Overseas woes in Australia, India erode CLP earnings
Analysts say the worst may be over for the power firm's Australian and Indian operations
The overseas business of CLP Holdings may bottom out this year after problems in Australia and India slashed the firm's earnings from abroad by 30.9 per cent last year.
The group's profit fell 8.8 per cent to HK$9.41 billion despite growth in the Hong Kong and mainland markets.
While the power company said it would still have to fork out an impairment loss of HK$315 million this year for its new plant in Jhajjar, where utilisation remained at 30 per cent due to a short supply of coal, chief executive Andrew Brandler said its performance should improve in the next six to 18 months.
He cited the company's adoption of imported coal and the Indian government's pledge to increase coal supply after CLP threatened to withdraw its investment.
The group's business in India posted a loss of HK$182 million last year. Several analysts expect earnings at its Jhajjar plant to break even, at best, this year.
CLP said that while utilisation at the plant could rise to 70 per cent in one year, it could take two to three years before its operation stabilised.
Brandler said the firm would stop investing further in thermal power generation in India for the time being.
The Australian business, which made up three-fifths of the group's revenue, was also a disappointment as higher costs, reduced demand and suppressed wholesale electricity prices squeezed earnings by 42.1 per cent. The company has put off its plan to spin off the business as Brandler wrote in the annual report that "a listing of the EnergyAustralia business in 2012 was unlikely to deliver full value to CLP's shareholders".
But analysts said the worst might be over for now.
"Their Australian business should improve this year as they spent a lot of effort rebranding their business there. They reformed the marketing team, cleared a majority of their bad debts, implemented a new billing system and cost-saving measures. I think they should start bearing fruit this year," Simon Yeung of Citic Securities said.
The business in Hong Kong, the mainland, Taiwan and Southeast Asia was doing well. While sales of electricity to the mainland fell 37.8 per cent last year, higher tariffs and lower coal prices boosted earnings by 22.2 per cent. Its most profitable power plant there will undergo an expansion, subject to government approval, expected in the next few months.
But the investment in the Yangjiang nuclear plant may have to increase as the government is reviewing the design and technology requirements for two units of the project following Japan's nuclear crisis in 2011.
CLP offered a dividend of 98 HK cents per share for the final quarter, bringing the total payout last year to HK$2.57.