CLP expects more Australia gloom

Power producer warns the key market will be tough for next two years, after posting 27pc drop in 2013 profit that was also hurt by write-downs

PUBLISHED : Friday, 28 February, 2014, 1:10am
UPDATED : Friday, 28 February, 2014, 4:59am


CLP expects tough market conditions in Australia - where it reaped 62 per cent of its revenue last year - to persist in the next two years, after posting a weaker than expected profit for last year on large asset impairment charges.

The larger of Hong Kong's two electricity suppliers, CLP posted a net profit of HK$6.06 billion for last year, down 27.1 per cent from HK$8.31 billion in 2012, and much lower than the HK$8.88 billion average forecast of 15 analysts polled by Thomson Reuters.

"The bottom-line figure is lower than expected due to the asset write-downs, but profit from its core operations is largely in line with expectations," Macquarie Securities head of utilities and renewables research Gary Chiu said.

Excluding one-off accounting items, CLP said last year's operating earnings of HK$9.31 billion were similar to those of 2012, with higher profits in Hong Kong and the mainland offsetting lower profits in Australia, while a net loss in India narrowed.

Hong Kong net profit rose 3.8 per cent to HK$6.99 billion despite power sales falling 1.2 per cent, due to growth in fixed assets to which its regulated earnings are linked.

A net loss of HK$2.46 billion was recorded in Australia, compared with a profit of HK$1 billion in 2012, since it booked a non-cash accounting asset impairment and other charges of HK$3.11 billion to reflect the impact of a tough operating environment in the years ahead.

While Australia's power demand has fallen 6 per cent since 2007, generating capacity has grown 13 per cent because plants take years to build and were based on outdated forecasts.

Lower demand was caused by a rise in subsidised home solar panel installations and industrial plant closures linked to an appreciating Australian dollar.

Announcements by carmakers Ford, General Motors and Toyota that they would pull out of Australia from 2016 to 2017 will also crimp future demand. CLP said the next two years were likely to remain challenging for all energy sector participants.

Chief executive Richard Lancaster sidestepped a question on whether the worst had been seen in Australia, but said it would take "some time" for the industry to rationalise overcapacity.

In Hong Kong, CLP has secured more power from Guangdong's Daya Bay nuclear plant so that 80 per cent of its output will be supplied to Hong Kong from late this year to 2018, up from 70 per cent. Betty Yuen, vice-chairwoman of CLP Power Hong Kong, said that would lower its cost of power supply by 1 per cent to 2 per cent and help offset fast rising gas costs.

A fourth-quarter dividend of 98 HK cents was declared, raising the full-year payout to HK$2.57 per cent, the same as in 2012.

CLP shares rose 1.2 per cent yesterday to HK$60.80 after the results, compared with a 1.7 per cent gain for the Hang Seng Index.