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SCMP Reporter

China Light & Power Co (CLP) is to establish a new holding company in Hong Kong in a corporate restructuring set to pave the way for the spin-off of non-regulated operations, such as power projects on the mainland and elsewhere in Asia.

 Under the proposal, CLP Holdings - which will have two distinct streams of operation - will be formed to replace CLP's stock exchange listing.

  The first category includes its electricity-generating business in Hong Kong, which is governed by a scheme of control.

 CLP's 49 per cent stake in Hong Kong Pumped Storage Development Co, which runs Guangzhou Pumped Storage Power Station, will also be included.

 The other stream covers power projects on the mainland and in other countries, as well as property development and a public lighting installation and maintenance firm that are not governed by the scheme of control.

 An analyst at a European securities house said: 'The new structure will prepare for the group's future spin-off of its critical mass of non-scheme of control operation.'  He estimated CLP's attributable profit would amount to $6 billion for the year ending September.

 Of that, about $1 billion would come from its non-scheme of control operations, including profit from its investment in Daya Bay Nuclear Plant, and $600 million in interest income from the $16.2 billion it raised from a share placement to Citic Pacific earlier this year.

 The other profits would come from its Hong Kong power-generating business.

 The analyst said that by 2000 both categories would contribute equally to profits if the Hok Un project in Hunghom was taken into account.

 However, he expected the holding company would only proceed with a spin-off after it took more interests in power projects, as its existing non-scheme of control portfolio was biased towards properties.

 Company public affairs manager Sandra Mak said the group had no present plans for a spin-off, but she admitted that its non-scheme of control operation was set for faster growth.

 'The scheme of control operation is by far the major chunk of our business, but the non-scheme of control operation has experienced significant development in the past two years and it is moving towards more development,' she said.

 This year, CLP has signed joint-venture agreements for power projects in Shandong province and Shenzhen.

 CLP chairman Michael Kadoorie said: 'As the growth of the group's electricity business in Hong Kong slows down in the wake of the maturing economy, the new structure will provide greater flexibility for the development of businesses outside Hong Kong and enable investors and customers to better understand our scheme of control and non-scheme of control operations.'  He said the proposed arrangement would not affect its electricity tariffs in Hong Kong.

 'Indeed, the clear definition of our core business will help to ensure transparency and public accountability.'  CLP has been locked in a battle with the Government over its excess capacity problem.

 In April, it was finally decided to delay the building of the last two units of its $24 billion Black Point power plant.

 Under its regulatory agreement with the Government, CLP may earn profits for shareholders in proportion to the size of its capital spending.

 CLP's reorganisation is being proposed by means of a scheme of arrangement under the Companies Ordinance.



CLP maps spin-off course