Power utility CLP Holdings expects growth in underlying profit in the second half of the year, even though margins on its home turf Hong Kong will be slashed as soon as October. The company said yesterday that underlying earnings increased 5.4 per cent to HK$5.25 billion in the first six months of the year, driven by 7.6 per cent growth in core electricity supply in Hong Kong. Attributable profit declined 8.5 per cent to HK$5.61 billion after taking into account a HK$423 million one-off gain from the sale of the SEA Gas Pipeline and a HK$67 million provision for coal-mine subsidence next to the group's Yallourn power plant in Australia. The comparative figure in the previous period was enlarged by numerous one-off gains from asset reorganisation and tax write-backs. The group's Australian energy flagship, TRUenergy, performed 'not as well as the management had hoped' on lower forward electricity prices while skyrocketing coal costs hammered its power plants on the mainland. 'Operating profit went up 5.4 per cent in the first half, and we expect a similar performance in the second half of this year,' CLP chief executive Andrew Brandler said. 'There are global increases in fuel costs, but shareholders are in a position that is not too bad in a sense that our fuel costs flow through to end customers in most of our operating markets.' The brightest spot of the interim results was regulated electricity supply in Hong Kong, which ties CLP's returns to spending on power assets. The firm spent 29.16 per cent more in the first half, partly on power distribution and transmission assets, to HK$3.1 billion. This is despite a 1.5 per cent drop in electricity sales in an unusually cold and long winter. However, the return on net fixed assets will be cut from between 13.5 and 15 per cent to 9.9 per cent under a new regulatory scheme that comes into force on October 1. The new scheme will govern CLP's peer Hongkong Electric Holdings from January 1 next year. 'On a full-year basis, the exposure of lower regulated earnings will be confined to two months,' an analyst at an American brokerage said. 'The real impact will be reflected next year.' In Australia, TRUenergy saw its operating earnings before exceptional items plummet 93.59 per cent to HK$31 million in the first half, as forward electricity prices were exceptionally high in the previous period because of drought. Mr Brandler warned Australia's looming trading scheme covering carbon emissions would have a material impact on CLP's coal-fired plants there. On the mainland, a 5.65 per cent tariff rise last month came 'too little too late' to offset a 22 per cent jump in first-half coal costs. This cut the mainland portfolio's profit contribution 45.16 per cent to HK$34 million. Earnings per share fell 8.62 per cent to HK$2.33. Shares in CLP fell 55 HK cents or 0.82 per cent to HK$66.85 yesterday after the results announcement.