# I. DISCUSSION AND ANALYSIS ON THE OPERATIONS (Continued)

# (III)Coal-to-chemicals sector

The layout of coal-to-chemicals industry is an important strategic move for the Company to extend its industrial chain, achieve transformation and upgrading and enhance its core competitiveness. The “13th Five-Year Plan for Energy Development” clearly states that the pace of development should be rationally controlled, technological innovation and market risk assessment should be strengthened, the conditions for environmental protection accession should be strictly implemented, the deep processing of coal should be developed in order, the upgrading of coal-to-fuel, coal-to-olefin production and other demonstrations should be steadily promoted and the competitiveness and risk-resistance of the project should be enhanced according to the orientation of the National Energy Technology Reserve and Capacity Reserve Demonstration Project. A total of three projects of “Xinjiang Yili”, “Xinjiang Ganquanpu” and “Inner Mongolia Yitai” were selected as key coal liquefaction projects in the “13th Five-Year Plan” for deep processing of coal. The Company has been unswervingly speeding up the approval and construction of coal chemical projects.

# 1. Demonstration project of coal-to-oil production of 0.16 Mtpa

During the reporting period, on ensuring the safe and stable production, Coal-to-oil Company optimized its processes and procedures, and enhanced technical innovation so that a total of 0.1943 million tonnes of various types of oil and chemicals were produced during the year. In the meantime, the Company realized the target of inventory-cutting and cost reduction and efficiency improvement via reasonable allocation of inventory materials and enhancement of cost control, and recorded a revenue of RMB894 million and a net profit of RMB31.84 million.

The 0.05 Mtpa stable light hydrocarbons deep processing project of Coal-to-oil Company achieved a successful trial run, further extending the industry chain and increasing the added value of the products for the Company.

# 2. Project construction

The 1.2 Mtpa of fine chemicals project of Yitai Chemical completed the transfer from CIP to PPE at the end of September 2018. The Company is actively advancing the engineering settlement and budgeting of the project. During the year, Yitai Chemical recorded a production volume of 0.26 million tonnes of chemicals, and a revenue of RMB1.292 billion and net profit of RMB57.78 million.

In 2018, as to the second phase of the 2 Mtpa indirect coal-to-liquids conversion pilot project of Coal-to-oil Company, the Company adjusted the product scheme and some process plan for the second phase of the project by focusing on the design optimization and taking into account of the implementation of the project, upper-stream facilities cooperation and construction, investment and financing, product scheme adjustment and other factors.

During the reporting period, Yili Energy actively carried out project site management, supporting resource integration and product scheme optimization, continued to promote the financing works and introduction of strategic partners.

During the reporting period, Yitai Xinjiang continued to enhance project site management for its energy project, and advanced the approval work for the project in a planned and orderly manner.