Power shutdown to short CLP's earnings

CLP Holdings warned investors yesterday that the partial shutdown of its biggest power plant in Australia would hit earnings this year, although analysts expect the Hong Kong power supplier to still post higher profit.

The company said in a statement to the Hong Kong stock exchange that its results were expected to be adversely affected by the incident. A CLP spokeswoman said the statement was not a profit warning, and that three of the plant's power-generation units should be back in operation by the middle of this month.

At the close of trading yesterday, CLP's shares were down 0.44 per cent at HK$67.20 each, after hitting an intra-day low of HK$66.60. The overall market fell nearly 2 per cent.

Flooding occurred in the state of Victoria last month and crippled three of the four units at the Yallourn coal-fired power station, which belongs to CLP's largest overseas subsidiary, TRUenergy. Analysts estimate it will cost CLP HK$2.5 billion in revenue and shave HK$500 million off earnings this year. Last year, the group posted HK$91.63 billion in revenue and HK$9.29 billion in profit.

Analysts generally were positive about the outlook for CLP for 2012. They said it could not be worse than the previous year, when the company set aside a non-recurrent impairment loss of HK$1.93 billion for a new carbon tax policy in Australia that is expected to pinch the company's income after government subsidies expire by 2017.

Also, from this year onwards the company would gain a carbon tax subsidy of A$257.5 million (HK$2.04 billion) from the government, so it was unlikely the incident would mean a loss so big that it would to eat up all the growth for CLP this year, Citigroup analyst Pierre Lau wrote in a report. While TRUenergy contributed three-fifths of CLP's revenue last year, it made up less than one-third of the group's earnings, or HK$2.91 billion.

Simon Yeung, an analyst at Citic Securities in Hong Kong, said it was impossible to give an accurate estimate of the incident's financial impact on CLP because no details were given about the plant's insurance coverage, any hedge made against the wholesale power tariff or any possible national subsidy the company might receive related to the disaster. But based on TRUenergy's earnings last year, the damage at the plant and its power capacity, Yeung estimated there could HK$2.5 billion in lost revenue this year.