Power utility CLP looking to build coal-fired plant in India
CLP Holdings, the larger of Hong Kong’s two power utilities, will pause investing in Australia, where it faced multiple set-backs, but is preparing to build a major coal-fired power plant in India where it booked losses in earlier years due to fuel shortages.
The company was conducting a feasibility study on the building of a coal-fired plant with up to 2,000 megawatts (MW) of annual generating capacity next to its 655 MW gas-fired plant in Gujarat, western India, chief executive Richard Lancaster said on Thursday after it posted a better-than-expected 8.1 per cent rise in underlying net profit for last year.
“CLP is at an early stage of development of a coal-fired power plant that will use imported coal at Paguthan’s existing site, where sufficient space exists,” he said, adding a memorandum of understanding had been signed with Gujarat’s government.
A final investment decision will be made after government environmental approvals are received and full supply and power purchase agreements are secured. Imported coal can be used as the site is close to a port.
CLP suffered losses in India in 2012 and 2013 due to shortages of gas and coal and high gas prices for its plants there. It turned in a net profit of HK$270 million last year, thanks to improved coal supply, but high gas prices meant its gas-fired plant’s utilisation fell below 10 per cent last year.
Although international gas prices have fallen sharply alongside oil prices in recent months, Lancaster said coal prices had also fallen, which meant gas prices needed to fall further to regain competitiveness in India.
CLP posted an underlying net profit of HK$10.06 billion for last year, compared with HK$9.31 billion in 2013, as higher profits in Hong Kong and Australia were partially offset by a decline on the mainland.
It was tipped to report a net profit of HK$9.78 billion for last year, according to the average estimate of 11 analysts polled by Thomson Reuters.
Including non-recurring items, mainly a HK$2 billion accounting gain related to a stake increase in its Hong Kong power plants and HK$3.2 billion of impairments of assets outside the city in 2013, total earnings jumped 85.2 per cent to HK$11.22 billion last year.
Excluding one-off items, net profit from Hong Kong grew 10.8 per cent to HK$7.45 billion thanks to the acquisition, while that from Australia jumped six-fold to HK$756 million after cost-cutting and that from the mainland dropped 27 per cent to HK$1.62 billion due to the sale of assets.
Last year’s Australian profit included the impact from a HK$1.58 billion impairment provision on a 20 per cent-invested coal seam gas project whose reserve and estimated potential output proved to be less than expected.
Lancaster said CLP still faced challenges in Australia in the next few years due to generation capacity oversupply, weak demand due to industrial activities moving offshore, rivalry from roof-top solar power and users’ energy efficiency gains. Market share and price competition in the retail business was also keen.
“We need to continue to improve performance of our existing businesses and we are not looking at further investment there,” he said.
A fourth interim dividend of HK$1 per share was proposed, raising the year’s total to HK$2.62 per share, from HK$2.57 in 2013.