Power utility CLP Holdings paid the price for diversification with attributable profit dragged down 4.7 per cent to HK$2.78 billion for the first half from a year earlier.
Diversification into the regional power market and Hong Kong's competitive telecommunications sector wiped out almost half the group's non-Scheme of Control (SoC) operating earnings to HK$133 million.
Earnings contribution of core SoC business - electricity supply to Kowloon, Lantau and the New Territories - grew 4.1 per cent to HK$2.63 billion.
The SoC is a mechanism for the government to monitor tariffs and power utilities' returns by capping a return to 15 per cent of their assets value.
CLP's capital expenditure soared nearly 61 per cent to HK$2 billion in the first half, a key indicator of asset growth.
Despite the negative effects of the diversification, CLP chief executive Andrew Brandler said: 'We'll continue working towards our target of having one-third of the group's earnings generated by non-SoC operations by 2005.'
The expiry of the SoC in 2008 prompted the utility to seek overseas opportunities.