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(L to R) Geert Peeters, group director and chief financial officer; Richard Lancaster, chief executive officer of CLP Holdings Limited and Betty Yuen So Siu-mei, vice chairman of CLP Power Hong Kong Limited, pose for a photograph during CLP Holdings Limited 2015 Interim Results at Kowloon Shangri-La in Tsim Sha Tsui. Photo: Sam Tsang

New | Hong Kong’s CLP sells Australia gas facilities to rationalise asset portfolio

Energy
ERIC NG

CLP Holdings, the larger of Hong Kong’s two power utilities, has agreed to sell a natural gas processing facility in Australia for HK$9.88 billion as part of efforts to rationalise its asset portfolio down under where the electricity industry faces over-supply and a tough operating environment.

“We consider the divestment of the CLP Group’s interest in the Iona gas plant is consistent with our strategy to restore value in our investments in Australia,” the firm said in a filing to Hong Kong’s bourse on Thursday.

The plant’s sale to Iona Asset, a company ultimately owned by the Queensland state government, is pending regulatory approvals and is targeted to be completed by the end of this year.

After the sale, CLP’s Australia unit EnergyAustralia will lease storage facilities from the Iona plant via a long term contract to serve the needs of its customers.

The plant, located in Iona in southeastern Victoria state, owns gas processing and compression facilities and underground gas storage reservoirs.

It generated a net profit of HK$224 million last year, up from HK$205 million in 2013. Its net asset value amounted to HK$659 million at the end of last year.

“It looks like they got a very good price for the asset – some 40 times the net profit of last year,” UBS head of Asian utilities research Simon Powell told the Post. “It is a very interesting and almost unique asset in a market with very little storage capacity.”

The disposal shows that CLP is looking to sharpen its focus its Australian business, given its biggest investment and customer base is in New South Wales state, while the Iona plant is in the far east of Victoria state, he added.

CLP has a 203 mega-watt gas-fired a power plant in South Australia state and another one with annual generating capacity of 435 MW in New South Wales state. It has shelved the 700 MW Marulan gas-fired plant in New South Wales citing reduced electricity demand.

Australia’s power demand fell 6 per cent between 2007 and 2013, while generating capacity grew 13 per cent because plants take years to build and were based on outdated forecasts.

Lower demand was caused by a rise in subsidised home solar panel installations and industrial plant closures linked to an appreciating Australian dollar.

Chief executive Richard Lancaster said in May the Australian power wholesale market was still facing oversupply in generation capacity due to a fall in demand in previous years, but demand had stabilised since the middle of last year, adding competition remained rife on the retail side.

In the firm’s latest annual report, he said CLP was “focusing on realigning our Australia business in light of the new market paradigm in Australia” and has initiated a competitive bidding process in July to test market interest in the Iona gas plant.

CLP’s net profit from Australia jumped six-fold last year to HK$756 million after a series of cost-cutting measures, a marked turnaround from a net loss of HK$2.46 billion in 2013 but still short of the HK$1 billion profit recorded in 2012.

In 2013 it booked non-cash accounting asset impairment and other charges of HK$3.11 billion to reflect the impact of a tough operating environment in the years ahead.

CLP shares fell 0.3 per cent on Thursday to close at HK$66.20.

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