Putting a price on CLP's fuel costs and environmental emissions caps
CLP is on a mission these days to explain to the business community and the public that rising fuel costs and environmental improvements will result in higher electricity fuel tariffs. The company is still smarting from its brush with the government in December when it wanted to raise tariffs by 9.2 per cent but ended up with a 4.9 per cent increase after a messy government-inspired public spat.
Speaking at a British Chamber of Commerce lunch yesterday, CLP managing director Richard Lancaster reiterated the message, albeit in more restrained tones than his chairman Michael Kadoorie did at the company's AGM in February.
Lancaster pointed out that to meet the government emission caps in 2015, CLP would need to double its use of natural gas and reduce the amount of coal it uses, even though coal is a cheaper fuel. However, the relatively cheap supply of natural gas the CLP has used from the Yacheng gas field south of Hainan Island is due to expire in the next two years. This, incidentally, is brought to Hong Kong by the world's second-longest subsea gas pipeline that is nearly 800 kilometres long.
The government shoehorned CLP into a gas deal with PetroChina that will supply Hong Kong and other parts of China with gas from Tajikistan via a 9,000 kilometre pipeline that is due to link up with CLP's Black Point Power Station at the end of this year.
CLP concedes the deal is a good one for them, with the gas priced at more or less market prices, with a bit extra added for the pipeline distribution.
'We have looked and we cannot find a better deal,' Lancaster said. But he said that when the new gas source came on stream, CLP's gas bill would increase fivefold after factoring in additional prices and the increased volume required. 'The floodgates are opening - we cannot continue to manage our tariffs at this level. If we were to swallow that cost, CLP would go out of business very quickly - in a matter of a few years,' Lancaster said.
He added that CLP had used up the various funds - the tariff stabilisation fund and the fuel clause - which it uses to stabilise tariffs. What he didn't say was that Donald Tsang's government was unwilling to explain to the public that higher electricity tariffs were necessary to pay for the fuel to meet the government-set emission targets.
He pointed out that Singapore, which uses 80 per cent natural gas to provide electricity, has seen electricity tariffs increase 68 per cent over the past seven years and will rise another 4 per cent this year, while Sydney's tariffs have more than doubled over the same period.
Looking further ahead, the government is supposed to set tighter emission caps for 2020, which can only be achieved by increasing the supply of electricity from nuclear power stations. But those consultations have been put on hold since the meltdown in Fukushima.
HITting the switch on solar
We see that Hongkong International Terminals (HIT) switched on its swish new solar power installation yesterday. The company has installed 129 solar photovoltaic panels above the Terminal 4 gatehouse, making it the fifth-largest solar PV system installation in Hong Kong from the private sector. The panels will produce approximately 19,200 kWh of electricity a year, or enough to power a four-member household in Hong Kong for around three years.
The solar PV panels will be used to power the canopy floodlights, gatehouse office lighting and security office equipment.
Unlike previous solar installations at HIT, these panels are directly wired into the CLP grid to generate power rather than generate heat, allowing the lights and equipment to automatically switch back to CLP power if there is not enough solar power to sustain their operations.
This leads us to the thought that it is just as well HIT is a customer of Kadoorie's CLP. If it was a customer of Hongkong Electric, HIT probably wouldn't be so willing to divert cash out of Li Ka-shing's pocket.
Taiwan's bulk air carrier
Our item yesterday on Air Fright China has prompted a response from a reader - not, unfortunately, one who could enlighten us as to what it's like to fly on this airline. His story concerns the sign at Taipei's Songshan domestic airport which reads 'FAT Passengers this way'.
Not being FAT himself, he wasn't too concerned by it. Nevertheless, for many years he considered it a pretty rude statement. That is until he learned that FAT is the acronym for FAT Taiwan, which in turn does business as Far Eastern Air Transport.