Power Assets expects lower fuel charges
Power Assets, a unit of tycoon Li Ka-shing's flagship Cheung Kong, (Holdings), says a recent fall in coal prices will help relieve customers' burdens, after it posted a 6.8 per cent rise in first-half profit.
The company's net profit amounted to HK$4.33 billion in the first six months, up from HK$4.06 billion in the same period a year ago.
Power Assets raised power prices by 6.3 per cent at the start of the year - pared from the 8 per cent it originally sought, following a public outcry.
Yesterday, it said softening fuel prices would ease the burden on customers. Coal prices have fallen about 30 per cent since November, a Sanford Bernstein research report finds.
'The higher fuel prices experienced over the last few years have in recent months moderated,' the firm said in its results statement. '[This] together with the higher electricity sales should be beneficial to customers and help in reducing the balance of fuel costs that we have deferred passing on to customers.'
Power Assets, whose power generating arm Hongkong Electric is the sole generator and distributor of electricity on Hong Kong Island and Lamma Island, and CLP, which serves Kowloon, the New Territories and Lantau Island, say they have been under pressure to raise tariffs because of rising coal costs and increasing use of more expensive but cleaner-burning fuel such as natural gas to comply with stricter environmental protection regulations.
Government and public opposition saw CLP pare its increase request of 9.2 per cent by nearly half to 4.7 per cent at the start of this year.
Power Assets said its first-half profit rise was led by earnings from outside Hong Kong, which accounted for 60 per cent of the total profit, and rose 13.4 per cent year on year to HK$2.58 billion. Earnings from local operations edged down 0.6 per cent to HK$1.74 billion, as a 3.4 per cent rise in sales on the back of warmer and more humid than normal weather was more than offset by higher interest expenses and tax adjustments.
Power Assets runs power distribution networks in Britain, Australia and New Zealand, and power plants in mainland China, Britain, Thailand and Canada, as well as a gas distribution network in Britain.
First-half profit of its British operations jumped 27.1 per cent year on year to HK$2.14 billion, while that in Australia grew 17.3 per cent to HK$435 million. Profit from the mainland business fell 27 per cent to HK$203 million.
The higher profits in Britain were mainly powered by a 21 per cent profit rise of its associate firm, UK Power Networks, which runs power grids in the southeast of the nation, as a result of cost savings and a lower tax rate.
In Australia, Power Assets had to give the tax authorities A$60 million as upfront payment over a tax dispute. Sanford Bernstein analyst Michael Parker calculated A$400 million of fees were in dispute over tax deductions, given that Australia has a 30 per cent corporate profit tax rate.
Meanwhile, Cheung Kong Infrastructure (CKI), which holds 38.9 per cent of Power Assets and has water supply, cement and toll road assets, posted a 17.7 per cent year-on-year rise in net profit to HK$4.69 billion.
It was led by a 45 per cent profit jump of its British operations to HK$2.72 billion. Excluding the impact from the acquisition of Northumbrian Water, which supplies water to northeast Britain, the profit increase was 16.2 per cent. Profit from its Hong Kong power operation grew 7 per cent to HK$1.67 billion.
Power Assets shares rose 1.2 per cent to close at HK$60 after the results.