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CLP HOLDINGS (2)

Principal Activities

The principal activity of the Company is investment holding and those of the subsidiaries are the generation and supply of electricity.

Latest Results

The Group's loss attributable to shareholders for the 6 months ended 30-06-2019 amounted to HKD 782.0 million. Basic loss per share was HKD 0.359. An interim dividend of HKD 0.63 per share was declared. Turnover amounted to HKD 43.84 billion, a decrease of 5.7% over the same period last year, gross profit margin down 3.4% to 59.4%. (Announcement Date: 06 Aug 2019)

Business Review - For the six months ended June 30, 2019

Hong Kong

Sales of electricity in Hong Kong in the first half of 2019 were 15,916GWh, 0.5% higher than the same period in 2018. Driven by various major infrastructure developments in Hong Kong, sales in the Commercial sector and the Infrastructure & Public Services sector recorded year-on-year increases of 1% and 2.9% respectively, offsetting lower sales in the Residential sector caused by a significantly warmer winter and cooler than normal temperatures in May.

No sales to Mainland China were recorded during the period as the Shekou electricity supply agreement expired in June 2018. Total electricity sales, which included local sales and sales to Mainland China, were 2.8% lower than in the first half of 2018.

We continued our efforts to reduce Hong Kong’s carbon intensity and increase the proportion of natural gas used in power generation, as well as enhance the cross border transmission overhead line circuits connecting Hong Kong and Mainland China known as the Clean Energy Transmission System (CETS). While continuing construction of the new 550MW Combined Cycle Gas Turbine (CCGT) unit at Black Point Power Station, which is due to go into operation by early 2020, we embarked on the development of a second new CCGT unit on an adjacent site. Front-End Engineering Design (FEED) has begun and the unit is targeted for completion in 2023. The additional gas-fired capacity from the two new CCGT units, together with upgrades being undertaken to the existing gas-fired generation units at Black Point, will help to facilitate the gradual retirement of coal-fired units at Castle Peak A Power Station when they reach the end of their operating lives by the mid-2020s.

We made significant progress, meanwhile, with our offshore LNG terminal project. After the issuing of an environmental permit last year, we commenced the FEED process for the offshore jetty facility and the subsea pipelines that will connect the facility to Black Point and Lamma Island. At the same time, Hong Kong LNG Terminal Limited, the joint venture established by Castle Peak Power Company Limited (CAPCO) and The Hongkong Electric Company, Limited., entered into a hire agreement with Mitsui O.S.K. Lines, Ltd. (MOL) for a Floating Storage and Regasification Unit (FSRU) vessel on a long-term time charter basis. When the terminal begins operations, the FSRU vessel will berth at the jetty to receive, store, and regasify LNG for power generation. An agreement has also been entered into by CAPCO with Shell Eastern Trading (Pte.) Ltd., a subsidiary of Royal Dutch Shell, for a long-term LNG supply. Construction is due for completion before the end of 2021, and the terminal will allow us to diversify our gas supply, access competitive international LNG pricing and enhance fuel supply security to the long-term benefit of our customers. At the same time, we will continue to receive gas supplies from PetroChina’s Second West-East Gas Pipeline and CNOOC’s subsea pipeline in the South China Sea.

Our new generation plant at West New Territories Landfill, comprising five 2MW units fired by landfill gas, is on track to start producing waste-to-energy electricity by the end of 2019.

As part of the new SoC Agreement that came into effect in October 2018, CLP has introduced new initiatives to promote the development of renewable energy and energy efficiency. Our Feed-in Tariff scheme, encouraging customers to install small scale renewable generation systems on their premises, has received positive responses. We received over 3,900 applications to the end of June 2019, with around 80% of the projects representing a total capacity of around 57MW already approved or connected to our grid. Our new Eco Building Fund, which provides subsidies for customers installing energy-efficient equipment in residential and commercial buildings, received over 260 applications from customers by the same date. There has also been positive feedback to our Renewable Energy Certificates, which since January have allowed customers to buy electricity generated from renewable energy sources in Hong Kong.

The Council for Sustainable Development began a three-month public engagement programme on Hong Kong’s long-term decarbonisation strategy in mid-June. We are studying the public engagement document in detail and will submit our views at a later stage. It has been our longstanding commitment to address climate change by changing our fuel mix to reduce carbon emissions, while maintaining a highly reliable electricity supply. With the help of our CCGT units and CETS, we are on track to play an important role in support of the Government’s decarbonisation objectives. In addition to efforts by the power industry, however, all sectors of the society can contribute to the effort by improving energy efficiency and living greener lifestyles.

Digitalisation of our power system is an important factor in creating a smarter, greener customer experience, as well as ensuring a more secure and reliable power supply. In the first half of 2019, we continued the rollout of smart meters with a target of providing smart meters for all our 2.6 million customers by 2025. The meters not only provide improved information on electricity consumption to users, but also access to more energy management services and faster maintenance in the event of incidents. By the end of June, 196,000 smart meters had already been installed and connected with priority installations at remote villages which are more prone to typhoon disruptions, in order to improve our supply reliability.

To deliver service innovations and improve energy efficiency, we continued to offer new energymanagement tools and services to customers in industries including hospitality and elderly care. In May, we set up the CLP 6 Senses Experience Zone during HOFEX 2019, Asia’s leading food and hospitality trade show, to promote a low-carbon catering culture and showcase the latest electric kitchen equipment and technology. We also conducted an Elderly Home Experience Day to showcase green technology and innovations to help improve energy efficiency in homes for the elderly. The opening of our SmartHub@CLP exhibition centre was another initiative to engage the community and industry partners and encourage them to support energy efficiency and smart city development in Hong Kong.

The data centre industry is expanding rapidly in Hong Kong. We provide operators with one-stop services in design and build solutions, infrastructural construction and management, energy efficiency, and renewable energy solutions, as well as guaranteeing the reliable, world-class power supply critical for data centre operations which is important for the development of Hong Kong as a regional data hub.

Mainland China

Our zero-carbon portfolio was a key driver of CLP’s solid performance in Mainland China in the first half of 2019 as a result of our long-standing strategy to focus on low-carbon investments. Our nuclear and renewable energy businesses continued to account for most of our earnings in the country. This also means that the earnings from our portfolio in China will likely become more stable as nuclear is subject to less dispatch and cost volatilities compared with our coal or renewable energy projects.

Yangjiang Nuclear Power Station delivered higher contributions as output increased following the commissioning of the fifth generating unit in July 2018. The sixth and final unit was commissioned in July this year, with the entire project completed within budget. Daya Bay Nuclear Power Station continued to perform safely and reliably.

Our solar energy portfolio benefitted from the addition of new projects such as the Lingyuan plant in Liaoning Province, commissioned in July 2018, and our newly-acquired plant in Meizhou, Guangdong Province. The Meizhou project is CLP’s first acquisition of an operating renewable project in Mainland China.

Our wind assets reported a stable performance. During the first half, we commenced commercial operations of CLP Laizhou II in Shandong Province, and began construction of Laiwu III in the same province.

Our hydro portfolio benefitted from the strong generation performance of Huaiji in Guangdong due to plentiful rainfall.

The utilisation level at Fangchenggang Power Station improved from the economic growth in the Guangxi Zhuang Autonomous Region and easing competition from hydro power generation due to low rainfall in the first half. In the meantime, the plant continued its evolution into an integrated energy provider by also supplying steam and carbon dioxide to a nearby factory, thereby securing more generation hours. The approval of our application for direct unloading of imported coal at the Fangchenggang Power Station jetty also helped reduce fuel costs.

TUS-CLP Smart Energy Technology Co. Ltd. (TUS-CLP), our joint venture with Beijing’s TUSHoldings Co., Ltd., was awarded a contract in February to build and operate an incremental distribution network (IDN) at Fangchenggang High-Tech Zone. TUS-CLP formed a project company with several joint venture partners and are working together on power network and smart energy planning. The IDN project is CLP’s first investment in distribution grids in Mainland China.

India

CLP India benefitted from the good operational performance of our renewable energy assets and the steady performance of the Jhajjar coal-fired plant in the first half of the year. A strategic partnership with CDPQ has strengthened our ability to capture new investment opportunities across the value chain in India’s power sector. In July, we entered into agreements for the acquisition of three power transmission assets, expanding our geographical reach in India and broadening our portfolio into a new segment of the country’s electricity value chain. These agreements remain subject to certain regulatory approvals.

The Veltoor solar plant continued to perform well following technology upgrades and operational enhancements. Operations at the Gale and Tornado solar plants stabilised after rectifying technical issues that had earlier hampered output, and the performance of both plants fulfilled expectations. The Veltoor and Gale plants became wholly-owned assets of CLP India after the acquisitions of the equity interests previously held by Suzlon Energy Limited in March.

Improved operational efficiencies and higher wind resources saw CLP India’s wind portfolio increase output.

Jhajjar reported a higher level of commercial availability compared with the first half of 2018 due to an increased coal supply and a better performance of the plant. It also reduced its sulphur dioxide (SO2) emissions after the flue gas desulfurisation unit became fully operational in February 2019.

Following the expiry of the previous power purchase agreement for Paguthan in December 2018, we have continued to explore new commercial avenues for the plant including short-term sales on the Indian Energy Exchange. However, the plant did not undertake any significant commercial generation in the first half.

The Indian administration was re-elected at the national elections in May. CLP India remains committed to working closely with the Government and stakeholders to support the country’s economic development by meeting its demand for reliable, low-carbon, affordable energy.

Southeast Asia and Taiwan

Both the Ho-Ping coal-fired power station in Taiwan and the Lopburi solar plant in Thailand reported stable operations in the first half of 2019.

In Vietnam, we continued our discussions with our partners and the Government over the Vung Ang II and Vinh Tan III legacy coal-fired projects.

Australia

The six months ended 30 June 2019 were challenging for EnergyAustralia, reflected by operating earnings before one-off items of HK$824 million, compared with an exceptional first half in 2018 of HK$2,257 million. This performance reflects the impact of operational issues experienced at our generation assets and the continuing competition in the retail business. In addition, a noncash change to the fair value of energy derivatives used for economic hedges that arose from an increase in the price of forward energy contracts further affected the results. We nevertheless made good progress with ongoing programmes to improve customer service and support the modernisation of Australia’s energy system.

EnergyAustralia began the year by pledging commitment to an Energy Charter, a world-first customer initiative aimed at uniting the energy industry to deliver better service for Australians. Meanwhile, work throughout the first half meant that on 1 July 2019 we were well prepared to implement new government safety-net prices for our customers, the most significant regulatory change to energy retailing for several years.

The regulations, known as the Default Market Offer and the Victorian Default Offer, effectively cap retail prices at new, lower levels. To comply, EnergyAustralia has transferred about 173,000 customers – around 10% of our electricity retail customer base – to the new tariffs. At the same time, we approached the disruption caused by the regulatory changes as an opportunity to enhance our competitive standing in the market, launching a new product suite comprising simple, lower-cost energy plans to existing and new customers.

A survey by consumer advocacy group CHOICE of energy offers for the 12 months to April 2019 confirmed our customer-first approach. The survey found that EnergyAustralia offered the most competitively-priced deals of any retailer in our largest market, New South Wales (NSW), and also in South-East Queensland.

The retail market in Australia remains intensely competitive. While our retail business reduced customer churn in line with the overall market, our account numbers decreased by around 50,300, or about 2%, in the first half.

Meanwhile, we continued to implement and assess projects to provide additional capacity and reliability for customers and the national electricity grid. The Hallett Repower project is in progress in South Australia adding 30MW to our existing gas-fired generation capacity. In early July, we announced a 60MW turbine upgrade at Mount Piper Power Station in NSW. Potential projects under assessment include pumped-hydro in South Australia and Queensland and flexible gas generation in NSW. EnergyAustralia also has demand-response measures and battery storage in its project portfolio.

In our generation business, electricity production from EnergyAustralia’s power plants was lower due to coal supply issues affecting Mount Piper and maintenance requirements at Yallourn Power Station in Victoria. This resulted in lower contributions to the energy segment. In addition to planned outages, operations at Yallourn were restricted as a fatal incident in late 2018 was investigated and new measures were introduced to enhance safety.

Coal supply issues hampered generation at Mount Piper, although the plant managed to maintain availability during peak demand periods.

The anticipated reduction in future earnings related to our retail business, announced in June, led EnergyAustralia to record a one-off, non-cash impairment of goodwill of HK$6,381 million as part of the Group’s interim results. This impacts EnergyAustralia’s earnings in the first half.

In a Federal election held in May, the governing Liberal-National Coalition was re-elected. EnergyAustralia remains committed to working with Federal and State Governments on a longterm, stable, integrated national policy framework that supports the investment needed to ensure supply reliability and affordability as the country moves towards cleaner energy sources.

Business Outlook - For the six months ended June 30, 2019

Hong Kong

In the second half of the year, we will continue to focus on implementing initiatives under the SoC Agreement and our five-year Development Plan in support of the Government’s goals on renewable energy, energy efficiency, and long-term decarbonisation. We will also closely monitor our new investments such as the offshore LNG terminal and the new CCGTs units, and continue to focus on developing innovative, technology-enabled services. These efforts will be significant factors in driving Hong Kong’s transition to a smarter, greener, low-carbon future.

Mainland China

We believe the Central Government’s efforts to shift the country’s energy mix in favour of cleaner generation will lead to growth in this sector over the long term. CLP will therefore continue to look for opportunities to expand our low-carbon portfolio. Following the award of the IDN project in Fangchenggang, we will explore similar opportunities in southern China as reform of the electricity sector continues.

The Outline Development Plan for the Greater Bay Area released by the Central Government in February makes the development of smart cities in the region a key focus for city-level administrations. CLP will work closely with our partners to pursue opportunities in this important emerging sector.

India

CLP India will continue to maintain and strengthen the operational excellence of our existing assets in the second half of 2019. Meanwhile, our alliance with CDPQ has brought long-term strategic backing and additional resources to support our continuing growth. Our expansion into power transmission opens up a new area of growth for the business which supports the continued growth of renewable energy in India. We are actively exploring further potential opportunities for acquisitions and investments in renewable energy and transmission, as the Government continues to implement energy industry reforms.

Southeast Asia and Taiwan

We will continue to focus on enhancing the operation of our assets in Taiwan and Thailand, and continue our efforts to support the Vietnamese Government to explore options to meet the country’s future energy needs.

Australia

In an intensely competitive retail market, customer service remains our priority. Our new retail approach is aimed at better serving and retaining customers as the market evolves under the new default price safety nets. Early indications are that the new, simple EnergyAustralia offers are performing well with customers. Heightened competitive activity, and the changes to our product portfolio, are expected to have an ongoing negative impact on earnings.

In the wholesale market, the recent reduction in baseload capacity and the ongoing addition of intermittent renewable energy generation are likely to result in continued volatility and elevated prices. For our existing generation assets, we will focus on enhancing their availability to safeguard the reliability of our supply. We expect operations at Yallourn to return to normal during the second half of 2019 as we complete operational and safety improvements. At Mount Piper, EnergyAustralia is working closely with the NSW Government, as well as the mine owner Centennial, to find alternative sources of coal. We are confident a solution will be reached. We will continue to use the gas-peaking generator at Tallawarra to supplement supply.

As part of our commitment to support Australia’s transition to a cleaner and more modern energy system and to better manage volatility in the wholesale electricity market, we will continue to explore innovative solutions and evaluate new projects that can deliver flexible, fast-response generation capacity in this high-price and volatile market environment.

Source: CLP Holdings (00002) Interim Results Announcement

Business Nature

The Group is engaged in the generation & supply of electricity.

Prospect

In 2007, the Group¡¦s focus will be continued investment in its supply system and the enhancement of its operating skills. This will include developments in customer service, such as enhancing its service offering at its Call Centre and Customer Service Centres, easier access by customers to more of its services through internet, product offerings for individual customer groups which more closely match their needs and partnering with product vendors and contractors to bring the benefits of new technologies and end use applications to Hong Kong

Chairman
Michael Kadoorie
Contact Info
Company Address:
147 Argyle Street Kowloon, H.K.
Web: http://www.clpgroup.com
Quote
HSI: 27,352.69 265.06
81.75
0.85 (1.1%)
As of16:15 13 Sep 2019
Open: 80.50 52Wk High: 97.40
Day High: 81.95 52Wk Low: 78.00
Day Low: 80.05 P/E: 15.242
Prev. Close: 80.90 Yield: 3.719%
Volume: 2.22M
Mkt Cap: 204.39B
Turnover: 180.01M NAV: 43.164
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Contact CLP HOLDINGS
Company Address:
147 Argyle Street Kowloon, H.K.
Web: http://www.clpgroup.com

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