An absence of one-time gains from property sales has led to a slight decline in Hongkong Electric's (HKE) 1996 net profits, broadly in line with analysts' expectations. The territory's second largest power supplier yesterday said it made an attributable profit of $4.15 billion in the year to the end of 1996, down 0.76 per cent on the previous year's $4.18 billion. The company's 1995 figures were boosted by a one-off gain of about $550 million from apartment sales on a redeveloped site at South Horizons. When the exceptional is stripped out, profits from the group's core power supply business showed an increase of just under 12 per cent. Turnover last year was $7.67 billion against $6.94 billion in 1995, a growth of 10.5 per cent. Earnings per share fell to $2.06 from $2.07. The company still managed to increase its dividend to $1.23 from $1.11. HKE has been in the spotlight this year as the focal point for a restructuring of Li Ka-shing's main listed companies. Under the shake-up, a 35 per cent stake in HKE was transferred from Hutchison Whampoa to Cheung Kong Infrastructure Holdings. HKE said it hoped the change would help it actively pursue investment opportunities outside Hong Kong. SBC Warburg analyst Joseph Lee said: 'These figures contain no surprises, [they are] very much in line with forecasts. 'They are meaningless for the share price. 'The key questions now concern the possibility of a merger with China Light & Power (CLP) and whether it will get the go-ahead for the building of extra generating capacity.' The scheme of control agreement with the Government links profit growth with capital expenditure. HKE is seeking approval to build $2.1 billion worth of new generating capacity despite the fact that, along with CLP, it has excess generating capacity relative to demand. Both have a reserve margin of 50 per cent. While the focus of attention at the moment is on CLP and the future of its Black Point plant, the Government may be reluctant to give HKE an early go-ahead for its new spending. If HKE does get permission to expand its generating capacity, analysts estimate profits could grow by another 12 per cent in 1998 and 9 per cent in 1999. The company's revenue mainly comes from supplying power to Hong Kong and Lamma islands. New developments in the central business district, which are due to be completed by 2000, should help make the case for HKE's planned extra 1,800 megawatts of capacity. The company said it was encouraging to report that following the Government's invitation it was proceeding with an environmental assessment study and site search based on two fuel options - coal and pipeline natural gas.