CLP’s 2019 net income may see a temporary dip as Hong Kong power deal takes effect in October
Company expected to see profit fall next year after new price-setting deal with Hong Kong government
Shares of CLP Holdings, the larger of Hong Kong’s two electricity suppliers, rose to an all-time high after it reported a 26 per cent rise in half-year net profit, driven by gains from its Australia and mainland China businesses, as it braces for a lower return rate that will take effect in October.
The company – set up at the beginning of the last century – reported a net profit of HK$7.44 billion (US$948 million) for the first six months, up from HK$5.91 billion a year earlier, it said in a filing to Hong Kong’s bourse after the morning trading session closed.
Excluding non-recurring items, mainly a HK$450 million provision on receivables, profit was HK$7.89 billion, in line with the number estimated by analyst Dennis Ip of Daiwa Capital Markets, and about 55 per cent of the HK$14.27 billion average full-year profit expected by 12 analysts in a Bloomberg survey.
A second interim dividend of 61 HK cents per share was proposed, making the total first-half payout HK$1.22, compared to HK$1.18 in the first half of last year.
Analysts see the company’s profit falling next year by 10.3 per cent to HK$12.8 billion after it agreed a 15-year arrangement with the Hong Kong government in July to cut the maximum allowed return on permitted assets from 9.99 per cent to 8 per cent, effective October 1.
In the latest half year, CLP sold 4.7 per cent more power in Hong Kong due to higher demand from an exceptionally hot May. The Hong Kong business saw net profit grow 3.2 per cent to HK$4.5 billion.