"CLP Expects China’s Power Demand to Boost Earnings | AboutHK.Com - more information about HK"
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| Bloomberg  CLP Holdings Ltd., Hong Kong’s biggest electricity supplier, expects earnings to improve in the second half as faster economic growth in mainland China increases industrial demand for power.
The utility is “bullish” about earnings prospects, Chief Executive Officer Andrew Brandler said at a media briefing in the city today after CLP posted a 42 percent drop in first-half profit on losses in a solar-technology venture in Australia and lower income from its operations in Hong Kong, China and India.
Power use in China gained 6 percent in July as the government’s 4 trillion-yuan ($585 billion) stimulus spending helped boost factory output by about 11 percent, government data show. CLP’s mainland sales rose in June and July, Executive Director Peter Tse said today, without elaborating.
Net income fell to HK$3.24 billion ($418 million) in the first half from HK$5.61 billion. CLP made a provision for its investment in Solar Systems that led to a loss of HK$346 billion. The rate of return on fixed-asset spending by CLP was also cut to 9.99 percent from between 13.5 percent and 15 percent, under an agreement introduced by the Hong Kong government in October that links power companies’ profits to efforts to cut pollution.
“The loss on the solar power business will have taken people by surprise,” said Michael Yuk, an analyst at Sun Hung Kai Financial in Hong Kong. “The results were generally disappointing, with lower earnings in mainland China too.”
Shares of CLP dropped 0.1 percent this year in Hong Kong, compared with the 41 percent gain in the benchmark Hang Seng index. The stock fell 1.9 percent to HK$52.55 today.
Revenue Falls
The company had a loss of HK$97 million on its mainland electricity business on reduced demand caused by the economic slowdown and government caps on power tariffs, compared with a HK$34 million profit a year earlier, CLP said. Power earnings in India fell to HK$159 million from HK$263 million as the rupee weakened against the Hong Kong dollar.
Overall sales dropped 15 percent to HK$23.5 billion in the first half. CLP gets about 56 percent of its revenue from Hong Kong last year, according to the company’s annual report. About 36 percent of sales came from Australia.
“CLP will look out for assets that come along,” Brandler said. The company’s development will be mainly “organic.”
The utility will be a “selective” and “prudent” investor in China’s wind-power industry as there could potentially be many “bad investments,” Chandler said. “We will focus back on our role as a utility, rather than being an investor in clean-technology developers.”
Full Year
The year “2009 will see the first full-year effect of the significant reduction in shareholder earnings from our Hong Kong electricity business,” said Chairman Sir Michael Kadoorie in today’s statement. “This lies behind the substantial fall in our business.”
Net income will likely decline 20 percent this year to HK$8.3 billion, according to a median estimate of seven analysts in data compiled by Bloomberg.
To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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