Hong Kong electricity provider CLP eyes China power distribution market, India’s renewables, says CEO
- CLP reported a net loss of HK$907 million (US$116 million) for the first half, on the back of a huge impairment on its Australian retail business
CLP Holdings, the larger of Hong Kong’s two power utilities firms, is eyeing opportunities to invest in southern China’s electricity distribution market, which has been partially deregulated to let private firms participate.
It is also seeking to step up investment in India’s consolidating renewable energy sector and power transmission and distribution assets, chief executive Richard Lancaster told reporters as the firm reported a net loss that fell within expectations.
“As the industry is going through reform, we do see opportunities to participate in [southern China’s] transmission and distribution and energy services [provision],” he said.
In recent years Beijing has launched pilot projects in various provinces to allow private participation in power distribution and retailing, breaking the monopoly of state-owned China Southern Power Grid.
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CLP – set up at the beginning of the last century – reported a net loss of HK$907 million (US$116 million) for the first six months of 2019. It made a profit of HK$7.44 billion in the same period a year earlier.
The loss came on the back of a HK$6.38 billion impairment on its Australian retail business.
That was flagged on June 20 when CLP cited a need to reflect lower electricity tariffs, after the federal government intervened to bring down the high prices caused by tight supply and changing policies.
Excluding the impairment, operating earnings fell 30.6 per cent to HK$5.47 billion, led by Australia and Hong Kong.
Its earnings from Hong Kong dropped 20 per cent to HK$3.59 billion after the government cut the permissible return on net fixed assets to 8 per cent from 10 per cent.
Lancaster said CLP expects to spend HK$52.9 billion over the next five years on less pollution-prone natural gas power plants and gas import facilities, which means its return will “ultimately” come back to last year’s level. He did not give a time frame.
The balance sheet showed CLP had HK$116.9 billion worth of fixed assets and investment property in Hong Kong at the end of June.
First-half profit at its Australia operation tumbled 63.5 per cent year-on-year, as a major power plant was hit by coal supply problems and its retail business faced stiff competition that saw it lose 2 per cent of its customers in the half.
CLP is seeking to slash back-office costs and is “confident” it will be able to find alternative coal sources, Lancaster said.
In India, first-half earnings fell by more than a half to HK$120 million after CLP sold a 40 per cent stake in its business to a Canadian pension fund.
CLP India agreed last month to buy three transmission grids for around US$463 million, the Hindu BusinessLine newspaper reported.
A second interim dividend of 63 HK cents per share was proposed, 3.3 per cent higher than that paid last year. Lancaster said CLP aims to maintain dividend payouts going forward.
For the full-year, CLP is forecast to post a 22.7 per cent net profit drop to HK$10.92 billion, before rebounding to HK$12.62 billion next year, according to the average estimate of 12 analysts in a Bloomberg survey.
CLP’s shares closed flat on Monday at HK$82.55, after falling as much as 1.9 per cent during the session. The Hang Seng Index fell 0.7 per cent.
