Talk of partnership boosts HK Power
Mainland link could help challenge domestic energy duopoly
Speculation that local aspiring third-party power producer China Hong Kong Power Development might join forces with a giant mainland partner has shaken up the century-old domestic power duopoly.
Reports at the weekend that China Hong Kong Power is negotiating a potential alliance with China Southern Power Grid, one of the mainland's two electricity distributors, also injected much-needed confidence into the fledgling local joint venture that aspires to be the third electricity supplier in Hong Kong.
But solutions to core issues remain outstanding.
In the latest twist to Hong Kong's power saga, it was reported on Saturday that the mainland power distributor had opened negotiations aimed at acquiring a 30 per cent interest in China Hong Kong Power, the joint venture that is 70 per cent owned by unlisted power producer China Power International Holdings and 30 per cent by media firm Vertex Communications and Technology Group.
The news sent another wake-up call to CLP Holdings and Hongkong Electric Holdings, the local duopoly that is resisting changes to the decades-old Scheme of Control governance system, which ends in 2008.
Industry observers and analysts said a tie-up would boost the credibility and prospects of China Hong Kong Power and added that China Southern Power Grid's role was crucial to the joint venture because of its assets - electricity transmission and distribution networks in five provinces in southern China, including Guangdong.
'Without question it solves the technical problem of transmitting electricity,' said a source from the government's Energy Advisory Committee. 'However, problems such as regulatory and commercial viability of the venture remain.'
At issue is whether the central government will allow state-owned China Southern Power Grid to sell electricity to Hong Kong while the mainland is plagued by power shortages. In expectation of a go-ahead, however, China Power International president Li Xiaolin, the daughter of former premier Li Peng, said on Friday the group had held talks with the Hong Kong government and CLP.
'Ability and determination is one thing. Whether CLP and Hongkong Electric open their power grids to a third party access is another,' the government adviser said. He pointed out that the private ownership of Hong Kong's power grids by the utilities created a significant hurdle to the joint venture's ambitious plan to import electricity into the city.
China Hong Kong Power has yet to put a specific business plan on the table but Vertex chairman Steven Poon Kwok-lim, a former legislator and former CLP Power general manager, has outlined a rough plan of laying its own trunk power network near the border to bring in cheaper electricity to selected customers in the New Territories.
'It doesn't make any economic and commercial sense,' said one energy expert. 'There is no point building a power grid parallel to CLP's or Hongkong Electric's. In addition, the marginal cost of adding new generation units at CLP's Black Point plant and Hongkong Electric's Lamma plant is much cheaper.'
The heart of the problem, the expert said, rested on the logic of importing dirtier but not necessarily cheaper electricity from undersupplied Guangdong into Hong Kong, where demand growth has matured and there is a surplus of installed capacity.
'The question is: does Hong Kong have any urgent need to bring in electricity from China? The reality is CLP is feeding Guangdong with electricity,' he said.
Energy experts have warned that any form of market reform should be devised specifically in the interests of Hong Kong consumers and meet the government's much-trumpeted objectives of ensuring a reliable, safe, environmentally friendly and efficient supply at reasonable prices.
They added that it was open to debate whether competition would lead to lower tariffs, which have been demanded by the public and various politicians.