CHINA MARKETS

Li Ka-shing’s Power Assets posts lower profit after stake sale in Hong Kong unit

PUBLISHED : Thursday, 23 July, 2015, 12:58pm
UPDATED : Thursday, 23 July, 2015, 10:23pm

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Power Assets Holdings, an international utilities firm controlled by tycoon Li Ka-shing, posted a net profit of HK$3.24 billion for the first six months of the year after booking a HK$532 million loss on a stake sale in its Hong Kong power unit.

Excluding the disposal loss, its underlying pre-tax profit would be HK$3.75 billion, flat compared with the HK$3.7 billion in the first half of last year, when a HK$52.93 billion gain was booked on the asset disposal from the separate listing of the unit, HK Electric Investments, early last year.

“The group remains in a strong cash position and will use those funds to actively seek suitable opportunities from around the world,” chairman Canning Fok Kin-ning said in a filing to Hong Kong’s stock exchange on Thursday. “We will continue to focus on high-quality investments in stable, well-regulated power and gas markets such as Australia, North America, the UK and continental Europe.”

We will continue to focus on high-quality investments in stable, well-regulated power and gas markets
Canning Fok, Power Assets chairman

Power Assets sold a 16.53 per cent stake in HK Electric last month to Qatar’s sovereign fund, while Cheung Kong Infrastructure (CKI), another firm controlled by Li, sold a 3.37 per cent stake in HK Electric to the fund. The sales reaped a total of HK$9.25 billion.

Power Assets’ stake in HK Electric, which faces the prospect of a further reduction in its permitted rate of return, was cut from 100 per cent to 33.4 per cent after the spin-off and stake sales.

CKI posted a net profit of HK$5.25 billion for the first half of the year on Thursday. It said underlying profit had risen 22 per cent year on year – mainly at its British operation - if accounting losses from the HK Electric stake sale this year and a HK$19 billion gain from HK Electric’s spin-off in the first half of last year were excluded.

Power Assets, which has energy assets in Britain, Australia, New Zealand, mainland China, the Netherlands, Canada, Thailand and Hong Kong, had HK$67.8 billion of cash and bank deposits at the end of June.

Power Assets, CKI, and the mainland’s two power distribution monopolies, State Grid Corporation and China Southern Power Grid, are considered potential bidders for 99-year leases on some A$26 billion (HK$149.4 billion) worth of power grid assets to be sold by Australia’s New South Wales state government to fund infrastructure investment, analysts and deal advisers have said.

Progress of the sale is being hampered by a dispute between operators of grid assets and the Australian Energy Regulator over the regulator’s lowering of the amount they can charge up to 2019. The operators are appealing the decisions, and a hearing is scheduled for September.  

In a research report, Daiwa Capital Markets’ analysts said a merger between Power Assets and CKI would “unlock” the value of assets under Li’s non-property investment vehicle, CK Hutchison, which last month completed a reorganisation also involving Cheung Kong Holdings that streamlined his property and non-property businesses.

CK Hutchison owns 75.7 per cent of CKI, which in turn owns 38.9 per cent of Power Assets.

The analysts said a merger would maximise the value of Power Assets and CKI’s co-owned overseas energy assets, enhance CKI’s market valuation and make more efficient use of Power Assets’ huge cash pile, since CKI’s wider business scope gave it more acquisition opportunities.

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