HK Electric chairman renews call to maintain fixed-asset earnings level
Interims show 8.6pc fall in profits, blamed on a sharp rise in financing costs
The chairman of HK Electric Investments, the listed energy firm spun off from Li Ka-shing’s Power Assets two years ago, has renewed its call on government not to cut the industry’s permitted levels of return on fixed assets, after it posted a 8.6 per cent year-on-year fall in net profit for the first half.
The company blamed the drop to HK$1.1 billion from HK$1.2 billion last time, on a HK$116 million rise in finance costs, due to higher bank borrowings. Revenue during the period grew 1.8 per cent year-on-year to HK$5.33 billion, but power sales edged down 0.8 per cent year-on-year due, it said, due to milder weather.
The company’s share price reacted to the results on Tuesday with a 5.24 per cent drop to HK$7.77, the lowest closing price since July 15.
The Hong Kong government last year held a public consultation on the electricity sector’s future development, including its current 10-year, so-called “scheme of control” policy regime, which expires in 2018.
Under that, the city’s two regional electricity generation and distribution monopolies — Hong Kong Electric, which serves 570,000 customers on Hong Kong Island and Lamma Island and is wholly-owned by HK Electric Investments, and CLP Power Hong Kong — are currently allowed to earn returns of up to 9.99 per cent of their net fixed assets.
The city’s environment chief Wong Kam-sing said in May last year that while the regime had worked well, it could be enhanced.