is a bargain purchase option, (iii) the lease term is at least 75% of the property’s estimated remaining economic life or (iv) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the lease periods.

The Group has no capital leases for any of the years presented.

(t) Income taxes

The Group follows the liability method of accounting for income taxes in accordance with ASC topic 740 (“ASC 740”), Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities, net operating loss and credits carryforwards, using enacted tax rates that will be in effect for the period in which the differences are expected to reverse. The Group records a valuation allowance against the amount of deferred tax assets if based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in the consolidated statements of comprehensive income in the period that includes the enactment date.

The Company accounts for uncertainty in income taxes in accordance with ASC 740. Interest and penalties arising from underpayment of income taxes are computed in accordance with the related PRC tax law. The amount of interest expenses is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amount previously taken or expected to be taken in a tax return. Interest recognized from the accounting for uncertainty in income taxes is classified in the financial statements as interest expenses, while penalties recognized from the accounting for uncertainty in income taxes are classified in the financial statements as other expenses.

The Group recognizes in its financial statements the impact of a tax position if a tax return position or future tax position is “more likely than not” to prevail, which is defined as a likelihood of more than fifty percent of being sustained upon audit, based on the technical merits of the tax position. Tax positions that meet the “more likely than not” threshold are measured, using a probability weighted approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement.

The Group’s estimated liability for unrecognized tax benefits is periodically assessed for adequacy and may be affected by changing interpretation of laws, rulings by tax authorities, certain changes and/or developments with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from the Group’s estimates. As each audit is concluded, adjustments, if any, are appropriately recorded in the Group’s financial statements. Additionally, in future periods, change in facts, circumstances, and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the change occurs. The Group classified unrecognized tax benefits as current liabilities to the extent the Group anticipates payment of cash within one year or the operating cycle, if longer.

The Company recognizes the tax benefit for the excess of the tax basis over the financial reporting basis or the tax liability when the financial reporting basis exceeds the tax basis (“outside basis difference”) of an investment in subsidiary in accordance with ASC sub-topic 740-30 (“ASC 740-30”), Income Taxes: Recognition, when it is apparent that the temporary differences will reverse in the foreseeable future. If it is “more likely than not” that a deferred tax liability will be realized as a result of the decision to dispose of a subsidiary, the tax liability would be recorded when the disposal group is classified as held for sale even though any gain expected upon disposal cannot be recognized until the sale is consummated.

(u) Net (loss) income per share

In accordance with ASC topic 260 (“ASC 260”), Earnings Per Share, basic (loss) income per share is computed by dividing net (loss) income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted (loss) income per share is calculated by dividing net (loss) income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary share equivalents outstanding during the period. Ordinary share equivalents consist of the ordinary shares issuable upon the conversion of warrants (Note 17) and share options (Note 26), using the treasury stock method.

(v) Segment reporting

The Group follows ASC topic 280 (“ASC 280”), Segment Reporting, for the presentation of segment information. The Group’s chief operating decision maker, who has been identified as the chief executive officer (“CEO”), relies upon financial information by provinces with operations in the PRC when making decisions about allocating resources and assessing the performance of the Group. As a result, the Group operates and manages its business as four operating and reportable segments, namely the Yunnan Province segment, the Sichuan Province segment, the Zhejiang Province segment and the Fujian Province segment. As the Group’s long-term assets are substantially all located in and derived from the PRC, no geographical segments are presented.

(w) Government grant

Government grants are recognized when there is reasonable assurance that the attaching conditions will be complied with. A grant relates to an expense item is recognized as income over the period necessary to match the grant on a systematic basis to the related costs, whereas a grant relates to an asset acquisition is recognized as deferred government grant and recognized as income in proportion to depreciation of the related assets. Grant income is recognized on a net basis as a reduction to cost of revenues in the consolidated statements of comprehensive income.

(x) Share-based payment

The Company accounts for share awards issued to employees in accordance with ASC topic 718 (“ASC 718”), Compensation-Stock Compensation. In accordance with the fair value recognition provision of ASC 718, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period. The Company has elected to recognize share-based compensation expense for share awards granted to employees using the straight-line method. The Company uses a binomial option pricing valuations model in determining the fair value of the options granted.

The Company accounts for share awards issued to non-employees in accordance with the provisions of ASC 718 and ASC sub-topic 505-50 (“ASC 505-50”), Equity: Equity-Based Payment to Non-employees. The Company’s share awards issued to non-employees are subject to graded vesting provisions. The Group recognizes share-based compensation expense for share awards granted to non-employees using the accelerated recognition method over the requisite service period of the award. In accordance with ASC 718 and ASC 505-50, the Company uses the binomial option pricing valuations model to measure the value of options granted to non-employees at each vesting date to determine the appropriate charge to share-based compensation.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in the subsequent period if actual forfeitures differ from initial estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to vest. Forfeiture rate is estimated based on historical and future expectation of employee turnover rate and is adjusted to reflect future change in circumstances and facts, if any.

(y) Long-lived assets to be disposed of and discontinued operations

The Company accounts for a long-lived asset to be disposed of other than by sale in accordance with the provisions of ASC 360, where such long-lived asset continues to be classified as held and used until it is disposed of. When a long-lived asset ceases to be used, the carrying amount of the asset is written down to its salvage value, if any.

The Company accounts for a long-lived asset or disposal group to be sold in accordance with ASC 360, where such long-lived asset or disposal group is classified as held for sale in the period in which all six criteria are met: (1) a plan to sell the asset has been committed to by management; (2) the asset can be sold in its current condition; (3) an active plan has been initiated to find a buyer; (4) it is probable that the asset will be sold and the sale will be completed within one year and will qualify as a completed sale; (5) the sales price is reasonable relative to the asset’s current fair value and the entity is actively marketing the asset; and (6) it is unlikely that the plan to sell the asset will be withdrawn or changed significantly.

A long-lived asset or disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell, and it is presented separately on the consolidated balance sheets. Long-lived assets reclassified as held for sale are not depreciated or amortized.

The Company follows ASC 205-20 in its accounting for a component of the Company that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the Company. Such component is reported as discontinued operations. In the period in which a component has been disposed of or classified as held for sale, the results of operations, including any gain or loss after tax recognized in accordance with ASC 360, less applicable income taxes, for the periods presented are reclassified into line items of income separately from net income (loss) from continuing operations before extraordinary items (if applicable), on the consolidated statements of comprehensive income.

(z) Recently issued accounting standards

In March 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-05 (“ASU 2013-05”), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which specifies that a cumulative translation adjustment should be released into earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustment attributable to the investment would be recognized in earnings when the investment is sold. When an entity sells either a part or all of its investment in a consolidated foreign entity, cumulative translation adjustment would be recognized in earnings only if the sale results in the parent no longer having a controlling financial interest in the foreign entity. In addition, cumulative translation adjustment should be recognized in earnings in a business combination achieved in stages (i.e., a step acquisition). The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-05.

In July 2013, the FASB issued ASU No. 2013-11 (“ASU 2013-11”), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which concludes an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law. The amendments are effective for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements from the adoption of ASU 2013-11.

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SHARE-BASED PAYMENT (Tables)

12 Months Ended

Dec. 31, 2013

SHARE-BASED PAYMENT

Schedule of total compensation cost recognized for share options granted

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Cost of revenues	—	—	—
General and administrative expenses	10,479	166	211
	10,479	166	211

Employees

SHARE-BASED PAYMENT

Schedule of share options granted

	Number of Options		Weighted- Average Exercise Price (US$)	Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (US$)
Outstanding at January 1, 2013	3,635,250		0.62	4.17	38
Granted	1,300,000		0.89	—	—
Exercised	(265,547	)	0.49	—	—
Forfeited or cancelled	(630,139	)	0.70	—	—
Expired	—		—	—	—
Outstanding at December 31, 2013	4,039,564		0.70	3.72	787
Vested and expected to vest at December 31, 2013	3,527,057		0.71	3.72	675
Exercisable at December 31, 2013	1,498,674		0.62	3.37	409

Schedule of assumptions used in estimating the grant-date fair value of options granted

	For the Years Ended December 31,
	2011	2012	2013
Suboptimal exercise factor	—	1.5	1.5
Risk-free interest rate	0.85%	0.62%~0.83%	1.52%
Expected volatility rate	71.87%	73.4%~89.21%	84.86%
Expected dividend yield	—	—	—
Expected share option life	5 years	5 years	4.62~5 years
Estimated forfeiture rate
Founders	—	—	—
Senior management	—	—	6.7
Employees	—	—	6.7
Fair value of ordinary shares	US$0.39	US$0.44~US$0.62	US$0.78

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PREPAYMENTS AND OTHER CURRENT ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

PREPAYMENTS AND OTHER CURRENT ASSETS

Schedule of prepayments and other current assets

	December 31,
	2012		2013
	US$		US$
Advances for construction projects	78		109
Acquisition deposits	716		738
Amounts due from original shareholders of acquired subsidiaries	1,297		1,350
Consideration receivable from disposal of a subsidiary	11,534		—
Prepaid insurance	360		509
Rental deposit	182		258
Prepaid finance consulting fee	570		844
Others	973		1,026
	15,710		4,834
Less: Provision for impairment allowance	(1,560	)	(1,608	)
Total	14,150		3,226

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INTEREST EXPENSE

12 Months Ended

Dec. 31, 2013

INTEREST EXPENSE.

INTEREST EXPENSE

22. INTEREST EXPENSE

Interest expense for the years ended December 31, 2011, 2012 and 2013 consist of:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Interest on loans	18,371	20,017	19,091
Accrued interest on unrecognized tax benefits (Note 13)	457	576	68
Amortization of debt issuance costs	19	191	175
Interest to original shareholders of acquired subsidiaries	2,503	1,126	240
Interest on loans from third parties	2,567	4,757	1,683
Bank charges	672	1,340	1,067
Others	168	63	244
Total	24,757	28,070	22,568

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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2013

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

21. EMPLOYEE BENEFIT PLANS

(a) Defined contribution plan

The Group’s full time employees in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain medical care unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on 33.5% to 45.9% of the employees’ salaries, subject to a certain cap limit, depending on the location of employment. The total contribution for such employee benefits, which was expensed as incurred, was US$1,045, US1,324 and US$1,024 for the years ended December 31, 2011, 2012 and 2013, respectively. The Group has no additional legal obligations or liabilities for the benefits beyond the paid and accrued amounts.

In November 2008, the New York office of the Company established a 401(k) retirement plan, which requires a dollar by dollar matching contribution from the employer up to 3% of the employee’s annual salary. The total contribution for the 401(k) retirement plan, which was expensed as incurred, was US$155, US$74 and US$2 for the years ended December 31, 2011, 2012 and 2013, respectively. The Group has no additional legal obligation or liabilities for the benefits beyond the paid and accrued amounts. The 401(k) retirement plan was terminated in May 2013.

(b) Defined benefit plan

The Company established a defined benefit plan with a retirement plan service agent for two former executive officers, John Kuhns and Mary Fellows, with an effective date of January 1, 2010. The guaranteed retirement benefit under this defined benefit plan is based on the two former executive officers’ salaries and length of service periods. In 2012, the two former executive officers terminated their employment relationship with the Company and opted to have a lump sum cash distribution for their accumulated defined benefit of US$244, resulting in zero assets and obligation as of December 31, 2012. The benefit obligation, net periodic benefit cost, fair value of plan contributed assets and changes in the funded status of the plan were insignificant as of and for the years ended December 31, 2011 and 2012 based on the actuarial valuation dated January 13, 2012 and January 18, 2013, respectively.

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INTEREST EXPENSE (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
INTEREST EXPENSE.
Interest on loans	$ 19,091	$ 20,017	$ 18,371
Accrued interest on unrecognized tax benefits	68	576	457
Amortization of debt issuance costs	175	191	19
Interest to original shareholders of acquired subsidiaries	240	1,126	2,503
Interest on loans from third parties	1,683	4,757	2,567
Bank charges	1,067	1,340	672
Others	244	63	168
Total	$ 22,568	$ 28,070	$ 24,757

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BASIC AND DILUTED (LOSS) INCOME PER SHARE (Tables)

12 Months Ended

Dec. 31, 2013

BASIC AND DILUTED (LOSS) INCOME PER SHARE

Schedule of basic and diluted (loss) income per share

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Numerator for basic and diluted loss per share:
Loss attributable to ordinary shareholders	(45,389	)	(1,243	)	(2,221	)
Denominator:
Weighted average number of ordinary shares outstanding—basic	156,505,076		161,989,097		162,071,626
Dilutive effect of convertible securities:
Warrants	—		—		—
Share options	—		—		—
Weighted average number of ordinary shares outstanding—diluted	156,505,076		161,989,097		162,071,626
(Loss) income per share—basic and diluted:
From continuing operations	(0.29	)	(0.03	)	(0.01	)
From discontinued operations	(0.00	)	0.02		—
Loss per share—basic and diluted	(0.29	)	(0.01	)	(0.01	)

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DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Dec. 31, 2013

Discontinued operations

Schedule of results of discontinued operations

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Revenues	4,737		4,661		—
Cost of revenues	(2,098	)	(1,131	)	—
General and administrative expenses	(226	)	(176	)	—
Interest income	2		2		—
Interest expense	(2,580	)	(1,634	)	—
Other (loss) income, net	(16	)	3,543		—
Income tax expense	(101	)	(1,358	)	—
Net (loss) income from discontinued operations	(282	)	3,907		—

Yuanping

Discontinued operations

Schedule of assets and liabilities attributable to discontinued operations

	March  2, 2012
	US$
Assets:
Cash and cash equivalents	56
Property, plant and equipment, net	17,304
Goodwill	3,219
Intangible assets, net	617
Deferred tax assets	259
Prepayments and other current assets	328
Total	21,783
Liabilities:
Current portion of long-term loans	477
Accrued expenses and other current liabilities	163
Long-term loans	10,489
Deferred tax liabilities	827
Total	11,956

Yuheng

Discontinued operations

Schedule of assets and liabilities attributable to discontinued operations

	October 31, 2012
	US$
Assets:
Cash and cash equivalents	472
Property, plant and equipment, net	18,509
Goodwill	23,448
Intangible assets, net	1,916
Deferred tax assets	174
Prepayment and other current assets	241
Total	44,760
Liabilities:
Current portion of long-term loans	14,920
Accrued expenses and other current liabilities	2,256
Long-term loans	7,301
Deferred tax liabilities	2,046
Other non-current liabilities	33
Total	26,556

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

23. COMMITMENTS AND CONTINGENCIES

(a) Operating lease commitments

The Group has entered into certain operating leasing arrangements relating to the lease of the Group’s office premises. Payments made under operating leases are expensed on a straight-line basis over the term of the lease. Rental expenses under operating leases for the years ended December 31, 2011, 2012 and 2013 were US$912, US$639 and US$544, respectively.

Future minimum lease payments for non-cancellable operating leases as of December 31, 2013 are as follows:

	US$
2014	20
2015	22
Thereafter	—
Total	42

The Group’s lease arrangements have no renewal options, rent escalation clauses, restriction or contingent rents and are all conducted with third parties.

(b) Capital commitments

Capital commitments as of December 31, 2013 were approximately US$183 (RMB1,116) representing contracted but unprovided amounts for the purchase of property, plant and equipment by Yingchuan, Jiulongshan , Ruiyang , Wangkeng and Banzhu.

(c) Other commitments

During the year ended December 31, 2011, the Company entered into compensation agreements with certain land owners in the Fujian Province, the PRC, who lost the usage of their land due to the operation of the Company’s hydroelectric power projects in the areas. These agreements have terms ranging from 5 to 43 years from the date of signing of the compensation agreements. The annual compensation is based on the relevant land acres and agreed compensation rate per acre. The total compensation costs to the land owners, which were recorded in “cost of revenues”, were US$166, US$739 and US$202 for the years ended December 31, 2011, 2012 and 2013, respectively.

Future minimum compensation costs to the land owners for the five years succeeding December 31, 2013 are as follows:

	US$
2014	85
2015	194
2016	194
2017	193
2018	202
Thereafter	5,286
Total	6,154

(d) Other contingencies

As of December 31, 2013, the Group has not obtained formal title certificates with respect to the land that the Group used at the hydroelectric power projects of Zhougongyuan, Binglangjiang, Jinlong, Jintang, Jinling and Jinwei with a total area of approximately 2,499,278 meter square. The management is in the process of completing the legal procedures for obtaining the relevant title certificates for the parcels of land and buildings involved and registering them in the name of the Group’s operating companies. In addition, the Group has not passed the completion acceptance procedure for hydroelectric power projects of Wangkeng, Banzhu, Jinlong, Jintang, Jinwei and Jinling. Moreover, the hydroelectric power project of Husahe cannot verify whether it has passed completion acceptance due to the loss of files caused by flood in 2004. The management is in the process of performing the completion acceptance procedure for these hydroelectric power projects. In the opinion of management, the likelihood of not obtaining the formal title certificates and completing the acceptance procedures is remote based on current facts and circumstances.

There were no significant contingencies as of December 31, 2012 and 2013.

(e) Legal proceedings

On October 22, 2009, the Company signed a capital increase agreement with Henan Lantian Group Co., Ltd. (“Lantian”) to subscribe 79% equity interest in Wuyue, which owns the right to develop a pumped storage hydropower plant in the Henan Province, the PRC, for US$26,247 (RMB162,500).  The Group completed the first capital injection of US$5,249 (RMB 32,500) in 2010.  The project made minimum progress after the acquisition of Wuyue by the Group in October 2009.  In 2011, the Company decided to abandon the development of the hydropower project and fully impair the construction in progress.  In 2012, the Company initiated negotiations with Lantian to terminate the original capital increase agreement.

In April 2012, twenty-four employees of Wuyue filed an arbitration claim against the Company for the payment of salary in the amount of US$428 and the payment of social security in the amount of US$33. The claim was heard by the Henan Guangshan County Labour Arbitration Committee (“GCLAC”) in May 2012. GCLAC ordered that Wuyue be joined as a joint defendant with the Company. As of December 31, 2012, no ruling or award has been granted in respect of the claim. The Company had made a full accrual of the claimed amount in accrued expenses and other current liabilities.  In October 2013, the twenty-four employees of Wuyue filed an arbitration claim against Wuyue, Lantian and the Company, which were named as joint respondents, for unpaid salary and social security payment in the amount of US$1,066.  The claim was heard by GCLAC in November 2013.  On November 26, 2013, GCLAC made an adjudication that the Company should pay salary and social security of US$540 (RMB3,342) and termination benefits of US$30 (RMB188) to those twenty-four employees.  On February 17, 2014, the Company fully settled the compensation costs of US$570 to the employees of Wuyue in accordance with the verdict.

In May 2013, Lantian filed an arbitration claim against the Company at the China International Economic and Trade Arbitration Commission (“CIETAC”) for the penalties for late capital injection in Wuyue in the amount of US$4,158 (RMB 25,740).  The Company filed a counterclaim against Lantian at the CIETAC for the termination of the capital increase agreement with Lantian and the return of the Company’s initial capital injection without additional penalties for late capital injection.  In September 2013, Lantian increased the penalty claim amount to US$6,174 (RMB 38,220).  As of December 31, 2013, no ruling or award has been granted in respect of the claim.  The Company expects that the arbitration committee at CIETAC will issue a ruling during the second quarter of 2014.  Since there is considerable uncertainty regarding the ultimate resolution of such matter, which includes eventual loss, fine, penalty or business impact, if any, an estimate for the reasonably possible loss or a range of reasonably possible losses cannot be made.

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OTHER INCOME (LOSS), NET

12 Months Ended

Dec. 31, 2013

OTHER INCOME (LOSS), NET

OTHER INCOME (LOSS), NET

24. OTHER INCOME (LOSS), NET

Other income (loss), net for the years ended December 31, 2011, 2012 and 2013 consists of:

	For the Years Ended December 31,
	2011		2012	2013
	US$		US$	US$
Reimbursement from ADS depositary bank	527		—	—
Gain from extinguishment of amounts due to original shareholders of acquired subsidiaries	—		462	—
Interest penalty income from late consideration payment by the acquirer of a disposed subsidiary	—		—	144
Others	(861	)	45	131
Other (loss) income, net	(334	)	507	275

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ORGANIZATION AND PRINCIPAL ACTIVITIES

12 Months Ended

Dec. 31, 2013

ORGANIZATION AND PRINCIPAL ACTIVITIES

ORGANIZATION AND PRINCIPAL ACTIVITIES

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

China Hydroelectric Corporation (the “Company”) was incorporated on July 10, 2006 under the laws of the Cayman Islands to serve as a vehicle for the acquisition of equity interests in companies with hydroelectric assets in the People’s Republic of China (the “PRC” or “China”). The Company and its subsidiaries (the “Group”) are principally engaged in the operation and development of hydroelectric assets and the generation of hydroelectric power in the PRC.

On January 25, 2010, the Company completed an initial public offering (“IPO”), whereby the Company issued 6,000,000 units of securities at US$16.00 per unit. Each unit consists of one American Depositary Share (“ADS”) priced at US$14.80 and one warrant priced at US$1.20. Each ADS represents three ordinary shares and each warrant entitles the holder to purchase three ordinary shares for an exercise price of US$15.00. The IPO yielded aggregate gross proceeds of US$96,000. The proceeds, net of applicable expenses, are used to acquire hydroelectric operating companies and assets and to develop new hydroelectric power projects in China, for working capital and for general corporate purposes.

The Company does not conduct any substantive operation of its own and conducts its primary business operations through its subsidiaries.

During the year ended December 31, 2011, the Company acquired one hydroelectric entity. The Company did not make any acquisition of hydroelectric entity during the years ended December 31, 2012 and 2013.

As of December 31, 2013, the Company’s subsidiaries included the following entities:

Subsidiaries	Place of Incorporation	Date of Establishment/ Acquisition	Percentage of Ownership		Principal Activities
Beijing A.B.C. Investment Consulting Co., Ltd. (“ABC”)	The PRC	April 19, 2007	100	%	Provision of general and administrative services to group companies
Yunnan Huabang Electric Power Development Co., Ltd. (“Binglangjiang”)	The PRC	April 25, 2007	100	%	Operation and development of hydroelectric assets
Sichuan Huabang Hydroelectric Development Co., Ltd. (“Liyuan”)	The PRC	May 21, 2007	100	%	Operation and development of hydroelectric assets
Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. (“Yingchuan”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
Qingtian Wuliting Hydroelectric Development Co., Ltd. (“Wuliting”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (“Jiulongshan”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
China Hydroelectric Corporation (Hong Kong) Limited (“CHC HK”)	Hong Kong (“HK”)	June 25, 2008	100	%	Investment holding company

	Place of Incorporation	Date of Establishment/ Acquisition	Percentage of Ownership		Principal Activities
Pingnan County Wangkeng Hydroelectric Co., Ltd. (“Wangkeng”)	The PRC	October 21, 2008	100	%	Operation and development of hydroelectric assets
Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. (“Banzhu”)	The PRC	October 22, 2008	100	%	Operation and development of hydroelectric assets
Sun Power Asia Limited (“Sunpower”)	HK	November 14,2008	100	%	Investment holding company
Yunhe County Shapulong Hydropower Generation Co., Ltd. (“Shapulong”)	The PRC	August 3, 2009	100	%	Operation and development of hydroelectric assets
Zhejiang Longquan Ruiyang Cascaded II Hydropower Plant Co., Ltd. (“Ruiyang”)	The PRC	August 20, 2009	100	%	Operation and development of hydroelectric assets
Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. (“Zhougongyuan”).	The PRC	December 3, 2009	100	%	Operation and development of hydroelectric assets
Fujian Huabang Hydroelectric Investment Co., Ltd. (“Fujian Huabang”).	The PRC	January 14, 2010	100	%	Investment holding company
Henan Wuyue Storage Power Generation Co., Ltd. (“Wuyue”)	The PRC	March 23, 2010	79	%	Development of hydroelectric assets
Yingjiang County Qinrui Husahe Power Co., Ltd. (“Husahe”)	The PRC	April 19, 2010	100	%	Operation and development of hydroelectric assets
Fugong County Hengda Electric Power Development Co., Ltd. (“Hengda”)	The PRC	June 22, 2010	100	%	Operation and development of hydroelectric assets
Fugong County Xineng Electric Power Development Co., Ltd. (“Xineng”)	The PRC	August 16, 2010	100	%	Operation and development of hydroelectric assets
Luquan Xiaopengzu Power Generation Co., Ltd. (“Xiaopengzu”)	The PRC	September 8, 2010	100	%	Operation and development of hydroelectric assets
Shaowu City Jinling Power Generation Co., Ltd. (“Jinling”)	The PRC	December 30, 2010	100	%	Operation and development of hydroelectric assets
Shaowu City Jinlong Hydroelectric Co., Ltd. (“Jinlong”)	The PRC	December 30, 2010	55	%	Operation and development of hydroelectric assets
Shaowu City Jintang Hydroelectric Co., Ltd. (“Jintang”)	The PRC	December 30, 2010	74	%	Operation and development of hydroelectric assets
Shaowu City Jinwei Hydroelectric Co., Ltd. (“Jinwei”)	The PRC	December 30, 2010	74	%	Operation and development of hydroelectric assets
Jinping Kanghong Hydroelectric Development Co., Ltd. (“Dazhaihe”)	The PRC	April 10, 2011	100	%	Operation and development of hydroelectric assets

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SEGMENT AND GEOGRAPHIC INFORMATION

12 Months Ended

Dec. 31, 2013

SEGMENT AND GEOGRAPHIC INFORMATION

SEGMENT AND GEOGRAPHIC INFORMATION

25. SEGMENT AND GEOGRAPHIC INFORMATION

The Group follows ASC 280 for disclosure of segment information. The Group’s chief operating decision maker, who has been identified as the CEO, relies upon financial information by provinces with operations in the PRC when making decisions about allocating resources and assessing the performance of the Group. For the years ended December 31, 2011, 2012 and 2013, the Group operated and managed its business as four operating and reportable segments, namely the Yunnan Province segment, the Sichuan Province segment, the Zhejiang Province segment and the Fujian Province segment. As the Group’s long-lived assets and revenues are substantially all located in and derived from the PRC, no geographical segments are presented.

The Group’s segment information as of and for the year ended December 31, 2011 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,806		555		25,382		14,854		—		—		54,597
Cost of revenues	(8,349	)	(568	)	(15,034	)	(10,874	)	—		3,511		(31,314	)
General and administrative expenses (including share-based compensation expense of US$10,479)	(1,519	)	(86	)	(1,148	)	(2,276	)	(23,867	)	—		(28,896	)
Impairment loss on goodwill	(5,260	)	—		—		(6,128	)	—		—		(11,388	)
Impairment loss on long-lived assets	—		—		—		—		(11,601	)	11		(11,590	)
Interest income	180		10		128		1,709		66		(1,992	)	101
Interest expense	(8,468	)	—		(8,565	)	(9,669	)	(73	)	2,018		(24,757	)
Changes in fair value of warrant liabilities	—		—		—		—		951		—		951
Exchange loss	(28	)	—		—		(244	)	(579	)	—		(851	)
Other (loss) income, net	(285	)	—		(36	)	(158	)	4,033		(3,888	)	(334	)
Income tax (expense) benefit	(142	)	5		(843	)	115		(662	)	—		(1,527	)
Net loss from continuing operations	(10,065	)	(84	)	(116	)	(12,671	)	(31,732	)	(340	)	(55,008	)
Loss from discontinued operations (net of income tax expense of US$101)	—		—		—		(631	)	—		349		(282	)
Net loss for the year from discontinued operations	—		—		—		(631	)	—		349		(282	)
Net loss	(10,065	)	(84	)	(116	)	(13,302	)	(31,732	)	9		(55,290	)
Net loss attributable to noncontrolling interests	—		—		—		2,546		7,355		—		9,901
Net loss attributable to China Hydroelectric Corporation shareholders	(10,065	)	(84	)	(116	)	(10,756	)	(24,377	)	9		(45,389	)
Total assets	200,681		15,896		318,616		374,296		421,650		(516,224	)	814,915
Total liabilities	(133,670	)	(753	)	(138,688	)	(185,330	)	(20,498	)	58,902		(420,037	)
Capital expenditures	1,763		1,128		3,031		645		970		(5	)	7,532
Depreciation and amortization expenses	5,181		344		9,837		6,569		115		—		22,046

The Group’s segment information as of and for the year ended December 31, 2012 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	13,460		598		41,616		29,714		—		—		85,388
Cost of revenues	(8,540	)	(689	)	(16,978	)	(13,133	)	—		3,545		(35,795	)
General and administrative expenses (including share-based compensation expense of US$166)	(2,108	)	(269	)	(2,569	)	(3,413	)	(11,989	)	—		(20,348	)
Interest income	236		121		838		1,713		3		(2,827	)	84
Interest expense	(9,039	)	(260	)	(10,550	)	(10,787	)	(247	)	2,813		(28,070	)
Changes in fair value of warrant liabilities	—		—		—		—		(399	)	—		(399	)
Exchange (loss) gain	—		—		—		(1	)	29		—		28
Other income (loss), net	136		22		(81	)	420		3,736		(3,726	)	507
Income tax benefit (expense)	72		(5	)	(3,831	)	(2,480	)	(207	)			(6,451	)
Net (loss) income from continuing operations	(5,783	)	(482	)	8,445		2,033		(9,074	)	(195	)	(5,056	)
Income from discontinued operations (net of income tax expense of US$399)	—		—		—		959		—		181		1,140
Gain on disposal of discontinued operations (net of income tax expense of $959)	—		—		—		—		2,767		—		2,767
Net income for the year from discontinued operations	—		—		—		959		2,767		181		3,907
Net (loss) income	(5,783	)	(482	)	8,445		2,992		(6,307	)	(14	)	(1,149	)
Net income attributable to noncontrolling interests	—		—		—		(94	)	—		—		(94	)
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(5,783	)	(482	)	8,445		2,898		(6,307	)	(14	)	(1,243	)
Total assets	192,843		22,790		344,923		289,702		426,518		(522,460	)	754,316
Total liabilities	(131,872	)	(8,092	)	(145,312	)	(129,627	)	(27,799	)	80,901		(361,801	)
Capital expenditures	877		1,384		3,973		1,305		15		(58	)	7,496
Depreciation and amortization expenses	5,546		477		10,136		6,767		142		—		23,068

The Group’s segment information as of and for the year ended December 31, 2013 is as follows:

	Yunnan Province		Sichuan Province		Zhejiang Province		Fujian Province		Unallocated		Eliminations		Consolidated
	US$		US$		US$		US$		US$		US$		US$
Revenues	14,608		373		36,000		23,536		—		—		74,517
Cost of revenues	(9,069	)	(634	)	(16,610	)	(12,393	)	(8	)	3,357		(35,357	)
General and administrative expenses (including share-based compensation expense of US$211)	(1,534	)	(193	)	(1,909	)	(2,423	)	(7,154	)	(45	)	(13,258	)
Impairment loss on long-lived assets	—		(3,549	)	—		—		—		—		(3,549	)
Interest income	340		365		1,801		702		2		(3,112	)	98
Interest expense	(7,726	)	(557	)	(10,128	)	(7,160	)	(109	)	3,112		(22,568	)
Changes in fair value of warrant liabilities	—		—		—		—		839		—		839
Exchange loss	—		—		—		—		(41	)	—		(41	)
Other income (loss), net	37		—		(18	)	91		3,477		(3,312	)	275
Income tax benefit (expense)	43		15		(2,245	)	(843	)	(444	)	—		(3,474	)
Net (loss) income from continuing operations	(3,301	)	(4,180	)	6,891		1,510		(3,438	)	—		(2,518	)
Net (loss) income from discontinuing operations	—		—		—		—		—		—		—
Net (loss) income	(3,301	)	(4,180	)	6,891		1,510		(3,438	)	—		(2,518	)
Net loss attributable to noncontrolling interests	—		—		—		297		—		—		297
Net (loss) income attributable to China Hydroelectric Corporation shareholders	(3,301	)	(4,180	)	6,891		1,807		(3,438	)	—		(2,221	)
Total assets	197,995		21,135		346,886		288,735		437,477		(554,986	)	737,242
Total liabilities	(117,524	)	(7,144	)	(128,690	)	(123,843	)	(28,315	)	70,903		(334,613	)
Capital expenditures	124		29		233		1,228		13		—		1,627
Depreciation and amortization expenses	5,633		482		10,437		6,839		133		—		23,524

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INTANGIBLE ASSETS (Details 2) (Intangible assets, excluding land use rights, USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Intangible assets, excluding land use rights
Estimated annual amortization expenses
2014	$ 185
2015	185
2016	185
2017	185
2018	$ 177

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CONDENSED FINANCIAL INFORMATION OF THE COMPANY (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statements of operations
Revenues	$ 74,517	$ 85,388	$ 54,597
Cost of revenues	35,357	35,795	31,314
Gross profit	39,160	49,593	23,283
Operating expenses:
General and administrative expenses (including share-based compensation expense)	(13,258)	(20,348)	(28,896)
Total operating expenses	(16,807)	(20,348)	(51,874)
Operating (loss) income	22,353	29,245	(28,591)
Interest income	98	84	101
Interest expense	(22,568)	(28,070)	(24,757)
Changes in fair value of warrant liabilities	839	(399)	951
Exchange (loss) gain	(41)	28	(851)
Gain from disposal of subsidiaries		2,767
Other income, net	275	507	(334)
(Loss) income before income tax expense	956	1,395	(53,481)
Income tax expense	(3,474)	(6,451)	(1,527)
Net loss attributable to China Hydroelectric Corporation shareholders	(2,221)	(1,243)	(45,389)
Other comprehensive income (loss), net of income tax
Foreign currency translation adjustments (net of income tax expense of nil in 2011, 2012 and 2013)	12,395	(1,413)	20,394
Defined benefit pension plans (net of income tax expense of nil in 2011, 2012 and 2013)		33	(33)
Other comprehensive income (loss)	12,395	(1,380)	20,361
Comprehensive (loss) income	9,877	(2,529)	(34,929)
Company
Statements of operations
Cost of revenues	(7)
Gross profit	(7)
Operating expenses:
General and administrative expenses (including share-based compensation expense)	(3,929)	(7,324)	(18,247)
Total operating expenses	(3,936)	(7,324)	(18,247)
Operating (loss) income	(3,936)	(7,324)	(18,247)
Equity in (losses) profits of subsidiaries	1,022	3,662	(27,395)
Interest income		3	66
Interest expense	(4)	(142)	(23)
Changes in fair value of warrant liabilities	839	(399)	951
Exchange (loss) gain	6	30	(580)
Gain from disposal of subsidiaries		3,726
Other income, net	152	293	375
(Loss) income before income tax expense	(1,921)	(151)	(44,853)
Income tax expense	(300)	(1,092)	(536)
Net loss attributable to China Hydroelectric Corporation shareholders	(2,221)	(1,243)	(45,389)
Other comprehensive income (loss), net of income tax
Foreign currency translation adjustments (net of income tax expense of nil in 2011, 2012 and 2013)	12,462	(1,404)	20,079
Defined benefit pension plans (net of income tax expense of nil in 2011, 2012 and 2013)		33	(33)
Other comprehensive income (loss)	12,462	(1,371)	20,046
Comprehensive (loss) income	$ 10,241	$ (2,614)	$ (25,343)

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ORGANIZATION AND PRINCIPAL ACTIVITIES (Tables)

12 Months Ended

Dec. 31, 2013

ORGANIZATION AND PRINCIPAL ACTIVITIES

Schedule of subsidiaries

As of December 31, 2013, the Company’s subsidiaries included the following entities:

Subsidiaries	Place of Incorporation	Date of Establishment/ Acquisition	Percentage of Ownership		Principal Activities
Beijing A.B.C. Investment Consulting Co., Ltd. (“ABC”)	The PRC	April 19, 2007	100	%	Provision of general and administrative services to group companies
Yunnan Huabang Electric Power Development Co., Ltd. (“Binglangjiang”)	The PRC	April 25, 2007	100	%	Operation and development of hydroelectric assets
Sichuan Huabang Hydroelectric Development Co., Ltd. (“Liyuan”)	The PRC	May 21, 2007	100	%	Operation and development of hydroelectric assets
Zhejiang Province Jingning Yingchuan Hydroelectric Development Co., Ltd. (“Yingchuan”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
Qingtian Wuliting Hydroelectric Development Co., Ltd. (“Wuliting”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
Suichang County Jiulongshan Hydroelectric Development Co., Ltd. (“Jiulongshan”)	The PRC	January 31, 2008	100	%	Operation and development of hydroelectric assets
China Hydroelectric Corporation (Hong Kong) Limited (“CHC HK”)	Hong Kong (“HK”)	June 25, 2008	100	%	Investment holding company

	Place of Incorporation	Date of Establishment/ Acquisition	Percentage of Ownership		Principal Activities
Pingnan County Wangkeng Hydroelectric Co., Ltd. (“Wangkeng”)	The PRC	October 21, 2008	100	%	Operation and development of hydroelectric assets
Sanming Zhongyin Banzhu Hydroelectric Co., Ltd. (“Banzhu”)	The PRC	October 22, 2008	100	%	Operation and development of hydroelectric assets
Sun Power Asia Limited (“Sunpower”)	HK	November 14,2008	100	%	Investment holding company
Yunhe County Shapulong Hydropower Generation Co., Ltd. (“Shapulong”)	The PRC	August 3, 2009	100	%	Operation and development of hydroelectric assets
Zhejiang Longquan Ruiyang Cascaded II Hydropower Plant Co., Ltd. (“Ruiyang”)	The PRC	August 20, 2009	100	%	Operation and development of hydroelectric assets
Suichang County Zhougongyuan Hydroelectric Development Co., Ltd. (“Zhougongyuan”).	The PRC	December 3, 2009	100	%	Operation and development of hydroelectric assets
Fujian Huabang Hydroelectric Investment Co., Ltd. (“Fujian Huabang”).	The PRC	January 14, 2010	100	%	Investment holding company
Henan Wuyue Storage Power Generation Co., Ltd. (“Wuyue”)	The PRC	March 23, 2010	79	%	Development of hydroelectric assets
Yingjiang County Qinrui Husahe Power Co., Ltd. (“Husahe”)	The PRC	April 19, 2010	100	%	Operation and development of hydroelectric assets
Fugong County Hengda Electric Power Development Co., Ltd. (“Hengda”)	The PRC	June 22, 2010	100	%	Operation and development of hydroelectric assets
Fugong County Xineng Electric Power Development Co., Ltd. (“Xineng”)	The PRC	August 16, 2010	100	%	Operation and development of hydroelectric assets
Luquan Xiaopengzu Power Generation Co., Ltd. (“Xiaopengzu”)	The PRC	September 8, 2010	100	%	Operation and development of hydroelectric assets
Shaowu City Jinling Power Generation Co., Ltd. (“Jinling”)	The PRC	December 30, 2010	100	%	Operation and development of hydroelectric assets
Shaowu City Jinlong Hydroelectric Co., Ltd. (“Jinlong”)	The PRC	December 30, 2010	55	%	Operation and development of hydroelectric assets
Shaowu City Jintang Hydroelectric Co., Ltd. (“Jintang”)	The PRC	December 30, 2010	74	%	Operation and development of hydroelectric assets
Shaowu City Jinwei Hydroelectric Co., Ltd. (“Jinwei”)	The PRC	December 30, 2010	74	%	Operation and development of hydroelectric assets
Jinping Kanghong Hydroelectric Development Co., Ltd. (“Dazhaihe”)	The PRC	April 10, 2011	100	%	Operation and development of hydroelectric assets

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BORROWINGS (Tables)

12 Months Ended

Dec. 31, 2013

BORROWINGS

Schedule of total borrowings

	December 31,
	2012	2013
	US$	US$
Short-term:
Secured	21,676	11,973
Long-term:
Current portion, secured	35,537	38,337
Non-current, secured	212,970	211,723
Total borrowings	270,183	262,033

Schedule of corporate guarantee by third party

	December 31,
	2012	2013
	US$	US$
Guaranteed by:
Guangsha Construction Group Co., Ltd.	10,119	6,069
Fujian Taiyu Investment (Group) Co., Ltd.	7,159	—
	17,278	6,069

Schedule of corporate guarantee by related parties

	December 31,
	2012	2013
	US$	US$
Guaranteed by:
Shaowu City Jinling Power Generation Co., Ltd. and Nanping City Xingshui Co., Ltd.	4,455	3,936
Fujian Taiyu Investment (Group) Co., Ltd., Shaowu City Jinling Power Generation Co., Ltd. and Xiamen Youxin Hydropower Development Co., Ltd.	6,523	—
Sanming Youxin Electricity Co., Ltd., Fujian Huabang Hydroelectric Investment Co., Ltd.	—	35,510
	10,978	39,446

Schedule of maturities of long-term loans

Maturities of long-term loans for the five years succeeding December 31, 2013 are as follows:

	US$
2014	38,337
2015	33,835
2016	34,071
2017	33,026
2018	27,532
Thereafter	83,259
	250,060

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 6) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Goodwill and intangible assets
Goodwill impairment loss	$ 0	$ 0	$ 11,388
Development right | Binglangjiang
Goodwill and intangible assets
Estimated useful lives for the intangible assets	30 years
Dam use right | Jinling
Goodwill and intangible assets
Estimated useful lives for the intangible assets	40 years
Software
Goodwill and intangible assets
Estimated useful lives for the intangible assets	5 years
Land use rights | PRC
Goodwill and intangible assets
Agreement term of land use rights	50 years
Land use rights | PRC | Minimum
Goodwill and intangible assets
Estimated useful lives for the intangible assets	41 years
Land use rights | PRC | Maximum
Goodwill and intangible assets
Estimated useful lives for the intangible assets	50 years

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 14,165	$ 7,967
Restricted cash		5,171
Accounts receivable (net of allowance for doubtful accounts of nil as of December 31, 2012 and 2013)	3,741	5,772
Notes receivable	492	1,877
Deferred tax assets	1,994	1,659
Amounts due from related parties (net of allowance for doubtful accounts of US$1,338 and US$1,379 as of December 31, 2012 and 2013)		86
Prepayments and other current assets (net of provision for impairment allowance of US$1,560 and US$1,608 as of December 31, 2012 and 2013)	3,226	14,150
Total current assets	23,618	36,682
Non-current assets:
Property, plant and equipment, net	540,242	548,511
Land use rights, net	48,962	48,640
Intangible assets, net	4,714	4,660
Goodwill	115,960	112,481
Deferred tax assets	1,526	1,329
Other non-current assets	2,220	2,013
Total non-current assets	713,624	717,634
TOTAL ASSETS	737,242	754,316
Current liabilities:
Accounts payable	1,992	3,124
Short-term loans	11,973	21,676
Current portion of long-term loans	38,337	35,537
Amounts due to related parties	9,491	12,705
Deferred tax liabilities	300
Accrued expenses and other current liabilities	28,072	43,825
Warrant liabilities		839
Total current liabilities	90,165	117,706
Non-current liabilities:
Long-term loans	211,723	212,970
Deferred tax liabilities	24,720	24,345
Other non-current liabilities	8,005	6,780
Total non-current liabilities	244,448	244,095
Total liabilities	334,613	361,801
Commitments and contingencies
China Hydroelectric Corporation shareholders' equity:
Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2012 and 2013; 161,989,097 and 162,099,665 shares issued and outstanding as of December 31, 2012 and 2013)	162	162
Additional paid-in capital	509,902	509,665
Accumulated other comprehensive income	54,059	41,597
Accumulated deficit	(161,693)	(159,472)
Total China Hydroelectric Corporation shareholders' equity	402,430	391,952
Noncontrolling interests	199	563
Total shareholders' equity	402,629	392,515
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 737,242	$ 754,316

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PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2013

PROPERTY, PLANT AND EQUIPMENT, NET

Schedule of property, plant and equipment and its related accumulated depreciation

	December 31,
	2012		2013
	US$		US$
Dams and reservoirs	339,123		348,905
Buildings	124,154		127,356
Machinery	153,837		158,527
Transportation equipment	1,865		1,925
Electronic equipment and others	4,244		1,797
	623,223		638,510
Less: Accumulated depreciation	(74,852	)	(98,513	)
	548,371		539,997
Construction in progress, net	140		245
Total	548,511		540,242

Schedule of construction in progress, net of impairment charge

	Jiulongshan	Liyuan		Binglangjiang		Banzhu		Wangkeng	Wuliting		Yingchuan	Xineng		Hengda		Ruiyang		Zhougongyuan		Dazhaihe		Total
	US$	US$		US$		US$		US$	US$		US$	US$		US$		US$		US$		US$		US$
Balance as of December 31, 2011	13	1,158		1		—		—	—		9	—		—		9		—		—		1,190
Addition to construction in progress	—	1,350		—		—		—	1,316		—	278		11		1,091		1,429		48		5,523
Transfer from property, plant and equipment	—	—		—		—		—	—		—	610		—		—		—		13		623
Transfer to property, plant and equipment	—	(2,416	)	(1	)	—		—	(1,316	)	—	(888	)	(11	)	(1,076	)	(1,429	)	(61	)	(7,198	)
Foreign currency translation adjustment	—	2		—		—		—	—		—	—		—		—		—		—		2
Balance as of December 31, 2012	13	94		—		—		—	—		9	—		—		24		—		—		140
Addition to construction in progress	—	29		—		411		83	—		—	—		—		—		—		—		523
Transfer to property, plant and equipment	—	—		—		(300	)	—	—		—	—		—		—		—		—		(300	)
Impairment of construction in progress	—	(134	)	—		—		—	—		—	—		—		—		—		—		(134	)
Foreign currency translation adjustment	—	11		—		2		1	—		—	—		—		2		—		—		16
Balance as of December 31, 2013	13	—		—		113		84	—		9	—		—		26		—		—		245

Schedule of depreciation expenses

	For the Years ended December 31,
	2011		2012		2013
	US$		US$		US$
Cost of revenues	(20,466	)	(21,402	)	(21,841	)
General and administrative expenses	(297	)	(345	)	(341	)
Total	(20,763	)	(21,747	)	(22,182	)

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SHARE CAPITAL (Details) (USD $)	12 Months Ended								0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Employees item	Dec. 31, 2013 Consultants item	Dec. 31, 2013 Former employees item	Dec. 31, 2013 Ordinary shares	Dec. 31, 2012 Ordinary shares	Dec. 31, 2011 Ordinary shares	Aug. 19, 2011 Ordinary shares Vicis	Oct. 27, 2011 Ordinary shares Shoen
SHARE CAPITAL
Preferred shares issued	0	0
Preferred shares outstanding	0	0
Share capital
Authorized ordinary share capital	400,000,000	400,000,000				400,000,000	400,000,000
Ordinary shares, par value (in dollars per share)	$ 0.001	$ 0.001				$ 0.001	$ 0.001
Ordinary shares issued	162,099,665	161,989,097				162,099,665	161,989,097
Ordinary shares outstanding	162,099,665	161,989,097				162,099,665	161,989,097	161,989,097
Exercise price (in dollars per share)									$ 1.1544	$ 1.15
Exercise of warrants (in shares)									8,662,509	31,072
Exercise of share options (in shares)	110,568
Number of persons who exercised share options			1	1	3

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CONDENSED FINANCIAL INFORMATION OF THE COMPANY (Details 2) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Balance sheets (Parenthetical)
Ordinary shares, par value (in dollars per share)	$ 0.001	$ 0.001
Ordinary shares, shares authorized	400,000,000	400,000,000
Ordinary shares, shares issued	162,099,665	161,989,097
Ordinary shares, shares outstanding	162,099,665	161,989,097
Company
Balance sheets (Parenthetical)
Ordinary shares, par value (in dollars per share)	$ 0.001	$ 0.001
Ordinary shares, shares authorized	400,000,000	400,000,000
Ordinary shares, shares issued	162,099,665	161,989,097
Ordinary shares, shares outstanding	162,099,665	161,989,097

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities:
Net loss	$ (2,518)	$ (1,149)	$ (55,290)
Adjustments to reconcile net loss to net cash generated from operating activities:
Depreciation of property, plant and equipment	22,182	22,407	21,984
Amortization of land use rights	1,164	1,174	1,144
Amortization of intangible assets	178	199	213
Impairment loss on goodwill	0	0	11,388
Impairment loss on long-lived assets	3,549	0	11,590
Deferred income taxes	(482)	(163)	(485)
Changes in fair value of warrant liabilities	(839)	399	(951)
Gain from disposal of subsidiaries		(2,767)
Amortization of debt issuance costs	175	191	19
Amortization of government grant	(3)	(3)	(3)
Share-based compensation expense	211	166	10,479
Loss from disposal of property, plant and equipment	45	508	266
Exchange loss (gain)	41	(28)	851
Gain from extinguishment of amounts due to original shareholders of acquired subsidiaries		(462)
Provision for impairment allowance on prepayments and other current assets		843	696
Provision for allowance for doubtful accounts on amounts due from a related party			1,302
Net pension cost recognized		33	173
Changes in operating assets and liabilities:
Accounts receivable	2,175	(1,797)	242
Notes receivable	789	(1,874)
Prepayments and other current assets	(426)	(463)	310
Other non-current assets	(538)	779	(344)
Accounts payable	(1,084)	(345)	(42)
Amounts due to related parties	(1)	(2)
Accrued expenses and other current liabilities	(6,437)	(1,524)	(1,903)
Other non-current liabilities	1,229	6,578	5
Net cash generated from operating activities	19,410	22,700	1,644
Cash flows from investing activities:
Acquisition of subsidiaries, net of cash acquired		(8,923)	(19,330)
Proceeds from disposal of subsidiaries	10,957	20,212
Cash deposit for potential acquisitions			(696)
Acquisition of intangible assets	(90)
Acquisition of property, plant and equipment	(1,087)	(7,091)	(1,490)
Proceeds from disposal of property, plant and equipment	26	35	112
Payment to contractors for construction projects	(450)	(6,931)	(3,330)
Loans to a related party		(86)
Proceeds from insurance claims	549
Net cash (used in) generated from investing activities	9,905	(2,784)	(24,734)
Cash flows from financing activities:
Proceeds from exercise of share options	26
Purchase of subsidiary shares from noncontrolling interests			(1,204)
Proceeds from loans from related parties	2,034	572	1,263
Proceeds from short-term loans	14,364	28,070	23,066
Proceeds from long-term loans	32,335	72,947	45,823
Proceeds from exercised warrants			10,036
Proceeds from loans from third parties	3,425	20,161	17,456
Payment of debt issuance costs and service fee	(194)	(704)
Repayment of loans from related parties	(5,585)	(69)
Repayment of short-term loans	(26,225)	(28,051)	(20,889)
Repayment of long-term loans	(36,544)	(69,986)	(66,955)
Repayment of loans from third parties	(13,313)	(38,136)	(10,637)
Restricted cash	5,249	(5,166)
Net cash used in financing activities	(24,428)	(20,362)	(2,041)
Net (decrease) increase in cash and cash equivalents	4,887	(446)	(25,131)
Effect of changes in exchange rate on cash and cash equivalents	1,311	11	76
Cash and cash equivalents at the beginning of the year	7,967	8,402	33,457
Cash and cash equivalents at the end of the year	14,165	7,967	8,402
Supplementary disclosure of cash flow information
Interest paid	16,588	19,983	22,928
Income taxes paid	5,061	2,855	2,333
Non-cash activities:
Non-cash portion of acquisition of subsidiaries			1,825
Non-cash portion of acquisition of property, plant and equipment	3,286	3,330	9,595
Non-cash portion of disposal of property, plant and equipment			20
Discharge of liability from disposal of subsidiaries		$ 158

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WARRANTS (Details) (USD $)	12 Months Ended				0 Months Ended		0 Months Ended		0 Months Ended		0 Months Ended		0 Months Ended		0 Months Ended		12 Months Ended				0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jan. 25, 2010 Ordinary shares	Jan. 25, 2010 Unit	Jan. 25, 2010 Unit ADS	Aug. 19, 2011 Vicis Ordinary shares	Aug. 11, 2011 Holders' Warrants Vicis Notes	Jan. 25, 2010 IPO Warrants item	Jan. 25, 2010 IPO Warrants ADS Minimum	Jan. 25, 2010 IPO Warrants Unit	Jan. 25, 2010 IPO Warrants Unit ADS	Jan. 25, 2010 Underwriter's Warrants	Jan. 25, 2010 Underwriter's Warrants Ordinary shares	Jan. 25, 2010 Underwriter's Warrants Unit	Jul. 26, 2010 Shoen's Warrants CHL	Dec. 31, 2013 Vicis'/Shoen's Amended Warrants	Dec. 31, 2012 Vicis'/Shoen's Amended Warrants	Dec. 31, 2011 Vicis'/Shoen's Amended Warrants	Oct. 27, 2011 Vicis'/Shoen's Amended Warrants	Aug. 18, 2011 Vicis' Amended Warrants Vicis	Aug. 19, 2011 Vicis' Amended Warrants Vicis item	Oct. 27, 2011 Shoen's Amended Warrants item	Oct. 26, 2011 Shoen's Amended Warrants
WARRANTS
Issuance of units					6,000,000						6,000,000
Share price (in dollars per share)				$ 4.93						$ 23.00
Unit price (in dollars per share)					$ 16.00	$ 14.80			$ 1.20		$ 16.00	$ 14.80
Number of ordinary shares per unit								1
Number of warrants consisted in each unit											1
Number of ADS consisted in each unit						1					1
Number of ordinary shares that can be purchased by warrant holder									3					3
Exercise price of warrants (in dollars per share)							$ 1.1544		$ 15.00					$ 18.00	$ 19.20						$ 1.1544		$ 1.15
Redemption price of each warrant during the exercise period (in dollars per share)									$ 0.01
Minimum last independent bid price of the ordinary share for warrant redemption (in dollars per share)																					$ 8.50	$ 17.66	$ 17.66	$ 8.50
Considerations of ordinary shares and the Founders' Warrants issued to Founding Shareholders																0
Number of warrants issued (in shares)																66,964
Number of shares that can be purchase by warrant holder	19,440,000
Fair value of warrants																	$ 0	$ 839,000	$ 440,000	$ 1,391,000
Changes in fair value of warrant liabilities	839,000	(399,000)	951,000														839,000	(399,000)	951,000
Number of ordinary shares represented by each ADS	3	3	3			3						3
Threshold number trading days for which the share price should exceed the specified amount									20
Threshold period of specified consecutive trading days within which the share price should exceed the specified amount									30 days
Warrants issued as part of the payment for services rendered													100.00
Percentage of the units of securities sold in the IPO allowed to be purchased by the holder of the warrant															4.00%
Purchase price of units as a percentage of the IPO price															120.00%
Exercise price of warrants as a percentage of the IPO warrant exercise price														120.00%
Term of warrants													5 years
Warrants exercised (in shares)																					8,662,509		31,072
Exercise of warrants (in shares)							8,662,509														8,662,509		31,072
Warrants outstanding (in shares)								18,666,666													10,004,157		35,892
Exercise price of warrants before amendment (in dollars per share)								$ 5.00
Number of terms amended																						4	4
Warrants classified from equity to liability (in shares)																						10,004,157	35,892
Debit to additional paid-in capital as a result of reclassification of warrants from equity to liability																			$ 1,391,000

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES.

Schedule of future minimum lease payments for non-cancellable operating leases

Future minimum lease payments for non-cancellable operating leases as of December 31, 2013 are as follows:

	US$
2014	20
2015	22
Thereafter	—
Total	42

Schedule of future minimum compensation costs to the land owners

Future minimum compensation costs to the land owners for the five years succeeding December 31, 2013 are as follows:

	US$
2014	85
2015	194
2016	194
2017	193
2018	202
Thereafter	5,286
Total	6,154

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EMPLOYEE BENEFIT PLANS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended			12 Months Ended								1 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012 item	Dec. 31, 2013 Multi-employer defined contribution plan	Dec. 31, 2013 Multi-employer defined contribution plan PRC	Dec. 31, 2012 Multi-employer defined contribution plan PRC	Dec. 31, 2011 Multi-employer defined contribution plan PRC	Dec. 31, 2013 Multi-employer defined contribution plan PRC Minimum	Dec. 31, 2013 Multi-employer defined contribution plan PRC Maximum	Dec. 31, 2013 401(k) retirement plan	Dec. 31, 2012 401(k) retirement plan	Dec. 31, 2011 401(k) retirement plan	Nov. 30, 2008 401(k) retirement plan Maximum
Defined contribution plan
Percentage of employees' salaries on which the entity has to accrue benefits as per labor regulations							33.50%	45.90%
Employer matching contribution (as a percent)												3.00%
Total contribution to the plan				$ 1,024	$ 1,324	$ 1,045			$ 2	$ 74	$ 155
Additional legal obligations or liabilities			0						0
Defined benefit plan
Number of former executive officers for whom the defined benefit plan is established	2
Number of former executive officers whose salaries and length of service periods are considered for guaranteed retirement benefit	2
Number of former executive officers terminated their employment relationship with the Company and opted to have a lump sum cash distribution		2
Accumulated defined benefit		244
Assets and obligation		$ 0

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STATUTORY RESERVES

12 Months Ended

Dec. 31, 2013

STATUTORY RESERVES

STATUTORY RESERVES

28. STATUTORY RESERVES

The Group’s ability to pay dividends is primarily dependent on the Group receiving distributions from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Group’s PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Group’s subsidiaries.

In accordance with the Law of the People’s Republic of China on Foreign Invested Enterprises (“FIE”) and its articles of association, a FIE established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A wholly-owned foreign invested enterprise (“WOFE”) is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide all the above allocation of annual after-tax profit at the discretion of its board of directors, except for the general reserve fund which has the same requirement as a WOFE. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. All of the subsidiaries of the Company except Wangkeng, Shapulong, Wuyue, Ruiyang, Husahe, Jinlong, Jintang, Jinwei and Dazhaihe were acquired or established as WOFEs, and therefore are subject to the above mandated restrictions on distributable profits. Wangkeng was acquired as a non-wholly-owned foreign invested equity; Shapulong and Wuyue are equity joint ventures established pursuant to the Law of China on Sino-Foreign Equity Joint Ventures, and Ruiyang, Husahe, Jinlong, Jintang, Jinwei and Dazhaihe are domestic companies established pursuant to the Company Law of China, and therefore are only subject to the 10% general reserve fund requirement.

As a result of the PRC laws, rules and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as general reserve fund, the Group’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital and statutory reserves as determined pursuant to PRC generally accepted accounting principles, totaling US$475,004 and US$503,912 as of December 31, 2012 and 2013, respectively. Profit appropriations of US$333, US$1,005 and US$833 were made for the years ended December 31, 2011, 2012 and 2013, respectively.

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CONDENSED FINANCIAL INFORMATION OF THE COMPANY (Tables)

12 Months Ended

Dec. 31, 2013

CONDENSED FINANCIAL INFORMATION OF THE COMPANY

Schedule of condensed balance sheets

	December 31,
	2012		2013
	US$		US$
ASSETS
Current assets:
Cash and cash equivalents	164		228
Amounts due from subsidiaries	10,000		4,130
Prepayments and other current assets	11,616		65
Total current assets	21,780		4,423
Non-current assets:
Property, plant and equipment, net	5		1
Investment in subsidiaries	399,364		427,679
Other non-current assets	—		19
Total non-current assets	399,369		427,699
TOTAL ASSETS	421,149		432,122
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Amounts due to subsidiaries	16,464		19,374
Accrued expense and other current liabilities	4,424		2,549
Amounts due to related parties	2		1
Deferred tax liabilities	—		300
Warrant liabilities	839		—
Total current liabilities	21,729		22,224
Total liabilities	21,729		22,224
Shareholders’ equity:
Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2012 and 2013; 161,989,097 and 162,099,665 shares issued and outstanding as of December 31, 2012 and 2013)	162		162
Additional paid-in capital	517,133		517,370
Accumulated other comprehensive income	41,597		54,059
Accumulated deficit	(159,472	)	(161,693	)
Total shareholders’ equity	399,420		409,898
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	421,149		432,122

Schedule of condensed statements of comprehensive income

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Revenues	—		—		—
Cost of revenues	—		—		(7	)
Gross profit	—		—		(7	)
Operating expenses:
General and administrative expenses	(18,247	)	(7,324	)	(3,929	)
Total operating expenses	(18,247	)	(7,324	)	(3,936	)
Operating loss	(18,247	)	(7,324	)	(3,936	)
Equity in (losses) profits of subsidiaries	(27,395	)	3,662		1,022
Interest income	66		3		—
Interest expense	(23	)	(142	)	(4	)
Changes in fair value of warrant liabilities	951		(399	)	839
Exchange (loss) gain	(580	)	30		6
Gain from disposal of subsidiaries	—		3,726		—
Other income, net	375		293		152
Loss before income tax expense	(44,853	)	(151	)	(1,921	)
Income tax expense	(536	)	(1,092	)	(300	)
Net loss	(45,389	)	(1,243	)	(2,221	)
Other comprehensive income (loss), net of income tax expense
Foreign currency translation adjustments	20,079		(1,404	)	12,462
Defined benefit pension plans	(33	)	33		—
Other comprehensive income (loss)	20,046		(1,371	)	12,462
Comprehensive (loss) income	(25,343	)	(2,614	)	10,241

Schedule of condensed statements of cash flows

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cash flows used in operating activities	(8,740	)	(3,651	)	(2,433	)
Cash flows (used in) provided by investing activities	(6,500	)	931		2,471
Cash flows provided by financing activities	10,036		—		26
Net (decrease) increasein cash and cash equivalents	(5,204	)	(2,720	)	64
Cash and cash equivalents at the beginning oftheyear	8,088		2,884		164
Cash and cash equivalents at the end oftheyear	2,884		164		228

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BORROWINGS

12 Months Ended

Dec. 31, 2013

BORROWINGS

BORROWINGS

15. BORROWINGS

Total borrowings as of December 31, 2012 and 2013 consist of:

	December 31,
	2012	2013
	US$	US$
Short-term:
Secured	21,676	11,973
Long-term:
Current portion, secured	35,537	38,337
Non-current, secured	212,970	211,723
Total borrowings	270,183	262,033

The short-term loans outstanding as of December 31, 2012 represent RMB denominated loans of US$5,823, US$3,818, US$795, US$4,773, US$2,243, US$1,101 and US$623 for Jinling, Wangkeng, Yingchuan, Ruiyang, Zhougongyuan, Binglangjiang and Hengda, respectively, and US$ denominated loans of US$2,500 obtained from financial institutions. These loans are due for settlement in 2013. The short-term loans for Jinling of US$2,386 were obtained from Agricultural Bank of China with annual interest rates between 7.20% and 7.80% and were guaranteed by Wangkeng, and US$3,437 were obtained from Agricultural Bank of China with annual interest rates between 7.80% and 8.528% and were secured by the pledge of the property, plant and equipment of Jinling. The short-term loan for Wangkeng of US$3,818 was obtained from Industrial Bank of Fujian with an annual interest rate of 8.7% and was guaranteed by Pingnan County Yuanping Hydroelectric Co., Ltd. The short-term loan for Yingchuan of US$795 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 9.60% and was guaranteed by Wuliting. The short-term loan for Ruiyang of US$1,591 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 15%, and was secured by the pledge of the property, plant and equipment of Zhougongyuan and guaranteed by Yingchuan; and US$3,182 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 18%, and was secured by the pledge of the property, plant and equipment of Jiulongshan and guaranteed by Wuliting. The short-term loan for Zhougongyuan of US$2,243 was obtained from Shanghai Pudong Development Bank with an annual interest rate of 5.40% and was secured by the pledge of a certificate of deposit of Zhougongyuan. The short-term loan for Binglangjiang of US$1,101 was obtained from Construction Bank of China with an annual interest rate of 7% and was secured by the pledge of proceeds from the future electricity sales of Binglangjiang. The short-term loan for Hengda of US$623 was obtained from Agricultural Bank of China with an annual interest rate of 6.29% and was secured by the pledge of notes receivable with a face amount of US$636. The short-term loan for CHC HK of US$2,500 was obtained from Bank of China with an annual interest rate of 4.64% and was secured by the pledge of a certificate of deposit of Fujian Huabang.

The short-term loans outstanding as of December 31, 2013 represent RMB denominated loans of US$3,280, US$3,773, US$3,280, and US$1,640 for Jinling, Wangkeng, Wuliting and Binglangjiang, respectively, obtained from financial institutions. These loans are due for settlement in 2014. The short-term loans for Jinling of US$3,280 were obtained from Agricultural Bank of China with an annual interest rate of 8.4% and were secured by the pledge of the property, plant and equipment of Jinling. The short-term loan for Wangkeng of US$3,773 was obtained from Industrial Bank of Fujian with an annual interest rate of 8.4% and was guaranteed by Fujian Huabang. The short-term loan for Wuliting of US$3,280 was obtained from Zhejiang Chouzhou Commercial Bank with an annual interest rate of 10.80%, and was guaranteed by Yingchuan and secured by the pledge of the property, plant and equipment, and management rights of Wuliting. The short-term loan for Binglangjiang of US$1,640 was obtained from Agricultural Bank of China with an annual interest rate of 7.80% and was secured by the pledge of the property, plant and equipment of Binglangjiang. As of December 31, 2013, Wangkeng was in violation of certain debt covenant provisions relating to the use of funds. Pursuant to the loan agreement, the financial institution has the right to charge penalties at the stated interest rate of the loan. As the loan was obtained on December 25, 2013, the amount of accrued penalties was insignificant for the year ended December 31, 2013.

The long-term loans of US$248,507 outstanding as of December 31, 2012 relate to RMB denominated loans obtained by Binglangjiang, Hengda, Xineng, Xiaopengzu, Yingchuan, Wuliting, Jiulongshan, Ruiyang, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Liyuan, Jinling and its subsidiaries from financial institutions. The loan balances of Yingchuan that were not in compliance with certain debt covenants as of December 31, 2011 were fully settled during the year ended December 31, 2012.

The long-term loans of US$250,060 outstanding as of December 31, 2013 relate to RMB denominated loans obtained by Binglangjiang, Hengda, Xineng, Xiaopengzu, Dazhaihe, Yingchuan, Wuliting, Jiulongshan, Ruiyang, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Liyuan, Jinlong, Jinwei and Jintang from financial institutions.

The interest rates on these long-term loans are variable based on the benchmark rate published by the People’s Bank of China each year. The weighted average interest rate on the long-term loans for the years ended December 31, 2012 and 2013 was 6.96% and 6.88%, respectively. The long-term loans are due from 2014 to 2027 and are secured by the following:

(a) Corporate guarantee by thirdparties and related parties

Long-term loans amounting to US$17,278 and US$6,069 as of December 31, 2012 and 2013, respectively, were guaranteed by the following third parties:

	December 31,
	2012	2013
	US$	US$
Guaranteed by:
Guangsha Construction Group Co., Ltd.	10,119	6,069
Fujian Taiyu Investment (Group) Co., Ltd.	7,159	—
	17,278	6,069

Long-term loans amounting to US$10,978 and US$39,446 as of December 31, 2012 and 2013, respectively, were guaranteed by the following related parties:

	December 31,
	2012	2013
	US$	US$
Guaranteed by:
Shaowu City Jinling Power Generation Co., Ltd. and Nanping City Xingshui Co., Ltd.	4,455	3,936
Fujian Taiyu Investment (Group) Co., Ltd., Shaowu City Jinling Power Generation Co., Ltd. and Xiamen Youxin Hydropower Development Co., Ltd.	6,523	—
Sanming Youxin Electricity Co., Ltd., Fujian Huabang Hydroelectric Investment Co., Ltd.	—	35,510
	10,978	39,446

(b) Pledge of property, plant and equipment

As of December 31, 2012, long-term loans of US$237,752 were secured by the pledge of the property, plant and equipment in the amount of US$564,563 of Binglangjiang, Liyuan, Hengda, Xineng, Xiaopengzu, Yingchuan, Wuliting, Ruiyang, Jiulongshan, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Jinlong, Jinwei and Jintang.

As of December 31, 2013, long-term loans of US$224,310 were secured by the pledge of the property, plant and equipment in the amount of US$567,035 of Binglangjiang, Liyuan, Hengda, Xineng, Xiaopengzu, Dazhaihe, Yingchuan, Wuliting, Ruiyang, Jiulongshan, Zhougongyuan, Shapulong, Wangkeng, Banzhu, Jinling, Jinlong, Jinwei and Jintang.

(c) Pledge of proceeds from future electricity sales

As of December 31, 2012, long-term loans of US$171,740 were secured by the proceeds from future electricity sales of Hengda, Xineng, Xiaopengzu, Wuliting, Zhougongyuan, Jiulongshan, Ruiyang, Yingchuan, Shapulong, Wangkeng, Jinling, Jinlong and Liyuan.

As of December 31, 2013, long-term loans of US$172,838 were secured by the proceeds from future electricity sales of Hengda, Xineng, Xiaopengzu, Dazhaihe, Binglangjiang, Wuliting, Zhougongyuan, Jiulongshan, Ruiyang, Yingchuan, Shapulong, Wangkeng, Jintang, Jinwei, Jinlong and Liyuan.

(d) Pledge of equity interest

As of December 31, 2012, long-term loans of US$20,683 and US$6,431 were secured by the pledge of the Company’s equity interest in Wuliting and Liyuan, respectively.  As of December 31, 2013, long-term loans of US$20,502, US$4,277 and US$3,936 were secured by the pledge of the Company’s equity interest in Wuliting, Liyuan and Dazhaihe, respectively.

Maturities of long-term loans for the five years succeeding December 31, 2013 are as follows:

	US$
2014	38,337
2015	33,835
2016	34,071
2017	33,026
2018	27,532
Thereafter	83,259
	250,060

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CONCENTRATION OF RISKS

12 Months Ended

Dec. 31, 2013

CONCENTRATION OF RISKS

CONCENTRATION OF RISKS

29. CONCENTRATION OF RISKS

Financial instruments that potentially subject the Group to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of December 31, 2012 and 2013, substantially all of the Group’s cash and cash equivalents were managed by financial institutions located in the United States and the PRC which management believes are of high credit quality.

Accounts receivable are typically unsecured and derived from revenue earned from customers in the PRC. As a percentage of total accounts receivable, the top five customers accounted for 86% and 91% as of December 31, 2012 and 2013, respectively.

Due to the Group’s dependence on a limited number of customers, any negative events or deterioration in financial strength with the Group’s customers or deterioration of relationship with the Group’s customers, may cause material loss to the Group and have a material adverse effect on the Group’s financial condition and results of operations. The major customers and the portion of revenue from these customers for the years ended December 31, 2011, 2012 and 2013 are listed below:

		For the Years Ended December 31,
Customers	Segment	2011		2012		2013
Yunnan Nujiang Electric Power Co., Ltd.	Yunnan Province	7	%	5	%	6	%
Yunnan Dehong Electric Power Co., Ltd.	Yunnan Province	11	%	6	%	8	%
Yunnan Honghe Electric Power Co., Ltd.	Yunnan Province	1	%	1	%	2	%
Yunnan Grid Company, Ltd.	Yunnan Province	4	%	3	%	3	%
Sichuan Cangxi Electric Power Co., Ltd.	Sichuan Province	1	%	1	%	1	%
Lishui Electric Power Bureau	Zhejiang Province	43	%	46	%	49	%
Fujian Electric Power Co., Ltd.	Fujian Province	16	%	20	%	19	%
Pingnan Power Supply Company	Fujian Province	8	%	5	%	—
Shaowu Electric Power Bureau	Fujian Province	7	%	9	%	9	%
Nanping Electric Power Bureau	Fujian Province	2	%	4	%	3	%
		100	%	100	%	100	%

Currency convertibility risk

Substantially all of the Group’s businesses are transacted in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China. However, the unification of the exchange rates does not imply the convertibility of RMB into US$ or other foreign currencies. Under Mainland China’s Foreign Exchange Currency Regulation and Administration, the Group is permitted to exchange RMB for foreign currencies through banks authorized to conduct foreign exchange business. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with invoices and signed contracts.

Foreign currency exchange rate risk

On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to US$. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximately 4.9%, 0.2% and 3.0% appreciation of the RMB against the US$ in 2011, 2012 and 2013, respectively. On June 19, 2010, the People’s Bank of China announced the end of the RMB’s de facto peg to US$, a policy which was instituted in late 2008 in the face of the global financial crisis, to further reform the RMB exchange rate regime and to enhance the RMB exchange rate flexibility. On March 15, 2014, the People’s Bank of China announced the widening of the daily trading band for RMB against US$. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant volatility of the RMB against the US$.

Any significant revaluation of RMB may materially and adversely affect the cash flows, revenues, earnings and financial position in US$.

Current vulnerability due to certain other concentrations

The Group’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for almost 30 years, no assurance can be given that the PRC Government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accumulated other Comprehensive income loss
Balance at the beginning of the period	$ 41,597	$ 42,968	$ 22,922
Current period other comprehensive income (loss)	12,462	987	20,046
Amounts reclassified from accumulated other comprehensive income		(2,358)
Net current-period other comprehensive income (loss)		(1,371)
Balance at the end of the period	54,059	41,597	42,968
Foreign currency items
Accumulated other Comprehensive income loss
Balance at the beginning of the period	41,597	43,001	22,922
Current period other comprehensive income (loss)	12,462	954	20,079
Amounts reclassified from accumulated other comprehensive income		(2,358)
Net current-period other comprehensive income (loss)		(1,404)
Balance at the end of the period	54,059	41,597	43,001
Defined benefit pension plan items
Accumulated other Comprehensive income loss
Balance at the beginning of the period		(33)
Current period other comprehensive income (loss)		33	(33)
Net current-period other comprehensive income (loss)		33
Balance at the end of the period			$ (33)

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WARRANTS

12 Months Ended

Dec. 31, 2013

WARRANTS.

WARRANTS

17. WARRANTS

On January 25, 2010, the Company completed an IPO, whereby the Company issued 6,000,000 units of securities at US$16.00 per unit. Each unit consists of one ADS and one warrant (“IPO Warrant”). Each ADS represents three ordinary shares and each IPO Warrant entitles the holder to purchase three ordinary shares for an exercise price of US$15.00. The Company determined that the relative fair value of the ADSs and the IPO Warrants was US$14.80 and US$1.20, respectively, and allocated the sales proceeds of US$16.00 per unit of securities to the ADS and the IPO Warrant based on their relative fair values. The exercise period of the IPO Warrants commences on the date of issuance and expires on the earlier of January 25, 2014 or the redemption of the warrants by the Company. The IPO Warrants can be redeemed at the option of the Company at any time during the exercise period at US$0.01 per warrant, provided that the sales price per ADS equals or exceeds US$23.00 for any 20 trading days within a 30-trading day period before the redemption. The IPO Warrants expired unexercised on January 25, 2014.

On January 25, 2010, the Company issued a warrant to Broadband Capital Management LLC (“Broadband Capital”), as part of the payment for services rendered by Broadband Capital in connection with the Company’s IPO, for US$100.00. The warrant allows Broadband Capital to purchase a number of units of securities equal to an aggregate of 4% of the units of securities sold in the IPO at an exercise price of 120% of the IPO price, or US$19.20 per unit (the “Underwriter’s Warrants”). The warrants underlying the units of securities issuable upon exercise of the Underwriter’s Warrant are equivalent to the IPO Warrants, except that the Underwriter’s Warrants are exercisable at 120% of the IPO warrant exercise price, or $18.00 for three ordinary shares. The Underwriter’s Warrants are exercisable on a cashless basis, are non-redeemable and have a five-year term.

Upon the closing of the Company’s IPO on January 25, 2010 and as of December 31, 2012 and 2013, in accordance with ASC sub-topic 815-40 (“ASC 815-40”), Derivatives and Hedging: Contracts in Entity’s Own Equity, the IPO Warrants and Underwriter’s Warrants were concluded to be indexed solely to the Company’s own stock since the warrants do not contain an exercise contingency based on an observable market or an observable index, and the settlement amount would equal to the difference between the fair value of a fixed number of the Company’s ordinary shares and a fixed exercise price. In addition, the Company evaluated ASC 815-40-25-7 to ASC 815-40-25-35 and concluded that the IPO Warrants and Underwriter’s Warrants could only be physical settled or net-share settled but not net-cash settled. Therefore, the IPO Warrants and Underwriter’s Warrants have been classified as equity since the Company’s IPO on January 25, 2010.

The IPO Warrants and Underwriter’s Warrants will continue to be reported as equity until such time as the warrants are exercised, expire, or become cash-settleable. In the event of a reclassification from equity to liability, the warrants will be measured at a new fair value as of the reclassification date with the change from the existing carrying value to the new fair value as an adjustment to shareholders’ equity.

On July 26, 2010, the directors of China Hydro LLC (“CHL”), a limited liability company formed under the laws of the State of Delaware which holds the equity interest in the Company for the founding shareholders, resolved to distribute its ordinary shares in the Company and its warrants to purchase ordinary shares of the Company (the “Founders’ Warrants”) to the founding shareholders in proportion of their shareholding percentage at nil consideration. In connection with the distribution, CHL distributed to Sam Shoen and Shoen’s Trusts (collectively, “Shoen”) 66,964 Founders’ Warrants (the “Shoen’s Warrants”). Except for the Shoen’s Warrants, all of the other Founders’ Warrants expired unexercised.

On August 18, 2011, the Company amended the exercise price of the 18,666,666 warrants, each to purchase one ordinary share, held by Vicis Capital Master Fund (“Vicis”) from US$5.00 per share to US$1.1544 per share. Immediately after the amendment, Vicis exercised 8,662,509 of the warrants to purchase 8,662,509 ordinary shares of the Company at the reduced exercise price of US$1.1544 per share. Vicis holds 10,004,157 warrants after the exercise. On August 19, 2011, the Company further amended four other terms of the remaining 10,004,157 warrants held by Vicis (the “Vicis’ Amended Warrants”) by (i) introducing full-ratchet anti-dilution protection where the exercise price is further adjusted to equal the dilutive price if the Company issues or sells any shares or equity-linked instrument at a price per share or new exercise price per share less than the reduced exercise price of US$1.1544; (ii) providing a cashless exercise option; (iii) increasing the hurdle for the Company’s exercise of its call option over the Holders’ Warrants, from a bid price equals or exceeds US$8.50 per share to US$17.66 per share; and (iv) extending the exercise period to the earlier of December 31, 2013 or upon redemption of the Vicis’ Amended Warrants by the Company.

On October 27, 2011, the Company amended the exercise price of the Shoen’s Warrants to US$1.15 per share. Immediately after the amendment, Shoen exercised 31,072 of the warrants to purchase 31,072 ordinary shares of the Company at the reduced exercise price of US$1.15 per share. After the exercise, the Company further amended four other terms of the remaining 35,892 warrants held by Shoen (the “Shoen’s Amended Warrants”) by (i) introducing full-ratchet anti-dilution protection where the exercise price is further adjusted to equal the dilutive price if the Company issues or sells any shares or equity-linked instrument at a price per share or new exercise price per share less than the reduced exercise price of US$1.15; (ii) providing a cashless exercise option; (iii) increasing the hurdle for the Company’s exercise of its call option over the Founders’ Warrants, from a bid price equals or exceeds US$8.50 per share to US$17.66 per share; and (iv) extending the exercise period to the earlier of December 31, 2013 or upon redemption of the Shoen’s Amended Warrants by the Company.

The Company evaluated ASC 815-40-15 and concluded that the 10,004,157 Vicis’ Amended Warrants and the 35,892 Shoen’s Amended Warrants are not indexed to its own stock due to the full-ratchet anti-dilution protection because the issuance of shares or an-equity-linked instrument in the future is not an input to the determination of the fair value of the settlement amount of a fixed-for-fixed or equity instrument. Therefore, the Vicis’ Amended Warrants and the Shoen’s Amended Warrants were reclassified from equity to liability. In accordance with ASC 815-40-35, the change in fair value of the Vicis’ Amended Warrants and the Shoen’s Amended Warrants during the period these warrants were classified as equity was accounted for as an adjustment to shareholders’ equity with any subsequent change in fair value being adjusted through earnings. The aggregate fair value of the Vicis’ Amended Warrants and the Shoen’s Amended Warrants were US$1,391, US$440, US$839 and nil at the time of amendment and as of December 31, 2011, 2012 and 2013, respectively. Thus, a debit to additional paid-in capital of US$1,391 and a gain of US$951 from the change in fair value of the Vicis’ Amended Warrants and Shoen’s Amended Warrants were recognized in the statements of shareholders’ equity and the statements of comprehensive income, respectively, during the year ended December 31, 2011. A loss of US$399 and a gain of US$839 from the change in fair value of the Vicis’ Amended Warrants and Shoen’s Amended Warrants were recognized in the statements of comprehensive income during the years ended December 31, 2012 and 2013, respectively. As of December 31, 2013, the Vicis’ Amended Warrants and Shoen’s Amended Warrants expired unexercised.

The fair values of Vicis’ Amended Warrants and Shoen’s Amended Warrants, which are classified as liabilities, were estimated at their commitment date and December 31, 2011 and 2012 using the following assumptions:

	Vicis’ Amended Warrants	Shoen’s Amended Warrants	Vicis’/Shoen’s Amended Warrants	Vicis’/Shoen’s Amended Warrants
Commitment date/ year-end date	August 18, 2011	October 27, 2011	December 31, 2011	December 31, 2012
Average risk-free rate of return	0.24%	0.24%	0.24%	0.14%
Expected term/life	2.38 years	2.18 years	2.00 years	1.00 years
Volatility rate	52.52%	51.20%	72.00%	88.40%
Expected dividend yield	—	—	—	—
Fair value of ordinary share	0.14	0.04	0.04	0.57
Estimated forfeiture rate	0%	0%	0%	0%

The fair values of the IPO Warrants and Underwriter’s Warrants, which are classified as equity, were estimated at their commitment date using the following assumptions:

	IPO Warrants	Underwriter’s Warrants
Commitment date	January 25, 2010	January 25, 2010
Average risk-free rate of return	2.40%	2.40%
Expected term/life	4.99 years	4.99 years
Volatility rate	66.00%	66.00%
Expected dividend yield	—	—
Fair value of ordinary share	4.93	4.93
Estimated forfeiture rate	0%	0%

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the fair value of the Company’s ordinary shares as of December 31, 2013, for those warrants that have an exercise price currently below the fair value of the Company’s ordinary shares. As of December 31, 2013, the Company has warrants outstanding to purchase an aggregate 19,440,000 ordinary shares. None of these warrants has an exercise price below the fair value of the Company’s ordinary shares, resulting in an aggregate intrinsic value of nil.

All warrants were vested as of the date they were issued, except for the Underwriter’s Warrants which vested on July 19, 2011, 540 days after the IPO. Except for the exercise and expiration of warrants described above, no other warrants were redeemed, forfeited, cancelled or exercised for the years ended December 31, 2011, 2012 and 2013.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (Recurring basis, USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012 Quoted price in active market for identical assets (Level 1)	Dec. 31, 2012 Significant unobservable inputs (Level 3)	Dec. 31, 2012 Money market funds in cash equivalent Quoted price in active market for identical assets (Level 1)	Dec. 31, 2012 Warrant liabilities Significant unobservable inputs (Level 3)
Fair value measurement
Assets	$ 0	$ 8		$ 8
Liabilities	$ 0		$ 839		$ 839

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RELATED PARTY TRANSACTIONS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended						12 Months Ended				12 Months Ended		12 Months Ended					12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2011 Kuhns Brothers, Inc. Miscellaneous expenses	Dec. 31, 2013 CPI Ballpark Investments Ltd	Dec. 31, 2012 CPI Ballpark Investments Ltd	Dec. 31, 2013 CPI Ballpark Investments Ltd Reimbursement of expenses related to extraordinary shareholders meeting:	Dec. 31, 2012 CPI Ballpark Investments Ltd Reimbursement of expenses related to extraordinary shareholders meeting:	Dec. 31, 2013 Nanping City Xingshui Co., Ltd.	Dec. 31, 2012 Nanping City Xingshui Co., Ltd.	Dec. 31, 2013 Lantian	Dec. 31, 2012 Lantian	Dec. 31, 2013 Xiamen Youen	Dec. 31, 2012 Xiamen Youen	Dec. 31, 2011 Xiamen Youen	Dec. 31, 2013 Sanming Youxin	Jun. 23, 2013 Sanming Youxin	Dec. 31, 2012 China New Energy Group Company
RELATED PARTY TRANSACTIONS
Expenses from transactions with related party				$ 90			$ 20	$ 269
Loans to related parties																		86
Loans from related parties	2,034	572	1,263								402		212	572	1,263	1,420
Repayment of loans from related parties	5,585	69												69		5,585
Amounts due from related parties gross											1,379	1,338
Amounts due from related parties gross																		86
Less: Allowance for doubtful accounts	(1,379)	(1,338)
Amounts due from related parties		86
Amounts due to related parties	$ 9,491	$ 12,705			$ 1	$ 2			$ 1,540	$ 1,494	$ 408			$ 11,209		$ 7,542	$ 11,593

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Ordinary shares	Additional paid-in capital	Accumulated other comprehensive income	Accumulated deficit	Noncontrolling interests
Balance at Dec. 31, 2010	$ 416,983	$ 153	$ 495,652	$ 22,922	$ (112,840)	$ 11,096
Balance (in shares) at Dec. 31, 2010		153,295,516
Increase (Decrease) in Stockholders' Equity
Reclassification of warrants from equity to liability	(1,391)		(1,391)
Exercise of warrants	9,675	9	9,666
Exercise of warrants (in shares)		8,693,581
Purchase of subsidiary shares from noncontrolling interests	(5,939)		(4,907)			(1,032)
Share-based compensation expenses	10,479		10,479
Other comprehensive income (loss)	20,361			20,046		315
Net (loss) income	(55,290)				(45,389)	(9,901)
Balance at Dec. 31, 2011	394,878	162	509,499	42,968	(158,229)	478
Balance (in shares) at Dec. 31, 2011		161,989,097
Increase (Decrease) in Stockholders' Equity
Share-based compensation expenses	166		166
Other comprehensive income (loss)	(1,380)			(1,371)		(9)
Net (loss) income	(1,149)				(1,243)	94
Balance at Dec. 31, 2012	392,515	162	509,665	41,597	(159,472)	563
Balance (in shares) at Dec. 31, 2012		161,989,097
Increase (Decrease) in Stockholders' Equity
Share-based compensation expenses	211		211
Exercise of share options	26		26
Exercise of share options (in shares)	110,568	110,568
Other comprehensive income (loss)	12,395			12,462		(67)
Net (loss) income	(2,518)				(2,221)	(297)
Balance at Dec. 31, 2013	$ 402,629	$ 162	$ 509,902	$ 54,059	$ (161,693)	$ 199
Balance (in shares) at Dec. 31, 2013		162,099,665

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
CONSOLIDATED BALANCE SHEETS
Allowance for doubtful accounts (in dollars)	$ 0	$ 0
Allowance for doubtful accounts, related parties (in dollars)	1,379	1,338
Provision for impairment allowance (in dollars)	$ 1,608	$ 1,560
Ordinary shares, par value (in dollars per share)	$ 0.001	$ 0.001
Ordinary shares, shares authorized	400,000,000	400,000,000
Ordinary shares, shares issued	162,099,665	161,989,097
Ordinary shares, shares outstanding	162,099,665	161,989,097

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LAND USE RIGHTS (Land use rights)

12 Months Ended

Dec. 31, 2013

Land use rights

Land use rights

LAND USE RIGHTS

10.LAND USE RIGHTS

Land use rights and their related accumulated amortization as of December 31, 2012 and 2013 are as follows:

	December 31,
	2012		2013
	US$		US$
Land use right	47,521		47,521
Less: Accumulated amortization	(4,614	)	(5,778	)
Foreign currency translation adjustment	5,733		7,219
Total	48,640		48,962

The estimated annual amortization expenses for each of the five succeeding fiscal years are as follows:

	US$
2014	1,192
2015	1,192
2016	1,192
2017	1,192
2018	1,192

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COMMITMENTS AND CONTINGENCIES (Details 3) In Thousands, unless otherwise specified		0 Months Ended					1 Months Ended		12 Months Ended		0 Months Ended		1 Months Ended
	Dec. 31, 2013 sqm	Oct. 22, 2009 Wuyue USD ($)	Oct. 22, 2009 Wuyue CNY	Feb. 17, 2014 Wuyue Subsequent event USD ($)	Nov. 26, 2013 Claim for payment of salary and social security Wuyue USD ($)	Nov. 26, 2013 Claim for payment of salary and social security Wuyue CNY	Oct. 31, 2013 Claim for payment of salary and social security Wuyue USD ($) employee	Apr. 30, 2012 Claim for payment of salary and social security Wuyue USD ($) employee	Dec. 31, 2013 Claim for payment of salary and social security Wuyue USD ($)	Dec. 31, 2012 Claim for payment of salary and social security Wuyue USD ($)	Nov. 26, 2013 Claim for payment of the termination of their labor contracts Wuyue USD ($)	Nov. 26, 2013 Claim for payment of the termination of their labor contracts Wuyue CNY	Sep. 30, 2013 Claim for payment of penalty of delayed capital injection Wuyue USD ($)	Sep. 30, 2013 Claim for payment of penalty of delayed capital injection Wuyue CNY	May 31, 2013 Claim for payment of penalty of delayed capital injection Wuyue USD ($)	May 31, 2013 Claim for payment of penalty of delayed capital injection Wuyue CNY
Other contingencies
Area of land for which formal title certificate has not been obtained (in square meters)	2,499,278
COMMITMENTS AND CONTINGENCIES
Number of employees who filed an arbitration claim against the company							24	24
Amount claimed against the company for the payment of salary								$ 428
Amount claimed against the company for the social security								33
Ruling or award granted in respect of the claim									0	0
Amount claimed against the company							1,066						6,174	38,220	4,158	25,740
Amount payable by company under verdict of GCLAC					540	3,342					30	188
First capital injection amount by company		5,249	32,500
Percentage of equity interest acquired		79.00%	79.00%
Cost of equity interest acquired		26,247	162,500
Amount of claims paid by the company				$ 570

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OTHER NON-CURRENT LIABILITIES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
OTHER NON-CURRENT LIABILITIES
Unrecognized tax benefits (Note 13)	$ 6,203	$ 5,091
Accrued interests on unrecognized tax benefits (Note 13)	1,697	1,583
Government grant	100	100
Others	5	6
Total	8,005	6,780
Banzhu
Other non-current liabilities
Government grant recognized	$ 3	$ 3	$ 3

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DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Income taxes
Net operating loss carry-forward	$ 22,365
2014
Income taxes
Net operating loss carry-forward	452
2015
Income taxes
Net operating loss carry-forward	1,361
2016
Income taxes
Net operating loss carry-forward	5,972
2017
Income taxes
Net operating loss carry-forward	7,560
2018
Income taxes
Net operating loss carry-forward	$ 7,020

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2013
Document and Entity Information
Entity Registrant Name	China Hydroelectric Corp
Entity Central Index Key	0001477156
Document Type	20-F
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding	162,126,002
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

XML

OTHER NON-CURRENT ASSETS

12 Months Ended

Dec. 31, 2013

OTHER NON-CURRENT ASSETS

OTHER NON-CURRENT ASSETS

11. OTHER NON-CURRENT ASSETS

Other non-current assets consist of the following:

	December 31,
	2012	2013
	US$	US$
Long-term prepaid debt insurance cost	315	311
Long-term prepaid rental expenses	118	3
Long-term prepaid compensation cost	337	230
Deposits for financing arrangement	859	1,358
Unamortized service fees	187	299
Long-term prepaid guarantee fee	197	19
Total	2,013	2,220

Deposit for financing arrangement and unamortized service fee represent the refundable deposits and nonrefundable service fees paid to IEL for arrangements to sell certain power generation assets and simultaneously leased back the assets. In August 2012, Liyuan sold assets to IEL for US$7,151 and simultaneously leased back the assets for three years at a monthly lease payment of US$219. The implicit interest rate on the lease payments is 6.5% per annum which is determined based on 0.35% above the benchmark interest rate announced by the People’s Bank of China for 1 to 3 years loans. In December 2013, Dazhaihe sold assets to IEL for US$3,876 and simultaneously leased back the assets for five years at a quarterly lease payment of US$230. The implicit interest rate on the lease payments is 6.72% per annum which is determined based on 0.32% above the benchmark interest rate announced by the People’s Bank of China for 3 to 5 years loans. As the Company retained substantially all of the benefits and risks from the ownership of the leased assets, the arrangements were accounted for as financing from IEL in accordance with ASC 840-40, Sale-leaseback transactions (Note 15). Pursuant to the agreements, the Company paid refundable deposits of US$858 and US$465 to IEL for the financing arrangements in 2012 and 2013, respectively. The deposits will be repaid to the Company at the end of the lease period.  The Company also paid nonrefundable service fees of US$354 and US$281 to IEL in 2012 and 2013, respectively, which are amortized over the lease terms under the effective interest method.

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PROPERTY, PLANT AND EQUIPMENT, NET (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Changes in construction in progress, net of impairment charge
Impairment of construction in progress	$ 3,549	$ 0	$ 11,590
Recognition of impairment loss of long-lived assets	4,098
Amount of insurance recovery recognized upon the receipt of insurance proceeds	549
Interest costs from continuing operations qualifying for capitalization	0	0	10
Liyuan
Changes in construction in progress, net of impairment charge
Long-lived assets and recognition of impairment loss	4,098
Construction in progress, net
Changes in construction in progress, net of impairment charge
Balance at the beginning of the period	140	1,190
Addition to construction in progress	523	5,523
Transfer from property, plant and equipment		623
Transfer to property, plant and equipment	(300)	(7,198)
Impairment of construction in progress	(134)
Foreign currency translation adjustment	16	2
Balance at the end of the period	245	140
Construction in progress, net | Jiulongshan
Changes in construction in progress, net of impairment charge
Balance at the end of the period	13	13	13
Construction in progress, net | Liyuan
Changes in construction in progress, net of impairment charge
Balance at the beginning of the period	94	1,158
Addition to construction in progress	29	1,350
Transfer to property, plant and equipment		(2,416)
Impairment of construction in progress	(134)
Foreign currency translation adjustment	11	2
Balance at the end of the period		94
Construction in progress, net | Binglangjiang
Changes in construction in progress, net of impairment charge
Balance at the beginning of the period		1
Transfer to property, plant and equipment		(1)
Construction in progress, net | Banzhu
Changes in construction in progress, net of impairment charge
Addition to construction in progress	411
Transfer to property, plant and equipment	(300)
Foreign currency translation adjustment	2
Balance at the end of the period	113
Construction in progress, net | Wangkeng
Changes in construction in progress, net of impairment charge
Addition to construction in progress	83
Foreign currency translation adjustment	1
Balance at the end of the period	84
Construction in progress, net | Wuliting
Changes in construction in progress, net of impairment charge
Addition to construction in progress		1,316
Transfer to property, plant and equipment		(1,316)
Construction in progress, net | Yingchuan
Changes in construction in progress, net of impairment charge
Balance at the end of the period	9	9	9
Construction in progress, net | Xineng
Changes in construction in progress, net of impairment charge
Addition to construction in progress		278
Transfer from property, plant and equipment		610
Transfer to property, plant and equipment		(888)
Construction in progress, net | Hengda
Changes in construction in progress, net of impairment charge
Addition to construction in progress		11
Transfer to property, plant and equipment		(11)
Construction in progress, net | Ruiyang
Changes in construction in progress, net of impairment charge
Balance at the beginning of the period	24	9
Addition to construction in progress		1,091
Transfer to property, plant and equipment		(1,076)
Foreign currency translation adjustment	2
Balance at the end of the period	26	24
Construction in progress, net | Zhougongyuan
Changes in construction in progress, net of impairment charge
Addition to construction in progress		1,429
Transfer to property, plant and equipment		(1,429)
Construction in progress, net | Dazhaihe
Changes in construction in progress, net of impairment charge
Addition to construction in progress		48
Transfer from property, plant and equipment		13
Transfer to property, plant and equipment		$ (61)

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DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Deferred tax assets-current
Allowance for uncollectible other receivables	$ 770	$ 747
Accrued water resource fee	316	332
Accrued expenses	985	706
Other payable	762	622
Deferred tax assets-current	2,833	2,407
Valuation allowance	(839)	(748)
Net deferred tax assets-current	1,994	1,659
Deferred tax assets-non-current
Net operating loss carryforwards	2,822	1,746
Depreciation of property, plant and equipment	948	812
Provision for impairment allowance	3,599	3,481
Others	10	10
Deferred tax assets-non-current	7,379	6,049
Valuation allowance	(5,853)	(4,720)
Net deferred tax asset-non-current	1,526	1,329
Deferred tax liabilities-current
Undistributed earnings of a foreign subsidiary	(300)
Deferred tax liabilities-non-current
Fair value step-up of property, plant and equipment	(23,647)	(23,279)
Fair value step-up of intangible assets	(1,073)	(1,066)
Deferred tax liabilities-non-current	(24,720)	(24,345)
Change in valuation allowance	1,041	575	3,818
Foreign currency translation adjustment on valuation allowance recognized in accumulated other comprehensive income	183	12	69
Undistributed earnings of foreign subsidiaries	39,541	29,260
PRC withholding tax rate (as a percent)	10.00%	10.00%
Unrecognized deferred tax liabilities for foreign subsidiaries undistributed earnings	$ 3,954	$ 2,926

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenues	$ 74,517	$ 85,388	$ 54,597
Cost of revenues	(35,357)	(35,795)	(31,314)
Gross profit	39,160	49,593	23,283
Operating expenses:
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(13,258)	(20,348)	(28,896)
Impairment loss on goodwill	0	0	(11,388)
Impairment loss on long-lived assets	(3,549)	0	(11,590)
Total operating expenses	(16,807)	(20,348)	(51,874)
Operating (loss) income	22,353	29,245	(28,591)
Interest income	98	84	101
Interest expense	(22,568)	(28,070)	(24,757)
Changes in fair value of warrant liabilities	839	(399)	951
Exchange (loss) gain	(41)	28	(851)
Other (loss) income, net	275	507	(334)
(Loss) income before income tax expense	956	1,395	(53,481)
Income tax expense	(3,474)	(6,451)	(1,527)
Net loss from continuing operations	(2,518)	(5,056)	(55,008)
Discontinued operations
(Loss) income from discontinued operations (net of income tax expense of US$101, US$399 and nil in 2011, 2012 and 2013)		1,140	(282)
Gain on disposal of discontinued operations (net of income tax expense of nil, US$959 and nil in 2011, 2012 and 2013)		2,767
Net (loss) income from discontinued operations		3,907	(282)
Net loss	(2,518)	(1,149)	(55,290)
Less:
Net loss (income) attributable to noncontrolling interests	297	(94)	9,901
Net loss attributable to China Hydroelectric Corporation shareholders	(2,221)	(1,243)	(45,389)
- Continuing operations	(2,221)	(5,150)	(45,107)
- Discontinued operations		3,907	(282)
Other comprehensive income (loss), net of income tax
Foreign currency translation adjustments (net of income tax expense of nil in 2011, 2012 and 2013)	12,395	(1,413)	20,394
Defined benefit pension plans (net of income tax expense of nil in 2011, 2012 and 2013)		33	(33)
Other comprehensive income (loss)	12,395	(1,380)	20,361
Comprehensive (loss) income	9,877	(2,529)	(34,929)
Less: Comprehensive loss (income) attributable to noncontrolling interests	364	(85)	9,586
Comprehensive (loss) income attributable to China Hydroelectric Corporation shareholders	$ 10,241	$ (2,614)	$ (25,343)
Net loss income attributable to ordinary shareholders per share (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.29)
-From continuing operations - basic and diluted (in dollars per share)	$ (0.01)	$ (0.03)	$ (0.29)
-From discontinued operations - basic and diluted (in dollars per share)		$ 0.02	$ 0.00
Weighted average number of ordinary shares used in computing:
Net loss attributable to ordinary shareholders per share - basic and diluted (in shares)	162,071,626	161,989,097	156,505,076
Ordinary shares
Other comprehensive income (loss), net of income tax
Net loss income attributable to ordinary shareholders per share (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.29)
-From continuing operations - basic and diluted (in dollars per share)	$ (0.01)	$ (0.03)	$ (0.29)
-From discontinued operations - basic and diluted (in dollars per share)		$ 0.02	$ 0.00
Weighted average number of ordinary shares used in computing:
Net loss attributable to ordinary shareholders per share - basic and diluted (in shares)	162,071,626	161,989,097	156,505,076
ADS
Other comprehensive income (loss), net of income tax
Net loss income attributable to ordinary shareholders per share (in dollars per share)	$ (0.03)	$ (0.02)	$ (0.87)
-From continuing operations - basic and diluted (in dollars per share)	$ (0.03)	$ (0.09)	$ (0.86)
-From discontinued operations - basic and diluted (in dollars per share)		$ 0.07	$ (0.01)
Weighted average number of ordinary shares used in computing:
Net loss attributable to ordinary shareholders per share - basic and diluted (in shares)	54,023,875	53,996,366	52,168,358

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PREPAYMENTS AND OTHER CURRENT ASSETS

12 Months Ended

Dec. 31, 2013

PREPAYMENTS AND OTHER CURRENT ASSETS

PREPAYMENTS AND OTHER CURRENT ASSETS

5. PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets consist of the following:

	December 31,
	2012		2013
	US$		US$
Advances for construction projects	78		109
Acquisition deposits	716		738
Amounts due from original shareholders of acquired subsidiaries	1,297		1,350
Consideration receivable from disposal of a subsidiary	11,534		—
Prepaid insurance	360		509
Rental deposit	182		258
Prepaid finance consulting fee	570		844
Others	973		1,026
	15,710		4,834
Less: Provision for impairment allowance	(1,560	)	(1,608	)
Total	14,150		3,226

Acquisition deposits as of December 31, 2013 represent a deposit of US$492 (2012: US$477) advanced by Wangkeng to Long Yan Ting Zhou Hydroelectric Development Co., Ltd. in April 2011 for the acquisition of the Ting Zhou hydroelectric project and a deposit of US$246 (2012: US$239) advanced by Hengda to Lushui Jinman Hydro Development Co., Ltd. in April 2011 for the acquisition of the Jinmanhe power project. As of December 31, 2011, these acquisitions have not been completed and the memorandums of understanding in relation to these acquisitions have expired. As a result, the Group recognized a full provision for impairment allowance on the acquisition deposits of US$738 (2012: US$716) as of December 31, 2013.

Amounts due from original shareholders of acquired subsidiaries as of December 31, 2013 mainly represent US$819 (2012: US$794) receivable from the original shareholders of Jinling and its subsidiaries for business tax and land value added tax related to the disposal of an office building and US$531 (2012: US$503) from the original shareholders of Banzhu for social insurance which should be borne by the original shareholders in accordance with the equity purchase agreements. As of December 31, 2012, the amounts due from the original shareholders of Jinling and its subsidiaries are determined to be not recoverable. As a result, the Group recognized a full provision for impairment allowance of US$819 (2012: US$794) as of December 31, 2013.

On October 18, 2012, the Company entered into an equity purchase and sale agreement with a third-party to dispose 100% equity interest in Yuheng for a total consideration of US$21,269 (RMB134,000) cash. Consideration receivable from disposal of a subsidiary as of December 31, 2012 represents US$11,534 unpaid consideration due from the buyer, which was fully settled on March 19, 2013.

Prepaid finance consulting fee as of December 31, 2013 mainly represents US$665 (2012: US$451) current portion of prepaid consulting fee paid to banks by Wuliting, Zhougongyuan, Ruiyang, Jiulongshan, Jintang and Jinwei for loans and US$179 (2012: US$119) current portion of prepaid service fee paid to International Far Eastern Leasing Co., Ltd. (“IEL”), by Liyuan and Dazhaihe for certain financing arrangements (Note 11). These prepaid fees for loans are amortized over the loan terms under the effective interest method.

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ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2013

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

4. ACCOUNTS RECEIVABLE

The Group’s trading terms with its customers are mainly on credit. The credit terms are generally within 60 days after the delivery of electricity. The Group does not offer extended payment terms and all accounts receivable balances are non-interest-bearing.

As of December 31, 2012 and 2013, all of the accounts receivable balances were within credit terms.

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OTHER NON-CURRENT LIABILITIES

12 Months Ended

Dec. 31, 2013

OTHER NON-CURRENT LIABILITIES

OTHER NON-CURRENT LIABILITIES

16. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of the following:

	December 31,
	2012	2013
	US$	US$
Unrecognized tax benefits (Note 13)	5,091	6,203
Accrued interests on unrecognized tax benefits (Note 13)	1,583	1,697
Government grant	100	100
Others	6	5
Total	6,780	8,005

The government grant of Banzhu is recognized as income over the periods necessary to match it on a systematic basis with the related costs which it is intended to compensate. During the years ended December 31, 2011, 2012 and 2013, US$3, US$3 and US$3 has been recognized as a reduction to cost of revenues, respectively.

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

12 Months Ended

Dec. 31, 2013

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	December 31,
	2012	2013
	US$	US$
Accrued payroll expenses	3,445	2,591
Retainage due to contractors	199	100
Employee termination costs	1,750	875
Guarantee deposits from original shareholders of acquired subsidiaries	1,358	1,394
Income tax payable	5,406	2,922
Other taxes payable	2,326	2,877
Amounts due to original shareholders of acquired subsidiaries	1,345	1,331
Accrued water resource fee	1,496	1,219
Loans from third parties	13,627	4,330
Interest payable	1,260	575
Accrued dam and reservoirs repair fee	1,424	851
Reservoir maintenance fund	1,905	2,338
Advance from customers	1,014	23
Deposits from third parties	716	—
Accrued audit fee	650	543
Accrued settlement costs for legal proceedings (Note 23(e))	—	579
Land compensation costs (Note 23(c))	959	624
Service fee payable	1,036	1,347
Other liabilities	3,909	3,553
Total	43,825	28,072

Employee termination costs as of December 31, 2012 and 2013 represent the termination benefits payable to the former chairman and CEO, John Kuhns, and the former executive vice president and corporate secretary, Mary Fellows. Based on a settlement agreement with the Company, John Kuhns and Mary Fellows resigned from their executive officer positions with the Group with effective date on September 30, 2012 and agreed to serve as senior advisors to the board of directors until December 15, 2012. After completion of their advisory roles, the Company shall pay aggregate termination benefits of US$1,250 and US$500 to John Kuhns and Mary Fellows, respectively, on a monthly basis over the course of 24 months. During the year ended December 31, 2013, the Company paid termination benefits amounting to US$875.

Guarantee deposits of US$90 (2012: US$87) and US$1,304 (2012: US$1,271) from original shareholders of acquired subsidiaries as of December 31, 2013 represent security deposits received by the Company from original shareholders of Yingchuan and Jinling, respectively, which will be returned by the Company when the original shareholders of the acquired subsidiaries furnish the Company with final documentation relating to the acquired hydroelectric power projects and dams and reservoirs or formal title certificates with respect to the land. The final documentation and title certificates have not been provided in full as of December 31, 2013. The Company will retain the security deposits until receipt of such documentations.

Amounts due to original shareholders of acquired subsidiaries as of December 31, 2012 mainly represent US$1,271 payable to the original shareholders of Dazhaihe, Hengda, Xineng and Banzhu for their entitlement to the net working capital surplus of Dazhaihe, Hengda, Xineng and Banzhu immediately prior to the consummation of the acquisitions in accordance with the supplemental equity transfer purchase agreements. Amounts due to original shareholders of acquired subsidiaries as of December 31, 2013 mainly represent US$1,313 payable to the original shareholders of Dazhaihe, Hengda, Xineng and Banzhu for their entitlement to the net working capital surplus of Dazhaihe, Hengda, Xineng and Banzhu immediately prior to the consummation of the acquisitions in accordance with the supplemental equity transfer purchase agreements.

Loans from third parties as of December 31, 2012 represent RMB denominated loans from non-financial institutions of US$9,139, US$4,121, US$240 and US$127 for Jinling, Jinlong, Hengda and Binglangjiang, respectively. The loans of US$32, US$2,743 and US$6,364 for Jinling bear an interest rate of 24%, 18% and 32% per annum, respectively. The loans for Jinlong bear an interest rate of 18% per annum. The loans for Hengda and Binglangjiang are interest free. Loans for Jinling, Hengda and Binglangjiang were fully repaid during the year ended December 31, 2013. Loans from third parties as of December 31, 2013 represent RMB denominated loans from non-financial institutions of US$4,330 for Jinlong. The loans for Jinlong bear an interest rate of 18% per annum.

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GOODWILL (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012 item	Dec. 31, 2011
GOODWILL.
Goodwill	$ 115,960	$ 112,481	$ 135,651
Changes in the carrying amount of goodwill by operating and reportable segments
Balance at the beginning of the period	112,481	135,651
Foreign currency translation adjustment	3,479	278
Disposal of subsidiaries		(23,448)
Balance at the end of the period	115,960	112,481	135,651
Impairment on goodwill	0	0	11,388
Number of subsidiaries disposed		2
Amount of goodwill derecognized on disposal date		23,448
Yuheng
Changes in the carrying amount of goodwill by operating and reportable segments
Disposal of subsidiaries		(23,448)
Amount of goodwill derecognized on disposal date		23,448
Yuanping
Changes in the carrying amount of goodwill by operating and reportable segments
Disposal of subsidiaries		(3,219)
Amount of goodwill derecognized on disposal date		3,219
Yunnan Province
GOODWILL.
Goodwill	22,265	21,597
Changes in the carrying amount of goodwill by operating and reportable segments
Balance at the beginning of the period	21,597	21,544
Foreign currency translation adjustment	668	53
Balance at the end of the period	22,265	21,597
Fujian Province
GOODWILL.
Goodwill	48,898	47,431
Changes in the carrying amount of goodwill by operating and reportable segments
Balance at the beginning of the period	47,431	70,760
Foreign currency translation adjustment	1,467	119
Disposal of subsidiaries		(23,448)
Balance at the end of the period	48,898	47,431
Amount of goodwill derecognized on disposal date		23,448
Zhejiang Province
GOODWILL.
Goodwill	44,797	43,453
Changes in the carrying amount of goodwill by operating and reportable segments
Balance at the beginning of the period	43,453	43,347
Foreign currency translation adjustment	1,344	106
Balance at the end of the period	$ 44,797	$ 43,453

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INTANGIBLE ASSETS (Intangible assets, excluding land use rights)

12 Months Ended

Dec. 31, 2013

Intangible assets, excluding land use rights

Intangible assets

INTANGIBLE ASSETS

8. INTANGIBLE ASSETS

In connection with the acquisition of Binglangjiang, the Company acquired a legal right to develop and operate Phase II of Binglangjiang’s hydroelectric power project. The development right allows the Company to expand the power generation capacity of Binglangjiang by utilizing the existing water dam of Binglangjiang, which has a useful life of 30 years. The Company recognized the fair value of US$2,909 of the development right as a separate intangible asset apart from goodwill in accordance with ASC 805. The estimated useful life of the development right is 30 years.

In connection with the acquisition of Jinling, the Company acquired a right to use the dam of the Dongguan hydropower project which has a useful life of 40 years. The Company recognized the fair value of US$1,759 for the dam use right as a separate intangible asset apart from goodwill in accordance with ASC 805. The estimated useful life of the dam use right of Dongguan is 40 years.

During the year ended December 31, 2013, the Company acquired financial system software, which has an estimated useful life of 5 years, for US$90.

Intangible assets and their related accumulated amortization as of December 31, 2012 and 2013 are as follows:

	December 31, 2012
	Gross Carrying Value	Accumulated Amortization		Foreign Currency Translation Adjustment	Net Carrying Value
Development right of Binglangjiang Phase II	2,909	(629	)	619	2,899
Dam use right of Dongguan	1,759	(90	)	92	1,761
Total	4,668	(719	)	711	4,660

	December 31, 2013
	Gross Carrying Value	Accumulated Amortization		Foreign Currency Translation Adjustment	Net Carrying Value
Development right of Binglangjiang Phase II	2,909	(749	)	706	2,866
Dam use right of Dongguan	1,759	(137	)	146	1,768
Software	90	(11	)	1	80
Total	4,758	(897	)	853	4,714

Amortization expenses from continuing operations for the years ended December 31, 2011, 2012 and 2013 were US$161, US$165 and US$178, respectively, which have been reported in the following accounts:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cost of revenues	(45	)	(45	)	(168	)
General and administrative expenses	(116	)	(120	)	(10	)
Total	(161	)	(165	)	(178	)

The estimated annual amortization expenses for each of the five succeeding fiscal years are as follows:

	US$
2014	185
2015	185
2016	185
2017	185
2018	177

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OTHER INCOME (LOSS), NET (Tables)

12 Months Ended

Dec. 31, 2013

OTHER INCOME (LOSS), NET

Schedule of other income (loss), net

	For the Years Ended December 31,
	2011		2012	2013
	US$		US$	US$
Reimbursement from ADS depositary bank	527		—	—
Gain from extinguishment of amounts due to original shareholders of acquired subsidiaries	—		462	—
Interest penalty income from late consideration payment by the acquirer of a disposed subsidiary	—		—	144
Others	(861	)	45	131
Other (loss) income, net	(334	)	507	275

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CONCENTRATION OF RISKS (Details) (PRC)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Foreign currency exchange rate risk
Appreciation of the RMB against US$ (as a percent)	3.00%	0.20%	4.90%
Top five customers
Concentration of risks
Number of customers	5
Accounts receivable | Credit concentration risk | Top five customers
Concentration of risks
Concentration risk (as a percent)	91.00%	86.00%
Revenue | Customer concentration risk
Concentration of risks
Concentration risk (as a percent)	100.00%	100.00%	100.00%
Revenue | Customer concentration risk | Yunnan Province | Yunnan Nujiang Electric Power Co., Ltd.
Concentration of risks
Concentration risk (as a percent)	6.00%	5.00%	7.00%
Revenue | Customer concentration risk | Yunnan Province | Yunnan Dehong Electric Power Co., Ltd.
Concentration of risks
Concentration risk (as a percent)	8.00%	6.00%	11.00%
Revenue | Customer concentration risk | Yunnan Province | Yunnan Honghe Electric Power Co., Ltd.
Concentration of risks
Concentration risk (as a percent)	2.00%	1.00%	1.00%
Revenue | Customer concentration risk | Yunnan Province | Yunnan Grid Company, Ltd.
Concentration of risks
Concentration risk (as a percent)	3.00%	3.00%	4.00%
Revenue | Customer concentration risk | Sichuan Province | Sichuan Cangxi Electric Power Co., Ltd.
Concentration of risks
Concentration risk (as a percent)	1.00%	1.00%	1.00%
Revenue | Customer concentration risk | Zhejiang Province | Lishui Electric Power Bureau
Concentration of risks
Concentration risk (as a percent)	49.00%	46.00%	43.00%
Revenue | Customer concentration risk | Fujian Province | Fujian Electric Power Co., Ltd.
Concentration of risks
Concentration risk (as a percent)	19.00%	20.00%	16.00%
Revenue | Customer concentration risk | Fujian Province | Pingnan Power Supply Company
Concentration of risks
Concentration risk (as a percent)		5.00%	8.00%
Revenue | Customer concentration risk | Fujian Province | Shaowu Electric Power Bureau
Concentration of risks
Concentration risk (as a percent)	9.00%	9.00%	7.00%
Revenue | Customer concentration risk | Fujian Province | Nanping Electric Power Bureau
Concentration of risks
Concentration risk (as a percent)	3.00%	4.00%	2.00%

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DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2013

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

6. DISCONTINUED OPERATIONS

On December 3, 2011, the Company entered into an equity purchase and sale agreement with a third-party to dispose 100% equity interest in Yuanping for a total consideration of US$11,276 (RMB71,050) cash. Yuanping owns and operates one hydroelectric station located in the Fujian Province, the PRC. On the same day, an agreement was entered into between Yuanping and Yuheng whereby Yuanping is assigned a right to use 36.48% of the water generated by Yuheng’s dam and reservoir at nil consideration with immediate effect. The dam and reservoir legally owned by Yuheng had been utilized in power generation by both Yuanping and Yuheng historically. The disposal date was March 2, 2012, which was the date the Company lost effective control over Yuanping. Accordingly, the operating results of Yuanping have been presented as discontinued operations in the consolidated statements of comprehensive income for all years presented.

On October 18, 2012, the Company entered into an equity purchase and sale agreement with a third-party to dispose 100% equity interest in Yuheng for a total consideration of US$21,269 (RMB134,000) cash. Yuheng owns and operates one hydroelectric station located in the Fujian Province, the PRC. The disposal date was October 31, 2012, which was the date the Company lost effective control over Yuheng. Accordingly, the operating results of Yuheng have been presented as discontinued operations in the consolidated statements of comprehensive income for all years presented.

The breakdown of assets and liabilities attributable to discontinued operations as of the disposal dates and the results of discontinued operations for the years presented are as follows:

(a) Assets and liabilities attributable to discontinued operations

The breakdown of assets and liabilities attributable to discontinued operations of Yuanping as of the date of disposal on March 2, 2012 is as follows:

	March  2, 2012
	US$
Assets:
Cash and cash equivalents	56
Property, plant and equipment, net	17,304
Goodwill	3,219
Intangible assets, net	617
Deferred tax assets	259
Prepayments and other current assets	328
Total	21,783
Liabilities:
Current portion of long-term loans	477
Accrued expenses and other current liabilities	163
Long-term loans	10,489
Deferred tax liabilities	827
Total	11,956

The breakdown of assets and liabilities attributable to discontinued operations of Yuheng as of the date of disposal on October 31, 2012 is as follows:

	October 31, 2012
	US$
Assets:
Cash and cash equivalents	472
Property, plant and equipment, net	18,509
Goodwill	23,448
Intangible assets, net	1,916
Deferred tax assets	174
Prepayment and other current assets	241
Total	44,760
Liabilities:
Current portion of long-term loans	14,920
Accrued expenses and other current liabilities	2,256
Long-term loans	7,301
Deferred tax liabilities	2,046
Other non-current liabilities	33
Total	26,556

(b) Results of discontinued operations

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Revenues	4,737		4,661		—
Cost of revenues	(2,098	)	(1,131	)	—
General and administrative expenses	(226	)	(176	)	—
Interest income	2		2		—
Interest expense	(2,580	)	(1,634	)	—
Other (loss) income, net	(16	)	3,543		—
Income tax expense	(101	)	(1,358	)	—
Net (loss) income from discontinued operations	(282	)	3,907		—

The gain on disposal of US$1,819 and US$1,907, net of tax effects of US$959, from the dispositions of Yuanping and Yuheng, respectively, was included in “Other (loss) income, net”  from discontinued operations for the year ended December 31, 2012.

(c) No allocation of cash flows has been made between continuing and discontinued operations, as the cash flows provided by or used in the operating, investing and financing activities of the discontinued operations were insignificant.

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PROPERTY, PLANT AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2013

PROPERTY, PLANT AND EQUIPMENT, NET

PROPERTY, PLANT AND EQUIPMENT, NET

7. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment and its related accumulated depreciation as of December 31, 2012 and 2013 are as follows:

	December 31,
	2012		2013
	US$		US$
Dams and reservoirs	339,123		348,905
Buildings	124,154		127,356
Machinery	153,837		158,527
Transportation equipment	1,865		1,925
Electronic equipment and others	4,244		1,797
	623,223		638,510
Less: Accumulated depreciation	(74,852	)	(98,513	)
	548,371		539,997
Construction in progress, net	140		245
Total	548,511		540,242

Construction in progress, net of impairment charge, as of December 31, 2012 and 2013 is as follows:

	Jiulongshan	Liyuan		Binglangjiang		Banzhu		Wangkeng	Wuliting		Yingchuan	Xineng		Hengda		Ruiyang		Zhougongyuan		Dazhaihe		Total
	US$	US$		US$		US$		US$	US$		US$	US$		US$		US$		US$		US$		US$
Balance as of December 31, 2011	13	1,158		1		—		—	—		9	—		—		9		—		—		1,190
Addition to construction in progress	—	1,350		—		—		—	1,316		—	278		11		1,091		1,429		48		5,523
Transfer from property, plant and equipment	—	—		—		—		—	—		—	610		—		—		—		13		623
Transfer to property, plant and equipment	—	(2,416	)	(1	)	—		—	(1,316	)	—	(888	)	(11	)	(1,076	)	(1,429	)	(61	)	(7,198	)
Foreign currency translation adjustment	—	2		—		—		—	—		—	—		—		—		—		—		2
Balance as of December 31, 2012	13	94		—		—		—	—		9	—		—		24		—		—		140
Addition to construction in progress	—	29		—		411		83	—		—	—		—		—		—		—		523
Transfer to property, plant and equipment	—	—		—		(300	)	—	—		—	—		—		—		—		—		(300	)
Impairment of construction in progress	—	(134	)	—		—		—	—		—	—		—		—		—		—		(134	)
Foreign currency translation adjustment	—	11		—		2		1	—		—	—		—		2		—		—		16
Balance as of December 31, 2013	13	—		—		113		84	—		9	—		—		26		—		—		245

Impairment of property, plant and equipment relates to write-off of plant assets of Liyuan which were damaged by flood in July 2013. The Company assessed the recoverability of its long-lived assets and recognized an impairment loss amounting to US$4,098 for the year ended December 31, 2013. Insurance recovery amounting to US$549 was recognized upon the receipt of insurance proceeds for the year ended December 31, 2013.

Interest costs from continuing operations qualifying for capitalization in the years ended December 31, 2011, 2012 and 2013 were US$10, nil and nil, respectively.

Depreciation expenses from continuing operations for the years ended December 31, 2011, 2012 and 2013 were US$20,763, US$21,747 and US$22,182, respectively. Accumulated depreciation as of December 31, 2012 and 2013 included foreign currency translation adjustment of US$157 and US$2,640, respectively. Depreciation expenses have been reported in the following accounts:

	For the Years ended December 31,
	2011		2012		2013
	US$		US$		US$
Cost of revenues	(20,466	)	(21,402	)	(21,841	)
General and administrative expenses	(297	)	(345	)	(341	)
Total	(20,763	)	(21,747	)	(22,182	)

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GOODWILL

12 Months Ended

Dec. 31, 2013

GOODWILL.

GOODWILL

9. GOODWILL

Goodwill of US$115,960 as of December 31, 2013 represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired relating to the acquisition of Binglangjiang during 2007, the acquisitions of Yingchuan, Wuliting, Wangkeng, and Banzhu during 2008, the acquisitions of Shapulong and Ruiyang during 2009, the acquisitions of Husahe, Hengda, Xineng, Xiaopengzu and Jinling and its subsidiaries during 2010 and the acquisition of Dazhaihe during 2011, net of foreign currency translation adjustment. Goodwill is not deductible for tax purposes. In accordance with ASC 350, goodwill is not amortized but is tested for impairment at least annually.

The changes in the carrying amount of goodwill by operating and reportable segments for the years ended December 31, 2012 and 2013 are as follows:

	Yunnan Province	SichuanProvince	Fujian Province		Zhejiang Province	Total
	US$	US$	US$		US$	US$
Balance as of December 31, 2011	21,544	—	70,760		43,347	135,651
Foreign currency translation adjustment	53	—	119		106	278
Disposal of subsidiaries	—	—	(23,448	)	—	(23,448	)
Balance as of December 31, 2012	21,597	—	47,431		43,453	112,481
Foreign currency translation adjustment	668	—	1,467		1,344	3,479
Balance as of December 31, 2013	22,265	—	48,898		44,797	115,960

During the year ended December 31, 2012 the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the qualitative assessment, the Company determined that it is not more likely than not that the fair values of its reporting units were less than their carrying values. Accordingly, the first and second steps of the goodwill impairment test are not necessary in accordance with ASC 350. No impairment on goodwill was recognized for the year ended December 31, 2012.

During the year ended December 31, 2012, the Company completed the disposal of two wholly-owned subsidiaries, Yuheng and Yuanping (Note 6). Goodwill amounting to US$23,448 and US$3,219 for Yuheng and Yuanping, respectively, was derecognized on the respective disposal date.

During the year ended December 31, 2013, due to the decline in its revenue as compared to the year ended December 31, 2012, the Company determined that there was an impairment indicator related to the carrying value of its goodwill. Thus, the Company performed the two-step goodwill impairment test on each of its reporting units.

In estimating the fair value of each of the reporting units in the first step of the impairment test, significant management judgment was applied. The Company estimated the fair value of each of the reporting units using the income approach valuation methodology. The market-based valuation methodology is not considered as appropriate because of volatility of the general market condition as well as insufficient number of comparable companies. In using the income approach methodology of valuation, estimates to determine the fair value of the reporting units included management’s judgment related to forecasts of future operating results, discount rates and expected future growth rates. The underlying assumptions used in the first step of the impairment test considered the market capitalization as of December 31, 2013 as well as the current local operating environment in certain provinces in the PRC and its expected impact on the fair value of the reporting unit. The Company determined that the fair values of all reporting units exceeded their carrying value and the second step of the impairment test was not necessary.

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CONCENTRATION OF RISKS (Tables)

12 Months Ended

Dec. 31, 2013

CONCENTRATION OF RISKS

Schedule of major customers and the portion of revenue from customers

		For the Years Ended December 31,
Customers	Segment	2011		2012		2013
Yunnan Nujiang Electric Power Co., Ltd.	Yunnan Province	7	%	5	%	6	%
Yunnan Dehong Electric Power Co., Ltd.	Yunnan Province	11	%	6	%	8	%
Yunnan Honghe Electric Power Co., Ltd.	Yunnan Province	1	%	1	%	2	%
Yunnan Grid Company, Ltd.	Yunnan Province	4	%	3	%	3	%
Sichuan Cangxi Electric Power Co., Ltd.	Sichuan Province	1	%	1	%	1	%
Lishui Electric Power Bureau	Zhejiang Province	43	%	46	%	49	%
Fujian Electric Power Co., Ltd.	Fujian Province	16	%	20	%	19	%
Pingnan Power Supply Company	Fujian Province	8	%	5	%	—
Shaowu Electric Power Bureau	Fujian Province	7	%	9	%	9	%
Nanping Electric Power Bureau	Fujian Province	2	%	4	%	3	%
		100	%	100	%	100	%

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LAND USE RIGHTS (Details) (Land use rights, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Land use rights
Land use rights
Land use right	$ 47,521	$ 47,521
Less: Accumulated amortization	(5,778)	(4,614)
Foreign currency translation adjustment	7,219	5,733
Total	48,962	48,640
Estimated annual amortization expenses
2014	1,192
2015	1,192
2016	1,192
2017	1,192
2018	$ 1,192

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ORGANIZATION AND PRINCIPAL ACTIVITIES (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended			12 Months Ended																					0 Months Ended
	Dec. 31, 2011 item	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 ABC	Dec. 31, 2013 Binglangjiang	Dec. 31, 2013 Liyuan	Dec. 31, 2013 Yingchuan	Dec. 31, 2013 Wuliting	Dec. 31, 2013 Jiulongshan	Dec. 31, 2013 CHC HK	Dec. 31, 2013 Wangkeng	Dec. 31, 2013 Banzhu	Dec. 31, 2013 Sunpower	Dec. 31, 2013 Shapulong	Dec. 31, 2013 Ruiyang	Dec. 31, 2013 Zhougongyuan	Dec. 31, 2013 Fujian Huabang	Dec. 31, 2013 Wuyue	Dec. 31, 2013 Husahe	Dec. 31, 2013 Hengda	Dec. 31, 2013 Xineng	Dec. 31, 2013 Xiaopengzu	Dec. 31, 2013 Jinling	Dec. 31, 2013 Dazhaihe	Jan. 25, 2010 Units	Jan. 25, 2010 Units ADS	Jan. 25, 2010 Units Warrant
Organization and principal activities
Issuance of units																									6,000,000
Number of ADS consisted in each unit																										1
Number of warrants consisted in each unit																											1
Unit price (in dollars per share)																									$ 16.00	$ 14.80	$ 1.20
Number of ordinary shares represented by each ADS	3	3	3																							3
Number of ordinary shares that can be purchased by warrant holder																											3
Exercise price of warrants (in dollars per share)																											$ 15.00
Aggregate gross proceeds yielded from IPO (in dollars)																									$ 96,000
Number of hydroelectric entities acquired	1
Percentage of ownership				100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	79.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%

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COMMITMENTS AND CONTINGENCIES (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Other commitments
Compensation costs paid	$ 202	$ 739	$ 166
Future minimum compensation costs
2014	85
2015	194
2016	194
2017	193
2018	202
Thereafter	5,286
Total	$ 6,154
Minimum
Other commitments
Term of compensation agreements			5 years
Maximum
Other commitments
Term of compensation agreements			43 years

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RELATED PARTY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2013

RELATED PARTY TRANSACTIONS

Schedule of principal related parties with which the entity had transactions

Name of related parties	Relationship with the Group
China Hydro LLC	A shareholder of the Company
CPI Ballpark Investments Ltd.	A shareholder of the Company
Kuhns Brothers, Inc.	A company owned by the former CEO, who resigned on September 30, 2012
China New Energy Group Company	A company controlled by the former CEO, who resigned on September 30, 2012
Lantian	Noncontrolling interest in Wuyue
Nanping City Xingshui Co., Ltd.	Noncontrolling interest in Jinlong
Xiamen Youen Hydropower Development Co., Ltd.(“Xiamen Youen”)	Noncontrolling interest in Jintang and Jinwei before June 23, 2013
Sanming Youxin Electric Power Industrial Co., Ltd. (“Sanming Youxin”)	Noncontrolling interest in Jintang and Jinwei after June 23, 2013

Schedule of expense paid on behalf by related parties

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Expense paid on behalf by related parties:
Kuhns Brothers, Inc.	90	—	—
	90	—	—

Schedule of reimbursement of expenses

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Reimbursement of expenses:
CPI Ballpark Investments Ltd.	—	269	20

Schedule of loans to related parties

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Loans to related parties:
China New Energy Group Company	—	86	—

Schedule of loans from and prepayment to related parties

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Loans from related parties:
Lantian	—	—	402
Xiamen Youen	1,263	572	212
Sanming Youxin	—	—	1,420
Repayment of loans from related parties:
Xiamen Youen	—	69	—
Sanming Youxin	—	—	5,585

Schedule of related party balances

	December 31,
	2012		2013
	US$		US$
Amounts due from related parties:
China New Energy Group Company	86		—
Lantian	1,338		1,379
Less: Allowance for doubtful accounts	(1,338	)	(1,379	)
	86		—
Amounts due to related parties:
CPI Ballpark Investments Ltd.	2		1
Nanping City Xingshui Co., Ltd.	1,494		1,540
Lantian	—		408
Xiamen Youen	11,209		—
Sanming Youxin	—		7,542
	12,705		9,491

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BORROWINGS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Borrowings
Short-term loans	$ 11,973	$ 21,676
Long-term, Current portion	38,337	35,537
Long-term, Non-current portion	211,723	212,970
Total borrowings	262,033	270,183
Long-term loans	250,060	248,507
Benchmark rate used for long-term loans	People's Bank of China	People's Bank of China
Weighted average interest rate on the long-term loans (as a percent)	6.88%	6.96%
Long-term loans guarantee by the third parties	6,069	17,278
Long-term loans guarantee by the related parties	39,446	10,978
Long-term loans secured by a pledge of property, plant, and equipment	224,310	237,752
Long-term loans secured by a pledge of proceeds from future electricity sales	172,838	171,740
Maturities of long-term loans
2014	38,337
2015	33,835
2016	34,071
2017	33,026
2018	27,532
Thereafter	83,259
Total	250,060	248,507
Property, plant and equipment
Borrowings
Value of pledged property, plant and equipment	567,035	564,563
Guangsha Construction Group Co., Ltd.
Borrowings
Long-term loans guarantee by the third parties	6,069	10,119
Fujian Taiyu Investment (Group) Co., Ltd.
Borrowings
Long-term loans guarantee by the third parties		7,159
Shaowu City Jinling Power Generation Co., Ltd. and Nanping City Xingshui Co., Ltd.
Borrowings
Long-term loans guarantee by the related parties	3,936	4,455
Fujian Taiyu Investment (Group) Co., Ltd., Shaowu City Jinling Power Generation Co., Ltd. and Xiamen Youen Hydropower Development Co., Ltd.
Borrowings
Long-term loans guarantee by the related parties		6,523
Sanming Youxin Electricity Co., Ltd.
Borrowings
Long-term loans guarantee by the related parties	35,510
Wuliting
Borrowings
Long-term loans secured by a pledge of equity interest	20,502	20,683
Wangkeng | Industrial Bank of Fujian | Fujian Huabang
Borrowings
Short-term loans	3,773
Annual interest rate on short-term loans (as a percent)	8.40%
Liyuan
Borrowings
Long-term loans secured by a pledge of equity interest	4,277	6,431
Dazhaihe
Borrowings
Long-term loans secured by a pledge of equity interest	3,936
Secured
Borrowings
Short-term loans	11,973	21,676
Long-term, Current portion	38,337	35,537
Long-term, Non-current portion	211,723	212,970
Secured | Jinling
Borrowings
Short-term loans		5,823
Secured | Jinling | Agricultural Bank of China | Property, plant and equipment
Borrowings
Short-term loans	3,280	3,437
Annual interest rate on short-term loans (as a percent)	8.40%
Secured | Jinling | Agricultural Bank of China | Wangkeng
Borrowings
Short-term loans		2,386
Secured | Jinling | Agricultural Bank of China | Minimum | Property, plant and equipment
Borrowings
Annual interest rate on short-term loans (as a percent)		7.80%
Secured | Jinling | Agricultural Bank of China | Minimum | Wangkeng
Borrowings
Annual interest rate on short-term loans (as a percent)		7.20%
Secured | Jinling | Agricultural Bank of China | Maximum | Property, plant and equipment
Borrowings
Annual interest rate on short-term loans (as a percent)		8.528%
Secured | Jinling | Agricultural Bank of China | Maximum | Wangkeng
Borrowings
Annual interest rate on short-term loans (as a percent)		7.80%
Secured | Wuliting | Zhejiang Chouzhou Commercial Bank | Yingchuan | Property, plant and equipment, and management rights
Borrowings
Short-term loans	3,280
Annual interest rate on short-term loans (as a percent)	10.80%
Secured | Yingchuan | Shanghai Pudong Development Bank | Wuliting
Borrowings
Short-term loans		795
Annual interest rate on short-term loans (as a percent)		9.60%
Secured | Ruiyang
Borrowings
Short-term loans		4,773
Secured | Ruiyang | Shanghai Pudong Development Bank | Yingchuan | Property, plant and equipment of Zhougongyuan
Borrowings
Short-term loans		1,591
Annual interest rate on short-term loans (as a percent)		15.00%
Secured | Ruiyang | Shanghai Pudong Development Bank | Wuliting | Property, plant and equipment of Jiulongshan
Borrowings
Short-term loans		3,182
Annual interest rate on short-term loans (as a percent)		18.00%
Secured | Binglangjiang | Agricultural Bank of China | Property, plant and equipment
Borrowings
Short-term loans	1,640
Annual interest rate on short-term loans (as a percent)	7.80%
Secured | Binglangjiang | China Construction Bank | Proceeds from future electricity sales
Borrowings
Short-term loans		1,101
Annual interest rate on short-term loans (as a percent)		7.00%
Secured | Zhougongyuan | Shanghai Pudong Development Bank | Certificate of deposit
Borrowings
Short-term loans		2,243
Annual interest rate on short-term loans (as a percent)		5.40%
Secured | Hengda | Agricultural Bank of China | Note receivable
Borrowings
Short-term loans		623
Annual interest rate on short-term loans (as a percent)		6.29%
Face amount of notes receivable		636
Secured | Wangkeng | Industrial Bank of Fujian | Yuanping
Borrowings
Short-term loans		3,818
Annual interest rate on short-term loans (as a percent)		8.70%
Secured | CHC HK | Agricultural Bank of China | Certificate of deposit of Fujian Huabang
Borrowings
Short-term loans		$ 2,500
Annual interest rate on short-term loans (as a percent)		4.64%

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2013

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

27. RELATED PARTY TRANSACTIONS

The principal related parties with which the Group had transactions during the years presented are as follows:

Name of related parties	Relationship with the Group
China Hydro LLC	A shareholder of the Company
CPI Ballpark Investments Ltd.	A shareholder of the Company
Kuhns Brothers, Inc.	A company owned by the former CEO, who resigned on September 30, 2012
China New Energy Group Company	A company controlled by the former CEO, who resigned on September 30, 2012
Lantian	Noncontrolling interest in Wuyue
Nanping City Xingshui Co., Ltd.	Noncontrolling interest in Jinlong
Xiamen Youen Hydropower Development Co., Ltd.(“Xiamen Youen”)	Noncontrolling interest in Jintang and Jinwei before June 23, 2013
Sanming Youxin Electric Power Industrial Co., Ltd. (“Sanming Youxin”)	Noncontrolling interest in Jintang and Jinwei after June 23, 2013

(a) The Company had the following related party transactions during the years presented:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Expense paid on behalf by related parties:
Kuhns Brothers, Inc.	90	—	—
	90	—	—

During the year ended December 31, 2011, Kuhns Brothers, Inc. paid US$90 of miscellaneous expenses on behalf of the Company. The amounts were fully repaid by the Company as of December 31, 2012.

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Reimbursement of expenses:
CPI Ballpark Investments Ltd.	—	269	20

During the years ended December 31, 2012 and 2013, the Company recorded expenses of US$269 and US$20 incurred by a shareholder in connection with the extraordinary shareholders meeting held on September 28, 2012 for the election of director nominees and certain administrative expenses, respectively.

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Loans to related parties:
China New Energy Group Company	—	86	—

During the year ended December 31, 2012, the Company provided a short-term loan amounting to US$86 to China New Energy Group Company. The short-term loan is unsecured, interest-free and repayable on demand.  During the year ended December 31, 2013, China New Energy Group Company was no longer a related party of the Company and the short-term loan provided was reclassified to “Prepayments and other current assets” on the consolidated balance sheets.

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Loans from related parties:
Lantian	—	—	402
Xiamen Youen	1,263	572	212
Sanming Youxin	—	—	1,420
Repayment of loans from related parties:
Xiamen Youen	—	69	—
Sanming Youxin	—	—	5,585

During the year ended December 31, 2011, the Company obtained short-term borrowings amounting to US$1,263 from Xiamen Youen. During the year ended December 31, 2012, US$69 was repaid and additional short-term borrowings of US$572 were obtained from Xiamen Youen. During the year ended December 31, 2013, additional short-term borrowings of US$212 was obtained from Xiamen Youen.

During the year ended December 31, 2013, the Company obtained short-term borrowings amounting to US$1,420 and US$402 from Sanming Youxin and Lantian, respectively.

All loans from related parties are unsecured, interest-free and repayable on demand.

(b) The Company had the following related party balances as of December 31, 2012 and 2013:

	December 31,
	2012		2013
	US$		US$
Amounts due from related parties:
China New Energy Group Company	86		—
Lantian	1,338		1,379
Less: Allowance for doubtful accounts	(1,338	)	(1,379	)
	86		—
Amounts due to related parties:
CPI Ballpark Investments Ltd.	2		1
Nanping City Xingshui Co., Ltd.	1,494		1,540
Lantian	—		408
Xiamen Youen	11,209		—
Sanming Youxin	—		7,542
	12,705		9,491

Amounts due from related parties as of December 31, 2013 represent payments made on behalf of Lantian by the Company for the construction of Wuyue’s hydroelectric project in 2010. The Company made a full bad debt provision on the balance due to the abandonment of the Wuyue hydroelectric project.

All balances with related parties as of December 31, 2013 are unsecured, interest free and repayable on demand.

Amounts due to Xiamen Youen of US$11,593 became amounts due to Sanming Youxin upon the transfer of noncontrolling interest in Jintang and Jinwei from Xiamen Youen to Sanming Youxin on June 23, 2013.  During the year ended December 31, 2013, US$5,585 was repaid by the Company.

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INCOME TAX EXPENSE (Tables)

12 Months Ended

Dec. 31, 2013

INCOME TAX EXPENSE

Schedule of (loss) income before income taxes

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cayman Islands	(17,593	)	(7,962	)	(2,943	)
Hong Kong	(659	)	(680	)	(480	)
PRC	(35,229	)	10,037		4,379
	(53,481	)	1,395		956

Schedule of income tax expenses

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Current income tax expense	2,113		7,013		3,956
Deferred income tax benefit	(586	)	(562	)	(482	)
Income tax expense	1,527		6,451		3,474

Schedule of reconciliation of the effective income tax provisions

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Taxation at PRC statutory tax rate of 25%	(13,370	)	349		239
Effect of non-PRC entities not subject to income tax	4,564		2,161		856
Effect of tax holiday	—		(466	)	(8	)
Effect of preferential tax rate	(248	)	(14	)	(119	)
Current and deferred tax rate differential	1,015		1,167		762
Deemed interest income	1,010		276		46
Non-deductible expenses	4,337		3,041		1,447
Change in valuation allowance	3,818		575		1,041
Impact of changes in enacted tax rates	(325	)	—		—
Prior year tax audit adjustment	190		—		—
PRC withholding tax on the outside basis difference of the discontinued operations	136		—		—
Provision for (reversal of) PRC dividend withholding tax	400		(296	)	300
Effect of changes in the tax basis of property, plant and equipment	—		(225	)	(391	)
Reduction to unrecognized tax benefits due to lapse of statute of limitations	—		(117	)	(699	)
Income tax expense	1,527		6,451		3,474
Effective tax rate (%)	(2.86	)%	462.44	%	363.39	%

Schedule of aggregate amount and effects of tax holidays on basic and diluted loss per share

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Aggregate amount	—	466	8
Basic and diluted	—	0.003	—

Schedule of reconciliation of accrued unrecognized tax benefits

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Balance as of January 1	3,743		6,093		6,077
Addition for tax positions taken in the current year	459		396		464
Reclassified from income tax payable for tax positions of prior years	2,336		1,138		1729
Reduction for tax positions of prior years	(87	)	(171	)	(27	)
Lapse of statute of limitations	—		(117	)	(669	)
Reclassified to liabilities directly associated with the assets classified as held-for-sale or disposal of discontinued operations	(618	)	(1,276	)	—
Foreign currency translation	260		14		211
Balance as of December 31	6,093		6,077		7,785

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DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

12 Months Ended

Dec. 31, 2013

DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

14. DEFERRED TAX ASSETS ANDDEFERRED TAX LIABILITIES

The significant components of deferred tax assets and deferred tax liabilities of the Company are as follows:

	December 31,
	2012		2013
	US$		US$
Deferred tax assets—current
Allowance for uncollectible other receivables	747		770
Accrued water resource fee	332		316
Accrued expenses	706		985
Other payable	622		762
Deferred tax assets—current	2,407		2,833
Valuation allowance	(748	)	(839	)
Net deferred tax assets—current	1,659		1,994
Deferred tax assets—non-current
Net operating loss carryforwards	1,746		2,822
Depreciation of property, plant and equipment	812		948
Provision for impairment allowance	3,481		3,599
Others	10		10
Deferred tax assets—non-current	6,049		7,379
Valuation allowance	(4,720	)	(5,853	)
Net deferred tax asset—non-current	1,329		1,526
Deferred tax liabilities—current
Undistributed earnings of a foreign subsidiary	—		(300	)
Deferred tax liabilities—non-current
Fair value step-up of property, plant and equipment	(23,279	)	(23,647	)
Fair value step-up of intangible assets	(1,066	)	(1,073	)
Deferred tax liabilities—non-current	(24,345	)	(24,720	)

The Group records a valuation allowance on its deferred tax assets that is sufficient to reduce the deferred tax assets to an amount that is more likely than not to be realized. Future reversal of the valuation allowance will be recognized either when the benefit is realized or when it has been determined that it is more likely than not that the benefit in future earnings will be realized.

The Group recognized an increase in valuation allowance of US$3,818, US$575 and US$1,041 during the years ended December 31, 2011, 2012 and 2013, respectively. Foreign currency translation adjustments of US$69, US$12 and US$183 on valuation allowance were recognized in accumulated other comprehensive income during the years ended December 31, 2011, 2012 and 2013, respectively.

Net operating loss carryforward amounted to US$22,365 as of December 31, 2013, of which US$452, US$1,361, US$5,972 US$7,560 and US$7,020 will expire in years 2014, 2015, 2016, 2017 and 2018, respectively.

Apart from the amount disclosed above related to PRC dividend withholding tax on the undistributed earnings of a foreign subsidiary, deferred tax liabilities have not been provided on the undistributed earnings amounting US$29,260 and US$39,541 of the Company’s other foreign subsidiaries as of December 31, 2012 and 2013, respectively, as the Company intends to indefinitely reinvest such earnings into its foreign subsidiaries. Under the prevailing income tax law of the PRC and its relevant regulations, dividends paid by PRC enterprises out of profits earned after December 31, 2007 to non-PRC tax resident investors are subject to PRC withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries. The amounts of unrecognized deferred tax liabilities for the foreign subsidiaries’ undistributed earnings were US$2,926 and US$3,954 as of December 31, 2012 and 2013, respectively.

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CONDENSED FINANCIAL INFORMATION OF THE COMPANY (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statements of cash flows
Cash flows used in operating activities	$ 19,410	$ 22,700	$ 1,644
Cash flows (used in) provided by investing activities	9,905	(2,784)	(24,734)
Cash flows provided by financing activities	(24,428)	(20,362)	(2,041)
Net (decrease) increase in cash and cash equivalents	4,887	(446)	(25,131)
Cash and cash equivalents at the beginning of the year	7,967	8,402	33,457
Cash and cash equivalents at the end of the year	14,165	7,967	8,402
Cash dividends paid to parent company
Cash dividends paid to parent company	0	1,039	0
Company
Statements of cash flows
Cash flows used in operating activities	(2,433)	(3,651)	(8,740)
Cash flows (used in) provided by investing activities	2,471	931	(6,500)
Cash flows provided by financing activities	26		10,036
Net (decrease) increase in cash and cash equivalents	64	(2,720)	(5,204)
Cash and cash equivalents at the beginning of the year	164	2,884	8,088
Cash and cash equivalents at the end of the year	$ 228	$ 164	$ 2,884

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BASIC AND DILUTED (LOSS) INCOME PER SHARE

12 Months Ended

Dec. 31, 2013

BASIC AND DILUTED (LOSS) INCOME PER SHARE

BASIC AND DILUTED (LOSS) INCOME PER SHARE

19.  BASIC AND DILUTED (LOSS) INCOME PER SHARE

Basic and diluted (loss) income per share for the years ended December 31, 2011, 2012 and 2013 are calculated as follows:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Numerator for basic and diluted loss per share:
Loss attributable to ordinary shareholders	(45,389	)	(1,243	)	(2,221	)
Denominator:
Weighted average number of ordinary shares outstanding—basic	156,505,076		161,989,097		162,071,626
Dilutive effect of convertible securities:
Warrants	—		—		—
Share options	—		—		—
Weighted average number of ordinary shares outstanding—diluted	156,505,076		161,989,097		162,071,626
(Loss) income per share—basic and diluted:
From continuing operations	(0.29	)	(0.03	)	(0.01	)
From discontinued operations	(0.00	)	0.02		—
Loss per share—basic and diluted	(0.29	)	(0.01	)	(0.01	)

The Group had warrants and share options outstanding which could potentially dilute basic income per share in the future but these securities were excluded from the computation of diluted loss per share in the years ended December 31, 2011, 2012 and 2013 as their effects would have been anti-dilutive.

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WARRANTS (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified		0 Months Ended
	Dec. 31, 2013	Aug. 18, 2011 Vicis' Amended Warrants Warrants classified as liabilities	Oct. 27, 2011 Shoen's Amended Warrants Warrants classified as liabilities	Dec. 31, 2012 Vicis'/Shoen's Amended Warrants Warrants classified as liabilities	Dec. 31, 2011 Vicis'/Shoen's Amended Warrants Warrants classified as liabilities	Jan. 25, 2010 IPO Warrants Warrants classified as equity	Jul. 19, 2011 Underwriter's Warrants	Jan. 25, 2010 Underwriter's Warrants Warrants classified as equity
Assumptions used in estimating the fair values of the outstanding warrants at commitment date
Average risk-free rate of return (as a percent)		0.24%	0.24%	0.14%	0.24%	2.40%		2.40%
Expected term/life		2 years 4 months 17 days	2 years 2 months 5 days	1 year	2 years	4 years 11 months 26 days		4 years 11 months 26 days
Volatility rate (as a percent)		52.52%	51.20%	88.40%	72.00%	66.00%		66.00%
Fair value of ordinary share (in dollars per share)		$ 0.14	$ 0.04	$ 0.57	$ 0.04	$ 4.93		$ 4.93
Estimated forfeiture rate (as a percent)		0.00%	0.00%	0.00%	0.00%	0.00%		0.00%
Additional disclosure
Shares that can be purchased by warrants outstanding (in shares)	19,440,000
Number of warrants with exercise price below the fair value of the ordinary shares	0
Aggregate intrinsic value of warrants	$ 0
Vesting period of warrants after the IPO							540 days

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OTHER NON-CURRENT ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

OTHER NON-CURRENT ASSETS

Schedule of other non-current assets

	December 31,
	2012	2013
	US$	US$
Long-term prepaid debt insurance cost	315	311
Long-term prepaid rental expenses	118	3
Long-term prepaid compensation cost	337	230
Deposits for financing arrangement	859	1,358
Unamortized service fees	187	299
Long-term prepaid guarantee fee	197	19
Total	2,013	2,220

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SEGMENT AND GEOGRAPHIC INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 item	Dec. 31, 2012	Dec. 31, 2011
Segment reporting
Number of operating segments	4
Number of reportable segments	4
Number of geographic segments	0
Segment and geographic information
Revenues	$ 74,517	$ 85,388	$ 54,597
Cost of revenues	(35,357)	(35,795)	(31,314)
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(13,258)	(20,348)	(28,896)
Impairment loss on goodwill	0	0	(11,388)
Impairment loss on long-lived assets	(3,549)	0	(11,590)
Interest income	98	84	101
Interest expense	(22,568)	(28,070)	(24,757)
Changes in fair value of warrant liabilities	839	(399)	951
Exchange (loss) gain	(41)	28	(851)
Other (loss) income, net	275	507	(334)
Income tax benefit (expense)	(3,474)	(6,451)	(1,527)
Net loss from continuing operations	(2,518)	(5,056)	(55,008)
Income (Loss) from discontinued operations (net of income tax expense of US$399, US$101 and US$152 for the year ended on December 31, 2012, 2011 and 2010, respectively)		1,140	(282)
Gain on disposal of discontinued operations (net of income tax expense of US$959)		2,767
Net (loss) income from discontinued operations		3,907	(282)
Net loss	(2,518)	(1,149)	(55,290)
Net loss (income) attributable to noncontrolling interests	297	(94)	9,901
Net loss attributable to China Hydroelectric Corporation shareholders	(2,221)	(1,243)	(45,389)
Total assets	737,242	754,316	814,915
Total liabilities	(334,613)	(361,801)	(420,037)
Capital expenditures	1,627	7,496	7,532
Depreciation and amortization expenses	23,524	23,068	22,046
Share-based compensation expense	211	166	10,479
Income tax expense (benefit) from discontinued operations	0	399	101
Income tax expense, gain on disposal of discontinued operations	0	959	0
Operating Segments | Yunnan Province
Segment and geographic information
Revenues	14,608	13,460	13,806
Cost of revenues	(9,069)	(8,540)	(8,349)
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(1,534)	(2,108)	(1,519)
Impairment loss on goodwill			(5,260)
Interest income	340	236	180
Interest expense	(7,726)	(9,039)	(8,468)
Exchange (loss) gain			(28)
Other (loss) income, net	37	136	(285)
Income tax benefit (expense)	43	72	(142)
Net loss from continuing operations	(3,301)	(5,783)	(10,065)
Net loss	(3,301)	(5,783)	(10,065)
Net loss attributable to China Hydroelectric Corporation shareholders	(3,301)	(5,783)	(10,065)
Total assets	197,995	192,843	200,681
Total liabilities	(117,524)	(131,872)	(133,670)
Capital expenditures	124	877	1,763
Depreciation and amortization expenses	5,633	5,546	5,181
Operating Segments | Sichuan Province
Segment and geographic information
Revenues	373	598	555
Cost of revenues	(634)	(689)	(568)
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(193)	(269)	(86)
Impairment loss on long-lived assets	(3,549)
Interest income	365	121	10
Interest expense	(557)	(260)
Other (loss) income, net		22
Income tax benefit (expense)	15	(5)	5
Net loss from continuing operations	(4,180)	(482)	(84)
Net loss	(4,180)	(482)	(84)
Net loss attributable to China Hydroelectric Corporation shareholders	(4,180)	(482)	(84)
Total assets	21,135	22,790	15,896
Total liabilities	(7,144)	(8,092)	(753)
Capital expenditures	29	1,384	1,128
Depreciation and amortization expenses	482	477	344
Operating Segments | Zhejiang Province
Segment and geographic information
Revenues	36,000	41,616	25,382
Cost of revenues	(16,610)	(16,978)	(15,034)
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(1,909)	(2,569)	(1,148)
Interest income	1,801	838	128
Interest expense	(10,128)	(10,550)	(8,565)
Other (loss) income, net	(18)	(81)	(36)
Income tax benefit (expense)	(2,245)	(3,831)	(843)
Net loss from continuing operations	6,891	8,445	(116)
Net loss	6,891	8,445	(116)
Net loss attributable to China Hydroelectric Corporation shareholders	6,891	8,445	(116)
Total assets	346,886	344,923	318,616
Total liabilities	(128,690)	(145,312)	(138,688)
Capital expenditures	233	3,973	3,031
Depreciation and amortization expenses	10,437	10,136	9,837
Operating Segments | Fujian Province
Segment and geographic information
Revenues	23,536	29,714	14,854
Cost of revenues	(12,393)	(13,133)	(10,874)
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(2,423)	(3,413)	(2,276)
Impairment loss on goodwill			(6,128)
Interest income	702	1,713	1,709
Interest expense	(7,160)	(10,787)	(9,669)
Exchange (loss) gain		(1)	(244)
Other (loss) income, net	91	420	(158)
Income tax benefit (expense)	(843)	(2,480)	115
Net loss from continuing operations	1,510	2,033	(12,671)
Income (Loss) from discontinued operations (net of income tax expense of US$399, US$101 and US$152 for the year ended on December 31, 2012, 2011 and 2010, respectively)		959	(631)
Net (loss) income from discontinued operations		959	(631)
Net loss	1,510	2,992	(13,302)
Net loss (income) attributable to noncontrolling interests	297	(94)	2,546
Net loss attributable to China Hydroelectric Corporation shareholders	1,807	2,898	(10,756)
Total assets	288,735	289,702	374,296
Total liabilities	(123,843)	(129,627)	(185,330)
Capital expenditures	1,228	1,305	645
Depreciation and amortization expenses	6,839	6,767	6,569
Unallocated
Segment and geographic information
Cost of revenues	(8)
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(7,154)	(11,989)	(23,867)
Impairment loss on long-lived assets			(11,601)
Interest income	2	3	66
Interest expense	(109)	(247)	(73)
Changes in fair value of warrant liabilities	839	(399)	951
Exchange (loss) gain	(41)	29	(579)
Other (loss) income, net	3,477	3,736	4,033
Income tax benefit (expense)	(444)	(207)	(662)
Net loss from continuing operations	(3,438)	(9,074)	(31,732)
Gain on disposal of discontinued operations (net of income tax expense of US$959)		2,767
Net (loss) income from discontinued operations		2,767
Net loss	(3,438)	(6,307)	(31,732)
Net loss (income) attributable to noncontrolling interests			7,355
Net loss attributable to China Hydroelectric Corporation shareholders	(3,438)	(6,307)	(24,377)
Total assets	437,477	426,518	421,650
Total liabilities	(28,315)	(27,799)	(20,498)
Capital expenditures	13	15	970
Depreciation and amortization expenses	133	142	115
Eliminations
Segment and geographic information
Cost of revenues	3,357	3,545	3,511
General and administrative expenses (including share-based compensation expense of US$10,479, US$166 and US$211 in 2011, 2012 and 2013)	(45)
Impairment loss on long-lived assets			11
Interest income	(3,112)	(2,827)	(1,992)
Interest expense	3,112	2,813	2,018
Other (loss) income, net	(3,312)	(3,726)	(3,888)
Net loss from continuing operations		(195)	(340)
Income (Loss) from discontinued operations (net of income tax expense of US$399, US$101 and US$152 for the year ended on December 31, 2012, 2011 and 2010, respectively)		181	349
Net (loss) income from discontinued operations		181	349
Net loss		(14)	9
Net loss attributable to China Hydroelectric Corporation shareholders		(14)	9
Total assets	(554,986)	(522,460)	(516,224)
Total liabilities	70,903	80,901	58,902
Capital expenditures		$ (58)	$ (5)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of assets and liabilities measured at fair value on a recurring basis

All assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are summarized below:

	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)
	US$	US$	US$
Money market funds in cash equivalent	8	—	—
Warrant liabilities (Note 17)	—	—	839
	8	—	839

Schedule of reconciliation of warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs

	Warrant liabilities
	US$
Balance as of December 31, 2011	440
Realized or unrealized losses	399
Balance as of December 31, 2012	839
Realized or unrealized gain	(839	)
Balance as of December 31, 2013	—

Summary of assets and liabilities measured at fair value on a nonrecurring basis

	Carrying valueat December 31, 2013	Quoted price in active market for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)	Total loss
	US$	US$	US$	US$
Property, plant and equipment	4,098	—	—	—	(4,098	)

Schedule of estimated useful lives of property, plant and equipment

Dams and reservoirs	30-49 years
Buildings	8-50 years
Machinery	1-30 years
Transportation equipment	1-11 years
Electronic equipment and others	1-15 years

Schedule of estimated useful life for the intangible assets

The estimated useful lives for the intangible assets as of December 31, 2013 were as follows:

Development right of Binglangjiang Phase II	30 years
Dam use right of Dongguan	40 years
Software	5 years

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SHARE-BASED PAYMENT (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
SHARE-BASED PAYMENT
Total compensation cost recognized	$ 211	$ 166	$ 10,479
General and administrative expenses
SHARE-BASED PAYMENT
Total compensation cost recognized	$ 211	$ 166	$ 10,479

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Share-based compensation expense	$ 211	$ 166	$ 10,479
Income tax expense, discontinued operations	0	399	101
Income tax expense, gain on disposal of discontinued operations	0	959	0
Foreign currency translation adjustments, income tax expense	0	0	0
Defined benefit pension plans, income tax expense	$ 0	$ 0	$ 0
Number of ordinary shares represented by each ADS	3	3	3

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Aggregate termination benefits payable	$ 875	$ 1,750
Guarantee deposits from original shareholders of acquired subsidiaries	1,394	1,358
Loans from third parties	4,330	13,627
John Kuhns
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Aggregate termination benefits payable	1,250
Period over which the company shall pay aggregate termination benefits	24 months
Mary Fellows
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Aggregate termination benefits payable	500
Period over which the company shall pay aggregate termination benefits	24 months
Yingchuan
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Guarantee deposits from original shareholders of acquired subsidiaries	90	87
Jinling
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Guarantee deposits from original shareholders of acquired subsidiaries	1,304	1,271
Loans from third parties		9,139
Jinling | 24% loan from non-financial institutions
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Loans from third parties		32
Annual interest rate on short-term loans (as a percent)		24.00%
Jinling | 18% loan from non-financial institutions
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Loans from third parties		2,743
Annual interest rate on short-term loans (as a percent)		18.00%
Jinling | 32% loan from non-financial institutions
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Loans from third parties		6,364
Annual interest rate on short-term loans (as a percent)		32.00%
Jinlong
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Loans from third parties	4,330	4,121
Annual interest rate on short-term loans (as a percent)	18.00%
Hengda
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Loans from third parties		240
Binglangjiang
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Loans from third parties		127
Dazhaihe, Hengda, Xineng and Banzhu
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Amounts due to original shareholders of Dazhaihe, Hengda, Xineng and Banzhu for their entitlement to net working capital surplus		1,271
Amounts due to original shareholders of acquired subsidiaries for borrowings before acquisition date	$ 1,313

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ACQUISITIONS

12 Months Ended

Dec. 31, 2013

ACQUISITIONS

ACQUISITIONS

3. ACQUISITIONS

(a) Acquisition of a subsidiary during the year ended December 31, 2011

During the year ended December 31, 2011, the Company completed the acquisition of 100% ownership interest in Dazhaihe. This acquisition was in line with the Company’s plan to further expand its hydroelectric power generation capacity in the PRC.

On November 6, 2010, Xiaopengzu entered into an equity transfer purchase agreement with seven individual shareholders to acquire 100% of the equity interest in Dazhaihe. The total purchase consideration for the acquisition was US$9,019 (RMB59,000) cash. The hydroelectric project of Dazhaihe is located in Mengqian County, Yunnan Province, and has been in operation since September 2008. The acquisition was completed and Xiaopengzu took effective control of Dazhaihe on April 10, 2011. The acquisition of Dazhaihe meets the definition of a business acquisition and the results of operations of the acquired business have been included in the Company’s consolidated financial statements since April 10, 2011.

The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition on April 10, 2011.

	US$
Cash purchase price	9,019
Total purchase consideration	9,019
Cash	59
Property, plant and equipment, net	11,540
Other assets	555
Goodwill	6,646
Total assets acquired	18,800
Other liabilities	(9,303	)
Deferred tax liabilities — non-current	(478	)
Total liabilities assumed	(9,781	)
Net assets acquired	9,019

The US$6,646 goodwill from the acquisition of Dazhaihe was assigned to the Yunnan Province segment. The goodwill recognized is primarily attributable to expected synergies and the assembled workforce of Dazhaihe. None of the goodwill is expected to be deductible for tax purposes.

The Company recognized US$28 of acquisition-related costs that were expensed in the year ended December 31, 2011. These costs are included in “General and administrative expenses” on the consolidated statements of comprehensive income.

The amounts of revenue and net loss of Dazhaihe included in the Company’s consolidated statement of comprehensive income from April 10, 2011, the acquisition date, to December 31, 2011 were as follows:

	US$
Revenue	831
Net loss	(717	)

(b) Acquisition of noncontrolling interest

On January 14, 2011, Fujian Huabang, a wholly-owned subsidiary of the Company, completed the acquisition of the remaining 10% equity interest of Wangkeng pursuant to an equity transfer purchase agreement with Sanming Chenyang Hydroelectric Co., Ltd. dated November 22, 2010. The purchase consideration for the acquisition was US$5,939 (RMB38,967). The Company accounted for the purchase of subsidiary shares from the noncontrolling interest as an equity transaction in accordance with ASC 810. The carrying amount of the noncontrolling interest was adjusted from US$1,032 (RMB6,777) to nil to reflect the noncontrolling interest holder’s reduced ownership interest in Wangkeng’s net assets. The difference between the consideration paid by the Company to the noncontrolling interest holder and the adjustment to the carrying amount of the noncontrolling interest in Wangkeng was recognized in additional paid-in capital. Upon the completion of this transaction, Wangkeng became a wholly-owned subsidiary of the Group.

The following table shows the effects of changes in the Company’s ownership interest in Wangkeng on the Company’s equity:

	For the yearendedDecember 31,
	2011
	US$
Net income (loss) attributable to the Company	(45,389	)
Decrease in the Company’s paid-in capital for purchase of 10% of equity interest in Wangkeng	(4,907	)
Net transfers to noncontrolling interest	(4,907	)
Change from net income (loss) attributable to the Company and transfers to noncontrolling interest	(50,296	)

During the years ended December 31, 2012 and 2013, the Company did not complete any acquisition of hydropower projects.

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INTEREST EXPENSE (Tables)

12 Months Ended

Dec. 31, 2013

INTEREST EXPENSE.

Schedule of interest expense

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Interest on loans	18,371	20,017	19,091
Accrued interest on unrecognized tax benefits (Note 13)	457	576	68
Amortization of debt issuance costs	19	191	175
Interest to original shareholders of acquired subsidiaries	2,503	1,126	240
Interest on loans from third parties	2,567	4,757	1,683
Bank charges	672	1,340	1,067
Others	168	63	244
Total	24,757	28,070	22,568

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INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Intangible assets
Amortization expenses	$ (178)	$ (199)	$ (213)
Continuing operations | Cost of revenues
Intangible assets
Amortization expenses	(168)	(45)	(45)
Continuing operations | General and administrative expenses
Intangible assets
Amortization expenses	(10)	(120)	(116)
Intangible assets, excluding land use rights
Intangible assets
Gross Carrying Value	4,758	4,668
Accumulated Amortization	(897)	(719)
Foreign Currency Translation Adjustment	853	711
Total	4,714	4,660
Intangible assets, excluding land use rights | Continuing operations
Intangible assets
Amortization expenses	(178)	(165)	(161)
Software
Intangible assets
Estimated useful life	5 years
Gross Carrying Value	90
Accumulated Amortization	(11)
Foreign Currency Translation Adjustment	1
Total	80
Binglangjiang | Development right
Intangible assets
Estimated useful life	30 years
Gross Carrying Value	2,909	2,909
Accumulated Amortization	(749)	(629)
Foreign Currency Translation Adjustment	706	619
Total	2,866	2,899
Dongguan hydropower project of Jinling | Dam use right
Intangible assets
Estimated useful life	40 years
Gross Carrying Value	1,759	1,759
Accumulated Amortization	(137)	(90)
Foreign Currency Translation Adjustment	146	92
Total	$ 1,768	$ 1,761

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SHARE-BASED PAYMENT (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended					12 Months Ended
	Aug. 27, 2013	Dec. 01, 2012	May 01, 2012	Dec. 28, 2011	Aug. 18, 2008	Dec. 31, 2013 item	Dec. 31, 2012	Dec. 31, 2011
SHARE-BASED PAYMENT
Ordinary shares authorized to be purchased					12,000,000
Share-based compensation cost recognized						$ 211	$ 166	$ 10,479
Number of Options
Exercised (in shares)						(110,568)
Maximum
SHARE-BASED PAYMENT
Period for approval of the Plan by shareholders from the date on which the Plan is adopted by the Board					12 months
Share options
SHARE-BASED PAYMENT
Contractual life			5 years
Share options vest and become exercisable on the first anniversary of the grant date (as a percent)			50.00%
Share options vest and become exercisable on the second and third anniversary of the grant date (as a percent)			25.00%
Exercise period under settlement agreement, maximum, from December 15, 2012							90 days
Incremental compensation cost on modification				0
Share-based compensation cost recognized				7,620
Weighted-Average Exercise Price
Granted (in dollars per share)			$ 0.62
Aggregate Intrinsic Value
Total intrinsic value of options exercised						62	0	0
Share options | Directors
Number of Options
Granted (in shares)					40,000
Expired (in shares)						(40,000)
Share options | Consultants
SHARE-BASED PAYMENT
Contractual life				5 years
Expiration period of options after termination of service				30 days
Number of Options
Granted (in shares)			50,000	9,250	9,250
Exercised (in shares)						(9,250)
Forfeited or cancelled (in shares)				(275,000)
Expired (in shares)						(50,000)
Weighted-Average Exercise Price
Granted (in dollars per share)				$ 0.46
Share options | Employees
SHARE-BASED PAYMENT
Contractual life	5 years	5 years		5 years
Expiration period of options after termination of service				30 days
Share options vest and become exercisable on May 31, 2013 (as a percent)		25.00%
Share options vest and become exercisable on the first, second and third anniversary of the grant date (as a percent)		25.00%
Share options vest and become exercisable on the first, second and third anniversary of the contractual date (as a percent)	33.30%
Number of Options
Outstanding at the beginning of the period (in shares)						3,635,250
Granted (in shares)	900,000	600,000	9,929,998	407,706		1,300,000
Exercised (in shares)						(265,547)
Forfeited or cancelled (in shares)				(10,109,000)		(630,139)
Expired (in shares)					(50,000)
Outstanding at the end of the period (in shares)						4,039,564	3,635,250
Vested and expected to vest (in shares)						3,527,057
Exercisable (in shares)						1,498,674
Weighted-Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)						$ 0.62
Granted (in dollars per share)	$ 0.8474	$ 0.72		$ 0.46		$ 0.89
Exercised (in dollars per share)						$ 0.49
Forfeited or cancelled (in dollars per share)						$ 0.70
Outstanding at the end of the period (in dollars per share)						$ 0.70	$ 0.62
Vested and expected to vest (in dollars per share)						$ 0.71
Exercisable (in dollars per share)						$ 0.62
Weighted-Average Remaining Contractual Life
Outstanding at the beginning of the period						3 years 8 months 19 days	4 years 2 months 1 day
Outstanding at the end of the period						3 years 8 months 19 days	4 years 2 months 1 day
Vested and expected to vest						3 years 8 months 19 days
Exercisable						3 years 4 months 13 days
Aggregate Intrinsic Value
Outstanding at the beginning of the period						38
Outstanding at the end of the period						787	38
Vested and expected to vest						675
Exercisable						409
Weighted-average grant-date fair value (in dollars per share)						$ 0.41	$ 0.19	$ 0.22
Number of employees terminated their employment relationship						8
Number of employees exercised their options						1
Unrecognized share-based compensation						553
Weighted-average vesting period						1 year 9 months 11 days
Assumptions used in estimating the grant-date fair value of options granted
Suboptimal exercise factor (in dollars per share)						$ 1.5	$ 1.5
Risk-free interest rate (as a percent)						1.52%		0.85%
Expected volatility rate (as a percent)						84.86%		71.87%
Expected share option life							5 years	5 years
Estimated forfeiture rate (as a percent)						6.70%
Fair value of ordinary share (in dollars per share)						$ 0.78		$ 0.39
Fair value of options vested						$ 273	$ 0	$ 90
Shares granted having exercise price below the fair value						3,519,283
Share options | Employees | Minimum
Assumptions used in estimating the grant-date fair value of options granted
Risk-free interest rate (as a percent)							0.62%
Expected volatility rate (as a percent)							73.40%
Expected share option life						4 years 7 months 13 days
Fair value of ordinary share (in dollars per share)							$ 0.44
Share options | Employees | Maximum
Assumptions used in estimating the grant-date fair value of options granted
Risk-free interest rate (as a percent)							0.83%
Expected volatility rate (as a percent)							89.21%
Expected share option life						5 years
Fair value of ordinary share (in dollars per share)							$ 0.62
Share options | Senior management
Assumptions used in estimating the grant-date fair value of options granted
Estimated forfeiture rate (as a percent)						6.70%
Share options | Former employees
Number of Options
Exercised (in shares)						(107,700)
Aggregate Intrinsic Value
Cashless exercises (in shares)						65,202
Number of employees exercised their options						3
Share options | One employee
SHARE-BASED PAYMENT
Contractual life	5 years
Share options vest and become exercisable on the first, second and third anniversary of the contractual date (as a percent)	33.30%
Number of Options
Granted (in shares)	400,000
Weighted-Average Exercise Price
Granted (in dollars per share)	$ 0.99

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Changes in fair value of warrant liabilities	Dec. 31, 2012 Changes in fair value of warrant liabilities	Dec. 31, 2012 Warrant liabilities	Dec. 31, 2011 Warrant liabilities
Reconciliation of warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs
Balance at the beginning of the period					$ 839	$ 440
Realized or unrealized gain (losses)			(839)	399
Balance at the end of the period					839	440
Cash and cash equivalents
Restricted cash and cash equivalents	0
Restricted cash
Restriction on cash collateral amount		$ 5,171
Maximum maturity term of Notes receivable	6 months

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ACCUMULATED OTHER COMPREHENSIVE INCOME

12 Months Ended

Dec. 31, 2013

ACCUMULATED OTHER COMPREHENSIVE INCOME

ACCUMULATED OTHER COMPREHENSIVE INCOME

20. ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in the balances of each component of accumulated other comprehensive income for the years ended December 31, 2011, 2012 and 2013 are as follows:

	Foreign currency items		Defined benefit pension plan items		Total
	US$		US$		US$
Balance at December 31, 2010	22,922		—		22,922
Current-period other comprehensive income (loss)	20,079		(33	)	20,046
Balance at December 31, 2011	43,001		(33	)	42,968
Current-period other comprehensive income	954		33		987
Amounts reclassified from accumulated other comprehensive income	(2,358	)	—		(2,358	)
Net current-period other comprehensive (loss) income	(1,404	)	33		(1,371	)
Balance at December 31, 2012	41,597		—		41,597
Current-period other comprehensive income	12,462		—		12,462
Balance at December 31, 2013	54,059		—		54,059

The amounts of foreign currency translation adjustments reclassified from accumulated other comprehensive income represent foreign currency translation adjustments realized in “gain on disposal of discontinued operations” on the consolidated statements of comprehensive income upon the dispositions of Yuanping and Yuheng during the year ended December 31, 2012.

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ACQUISITIONS (Details) In Thousands, unless otherwise specified							9 Months Ended	12 Months Ended		0 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 Yunnan Province USD ($)	Dec. 31, 2012 Yunnan Province USD ($)	Dec. 31, 2011 Yunnan Province USD ($)	Dec. 31, 2011 Dazhaihe USD ($)	Dec. 31, 2011 Dazhaihe USD ($)	Apr. 10, 2011 Dazhaihe Yunnan Province USD ($)	Apr. 10, 2011 Dazhaihe Xiaopengzu USD ($)	Apr. 10, 2011 Dazhaihe Xiaopengzu CNY	Nov. 06, 2010 Dazhaihe Xiaopengzu item
ACQUISITIONS
Ownership interest (as a percent)							100.00%	100.00%
Number of shareholders entered into an equity transfer purchase agreement												7
Estimated fair value of the assets acquired and liabilities assumed at the date of acquisition
Cash purchase price										$ 9,019
Total purchase consideration										9,019	59,000
Cash										59
Property, plant and equipment, net										11,540
Other assets										555
Goodwill	115,960	112,481	135,651	22,265	21,597	21,544			6,646	6,646
Total assets acquired										18,800
Other liabilities										(9,303)
Deferred tax liabilities - non-current										(478)
Total liabilities assumed										(9,781)
Net assets acquired			1,825							9,019
Goodwill expected to be deductible for tax purposes									0
Acquisition-related costs								28
Revenue							831
Net profit/(loss)							$ (717)

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CONDENSED FINANCIAL INFORMATION OF THE COMPANY

12 Months Ended

Dec. 31, 2013

CONDENSED FINANCIAL INFORMATION OF THE COMPANY

CONDENSED FINANCIAL INFORMATION OF THE COMPANY

31. CONDENSED FINANCIAL INFORMATION OF THE COMPANY

The following is the condensed financial information of the Company on a non-consolidated basis:

Balance sheets

	December 31,
	2012		2013
	US$		US$
ASSETS
Current assets:
Cash and cash equivalents	164		228
Amounts due from subsidiaries	10,000		4,130
Prepayments and other current assets	11,616		65
Total current assets	21,780		4,423
Non-current assets:
Property, plant and equipment, net	5		1
Investment in subsidiaries	399,364		427,679
Other non-current assets	—		19
Total non-current assets	399,369		427,699
TOTAL ASSETS	421,149		432,122
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Amounts due to subsidiaries	16,464		19,374
Accrued expense and other current liabilities	4,424		2,549
Amounts due to related parties	2		1
Deferred tax liabilities	—		300
Warrant liabilities	839		—
Total current liabilities	21,729		22,224
Total liabilities	21,729		22,224
Shareholders’ equity:
Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2012 and 2013; 161,989,097 and 162,099,665 shares issued and outstanding as of December 31, 2012 and 2013)	162		162
Additional paid-in capital	517,133		517,370
Accumulated other comprehensive income	41,597		54,059
Accumulated deficit	(159,472	)	(161,693	)
Total shareholders’ equity	399,420		409,898
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	421,149		432,122

Statements of comprehensive income

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Revenues	—		—		—
Cost of revenues	—		—		(7	)
Gross profit	—		—		(7	)
Operating expenses:
General and administrative expenses	(18,247	)	(7,324	)	(3,929	)
Total operating expenses	(18,247	)	(7,324	)	(3,936	)
Operating loss	(18,247	)	(7,324	)	(3,936	)
Equity in (losses) profits of subsidiaries	(27,395	)	3,662		1,022
Interest income	66		3		—
Interest expense	(23	)	(142	)	(4	)
Changes in fair value of warrant liabilities	951		(399	)	839
Exchange (loss) gain	(580	)	30		6
Gain from disposal of subsidiaries	—		3,726		—
Other income, net	375		293		152
Loss before income tax expense	(44,853	)	(151	)	(1,921	)
Income tax expense	(536	)	(1,092	)	(300	)
Net loss	(45,389	)	(1,243	)	(2,221	)
Other comprehensive income (loss), net of income tax expense
Foreign currency translation adjustments	20,079		(1,404	)	12,462
Defined benefit pension plans	(33	)	33		—
Other comprehensive income (loss)	20,046		(1,371	)	12,462
Comprehensive (loss) income	(25,343	)	(2,614	)	10,241

Statements of cash flows

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cash flows used in operating activities	(8,740	)	(3,651	)	(2,433	)
Cash flows (used in) provided by investing activities	(6,500	)	931		2,471
Cash flows provided by financing activities	10,036		—		26
Net (decrease) increasein cash and cash equivalents	(5,204	)	(2,720	)	64
Cash and cash equivalents at the beginning oftheyear	8,088		2,884		164
Cash and cash equivalents at the end oftheyear	2,884		164		228

(a) Basis of presentation

In the Company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. Company-only financial statements should be read in conjunction with the Company’s consolidated financial statements.

The Company records its investment in its subsidiaries under the equity method of accounting as prescribed in ASC 323. Such investment is presented as “Investment in subsidiaries” on the balance sheets and share of the subsidiaries’ losses or profits is presented as “Equity in profits (losses) of subsidiaries” on the statements of comprehensive income.

The subsidiaries paid nil, US$1,039 and nil, dividend to the Company for the years ended December 31, 2011, 2012 and 2013, respectively.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted by reference to the disclosures in the consolidated financial statements.

(b) Commitments

The Company does not have any significant commitments or long-term obligations as of any of the years presented, except for those disclosed in the consolidated financial statements (Note 23).

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INCOME TAX EXPENSE

12 Months Ended

Dec. 31, 2013

INCOME TAX EXPENSE

INCOME TAX EXPENSE

13. INCOME TAX EXPENSE

Cayman Islands

Under the current income tax laws of the Cayman Islands, the Company is not subject to tax on any income or capital gain.

Hong Kong

Under the current income tax laws of Hong Kong, in general, companies are subject to Hong Kong Profits Tax at 16.5% on income arising in or derived from Hong Kong. CHC HK and Sunpower do not derive any income which is subject to Hong Kong Profits Tax since their incorporations. In addition, upon payments of dividends by CHC HK and Sunpower to the Company, no Hong Kong withholding tax will be imposed.

PRC

Effective from January 1, 2008, the PRC’s statutory income tax rate is 25%. The Company’s PRC subsidiaries are subject to income tax at 25% unless otherwise specified.

Pursuant to CaiShui [2012] No. 58, the Company’s PRC subsidiaries which are located in the Western region of the PRC and engaged in hydroelectric power activities are entitled to the preferential tax rate of 15% from 2010 to 2020 and 2-year full income tax exemption followed by 3-year 50% income tax reduction (the “2+3 tax holiday”), respectively. For a domestic enterprise, the 2+3 tax holiday starts from its commencement of business operation. For a foreign investment enterprise, the 2+3 tax holiday starts from its first profit-making year from income tax perspective. Accordingly, the following preferential tax rates are noted:

(i)	Binglangjiang and Husahe are subject to income tax at 15% from 2010 to 2020;
(ii)	Liyuan and Hengda were subject to income tax at 7.5% for 2010 and 2011, and are subject to income tax at 15% from 2012 to 2020;
(iii)	Xineng and Xiaopengzu were tax exempted for 2010, and are subject to income tax at 7.5% from 2011 to 2013, and at 15% from 2014 to 2020; and
(iv)	Based on the local tax authority’s approvals, Dazhaihe was tax exempted for 2010, and is subject to income tax at 7.5% for 2011, at 12.5% for 2012 and 2013, and at 15% from 2014 to 2020.

Further, Banzhu, being a foreign invested production-type enterprise, was entitled to a 2+3 tax holiday which is grandfathered under the prevailing PRC Corporate Income Tax Law (“the CIT Law”) and its relevant regulations. As such, Banzhu is subject to income tax at 12.5% from 2010 to 2012.

In accordance with the prevailing CIT Law and its relevant regulations, enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC territory are considered PRC resident enterprises and subject to the PRC income tax at the rate of 25% on worldwide income. The definition of “place of effective management” refers to an establishment that exercises, in substance, overall management and control over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December 31, 2013, no detailed interpretation or guidance has been issued to define “place of effective management” for non-China-funded overseas enterprises, such as the Company. If the Company’s non-PRC incorporated entities are deemed PRC tax residents, such entities would be subject to PRC tax under the CIT Law. As of December 31, 2013, the Company has analyzed the applicability of this law and has not accrued for PRC tax on such basis. The Company will continue to monitor changes in the interpretation or guidance of this law.

The Group had minimal operations in jurisdictions other than the PRC.

Income (loss) before income tax expense from continuing operations consists of:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Cayman Islands	(17,593	)	(7,962	)	(2,943	)
Hong Kong	(659	)	(680	)	(480	)
PRC	(35,229	)	10,037		4,379
	(53,481	)	1,395		956

Income tax expense consists of:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Current income tax expense	2,113		7,013		3,956
Deferred income tax benefit	(586	)	(562	)	(482	)
Income tax expense	1,527		6,451		3,474

A reconciliation of the actual income tax expense to the amount computed by applying the PRC statutory tax rate to income (loss) before income tax expense in the consolidated statements of comprehensive income is as follows:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Taxation at PRC statutory tax rate of 25%	(13,370	)	349		239
Effect of non-PRC entities not subject to income tax	4,564		2,161		856
Effect of tax holiday	—		(466	)	(8	)
Effect of preferential tax rate	(248	)	(14	)	(119	)
Current and deferred tax rate differential	1,015		1,167		762
Deemed interest income	1,010		276		46
Non-deductible expenses	4,337		3,041		1,447
Change in valuation allowance	3,818		575		1,041
Impact of changes in enacted tax rates	(325	)	—		—
Prior year tax audit adjustment	190		—		—
PRC withholding tax on the outside basis difference of the discontinued operations	136		—		—
Provision for (reversal of) PRC dividend withholding tax	400		(296	)	300
Effect of changes in the tax basis of property, plant and equipment	—		(225	)	(391	)
Reduction to unrecognized tax benefits due to lapse of statute of limitations	—		(117	)	(699	)
Income tax expense	1,527		6,451		3,474
Effective tax rate (%)	(2.86	)%	462.44	%	363.39	%

The aggregate amount and effect of tax holidays on basic and diluted loss per share are as follows:

	For the Years Ended December 31,
	2011	2012	2013
	US$	US$	US$
Aggregate amount	—	466	8
Basic and diluted	—	0.003	—

The Company’s unrecognized tax benefits are mainly related to transfer pricing and non-deductible expenses.

A reconciliation of the Company’s unrecognized tax benefits is as follows:

	For the Years Ended December 31,
	2011		2012		2013
	US$		US$		US$
Balance as of January 1	3,743		6,093		6,077
Addition for tax positions taken in the current year	459		396		464
Reclassified from income tax payable for tax positions of prior years	2,336		1,138		1729
Reduction for tax positions of prior years	(87	)	(171	)	(27	)
Lapse of statute of limitations	—		(117	)	(669	)
Reclassified to liabilities directly associated with the assets classified as held-for-sale or disposal of discontinued operations	(618	)	(1,276	)	—
Foreign currency translation	260		14		211
Balance as of December 31	6,093		6,077		7,785

As of December 31, 2012 and 2013, the Company’s unrecognized tax benefits of US$6,077 and US$7,785, of which US$4,159 and US$5,481, respectively, of the unrecognized tax benefits, if ultimately recognized, will impact the effective tax rate. Of the US$6,077 and US$7,785 unrecognized tax benefits, US$986 and US$1,582, respectively, are presented on a net basis on the face of the consolidated balance sheets against deferred tax assets related to net operating loss, for which a full valuation allowance would otherwise be recorded.

Management does not expect the amount of unrecognized tax benefits will change significantly in the next 12 months. As of December 31, 2012 and 2013, unrecognized tax benefits of US$5,091 and US$6,203 were included in “other non-current liabilities”, respectively. During the years ended December 31, 2011, 2012 and 2013, the Company recognized interest related to unrecognized tax benefits amounting to US$457, US$576 and US$68 in interest expense, respectively. Total accrued interests as of December 31, 2012 and 2013 were US$1,583 and US$1,697, respectively, and were included in “other non-current liabilities”, respectively. There was no penalty recognized by the Company in relation to its unrecognized tax benefits.

For the Company’s PRC subsidiaries, their tax years 2009 through 2013 remain open to examination by the tax authorities as of December 31, 2013.

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COMMITMENTS AND CONTINGENCIES (Details) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 Property, plant and equipment Yingchuan, Jiulongshan, Ruiyang,Wangkeng and Banzhu USD ($)	Dec. 31, 2013 Property, plant and equipment Yingchuan, Jiulongshan, Ruiyang,Wangkeng and Banzhu CNY
COMMITMENTS AND CONTINGENCIES.
Rental expenses under operating leases	$ 544	$ 639	$ 912
Future minimum lease payments for non-cancellable operating leases
2014	20
2015	22
Total	42
Capital commitments
Capital commitments for property, plant and equipment				$ 183	1,116