After weeks of negotiations with the government, China Light & Power (CLP) finally has decided to delay the building of the last two units of its $24 billion Black Point power plant - a move most observers had discounted as inevitable. The company yesterday said units 7-8 of the station would be deferred for a minimum of three and a maximum of five years. This decision coupled with the early decommissioning of 442 megawatts of gas turbine capacity at two other plants proved to be enough to satisfy the government that completion of units 5-6 of the plant could go ahead as scheduled. It was last November that the government asked CLP to delay the whole of the second half of Black Point. The first half is already operational. Throughout the talks CLP argued that installation of units 5-6 were effectively too advanced to delay. Announcing the company's decision at a legislative economic services panel meeting, managing director Ross Sayers said deferral would resolve the issue of CLP's excess generating capacity. 'This combination will address the high reserve margin in the short and long term,' he told legislators. In the first instance units 7-8 will be delayed for three years. In the fourth quarter of 1999 the company will again sit down with the government to undertake a capacity review and decide on whether a further delay is necessary. Mr Sayers conceded that the possibility of selling power to Hongkong Electric to tackle the overcapacity problem was off the agenda. Secretary for Economic Services Stephen Ip Shu-kwan welcomed the agreement as a flexible one. He said that an installed capacity 30 per cent higher than peak demand would be a reasonable level to use as a benchmark for the review process in 1999. This figure is now about 50 per cent. CLP said it would have to start talks with companies contracted to work on the Black Point project and agree terms for the cost of delay. Mr Sayers said CLP would negotiate very aggressively to minimise these costs. The company then would go back to government to discuss how this extra expenditure should be borne and whether it was in line for compensation. Under the regulatory agreement with the government, CLP is allowed to earn profits for shareholders only in proportion to the size of its capital base. A delay in completion of Black Point will therefore trim the company's earnings growth. However, Mr Sayers said the financial impact would be relatively minor. The deferral of the final two units of the plant had been widely anticipated by industry watchers. 'It is not surprising, this is what the market had been expecting,' NatWest Markets analyst Micheal Slater said. He calculated a three-year delay would trim compound earnings growth from the company's generating activities by half a per cent to 4 per cent per annum over the period of delay. The Black Point plant, in common with all CLP's Hong Kong generating interests, is a joint venture between CLP and US giant Exxon. News of deferral made little impression in the market, CLP's shares lost just 30 cents to end at $35 on a day when stocks fell heavily.